18 U.S.C. § 1343 · C relations

fact · supports Counts 5-10 each also allege a specific wire communication transmitted or caused to be transmitted by defendant in furtherance of that scheme.

fact · cuts-against The specific nature of the five alleged wire communications is not material to the analysis called for by defendant’s motion

fact · supports The Indictment alleges that beginning in or about January 2001, defendant used his office to advance the business interests of various individuals and corporations in return for money and other things of value paid either directly to defendant or via ‘nominee companies,’ ie., companies ostensibly controlled by one of defendant’s family members, but in fact controlled by defendant himself.

fact · supports In this case, Counts 5-10 allege that this defendant devised a scheme to deprive others of defendant’s honest services “by knowingly and corruptly demanding, seeking, receiving, accepting, and agreeing to receive and accept things of value” — in other words, by soliciting or receiving bribes.

rule It follows that an indictment will sufficiently charge a violation of the honest services wire fraud statute where it alleges that a defendant devised a scheme to solicit or receive bribes and transmitted a wire communication in furtherance of that scheme.

held Accordingly, Counts 5-10 sufficiently allege a violation of the honest services wire fraud statute.

fact · supports The Indictment further alleges that defendant failed to disclose the existence of his interest when performing the official acts for which he had solicited and received bribes.

fact · cuts-against As defendant notes, the honest services fraud allegations contained in Counts 5-10, and referenced in Counts 1, 2, and 16, explicitly frame the alleged deprivation of honest services as a consequence of defendant’s alleged solicitation and receipt of bribes.

rule It follows that an indictment will sufficiently charge a violation of the honest services wire fraud statute where it alleges that the defendant intentionally failed to disclose the existence of a direct interest in a matter on which he is “passing.”

rule Mandel is more accurately read to recognize honest services fraud predicated on a conflict of interest with regard to an official’s official acts, including those affecting decisions that may be beyond the official’s own decision-making authority.

held Counts 5-10 adequately allege the statutory elements of an honest services fraud offense, and the government is entitled to pursue a theory of the offense at trial that is predicated on alleged conflicts of interest in defendant’s performance of official duties.

fact · supports Here, the evidence produced at trial directly supported the government’s allegation that defendant attempted to defraud Tish-man by bribing someone defendant thought was a consultant to Tishman.

fact · cuts-against If the intended victim has no actual right to the employee’s honest services, the defendant’s scheme cannot be said to actually harm the victim by depriving the victim of those honest services.

rule Yet, as noted in Part II of this Opinion, § 1343 does not require a defendant to have actually defrauded the intended victim, or that a defendant’s scheme was capable of doing so.

rule The essence of the wire fraud act is the defendant’s intent to defraud, and the scheme he perpetrates in furtherance of that intent, and not the actual corruption of an employee.

fact · supports defendant concealed his agreement with the undercover officer from Tishman

rule However, the government must establish that “some actual harm or injury was contemplated by the schemer.”

held Thus, the government has established that defendant intended to defraud Tishman of the honest services of its consultant.

fact · cuts-against At the beginning of the November 21,1995 telephone call, the undercover officer informed defendant that he had already made a favorable recommendation to Tishman.

fact · supports Defendant also intended to pay the undercover officer a bribe for his participation in defendant’s scheme.

fact · supports Defendant concedes that the November 21, 1995 telephone conversation between defendant and the undercover officer touched on how defendant would structure the bribe payments to avoid creating the appearance of a conflict of interest.

rule As the bribe was an integral part of defendant’s scheme, any conversation between defendant and the undercover officer regarding how the bribe would be made were “in furtherance” of the defendant’s overall scheme.

held A judgment of acquittal with regard to Count Two is not warranted on the ground that the November 21 telephone call was not “in furtherance” of defendant’s scheme.

fact · supports The evidence at trial showed that defendant agreed to pay a $1.25 million bribe to an undercover officer (who defendant believed to be a consultant of Tishman) to induce Tishman to participate in a construction project, and that defendant concealed his agreement with the undercover officer from Tishman.

fact · cuts-against It may be true, as defendant asserts, that no person has yet been prosecuted under the wire fraud statute for attempting to bribe someone who was actually an undercover officer rather than the intended victim’s employee.

