Wire Fraud Law
18 U.S.C. § 1343 is the wire fraud law. This law makes it a federal crime to use either a wire, radio, or television to carry out a con or scam. Notably, this law has four key elements:
- A scheme to defraud;
- False material representations or promises;
- Sending by wire, radio, or television any writing or signal for the purpose of carrying out the con or scam; and
- Specific intent to defraud.
In other words, the government must prove to a jury that someone did all four of these things. And they have to prove each one of these facts beyond a reasonable doubt. If they cannot, then a person is not guilty of wire fraud.
Of major interest, this law targets plans or schemes to defraud. And using a wire to carry out the scam is the hook that turns a state crime into a federal offense. On top of that, a person breaks this law each time he uses a wire to carry out the scam.
Equally important, the wire fraud law is almost identical to the mail fraud law. This means that the case law and defenses for mail fraud also apply to wire fraud.
Finally, in this post, we will show you how the wire fraud law works. And we will show you how it differs from the mail fraud law. We will also talk about possible defenses to a wire fraud charge.
What is a scheme to defraud?
The first element of wire fraud is a “scheme to defraud.” This term is the same for both the wire fraud and mail fraud cases. It means any plan, pattern, or course of action that is intended to cheat another person out of money or property.
This term also includes a plan, pattern, or course of action that brings financial gain for the people in the scheme. Stated differently, it means a scam or con to cheat someone out of money or property.
What is a false material representation?
A representation is “false” if the person makes it knowing that it is untrue or makes it with reckless indifference as to its truth or falsity. In addition, a representation is false if it is a half truth, or omits or hides a material fact, provided it is made with the intent to defraud.
Similarly, a representation is “material” if it has a natural tendency to influence, or is capable of influencing, the decision of the person or entity to which it is addressed.
Interestingly, the term “material” is a key element in mail, wire, and bank fraud cases. However, this term is not in either the mail or wire fraud statutes. Instead, the Supreme Court added this element in a case called Neder v. United States, 527 U.S. 1, 4 (1999).
Stated a different way, a false material representation is an intentional lie about a fact that would cause a victim to do or not do something. This also includes lies by omission.
How does “Use of Wires in Furtherance of the Scheme” work?
A. “Cause” to Use a Wire
The Supreme Court explained how the use of mails or wires in furtherance of a scheme to defraud works. Specifically, a person uses either mails or wires when:
[O]ne does an act with knowledge that the use of the mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not actually intended, then he “causes” the mails to be used.
Pereira v. United States, 347 U.S. 1, 9 (1954).
To be sure, the Pereira case applies to both mail and wire fraud cases. This is an important point. Like the mail fraud law, each use of the wires is a separate crime. This can lead to perverse results.
For instance, the government can charge a person with multiple counts of wire fraud even though there is only one scheme to defraud.
B. In Furtherance of the Scheme to Defraud.
The use of the wire does not have to be the key part of the scheme or plan. On the contrary. The use of the wire will be in furtherance of the scheme to defraud even if the wire is only “incident to an essential part of the scheme or a step in the plot.” This explanation gives prosecutors lots of leeway in connecting the use of the wire to the scheme to defraud.
The main issue is the link between the use of the wires and the scheme to defraud. Consequently, courts asks two questions when dealing with this problem: (1) Did the use of the wire somehow help the scheme succeed or move forward?’ and (2) Did the defendant intend this to happen? If the answer is yes to both questions, then the use of the wires is in furtherance of the scheme to defraud.
C. Interstate Commerce.
The mail and wire fraud statutes are almost identical. In fact, they have almost the same key elements. And they carry the exact same penalties. But they differ in one important way.
In a wire fraud case, the government must prove the wire traveled in interstate commerce. In contrast, the government does not need to show this in a mail fraud case. This is because Congress passed the wire fraud law using its power under the Commerce Clause. On the other hand, Congress passed the mail fraud law using its power to create post offices and post roads.
However, the interstate commerce issue is almost never a problem for the government. This is because the most common ways to commit wire fraud involve emails, the internet, and telephones. These three types of wires almost certainly affect interstate commerce. Nonetheless, it important never to overlook this issue in the off chance it becomes a problem for the government.
What does specific intent to defraud mean?
Specific intent to defraud means a conscious, knowing intent to deceive or cheat someone. But it is also a difficult element to prove. For this reason, courts give the government and defense lots of leeway in showing the person either had or did not have specific intent to defraud. This includes allowing the defense to put on proof that he acted in good faith. We will discuss the good faith defense below.
But at the same time, some statements are not fraud. This includes “puffing.” Puffing happens when a seller gives a buyer his opinion of the good or service. Puffing includes statements like:
- “This is the best vacuum cleaner on the market.”
- “Our cellphone camera takes top-rated pictures.”
- “We have the cleanest motels in Texas.”
- “I’m the best criminal lawyer in town.”
These statements are opinions. They are not made with intent to defraud. As a result, these types of statements are not crimes.
What is the good faith defense?
Good faith is a defense in mail and wire fraud cases. It allows the defense to show that he did not act with specific intent to defraud. This can happen when the person makes a false statement that he believes is true. If this is the case, then the person is not acting with specific intent to defraud.
Of major interest, good faith is a complete defense to both mail and wire fraud charges:
In mail fraud cases often the only available defense is that of good faith. In the typical case, the accused is not in position usually to refute that the representations made were false. The accused can then only defend on the ground that the representations were made in good faith and without intent to defraud. Courts have come to recognize that in our high pressure economy, puffing of merchandise and services to the legal limit is commonplace.
United States v. Diamond, 430 F.2d 688, 692 (5th Cir. 1970).
Good faith can also apply when the person relies on advice from a lawyer or CPA. To illustrate, if a person relies on the advice of a professional when he files his tax returns or applies for a bank loan, then he can use this fact to show he was acting in good faith with no intent to defraud.
What are the penalties for Wire Fraud?
| Wire Fraud Penalty. | Jail Time. | Fine Amount. | Asset Forfeiture. | Statute of Limitations. |
|---|---|---|---|---|
| Does not involve a bank. | 0-20 years. | $0.00 to $250,000.00. | Yes. | 5 years. |
| Involves a bank. | 0-30 years. | $0.00 to $1,000.000.00. | Yes. | 10 years. |
If the scheme to defraud did not affect a bank, then the jail time is between 0-20 years in prison.
On the other hand, if the scheme to defraud affected a bank, then the jail time is between 0-30 years in prison.
Finally, the government must file the charges within 5 years if the fraud did not affect a bank. Or within 10 years if it affected a bank. It the government files the charges outside of these time frames, then the person can raise a statute of limitations defense.
White Collar Defense.
The wire fraud law is an unusual crime. Like the mail fraud law, it turns state fraud crimes into federal offenses if the person uses a wire during the scheme. This gives the government a powerful tool to use against suspected conmen and scammers.
But someone charged with wire fraud (or mail fraud) should ask the following questions:
- What is the scheme to defraud the government is saying I did?
- Who is the victim?
- What statements, letters, text messages, or emails did the victim receive or rely on during the scheme to defraud?
- How is the use of the wire connected to the scheme to defraud? and
- What were the facts and circumstances of the scheme to defraud?
The answers to these questions will paint the outlines of your defense. Most important of all, they will help you figure out if you can raise a good-faith defense.
Attorney Genaro R. Cortez.
Phone: 210-733-7575