Timber Harvesting on Federal Lands

Summary: Congress has granted some federal land management agencies the authority to sell timber from federal lands. Two agencies, the Forest Service (FS) and the Bureau of Land Management (BLM), conduct timber sales as an authorized use. Together, the FS and the BLM manage 76% of federal forest area. FS manages 144.9 million acres, while BLM manages 37.6 million acres. The other major federal land management agencies, the National Park Service (NPS) and the Fish and Wildlife Service (FWS), rarely conduct timber sales.

Summary: Lands managed by the FS, the National Forest System (NFS), are managed under a multiple use-sustained yield model pursuant to the Multiple Use-Sustained Yield Act of 1960 (MUSYA). This statute directs FS to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress, through the National Forest Management Act (NFMA), has directed FS to engage in long-term land use and resource management planning. Plans set the framework for land management, uses, and protection; they are developed through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and include measures of sustainable timber harvest levels. FS uses these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.

Summary: Timber harvest on FS lands has varied over time. FS harvest volumes in the 1940s were around 1-3 billion board feet per year. Annual harvest volumes rose from the 1950s through the 1980s, sometimes exceeding 10 billion board feet. Annual harvested volumes decreased in the early 1990s and have remained between 1.8 and 2.8 billion board feet since FY2003. The total dollar value of FS timber harvests generally rose from the early 1940s to over $3 billion in FY1979. Total value has been between $100 million and $300 million since FY2001. From FY2014 to FY2018, the greatest average annual harvest volume on FS lands was from Oregon and Washington.

Summary: BLM lands are managed under a multiple use-sustained yield model pursuant to the Federal Land Policy and Management Act of 1976 (FLPMA). This statute directs BLM to balance multiple uses of their lands and ensure a sustained yield of those uses in perpetuity. Congress has directed BLM to engage in long-term land use and resource management planning through FLPMA. Plans set the framework for land management, uses, and protection; they are developed made through an interdisciplinary process with opportunities for public participation. In the case of timber, they describe where timber harvesting may occur and contain measures of sustainable timber harvest levels. The FS and the BLM use these plans to guide implementation of individual sales, which generate revenue. Congress has specified various uses for this revenue.

Summary: Although trends in timber activities on BLM lands are challenging to infer from the available data, volumes sold in the past appear to be larger than recent volumes offered for sale. Harvested volumes for the BLM have been between 100 and 260 million board feet annually from FY1995 onward, except in FY1994 and between FY2001-FY2003. Total harvest values have declined since the mid-1990s, and have generally been between $20 million and $50 million annually since FY2011. From FY2014 to FY2018, the greatest average annual harvest volume from BLM lands was from Oregon and Washington.

Summary: Congress has debated the appropriate balance of timber harvesting and other uses on federal lands. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Preferences for certain balances of these uses often stem from values about federal forests' purposes, such as consideration of economic, environmental, or recreational values. Debate has also centered on the relationship of timber harvesting levels to forest health, including whether changing harvest levels is a desirable forest management tool.

Timber harvesting on federal lands is a long-standing activity which sometimes generates controversy. Most timber harvesting on federal lands occurs on lands directed to provide a regular output of multiple uses under current law. Determining the proportions of these uses, in whole and on individual lands, is challenging for land management agencies. Often at issue is the appropriate use of federal lands for timber harvesting under these policies, including what amount of timber harvesting should occur and what constitutes proper balance among timber harvesting and other uses.

Congress has authorized timber harvesting on certain federal lands under specified circumstances. Most timber harvesting on federal lands occurs on two land systems. The majority of harvests occur on the National Forest System (NFS), which is managed by the Forest Service (FS) within the Department of Agriculture (USDA). Harvests also occur on the public lands managed by the Bureau of Land Management (BLM) within the Department of the Interior (DOI). The FS manages 144.9 million acres of forest, while the BLM manages 37.6 million acres of forest (see Figure 1 ). Together, FS and BLM forest comprises 76% of federal forest area and 23% of all forest in the United States. Within their respective forest, the FS has 96.1 million acres of timberlands, and the BLM has 6.1 million acres of timberlands. The United States has 765.5 million acres of forest, of which 514.4 million acres is timberland and 57% is private. The United States has 57.0 million acres of woodland.

Timber harvesting is the physical cutting and removal of trees or parts of trees from a given forested site. Harvested timber , or cut and removed trees, is the raw material for items made of wood, such as lumber, plywood, paper, and other products. Timber harvesting may occur on private, federal, or non-federal publicly owned lands, and may be conducted by the landowner or by another entity they allow to do so. Most timber harvesting in the United States is conducted on private lands: in 2011, 88% of timber harvests were conducted on private lands, and in 2012, 90% of wood and paper products in the United States originated on private lands.

FS and BLM conduct timber sales as the most general way to allow timber harvesting on their respective lands, although they may allow harvesting in other ways. A timber sale is a formal process whereby an entity may purchase a contract to cut and remove specified timber. FS and BLM receive revenue from the sale of the contract. Information on timber harvesting in this report, such as harvested volume, harvested value, and other statistics, derives from FS and BLM data and may include timber harvested through timber sales or other means.

Both FS and BLM timber sale planning and implementation proceed under similar principles of achieving multiple use and sustained yield. Both agencies conduct timber harvesting for various purposes. Both plan long-term timber management by designating areas that can support sustainable timber harvest and calculating yields that can be taken without permanent impairment. In the short term, both agencies create plans for timber sales, determine the value of offered timber and specify what timber may be cut, and conduct sales in a competitive manner open to the public.

