Source: https://www.shouselaw.com/ca/defense/federal/wire-fraud/
Timestamp: 2020-07-14 12:45:31
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The Federal Crime of “Wire Fraud” in California
Shouse Law Group › Criminal Defense › Federal Crimes › Wire Fraud
Wire fraud is fraud that is carried out through any form of wire, radio, or television communication.1 These days, this also includes e-mail communication.2 So wire fraud can include certain forms of internet fraud as well.
Wire fraud is fraud that is carried out through any form of wire, radio, or television communication
Wire fraud is a serious federal crime. Charges for this offense will be brought by federal Department of Justice rather than state prosecutors. And the potential penalties are quite steep despite the fact that wire fraud is a so-called “white collar crime”. If you are convicted of wire fraud, you can face up to twenty (20) years in federal prison and/or a hefty fine.3
For these reasons, it’s important to get help from a California criminal defense attorney who is licensed to practice in the United States federal courts.
In this article, our California federal criminal defense attorneys4 explain the federal crime of wire fraud by addressing the following:
You can’t be found guilty of a crime unless the prosecutor can prove that certain things-known as “elements” of the crime-are true. The elements of wire fraud are:
Specific intent to commit fraud.5
You can’t be convicted of wire fraud unless you had a scheme-or plan-to commit fraud. Fraud consists of knowingly or recklessly telling someone a lie (or a “misrepresentation,” as lawyers are more likely to put it) in order to deprive the victim of something valuable (typically money).6
A misrepresentation, or lie, can’t support wire fraud charges unless it is material.
A misrepresentation, or lie, can’t support wire fraud charges unless it is material.7 In other words, it needs to be about something important or significant.
Example: Travis uses the telephone to market an herbal medicine that he claims can help people lose weight. In his telephone marketing calls, he tells potential customers that the medicine has been shown to help mice lose weight in clinical studies. But, in fact, there have never been any studies about whether the medicine works. This is a material misrepresentation, and Travis may be guilty of wire fraud. BUT…
Example: Let’s say that there HAVE been clinical studies done that show the medicine helps with weight loss…but the studies used hamsters, not mice (as Travis claimed). This is probably not a material misrepresentation that could lead to Travis being charged with fraud.
Also, a misrepresentation is not fraud unless it seems calculated to fool someone of “ordinary prudence”-or someone with a decent amount of common sense.8 Some lies are so outrageous that most prudent people would never believe them. It may be hard to get a wire fraud conviction based on those sorts of lies.
Example: As a practical joke, Travis launches a radio marketing scheme for a weight loss herbal medicine that, he claims, helps “nine out of ten unicorns lose weight.” Most likely he will not be convicted under the federal wire fraud laws…because his lie would not have fooled anyone of “ordinary prudence.”
To be convicted of wire fraud, you don’t necessarily need to have actively told a lie. You can be convicted if you just failed to state certain facts, in a way that is misleading and so is basically the same as deceit.9
Example: Dan is trying to start a software company and is looking for investors. He contacts several potential investors by phone and fax and tells them that Bill Gates, the software billionaire, has expressed interest in investing in the project. This is true…Bill Gates has “expressed interest.” But after looking into the idea further, Bill Gates has already decided not to invest. Dan doesn’t tell the potential investors this second fact.
Dan may be committing wire fraud…even though he did not actually say anything that was untrue. By failing to disclose the important fact that Bill Gates has decided not to invest in the company, he is misleading potential investors.
Travis and Dan in the above examples may be charged with wire fraud even if they never actually got anyone to give them money. The crime of wire fraud doesn’t require that the scheme to defraud actually succeed.10 If you use the wires to try to pull off a fraud, you can be convicted of wire fraud even if no one else suffered any loss because of your actions.
Fraud typically involves people trying to swindle other people out of their property or money. But there is a less well-known form of fraud called “honest services fraud” that also can lead to wire fraud charges.11
Kickbacks.12
A ‘kickback’ is what happens when Person A makes a deal with Person B under which Person B helps Person A receives a benefit they should not be receiving, and then Person A returns a portion of the profits from the benefit to Person B.13
Example: Adam is an executive at a company that makes nuclear power plants. Part of Adam’s job involves choosing which companies get the lucrative contracts to make parts for the nuclear power plants.
Bob owns a manufacturing company. Adam and Bob make a deal: Adam will steer contracts to Bob’s company, and Bob will secretly give a portion of the profits from these contracts back to Adam.
This is a kickback. If Adam and Bob use any form of wire communication to advance their deal or put it into practice, they may be charged with wire fraud.
Use of wire, radio, or television communication is, of course, a key element of the crime of wire fraud.14
Use of wire, radio, or television communication is of course a key element of the crime of wire fraud.
