A completed contract and a satisfied customer do not necessarily defeat a federal fraud charge. The defense must examine what was represented, why it mattered, and what the accused actually intended.
A business owner facing a fraud investigation may have a straightforward response: the customer received the work, the price was fair, and nobody lost money. Those facts deserve attention. They do not necessarily answer the government's legal theory.
In Kousisis v. United States, decided May 22, 2025, the Supreme Court held that a person who induces a transaction through materially false pretenses may be convicted of federal fraud even without intending to cause the victim an economic loss. The decision remains important for executives, contractors, and professionals whose certifications or representations helped secure payment. It also makes careful attention to the remaining limits on federal fraud more important. [1]
The practical question is whether the government can prove the charged scheme, including material deception directed at obtaining money or property. A defense built only around the value of the work performed may leave that question largely unanswered.
What the Supreme Court decided
Kousisis arose from Pennsylvania transportation projects. The contractor represented that it would obtain supplies from a qualifying disadvantaged business. Instead, that business served as a pass-through while other suppliers provided the materials. The painting work met the agency's expectations, but the contractor's representations about the supplier's role were false. A jury convicted the company and its project manager of wire fraud and conspiracy. [1]
The defendants argued that the government had received the economic benefit of its bargain. The Supreme Court rejected a rule making intended net economic loss necessary to a fraudulent-inducement prosecution under the wire fraud statute. Obtaining payment through materially false pretenses can satisfy the property requirement even when the recipient supplies something of equal economic value. [1]
The decision addressed federal wire fraud. It did not establish that every inaccurate certification is criminal, that every contractual breach proves fraud, or that every dollar paid is automatically a recoverable loss. Those questions require attention to the particular offense, evidence, and remedy.
The government still needs a property fraud theory
The government must identify money or a traditional property interest as an object of the scheme. Interfering with regulatory authority or depriving someone of information, without the required property objective, does not become property fraud simply because the conduct is objectionable. Kousisis expressly preserved that distinction. [2]
In Ciminelli v. United States, the Supreme Court rejected the theory that a victim's right to control its assets through accurate economic information was itself property protected by the wire fraud statute. Kousisis did not revive that theory. It distinguished a scheme aimed at obtaining the victim's money from one premised on the deprivation of information alone. [2]
For defense counsel, that requires reading the government's theory closely. What property was supposedly targeted? Whose property was it? How did the alleged falsehood serve the plan to obtain it? Was the expenditure the scheme's objective, or merely an incidental consequence of some other alleged misconduct?
These questions should be answered from the charging allegations and the evidence, not from the broad label “fraud.” They also should not be treated as interchangeable with a claim that the customer suffered no net financial loss.
Materiality needs evidence rather than assumptions
A false statement must be material. Kousisis emphasized that requirement but did not resolve the parties' disagreement over the precise materiality standard because the defendants had not contested materiality in that case. In particular, the Court did not adopt the government's proposed “essence of the bargain” formulation as a new, universally controlling test. [3]
The established starting point includes whether a statement has a natural tendency to influence, or is capable of influencing, the relevant decision. Neder v. United States also makes clear that the federal fraud statutes do not require the victim's actual reliance or completed damages as elements. A defense therefore cannot assume that showing the customer would have paid anyway necessarily ends the case. [4]
Still, the actual business record matters. Counsel should examine the operative requirements, the representations made in negotiations, communications explaining their significance, and the decision process used at the time. A requirement prominently identified as essential may support the prosecution. A record showing ambiguity, disclosed exceptions, or a different understanding may support a defense, depending on the governing standard and the other evidence.
Consider a hypothetical supplier accused of misrepresenting the origin of components. Proof that the components worked perfectly would not alone resolve a fraudulent-inducement allegation. Counsel would also need to determine what the contract required, what the supplier represented, whether the representation mattered to the purchasing decision, and what the responsible individuals knew when it was made. Those are separate factual inquiries.
