Policy Relating to Mail and Wire Fraud
The Government strongly advises that a prosecutor not undertake a fraud prosecution where the scam used consists of isolated transactions between individuals where minor loss occurs to the victims. In cases like this, the two parties should be left to settle differences and or seek reparations in civil court or through criminal litigation in state court. Instead, it is strongly advised that prosecution pursue cases where a scam was directed at defrauding a class of people, such as the general public with a substantial pattern of fraud.
Jurisdiction to investigate possible violations of mail and wire fraud statutes lies in the power of the Federal Bureau of Investigation (FBI), however, some cases warrant that the Securities and Exchange Commission investigated cases and complaints that involve securities. Additionally, wire and mail fraud investigations may be initiated by the Postal Inspection Service of the United States Postal Service. In all situations, the entity who initiates an investigation is usually the entity who continues an investigation. Once a report is completed, its results are disseminated directly to the appropriate United States Attorney.
18 U.S.C Section 1341 -- Elements of Mail Fraud
According to Section 1341, there are two elements of fraud:
Similarly, the offense for mail fraud is defined under Section 1341 as:
18 U.S.C 1343 -- Elements of Wire Fraud
Wire fraud statutes as described in Section 1343 are consistent with those in the mail fraud statute, however, wire fraud requires the use of an interstate telephone call or an electronic communication during the process of the fraudulent activity. The four essential elements of wire fraud are:
In order to prove the crime of wire fraud, the government must prove that the defendant crafted or participated in a scheme based on false pretenses, that the defendant knowingly and willfully participated in the scheme, and that he or she used interstate wire communications to further the scheme.
The Scheme of Artifice to Defraud
The wire fraud statute was written to mimic the mail fraud statute. Therefore, the same principles that define “scheme to defraud” are the same for both mail and wire fraud prosecutions.
Because Congress did not clearly define the terms “scheme” and “artifice” when creating both the mail and wire fraud statutes, the courts have been hesitant to offer specific definitions of either term. Instead, they have opted to base “scheme” and “artifice” in more general terms.
The fraudulent aspect of an intent to defraud is not restricted by any common-law definition of false pretenses and is to be measured by non-technical standards. The general term “intent to defraud” is generally defined as having the ‘common understanding of wrongdoing by dishonest methods and/or schemes’ and usually involve depriving a person or party of something of value by deception, trick, chicane, or overreaching. The concept of fraud umbrellas a number of acts, including embezzlement, which is defined as the theft or misappropriation of funds placed in one’s trust.
No Loss or Gullible Victims
According to law, it is the scheme or intent to defraud a person or party and not the fraud it itself that is required to have broken the law. No particular type of victim or success of the scam is needed, and no actual loss needs to occur. The fraud statutes specify that the law is broken with the deceit or intent to deceive. There does not have to be a victim that suffered loss in order for a prosecution to be successful. Furthermore, the amount of money collected from this fraudulent is also a nonfactor for a successful prosecution. Prosecution can occur solely with evidence supporting that there was an intent to defraud. According to the same law, it makes no difference whether the scam that defrauded a person took from someone who is gullible, skeptical, dull, or bright. The intelligence, intellect, skepticism, or gullibility is no shield for the accused.
Proof of Scheme and Artifice to Defraud
In order to sustain a conviction that an individual has committed fraud, the government must establish and prove the existence of a scheme. The government is not required, however, to prove every detail and all instances of alleged illegal conduct. Instead, the prosecution is only burdened with proving beyond a reasonable doubt that the defendant willingly and knowingly devised or participated in a scheme to defraud others.
McNally and Intangible Rights
In McNally v. United States, 483 U.S 350 (1987)the Supreme Court ruled that the mail fraud statute in place does not reach “schemes to defraud citizens of their intangible rights to honest and impartial government" and that the statute is limited in its scope to the protection of property rights. In response to this ruling, Congress passed Section 1346 of Title 18, which included the term “scheme or artifice to defraud”. With this addition, which became effective on November 18, 1988, a scheme or artifice to deprive another of the intangible right of honest services.
