Mail and Wire Fraud: A Brief Overview of Federal Criminal Law
Released: 2019-02-11T00:00:00

Introduction1

Some time ago, a federal prosecutor referred to the mail and wire fraud statutes as "our Stradivarius, our Colt 45, our Louisville Slugger … and our true love." Not everyone shared the prosecutor's delight. Commentators have argued that the statutes "have long provided prosecutors with a means by which to salvage a modest, but dubious, victory from investigations that essentially proved unfruitful." Federal judges have also expressed concern from time to time, observing that the "mail and wire fraud statutes have 'been invoked to impose criminal penalties upon a staggeringly broad swath of behavior,' creating uncertainty in business negotiations and challenges to due process and federalism." Nevertheless, mail and wire fraud prosecutions have brought to an end schemes that bilked victims of millions, and sometimes billions, of dollars.

The federal mail and wire fraud statutes outlaw schemes to defraud that involve the use of mail or wire communications. Both condemn fraudulent conduct that may also come within the reach of other federal criminal statutes. Both may serve as racketeering and money laundering predicate offenses. Both are punishable by imprisonment for not more than 20 years; for not more than 30 years, if the victim is a financial institution or the offense is committed in the context of major disaster or emergency. Both entitle victims to restitution. Both may result in the forfeiture of property.

Background

The first of the two, the mail fraud statute, emerged in the late 19 th century as a means of preventing "city slickers" from using the mail to cheat guileless "country folks." But for penalty increases and amendments calculated to confirm its breadth, the prohibition has come down to us essentially unchanged. Speaking in 1987, the Supreme Court noted that "the last substantive amendment to the statute ... was the codification of the holding of Durland ... in 1909." Congress did amend it thereafter to confirm that the mail fraud statute and the wire fraud statute reached schemes to defraud another of the right to honest services and to encompass the use of commercial postal carriers.

The wire fraud statute is of more recent vintage. Enacted as part of the Communications Act Amendments of 1952, it was always intended to mirror the provisions of the mail fraud statute. Since its inception, changes in the mail fraud statute have come with corresponding changes in the wire fraud statute in most instances.

Elements

The mail and wire fraud statutes are essentially the same, except for the medium associated with the offense—the mail in the case of mail fraud and wire communication in the case of wire fraud. As a consequence, the interpretation of one is ordinarily considered to apply to the other. In construction of the terms within the two, the courts will frequently abbreviate or adjust their statement of the elements of a violation to focus on the questions at issue before them. As treatment of the individual elements makes clear, however, there seems little dispute that conviction requires the government to prove

the use of either mail or wire communications in the foreseeable furtherance of a scheme and intent to defraud another of either property or honest services involving a material deception.

Use of Mail or Wire Communications

The wire fraud statute applies to anyone who "transmits or causes to be transmitted by wire, radio, or television communication in interstate or foreign commerce any writings ... for the purpose of executing [a] ... scheme or artifice." The mail fraud statute is similarly worded and applies to anyone who "... for the purpose of executing [a] ... scheme or artifice ... places in any post office ... or causes to be delivered by mail ... any ... matter."

The statutes require that a mailing or wire communication be in furtherance of a scheme to defraud. The mailing or communication need not be an essential element of the scheme, as long as it "is incident to an essential element of the scheme." A qualifying mailing or communication, standing alone, may be routine, innocent or even self-defeating, because "[t]he relevant question at all times is whether the mailing is part of the execution of the scheme as conceived by the perpetrator at the time, regardless of whether the mailing later, through hindsight, may prove to have been counterproductive." The element may be satisfied by mailings or communications "designed to lull the victim into a false sense of security, postpone inquiries or complaints, or make the transaction less suspect." The element may also be satisfied by mailings or wire communications used to obtain the property which is the object of the fraud.

A defendant need not personally have mailed or wired a communication; it is enough that he "caused" a mailing or transmission of a wire communication in the sense that the mailing or transmission was the reasonable foreseeable consequence of his intended scheme.