Timber harvesting may also occur on two other federal land systems, the National Park System, managed by the National Park Service, and the National Wildlife Refuge System (NWRS), managed by the Fish and Wildlife Service (both agencies are within DOI). In the case of the National Park System, the Secretary may dispose of timber to control insects and diseases or to conserve natural or historic resources. In the case of the NWRS, the Secretary of the Interior may permit timber harvesting to achieve desired fish and wildlife habitat conditions. On both systems, timber harvesting is rare, and harvested volumes are small.

This report provides an overview of timber harvesting on FS and BLM lands. The report describes general statutory authorities and regulations, planning activities, timber sales, and trends in the volume and value of timber harvested, first from FS lands, and then for BLM lands. It concludes with a discussion of issues Congress has debated concerning timber harvesting and federal lands.

The National Forest System comprises nearly 193 million acres. It is made up of 154 national forests, national grasslands, and other units such as research and experimental areas. Approximately 75% of national forest acreage is located in 15 states. As discussed, the NFS contains 144.9 million acres of forest and woodland, of which 66% are considered timberland.

Most of the lands contained in the modern Forest Service were reserved from the public lands in the late 19 th and early 20 th centuries, in what were first called "forest reserves". The forest reserves were initially managed by the DOI and later moved to the USDA and the Forest Service. Through the Organic Administration Act, Congress specified that the purpose of these forests was to "improve and protect the forest within the reservation … and to furnish a continuous supply of timber for the use and necessities of the citizens of the United States," in addition to protecting water flows. The act authorized timber sales of "dead, matured or large growth of trees" and set out procedures for conducting them.

Congress expanded the purposes for the national forests, and developed management goals to achieve those purposes, through the Multiple Use-Sustained Yield Act of 1960 (MUSYA). Congress added the provision of fish and wildlife habitat, recreation, energy and mineral development, and livestock grazing as official purposes of the national forests, in addition to timber harvesting and watershed protection. To supply these activities, management of the forests' resources is to be organized for multiple uses in a "harmonious and coordinated" manner that considers the combination of uses that best meets the needs of the American people, not that necessarily yields the largest dollar return or output. The act also directs a sustained yield of products and services, meaning high-level regular output in perpetuity without impairing the lands' productivity.

Congress has directed FS to engage in long-term land use and resource management. Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunities for public participation. FS uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels, and are used to guide implementation of individual sales. These sales generate revenues. Congress has specified various uses for these revenues.

Congress directed the Forest Service to conduct long-term planning and management through the passage of the National Forest Management Act of 1976 (NFMA). NFMA requires the FS to prepare a land and resource management plan—often called a "forest plan"—for each NFS unit. These plans are to be revised at least every 15 years. The FS has issued regulations to implement the planning requirement—often called "planning rules"—and to establish the procedures for developing, amending, and revising forest plans. The first planning rule was issued in 1979 and later revised; the current rule dates from 2012. Forest planning and implementation generally proceed as described below. Forest Service timber planning and administration proceed under general FS planning procedures.

Forest plans guide management of the plan area by specifying objectives, standards, and guidelines for resources and activities. They contain certain components required by statute, such as components addressing provision of outdoor recreation, range, wildlife, fish, and timber. Among the most general required components addressing timber are requirements to identify areas and quantities for timber harvesting. The FS must identify lands that may be not suited for timber production . All other lands in the NFS unit are considered suitable for timber production. The plan must contain the allowable sale quantity, the measure of timber that can be removed annually without impairing future yield, although FS also considers other measures of sustainable yield in planning over various time horizons. The allowable sale quantity informs the amount of timber that can be removed annually over a ten-year plan period. Plans are required to be developed with public participation and in accordance with various other administrative and environmental statutes, such as the National Environmental Policy Act (NEPA).

Forest plans may consider harvesting for various purposes—for example, to produce timber or to achieve and maintain desired resource conditions, such as habitat improvement, fire risk reduction, and sanitation. If the forest plan identifies lands as suitable for timber production, the plan must address timber harvesting on those lands. If the forest plan considers timber harvesting for purposes other than producing timber, it must delineate areas where such activities may occur. These areas may be identified by forest type, geographic area, or other criteria.

FS conducts timber sales to achieve the objectives in the forest plan. FS establishes a sale schedule and timber sale project plan, which may include more than one timber sale. The plan estimates volume offered, acreage, and harvest methods for the relevant sales. Site-specific timber harvests must also comport with NEPA and relevant statutes, including any requirement for site-specific environmental analysis and review.

Prior to an individual sale, FS marks and appraises the timber to be offered. FS may designate timber in one of three ways: physical marking, a written description of specific trees for harvest (called description ) , or a written description of desired post-harvest stand characteristics (called prescription ). FS creates a sale package, including a prospectus, sample contract, and other required documentation; some requirements are site-specific. FS advertises the package at an appraised starting price. Interested parties may bid on the package. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms—such as timeline, harvest method, and road construction conditions—specified in the contract. Timber harvests must generally be completed in 3 years, with a maximum term of 10 years.

