James H. McComas

Attorney at Law

and Of Counsel to

Friedman, Rubin & White

1227 W. 9th Avenue, Suite 201

Anchorage, AK 99501

(907) 258-0704

Attorney for xxxxxxxxx

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ALASKA

UNITED STATES OF AMERICA, )

Plaintiff, ) NO. xxxxxxxxxxxxxxxx

)

vs. )

) MEMORANDUM IN SUPPORT OF

xxxxxxxxxxxxxxxxxx; )

xxxxxxxxxxxxxx ) IL-1

xxxxxxxxxxxx ) Mr. xxxxx 1st MOTION IN LIMINE: xxxxxxxxxxx; and xxxxxxxxxxxxxx,)CIVIL VIOLATIONS/PROOF OF INTENT

Defendants. )

______________________________)

xxxxxxxxx, by his counsel, respectfully submits the following facts, points, analysis and authorities in support of his IL-1, First Motion In Limine: Civil Violations/Proof of Intent.

TABLE OF CONTENTS

OVERVIEW ....................... 3

STATEMENT OF RELEVANT FACTS ............ 6

LEGAL ANALYSIS

I. EVIDENCE OF CIVIL LAW VIOLATIONS IS INADMISSIBLE. ...... 20

A. The Analytical Framework. ......................... 20

1. Criminal culpability cannot be proven by evidence of regulatory violations. .......... 20

2. Narrow exception admits evidence necessary for truly limited purpose. ........ 21

B. The Ninth Circuit Is In Accord. ................... 23

C. Application Here -- Civil Violations Inadmissible. . 26

II. PROOF OF SPECIFIC INTENT, NOT RECKLESSNESS, IS REQUIRED. 28

A. The Fundamental Dispute. .......................... 29

B. Recklessness In Fraud Prosecutions. ............... 32

1. Summary of Ninth Circuit cases. ......... 32

2. In the beginning, recklessness meant knowledge. .............................. 33

3. Weeds in the garden -- recklessness creeps from knowledge to intent. ........ 35

4. McNally precludes prosecution theory. ... 37

C. Application Here -- Recklessness Inadmissible. ...... 40

1. No probative value. ..................... 40

2. Overwhelming prejudice. ................. 45

III. APPROPRIATE RELIEF MUST BE GRANTED. .................. 47

OVERVIEW

Next to the motion for severance, this pleading is the most important document Mr.xxxx will file in this case.

Simply put, the decision on this Motion will determine whether the Court conducts a long, unnecessarily complicated trial which swerves far from the road of deciding criminal culpability into the thicket of civil regulatory provisions and the civil standard of care established by internal bank policies, or whether the Court presides over a fairly short, manageable trial focused on the relativxxxxxxx few criminal allegations set out in the indictment.

The first route, sponsored throughout by the government, requires the Court to retry both civil cases -- note collection and director liability -- under the rubric of a criminal indictment. No doubt experts on both sides will have to testify as to the existence, meaning, and application of what the government claims are dozens of applicable civil regulations, bank policies, and prudent banking practices. ⁽¹⁾ If allowed, all this will establish is the directors' civil duties -- that is the standard of ordinary care beneath which they are negligent. The government will then seek to argue, and ask the jury to infer, from negligence to criminal negligence; from criminal negligence to recklessness; and, finally, from recklessness, somehow jumping over knowledge, to specific intent to defraud! Presumably, the Court will instruct on all of these charged and uncharged mental states.

Ironically, the purported regulatory and policy violations on which this tower of inference about Mr. xxxxxxx's state of mind rests were far from evident, even to the experts at the time, and in the circumstances, of these events. Thus, the state and federal regulators themselves found no such violations of civil law or policy until nearly two years after Mr. xxxxxxx left the ASB Board, and one year after the second, final renewal of the loans. Compare Atts. A, B&C with Att. D, infra. Even then, no violation was found in the making or renewal of the loans, but only for alleged "lax" collection efforts during a severe economic downturn. Atts. D & E.

Of course, this approach creates enormous, unavoidable and unfair prejudice to the accused, who is likxxxxxxx to be "convicted" in criminal court for civil liability already adjudged against him. It is a dangerous road upon which the prosecution invites the Court to travel; a road certain to lead to summary reversal of any resulting conviction. U.S. v. Wolf, 820 F.2d 1499 (9th Cir. 1987), cert. denied, 485 U.S. 960 (1988); see also Section I, infra; U.S. v. Larry J. Lewis, ___ F.3d ___, slip op. No. 94-30214, at 12373-76 (9th Cir. September 28, 1995); U.S. v. Olano, 62 F.3d 1180 (9th Cir. 1995); see also Section II, infra.

In contrast, what this criminal trial should be about is whether or not Mr. xxxxxxx actually undertook the stock loan as an individual obligation, and understood the other directors to have done likewise. At bottom, the government claims that the directors were really undisclosed nominees for Mr. Whitmore. As such, they purportedly obtained the loans/renewals with no intent to pay them back, while intentionally misrepresenting that they would repay in the bank's records, and, consequently, to bank regulators. If established beyond a reasonable doubt, these few assertions support convictions on all counts. If not, acquittal is required. In either case, the verdict must rest upon the jury's resolution of the real issue here, not on some improper transference of civil liability to criminal guilt.

STATEMENT OF RELEVANT FACTS ⁽²⁾

1. The director stock loans were first made in June 1984.

2. On August 31, 1984, Alaska Division of Banking personnel conducted an examination of ASB, limited to loans and investments. The examination resulted in "little in the way of adverse criticism or comment." The director stock loans were neither adversxxxxxxx classified, nor listed as preferential, nor identified in any other way as being inconsistent with state and federal laws or regulations or the bank's own policies. Att. A.

3. The loans were renewed and supplemented in November, 1985.

4. On November 30, and/or December 6, 1985, state and federal regulators conducted a visitation at ASB. The bank was found in "satisfactory" condition. The director stock loans were neither recommended for adverse classification, nor listed as preferential, nor identified in any other way as being inconsistent with state and federal laws or regulations or the bank's own policies. ASB's efforts to pursue additional capital by acquiring another bank were specifically noted. Att. B.

5. Mr. xxxxxxx resigned from the ASB Board on April 28, 1986. From that point on, he had no access to, and did not see, until litigation after the bank was closed, subsequent regulatory reports of examinations of ASB.

6. FDIC conducted an exam of ASB on February 20, 1987. The depressed Alaska economy was identified as the primary cause of the decreased quality of the bank's loan portfolio. The Swain and xxxxxxx stock loans were adversxxxxxxx classified, but were not cited as violating Regulation O or any other state or federal law or regulation or any bank policy. Significantly, other loans to Whitmore and MIKLAUTSCH were cited as violations of Regulation O. Att. C.

