Thompson v. United States

LII note: The U.S Supreme Court has now decided Thompson v. United States

Issues

Does 18 U.S.C § 1014 criminalize the making of a true but misleading statement to federal agencies such as the Federal Deposit Insurance Corporation?

Oral argument:
January 14, 2025
Court below:
United States Court of Appeals for the Seventh Circuit

This case asks the Court to determine if 18 U.S.C. § 1014, which criminalizes the making of a false statement to influence federal agencies, also criminalizes true but misleading statements. Petitioner contends that the statute is limited to false statements. Respondent contends that section 1014 criminalizes any “false” statement, including misleading ones. This case touches upon important questions regarding the balancing act between protecting financial institutions from fraudulent acts and overexpansive criminal liability.

Questions as Framed for the Court by the Parties

Whether 18 U.S.C. § 1014 , which prohibits making a “false statement” for the purpose of influencing certain financial institutions and federal agencies, also prohibits making a statement that is misleading but not false.

Facts

In pertinent part, 18 U.S.C. § 1014 criminalizes knowingly making false statements to a lending institution. Specifically, the section authorizes a maximum penalty of not more than $1,000,000 and a 30-year maximum imprisonment for “whoever knowingly makes any false statement…for the purpose of influencing in any way the action of the…Federal Deposit Insurance Corporation…upon any…loan.” Arising out of his dealings with Washington Federal Bank for Savings (“Washington Federal”) dating back to 2011, Patrick Thompson (“Thompson”) was indicted on two counts of violating § 1014 in April 2021.

Over the course of four years, Thompson took out three loans from Washington Federal. First, in 2011, Thompson borrowed $110,000 to pay for an equity stake in his law firm. Thompson guaranteed the loan with his residence as property collateral. Second, in 2013, Thompson took out a second loan of $20,000 to pay off taxes. Third, in 2014, Thompson borrowed $89,000 to repay a debt Thompson owed to a third-party bank. Thompson did not guarantee the second and third loans. In total, Thompson took out $219,000 in loans.

Evidence presented to the court demonstrated that Thompson acknowledged his total debt, plus interest, of $249,050 to Washington Federal during the following three years. The evidence included an email from Washington Federal’s president with a chart breakdown, two separate instances where Thompson listed the correct total on a loan application, and, in 2017, Thompson provided his accountant with the tax statement that he received from Washington Federal, which contained the proper outstanding balance.

Washington Federal failed in 2017. The Federal Deposit Insurance Corporation (“FDIC”) became its receiver , assuming the responsibility to collect assets owed to Washington Federal.

In carrying out this receivership, FDIC hired Planet Home Lending (“Planet Home”), a loan receiver service, to assist. In 2018, Planet Home sent Thomspon an invoice indicating that he owed Washington Federal $269,120.58. A week later, Thompson called Planet Home and claimed to have no recollection of that balance. Thompson denied owing $269,000, stating that he “only borrowed $110,000”—the amount of the first loan. Thompson claimed that he had “never received an invoice” from Washington Federal and that he had “no idea where the 269 number” came from because it did not “match with anything that I have.”

On March 1, 2018, Thompson spoke to FDIC contractors. The contractors told Thompson that he owed approximately $269,000. The contractors testified that Thompson denied this number and claimed he had only borrowed $110,000 for “home improvement.” . In December 2018, Thompson and the FDIC agreed to settle Thompson’s debt for $219,000, the original amount Thompson owed without any interest included.

In April 2021, a grand jury charged Thompson with two counts of violating 18 U.S.C. § 1014. Count One was for lying to Planet Home on February 23, 2018, and Count Two was for lying to the FDIC on March 1, 2018.

The jury convicted Thompson on both counts. The United States District Court for the Northern District of Illinois sentenced Thompson to four months in prison and ordered restitution in the amount of $50,120,58 (his unpaid interest) to the FDIC. Thompson appealed to the United States Court of Appeals for the Seventh Circuit , arguing that his statements were not “false statements” under the definition of 18 U.S.C. § 1014.

On appeal, Thompson argued that his statements were not false; they were true but misleading. The Seventh Circuit rejected this argument and explained that the Seventh Circuit had already decided, in United States v. Freed , that 18 U.S.C § 1014 criminalized misleading representations because false under the understanding of the statute includes the failure to disclose material information to avoid deception. The Seventh Circuit affirmed the conviction.

Petitioner Thompson subsequently petitioned the Supreme Court of the United States for a writ of certiorari on April 5, 2024. . Petitioner sought the Supreme Court’s review to resolve the circuit split on whether 18 U.S.C § 1014 criminalizes statements that are true but misleading. The United States Supreme Court granted certiorari on October 4, 2024.

