United States v. Robert Harra, Jr.

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
__________
No. 19-1105
__________
UNITED STATES OF AMERICA
v.
ROBERT V.A. HARRA, JR.,
Appellant
__________
On Appeal from the United States District Court
for the District of Delaware
(D. Del. No. 1:15-cr-00023-003)
Hon. Richard G. Andrews, United States District Judge
__________
No. 19-1136
__________
UNITED STATES OF AMERICA
v.
DAVID GIBSON,
Appellant
__________
On Appeal from the United States District Court
for the District of Delaware
(D. Del. No. 1:15-cr-00023-002)
Hon. Richard G. Andrews, United States District Judge
__________
No. 19-1190
__________
UNITED STATES OF AMERICA
v.
WILLIAM B. NORTH,
Appellant
__________
On Appeal from the United States District Court
for the District of Delaware
(D. Del. No. 1:15-cr-00023-004)
Hon. Richard G. Andrews, United States District Judge
__________
No. 19-1237
__________
UNITED STATES OF AMERICA
v.
KEVYN N. RAKOWSKI,
Appellant
__________
On Appeal from the United States District Court
for the District of Delaware
(D. Del. No. 1:15-cr-00023-005)
Hon. Richard G. Andrews, United States District Judge
__________
Argued June 30, 2020
Before: KRAUSE, PHIPPS, and GREENBERG, Circuit
Judges
(Filed: January 12, 2021)
2
Sharon D. Feldman
Andrew M. Lawler
641 Lexington Avenue, 15th Floor
New York, NY 10022
Avram D. Frey
Cambria County Office of District Attorney
200 South Center Street
Cambria County Court House
Ebensburg, PA 15931
Jennifer A. Hradil
Lawrence S. Lustberg [ARGUED]
Elizabeth A. Mancuso
Thomas R. Valen
Gibbons
One Gateway Center
Newark, NJ 07102
Michael P. Kelly
Steven P. Wood
McCarter & English
405 North King Street
Renaissance Centre, 8th Floor
Wilmington, DE 19801
Geoffrey N. Rosamond
McCarter & English
100 Mulberry Street
Four Gateway Center, 14th Floor
Newark, NJ 07102
Counsel for Appellant Robert V.A. Harra, Jr.
Kenneth M. Breen
Phara A. Guberman
John P. Nowak
Jena A. Sold
Paul Hastings
200 Park Avenue, 30th Floor
New York, NY 10166
3
Stephen B. Kinnaird
Paul Hastings
2050 M Street, N.W.
Washington, DC 20036
Counsel for Appellant David Gibson
Andrea S. Brooks
Russell S. Nolte
David E. Wilks
Wilks Law
4250 Lancaster Pike, Suite 200
Wilmington, DE 19805
Thomas A. Foley
1905 Delaware Avenue
Wilmington, DE 19806
George W. Hicks, Jr. [ARGUED]
Aaron L. Nielson
Kirkland & Ellis
1301 Pennsylvania Avenue, N.W.
Washington, DC 20004
Counsel for Appellant William B. North
Andrew C. Dalton
Bartholomew J. Dalton
Ipek K. Medford
Dalton & Associates
1106 West 10th Street
Cool Spring Meeting House
Wilmington, DE 19806
Henry E. Klingeman [ARGUED]
Klingeman Cerimele
60 Park Place, Suite 1100
Newark, NJ 07102
Counsel for Appellant Kevyn N. Rakowski
Robert F. Kravetz [ARGUED]
Jamie M. McCall
Lesley F. Wolf
Office of United States Attorney
4
1313 North Market Street
Hercules Building, Suite 400
Wilmington, DE 19801
Counsel for Appellee United States of America
__________
OPINION OF THE COURT
__________
KRAUSE, Circuit Judge.
When a defendant is charged with false reporting based
on an ambiguous reporting requirement, what is the prosecu-
tion’s burden at trial as to the element of falsity? Is it sufficient
for the prosecution to prove the statement was false only under
the Government’s interpretation of the requirement, or must it
prove the statement was false under each objectively reasona-
ble interpretation of the requirement? In the balance hang the
convictions of four former executives of Wilmington Trust
Corporation, a bank that, in the wake of the Great Recession of
2008, excluded certain commercial real estate loans from those
it reported as “past due” to the Securities and Exchange Com-
mission and the Federal Reserve. The executives maintained
that, under a reasonable interpretation of these requirements,
the exclusion of the loans was proper, but the District Court
denied their requests to introduce evidence concerning or in-
struct the jury about that alternative interpretation. The jury
then found the executives’ reporting constituted “false state-
ments” for purposes of 18 U.S.C. § 1001, 15 U.S.C. § 78m, and
related statutes and convicted Defendants on all counts.
We hold today that to prove falsity beyond a reasonable
doubt in this situation, the Government must prove either that
its interpretation of the reporting requirement is the only objec-
tively reasonable interpretation or that the defendant’s state-
ment was also false under the alternative, objectively reasona-
ble interpretation. And because the Government here pro-
duced insufficient evidence from which a rational jury could
find Defendants’ statements false under this rule, we will re-
verse Defendants’ false statements convictions and remand on
those counts for entry of judgments of acquittal. As for De-
fendants’ conspiracy and securities fraud convictions,
5
however, which were charged in the alternative on an inde-
pendent theory of liability, we will vacate and remand for re-
trial.
I. BACKGROUND
A. The Bank’s Internal Practices
For many years before the Great Recession, Wilming-
ton Trust maintained a significant commercial real estate lend-
ing practice. This department responsible for this practice is-
sued “term loans,” meaning the borrower would make monthly
interest payments and repay the principal sum at “maturity,”
i.e., the date “set forth in the promissory note and the loan
agreement.” A5977–78; see, e.g., A11755 (requiring “pay-
ment of all outstanding principal plus all accrued unpaid inter-
est” on the date of maturity as well as “regularly monthly pay-
ments of all accrued unpaid interest” on a monthly basis). Be-
cause the loans typically financed construction projects, those
terms were short—two or three years—and, upon their expira-
tion, the loans could be repaid, extended, or refinanced.
A3040. Extensions were commonplace in this context, and the
Bank’s loan documents reserved its right to “renew or extend
(repeatedly and for any length of time) this loan . . . without the
consent of or notice to anyone.” A11756.
For purposes of its internal classification of such loans,
the Bank did not classify all mature loans with unpaid princi-
pals as past due. Instead—so long as loans were in the process
of renewal and interest payments were current—the Bank did
not classify those loans as “past due,” even if the maturity date
had passed. This treatment of the loans internally was known
as a “waiver practice.”
Through most of Wilmington Trust’s history, the
waiver practice had been a relatively minor feature of the
Bank’s portfolio. But this changed dramatically in 2009. By
that point, the Bank had taken on an increasing number of com-
mercial real estate loans, many with maturity dates around the
same time. When borrowers on these loans were unable to re-
pay their principals with the advent of the Great Recession, the
volume of mature loans without full principal repayment ex-
ploded, ballooning to $303.6 million in total by year-end 2009.
6
The effect on the Bank’s reporting was commensurate: As the
Bank applied its pre-existing waiver practice to many of these
loans, the discrepancy between matured, non-repaid loans and
Bank-defined “past due” loans ballooned as well. See A5359–
65, A7740 ($8.5 million reported, $296.6 million in all).
The Bank reacted to this unprecedented volume in sev-
eral ways. First, it approved mass extensions of loans that had
matured or were nearing maturity. Second, for reasons not en-
tirely clear, in July 2010 the Bank changed its waiver practice,
resolving that “[a]ll matured/current loans” would be “reported
in [the] Past Due numbers.” A11044. Ultimately, however,
the Bank was unable to weather the financial crisis unscathed.
By the third quarter of 2010, a substantial number of loans were
past due or placed on nonaccrual; the Federal Reserve issued a
“troubled condition” letter, A3528; and by November 2010 the
Bank had merged with M&T Bank.
B. Wilmington Trust’s Regulatory Oversight
Wilmington Trust’s internal classification of its loans
also carried over to its external reporting of loans so that, when
required to report “past due” loans, it excluded the “waived”
loans, which it treated as current. As a federally insured bank
and a publicly traded company, Wilmington Trust reported to,
as relevant here, three regulators: the SEC, the Fed, and the
Office of Thrift Supervision (OTS), an agency within the De-
partment of the Treasury that has since merged with the Office
of the Comptroller.1 Each of these regulators required the
Bank to report “past due” loans and, while none gave a defini-
tion, each described the reporting requirement in slightly dif-
ferent terms.
The SEC, in its “Industry Guide” for bank holding com-
panies, instructed the Bank to identify “[a]ccruing loans which
are contractually past due 90 days or more as to principal or
interest payments.” A9219 (emphasis added); see also 17
C.F.R. § 229.303(a)(1) instruction 13 (directing “bank holding
companies” to the “information called for in Guide 3” when
1
Defendants were not charged with making false state-
ments to the OTS.
7
preparing quarterly and annual reports). The SEC provided no
further guidance on the meaning of “past due.”
