Fraud Cases

In a tax fraud conspiracy appeal, the Tenth Circuit vacated the defendant’s § 371 conviction where the district court plainly erred in instructing the jury on the elements of the “offense” clause under § 371 instead of the “defraud” clause. The trial court also plainly erred when it limited the advice of counsel instruction to the substantive count and instructed the jury that advice of counsel was not a defense to the conspiracy count.

The Eleventh Circuit affirmed convictions arising from a check-cashing and mail-theft scheme, rejected a Dubin challenge to the defendant’s conviction for aggravated identity theft, vacated the “sophisticated means” enhancement for lack of defendant-specific conduct, and vacated restitution tied to the defendant’s pre-participation conduct.

The Second Circuit affirmed a jury verdict finding a medical billing company owner guilty of health care fraud, conspiracy, wire fraud, and aggravated identity theft, but vacated his 144-month sentence, $63.38 million forfeiture judgment, and $336.99 million restitution award. The Court held the district court procedurally erred by lengthening the prison term based on the prospect of First Step Act earned-time credits and RDAP benefits, misapplied two Guidelines enhancements without adequate findings, and used flawed methodologies for forfeiture and restitution.

In a 7-2 opinion, the Supreme Court held that a defendant who induces a victim to enter a transaction under materially false pretenses may be convicted of wire fraud even if he did not seek to cause economic loss.

In a 9-0 opinion, the Supreme Court reversed a bank-fraud conviction, holding that 18 U.S.C. § 1014, which makes it a crime to “knowingly make any false statement” to influence the FDIC, requires a statement that is false as a matter of fact and does not criminalize statements that are misleading but technically true.

In a 7-2 opinion, the Supreme Court affirmed a defendant’s conviction for encouraging and/or inducing an alien to come to the U.S. for a criminal purpose. The Court rejected the defendant’s facial overbreadth argument under the First Amendment, holding that “encourage” and “induce” are “terms of art” under 1324(a)(1)(A)(iv) and that, as such, the statute criminalizes only the “purposeful solicitation and facilitation of specific acts known to violate federal law.”

In a unanimous opinion, the Supreme Court held that the Constitution “permits the retrial of a defendant following a trial in an improper venue conducted before a jury drawn from the wrong district.”

In an 8-1 opinion, the Supreme Court held that a healthcare fraud defendant’s use of patient information to fraudulently bill Medicaid did not constitute aggravated identity theft under 18 USC 1028A. Under 1028A, which adds a consecutive 2-year sentence when a defendant uses or possesses another person’s means of identification during another offense, the government must show that the defendant’s use or possession of another’s identification “is at the crux” of the underlying offense. The Court concluded that 1028A penalizes “identity theft,” and it is not sufficient that another person’s identifying information was merely involved in or used in an offense without showing more.

This month, the Supreme Court issued two noteworthy opinions limiting the scope of federal fraud statutes, specifically those that prohibit “honest services fraud.” Under 18 USC 1346, a “scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services.”

In Ciminelli v. United States, the Court unanimously invalidated the conviction of a construction company owner who had engaged in bid rigging for government contracts, which deprived the government of “potentially valuable economic information necessary to make discretionary economic decisions.” As a result, the trial court instructed the jury that “property” as defined under the fraud statute, included “intangible interests such as the right to control the use of one’s assets.”

The Court held that this was error, as the right to such intangible but “valuable economic information” was not a “traditional property interest” protected by the statute. The Court’s holding will likely be used to challenge future fraud prosecutions involving intangible losses.

In Percoco v. United States, the Court invalidated another defendant’s conviction, this time that of a former official in the Governor’s office in New York who, while on hiatus from his official role to assist in the governor’s campaign, accepted money to advise a real estate development company in its dealings with a state agency. Specifically, Percoco had lobbied internally to urge other officials to ease certain work requirements for the company, which received government funding.

The Court held that the trial court erred in instructing the jury that it could convict Percoco of honest services fraud, even while not serving as a public official, if it found that he “dominated and controlled any government business” and that “people working in the government actually relied on him because of a special relationship he had with the government.” The Court held these instructions were too vague and swept too broadly. However, the Court rejected the defendant’s argument that a private citizen cannot be convicted of depriving the public of honest services, reserving the question whether some private citizens could have the “necessary fiduciary duty to the public.”

Last month, the U.S. Sentencing Commission published a new report titled “The Organizational Sentencing Guidelines: Thirty Years of Innovation and Influence,” summarizing hte history and development of Chapter 8 of the U.S. Guidelines, which apply to defendant-corporations and other defendant-entities.