Bates v. United States

Background

A former school treasurer, a for-profit management company that ran a technical school, the school’s owners, and the Department of Education are at the center of this case. The school accepted federally guaranteed student loans under the Title IV program. School officers diverted money by paying management fees, salaries, and loans instead of making required refunds to loan lenders when students withdrew. Over time the school accumulated tens of thousands of dollars in unpaid refunds, lost accreditation, and stopped participating in the loan program. A federal grand jury indicted the school treasurer for "knowingly and willfully" misapplying student loan funds under the federal statute 20 U.S.C. § 1097(a). The district court dismissed the indictment for failing to allege an intent to injure or defraud, but the Seventh Circuit reinstated the prosecution and the Supreme Court agreed to resolve a split with another appeals court.

Reasoning

The core question was whether the statute required proof that the defendant specifically intended to injure or defraud someone. The Court examined the text and structure of § 1097(a) and found no such language, noting that a related subsection, § 1097(d), expressly included an intent-to-defraud requirement. The Court relied on that contrast and other textual arguments to conclude Congress did not add an intent-to-defraud element to § 1097(a). The Court therefore held the Government need only prove knowing and willful conversion of Title IV funds, not a purpose to injure or defraud.

Real world impact

The decision affirms the Seventh Circuit and allows prosecutors to pursue criminal charges under § 1097(a) without proving a specific intent to injure or defraud the Government or others. It clarifies the law for prosecutions involving misuse of federally guaranteed student loans and resolves the circuit split. The Court did not address whether a defendant must know their conduct violated the law.