Analysis

THE SCOPE OF “FALSE” UNDER 18 U.S.C § 1014

Petitioner Thompson argues that section 1014 prohibits false statements, not those that are true yet misleading. Thompson posits that “false” and “misleading” are different words with different definitions; therefore, because 18 U.S.C. § 1014 speaks explicitly of false statements, true but misleading statements do not fall within its purview. . For support, Thompson argues, from a textualist point of view, that the definitions of “false” and “misleading” are different Thompson proffers support for this perspective by asserting that standard dictionaries, like the Oxford English Dictionary and the Random House Webster’s College Dictionary, among others, define “false” and “misleading” differently. Thompson also argues that legal precedent backs up this view that “false” and “misleading” are legally different terms. For example, Thompson notes Peel v. Attorney Registration & Disciplinary Comm’n explained that “true” statements can nevertheless be misleading. Thompson asserts that the Supreme Court has already rejected a non-literal approach to reading the statute in Williams v. United States . According to Thompson, in Williams , the Supreme Court found that the statute only prohibits “literal” statements. Thompson contends that though Williams referred to a bounced check, the Court found that the term “statement” must be read literally and so it should follow that the word “false” must also be read literally. Finally, Thompson concludes with the assertion that even if the statute’s words were at best ambiguous, under the rule of lenity , ambiguous words or phrases should be interpreted in the defendant’s favor

In response, the United States (“Government”) argues that a plain-meaning reading of § 1014 includes misleading statements. The Government contends that even under a textualist approach, “false” does not exclude statements that are intentionally misleading. The Government proffers support for this perspective, asserting that standard dictionaries, such as the Oxford English Dictionary and the American College Dictionary, among others, define “false” not only as “not true” but also as “deceitful,” “mendacious,” or “deceptive.” The Government further asserts that even a legal dictionary, such as Black’s Law Dictionary, considers the definition of “false” to include “deceitful.” Further, the Government emphasizes that the etymological origin of “false,” the Latin “ falsus ,” is a past participle of “ fallěre ,” which means “to deceive.” The Government also argues that legal precedent supports its position. For example, the Government notes Macquarie Infrastructure Corp. v. Moab Partners, L.P. , in which the court found that the statute covers statements, that, while true, also omit materially relevant information. The Government also argues that Thompson has misread the Supreme Court’s ruling in Williams . The Government submits that Williams does not address whether a statement is true or false. Instead, the Government argues, Williams stands for the much narrower rule that a check is not a “statement” and nothing more. Finally, the Government maintains that the rule of lenity is inapplicable in this case. The Government states that the rule of lenity only becomes relevant when a criminal statute contains a “grievous ambiguity,” which means that it only comes into consideration if no other rule of statutory construction can provide a clue as to what Congress intended when writing the statute. Here, the Government concludes, the rule of lenity does not apply as a plain reading of the text resolves any such ambiguity.

READING 18 U.S.C § 1014 IN CONTEXT: STATUTORY COMPARISON AND PRECEDENT

Next, Thompson argues that context confirms that section 1014 does not reach anything more than literally false statements. Thompson looks at other statutes that do explicitly criminalize “false or misleading” information, such as 18 U.S.C. § 1038 . Thompson asserts that if the word “false” encompassed the word “misleading,” it would be illogical for a statute to use both words. Thompson argues that Congress is clear when it intends that a statute criminalize both false statements and statements that are misleading due to an omission. For example, Thompson submits that 18 U.S.C. § 1027 explicitly states that it is illegal for a person to fail “to disclose any fact the disclosure of which is … necessary to verify.” To validate the relevancy of relying on one statute to argue the reading of another statute, Thompson asserts that the Supreme Court has found it to be a proper form of statutory interpretation. Thompson expands on this statutory-based contextual reading by looking at prior court precedents, such as United States v. Ninety-Five Barrels , which recognized that statements can be simultaneously true on their face but misleading at the same time. Thompson emphasizes that narrower readings of statutes are common in the context of criminal statutes. Thompson asserts that it is particularly important in the criminal context because otherwise, there is the risk of a normal person engaging in illegal conduct unintentionally—which is particularly relevant in the context of speech, potentially triggering First Amendment concerns. For support, Thompson proffers Williams , wherein the Supreme Court explained that while a “broader reading of § 1014 is plausible, we are not persuaded that it is the preferable or intended one.” While Williams regarded a bounced check, Thompson argues that the Supreme Court has already set the precedent on this matter.

