Supreme Court Upholds Fraud Conviction Without Proving Economic Harm in Kousisis v. United States

Background: A Fraud Case with No Financial Loss

On May 22, 2025, the U.S. Supreme Court decided Kousisis v. United States, a case arising from a government contracting scheme in Philadelphia. For a detailed background and analysis of the arguments presented prior to this Supreme Court ruling, please see our earlier analysis of Kousisis v. United States.

Stamatios Kousisis and his company, Alpha Painting & Construction, landed two large PennDOT contracts for bridge and station renovations by promising to use a disadvantaged business enterprise (DBE) as a subcontractor. Federal rules required a portion of the work to go to a DBE, a small business owned by socially and economically disadvantaged individuals, as a condition of these contracts. Kousisis named a certified DBE supplier, Markias Inc., in the bid. However, this company turned out to be a mere "pass-through" front. Markias performed no real work; instead, it merely forwarded invoices from non-DBE suppliers and collected a small markup fee. Alpha executed the painting work and received full payment, netting a substantial profit, even though they did not truly fulfill the DBE requirement.

Federal prosecutors charged Kousisis and Alpha with wire fraud and conspiracy, alleging they fraudulently induced PennDOT to award the contracts by lying about DBE participation. Kousisis argued that because PennDOT received the painting services at the agreed price without monetary loss, no fraud occurred. Both the trial court and the Third Circuit rejected this argument. They concluded that the scheme's objective was to secure contract payments Kousisis would not have received absent the fraudulent misrepresentations.

Does Federal Fraud Require Economic Harm? – The Supreme Court Says No

Justice Amy Coney Barrett wrote the majority opinion in which the Supreme Court upheld Kousisis’s fraud conviction, resolving a circuit split. The Court ruled that proof of intended or actual economic loss to the victim is not required under federal fraud laws. A defendant who induces someone into a transaction through materially false pretenses can face fraud charges even without causing financial harm. The Court clarified that obtaining "money or property" by deception falls squarely within the wire fraud statute, regardless of whether the victim ultimately received expected goods or services of equal value.

Justice Barrett emphasized, "A defendant who induces a victim to enter into a transaction under materially false pretenses may be convicted of federal fraud… even if the defendant did not seek to cause the victim economic loss." In Kousisis’s case, PennDOT’s payments on the contracts constituted the "money or property" obtained by fraud. Consequently, the Court made clear that "no-harm-no-foul" is not a valid defense to federal wire fraud.

Key Reasoning: Text, History, and the Meaning of ‘Property’

The Supreme Court grounded its decision in a close reading of the statutory text, the common-law history of fraud, and its own precedents. Each show that an economic harm requirement does not square with the fraud statutes.

Additionally, the Supreme Court carefully distinguished common-law fraud from the common-law tort of deceit. Historically, deceit specifically required proof of economic loss, whereas common-law fraud had a broader and more flexible scope. This historical distinction further supports the Court's reasoning that federal fraud statutes, grounded in broader common-law principles, do not inherently require showing economic harm.

The wire fraud statute (18 U.S.C. §1343) makes it a crime to "devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses." Notably, nowhere does the statute mention economic loss. The majority emphasized that Kousisis’s conduct met every element of this text: he devised a scheme to obtain money (PennDOT’s contract payments) by making false representations regarding the use of a DBE subcontractor. The statute is satisfied once the defendant has deceived someone to part with money or property, regardless of whether the victim also received something in exchange. Justice Barrett explained, a fraudster’s money or property "is no less ‘obtained’ simply because something else is given in return."

Kousisis argued that common-law fraud required injury, suggesting a financial-injury requirement. The Court disagreed, finding that historically, fraud was broadly defined without consistently requiring monetary loss. Classic fraud scenarios did not necessitate proving net loss, The tricking of a victim into parting with property sufficed, even if what they received was of equal value. The historical view thus contradicts the notion that Congress silently built a loss requirement into modern statutes.

The decision in Kousisis aligns with past Supreme Court rulings, and the majority cited them to reinforce the point. The Court noted its prior rulings, including Carpenter v. United States, 484 U.S. 19 (1987), and Shaw v. United States, 580 U.S. 63 (2016), which rejected the idea that fraud convictions require economic loss. These cases affirmed fraud convictions even though the victims did not suffer direct financial losses, reinforcing the principle that fraud involves obtaining money or property through deceit, regardless of whether the victim ultimately lost money.

