Kousisis v. United States, Docket No. 23-909

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You might think fraud only matters if someone loses money, but the Supreme Court dug into a finer point of the law. In this case, a painting company and its owner, Stamatios Kousisis, were tried for wire fraud after they persuaded a customer to start a deal with false promises. The Court said it doesn’t matter whether the customer ended up losing cash. What counts is that important lies were used to get them into the deal.

Justice Amy Coney Barrett and six other justices agreed that tricking someone into a transaction itself meets the federal fraud law. They said it’s enough that the lie was “material,” meaning it was big enough to matter to the deal. No proof of real financial harm is required.

Summary of the Case

In December 2024, the U.S. Supreme Court agreed to hear Kousisis v. United States to resolve a disagreement among federal courts about wire fraud convictions. The key question: Can someone be convicted of wire fraud when they trick a government agency into paying them money, even if the agency doesn't suffer a financial loss?

The case involves Stamatios Kousisis and his company, Alpha Painting and Construction. They won two Pennsylvania Department of Transportation (PennDOT) contracts worth about $86 million. These contracts, funded with federal money, required subcontracting with disadvantaged business enterprises (DBEs). When bidding, Kousisis falsely claimed that a qualified DBE called Markias would supply over $6 million in paint. In reality, Markias was just a "pass-through" for Alpha's non-DBE suppliers, violating both regulations and a material contract term.

After completing the work and making $20 million in profit, Kousisis and his company were convicted of wire fraud and conspiracy under a "fraudulent-inducement" theory. They argued for acquittal, claiming PennDOT suffered no financial loss and therefore couldn't have been defrauded "of money or property." The Third Circuit rejected this argument, and the Supreme Court agreed to review the case.

Opinion of the Court

Justice Barrett, writing for a 7-Justice majority, affirmed the conviction. The wire fraud statute punishes any "scheme for obtaining money or property by means of false or fraudulent pretenses." The Court found that the law's text doesn't require proof of net economic loss. To "obtain" simply means "to gain or attain possession," even if the victim receives something in return.

The Court noted that common law didn't generally require pecuniary loss in all fraud actions. Some fraud remedies focused on whether the victim received "property of a different character or condition than promised," not whether they suffered a net loss. The wire fraud statute's "money-or-property" requirement therefore covers fraudulent-inducement schemes as long as money or property was an object of the fraud.

Previous Supreme Court cases like Carpenter v. United States and Shaw v. United States confirm that wire fraud liability doesn't depend on causing economic loss. False statements that induce payment—even if the victim receives value—fall within the statute, provided they are "material" (meaning important to the transaction). The Court emphasized that materiality remains a "demanding" element and held that the Third Circuit correctly applied the law in affirming the convictions.

Separate Opinions

Justice Thomas concurred in the judgment, agreeing that a net loss isn't required but taking no position on the case's outcome under a more demanding materiality test. He wrote separately to emphasize that materiality deserves rigorous analysis but declined to define its exact boundaries here.

Justice Gorsuch also concurred in part and in the judgment. He agreed that the statute doesn't require victim economic loss but objected to the majority's suggestion that any "obtaining" of money or property is sufficient regardless of whether the victim received what they bargained for. He urged adherence to the common-law rule that fraud requires proof that the victim lost "what he bargained for."

Wire Fraud and the "Fraudulent Inducement" Theory Explained

The wire fraud statute prohibits schemes to "obtain money or property by means of false pretenses." It has three key elements: (1) a scheme to defraud; (2) an objective to obtain money or property; and (3) use of interstate wires to further the scheme.

Under the "fraudulent-inducement" theory upheld by the Court, a person violates the law by making important misrepresentations to induce someone to pay them—even if they deliver value and don't intend to cause financial loss. The Court clarified that "obtain" simply means "gain possession," without considering exchange value.

Historical context supports this interpretation. At common law, certain fraud prosecutions and contract cancellations focused on schemes that deprived victims of promised property, not on proving financial loss. The only common-law fraud action requiring economic loss was the tort of misrepresentation, not the criminal offense of false pretenses.

The Court's decision, consistent with previous cases, rejects requiring proof of net financial loss in wire fraud cases. However, the "materiality" requirement remains important—it distinguishes actionable misrepresentations from minor ones. The fraudulent inducement theory doesn't extend to mere interference with regulatory power, nor does it blur distinctions with other federal fraud statutes. It protects only money or property, not intangible interests.