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Matched Legal Cases: ['§ 1014', '§ 1014', '§ 1014', '§ 3', '§ 3', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 5', '§ 1014', '§ 1014', '§ 7', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 341', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014', '§ 1014']

Williams v. United States - 458 U.S. 279 (1982) :: Justia US Supreme Court Center
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Case	U.S. Supreme CourtWilliams v. United States, 458 U.S. 279 (1982)Williams v. United StatesNo. 80-2116Argued April 20, 1982Decided June 29, 1982458 U.S. 279CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
639 F.2d 1311, reversed and remanded. Page 458 U. S. 280
On May 8, 1978, federal and state examiners arrived at the Pelican Bank to conduct an audit. That same day, petitioner Page 458 U. S. 281 embarked on a series of transactions that seemingly amounted to a case of "check-kiting." [Footnote 1] He began by opening a checking account with a deposit of $4,649.97 at the federally insured Winn State Bank and Trust Company in Winnfield, La. The next day, petitioner drew a check on his new Winn account for $58,500 -- a sum far in excess of the amount actually on deposit at the Winn Bank -- and deposited it in his Pelican account. Pelican credited his account with the face value of the check, at the same time deducting from petitioner's account the $58,055.44 total of his checks that previously had been cleared through the dummy account. At the close of business on May 9, then, petitioner had a balance of $452.89 at the Pelican Bank.
On May 10, petitioner wrote a $60,000 check on his Pelican account -- again, a sum far in excess of the account balance -- and deposited it in his Winn account. The Winn Bank immediately credited the $60,000 to petitioner's account there, and Pelican cleared the check through its dummy account when it was presented for payment on May 11. The Winn Bank routinely Page 458 U. S. 282 paid petitioner's May 9 check for $58,500 when it cleared on May 12.
The other Page 458 U. S. 283 § 1014 count used virtually identical language to indict petitioner for depositing in his Winn account the May 10 check drawn on the Pelican Bank. App. 3-4. [Footnote 3]
Id. at 38. The jury convicted petitioner on both counts, and he was sentenced to six months' incarceration on the second § 1014 count. For the first § 1014 count, he was placed on five years' probation, to begin upon his release from confinement. App. 39. [Footnote 4] Page 458 U. S. 284
Although petitioner deposited several checks that were not supported by sufficient funds, that course of conduct did not involve the making of a "false statement," for a simple reason: technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as "true" or "false." Petitioner's bank checks served only to direct the drawee banks to pay the face amounts to the bearer, while committing petitioner to make good the obligations if the banks dishonored the drafts. Each check did not, in terms, Page 458 U. S. 285 make any representation as to the state of petitioner's bank balance. As defined in the Uniform Commercial Code, 2 U.L.A. 17 (1977), a check is simply "a draft drawn on a bank and payable on demand," § 3-104(2)(b), which "contain[s] an unconditional promise or order to pay a sum certain in money," § 3-104(1)(b). As such,
The foregoing description of bank checks is concededly a technical one, and the Government therefore argues with some force that a drawer is generally understood to represent that he "currently has funds on deposit sufficient to cover the face value of the check." Brief for United States 19. See United States v. Payne, 602 F.2d at 1218. If the Page 458 U. S. 286 drawer has insufficient funds in his account at the moment the check is presented, the Government continues, he effectively has made a "false statement" to the recipient. While this broader reading of § 1014 is plausible, we are not persuaded that it is the preferable or intended one. It "slights the wording of the statute," United States v. Enmons, 410 U. S. 396, 410 U. S. 399 (1973), for, as we have noted, a check is literally not a "statement" at all. In any event, whatever the general understanding of a check's function, "false statement" is not a term that, in common usage, is often applied to characterize "bad checks." And, when interpreting a criminal statute that does not explicitly reach the conduct in question, we are reluctant to base an expansive reading on inferences drawn from subjective and variable "understandings." [Footnote 7]