Timber sales generate revenue, and disposition of this revenue depends on several factors. Congress has established several funds for FS to retain and use timber sale receipts. Depending on the type of sale, among other factors, FS may be required to make certain deposits to these funds. If any portion of receipts are not required to be deposited, FS may distribute receipts among funds at their discretion, including depositing all revenue in a single fund. The money in these funds may be used by the FS for a variety of purposes, sometimes without further appropriation (i.e., as mandatory appropriations). See Table A-1 for a list of these funds. A more detailed discussion of revenue levels, expenditures, and issues related to FS timber revenue funds is outside the scope of this report.

Timber harvesting is one of many authorized uses of the NFS. The amount of timber harvested from the NFS, and its relative proportion of total U.S. timber supply, has fluctuated over time. This section provides an overview of timber volume harvested from the NFS, and value of those harvests, along with some economic and historical factors which may have contributed to observed changes.

The volume of timber harvested from the national forests (and their precursors, the forest reserves) increased slowly from 1898 until the 1940s. Most demand for wood was met by private timberlands; by 1940, for example, FS lands supplied 2% of U.S. timber supply.

In the post-World War II era, timber harvest volume from the NFS grew (see Figure 2 ). The timber supply from private forestry was unable to keep pace with the increased demand, due in part to high harvest levels during WWII. In the 1950s, the FS began to raise harvest limits. Harvests rose from 1-3 billion board feet (abbreviated BBF) annually in the early 1940s to more than 10 BBF in some years of the 1960s and 1970s. According to historical data from one source, harvest from the NFS rose from 9% of total U.S. harvest in 1952 to 16% in 1962 and 1970, and 15% in 1976.

Harvest volume declined from the mid-1970s to the early 1980s. Harvest on FS lands shifted to more marginal timberlands; in part, clear-cutting in the previous decades had reduced tree volume available for harvest in productive areas. This period also coincided with recessions in 1980 and 1982, which may have reduced demand.

Timber harvests rose from the early 1980s to the early 1990s, sometimes reaching levels of over 12 BBF per year. These timber harvests coincided with the 1986 U.S. peak in per capita consumption of wood products, driven in part by an increase in housing starts following the 1982 recession. In 1986, timber harvests from the NFS were 13% of total U.S. timber harvests.

In the early 1990s, harvested timber volume began a sustained decrease. In 1991, the NFS supplied 11% of total U.S. harvested timber, and in 1997, the NFS supplied 5% of total U.S. harvested timber. In 2011, NFS supplied 2% of U.S. wood and paper products. Numerous interrelated factors, including statutory, administrative, biological, and market influences, may have contributed to this decline. The effect of each individual factor is not settled, as is the effect of each factor over time. These factors occurred at varying points in time and may not coincide directly with observed harvest level changes. Some sources have noted that statutory changes added complexity to forest management and increasing litigation frequency, while also increasing transparency and public participation. Other sources have noted changing management priorities. Others have noted decreasing domestic demand, volatile prices, and the prevalence of less valuable timber due to high harvest levels in previous decades. The listing of the northern spotted owl ( Strix occidentalis caurina) under the Endangered Species Act in 1990 is often discussed in regard to declining timber harvest levels.

Harvested volumes have consistently been between 2 BBF and 3 BBF annually from FY2004 onward. In FY2018, approximately 2.8 BBF were harvested from FS lands. Although the national timber market in the United States was affected by the 2008 housing market collapse and the subsequent decline in demand, timber volumes harvested from FS experienced relatively little change in volume, for unclear reasons.

In FY2018 dollars, harvest values from approximately FY2000 onward are similar to harvest values in the early 1940s. Harvest values generally increased from the early 1940s to a peak of approximately $3.4 billion (FY2018 dollars) in FY1979, before a decline through FY1982. They rose again thereafter, reaching another peak of approximately $2.6 billion (FY2018 dollars) in FY1989, before again declining. Values from FY2001 onward have generally been between approximately $100 million and $300 million in FY2018 dollars. In FY2018, cut value was approximately $188.8 million. FS harvest value declined during the recession and housing collapse of 2008. Harvest value may vary due to quality, species, and age class of offered timber and timber market conditions, and is correlated with volume harvested.

Geographic Distribution of Timber Harvests from NFS Lands

FS harvest volume differs by region; these differences mirror the major production regions in private forestry (see Figure 3 ). FS Region 6 (the Pacific Northwest), Region 8 (the Southeast), and Region 9 (the North), are the three largest producing regions in both private and public forestry. In general, harvest volume and value by region is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of FS sites for harvest operations; the legal limitations on land uses; and the status of the local forest products industry.

The Bureau of Land Management (BLM) administers about 246 million surface acres of federal lands, almost entirely located in twelve western states. As noted, about 37.6 million acres of BLM lands are forest; of that, 16% is considered timberland. The Oregon and California (O&C) lands, which comprise approximately 2.6 million acres, contain 2.4 million acres of forest (see " Statutory Authorities for Harvesting Timber ," below, for a description of the O&C lands). The transfer of the forest reserves to FS administration in the early 1900s reduced the amount of forest land and timberland under BLM management today.

The modern BLM was formed in 1946 to manage the public domain lands. At its formation, BLM had no general authority to harvest timber on those lands. Congress authorized BLM to dispose of forest materials through the Materials Act of 1947. Congress later elaborated BLM's management responsibilities with the passage of the Federal Land Policy and Management Act of 1976 (FLPMA). Like the MUSYA's mandate for the FS, FLPMA requires BLM to manage the public lands for multiple use and sustained yield in a "harmonious and coordinated" manner that considers the combination of uses that best meets the needs of the American people, not necessarily yields the largest dollar return or output. The act directs a sustained yield of renewable resources, meaning high-level regular output in perpetuity without impairing the lands' productivity.