The Fed, in its instructions to banks submitting quar-
terly “call reports,” also used the word “contractual” to define
“past due loans”: It required the Bank to report “all loans . . .
that are past due,” with “[t]he past due status of a loan . . . de-
termined in accordance with its contractual repayment terms.”
A9622. The Fed’s instructions (the “call report instructions”)
then went further, stating that “grace periods allowed by the
bank after a loan . . . has become past due but before the impo-
sition of late charges are not to be taken into account,” id., and
clarifying, in relevant part, that loans “are to be reported as past
due when either interest or principal is unpaid in the following
circumstances”:
(3) Single payment and demand notes, debt se-
curities, and other assets providing for the pay-
ment of interest at stated intervals are to be re-
ported as past due after one interest payment is
due and unpaid for 30 days or more.
(4) Single payment notes, debt securities, and
other assets providing for the payment of interest
at maturity are to be reported as past due after
maturity if interest or principal remains unpaid
for 30 days or more.
A9622–23.
The Bank’s third regulator, OTS, also provided an “in-
struction manual” directing Wilmington Trust to “[r]eport all
loans . . . that are contractually past due” and, much like those
from the Federal Reserve, specifying that “grace periods”
should not be “take[n] . . . into account when determining past
due status.” A12399. OTS also tracked the language of the
Fed’s “Circumstance 3” and “Circumstance 4” to describe its
requirement, instructing that loans should be reported “as past
due when either interest or principal is unpaid in the following
circumstances”:
c) Single payment and demand notes providing
for the payment of interest at stated intervals
(such as certain construction loans) after one
8
interest payment is due and unpaid for 30 days or
more.
d) Single payment notes providing for the pay-
ment of interest at maturity if interest or principal
remains unpaid for 30 days or more after ma-
turity.
Id. (emphasis omitted).
Unlike the Fed, however, OTS provided further guid-
ance as to the meaning of these circumstances in the form of
Q&As on its website. Importantly for our purposes, one such
question asked about a situation—akin to the Bank’s waiver
practice—where “construction loans that require interest-only
payments due monthly with the principal due at maturity” were
past maturity but current on interest. A12509. The response
posted by OTS was that:
If management has restructured or extended a
loan—formally or informally[—]then the loan
would not be past due. An informal extension
(not the same as a restructuring) is when the bank
has agreed to accept interest payments until the
property is rented or sold. The extension should
be for a limited and reasonable length of time[,]
and the bank should get the extension in writing.
From the borrower’s perspective, if he is doing
what the bank has told him, the loan is not in de-
fault and does not have to be reported . . . .
Id. (emphasis added).
All parties agree that apart from these sources, there are
no statutory or regulatory definitions illuminating the defini-
tion of “past due” or explaining how that term should be ap-
plied to term loans past maturity but current on interest.
C. Procedural History
In August 2016, a grand jury returned a Third Supersed-
ing Indictment (the Indictment) charging Gibson, Harra, North,
Rakowski, and the Bank with conspiracy to defraud the United
States, commit securities fraud, and make false statements to
9
regulators in violation of 18 U.S.C. § 371 (Count One); secu-
rities fraud in violation of 18 U.S.C. § 1348 (Count Two);
making false statements to the SEC and Federal Reserve in vi-
olation of 18 U.S.C. § 1001 and 15 U.S.C. § 78m (Counts
Three through Sixteen); and falsely certifying financial reports
in violation of 18 U.S.C. § 1350 (Counts Seventeen through
Nineteen, as to Gibson only).2 Every offense with which De-
fendants were charged involved the alleged falsity of the
Bank’s reporting of “past due” loans.3 As the Government puts
it, the “starting point” for each charge “[wa]s that Defendants
knew that the . . . past due loan statements were false” but
nonetheless made them with the requisite criminal intent. Ap-
pellee’s Br. 123.
The Government separately contends that the mass ex-
tensions mentioned above formed an alternate basis for liabil-
ity for the conspiracy and securities fraud counts, independent
of any false statements. Under this “extend and pretend”
scheme, the Government charged the Defendants with extend-
ing the maturity date of soon-to-come-due loans without ade-
quate investigation or underwriting, in order to hide the scope
of the Bank’s past due loan liability from investors.
For their part, Defendants advanced a theory throughout
the trial that their statements were not actually false because
the SEC’s and Federal Reserve’s reporting instructions were
2
Count Three charges only the Bank, but the Bank was
dismissed as a defendant before trial.
3
“To establish a violation of § 1001, the government
[i]s required to prove each of the following five elements:
(1) that [the accused] made a statement or representation;
(2) that the statement or representation was false; (3) that the
false statement was made knowingly and willfully; (4) that the
statement or representation was material; and (5) that the state-
ment or representation was made in a matter within the juris-
diction of the federal government.” United States v. Mo-
yer, 674 F.3d 192, 213 (3d Cir. 2012). The conspiracy, secu-
rities fraud, and false certification charges proceeded on the
theory that Defendants’ exclusion of the waived loans from
those they reported as “past due,” amounted to a false state-
ment.
10
ambiguous and, under an objectively reasonable interpretation
of those instructions, Defendants were not required to report
the waived loans as “past due.” The District Court’s first ruling
relating to this theory came in response to the Government’s
motion to exclude the OTS Q&A. In ruling that the OTS Q&A
could be introduced only with respect to Defendants’ affirma-
tive defense of good faith—relevant to scienter—but not with
respect to the element of falsity, the District Court ruled that
“the applicable reporting requirements [we]re [not] ambigu-
ous.” A4. And even if there were ambiguity in the definition
of “past due,” the Court concluded, the interpretation presented
in the OTS Q&A—that a loan that has been “informal[ly] ex-
ten[ded] . . . when the bank has agreed to accept interest pay-
ments until the property is rented or sold” is not “past due,”
A12509—would not be “a reasonable interpretation” of the
call report instructions because an “informal” extension would
be akin to a “grace period,” which the instructions made clear
could not be taken into account. A6. Accordingly, the Court
ruled that insofar as the OTS Q&A had suggested that “a bank
need not execute legal documents for the status of a loan to
change for past due reporting documents,” OTS provided an
unreasonable interpretation of the term “past due” that the jury
should not consider relevant to the reporting requirement or the
Government’s burden to prove falsity. A6–7.
The issue of how to determine whether the Bank’s “past
due” reporting was false returned when it came time for jury
instructions. Defendants urged the District Court to instruct
the jury that “[t]o prove that any statement was false, the gov-
ernment must prove beyond a reasonable doubt that the state-
ment was not true under any reasonable interpretation of the[]
reporting standards,” regardless what “any defendant actually
believed.” A1251; accord A1228–29, A1262, A1277–78,
A1300. They also asked that the jury be instructed to consider
the OTS Q&A when ascertaining the “reasonable interpreta-
tion[s]” of what “past due” meant. See, e.g., A1278.
The Court denied both requests. Instead, the Court gave
three falsity instructions. In the first, it called the jury’s atten-
tion to the Fed’s call report instructions, emphasizing that a
loan’s past due status “should be determined in accordance
with its contractual repayment terms” excluding “grace peri-
ods,” A7624–25, and reading aloud to the jury the third and
11
fourth circumstances. In the second, the Court called the jury’s
attention to the SEC’s requirement to state “loans which are
contractually past due . . . as to principal or interest payments.”
A7627. And in the third, the Court instructed the jury that “[a]
statement . . . is false if it is untrue when made, and if the per-
son making the statement . . . or causing it to be made knew it
was untrue at the time.” A7646. The Court did not instruct
that the Government must prove falsity under any reasonable
interpretation of “past due,” nor did it refer to the OTS Q&A
in any of its instructions.
The jury found defendants guilty on all counts. These
appeals followed.
II. DISCUSSION4
Defendants challenge the sufficiency of the evidence
supporting their convictions, asserting that the Government
failed to prove beyond a reasonable doubt that their statements
were actually “false.”5 In doing so, they raise an issue of first
impression in this Circuit as to the prosecution’s burden to
prove that a statement was “false” in response to an ambiguous
reporting requirement: Must the prosecution prove the state-
ment false under each objectively reasonable interpretation of
that reporting requirement, as Defendants argue and as several
of our sister circuits require? Or is it enough, as the Govern-
ment contends, for the prosecution to prove that a statement is
false under one reasonable interpretation, as long as a defend-
ant accepted that interpretation at the time she made the state-
ment? For the following reasons, we agree with Defendants
that the former is the proper burden and join our sister circuits
in holding that the prosecution must prove a statement false
under each objectively reasonable interpretation of an
4
The District Court had jurisdiction under 18 U.S.C.
§ 3231, and we have appellate jurisdiction under 28 U.S.C.
§ 1291.
5
Defendants also argue that insufficient evidence sup-
ports the jury’s findings that they possessed the requisite sci-
enter. Because we reverse on other grounds, we need not ad-
dress this argument with respect to Defendants’ false statement
and certification convictions.
