In the unanimous Kousisis v. United States decision (605 U.S. __, 2025), the U.S. Supreme Court expanded the scope of federal fraud prosecutions under the wire fraud statute, 18 U.S.C. § 1343. The case resolved a 6-5 circuit split, clarifying that a federal fraud conviction does not require proving the victim suffered a net economic loss. Instead, the Court held that a defendant can be guilty of wire fraud if they use material misrepresentations to induce a victim into a contract that involves handing over money or property, even if the victim receives the expected goods or services.
Background
The case involved Stamatios Kousisis, a project manager for a painting company, who misrepresented to the Pennsylvania Department of Transportation (PennDOT) that his company would subcontract 6-7% of federally funded contracts to a disadvantaged business, as required by federal regulations (49 C.F.R. § 26.5). In reality, the company used a pass-through scheme, generating false purchase orders through the disadvantaged business while sourcing supplies elsewhere. Kousisis and the company were convicted of wire fraud and conspiracy after submitting false certifications to conceal the scheme. They argued that PennDOT suffered no economic loss since the painting work met expectations, but the Third Circuit and Supreme Court rejected this defense.
Key Points of the Ruling
- No Economic Loss Required: The Court ruled that wire fraud under § 1343 only requires a scheme to obtain money or property through false pretenses, not proof of economic harm. The statute’s plain text focuses on the act of obtaining, not the victim’s net loss.
- Materiality as the Key Standard: The decision emphasized the statute’s “demanding materiality requirement,” meaning the misrepresentation must be significant enough to influence the victim’s decision. However, the Court left open the exact standard for materiality, noting ongoing debates about whether it requires the misrepresentation to go to the “essence of the bargain” or merely influence a reasonable person.
- Distinguishing Prior Cases: The Court distinguished Kousisis from recent rulings like Ciminelli v. United States (2023) and Kelly v. United States (2020), which rejected fraud theories based on intangible rights (e.g., the “right to control” assets) or regulatory interference. In Kousisis, the defendants directly sought to obtain money through misrepresentations, satisfying the statute’s money-or-property requirement.
- Concurring Opinions: Justices Sotomayor and Gorsuch expressed concerns about the ruling’s breadth. Sotomayor noted that PennDOT did not receive what was promised (subcontracting to a disadvantaged business), while Gorsuch argued that fraud should require proof the victim did not receive what was promised to avoid criminalizing minor lies.
Implications
- Broader Prosecutorial Reach: The ruling allows prosecutors to pursue fraud cases without proving economic loss, potentially increasing liability for deceptive practices in commercial transactions.
- Materiality Focus: Future cases will likely hinge on whether misrepresentations meet the materiality threshold, which remains undefined. Lower courts have cited older precedents suggesting a misrepresentation is material if it has a “natural tendency to influence” a decision (United States v. Peraire-Bueno, 2025 WL 2062021).
- Potential for Overreach: The decision raises concerns about over-criminalization, as illustrated by the Court’s discussion of a hypothetical babysitter lying about using wages for college to secure a job. Such cases could theoretically fall under wire fraud, though prosecutions are unlikely.
- DEI Compliance Risks: Commentators suggest the ruling could expose government contractors to liability for misrepresenting compliance with anti-DEI certification requirements, even if contract specifications are met, depending on the materiality of such certifications.
The Kousisis decision marks a departure from the Court’s recent trend of narrowing white-collar crime statutes, surprising some observers given its unanimous support. It strengthens federal prosecutors’ ability to target fraudulent inducement while leaving materiality as a critical battleground for future litigation.