The O&C lands are lands in western Oregon managed according to their own establishing statutes, mostly by BLM. FS manages 492 thousand acres of the O&C lands, or 18% of this total area. The lands consist of several areas, the Oregon and California lands and the Coos Bay Wagon Road (CBWR) lands, which were revested to the federal government following violation of grant terms. They are usually referred to collectively as "O&C lands" and often grouped for legislative purposes. BLM or FS's mandate to sell timber on the O&C lands derives directly from the O&C lands' establishing statute. The O&C Act directs that O&C lands be managed for sustained yield of permanent forest production, watershed protection, recreation, and contributing to the economic stability of local communities and industries.

Congress has directed BLM to engage in long-term land use and resource management planning . Plans set the framework for land management, uses, and protection. They are developed through an interdisciplinary process with opportunit ies for public participation. BLM uses these plans to guide implementation of site-specific activities. In the case of timber, plans describe where timber harvesting may occur and include measures of sustainable timber harvest levels . They are used to guide execution of individual sales , which generate revenues. Congress has specified various uses for these revenues.

BLM timber planning and administration follow general BLM land use planning procedures. Through FLPMA, Congress directs BLM to develop, maintain, and revise plans for managing public lands. BLM issued the first regulations to implement the planning requirement in 1979, and subsequently revised them; the current BLM planning rule dates from 2005. Plans must be developed with public participation and in accordance with various other administrative and environmental statutes (e.g., NEPA).

Under BLM's planning rule, resource management plans remain in effect indefinitely. They are to include monitoring and evaluation standards, and are to be amended or revised when circumstances warrant. The planning rule directs BLM to identify indicators that describe the desired forest outcomes in the plan area. BLM is to identify a suite of management actions to achieve those outcomes, including identifying sustained yield areas, areas that could support long-term timber harvest. BLM personnel determine a harvest level for these areas that can be maintained without permanent impairment; this harvest level is known as the allowable sale quantity . Allowable sale quantity is measured for a ten-year period.

In addition, BLM generally makes annual forest product sale plans. These plans contain estimates of sale volume, acreage, and permitted harvest methods for any sales proposed for the year. Site-specific timber harvests must comport with NEPA and relevant statutes, including any additional requirement for site-specific analysis and review.

To conduct an individual sale within the plan, BLM designates the timber for sale and appraises the value of the timber. BLM timber may be designated by physical marking or by enclosing timber in a sale boundary. BLM prepares a sale contract, along with a prospectus describing the sale. The sale is advertised at an appraised starting price. Interested parties may bid on the contract. A contract is awarded to the highest bidder provided legal conditions are met. The winning bidder conducts the timber harvest according to the terms specified in the contract, such as timeline and harvest method. Timber harvests must generally be completed in three years, but may be extended under certain circumstances.

Timber sales generate revenues, and disposition of these revenues depends on a number of factors. Congress has established several funds for timber sale revenues. Depending on the type of sale and the originating lands, BLM may be required to make certain deposits to these funds. If any portion of revenues are not required to be deposited, BLM may allocate those revenues among funds at its discretion, including depositing all revenues in a single account. Some funds are permanently appropriated to BLM and may be used without further congressional action (i.e. as mandatory appropriations). See Table A-2 for a list of these funds. A more detailed discussion of funding levels, expenditures, and issues related to BLM timber revenue funds is outside the scope of this report.

Timber harvesting is one of many authorized uses of BLM lands. Long-term historical data regarding BLM timber harvesting is unavailable. Other data on past timber program activity show that BLM timber harvesting may have changed over time. This section provides data on timber offered for sale, timber sold, and timber harvested from BLM lands at various points in time, along with some economic and historical factors which may have contributed to observed changes.

Data on cut timber volume from BLM lands is available from FY1994 onward (see Figure 4 ). While complete historical cut data is unavailable prior to FY1994, some data exists about past sales (see Table 1 ). The intermittent nature of this data challenges drawing conclusions about larger trends in these periods, especially in the missing decades. In addition, these data refer to either timber sold or timber offered for sale, which differs from volume of timber cut. However, as an approximate comparison, the data show that the volumes sold prior to FY1990 are large compared to recent volumes offered for sale. Observers confirmed a decline in public domain timber offered for sale beginning in 1991, though the investigation did not consider the O&C lands.

Volumes harvested from BLM lands were between 100 and 260 MMBF from FY1995 to FY2000 and from FY2004 to FY2018 (see Figure 4 ). Harvests were lower in FY1994 and between FY2001 and FY2003. Harvested volumes have shown a generally increasing trend since FY2001, with the largest recently recorded harvest in FY2015 (about 258 MMBF). Like the NFS, harvests from BLM lands during the recession and housing market collapse of 2008 experienced relatively little change in volume, for unclear reasons. In FY2018, BLM harvested about 178 MMBF.

Data on cut timber value from BLM lands is available from FY1996 onward (see Figure 4 ). Total value of harvests has declined since FY1996. Harvest values have generally increased since the low value of approximately $15.4 million in FY2001, and have been between $20 million and $50 million since FY2011 (FY2018 dollars). In FY2018, cut value was $41.3 million. Like the FS, BLM harvest value during the recession and housing market collapse of 2008 declined, but the relative change was small compared to the decreases of the late 1990s. Harvest value may vary due to the quality, species, and age class of offered timber as well as timber market conditions, and is correlated with harvested volume. BLM harvest values per unit of timber are higher than FS values per unit, due to the dominant timber type harvested from BLM lands, among other factors.

