What is wire fraud?
Wire fraud is an act of fraud that uses electronic communications, such as making false representations on the telephone, to obtain money. The federal Wire Fraud Act provides that any artifice to defraud by means of wire or other electronic communications (such as radio or television) in foreign or interstate commerce is a crime. Fraud is a knowing misrepresentation of the truth or concealment of a material fact to induce to another to act to his or her detriment. Id.
What are the essential elements of wire fraud?
The essential elements of wire fraud are (1) devising or intending to devise a scheme or trick to defraud another by means of a material misrepresentation, with (2) the intent to defraud through (3) the use interstate or international electronic communications.
What constitutes a material misrepresentation under the Wire Fraud Act?
The Supreme Court has defined a material misrepresentation as one capable of influencing or having a "natural tendency" to influence the making of a decision.
For a matter to be material, a reasonable person would attach importance to its existence or nonexistence in determining his choice of action in the transaction in question, or the maker of the misrepresentation knows or has reason to know that its recipient regards or is likely to regard the matter as important in determining his course of action, although a reasonable would not necessarily regard it as important.
Materiality is an element of fraud in the common law (i.e. the law judges make in deciding cases) and the issue was whether the federal fraud statutes incorporated this concept. The Supreme Court put this issue to rest when it found that Congress had intended to incorporate materiality when making these laws.
What constitutes a scheme to defraud?
The case law regarding wire fraud has defined a fraudulent scheme in broad terms. For example, using the telephone to order liquor from discount package stores as part of a scheme to smuggle the liquor into Canada resulted in wire fraud convictions. A reporter who misappropriated confidential information from his newspaper as part of an insider trading scheme was convicted of wire fraud because the paper used electronic means to send news to its readers.
Does a defendant have to foresee an electronic transmission across state lines?
An interstate transmission is a requirement of the Wire Fraud Act; however, the defendant does not have to know of or foresee an interstate electronic transmission. In one famous case, the defendants sent two telegrams from Kansas City, Missouri, to Bridgetown, Missouri. What they didn't know was that the telegrams were routed through Middletown, Virginia. The Eighth Circuit affirmed their convictions, noting that the interstate jurisdictional requirement was satisfied for the purposes of the Wire Fraud Act.
What are the possible penalties for violating the Wire Fraud Statute?
Violation of the Wire Fraud Statute can result in a fine, imprisonment of up to 20 years, or both. If the violation affects a financial institution, the fine will no exceed $1,000,000, nor will imprisonment exceed 30 years.
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