Scheme to Defraud

The mail and wire fraud statutes "both prohibit, in pertinent part, 'any scheme or artifice to defraud[,]' or to obtain money or property 'by means of false or fraudulent pretenses, representations, or promises," or deprive another of the right to honest services by such means. From the beginning, Congress intended to reach a wide range of schemes to defraud, and has expanded the concept whenever doubts arose. It added the second prong—obtaining money or property by false pretenses, representations, or promises—after defendants had suggested that the term "scheme to defraud" covered false pretenses concerning present conditions but not representations or promises of future conditions. More recently, it added 18 U.S.C. § 1346 to make it clear the term "scheme to defraud" encompassed schemes to defraud another of the right to honest services. Even before that adornment, the words were understood to "refer 'to wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'"

As a general rule, the crime is done when the scheme is hatched and an attendant mailing or interstate phone call or email has occurred. Thus, the statutes are said to condemn a scheme to defraud regardless of its success. It is not uncommon for the courts to declare that to demonstrate a scheme to defraud the government needs to show that the defendant's "communications were reasonably calculated to deceive persons of ordinary prudence and comprehension." Even a casual reading, however, might suggest that the statutes also cover a scheme specifically designed to deceive a naïve victim. Nevertheless, the courts have long acknowledged the possibility of a "puffing" defense, and there may be some question whether the statutes reach those schemes designed to deceive the gullible though they could not ensnare the reasonably prudent. In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception.

Defrauding or to Obtain Money or Property

The mail and wire fraud statutes speak of schemes to defraud or to obtain money or property by means of false or fraudulent pretenses. The Supreme Court has said that the phrase "to defraud" and the phrase "to obtain money or property" do not represent separate crimes, but instead the phrase "obtain money or property" describes what constitutes a scheme to defraud. In later look-alike offenses, Congress specifically numerated the two phrases. The bank fraud statute, for example, applies to "whoever knowingly executes … a scheme or artifice — (1) to defraud a financial institution; or (2) to obtain any of the money, funds, credits, assets, securities, or other property owned by … a financial institution, by means of false or fraudulent pretenses …" It left the mail and wire fraud statutes, however, unchanged.

The mail and wire fraud statutes clearly protect against deprivations of tangible property. They also protect certain intangible property rights, but only those that have value in the hands of the victim of a scheme. "To determine whether a particular interest is property for purposes of the fraud statutes, [courts] look to whether the law traditionally has recognized and enforced it as a property right."

Materiality

Neither the mail nor the wire fraud statute exhibits an explicit reference to materiality. Yet materiality is an element of each offense, because at the time of the statutes' enactment, the word "defraud" was understood to "require[] a misrepresentation or concealment of [a] material fact." Thus, other than in an honest services context, a "scheme to defraud" for mail or wire fraud purposes must involve a material misrepresentation of some kind. "A misrepresentation is material if it is capable of influencing the intended victim."

Intent

Again, other than in the case of honest services, "'intent to defraud' requires an intent to (1) deceive, and (2) cause some harm to result from the deceit. A defendant acts with the intent to deceive when he acts knowingly with the specific intent to deceive for the purpose of causing pecuniary loss to another or bringing about some financial gain to himself."

A defendant has a complete defense if he believes the deceptive statements or promises to be true or otherwise acts under circumstances that belie an intent to defraud. Yet, a defendant has no defense if he blinds himself to the truth. Nor is it a defense if he intends to deceive but feels his victim will ultimately profit or be unharmed.

