OCTOBER TERM, 1997
Syllabus
BATES
v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH
CIRCUIT
No. 96-7185. Argued October 7, 1997-Decided 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
24
Syllabus
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. 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 de-
25
fraud" 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. 482, 499.
Pp.29-33.
96 F.3d
964, affirmed.
GINSBURG, J., delivered the opinion for a unanimous Court.
C.
Richard Oren, by appointment of the Court, 520 U. S.
1114, argued the cause and filed briefs for petitioner.
Lisa Schiavo Blatt argued the cause for the United
States.
With her on the brief were Acting Solicitor General Dellinger,
Acting Assistant Attorney General Keeney, Deputy Solicitor General
Dreeben, and Daniel S. Goodman.
*
JUSTICE GINSBURG delivered the opinion of the Court. This case
concerns the meaning of § 490(a) (Pub. L. 99498), 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).
I
The indictment in this case, App. 2-12, alleged the following
facts. James and Laurenda Jackson owned and operated
* Lisa B. Kemler filed a brief for the National
Association of Criminal Defense Lawyers as
amicus curiae
urging reversal.
26
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 Batesthen 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.).l 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 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
1 In 1992, Congress amended the GSL program and renamed it the
Federal Family Education Loan Program. Higher Education Amendments
of 1992, Pub. L. 102-325, § 411(a)(1), 106 Stat. 510. Because the
indictment in this case concerns only pre-1992 conduct, we refer to
the program as the GSL program.
27
withdrew and how much the student had paid at that point.2
Refunds to the lender, the applicable regulation, § 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." App. 4. 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." See
ibid. 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 segregated the unearned
student-loaned tuition from the general account. Acme's former
owners had used this special account to ensure that funds were
always available for timely refunds to lenders.
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
2 The Department of Education since has consolidated the
requirements of §§ 668.22 and 682.606 into the current § 668.22.
See 59 Fed. Reg. 61211 (1994).
28
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." See
id., at 5.
In April 1989, the National Association of Trade and Technical
Schools, a national accrediting association, conducted an on-site
audit of Acme to determine whether it should continue to accredit
the school. A month later, the Association reported to the
Department of Education that Acme had "inadequately demonstrated
its ability to make appropriate and timely refunds," and had
"loaned substantial amounts of money to [James Jackson,] the chief
trustee." The report also noted evidence that management fees had
been "upstream[ed]" to Education America. See
ibid. Acme
subsequently lost its accreditation, and the Department of
Education notified the school on April 7, 1990, that effective
March 8, 1990, Acme was no longer eligible to participate in the
GSL program. On June 5, 1990, Acme ceased operations. During
Bates's tenure as Acme's chief financial officer, the school
amassed $139,649 in unmade refunds, not including interest and
certain special allowances.
On September 8, 1994, a federal grand jury indicted Bates on
twelve counts of "knowingly and willfully misapply[ing],"
id., at 11, 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 (1988 ed.). 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."
96 F.3d
964, 967 (CA7 1996). Because the indictment lacked such an
allegation, the District Court dismissed it.
29
On appeal, the Seventh Circuit vacated the District Court's
judgment and reinstated the prosecution.
96
F.3d 964 (1996). The Court of Appeals concluded that § 1097(a)
required the Government to prove only that "the defendant
misapplied-i. e., converted-Title IV funds and that he did so
knowingly and willfully."
Id., at 970. The Seventh Circuit's
decision conflicts with the Eleventh Circuit's decision in
United States v.
Kammer, 1 F.3d
1161, 1165-1166 (1993), which held that § 1097(a) requires the
Government to allege and prove that the defendant had an "intent to
defraud" the United States. We granted certiorari to resolve this
conflict, 519 U. S. 1108 (1997), and now affirm the Seventh
Circuit's judgment.
II
Our inquiry begins with the text of 20 U. S. C. § 1097(a) (1988
ed.). At the time of the offenses charged in the indictment, the
measure provided in relevant part: "Any person who knowingly and
willfully embezzles, misapplies, steals, or obtains by fraud, false
statement, or forgery any funds, assets, or property provided or
insured under this subchapter ... shall be fined not more than
$10,000 or imprisoned for not more than 5 years, or both." 3
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, § 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 intention-
3 Higher Education Amendments of 1986, Pub. L. 99-498, § 490(a),
100 Stat. 1491.
30
ally 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)).
