In a notable decision issued on May 22, 2025, Kousisis v. United States, the U.S. Supreme Court held that a defendant may be convicted of wire fraud under 18 U.S.C. § 1343 even when the scheme does not result in any economic loss and the alleged perpetrator provides bargained-for goods or services to the victim. The case arose from the criminal convictions of Stamatios Kousisis and his company, Alpha Painting & Construction Co., which received more than $20 million in highway painting contracts from the Pennsylvania Department of Transportation based on false representations concerning compliance with federal rules requiring the use of disadvantaged business subcontractors. The Supreme Court upheld their convictions for wire fraud, even though Alpha ultimately completed all required work under the contract and the agency suffered no pecuniary harm. The decision departs from a recent trend in which the Supreme Court has reversed federal convictions and rejected prosecutors’ expansive interpretations of federal fraud statutes.

BACKGROUND

Wire Fraud

The federal wire fraud statute prohibits the use of interstate wires in furtherance of schemes to obtain money or property by means of materially “false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1343. The Supreme Court has acknowledged that this language is “undeniably broad” but has stressed in recent decisions that it only reaches “schemes that target traditional money or property interests.”[1]

Recent Supreme Court Decisions

In recent years, the Supreme Court has reversed several criminal convictions for fraud and public corruption offenses, rejecting prosecutors’ expansive readings of federal fraud statutes in favor of narrower interpretations. These include:

• Cleveland United States, 531 U. S. 12 (2000): holding, in a case involving false statements to a state regulator in an application for a poker license, that the state’s authority over the issuance, renewal, and revocation of such licenses does not constitute “property” under federal fraud statutes.
• Kelly United States, 590 U. S. 391 (2020): reversing the convictions of former New Jersey officials who engaged in alleged political retribution by closing lanes on a toll bridge on the basis that federal fraud statutes only cover “schemes to defraud” in which the aim is to deprive victims of money or property.
• Ci­minelli United States, 598 U. S. 306 (2023): holding, in a case relating to an alleged influence-peddling scheme by associates of the Governor of New York, that the “right to control theory” of wire fraud—i.e. that potentially valuable economic information necessary to make discretionary economic decisions constituted “property” under federal fraud statutes—is invalid.

The Defendants’ Convictions

Kousisis v. United States arose from federally-funded infrastructure contracts awarded by the Pennsylvania Department of Transportation (PennDOT). Because those projects received substantial federal grants from the U.S. Department of Transportation (DOT), PennDOT was obligated to comply with federal regulations that require contractors to subcontract a percentage of the total contract amount to DBEs—defined as small businesses controlled by individuals who are both socially and economically disadvantaged. The regulations require that DBEs substantively participate in the actual fulfillment of contracts.[2]

As part of the bidding process for painting contracts, Alpha’s project manager, Kousisis, certified that Alpha would procure approximately $6.4 million worth of paint supplies from Markias, Inc., a certified DBE. In reality, Markias functioned solely as a pass-through entity, performing no substantive work. PennDOT, unaware of the nature of the DBE arrangement, paid Alpha in full upon satisfactory completion of the projects.[3]

Alpha and Kousisis were indicted and ultimately convicted by a jury on three counts of wire fraud and one count of wire fraud conspiracy. After trial, the defendants moved for acquittal, arguing that because PennDOT had received the full economic benefit of its bargain and suffered no financial loss, the defendants’ conduct did not constitute wire fraud. The district court denied the motion, and the Third Circuit affirmed, holding that Alpha and Kousisis “set out to obtain millions of dollars that they would not have received but for their fraudulent misrepresentations.”[4] The defendants successfully petitioned for a writ of certiorari.

THE SUPREME COURT’S DECISION

In rejecting the defendants’ arguments, the Supreme Court held that that “[t]he fraudulent-inducement theory”—namely, the theory that a defendant commits federal fraud when he uses a material misstatement to induce a victim to hand over money or property, even if no net pecuniary loss is intended—is consistent with both the text of the wire fraud statute and its precedent.[5] The Court specifically rejected the imposition of an “economic-loss requirement.”[6]

The Court began by examining the statutory text of § 1343: “No matter how long we stare at it, the broad, generic language of § 1343 leaves us struggling to see any basis” for requiring economic loss. The Court emphasized that the statute “does not so much as mention loss, let alone require it.”[7] The Court concluded that it was irrelevant that Alpha had actually performed the bargained-for services, observing that “a thing is no less ‘obtained’ simply because something else is simultaneously given in return.”[8] The Court also rejected Alpha and Kousisis’ argument that economic loss was historically an essential component of common-law fraud, concluding that common-law courts permitted rescission of contracts and other fraud-related remedies absent such a loss.[9]

The Court similarly rejected Alpha and Kousisis’ attempt to argue that a fraud conviction absent actual economic loss should only be permissible in situations where the victim received something “different from what was promised” or where the bargain “involv[ed] an item with unique qualities.”[10] The Court found this reasoning unworkable and held that the proper limiting principle is not “uniqueness” or “injury,” but the materiality of the alleged misrepresentations, which “is judged according to an objective standard.”[11]

