Williams v. United StatesAnnotate this Case
458 U.S. 279 (1982)
U.S. Supreme Court
Williams v. United States, 458 U.S. 279 (1982)
Williams v. United States
Argued April 20, 1982
Decided June 29, 1982
458 U.S. 279
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FIFTH CIRCUIT
Title 18 U.S.C. § 1014 makes it a crime to "knowingly mak[e] any false statement or report," or "willfully overvalu[e] any land, property or security," for the purpose of influencing the action of described financial institutions (including federally insured banks) "upon any application, advance, . . . commitment, or loan." Petitioner engaged in a series of transactions seemingly amounting to a case of "check-kiting" between his accounts in federally insured banks, first drawing a check far in excess of his account balance in one bank and depositing it in his account in the other, and then reversing the process between his accounts. Petitioner was convicted in Federal District Court of violating § 1014, and the Court of Appeals affirmed.
Held: Petitioner's conduct in depositing "bad checks" in federally insured banks is not proscribed by § 1014. Pp. 458 U. S. 282-290.
(a) Petitioner's actions did not involve the making of a "false statement." Technically speaking, a check is not a factual assertion at all, and therefore cannot be characterized as "true" or "false." Similarly, petitioner's conduct cannot be regarded as "overvalu[ing]" property or a security. In a literal sense, the face amounts of the checks were their "values." To interpret § 1014 as meaning that a drawer of a check has made a "false" statement whenever he has insufficient funds in his account at the moment the check is presented would "sligh[t] the wording of the statute," United States v. Enmons,410 U. S. 396, 410 U. S. 399, and would render a wide range of unremarkable conduct violative of federal law. When § 1014 was enacted, federal action was not necessary to interdict the deposit of bad checks, for fraudulent checking activities already were addressed in comprehensive fashion by state law. Pp. 458 U. S. 284-287.
(b) The legislative history does not support the proposition that § 1014 was designed to have general application to the passing of worthless checks, and does not demand that the statute be read as applicable to anything other than representations made in connection with conventional loan or related transactions. A narrow interpretation of § 1014 is consistent with the usual approach of lenity in the construction of criminal statutes. Pp. 458 U. S. 288-290.
639 F.2d 1311, reversed and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which POWELL, REHNQUIST, STEVENS, and O'CONNOR, JJ., joined. WHITE, J., filed a dissenting opinion, in which BRENNAN, J., joined, post, p. 458 U. S. 291. MARSHALL, J., filed a dissenting opinion, in which BURGER, C.J., and BRENNAN and WHITE, JJ., joined, post, p. 458 U. S. 292.
JUSTICE BLACKMUN delivered the opinion of the Court.
In this case, we must decide whether the deposit of a "bad check" in a federally insured bank is proscribed by 18 U.S.C. § 1014.
In 1975, petitioner William Archie Williams purchased a controlling interest in the Pelican State Bank in Pelican, La., and appointed himself president. The bank's deposits were insured by the Federal Deposit Insurance Corporation.
Among the services the bank provided its customers at the time of petitioner's purchase was access to a "dummy account," used to cover checks drawn by depositors who had insufficient funds in their individual accounts. Any such check was processed through the dummy account and paid from the bank's general assets. The check was then held until the customer covered it by a deposit to his own account, at which time the held check was posted to the customer's account and the dummy account was credited accordingly. As president of the bank, petitioner enjoyed virtually unlimited use of the dummy account, and by May 2, 1978, his personal overdrafts amounted to $58,055.44, approximately half the total then covered by the account.
On May 8, 1978, federal and state examiners arrived at the Pelican Bank to conduct an audit. That same day, petitioner
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
paid petitioner's May 9 check for $58,500 when it cleared on May 12.
Petitioner next attempted to balance his Pelican account by depositing a $65,000 check drawn on his account at yet another institution, the Sabine State Bank in Many, La. Unfortunately, the balance in petitioner's Sabine account at the time was only $1,204.81. The Sabine Bank therefore refused payment when Pelican presented the check on May 17. On May 23, petitioner settled his Pelican account by depositing at the Pelican Bank a $65,000 money order obtained with the proceeds from a real estate mortgage loan.
The bank examiners, meanwhile, had been following petitioner's activities with considerable interest. Their scrutiny ultimately led to petitioner's indictment, in the United States District Court for the Western District of Louisiana, on two counts of violating 18 U.S.C. § 1014. [Footnote 2] That provision makes it a crime to
"knowingly mak[e] any false statement or report, or willfully overvalu[e] any land, property or security, for the purpose of influencing in any way the action of [certain enumerated financial institutions, among them banks whose deposits are insured by the Federal Deposit Insurance Corporation], upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan. . . ."