7. All of the loans but Haxby's were renewed and supplemented in December 1986 - February 1987.

8. On January 29, 1988, state and federal regulators conducted a joint examination of ASB. Regulators began to shift blame from the economy to belatedly objected-to lending and collection practices. Three and one-half years after they were made, and one year after FDIC itself passed over these loans, the stock loans were first cited as Regulation O violations. Although finding them acceptable when made, the FDIC now cited the loans in 1988 because supposedly "lax" collection efforts constituted preferential treatment. Att. D.

9. By the time of the joint state-federal exam on October 28, 1988, ASB's failure was "imminent." It comes as no surprise, then, that regulators attempted to shift more and more blame to the bank's directors and officers. Director loans were now recharacterized as a "major weakness," perhaps the ultimate cause of the bank's failure! As for the stock loans, the party line continued to be that they were fine when made, but rendered preferential in 1988 by failures to add collateral or collect them. Att. E.

10. Regulators closed ASB on February 3, 1989.

11. In its February 27, 1989, Report of Preliminary Findings, the FDIC hypothesized that the director stock loans were actually made to the directors as undisclosed nominees of Whitmore. Att. F.

The Civil Litigation

12. The conduct charged against Mr. xxxxxxx was already 8 - 11 years old at the time of his indictment in 1995. Yet, during that time span, the government vigorously pursued and prosecuted Mr. xxxxxxx in a succession of three civil suits, all arising from his role in the director stock loans.

13. At the time the FDIC took the bank, Roger Haxby and Mr. xxxxxxx had already been sued in state court by ASB on the promissory notes underlying the director stock loans. (3AN-88-7692 Civil) The complaint alleged nonpayment of principal and interest on Mr. xxxxxxx's director stock loans and extensions in an amount exceeding $555,000.00. Additionally, ASB sought to recover its costs and attorney fees in collecting on the notes, as well as pre- and post-judgment interest. See Att. C, to D-4 Memo (R.227). ⁽³⁾

a. After taking the bank, the FDIC took over the notes, in its capacity as receiver, and substituted in as plaintiff, in its corporate capacity, as an agent of the United States, in the previously filed collection suit. The FDIC, in its corporate capacity, removed the case to federal court, and activxxxxxxx prosecuted Mr. xxxxxxx on the claims asserted in the complaint. (A89-368 Civil) See Att. E, ¶7, D-4 Memo (R.227).

b. On February 18, 1992, U.S. District Court Judge Holland granted summary judgment in favor of FDIC, and dismissed Mr. xxxxxxx's counterclaims. See Att. D, D-4 Memo (R.227).

c. Judgment for $792,966.71 was entered against Mr. xxxxxxx by the same court on April 1, 1992. See Att. E, D-4 Memo (R.227).

14. Apparently not satisfied, the FDIC again sued Mr. xxxxxxx, and this time his wife, in federal district court, in July 1993. (A93-283 CIV)

a. The suit alleged fraudulent conveyances in connection with the xxxxxxxs' exchange of assets in mid-1990, during implementation of an estate plan. Att. F, D-4 Memo (R.227).

b. The complaint sought a wide range of injunctive and other relief, restraining the xxxxxxxs from transferring assets, for imposition of a constructive trust, for entry of a declaratory judgment nullifying the marital transfers and essentially forfeiting them to the FDIC, etc. Att. F, Requests for Relief, ¶¶ 1-7, D-4 Memo (R.227).

c. The FDIC's suit was dismissed by this Court on March 25, 1994. See Att. G, D-4 Memo (R.227).

15. In 1992, the FDIC sued Mr. xxxxxxx in federal court yet again, this time with other ASB officers and directors. (A92-060 CIV)

a. The complaint alleged director/officer civil liability for violation of federal regulations, ASB's related loan policies, and fiduciary duties in connection with the director stock loans. The government's claims mirror the allegations subsequently charged against Mr. xxxxxxx in the criminal indictment. See Mr. Reply to government Opposition to Motion D-4(Double Jeopardy), § I.B. (R. 404); Exh. P to Swain's Memorandum in Support of Motion to Dismiss Indictment Based on Double Jeopardy, ¶¶ 37-52 (R. 183).

b. Almost three more years passed, with the government pursuing its prosecution of Mr. xxxxxxx in the director/officer liability suit. Then, just 3 months before it indicted him for the same conduct for which it was suing him for punitive damages, the government settled with Mr. xxxxxxx for a one-time payment of $60,000. Att. H, Section I, D-4 Memo (R.227). The FDIC expressly required that the negotiated settlement payment be in addition to the nearly $800,000.00 judgment it had obtained in the prior note collection litigation.

The Indictment & Particulars

16. On March 1, 1995, less than three months after settling the third lawsuit brought against him by the government in connection with the director stock loans, the government filed its fourth -- the criminal indictment in the present case. (R. 27) Even a cursory comparison of the indictment with the D&O complaint reveals that the allegations contained in each are substantially identical. As demonstrated in the following paragraphs, the "criminal" charges are replete with references to regulatory provisions and civil duties; those references were multiplied further when the government filed its bills of particulars.

General Provisions

17. Indictment ¶ 1.2 asserts that ASB was subject to Alaska banking laws and FDIC regulations.

17.a. ¶ 1.2 asserts that Alaska law "required that loans in excess of $10,000 to officers or employees... required prior approval by the Board of Directors and had to be secured by adequate collateral."

17.b. ¶ 1.2 asserts, "The policies and procedures of Alaska Statebank also required prior approval by the Loan Committee and Board of Directors for all loans to directors."

17.c. ¶ 1.2 asserts, "Auditors and regulators reviewed compliance with the laws and regulations, as well as compliance with Alaska Statebank's own internal policies and procedures as part of their normal examinations."

17.d. ¶ 1.2 is incorporated in the conspiracy count by ¶ 7.0, in the bank fraud counts by ¶¶ 8.0 & 10.0, and in the false entry counts by ¶¶ 11.0, 14.0, 18 & 19.

18. Indictment ¶ 1.11 asserts the ASB Board "had the duty and responsibility to create policy for the bank. This included the duty to make and review lending policies and review and exercise final approval over certain loans, including loans to employees, officers and directors."

18.a. ¶ 1.11 is incorporated in the conspiracy count by ¶ 7.0, in the bank fraud counts by ¶¶ 8.0 & 10.0.

19. Indictment ¶ 1.12 purports to summarize the material procedures "required for commercial loans outside the loan officer's lending limits," beginning with the loan officer's write-up of a CL-10, through board approval on certain loans.

