Challenge to 3rd Cir. Expansion of Fraud Statutes Seeks Cert.

By: Ronald Chapman II

Review the petition here: United States v. Kousisis, No. 19-2679

The wire fraud statute is broad but the Supreme Court has consistently sought to restrict it. Unfortunately, the Circuit Courts need a reminder occasionally that fraud statutes are not a vehicle for expansion of Federal power – namely federal police power.

Last term the Supreme Court decided Ciminelli v. United States, 598 U.S. 306 (2023). In that case the Supreme Court rejected the “right to control theory” determining that this is not a valid property interest covered by the Wire Fraud statute. Namely, the right to control of economic decisions is not a property interest and there must be some economic harm.

The Kousisis petition challenges yet another theory – the fraudulent inducement theory which has been approved by five circuits and disapproved by five others.

In Kousisis, the Defendant sought a contract with Pennsylvania Department of Transportation. The Government contended that they evaded regulatory and contractual disadvantaged business requirements. These requirements seek to give contracts to minority or disadvantaged businesses. The Government alleged that Kousisis cheated this process by engaging with a nominee disadvantaged business that was not actually involved in the construction. Kousisis was convicted and the conviction was affirmed by the 3rd Circuit.

The Petition for cert seeks review of the “fraud in the inducement” theory which is subject to a deep and wide circuit split. Should the court take the case, we may have a resolution as to whether “fraud in the inducement” even absent any measurable economic harm is sufficient.

The well written brief was authored by Lisa Mathewson of Philadelphia.