MEMORANDUM ORDER

RICHARD G. ANDREWS, District Judge.

The Government filed a motion in regard to the admissibility of a "Question and Answer" ("Q&A") from the website of the Office of Thrift Supervision ("OTS")1 related to the reporting of past due construction loans. (D.I. 714). The issues are fully briefed. (D.I. 716, 719, 722, 726, 730).

As an initial matter, there seems to be no dispute that, during the relevant time period, Wilmington Trust was required to file Thrift Financial Reports ("TFR") with OTS, in which the Bank disclosed its number of past due loans.

OTS, like the Federal Reserve Bank, was a member of the Federal Financial Institutions Examination Council ("FFIEC"). Established in 1979, FFIEC "is a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions" and "to make recommendations to promote uniformity in the supervision" of those institutions. About the FFJEC, Federal Financial Institutions Examination Council, https://www.ffiec.gov/about.htm (last visited April 12, 2018).

The TFR Instruction Manual, Schedule PD, provides in relevant part:

(D.I. 667-1, Exh. A2 at p. 2 (emphasis omitted)). Defendants maintain, and I agree, that those two circumstances mirror circumstances #3 and #4 related to past due loans from the RC-N Call Report Instructions. (Compare id., with D.I. 396-5 at pp. 1-2).

The OTS Q&A at issue, dated September 5, 2002, can be accessed through OCC's website. See TFR Questions and Answers, Office of the Comptroller of the Currency, https://occ.gov/static/ots/thrift-financial-files/trf-q-and-a.pdf (last visited April 12, 2018). The Q&A reads:

(D.I. 667-1, Exh. Cat p. 99).

In its motion, the Government seeks to exclude the OTS Q&A from jury instructions and at trial. As to jury instructions, it argues the Call Report Instructions related to past due loans are unambiguous as a matter of law and that I should so instruct the jury. (D.I. 714 at 1, 7-8). Further, citing United States v. Willson, 708 F.3d 47, 58 (1st Cir. 2013), the Government argues Defendants are not entitled to an instruction incorporating the Q&A absent evidence "they actually held an objectively reasonable belief that their conduct in reporting past due loans conformed to the information on the Q and A webpage." (Id. at 1). As to whether the Q&A is admissible at trial, the Government submits that I should exclude it absent evidence of Defendants' "contemporaneous reliance" on the Q&A. (Id. at 11).3

As an initial matter, it is my job to instruct the jury regarding applicable reporting requirements. See United States v. Prigmore, 243 F.3d 1, 17-18 (1st Cir. 2001). Further, to the extent applicable law is ambiguous and thus subject to multiple reasonable interpretations, it is my job to decide whether a particular interpretation is reasonable. See id. at 18 ("[I]f the evidence at trial gives rise to a genuine and material dispute as to the reasonableness of a defendant's asserted understanding of applicable law, the judge, and not the jury, must resolve the dispute." (citations omitted)).

Here, I do not think the applicable reporting requirements are ambiguous. The Call Report Instructions state that the "past due status of a loan . . . should be determined in accordance with its contractual repayment terms." (D.I. 396-5 at p. 1 (emphasis added)). They provide further that "grace periods allowed by the bank after a loan or other asset technically has become past due but before the imposition of late charges are not to be taken into account in determining past due status." (Id. (emphasis added)). They go on to provide, among other things, that "loans . . . are to be reported as past due when either interest or principal is unpaid in the following circumstances." (Id.).4 Five circumstances follow. (See id. at pp. 1-2).

I think these instructions are clear in that the "repayment terms" in the loan contract, which, as I understand it, include a maturity date, control in regard to the past due status of that loan. Further, any period of time during which the loan is technically past due, that is, when interest or principal is unpaid in the five circumstances that follow in the instructions, but the bank does not impose late charges, is "not to be taken into account in determining past due status." I am hard pressed to see how these reporting instructions are ambiguous. It is not as though they state only, "Report past due loans," without any instruction as to what a past due loan is. Rather, the instructions specifically tie past due status to the loan contract and to the payment, or lack thereof, of interest or principal.

Defendants argue the instructions are ambiguous because multiple witnesses during the Government's case offered "reasonable definitions" of a past due loan. (D.I. 716 at 14). But those witnesses did not opine on the definition of past due in regard to the Call Report Instructions. Rather, to the extent they offered any definition of past due, they did so in providing context for their testimony. Hickman Beckner, for example, an employee of Shaw Systems, testified about when a loan is considered to be past due on the CL/2000 software. (3/13/18 Tr. at 1294:11-14). He did not in any way tie his testimony to past due reporting pursuant to Schedule RC-N.

