Interesting Ruling

The Supreme Court has affirmed a fraud conviction even though that there was no direct economic harm.

The short version is that a contractor was convicted of fraud for falsifying its compliance with the diversity requirements in its contract.

The substance of the appeal was that even if they lied, there was no actual monetary loss.

In a 9-0 decision, the Supreme Court (IMHO correctly) called bullsh%$ on this.

There was a criminal taking here, the contract that would have otherwise gone to some other contractor:

The Supreme Court on Thursday upheld the fraud conviction of a Philadelphia-area government contractor. Stamatios Kousisis was found guilty, along with Alpha Painting and Construction, after they failed to comply with a contract provision intended to promote diversity. Prosecutors insisted that federal wire fraud laws apply equally to cases in which the defendant uses deception to enter into a transaction that doesn’t harm the victim financially. On Thursday, the justices agreed.

The court in recent years has resisted what it sees as the federal government’s overly expansive readings of federal fraud laws, so Thursday’s decision was a relatively rare victory for federal prosecutors in that area.

Kouisisis, Alpha, and their business partners won contracts on two major construction projects in the Philadelphia area: a bridge over the Schuylkill River and repairs at Amtrak’s 30th Street Station. As part of the contracts, they were required to work with “disadvantaged business enterprises.”

Alpha indicated that it would use a paint supplier, Markias, that was a DBE. But Markias was merely a pass-through that did not supply any paint to the projects. Instead, other suppliers sent Markias invoices; Markias then added a small mark-up and sent its own invoices to Alpha.

Alpha and Kousisis were indicted on federal wire fraud charges. The government relied on a theory known as “fraudulent inducement” – the idea that Kouisisis and Alpha obtained the contracts by making deceptive promises to use a disadvantaged business enterprise.

Alpha and Kousisis countered that under the fraudulent inducement theory, the government must show that they intended to harm the victim financially – which they did not do. But the lower courts disagreed. The U.S. Court of Appeals for the 3rd Circuit stressed that participation by a disadvantaged business enterprise was “an essential part of the contract.”

Kousisis was convicted and sentenced to 70 months in prison, while Alpha was required to pay a $500,000 fine and forfeit its profits from the contracts.

In an opinion by Justice Amy Coney Barrett, the Supreme Court on Thursday upheld the 3rd Circuit’s decision, rejecting the argument by Kousisis and Alpha that they could not be held liable unless the government had suffered a financial loss. “The fraudulent-inducement theory,” Barrett wrote, “is consistent with both the text of the wire fraud statute and our precedent interpreting it.” 

I am surprised.that the Supreme Court ruled this way, particularly unanimously, but it's a win for good government.