Defining 'Property' Under Federal Fraud Laws

An important aspect of the Court’s reasoning was clarifying the scope of "property" in fraud statutes. Recent Supreme Court decisions had reined in overly broad theories of property. For instance, in last term’s Ciminelli v. United States, 598 U.S. ___ (2023), the Supreme Court struck down the "right-to-control" theory. In doing so, it held that an abstract right to make informed economic decisions does not constitute "property" under fraud laws. Similarly, a scheme aimed at intangible interests, such as "a citizen’s interest in impartial government," falls outside the scope of the wire fraud statute. This distinction echoes the Court’s earlier decision in McNally v. United States, 483 U.S. 350 (1987).

In Kousisis, the Court highlighted the clear boundaries established by these prior rulings. Justice Barrett emphasized that federal fraud statutes protect only traditional property interests. Specifically, she explained that the object of a fraudulent scheme must be "money or property." Fraudulent inducement, therefore, remains firmly anchored in schemes targeting money or tangible property.

Narrow Ruling

The Supreme Court's decision in Kousisis v. United States is narrow, in that it supports limitations on federal fraud statutes.

Central to the Court's cautious approach is its reaffirmation of materiality. Not every misstatement or minor deception rises to the level of federal wire fraud; instead, the deceit must meaningfully influence the victim's decision to enter into a transaction involving money or tangible property. Although affirming that materiality is essential, the Court explicitly declined to expand upon or redefine the materiality standard under §1343, since the parties did not contest this point. Thus, existing standards remain intact.

Additionally, the Court distinguished its ruling from broader interpretations by clarifying that intangible or abstract interests—such as a citizen’s interest in impartial government or the previously rejected "right-to-control" theory—do not qualify as "property" under the wire fraud statute. The Supreme Court specifically recognized fraudulent inducement—lying or deception intended to persuade someone into entering a contract or transaction—as a valid form of federal fraud, but explicitly limited its scope. This theory of fraud does not extend to situations involving only regulatory violations or intangible rights, such as the right to honest services or fair governance. To qualify as federal fraud under a fraudulent inducement theory, the deception must specifically aim at obtaining actual money or tangible property from the victim. Simply interfering with regulations, abstract rights, or intangible interests is insufficient.

Finally, the Court emphasizes that any decision to expand the scope of fraud statutes remains exclusively within the purview of Congress, reflecting judicial caution against broadly interpreting criminal laws. The Court explicitly emphasized that defining and adjusting the boundaries of criminal fraud statutes is a legislative responsibility. It stressed that any decision to broaden or narrow the scope of federal fraud laws must originate from Congress rather than from judicial interpretation. This emphasis on legislative authority highlights judicial restraint, further reinforcing the narrow and careful scope of the ruling.

In sum, even though the Court rejected the requirement of economic harm, its opinion explicitly preserves clear boundaries around what constitutes federal fraud.

Justice Gorsuch’s Concurring Opinion: Materiality and Scope

Justice Neil Gorsuch concurred in judgment but voiced concerns about the Court’s broad interpretation of federal fraud statutes. Gorsuch emphasized the historical significance of materiality in fraud cases, which means that for a misrepresentation to be "material," it must meaningfully influence a victim's decision to transact. He pointed to examples such as a babysitter falsely claiming a clean criminal record or a plumber inflating credentials but performing satisfactory work. Gorsuch argued that without clear boundaries, minor misrepresentations could unjustly fall under federal criminal statutes.

He specifically cautioned that the majority's interpretation of materiality could unintentionally broaden criminal liability, encompassing trivial or harmless misstatements. Materiality, he stressed, should serve as a clear threshold, ensuring that only significant and genuinely impactful misrepresentations trigger federal fraud prosecution.

Justice Sotomayor’s Clarification on the Decision’s Narrow Scope

Justice Sonia Sotomayor separately emphasized the narrowness of the Court’s ruling, clarifying that it strictly applies to deception directly tied to transactions involving money or property. She wrote that the decision does not broadly criminalize minor inaccuracies or harmless exaggerations. Sotomayor assured the ruling’s precise boundaries would prevent expansive or overly punitive interpretations of the federal fraud statute, thus preserving clear limits and protecting against prosecutorial overreach.

Conclusion: Practical Implications of the Kousisis Decision

Companies should carefully consider any representations that might be construed as untrue during contract procurement, as the ruling confirms that fraudulent inducement charges may apply even without direct financial harm.

Citation:

Kousisis v. United States, No. 23-157, slip op. (U.S. May 22, 2025).

NB: This article is for informational purposes only and does not constitute legal advice. It is intended for clients and friends of our firm. Every situation is unique, and you should not act or refrain from acting on the basis of any information contained herein without seeking professional counsel.