In another one of those confusing 9th Circuit fraud decisions – the Court of Appeals has upheld the convictions and sentences of three men who summoned the likes of Charles Ponzi and swindled 1700 investors out of $40 million. In US v. Treadwell the Court upheld an instruction that “intent to defraud is an intent to deceive or cheat,” and that “a defendant’s belief that the victims of the fraud will be paid in the future or will sustain no economic loss is no defense to the crime.”
The Court goes on to draw an analogy to embezzlement. It is not a defense to embezzling money from your employer that you intended on returning the money to him someday – even if you honestly believed you could, with interest! That makes sense to me because fraud is simply theft – if you get the money by lying it is not a defense that you may someday give the money back, or the investor may someday get the investment back. Bernie Madoff’s investors got money back, from other investor money!
And if someone was to sweet talk my wife into "giving" them my MacBook Air on the premise that we would get two new ones back in a few months, I wouldn’t care whether he or she had the good faith belief that they could get me a 100% return on my bride’s "investment." My computer would be gone – just like the investor’s $40 million.
Look at the following language – it pulls together the key stuff here:
"According to the federal wire fraud statute, 18 U.S.C. § 1343, any person who “having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be trans- mitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice,” is guilty of wire fraud. Conviction under § 1343 means a defendant must have intended “to defraud” his victim. See United States v. Oren, 893 F.2d 1057, 1061 (9th Cir. 1990). “To defraud” under § 1343 encompasses “any scheme to deprive another of money or property by means of false or fraudulent pretenses, representations, or promises.” Carpenter v. United States, 484 U.S. 19, 27 (1987); see also United States v. Ciccone, 219 F.3d 1078, 1082 (9th Cir. 2000) (“[T]he offense’s specific intent element . . . require[s] proof of intent to deprive the victim of money or property.”). It means to “wrong[ ] one in his property rights by dishonest methods or schemes, and usually signif[ies] the deprivation of something of value by trick, deceit, chicane or overreaching.” Carpenter, 484 U.S. at 27 (internal quotation marks omitted)"
It’s the scheme that is the key – if you get the money by lying and scheming the law will be at your door. Or maybe – it will be some lawyer in a nice suit looking to collect back that "investor" money from you in a civil suit. Either way, this case is fair warning that the scheme imposes liability – both civil and criminal.
Have a question about an investment "opportunity" that seems too good to be true? Get some advice before you give away the farm.