Tangible vs. Intangible Property Rights
The Supreme Court found that the intangible nature of the term “confidential business information” does not make it any less “property” protected by the wire and mail fraud statutes. The Court made sure to distinguish intangible property rights, which were still protected from the in-place mail and wire fraud statutes and separates them from intangible non-property rights which would not be protected under these statutes. The Court found that although a scheme to defraud an individual must threaten some sort of harm to its target. This harm does not need to be a deprivation of tangible property or money but can include the fraud or intent to defraud one out of intangible items as well. Though it was found that union ballots are considered tangible property, a fair bidding opportunity is not. Additionally, the government's regulatory interests are not protected by the mail fraud statute due to concerns involving licenses and permits.
How does one determine whether there is an interest in a property?
A shareholder’s property rights are defined by the law of fraud, along with state law. In order to determine whether or not an interest in a property violates or is in line with fraud statutes, look to see if the law has traditionally recognized and enforced it as a property right.
Intent to Defraud
In order to prove an intent to defraud, the government is burdened with proving that the defendant had the specific intent to defraud an individual or a party. This means that no actual proof of fraud is required, only proof beyond a reasonable doubt that the defendant had the intent, which is essential for conviction. It's important to note that specific intent requires intent to defraud, and not just the intent to violate the statute. Proof that someone was defrauded or taken advantage of is not necessary in an ‘intent to defraud’ case because an intent case only requires proof of the intent and will participation, not the damage to the victim.
Proof of Fraudulent Intent
The requisite ‘intent’, according to federal mail and wire fraud statutes, may be inferred through the circumstances of the situation and does not require any direct evidence. Because of this fact, intent can be proven or inferred through statements and conduct rather than actual proof. Also admissible in court is impression testimony. This is testimony from victims that takes their account of how they were misled by the defendant. This type of testimony is admissible in court to show an intent to defraud. Complaint letters received by the defendant are also admissible pieces of evidence to show his or her intent to defraud. This can infer that since the defendant knew that individuals were being misled and still continued to solicit literature and other false representations that continued the fraudulent activity. Fraudulent intent can also be proven if the defendant represents him or herself with reckless indifference of whether or not the claims that he or she made are true or false.
Fraudulent intent can also be inferred from the ‘modus operandi’ of a scheme, which means the particular method or characteristic that the scheme was carried out. The purpose of this scheme must be to cause injury. Proof that the defendant actually defrauded a victim is also good evidence of a defendant's intent. A defendant’s scheme does not need to be a success or even complete to prove intent. Therefore, no one needs to have actually been injured by the scheme. The government must, however, show that some form of injury or harm was contemplated by the defendant. This can be proven by providing evidence of intent to deceive to accomplish a mail or wire fraud statute violation.
Use of Mailings and Wires in Furtherance of the Execution of a Scheme
The federal mail fraud statute currently in place does
not support all types of fraud, only those limited to instances where the use of mail is part of the execution. All other cases are to be handled through state law. Mail fraud demands proof of a
scheme or plan to defraud, which at some point, mail is used as a means of executing the fraud. A mail fraud statute violation can be proven as long as the intent to use mail as an essential part of
the scheme can be proven.
For conviction under a mail fraud statute, the mail system must be used for the purpose of executing or furthering a scheme. Conviction may not occur under the mail fraud statute if mail was used as a result of a scheme. These same rules, necessities, and standards apply to wire fraud cases since the two statues are parallel to one another.
Also, it is not necessary for a prosecutor to show that the defendant directly participated in an instance where it is established that the defendant caused the transmission and that such was a foreseeable act. When mail and wire fraud statutes have both been violated, the violation of each violation constitutes a separate offense.
Proof of Mailings and Transmissions
The mailing or wire communication committed by the defendant may be proven by circumstantial evidence. To constitute a violation, it is not necessary to prove that a defendant actually mailed something themselves. To prove a violation, it is sufficient to show that the defendant caused a mailing to occur for the purpose of executing a scheme. As long as the government proves that the defendant caused the mail fraud to occur by acting with knowledge that the use of mail would contribute to fraudulent activity.
