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Most Federal white collar criminal cases are prosecuted under the wire fraud statute. This law is extremely broad and provides for up to 20 years imprisonment (30 years in the case of bank fraud) for anyone that is engaged in any scheme to defraud one of “money or property” by false representations (lying), through the use of “wire” communications (usually computer or telephone). This statute is often used by prosecutors because Federal courts have held that the law prohibits “any” scheme to deprive one of money or property and “an individual’s ability to devise a scheme to deceive or defraud is virtually unlimited – as old as falsehood and as versable as human ingenuity.”
Notwithstanding the extreme breadth of the wire fraud statute, its reach is not unlimited, as the government has tried to urge. The government continually urges an expansive view of the wire fraud statute that would criminalize the public’s right to “honest services”. This expansion was originally accepted by the courts, which held that “a scheme by public officials to defraud local government effectively impairs the public’s right to the honest and faithful services of its officials though it reaches the outer limits of meaning that can be placed on the word ‘defraud’.”
In 1987, the United States Supreme Court in the case of McNally v. United States struck down the “intangible right to honest services” theory, ruling that the intangible right to honest services did not fall within the ambit of a scheme to defraud, because the term “defraud” literally means “wronging one in his property rights by dishonest methods or schemes.”
Congress then stepped into the picture and enacted legislation that the term “scheme to defraud includes a scheme to deprive another of the intangible right to honest services.”
Prosecutors took this as a green light that virtually any dishonest act could be prosecuted under the wire fraud statute. But not so fast: the United States Supreme Court has reined in this expansive view in a series of major cases, starting with Skilling v. United States (2010). Skilling was the CEO of Enron. He was charged under the wire fraud statute with making misleading statements about Enron’s performance in order to boost the value of Enron’s stock price. It was the government’s theory that Skilling “profited from the fraudulent scheme … through the receipt of salary and bonuses … and through the sale of approximately $200 million in Enron stock, which netted him $89 million” and that Skilling defrauded the corporation Enron of its right to his honest services. The Supreme Court held that the statute could not be read so broadly. Rather, it is limited to the “core” of bribery and kickback cases and since Skilling did not solicit or accept side payments from a third party in exchange for making these misrepresentations, he did not commit wire fraud.
The definition of “bribery” was then limited by the Supreme Court in McDonnell v. United States (2016). McDonnell was the former governor of Virginia. He was charged with honest services fraud for accepting benefits from a nutritional supplement company in exchange for his influence in organizing university studies of the company’s products. These benefits included over $175,000 in gifts and loans. The Supreme Court held that the governor setting up meetings to assist one of his constituents, without more, is not enough. Bribery requires a “quid pro quo”, meaning a specific intent to give or receive something of value “in exchange for” an official act. Therefore, McDonnell’s conviction was reversed.
The last of the Supreme Court cases further restricting the breadth of the wire fraud statute is what has become known as “Bridgegate”. Officials connected to Chris Christie, the then governor of New Jersey, caused a major traffic jam on the George Washington Bridge to retaliate against a New Jersey mayor for failing to support Governor Christie in his reelection campaign. They falsely claimed that they did not intentionally cause the traffic jam; rather, they claimed they were conducting a traffic study. They were convicted under the wire fraud statute for falsely representing they were conducting a traffic study. The “property” that was allegedly involved was depriving the Port Authority of its right to control the bridge lanes and miscellaneous costs that were incurred. Although the United States Supreme Court did not countenance their use of deception for political payback, this was not a taking of property that would be encompassed within the wire fraud statute.
In conclusion, although the wire fraud statute is very broad, and encompasses many different types of fraudulent activity, it is not as broad as prosecutors would like to think, leaving various avenues of viable defenses.
Moreover, one of the essential elements of the offense is that one had the specific intent to defraud. That is, they specifically intended to defraud somebody. In most of these cases the defense is, “I did many of the things the government says I did; however, I was acting in ‘good faith’ and never had the ‘specific intent to defraud’.” This defense is often difficult for the government to overcome, because the wind is taken out of their sails by admitting to the underlying conduct and simply contesting “intent”.