Federal Criminal Defense - Wire Fraud
Mr. Korody has represented clients in Federal District Court in and around Jacksonville, Florida, and in other federal courts appearing pro hac vice, since 2015. He has represented clients facing the spectrum of federal charges including armed robbery, burglary, rape, sexual assault, bank fraud, wire fraud, securities fraud, healthcare fraud, public assistance fraud, drug distribution, and various federal firearm offenses. Mr. Korody and his team of experienced federal criminal defense lawyers have built a superior representation for defendant complex white collar criminal charges like mail and wire fraud.
What is wire fraud?
The federal wire fraud statute, codified as 18 U.S. Code § 1343, criminalizes using interstate wire, radio, or television communications to execute schemes to defraud or obtain money or property by false pretenses, punishable by up to 20 years in prison and fines.
How do federal prosecutors use the wire fraud statute?
Federal prosecutors aggressively use the federal wire fraud statute, codified as 18 U.S. Code § 1343, to prosecute any and all fraud where "a wire" is used. Because every email, text message, phone call, internet transaction, and credit card transaction involves "a wire", federal prosecutors can seek federal charges where there is very little nexus to interstate commerce. Thus nearly every marketing endeavor or business transaction can result in a federal wire fraud charge. And, every single instance of using "a wire" as part of an alleged scheme to defraud can be charged as a separate wire fraud count in an indictment.
What are the elements of the wire fraud statute?
To convict a person of wire fraud under 18 U.S. Code § 1343, federal prosecutors must prove beyond a reasonable doubt:
Intent to Defraud: The defendant must have acted with the specific intent to defraud, meaning they knowingly and voluntarily participated in a scheme intended to deceive others.
Use of Interstate Wire Communications: The defendant must have used interstate wire communications (such as phone calls, emails, or text messages) to further the fraudulent scheme.
Materiality: The false statement or misrepresentation must be significant enough to sway the target of the fraud.
How to defend a wire fraud charge?
Defending against federal wire fraud charges is a complex endeavor that should focus on the defendant's intent and materiality of alleged false statement or misrepresentation. In short, showing that there was no fraud.
Nearly every business in the business of selling goods or services at one time or another makes a false statement or misrepresentation or overbills a customer. However, was that an innocent mistake or part of a scheme to defraud?
“Good faith” is the opposite of intent to defraud. An honest belief in the truth of the representation made at the time it was made or an honest mistake about the truth of the representation made is a complete defense to wire fraud. A “good faith” defense can be used with an “advice of counsel” defense, which is where the defendant sought and obtained legal advice that the acts being carried out were lawful.
“Materiality” means that it is a significant point in the alleged victim’s decision-making process. Puffery or sales talk that is too general for a reasonable person or business to consider significant is not actionable under the fraud laws. Puffery includes expressions of optimism and general statements about a company’s reputation that do not include misrepresentations of facts. Similarly, a misrepresentation may not be material to the transaction if it is simply is irrelevant to the transaction itself.
What about this Ciminelli vs. United States case?
In 2023, the Supreme Court held that defendants cannot be convicted for federal fraud under a right-to-control theory.
The defendant, Louis Ciminelli, was a businessman involved in a scheme to fraudulently obtain a lucrative state development project in Buffalo, New York. The scheme involved the bribing of state officials to help ensure that his company was awarded the contract. While it was a lucrative contract, Ciminelli, and others, completed the contract to the specifications and there was no allegation (at least by the federal prosecutors during the trial) that the government did not receive what it bargained for, i.e. that they paid for something they bargained for and did not receive it. The alleged fraud was based on the idea that Ciminelli became a “preferred developer” because he had, unbeknownst to the decision-makers, paid for such privilege. New York federal prosecutors made their case for wire fraud charges based on a right-to-control theory, meaning that they would show that the defendant schemed to deprive the victim (the state) of potentially valuable economic information necessary to make discretionary economic decisions.
The Supreme Court rejected the right-to-control theory of prosecution and held that the mail and wire fraud statutes only protect traditional property rights – like services, tangible property, and money. The decision will likely discourage further efforts on the part of prosecutors to base federal fraud cases on abstract injuries and instead will encourage them to focus on proving that alleged victims of fraud lost money or property.
Is it wire fraud even if the scheme was not successful?
Because wire fraud under 18 U.S. Code § 1343 focuses on the defendant's intent, the scheme does not have to be successful.
Wire fraud is focused on the intent, materiality, and the object of the scheme to defraud. The scheme does not need to be successful for a defendant to be charged with wire fraud. The focus is on the defendant’s intent, the materiality of the false statement or misrepresentation, and the object of the scheme defraud (i.e. money, property, or services).
What does a wire fraud investigation look like?
Because wire fraud cases are largely built on representations and transactions, they involve voluminous records.
Federal prosecutors like to build wire fraud prosecutions based on records – emails, text messages, collaboration applications, banking transactions, and computer records. Today, most prosecutors get search warrants for cloud data – both for individuals and companies – for email, messaging, and data files from companies like Google, DropBox, Apple, and Microsoft. The prosecutors often cherry-pick statements and records to make a fraud case before the grand jury to obtain an indictment.
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