Finally, the Court rejected petitioners’ argument that its holding was foreclosed by precedent. First, it distinguished this case from Kelly and Cleveland on the basis that those decisions involved interference with the government’s regulatory authority, not schemes to obtain actual money or property. Second, the Court rejected petitioners’ reliance on Ciminelli, explaining that the right-to-control theory invalidated there treated “mere information as the protected interest,” whereas the fraudulent inducement theory remains grounded in the traditional conception of property under § 1343 and prohibits schemes aimed at obtaining money or property.[12]

IMPLICATIONS

The Kousisis decision could significantly expand the circumstances under which the U.S. Department of Justice investigates and prosecutes companies and their employees for misrepresentations in business transactions. It signals a sudden, and perhaps surprising, break from the Court’s recent, sustained trend of narrowing the scope of federal fraud statutes and gives rise to a number of potential implications.

First, the decision could embolden DOJ prosecutors to investigate and charge corporate criminal cases that involve arguably collateral or inconsequential misrepresentations, insofar as they do not involve financial loss or a failure to provide the bargained-for product or service. This decision resolves a circuit split in which the Third, Seventh, Eighth, and Tenth Circuits had upheld federal fraud convictions absent economic loss, while the Second, Sixth, Ninth, Eleventh, and D.C. Circuits had rejected them in similar circumstances.[13] In United States v. Regent Office Supply Co., 421 F.2d 1174 (2d Cir. 1970), for example, the Second Circuit reversed mail fraud convictions where the defendant sales agents used fabricated backstories—such as claiming to be doctors offloading stationery or claiming that a friend’s stationery needed to be sold due to a death—to persuade secretaries to transfer their calls to purchasing agents. The Second Circuit held that no wire fraud occurred because the deception did not affect the substance of the bargain and the goods were delivered as promised. Kousisis makes clear that the lack of financial harm would no longer bar a conviction in such cases if the misrepresentations were material. It therefore raises the prospect that the wire fraud statute may operate to police the honesty of parties in the negotiating and contracting process, as the Court’s approval of the fraudulent inducement theory places prosecutors and judges in that role even where no party suffers any pecuniary injury.

Second, the decision is likely to cause prosecutors, defendants, and courts to focus increasingly on materiality (or lack thereof) as an element of proof and a possible defense to wire fraud. The Court’s reasoning makes clear that the wire fraud statute’s requirements are satisfied when the relevant misrepresentation is “material”—e.g., when it is made with a purpose of obtaining “property” that the victim “would not otherwise have parted with.” In considering materiality, counsel and courts will likely need to grapple with complex questions concerning whether an alleged victim would have made a different business decision had the victim known that an alleged fraudster’s statements were untrue. Resolving those issues could be challenging notwithstanding courts’ application of an “objective” materiality standard because such determinations often rest on arguably subjective determinations, including consideration of hypothetical scenarios.

Third, companies would be well-advised to consider how this decision could lead prosecutors to more frequently pursue fraud charges when investigating and negotiating corporate criminal resolutions. For example, without a required showing of economic loss, prosecutors could consider charging wire fraud in a wider range of factual circumstances involving potential sanctions evasion, securities fraud, or failure to meet Bank Secrecy Act/Anti-Money Laundering and suspicious activity reporting requirements. Prosecutors could also seek to charge companies with wire fraud based on suspected misrepresentations that employees used to induce customers to purchase a product or service but that are unrelated to the core purpose of the transaction—for example, a false assertion that a company complies with environmental or human rights standards, privacy policies, public health requirements, or racial discrimination laws or regulations. And the government could do so even though the customer suffered no loss and the company fully performed its part of the commercial bargain.

Fourth, because the Kousisis decision involved procurement fraud, it also raises the prospect​ that the DOJ will seek to bring criminal wire fraud charges in conjunction with civil claims brought under the False Claims Act (FCA)—a statute originally enacted to address fraud in government contracts. The DOJ recently signaled its intent to aggressively pursue FCA claims in the areas of government waste and abuse, civil rights enforcement, and tariffs evasion, and the FCA also allows private parties (including whistleblowers) to initiate such claims.

ENDNOTES

^[1]           Kousisis et al. v. United States, 605 U.S. ____ at 19 (2025) (citing Pasquantino v. United States, 544 U.S. 349, 372 (2005); Ciminelli v. United States, 598 U. S. 306, 316 (2023).

[2]           Kousisis, 605 U.S ____ at 2-3.

[3]           Id. at 3.

^[4]           Id. at 4 (citing United States v. Kousisis, 82 F.4th 230, 240 (3d Cir. 2023)).

[5]           Id. at 1.

^[6]           Id. at 6.

[7]           Id. at 8.

[8]           Id. at 7.

[9]           Id. at 13.

[10]         Id. at 14.

[11]         Id. at 13-14 n. 6, 15, 15 n.7.

[12]         Id. at 16-19.

[13]         Id. at 4-5.

This post comes to us from Sullivan & Cromwell LLP. It is based on the firm’s memorandum, “In Break from Recent Precedent, Supreme Court Embraces Broad Interpretation of Federal Wire Fraud Statute,” dated May 23, 2025, and available here.