WESTFALL v. UNITED STATES

Supreme Court of the United States1927-05-16No. No. 766

274 U.S. 25647 S. Ct. 62971 L. Ed. 10361927 U.S. LEXIS 639SCDB 1926-121

Summary · law.co

Holding. The provision of the Federal Reserve Act making State banks and their officers, agents, and employees subject to federal criminal penalties under the Revised Statutes is constitutional. The question certified by the Circuit Court of Appeals is answered in the affirmative.

Westfall was convicted of aiding a State bank manager in misapplying bank funds and of conspiring to do so, charges brought under federal law applicable to member banks of the Federal Reserve System. The central question was whether Congress had constitutional authority to impose federal criminal penalties on officers and employees of State banks participating in the Federal Reserve System for acts that harm those banks, even when the Federal Reserve Banks themselves suffer no direct loss.

The Court upheld Congress's power to do so. The Court reasoned that when a State bank voluntarily joins the Federal Reserve System created by the United States, the federal government may punish conduct that injures the System and its member banks. The Court noted that conduct may be criminal under both state and federal law simultaneously, and that fraudulent acts weakening a member bank necessarily weaken the overall System. The Court also observed that statutes need not be narrowly tailored to the precise harm targeted; they may reach broader conduct if necessary to prevent the evil at hand.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Congressional power to impose federal criminal penalties on State bank officers and employees
Constitutionality of applying federal law to member banks of the Federal Reserve System
Whether federal jurisdiction requires actual harm to Federal Reserve Banks themselves
Permissibility of dual state and federal criminal jurisdiction over the same conduct

Procedural posture

The Circuit Court of Appeals for the Sixth Circuit certified a constitutional question to the Supreme Court regarding the validity of a federal statute imposing criminal liability on State bank members of the Federal Reserve System.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Mr. Justice Holmes

delivered the opinion of the Court.

Westfall was convicted under two indictments, the first of which charged him with aiding and procuring tfie branch manager of a State bank which was a member of the Federal Reserve System to misapply the funds of the bank. The second indictment charged a conspiracy to misapply the funds of the bank between the same and other parties. Both were based upon: the issuing a fraudulent certificate of deposit for ten thousand dollars and the paying the same from the funds of the bank. The Circuit Court of Appeals for the Sixth Circuit certifies this question: “Is the provision of section 9, chapter 6, of the Federal Reserve Act of December 23, 1913 [38 Stat. 259, 260,] as amended June 21, 1917 [c. 32, §3; 40 Stat. 232,] and July 1, 1922 constitutional in so far as it provides that such banks and the officers, agents and employees thereof shall also be subject to the provisions of and the penalties prescribed by Section 5209 of the Revised Statutes?’ ” The amendment of July 1, 1922, referred to is, we presume, c. 274; 42 Stat. 821. It has no immediate bearing upon the question propounded arid as it is not relied upon in argument we shall leave it on one side.

It is not disputed that Rev. Stat. §5209, if applicable, punishes the bank manager, and those who aided and abetted him in his crime. Coffin v. United States, 156 U. S. 432, 447. The argument is that Congress has no power to punish offences against the property rights of State banks. It is said that the statute is so broad that-it covers such offences when they could not result in any loss to the Federal Reserve Banks, and it is suggested that if upheld the Act will invalidate similar statutes of the States. This argument is well answered by Hiatt v. United States, 4 F. (2d) 374, 377. Certiorari denied. 268 U. S. 704. Of course an act may be criminal under the laws of both jurisdictions. United States v. Lanza, 260 U. S. 377, 382. And if a state bank chooses to come into the System created by the United States, the United States may punish acts injurious to the System, although doné to a corporation that the State also is entitled to protect. The general proposition is too plain to need more than statement. That there is such a System and that the Reserve Banks are interested in the solvency and financial condition of the members also is too obvious to require a repetition of the careful analysis presented by the Solicitor General. The only suggestion that may deserve a word is that the statute applies indifferently whether there is a loss to the Reserve Banks or not. But every fraud like the one before us weakens the member bank and therefore weakens the System. Moreover, when it is necessary in order to prevent an evil to make the law embrace more than the precise thing to be prevented it may do so. It may punish the forgery and utterance of spurious interstate bills of lading in order to protect the genuine commerce. United States v. Ferger, 250 U. S. 199. See further, Southern Ry. Co. v. United States, 222 U. S. 20, 26. That principle is settled. Finally, Congress may employ state corporations with their consent as instrumentalities of the United States, Clallam County v. United States, 263 U. S. 341, and may make frauds that impair their efficiency crimes. United States, v. Walter, 263 U. S. 15. We answer the question: Yes.