Even without economic harm, the court upholds a federal fraud conviction
The Supreme Court upheld a fraud conviction against a government contractor in the Philadelphia area on Thursday. Stamatios Kousisis, along with Alpha Painting and Construction were found guilty after they failed comply with a clause in the contract intended to promote diversity. Prosecutors argued that federal wire fraud laws applied equally to cases where the defendant used deception to enter a transaction without harming the victim financially. The justices agreed on Thursday.
The court in recent years has resisted what it sees as the federal government’s overly expansive readings of federal fraud laws, so Thursday’s decision was a relatively rare victory for federal prosecutors in that area.
Kouisisis, Alpha, and their business partners won contracts on two major construction projects in the Philadelphia area: a bridge over the Schuylkill River and repairs at Amtrak’s 30th Street Station. They were required to work with disadvantaged businesses as part of their contracts. Markias, however, was only a pass-through and did not supply paint to any of the projects. Markias received invoices from other suppliers; Markias added a small markup and sent its invoices to Alpha.
Alpha was indicted for federal wire fraud. The government based its case on a theory called “fraudulent inducement” – that Kouisisis, Alpha and their business partners obtained contracts by deceptive promises of using a disadvantaged enterprise.
Alpha & Kousisis countered by claiming that the government had to prove that they intended harming the victim financially, which they didn’t. The lower courts disagreed. The U.S. Court of Appeals, 3rd Circuit, stressed that participation by a disadvantaged enterprise was “an important part of the contract.”
Kousisis received a 70-month prison sentence while Alpha had to pay a fine of $ The Supreme Court, in an opinion written by Justice Amy Coney Barrett on Thursday, upheld the 3rd Circuit decision. It rejected the argument made by Kousisis, and Alpha, that they couldn’t be held responsible unless the government suffered a financial injury. “The fraudulent-inducement theory,” Barrett wrote, “is consistent with both the text of the wire fraud statute and our precedent interpreting it.”
Starting with the text of the wire fraud statute, Barrett explained that the law simply requires someone to “devise” or “intend to devise” a scheme to “obtain money or property” through “false or fraudulent pretenses, representations, or promises.” The fraudulent-inducement theory, she stressed, does exactly that, as this case shows: “By using Markias as a pass-through entity,” Kousisis and Alpha “‘devised’ a ‘scheme’ to obtain contracts through feigned compliance with PennDOT’s disadvantaged-business requirement.” The goal of that scheme, she continued, was to obtain “tens of millions of dollars” from PennDOT by “making a number of ‘false or fraudulent … representations’ — first about their plans to obtain paint supplies from Markias and later about having done exactly that.”
The Supreme Court has also “twice rejected the argument that a fraud conviction depends on economic loss,” Barrett continued, citing the cases of Carpenter v. United States and Shaw v. United States. She also stressed that no matter what theory prosecutors use, a conviction for wire fraud in this case requires that “money or property” be the object of the fraudsters’ scheme. This requirement, she noted, distinguishes wire fraud laws from laws that prohibit conspiracy to defrau
Barrett rejected the argument made by Kousisis & Alpha that a decision upholding the 3rd Circuit could lead to fraud liability for anyone who intentionally misrepresents anything as part of a real estate transaction. She noted that fraud laws require the misrepresentation to be material, that is, significant enough that it affects the decision to enter the transaction. Second, she continued, the fraudulent-inducement theory targets “a particular species of fraud: intentionally lying to induce a victim into a transaction that will cost her money or property.” She acknowledged that the wire fraud statute potentially has a “broad” sweep. Clarence Thomas, who joined Barrett’s opinion, wrote a concurring opinon in which he questioned if the misrepresentations made by Kousisis & Alpha were material. “I seriously doubt,” wrote Thomas, “that the DBE provision can meet this standard.” He questioned the section of Barrett’s opinion that stated that the wire fraud statute’s injury requirements are satisfied when a defendant “obtains… property” that a victim “would not otherwise have partaken with” by means of a “material misrepresent “When a defendant tricks a victim out of their money by promising one thing and delivering something materially different,” she wrote, “it is no defense to say that the delivered items are of equal economic value.” But she would go no further than that, and she declined to join the majority’s opinion to the extent it “appears to speak more broadly.”
Posted in Featured, Merits Cases
Cases: Kousisis v. United States
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Amy Howe
Even though there was no economic harm, the court upheld a federal fraud conviction.
SCOTUSblog
(May. 22, 2025, 2:05 PM),
