Intro to Mail and Wire fraud

Hello everyone, today we are going to try to write a little about mail and wire fraud. If you have been following the blog and reading the news articles that we post, you will notice a certain correlation with all the charges brought against the defendants in these white-collar crime cases. It would appear that many people found guilty of charges like bribery, insider trading, creating illegal tax shelters, and embezzlement, are also guilty of mail and wire fraud.

The answer to this is much simpler than you would imagine and becomes clear once we know what the two aspects of the functional definition are. The first element is that the individual accused must have devised or intended to devise a scheme to defraud individuals. The second part is that they must have used the postal service or the telecommunications industry in the execution of their fraud. This falls under the bubble of the federal government's ability to regulate interstate commerce. The interesting part about this is that for instance that these crimes are committed there is a separate charge. That is why you will see individuals being charged with 1 count of bribery 17 counts of mail fraud and 638 counts of wire fraud.

    So how does someone like Raffello Follieri (we reported on him yesterday) who is accused of embezzling millions of dollars to support his opulent lifestyle, get charged with mail fraud? Well, In order to successfully embezzle money, one must take it from one source to another via a method, which is usuaslly executed with the intent to deceive. Essentially, that crime necessitates a scheme to defraud, which is our first parameter for defining these crimes. So if for example, the embezzler is defrauding a company by creating accounts, which are the payee of services that are never rendered, the embezzled funds must be physically moved through some medium. If it is a check, which is mailed to a P.O. Box; it becomes mail fraud. Maybe, the funds are wired to an account, which is accessed online; now we have a case of wire fraud.

    The important question is now one of scope. How far removed from a fraud can an action be and still considered mail/wire fraud. To understand this better we will use a couple Supreme Court cases as an example.

In Schmuck v. United States, 489 U.S. 705 (1989), the defendant was a used car salesman who bought cars, rolled back the odometer, and then sold them for inflated prices because of the low-mileage readings to car dealerships in Wisconsin. If order to the re-sale to be complete there had to be the submission of a "Title Application Form" to the Wisconsin Department of Transportation. The submission of these forms was done by mail and of course led to the charges against Mr. Schmuck of mail fraud.

    The Supreme Court used the elements test in their decision, which states that the defendant may be found guilty of crimes necessary to the charges brought against them. In other words because Mr. Schmuck needed to submit the forms to switch the title of the car over in order to commit his fraud, the act of submitting a form (which was seemingly within the law when viewed outside of the scope of his scheme) was in fact mail fraud because it was just as necessary as turning back the odometers to his scheme.

In KANN v. U.S., 323 U.S. 88 (1944), senior executives of a corporation created a subsidiary company in order to supplement their income because they felt their pay was inadequate (it was capped as a condition for securing a loan). The defendants were charged with Mail fraud in three separate cases:

1. When their checks were mailed to themselves as salary or dividends
2. When they deposited their checks to the Bank
3. When the banks they deposited in sent the checks back to their reserve banks

The Supreme Court found that the defendants were innocent on the third charge because the scheme had already been completed and proposed fraudulent acts were of no concern to those committing the crime.

From these cases, we have an idea of where the line is draw for mail and wire fraud. Here are some cases in the news today:

Here is a recent one involving Fannie Mae

This one is related to class action drug settlement

These stories are rather dry and don't really give us that much insight on the whole nature of the phenomena.

Does anyone remember chain letters? That's a classic example if I ever saw one.

Also, I would suggest going to Wikipedia and typing in a search on Charles Ponzi, perhaps the grandfather of mail fraud.

I hope this was both informative and maybe even a little entertaining for you. Write to the Email if you have any questions or Comments