Geographic Distribution of Timber Harvests on BLM Lands

Most timber harvests on BLM lands are conducted on the O&C lands. From FY2014 to FY2018, the average harvested volume from O&C lands was 93% of the average total volume. The large proportion of volume harvested from O&C lands reflects the forest cover and type, dominant use for forest production, and the size of the forest industry in the Pacific Northwest. As with the NFS, in general, BLM harvest volume and value is a function of many complex factors, including the dominant timber type, age class, and condition; the suitability of sites for harvest operations; legal limitations on land uses; and the status of the local forest products industry.

Management of federal lands for multiple uses and sustained yield is challenging, including balancing timber harvesting with other uses. Timber production from federal lands is driven by a complex interaction of environmental factors, market forces, and land management policies. Under current law, efforts to change harvest levels must comport with the provision of a sustained yield of multiple uses. Congress has sometimes considered legislation to prioritize or exclude some uses in a limited manner—in certain geographic regions, for example—but has not changed these fundamental management concepts since their enactment in the 1960s and 1970s.

The public often expresses preferences for uses of federal forests, including with respect to timber harvesting. Some may support timber harvesting generally, and believe the current levels of production are sufficient. Others may wish to see the levels of production increased or decreased, depending on their perspective. Those who support timber harvesting on federal lands may cite benefits to the local timber industry, a belief that harvesting is part of the core mission of federal forests, or a belief that timber harvesting is a tool for improving forest health conditions, among other reasons. Proponents of timber harvesting on federal lands may also emphasize the role of timber harvesting in some forest-adjacent rural economies. Others may oppose timber harvesting due to concerns about ecological or human impacts: for example, they may cite beliefs that timber sales have detrimental impacts on environmental quality, fish and wildlife habitat, forest character, recreation and tourism, or cultural and aesthetic values. Opponents may also contend that conducting timber sales favors the timber industry over other interests.

In addition to the themes identified above, Congress may also debate other issues related to federal timber harvests that are not discussed in detail in this report. For example, these include issues related to the disposition and use of timber sale revenues; the relationship between timber harvest planning and statutes such as NEPA and the Endangered Species Act (ESA); and special harvest authorities, among others.

The following tables list and describe the funds that receive timber sale revenues; the funds' statutory authority is also shown. A detailed discussion of funding levels, expenditures, and issues related to these funds is outside the scope of this report.


Mail and Wire Fraud: A Brief Overview of Federal Criminal Law

Summary: The mail and wire fraud statutes are exceptionally broad. Their scope has occasionally given the courts pause. Nevertheless, prosecutions in their name have brought to an end schemes that have bilked victims out of millions, and sometimes billions, of dollars. The statutes proscribe (1) causing the use of the mail or wire communications, including email; (2) in conjunction with a scheme to intentionally defraud another of money or property; (3) by means of a material deception. The offenses, along with attempts or conspiracies to commit them, carry a term of imprisonment of up to 30 years in some cases, followed by a term of supervised release. Offenders also face the prospect of fines, orders to make restitution, and forfeiture of their property.

Summary: The mail and wire fraud statutes overlap with a surprising number of other federal criminal statutes. Conduct that supports a prosecution under the mail or wire fraud statutes will often support prosecution under one or more other criminal provision(s). These companion offenses include (1) those that use mail or wire fraud as an element of a separate offense, like racketeering or money laundering; (2) those that condemn fraud on some jurisdictional basis other than use of the mail or wire communications, like those that outlaw defrauding the federal government or federally insured banks; and (3) those that proscribe other deprivations of honest services (i.e., bribery and kickbacks), like the statutes that ban bribery of federal officials or in connection with federal programs.

Summary: Among the crimes for which mail or wire fraud may serve as an element, RICO (Racketeer Influenced and Corrupt Organizations Act) outlaws employing the patterned commission of predicate offenses to conduct the affairs of an enterprise that impacts commerce. Money laundering consists of transactions involving the proceeds of a predicate offense in order to launder them or to promote further predicate offenses.

Summary: The statutes that prohibit fraud in some form or another are the most diverse of the mail and wire fraud companions. Congress modeled some after the mail and wire fraud statutes, incorporating elements of a scheme to defraud or obtain property by false pretenses into statutes that outlaw bank fraud, health care fraud, securities fraud, and foreign labor contracting fraud. Congress designed others to protect the public fisc by proscribing false claims against the United States, conspiracies to defraud the United States by obstructing its functions, and false statements in matters within the jurisdiction of the United States and its departments and agencies.

Summary: Federal bribery and kickback statutes populate the third class of wire and mail fraud companions. One provision bans offering or accepting a thing of value in exchange for the performance or forbearance of a federal official act. Another condemns bribery of faithless agents in connection with federally funded programs and activities. A third, the Hobbs Act, outlaws bribery as a form of extortion under the color of official right.

Summary: The fines, prison sentences, and other consequences that follow conviction for wire and mail fraud companions vary considerably, with fines from not more than $25,000 to not more than $2 million and prison terms from not more than five years to life.

