Mail and wire fraud.

AuthorFlavin, Kathleen
PositionEleventh Survey of White Collar Crime

    1. Scheme to Defraud

      1. Traditional Frauds

      2. Fraud Involving Intangible Rights

    2. Intent to Defraud

    3. Mailing In Furtherance of a Scheme

      1. Causing the Mails to be Used

      2. The "In Furtherance" Requirement III. DEFENSES IV. VENUE V. SENTENCING


    Since its enactment in 1872, the federal mail fraud statute(1) has been a powerful tool for federal prosecutors.(2) The statute provides:

    Whoever, having devised or intending to devise any scheme or artifice to

    defraud, or for obtaining money or property by means of false or fraudulent

    pretences, representations or promises . . . for the purpose of executing

    such a scheme or artifice or attempting so to do, places in any post office or

    authorized depository for mail matter, any matter or thing whatever to be sent

    or delivered by the Postal Service, or deposits or causes to be deposited any

    matter or thing whatever to be sent or delivered by any private or commercial

    interstate carrier, or takes or receives therefrom, any such matter or

    thing, or knowingly causes to be delivered by mail or such carrier according to

    the direction thereon, or at the place at which it is directed to be delivered

    by the person to whom it is addressed, any such matter or thing, . . . shall

    be fined under this title or imprisoned not more than five years or both. If

    the violation affects a financial institution, such person shall be fined not

    more than $1,000,000 or imprisoned not more than 30 years, or both.(3)

    A companion to the federal mail fraud statute, the federal wire fraud statute enacted in 1952, contains similar language(4) and prohibits fraudulent schemes that make use of interstate television, radio, or wire communications. These two statutes have been applied to "cover not only the full range of consumer frauds, stock frauds, land frauds, bank frauds, insurance frauds, and commodity frauds, but [also] . . . such areas as blackmail, counterfeiting, election fraud and bribery."(5) The mail and wire fraud statutes have also been useful in Racketeer Influenced and Corrupt Organizations Act ("RICO") and money laundering prosecutions.(6) A violation of [sections] 1341 and/or [sections] 1343 can be used as the unlawful acts necessary to establish either a RICO violation(7) or money laundering.(8) After proof of mail or wire fraud has been established, both RICO and money laundering statutes allow for more severe penalties.(9)

    When legislatures have been slow to act in particular areas, these statutes have "frequently represented the sole instrument of justice that could be wielded against the ever-innovative practitioners of deceit."(10) In 1994, responding to new innovations such as telemarketing fraud, the federal mail fraud statute was amended to cover not only the United States Postal Service, but private interstate commercial carriers (Federal Express, United Parcel Service, DHL).(11) Congress also specifically criminalized telemarketing fraud under the Senior Citizens Against Marketing Scams Act ("SCAMS").(12) The SCAMS Act of 1994 provides enhanced penalties for mail and wire fraud convictions in connection with telemarketing fraud where the scheme targeted those individuals 55 and over.(13)

    This article focuses primarily on the mail fraud statute, which has traditionally been utilized more frequently than its wire fraud Companion. However, as technology becomes more prevalent, the wire fraud statute may eventually overshadow the mail fraud statute.(14) While differences exist, the mail and wire fraud statutes are similar in their wording and court decisions addressing the character and scope of one statute are generally applicable to the other.(15) The following sections outline the elements of mail fraud, and address interpretations of and changes in the elements brought about by Supreme Court rulings and Congressional action.


    To prove mail fraud under section 1341 the government must show: (1) a scheme to defraud; (2) committed with intent to defraud; and (3) use of the United States mails or private interstate commercial carrier to further the fraudulent scheme.(16) The government iS not required to prove that the scheme to defraud was successful.(17) It need only prove that a scheme existed in which use of the mails was reasonably foreseeable and that an actual mailing occurred in furtherance of the scheme. Each use of the mails constituteS a separate offense, thus, each mailing can constitute a separate count in an indictment.(18)

    Unlike the mail fraud statute ([sections] 1341), the wire fraud statute ([sections] 1343) requires that the communication cross state lines. The interstate requirement is necessary because Congress relied on the Commerce Clause to assert jurisdiction over wire fraud. Congressional jurisdiction over the U.S. Postal Service provides the basis for the mail fraud statute.(19)

