Kousisis v. United States
605 U. S. ____ (2025) (Slip Opinion) (2025)
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Rule of Law:
A defendant may be convicted of federal wire fraud for inducing a victim to enter into a transaction under materially false pretenses, even if the defendant did not seek or cause the victim to suffer a net pecuniary loss.
Facts:
- The Pennsylvania Department of Transportation (PennDOT) awarded Stamatios Kousisis and his company, Alpha Painting and Construction Co., two contracts for painting projects.
- Federal regulations attached to the contracts required that a portion of the work be subcontracted to a certified disadvantaged business enterprise (DBE).
- As part of the bidding process, Kousisis falsely represented that Alpha would obtain its paint supplies from Markias, Inc., a prequalified DBE.
- In reality, Kousisis arranged for Markias to act as a mere 'pass-through' entity, which did not supply any materials or perform a 'commercially useful function' as required by law.
- Markias's only role was to process invoices and checks between Alpha and its actual suppliers in exchange for a fee, creating the false appearance of DBE participation.
- Alpha performed the painting work to PennDOT's satisfaction and received over $20 million in gross profit from the contracts.
Procedural Posture:
- The United States Government charged Stamatios Kousisis and Alpha Painting and Construction Co. in the U.S. District Court for the Eastern District of Pennsylvania with wire fraud and conspiracy.
- Following a trial, a jury found Kousisis and Alpha guilty on three counts of wire fraud and one count of conspiracy.
- Kousisis and Alpha moved for a judgment of acquittal, arguing the government failed to prove a scheme to defraud PennDOT of 'money or property'.
- The District Court denied the motion for acquittal.
- Kousisis and Alpha, as appellants, appealed their convictions to the U.S. Court of Appeals for the Third Circuit, with the United States as appellee.
- The Third Circuit affirmed the convictions.
- Kousisis and Alpha filed a petition for a writ of certiorari with the U.S. Supreme Court, which was granted.
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Issue:
Does the federal wire fraud statute, 18 U.S.C. § 1343, require the government to prove that a defendant intended to cause the victim a net pecuniary loss to sustain a conviction for a scheme to obtain money or property by means of false pretenses?
Opinions:
Majority - Justice Barrett
No, the federal wire fraud statute does not require the government to prove that a defendant intended to cause the victim a net pecuniary loss. A scheme to obtain money or property through material deception is sufficient to violate the statute, regardless of whether the victim receives something of equivalent value in return. The court's reasoning is threefold. First, the text of § 1343 criminalizes schemes to 'obtain' money or property, which means to gain possession, and a thing is no less obtained simply because something else is given in exchange. The statute does not mention economic loss. Second, while 'fraud' is a common-law term, there was no settled common-law rule requiring economic loss in all fraud cases; for instance, actions for contract rescission or prosecutions for false pretenses often did not require it, focusing instead on the victim receiving something materially different than what was promised. Third, this holding is consistent with precedent like Shaw v. United States, which held that the bank fraud statute demands neither a showing of ultimate financial loss nor an intent to cause it. The fraudulent-inducement theory properly targets the deprivation of traditional property (money) and is limited by the element of materiality, which distinguishes it from harmless lies.
Concurring - Justice Thomas
Yes, I agree that an economic-loss requirement should not be added to the wire fraud statute. However, I write separately to express skepticism that the government could prove the materiality of the misrepresentations in this case. For a misrepresentation to be material under the 'essence of the bargain' test, it must be central to the contract's purpose. Here, the contracts were for bridge repair, and the DBE provisions were ancillary to that fundamental purpose. The potential unconstitutionality of the DBE program itself further calls into question whether a reasonable person would consider compliance with it essential to the bargain.
Concurring - Justice Gorsuch
Yes, I agree that the wire fraud statute does not require proof of a 'net pecuniary loss.' However, I write to express concern that the majority's opinion, particularly in a footnote, appears to dispense with the traditional common-law injury requirement, which demands that the victim not receive the benefit of their bargain. The proper rule is that fraud requires an injury, defined as the victim not getting what they were promised, not merely parting with money. While the defendant here did fail to deliver the promised benefit (work performed with a DBE), the majority's reasoning is dangerous dicta that risks criminalizing victimless lies where the victim gets exactly what they paid for.
Concurring - Justice Sotomayor
Yes, I agree that the wire fraud statute does not contain an economic-loss requirement, and rejecting that theory is all that is necessary to resolve this case. The Court should not have opined more broadly on the fraudulent-inducement theory for cases where a defendant provides exactly what was promised but lies about other matters. I write to emphasize that, contrary to Justice Thomas's skepticism, the misrepresentations here were clearly material. PennDOT expressly made DBE compliance a material term of the contract, its federal funding was conditioned on it, and failure to comply exposed PennDOT to legal sanctions.
Analysis:
This decision resolves a circuit split and solidifies the 'fraudulent inducement' theory of wire fraud, clarifying that the 'money or property' element is satisfied when a defendant obtains money through material lies, even if the victim receives a service or good of equivalent value. The Court emphasized that the harm is in the deceptive act of obtaining the property, not in the victim's final balance sheet. The ruling reinforces that lying to win a government contract is fraud, even with satisfactory performance, if the lie was material. By declining to resolve the specific standard for materiality, the Court leaves the primary battleground for future fraud cases focused on whether the lie was important enough to influence the victim's decision.