The elements of mail fraud can also be satisfied if these mailings are routine. Mailings that led to the uncovering of the fraudulent scheme may also supply the mailing element of the mail fraud offense.
Use of Private or Commercial Interstate Carriers
In the fight against telemarketing fraud, Congress amended the mail fraud statute to broaden its application. The new amendment included private and commercial interstate carriers in addition to the United States Postal Service.
What is an Interstate Carrier?
An interstate carrier is a large delivery service company, such as Federal Express (FedEx) and United Parcel Service (UPS). Smaller carriers like local courier and messenger services are harder to categorize.
Use of a Wire Communication in Interstate or Foreign Commerce
The mail fraud statute requires a transmission in interstate or foreign commerce. Intrastate transmissions do not justify an offense.
What is the definition of Foreign Commerce?
The term foreign commerce is defined as including commerce with another country.
Lulling Letters, Telegrams, and Telephone Calls
It is a well-established principle of fraud statutes that the use of mail after money has been obtained may be for the purpose of executing the fraud. This proposition was taken into consideration by the Supreme Court where a salesman fraudulently obtained applications and advance payments from businessmen and then mailed such funds to the victims to lead them to believe that services would be performed. These post-purchase mailings/wire transmission that are designed to “lull” or entice a victim into a false sense of security, postpone inquiries or complaints or make a transaction less suspect are violations to the statute.
Expanding Uses of the Mail and Wire Fraud Statutes in Prosecutions
The mail and wire fraud statutes are becoming important grounds for prosecutions of
RICO violations, money laundering, financial institution fraud, and telemarketing fraud. Mail and wire fraud violations that support prosecutions under these justifications can result in more severe penalties and can form the basis for civil or criminal forfeiture.
Rico Prosecutions -- 18 U.S.C. §§ 1961-68
Although not initially used, federal prosecutors now use RICO expansively and it is used against many types of crime, including white-collar crimes. If the other necessary elements of a RICO violation can be established, a defendant who has committed the acts of mail or wire fire may be subject to harsher penalties.
Money Laundering - 18 U.S.C. §§ 1956 & 1957
The Anti-Drug Abuse Act of 1986 created the offense of money laundering. A conviction for money laundering may result in a much more severe sentence than a conviction that would otherwise be based solely upon mail or wire fraud.
Fraud Affecting a Financial Institution
In the fight against financial institution fraud, Congress enacted the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), which amended previous laws if the offense affects a financial institution.
What is the meaning of the phrase "affects a financial institution?"
A financial institution is a company that handles financial and monetary transactions such as deposits, loans, investments and currency exchanges.
Ten Year Statute of Limitations
18 U.S.C. § 3293(2) provides for a ten-year statute of limitations for a violation, or a conspiracy to violate the mail and wire fraud statutes if the violation affects a financial institution. This ten-year limitation also applies to offenses committed prior to the enactment of FIRREA.
More Severe Sanctions, Including Forfeiture
The maximum fine and imprisonment for violating the mail and wire fraud statutes were increased to $1,000,000 and 20 years for violations that affected financial institutions. Additionally, FIRREA directed the United States Sentencing Commission to provide guidelines that ensure that any violation or conspiracy to violate mail or wire fraud statutes that jeopardize the safety and soundness of a federally insured financial institution would be subject to a substantial period of incarceration.
Civil Actions for Mail and Wire Frauds and Use of Grand Jury Information
FIRREA also makes room for civil actions by the Attorney General for violating the mail or wire fraud statutes that affected a financial institution. Additionally, FIRREA permits the disclosure of grand jury information to other government attorneys for the use of enforcing the civil penalty and the civil forfeiture provisions of FIRREA.
Criminal Penalties for Disclosure of Grand Jury Subpoenas
FIRREA further provides criminal penalties for the disclosure of grand jury subpoenas for customer records that have been served.
