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Supreme Court of the United States

The Supreme Court and Thompson v. United States: Redefining Fraud Liability in Federal Law

R Tamara de Silva

 

Earlier this month, the Supreme Court granted certiorari in Thompson v. United States, No. 23-[Docket Number Pending], a case arising from a Seventh Circuit ruling that could redefine the boundaries of fraud liability in federal law. The core issue is whether 18 U.S.C. § 1014—which prohibits making a "false statement" for the purpose of influencing financial institutions and federal agencies—extends to statements that are misleading but not literally false.

 

The case presents an opportunity for the Supreme Court to resolve an ongoing circuit split. Some circuits limit § 1014’s scope strictly to explicitly false statements, while others allow prosecution based on misleading statements. The outcome could significantly impact federal fraud prosecutions nationwide. With inconsistent rulings across circuits, the Supreme Court’s decision could redefine the boundaries of fraud liability in federal prosecutions

 

In the reply brief the petitioner in Thompson v. United States, seeking certiorari from the Supreme Court, lays out the fundamental debate over the proper scope of 18 U.S.C. § 1014. He argues that the issue before the Court is a case study in how the government attempts to expand criminal liability beyond statutory limits. The petitioner, Patrick D. Thompson, challenges the government’s aggressive interpretation of the statute. He asserts that the government has broadened its reach far beyond the law's intended limits, morphing what was intended as a statute targeting literal falsehoods into a general prohibition on misleading statements. The problem with prosecuting statements as 'misleading' is that it opens a Pandora’s box of interpretation: what’s misleading, and to what degree, is often a matter of perspective—and in the hands of prosecutors, that perspective can become perilously broad.

 

1. Statutory Interpretation and Prosecutorial Overreach

At the heart of this case lies the statutory text of § 1014, which prima facie criminalizes only literally false statements made to financial institutions to influence their decisions. But in application of the statute, the government has gone further. Thompson contends that prosecutors have stepped beyond this clear statutory language, attempting to criminalize misleading statements . For example statements that may omit information but are not strictly false. Such an approach not only broadens liability but does so in a way that threatens the statute’s integrity. It invites prosecutorial discretion but also potential overreach, expanding criminal statutes into areas Congress never intended to address.

 

The Textual Argument

Thompson argues for strict adherence to the statute's language. Throughout Title 18, Congress has repeatedly differentiated between statutes that address “false statements” and those explicitly including “misleading statements.” This distinction is not accidental. If Congress intended § 1014 to encompass misleading conduct, it would have used similar language. Thompson's argument emphasizes that criminal statutes demand precision, not prosecutorial creativity. The boundaries of criminal liability must be clear and defined by the legislature—not expanded through creative legal interpretations.

 

2. The Rule of Lenity and Its Proper Application

Central to this case is the rule of lenity, a foundational doctrine in criminal law that mandates ambiguous statutes be interpreted in favor of defendants. This principle ensures that the government cannot stretch statutes to cover conduct that Congress did not expressly criminalize. Thompson emphasizes that the rule of lenity is not a mere formality. It exists to prevent unjust expansions of criminal law that can result in disproportionate punishment. In his view, ambiguity in criminal statutes should default to narrower interpretations. This is not only a matter of statutory interpretation but of protecting fundamental principles of due process. It ensures that the government’s reach is kept in check, as Congress intended.

 

3. The Circuit Split and Its Implications

The brief highlights a significant circuit split regarding § 1014’s interpretation. In the Sixth Circuit’s decision in United States v. Kurlemann, 736 F.3d 439 (6th Cir. 2013), the court rejected the idea that the statute could apply to misleading statements, limiting it strictly to false ones.


However, in the Seventh Circuit, where Thompson’s case was adjudicated, the court accepted a broader interpretation that included misleading statements.[i] The Seventh Circuit upheld Patrick D. Thompson’s conviction under 18 U.S.C. § 1014, dismissing his claim that the statute only applies to literally false statements. The court found that misleading statements fall under § 1014 as well, citing its precedent in United States v. Freed 921 F.3d 716 (7th Cir. 2019). Thompson’s statements about his loan amount, which implied he owed far less than he did, were ruled misleading and intended to influence Planet Home and the FDIC. Additionally, the court found sufficient evidence that his misrepresentation about the loan’s purpose - claiming it was for “home improvement” -was intended to minimize his debt, likely affecting the FDIC’s collection efforts. Thompson’s argument of “constructive amendment” was also dismissed, as the court ruled that the trial evidence was consistent with the charges in the indictment. The Seventh Circuit opinion can he read here.

 

This is not just an academic difference; it has real consequences for defendants like Thompson. In the Sixth Circuit, he would not face conviction unless the statement was explicitly false. In the Seventh Circuit, however, misleading but technically true statements could sustain a conviction.

 

The impact of this split and inconsistency pose questions about fairness and uniformity in federal law’s application. The implications for defendants are substantial. A person prosecuted under § 1014 could face up to 30 years in prison, whereas the same conduct prosecuted under § 1001, which explicitly includes misleading statements, carries a maximum of 5 years. The discrepancy is not trivial and speaks to issues of fairness. If the Supreme Court does not intervene, as Thompson argues, inconsistent interpretations of federal law will persist, affecting sentencing, prosecutorial discretion, and potentially coercing guilty pleas to avoid harsher penalties.

 

4. Broader Consequences of Prosecutorial Discretion

Thompson's brief also warns against the dangers of over-criminalizing ordinary negotiation tactics. Consider a scenario with a homebuyer- if this buyer mentions a competing offer with a lower interest rate to a lender (as a way to negotiate better terms) but leaves out the fact that this competing offer requires a higher down payment, they are not lying -they are presenting information that is technically accurate but selectively incomplete. Thompson’s concern is that, under the government’s interpretation, this omission could be viewed as "misleading" and thus meet the criteria for a felony offense under § 1014.

