United States of America, Appellee, v. Frederick J. Tyson, A/k/a Omar Harkkon, Defendant, Appellant, 690 F.2d 9 (1st Cir. 1982)

Defendant was convicted under 18 U.S.C. § 2314 ("Transportation of stolen goods, securities ..."). This appeal presents a single question of statutory interpretation: did Congress intend in paragraph three of that section to encompass by the phrase "falsely made, forged, altered, or counterfeited securities" a valid check with a forged countersignature? Though a question of first impression in this circuit, the Second, Eighth, Ninth and Tenth Circuits have held that Congress did not so intend.¹  We agree with the analysis of those courts and reverse appellant's conviction.

There is no dispute between the parties over the facts that led to appellant's indictment. Using the name Frederick Tyson²  and supplying false account information, appellant opened a bank account with a cash deposit of twenty-five dollars. Later the same day, an unidentified person deposited into appellant's account an American Express check made out for the sum of $11,709.75 payable to Don Roth's Restaurant, Inc. The check bore two endorsements: one which purported to be that of Michael Roth, manager of Don Roth's Restaurant, but which was a forgery and one which purported to be that of appellant. The check traveled in interstate commerce from Boston to New York where it was paid. When appellant returned to the bank two months later, the bank informed him that his account had been closed³  and presented him with two checks-one in the amount of his initial deposit and one in the amount of the American Express check.

Appellant was charged in a one count indictment with causing the interstate transportation of a falsely made, forged, altered or counterfeited security in violation of 18 U.S.C. §§ 2314 and 2.⁴  At the conclusion of the government's case in a jury-waived trial, appellant moved for acquittal contending that, as a matter of law, the forging of an endorsement on an otherwise valid security does not render the security falsely made, forged, altered, or counterfeited for purposes of § 2314. After taking the motion under advisement, the district court denied defendant's motion, found him guilty, and subsequently ordered him committed to the custody of the Attorney General for a period of two years. That sentence was stayed pending this appeal.

Section 2314 provides in relevant part (paragraph 3):⁵ 

"Whoever, with unlawful or fraudulent intent, transports in interstate or foreign commerce any falsely made, forged, altered, or counterfeited securities or tax stamps, knowing the same to have been falsely made, forged, altered or counterfeited; ...

Shall be fined not more than $10,000, or imprisoned not more than ten years, or both."

Emphasizing the word altered, the district court found that the "plain language" of paragraph three applies unambiguously to a forged countersignature on a check. Because the forged endorsement "convert(ed) the check from order paper to bearer paper"-"a material alteration under the common law and under the Uniform Commercial Code"-the court reasoned, "(t)he check in this case clearly is an 'altered ... securit(y).' " It was unpersuaded by precedent to the contrary in other circuits.

The district court first found that the seminal decision in this line, Streett v. United States, 331 F.2d 151 (8th Cir. 1964), had relied inappropriately on Prussian v. United States, 282 U.S. 675, 51 S. Ct. 223, 75 L. Ed. 610 (1931). In Prussian the Supreme Court, construing language very similar to that in § 2314, held that 18 U.S.C. § 148 (now § 471)⁶  did not include the forging of an endorsement. The court in Streett found Prussian relevant precedent despite the fact that the statute interpreted in Prussian concerned only government securities.

"The government objects to the relevance of these cases (Prussian and those following it) in that they all are concerned with the protection of the United States' securities. Nevertheless, the objective being sought here is to discover the scope of § 2314, and authoritative court interpretations of a statute bearing strikingly similar language would appear to be pertinent here." 331 F.2d at 154.

