Tag Archives: wire fraud

You Don’t Have to Cheat Someone Out of Money to Commit Wire Fraud – Update for May 27, 2025

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We post news and comment on federal criminal justice issues, focused primarily on trial and post-conviction matters, legislative initiatives, and sentencing issues.

STAM’S SCAM SLAMMED

Savingmoney250527The Supreme Court last Thursday upheld the fraud conviction of painting contractor Stamatios Kousisis. Stam got two government contracts that required him to work with disadvantaged business enterprises (DBEs), companies owned by racial minorities.

Stam set up a scam, a “pass-through” DBE company that was supposed to be supplying paint but really was just a front. Stam bought the paint, sold it to the DBE and then bought it back for a small markup that the minority “front” man got to keep for his part in the scam.

The catch was that Stam’s bid – with the sham DBE “front” – was below everyone else’s. As a result, the government paid less than it would have if it had accepted a bid from one of the other contractors who put their bids together with a legitimate DBE. The government charged Stam with wire fraud under the theory that he had fraudulently induced Pennsylvania to save money by contracting with him based on his claim that he was working with a real DBE. Stam argued that under the fraudulent inducement theory, the government had to show Stam intended to harm the government financially, which the government could not do.

The 3rd Circuit held that DBE participation in the deal was “an essential part of the contract,” and that was good enough to establish wire fraud, even if the government did save money. Last week, the Supreme Court agreed.

dbe250527The Supremes held that wire fraud simply requires someone to “devise” a scheme to “obtain money or property” through “false or fraudulent pretenses, representations, or promises.” The fraudulent-inducement theory, Justice Barrett wrote, does that: By using “a pass-through entity,” she said, Stam “‘devised’ a ‘scheme’ to obtain contracts through feigned compliance with PennDOT’s disadvantaged-business requirement.” The goal of the scheme was to obtain “tens of millions of dollars” from PennDOT by “making a number of ‘false or fraudulent… representations’ — first about their plans to obtain paint supplies from [the DBE] and later about having done exactly that.”

Fraud160811Obtaining money or property must be the goal of the wire fraud scheme, SCOTUS said, but the scheme does not “depend[] on economic loss.” The unanimous Court (with three concurring opinions) acknowledged that the wire fraud statute potentially has a “broad” sweep, “[b]ut Congress enacted the wire fraud statute, and it is up to Congress—if it so chooses—to change it.”

Kousisis v. United States, Case No 23-909, 2025 U.S. LEXIS 1982 (May 22, 2025)

SCOTUSBlog, Court upholds federal fraud conviction even without economic harm (May 22, 2025)

– Thomas L. Root

Meanwhile, Back at the High Court Ranch… Update for May 14, 2020

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We post news and comment on federal criminal justice issues, focused primarily on trial and post-conviction matters, legislative initiatives, and sentencing issues.

THE WORLD KEEPS ON TURNING

The Supreme Court handed down a pair of cases last week, neither of which even mentioned the coronavirus. It reminds us that the world goes on.

jam200514In Kelly v. United States, the Court reversed the conviction of a couple of former New Jersey governor Chris Christie’s assistants, who had shut down some lanes on the George Washington Bridge to mess with Fort Lee, New Jersey. The Fort Lee mayor refused to support Gov. Christie’s re-election, and the pair decided they would back up bridge traffic coming from Fort Lee to teach the mayor a lesson.

The scheme was found out, and the U.S. Attorney brought wire fraud charges. The pair was convicted.

This was another great example of government overreach. The Supreme Court has previously said wire fraud must involve property. Here, the government argued that the defendants deprived motorists of the property right to use all lanes on the bridge, and cost the Port Authority – which runs the bridge – money the hire extra toll-takers.

The Supreme Court didn’t buy it. “The property must play more than some bit part in a scheme: It must be an ‘object of the fraud’,” the Court ruled. “A property fraud conviction cannot stand when the loss to the victim is only an incidental byproduct of the scheme… The time and labor of Port Authority employees were just the implementation costs of the defendants’ scheme to reallocate the Bridge’s access lanes. Or said another way, the labor costs were an incidental (even if foreseen) byproduct of their regulatory object… Every regulatory decision requires the use of some employee labor. But that does not mean every scheme to alter a regulation has that labor as its object. The defendants’ plan aimed to impede access from Ft Lee to the George Washington Bridge. The cost of the employee hours spent on implementing that plan was its incidental byproduct.”

The unanimous court warned that “Federal prosecutors may not use property fraud statutes to set standards of disclosure and good government for local and state officials.”

judge160229The other case – United States v. Sineneng-Smith – is noteworthy for the court’s slapping down of the 9th Circuit. A defendant convicted of encouraging illegal immigration argued the statute – 8 U.S.C. § 1324(a)(1)(A) – violated her 1st Amendment rights. The Court of Appeals wanted the parties to argue a different issue, however, and on its own assigned some amici (friends of the court) to argue the different issue.

The Supreme Court reversed. “The Nation’s adversarial adjudication system follows the principle of party presentation,” the Court said. “In both civil and criminal cases, we rely on the parties to frame the issues for decision and assign to courts the role of neutral

The Supremes admitted that a court is not “hidebound by counsel’s precise arguments, but the Ninth Circuit’s radical transformation of this case goes well beyond the pale.”

Kelly v. United States, Case No. 18-1059, 2020 U.S. LEXIS 2640 (May 7, 2020)

United States v. Sineneng-Smith, Case No. 19-67,  2020 U.S. LEXIS 2639 (May 7, 2020)

– Thomas L. Root