The first of the counts under § 1014 was directed at the May 9, 1978, check drawn on the Winn Bank, and charged that petitioner
"did knowingly and willfully overvalue . . . a security, that is a check . . . for the purpose of influencing the Pelican State Bank, . . . a bank the deposits of which are insured by the Federal Deposit Insurance Corporation, upon an advance of money and extension of credit."
§ 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]
At petitioner's trial, the court charged the jury that "[a] check is a security for purposes of Section 1014." The court then explained that
"[t]he Government charges that Mr. Williams was involved in check-kiting -- a scheme whereby false credit is obtained by the exchange and passing of worthless checks between two or more banks."
Id. at 36. To convict petitioner, the court continued, the jury had to find as to each count that "the defendant . . . did knowingly and willfully make a false statement of a material fact," that the statement "influence[d] the decision of the [bank] officers or employees," and that "the defendant made the false statement with fraudulent intent to influence the [bank] to extend credit to the defendant." Id. at 37-38. "The crucial question in check-kiting," the court concluded,
"is whether the defendant intended to write checks which he could not reasonably expect to cover, and thereby defraud the bank, or whether he was genuinely involved in the process of depositing funds and then making legitimate withdrawals against them."
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]
Among other things, petitioner argued on appeal that the indictment did not state a violation of § 1014. The Court of Appeals rejected this contention, however, concluding that petitioner's actions "constitute classic incidents of check-kiting." 639 F.2d 1311, 1319 (CA5 1981). In line with its earlier decision in United States v. Payne, 602 F.2d 1215 (CA5 1979), cert. denied, 445 U.S. 903 (1980), the court found such action proscribed by the statute.
We granted certiorari, limited to Questions 3 and 4 presented by the petition, in order to resolve a conflict concerning the reach of § 1014. [Footnote 5] 454 U.S. 1030 and 1096 (1981).
To obtain a conviction under § 1014, the Government must establish two propositions: it must demonstrate (1) that the defendant made a "false statement or report," or "willfully overvalue[d] any land, property or security," and (2) that he did so "for the purpose of influencing in any way the action of [a described financial institution] upon any application, advance, . . . commitment, or loan." We conclude that petitioner's convictions under § 1014 cannot stand, because the Government has failed to meet the first of these burdens.
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,
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,
"[t]he drawer engages that upon dishonor of the draft and any necessary notice of dishonor or protest he will pay the amount of the draft to the holder."
§ 3-413(2), 2 U.L.A. 424 (1977). The Code also makes clear, however, that
"[a] check or other draft does not of itself operate as an assignment of any funds in the hands of the drawee available for its payment, and the drawee is not liable on the instrument until he accepts it."
§ 3-409(1), 2 U.L.A. 408 (1977). Louisiana, the site of petitioner's unfortunate banking career, embraces verbatim each of these definitions. See La.Rev.Stat.Ann. §§ 10:3-104, 10:3-409, 10:3-413 (West Supp.1982). [Footnote 6]
For similar reasons, we conclude that petitioner's actions cannot be regarded as "overvalu[ing]" property or a security. Even assuming that petitioner's checks were property or a security as defined by § 1014, the value legally placed upon them was the value of petitioner's obligation; as defined by Louisiana law, that is the only meaning actually attributable to a bank check. See La.Rev.Stat.Ann. §§ 10:3-409(1), 10:3-413(2) (West Supp.1982). In a literal sense, then, the face amounts of the checks were their "values."
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
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
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]
In the 1948 codification of Title 18 of the United States Code, 62 Stat. 683, § 1014 reduced 13 existing statutes, which criminalized fraudulent practices directed at a variety of financial and credit institutions, to a single section. See 18 U.S.C. § 1014, Historical and Revision Notes. Of the originally enumerated institutions, [Footnote 10] only two -- the Reconstruction Finance Corporation, see 15 U.S.C. § 616(a) (1946 ed.), and the Federal Reserve Banks, see 12 U.S.C. § 596 (1946 ed.) -- performed duties other than the making of farm and home loans, and neither of those two organizations accepted checks for deposit from private customers. See United States v. Sabatino, 485 F.2d 540, 548 (CA2 1973), cert. denied, 415 U.S. 948 (1974); United States v. Edwards, 455 F.Supp. 1354, 1357 (MD Pa.1978). It is evident, then, that bad checks were not among the "false statements" or "overvalued property" originally addressed by the statute. While Congress has added and subtracted certain institutions to and from the list covered by § 1014 over the intervening years, no changes have been made in the type of transactions proscribed by the provision.
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
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).