Equally as important, the Government's interpretation of § 1014 would make a surprisingly broad range of unremarkable conduct a violation of federal law. While the Court of Appeals addressed itself only to check-kiting, its ruling has wider implications: it means that any check, knowingly supported by insufficient funds, deposited in a federally insured bank could give rise to criminal liability, whether or not the drawer had an intent to defraud. Under the Court of Appeals' approach, the violation of § 1014 is not the scheme to pass a number of bad checks; it is the presentation of one false statement -- that is, one check that, at the moment of deposit, is not supported by sufficient funds -- to a federally insured Page 458 U. S. 287 bank. The United States acknowledged as much at oral argument. Tr. of Oral Arg. 40. Indeed, each individual count of the indictment in this case stated only that petitioner knowingly had deposited a single check that was supported by insufficient funds, not that he had engaged in an extended scheme to obtain credit fraudulently. [Footnote 8]
Yet, if Congress really set out to enact a national bad check law in § 1014, it did so with a peculiar choice of language, and in an unusually backhanded manner. Federal action was not necessary to interdict the deposit of bad checks, for, as Congress surely knew, fraudulent checking activities already were addressed in comprehensive fashion by state law. See Comment, Insufficient Funds Checks in the Criminal Area: Elements, Issues, and Proposals, 38 Mo.L.Rev. 432 (1973). Absent support in the legislative history for the proposition that § 1014 was "designed to have general application to the passing of worthless checks," United States v. Krown, 675 F.2d 46, 50 (CA2 1982), we are not prepared to hold petitioner's conduct proscribed by that particular statute. [Footnote 9] Page 458 U. S. 288
The legislative history does not demand a broader reading of the statute. The amendments adding institutions to § 1014's list attracted little attention in Congress, and were dealt with summarily; at no point was it suggested that the statute should be applicable to anything other than representations Page 458 U. S. 289 made in connection with conventional loan or related transactions. In 1964, for example, when Congress, by Pub.L. 88-353, § 5, 78 Stat. 269, added Federal Credit Unions to the statutory list, § 1014 was described as barring "false statements or willful overvaluations in connection with applications, loans, and the like." S.Rep. No. 1078, 88th Cong., 2d Sess., 1 (1964). Thus, the Senate Committee on Banking and Currency declared that § 1014 "is designed primarily to apply to borrowers from Federal agencies or federally chartered organizations." [Footnote 11] Id. at 4. Similarly, the first of two 1970 amendments, which added state-chartered credit unions to the statutory list, Pub.L. 91-468, § 7, 84 Stat. 1017, was characterized simply as "relating to false statements in loan and credit applications." H.R.Rep. No. 91-1457, p. 21 (1970).
"would describe more explicitly the institutions which are covered by 18 U.S.C. § 1014, which provides penalties for making false statements or reports in connection with loans or other similar Page 458 U. S. 290 transactions."
It is so ordered. Page 458 U. S. 291
Before addressing the application of § 1014 to Williams' conduct, I think that it is helpful to set forth clearly what is not involved here. This is not a case in which a defendant, through careless bookkeeping, wrote checks on accounts with insufficient funds. Nor is this a case in which a defendant wrote a check on an account containing insufficient funds with the good faith intention to deposit in that account an amount that would cover the check before it cleared in the normal course of business. Rather, this case clearly involves Page 458 U. S. 293 fraudulent conduct. Petitioner Williams engaged in an intentional check-kiting scheme. He misled the first bank into honoring his worthless, or virtually worthless, check and extending him immediate credit. This extension of credit enabled him to "play the float" and cover that check by misleading another bank into extending him credit on an equally worthless check. In effect, Williams was able to obtain interest-free extensions of credit. Williams, who was a bank president, does not, nor can he, make any credible argument that he was unaware that his conduct was wrongful. With this in mind, I turn to the question whether Williams' conduct constitutes a violation of 18 U.S.C. § 1014.