19.a. ¶ 1.12 is not "realleged in [its] entirety and incorporated" in any of the Counts charged against Mr. xxxxxxx.

Conspiracy Charge: Count 7

20. Count 7 charges a purported conspiracy to commit bank fraud and make false entries in connection with the director stock loans. ¶¶ 7.0 - 7.2.

20.a. ¶ 7.1 asserts, "Due to possible regulatory concerns, Whitmore would fund his purchases of ANBN stock at another bank." (Emphasis added.)

20.b. ¶7.2 is asserted to include, as a purported false statement, that the stock loans "followed the bank's policies and practices..." (Bill of Particulars (R. 398), p.2 ¶1.b.)

20.c. ¶7.2 is further claimed to include, as false representations, a series of statements purportedly implicit in the director's oath of office -- directors act independently; directors have no direct/indirect interest in loans to other board members; directors review each loan on merits; directors certify loans complied with bank policies, followed normal policies and procedures, and were not preferential; directors were representing the bank's interests in approving the loans. (Bill of Particulars (R. 398), pp.2-3, ¶1.b.)

20.d Finally, representations to the FDIC in 1987 and 1988 are alleged to be false insofar as they assert the stock loans "were made in the ordinary course of business." (Bill of Particulars (R. 398), pp.2-3, ¶1.b.)

20.e. False entries referred to in ¶7.2(b) are alleged to include statements and board minutes "suggesting that these loans were individual, non-preferential loans made in the ordinary course," and that the two renewals were effected by "independent directors acting on behalf of ASB's best interests." (Bill of Particulars (R. 398), p. 5, ¶2(2))

21. The manner and means of the alleged conspiracy are said to include "using undue influence, conflicts of interest... (c) to cause the renewals and further commitments of funds to be made without regard to the bank's policies, procedures and prudent banking practices and in reckless disregard of the bank's interests..." ¶7.4.

21.a. In the Bill of Particulars it was ordered to file, the government presented a 3-page index of the civil regulations, bank policies, and prudent practices the violation of which it purportedly relies upon to prove criminal guilt, and with which it intends to inundate the jury. (Bill of Particulars (R. 398), pp. 9-11, ¶ 9, incorporated into conspiracy particulars at p.5, ¶ 3) ⁽⁴⁾ In order to provide the Court with some idea as to how far the government's pursuit of these subjects would divert the trial from the question of criminal liability, the defense attaches a copy of the index and the referenced civil regulations and policies. See Att. G. ⁽⁵⁾

22. The original loans are alleged to have been "granted and underwritten in violation of Alaska Statebank policies and procedures and prudent banking policies..." ¶ 7.10. ⁽⁶⁾

23. The first renewal (November 1985) was allegedly approved by the ASB Board "without regard to [ASB's] normal policies and procedures and prudent banking practices and with reckless disregard for the bank's interests..." ¶7.12.

23.a. Codefendant Smith is alleged, on November 14, 1985, to have voted approval of the first renewal in the loan committee, ¶ 7.12, "without regard to the bank's policies and procedures." ¶ 7.20(2).

24. The same allegation -- approval "without regard to [economic conditions,] the bank's policies and procedures or prudent banking practices and in reckless disregard for the bank's interests..." is made concerning the second renewal (late 1986 - early 1987) by the Board of some of the stock loans. ¶ 7.16. Mr. xxxxxxx was no longer on the Board, and the second renewal of his loan was not subject to Board approval.

25. Codefendant Smith is further alleged, on July 31, 1987, to have sent a letter to the FDIC "falsxxxxxxx stating that the director stock loans followed the normal processes and procedures" of ASB. ¶ 7.20(9).

Bank Fraud Charge: Counts 8 & 10

1st Renewal: Count 8

26. Count 8 alleges a scheme to defraud through, inter alia, "undue influence, conflict of interest..." ¶ 8.1 (and realleging and incorporating ¶¶ 1.0-1.7 and 1.11).

27. The substance of the scheme to defraud is realleged and incorporated from ¶¶ 7.3 - 7.18. ¶8.2.

28. The actus reus is alleged to be Mr. xxxxxxx's approval of the first renewal and extensions of the stock loans of other directors. ¶8.3

29. The alleged false representations are asserted to be "the same as those in the conspiracy..." (Bill of Particulars, p.7, ¶ 5) Presumably, this stretches as far as the vast net described above in paragraphs 20.b - 20.e., 21.a., 23.a. & 25 of this pleading.

2d Renewal: Count 10

30. Count 10 incorporates and realleges ¶¶ 1.0-1.7, 1.11, 8.1 & 8.2 (and, thereby, ¶¶ 7.3 - 7.18), in charging bank fraud. ¶ 10.0.

31. The actus reus is alleged to be Mr. xxxxxxx's causing, with codefendants Whitmore and Smith, the second renewal and extension of his own stock loan. ¶10.1.

32. The alleged false representations are asserted to be "the same as those in the conspiracy..." (Bill of Particulars, p.7, ¶ 5) Presumably, this stretches as far as the vast net described above in paragraphs 20.b - 20.e., 21.a., 23.a. & 25 of this pleading.

False Entry Charges: Counts 11, and 18 & 19 via 14

33. Count 11, realleging and incorporating ¶¶ 1.0 - 1.7, 1.11, 8.1 & 8.2 (and, thereby, ¶¶ 7.3-7.18), charges false entry by causing and approving allegedly false representations on the CL-10s supporting the first renewal. ¶¶ 11.0 & 11.1.

33.a. The government also proffers its desire to prove as "false statements" the purported absence of the following items, allegedly required to be included by regulation and/or bank policy or practice: "(1)...analysis of collateral value; (2) financial information; (3) spread sheets; (4) loan officer signatures; (5) credit reports." (Bill of Particulars, p.7, ¶6)

34. Count 18, realleging and incorporating ¶¶ 1.0 - 1.7, 1.11, 8.1 & 8.2 (and, thereby, ¶¶ 7.3-7.18), charges false entry against Mr. xxxxxxx by his alleged making, causing to be made, and signing false representations in the Application for Modification of Loan for the second renewal of the $350,000 part of his stock loan. ¶¶ 14.0, 14.1 & 18.

35. Count 19, realleging and incorporating ¶¶ 1.0 - 1.7, 1.11, 8.1 & 8.2 (and, thereby, ¶¶ 7.3-7.18), charges false entry against Mr. xxxxxxx by his alleged making, causing to be made, and signing false representations in the Application for Modification of Loan for the second renewal of the $270,000 part of his stock loan. ¶¶ 14.0, 14.1 & 19.

