The U.S. Court of Appeals here reversed a lower court decision yesterday and reinstated the government's charges that two former Export-Import Bank officials violated their public trust by using their positions to sell stock in a Thai paper company at an inflated price.
The Justice Department has alleged in the two-year-old civil case that Henry J. Kearnes, the bank's president from 1969 to 1973, and Donald Bostwick, the bank's executive vice president in the same period, reaped $351,000 in unwarranted profits from the stock sale and is seeking to recover that amount.
U.S. District Court Judge June Green had dismissed the charges against Kearns and Bostwick on grounds that the government had not proved that it had suffered a direct financial loss as a result of the two official's stock dealings.
But the appellate court, in a decision written by Judge David L. Bazelon and concurred in by Judge J. Skelly Wright and George E. MacKinnon, said 'federal courts have often provided relief for the government in civil actions charging its agents with abuse of office."
When Kearns was nominated by former President Richard M. Nixon to be the bank's president in 1969, he told a Senate confirmation hearing that he would resign his directorship in the Siam Kraft Paper Co. Ltd. and place 100,000 shares of stock he owned in the firm in a blind trust. Siam Kraft had borrowed $14 million from the bank before Kearn's appointment and the debt remained outstanding during Kearns' tenure at the bank.
In December 1972, Kearn's trust sold the stock for $5 a share to the American arm of the Japanese trading firm Mitsui. The government has alleged that the $5-a-share price was greatly inflated and said at the time of the sale the stock was traded on the Bangkok Stock Exchange for $1.75 a share.
The result, the government alleges, was a breach of trust on the part of Kearns. mortgage certificates which provide an annual return of principalled an