Petition for Writ of Certiorari — Lundy v. United States

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units. Supreme Cour, U.s.

C1) FILED

01185 4 JUN 172002

No. OFFICE OF THE CLERK

IN THE

Supreme Court of the United States

JOHN T. LUNDY,

Petitioner,

¥.

UNITED STATES OF AMERICA, - |

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

RALPH A. PETERSON

DAVID L. MCGEE *

BEGGS & LANE, LLP

3 WEST GARDEN STREET

P.O. Box 12950

Pensacola, FL 32576-2950

* Counsel of Record (850) 432-2451

June 17, 2002

LRP LLE RE NINE IONE DEEN LEAVE ALTE. NEOTEL EDGE DOLEL BELEN INGER NLOLARLSAB AEE LE LIE IEE ARE NEE

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the prohibition of false statements intended to

influence a bank’s decision found in § 1014 of Title 18

includes within it all omissions of information intended to

influence the bank’s decision.

2. Whether a statute which forbids false statements may,

consistent with the Due Process clause and the Rule of

Lenity, be read to include mere silence.

(i)

LIST OF PARTIES AND AFFILIATES

The parties to the proceedings in the Fifth Circuit are

Petitioners John T. Lundy and Gary Matthews and the United

States of America as the Respondent.

Pursuant to Rule 29.6 of the Rules of this Court, petitioner

states that it has no parent corporations and it has issued no

publicly held stock.

TABLE OF CONTENTS

Page

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LIST OF PARTIES AND AFFILIATEG....................... il

PRBS GO PALS TF ROCIUREE BESS ctcncciccssccccecescesénestarencsssionse iv

a ST a ccna ne Ale hcdanildieieanciionaabiicnbinielonnts l

ITI is inca aidigecaeiionnindesbibdemasneleitinlinesamptiiaienin l

CONSTITUTIONAL AND REGULATORY

fg 8 ft By |: ) nese 2

STA TIME E GE THRE CARE. ...ccerrccecccccssccscsccssecssccsees 2

A. Reasons for Granting the Petition...................... 4

B. Expansion of the Statute .........cc.cccccccccsccssssscseee 5

C. The Appellate Court’s Reading of the Statute

IIIT ci ccschicostesasenstiocenscuctnaiieckpaesaiiontbeas 8

D. Rule of Lenity and Due Process.....................0+. 14

| __— a RATIE TE TO T 17

(iii)

TABLE OF AUTHORITIES

CASES

Chiarella v. U.S., 445 U.S. 226 (1980)..............004.

Crandon v. U.S., 494 U.S. 152 at 160 (1990)........

Emery v. American General Finance, Inc., 71

Fe Be COU Grete UD elanicinsincncecbaiirccnninitanani

Fasulo v. U.S., 272 U.S. 620 (1926)............cceeeeeee

Kolender v. Lawson, 461 U.S. 356 at 357 (1983)..

Liparota v. U.S., 471 U.S. 419 (1985)...

Morisette v. U.S., 342 U.S. 246 (1952).............0008

Reynolds v. East Dyer Development Co., 882

rer fe LS Ee

Staples v. U.S., 511 U.S. 600 (1994)... eee

U.S. v. American Trucking Assoc., Inc., 310 U.S.

a CE vcitincsininiarscsatiiduiapiciandigtaiiibenihenionbianpaletanie

U.S. v. Bars, 404 U.S. 336 (1971).........secccscessseseeeee

U.S. v. Brown, 79 F.3d 1550 (11th Cir. 1996).......

U.S. v. Crop Growers Corp., 954 F.Supp. 335

Re ene PURO D nsicssnninsnicinlihdeiceicccihididemiabaesbiaitindeiioeiinn

U.S. v. Diogo, 320 F.2d 898 (2nd Cir. 1963).........

U.S. v. Dupre, 117 F.3d 818 (Sth Cir. 1997) cert.

denied 522 U.S. 1078 (1998) ...............cccccceeeeeeee

U.S. v. Doke, 171 F.3d 240 (Sth Cir. 1999) cert.