The district court disagreed, however, arguing that Congress' purpose to protect the "bonds and securities (sic) of the United States" rather than to punish "any fraud or wrong on individuals" (quoting Prussian, 282 U.S. at 678, 51 S. Ct. at 224) made the section interpreted by Prussian inapposite to § 2314.⁷ 

The court below was also unpersuaded by the fact that the legislative history of paragraph three (added to the National Stolen Property Act of 1934 by amendment in 1939) emphasized the actual false making or reproducing of securities (see Streett, supra, at 154; United States v. Sciortino, 601 F.2d 680, 682 (2d Cir. 1979)).⁸  Pointing to United States v. Sheridan, 329 U.S. 379, 67 S. Ct. 332, 91 L. Ed. 359 (1946), in which the Supreme Court held paragraph three applicable to the forging of two checks, the court reasoned that Congress did not intend to reach only large scale counterfeiting and that there is thus no basis for distinguishing a forged "subsequent endorsement" from a forged "original endorsement".⁹ 

Finally, the district court rejected the reasoning of United States v. Simpson, 577 F.2d 78, 81 (9th Cir. 1978) (accord, United States v. Sciortino, supra, at 682) that the 1968 amendment to § 2314 making illegal the interstate transportation of traveler's checks with forged countersignatures¹⁰  is evidence for the proposition that forged countersignatures on other securities are not covered by the general language of paragraph three. "The better inference to be drawn", the court concluded, "is that because Congress has not amended paragraph three since the Street (sic) decision was handed down, paragraph three still means what its plain words say it means."

We are not sure that the Court's interpretation in Prussian of language parallel to § 2314 is so distinguishable as to bear no weight. The Court did not, as the district court suggests, rely principally on the purpose of the Act it construed but rather on its language. See Prussian v. United States, supra, 282 U.S. at 677-78, 51 S. Ct. at 224-225 (interpretation including endorsement "would be possible only by a strained construction of the language"-"if the point were doubtful, the doubt would be resolved by a consideration of the purpose and history of the Act"). If it were clear, as the district court concluded, that to transform a security through endorsement from order paper to bearer paper is to "alter" the security, the Court in Prussian would not have had to reach the conclusion it did. Nor are we impressed by the government's argument that the narrow definition of "government security" in § 147 (now § 8) and the broad definition of "security" in § 2311 make Prussian inapposite.¹¹  The Court's holding was not so narrow.

"The endorsement was at most the purported obligation of the endorser, not of the United States, and a purported transfer of the title of the draft to the endorsee. In neither aspect was the endorsement itself an obligation of the United States as defined by § 147, or such a part of the draft as to constitute the forging of the endorsement a forgery of the draft." 282 U.S. at 678, 51 S. Ct. at 224 (emphasis added). See also Streett, supra, at 154.

Nor are we sure that the legislative history of the 1939 amendment adding paragraph three has been brushed aside by United States v. Sheridan, supra. Sheridan itself emphasized that history.

"In amending § 3 (of the National Stolen Property Act-paragraph three of 18 U.S.C. § 2314) Congress was extending the federal law enforcement arm to reach primarily the larger dealers in forged and counterfeited securities. Not only forged checks, but forged or counterfeited bonds and coupons, as well as other forms of securities, and the instruments with which these are made were the target. The legislative history shows that the purpose was to bring operators in these false securities into substantially the same reach of federal power as applied to others dealing in stolen goods, securities and money." 329 U.S. 389, 67 S. Ct. 337 (footnotes omitted).

Though Sheridan held that paragraph three applies to small time as well as large scale counterfeiters, id. at 390, 67 S. Ct. at 337-338, nothing in Sheridan suggested that paragraph three applies to anything but the actual false making or reproducing of securities. It was "not questioned" in Sheridan "that the checks were 'securities' " or "that they were 'forged.' " Id. at 382, 67 S. Ct. at 334.

