Does The Supreme Court Argument In Ciminelli Foreshadow Further Narrowing Of Federal Fraud Statutes?

• Published date: 19 December 2022
• Subject Matter: Litigation, Mediation & Arbitration, Criminal Law, Trials & Appeals & Compensation, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: BakerHostetler
• Author: Mr Jonathan Forman, Matthew B. Friedman and George Stamboulidis

Key Takeaways

• Based on recent oral argument in Ciminelli v. United States, the Supreme Court seems poised to continue a trend of narrowing the scope of federal criminal fraud statutes.
• The "right-to-control" theory relied on in the Second Circuit, whereby a fraudulent scheme is criminal so long as the victim is deprived of "potentially valuable economic information" concerning the victim's control of money or property, appears largely abandoned by the government.
• At argument, the justices ' and the government ' appeared to agree that such control is not "property" for purposes of Title 18. But thorny issues remain.

Background

In recent years, the U.S. Supreme Court has narrowed the scope of various federal criminal fraud statutes. For example, in McDonnell v. United States, the Court overturned the honest services fraud conviction of the former governor of Virginia because arranging a meeting, contacting a government official and hosting an event are not "official acts" subject to the bribery statute.¹ In Kelly v. United States, the Court overturned the fraud convictions of aides to former New Jersey Governor Chris Christie because there was no property right of which the government was deprived when the aides shut down lanes on the George Washington Bridge for political retribution.² And in a case we previously discussed,³ United States v. Blaszczak, the Court vacated the Second Circuit's affirmance of insider trading convictions under Kelly because a government agency's so-called pre-decisional information is not property under Title 18.⁴ The Supreme Court appears ready to continue this trend of narrowing criminal fraud statutes in a case that was recently argued, especially on the "property" conception at issue in Kelly and Blaszczak.

History of the Ciminelli Case

In Ciminelli v. United States, the Court heard oral argument on an appeal by a construction company executive who was convicted of wire fraud. Mr. Ciminelli was convicted for his participation in a bid-rigging scheme during the "Buffalo Billion" initiative to revitalize greater Buffalo, New York.⁵ He secretly collaborated with insiders at a nonprofit responsible for purchasing land and developing facilities as part of the initiative so that the request for proposal (RFP) process would favor the selection of his company as a "preferred developer."⁶

Though prosecutors charged Mr. Ciminelli with wire fraud, it was not a typical wire fraud charge. Rather than show a deprivation of money or...