Source: https://caselaw.findlaw.com/us-supreme-court/522/23.html
Timestamp: 2020-02-22 09:17:22
Document Index: 293436048

Matched Legal Cases: ['§1097', '§1097', '§1097', '§1097', '§1097', '§1097', '§656', '§656', '§656', '§1097', '§1097', '§1097', '§1097', '§1097', '§1097', '§1097', '§1097', '§1097', '§668', '§1097', '§1097', '§1097', '§656', '§1097', '§656', '§1097', '§1097', '§1097', '§1097', '§1097']

FindLaw: US Supreme Court Opinions: BATES(1997)
Argued: October 7, 1997Decided: November 4, 1997
James and Laurenda Jackson owned and operated Education America, Inc., a for-profit consulting and management firm for technical and vocational schools. In 1986, the Jacksons acquired the Acme Institute of Technology, a not-for-profit technical school, and appointed petitioner Bates, then vice president of Education America, to serve as Acme's treasurer. In 1987, James Jackson, as Acme's president, signed a program participation agreement with the Department of Education that authorized the school to receive student loan checks through the Title IV Guaranteed Student Loan (GSL) program. See 20 U.S.C. 1070 et seq. Acme's participation hinged upon both its continued accreditation by an approved accrediting association and Jackson's promise to comply with all applicable statutes and regulations. Under the GSL program, banks and other private institutions lent money to Acme students for tuition and other educational expenses. The Federal Government administered the program and guaranteed payment if a student borrower defaulted. Acme would receive a loan check directly from the lender, endorse the check, and credit the amount of the check against the student's tuition debt. If a GSL student withdrew from Acme before the term ended, the governing regulations required the school to return to the lender, within a specified time, a portion of the loan proceeds. The lender would then deduct the refund from the amount that the student owed. If Acme did not repay the lender, the student-and if she defaulted, the Government-would remain liable for the full amount of the loan. In late 1987, pursuant to decisions made by the Jacksons and Bates, Acme initiated a pattern and practice of not making GSL refunds. Bates gave priority to the payment of a management fee to Education America and salaries to the Jacksons, and instructed other Acme employees not to make the required GSL refunds. Bates, as Education America's vice president, wrote a letter that stated the unmade refunds were solely the responsibility and decision of the corporate office. By March 1989, Acme's refund liability had grown to approximately $85,000. Acme subsequently lost its accreditation, and, in 1990, the Department of Education notified the school that Acme was no longer eligible to participate in the GSL program. A few months later, Acme ceased operations. In 1994, Bates was indicted on twelve counts of "knowingly and willfully misapply[ing]" federally insured student loan funds, in violation of 20 U.S.C. 1097 (a) (1988 ed.) and 18 U.S.C. 2. Agreeing with Bates that conviction under §1097(a) for willful misapplication required an allegation of the defendant's "intent to injure or defraud the United States," the District Court dismissed the indictment because it lacked such an allegation. The Seventh Circuit vacated the judgment and reinstated the prosecution, concluding that §1097(a) required the Government to prove only that Bates knowingly and willfully misapplied Title IV funds.
Specific intent to injure or defraud someone, whether the United States or another, is not an element of the misapplication of funds proscribed by §1097(a). The text of §1097(a) does not include an "intent to defraud" requirement, and this court ordinarily resists reading words into a statute that do not appear on its face. In contrast, 20 U.S.C. 1097 (d), enacted at the same time as §1097(a), has an "intent to defraud" requirement. It is generally presumed that Congress acts intentionally and purposely where it includes particular language in one section of a statute but omits it in another. See Russello v. United States, 464 U.S. 16 , 23. Despite the contrasting language of §§1097(a) and (d), Bates relies on decisions interpreting 18 U.S.C. 656 which proscribes willful misapplication of bank funds. An "intent to defraud" element, originally included in the text of §656, was dropped from the text during a technical revision of the criminal code. In view of that history, courts have continued to hold that an "intent to defraud" is an element of the offense described in §656. Assuming, without deciding, that §656 is correctly read to retain an "intent to defraud" element, §1097(a) never contained such a requirement, one present from the start and still contained in §1097(d). Neither text nor history warrants adoption of Bates's construction of §1097(a). Nor does §1097(a) set a trap for the unwary. As construed by the Seventh Circuit, §1097(a) catches only the transgressor who intentionally exercises unauthorized dominion over federally insured student loan funds for his own benefit or for the benefit of a third party. So read, the measure does not render felonious innocent maladministration of a business enterprise or a merely unwise use of funds. Furthermore, a 1992 amendment adding "fails to refund" to §1097(a)'s text does not demonstrate that the deliberate failure to return GSL funds, without an intent to defraud, became an offense within §1097(a)'s compass only under the statute's current text. The added words simply foreclose any argument that §1097(a) does not reach the failure to make refunds. Cf. Commissioner v. Estate of Sternberger , 348 U.S. 187 , 194. Finally, as nothing in the text, structure, or history of §1097(a) warrants importation of an "intent to defraud" requirement into the misapplication proscription, the rule of lenity does not come into play in this case. See United States v. Wells , 519 U. S. ___, ___. Pp. 5-9.
The indictment in this case (App. 2-12) alleged the following facts. James and Laurenda Jackson owned and operated Education America, Inc., a for-profit consulting and management firm for technical and vocational schools. In December 1986, the Jacksons acquired the Acme Institute of Technology, a not-for-profit technical school located in South Bend, Indiana, which offered associate degree programs in electronic engineering, and tool, die, and plastics mold design. After the acquisition, the Jacksons appointed Bates-then the vice president of Education America-to serve as treasurer of Acme's board of trustees.