 

The broader implication is that such an interpretation could turn typical negotiation behavior, where parties often selectively present facts to create leverage, into criminal acts if any incomplete statement can be deemed misleading. This, according to Thompson, risks over-criminalizing routine interactions by treating nuanced, ordinary statements as felonious “false statements.”

 

Under the government’s interpretation, the omission of the home buyer could constitute a felony. The practical effect of such an interpretation would be to chill ordinary commercial negotiations, where incomplete information is common. Not only would this broaden criminal liability, but it would do so in a way that contradicts the statutory text.

 

Beyond the chilling effect on negotiations, Thompson’s argument also highlights a troubling use of prosecutorial discretion. By charging under § 1014, the government can impose harsher penalties than under statutes like § 1001, which explicitly cover misleading conduct. This use of the statute as a lever for obtaining longer sentences or more severe outcomes raises significant concerns. It transforms the statute from a targeted tool against literal falsehoods into a broader weapon of prosecutorial convenience. It is a troubling extension of power, one that the rule of law should not permit.

 

5. Purposivism vs. Textualism in Criminal Law

The government defends its interpretation of § 1014 by invoking purposivism. It argues that the statute's purpose is to protect financial institutions from false or misleading information. But Thompson disputes this approach, calling for strict adherence to the text. The Supreme Court has consistently emphasized judicial restraint in interpreting criminal statutes. Cases like Dubin v. United States, 599 U.S. ___, 143 S. Ct. 1557 (2023) reinforce that courts should not infer prohibitions that are not explicitly stated. Thompson asserts that purposivism, while useful in civil contexts, has no place in criminal law where liberty is at stake. He contends that statutory interpretation in this domain must prioritize clarity and explicit legislative language.

 

Thompson’s reliance on textualism aligns with longstanding Supreme Court precedent. Statutes defining criminal liability should be interpreted narrowly, focusing solely on what Congress has clearly prohibited. This ensures that defendants are not subjected to unexpected liabilities or disproportionately harsh penalties based on ambiguous language.

6. Practical Implications of the Ruling

 

This is not a case about abstract principles as it has very real implications. If the government’s interpretation prevails, defendants charged under § 1014 could face 30-year sentences for misleading, but not explicitly false, statements. Such outcomes would be disproportionate. It contradicts the principle that punishment should fit the crime and reflects a broader trend of overcriminalization. If the interpretation of § 1014 is not corrected, defendants could face longer sentences than Congress intended for conduct that falls short of literal falsity.

 

Thompson’s brief emphasizes that this circuit split, coupled with the government’s tendency to stretch statutory language, necessitates Supreme Court intervention. The inconsistent application of § 1014 across circuits threatens not only uniformity but also the integrity of federal criminal law. The Court must establish clear standards for interpreting § 1014 to protect the rights of defendants and uphold the rule of law.

7. Key Cases Supporting Thompson’s Position

 

Thompson supports his arguments with several pivotal cases:

  • United States v. Kurlemann, 736 F.3d 439 (6th Cir. 2013), Limits § 1014 to literally false statements.
  • United States v. Thorn, 17 F.3d 325 (11th Cir. 1994Establishes that misleading but technically accurate statements cannot sustain a conviction under § 1014.
  • United States v. Attick, 649 F.2d 61 (1st Cir. 1981)Reaffirms that § 1014 requires literal falsity.
 

These cases offer diverging interpretations of § 1014 and strengthen Thompson’s call for Supreme Court review. The inconsistency among circuits is stark and demands resolution for the sake of uniform federal law enforcement.

 

8. Analysis of the Government’s Opposition Brief

The government’s opposition brief largely rejects the premise that § 1014 is limited to literally false statements. It contends that the statute should be read to include misleading representations, arguing that such an interpretation aligns with the statute’s broader purpose of protecting financial institutions from deceit. However, this position differs from the statutory language, which explicitly targets false statements and does not mention misleading conduct. The government’s stance overlooks the textual distinction Congress has drawn in other statutes that address both false and misleading statements.

 

The government downplays the significance of the circuit split, arguing that it is not practically meaningful. It contends that differences in interpretation across circuits do not substantially affect outcomes in most cases. Though inconsistent legal standards based on geography undermine fairness and the uniform application of federal law.

 

Use of Purposivism Over Textualism

The government’s reliance on purposivism is evident throughout its brief. It repeatedly emphasizes the legislative intent behind § 1014, arguing that a broader reading is necessary to fulfill Congress’s intent to protect financial institutions. Thompson’s reply criticizes this approach, underscoring that purposivism is inappropriate in the criminal context, where statutory language must be clear and precise to meet constitutional standards of due process.

 

Dismissal of Rule of Lenity

The government largely ignores the rule of lenity, briefly suggesting that it is inapplicable given the alleged clarity of § 1014’s language. Thompson’s brief, however, stresses that the rule of lenity is a critical safeguard against overcriminalization. By failing to address this issue comprehensively, the government’s brief overlooks a fundamental principle that guards against arbitrary and unjust prosecutorial expansion of criminal statutes.

 

8. Conclusion

With certiorari granted on October 4th, the Supreme Court now has the opportunity to clarify the reach of 18 U.S.C. § 1014 and resolve a significant circuit split. At issue is whether the statute should apply only to explicitly false statements or extend to misleading ones, a question that holds real implications for prosecutorial boundaries and fairness in federal fraud cases. The Court’s decision will shape not only this case but perhaps also the principles of clarity, proportionality, and consistency that underpin our criminal justice system.

[i] United States v. Thompson, No. 22-2254, 7th Cir., January 8, 2024, (decided by Circuit Judges Flaum, St. Eve, and Pryor

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