Honest Services

The Supreme Court held in McNally v. United States that the protection of the mail fraud statute, and by implication the protection of the wire fraud statute, did not extend to "the intangible right of the citizenry to good government." Soon after McNally , Congress enlarged the mail and wire fraud protection to include the intangible right to honest services, by defining the "term 'scheme or artifice to defraud' [to] include[s] a scheme or artifice to deprive another of the intangible right to honest services." Lest the expanded definition be found unconstitutionally vague, the Court in Skilling v. United States limited its application to cases of bribery or kickbacks. The Court in Skilling supplied only a general description of the bribery and kickbacks condemned in the honest-services statute. Subsequent lower federal courts have often looked to the general federal law relating to bribery and kickbacks for the substantive elements of honest services bribery. In this context, bribery requires "a quid pro quo—a specific intent to give … something of value in exchange for an official act." And an "official act" means no more than an officer's formal exercise of governmental power in the form of a "decision or action on a 'question, matter, cause, suit, proceeding or controversy'" before him.

The definition of the word "kickback" quoted by the Court in Skilling has since been reassigned, and the courts have cited the dictionary definition on occasion.

Except for the elements of a scheme to defraud in the form of a bribe and a kickback, honest services fraud, as an adjunct of the mail and wire fraud statutes, draws its elements and the sanctions that attend the offense from the mail and wire fraud statutes.

Aiding and Abetting, Attempt, and Conspiracy

Attempting or conspiring to commit mail or wire fraud or aiding and abetting the commission of those offenses carries the same penalties as the underlying offense. "In order to aid and abet another to commit a crime it is necessary that a defendant in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed."

"Conspiracy to commit wire fraud under 18 U.S.C. § 1349 requires a jury to find that (1) two or more persons agreed to commit wire fraud and (2) the defendant willfully joined the conspiracy with the intent to further its unlawful purpose." As a general rule, a conspirator is liable for any other offenses that a co-conspirator commits in the foreseeable furtherance of the conspiracy. Such liability, however, extends only until the objectives of the conspiracy have been accomplished or the defendant has withdrawn from the conspiracy.

Where attempt has been made a separate offense, as it has for mail and wire fraud, conviction ordinarily requires that the defendant commit a substantial step toward the completion of the underlying offense with the intent to commit it. It does not, however, require the attempt to have been successful. Unlike conspiracy, a defendant may not be convicted of both the substantive offense and the lesser included crime of attempt to commit it.

Sentencing

A mail and wire fraud are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations), or fine of not more than $1 million and imprisonment for not more than 30 years if the victim is a financial institution or the offense was committed in relation to a natural disaster. It is also subject to a mandatory minimum two-year term of imprisonment if identify theft is used during and in furtherance of the fraud. Conviction may also result in

probation, a term of supervised release, a special assessment, a restitution order, and/or a forfeiture order.

Sentencing Guidelines

Sentencing in federal court begins with the federal Sentencing Guidelines. The Guidelines are essentially a scorekeeping system. A defendant's ultimate sentence under the Guidelines is determined by reference first to a basic guideline, which sets a base "offense level." Offense levels are then added or subtracted to reflect his prior criminal record as well as the aggravating and mitigating circumstances attending his offense. One of two basic guidelines applies to mail and wire fraud. Section 2C1.1 applies to mail or wire fraud convictions involving corruption of public officials. Section 2B1.1 applies to other mail or wire fraud convictions. Both sections include enhancements based on the amount of loss associated with the fraud.

After all the calculations, the final offense level determines the Guidelines' recommendations concerning probation, imprisonment, and fines. The Guidelines convert final offense levels into 43 sentencing groups, which are in turn each divided into six sentencing ranges based on the defendant's criminal history. Thus, for instance, the recommended sentencing range for a first-time offender (i.e., one with a category I criminal history) with a final offense level of 15 is imprisonment for between 18 and 24 months. A defendant with the same offense level 15 but with a criminal record placing him in criminal history category VI, would face imprisonment from between 41 and 51 months. The Guidelines also provide offense-level-determined fine ranges for individuals and organizations.

As a general rule, sentencing courts may place a defendant on probation for a term of from 1 to 5 years for any crime punishable by a maximum term of imprisonment of less than 25 years. The Guidelines, however, recommend "pure" probation, that is, probation without any term of incarceration, only with respect to defendants with an offense level of 8 or below, i.e., levels where the sentencing range is between zero and six months.

