Mail fraud is one of the most common federal criminal charges. The following article explains what constitutes the crime of mail fraud and provides several examples.
Definition of Mail Fraud
The term fraud refers to the use of intentional deception for monetary or personal gain. The federal crime of mail fraud involves two elements: "(1) a scheme to defraud, and (2) the mailing of a letter, etc., for the purpose of executing the scheme."
Mailing money, contracts, things of value, or communications regarding a fraudulent deal all meet the definition. The person who mailed it can be charged and those who knowingly participated can be charged.
Mail does not necessarily need to cross state lines in order to be the basis of a federal offense. Whether delivered by the United States Postal Service, a private carrier like FedEx, or a commercial interstate carrier, the mail is an instrument of interstate commerce. When used to commit a crime of deceit, the Commerce Clause of the Constitution grants the federal government jurisdiction.
Federal mail fraud charges have been used to prosecute both white-collar crimes and organized crime mobs. Mail fraud is often part of white-collar crime cases, like financial fraud, Ponzi schemes, credit card fraud, or insurance fraud.
The International Travel Act of 1961 brought mail fraud into organized crime cases. This federal statute prohibits the use of the mail for carrying out unlawful activity or distributing the proceeds of unlawful activity. The activities the statute applies to are:
- Liquor violations and narcotics
- Bribery and corruption of local officials
- Labor racketeering
Penalties for Mail Fraud
Mail fraud is punishable by a fine and imprisonment for up to 20 years. Penalties are enhanced if the crime involves a financial institution or a presidential declaration of disaster or emergency. Those convicted of mail fraud can be fined up to $1 million and imprisoned for up to 30 years.
Common Forms of Mail Fraud
The U.S. Postal Inspection Service investigates mail fraud and then refers cases to federal law enforcement. There are dozens of ways that mail fraud becomes part of a criminal case. Often fraudsters target vulnerable people:
Mail Fraud Targeting Senior Citizens
- Fraudulent home improvement offers: Senior citizens are mailed an offer of a free home inspection. They mail in a postcard. The scammer comes to the home and tells them a lot of expensive (and often unnecessary) work needs to be done. Sometimes, the senior instead receives a flyer offering home repair at an unusually low cost. After they pay, the work is not performed or it is done poorly.
- Health insurance fraud: Many seniors are susceptible to con artists trying to sell them inappropriate Medicare supplemental insurance.
- Healthcare fraud: In order to save money, seniors may order drugs from overseas to be delivered by mail. These drugs may not be what they claim to be, or they are simply never delivered at all.
- Land fraud: Seniors looking for a warmer place to retire may fall victim to land fraud scammers. They receive a real estate brochure in the mail advertising land in another state being sold at a bargain. In reality, the land is a bad deal, not worth the advertised price, or worse. Sometimes the land and the contract are fake.
- Inheritance scams: Victims are notified that they have inherited money, but need to send payment for "taxes and fees" before payment.
- Paying for free services: Victims receive letters offering to do for a fee what the senior could do themselves for free, such as putting their name on a do-not-call registry.
- Charitable giving fraud: Seniors are often very charitable. They can fall prey to fake charities and fraudulent requests for political contributions.
- Sweepstakes fraud: The recipient is asked to pay money before receiving their "free" prize.
Mail Fraud Targeting Veterans
Veterans, and sometimes active-duty military families, are often targets of mail fraud. Veteran fraud schemes range from:
- Charging money for records the veteran could obtain free from the VA, Department of Veterans Affairs, or their service branch;
- Exclusive deals for veterans with reduced costs on cars, home loans, home rentals, and more. Sometimes the items are not discounted at all. Other times they are non-existent; or
- Fraudulent veteran's charities that mail official-looking donation requests.
Mail Fraud Targeting the Unemployed
Employment schemes give unemployed people false hope that they can earn good money, but at a cost. These take the form of placement agencies that charge up front fees and do nothing, "investment" opportunities that offer a valueless stock, pay to file a job application, or join a pyramid scheme.
Mail Fraud Targeting Small Businesses
Small business owners can also be victims of mail fraud. Small businesses owners might be overwhelmed with work and may lack extensive business experience or formal training. Fraudsters also prey on immigrant-owned businesses, hoping to take advantage of owners who do not speak English as their first language.
A small business owner may receive a letter that looks like it came from a government agency. These letters demand immediate payment for a seemingly official registration of their business or bill some fake business-related fee to hold on to a license. The victims often do not see the tiny type at the bottom of the page, disclaiming any company affiliation with the government.
Examples of Mail Fraud
Mail Fraud Conviction: Otto Kerner
Otto Kerner was a federal judge on the 7th Circuit Court of Appeals, having previously served as the Democratic Governor of Illinois. In 1973, Kerner found himself charged with bribery for having bought stock options at a reduced price while serving as Governor.
The business owner allegedly offered the options in exchange for favorable treatment. She considered the exchange a standard business expense and deducted the value of the stock from her taxes. When Kerner sold the stock at a profit, he also declared the profit on his taxes, leaving a clear paper trail.
Kerner was prosecuted by two attorneys who would later rise to high positions within the Republican party. At trial, with the help of "Mr. Mail Fraud" (U.S. Postal Service inspector Martin McGee), he was convicted of 17 counts of mail fraud, conspiracy, perjury, and more. The business owner was never charged with bribery.
The federal court sentenced Kerner to three years in prison and a $50,000 fine. He appealed the conviction and the courts overturned all but four charges of mail fraud.
Mail Fraud Conviction Overturned: McNally, Hunt, and Gray
Prior to 1983, Charles McNally, Howard Hunt, and James E. Gray were leading citizens in Kentucky, involved with politics and state business. In 1983, Hunt was charged with defrauding the citizens of Kentucky of "their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud."
Hunt pled guilty to mail and tax fraud. His conspirators were convicted of abetting fraud.
In 1986, McNally and Gray appealed Hunt's conviction. They said Hunt, former chair of the Kentucky Democratic Party, had no fiduciary duty to the people of Kentucky. He could not have committed fraud under the "Honest Services" provision of the federal fraud statutes. The Sixth Circuit Court of Appeals disagreed with the defendants. The conviction was upheld.
In 1987, the U.S. Supreme Court disagreed with the Court of Appeals. In the case of McNally v. United States, 483 U.S. 350, it concluded that Congress intended that mail fraud be limited to protecting money and property. The majority of opinion was that before a more severe sentence was given, Congress should be clearer. McNally and Gray were released.
In 1988, Congress was more clear. It enacted a new law that criminalized fraudulent schemes to defraud victims of the right of honest service (which is to say, government corruption).
Mail Fraud Conviction: Rick Hendrick
In 1998, NASCAR team owner Rick Hendrick pled guilty to sending $20,000 in the U.S. mail to a Honda auto executive. The case was part of a multi-year investigation into corruption at American Honda. Because the cars were in such high demand, Honda employees accepted bribes and kickbacks in exchange for shipments of cars.
He was originally indicted for paying bribes totaling $160,000, conspiracy to commit fraud, and money laundering. In exchange for pleading guilty, conspiracy and money-laundering charges were dropped.
Although the mail fraud conviction could carry a five-year prison sentence, Hendrick was sentenced to 12 months home confinement due to a life-threatening medical condition. During that time, he could not operate his business or NASCAR operations. He was also ordered to pay a fine of $250,000.
Charged With Mail Fraud? Get Legal Help
If you have been accused of mail fraud, contact a federal criminal defense attorney. You need a strong defense to protect your rights in court.
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