LEGAL ANALYSIS

I.

EVIDENCE OF CIVIL LAW VIOLATIONS IS INADMISSIBLE.

A. The Analytical Framework

1. Criminal culpability cannot be proven by evidence of regulatory violations.

In United States v. Christo, 614 F.2d 486 (5th Cir. 1980), misapplication of bank funds convictions were reversed. The Court held that the erroneous inclusion of evidence, argument, and instructions concerning regulatory prohibitions which related to the crimes charged -- primarily the provisions of 12 U.S.C. § 375a -- constituted plain, reversible error. 614 F.2d, 492.

Observing that, as long as the elements of the charged criminal offense were proved, "it simply does not matter that the same acts might violate the regulatory prohibitions," the Court found evidence of such regulatory violations "legally irrelevant." Christo, 614 P.2d, 492.

Beyond irrelevance, however, the Court found admission of such evidence to be highly, and unfairly, prejudicial to the accused. Essentially, the Court concluded that the evidence, argument, and instructions concerning regulations and civil violations had diverted the trial from the central issues and confused the jury -- resulting in a real risk that the accused had been criminally convicted for civil transgressions.

A conviction, resulting from the government's attempt to bootstrap a series of checking account overdrafts, a civil regulatory violation, into an equal amount of misapplication felonies cannot stand. The government's evidence and argument concerning [regulatory] violations... impermissibly infected the very purpose for which the trial was being conducted [--] to determine whether Christo willfully misapplied bank funds with an intent to injure and defraud the bank, not whether Christo violated a regulatory statute... The trial court's instructions and emphasis on [regulatory provisions] served only to compound the error by improperly focusing the jury's attention to the [regulatory] prohibitions...

Christo, 614 F.2d, 492 (emphasis added). In summarizing the effect of the regulation violation evidence on the trial, the Court observed, "[O]ne questions whether Christo was found guilty of willful misapplication with intent to injure and defraud the bank or whether he was given eighteen concurrent 5 year sentences and fined $90,000 for [regulatory violations]." Id.

2. Narrow exception admits evidence necessary for truly limited purpose.

Christo was acknowledged, and distinguished, in U.S. v. Stefan, 784 F.2d 1093 (11th Cir.), cert. denied, 107 S.Ct. 193 (1986). The Stefan court concurred in Christo's holding excluding "evidence of civil banking statute violations solxxxxxxx for the purpose of proving" criminal offenses. 784 P.2d, 1098.

At the same time, the court indicated evidence of civil violations might be admissible (1) if actually relevant for some other, legitimate purpose, (2) if "not presented in such a way that the jury's attention is focused on the civil violations rather than the criminal ones," and (3) if the court's instructions include (a) an admonition that regulatory infractions "should not be considered as violations of criminal law," ⁽⁷⁾ (b) a limitation of the evidence to its legitimate purpose, and (c) a clear direction that any inference of criminal intent from civil violations is permissive, not mandatory. Stefan, 784 F.2d, 1098-99.

In Stefan, a limited amount of evidence concerning the limitation on lending amounts imposed by 12 U.S.C. § 84 was admitted to show one reason why the accused dealt with straw borrowers -- to avoid § 84's limitations. 784 F.2d, 1098. The government produced evidence that "Stefan was concerned about possible section 84 infractions and that he discussed the statute with other [bank] officials and bank examiners." Id. Given this foundation, the limited purpose for which a small amount of evidence was admitted, and the admonitory, limiting and permissive-inference-only instructions given, the court found no error.

B. The Ninth Circuit Is In Accord

The Ninth Circuit considered these issues in U.S. v. Wolf, 820 F.2d 1499 (9th Cir. 1987), cert. denied, 485 U.S. 960 (1988). Reversing most of the conviction counts in Wolf, the Court held that "testimony and arguments regarding civil bank regulations tainted the trial on most of the misapplication and false entry counts." 820 F.2d, 1501.

At trial, the government presented expert testimony from an FDIC bank examiner concerning Federal Reserve Board Regulation O ⁽⁸⁾and a state statute pertaining to bank lending limits. Wolf, 820 F.2d, 1502. The trial court instructed the jury that testimony about civil banking laws "was background information only." Id.

The Ninth Circuit considered and adopted the Christo-Stefan analysis. Wolf, 820 F.2d, 1504-05. The Court concluded that Stefan justified the admission of evidence of the statutory lending limit, "as background information bearing on motive and intent." 820 F.2d, 1505. ⁽⁹⁾ Critical to this holding was the fact that --

It was clear throughout the trial that Wolf was not being tried for violating the lending limits... As in Stefan, violation of lending limits was not directly or indirectly an element of any of the charges.

Id. (Emphasis added.) In such circumstances, the risk of unfair prejudice was greatly reduced, making the admissibility issue "more akin to Stefan than to Christo." Id. ⁽¹⁰⁾

On the other hand, the Court held the admission of evidence concerning Regulation O was controlled by Christo, and found reversible error. Wolf, 1505-06. Reliance on the "background information" rubric was rejected, because the references to Regulation O in the indictment and testimony were "a key part of the government's case on the misapplication and false entry counts." 820 F.2d, 1505.

The indictment itself alleged Regulation "O" violations "[t]o supply the missing [duty] element" of the criminal statutes. 820 F.2d, 1505. At trial, the prosecution's expert "established that Regulation O imposed a duty on Wolf" to advise other directors of his interest in certain loans -- thus, "[t]he government used Regulation O to supply a crucial element of the misapplication and false entry charges." Id. & n.1. The resultant risk of unfair prejudice to the accused -- that he would be convicted of crime for a civil law violation -- could not be repaired by the trial judge's limiting instruction. Id.

This risk of unfair prejudice was especially intolerable, because the regulatory evidence was unnecessary to a fair presentation of the government's case.

We note that the government did not need to rxxxxxxx upon Regulation O. The evidence that each loan application misidentified the true borrower would have been enough to sustain the convictions... However, the indictment and the government's evidence and argument made Regulation O a key element of the charges by suggesting that it was criminal to submit loan applications that did not satisfy Regulation O's disclosure requirement.

Wolf, 820 F.2d, 1505 n.1 (emphasis added) & 1506 n.2.

C. Application Here -- Civil Violations Inadmissible

Applying the Wolf-Christo-Stefan analysis here, it is clear that almost all ⁽¹¹⁾ of the civil regulatory and liability standards alleged in the present indictment, and proffered as trial evidence, are inadmissible.