Nor do I think the instructions are rendered ambiguous by the OTS Q&A. While the Q&A refers to extensions in the context of a bank's reporting of loans past maturity pursuant to Schedule PD, the Q&A is not tied to any specific language in the TFR instructions. In other words, it is impossible to tell what language, if any, the Answer portion of the Q&A purports to interpret.

In any event, even if the instructions were ambiguous, I do not think the Q&A at issue is a reasonable interpretation of those instructions insofar as it suggests the status of a loan for past due reporting purposes can change absent executed legal documents.5

The Q&A provides that, pursuant to Schedule PD, a loan is not past due ifbank management has formally or informally extended the loan. As to an "informal" extension, the Q&A states, among other things, that "the bank should get the extension in writing." (D.I. 667-1, Exh. Cat p. 99). The Q&A's distinction between a "formal" and "informal" extension suggests that the former requires executed legal documents, while the latter requires something less.

I think the "informal" extension contemplated by the OTS Q&A essentially constitutes a "grace period." Because an "informal" extension should be in writing but does not require execution of legal documents, the extension is not a new contract. I do not see how such an interpretation is reasonable when the applicable instructions provide that a loan's "contractual repayment terms" govern in regard to determining past due status and that "grace periods . . . are not to be taken into account."

Thus, in my opinion, the Q&A's suggestion that, a bank need not execute legal documents for the status of a loan to change for past due reporting purposes, is not a reasonable interpretation of the applicable reporting requirements.6

I have attached a proposed jury instruction in regard to the reporting requirements in the Call Report that reflects my conclusions as to the Q&A.

As to whether the Q&A is admissible at trial, I will allow Defendants to introduce it during their case.

While it appears that Defendants neither saw nor relied upon the Q&A,7 I think it is relevant to their good faith belief that certain loans excluded from the Bank's Call Reports were not in fact past due under the relevant instructions. In other words, to the extent the Q&A is consistent with Defendants' belief about what was required to be reported as past due, and given that the Q&A comes from an FFIEC agency to which the Bank reported its loans pursuant to instructions that mirror the Call Report Instructions, I think the Q&A supports their defense that they honestly believed the loans at issue were not required to be reported as past due. Thus, while the OTS Q&A may not be introduced as evidence of what the law is, and I will provide a limiting instruction to that effect, Defendants may introduce it to support their good faith defense. I have attached a proposed limiting instruction.

In my opinion, the probative value of the OTS Q&A is not substantially outweighed by any of the relevant risks under Rule 403.

Accordingly, the Government's motion (D.I. 714) is GRANTED IN PART and DENIED IN PART.

It is SO ORDERED.

Proposed Jury Instruction

The jury must decide whether statements in the Call Reports relating to the amount of 90-day past due loans are false.

I instruct you that a construction loan or a commercial real estate loan that requires interest-only payments due on a regular basis with the principal due at maturity becomes past due when an interest payment is not timely paid or when the principal is not paid at the maturity date. If the only reason that a loan is past due is because the principal was not paid at the maturity date, the loan does not have to be reported on the Call Report if the bank has formally restructured or extended the loan. A formal restructuring or extension of a loan requires legally-binding documents.

Proposed Limiting Instruction

I am admitting the Question and Answer from the Office of Thrift Supervision, Exhibit ___, for a limited purpose.

You should consider this exhibit only insofar as it bears on the question of whether any of the defendants made an honest mistake or had an honest misunderstanding about when a loan needed to be reported as past due in Wilmington Trust's Call Reports. That is the only purpose for which you may consider it. It is not being admitted as evidence of what the Call Reports actually require to be reported as past due. As I will tell you in my final jury instructions, a construction loan or a commercial real estate loan that requires interest-only payments due on a regular basis with the principal due at maturity becomes past due when an interest payment is not timely paid or when the principal is not paid at the maturity date. If the only reason that a loan is past due is because the principal was not paid at the maturity date, the loan does not have to be reported on the Call Report if the bank has formally restructured or extended the loan. A formal restructuring or extension of a loan requires legally-binding documents.

For the limited purpose for which this evidence has been admitted, you may give it such weight as you feel it deserves. You may not, however, use this evidence for any other purpose not specifically mentioned.