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United States v. Walters

United States Court of Appeals, Seventh Circuit
997 F.2d 1219 (1993)
ELI5:

Rule of Law:

To sustain a conviction under the federal mail fraud statute, 18 U.S.C. § 1341, the government must prove that the defendant's fraudulent scheme had as its objective the acquisition of the victim's money or property. A scheme that merely causes an incidental or consequential loss to the victim, while the defendant's profits are sought from a different source, does not satisfy the statutory requirement of a scheme 'for obtaining money or property' from the victim.


Facts:

  • Sports agent Norby Walters signed 58 college football players to representation contracts while they were still actively playing for their universities.
  • Under NCAA rules, athletes who sign with agents are deemed professionals and become ineligible to compete in collegiate sports.
  • To conceal the players' ineligibility, Walters gave them cash and cars, post-dated the contracts, and locked them in a safe.
  • The success of Walters' scheme depended on the players continuing their college careers to enhance their professional value, which required them to deceive their universities about their professional status.
  • The players periodically signed university-required eligibility forms, falsely certifying they were still amateurs.
  • Relying on these false certifications, the universities continued to pay scholarships to the now-ineligible athletes.
  • Walters' ultimate financial goal was to earn a percentage of the players' future professional football contracts, not to acquire the universities' scholarship funds.

Procedural Posture:

  • The United States indicted Norby Walters in the U.S. District Court for the Northern District of Illinois for conspiracy, RICO violations, and mail fraud.
  • A jury in the trial court convicted Walters on all counts.
  • On appeal, the U.S. Court of Appeals for the Seventh Circuit reversed the conviction due to an erroneous jury instruction and remanded the case for a new trial.
  • On remand in the district court, Walters filed a motion to dismiss the indictment for insufficient evidence, which the court denied.
  • Walters then entered a conditional guilty plea to the mail fraud charge, preserving his right to appeal the district court's ruling on the sufficiency of the evidence.

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Issue:

Does a fraudulent scheme violate the federal mail fraud statute, 18 U.S.C. § 1341, where the defendant's goal was to obtain money from a third party, and the alleged victim's loss of property was only an incidental byproduct of the scheme, not its object?


Opinions:

Majority - Easterbrook

No. A scheme violates the mail fraud statute only if it is designed to obtain money or property from the victim; losses that are merely an incidental byproduct of a deceitful scheme are not sufficient to constitute mail fraud. The court reasoned that the statutory language 'for obtaining money or property' requires that the victim's loss be the objective of the fraud, not merely a consequence. Here, Walters’ scheme was designed to obtain a percentage of the players’ future professional salaries, not the scholarship money from the universities. The universities' loss of property was an indirect result, not the goal of the fraud. The court further held that the prosecution failed to prove that the use of the mails—the mailing of eligibility forms—was a foreseeable and essential part of the scheme's execution from Walters' perspective.



Analysis:

This decision significantly narrows the scope of the federal mail fraud statute by requiring a direct link between the fraudulent scheme and the goal of obtaining the victim's property. It clarifies that an incidental or consequential loss by a victim is insufficient; the defendant must have specifically targeted the victim's property as an objective of the scheme. This holding prevents the statute from being used to criminalize a wide range of deceptive business practices or rule-breaking where a third party suffers an indirect financial loss. It reinforces the principle that not all deceitful conduct that causes a loss constitutes federal mail fraud, particularly when used to police the rules of private organizations like the NCAA.

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