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The Supreme Court heard arguments in a case about how far the criminal law extends to cover a company’s deceptive acts. How the justices decide the case could affect a number of white-collar prosecutions in the future.
What is indisputable Koussis v. united statesargued Monday, is that Alpha Painting and Construction Co. lied about his intention to comply with a recall requirement when he won the bidding process for a pair of high-profile construction projects in Philadelphia. But did the company’s deception turn into criminal mail or wire fraud?
The Pennsylvania DOT had conditioned the companies bidding on the projects to meet their disadvantaged business participation goals for each project. Pennsylvania DOT required that at least 7% of the contract amount for its 30th Street station project and at least 6% of the contract amount for a stand-alone bridge project goes to a DBE.
Alpha delivered the contracted work on both projects but without the assistance of a DBE. In fact, the company allegedly falsified invoices to demonstrate compliance with DBE and represented that it would obtain $6.4 million in paint supplies from DBE, without any intention of doing so.
Representing the defendants, attorney Jeffrey Fisher told the judges that criminal fraud cannot be committed if there is no injury or damage to a property interest. Because Alpha performed all the work on the projects, he said PennDOT had suffered no damages and the company should not have been convicted of wire fraud.
But judges on both sides of the aisle expressed skepticism. For example, Judge Neil Gorsuch noted, “The contract specifically says we want DBE. That was an essential part of the contract.”
Meanwhile, Justice Elena Kagan asked Fisher: “Let’s say you make a contract and you pay for a million dollars worth of gold bullion and you get a million dollars worth of coal, have you been ripped off?” When Fisher responded that Kagan’s hypothetical was not the case, he said, “But it goes right to your theory. Your theory is that the loss of a dollar makes all the difference.”
Representing the government, Assistant Attorney General Eric Feigin told the justices Pennsylvania DOT he made it very clear what kind of service he wanted in the contract, and the agency didn’t get it. Feigin added that the theory would be the same if a contract required someone to be hired because he’s a veteran, and it turned out he wasn’t.
Justice Samuel Alito observed: “The Court really dislikes the federalization of white-collar prosecutions and has been hostile to this enterprise.”
Along similar lines, Chief Justice John Roberts asked Feigin if there were limits to his criminal fraud theory and wondered why state law could not handle the dispute.
In a case from 2023, Ciminelli v. United Statesthe Supreme Court held that a scheme to defraud contemplates damage to a traditional patrimonial interest. The justices noted in that ruling that wire and mail fraud statutes do not criminalize garden-variety disputes and leave them to state contract and tort laws.