Under the GSL program, banks and other private institutions lent money to Acme students for tuition and other educational expenses. The Federal Government administered the program and guaranteed payment if a student borrower defaulted. Acme would receive a loan check directly from the lender, endorse the check, and credit the amount of the check against the student's tuition debt. If a GSL student withdrew from Acme before the term ended, the governing regulations (34 CFR §§668.22 and 682.606 (1990)) required Acme to return to the lender a portion of the loan proceeds, based upon how late in the term the student withdrew and how much the student had paid at that point. 2
By October 1988, Acme had amassed roughly $55,000 in unmade GSL refunds. Acme's financial aid director sent James Jackson a letter in January 1989 to draw Jackson's attention to the gravity of the unmade refunds, which then totaled $68,000. By March 1989, Acme's refund liability had grown to approximately $85,000. In a letter dated March 13, 1989, Bates, as Education America's vice president, released Acme's financial aid director from all responsibility concerning GSL refunds, as she had requested. The letter stated that unmade refunds were "solely the responsibility and decision of the corporate office."
On September 8, 1994, a federal grand jury indicted Bates on twelve counts of "knowingly and willfully misapply[ing]" federally insured student loan funds between January 15, 1990, and June 15, 1990, in violation of 20 U.S.C. 1097 (a) (1988 ed.) and 18 U.S.C. 2. On February 7, 1995, Bates filed a motion to dismiss the indictment. He argued, and the District Court agreed, that conviction under §1097(a) for willful misapplication required an allegation of the defendant's "intent to injure or defraud the United States." Because the indictment lacked such an allegation, the District Court dismissed it.
The text of §1097(a) does not include an "intent to defraud" state of mind requirement, and we ordinarily resist reading words or elements into a statute that do not appear on its face. In contrast, 20 U.S.C. 1097 (d), enacted at the same time as §1097(a), makes it a felony "knowingly and willfully" to "destro[y] or concea[l] any record relating to the provision of assistance under [Title IV] with intent to defraud the United States " (emphasis added). As this Court has reiterated: " '[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion.' " Russello v. United States , 464 U.S. 16 , 23 (1983) (quoting United States v. Wong Kim Bo , 472 F. 2d 720, 722 (CA5 1972)).
In another case involving a different defendant named Bates, the Seventh Circuit explained why §656 included an "intent to injure or defraud" element:
Nor does §1097(a) set a "trap for the unwary," as the Seventh Circuit suggested §656 would if read to render felonious "every unauthorized loan by a bank officer." See Bates , 852 F. 2d, at 215. Under the Seventh Circuit's construction, §1097(a) catches only the transgressor who intentionally exercises unauthorized dominion over federally insured student loan funds for his own benefit or for the benefit of a third party. "[I]nnocent . . . maladministration of a business enterprise" or a use of funds that is simply "unwise," see Brief for Petitioner 5, does not fit within that construction. 7
This change, Bates argues, establishes that the deliberate failure to return GSL funds, without an intent to defraud, was not previously an offense within §1097(a)'s compass, but became one only under the statute's current text. Congress' 1992 amendment hardly means that §1097(a) did not previously cover the conduct in question. Cf. Commissioner v. Estate of Sternberger , 348 U.S. 187 , 194 (1955) ("Subsequent amendments have clarified and not changed th[e earlier] principle."). The three added words-"fails to refund"-simply foreclose any argument that §1097(a) does not reach the failure to make refunds; those words do not make the argument a persuasive one. See H. R. Conf. Rep. No. 102-630, p. 513 (1992) ("[F]ailure to pay refunds does constitute criminal misapplication under current law. Language is added in this bill merely as a clarification.").
4 United States v. Whitlock , 663 F. 2d 1094, 1102 (CADC 1980); United States v. Wester , 90 F. 3d 592, 595 (CA1 1996); United States v. Castiglia , 894 F. 2d 533, 537 (CA2), cert . denied, 497 U.S. 1004 (1990); United States v. Thomas , 610 F. 2d 1166, 1174 (CA3 1979); United States v. Duncan , 598 F. 2d 839, 858 (CA4), cert . denied, 444 U.S. 871 (1979); United States v. McCord , 33 F. 3d 1434, 1448 (CA5 1994), cert . denied sub nom . Haley v. United States , 515 U.S. 1132 (1995); United States v. Woods , 877 F. 2d 477, 479 (CA6 1989); United States v. Crabtree , 979 F. 2d 1261, 1266 (CA7 1992), cert. denied, 510 U.S. 878 (1993); United States v. Ness , 665 F. 2d 248, 249 (CA8 1981); United States v. Wolfswinkel , 44 F. 3d 782, 786 (CA9 1995); United States v. Evans , 42 F. 3d 586, 589 (CA10 1994); United States v. Morales , 978 F. 2d 650, 652 (CA11 1992).
6 Ratzlaf v. United States , 510 U.S. 135 (1994), does not bear on our decision today. Ratzlaf decided only, in the particular statutory context of currency structuring, that knowledge of illegality was an element of 31 U.S.C. 5322(a) as that provision was then framed. Ratzlaf did not involve the question presented here regarding §1097(a), which is whether, in addition to a knowledge requirement, the Government must allege and prove an "intent to injure or defraud."