A second 1970 amendment, Pub.L. 91-609, § 915, 84 Stat. 1815, added banks insured by the Federal Deposit Insurance Corporation, Federal Home Loan Banks, and institutions insured by the Federal Savings and Loan Insurance Corporation, for the first time listing institutions that engaged in commercial checking. [Footnote 12] But there was no contemporaneous congressional recognition of the substantial expansion of federal criminal jurisdiction that would attend the proscription of bad checks. To the contrary, the Reports accompanying the amendment stated simply that the addition
"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
H.R.Rep. No. 91-1556, p. 35 (1970). See H.R.Conf.Rep. No. 91-1784, p. 66 (1970). Congressional debate was directed only at the addition of federally insured savings and loan institutions, which was said to
"mak[e] it a Federal crime to submit false data to an insured savings and loan on the true value of a property on which a mortgage is to be granted."
116 Cong.Rec. 42633 (1970) (remarks of Rep. Sullivan).
Given this background -- a statute that is not unambiguous in its terms and that, if applied here would render a wide range of conduct violative of federal law, a legislative history that fails to evidence congressional awareness of the statute's claimed scope, and a subject matter that traditionally has been regulated by state law -- we believe that a narrow interpretation of § 1014 would be consistent with our usual approach to the construction of criminal statutes. The Court has emphasized that,
"'when choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite.'"
United States v. Bass,404 U. S. 336, 404 U. S. 347 (1971), quoting United States v. Universal C.I.T. Credit Corp.,344 U. S. 218, 344 U. S. 221-222 (1952). [Footnote 13] To be sure, the rule of lenity does not give courts license to disregard otherwise applicable enactments. But in a case such as this one, where both readings of § 1014 are plausible,
"it would require statutory language much more explicit than that before us here to lead to the conclusion that Congress intended to put the Federal Government in the business of policing the"
deposit of bad checks. United States v. Enmons, 410 U.S. at 410 U. S. 411.
The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
As the Government explains, a check-kiting scheme typically works as follows:
"The check-kiter opens an account at Bank A with a nominal deposit. He then writes a check on that account for a large sum, such as $50,000. The check-kiter then opens an account at Bank B and deposits the $50,000 check from Bank A in that account. At the time of deposit, the check is not supported by sufficient funds in the account at Bank A. However, Bank B, unaware of this fact, gives the check-kiter immediate credit on his account at Bank B. During the several-day period that the check on Bank A is being processed for collection from that bank, the check-kiter writes a $50,000 check on his account at Bank B and deposits it into his account at Bank A. At the time of the deposit of that check, Bank A gives the check-kiter immediate credit on his account there, and on the basis of that grant of credit pays the original $50,000 check when it is presented for collection."
"By repeating this scheme, or some variation of it, the check-kiter can use the $50,000 credit originally given by Bank B as an interest-free loan for an extended period of time. In effect, the check-kiter can take advantage of the several-day period required for the transmittal, processing, and payment of checks from accounts in different banks. . . ."
Brief for United States 113.
Petitioner also was charged with -- and thereafter convicted of -- one count of misapplying bank funds, in violation of 18 U.S.C. § 656. The validity of that conviction, which was affirmed on appeal, is not before us.
Neither of the § 1014 counts of the indictment expressly charged petitioner with making a "false statement." The first count, however, did allege that he
"presented said check for deposit at Pelican State Bank . . . and represented and caused to be represented to said bank that said check was of a value equal to the face amount of the check, when in truth and fact, as the [petitioner] then well knew, there were no sufficient funds in the account of W. A. Williams at the Winn State Bank and Trust Company, to cover said check."
App. 3. Similar language was employed in the second § 1014 count. Id. at 4.
The sentence of probation also applied to petitioner's conviction for misapplication of bank funds. Seen 2, supra.
See United States v. Sher, 657 F.2d 28 (CA3 1981), cert. pending, No. 81-1047 (holding that § 1014 does not proscribe check-kiting). Cf. United States v. Krown, 675 F.2d 46, 50 (CA2 1982) (noting the conflict).
Unlike many state statutes that do proscribe conduct such as that engaged in by petitioner, the federal scheme obviously does not, in terms, reach the deposit of checks that are supported by insufficient funds. See Comment, Insufficient Funds Checks in the Criminal Area: Elements, Issues, and Proposals, 38 Mo.L.Rev. 432 (1973).
That is particularly true where, as here, it is not immediately clear what "common understanding" would recognize as the implied representation of the act of depositing one's own check. The United States suggests that one who deposits a check represents that he "currently has funds on deposit sufficient to cover the face value." Brief for United States 19. But it would be equally plausible to suggest that many people understand a check to represent that the drawer will have sufficient funds deposited in his account by the time the check clears, or that the drawer will make good the face value of the draft if it is dishonored by the bank. We therefore find "common understanding" a particularly fragile foundation upon which to base an interpretation of § 1014.
