When the media reports white-collar crimes like racketeering, money laundering, embezzlement or other financial scams, the defendant’s charges usually include wire fraud. What is wire fraud and why is it a common charge in white-collar crime cases?
What is Wire Fraud?
Wire fraud, defined under 18 U.S.C. Section 1343, is a federal felony crime. Fraudulent schemes are purposefully designed to get money or property by false claims. Wire fraud charges are common in the prosecution of white-collar crimes because they can be applied in any case where communication via a “wire” was used to further the crime, and are regularly investigated by federal agencies including the Department of Homeland Security, Federal Bureau of Investigations (FBI) and the Bureau of Alcohol, Tobacco and Firearms (ATF). Considering a “wire” includes cell phone calls, texting, email, and messaging via apps, a wire fraud charge can easily be made in prosecuting fraudulent behavior in investing, avoiding taxes, telemarketing, or securities (such as insider trading or Ponzi schemes). The legal definition of wire also includes communication by radio, television, and calls made to other states by landline telephones.
When two or more people work together to intentionally defraud victims using a wire, the charge is federal conspiracy to commit wire fraud. A defendant can be charged both as an individual and additionally for conspiracy if suspected of collaborating with others on a fraudulent scheme.
In order to be charged with wire fraud, it must be proven the defendant was involved in a scheme created for the purpose of committing fraud, participated in the scheme knowingly and willfully, and used a wire to carry out the scheme.
Public figures accused of fraudulent crimes often have their misfortune splashed all over the news media, especially since many readers relish the downfall of a wealthy or powerful person. Since wire fraud has such a broad definition, these high-profile cases help illustrate how a crime can include wire fraud charges:
- In July 2022, Jen Shah, a cast member of The Real Housewives of Salt Lake City, pleaded guilty to wire fraud in connection with a telemarketing scheme that targeted senior citizens. Prior to her arrest, Shah was known for her glamorous lifestyle in a luxury mountain chalet, designer clothes, lavish parties, and a lucrative marketing business she ran with her assistant Stuart Smith and her entourage of employees known as “The Shah Squad.” The FBI investigated Shah’s business dealings and charged Shah and Smith with wire fraud and conspiracy to commit money laundering. Shah and Smith allegedly generated lists of contacts for others to target in a “business opportunity” financial scam. After Shah pleaded guilty, the conspiracy to commit money laundering was dropped. Shah has been ordered to forfeit $6 million and pay restitution of $9 million, and faces a jail sentence of up to 14 years.
- Two jazz musicians, Irvin Mayfield and Ronald Markham, were key in the rebuilding of the jazz scene in New Orleans after Hurricane Katrina. They had established a non-profit called the New Orleans Jazz Orchestra, and after the storm took the life of Mayfield’s father, the organization was more important than ever in promoting New Orleans culture and developing top players in the jazz scene. In November 2020, Mayfield and Markham pleaded guilty to wire fraud charges when accused of redirecting charitable funds from the New Orleans Public Library Foundation, where they were both on the board, into the New Orleans Jazz Orchestra. Although some of the diverted funds supported the Jazz Orchestra’s operating costs, the funds were also used to pay the defendant’s six-figure salaries, and luxury goods like a gold-plated trumpet and stays at luxury hotels. The defendants were charged with conspiracy to commit wire fraud and obstruction of justice, but after the guilty plea the latter charge was dropped.
- In March 2018, the organizer of the infamous Fyre Festival in the Bahamas pleaded guilty to wire fraud for selling tickets and accommodation for a concert that never materialized. Nearly 300 attendees paid between $1000 and $12,000 for tickets to the event that was marketed as including top-tier entertainment, catering, and transportation to the venue by yacht. The defendant, Billy McFarland, attracted investors to the festival to the tune of $26 million, including the rapper Ja Rule, and social media influencers were paid hundreds of thousands of dollars to post about the event. When the guests arrived in the Bahamas, there was no festival and the only accommodation available was emergency FEMA tents. McFarland was also charged with selling tickets to other non-existent music and fashion events and misrepresenting the track record of his production company. He was sentenced to six years in prison. Nearly 300 attendees of the Fyre Festival were awarded settlements of $7220 each, and two attendees that paid $13,000 for VIP packages were awarded a staggering $5 million. McFarland’s business partner in the Fyre Festival, Ja Rule, was cleared of any charges.
Penalties For Wire Fraud Charges
Even though wire fraud is generally classed as a white-collar crime, it is important to take wire fraud charges seriously as they come with potentially significant penalties. Wire fraud carries a maximum federal prison sentence of 20 years and/or a $250,000 fine. Penalties increase significantly when the crime involves a financial institution or a federally declared disaster or emergency fund. In these cases, the maximum prison sentence is 30 years and/or a $1 million fine.
If the defendant is found guilty in a wire fraud case, the sentence may take several factors into account:
- The amount of money or property involved in the fraudulent acts
- The age of the defrauded party (for example, if the victims were senior citizens)
- The scope of the fraudulent scheme
- If the defendant has cooperated with the investigation
- The defendant’s previous criminal history
Wire fraud does not carry a mandatory minimum sentence. However, wire fraud charges can also be one of multiple charges for other felony crimes that do include mandatory minimums, such as racketeering, money laundering, mortgage fraud, and aggravated identity theft.
Wire fraud charges can potentially lead to jail time and heavy fines, and you need the best legal counsel to navigate your case. If you are facing wire fraud charges, contact our experienced legal team for a free consultation.