GAGES UA. FET CUI OD cicsatsictedanariasesensscseves

U.S. v. Greene, 578 F.2d 648 (Sth Cir. 1978)

cert. denied 439 U.S. 133 (1979)...

U.S. v. Irwin, 654 F.2d 671(10th Cir. 1981) cert.

denied 455 U.S. 1016 (1982)... eeeeeeeee

U.S. v. London, 550 F.2d 206 at 212 (Sth Cir.

U.S. v. Ron Pair Enterprises, Inc. 489 U.S. 235

ee ei cisincicnsasksnpiassisissamaiinsteapainieniiasastsissiainaacelindiabitis

U.S. v. Trice, 823 F.2d 80 at 86 (Sth Cir. 1987) ....

U.S. v. Watts, 72 F.Supp. 2d 106 (E.D.N.Y.

TABLE OF AUTHORITIES—Continued

Page

U.S. v. Wells, 519 U.S. 482 (1997) ...............0000 7, 8,9, 15

U.S. v. Wiltberger, 18 U.S. 35 (5 Wheat 76 at 95)

ERT ie icctieindnsiikcesitilianduimcsnnasingdantasaisasiampadinddaiis 15

U.S. v. X-Citement Video, Inc., 513 U.S. 64

CRED cxiescsscseusiscuanidiettiiinnaieiateduisiasiestalaieaaiiadesiiaaiadatalaate 7, 8

Williams v. U.S., 458 U.S. 279 (1982)...5, 6, 7, 13, 14, 15

STATUTES

BD UBL: © BAIRD cnisseesscissecnarscsesnsitelackipeeatatetaanins 2

iF EF i sstscthaciunssiaasonatiaceutaaeudsagasentelaabaninas 2

1D Ta svsnciciacisateneliensnsubininmineniiaiaiaal 9, 15, 16

Fi inncnscsntnsssdnnenpieisbionlénsibaktonsnechdinnens passim

DSP e siciciccsetaanaastacicesiitemaniiaiimaniaias 2

i Th ee cisecisecadisshassaciabthegansnannansiiieaeaaad 10

y TUR Tame By. | | ReReneemnemynncmnpmm merrier or nes l

OTHER

Restatement of 2d Contracts

IP IEE; cicsenindonstbopaananinesaiuadacasesaouasneammeiaaiaianeiaa 12

Restatement of 2d Torts

1 ST snsiscsiintninebnisunsmeaantionnanannaeiaadennaanmanmeaaie 11,12

Fifth Amendment to the United States

sissies sstiniintnepeietacndiaeniiaeatdaanasambatonmis l

Sarah Newland, The Mercy of Scalia: Statutory

Construction And The Rule of Lenity, Harvard

Civil Rights-Civil Liberties Law Review at

OT CRP NE Fe i iiitisenncrcccisncnsoneaticidiiitegsabmitennicn 16

IN THE

Supreme Court of the Anited States

JOHN T. LUNDY,

Petitioner,

UNITED STATES OF AMERICA,

Respondents.

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Fifth Circuit

PETITION FOR A WRIT OF CERTIORARI

John T. Lundy through counsel respectfully petitions for a

writ of certiorari to review the judgment of the United States

Court of Appeals for the Fifth Circuit in this case.

OPINION BELOW

The Opinion of the United States Court of Appeals for the

Fifth Circuit is reproduced in the Appendix to this Petition at

la. The Order of the Court of Appeal denying the petitions

for rehearing is published in the Appendix at 26a.

JURISDICTION

The judgment of the Court of Appeals was entered on

January 28, 2002 and motions for rehearing were denied on

March 20, 2002. The jurisdiction of this court is invoked

under 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

1. The Fifth Amendment to the United States Constitution

provides in pertinent part that:

“No person shall . . . be deprived of life, liberty, or

property without due process of law...”

