On May 22, 2025, the Supreme Court of the United States affirmed prosecutors' ability to pursue mail and wire fraud charges under the "fraudulent inducement" theory. Under that theory, a defendant need not intend to cause economic harm.
As this blog previewed before and after oral argument in Kousisis v. United States, the U.S. Department of Justice (DOJ) has suffered a recent wave of defeats in pursuing fraud charges under various theories, such as when the Supreme Court foreclosed the "right to control" theory in Ciminelli v. United States. But the Court in Kousisis upheld the "fraudulent inducement" theory as consistent with the traditional understanding of fraud and with the language of the federal mail and wire fraud statutes. The Court's decision resolved a 6-5 circuit split against long-standing precedents in the Courts of Appeals for the D.C., Second, Sixth, Ninth, and Eleventh Circuits.
The Supreme Court's Decision
In Kousisis, the Supreme Court was asked to resolve whether a bridge-repair company and its former employee could be guilty of fraud when they represented to a contracting government agency in Pennsylvania that they would buy materials from a "disadvantaged business enterprise" (DBE). The defendants never intended to do so and ultimately paid a DBE to act as if it were a legitimate supplier. There was no dispute, however, that the bridge-repair company otherwise finished its work for the government satisfactorily, on budget, and on time.
The question before the Court was whether a defendant who intends to deceive another to induce a commercial transaction—but does not intend to (and does not in fact) cause economic harm—can be guilty of fraud.
Justice Amy Coney Barrett, writing for a unanimous Court, answered in the affirmative. She rejected the defendants' claim that a fraud conviction required some form of net economic harm. She pointed out that the federal statute requires a defendant to intend to obtain another's "money or property," and that this was precisely the defendants' intention here. Moreover, despite the lack of any monetary loss to the Pennsylvania government agency, Justice Barrett wrote that the federal "wire fraud statute is agnostic about economic loss." (Although the wire fraud statute was at issue here, it is nearly identical in text to the mail fraud statute.)
Justice Sonia Sotomayor, in her concurrence, offered a similar, if quintessentially New York, take: "A Yankees fan deceived into buying Mets tickets is no less defrauded simply because the Mets tickets happen to be worth the same amount as the promised Yankees ones."
In other words, the Court held, defendants can be convicted of fraud where they intend to deceive another to enter a commercial transaction even in the absence of an intent to cause financial loss or economic harm.
The Road Ahead
The most immediate impact of Kousisis is that prosecutors of white-collar crime can continue to charge defendants under the fraudulent inducement theory. Only time will tell how far the government will stretch this theory and whether, as the defendants argued in their brief, "every intentional misrepresentation designed to induce someone to transact in property" could conceivably "constitute property fraud."
The Supreme Court will no doubt soon face cases requiring the justices to further distinguish between actionable fraud and mere deceit that might give rise to civil remedies like breach of contract, if anything at all. As Justice Neil Gorsuch previewed in his concurrence, Kousisis "touches on an old question: What is the difference between a lie and a criminal fraud?" Lower courts will attempt to further refine that answer.
The Kousisis decision also takes place against a backdrop of changing DOJ criminal enforcement priorities. That the DOJ can continue to prosecute cases under the fraudulent inducement theory does not mean it is required to, or in fact will, do so. White-collar prosecutors and defendants are likely to see additional guidance from the DOJ's Criminal Division on the contours of permissible fraud charges in the coming months or years.
One final question is how the Court will treat a similar petition filed last term by the former dean of Temple University's business school (Porat v. United States), who was sentenced to 14 months in prison for submitting false data to manipulate a magazine's business school rankings. The Court declined at the end of its last term in June 2024 to either grant or deny Moshe Porat's petition for writ of certiorari, instead holding it (likely until the decision in Kousisis). On May 27, 2025, and with Kousisis decided, the Porat petition was redistributed for the justices' consideration. It is likely that the Supreme Court will remand Porat to the Third Circuit for further consideration in light of Kousisis. How the Court of Appeals handles that case on remand could be an early sign about the impact of Kousisis on future prosecutions.
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