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Regulation White Collar Crime

The ‘Right to Control’ Wire Fraud Theory Should Be Eliminated

In recent decades, federal fraud prosecutions have relied on the theory that a defendant can fraudulently deprive a victim of the intangible “right to control” its assets, even if the victim is not deprived of any tangible money or property. While this theory has been repeatedly affirmed by the Second Circuit, it is incompatible with a series of recent Supreme Court cases in which the Court has narrowed the scope of federal white-collar criminal statutes by adopting narrow definitions of the term “property.”

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Judge Jed Rakoff famously noted that, “[t]o federal prosecutors of white collar crime, the mail fraud statute is our Stradivarius, our Colt 45, our Louisville Slugger, our Cuisinart — and our true love.” Jed S. Rakoff, The Federal Mail Fraud Statute (Part 1), 18 Duq. L. Rev. 771 (1980). This effusive enthusiasm for the federal mail and wire fraud statutes is rooted largely in their “adaptability.” Id. In recent decades, the federal prosecutors of the Second Circuit have demonstrated, and the Second Circuit has affirmed, that adaptability by broadly using the federal fraud statutes to penalize even conduct that does not and could not result in a transfer of tangible property from the victim to the defendant. These prosecutions have relied on the theory that a defendant can fraudulently deprive a victim of the intangible “right to control” its assets, even if the victim is not deprived of any tangible money or property. While this theory has been repeatedly affirmed by the Second Circuit, it is incompatible with a series of recent Supreme Court cases in which the Court has narrowed the scope of federal white-collar criminal statutes by adopting narrow definitions of the term “property.” Given the Second Circuit’s crucial role in defining the law for the prosecution of complex white-collar criminal cases, this discrepancy looms large: the Supreme Court should eliminate the Second Circuit’s dubious right to control doctrine.

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