WIRE FRAUD

Issues

Ideal Steel Supply Corporation and National Steel Supply Inc. were competitors for many years in the New York area, with facilities in Queens and later the Bronx. They each sold steel mill products and other hardware, and the owners were even related by marriage. As Ideal Steel’s sales in the Bronx dropped and National Steel’s increased, despite both companies charging the same price for their product, Ideal Steel became suspicious. In particular, Ideal Steel was concerned about National Steel’s “cash, no tax” policy, in which customers of National Steel that paid with cash did not have to pay the sales tax required by New York State. Ideal Steel filed a civil suit in federal district court alleging that the “cash, no tax” policy constituted racketeering under the Racketeer Influenced and Corrupt Organizations Act, in that the failure to charge state sales tax and the filing of false sales tax returns was a pattern of mail and wire fraud intended to give National Steel an unfair competitive advantage over Ideal Steel. The district court dismissed Ideal Steel’s claim, ruling that Ideal Steel failed to allege that there was a sufficient connection between National Steel’s alleged illegal conduct and the harm to its business or lost profits. The Court of Appeals for the Second Circuit reversed and ordered that the suit should proceed, ruling that it was sufficient for Ideal Steel to prove that New York State relied on National Steel’s fraudulent conduct, which allowed the scheme to continue, and ultimately led to the harms alleged. The United States Supreme Court must now examine the Racketeer Influenced and Corrupt Organizations Act and determine whether a company such as Ideal Steel is injured by such violations where the company is not directly defrauded and did not rely on the illegal acts.  

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Issues

This case asks the Supreme Court to decide whether the “right to control” theory of fraud creates a cause of action under the federal wire fraud statute. Under the “right to control” theory, the federal wire fraud statute may be used to punish schemes which intend to deprive a victim of valuable information regarding an economic decision. Ciminelli claims that the “right to control” theory improperly expands rights considered in the fraud statutes and improperly eases the government’s burden of proof. United States maintains that the “right to control” is properly limited to specifically target information deprivation schemes with tangible economic harms and that Ciminelli’s conviction holds even without the “right to control” theory. This case has significant implications for the construction industry, concerns of overcriminalization, and the limit of federal jurisdiction.

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In 2010, two public officials, Bridget Anne Kelly and William E. Baroni, Jr., reallocated two toll lanes on the George Washington Bridge’s upper level to punish Fort Lee’s mayor for refusing to endorse then-New Jersey governor Chris Christie’s re-election campaign. Despite disguising this corrupt act as a traffic study, Kelly and Baroni were indicted for and convicted of wire fraud, defrauding a federally funded entity, and conspiracy to defraud. Petitioner Kelly and Respondent Baroni now argue that the Port Authority was never deprived of a legally-protected property right and that fraud cannot have occurred because the alleged victim received exactly what was bargained for, even though the public officials lied about their true intentions. Respondent United States contends that the Port Authority was deprived of a property right because Kelly and Baroni’s traffic-study lie encumbered the Port Authority’s exclusive free use of the George Washington Bridge and because neither Kelly nor Baroni had the authority to make such drastic changes. The outcome of this case has implications on future politics and whether political corruption should be prosecuted as a federal crime.

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This case asks the Court to determine whether a private contractor’s fraudulent misrepresentation to a government agency regarding the contractor’s subcontracting duties causes harm sufficient for a conviction of wire fraud under 18 U.S.C. § 1343. Kousisis argues that the fraudulent-inducement theory that formed the basis for his conviction expands the notion of a property interest beyond the language of § 1343. Kousisis claims that expansion would convert all purposeful breaches of contract into federal crimes with harsh sentences, increasing the size of the federal prison population. The United States argues that the fraudulent-inducement theory fits within the statute and the Court’s precedent. In any event, the United States claims that the government agency overspent on the project because of Kousisis’s misrepresentations, and the government has an interest in protecting against such harms.  The United States asserts that overcriminalization is not an issue, and that contractors should not escape prosecution for misrepresentations to obtain government contracts.

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This case asks the Supreme Court to determine the scope of the “exceeds authorized access” clause of the Consumer Fraud and Abuse Act (“CFAA”). A person violates the CFAA when the person “accesses a computer without authorization or exceeds authorized access, and thereby obtains information” from the computer. Petitioner Van Buren was a policeman who was authorized to access a law enforcement database. For reasons unrelated to his job, he used that access to search a license plate for financial gain. Respondent United States contends that when Van Buren accessed the database for a reason unrelated to his job, he exceeded his authorized access and violated the CFAA. Van Buren argues that he did not exceed his authorized access because the “exceeds authorized access” provision does not punish individuals who misuse information they are otherwise authorized to access. The outcome of this case will have broad implications on how employers protect sensitive data and how prosecutors can pursue hacking and computer fraud. 

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