Some time ago, a federal prosecutor referred to the mail and wire fraud statutes as "our Stradivarius, our Colt 45, our Louisville Slugger … and our true love." Not everyone shared the prosecutor's delight. Commentators have argued that the statutes "have long provided prosecutors with a means by which to salvage a modest, but dubious, victory from investigations that essentially proved unfruitful." Federal judges have also expressed concern from time to time, observing that the "mail and wire fraud statutes have 'been invoked to impose criminal penalties upon a staggeringly broad swath of behavior,' creating uncertainty in business negotiations and challenges to due process and federalism." Nevertheless, mail and wire fraud prosecutions have brought to an end schemes that bilked victims of millions, and sometimes billions, of dollars.

The federal mail and wire fraud statutes outlaw schemes to defraud that involve the use of mail or wire communications. Both condemn fraudulent conduct that may also come within the reach of other federal criminal statutes. Both may serve as racketeering and money laundering predicate offenses. Both are punishable by imprisonment for not more than 20 years; for not more than 30 years, if the victim is a financial institution or the offense is committed in the context of major disaster or emergency. Both entitle victims to restitution. Both may result in the forfeiture of property.

The first of the two, the mail fraud statute, emerged in the late 19 th century as a means of preventing "city slickers" from using the mail to cheat guileless "country folks." But for penalty increases and amendments calculated to confirm its breadth, the prohibition has come down to us essentially unchanged. Speaking in 1987, the Supreme Court noted that "the last substantive amendment to the statute ... was the codification of the holding of Durland ... in 1909." Congress did amend it thereafter to confirm that the mail fraud statute and the wire fraud statute reached schemes to defraud another of the right to honest services and to encompass the use of commercial postal carriers.

The wire fraud statute is of more recent vintage. Enacted as part of the Communications Act Amendments of 1952, it was always intended to mirror the provisions of the mail fraud statute. Since its inception, changes in the mail fraud statute have come with corresponding changes in the wire fraud statute in most instances.

The mail and wire fraud statutes are essentially the same, except for the medium associated with the offense—the mail in the case of mail fraud and wire communication in the case of wire fraud. As a consequence, the interpretation of one is ordinarily considered to apply to the other. In construction of the terms within the two, the courts will frequently abbreviate or adjust their statement of the elements of a violation to focus on the questions at issue before them. As treatment of the individual elements makes clear, however, there seems little dispute that conviction requires the government to prove

the use of either mail or wire communications in the foreseeable furtherance of a scheme and intent to defraud another of either property or honest services involving a material deception.

The wire fraud statute applies to anyone who "transmits or causes to be transmitted by wire, radio, or television communication in interstate or foreign commerce any writings ... for the purpose of executing [a] ... scheme or artifice." The mail fraud statute is similarly worded and applies to anyone who "... for the purpose of executing [a] ... scheme or artifice ... places in any post office ... or causes to be delivered by mail ... any ... matter."

The statutes require that a mailing or wire communication be in furtherance of a scheme to defraud. The mailing or communication need not be an essential element of the scheme, as long as it "is incident to an essential element of the scheme." A qualifying mailing or communication, standing alone, may be routine, innocent or even self-defeating, because "[t]he relevant question at all times is whether the mailing is part of the execution of the scheme as conceived by the perpetrator at the time, regardless of whether the mailing later, through hindsight, may prove to have been counterproductive." The element may be satisfied by mailings or communications "designed to lull the victim into a false sense of security, postpone inquiries or complaints, or make the transaction less suspect." The element may also be satisfied by mailings or wire communications used to obtain the property which is the object of the fraud.

A defendant need not personally have mailed or wired a communication; it is enough that he "caused" a mailing or transmission of a wire communication in the sense that the mailing or transmission was the reasonable foreseeable consequence of his intended scheme.

The mail and wire fraud statutes "both prohibit, in pertinent part, 'any scheme or artifice to defraud[,]' or to obtain money or property 'by means of false or fraudulent pretenses, representations, or promises," or deprive another of the right to honest services by such means. From the beginning, Congress intended to reach a wide range of schemes to defraud, and has expanded the concept whenever doubts arose. It added the second prong—obtaining money or property by false pretenses, representations, or promises—after defendants had suggested that the term "scheme to defraud" covered false pretenses concerning present conditions but not representations or promises of future conditions. More recently, it added 18 U.S.C. § 1346 to make it clear the term "scheme to defraud" encompassed schemes to defraud another of the right to honest services. Even before that adornment, the words were understood to "refer 'to wronging one in his property rights by dishonest methods or schemes,' and 'usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.'"

As a general rule, the crime is done when the scheme is hatched and an attendant mailing or interstate phone call or email has occurred. Thus, the statutes are said to condemn a scheme to defraud regardless of its success. It is not uncommon for the courts to declare that to demonstrate a scheme to defraud the government needs to show that the defendant's "communications were reasonably calculated to deceive persons of ordinary prudence and comprehension." Even a casual reading, however, might suggest that the statutes also cover a scheme specifically designed to deceive a naïve victim. Nevertheless, the courts have long acknowledged the possibility of a "puffing" defense, and there may be some question whether the statutes reach those schemes designed to deceive the gullible though they could not ensnare the reasonably prudent. In any event, the question may be more clearly presented in the context of the defendant's intent and the materiality of the deception.