12
ambiguous reporting requirement. We first address the Gov-
ernment’s burden to prove falsity in the face of an ambiguous
reporting requirement and then, reviewing the evidence in light
of this burden, conclude the evidence was insufficient to sup-
port Defendants’ convictions. Because this is fatal to the false
statement counts of the Indictment, we will reverse those con-
victions. And because we conclude this error was not harm-
less, we will vacate Defendants’ remaining convictions and re-
mand for retrial on those counts.
A. The Government’s Burden to Prove Falsity
We begin with the Government’s burden to prove the
falsity element of the charged offenses, a matter over which we
exercise plenary review. See United States v. Rodriguez, 342
F.3d 296, 298 (3d Cir. 2003). We address four issues: (1) the
Government’s contention that we have previously decided this
issue in its favor; (2) why a defendant’s subjective belief that a
statement is false cannot satisfy the objective falsity element
consistent with due process; (3) the proper burden of proof; and
(4) whether reasonableness in this context is a question for the
jury or the judge.
1. The Government’s burden to prove falsity
in the face of an ambiguous reporting re-
quirement is a matter of first impression in
this Circuit.
The Government argues, drawing on a line of cases
dealing with “fundamental ambiguity” in the context of perjury
and false statements under § 1001, that—short of a “fundamen-
tal” ambiguity—we have held ambiguity irrelevant to the ele-
ment of falsity. That assertion misapprehends the development
of our case law to date.
In one line of cases, we have addressed the prosecu-
tion’s burden to prove falsity in the absence of ambiguity. In
run-of-the-mill cases where there is no dispute over the mean-
ing of the question or reporting requirement to which a defend-
ant responded, proving falsity is straightforward: A statement
is false if it is “untrue.” United States v. Castro, 704 F.3d 125,
139 (3d Cir. 2013). And as a necessary corollary, a statement
that is “literally true . . . is, by definition, not false.” Id.13
In another line of cases, we have discussed the effect of
“fundamental ambiguity” on scienter. In the context of perjury
and false statement convictions, we have held that “if a ques-
tion is excessively vague or ‘fundamentally ambiguous,’ then
the answer to such question may not, as a matter of law, form
the basis of a perjury or false statements prosecution.” United
States v. Ryan, 828 F.2d 1010, 1015 (3d Cir. 1987) (citations
omitted), abrogated in other part by United States v. Wells, 519
U.S. 482 (1997). We have consistently framed this rule as one
that screens out perjury and false statement charges for which
a jury could never determine “which construction the defend-
ant placed on the question” and, consequently, whether that de-
fendant intended to give a false answer.6 Id. And most re-
cently, in United States v. Hird, 913 F.3d 332 (3d Cir. 2019),
we reiterated that fundamental ambiguity requires a court to
“disturb a jury’s determination” if “it is entirely unreasonable
to expect that the defendant understood the question posed to
him” and characterized our inquiry on appeal as looking to
whether there was sufficient evidence that the defendant in-
tended to perjure because she “understood the question well
enough to give an answer that he or she knew to be false.” Id.
at 346 (internal quotation marks and citation omitted); see id.
at 349 (finding a question not fundamentally ambiguous be-
cause the evidence at trial “would give any reasonable fact
finder more than enough basis to conclude that the witness
6
We first adopted this rule, albeit without yet using the
phrase “fundamentally ambiguous,” in United States v. Slawik,
548 F.2d 75 (3d Cir. 1977), where we ordered dismissal of a
perjury indictment because it was “premised . . . on questions
that were deliberately artless and vague” and thus “it was en-
tirely unreasonable to expect that the defendant understood the
questions posed to him.” Id. at 86. Even with this category of
questions, however, the mere fact that a question was funda-
mentally ambiguous does not mean a statement made in answer
can never be false. The inquiry is necessarily fact-specific,
ranging from adoptive admissions where the truth of the an-
swer depends entirely on the clarity of the question, to free-
standing or non-responsive statements included in the answer
that may be false entirely independent of the question asked.
14
knew” the question had a certain meaning);7 see also United
States v. Richardson, 421 F.3d 17, 33 (1st Cir. 2005) (“A ques-
tion that is truly ambiguous . . . can never provide a basis for a
finding of perjury, as it could never be said that one intended
to answer such a question untruthfully.” (citation omitted)).
But these cases all discussed the effect of “fundamental ambi-
guity”—not just arguable ambiguity—and they did so in the
context of the element of scienter, not falsity.8
Neither line of cases resolved the effect of arguable am-
biguity on the issue we confront today: the Government’s bur-
den to prove falsity. The closest we came before today was in
United States v. Syme, 276 F.3d 131 (3d Cir. 2002). There, the
defendant was charged with fraudulently billing Medicare and
Medicaid for ambulance services as if the vehicles had their
“home station” in Pennsylvania when in fact the “home sta-
tions” were in other states. Id. at 142. Like Defendants here,
7
We note that Hird’s application of the fundamental
ambiguity standard on sufficiency of the evidence review, see
913 F.3d at 346–47, is in some tension with our earlier funda-
mental ambiguity cases framing the standard as one to be ap-
plied when a defendant moves to dismiss an indictment, see,
e.g., United States v. Serafini, 167 F.3d 812, 814, 820 (3d Cir.
1999). Because this tension concerns only the Government’s
burden to prove scienter—an element of the offense not at is-
sue here—we leave its resolution for another day.
8
We recognize that the distinction between questions
considered typically or “arguably ambiguous” and those con-
sidered “fundamentally ambiguous” can be somewhat elusive,
with the latter descriptor in some sense, conclusory. Consistent
with the use of these terms in the case law, however, the dif-
ference seems to be that an ambiguous question as typically
understood is “open to more than one interpretation,” but it is
also capable—by reference to context or other interpretative
tools—of taking on one of them. Ambiguous, Lexico.com,
https://www.lexico.com/definition/ambiguous (2020). In the
case of “fundamental ambiguity,” on the other hand, there is
no rational basis for making that choice. For purposes of this
opinion, we will use the term “arguably ambiguous” or simply
“ambiguous” to refer to this type of question, as opposed to a
“fundamentally ambiguous” question.
15
the Syme defendant challenged his false statement conviction
on the ground that the term “home station” was not clearly de-
fined. Id. at 142–43. We agreed that there was some ambiguity
as to the applicable definition of home station, but we did not
reach the question of the prosecution’s burden to prove falsity
in the face of an ambiguous reporting requirement. Because
the prosecution presented alternative theories of guilt on the
relevant counts and the jury had returned a general verdict, we
reasoned—pursuant to the Supreme Court’s decision in Griffin
v. United States, 502 U.S. 46 (1991)—that the conviction could
be reversed only if the “home station” theory of falsity was un-
constitutional or legally invalid. Id. at 144. Concluding that
the indictment did not “rel[y] on erroneous interpretations of
the law” and that the district court had properly instructed the
jury, we affirmed under Griffin and declined to reach whether
the “home station” theory of falsity was supported by sufficient
evidence. Id. at 146–48.
In sum, the Government’s protestations to the contrary,
we have not previously defined the Government’s burden of
proof to establish falsity in the face of ambiguous reporting re-
quirements—much less resolved it in the Government’s favor.
That is a question of first impression in our Circuit and the one
to which we now turn.
2. Due process demands that the falsity ele-
ment stand independent of a defendant’s
subjective intent.
Relying on Ryan and Hird, the Government argues that
as long as a question is not fundamentally ambiguous, the Gov-
ernment’s burden as to falsity is simply to prove that a defend-
ant understood an ambiguous reporting requirement to mean
what the Government says it means and, in light of that mean-
ing, intended to lie. Oral Arg. Tr. 109:15–16 (emphasizing
“the construction that a particular [d]efendant placed on the
term ‘past due’”). This argument fails not only because it mis-
takes the case law on which it relies as addressing falsity in-
stead of scienter but also, more fundamentally, because it col-
lapses subjective falsity—the defendant’s intent to lie—with
objective falsity, i.e., the untruth of the statement in question.
It thus runs up against the demands of due process: the prose-
cutor’s duty to prove every element of the offense.
16
It is a bedrock principle that “the [Fourteenth Amend-
ment’s] Due Process Clause protects the accused against con-
viction except upon proof beyond a reasonable doubt of every
fact necessary to constitute the crime with which he is
charged.” In re Winship, 397 U.S. 358, 364 (1970); see also
United States v. Nasir, 982 F.3d 144, 162 (3d Cir. 2020) (en
banc). Once the Government chooses to charge a particular
offense, it undertakes the burden to “convince the trier of all
the essential elements of guilt,” Winship, 297 U.S. at 361, and
if the prosecution fails to carry this burden, a conviction cannot
stand. To allow otherwise would be to endorse conviction
merely for “being bad”—an outcome abhorrent to the tenet
that, in “our legal system,” we convict people only of “specific
crimes.” Castro, 704 F.3d at 140. Indeed, we have repeatedly
found that the prosecution’s failure to prove an element of an
offense is sufficiently grave to amount to a “miscarriage of jus-
tice” and a basis to reverse a conviction even on plain error
review. See, e.g., Nasir, 982 F.3d at 174; United States v. Re-
tos, 25 F.3d 1220, 1231–32 (3d Cir. 1994); United States v.
Xavier, 2 F.3d 1281, 1287 (3d Cir. 1993).
