A recent ruling by the 4th U.S. Circuit Court of Appeals shows how federal prosecutors are using the federal wire fraud statute to pursue an increasingly expansive range of misconduct, McGuireWoods partner John Adams and associates Elissa Baur and Robert Day wrote in a Sept. 12, 2022, article for Law360. The Richmond lawyers are all members of the firm’s Government Investigations & White Collar Litigation Department.
The authors analyzed the 4th Circuit’s June 30 decision in U.S. v. Elbaz, in which the court affirmed the conviction of Lee Elbaz, who ran a global investment fraud scheme that duped victims out of more than $100 million, for conspiring to commit wire fraud and substantive wire fraud. Elbaz orchestrated her scheme in Israel, but targeted victims all over the world, including the United States.
On appeal, Elbaz argued that her conviction relied on an impermissible extraterritorial application of the statute. The 4th Circuit disagreed, citing cases holding that venue for wire fraud prosecutions is proper in any location the wire was sent, traveled through, or was received. It ruled that Elbaz’s conviction was a permissible domestic application of the statute, even though the scheme was executed from abroad, because “the charged wire transmissions were domestic.”
The authors showed how a series of cases, each of which took an incremental step in expanding the scope of the wire fraud statute, has collectively ballooned the scope of the statute to cover large swaths of foreign activity. Elbaz and other recent cases show that foreign defendants are still often exposed to prosecution in the U.S., and the attorneys said they expect federal prosecutors to take advantage of these recent judicial stamps of approval in pursuing fraud cases against foreign defendants.
“When faced with a potential wire fraud charge involving a foreign defendant, counsel should hone in on which wires the government could or will rely. It is key to determine whether those wires were sent in, traveled through or were received in the U.S. Without that, the government cannot use the wire fraud statute,” the authors wrote.
“A strategic defense should also consider whether the relevant wire is a core component of the alleged scheme, and whether that fact is required for the government to invoke the statute in your jurisdiction.”