Sending a fax that advances the scheme to defraud;15
Sending a telegram that advances the scheme to defraud;16
Making a telephone call that advances the scheme to defraud;17
Initiating or causing someone else to initiate a wire transfer of money in connection with a scheme to defraud;18 or
Sending an email that advances the scheme to defraud.19
The communication by wire just needs to be made for the purpose of advancing the scheme to defraud….it doesn’t need to play a crucial role in the scheme.20 What this means is that you can use the wires for something pretty trivial and still be convicted of wire fraud.
Example: Luis is named the administrator of his grandmother’s estate after she dies. He is supposed to distribute the money in the estate to several relatives. Instead, though, he wires the funds to a new bank account. Luis uses this bank account as a personal piggy bank, buying himself a new car and writing checks for large purchases.
Luis is guilty of wire fraud…the “use of wires” element is satisfied by his transfer of money from one bank to another by wire.21
Example: Roy and his friend Dennis cheat at blackjack at a casino in Las Vegas. The cheating is considered fraud. Before they travel to Vegas together, Roy calls Dennis on the phone to ask him if he is planning on coming. That telephone call establishes the “use of wires” element.22
The third element of the crime of wire fraud is a fraudulent intent.23 This means that the prosecution needs to show that you specifically intended to deceive or defraud someone else. Simply participating in a wire fraud scheme is not enough…you also need to have known about the scheme and had the specific goal of committing fraud.24
But there are some cases where people can be convicted of wire fraud even if they lacked specific intent…IF the prosecution is able to show that they acted with “reckless indifference” to whether the statements they were making were true.25
Example: Ellen comes up with a scheme to market a new kind of face cream she has invented. Her plan is to have people pay her for a license to market and sell the face cream to their friends and acquaintances in return for the right to keep a portion of the profits from all sales.
Ellen sends emails designed to convince people to take advantage of this “business opportunity.” In the emails, she says that her face cream is more effective than any other cream on the market. But she has never tested it against any other face creams and has no way of knowing if this is true.
Ellen did not lie per se in her emails…but she may still be charged with wire fraud, because her statements showed a reckless indifference to the truth.
Fortunately, there are multiple legal defenses that you may assert against a wire fraud charge
Example: Joan is married to James. James runs a scam in which he travels around the country selling popcorn machines, takes payment for the machines from customers, and then doesn’t deliver the machines.
Joan has only a ninth grade education and worked as a waitress before marrying James. Now she works as the secretary for his company. She takes telephone calls from his “customers” and tells them the machines are on their way. But she has no idea that James’ business is built on fraud and that his customers will never receive their popcorn machines.
Joan is not criminally liable for fraud along with James, because there is no evidence that she specifically intended to commit fraud.26
As Ventura criminal defense attorney John Murray explains:27
“Because specific intent is an element of the crime of wire fraud, you cannot be convicted if you can show that you committed the acts in question while you were mistaken about certain key facts. This can be a particularly useful defense in wire fraud cases, because the underlying facts are often complicated and hard to understand.”
Let’s say you transmitted a fax containing a false statement, but you actually believed that the statement was true. If this is the case, then the prosecution will not likely be able to show that you had specific intent to defraud.
Wire fraud is punishable with up to twenty (20) years in federal prison, a fine, or both.28 If the fraud involves a federal disaster or a financial institution (like a national bank), then the maximum sentence increases to thirty (30) years in prison.29
The law does not distinguish between someone who succeeds in committing wire fraud and someone who attempts to do so unsuccessfully. Attempted wire fraud carries the same criminal penalties as regular wire fraud.30
Also, the penalties for participating in a criminal conspiracy to commit wire fraud are the same as those for actually committing wire fraud.31
The crime of mail fraud, also known as postal fraud, is very similar to wire fraud. Like wire fraud, mail fraud is a federal crime.32 Also like wire fraud, a mail fraud conviction requires a showing of: 1) a scheme to commit fraud, and 2) specific intent to commit fraud.33
The only real difference between mail fraud and wire fraud is that, instead of the use of wire communications, mail fraud requires the use of the United States mails in furtherance of the scheme to defraud.34 Because an elaborate fraud scheme may involve both the use of wire communications like the telephone and the use of mail, wire fraud and mail fraud are often charged together.
Like wire fraud, mail fraud is also punishable with up to twenty (20) years in prison, a fine, or both. If the fraud involves a federal disaster or a financial institution (like a national bank), then the maximum sentence increases to thirty (30) years in prison.35
Securities fraud laws cover a wide range of behavior involving investment securities, including making false or misleading statements in connection with the sale or purchase of securities.