    1. Scheme to Defraud

      The element of "scheme to defraud" under sections 1341 and 1343 are identical in their wording and courts have applied the same analysis to both offenses when construing this element.(20) This section discusses the two types of frauds prosecuted under the statute: traditional frauds and frauds involving intangible rights. In 1988, Congress amended Title 18 to explicitly establish that the deprivation of intangible rights falls within the reach of the mail and wire fraud statutes.(21) Congress passed this amendment in response to the Supreme Court's ruling in McNally v. United States,(22) which had held that schemes to deprive victims of intangible rights were not reached by the statutes. At least one circuit has found that acts completed before 1988 are still governed by McNally, while acts completed after 1988 are governed by the amendment.(23) Most cases brought today involve post-McNally schemes, since the statute of limitations for mail and wire fraud prosecutions is five years.(24)

      1. Traditional Frauds

        Traditional frauds are those activities "intended to defraud individuals of money or other tangible property interests ... [and] involve calculated efforts to use misrepresentations or other deceptive practices to induce the innocent or unwary to give up some tangible interest."(25) These types of schemes involve "some sort of fraudulent misrepresentations or omissions reasonably calculated to deceive persons of ordinary prudence and comprehension."(26) Proof of actual harm to the victim or success of the scheme is not required.(27)

        Examples of traditional fraudulent schemes prosecuted under section 1341 include false insurance claims,(28) fraudulent investment schemes,(29) misrepresentations state issued licenses constitute property, due to the states' regulatory interests and the accompanying rights which are bestowed on the holders.(38) The Second, Sixth, Seventh, Eighth, and Ninth Circuits have held that licenses are not property in most instances.(39) However, the Seventh Circuit has held that a franchise is property based upon state law property rights.(40)

      2. Fraud Involving Intangible Rights

        Frauds involving deprivation of "intangible rights" may also be prosecuted under the mail and wire fraud statutes.(41) The term "intangible rights" encompasses both property and non-property rights. Unlike traditional frauds which may arise regardless of the relationship between the defendant and the victim, cases involving intangible rights are premised on the theory that a fiduciary who fails to disclose material information to her principal deprives the principal of her right to honest and faithful services.(42) In the private sector, this has led to prosecution of professionals who have defrauded clients,(43) and organization officials who have defrauded organization members.(44) The intangible rights theory has also been used in the public arena, including prosecution for voter fraud(45) and public corruption involving bribes and kickbacks.(46)

        The prevailing views hold that breach of fiduciary duty is central to the crime.47 Breaches of a fiduciary duty between employers and employees can also form the basis of a violation of the mail fraud statute.(48) The Second Circuit, however, has ruled that only those breaches constituting "concealment by a fiduciary of material information which he is under a duty to disclose to another under circumstances where the non-disclosure could or does result in harm to the other" are actionable.(49) In cases where this test is applied to convict corporate officials, the courts have often required that the fiduciary has concealed material information about the breach of his fiduciary duty from his employer, and that the fiduciary's concealment of this information was potentially harmful to the employer.(50)

        With regard to the requirement that the defrauded information harm the employer, several circuits have ruled that monetary loss is not required for conviction: the loss of economically useful information is sufficient.(51) Other courts have utilized a slightly different test that focuses on the foreseeability of the harm.(52) The inquiry is whether the employee could reasonably foresee that nondisclosure of information would cause the employer harm.(53) Although the mail fraud statute does not require actual harm to the victim,(54) the D.C. Circuit requires that the defendant must have contemplated that harm would probably result.(55)

    2. Intent to Defraud

      The second element the government must prove for a mail fraud conviction is that the defendant had specific intent to defraud.(56) Because intent involves the defendant's state of mind, and is difficult to prove directly, it is usually proven by circumstantial evidence.(57)

      A variety of circumstantial evidence has been held relevant to infer fraudulent intent. Intent may be inferred from evidence that the defendant attempted to conceal activity.(58) Intent to defraud may be inferred from the defendant's misrepresentations,(59) knowledge of a false statement,(60) as well as...

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