In the false statement context, because falsity and
knowledge are distinct elements, this means the Government
must prove a statement was false beyond a reasonable doubt,
regardless of the defendant’s subjective intent to lie. Castro,
704 F.3d at 139. If that were ever in question, any doubt was
erased by our decision in United States v. Castro, where a de-
fendant who believed he was lying when he told a federal agent
he received money from a particular person, but who in fact
had made a “completely, if unintentionally, accurate” state-
ment because the money had actually come from an under-
cover agent, had been convicted of making a false statement
under § 1001. Id. at 131, 133, 139–40. We reversed, holding
that the defendant could not be convicted for making a false
statement when his statement was literally true, even though he
believed it was untrue. Id. Allowing a defendant’s subjective
intent to stand in for “a complete failure of proof” on the falsity
element, we explained, would collapse the two elements and
17
relieve the prosecution of its constitutional burden to prove
each and every element of the offense.9 Id. at 139.
Yet the Government here advances the selfsame argu-
ment as the prosecution in Castro: that the actual falsity of De-
fendants’ statements is “irrelevant,” Castro, 704 F.3d at 140,
as long as the Government can establish that there was a meet-
ing of the minds between Defendants and their regulators on
what constituted a “past due” loan and that Defendants in-
tended to report falsely in light of this mutually understood
meaning. Consistent with the Government’s burden to prove
each and every element of an offense beyond a reasonable
doubt, we rejected this argument in Castro and do so again to-
day. The Government must show not merely that a defendant
subjectively intended to lie, but also that the statement in ques-
tion was objectively false.10
3. Where a reporting requirement is ambig-
uous, the Government bears the burden of
proving falsity under each objectively rea-
sonable interpretation of the requirement.
Because we must define a standard for falsity independ-
ent of a defendant’s subjective intent, we now turn to defining
the Government’s burden of proof where a reporting require-
ment is ambiguous. Here, we are guided by another due
9
Nor does the text of § 1001 support a subjective-belief
exception to the Government’s burden to prove falsity. Be-
cause “[k]nowledge and belief are very different mental states”
and Congress, in enacting § 1001, chose to criminalize only
knowledge, § 1001 cannot support the conviction of a defend-
ant who merely believes that his true statement is false. Castro,
704 F.3d. at 140 (citation omitted).
10
As we recently put it in discussing the element of fal-
sity under the False Claims Act, a requirement of “factual evi-
dence that [the defendant] was making a knowingly false deter-
mination” in order to prove “factual” or “objective” falsity
would “conflate[] the elements of scienter and falsity” and
“read[] the scienter element out of the text of the statute.”
United States v. Care Alternativeness, 952 F.3d 89, 96 (3d Cir.
2020) (emphasis in original).
18
process principle: the requirement that potential defendants be
given “fair warning” of what conduct could give rise to crimi-
nal liability.
It is “[a] fundamental principle in our legal system . . .
that laws which regulate persons or entities must give fair no-
tice of conduct that is forbidden or required.” FCC v. Fox Tel-
evision Stations, Inc., 567 U.S. 239, 253 (2012). Thus, “a con-
viction . . . fails to comply with due process if the statute or
regulation under which it is obtained ‘fails to provide a person
of ordinary intelligence fair notice of what is prohibited, or is
so standardless that it authorizes or encourages seriously dis-
criminatory enforcement.’” Id. (quoting United States v. Wil-
liams, 553 U.S. 285, 304 (2008)). This fundamental tenet en-
sures that a “statute, either standing alone or as construed,
made it reasonably clear at the relevant time that the defend-
ant’s conduct was criminal.” United States v. Lanier, 520 U.S.
259, 267 (1997). Accordingly, as the Supreme Court explained
in Lanier, “due process bars courts from applying a novel con-
struction of a criminal statute to conduct that neither the statute
nor any prior judicial decision has fairly disclosed to be within
its scope.”11 Id. at 266.
Fair warning principles apply with equal force when a
defendant is criminally charged as a result of noncompliance
with agency regulations or guidance. See Fox Television Sta-
tions, 567 U.S. at 253 (explaining the “due process concern[]”
that “regulated parties should know what is required of them
so they may act accordingly”). Thus, a conviction for conceal-
ing material facts in violation of 18 U.S.C. § 1001(a)(1)—an-
other subsection of the statute under which Defendants were
convicted for making false statements—cannot stand absent
11
This is one of “three related manifestations of the fair
warning requirement.” Lanier, 520 U.S. at 266. The other two
manifestations are the vagueness doctrine, which “bars en-
forcement of ‘a statute which either forbids or requires the do-
ing of an act in terms so vague that men of common intelli-
gence must necessarily guess at its meaning and differ as to its
application,’” id. (quoting Connally v. General Constr. Co.,
269 U.S. 385, 391 (1926)), and the rule of lenity, which “en-
sures fair warning by so resolving the ambiguity in a criminal
statute as to apply it only to conduct clearly covered,” id.19
fair notice of the legal duty to make the particular disclosure.
See United States v. Safavian, 528 F.3d 957, 964–65 (D.C. Cir.
2008) (reversing a § 1001(a)(1) conviction because “vague”
government guidance documents were insufficient to create a
legal duty to disclose); United States v. White Eagle, 721 F.3d
1108, 1118 (9th Cir. 2013) (reversing a § 1001(a)(1) convic-
tion when the regulation purportedly creating a duty to disclose
did not “provide specifics on what kind of information should
be reported or to whom”). Likewise, where neither the tax
code, Treasury regulations, nor federal court cases create “a
clear rule of law,” there has been no fair warning and a tax
evasion conviction cannot stand. United States v. Harris, 942
F.2d 1125, 1131–32 (7th Cir. 1991); see also, e.g., Sanders v.
Freeman, 221 F.3d 846, 852–53 (6th Cir. 2000); United States
v. Pirro, 212 F.3d 86, 91 (2d Cir. 2000); United States v. Mal-
las, 762 F.2d 361, 364–65 (4th Cir. 1985).
Even in the civil context, fair warning requires that gov-
ernment agencies communicate their interpretation of their
own regulations with “ascertainable certainty” before subject-
ing private parties to punishment under that interpretation.
FTC v. Wyndham Worldwide Corp., 799 F.3d 236, 249, 251
(3d Cir. 2015). This is because it is difficult for a private party
to predict how an agency will interpret an ambiguous statute or
regulation. Id. at 251–52. Whereas “courts generally resolve
statutory ambiguity by applying traditional methods of con-
struction” so that “[p]rivate parties can reliably predict the
court’s interpretation by applying the same methods,” agencies
are “often free to adopt any reasonable construction” and
“may impose higher legal obligations than required by the best
interpretation.” Id. at 252. As a result, “[i]t is harder to predict
how an agency will construe a statute or regulation at some
unspecified point in the future, particularly when that interpre-
tation will depend on the political views of the President in of-
fice at [that] time.” Id. (second alteration in original) (internal
quotation marks and citation omitted). And this is where due
process steps in: Against the backdrop of that unpredictability,
an agency must have clearly communicated its policies before
a private party may be sanctioned—much less criminally pros-
ecuted—for violating them.
Applying these fair warning principles here, we hold
that where falsity turns on how an agency has communicated
20
its reporting requirements to the entities it regulates and those
communications are ambiguous, fair warning demands that the
Government prove a defendant’s statement false under each
objectively reasonable interpretation of the relevant require-
ments.12 This standard ensures that the requisite notice will be
given to potential criminal defendants making required reports
to their regulators, for an ambiguous reporting requirement—
one susceptible to an objectively reasonable interpretation un-
der which a defendant’s statement is true—does not “fairly dis-
close[],” Lanier, 520 U.S. at 266, to the defendant that her re-
sponse, because false under a different reasonable interpreta-
tion, could give rise to criminal liability. That defendant can-
not know with “ascertainable certainty,” Wyndham, 799 F.3d
at 251, whether her statement will be considered false. If a
regulator fails to give fair warning, it may still succeed in a
false statement prosecution—but only if it proves either that its
interpretation is the only reasonable one or that the defendant’s
statement is false under each reasonable interpretation.
With this holding, we join our many sister circuits that
have reached similar conclusions. See United States v. White-
side, 285 F.3d 1345, 1351 (11th Cir. 2002) (“In a case where
the truth or falsity of a statement centers on an interpretive
question of law, the government bears the burden of proving
beyond a reasonable doubt that the defendant’s statement is not
true under a reasonable interpretation of the law.”); United
States v. Prigmore, 243 F.3d 1, 17–18 (1st Cir. 2001) (“[T]here
12
No doubt, under an objective standard, the determi-
nation here—as in other areas of the law that rely on an objec-
tive reasonableness standard—may take account of particular
characteristics of the defendant by considering, for example,
“what a reasonable person under the circumstances would be-
lieve or understand,” United States v. Berrios, 676 F.3d 118,
137 (3d Cir. 2012), “prevailing professional norms,” Strick-
land v. Washington, 466 U.S. 668, 688–89 (1984), and “the
perspective of a reasonable [category of professional]” in the
defendant’s situation, Kedra v. Schroeter, 876 F.3d 424, 450
(3d Cir. 2017). Assessing reasonableness from “the perspec-
tive of a reasonable person in [the defendant’s] position, con-
sidering ‘all the circumstances,’” Oncale v. Sundowner Off-
shore Servs., Inc., 523 U.S. 75, 81 (1998), however, is still an
objective, not a subjective, inquiry.