Once a court has calculated the Guidelines' recommendations, it must weigh the other statutory factors found in 18 U.S.C. § 3553(a) before imposing a sentence. Appellate courts will uphold a sentence if the sentence is procedurally and substantively reasonable. A sentence is reasonable procedurally if it is free of procedural defects, such as a failure to accurately calculate the Guidelines' recommendations and to fully explain the reasons for the sentence selected. A sentence is reasonable substantively if it is reasonable in light of circumstances that a case presents.

Supervised Release and Special Assessments

Supervised release is a form of parole-like supervision imposed after a term of imprisonment has been served. Although imposition of a term of supervised release is discretionary in mail and wire fraud cases, the Sentencing Guidelines recommend its imposition in all felony cases. The maximum supervised release term for wire and mail fraud generally is three years—five years when the defendant is convicted of the mail or wire fraud against a financial institution that carries a 30-year maximum term of imprisonment. Release will be subject to a number of conditions, violation of which may result in a return to prison for not more than two years (not more than three years if the original crime of conviction carried a 30-year maximum). There are three mandatory conditions: (1) commit no new crimes; (2) allow a DNA sample to be taken; and (3) submit to periodic drug testing. The court may suspend the drug testing condition, although it is under no obligation to do so even though the defendant has no history of drug abuse and drug abuse played no role in the offense.

Most courts will impose a standard series of conditions in addition to the mandatory condition of supervised release. The Sentencing Guidelines recommend that these include the payment of any fines, restitution, and special assessments that remain unsatisfied. Defendants convicted of mail or wire fraud must pay a special assessment of $100.

Restitution

Restitution is ordinarily required of those convicted of mail or wire fraud. The victims entitled to restitution include those directly and proximately harmed by the defendant's crime of conviction, and "in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity," like mail and wire fraud, "any person directly harmed by the defendant's conduct in the course of the scheme, conspiracy, or pattern."

Forfeiture

Property that constitutes the proceeds of mail or wire fraud is subject to confiscation by the United States. It may be confiscated pursuant to either civil forfeiture or criminal forfeiture procedures. Civil forfeiture proceedings are conducted that treat the forfeitable property as the defendant. Criminal forfeiture proceedings are conducted as part of the criminal prosecution of the property owner.

Related Criminal Provisions

The mail and wire fraud statutes essentially outlaw dishonesty. Due to their breadth, misconduct that constitutes mail or wire fraud may constitute a violation of one or more other federal criminal statutes as well. This overlap occurs perhaps most often with respect to (1) crimes for which mail or wire fraud are elements ("predicate offenses") of another offense; (2) fraud proscribed under jurisdictional circumstances other than mail or wire use; and (3) honest services fraud in the form of bribery or kickbacks.

Predicate Offense Crimes

Some federal crimes have as an element the commission of some other federal offense. The money laundering statute, for example, outlaws laundering the proceeds of various predicate offenses. The racketeering statute outlaws the patterned commission of a series of predicate offenses in order to operate a racketeering enterprise. Mail and wire fraud are racketeering and money laundering predicate offenses.

RICO

The Racketeering Influenced and Corrupt Organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise, engaged in or whose activities affect interstate commerce, through loan sharking or the patterned commission of various other predicate offenses. The racketeering-conduct and conspiracy-to-engage-in-racketeering-conduct appear to be the RICO offenses most often built on wire or mail fraud violations. The elements of the RICO conduct offense are (1) conducting the affairs; (2) of an enterprise; (3) engaged in activities in or that impact interstate or foreign commerce; (4) through a pattern; (5) of racketeering activity. To prove a RICO conspiracy, the government must prove: "(1) that two or more persons agreed to conduct or to participate, directly or indirectly, in the conduct of an enterprise's affairs through a pattern of racketeering activity; (2) that the defendant was a party to or a member of that agreement; and (3) that the defendant joined the agreement or conspiracy knowing of its objective to conduct or participate, directly or indirectly, in the conduct of the enterprise's affairs through a pattern of racketeering activity."