The indictment emphasizes that ASB, and its leadership, were subject to state and federal laws and regulations. See Facts, supra, ¶¶ 17, 17.a., 17.b., 18, 19. The indictment specifically alleges that regulators reviewed ASB for compliance with these requirements, as well as for compliance with its own internal policies and procedures. Facts, supra, ¶ 17.c. These allegations are specifically incorporated into each of the offenses charged against Mr. xxxxxxx. Facts, supra, ¶¶ 17.d, 18.a.

Moving to the criminal counts themselves, the indictment repeatedly claims Mr. xxxxxxx violated these standards, which violations are asserted to establish his conspiracy, scheme, and intent to defraud. Facts, ¶¶ 20.b.-e., 21, 21.a., 22, 23, 23.a., 24, 25, 26, 27, 29, 30, 32, 33, 33.a., 34 & 35, supra; Att. G, infra.

Thus, the government seeks to use "Regulation O [and the other civil regulatory and liability violations] to supply a crucial element of the [criminal] charges," by defining the "duty" whose breach is then equated with criminal responsibility. Wolf, 820 F.2d, 1505 & n.1. Indeed, among the civil standards plead and proffered by the prosecution here are the very ones excluded by decided cases. See Wolf, supra (Regulation O); Christo, supra (12 U.S.C. § 375). And the numerous purported violations of ASB's policies are offered to set the "standard of director care," deviations from which are offered as the inferential basis for the preferentiality prohibited by Regulation O. This constitutes the very bootstrapping of criminal guilt from civil liability that was condemned in Christo and Wolf. Christo, 614 F.2d, 492; Wolf, 820 F.2d, 1505.

Unlike in Stefan, Olano, Brown and Smith, the civil liability evidence is neither plead nor proffered for some narrow and necessary background or explanatory purpose. Instead, and exactly as in Wolf, the regulation evidence is unnecessary to the legitimate issue -- whether the directors were the real borrowers on the loans. Wolf, 820 F.2d, 1505 n.1, 1505 n.2.

Even more significantly, unlike Stefan and its progeny, the civil regulatory and liability allegations here cannot be admitted as "not directly or indirectly [proving] an element of any of the charges." Wolf, 820 F.2d, 1505. To the contrary, as in Wolf and Christo, they are plead in the indictment, and proffered for trial, as establishing Mr. xxxxxxx's "duties" as a director, violation of which purports to be a crime. The civil regulatory and liability violations here are used both directly and indirectly to prove elements of all the criminal charges. Convictions resulting on an indictment so written, and from a trial in which such evidence is admitted, will be reversed. Christo, 614 F.2d, 492; Wolf, 820 F.2d, 1505-06.

II.

PROOF OF SPECIFIC INTENT, NOT RECKLESSNESS, IS REQUIRED.

From the foregoing, it should be apparent that prosecution efforts to offer evidence of civil violations in proof of an essential element -- such as intent to defraud -- are improper and must fail. Wolf, supra; Christo, supra. Yet, the indictment is predicated, in substantial part, on repeated allegations that the loans were made/renewed "without regard to the bank's policies, procedures and prudent banking practices and in reckless disregard of the bank's interests..." ¶ 7.4; see also Indictment ¶¶ 7.10, 7.12, 7.16, 8.2, 10.0, 11.0, 11.1, 14 & related bills of particulars provisions.

As shown in the Facts section above, dozens of regulatory provisions, loan policies, and purported prudent practices are asserted by the prosecution as establishing the (civil) duties Mr. xxxxxxx allegedly violated in a criminally reckless manner. Facts, supra, ¶¶ 20.b.-e., 21, 21.a., 22, 23, 23.a., 24, 25, 26, 27, 29, 30, 32, 33, 33.a., 34 & 35, supra; Att. G, infra. As demonstrated below, such evidence is not relevant to any legitimate issue in the case. Sections II.B. & C.1., infra. Additionally, and independently, the overwhelming risks of jury confusion and unfair prejudice to the accused require the exclusion of such evidence, regardless of relevance. Section II.C.2., infra.

A. The Fundamental Dispute

The prosecution makes clear, in its indictment, bills of particulars, and statements of position, its desire to devote a substantial portion of its evidence and argument to the theory that Mr. xxxxxxx's allegedly "reckless disregard of the bank's interests" constitutes a mens rea sufficient to support the bank fraud and conspiracy charges.

The defense position is that such allegedly reckless disregard is not sufficient -- the culpable mens rea for bank fraud/conspiracy to commit bank fraud is specific intent to defraud.

The ramifications of these distinct positions are diametrically opposite. If the government's view is accepted, the criminal trial of this case will be converted into a rehash of the civil liability issues already beaten to death in three successive cases against Mr. xxxxxxx. Witness after witness will be called purportedly to establish the standard of reasonable care a bank director would follow, so that the prosecution can attempt to argue that Mr. xxxxxxx's deviation was so great as to amount to negligence, then to criminal negligence, then to criminal recklessness, and then, somehow, to specific intent -- ergo bank fraud. Thus, a substantial, unavoidable risk of wrongful conviction will arise because the accused was wrong, negligent, didn't follow the rules, or should have known better, not because the mens rea required by the criminal statute in question was proved beyond a reasonable doubt. See Wolf, supra; Christo, supra; Section I, supra.

By contrast, the defense position is that specific intent to defraud is the core element of the bank fraud, conspiracy, and false entry charges. Given the potential for unfair prejudice -- conviction on an improper basis -- the defense urges that the trial evidence be tightly and narrowly focused on the legitimate issues in this case.

Those issues are easily identified. At bottom, the false entry charges consist of the claim that Mr. xxxxxxx made or caused to be made material misrepresentations, by asserting he intended to repay the second renewal loans when he did not (Counts 18 & 19), or by concealing, at the time of the first renewal, his and other directors' total lack of intent ever to repay the loans (Count 11). Presumably, this is same criminal conduct upon which the bank fraud and conspiracy counts are actually based, once the surplusage of their civil liability trappings is stripped away.

If Mr. xxxxxxx never intended to repay the loans, conspired with others who also never intended to repay the loans, and made or caused to be made false representations and entries to effectuate such a scheme, then, generally speaking, he has committed the crimes charged against him. If there is a reasonable doubt as to such intent, then he is not guilty. This is what the trial, properly limited and managed, should be about.

Bank policies and administrative regulations are simply not relevant to the central question -- whether these were disguised nominee loans. Any marginal relevance they may have is so attenuated and distant from the real dispute, that exclusion under F.R.E. 403 is required, to prevent diversion of the jury from the true issues and to protect the accused from the grossest form of unfair prejudice -- conviction for an unlawful reason.

The prosecutors have repeatedly said Ninth Circuit law holds that "reckless disregard of the bank's interests" constitutes a mens rea sufficient to support the bank fraud /conspiracy charges. This is simply wrong, as the defense will now demonstrate.