2. Section 1014 of Title 18 of the United States Code

provides in pertinent part that:

“Whoever knowingly makes any false statement . . . for

the purpose of influencing in any way the action of any

institution the accounts of which were insured by the

Federal Deposit Insurance Corporation . . . upon any

application . . . or loan or any change or extension of

...the same . . . shall be fined not more than $1,000,000

or imprisoned not more than thirty years, or both.”

STATEMENT

On December 11, 1998 Petitioner was indicted by a federal

grand jury. The indictment charged him with conspiring to

commit the offenses of bank fraud, bank bribery, and making

false statements to a federally insured institution all in

violation of 18 U.S.C. §371; and with committing the

substantive offenses of bank fraud in violation of 18 U.S.C.

§ 1344; bank bribery in violation of 18 U.S.C. § 215(a); and

three counts of making a false statement to a federally insured

financial institution in violation of 18 U.S.C. § 1014. C.A.R.

at 298. On September 18, 1999 a superceding indictment was

filed. The superceding indictment restated the previous

charges but added a fourth count of making false statements

to a federally insured financial institution in violation of 18

U.S.C. § 1014. C.A.R. at 152. The case proceeded to trial on

January 18, 2000. C.A.R. 298. On that date the government

dismissed two of the counts of the indictment alleging false

statements (C.A.R. 298). On February 2, 2000 the trial court

dismissed another of the false statement counts. C.A.R. 413.

During trial the government proposed a jury instruction that

defined “false statement” for the purposes of 18 U.S.C.

§ 1014 as follows:

“A person makes a false statement under this statute if

he fails to disclose material information to a federally

insured bank in connection with a loan transaction.”

Transcript, Vol. I at p. 18.

Petitioner objected to this instruction arguing that it defined

false statement too broadly (Transcript, Vol. [IX at pp. 137-

148); and that it erroneously permitted a jury to convict on

the basis of the omission of information which Petitioner “. . .

was never asked, [and] had no legal obligation to provide...”

(Transcript, Vol. LX at p. 146). Petitioner offered specific

examples of how the requested instruction would apply to

circumstances clearly not contemplated by the statute.

Transcript, Vol. IX at p. 141. The trial court expressed its

doubts about the instruction but eventually accepted it.

Transcript Vol. IX, pp. 142, 147, 148. The trial court’s

instructions were applicable to both the substantive count of

false statement and the conspiracy to make false statements.

The trial court also instructed the jury that an agreement to

make false statements constituted a conspiracy as charged in

Count I of the indictment and that membership in that

conspiracy would permit the jury in certain circumstances to

convict Petitioner of other substantive offenses committed by

his co-defendant. Transcript Vol. X, p. 15. The contested

definition of false statement, therefore, potentially infected all

counts of the indictment.

On February 7, 2000 the jury returned a verdict of guilty of

one count of conspiracy, one count of bank fraud, one count

of making a false statement, and one count of bank bribery.

From that conviction Petitioner appealed to the Fifth Circuit

Court of Appeals. The appeal asserted among other things

that the trial court’s definition of false statements was

overbroad and violated both the Rule of Lenity and Due

Process notice requirements. On January 28, 2002 the

Appellate Court denied Petitioner’s appeal. In addressing

Petitioner’s arguments regarding the definition of “false

statement”, the Appellate Court stated:

“... the § 1014 instruction required finding Defendants

intentionally failed to disclose material information to a

federally insured bank regarding a loan transaction for

the purpose of influencing its lending activities, which is

more than the statute requires. See 18 U.S.C. § 1014.

There is no error, plain or otherwise.

With respect to Defendants’ remaining contentions

concerning the § 1014 instruction, and as discussed

above, an intentional omission of material fact can

constitute a false statement if made for the purpose

of influencing a federally insured bank’s lending

activities.”

Appellate Court’s decision at pp. 26-27.