21
has been no crime if the statements were not false . . . under an
objectively reasonable interpretation of the law imposing the
duty.”); United States v. Migliaccio, 34 F.3d 1517, 1525 (10th
Cir. 1994) (“[T]he government bears the burden to negate any
reasonable interpretations that would make a defendant’s state-
ment factually correct where reporting requirements are am-
biguous.”); United States v. Johnson, 937 F.2d 392, 399 (8th
Cir. 1991) (“[T]he government must negative any reasonable
interpretation that would make the defendant’s statement fac-
tually correct.”); cf. United States v. Jones, 664 F.3d 966, 977
(5th Cir. 2011) (concluding that where defendants claim they
“reasonably believed” their statements were legal, “the Gov-
ernment must show that [they] knew that their claims were
false by proving [their] interpretation of the law was not rea-
sonable”).13
Of course, by adopting this standard as to falsity, we do
not suggest that the ambiguity of a reporting requirement or the
reasonableness of an alternative interpretation is irrelevant to
mens rea; to the contrary, a defendant may well argue she
lacked scienter because she reasonably relied on an alternative
interpretation. But we do reject the Government’s positions
that ambiguity is relevant exclusively to scienter and that the
13
Two Courts of Appeals have suggested, in false state-
ment cases involving application forms, that as long as there is
sufficient evidence that the Government and the defendant had
the same meaning in mind, the prosecution has satisfied its bur-
den to prove falsity. See United States v. Sarwari, 669 F.3d
401, 403, 408–09 (4th Cir. 2012) (involving the term “father”
on a passport application); United States v. Camper, 384 F.3d
1073, 1074, 1076 (9th Cir. 2004) (involving a question about a
firearm possession conviction on a security clearance applica-
tion). But these cases do not grapple with falsity at all—only
with scienter. See Sarwari, 669 F.3d at 407 (explaining that
the jury’s role is to “determine[] whether the defendant knew
his statement was false”); Camper, 384 F.3d at 1076 (explain-
ing that the jury “decides which of the plausible interpretations
of an ambiguous question the defendant apprehended and re-
sponded to”). In any event, for the reasons we have explained,
we reject that approach as collapsing falsity and scienter in
contravention of due process.
22
decisions of our sister circuits support that proposition. They
do not.
As our sister circuits have made clear and as fair warn-
ing demands, ambiguity is relevant to falsity in its own right.
The Eleventh Circuit in Whiteside explicitly applied the stand-
ard we adopt today to hold that the government failed to
“prove[e] the actus reus of the offense—actual falsity,” 285
F.3d at 1353, and the Eighth Circuit has recognized for decades
that “in carrying out [its] burden [to prove falsity], the govern-
ment must negative any reasonable interpretation that would
make the defendant’s statement factually correct,” United
States v. Anderson, 579 F.2d 455, 460 (8th Cir. 1978). Alt-
hough the First and Tenth Circuits have articulated this stand-
ard primarily in the context of addressing requested jury in-
structions going to the knowledge element, both have also ex-
plicitly linked it to falsity. See Prigmore, 243 F.3d at 17–18
(relying on the general rule that a statement is not “fraudulent”
if it is “not in fact false under an objectively reasonable inter-
pretation” of a reporting requirement (citing United States v.
Rowe, 144 F.3d 15, 21–23 (1st Cir. 1998))); Migliaccio, 34
F.3d at 1525 (observing, with respect to falsity, that “the Gov-
ernment bears the burden to negate any reasonable interpreta-
tions that would make a defendant’s statement factually correct
where reporting requirements are ambiguous” (citing United
States v. Anderson, 579 F.2d 455, 460 (8th Cir. 1978), and
United States v. Race, 632 F.2d 1114, 1120 (4th Cir. 1980))).
In sum, an ambiguous reporting requirement is not nec-
essarily fatal to a false statement conviction. But to prove a
statement in response to that requirement false, the Govern-
ment must prove either (a) that its interpretation is the only ob-
jectively reasonable interpretation and that, under this interpre-
tation, the defendant’s statement was false, or (b) that the de-
fendant’s statement was false under each alternative, objec-
tively reasonable interpretation. Put another way, if the Gov-
ernment cannot prove beyond a reasonable doubt that a defend-
ant’s statement was false under each objectively reasonable in-
terpretation of an ambiguous reporting requirement, it cannot
prove the element of falsity.
23
4. Reasonableness is for the jury, not the
judge.
When it comes to determining whether it has met its
burden, the Government argues that reasonableness must be a
question of law for the judge, not the jury, because “courts, not
juries, must determine the scope of a [statutory or regulatory]
provision.” Appellee’s Br. 70 (quoting Obasi Inv. Ltd. v. Tibet
Pharm., Inc., 931 F.3d 179, 188 (3d Cir. 2019)); see also Oral
Arg. Tr. 81:4–18 (contending that the judge must construe re-
porting requirements as “legal concept[s]” and that the jury’s
role is limited to “dispos[ing] of any genuine issues of material
fact” based on those concepts). We disagree.
The question is not the legally correct interpretation of
a requirement, but rather whether a reasonable person in the
defendant’s position could interpret the reporting requirement
only in the way urged by the Government or also in a way that
would make the defendant’s responses true.14 Cf. Wyndham,
799 F.3d at 252 (recognizing a difference between how an
agency interprets ambiguous statutes and regulations and how
a court might interpret those same sources). And this type of
reasonableness determination is one that juries routinely per-
form. As the Supreme Court recently observed, “we have long
recognized across a variety of doctrinal contexts that, when the
relevant question is how an ordinary person or community
would make an assessment, the jury is generally the deci-
sionmaker that ought to provide the fact-intensive answer.”
Hana Fin., Inc. v. Hana Bank, 574 U.S. 418, 422 (2015); id.14
For that reason, the reasonableness inquiry goes be-
yond the purview of the judge to resolve “disputes regarding
the meaning of federal statutes and federal regulations,”
Bonkowski v. Oberg Indus., Inc., 787 F.3d 190, 203 (3d Cir.
2015). And because reasonableness is a question of fact, it
does not require the jury to “constru[e]” highly technical “writ-
ten instruments,” Markman v. Westview Instruments, Inc., 517
U.S. 370, 388 (1996). The evidence here, for example, consists
of two sets of written instructions to banks that, although dry,
are written in relatively plain language and do not rely on any
industry-specific terms of art or legal terminology.
24
(collecting cases).15 That is no less true when the question is
the “construction of an arguably ambiguous” question or re-
porting requirement. Slawik, 548 F.2d at 86 (citation and in-
ternal quotation omitted).
Of course, this does not mean that “ambiguous ques-
tioning [is] a safe conduct for perjury.” Id. It means merely
that “when an answer would be true on one construction of an
arguably ambiguous question but false on another,” id., the
jury must decide whether the Government has satisfied its bur-
den to prove that its interpretation “is the only reasonable in-
terpretation,” id. at 85. And the Government has a range of
tools at its disposal to meet that burden: In some cases, it may
be sufficient to point the jury to the plain text of the relevant
reporting requirement; in others, additional evidence may be
required, e.g., expert testimony establishing that the purport-
edly ambiguous requirement involved terms of art well known
to a reasonable person in the defendant’s field or could be rea-
sonably interpreted only as the Government argues in a given
business context. See, e.g., Syme, 276 F.3d at 143–44 (discuss-
ing testimony going to “a debate within the [relevant] commu-
nity” about the meaning of a disputed reporting requirement);
Stawick, 548 F.2d at 85 (distinguishing questions involving
ambiguous terms from those involving “terms of art” or “words
of common currency” in a given context). But if the
15
See also Minarsky v. Susquehanna County, 895 F.3d
303, 312–16 (3d Cir. 2018) (treating both whether an employer
exercised reasonable care in detecting and eliminating sexual
harassment and whether the employee acted reasonably in not
availing herself of the employer’s anti-harassment opportuni-
ties as jury questions); Colwell v. Rite Aid Corp., 602 F.3d 495,
506 (3d Cir. 2010) (treating whether a shift change was a rea-
sonable accommodation under the ADA as a jury question);
Palmer v. Hendricks, 592 F.3d 386, 396 (3d Cir. 2010) (treat-
ing the objective reasonableness of a defendant’s belief that
deadly force was necessary for self-defense as a jury question);
Jaasma v. Shell Oil Co., 412 F.3d 501, 512 (3d Cir. 2005)
(treating whether a lessor made reasonable efforts to mitigate
damages following a lessee’s vacation of the premises as a
question for the jury); Rivas v. City of Passaic, 365 F.3d 181,
198 (3d Cir. 2004) (noting that “[t]he reasonableness of [a po-
lice officer’s] use of force is normally an issue for the jury”).