B. Recklessness In Fraud Prosecutions

1. Summary of Ninth Circuit cases

A careful review of Ninth Circuit authority reveals that the recklessness concept in fraud cases arose, and is well-established, in the context of proving an accused's knowledge of the falsity of his representations, not as a substitute for the independent and essential element of specific intent to defraud. Certain panels have slopped recklessness into the intent calculus, without acknowledging they are doing so, and obliviously citing the original recklessness/knowledge cases, and each other, as their sole authority. Moreover, the cases most relied upon by the prosecutors do not even address recklessness in the fraud context, but instead concern misapplication charges.

2. In the beginning, recklessness meant knowledge.

In one of the earliest discussions of recklessness in a fraud prosecution, the Court held:

One who acts with reckless indifference as to whether a representation is true or false is chargeable as if he had knowledge of its falsity.

Irwin v. U.S., 338 F.2d 770, 774 (9th Cir. 1964). Other early discussions similarly make clear that "reckless indifference" to the verity of representations satisfies the requirement that the accused knew the statements were false. U.S. v. Love, 535 F.2d 1152, 1157-58 (9th Cir.), cert. den., 429 U.S. 847 (1976); Babson v. U.S., 330 F.2d 662, 664 (9th Cir. 1964).

In U.S. v. McDonald, 576 F.2d 1350, cert. den., 439 U.S. 830 (1978), the Court held the evidence of McDonald's specific intent to defraud insufficient.

We cannot infer from the facts in the record that McDonald had, beyond doubt, the specific intent to defraud "because the logical relationship between what he could have known and a specific intent has no rational basis."

McDonald, 576 F.2d, 1359. McDonald thus establishes the fundamental distinction between knowledge of falsity of representations and specific intent to defraud. Its holding goes farther, and refutes the government's exaggerated claim that, since reckless indifference can show knowledge, and knowledge can imply intent, a fraud conviction may rest on proof of reckless indifference alone. The Court specifically cautioned against making such leaps --

McDonald may have in some respects violated a fiduciary duty to his investment clients, but that in itself would not demonstrate the specific intent necessary to sustain a conviction.

McDonald, 576 F.2d, 1359 n. 14. ⁽¹²⁾

Thus Irwin-Babson-Love establish that reckless indifference to the falsity of representations can constitute culpable knowledge of such falsity. However, holds McDonald, proof of the additional specific intent to defraud element requires something more.

Confirmation of this conclusion appears in the repeated holdings that the accused's good faith -- which negates any claimed specific intent to defraud -- is a complete defense to fraud charges. U.S. v. Dees, 34 F.3d 838, 842 (9th Cir. 1994); U.S. v. Federbush, 625 F.2d 246, 255 (9th Cir. 1980); U.S. v. Beecroft, 608 F.2d 753, 757 (9th Cir. 1979).

Panels of the Ninth Circuit have continued properly to focus the effect of recklessness evidence on the issue of the accused's knowledge of false representations, and not as a substitute for proof of specific intent. See, e.g., U.S. v. McCollum, 802 F.2d 344, 346-47 (9th Cir. 1986); U.S. v. Diggs, 649 F.2d 731, 736 & n.4 (9th Cir. 1981); U.S. v. Federbush, 625 F.2d 246, 255 (9th Cir. 1980); U.S. v. Beecroft, 608 F.2d 753, 757 (9th Cir. 1979).

3. Weeds in the garden -- recklessness creeps from knowledge to intent.

The first departure from the recklessness/knowledge principle came in U.S. v. Farris, 614 F.2d 634, 638 (9th Cir. 1979). In hugxxxxxxx overbroad language, and without any analytical effort to distinguish the knowledge/intent elements, the panel asserted that "reckless disregard for truth or falsity is sufficient to sustain... a conviction for mail fraud." Id. Accord U.S. v. Schaflander, 719 F.2d 1024, 1027 (9th Cir. 1983), cert. den., 467 U.S. 1216 (1984)(citing Farris).

The problem with this loose language is, that by failing to connect the recklessness concept to the mental element of knowledge, the courts opened the door for reconstruction of the intent element into a recklessness equivalent. And that is precisxxxxxxx what happened.

In U.S. v. Cusino, 694 F.2d 185, 187 (9th Cir. 1982), cert. den., 461 U.S. 932 (1983), the court made the analytical error explicit, opining that "[f]raudulent intent is shown if a representation is made with reckless indifference to its truth or falsity." Cusino relied on U.S. v. Beecroft, 608 F.2d 753, 757 (9th Cir. 1979). Beecroft, like the case on which it relied, U.S. v. Love, 535 F.2d 1152, 1157-58 (9th Cir.), cert. den., 429 U.S. 847 (1976), never held that recklessness established intent to defraud -- instead Beecroft and Love reaffirmed the indisputable proposition that reckless indifference to falsity constitutes culpable knowledge of the falsity. In U.S. v. Gay, 967 F.2d 322, 326-27 (9th Cir. 1992), the error was repeated. Citing Schaflander, Cusino, and Farris, and misapplying Federbush, Love, and Irwin, the Gay court erroneously asserted that reckless indifference, not a subjective intent to defraud, constitutes the mens rea required by the fraud statutes.

Significantly, neither Farris, Schaflander, Gay, nor Cusino acknowledges, or addresses, the critical distinction drawn between knowledge and specific intent in U.S. v. McDonald, 576 F.2d 1350, cert. den., 439 U.S. 830 (1978). For this reason, they create an unavoidable conflict among panels in the Ninth Circuit.

4. McNally precludes prosecution theory.

As already seen, the proper application of the recklessness concept in fraud cases concerns the verity or falsity of the accused's representations. But here the government wants to go even farther, and convict Mr. xxxxxxx for allegedly recklessly disregarding "the interests of the bank."

Among the many problems with this suggestion is that the conceptual result of such a theory could easily include a conviction simply because the accused recklessly disregarded the bank's right to the performance of his fiduciary duty, or any number of other intangible, non-property "rights". The risk is particularly acute where, as here, the government seeks to introduce dozens of loan manual and regulatory violations. Such a conviction would, of course, violate the Supreme Court's pre-amendment construction of the fraud statutes. McNally v. United States, 483 U.S. 350 (1987). Accord U.S. v. Olano, 62 F.3d 1180 (9th Cir. 1995) (McNally prohibits prosecution theories based on alleged violations by directors/officers of obligation to provide "honest services" to financial institutions; failure of fraud charge requires reversal of conspiracy count). Such a conviction would be improper, because it would rest, in part, on a legally invalid theory of culpability. U.S. v. Jerome, 942 F.2d 1328, 1330-31 (9th Cir. 1991).