It is this holding of the Appellate Court that Petitioner

challenges. Petitioner filed petitions for rehearing and

rehearing en banc with the Appellate Court, which were

denied on March 20, 2002. Appendix at page 26a.

A. Reasons For Granting The Petition.

As described in detail below, the Court of Appeals has in

this matter decided an important question of federal law that

has not been but should be settled by this Court. That

decision involves an interpretation of the prohibition found in

§ 1014 of Title 18 of false statements intended to influence

the actions of a federal or federally insured financial

institution. The Court of Appeals reads § 1014’s prohibition

of false statements to include a prohibition of all omissions of

information intended to influence the banks action. Such a

reading of the statute dramatically increases its purview and

by implication the purview of many other false statement

statutes. It does so in a manner that brings within the

statute’s prohibition a broad range of common and innocuous

business practices. If permitted to stand such a reading will

result in the unintended disruption of widely accepted

business practices and the imposition of unjust punishment on

many borrowers.

The Appellate Court’s decision is also’ impliedly

inconsistent with the decisions of this Court and the several

Appellate Courts which have defined “false statement” more

narrowly. These decisions include Williams v. U.S., 458 U.S.

279 (1982), and U.S. v. Diogo, 320 F.2d 898 (2nd Cir. 1963).

The Court of Appeals found no error in a jury instruction

that defines false statement under Section 1014 as the failure

to disclose material information to a federally insured bank in

connection with a loan transaction for the purpose of

influencing its lending activities. Appellate decision at page

26. As explained below such a holding works an enormous,

unprecedented, and unwarranted expansion of the statute and

interprets the statute in a manner which is both inconsistent

with its plain wording and gives no notice of that which it

prohibits.

B. Expansion of the Statute

The first problem with the Appellate Court’s holding is its

overbreadth. It interprets the statute in a manner that makes it

applicable to most loan negotiations with federally insured

institutions. By defining false statement to include all

omissions intended to influence the lending activity, the

appellate court brings within the aegis of the statute all loan

negotiations in which the borrower has deliberately not told

the bank some fact with the hope of influencing the

negotiations. One need only consider a few examples to

realize the breadth of this interpretation. Consider the

borrower who is willing and able to pay a ten percent interest

on a loan under negotiations but negotiates a loan at a rate of

eight percent without telling the bank that he was willing and

able to pay ten percent. As § 1014 is interpreted by the

Appellate Court, this borrower could be sentenced to thirty

years in prison for omitting a fact with the intention of

influencing the banks lending decision. Similar results would

apply to borrowers who do not tell one bank of the offers

made by their competitors or who do not tell the bank officer

their religion because they believe it lessens the likelihood of

their receiving the loan. The possibilities are endless. Thus a

statute that on its face serves the noble and logical purpose of

prohibiting false statements to a federally insured bank has

now been read to prohibit routine and innocuous activity that

occurs in many and probably most loan transactions. This

Court has previously expressed its concern over the potential

expansion of § 1014 into areas of seemingly unremarkable

conduct. In William v. U.S., 458 U.S. 279, 286-87 (1982), the

Court rejected an interpretation of §1014 that would have

greatly broadened its purview.

“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 federaily insured bank could give rise to a

criminal liability, whether or not the drawer had an

intent to defraud.”

Williams v. U.S., supra at 286.

“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. .. .

Absent support in the legislation history for the

proposition that § 1014 was designed to have general

application to the passing of worthless checks [citation

omitted] we are not prepared to hold petitioners conduct

proscribed by that particular statute.”

Williams v. U.S., supra at 287.

The same theme was addressed in U.S. v. Wells, 519 U.S.

482, 498 (1997), where the Court accepted a particular

interpretation of § 1014 in part because it would not effect an

unwarranted expansion of the statute.