Defrauding or to Obtain Money or Property

The mail and wire fraud statutes speak of schemes to defraud or to obtain money or property by means of false or fraudulent pretenses. The Supreme Court has said that the phrase "to defraud" and the phrase "to obtain money or property" do not represent separate crimes, but instead the phrase "obtain money or property" describes what constitutes a scheme to defraud. In later look-alike offenses, Congress specifically numerated the two phrases. The bank fraud statute, for example, applies to "whoever knowingly executes … a scheme or artifice — (1) to defraud a financial institution; or (2) to obtain any of the money, funds, credits, assets, securities, or other property owned by … a financial institution, by means of false or fraudulent pretenses …" It left the mail and wire fraud statutes, however, unchanged.

The mail and wire fraud statutes clearly protect against deprivations of tangible property. They also protect certain intangible property rights, but only those that have value in the hands of the victim of a scheme. "To determine whether a particular interest is property for purposes of the fraud statutes, [courts] look to whether the law traditionally has recognized and enforced it as a property right."

Neither the mail nor the wire fraud statute exhibits an explicit reference to materiality. Yet materiality is an element of each offense, because at the time of the statutes' enactment, the word "defraud" was understood to "require[] a misrepresentation or concealment of [a] material fact." Thus, other than in an honest services context, a "scheme to defraud" for mail or wire fraud purposes must involve a material misrepresentation of some kind. "A misrepresentation is material if it is capable of influencing the intended victim."

Again, other than in the case of honest services, "'intent to defraud' requires an intent to (1) deceive, and (2) cause some harm to result from the deceit. A defendant acts with the intent to deceive when he acts knowingly with the specific intent to deceive for the purpose of causing pecuniary loss to another or bringing about some financial gain to himself."

A defendant has a complete defense if he believes the deceptive statements or promises to be true or otherwise acts under circumstances that belie an intent to defraud. Yet, a defendant has no defense if he blinds himself to the truth. Nor is it a defense if he intends to deceive but feels his victim will ultimately profit or be unharmed.

The Supreme Court held in McNally v. United States that the protection of the mail fraud statute, and by implication the protection of the wire fraud statute, did not extend to "the intangible right of the citizenry to good government." Soon after McNally , Congress enlarged the mail and wire fraud protection to include the intangible right to honest services, by defining the "term 'scheme or artifice to defraud' [to] include[s] a scheme or artifice to deprive another of the intangible right to honest services." Lest the expanded definition be found unconstitutionally vague, the Court in Skilling v. United States limited its application to cases of bribery or kickbacks. The Court in Skilling supplied only a general description of the bribery and kickbacks condemned in the honest-services statute. Subsequent lower federal courts have often looked to the general federal law relating to bribery and kickbacks for the substantive elements of honest services bribery. In this context, bribery requires "a quid pro quo—a specific intent to give … something of value in exchange for an official act." And an "official act" means no more than an officer's formal exercise of governmental power in the form of a "decision or action on a 'question, matter, cause, suit, proceeding or controversy'" before him.

The definition of the word "kickback" quoted by the Court in Skilling has since been reassigned, and the courts have cited the dictionary definition on occasion.

Except for the elements of a scheme to defraud in the form of a bribe and a kickback, honest services fraud, as an adjunct of the mail and wire fraud statutes, draws its elements and the sanctions that attend the offense from the mail and wire fraud statutes.

Aiding and Abetting, Attempt, and Conspiracy

Attempting or conspiring to commit mail or wire fraud or aiding and abetting the commission of those offenses carries the same penalties as the underlying offense. "In order to aid and abet another to commit a crime it is necessary that a defendant in some sort associate himself with the venture, that he participate in it as in something that he wishes to bring about, that he seek by his action to make it succeed."

"Conspiracy to commit wire fraud under 18 U.S.C. § 1349 requires a jury to find that (1) two or more persons agreed to commit wire fraud and (2) the defendant willfully joined the conspiracy with the intent to further its unlawful purpose." As a general rule, a conspirator is liable for any other offenses that a co-conspirator commits in the foreseeable furtherance of the conspiracy. Such liability, however, extends only until the objectives of the conspiracy have been accomplished or the defendant has withdrawn from the conspiracy.

Where attempt has been made a separate offense, as it has for mail and wire fraud, conviction ordinarily requires that the defendant commit a substantial step toward the completion of the underlying offense with the intent to commit it. It does not, however, require the attempt to have been successful. Unlike conspiracy, a defendant may not be convicted of both the substantive offense and the lesser included crime of attempt to commit it.

A mail and wire fraud are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations), or fine of not more than $1 million and imprisonment for not more than 30 years if the victim is a financial institution or the offense was committed in relation to a natural disaster. It is also subject to a mandatory minimum two-year term of imprisonment if identify theft is used during and in furtherance of the fraud. Conviction may also result in

probation, a term of supervised release, a special assessment, a restitution order, and/or a forfeiture order.

Sentencing in federal court begins with the federal Sentencing Guidelines. The Guidelines are essentially a scorekeeping system. A defendant's ultimate sentence under the Guidelines is determined by reference first to a basic guideline, which sets a base "offense level." Offense levels are then added or subtracted to reflect his prior criminal record as well as the aggravating and mitigating circumstances attending his offense. One of two basic guidelines applies to mail and wire fraud. Section 2C1.1 applies to mail or wire fraud convictions involving corruption of public officials. Section 2B1.1 applies to other mail or wire fraud convictions. Both sections include enhancements based on the amount of loss associated with the fraud.