The McNally doctrine plainly applies to pre-amendment bank fraud cases. U.S. v. Larry J. Lewis, ___ F.3d ___, slip op. No. 94-30214, at 12373-76 (9th Cir. September 28, 1995)(construing "intent to defraud" provision of bank fraud statute; McNally applicable and controlling -- the "right to make an informed lending decision" is not a sufficient property interest); U. S. v. Henry, 29 F.3d 112, 114-16 (3rd Cir. 1994); U.S. v. Orr, 932 F.2d 330, 332 (4th Cir. 1991). See also United States v. Holley, 23 F.3d 902, 909-911 (5th Cir. 1994); U.S. v. Saks, 964 F.2d 1514, 1520-22 (5th Cir. 1992).

Against this convincing authority, the prosecution relies upon two cases construing the elements of a different statute. These courts have said intent to injure or defraud the bank in misapplication cases "may be inferred from defendant's reckless disregard of the bank's interests..." U.S. v. Stozek, 783 F.2d 891, 893 (9th Cir. 1986), cert. den., 479 U.S. 888 (1986); U.S. v. Castro, 887 F.2d 988, 994-95 (9th Cir. 1985). Of course, even at face value, these cases mean only that recklessness may give rise to a permissive inference of intent. Indeed, Stozek is clear that proof of "reckless disregard is not in itself sufficient to impose criminal liability." 783 P.2d, 893 (emphasis added).

More fundamentally, however, the misapplication offense, 18 U.S.C. § 656, involves elements not found in the fraud statute, elements which directly implicate the broader concept of the "bank's interests." Thus, the government must prove the accused is an executive officer of the bank, that the accused willfully misapplied funds -- that is, for a purpose contrary to the bank's interests -- in addition to establishing intent to defraud. U.S. v. Wolfswinkel, 44 F.3d 782, 786 (9th Cir. 1995). The graveman of misapplication is that the bank "has been deprived of its right to... make its own decision as to how [its] funds are used." U.S. v. Hazeem, 679 F.2d 770, 772 (9th Cir.), cert. denied, 459 U.S. 848 (1982). Intent to defraud in that context necessarily implicates intangible, non-property rights and fiduciary obligations to some extent. Bank fraud, on the other hand, contains no such necessary implication.

C. Application Here -- Recklessness Inadmissible

1. No probative value

In this case, there simply is no logical or legitimate legal connection between recklessness and specific intent which would permit inferring the latter from the former. Accordingly, evidence of recklessness based on civil law and liability violations is not relevant to prove intent in a criminal prosecution. F.R.E. 401 & 402.

Inferring knowledge from reckless disregard of truth of falsity is a much closer fit, and is supported by the substantial public policy in discouraging "invited ignorance" defenses in false statement cases. For these reasons, the long line of Ninth Circuit cases permitting an inference of knowledge from reckless disregard of falsity is sound law. See Sections II.A.1. & 2., supra. In stark contrast, the deviant cases suggesting specific intent to defraud, or overall guilt, can somehow be inferred from reckless disregard of the bank's interests are neither logically, nor legally, sound. See Sections II.A.3. & 4, supra.

Logic first. Just what is the conceptual path by which recklessness is permitted to jump over the next highest mental state -- knowledge -- and land on specific intent? The whole concept of recklessness is conscious disregard of risk -- the antithesis of specific intent. Firing a rifle at a building is criminally reckless; trying to hit a particular occupant is specific intent. To date, no court has been able to articulate just how reckless disregard for a bank, by gross violation of the civil standards governing banking, can substantiate a specific intent to defraud.

Even before the ultimate, nonsensical leap from recklessness to intent, logic strains at the number of inferences required to get there. First, regulations or statutes set general standards -- like no preferential treatment. Second, multiple bank policies and banking practices are dragged in to provide more specific content in the particular case. Third, a breach of civil duty is shown. Fourth, the jury has to infer the breach was not merxxxxxxx negligent, then, fifth, not merxxxxxxx criminally negligent, then, sixth, criminally reckless. From that point, they are asked to leap over the abyss between recklessness and intent, with "knowledge" having fallen away somewhere in between. The probative value of evidence offered toward a conclusion reached by such a tortuous path is necessarily slight. Here, the inference from general recklessness to "specific intent has no rational basis." McDonald, 576 F.2d, 1359.

More basically, what conceivable probative value can purported regulatory and policy violations have on the accused's state of mind when even the experts -- the state and federal regulators themselves -- found no such violations until nearly two years after Mr. xxxxxxx left the ASB Board, and one year after the second, final renewal of the loans? Compare Atts. A, B & C with Att. D, infra. The answer is obvious -- no relevance.

Even by its own terms, the government's theory falls from relevance to self-contradiction in the details. For example, the stock loans are allegedly preferential because no bank fees were charged, and interest was lower than on other loans. The whole concept of preferential treatment implies that benefits are being given to actual borrowers, thus gutting the only legitimate criminal claim -- that the directors were undisclosed nominees -- since nominees have no stake in interest rates for which they would never be liable! Preferentiality in loan terms undercuts the nominee claim. It may be relevant in a civil suit for damages, but it has no legitimate legal relevance in this criminal trial.

Now the law. The sloppy, unexplained deviations by the Farris, Schaflander, Gay, and Cusino panels -- from using recklessness as to falsity infer knowledge to inferences of intent/guilt -- are in direct conflict with at least two other consistent and persuasive lines of cases.

First, the Wolf-Christo doctrine establishes conclusivxxxxxxx that evidence of civil law violations is "legally irrelevant" in a criminal prosecution. Christo, 614 F.2d, 492. See Section I, supra. Evidence of such departures from civil standards is not admissible if it goes "directly or indirectly [to] an element of any of the [criminal] charges." Wolf, 820 F.2d, 1505. Yet, to prove "reckless disregard of the bank's interests," the prosecution must establish the legal and regulatory requirements, then establish the bank's policies and prudent banking practices to set the specific standards underlying the laws and regulations. Then, having shown the director's civil duty, prove he breached it, not just negligently nor criminally negligently, but recklessly. That is why the indictment is permeated with such language, and why the discovery in this case has chiefly to do with, and is chiefly just copied from, the civil cases.