The language of § 1014 is sweeping. It embraces numerous entities in which the Federal Government has a financial interest. It proscribes, in the disjunctive, a wide variety of Page 458 U. S. 294 deceptive schemes that might impair the financial stability of these institutions. Cf. United States v. Naftalin, 441 U. S. 768, 441 U. S. 774 (1979) (disjunctive prohibitions intended to "cover additional kinds of illegalities -- not to narrow the reach of the prior sections"). The statute refers broadly to "any false statement or report," and to overvaluations of "any" property or security. The list of transactions to which the statute applies is equally expansive -- it covers
Nothing on the face of § 1014 "suggests a congressional intent to limit its coverage" to a particular kind of transaction. United States v. Culbert, supra, at 435 U. S. 373. Check-kiting, which threatens the assets of federally insured banks in precisely the same way as a misrepresentation in a loan application, should not be excluded from the reach of the statute simply because the terms of the statute and its legislative history do not specifically identify check-kiting by name or precise description. This method of statutory construction was Page 458 U. S. 295 rejected recently in Harrison v. PPG Industries, Inc., 446 U. S. 578, 446 U. S. 592 (190):
The basis for the Court's conclusion that Williams did not make a "false statement or report" is concededly technical Page 458 U. S. 296 and "simple": "a check is not a factual assertion at all, and therefore cannot be characterized as true' or `false.'" Ante at 458 U. S. 284. This argument proves too much: it would apply equally to material omissions or failures to disclose in connection with loan applications. However, the Courts of Appeals have held that the failure to disclose material information needed to avoid deception in connection with loan transactions covered by § 1014 constitutes a "false statement or report," and thus violates the statute. See, e.g., United States v. Greene, 578 F.2d 648, 657 (CA5 1978), cert. denied, 439 U. S. 1133 (1979). I assume that the majority would not disagree with this analysis, which is based on established contract principles. I am at a loss as to why the majority does not apply the same analysis to the transactions at issue in this case.
F. Whitney, The Law of Modern Commercial Practices § 341 (2d ed.1965). [Footnote 2/1] Despite the majority's Page 458 U. S. 297 equivocation on this point, those who write or accept checks in exchange for goods, services, or cash undoubtedly understand that this implicit representation has been made. [Footnote 2/2] Page 458 U. S. 298 A check is accepted with the expectation that it will be paid in the normal course of collection. A banker who knew that the drawer did not have funds on deposit would not credit the check to the drawer's account or reduce it to cash. Regardless of any contractual breach also involved in check-kiting, a person who writes a series of checks knowing that there are no funds to cover them has made intentional false representations within the reach of § 1014.
In addition to violating § 1014 by intentionally making a false statement to a federally insured bank for the purpose of obtaining credit, Williams also violated the statute for a separate and independent reason. Although Williams presented to the bank for immediate credit a check which on its face represented an amount exceeding $50,000, he well knew that, in fact, the check was virtually worthless. In so doing, he "willfully overvalue[d] . . . property or security" for the purpose of obtaining credit. [Footnote 2/3] The Court's rejection of the Government's Page 458 U. S. 299 argument with respect to this issue is startling in both its brevity and its concededly technical and "literal" interpretation of the legal value of a check which completely ignores the meaning attributed to checks in the real world.
The very essence of a check-kiting scheme is the successful overvaluation of a security or property which misleads a bank into issuing immediate credit on the assumption that the security or property is in fact valued at the amount represented on its face. A check-kiting scheme is successful only when the bank to which the check is presented assumes that the check is supported by adequate funds in the account upon which it is drawn, and that the face amount of the check is, in fact, its value. See supra at 458 U. S. 296-298; United States v. Payne, 602 F.2d 1215, 1217-1218 (CA5 1979). If the bank does not accept the valuation on the face of the check, and instead either inquires into the status of the account on which the check is drawn or waits until the check clears before paying the face amount of the check, the scheme will collapse. Of course, it would be more prudent for a bank to take such precautions, just as it would be prudent for banks to inquire carefully into the accuracy of all representations made concerning the value of collateral pledged as security for conventional loans. However, this more prudent course is not always practicable. Moreover, the bank may not believe that such precautions are necessary where, as here, the person presenting the check is the president of another bank presumed to know the illegality, and the drastic adverse consequences Page 458 U. S. 300 to a bank, of a check-kiting scheme. In any event, a bank's failure to take all possible precautions does not bar prosecution under § 1014, which places the burden of avoiding false representations, at the risk of criminal prosecution, upon the person who seeks the funds of the federally insured bank. Section 1014 forbids a person seeking such funds to make "any" false statement or to "willfully overvalue" any security or property to obtain use of the bank's funds. A kited check is "willfully overvalued" within the meaning of the statute, just as worthless securities presented as collateral for a loan are "willfully overvalued." See United States v. Calandrella, 605 F.2d 236 (CA6), cert. denied sub nom. Kaye v. United States, 444 U.S. 991 (1979).