25
Government cannot persuade the jury that its interpretation is
the only reasonable interpretation in the circumstances, then to
prove falsity, it must prove beyond a reasonable doubt that the
defendant’s statement was false under both interpretations. See
Syme, 276 F.3d at 147 (holding that whether a disputed term in
a false statements case had “a meaning” was a jury question);
see also, e.g., United States v. Stacks, 821 F.3d 1038, 1043–44
(8th Cir. 2016); Whiteside, 285 F.3d at 1352–53; Migliaccio,
34 F.3d at 1525.
This is not to say that there is no role for the judge. To
the contrary, the judge’s role in requiring the Government to
meet its burden of proof is substantial. At the outset of a trial,
the judge must determine, as a preliminary question under Fed-
eral Rule of Evidence 104, whether a reporting requirement is
ambiguous—and, accordingly, the extent to which she will al-
low evidence and argument on the existence of an objectively
reasonable interpretation under which a defendant’s statement
is true. If the judge determines that “administrative authority
clearly answer[s] the dilemma the defendants faced,” White-
side, 285 F.3d at 1353–54, she might limit the introduction of
evidence concerning ambiguity to purposes other than objec-
tive falsity. If she determines the question of ambiguity should
reach the jury, she may be more receptive to admitting evi-
dence on that subject, e.g., evidence of commonly known in-
dustry practices or terms of the trade. And in the latter case,
she performs another essential check at the conclusion of the
prosecution’s case by assessing whether the Government has
introduced sufficient evidence of falsity under each reasonable
interpretation of the reporting requirement to survive a Rule 29
motion. See Fed. R. Crim. P. 29(a).
It is also incumbent on the judge, in the context of am-
biguous reporting requirements, to provide the proper jury in-
structions on the Government’s burden of proof with respect to
falsity. These instructions mirror the instructions requested
here and those included in the model jury instructions of many
of our sister circuits, which require the jury to find whether “a
particular question was ambiguous and the defendant truthfully
answered one reasonable interpretation of the question” and
26
instruct the jury that, if so, that “answer would not be false.”16
See Fifth Circuit Pattern Jury Instructions: Criminal § 2.69
(2019); Tenth Circuit Pattern Jury Instructions: Criminal § 2.66
(2018); Eleventh Circuit Pattern Jury Instructions: Criminal
§ O64 (2020); see also Modern Federal Jury Instructions:
Criminal ¶ 36.01[3] instruction 36-12 (2020) (including the
same instruction for § 1001 offenses).
In sum, while the judge retains an essential role in a
false statement trial involving an ambiguous reporting require-
ment, the question of the reasonableness of a proffered inter-
pretation of that requirement is for the jury.
B. Whether the Government Met Its Burden to
Prove Falsity
Having defined the Government’s burden to prove fal-
sity, we now consider whether it carried that burden by intro-
ducing sufficient evidence at trial. When a defendant chal-
lenges the sufficiency of the evidence supporting her convic-
tion, we “examine the totality of the evidence . . . in the light
most favorable to the government,” United States v. Starnes,
583 F.3d 196, 206 (3d Cir. 2009) (citation omitted), and “ask
whether [the evidence] is strong enough for a rational trier of
fact to find guilt beyond a reasonable doubt,” United States v.
Caraballo-Rodriguez, 726 F.3d 418, 430 (3d Cir. 2013).
In view of what we have recognized today as the Gov-
ernment’s burden of proof, we consider (1) whether the re-
quirement to report “past due” loans was ambiguous, and, if so,
(2) whether the Government proved beyond a reasonable doubt
that Defendants’ reports of “past due” loans were false under
each reasonable interpretation.
16
While we note that Defendants’ requested instruction
was a correct statement of the law, United States v. Davis, 183
F.3d 231, 250 (3d Cir. 1999), we need not reach whether any
instructional error was harmless with respect to the false state-
ment counts, see United States v. Korey, 472 F.3d 89, 96 (3d
Cir. 2007), because we resolve this appeal on other grounds.
27
1. The relevant reporting requirements were
ambiguous.
We agree with Defendants that, particularly given the
OTS Q&A, both the SEC instructions and the call report in-
structions are ambiguous with respect to the “precise question
at issue,” Chevron, U.S.A., Inc. v. Nat. Res. Def. Council, Inc.,
467 U.S. 837, 843 n.9 (1984): whether mature loans with un-
paid principals that were current for interest and in the process
of being extended were to be reported as “past due.”17
Begin with the SEC instructions, which directed the
Bank to identify “[a]ccruing loans which are contractually past
due 90 days or more as to principal or interest pay-
ments.” A9219 (emphasis added). No further definition is
given. Yet the Government—relying on what it characterizes
as the “ordinary meaning” of past due—argues that the SEC
instructions unambiguously require that “a borrower’s failure
to repay principal upon maturity . . . must be reported as past
due.” Appellee’s Br. 53.
The Government’s interpretation ignores the role of the
word “contractually,” which indicates that whether a loan is
“past due” is determined by the terms of that particular loan’s
contract, not by any general meaning of “past due.” And
17
While each agency’s instructions were arguably am-
biguous standing alone, that ambiguity was undoubtedly com-
pounded by consideration of those instructions together and in
relation to the OTS Q&A. We observe that where a defendant
is instructed to make nearly identical reports to multiple agen-
cies that assign different meanings to substantially similar
terms, we may—at least in the absence of clear and precise
guidance by the particular agency whose instructions are at is-
sue—consider those other instructions in determining both am-
biguity and reasonableness. See Whiteside, 285 F.3d at 1352(looking to regulations, administrative rulings, and judicial de-
cisions to determine that there was no clear definition of a re-
porting requirement); United States v. Maxwell, 579 F.3d 1282,
1288 (11th Cir. 2009) (consulting state and federal regulations
to identify ambiguity where the falsity of defendant’s state-
ment depended on parallel definitions in both types of regula-
tions).
28
looking to the contracts here does not answer the question, but
rather confirms that “reasonable people [can] differ,” White-
side, 285 F.3d at 1352–53, as to whether the waived loans were
“contractually past due.” After all, the Bank’s contracts pro-
vide that failure to pay the principal at maturity would consti-
tute a default—suggesting that mature loans with unpaid prin-
cipals would be “contractually past due.” But they also pre-
serve the Banks’s right to “renew or extend (repeatedly and for
any length of time) th[e] loan . . . without the consent of or no-
tice to anyone,” A11756—giving the Bank a contractual right
to, of its own accord, determine that a payment due under the
contract is not due at all. Where, as here, the Bank exercised
this right—by making arrangements with borrowers to “waive”
the loan—whether the principal payment remained “contractu-
ally past due” is ambiguous to say the least.
The call report instructions too are ambiguous. To
begin with, they track the language of the SEC instructions,
stating that “[t]he past due status of a loan . . . [is] determined
in accordance with its contractual repayment terms.” A9622.
They then attempt to clarify this ambiguity by addressing the
“circumstances” in which loans “are to be reported as past due
when either interest or principal is unpaid,” including:
(3) Single payment and demand notes, debt se-
curities, and other assets providing for the pay-
ment of interest at stated intervals are to be re-
ported as past due after one interest payment is
due and unpaid for 30 days or more.
(4) Single payment notes, debt securities, and
other assets providing for the payment of interest
at maturity are to be reported as past due after
maturity if interest or principal remains unpaid
for 30 days or more.
A9622–23. Yet neither of these circumstances clearly applies
to loans—like those at issue here—that require interest to be
paid both at regular intervals and at maturity. See A11755
(providing for the payment of both regular monthly payments
and the payment of “all accrued unpaid interest” upon ma-
turity). If Circumstance Three loans are required to be reported
only when interest is unpaid for 30 days and Circumstance
29
Four loans are required to be reported when interest or the prin-
cipal is unpaid 30 days, when should a loan that requires both
interest to be regularly paid and interest to be paid at maturity
be reported as past due? The call report instructions give no
“clear[] answer,” Whiteside, 285 F.3d at 1352–53.
The Government’s attempts to dispel this internal in-
consistency in the call report instructions are unavailing. First,
the Government argues that Circumstance Four unambigu-
ously applies to the waived loans because the loan agreements
“required borrowers to continue making interest payments at
and beyond maturity.” Appellee’s Br. 58. True enough, but
by its plain language, Circumstance Three also applies to such
a loan. The Government next argues that only Circumstance
Four applies to “matured loans.” Id. at 54. But this reads a
distinction between Circumstances Three and Four that is ab-
sent from the text, as nowhere do the call report instructions
suggest that Circumstance Three applies only to loans before
maturity and that, once a loan matures, Circumstance Four
governs.
The Government goes on to fault Defendants for ignor-
ing the definition of “nonaccrual” loan status in a different sec-
tion of the call report instructions as applying when either the
principal or interest is unpaid. A9623. Yet this only under-
mines the Government’s point: “Past due” and “nonaccrual”
are distinct terms of art, and the call report instruction’s use of
specific language in the “nonaccrual” definition suggests that
this language was intentionally excluded from the “past due”
definition.
