Misapplication, 18 U.S.C. §§ 656, 657
The offense of criminal misapplication generally means criminally misapplying the funds of a financial institution by willfully converting the money. The U.S Code outlines the elements of criminal misapplication as follows:
1. the accused was an officer, director, agent or employee of, or connected in any capacity with, a bank or one of certain enumerated entities;
2. the bank or entity was, among other things, a Federal Reserve System member bank, a national bank, a federally-insured bank, a Federal Reserve bank, a depository institution holding company, an insured bank, branch, agency of a foreign bank, or an organization operating under section 25 or section 25(a) of the Federal Reserve Act (e.g., a foreign subsidiary of a United States bank or an Edge corporation);
3. the accused willfully misapplied moneys, funds or credits of the bank or entity or moneys, funds, assets or securities intrusted to the custody or care of the bank or entity; and
4. the accused acted with the intent to injure or defraud such bank or entity.
Sections 656 and 657 of the Code apply to insiders. However, outsiders who took part in the scheme may be charged with misapplication as well if there was causal connection between the officer and the defendant.
To secure conviction, the prosecution must prove that the defendant was an officer, director, agent or employee of the institution or entity or the person's status as an individual ''connected in any capacity with'' such institution or entity. The government also must prove that the defendant willfully misapplied ''moneys, funds or credits'' of the bank or entity or ''moneys, funds, assets or securities intrusted to the custody or care'' of such bank or entity. Finally, an intent to injure or defraud must be established. Without the showing of intent to injure or defraud, the act is not a criminal misapplication, although it may be the basis for a civil action for a breach of fiduciary duty.
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