We are certain, however, that the only sensible interpretation of § 2314 after the 1968 amendment is that, except in the case of traveler's checks, a forged endorsement does not convert a valid security into one "falsely made, forged, altered, or counterfeited."¹²  Paragraph four makes punishable the transportation in interstate commerce "with unlawful or fraudulent intent" of "any traveler's check bearing forged countersignature." Traveler's checks are explicitly included within the meaning of the term "securities" as used in paragraph three. See § 2311. Therefore, if a forged countersignature were included within the meaning of the phrase "forged, altered, or counterfeited" in paragraph three, paragraph four would add nothing to paragraph three.¹³  We hesitate to ascribe to Congress such a meaningless effort. The district court did not attempt to explain how its interpretation of paragraph three could make paragraph four anything but redundant.

Our interpretation is supported by the legislative history. Paragraph four was added by amendment with full consideration of the prior holding in Streett v. United States, 331 F.2d 151 (8th Cir. 1964) that a forged countersignature does not make an otherwise valid security "falsely made, forged, altered, or counterfeited" within the meaning of § 2314.

"Section 2311 of title 18 of the United States Code includes traveler's checks under the definition of the term 'securities' as used in an existing paragraph of section 2314. However, the Department of Justice points out in a letter dated January 31, 1968, that the words 'falsely made, forged, altered, or counterfeited' have been construed to refer only to the making or execution of an instrument and not to cover a validly executed instrument bearing a forged countersignature (Streett v. United States, 331 F.2d 151 (C.A. 8, 1964))." H.R.Rep.No.1728, 90th Cong., 2d Sess., reprinted in 1968 U.S.Code Cong. & Ad.News 3654, 3654-55.

In adding paragraph four, Congress responded to contentions that forged countersignatures on traveler's checks pose an especial interstate and therefore federal problem.

"Representatives of the traveler's check industry also state that their records indicate that a great majority of traveler's checks issued are used in interstate commerce. Consequently, lost or stolen traveler's checks are most susceptible to forgeries and illegal transportation." Id.

Thus, though acknowledging the general scope of the holding in Streett -that paragraph three does "not ... cover a validly executed instrument bearing a forged countersignature"-Congress amended § 2314 only with respect to traveler's checks. See United States v. Simpson, supra, at 81.

Therefore, based on the language of § 2314 examined as a whole and as reinforced by its legislative history, we follow our sister courts and hold that the phrase "falsely made, forged, altered, or counterfeited securities" in paragraph three of § 2314 does not include a valid security with a forged endorsement. The government cites no cases that have held to the contrary. The cases upon which it relies have all involved the falsification of elements necessary to the completion of the security itself rather than to the subsequent transfer of that security. See, e.g., United States v. Hagerty, 561 F.2d 1197 (5th Cir. 1977) (making of draft with fictitious drawee information); United States v. Huntley, 535 F.2d 1400 (5th Cir. 1976) (same); United States v. Tucker, 473 F.2d 1290 (6th Cir. 1973) (sight draft executed with fictitious name); United States v. Di Pietto, 396 F.2d 283 (7th Cir. 1968) (falsified payee information on stolen money order) (criticizing in dicta holding of Streett) .

Our holding does not create a loophole in the federal scheme for prosecution of crimes involving the interstate transportation of stolen or falsified securities. We have no doubt that a valid security with a forged endorsement, no matter how the security was acquired by the forger, has been "converted or taken by fraud" within the meaning of paragraph one of § 2314. See United States v. Handler, 142 F.2d 351 (2d Cir. 1944) (statute applicable to any taking whereby a person dishonestly obtains goods or securities belonging to another with the intent to deprive the owner of the rights and benefit of ownership); cf. Prosser on Torts, § 15 (conversion). Unlike the transportation of "falsely made, forged, altered, or counterfeited securities", however, Congress made the interstate transportation of such converted securities a federal crime only if their value exceeds $5,000.

The security in question here was, as a matter of agreed fact, worth more than $5,000. That appellant was charged under paragraph three and not under paragraph one appears anomalous. But that he was is clear and undisputed.¹⁴  We are not at liberty to speculate about appellant's guilt for a crime with which he was not charged and thus had no notice to defend. We find the evidence insufficient to convict appellant as charged under paragraph three of § 2314.

Reversed.