“It is true that we have held § 1014 inapplicable to

depositing false checks at a bank, in part because we

thought that it would have “made a surprisingly broad

range of unremarkable conduct a violation of federal

law; Williams v. U.S., 458 U.S. at 286-287 n.8, .. . and

elsewhere thought it possible to construe a prohibition

narrowly where a loose mens rea requirement would

otherwise have resulted in a surprisingly broad statutory

sweep, see U.S. v. X-Citement Video, Inc., 513 U.S. 64,

71-72 ... but an unqualified reading of § 1014 poses no

risk of criminalizing so much conduct as to suggest that

Congress meant something short of the straight-forward

reading. The language makes a false statement to one of

the enumerated financial institutions a-crime-onty if the

speaker knows the falsity of what he says and intends it

to influence the institution.”

U.S. v. Wells, supra at 499-500.

The Court has also read other criminal statutes narrowly in

order to avoid including within their purview “. . . a broad

range of apparently innocent conduct “Liparota v. U.S., 471

U.S. 419, 426 (1985). See e.g. Staples v. U.S., 511 U.S. 600

(1994) (Court rejected a statutory reading which would

criminalize behavior that a defendant believed fell within a

long tradition of widespread lawful gun ownership by private

individuals); Morisette v. U.S., 342 U.S. 246 (1952) (Court

reads scienter requirement into welfare statute to avoid

criminalizing broad range of apparently innocent conduct);

and U.S. v. X-Citement Video, Inc., 513 U.S. 69 (1994) (Court

reads mens rea requirement into child pornography statute to

avoid criminalizing otherwise innocent activity). More than

any of the cases cited above this case presents the risk of

expanding a criminal statute into broad areas of innocuous

and apparently innocent activity. Moreover, in each of the

cited cases the language of the statute could plausibly be read

to suggest the broader reach. The Court’s decisions in those

cases turned not so much on the wording of the statute as on

the fact that the broader reading reached into areas of

seemingly innocent conduct. That same principle applies to

this case but with the additional impetus that the plain

wording of the § 1014 requires the narrower reading.

