## Facts

- Richard A. Dougherty was vice president of the international banking division at First National Bank of St. Paul.
- In April 1979, the bank approved a $3.5 million loan to Transalaska Fisheries Corporation to convert a ship into a floating crab-processing vessel; the project later faced delays, cost overruns, and weak seasonal returns.
- In September 1979, Dougherty advanced an additional $350,000 beyond the approved loan limit without obtaining required higher-level approval; he placed an internal memo in the credit file.
- To provide additional financing to Transalaska, Dougherty issued unapproved “bankers’ acceptances,” did not obtain senior loan committee approval, and did not record the acceptances in the bank’s general ledger.
- The unrecorded acceptances were kept in Dougherty’s desk drawer and were not processed through ordinary channels.
- When Transalaska could not pay acceptances at maturity, Dougherty repeatedly rolled them over to avoid overdrafts that would have revealed the account’s condition and the bank’s exposure.
- Dougherty similarly issued more than $400,000 in bankers’ acceptances to finance a restaurant business run by David Nolan; these acceptances were also unrecorded and kept in Dougherty’s desk.
- The unpaid acceptances caused large losses to the bank (described at trial as totaling many millions of dollars), and Dougherty resigned after discovery.
- It was undisputed Dougherty did not personally profit and had no special personal relationship with either borrower.

## Issues

1. Whether the evidence was sufficient to prove Dougherty “willfully misapplied” bank funds under 18 U.S.C. § 656 despite no personal gain and his claim that he acted to protect the bank and borrowers.
2. Whether the evidence and jury instructions correctly required proof of specific intent under 18 U.S.C. §§ 656 and 1005.
3. Whether the government had to prove intent to injure or defraud (or to deceive bank officers or examiners) and, if so, whether the evidence supported that intent.
4. Whether challenged evidentiary and procedural rulings improperly limited Dougherty’s good-faith defense and proof of internal banking practices.

## Decision

- The Eighth Circuit affirmed Dougherty’s convictions for misapplication of bank funds under 18 U.S.C. § 656 and falsifying/omitting bank records under 18 U.S.C. § 1005.
- The court held the evidence permitted a rational jury to find Dougherty knowingly engaged in unauthorized credit extensions, concealed them from bank controls, and exposed the bank to substantial risk of loss.
- The court held the absence of personal financial gain did not bar a finding of criminal misapplication or falsification.
- The court upheld the jury instructions on specific intent when read as a whole, concluding they required wrongful intent and did not allow conviction for negligence or poor business judgment.

## Legal Principles

- A bank officer “willfully misapplies” funds under 18 U.S.C. § 656 by knowingly using bank funds or credit in an unauthorized manner that exposes the bank to risk of loss; personal benefit is not an element.
- Intent for § 656 may be inferred from circumvention of approval limits, concealment of transactions, and conduct designed to prevent detection of the bank’s true exposure.
- Under 18 U.S.C. § 1005, materially keeping transactions off the books, or otherwise causing bank records to present a false or misleading picture, can constitute false entries or willful omissions when done with intent to defraud or injure the bank or to deceive bank officers or examiners.
- Specific intent under §§ 656 and 1005 is evaluated from the totality of conduct; deliberate concealment and off-ledger handling supports an inference of intent to deceive.

## Conclusion

The court upheld the convictions because the jury could find that Dougherty deliberately issued unapproved bankers’ acceptances, kept them off the bank’s records, and rolled them over to avoid detection, conduct sufficient to prove willful misapplication and false entries or omissions even without evidence of personal gain.


United States v. Dougherty, 763 F.2d 970 (8th Cir. 1985)