"Racketeering activity" means, among other things, any act that is indictable under either the mail or wire fraud statutes. As for pattern, a RICO pattern "requires at least two acts of racketeering activity. The racketeering predicates may establish a pattern if they [were] related and … amounted to, or threatened the likelihood of, continued criminal activity.'"

The pattern of predicate offenses must be used by someone employed by or associated with a qualified enterprise to conduct or participate in its activities. "Congress did not intend to extend RICO liability . . . beyond those who participated in the operation and management of an enterprise through a pattern of racketeering activity." Nevertheless, "liability under § 1962(c) is not limited to upper management … An enterprise is operated not just by upper management but also by lower rung participants."

The enterprise may be either any group of individuals, any legal entity, or any group "associated in fact." "Nevertheless, 'an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise and longevity sufficient to permit those associates to pursue the enterprise's purpose.'" Moreover, qualified enterprises are only those that "engaged in, or the activities of which affect, interstate or foreign commerce."

RICO violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered when one of the predicate offenses is mail or wire fraud. RICO has one of the first contemporary forfeiture provisions, covering property and interests acquired through RICO violations. As noted earlier, any RICO predicate offense is by virtue of that fact a money laundering predicate. RICO violations create a cause of action for treble damages for the benefit of anyone injured in their business or property by the offense.

Money Laundering

Mail and wire fraud are both money laundering predicate offenses by virtue of their status as RICO predicates. The most commonly prosecuted federal money laundering statute, 18 U.S.C. § 1956, outlaws, among other things, knowingly engaging in a financial transaction involving the proceeds generated by a "specified unlawful activity" (a predicate offense) for the purpose (1) of laundering the proceeds (i.e., concealing their source or ownership), or (2) of promoting further predicating offenses.

To establish the concealment offense, the government must establish that "(1) [the] defendant conducted, or attempted to conduct a financial transaction which in any way or degree affected interstate commerce or foreign commerce; (2) the financial transaction involved proceeds of illegal activity; (3) [the] defendant knew the property represented proceeds of some form of unlawful activity, [such as mail or wire fraud]; and (4) [the] defendant conducted or attempted to conduct the financial transaction knowing the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds of specified unlawful activity."

To prove the promotional offense, "the Government must show that the defendant: (1) conducted or attempted to conduct a financial transaction; (2) which the defendant then knew involved the proceeds of unlawful activity; (3) with the intent to promote or further unlawful activity."

Nothing in either provision suggests that the defendant must be shown to have committed the predicate offense. Moreover, simply establishing that the defendant spent or deposited the proceeds of the predicate offense is not enough without proof of an intent to promote or conceal.

Either offense is punishable by imprisonment for not more than 20 years and a fine of not more than $500,000. Property involved in a transaction in violation of Section 1956 is subject to civil and criminal forfeiture.

Merely depositing the proceeds of a money laundering predicate offense, like mail or wire fraud, does not alone constitute a violation of Section 1956. It is enough for a violation of 18 U.S.C. § 1957, however, if more than $10,000 is involved. Section 1957 uses Section 1956's definition of specified unlawful activities. Thus, mail and wire fraud violations may serve as the basis for the prosecution under Section 1957. "Section 1957 differs from Section 1956 in two critical respects: It requires that the property have a value greater than $10,000, but it does not require that the defendant know of [the] design to conceal aspects of the transaction or that anyone have such a design."

Violations are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000) for organizations. The property involved in a violation is subject to forfeiture under either civil or criminal procedures.

Fraud Under Other Jurisdictional Circumstances

This category includes the offenses that were made federal crimes because they involve fraud against the United States, or because they are other frauds that share elements with the mail and wire fraud. The most prominent are the proscriptions against defrauding the United States by the submission of false claims, conspiracy to defraud the United States, and material false statements in matters within the jurisdiction of the United States. Bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting are mail and wire fraud look-alikes.