rule The statute does not expressly limit culpability to cases involving schemes to deprive another of, “honest services of a fiduciary.”

rule There is simply no indication from the text of §§ 1343 and 1346 that a necessary element of wire fraud is the existence of an actual fiduciary duty.

held Accordingly, the government’s proof satisfies every essential element of wire fraud under §§ 1343 and 1346.

fact · supports There was also ample testimony regarding the special training and equipment required to evaluate the physical qualities of fíne gems and jewelry from which the jury could reasonably conclude that the misrepresentations were not easily verifiable by the person of ordinary prudence.

fact · supports Furthermore, Hasson prepared false appraisals and arranged for false appraisals prepared by co-conspirator posing as an independent appraiser, creating the impression that his representations were independently verified and making it unlikely that a person of ordinary prudence would invest the time and expense to obtain second or third evaluations of the items purchased.

fact · supports The con included paying co-conspirators to play the roles of the Sultan’s nephew and the nephew’s entourage at a meeting between Johnson and the “nephew” held on Hasson’s private jet, disguised as the nephew’s jet, in late 1995, and at a similar meeting held in a limousine at the Palm Beach airport in late 1996.

rule That is, not all misrepresentations or omissions constitute a scheme, to defraud; the misrepresentation or omission must be material and it must be one on which a person of ordinary prudence would rely.

rule Puffery, for example, is not part of a scheme to defraud because a person of ordinary prudence would not rely on it; nor would a person of ordinary prudence engaged in an arm’s-length purchase rely on the seller’s representations regarding the market value of the property when the market value can be, and should be, easily verified by consulting other sources.

held Has-son’s conduct simply cannot be analogized to the mere misrepresentation of accessible market values which, as we held in Brown, could not be reasonably calculated to induce purchase by a person of ordinary prudence.

fact · supports The government established that Hasson repeatedly misrepresented the carat weight, color grading, and clarity grading of gems; misrepresented semi-precious gems, synthetic gems, or simulants as natural gems and diamonds; misrepresented stones that had been color- or clarity-treated as natural stones; and misrepresented the history or provenance of items sold.

fact · supports In sales to Aben and Joan Johnson, Hasson misrepresented the type of gems or stones in 314 items and the history and provenance of at least 80 items and gems.

rule A material misrepresentation is one having a natural tendency to influence, or capable of influencing, the decision maker to whom it is addressed.

held The record in this case is replete with evidence of material misrepresentations regarding the physical and objective characteristics of the gems and jewelry sold.

fact · supports The interstate wires which were the subject of the substantive counts were three wire transfers made by Aben Johnson, the principal victim of the scheme, from his Michigan bank account to Hasson’s Florida bank account.

fact · supports Mr. and Mrs. Johnson maintained homes in both Florida and Michigan during the time when they purchased gems and jewelry from Hasson and, as was clear from many of the checks written by the Johnsons, maintained out-of-state bank accounts.

rule To “cause” the interstate wires to be used, the use of the wires need not be actually intended; it need only be reasonably foreseeable.

held It was foreseeable that these customers would at some point make use of the interstate wires to transfer large sums of money to complete some of their many expensive purchases.

fact · supports The March 6, 1995, wire transfer was for the purchase of two items, one of which was represented to the Johnsons as a diamond ring featuring a flawless 22.11-carat diamond with a color grade of D.

fact · supports This ring in fact featured an 11.37-carat diamond with a clarity grade VS2 and a color grade L to M.

fact · supports These representations were supported with an appraisal prepared by a co-conspirator and provided by Hasson.

rule An interstate wire transmission is “for the purpose of executing” the scheme to defraud if it is “incident to an essential part of the scheme” or “a step in the plot.”

held This wire transfer was an interstate transmission over the wires caused for the purpose of executing the scheme to defraud.

fact · cuts-against the government introduced no evidence that the physical and objective characteristics of these two pieces of jewelry were misrepresented

fact · supports Hasson later induced the Johnsons to repurchase these two pieces, falsely representing that a potential buyer of the Johnsons’ gem and jewelry collection, the Sultan of Brunei, was interested in completing this very substantial purchase only if these items were included in the transaction.