Intent remains an individual question
Kousisis removes intended economic loss as a necessary ingredient of the fraudulent-inducement theory it approved. It does not eliminate the government's obligation to prove the required fraudulent intent. The majority described the covered conduct as intentionally lying to induce a transaction that costs the victim money or property. [5]
An investigation should distinguish a deliberately false representation from a mistake, a disputed interpretation, or a promise honestly made that later became impossible to perform. The timing matters. An accurate statement does not become knowingly false merely because subsequent events made the transaction unsuccessful. Conversely, an intention to deliver good work does not excuse a deliberate, material lie used to obtain the contract.
For an individual executive or professional, the record should show who prepared the statement, what information was available, what the individual reviewed, and what concerns were raised before approval. Job title and proximity to a transaction should not substitute for a careful account of the individual's conduct and state of mind.
What recent Fourth and Eleventh Circuit decisions show
Two 2026 appellate decisions illustrate why older formulations of the no-loss defense require care.
In United States v. Russ, the Eleventh Circuit applied Kousisis in affirming convictions arising from a fraudulent nursing-credentials scheme. It distinguished a scheme aimed at employers' money from the invalid right-to-control theory and described its earlier decision in United States v. Takhalov as overruled in part. The decision is unpublished and is an illustration of the court's application, not binding circuit precedent. [6]
In United States v. Wilson, decided October 6, 2026, the Fourth Circuit rejected challenges to fraud instructions in an insurance-fraud prosecution. The panel relied on Kousisis in rejecting an argument about non-harmful deception and upheld instructions addressing money or property and materiality. That opinion is also unpublished and nonbinding. [7]
The lesson is practical: counsel should test older cases and proposed jury instructions against Kousisis and the law of the court hearing the case. A familiar phrase from a pre-2025 opinion may no longer support the argument for which it is offered.
Build the defense before the business explanation hardens
Early review should preserve the original record and connect each disputed representation to the transaction it allegedly influenced. Useful work includes:
- Identifying the exact statement, certification, or omission at issue, its date, its recipient, and the person responsible.
- Preserving contracts, bid materials, submission histories, communications, and contemporaneous explanations without editing or reconstructing originals.
- Separating evidence of satisfactory performance from evidence about truthfulness, materiality, and intent.
- Testing the claimed connection between the statement, the payment sought, and the interstate or foreign wire communication required by the charged statute. [8]
- Coordinating the response with any related civil, regulatory, employment, or licensing matter before offering an explanation that may affect more than one proceeding.
Where an investigation concerns government payments, the same records may also matter in a False Claims Act dispute. That does not make the criminal and civil standards interchangeable. The particular claim, burden of proof, and available remedies must be analyzed separately.
A customer who received valuable work may be important to the defense. So may an accurate account of what the business understood and disclosed. The objective is to put those facts to their proper legal use rather than assume that a completed job or a fair price defeats the prosecution by itself.
Discuss representation
Charles Rollins, PC represents individuals and businesses facing white-collar investigations and criminal charges, with attention to related civil, regulatory, and professional consequences. To discuss representation, contact the firm at (706) 814-2361 or charles@rollinspc.org. Please do not send confidential details or documents before representation is agreed upon.
This article provides general information, not legal advice. The law and available defenses depend on the facts, the charges, and the jurisdiction. Contacting the firm does not create an attorney-client relationship.
Sources
- Kousisis v. United States, No. 23-909, slip op. at 1–8 (U.S. May 22, 2025) (case facts and rejection of intended net economic loss as a requirement). Reported at 605 U.S. 114 (2025). Pinpoints here refer to the printed majority-opinion pages, which begin on PDF page 5.
- Kousisis, slip op. at 5–6, 16–19; Ciminelli v. United States, 598 U.S. 306, 312–16 (2023) (traditional property requirement and rejection of the right-to-control theory).
- Kousisis, slip op. at 14–16, 19 (materiality remains an element; precise competing formulations not resolved).
- Neder v. United States, 527 U.S. 1, 16, 24–25 (1999) (materiality; no requirement of actual reliance or damages under the federal fraud statutes).
- Kousisis, slip op. at 19 (intentional, material deception inducing a transaction involving money or property).
- United States v. Russ, No. 24-11086, slip op. at 6–8 (11th Cir. Jan. 16, 2026) (unpublished).
- United States v. Wilson, No. 25-4394, slip op. at 7–8 (4th Cir. Oct. 6, 2026) (unpublished).
- 18 U.S.C. § 1343 (wire fraud statute).