The Senior Citizens Against Marketing Scams Act of 1994 provides increased penalties for persons convicted of mail or wire fraud in connection with the conduct of telemarketing. This is specified as an additional five-year imprisonment or an additional ten years if the offense was committed against ten or more persons over the age of 55.
Credit Card Frauds
Mail fraud prosecutions that involve credit cards are limited to instances that involve obtaining the information of a credit card, or a dishonest merchant who knows that the use of the card is unauthorized.
Conspiracy to Violate the mail or Wire Fraud Statutes
When a scheme defraud is shared by two or more individuals, it graduates to conspiracy to defraud. The essential factors for a conspiracy to commit mail or wire fraud are:
With any other conspiracy, it is sufficient that the defendant knowingly participated in the conspiracy in which the mail or wire fraud was a foreseeable act in the conspiracy.
Defenses - Good Faith
Good faith is recognized as a defense to a mail or wire fraud charge. Acting on good faith means that the defendant is claiming that he or she acted or took actions believing that both parties were dealing with one another honestly and fairly.
Sufficiency of Indictment
Generally, Rule 7(c)(1) of the Federal Rules of Criminal Procedure requires indictments to provide a “plain, concise, and definite written statement of the essential facts that constitute the offense charged”. According to the Supreme Court, an indictment is sufficient if it contains the elements of the offense charged does a fair job at informing the defendant of such charges that he or she must defend. In addition, this indictment must allow the defendant to enter a plea without fear of double jeopardy, or the fear of being prosecuted twice for the same offense. Indictments are measured by guidelines. First, an indictment must, by itself, contain the elements in which the defendant will be charged and it must be sufficient to inform the accused of the nature of the offense. Second, the record of the case must be sufficient after the conviction so that the accused can plead the judgment in bar of any subsequent prosecution of for the same offense.
For example, in one particular case, the court found that the indictment was defective in that it did not provide the defendant with sufficient notice of the charge against him. In another case, the court stated that mere evidential matters or detail appropriate in bills of particular do not need to be pleaded in an indictment based on Section 1341.
Victims and Loss
In an indictment, victims do not need to be identified by name. Additionally, indictments that contain mail fraud do not need to allege actual monetary or economic loss to any type of insurance company. Because a mail fraud indictment punishes the scheme to defraud, the success of the fraud, actual defrauding of a person or entity, and the names of any victims is not necessary for successful prosecution.
Mailings or Transmissions in Furtherance of a Scheme
To support a scheme an indictment, the government is not charged with the task of providing evidentiary facts that support an ‘in furtherance’ element of the crime charged. Furthermore, an indictment that is based on charges of mail fraud that alleges that mail was used in furtherance of the scheme should not be dismissed as insufficient unless there is no evidence that the Government can produce at trial to support an ‘in furtherance” allegation. Instead, the courts found the following concerns with an “in furtherance” allegation:
The concern is not whether an indictment alleges sufficient facts from which a jury could find that the alleged mailings were in furtherance of a scheme, but rather whether the Government could produce evidence at trial that shows that the alleged mailings were for the purpose of executing a scheme.
The question of whether or not the alleged mailings were in furtherance of the scheme must be settled at trial unless it convincingly appears on the face of the indictment that as a matter of law, waiting to trial is unnecessary.
Each mailing or wire transmission in furtherance of a scheme and any other clever or cunning devices used to further a scheme is considered a separate offense. Because of this fact, proper drafting of a charge requires that only one mailing or transmission should be alleged for each count.
Accordingly, proper draftsmanship requires that only one mailing or transmission should be alleged in each count. Otherwise, the count may be duplicitous. Because descriptions of a scheme are often very descriptive and lengthy, these descriptions should be set out in full in one individual count and be incorporated into another count with a suitable or reasonable reference in pursuit of Rule 7(c), Federal Rules of Criminal Procedure.
It is important that the proper method is followed for the charging of the violation of a mail statute. If a letter is mailed from one district to the next, it is important to charge a taking from the mail or delivery according to the direction thereon instead of placing the charge in the mail. Additionally, charge a placing in the mail in the district of an indictment of a letter addressed to someone outside that district.
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