Securities fraud laws cover a wide range of behavior involving investment securities, including making false or misleading statements in connection with the sale or purchase of securities.36 Thus, if someone uses the wires to advance a fraudulent scheme involving securities, they may be charged with both wire fraud and securities fraud.
Securities fraud is both a federal crime and a California state crime.37 The penalties can be quite severe. Violations of California state securities fraud laws can result in fines of up to ten million dollars ($10,000,000) or imprisonment for as much as five (5) years.38 Federal securities fraud convictions can mean imprisonment for up to twenty (20) years.39
Some kinds of internet fraud will be prosecuted as wire fraud-for example, when someone uses email to advance a fraudulent scheme.40 Fraud through email is extremely common these days. Popular schemes include non-delivery merchandise fraud, advance fee fraud, work-at-home scams, and real estate overpayment fraud.41
Other forms of internet fraud can be prosecuted under either federal crime or California state criminal law.42 These include “phishing”-obtaining other people’s personal or credit card information over the internet and using it for fraudulent purposes-and unauthorized access to computers or computer data, sometimes through hacking.
California’s criminal fraud laws cover a wide range of specific offenses, such as health care fraud, real estate fraud and identity theft (530.5 PC).
18 United States Code (“U.S.C.”) § 1343 – Fraud by wire, radio, or television. (“Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.”)
See United States v. Selby, (2009) 557 F.3d 968, 979. (“The internal e-mail Selby forwarded to her husband . . . is sufficient to establish the element of the use of the wires in furtherance of the scheme.”)
United States v. Garlick, (9th Cir. 2001) 240 F.3d 789, 792. (“Wire fraud has three elements: (1) a scheme to defraud, (2) use of the wires in furtherance of the scheme and (3) a specific intent to deceive or defraud.”)
Black’s Law Dictionary (9th ed. 2009), fraud. (“1. A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment. • Fraud is usu. a tort, but in some cases (esp. when the conduct is willful) it may be a crime. – Also termed intentional fraud. . . . 2. A misrepresentation made recklessly without belief in its truth to induce another person to act….”)
Neder v. United States, (1999) 527 U.S. 1, 25. (“[W]e hold that materiality of falsehood is an element of the federal mail fraud, wire fraud, and bank fraud statutes.”)
United States v. Cochran, (10th Cir. 1997) 109 F.3d 660, 664-65. (“A scheme to defraud is conduct intended or reasonably calculated to deceive persons of ordinary prudence or comprehension. The objective reference to persons of ordinary prudence or comprehension assists in determining whether the accused’s conduct was calculated to deceive.”) (citations and internal quotation marks omitted)
United States v. Bohonus, (9th Cir. 1980) 628 F.2d 1167, 1172. (“The fraudulent scheme need not be one which includes an affirmative misrepresentation of fact, since it is only necessary for the government to prove that the scheme was calculated to deceive persons of ordinary prudence. Similarly, the deceitful concealment of material facts is not constructive fraud but actual fraud.”)
United States v. Schwartz, (2d Cir. 1991) 924 F.2d 410, 420 (explaining that the government does not have to prove “that the intended victim of the fraud was actually harmed; it is enough to show defendants contemplated doing actual harm, that is, something more than merely deceiving the victim”).
See also Neder v. United States, (1999) 527 U.S. 1, 24-25. (“The common-law requirements of ‘justifiable reliance’ and ‘damages,’ for example, plainly have no place in the federal fraud statutes.”)
18 U.S.C. § 1346 – Definition of scheme or artifice to defraud. (“For the purposes of this chapter, the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”)
See Skilling v. United States, (2010) 130 S.Ct. 2896, 2930. (‘The “vast majority’ of the honest-services cases involved offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes.”)
United States v. Pelisamen, (9th Cir. 2011) 641 F.3d 399, 405. (“Black’s Law Dictionary defines a kickback’ as a ‘return of a portion of a monetary sum received, esp. as a result of coercion or a secret agreement.’. . . In contrast, the paradigmatic kickback is made ‘for the purpose of improperly obtaining or rewarding favorable treatment’ in some area ( e.g., government contracts).”)
See United States v. Garlick, (9th Cir. 2001) 240 F.3d 789, 794.
See Sibley v. United States, (5th Cir. 1965), 344 F.2d 103, 104.
See United States v. Garner, (9th Cir. 1981) 663 F.2d 834, 838.
See United States v. McNeill, (9th Cir. 2003) 320 F.3d 1034, 1040.
Based on United States v. Pelisamen, (9th Cir. 2011) 641 F.3d 399, 409.
Loosely based on United States v. Garner, (9th Cir. 1981) 663 F.2d 834, 838.
United States v. Dupre, (SDNY 2004) 339 F.Supp.2d 534, 539. (“Under the wire fraud statute, even false representations or statements or omissions of material facts do not amount to a fraud unless done with fraudulent intent.”)