If a worthless check is submitted to a bank for reasons other than to obtain an extension of credit, the conduct simply is not check-kiting in the ordinary sense of the term, and Page 458 U. S. 301 would not fall within the prohibition of § 1014. [Footnote 2/4] However, if a properly instructed jury concludes that a worthless check was submitted in order to obtain immediate credit from a bank, there is no reason to regard the conduct as falling outside the reach of § 1014. The jury that convicted Williams was so instructed, see n. 2, supra, and found that Williams' conduct constituted a "false representation" designed to influence the banks into extending him immediate credit.
The Court finds no indication that Congress intended to exclude check-kiting schemes from the scope of the statute. The Court's brief review of the legislative history to § 1014 does suggest that the primary purpose of the statute is to prohibit misrepresentations in connection with conventional loan applications. However, neither this fact, nor the fact that most convictions under the statute involve such transactions, compels the Court to ignore the broad language and Page 458 U. S. 302 purposes of the statute by interpreting it to cover only these transactions. In the past, we have consistently rejected the argument that a criminal statute must be given its narrowest meaning by limiting its scope to effectuate only its primary purpose. See, e.g., United States v. Turkette, supra; United States v. Naftalin, 441 U. S. 768 (1979); United States v. Moore, 423 U. S. 122 (1975).
In contrast with this established approach, the majority today interprets § 1014 without acknowledging the broad statutory language chosen by Congress. This error is compounded by the Court's failure to address the fact that this broad language was intended to proscribe, in generic and disjunctive Page 458 U. S. 303 terms, precisely the type of conduct of which Williams was found guilty -- intentionally misleading the bank into extending him credit -- and to protect federally insured institutions from precisely the risk of loss to which Williams' conduct subjected them. Ignoring these factors, the majority begins its analysis by employing an oversimplified, concededly technical and literal interpretation of the "legal definition" of a check. It then observes that Congress never explicitly stated that it intended the statute to cover check-kiting schemes. It concludes that, in the absence of such an express statement, the rule of lenity requires that the statute not cover these schemes.
If the broad language and evident purpose of the statute had been given effect, there would have been no need to parse the legislative history for affirmative evidence that Congress "demand[ed] a broader reading of the statute." Ante at 458 U. S. 288. Holding that § 1014 reaches check-kiting does Page 458 U. S. 304 not produce an absurd result, render the statute internally contradictory, or diverge from legislative policy. To the contrary, Congress' policy, manifest in § 1014 and elsewhere throughout Title 18 of the United States Code, is that federal criminal sanctions are necessary to provide federally insured banking institutions with comprehensive protection against practices that cause risk of loss. The Court's construction of § 1014, on the other hand, results in a large loophole in the protection afforded these institutions by limiting the statute's application to formal loan transactions. After today's decision, a bank's protection against false statements intended to influence credit transactions depends not upon whether a misrepresentation was made in connection with a loan, advance, or commitment, but rather upon whether a court concluded that the transaction was "traditional" or that Congress specified that transaction by name in a committee report.
There is no question that Williams, a bank president, knew that his check-kiting scheme was wrongful. The majority's attempt to buttress its decision by arguing that check-kiting has traditionally been regulated by the States, and that federal enforcement might interfere with this regulation, is completely unjustified. [Footnote 2/5] The Federal Government, which provides Page 458 U. S. 305 deposit insurance, has a paramount interest in safeguarding the financial integrity of federally insured banking institutions. The Courts of Appeals have been virtually unanimous in holding that check-kiting is subject to federal prosecution under the mail and wire fraud statutes, see, e.g., United States v. Giordano, 489 F.2d 327 (CA2 1973); United States v. Constant, 501 F.2d 1284 (CA5 1974), cert. denied, 420 U.S. 910 (1975), and the majority apparently does not question these decisions. Therefore, a check-kiting prosecution under § 1014, which, by its terms, applies only to federally insured institutions, results in no new inroad upon state criminal jurisdiction.
Under the version of the rule of lenity adopted today, conduct which falls within the literal terms of a broad statute, which proscribes in disjunctive and generic terms the type of conduct at issue, and which is designed to protect against the very risk created by such conduct, escapes the reach of the statute unless Congress specifies that conduct by name in the statute or describes it in detail in the statute's legislative history. Page 458 U. S. 306 In order to find Williams' conduct outside the scope of § 1014, the majority ignores the function of a check in today's society. The rule of lenity has never been interpreted to require this kind of result. I am at a loss to explain why the Court adopts this approach today, and consequently turns the rule of lenity on its head. Accordingly, I dissent.