Federal Fraud
Kousisis v. United States
Date: May 22, 2025
Issue: Whether a defendant may be convicted of federal fraud for inducing a victim to enter into a transaction under materially false pretenses, even if the defendant did not intend to cause the victim economic loss.
Case Summary: In a unanimous decision, the U.S. Supreme Court ruled a defendant may be convicted of federal fraud for inducing a victim to enter into a transaction under materially false pretenses, even if the defendant did not intend to cause the victim economic loss.
18 U.S.C. § 1343 is a federal law that prohibits fraud by wire, radio, or television and criminalizes the use of these communication methods to defraud or obtain money or property by means of false pretenses. Under the fraudulent-inducement theory, a defendant commits federal fraud by using a material misstatement to trick a victim into a contract that requires the transfer of money or property, regardless of whether the fraudster, who often provides something in return, seeks to cause the victim a net pecuniary loss.
The Pennsylvania Department of Transportation (PennDOT) awarded Stamatios Kousisis and Alpha Painting (the petitioners) two painting contracts in Philadelphia, which required subcontracting with a disadvantaged business. Kousisis falsely claimed Alpha would buy paint supplies from Markias Inc., a certified disadvantaged business. Instead, he used Markias as a pass-through to funnel checks and invoices, while Alpha’s actual suppliers provided the materials — violating federal contract requirements.
The U.S. Government charged the petitioners with wire fraud and conspiracy to commit wire fraud based on a fraudulent-inducement theory. The U.S. Government alleged that the petitioners secured painting contracts from PennDOT by making materially false statements. A jury convicted the petitioners, and they appealed, arguing PennDOT received the full economic value of the contracts, despite the lack of disadvantaged-business participation. The U.S. District Court for the Eastern District of Pennsylvania and the Third Circuit rejected their argument, with the Third Circuit joining the Seventh, Eighth, and Tenth Circuits by upholding the “validity of a federal fraud conviction when the defendant did not seek to cause the victim net pecuniary loss.”
In a decision written by Amy Coney Barrett, the U.S. Supreme Court affirmed the Third Circuit’s decision. The Court reasoned the wire fraud statute does not mention, much less require, actual economic loss. The Court explained that Kousisis and Alpha devised a scheme to “feign” compliance with PennDOT’s disadvantaged-business requirements with the goal of obtaining money from PennDOT by making false or fraudulent representations. According to the Court, the wire fraud statute requires nothing more. The Court also rejected arguments that economic loss was inherent to the common-law understanding of fraud, that the holding was inconsistent with its precedent, and that the holding risks turning every misrepresentation into fraud. As a result, the Court concluded the fraudulent-inducement theory aligns with the text of Section 1343 and the Court’s precedent.
In concurrence, Justice Sonia Sotomayor agreed that the Court correctly rejected the petitioners’ attempt to add an economic-loss requirement to the federal wire fraud statute. She explained that when a defendant deceives a victim by promising one thing but delivering something materially different, the defendant cannot avoid liability by claiming both items hold equal value. In Justice Sotomayor’s view, “a Yankees fan deceived into buying Mets tickets is no less defrauded simply because the Mets tickets cost the same.” She emphasized that this clear principle is all the Court needed to decide the case.
Bottom Line: The Supreme Court’s decision departs from decisions that have narrowed the scope of federal fraud statutes.
Document: Opinion
