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CRM 500-999

802. Applicability Of 18 U.S.C. §656 And 657

The purpose of 18 U.S.C. §§ 656 and 657 is to preserve and protect the assets of banks having a Federal relationship. See United States v. Garrett, 396 F.2d 489 (5th Cir.), cert. denied, 393 U.S. 952 (1968). They apply, however, only to a particular class of individuals, i.e., officers, directors, agents, employees or whoever is connected in any capacity with any of the designated institutions. See United States v. Cooper, 464 F.2d 648 (10th Cir. 1972), cert. denied, 409 U.S. 1107 (1973). For a more detailed discussion of this issue, see the Fraud Section, Criminal Division's Manual entitled Financial Institution Fraud Federal Prosecution Manual (FIF Manual)(1994) at 134-40.

The term "connected in any capacity" is necessarily broad to include any person who has such a relationship to the institution that he/she could injure it by committing one or more of the criminal offenses set out in 18 U.S.C. §§ 656 and 657. In the Garrett case, the defendants, who were held to be "connected in any capacity," had purchased a controlling interest in a bank, had exercised control through naming employees and associates to the board of directors, and were active in the affairs of the bank through increasing deposits. In United States v. Edick, 432 F.2d 350 (4th Cir. 1970), the defendant was the employee of a corporation that handled the proofing and bookkeeping for several banks controlled by a holding company. Because of the defendant's position, the defendant was able to divert bank funds. The defendant's relation to the bank was held to be the same as if the defendant had been a bank employee. Thus, the court held that he was "connected in any capacity" with the victim banks. Similarly, in United States v. Fulton, 640 F.2d 1104, 1105 (9th Cir. 1981), the defendant-embezzler was covered under the statute even though she worked for a mortgage company which was a wholly owned subsidiary of a Federally insured bank.

[cited in JM 9-40.000]