What is a Fraud?

It seems like lately we feel the need to reexamine basic truths that have been understood for all of time.

Things like … what is a fraud?

Whenever I describe fraud to juries, I try to simplify it, but I think we all inherently understand it: Fraud is a lie that helps the liar get something he would not otherwise be entitled to.

Litigating fraud cases requires us to go back to basics: KISS (Keep it Simple Stupid). It also requires us to find an “emotional hook” in the midst of document intensive cases.

The Supreme Court today helped enormously in the case Kousisis v. United States when it held (from the summary): “A defendant who induces a victim to enter into a transaction under materially false pretenses may be convicted of federal fraud even if the defendant did not seek to cause the victim economic loss.”

In that case, the defendant induced the Pennsylvania Dept of Transportation to enter into a contract by falsely representing that it would obtain materials from a designated disadvantaged business.

The defendant didn’t but did actually perform the work.

Still fraud.

I had a recent trial in which a husband and wife usurped the businesses of a service- disabled vet and another black couple to access the sole source contracting advantages for minority or disadvantaged group businesses from the VA and SBA.

They performed on the $15 million govt contracts related to the Great Smoky Mountains National Park but were themselves no longer eligible for the 8(a) programs.

So they lied to the govt about who was running the businesses – claiming it was still the original owners -- but put themselves as the owners of the businesses and sole account holders on the banks’ paperwork.

They did the work and got the 💰 while the actual owners of the businesses got little or nothing.

Thus, they defrauded the government into thinking it was awarding sole source contracts to qualified disadvantaged businesses, which is what enabled them to (largely improperly) subcontract out all the work at significantly lower prices and pocket the differences on the contracts.

Their argument was that there was no fraud: the government got what it paid for.

I presented documentary evidence of their lies and then focused on their exorbitant spending on things like a personal plane, Mercedes Benz car, 1st class travel, and shoes. Lots and lots of shoes. 👠 👠 👠

And then I pointed to the people whose businesses they had usurped who got virtually nothing from the contracts – including a disabled vet who was living in near poverty.

And finally I pointed out that there were numerous businesses who lawfully qualified for the program who were denied the benefit of being able to get the contract.

Emotional hook connected to the truth of the fraud. Jury convicted.

Fraudulent gain even if no loss. The S.Ct. agrees…