Bates v. U.S.
| Decision Date | 04 November 1997 |
| Docket Number | 967185 |
| Citation | 118 S.Ct. 285,139 L.Ed.2d 215,522 U.S. 23 |
| Parties | Garrit BATES, Petitioner, v. UNITED STATES |
| Court | U.S. Supreme Court |
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.
Held: 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, 104 S.Ct. 296, 300, 78 L.Ed.2d 17. 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, 75 S.Ct. 229, 233, 99 L.Ed. 246. 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. ___-___.
96 F.3d 964 (C.A.7 1996), affirmed.
C. Richard Oren, Rochester, IN, for petitioner.
Lisa S. Blatt, Washington, DC, for respondent.
This case concerns the meaning of 100 Stat. 1491, as added, 20 U.S.C. §1097(a) (1988 ed.), which declared it a felony "knowingly and willfully'' to misapply student loan funds insured under Title IV of the Higher Education Act of 1965. The United States acknowledges that §1097(a) demanded allegation and proof of the defendant's intentional conversion of loan funds to his own use or the use of a third party. The question presented is whether §1097(a) demanded, in addition, allegation and proof that the defendant specifically intended to injure or defraud someone-either the United States as loan guarantor, as the District Court read the measure, or another. We hold, in accord with the Court of Appeals, that 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 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.
On April 30, 1987, James Jackson, as president of Acme, signed a program participation agreement with the Department of Education that authorized the school to receive student loan checks through the Title IV federal Guaranteed Student Loan (GSL) program. See 20 U.S.C. §1070 et seq. (1988 ed.). 1 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 (34 C.F.R. §§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 Refunds to the lender, the applicable regulation (34 C.F.R. §682.607) instructed, were to be made within a specified period (30 or 60 days) following the student's withdrawal. The lender would then deduct the refund from the amount that the student owed. If Acme did not refund the loans to the lender, the student-and if she defaulted, the Government-would remain liable for the full amount of the loan.
Around the end of 1987, pursuant to decisions made by the Jacksons and Bates, Acme initiated a pattern and practice of not making GSL refunds. On April 14, 1988, James Jackson sent a letter to Acme's director ordering him, effective the following month, to "tally [Acme's] receipts for the preceding month and remit a management fee of 10% of [the] total receipts to Education America, Inc.'' The letter also told the director to pay the Jacksons a monthly salary. The letter further stated: "If the above creates a cash shortfall in your school, money will be loaned back to you to cover the shortfall.'' Bates, serving as Acme's chief financial officer, permitted these fee and salary payments to take priority over the GSL refunds, and specifically instructed other Acme employees not to make the required GSL refunds. In late 1988 or early 1989, Education America officials ordered Acme to stop using a special bank account that...
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