On May 22, 2025, the Supreme Court held that a defendant could be convicted of federal wire fraud pursuant to 18 USC § 1343 even when the fraud did not result in any economic loss for the victim. This holding expands the broad reach of the federal wire fraud statute with implications for federal contractors.
Case Background
In the case, Kousisis v. United States, the Pennsylvania Department of Transportation (PennDOT) awarded Stamatios Kousisis and his company, Alpha Painting and Construction Co., two government contracts for painting the 30th Street Train Station and the Girard Point Bridge in Philadelphia. Both contracts were largely funded with Department of Transportation (DOT) grants. DOT required bidders for each contract to commit to subcontracting a portion of the work with disadvantaged businesses. Kousisis represented that Alpha Painting would acquire $6.4M in painting supplies from Markias, Inc., a pre-qualified disadvantaged business.
This was untrue. Kousisis worked directly with other paint suppliers and generated false purchase orders billed to Markias. In this arrangement, Markias functioned only as a pass-through entity, sending checks to and from Alpha Painting’s paint suppliers. PennDOT did not discover Kousisis’s scheme during contract performance. Later, the Government indicted Kousisis and Alpha Painting for wire fraud pursuant to 18 USC § 1343. Kousisis and Alpha Painting moved for acquittal post-verdict, arguing that PennDOT received the full benefit of their painting services under the contracts and, as such, they could not be convicted under the federal wire fraud statute.
The US District Court for the Eastern District of Pennsylvania convicted Kousisis of wire fraud under theory of fraudulent inducement, where a defendant can be held liable for federal fraud when they use falsehoods to induce a victim to enter into a transaction. The Third Circuit affirmed the conviction. The Supreme Court took the case to resolve a circuit split concerning the “validity of a federal fraud conviction when the defendant did not seek to cause the victim net pecuniary loss.”
The Supreme Court’s Holding
Ultimately, the Court affirmed Kousisis’s conviction, finding the fraudulent inducement theory was consistent with 18 USC § 1343. Further, the Court found neither existing precedent nor the text of § 1343 required economic loss for a fraud conviction.
The Court’s opinion did not explicitly define the materiality standard for the purposes of § 1343, noting that it was not at issue in the case because Alpha Painting and Kousisis did not contest the materiality of their misrepresentations. The Court did note that materiality was required for federal fraud convictions stating, “that materiality of falsehood is an element of – and thus a limit on – the federal fraud statutes” and “[a] conviction premised on the fraudulent-inducement theory cannot be sustained without it.”
Key Takeaways
The Supreme Court’s holding in Kousisis reinforces the long reach of the federal wire fraud statute and the fraudulent inducement theory as a tool for prosecutors. A federal contractor can be criminally liable for wire fraud based on their misrepresentations while entering contracts regardless of whether the falsehoods created an economic loss for the government or if the contractor fulfilled its obligations to the government.
Because the Court did not precisely define the materiality standard for § 1343, it is uncertain how much discretion prosecutors will exercise when considering whether to pursue federal wire fraud charges for misrepresentations made by federal contractors.
In moving forward after Kousisis, contractors should continue to maintain robust compliance departments and ensure their proposals and communications with the Government are entirely accurate to avoid criminal liability.
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