C. The Appellate Court’s Reading of the Statute Is

Unprecedented

The Appellate Court has cited no case which supports its

interpretation of § 1014, and a review of the case law reveals

no similar interpretation by any court in America. While

there are numerous cases which hold that omissions may in

certain circumstances constitute false statements under

§ 1014, no case suggests that all omissions intended to

influence the banks decision constitute false statements. As

noted above, this Court in U.S. v. Wells, supra at 500, has

stated that § 1014 is applicable only “. . . if the speaker knows

the falsity of what -he says ...” Such a requirement is

inconsistent with the Appellate Court’s definition of “false

statement” in this case. Even in the Fifth Circuit the case law

requires that only omissions needed to avoid deception may

constitute false statements under § 1014. See U.S. v. Dupre,

117 F.3d 818, 819 (Sth Cir. 1997); U.S. v. Trice, 823 F.2d 80,

86 (Sth Cir. 1987); and U.S. v. Greene, 578 F.2d 648, 657

(Sth Cir. 1978). There is no case in the Fifth Circuit or

elsewhere which goes further. The Appellate Court’s reliance

on U.S. v. Doke, 171 F.3d 240, 246 (Sth Cir. 1999), for its

new definition of “false statement” is inappropriate. Doke is

a “straw” borrower case where the straw borrower falsely told

the bank that he was putting his own money into the deal and

omitted telling them he was fronting for the real borrower

who could not borrow more money because of the bank’s

lending limits. Doke, therefore, fits neatly into the cases

relying on omissions needed to avoid deception. There is a

very big difference between an omission of information on

one hand and an omission of information needed to avoid

deception on the other. One remarkable aspect of the

Appellate Court’s decision is that it both untethers the

definition of “false statement” from the concept of deception

and requires no affirmative act by the borrower. No previous

case has done this. If the decision below is allowed to stand,

omissions not intended to deceive will now constitute felonies

punishable by up to 30 years in prison. While there is no case

which specifically rejects the holding of the Appellate Court,

there is much which impliedly rejects it. In the 54 years since

the inception of § 1014, no court appears to have suggested

an interpretation similar to that adopted by the Appellate

Court in this case. The United States Code contains at least

100 false statement statutes. U.S. v. Wells, supra at 505

(dissent). Counsel has been unable to locate a single case

interpreting any of those statutes in a manner consistent with

the Appellant Court’s decision in this case but many that

reject such logic. The cases dealing with 18 U.S.C. § 1001

provide a good example. Section 1001 forbids among other

things false statements in matters of federal jurisdiction. It is

therefore similar to § 1014 which forbids false statements to

certain federal and federally insured financial institution. In

this very similar statute, the courts have rejected the

Appellate Court’s conclusion in this case.

“The requirement of an affirmative act is implied in the

second clause of § 1001 by the statutes proscriptions of

false statements.”

U.S. v. London, 550 F.2d 206, 212 (5th Cir. 1977).

“Thus a false representation charge requires that the

defendant made a misrepresentation or used a document

that contained a false statement or entry in other words

that the defendant made some sort of active

misrepresentation. [emphasis added]

U.S. v. Crop Growers Corp., 954 F.Supp 335 (D.D.C. 1997).

“. . . where a statute or regulation imposes no duty

whatever to disclose information due process concerns

require that criminal liability not be based on omission

of such information.”

U.S. v. Crop Growers Corp., supra at 345.

In U.S. v. Diogo, 320 F.2d 898 (2nd Cir. 1963), the Court

in interpreting both Section 1001 and Section 1546 of Title 18

(forbidding false statements in immigration applications)

rejected “mere omissions” as a basis for a false statement

case.

“We do not read the quoted passage to suggest that a

prosecution for false representations can be grounded

upon omission of an explanation which omission carries

with it implications of a state of facts which were not...

true. To so hold would distort the language of the

statute...”

U.S. v. Diogo, supra at 905.

While the above cited cases deal with false statement

statutes other than § 1014, they all deal with statutes similar

to § 1014 and reflect a logic equally applicable to § 1014.

See also U.S. v. Watts, 72 F.Supp 2d 106, 117 (E.D. N.Y.

1999) (defenses described in Diogo are equally applicable

to § 1014).

That the Appellate Court’s holding in this case is

inconsistent with American legal notions of what constitutes a

false statement is reflected in the Restatement of Law.

eiarrteearieseai iittala aie iia iaia A

Two provisions of the Restatement of Law deals with a

non-disclosure. The first is § 551 of Restatement of 2d Torts

which provides as follows:

“§ 551. LIABILITY FOR NONDISCLOSURE

1. One who fails to disclose to another a fact that he

knows may justifiably induce the other to act or

refrain from acting in a business transaction is subject

to the same liability to the other as though he had

represented the nonexistence of the matter that he has

failed to disclose, if, but only if, he is under a duty to

the other to exercise reasonable care to disclose the

matter in question.

2. One party to a business transaction is under a duty to

exercise reasonable care to disclose to the other before

the transaction is consummated,

a. matters known to him that the other is entitled to

know because of a fiduciary or other similar

relation of trust and confidence between them; and

b. matters known to him that he knows to be

necessary to prevent his partial or ambiguous

Statement of the facts from being mis-

leading; and

c. subsequently acquired information that he knows

will make untrue or misleading a previous

representation that when made was true or

believed to be so; and

d. the falsity of a representation not made with the

expectation that it would be acted upon, if he

subsequently learns that the other is about to act in

reliance upon it in a transaction with him; and

e. facts basic to the transaction, if he knows that the

other is about to enter into it under a mistake as to

them, and that the other, because of the

relationship between them, the customs of the

trade or other objective circumstances, would

reasonably expect a disclosure of those facts.”

