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| 2 minutes read

The de-internationalization of wire fraud?

Imagine a non-U.S. person who devises an allegedly fraudulent foreign investment program in a foreign land.  The only connection to the United States is this: The foreign person sends one email to one investor in the United States; the email itself is truthful -- say, for example, that it merely confirms receipt of the investor's funds.

Premised solely on the lone email (or wire) to the investor in the United States, may the U.S. Department of Justice charge this foreign person with wire fraud?

The first question in the analysis is whether the wire-fraud statute applies extraterritorially.  There is a presumption against extraterritorial application; after all, "international discord . . . can result when U.S. law is applied to conduct in foreign countries."  RJR Nabisco, Inc. v. Eur. Cmty., 579 U.S. 325, 335-36 (2016).  To rebut that presumption, courts examine "whether the statute gives a clear, affirmative indication that it applies extraterritorially."  Id. at 337.  Here, the question, then, is whether the wire-fraud statute, 18 U.S.C. ยง 1343, clearly and affirmatively indicates that it applies internationally.  The statute's definition of the offense does refer to the use of a wire "in interstate or foreign commerce."  Is that (and any other statutory evidence) a sufficiently clear indication that defeats the presumption against extraterritoriality?

If the answer is no, then the second question is "whether the case involves a domestic application of the statute."  RJR Nabisco, 579 U.S. at 337.  Under our imaginary scenario, the question reduces to this: Is the mere use of a lone domestic wire enough to constitute a domestic application of the wire-fraud statute, or is more appreciable domestic conduct needed where, as here, the asserted fraud scheme is otherwise entirely foreign in nature?

Based on a new cert petition before the U.S. Supreme Court, the circuits are divided over both questions.  See Elbaz v. United States, No. 22-1055.  According to the petition, the Third Circuit has held that the wire-fraud statute applies extraterritorially, while the Second, Fourth, and Eleventh Circuits have held to the contrary.  On the second question, the petitioner argues that the Fourth and Ninth Circuits have concluded that the wire-fraud statute may "be applied to foreign conduct by foreign actors as part of a foreign scheme so long as the scheme involves an incidental domestic wire transmission," whereas the First and Second Circuits have concluded that the scheme must "involve substantial domestic conduct, such as the use of domestic wires as an essential component of the fraudulent scheme."

In recent weeks, the Supreme Court and D.C. Circuit have narrowed the scope of the wire-fraud statute -- DOJ's bread-and-butter white-collar fraud charge.  Whether the Supreme Court will grant cert and narrow the statute even further remains to be seen.  In the meantime, litigants would do well to preserve extraterritoriality issues in wire-fraud cases, even (or especially) in circuits with adverse authority.  The Supreme Court may very well point up the principle that "United States law governs domestically but does not rule the world."  Kiobel v. Royal Dutch Petrol. Co., 569 U.S. 108, 115 (2013).

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regulatory & investigations