In response, the Government argues that reading section 1014 in context does not justify narrowing the definition of “false” to exclude a misleading representation. The Government argues that even if other statutes used different forms such as “false” or “misleading” or “false or misleading,” that is irrelevant to the question of whether Congress intended to change the meaning of “false” in this statute. The Government posits that many of the statutes cited by Thompson are from different parts of the U.S. Code and, therefore, have limited comparative value. To support this assertion, the Government invokes Justice Scalia , who explained that comparisons between statutes are the most persuasive when they were “enacted at the same time” and “dealt with the same subject.” Further, the Government maintains that it is typical for Congress when drafting legislation to use redundant words, and therefore, whether Congress included or excluded a specific word or phrase from a particular statute does not mean by itself that Congress intended to limit the statute to those words For example, the Government asserts that 18 U.S.C § 1001 uses the words “false” and “fictitious,” which have synonymous meanings. Therefore, the Government asserts that using words in a statute does not necessarily mean that they must be distinct to be applied. Next, the Government contends that while some criminal statutes are interpreted narrowly, there is no evidence to read § 1014 narrowly in prior case precedent. The Government rejects Thompson’s reliance on Williams , arguing that the Supreme Court did not find that the statute did not cover misleading statements but rather that a check is not a misleading statement at all, making that case irrelevant here.

Discussion

PROTECTING FINANCIAL INSTITUTIONS FROM FALSE STATEMENTS

The Government argues that ruling in favor of Thompson would threaten financial institutions insured by the FDIC by giving a “free pass” to borrowers who knowingly misreport financial information. The Government asserts that such a ruling would create a “loophole for the underreporting of debts.” The Government also argues that a ruling for Thompson would undermine Congressional intent to protect federally insured institutions from false statements. In particular, the Government argues that Congress intended to protect federally insured lenders from “losses stemming from false statements or misrepresentations that mislead the institutions into making financial commitments.” The Government argues that a ruling for Thompson would undermine the statute’s ability to protect federally insured lenders whose borrowing decisions require “accurate risk assessment and careful bookkeeping.” As a result, the Government maintains that a ruling for Thompson would make it easy for people to “elude its provisions” and accordingly expose financial institutions to harms.

Thompson counters that the Government’s concerns regarding potential risk to federally insured lenders are overblown. Thompson disagrees with the Government’s view that a ruling for Thompson would create a “loophole for the underreporting of debts.” Thompson asserts that financial institutions can avoid this problem because financial institutions almost always ask for a list of “all outstanding debts” before making a loan. Thompson argues that someone who omitted debts in response to this question would be making a false statement because the request clearly asks for all outstanding debts. Thompson additionally argues that the impact of false or misleading statements on financial institutions are policy issues that would be better directed to Congress. However, Thompson further argues that these policy concerns are misplaced because other federal statutes prohibit making misleading statements to lenders.

GUARDING AGAINST OVEREXPANSIVE CRIMINAL LIABILITY

In support of Thompson, the National Association of Criminal Defense Lawyers (“NACDL”) argues that a finding for the United States would render section 1014 unconstitutionally “standardless.” NACDL argues that such a finding would leave millions of Americans who regularly interact with federally insured lenders with no way of knowing “what is acceptable and what is criminalized.” Professor Joel Johnson submits that prosecutors can argue for a broad interpretation of criminal statutes easily, while defense counsel face significant costs in arguing for a narrower interpretation. Because of these costs, Professor Johnson contends that criminal defense lawyers often focus their resources on other arguments or plea negotiations. Accordingly, Professor Johnson argues that if the Court adopts a general rule of narrowly construing federal criminal statutes—including Section 1014 at issue in this case—the cost of arguing for narrower interpretations of criminal statutes will decrease.

The Government argues that concerns about overexpansive criminal liability are misplaced. The Government contends that Section 1014 does not reach omissions and requires a defendant to make a “statement of some kind” to be criminally liable under the statute. Accordingly, the Government submits that the statute does not criminalize a “pure omission,” and only reaches statements that omit important information yet purport to be accurate and complete. Additionally, the Government argues that a ruling for the Government would not encompass “a great deal of everyday conduct.” The Government also asserts that prosecutions for misstatements involving “everyday conduct” would be rare. Notwithstanding the rarity of such hypothetical prosecutions, the Government contends that section 1014 can only applied to “factual assertions” that can be characterized as either true or false. Additionally, the Government argues that common law principles would exclude common scenarios such as negotiations from the statute’s reach.

Conclusion

Authors

Written by: Kehan Rattani and Andrew Hallowell

Edited by: Grace Braider

Additional Resources