As this discussion makes clear, the Government’s reli-
ance on the phrase “contractually past due” does not eliminate
any ambiguity with respect to the types of loans at issue in this
case.
2. The Government failed to prove that De-
fendants’ interpretation of the relevant re-
porting requirements was unreasonable.
In light of this ambiguity, the Government bore the bur-
den of proving beyond a reasonable doubt that either the alter-
native interpretation was unreasonable or that Defendants’
30
statements were false even under that alternative and reasona-
ble interpretation. The Government concedes that the state-
ments were not false under the interpretation Defendants have
put forward and, given the record before us, no reasonable jury
could conclude that their alternative interpretation was objec-
tively unreasonable. To the contrary, with respect to the SEC
instructions, it is quite plausible—given the terms of the loan
agreements here—that the phrase “contractually past due”
would exclude a mature loan that is treated as “waived” and
that is in the process of being extended, even when no notice
has been given the borrower. And, critically, other than relying
on the purported “ordinary meaning” of “contractually past
due,” the Government offers no evidence that this interpreta-
tion is unreasonable—which it must in order to meet its burden
to prove falsity.18
Turning to the call report instructions, the Government
faces an even steeper climb. Defendants point out, quite logi-
cally, that Circumstances Three and Four can be reconciled by
reading Circumstance Three as applying to loans that require
interest payments pre-maturity and Circumstance Four as gov-
erning loans that require no interest payments until maturity
(such as lump-sum “bullet” loans). And the OTS Q&A repre-
sented the position of another regulatory agency interpreting a
nearly identically worded provision to mean that a loan that has
been “informal[ly] exten[ded] . . . when the bank has agreed to
accept interest payments until the property is rented or sold” is
not “past due.”19 A12509. This is perfectly logical. Accord
18
Had the Government, for example, offered evidence
that “contractually past due” was an industry term of art with a
widely accepted meaning, it may have been able to convince a
jury that the alternative interpretation was unreasonable. See,
e.g., Syme, 276 F.3d at 143–44. But in the absence of any such
evidence, there was insufficient evidence from which a jury
could conclude that the Government’s interpretation is the only
reasonable reading of the reporting requirement.
19
Defendants challenge the exclusion of this evidence
as to falsity on appeal. Because we find the convictions unsup-
ported by sufficient evidence regardless, we need not reach
whether limiting that evidence was an abuse of discretion. But
we note that in future cases, another agency’s interpretation of
31
Whiteside, 285 F.3d at 1352 (finding the defendants’ interpre-
tation reasonable where it “comport[ed] with [a] logical no-
tion”). The Government, on the other hand, contends that only
Circumstance Four applies to matured loans—even those gov-
erned by Circumstance Three before maturity—which renders
Circumstance Three in large part redundant. But even assum-
ing that interpretation is also reasonable, the Government has
not put forth evidence from which the jury could find that this
was the only reasonable interpretation.
In sum, the Government has failed to prove that its view
of either the SEC or the Fed requirements is the only reasona-
ble interpretation. Under these circumstances, it could prove
falsity only by establishing that Defendants’ statements were
false under each reasonable interpretation. As the Government
conceded at oral argument, however, it cannot do so, which is
fatal to Counts Four through Nineteen. Because these counts
require proof of falsity as an essential element and the Govern-
ment cannot meet its burden of proof as to that element, we
will reverse Defendants’ convictions on these counts.
C. The Remaining Securities Fraud Counts
Having addressed the convictions that rested on the al-
leged Waiver Practice scheme, we now turn to Defendants’
convictions for Counts One (conspiracy) and Two (securities
fraud). The Government argues these convictions can be sal-
vaged because they also rested on a second theory of liability:
the Bank’s short-term extension en masse of loans approaching
maturity, which the Government describes as a “mass-exten-
sion” or “‘extend and pretend’ scheme [linked] to the capital
raise as an independent basis of guilt for the conspiracy and
securities fraud offenses.” Appellee’s Br. 147, 148 n.45. The
success of that argument, however, depends on: (1) whether
the Government’s invocation of the “extend and pretend” the-
ory constructively amended the Indictment; (2) whether the
Government presented sufficient evidence to support that the-
ory; and (3) whether the erroneous jury instructions concerning
a parallel reporting requirement may be relevant to the reason-
ableness of a defendant’s interpretation.
32
the falsity theory were harmless as to the alternate mass-exten-
sion theory. We consider these questions below.
1. The Indictment was not constructively
amended.
An indictment is facially sufficient when it not only
states the elements of the offense, but also “sufficiently ap-
prises the defendant of what he must be prepared to meet, and
. . . allows the defendant to show with accuracy to what extent
he may plead a former acquittal or conviction in the event of a
subsequent prosecution.” United States v. Stevenson, 832 F.3d
412, 423 (3d Cir. 2016) (citation omitted); see Fed. R. Crim. P.
7(c)(1) (“The indictment . . . must be a plain, concise, and def-
inite written statement of the essential facts constituting the of-
fense charged.”). It is constructively amended, however, when
it fails to provide that fair notice because the trial “broaden[s]
the possible bases for conviction from that which appeared in
the indictment.” United States v. McKee, 506 F.3d 225, 229
(3d Cir. 2007) (citation omitted). According to Defendants,
that is precisely what happened here: the mass-extension the-
ory “first surfaced” at trial, and the only theory of liability iden-
tified in the Indictment relied on the “entirely different”
Waiver Practice. North Br. 49, 52.
We disagree. Although the overriding focus of the In-
dictment is undoubtedly the Waiver Practice, both the facts of
the mass-extension procedure and the fraud it allegedly fur-
thered were introduced in the Indictment.20 Under the heading
of “the Mass Extension Process,” the Indictment alleged that
Defendants “embarked on a plan to mass-extend, through
20
The Government also urges us to look to the Bill of
Particulars as further evidence that the short-term extensions
were charged as a basis of liability for securities fraud (Count
Two) and the conspiracy to commit it (Count One). We are
skeptical that the Bill, which upon inspection says absolutely
nothing about the mass extensions, would apprise the Defend-
ants of the need to meet charges related to anything other than
the Waiver Practice. However, we need not resolve the impact
of the Bill of Particulars because we conclude that the Indict-
ment, standing alone, sufficiently alleged the extensions as an
independent theory of liability.
33
short-term extensions,” loans that would otherwise come due
at the end of 2009. A224–25. It also described how both the
Waiver Practice and the mass extensions went undisclosed in
the Bank’s 2009 Form 10-K filing, how the 10-K was incorpo-
rated into the Bank’s subsequent stock offering and attendant
capital raise, and how Defendants did not inform the Fed about
either the Waiver Practice or the mass extensions.
Defendants counter that these allegations were still in-
sufficient to “inform [Defendants] of the specific offense . . .
with which [Defendants were] charged,” Russell v. United
States, 369 U.S. 749, 765 (1962) (citation omitted), because
they appear only in the Indictment’s “Introduction,” A210, and
not in the text of Counts One and Two. But Count One specif-
ically identifies false certifications in the 2009 Form 10-K as a
result of “significant issues with the . . . proper extension” of
matured loans as an overt act in furtherance of the conspiracy,
A234, and each of the Counts expressly incorporates the intro-
ductory allegations. Granted, incorporating each and every
paragraph of a lengthy introduction may not be the best way to
give a defendant notice and may, as here, invite legal chal-
lenge. Nevertheless, “incorporat[ion] by reference” is permit-
ted under the rules, Fed. R. Crim. P. 7(c)(1), and notice need
not be ideal, only fair, as it was in this case: Although the In-
dictment did not expressly label the mass-extension scheme an
alternative basis for liability, no such label was required be-
cause the Indictment “makes it sufficiently clear that [the]
counts alleged the . . . theory.” Syme, 276 F.3d at 151 (uphold-
ing an indictment that identified an alternate theory by only a
two-letter abbreviation in a summary chart); see also Steven-
son, 832 F.3d at 425 (noting that the only limitation on incor-
poration by reference is the requirement that it be “expressly
done” (citation omitted)); United States v. Vanderpool, 528
F.2d 1205, 1206–07 (4th Cir 1975) (approving incorporation
of introductory allegations by reference); United States v.
McGuire, 381 F.2d 306, 319 (2d Cir. 1967) (permitting the use
of introductory paragraphs that “specifically referr[ed] to the
counts involved”).
Because the Indictment made sufficiently clear that
there were two bases for the conspiracy and securities fraud
charges—the Waiver Practice on the one hand, and the mass-
extension scheme on the other—the trial evidence and
34
argument concerning the extensions did not constitute a con-
structive amendment.
2. The mass-extension evidence was suffi-
cient.
Defendants argue that, even if the securities fraud and
conspiracy counts were properly charged, the evidence at trial
was insufficient to establish the requisite scienter: intent to de-
fraud.21 See 18 U.S.C. § 1348; United States v. Mahaffy, 693
F.3d 113, 125 (2d Cir. 2012). We review a challenge to the
sufficiency of the evidence by examining the totality of the ev-
idence “in the light most favorable to the government,”
Starnes, 583 F.3d at 206 (citation omitted), and determining if
that totality was sufficient for a rational jury to find the essen-
tial elements of the offense beyond a reasonable doubt, Cara-
ballo-Rodriguez, 726 F.3d at 430.