The second applicable provision is found in § 161 of the

Restatement 2d Contracts, which provides:

“§ 161. WHEN NON-DISCLOSURE IS EQUIVALENT

TO AN ASSERTION

A person’s non-disclosure of a fact known to him is

equivalent to an assertion that the fact does not exist in the

following cases only:

a. where he knows that disclosure of the fact is

necessary to prevent some previous assertion from

being a misrepresentation or from being fraudulent

or material.

b. where he knows that disclosure of the fact would

correct a mistake of the other party as to a basic

assumption on which that party is making the

contract and if non-disclosure of the fact amounts to

a failure to act in good faith and in accordance with

reasonable standards of fair dealing.

c. where he knows that disclosure of the fact would

correct a mistake of the other party as to the contents

or effect of a writing, evidencing or embodying an

agreement in whole or in part.

d. where the other person is entitled to know the fact

because of a relation of trust and confidence between

them.”

These two standards for civil liability well reflect American

legal concepts of when an omission may constitute false

statement. Notably they are both significantly inconsistent

with the holding of the Appellate Court. Indeed it is difficult

to find any support in either criminal or civil law for the

proposition espoused by the Appellate Court that all

omissions intended to influence loan negotiations constitute

false statements.

In the closely related concept of fraud, the case law is

similarly inconsistent with the notion that mere omissions

may constitute a crime.

“At common law, misrepresentation made for the

purpose of inducing reliance upon the false statement is

fraudulent. But one who fails to disclose material

information prior to the consummation of a transaction

commits fraud only when he is under a duty to do so.

And the duty to disclose arises when one party has

information ‘that the other [party] is entitled to know

because of a fiduciary or other similar relation of trust

and confidence between them.’”’

Chiarella v. U.S., 445 U.S. 226, 227-28 (1980).

“And of course there can be no criminal conviction for

failure to disclose when no duty to disclose is

demonstrated.”

U.S. v. Irwin, 654 F.2d 671, 679 (10th Cir. 1981) cert. denied

455 U.S. 1016 (1982).

See also U.S. v. Brown, 79 F.3d 1550, 1556-57 (11th Cir.

1996); Emery v. American General Finance, Inc., 71 F.3d

1343, 1347 (7th Cir. 1995); and Reynolds v. East Dyer

Development Co., 882 F.2d 1249, 1252 (7th Cir. 1989). The

relevance of the fraud cases is further supported by this

Court’s decision in Williams to reject a broader reading of

§ 1014 in part because it included acts which did not include

an intent to defraud. Williams v. U.S., supra at 286.

The Appellate Court in this matter has concluded that

under § 1014 all omissions intended to influence the bank’s

decision constitute false statements and are _ therefore

punishable under the statute. This conclusion is inconsistent

with all existing precedent, as well as American notions of

what constitutes and actionable false statement.

D. Rule of Lenity and Due Process

The Appellate Court in this case has interpreted a

prohibition of “false statements” to federally insured banks to

include within it all omissions of information intended to

influence the bank’s decision. The Court's failure to comport

its holding to the plain wording of the statute violates the

related concepts found in the Rule of Lenity and Due Process

clause of the Fifth Amendment. The beginning point for all

Statutory interpretation is, of course, the wording of statute.

Where that language is plain the inquiry should end. U.S. v.

Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989). The

language of § 1014 is plain. In applicable part, it forbids the

knowing making of a false statement for the purpose of

influencing any loan. It cannot reasonably be argued that this

language was plainly intended to cover all omissions of

information intended to influence the loan. However, were

there any ambiguity in the statutory language the Rule of

Lenity requires that ambiguity be resolved in Petitioner's

favor.

“. . . before one can be punished it must be shown that

his case is plainly within the statute.”

Fasulo v. U.S., 272 U.S. 620, 629 (1926).

“when choice has to be made between two readings of

what Congress has made a crime, it is appropriate before

we chose the harsher alternative, to require that

Congress should have spoken in language that is clear

and definite.”

U.S. v. Bars, 404 U.S. 336, 347 (1971).