Defrauding the United States

False Claims

Section 287 outlaws the knowing submission of a false claim against the United States. "To prove a false claim, the government must prove that (1) [the defendant] 'made and presented' to the government a claim, (2) 'the claim was false, fictitious, or fraudulent,' (3) [the defendant] knew the claim was false, fictitious, or fraudulent, and (4) 'the claim was material' to the government." The offense carries a sentence of imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, but either a private individual or the government may bring a civil action for treble damages under the False Claims Act. Section 287 offenses are neither RICO nor money laundering predicate offenses. Nevertheless, a defendant who presents his false claim by mail or email may find himself charged under both Section 287 and either the mail or wire fraud statutes.

Conspiracy to Defraud the United States

The general conspiracy statute has two parts. It outlaws conspiracies to violate the laws of the United States. More relevant here, it also outlaws conspiracies to defraud the United States. "To convict on a charge under the 'defraud' clause, the government must show that the defendant (1) entered into an agreement (2) to obstruct a lawful government function (3) by deceitful or dishonest means and (4) committed at least one overt act in furtherance of the conspiracy." Thus, the "fraud covered by the statute reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful functions of any department of the Government" by "deceit, craft or trickery, or at least by means that are dishonest." Unlike mail and wire fraud, the government need not show that the scheme was designed to deprive another of money, property, or honest services; it is enough to show that the scheme is designed to obstruct governmental functions.

Conspiracy to defraud the United States is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense.

False Statements

Section 1001 outlaws knowingly and willfully making a material false statement on a matter within the jurisdiction of the executive, legislative, or judicial branch of the federal government. A matter is material for purposes of Section 1001 when "it has a natural tendency to influence, or [is] capable of influencing, the decision of" the individual or entity to whom it is addressed. A matter is within the jurisdiction of a federal entity "when it has the power to exercise authority in a particular matter," and federal jurisdiction "may exist when false statements [are] made to state or local government agencies receiving federal support or subject to federal regulation."

A violation of Section 1001 is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, unless the offense relates to the activities of various federal financial receivers and conservators. Moreover, in a situation where the offense involves the submission of a false claim, either a private individual or the government may bring a civil action for treble damages under the False Claims Act.

Fraud Elsewhere in Chapter 63

Chapter 63 contains four other fraud proscriptions in addition to mail and wire fraud: bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting. Each relies on a jurisdictional base other than use of the mail or wire communications.

Bank Fraud

The bank fraud statute outlaws (1) schemes to defraud a federally insured financial institution, and (2) schemes to falsely obtain property from such an institution. To establish the bank- property scheme to defraud offense, "the Government must prove: (1) the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution; (2) the defendant did so with the intent to defraud a financial institution; and (3) the financial institution was federally insured."

As for the bank-custody offense, "the government must prove (1) that a scheme existed to obtain moneys, funds, or credit in the custody of a federally-insured bank by fraud; (2) that the defendant participated in the scheme by means of material false pretenses, representations, or promises; and (3) that the defendant acted knowingly."

Violation of either offense is punishable by imprisonment for not more than 30 years and a fine of not more than $1 million. Bank fraud is both a RICO and a money laundering predicate offense. Conviction also requires an order for victim restitution. Property constituting the proceeds of a violation is subject to forfeiture under either civil or criminal procedure.