United States v. Price, (9th Cir. 1980) 623 F.2d 587, 591-92 (overruled on other grounds by United States v. De Bright, (9th Cir. 1984) 730 F.2d 1255, 1259). (“Participation in furtherance of a fraudulent scheme does not, by itself, justify a conviction unless the defendant’s knowledge of the fraudulent purpose can be shown.”)
Note that this case concerned a charge of mail fraud, not wire fraud. However, the analysis of the intent element is the same for mail fraud and wire fraud charges. See United States v. Bohonus, (9th Cir. 1980) 628 F.2d 1167, 1171 n.7. (“This court noted the similarity in sections 1341 and 1343 which, we stated, is that they share identical language in proscribing the formation of schemes to defraud. The Eighth Circuit was cited as in agreement on this point. This court then reviewed the scope of s 1341 as guidance in its determination of the scope of s 1343.”) (internal quotation marks omitted)
United States v. Cochran, (10th Cir. 1997) 109 F.3d 660, 665. (“That said, a scheme to defraud by false representations may be accomplished by patently false statements or statements made with a reckless indifference as to their truth or falsity . . . .”)
Based on United States v. Price, (9th Cir. 1980) 623 F.2d 587, 591-92 (overruled on other grounds by United States v. De Bright, (9th Cir. 1984) 730 F.2d 1255, 1259).
Ventura criminal defense lawyer John Murray defends against criminal charges throughout Los Angeles and Ventura counties.
18 U.S.C. § 1343 – Fraud by wire, radio, or television. (“Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.”)
Same. (“. . . If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.”)
18 U.S.C. § 1349 – Attempt and conspiracy. (“Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.”)
18 U.S.C. § 1341 – Frauds and swindles. (“Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.”)
Miller v. Yokohama Tire Corp., (9th Cir. 2004) 358 F.3d 616, 620. (“To allege a violation of mail fraud under § 1341, it is necessary to show that (1) the defendants formed a scheme or artifice to defraud; (2) the defendants used the United States mails or caused a use of the United States mails in furtherance of the scheme; and (3) the defendants did so with the specific intent to deceive or defraud.”) (internal quotations marks omitted)
18 U.S.C. § 1341 – Frauds and swindles.
Corporations Code 25401 – Sale or purchase of securities by means of written or oral communications containing false statements or omissions. (“It is unlawful for any person to offer or sell a security in this state or buy or offer to buy a security in this state by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.”)
15 U.S.C. § 78ff(a). (“(a) Willful violations; false and misleading statements. Any person who willfully violates any provision of this chapter (other than section 78dd-1 of this title), or any rule or regulation thereunder the violation of which is made unlawful or the observance of which is required under the terms of this chapter, or any person who willfully and knowingly makes, or causes to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement as provided in subsection (d) of section 78o of this title, or by any self-regulatory organization in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, shall upon conviction be fined not more than $5,000,000, or imprisoned not more than 20 years, or both, except that when such person is a person other than a natural person, a fine not exceeding $25,000,000 may be imposed; but no person shall be subject to imprisonment under this section for the violation of any rule or regulation if he proves that he had no knowledge of such rule or regulation.”)
Corporations Code 25540(b) – Violations of Corporate Securities Law or rules or orders thereunder; punishment. (“(b) Any person who willfully violates Section 25400, 25401, or 25402, or who willfully violates any rule or order under this division adopted pursuant to those provisions, shall upon conviction be fined not more than ten million dollars ($10,000,000), or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code for two, three, or five years, or be punished by both that fine and imprisonment.”)
See United States v. Selby, (2009) 557 F.3d 968, 979.
See Internet Crime Complaint Center, 2010 Internet Crime Report.
See Penal Code 530.5 PC – Unauthorized use of personal identifying information of another person; attempt to obtain credit, goods, services, real property or medical information; commission of crime; punishment for first, subsequent or multiple offenses; sale of information; mail theft; liability of computer service or software providers; Penal Code 484e PC – Theft of access cards or account information; Business & Professions Code 22948.2 BPC – Unlawful requests by misrepresentation; 18 U.S.C. § 1028 – Fraud and related activity in connection with identification documents, authentication features, and information; 18 U.S.C. § 1029 – Fraud and related activity in connection with access devices; Penal Code 502 PC – Unauthorized access to computers, computer systems and computer data; and 18 U.S.C. § 1030 – Fraud and related activity in connection with computers.
Wire fraud is fraud that is carried out through any form of wire, radio, or television communication.1 These days, this also includes e-mail communication.2 So wire fraud can include certain forms of internet fraud as well. Wire fraud is fraud that is carried out through any form of wire, radio, or television communication Wire fraud ...