What is Wire Fraud?
Wire Fraud is codified in Title 18 United States Code §1343, and provides in relevant part “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.”
As wire fraud closely mirrors the language of mail fraud, which is codified in 18 U.S.C. §1341, “interpretations and analyses of one statute will typically apply to the other.” Following the U.S. Supreme Court’s decision in McNally v. United States,18 U.S.C. §1346 clarified that the scope of the term “scheme or artifice to defraud,” includes “a scheme or artifice to deprive another of the intangible right of honest services” that broadened the scope to beyond just protection of property rights.
What Are the Elements of Wire Fraud?
District Courts across the United States have interpreted the wire fraud statute to have two, three, or four elements. In jurisdictions that have adopted a two-element approach, the two elements of wire fraud that the Government must prove beyond a reasonable doubt are: (1) a scheme or artifice to defraud; and (2) use of interstate wire communication to facilitate that scheme to get money or property. In federal jurisdictions that have adopted a four-element approach, the wire fraud elements are (1) that the defendant voluntarily and intentionally devised or participated in a scheme to defraud another out of money; (2) that the defendant did so with the intent to defraud; (3) that it was reasonably foreseeable that interstate wire communications would be used; and (4) that interstate wire communications were in fact used. As part of the Second Circuit, New York follows a three-element approach and thus the elements are (1) a scheme to defraud, (2) money or property as the object of the scheme, and (3) use of wires to further the scheme. Although not a statutory element, materiality of a falsehood in the scheme to defraud is a common-law element of wire fraud.
(1) Scheme to Defraud Involving a Material Misrepresentation or Disclosure
The requisite “scheme to defraud” has been framed broadly, sometimes as broadly as “a departure from fundamental honesty, moral uprightness and candid dealings in the general life of the community.” Generally, what the scheme to defraud element contemplates is conduct reasonably calculated to deceive. Wire fraud can be “premised on either a non-disclosure or an affirmative misrepresentation.” In Autuori v. United States, the Second Circuit defined a misrepresentation as a “statement that misleadingly omits critical facts.” Although the Courts have previously held that a non-disclosure can only support a fraud charge only “where there is an independent duty that has been breached by a person so charged,” the Courts in several circuits, including the Second Circuit, have repeatedly held that material non-disclosures alone are sufficient to sustain a wire fraud conviction, even in the absence of a fiduciary duty.
In United States v. Townley, the Fifth Circuit further held that “statements need not be false or fraudulent on their face, and the accused need not misrepresent any fact, since all that is necessary is that the scheme be reasonably calculated to deceive.” The Courts have held that both under 18 U.S.C. §1341 and §1343, it need not be proven that the actual scheme was successful, but rather only that a scheme existed. As held by the U.S. Supreme Court in Neder v. United States, the misrepresentation involving the scheme to defraud must rise to the level of being “material.” A false statement rises to the level of being a material misrepresentation “if it has a natural tendency to influence, or is capable of influencing, the decision of the decision-making body to which it was addressed.”
(2) Intent to Defraud Another of Money, Property, or Honest Services
The specific intent to defraud can be understood as “the specific intent to deceive or cheat, usually for the purpose of getting financial gain for one’s self or causing financial loss to another.” Thus, if, in good faith, an individual makes a statement in good faith that turns out to be false, that would simply not satisfy the specific intent requirement. The Second Circuit has stated that the mere conscious avoidance of the truth is absolutely no defense to circumvent the intent requirement. While the prosecution must show that some harm or injury was contemplated by the scheme, it need not show that direct, tangible economic loss resulted to the scheme’s intended victims.
(3)Interstate Wire Communications Were Used in Furtherance of the Scheme
The Second Circuit has held that “one causes a wire transmission when he ‘act[s] with knowledge that the use of the wires would follow in the ordinary course of business, or if such use could reasonably have been foreseen.'” In a scheme to commit wire fraud, it is not necessary that an individual use the wires personally because the term “transmits or causes to be transmitted‘ has been interpreted to mean that ’one causes a wire transmission when he act[s] with knowledge that the use of the wires would follow in the ordinary course of business, or if such use could reasonably have been foreseen.’” The Second Circuit explained that the Government does not need to show that wire transmission was an “essential element,” but rather, ”that it was for the purpose of executing the scheme.”
Sentencing and Penalties for Wire Fraud
Wire Fraud is a serious federal crime, that is punishable by up to 20 years imprisonment and/or a fine of up to $250,000. In the event the Wire Fraud violation was in connection with a presidentially declared major disaster or emergency or affected a financial institution, it is punishable by imprisonment of up to 30 years and/or a fine of up to $1,000,000.