Bates v. United States

PETITIONER: Bates
RESPONDENT: United States
LOCATION: Randon Bragdon's Dental Office

DOCKET NO.: 96-7185
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Seventh Circuit

CITATION: 522 US 23 (1997)
ARGUED: Oct 07, 1997
DECIDED: Nov 04, 1997

ADVOCATES:
C. Richard Oren - on behalf of the Petitioner
Lisa Schiavo Blatt -
Lisa S. Blatt - on behalf of the Respondent

Facts of the case

In 1986, Garrit Bates was appointed to serve as the Acme Institute of Technology'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. Under the GSL program, governing regulations required Acme to return a portion of a loan if the student withdrew from Acme before the term ended. In 1987, Jackson and Bates began a practice of not making GSL refunds. Ultimately, in 1994, Bates was indicted on of "knowingly and willfully misapplying" federally insured student loan funds, in violation of 20 USC section 1097(a). The District Court dismissed Bates's indictment because it lacked an allegation of his "intent to injure or defraud the United States." Reinstating the prosecution, the Court of Appeals concluded that section 1097(a) required the Government to prove only that Bates knowingly and willfully misapplied Title IV funds.

Question

Does 20 USC section 1097(a), which makes it a felony "knowingly and willfully" to misapply student loan funds insured under Title IV of the Higher Education Act of 1965, require an allegation and proof that a defendant specifically intended to injure or defraud either the United States as loan guarantor or another?

Media for Bates v. United States

Audio Transcription for Oral Argument - October 07, 1997 in Bates v. United States

Audio Transcription for Opinion Announcement - November 04, 1997 in Bates v. United States

Ruth Bader Ginsburg:

This case concerns 20 U.S.C. section 1097(a) which declares it a felony to misapply federally insured student loan funds, knowing and willfully.

The question presented is whether Section 1097(a) demanded allegation and proof that the defendant specifically intented to defraud someone, either the United States as loan guarantor or another.

We hold that the government need not prove that the defendant had an intent to defraud the United States or another and affirm the judgment of the Court of Appeals for the Seventh Circuit.

The federally insured student loan program involved in this case works as follows: Banks lend money to students pursuing post secondary education.

The lenders send checks covering tuition directly to the educational institution which credits the bank's loan against the student's tuition debt.

The government guarantees payment of the loan to the students default, if the student withdraws before the end of the term, the school must return to the bank the unused portion of the loan, if the school does not return the money, the student and if she default, the government will be obligated to repay the loan.

Defendant Bates was the chief financial officer of the school that received federally insured loans according to the indictment, Bates repeatedly diverted unused loan funds to the school's owners instead of making refunds to the bank.

For this alleged conduct, he was charged with 12 violations of 1097(a), the indictment alleged that Bates knowingly and willfully misapplied student's loan funds but they it did not alleged in addition that he acted with an intent to injure or defraud the United States.

The District Court held that misapplication on the Section 1097(a) required such an allegation and therefore dismiss the indictment.

The Seventh Circuit reversed.

In conflict with the Eleventh Circuit, the Seventh Circuit held that intent to defraud is not an element of the crime defined in Section 1097(a).

Our decision today dissolves that conflict.

The word "intent to defraud" to not appear in the text of Section 1097(a) but they do appear in the text of a neighboring provision 20 U.S.C. 1097(d) passed at the same time as Section 1097(a).

This Court has said in similar context when Congress includes language in one section and omits it from a closely place section of the same statute courts should not add what Congress omitted.

Bates emphasized is that another statute 18 U.S.C. Section 656 which prohibits the willful misapplication of bank funds, similarly does not now contain an intent to defraud requirement but that statute, as originally written, did contain such as requirement, the requirement was dropped out during the technical revision of the criminal code.

Courts have continued to read and intent to defraud requirement into Section 656, concerned that without it even unauthorized loan, every an authorized loan by a bank officer might be turned into a federal offense.

We assume, without deciding, that Section 656 is correctly read to retain an intent to defraud element but Section 1097(a) is differently situated, Section 1097(a) never contained an intent to defraud a requirement and there is no risk under the Seventh Circuit's contraction that near maladministration or unwise use of funds would fall within Section 1097(a)'s compass.

The decision affirming the Seventh Circuit's judgment is unanimous.