fact · supports Hasson specifically represented that the Sultan wanted these two pieces of jewelry included in the Johnsons’ collection because they had been stolen from the Sultan’s mother.

rule To violate the wire fraud statute, it is not necessary that the transmitted information include any misrepresentation.

held We readily conclude that the use of the wires to make payment for the two pieces of jewelry whose purchase was fraudulently induced was “for the purpose of executing” the scheme to defraud.

fact · supports They employed Hilts and others to drive the liquor over the Canadian border, without paying the required excise taxes.

fact · supports The drivers avoided paying taxes by hiding the liquor in their vehicles and failing to declare the goods to Canadian customs officials.

fact · supports The evidence showed that petitioners routinely concealed imported liquor from Canadian officials and failed to declare those goods on customs forms.

rule Their offense was complete the moment they executed the scheme inside the United States; “[t]he wire fraud statute punishes the scheme, not its success.”

held This, then, was a scheme “designed to defraud by representations,” Durland v. United States, 161 U. S. 306, 313 (1896), and therefore a “scheme or artifice to defraud” Canada of taxes due on the smuggled goods.

fact · supports Uncontested evidence at trial showed that Canadian taxes then due on alcohol purchased in the United States and transported to Canada were approximately double the liquor’s purchase. price.

fact · supports Had petitioners complied with this legal obligation, they would have paid money to Canada.

fact · supports Here, by contrast, the Government alleged and proved that petitioners’ scheme aimed at depriving Canada of money to which it was entitled by law.

rule Valuable entitlements like these are “property” as that term ordinarily is employed.

rule The right to be paid money has long been thought to be a species of property.

held Taking the latter element first, Canada’s right to uncollected excise taxes on the liquor petitioners imported into Canada is “property” in its hands.

fact · supports According to the evidence presented at trial, the Pasquantinos, while in New York, ordered liquor over the telephone from discount package stores in Maryland.

rule Unlike the treaties and the antismuggling statute, the wire fraud statute punishes fraudulent use of domestic wires, whether or not such conduct constitutes smuggling, occurs aboard a vessel, or evades foreign taxes.

held Petitioners used U. S. interstate wires to execute a scheme to defraud a foreign sovereign of tax revenue.

fact · supports Accordingly, as part of the bidding process, Kousisis represented that Alpha would acquire ap- proximately $6.4 million in painting supplies from Markias, Inc., a prequalifed disadvantaged business.

fact · supports In short, Markias was no more than a paper pusher, funneling checks and invoices to and from Alpha's actual suppliers.

fact · supports As the proj- ects progressed, he falsely reported qualifying payments to Markias.

rule Rather, the theory criminalizes a particular species of fraud: intention- ally lying to induce a victim into a transaction that will cost her money or property.

held By using Markias as a pass-through entity, petitioners “devised” a “scheme” to ob- tain contracts through feigned compliance with PennDOT's disadvantaged-business requirement.

held A conviction premised on a fraudulent inducement thus com- ports with § 1343.

fact · supports PennDOT, satisfed with Alpha's paint and repair work, paid it accordingly. By the time the last coat of paint had dried, Alpha had turned a gross proft of over $20 mil- lion.

fact · supports Their goal? To “obtai[n] money” (tens of millions of dollars) from Penn- DOT.

fact · cuts-against Alpha and Kousisis moved for a judgment of acquittal, arguing that because their paintwork met PennDOT's expectations, PennDOT had received the full economic beneft of its bargain.

fact · supports Nothing suggests that they concocted their scheme with the goal of thwarting Penn- DOT's disadvantaged-business initiative.

rule Obtaining the victim's money or property must have been the “aim,” not an “incidental byproduct,” of the defendant's fraud.

rule In short, the wire fraud statute is agnostic about economic loss. The statute does not so much as mention loss, let alone require it.

held But if, as here, the fraudster seeks to induce the Gov- ernment into a transfer of its money or property, that loss is suffcient to sustain a fraud conviction.

fact · supports Failing to comply with this requirement would consti- tute “a material breach” and could “result in [contract] termi- nation.”

rule For now, it is enough to reiterate “that materiality of falsehood is an element of ”— and thus a limit on—the federal fraud statutes.

held We need not settle the debate here, however, because Alpha and Kousisis have not contested that their misrepresentations were material.