On May 22, the Supreme Court in Kousisis, et al., v. United States,[1] affirmed the convictions of a painting subcontractor and its owner (defendants) under the federal wire fraud statute for conspiring to defraud the Department of Transportation (DOT) and the Pennsylvania Department of Transportation (PennDOT) by exploiting the DOT’s disadvantaged business enterprise (DBE) program in connection with two Philadelphia construction projects.[2] As explained below, the Court resolved a divide among the circuits over the validity of a federal fraud conviction where the defendant did not seek to cause the victim net pecuniary loss. The Court held that where a fraudster seeks to induce the government into a transfer of its money or property, that loss is sufficient to sustain a fraud conviction, regardless of whether the government has suffered pecuniary loss.
Suppliers Beware: U.S. Government Continues Prosecution of Disadvantaged Business Enterprise Fraud Cases Involving Supplies Passed Through Disadvantaged Business Enterprises
Michael Schwartz, Kristin Jones, and John Gazzola were published in the August 2023 Pratt’s Government Contracting Law Report article, “Suppliers Beware: U.S. Government Continues Prosecution of Disadvantaged Business Enterprise Fraud Cases Involving Supplies Passed Through Disadvantaged Business Enterprises.”
Enhanced Anti-Corruption Scrutiny in Construction Industry
Bribery and corruption have long plagued the construction industry, particularly in emerging markets in Latin America, Eastern Europe, the Middle East and Asia-Pacific. Large contracts often trickle down through layers of subcontractors and consultants, presenting opportunities for corruption at each level. The risk is enhanced in certain foreign jurisdictions where public officials may expect payment in exchange for state-issued licenses or government contracts.