JUSTICE MARSHALL's dissent does not fully respond to this point. That opinion, like the Government's brief, emphasizes that petitioner's "conduct was wrongful," post at 458 U. S. 293, and deals only with § 1014's application to check-kiting. See also post at 458 U. S. 294, 458 U. S. 295, 458 U. S. 299, 458 U. S. 300, and 458 U. S. 301. Indeed, the dissent seems to suggest that that statute would not reach the conduct of a defendant who
"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."
Post at 458 U. S. 292. Accepting JUSTICE MARSHALL's theory, however, would bring such conduct within the literal language of the statute, for a "false statement" would have been submitted with the hope of inducing a bank to "advance" funds. While the dissent attempts to avoid this by suggesting that there would be no violation of § 1014 absent an intent "to defraud," post at 458 U. S. 301, n. 4, the language of the statute imposes no such intent requirement. And as we emphasize above, we believe that the wording of § 1014 would be a peculiar choice of terms if Congress wished to proscribe such conduct.
JUSTICE MARSHALL's dissent rests entirely on the proposition that petitioner's conduct falls within the "plain language" of § 1014. Post at 458 U. S. 293. See also post at 458 U. S. 301, 458 U. S. 302, and 458 U. S. 305-306. In our view, that literally is not true. And even if one looks to the "common understanding" so emphasized by JUSTICE MARSHALL, post at 458 U. S. 296-298, the statute is, at best, ambiguous, for we doubt that the public typically describes bad checks as "false statements. "
These included the Farmers' Home Corporation, the Federal Crop Insurance Corporation, Federal Reserve Banks, the Farm Credit Administration, Federal Credit Banks, the Federal Farm Mortgage Corporation, the National Agricultural Credit Corporation, Federal Home Loan Banks, the Home Owners' Loan Corporation, the Reconstruction Finance Corporation, and related institutions. See 7 U.S.C. §§ 1026(a), 1514(a) (1946 ed.); 12 U.S.C. §§ 596, 981, 1122, 1123, 1138d(a), 1248, 1312, 1313, 1441(a), 1467(a) (1946 ed.); 15 U.S.C. § 616(a) (1946 ed.).
The Committee added ambiguously that the statute
"is not, however, limited by its terms to borrowers, and would seem also to apply to others, including for example, officers and employees of the agencies and institutions named."
S.Rep. No. 1078, 88th Cong., 2d Sess., 4 (1964).
Also added to the list in 1970 were the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation themselves, as well as the Administrator of the National Credit Union Administration. Pub.L. 91-609, § 915, 84 Stat. 1815.
We therefore find it somewhat surprising that JUSTICE MARSHALL's dissenting opinion takes us to task for noting the applicability of the rule of lenity to the interpretation of what we believe to be an ambiguous statute.
JUSTICE WHITE, with whom JUSTICE BRENNAN joins, dissenting.
The majority reverses petitioner's conviction under 18 U.S.C. § 1014 on the grounds that the Government has not shown that he made a "false statement or report" or "willfully overvalue[d] any land, property or security." Ante at 458 U. S. 284. According to the majority, a check is not a statement; it is merely an order to the drawee bank to pay the face amount to the payee and a promise to pay the amount of the check upon notice of dishonor. Ante at 458 U. S. 284-285. Like JUSTICE MARSHALL, I do not disagree with the majority that, under the Uniform Commercial Code, a check constitutes an order to the drawee bank and a promise to pay upon notice of dishonor. However, the fact that the Uniform Commercial Code describes a check in this manner does not mean that a check does not carry with it other representations, for the Code does not purport to contain an all-inclusive definition of a check.
It defies common sense and everyday practice to maintain, as the majority does, that a check carries with it no representation as to the drawer's account balance. No bank would give a customer immediate credit for a check drawn on another bank or reduce a check to cash if it did not believe that the check would be paid in the normal course of collection. It could be argued that petitioner did not make a false statement with respect to the May 10 check drawn on the Pelican Bank, because he knew the bank would pay the check through its dummy account. However, petitioner does not contend that he had any such arrangement with the Winn Bank, and thus the May 9 check for $58,500 drawn on the Winn Bank, when his balance was $4,649.97, can fairly be said to constitute a false statement. In any event, a properly instructed jury surely found that Williams had made false representations with respect to each of the checks that were the subject of this indictment.
If the majority really means what it says in 458 U. S. S. 292