## Facts

- Kathleen Gayle Stuart and John Van de Water agreed to illegally withdraw funds from a savings and loan association by using positions at different branches to execute an inter-branch withdrawal from a “jumbo” account.
- Van de Water identified a target account and the pair planned a $40,000 withdrawal through Stuart’s branch, to be converted into a cashier’s check and used to buy gold coins.
- Stuart issued a $40,000 cashier’s check payable to a coin dealer; the dealer could not verify the check, and the institution dishonored it.
- No currency left the institution and no funds were actually removed from the customer’s account.
- A federal indictment charged Stuart with conspiracy (18 U.S.C. § 371), misapplication of funds (18 U.S.C. § 657), and making false entries (18 U.S.C. § 1006).
- Van de Water entered a plea agreement requiring truthful testimony at Stuart’s trial.
- The district court ordered a psychiatric examination of Van de Water and reviewed psychiatric reports in camera but denied Stuart access to them.
- At trial, Stuart sought to impeach Van de Water through an FBI agent’s testimony about an alleged prior inconsistent statement; the court ruled that doing so would permit the government to elicit prior consistent statements from the same interview.

## Issues

1. Whether misapplication under 18 U.S.C. § 657 requires an actual disbursement of funds or actual loss to the institution.
2. Whether withholding a key witness’s psychiatric reports after in camera review violated the defendant’s confrontation rights or constituted reversible error.
3. Whether prior consistent statements were admissible under Federal Rule of Evidence 801(d)(1)(B) when the defense attacked the witness’s credibility and motive tied to a plea agreement.

## Decision

- The Ninth Circuit affirmed Stuart’s convictions on all counts.
- The court held that § 657 misapplication does not require actual disbursement of funds; the evidence supported a willful misuse of the institution’s control and credit.
- The court held that nondisclosure of the psychiatric reports did not warrant reversal because the defense had substantial other impeachment material and any error was harmless.
- The court held that prior consistent statements were properly allowed to rehabilitate the witness after the defense implied improper influence or motive.

## Legal Principles

- Under 18 U.S.C. § 657, misapplication is complete upon willful misuse of an institution’s funds or credit entrusted to an employee; actual disbursement, permanent loss, or ultimate deprivation is not required.
- A trial court may review psychiatric materials of a witness in camera and limit disclosure; reversal requires a showing that nondisclosure meaningfully impaired cross-examination and caused prejudice.
- Under Fed. R. Evid. 801(d)(1)(B), prior consistent statements may be admitted to rebut an express or implied charge of fabrication or improper influence or motive, including attacks based on plea-agreement incentives; introducing part of an interview for impeachment can permit rehabilitative use of consistent portions.

## Conclusion

The Ninth Circuit upheld the convictions, ruling that a thwarted cashier’s-check scheme could satisfy § 657 misapplication without any actual transfer of funds, that in camera handling of a witness’s psychiatric records did not require disclosure absent prejudice, and that credibility attacks implying improper motive allowed the government to use prior consistent statements for rehabilitation.


United States v. Stuart, 718 F.2d 931 (9th Cir. 1983)