Health Care Fraud

The health care fraud provision follows the pattern of other Chapter 63 offenses. It condemns schemes to defraud. The schemes it proscribes include honest services fraud in the form of bribery and kickbacks. Attempts and conspiracies to violate its prohibitions carry the same penalties as the complete offense it describes. It is often prosecuted along with other related offenses. Parsed to its elements, the section declares:

[a] Whoever

[b] knowingly and willfully

[c] executes or attempts to execute

[d] a scheme or artifice

(1) to defraud any health care benefit program, or

(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property owned by, or under the custody or control of, any health care benefit program

[e] in connection with the delivery of or payment for health care benefits, items, or services shall be …

Section 1347's penalty structure is somewhat distinctive. General violations are punishable by imprisonment for not more than 10 years and fines of not more than $250,000. Should serious bodily injury result, however, the maximum penalty is increased to imprisonment for not more than 20 years; should death result, the maximum penalty is imprisonment for life or any term of years. Section 1347 offenses are neither money laundering nor RICO predicate offenses, and proceeds of a violation of Section 1347 are not subject to confiscation. Victims, however, are entitled to restitution.

Securities and Commodities Fraud

Section 1348, the securities and commodities fraud prohibition, continues the progression of separating its defrauding feature from its obtaining-property feature. The elements of defrauding offense "are (1) fraudulent intent, (2) a scheme or artifice to defraud, and (3) a nexus with a security." To prove a violation of Section 1348(2), the government must establish that the defendant (1) executed, or attempted to execute, a scheme or artifice; (2) with fraudulent intent; (3) in order to obtain money or property; (4) by material false or fraudulent pretenses, representations, or promises.

A conviction for mail fraud or wire fraud, or both, sometimes accompanies a conviction for securities fraud under Section 1348.

Under either version of Section 1348, offenders face imprisonment for not more than 25 years and fines of not more than $250,000 (not more than $500,000 for organizations). The offense s are neither money laundering nor RICO predicate offense s . Victim restitution must be ordered upon conviction, but forfeiture is not authorized.

Fraud in Foreign Labor Contracting

"The substantive offense of fraud in foreign labor contracting [under 18 U.S.C. § 1351] occurs when someone: (1) recruits, solicits, or hires a person outside the United States, or causes another person to do so, or attempts to do so; (2) does so by means of materially false or fraudulent pretenses, representations or promises regarding that employment; and (3) acts knowingly and with intent to defraud." The offense occurs outside the United States when related to a federal contract or U.S. presence abroad.

The offense is a RICO predicate offense and consequently a money laundering predicate offense as well. A restitution order is required at sentencing, but forfeiture is not authorized.

Honest Services Fraud Elsewhere

After the Supreme Court's 2010 decision in Skillin g v. United States , honest services mail and wire fraud consists of bribery and kickback schemes furthered by use of the mail or wire communications. Mail and wire fraud aside, the principal bribery and kickback statutes include 18 U.S.C. §§ 201(b)(1) (bribery of federal officials), 666 (bribery relating to federal programs), 1951 (extortion under color of official right); 15 U.S.C §§ 78dd-1 to 78dd-3 (foreign corrupt practices); and 42 U.S.C. § 1320a-7b (Medicare/Medicaid anti-kickback).

Bribery of Federal Officials

Conviction for violation of Section 201(b)(1) "requires a showing that something of value was corruptly ... offered or promised to a public official ... or corruptly ... sought ... or agreed to be received by a public official with intent ... to influence any official act ... or in return for 'being influenced in the performance of any official act."

The hallmark of the offense is a corrupt quid pro quo, "a specific intent to give or receive something of value in exchange for an official act." The public officials covered include federal officers and employees, those of the District of Columbia, and those who perform tasks for or on behalf of the United States or any of its departments or agencies. The official acts that constitute the objective of the corrupt bargain include any decision or action relating to any matter coming before an individual in his official capacity.

Section 201 punishes bribery with imprisonment for up to 15 years, a fine of up to $250,000 (up to $500,000 for an organization), and disqualification from future federal office or employment. Section 201 is a RICO predicate offense and consequently also a money laundering predicate offense. The proceeds of a bribe in violation of Section 201 are subject to forfeiture under either civil or criminal procedure.

