Wire Fraud, Mail Fraud? Possible Cause of Action Against Pretenders and Attorneys

Editor’s Comment: This reminds me of the end of Grisholm’s Book “The firm”. It’s not sexy but it has lots of teeth. The quote below is from Wikipedia. I was talking to an old friend of mine about the securitization scam which continues as an on-going process, first in the form of “closing” alleged loans and now in the form of foreclosures. It seems that the use of electronic media sent through the internet, like spreadsheets with misinformation on it, and which is part of a scheme wherein money is wired and illicit profits are earned, may be a crime and a cause of action for private individuals.

My friend, who shall remain anonymous, basically puts it this way. This is an oversimplification of the way he analyzed it. Money is wired into a “pool account.” That came from “investors. Then money is wired into an escrow account which in turn is wired into the accounts of third parties to close the transaction. Sometimes some of the wire proceeds are converted to checks. The procedure is perfectly legal unless the purpose of the or goal of the transaction was illegal, and more specifically fraudulent. The diversion of funds that were wired into undisclosed accounts for undisclosed parties in transactions that were misrepresented on the facts (appraisal fraud on the property and ratings fraud on the securities) makes the deal susceptible to wire fraud allegations.

Since we have now determined that at the time of “sale”of the “loan product” to the “borrower” the actual transaction papers were rarely if ever transmitted to anyone, and since we have now determined that the general practice was to send electronic spreadsheets with loan data on it which substantially misrepresented the content of the actual transactions, and since we we have determined that the ratings were at least wrong and probably fraudulent, the scheme fits neatly into the wire fraud and mail fraud infrastructure. If that is the case, there is a rather mundane cause of action with a lot of teeth in it which could bring the investment bankers and all their affiliates to task. You see, says my friend, they not only did it to each other, the borrowers and the investors, but they employed the same means with the Federal government when they took TARP money, went to the Fed window and participated in other Federal programs. In his opinion, this is a far simpler case to make than securities fraud or predatory lending.

Mail fraud is an offense under United States federal law, which refers to any scheme which attempts to unlawfully obtain money or valuables in which the postal system is used at any point in the commission of a criminal offense. Mail fraud is covered by Title 18 of the United States Code, Chapter 63. As in the case of wire fraud, this statute is often used as a basis for a separate federal prosecution of what would otherwise have been only a violation of a state law. “Mail fraud” is a term of art referring to a specific statutory crime in the United States of America. In countries with nonfederal legal systems the concept of mail fraud is irrelevant: the activities listed below are likely to be crimes there, but the fact that they are carried out by mail makes no difference as to which authority may prosecute or as to the penalties which may be imposed. In the 1960s and ’70s, inspectors under regional chief postal inspectors such as Martin McGee, known as “Mr. Mail Fraud,” exposed and prosecuted numerous swindles involving land sales, phony advertising practices, insurance ripoffs and fraudulent charitable organizations using mail fraud charges^[1][2]

Wire fraud, in the United States Code, is any criminally fraudulent activity that has been determined to have involved electronic communications of any kind, at any phase of the event. The involvement of electronic communications adds to the severity of the penalty, so that it is greater than the penalty for fraud that is otherwise identical except for the non-involvement of electronic communications. As in the case of mail fraud, the federal statute is often used as a basis for a separate, federal prosecution of what would otherwise have been a violation only of a state law.

The crime of wire fraud is codified at 18 U.S.C. § 1343, and reads as follows:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

In the case of United States v. LaMacchia (1994; text of opinion), a student of the Massachusetts Institute of Technology was charged with wire fraud when, because he had not profitted personally from online distribution of millions of dollars’ worth of illegally copied software, he could not be charged with criminal copyright infringement. The United States District Court, District of Massachusetts, dismissed the charges, noting they were an attempt to find a broad federal crime where the more narrowly defined one had not occurred. Congress then amended the copyright law to limit further use of this loophole.

According to Neder v. United States (527 U.S. 1, 23, decided in 1999), the alleged misrepresentation to support a conviction under 18 U.S.C. § 1343 must be a material misrepresentation; a misrepresentation that is capable of influencing, or has a “natural tendency” of influencing, a decision is material.

To commit wire fraud, one must (1) devise, or intend to devise, a scheme or artifice to defraud another person on the basis of a material representation, and (2) do it with the intent to defraud, and (3) do it through the use of interstate wire facilities (i.e. telecommunications of any kind).

See 8th Circuit Pattern Criminal Jury Instructions, 242 & 250.

If a fourth element—that the alleged victim is a financial institution—also is present, the penalty is enhanced as provided in the statute.

Tags: mail fraud, wire fraud
Posted in Corruption, evidence, Pleading, securities fraud |