Offer for Procurement of Federal Reserve Bank Loan - Title 18 U.S. Code 214
Many lending agencies or loan brokers receive some fee for the service of obtaining a loan for their clients. But when such loans involve funds connected to the federal banking system (i.e., the Federal Reserve), those fees must be stipulated in writing.
18 U.S. Code 214 offer for procurement of Federal Reserve bank loan and discount of commercial paper says, “Whoever stipulates for or gives or receives, or consents or agrees to give or receive, any fee, commission, bonus, or thing of value for procuring or endeavoring to procure from any Federal Reserve bank any advance, loan, or extension of credit or discount or purchase of any obligation or commitment with respect thereto, either directly from such Federal Reserve bank or indirectly through any financing institution, unless such fee, commission, bonus, or thing of value and all material facts with respect to the arrangement or understanding therefor shall be disclosed in writing in the application or request for such advance, loan, extension of credit, discount, purchase, or commitment, shall be fined under this title or imprisoned not more than one year, or both.”
Related 18 U.S. Code 213 acceptance of loan or gratuity by financial institution examiner says, “Whoever, being an examiner or assistant examiner, accepts a loan or gratuity from any bank, branch, agency, organization, corporation, association, or institution examined by the examiner or from any person connected with it, shall—
(1) be fined under this title, imprisoned not more than one year, or both,
(2) may be fined a further sum equal to the money so loaned or gratuity given and
(3) shall be disqualified from holding office as an examiner."
If a lender solicits or receives anything of value in exchange for these services—or if the borrower offers it—without putting it in writing, it is a federal crime under 18 U.S.C. 214. You could face up to a year in federal prison if convicted of this crime.
What Does the Law Prohibit?
Title 18 U.S.C. 214 is a federal law that strictly forbids anyone from offering, receiving, or agreeing to give or receive any form of value for procuring or attempting to procure any advance, loan, credit extension, discount, purchase, or commitment from a Federal Reserve bank without the proper documentation.
This prohibition applies whether the transaction is conducted directly with the Federal Reserve Bank or indirectly through a financing institution. This law was enacted to prevent corrupt practices such as bribery and graft in procuring loans or credit from Federal Reserve banks.
By requiring full disclosure of all fees or other forms of compensation exchanged for procuring a loan or line of credit, the law helps ensure transparency, fairness, and integrity in the financial system.
To secure a conviction under this law, the prosecution must prove three critical elements:
- You offered, received, or agreed to give or receive a fee, commission, gift, bonus, or something else of value.
- This transaction was compensation to procure or attempt to procure an advance, loan, credit extension, etc., from a Federal Reserve bank and
- You knowingly and willfully failed to disclose all material facts regarding this arrangement in writing.
What Are Some Examples?
EXAMPLE 1: James is the owner of a major corporation that is facing financial difficulties. To "hedge his bets" regarding getting a bank loan, he offers a significant sum of money "off the books" to the loan officer, understanding that the official will facilitate the approval of his loan application. Whether or not the loan officer takes the money, James could be charged under U.S.C. 214 for offering compensation without properly documenting it.
EXAMPLE 2: Jane is an executive at a lending company that acts as the intermediary between businesses and the bank. Fred, who owns a limousine company, approaches Jane to help procure a credit extension for the company. Jane agrees to put "extra effort" into getting the loan approved in exchange for unlimited limo service as a "special thank-you" in advance for ensuring their application for credit extension is approved. There is no mention of this perk in the loan documentation. Jane can be charged under U.S.C. 214.
EXAMPLE 3: Bob runs a loan company for businesses with bad credit. He offers an unadvertised "premium service" to specific companies to get high-risk loans for an additional undocumented fee. Bob can face charges under U.S.C. 214 for offering to procure loans not written for additional fees.
What Are the Related Federal Laws?
18 U.S. Code Chapter 11, bribery, graft, and conflicts of interest has several federal laws that are related to 18 U.S.C. 214 offer for procurement of Federal Reserve bank loan, including the following:
- 18 U.S.C. 201 - Bribery of public officials and witnesses,
- 18 U.S.C. 202 - Definitions,
- 18 U.S.C. 203 - Compensation to Members of Congress, officers, and others in matters affecting the Government,
- 18 U.S.C. 204 - Practice in United States Court of Federal Claims or the United States Court of Appeals for the Federal Circuit by Members of Congress,
- 18 U.S.C. 205 - Activities of officers and employees in claims against and other matters affecting the Government,
- 18 U.S.C. 206 - Exemption of retired officers of the uniformed services,
- 18 U.S.C. 207 - Restrictions on former officers, employees, and elected officials of the executive and legislative branches,
- 18 U.S.C. 208 - Acts affecting a personal financial interest,
- 18 U.S.C. 209 - Salary of Government officials and employees payable only by the United States,
- 18 U.S.C. 210 - Offer to procure appointive public office,
- 18 U.S.C. 211 - Acceptance or solicitation to obtain appointive public office,
- 18 U.S.C. 212 - Offer of loan or gratuity to financial institution examiner,
- 18 U.S.C. 213 - Acceptance of loan or gratuity by financial institution examiner,
- 18 U.S.C. 215 - Receipt of commissions or gifts for procuring loans,
- 18 U.S.C. 216 - Penalties and injunctions,
- 18 U.S.C. 217 - Acceptance of consideration for farm indebtedness,
- 18 U.S.C. 218 - Voiding transactions in violation of chapter; recovery by the U.S.,
- 18 U.S.C. 219 - Officers and employees acting as agents of foreign principals,
- 18 U.S.C. 220 - Eliminating kickbacks in the recovery act,
- 18 U.S.C. 224 - Bribery in sporting contests,
- 18 U.S.C. 225 - Continuing financial crimes enterprise,
- 18 U.S.C. 226 - Bribery affecting port security,
- 18 U.S.C. 227 - Wrongfully influencing a private entity's employment decisions by a Member of Congress or an officer or employee of the legislative or executive branch.
What Are the Penalties?
Violating 18 U.S.C. 214 can come with significant penalties. If you're convicted, you could face:
- Fines of up to $100,000 and
- Up to 1 year in federal prison.
What Are the Common Defenses?
While it's serious to be charged with offering or receiving compensation for loan procurements without supporting documentation, a skilled federal criminal defense attorney can still employ various defenses to counter the charges. These include, but are not limited to:
- Lack of Knowledge: Your attorney may argue that you were unaware of the requirement to disclose all material facts in the application or transaction request.
- Lack of Intent: Your attorney may show there was no intention to defraud or deceive the bank or any other party involved.
- No Material Benefit: If your attorney can show that no fee, commission, gift, bonus, or thing of value was received or offered, the charges may be dropped.
- No Exchange for Services: Your attorney may argue, for instance, that you had a prior acquaintance with the other party and that the gifts you offered were entirely independent of the loan transaction.
Our law firm represents clients across the United States on federal criminal matters. Contact us for more information. Eisner Gorin LLP has offices in Los Angeles, California.
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