Academic journal article Journal of Criminal Law and Criminology

Federal False Statement Prosecutions: The Absurd Becomes Material

Academic journal article Journal of Criminal Law and Criminology

Federal False Statement Prosecutions: The Absurd Becomes Material

Article excerpt

United States v. Wells, 117 S. Ct. 921 (1997)

I. INTRODUCTION

In United States v. Wells,(1) the United States Supreme Court held that materiality is not an element of the offense of making a false statement to a federally insured bank.(2) The Court concluded that, under a natural reading of 18 U.S.C. [sections] 1014, materiality is not an express element of the offense.(3) The Court further reasoned that the phraseology of the statute conveys no implicit meaning, which the Court believed is confirmed by the legislative history of [sections] 1014.(4) According to the Court, there is no need for a materiality requirement because no one would make an immaterial false statement to a bank.(5)

This Note argues that the Court erred in holding that [sections] 1014 contains no materiality requirement.(6) First, this Note asserts that the Court, in allowing a vast spectrum of immaterial false statements to be criminalized, failed to adhere to the "absurd result principle"(7) of statutory interpretation. Second, this Note contends that the Court misinterpreted and misapplied cases analyzing several predecessor statutes of [sections] 1014.(8) As a result, the Supreme Court incorrectly held that materiality is not an element of the offense of making a false statement to a federally insured bank.

II. BACKGROUND

A. THE HISTORY OF 18 U.S.C. [sections] 1014

1. Cases Examining [sections] 1014's Predecessor Statutes

The predecessor statutes of 18 U.S.C. [sections] 1014(9) were designed to prevent banking fraud in a wide variety of contexts.(10) The first reported case involving a false statement made to a federally insured lending institution was McClanahan v. United States,(11) where the defendant was convicted of violating [sections] 31 of the Federal Farm Loan Act.(12) Meade McClanahan had applied for a loan using an application form supplied by the Federal Farm Loan Board, which was designed to elicit information to determine the advisability of making a loan to the applicant.(13) McClanahan provided false information in response to several of the queries on the application.(14) On appeal to the Seventh Circuit, McClanahan argued that the statute criminalized any false statement, however immaterial or unrelated such statement was to the transaction, and was therefore unconstitutionally broad.(15) He based his materiality argument on the contention that Congress did not have the constitutional power to criminalize "merely immoral" actions.(16) In reaching its decision, the Seventh Circuit determined that the application form had been designed to require an applicant to provide only information material to the determination of the applicant's eligibility for a loan.(17) The court therefore concluded that immaterial information does not provide the basis for a prosecution under the Federal Farm Loan Act.(18)

In the second reported case involving a predecessor statute of [sections] 1014, United States v. Kreidler,(19) the defendant was indicted for making a false statement to the Home Owners' Loan Corporation in violation of [sections] 8(a) of the Home Owners' Loan Act of 1933.(20) A. L. Kreidler challenged the validity of his indictment on several grounds, including materiality.(21) He claimed that a false statement had to be "material and calculated to deceive" to constitute an offense under [sections] 8(a).(22) As in McClanahan, the Kreidler court determined that "a statement made to influence the whim of some officer of the corporation... would not support the charge [of criminal wrongdoing]."(23) Rather, the statement "must be relevant and material."(24) The court concluded that the false statements made by Kreidler were relevant to the Home Owners' Loan Corporation's application process and overruled Kreidler's demurrer to the indictment.(25)

Kay v. United States was perhaps the most important case involving one of [sections] 1014's predecessor statutes. …

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