Despite the contrasting language of §§ 1097(a) and (d), Bates
urges that an "intent to defraud" is an essential, albeit
unexpressed, element of the offenses charged against him. For this
argument, Bates relies primarily upon the District Court's
reasoning in this case. The District Court, like the Eleventh
Circuit in
United States v.
Kammer, 1 F. 3d, at 1165,
looked to decisions interpreting 18 U. S. C. § 656, which
proscribes willful misapplication of bank funds. The Courts of
Appeals unanimously agree that § 656 requires the Government to
prove that the defendant acted with an intent to "injure or
defraud" the bank or "deceive" a bank officer,4 even though the
statute, on its face, contains no such element.5 In another case
involving a different defendant named Bates, the Seventh Circuit
explained why § 656 included an "intent to injure or defraud"
element:
"The current statutory language does not expressly require any
proof of [fraudulent or injurious] intent.
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 (CAW 1994);
United States v.
Morales,
978 F.2d
650, 652
(CA111992).
5 Section 656 currently provides that any person "connected in
any capacity with any Federal Reserve bank" or a related
organization commits a felony if she "embezzles, abstracts,
purloins or willfully misapplies any of the moneys, funds or
credits" of the bank or related organization.
31
Originally the statute did require proof of intent to 'injure or
defraud' the bank or 'deceive' a bank officer but these words were
inadvertently dropped in the course of a technical revision of the
criminal code. To avoid making every unauthorized loan by a bank
officer a willful misapplication of bank funds, courts ... read the
missing words back into the section." United States v.
Bates, 852 F.2d
212, 215 (1988).
Assuming, without deciding, that the Seventh Circuit's reading
of § 656 is correct, § 1097(a) never contained, as § 656 did, an
"intent to defraud" requirement, a requirement present from the
start and still contained in § 1097(d). In short, there is here
neither text nor history warranting the construction of § 1097(a)
that Bates urges us to adopt.6
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
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."
7The Seventh Circuit's "working definition" of § 1097(a) reads:
"[W]illful misapplication under § 1097(a) requires the government
to allege and prove that the defendant consciously, voluntarily,
and intentionally exercised unauthorized control or dominion over
federally provided or guaranteed Title IV funds that interfered
with the rights of the funds' true owner(s), for the use and
benefit of the defendant or a third person,
32
Bates also relies on a 1992 amendment to § 1097(a), which added
"fails to refund" to the provision's text.8 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 thee
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.").
Bates finally urges that, to the extent § 1097(a) is ambiguous,
the rule of lenity supports interpretation of the provision to
include fraudulent intent as an essential element of the offense of
knowing and willful misapplication of funds. As we have explained,
however, nothing in the text, struc-
while knowing that such an exercise of control or dominion over
the funds was a violation of the law." 96 F. 3d, at 970.
The Government argues that the Seventh Circuit erred in reading
§ 1097(a) to require proof that a defendant knew his misapplication
violated
the law. Brief for United States 21-22. However,
the Government did not challenge by cross-petition any part of the
Seventh Circuit's decision, so the question whether the defendant
must know his conduct was a violation of the law is not before
us.
8 As amended in 1992, § 1097(a) reads in relevant part:
"Any person who knowingly and willfully embezzles, misapplies,
steals, obtains by fraud, false statement, or forgery, or fails to
refund any funds, assets, or property provided or insured under
this subchapter ... shall be fined not more than $20,000 or
imprisoned not more than 5 years, or both." Higher Education
Amendments of 1992, Pub. L. 102-325, § 495, 106 Stat. 631.
33
ture, or history of § 1097(a) warrants importation of an "intent
to defraud" requirement into the misapplication proscription. The
rule of lenity, therefore, does not come into play. See
United
States v.
Wells, 519 U. S. 482, 499
(1997). The Government need not charge or prove that Bates aimed to
injure or defraud anyone, nor is it a defense that Bates hoped the
Jacksons, the students, or someone else would pay the amount due
the lenders so that the federal fisc would suffer no loss.
***
For the reasons stated, the judgment of the Court of Appeals for
the Seventh Circuit is
Affirmed.
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