United States v. Dougherty

Richard Dougherty (defendant) was vice president of the international banking division of the First National Bank of St. Paul (bank). In April 1979, Dougherty obtained approval from the bank’s loan committee to make a $3.5 million loan to Transalaska Fisheries Corporation (Transalaska), a Seattle-based company, in exchange for a term note. The loan was intended to finance the conversion of a ship into a floating seafood processor that would harvest king crab. The project experienced delays and cost overruns. Additionally, the king crab season fell short of expectations. In September 1979, Dougherty disbursed to Transalaska $350,000 beyond the approved limit. Dougherty documented this disbursement in a memorandum to the bank’s president and recorded the disbursement in Transalaska’s credit file. Transalaska eventually requested additional financing from Dougherty. Dougherty agreed to issue unapproved bankers’ acceptances, a type of secured credit issued as a negotiable instrument. In violation of bank policies, Dougherty did not seek approval from the bank’s senior loan committee, even though Dougherty sat on the committee. Dougherty also did not record the financing in the bank’s general ledger. Subsequently, when Transalaska was unable to pay the bankers’ acceptances at maturity, Dougherty agreed, repeatedly, to roll the loans over. By agreeing to the rollovers, Dougherty was able to prevent Transalaska from experiencing overdrafts, which would have alerted the bank. In addition to the Transalaska financing, Dougherty also used bankers’ acceptances to finance a Minneapolis-St. Paul restaurant business run by David Nolan. Dougherty issued more than $400,000 in bankers’ acceptances to Nolan during 1979 and 1980, none of which were paid. None of the bankers’ acceptances were recorded in the bank ledger. Instead, the bankers’ acceptances were maintained in Dougherty’s desk drawer. None of the bankers’ acceptances were sold to the Federal Reserve. When the bank learned of the losses incurred by the unpaid bankers’ acceptances, Dougherty resigned. Dougherty did not personally profit from the loan transactions, nor did he have any special relationship with Transalaska or Nolan. Dougherty was charged by the federal government with the improper issuance of bankers’ acceptances and failure to record the transactions in violation of 18 U.S.C. §§ 656 and 1005. Dougherty appealed.