Bribery and Fraud Related to Federal Programs

Section 666 outlaws both (1) fraud and (2) bribery by the faithless agents of state, local, tribal, or private entities—that receive more than $10,000 in federal benefits—in relation to a transaction of $5,000 or more. "A violation of Section 666(a)(1)(A) requires proof of five elements. The government must prove that: (1) a defendant was an agent of an organization, government, or agency; (2) in a one-year period that organization, government, or agency received federal benefits in excess of $10,000; (3) a defendant … obtained by fraud … ; (4) … property owned by, or in the care, custody, or control of, the organization, government, or entity; and (5) the value of that property was at least $5,000."

"A person is guilty under § 666[(a)(1)(B)] if he, being an agent of an organization, government, or governmental agency that receives federal-program funds, corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more."

Agents are statutorily defined as "person[s] authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative." The circuits appear divided over whether the government must establish a quid pro quo as in a Section 201 bribery case. The government, however, need not establish that the tainted transaction involves federal funds.

Violations of Section 666 are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000 for organizations). Section 666 offenses are money laundering predicate offenses. Section 666 offenses are not among the RICO federal predicate offenses, although bribery in violation of state felony laws is a RICO predicate offense. The proceeds of a bribe in violation of Section 666 are subject to forfeiture under either civil or criminal procedure.

Hobbs Act

The Hobbs Act, 18 U.S.C. § 1951, outlaws obtaining the property of another under "color of official right," in a manner that has an effect on interstate commerce. Conviction requires the government to prove that the defendant "(1) was a government official; (2) who accepted property to which she was not entitled; (3) knowing that she was not entitled to the property; and (4) knowing that the payment was given in return for officials acts: (5) which had at least a de minimis effect on commerce." Conviction does not require that the public official sought or induced payment: "the government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts."

Hobbs Act violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for an organization). Hobbs Act violations are RICO predicate offenses and thus money laundering predicates as well. The proceeds of a Hobbs Act violation are subject to forfeiture under either civil or criminal procedure.

Foreign Corrupt Practices

The bribery provisions of the Foreign Corrupt Practices Act (FCPA) are three: 15 U.S.C. §§ 78dd-1 (trade practices by issuers), 78dd-2 (trade practices by domestic concerns), and 78dd-3 (trade practices by others within the United States). Other than the class of potential defendants, the elements of the three are comparable. They

make[] it a crime to: (1) willfully; (2) make use of the mail or any means or instrumentality of interstate commerce; (3) corruptly; (4) in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to; (5) any foreign official; (6) for purposes of [either] influencing any act or decision of such foreign official in his official capacity [or] inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official [or] securing any improper advantage; (7) in order to assist such [corporation] in obtaining or retaining business for or with, or directing business to, any person.

None of the three proscriptions apply to payments "to expedite or to secure the performance of a routine governmental action," and each affords defendants an affirmative defense for payments that are lawful under the applicable foreign law or regulation.

Violations are punishable by imprisonment for not more than five years and by a fine of not more than $100,000 (not more than $2 million for organizations). Foreign Corrupt Practices Act violations are not RICO predicate offenses, but they are money laundering predicates. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure.

Medicare Kickbacks

The Medicare/Medicaid kickback prohibition in 42 U.S.C. 1320a-7b(b) outlaws "knowingly and willfully [offering or paying], soliciting [or] receiving, any remuneration (including any kickback) ... (A) to induce the referral of [, or (B) the purchase with respect to] Medicare [or] Medicaid beneficiaries ... any item or service for which payment may be made in whole or in part under the Medicare [or] Medicaid programs...."

Violations are punishable by imprisonment for not more than five years and by a fine of not more than $25,000. Section 1320a-7b kickback violations are money laundering, but not RICO, predicate offenses. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure.

Statutory Text

18 U.S.C. 1341 (Mail Fraud) (Text)

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.

18 U.S.C. 1343 (Wire Fraud) (Text)

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.

18 U.S.C. 1346 (Honest Services) (Text)

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.

18 U.S.C. 1349 (Attempt and Conspiracy) (Text)

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.