Federal Wire Fraud charges under 18 U.S.C. Section 1343.

Wire fraud is one of the most frequently prosecuted white collar crimes in federal court. It is often applied by prosecutors to cases of embezzlement or cases involving internet scams, but it may also be applied to cases involving credit card fraud, identity theft, email crimes like “phishing” or hacking, tax fraud, securities fraud, money laundering, or immigration fraud.

What is wire fraud?

The federal wire fraud statute is 18 U.S.C. § 1343. To convict on wire fraud charges, the government must prove beyond a reasonable doubt that the accused person intentionally used some kind of electronic communication, such as a phone or email, for the purpose of committing fraud.  The specific definition of wire fraud is established by its legal elements.  These are:

• Scheme to defraud.  This element requires the prosecution to prove that there was a scheme or plan to cheat somebody of money or something else that has value.
• The scheme involved false representations that were material.  The prosecution has to prove that false statements were made.  This can also include half-truths.  But these false statements also have to be “material,” which means they have to be capable of influencing somebody. 
• Intent to defraud.  This requires the prosecution to prove that the false statements were made with the purpose to deceive, and not for some other purpose. 
• Wire transmission in interstate or foreign commerce.  This requires the prosecution to prove the accused person’s use of an interstate wire—which would include internet, but could be any other wire transmission like radio, television, or a phone call.  Because federal prosecutors do not have jurisdiction to prosecute state crimes, this establishes the interstate element that gives them jurisdiction over these offenses.  Note that every wire communication can be a separate count.

Notably, a person can still be charged with wire fraud even if they are unsuccessful in taking, stealing, or defrauding any money from any victims. It is the scheme itself, combined with the fraudulent communications, that suffices. Most of the time, individuals are charged collectively as part of a cooperating conspiracy.

Who Investigates Wire Fraud?

Federal wire fraud charges are typically investigated by federal law enforcement agencies such as the FBI.  In some cases, multiple agencies stage a joint investigation. Homeland Security, the IRS, the Secret Service, the Postal Service, and several other agencies could potentially be involved, as well. In conjunction with federal prosecutors, agents from these agencies may obtain search warrants, subpoenas, and wiretaps (surveillance) to investigate these cases.

Defenses to Wire Fraud

There are many potential defenses to wire fraud charges. Oftentimes, individuals facing wire fraud charges can argue that although they may have failed to deliver what they had promised to their customers or clients, their purposes or promises were not intentionally fraudulent. Sometimes, accused individuals genuinely believed that they could deliver on their promises, but unforeseen circumstances or things beyond their control made them unable to do so. In such a case, the dispute between the parties would be more appropriately resolved in civil court than in criminal court, as there was no intent to defraud or acquire money under false pretenses.

Of course, one can also potentially argue that the purported false statements were not material. For example, if one were to inflate one’s annual income on a bank loan application by $500, it may be technically false but it would not likely have affected the bank’s decision to offer the loan.

There are obviously many potential defenses to wire fraud that depend on the specific facts of the case. An experienced criminal defense attorney can help you explore and develop these arguments.

What is a Wire Fraud Conspiracy?

If more than one person is involved in the alleged wire fraud, federal prosecutors will often bring conspiracy charges as well.  The laws used to prosecute these conspiracy charges are 18 U.S.C. § 371 and 18 U.S.C. §1349.  In the most basic terms, conspiracy charges require the prosecution to prove that two or more people agreed to commit a wire fraud offense, and that the defendant joined in that agreement.

Prosecutors often charges numerous people in these sorts of cases, and then sometimes persuade defendants to “cooperate” and provide information about other participants in the schemes. Conspiracy charges are particularly onerous for criminal defendants because the defendants become responsible for all “reasonably foreseeable” acts of the others involved in the conspiracy.  So, even if the defendant did not do a specific act performed by the conspiracy, s/he could be responsible for it anyway. In short, once you join the team for a minute, you are likely to be held accountable for everything the team does.

Wire Fraud Penalties and Sentencing Guidelines

Wire fraud and other financial crimes can carry long prison terms even for people with little or no criminal history. Both offenses carry a wire fraud penalty of up to 20 years in prison.  In reality, the sentences in wire fraud cases are determined by a close analysis of the facts of the case, and the background and character of the person that is before the court for sentencing. See 18 U.S.C. Section 3553(a).

The federal sentencing guidelines are, by law, the starting point for the judge’s consideration.  They are advisory, not mandatory, but they play an important role in determining what sentence may be imposed.

Federal sentencing is usually quite complex, and wire fraud cases are no different. One can start by looking the Federal Sentencing Guidelines, section § 2B1.1, to learn more about some of the relevant factors in determining a guideline sentence for wire fraud.  That section of the Guidelines provides a number of factors about the offense conduct that can push the offense level up.  One of these factors, often the most critical, is the amount of “loss.”  The table below shows just how much of a role the loss calculation plays.  (The numbers on the right are “offense levels” which correspond to greater and greater ranges of suggested imprisonment.) The baseline offense level is typically 6, plus these increases in offense level.

See the full sentencing guideline here.

Typically, “loss” will mean loss of money to a victim, but not always.  In some cases, there will be no loss to victims, and indeed there may be no “victim” at all.  In these cases, prosecutors will rely instead on the “gain” to the defendant, or something called the “intended loss.”  (Some federal courts will entertain the idea of “actual loss” being the real metric, instead of “intended loss,” but that is generally the exception to the rule).

Many other offense characteristics can also increase the advisory sentence, for example:

• The offense involved multiple victims;
• The offense caused “substantial financial hardship”;
• The offense involved a “misrepresentation that the defendant was acting on behalf of a charitable, educational, religious, or political organization, or a government agency”;
• The offense involved a “misrepresentation or other fraudulent action during the course of a bankruptcy proceeding”;
• “A substantial part of a fraudulent scheme was committed from outside the United States”;
• The offense involved “sophisticated means and the defendant intentionally engaged in or caused the conduct constituting sophisticated means.”

In addition to the fraud guideline, there are other sections of the sentencing guidelines that may apply.  For example, section 3B1.1 through 3B.5 provides for certain enhancements or reductions for the defendant’s role in the offense, such as abuse of a position of trust or a special skill, leadership versus minor role, and others. A person who supervises others in a criminal scheme may see in increase in their offense level, whereas a person who played a minor role in the conspiracy or crime may have their sentence reduced by 2 levels, and a person who played a minimal role could have their offense level reduced by 4 levels.

After that, a person’s criminal history must be calculated. Sometimes, for people who have never been arrested before, that calculation is quite easy. For other individuals, that analysis can be complicated. But once an offense level and a criminal history category have been determined, a sentencing chart contained in the Federal Sentencing Guidelines provides the recommended number of months in prison.

But the correct calculation of the sentencing guidelines is only the beginning.  After this is done, the judge will then consider many other factors under 18 U.S.C. § 3553.  This requires the judge to consider things like the nature of the offense, the background and character of the defendant, the need for deterrence, the need to protect the public, the kinds of sentences available, the need for treatment, and virtually any other factor.  This is also where judges will consider arguments about whether the guidelines fairly reflect the seriousness offense and/or the defendant’s criminal history, and if not, why not. 

Talk to an Experienced Fraud Attorney

If you believe you may be facing such charges, it is important not to discuss your case with anyone (especially the government) before speaking with an experienced federal white collar crime attorney.  Matthew Galluzzo is an experienced federal criminal defense attorney and former Manhattan prosecutor and may be able to help.