Unfortunatxxxxxxx for the government, it is clear in the Ninth Circuit that civil liability standards cannot be used to establish the "duty", violation of which gives rise to criminal responsibility. Wolf, 614 F.2d, 1505 & n.1 (prosecution's expert "established that Regulation O imposed a duty on Wolf" to advise other directors of his interest in certain loans -- thus, "[t]he government used Regulation O to supply a crucial element of the [criminal] charges;" reversed); Smith, 891 F.2d, 710 ("Clearly, evidence of the violation of a civil banking statute may not be introduced to prove a criminal offense"). See also Christo, 614 P.2d, 492 ("it simply does not matter that the same acts might violate the regulatory prohibitions," evidence of regulatory violations is "legally irrelevant"); Stefan, 784 F.2d, 1098 (excluding "evidence of civil banking statute violations solxxxxxxx for the purpose of proving" criminal offenses).

The second line of cases undercutting the prosecution's relevance claim began with McNally, and continues in bank fraud cases to this day. Lewis, supra. Simply put, McNally, Olano, and Lewis mean that prosecution theories based on alleged violations by directors/officers of civil obligations to provide "honest services" to financial institutions fail to allege a criminal offense under the pre-amendment fraud statutes. See Section II.B.4., supra. Accordingly, the mass of policies, practices and civil law standards which define the duty of "honest services" are legally irrelevant here, because their breach goes to a non-existent crime.

2. Overwhelming prejudice

Postulating, arguendo, that a permissive inference of intent could lawfully be drawn from reckless disregard of civil standards, the risk that such evidence would be misused to provide a shortcut to guilt is enormous.

The first problem is unfair prejudice to the accused, culminating in his criminal conviction for what is really civil liability. For example, a jury could find Mr. xxxxxxx was not an undisclosed nominee, and intended that he and the other directors would ultimatxxxxxxx be financially responsible for the stock loans. Nonetheless, the jury might conclude that the loans violated Regulation O, because no bank fees were charged, there was a break on the interest rate, or the loans contained interest reserves. From any of those civil violations, the jury could then infer specific intent to defraud, and wrongfully convict him. Less analytically, jurors might simply be so inflamed and prejudiced by proof of numerous civil violations that they decide to convict, regardless of the insufficiency of evidence on one or more of the required legal elements.

Christo and Wolf provide poignant examples of this serious risk of injustice. In Christo, the government tried to "bootstrap" criminal responsibility from proof of a civil violation. 614 F.2d, 492. Noting that the real issues of criminal culpability may never have been reached, with the jury using a regulatory violation as a shortcut to guilt, the Christo court reversed the resultant convictions. Id.

If the government gets its way, it is easy to foresee the same result here. As demonstrated in the Facts section, allegations of civil law and liability violations pervade the indictment. Simply hefting Att. G gives the Court some idea of how much of the government's case will be devoted, if the Court allows it, to proving up ASB's policies, "prudent banking practices," and state and federal civil law and regulatory requirements. If so tried, "testimony and arguments regarding civil bank regulations [will] taint[] the trial on" the criminal counts. Wolf, 820 F.2d, 1501.

Here, the civil violations play "a key part of the government's case on the [charged] counts." Wolf, 820 F.2d, 1505. The indictment itself alleges Regulation "O" violations "[t]o supply the missing [duty] element" of the criminal statutes. Id. At trial, the prosecution will try to establish that statutes, regulations, ASB's policies and prudent practices "imposed a duty" on Mr. xxxxxxx. Id. Thus, "[t]he government [will try to] use Regulation O and the other civil standards] to supply a crucial element of the... charges." Id. & n.1.

The resultant risk of unfair prejudice to the accused -- that he could be convicted of crime for a civil law violation -- cannot be repaired by instructions. Wolf, 820 F.2d, 1505. It would be clear, reversible error to subject Mr. xxxxxxx to this risk. Wolf, 820 F.2d, 1505-06; Christo, 614 F.2d, 492; FRE 403.

Additionally, and independently, the dangers of "confusion of the issues, [] misleading the jury, [and] considerations of undue delay, waste of time, or needless presentation of cumulative evidence" obviously and substantially outweigh any dubious probative value of the proffered evidence. Accordingly, FRE 403 requires its exclusion. Wolf, supra; Christo, supra.

Additionally, and independently, requiring Mr. xxxxxxx to stand trial, while bearing the risk of the above forms of prejudice, would be fundamentally unfair, and deprive him of his constitutional rights to due process and to trial by a fair and impartial jury. U.S. Constitution, Amendments V & VI.

III.

APPROPRIATE RELIEF

The foregoing analysis mandates three forms of relief in this case.

First, the Court should strike or redact from the indictment and/or bills of particulars all of the references identified in the Statement of Relevant Facts, supra, at ¶¶ 17, 17.a., 17.b., 17.c., 17.d., 18, 18.a., 19, 20, 20.b., 20.c., 20.d., 20.e., 21., 21.a. (& Att. G), 22, 23, 23.a., 24, 25, 26, 27, 29, 30, 32, 33, 33.a., 34, 35. Where an indictment impermissibly invokes civil standards to prove criminal guilt, all such references must be redacted from the charging document. Christo, 614 F.2d, 492 n.7 (all references to 12 U.S.C. § 375 are surplusage; ordered stricken from indictment). ⁽¹³⁾

Second, the Court should exclude any and all testimony and evidence concerning allegedly applicable state and federal civil statutes and regulations, ASB loan and banking policies, and "prudent banking practices."

Third, the Court should preclude any and all reference, comment, and argument concerning allegedly applicable state and federal civil statutes and regulations, ASB loan and banking policies, and "prudent banking practices."

CONCLUSION

WHEREFORE, Mr. xxxxxxx asks the Motion IL-1 be granted, and that the accompanying proposed Order be granted.

Dated this __ day of January, 1996.

Respectfully submitted,

Robert xxxxxxx

____________________________

James H. McComas

VERIFICATION OF FACTS BY COUNSEL

STATE OF ALASKA )

) ss.

THIRD JUDICIAL DISTRICT )

JAMES H. McCOMAS, having been duly sworn, hereby deposes and states as follows:

1. My name is James H. McComas, and I am counsel of record for Mr. Robert xxxxxxx in the above-captioned case.

2. I personally prepared the Memorandum in Support of Motion IL-1. The factual assertions contained in the Statement of Relevant Facts section are true and correct to the best of my ability so to determine, based upon my review of court records, discovery materials, an independent defense investigation, and reasonable inferences therefrom.

FURTHER YOUR AFFIANT SAYETH NAUGHT.

DATED this _____ day of January, 1996.

________________

James H. McComas

Subscribed and sworn to before me this

____ day of January, 1996.

_________________

Notary Public

My commission expires: __________

1.

⁰See Att. G.

2.

0The following facts are verified by the accompanying Verification Of Facts By Counsel, and are supported by the accompanying attachments.