How Advancing a Fraudulent Scheme Thru the U.S. Postal Service Can Land You in Serious Trouble

April 26th, 2019 by Tad Nelson in White Collar, White Collar Crime

White collar crimes like fraud often involve the use of various interstate networks, such as the U.S. Postal Service or the internet. This means that even if the act of fraud itself is contained within a single state–i.e., a Texas resident is accused of defrauding a Texas business–the federal government may still have jurisdiction to prosecute the case. And federal charges often bring significantly more jail time than similar state crimes.

Texas Man Sentenced to More Than 8 Years in Prison for Fraudulent Billing Scheme

Consider this recent decision by the U.S. Fifth Circuit Court of Appeals, United States v. Hanks. The defendant in this case performed electrical work through his own company. At some point, the defendant decided to go work for a larger electric service company although he continued to maintain his own business. The defendant’s new employer would then occasionally reimburse him for the use of his equipment and inventory.

As it turned out, the defendant would submit tickets for reimbursement to his employer for work and parts use at customers of his own company–except that the defendant never performed any actual work. In other words, the defendant got the employer to reimburse him, but when the employer sent invoices to the customers, the customers refused to pay since they never received any work. When the employer discovered what was going on, it confronted the defendant, who told his managers that the customers in question “had been purchased” by another company, and that the invoices should be sent to this firm, which it turned out did not exist.

Ultimately, federal prosecutors said the defendant managed to defraud his employer out of approximately $400,000. The defendant then found a job with another company where he effectively ran a similar scheme, which netted him over $1 million.

Prosecutors charged the defendant with four counts of mail fraud and three counts of failure to file a tax return (in other words, he never reported the money he acquired via fraud on his 1040.) The jury found the defendant guilty. A federal judge sentenced the defendant to more than eight years in jail for the mail fraud.

On appeal to the Fifth Circuit, the defendant argued the federal government lacked jurisdiction in this case because the alleged mail fraud “did not sufficiently relate to his scheme.” The Fifth Circuit rejected that argument and upheld the defendant’s conviction and sentence. The appeals court explained that mail fraud only requires proof that mailing is used to “promote” a fraudulent “scheme” in some way. It need not be “an essential part of the fraud itself.”

Here, the defendant’s fraud led his employer to mail invoices for non-existent work to its customers. The use of the mail therefore “advanced” the defendant’s fraudulent scheme, the Fifth Circuit said. His case was therefore properly tried in federal court.

Speak with a Galveston or League City White Collar Crimes Defense Lawyer Today

The federal government takes all forms of white collar crime extremely seriously, especially when it results in innocent businesses and individuals sustaining financial losses. So if you have been accused of any type of fraud and need assistance from an experienced Houston criminal defense attorney, call the Law Offices of Tad Nelson & Associates right away at (713) 802-1631 or contact us online.

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