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| 2 minutes read

The winnowing of wire fraud

A few days after the U.S. Supreme Court in Ciminelli v. United States narrowed the scope of the wire and mail fraud statutes (link to prior post on this case), the D.C. Circuit in United States vGuertin did some narrowing of its own.  Together, these cases highlight three ways that wire-fraud prosecutions may be challenged.

The facts of Guertin are simple.  A federal employee underwent a routine security-clearance renewal. He lied during that process and was charged with wire fraud, which criminalizes schemes to defraud others of "money or property."  The government's theory was that Guertin committed fraud "when he lied in order to get the renewed security clearance necessary for his job."

The D.C. Circuit rejected this theory.  As the court saw it:  "Stripped to its core, the Government's theory is that whenever an employee lies about a specific, concrete condition of employment - here, Guertin's suitability for security clearance - the employer is defrauded of 'money or property' by paying the employee's salary.  We reject this theory."

The court reasoned that "when the employer receives the benefit of its bargain, the employee's lie merely deprives the employer of honesty as such, which cannot serve as the predicate for a wire fraud conviction."  That's the case for two reasons.  First, blessing wire fraud in this context "would create an intangible right to honest services in just the way [that Supreme Court precedent] renounces." Second, criminalizing deceits of this sort "would sweep a large swath of everyday workplace misconduct within the ambit of the federal fraud statutes" and "would give federal prosecutors carte blanche to set the standards of disclosure and honesty in employment."

Key to the court's decision was the lack of any showing "that an honest employee would have performed better or that the employer would have paid less for the dishonest employee's work."  The court observed that such a showing, combined with deceit, would "deprive the employer of the benefit of its bargain, meaningfully defrauding the employer of "money or property" when it pays the employee's salary.  In other words, the employer would then be "deprived of something more than [the employee's] honesty."

Together, Guertin and Ciminelli remind us of three limitations to which the government should adhere when charging wire or mail fraud.

First, an employee's lies that do not go to "the core employment bargain" are not actionable, even if the employer could be said to have parted with "money or property" by paying the employee his or her salary.  Though Guertin arose in an employment context, its benefit-of-the-bargain logic could apply more generally to other arrangements, contractual or otherwise.

Second, Guertin discussed - but left for another day - a separate potential limitation on wire-fraud prosecutions; namely, "the wire fraud statute requires the object of the scheme to be to 'obtain money or property,'" so an allegation that a defendant lied to "maintain" his employment or salary is insufficient.  That's the rule in the Ninth Circuit.  See United States v. Yates, 16 F.4th 256, 266 (9th Cir. 2021) ("[T]here is a difference between a scheme whose object is to obtain a new or higher salary and a scheme whose object is to deceive an employer while continuing to draw an existing salary - essentially, avoiding being fired.").

Third, the Supreme Court in Ciminelli made clear that the federal fraud statutes "criminalize only schemes to deprive people of traditional property interests."  Indeed, the Court used the word "traditional" (or its variant) more than a dozen times in its 10-page decision.  Fraud theories that seek to protect interests unconnected to traditional property rights are ripe for challenge.


fraud, regulation, regulatory & investigations