While the evidence limited to mass extensions is indeed
thin, we cannot say, viewing the record in the light most favor-
able to the Government, that no rational jury could have found
the essential elements of conspiracy to commit securities fraud
and securities fraud beyond a reasonable doubt. That evidence
reflected that there was pressure to address mounting loans
coming due in late 2009, that Bank executives (including De-
fendant North) scheduled a meeting in October 2009 to discuss
“eliminat[ing] matured loans by” the end of the year, A10992,
that extensions in the ordinary course of business would re-
quire full and time-consuming underwriting, and that, contrary
to ordinary practice and Bank policy, hundreds of millions of
dollars in soon-to-mature loans were extended on a short-term
21
The securities fraud statute Defendants were con-
victed of violating, 18 U.S.C. § 1348, was only enacted in 2002
as part of the Sarbanes-Oxley Act, and we have yet to address
its scienter requirement. Because our sister circuits are in
agreement that § 1348 requires proof of intent to defraud, see
United States v. Hussain, 972 F.3d 1138, 1146 (9th Cir. 2020);
United States v. Coscia, 866 F.3d 782, 796 (7th Cir. 2017);
Mahaffy, 693 F.3d at 125, and Defendants do not challenge that
requirement (only the sufficiency of the proof to make it out),
we will assume without deciding that § 1348 requires intent to
defraud.
35
basis at the end of 2009 after only a “superficial review.”
A5761. In addition, the evidence showed that all Defendants
were included on communications discussing these late 2009
extensions, that the effect of extending the maturity dates of
these loans past the first quarter of 2010 was to render them
current for purposes of reporting requirements at the 2009
year-end, that Defendants were involved in the creation of of-
fering documents describing the Bank’s financial health in
connection with its February 2010 capital raise, and that those
documents—which did not reflect the loans that would have
matured but for the mass extensions—told prospective inves-
tors the Bank’s past-due loan liability was even lower at the
end of 2009 than the prior year.
Considering the totality of this evidence, a rational juror
could conclude that Defendants had knowingly caused matur-
ing loans to be extended in order to push them off the books
for 2009 and conceal the poor financial health of the Bank from
investors, and that they had knowingly joined an agreement to
do so.22 See United States v. Williams, 974 F.3d 320, 370 (3d
Cir. 2020) (“The Government may prove the existence of a
conspiracy entirely through circumstantial evidence.” (citation
omitted)). We therefore reject Defendants’ sufficiency chal-
lenges to Counts One and Two.
3. The falsity error was not harmless.
Although we are persuaded that the Government
charged and adduced sufficient evidence to support a mass-
22
Gibson separately argues that there was insufficient
evidence that he joined a conspiratorial agreement. But the ev-
idence showed that Gibson signed the 2009 Form 10-K and
certified both the accuracy of its representations and the ade-
quacy of the Bank’s internal controls, that he was included in
communications discussing the mass extensions, and that the
Form 10-K he signed nevertheless asserted that the Bank’s
past-due loan liability decreased from the end of 2008 to the
end of 2009. Viewing the totality of the evidence in the light
most favorable to the Government, a rational juror could con-
clude that Gibson knowingly joined a conspiracy to defraud
investors through the 2009 Form 10-K. Accordingly, we also
reject Gibson’s individual sufficiency challenge.
36
extension theory of liability, that does not end our analysis be-
cause Counts One and Two were also premised on the Waiver
Practice theory, and where a conviction is supported by two
independent theories, one of which is legally invalid, we must
review the instructions for harmless error. See Skilling v.
United States, 561 U.S. 358, 414 (2010); Syme, 276 F.3d at144–45 (citing Griffin v. United States, 502 U.S. 46, 56 (1991).
Specifically, “[w]e presume that such errors are not harmless
unless it can be ‘prove[d] beyond a reasonable doubt that the
error complained of did not contribute to the verdict ob-
tained.’” United States v. Wright, 665 F.3d 560, 570–71 (3d
Cir. 2012) (quoting Chapman v. California, 386 U.S. 18, 24
(1967) (internal quotation marks and citation omitted)) (second
alteration in original). And that presumption is particularly dif-
ficult to overcome where “the government relies heavily on the
improper theory, and the district court’s instructions on the im-
proper theory are ‘interwoven’ throughout the jury charge.”
United States v. Andrews, 681 F.3d 509, 522 (3d Cir. 2012).
The presumption is not overcome in this case. Although
the Government maintains that it “scrupulously introduced ev-
idence regarding each of [the] charged offenses” and carefully
distinguished the extensions from the Waiver Practice as “an
independent basis of guilt,”23 Appellee’s Br. 146–47, the trial
record reflects that it repeatedly linked the Waiver Practice,
mass extensions, and false statements together. In its opening,
for instance, the Government asserted that “defendants
switched their scheme” from waiving past due loans to “ex-
tend[ing] them on a short-term basis” with “the end result
23
The Government concedes on appeal that the false
statement counts relied only on the Wavier Practice. There is
little in the record, however, to assuage our doubt that this dis-
tinction was clear to the jury. In particular, a number of the
false statement counts related to statements made in the 2009
Form 10-K. It is unclear why the mass-extension theory could
not support these counts as well; after all, the Government ac-
cused the Bank of hiding its past-due liability by, among other
things, extending loans en masse without disclosing the prac-
tice in the Form 10-K. The Government’s concession on this
point is binding, but the possibility that the extensions could
have supported at least some of the false statement counts fur-
ther illustrates why the falsity error cannot be held harmless.
37
[being] the same,” A2476, and that “there[ was] no carveout,
no exception for [the short-term extensions] in the call report
instruction,” A2478. When the District Court asked the pros-
ecutors to explain their position as to whether the mass exten-
sion of loans “didn’t make them not past due,” the Government
responded that “the mass extension process was essentially a
scheme to take what otherwise would have been reportable and
reported as past due loans . . . and wiped them off reporting
without having to deal with the waiver practice.” A12631–32.
And in its summation, it described the mass-extension process
as the outgrowth of “the waived loans bec[o]m[ing] over-
whelming,” A7741, even going so far as to tell the jury that
“mass extensions are basically just a new version of the waiver
practice,” A7746. In short, the Government not only relied
heavily at trial on the legally erroneous Waiver Practice theory;
it also failed to distinguish the evidence concerning that theory
of fraud and the mass-extension scheme in its arguments before
the District Court and the jury. As such, we cannot say with
confidence that the erroneous instruction as to falsity did not
“contribute to the [jury’s] verdict.” Wright, 665 F.3d 560, 570
(citation omitted).
The District Court’s other instructions raise additional
doubts. For instance, its instructions on Count Two (the secu-
rities fraud offense that also underlies Count One’s conspiracy
charge) are rife with references to the falsity of Defendants’
representations about past due loans: They informed the jury
that the “scheme to defraud” involved “false or fraudulent . . .
representations” that were “contained in [the Bank’s] SEC
Form 10-K for 2009,” A8354, defined the materiality of the
statements at issue in Count Two by reference to “the alleged
false statements regarding past due loans,” A8359, and specif-
ically enumerated the statements regarding past due loans in
the 2009 Form 10-K that the Government contended were
false, see A8363. And the jury here was given only a general
unanimity instruction, not the specific instruction that might
have avoided “a composite theory of guilt, producing twelve
jurors who unanimously thought the defendant was guilty but
who were not unanimous in their assessment of which act
38
supported the verdict.”24 United States v. Beros, 833 F.2d 455,
462 (3d Cir. 1987).
In sum, where, as here, we confront “a trial environment
that emphasized the [legally erroneous] theory,” Wright, 665
F.3d at 572, and jury instructions where “the improper theory
[was] ‘interwoven’ throughout the . . . charge,” Andrews, 681
F.3d at 522, the presumption that this error was not harmless
controls. Accordingly, we will vacate Defendants’ convictions
on Counts One and Two and remand for a new trial limited to
the mass-extension theory of fraud.25 See Syme, 276 F.3d at144–45.
* * *
For these reasons, we will reverse Defendants’ false
statement and certification convictions, remanding on those
counts for the entry of judgments of acquittal, and we will va-
cate Defendants’ convictions for conspiracy and securities
fraud, remanding on those counts for a new trial.
24
Ordinarily, a general unanimity instruction will suf-
fice to “ensure that the jury is unanimous on the factual basis
for a conviction, even where an indictment alleges numerous
factual bases for criminal liability.” United States v. Gonzalez,
905 F.3d 165, 184 (3d Cir. 2018) (internal quotation marks and
citation omitted). However, we have long recognized an ex-
ception to this rule and the propriety of specific instructions
“where the complexity of the case, or other factors, creates the
potential that the jury will be confused.” United States v.
Beros, 833 F.2d 455, 460 (3d Cir. 1987).
25
Defendants also challenge their convictions on
Counts One and Two on the basis of an alleged prejudicial var-
iance and cumulative error. As we vacate and remand in any
event, we need not address those arguments.
39