Indeed in circumstances more conducive to a broad reading

of § 1014 than those here at bar this Court has relied on the

Rule of Lenity to require the narrower reading. See Williams

8 ee

v. U.S., supra at 290. Such a reading is consistent with

ancient and fundamental principles of American

jurisprudence.

“The rule that penal laws are to be construed strictly is

perhaps not much less old than construction itself. It is

founded on the tenderness of the law for the rights of

individuals; and on the plain principle, that the power of

punishment is vested in the legislature not in the judicial

department.”

U.S. v. Wiltberger, 18 U.S. 35, 43 (S Wheat 76, 95) (1820).

That the Appellate Court’s reading of § 1014 flies in the

face of these maxims is evident both in the plain wording of

the statute and in other interpretations of the meaning of

“false statement.” For example as previously noted, this

Court has interpreted the language of § 1014 to require proof

that the author of the false statement “know the falsity of

what he says...” U.S. v. Wells, supra at 500. The Appellate

Court ‘s reading of § 1014 implicitly rejects that requirement.

In interpreting a similar prohibition of “false statements in

§ 1001 the Fifth Circuit held that the requirement of an

affirmative act is implied in § 1001 by the statutes prohibition

of false statements.” U.S. v. London, supra at 212.

Closely related to the Rule of Lenity is the Due Process

requirement of fair notice. This doctrine requires:

“, . . that a penal statute define the criminal offense with

sufficient definiteness that ordinary people can

understand what conduct is prohibited and in a manner

that does not encourage arbitrary and discriminatory

enforcement.”

Kolender v. Lawson, 461 U.S. 356, 357 (1983).

In the Williams case, the Court concluded that the term

“false statement” would not commonly be used to describe a

bad check. (Williams v. U.S., supra at 286.) Similarly in this

case common usage would not define “false statement” as

every omission of information, nor would ordinary people

conclude that a law forbidding false statements to a bank |

required them to unilaterally inform the bank of all facts that

might influence its decision regardless of whether the bank

asks about those facts. In analyzing § 1001 the Court in Crop

Growers Corp. concluded that “. . . where a statute or

regulation imposes no duty whatever to disclose information,

due process concerns require that criminal liability not be

based on omission of such information.” U.S. v. Crop

Growers Corp., supra at 905. This conclusion is further

supported by the Absurd Result Principle. This principle

rejects even the plain wording of statutes if that wording leads

to an absurd and plainly unintended consequence. See U.S. v.

American Trucking Assoc. Inc., 310 U.S. 534, 543 (1940).

As reflected in the example described above, the Appellate |

Court’s interpretation of § 1014 in this case leads to an absurd |

and plainly unintended result. It must therefore be rejected. |

Finally, the legislative history of § 1014 does not alter the

conclusions reached above. Notions of the importance of

legislative history may vary. See The Mercy Of Scalia:

Statutory Construction And The Rule of Lenity by Sarah

Newland, Harvard Civil Rights-Civil Liberties Law Review

at 197 (Winter 1994). However, no view of legislative

history would work a change in the conclusions described

above.

“. .. it is rare that legislative history or statutory policies

will support a construction of a statute broader than that

clearly warranted by the text.”

Crandon v. U.S., 494 U.S. 152, 160 (1990).

The legislative history of § 1014 is not easily deciphered. |

The statute was enacted in 1948 as an amalgamation of 13 |

different preexisting false statement statutes. Counsel has

been unable to locate any reference in the legislative histories

EE eoO

of § 1014 or its predecessors which speaks to the issues here

at bar. Perhaps most telling, however, is that there appears to

be no case law interpreting any of § 1014’s predecessor

statutes in a manner consistent with the Appellate Court’s

reading. It is doubtful that Congress intended to adopt an

interpretation of § 1014 never previously evidenced in the

case law. This is reinforced by the passing of 54 years

without a single Court interpreting § 1014 in that manner.

CONCLUSION

The petition for writ of certiorari should be granted.

Respectfully submitted.