After all the calculations, the final offense level determines the Guidelines' recommendations concerning probation, imprisonment, and fines. The Guidelines convert final offense levels into 43 sentencing groups, which are in turn each divided into six sentencing ranges based on the defendant's criminal history. Thus, for instance, the recommended sentencing range for a first-time offender (i.e., one with a category I criminal history) with a final offense level of 15 is imprisonment for between 18 and 24 months. A defendant with the same offense level 15 but with a criminal record placing him in criminal history category VI, would face imprisonment from between 41 and 51 months. The Guidelines also provide offense-level-determined fine ranges for individuals and organizations.

As a general rule, sentencing courts may place a defendant on probation for a term of from 1 to 5 years for any crime punishable by a maximum term of imprisonment of less than 25 years. The Guidelines, however, recommend "pure" probation, that is, probation without any term of incarceration, only with respect to defendants with an offense level of 8 or below, i.e., levels where the sentencing range is between zero and six months.

Once a court has calculated the Guidelines' recommendations, it must weigh the other statutory factors found in 18 U.S.C. § 3553(a) before imposing a sentence. Appellate courts will uphold a sentence if the sentence is procedurally and substantively reasonable. A sentence is reasonable procedurally if it is free of procedural defects, such as a failure to accurately calculate the Guidelines' recommendations and to fully explain the reasons for the sentence selected. A sentence is reasonable substantively if it is reasonable in light of circumstances that a case presents.

Supervised Release and Special Assessments

Supervised release is a form of parole-like supervision imposed after a term of imprisonment has been served. Although imposition of a term of supervised release is discretionary in mail and wire fraud cases, the Sentencing Guidelines recommend its imposition in all felony cases. The maximum supervised release term for wire and mail fraud generally is three years—five years when the defendant is convicted of the mail or wire fraud against a financial institution that carries a 30-year maximum term of imprisonment. Release will be subject to a number of conditions, violation of which may result in a return to prison for not more than two years (not more than three years if the original crime of conviction carried a 30-year maximum). There are three mandatory conditions: (1) commit no new crimes; (2) allow a DNA sample to be taken; and (3) submit to periodic drug testing. The court may suspend the drug testing condition, although it is under no obligation to do so even though the defendant has no history of drug abuse and drug abuse played no role in the offense.

Most courts will impose a standard series of conditions in addition to the mandatory condition of supervised release. The Sentencing Guidelines recommend that these include the payment of any fines, restitution, and special assessments that remain unsatisfied. Defendants convicted of mail or wire fraud must pay a special assessment of $100.

Restitution is ordinarily required of those convicted of mail or wire fraud. The victims entitled to restitution include those directly and proximately harmed by the defendant's crime of conviction, and "in the case of an offense that involves as an element a scheme, conspiracy, or pattern of criminal activity," like mail and wire fraud, "any person directly harmed by the defendant's conduct in the course of the scheme, conspiracy, or pattern."

Property that constitutes the proceeds of mail or wire fraud is subject to confiscation by the United States. It may be confiscated pursuant to either civil forfeiture or criminal forfeiture procedures. Civil forfeiture proceedings are conducted that treat the forfeitable property as the defendant. Criminal forfeiture proceedings are conducted as part of the criminal prosecution of the property owner.

The mail and wire fraud statutes essentially outlaw dishonesty. Due to their breadth, misconduct that constitutes mail or wire fraud may constitute a violation of one or more other federal criminal statutes as well. This overlap occurs perhaps most often with respect to (1) crimes for which mail or wire fraud are elements ("predicate offenses") of another offense; (2) fraud proscribed under jurisdictional circumstances other than mail or wire use; and (3) honest services fraud in the form of bribery or kickbacks.

Some federal crimes have as an element the commission of some other federal offense. The money laundering statute, for example, outlaws laundering the proceeds of various predicate offenses. The racketeering statute outlaws the patterned commission of a series of predicate offenses in order to operate a racketeering enterprise. Mail and wire fraud are racketeering and money laundering predicate offenses.

The Racketeering Influenced and Corrupt Organization (RICO) provisions outlaw acquiring or conducting the affairs of an enterprise, engaged in or whose activities affect interstate commerce, through loan sharking or the patterned commission of various other predicate offenses. The racketeering-conduct and conspiracy-to-engage-in-racketeering-conduct appear to be the RICO offenses most often built on wire or mail fraud violations. The elements of the RICO conduct offense are (1) conducting the affairs; (2) of an enterprise; (3) engaged in activities in or that impact interstate or foreign commerce; (4) through a pattern; (5) of racketeering activity. To prove a RICO conspiracy, the government must prove: "(1) that two or more persons agreed to conduct or to participate, directly or indirectly, in the conduct of an enterprise's affairs through a pattern of racketeering activity; (2) that the defendant was a party to or a member of that agreement; and (3) that the defendant joined the agreement or conspiracy knowing of its objective to conduct or participate, directly or indirectly, in the conduct of the enterprise's affairs through a pattern of racketeering activity."

"Racketeering activity" means, among other things, any act that is indictable under either the mail or wire fraud statutes. As for pattern, a RICO pattern "requires at least two acts of racketeering activity. The racketeering predicates may establish a pattern if they [were] related and … amounted to, or threatened the likelihood of, continued criminal activity.'"

The pattern of predicate offenses must be used by someone employed by or associated with a qualified enterprise to conduct or participate in its activities. "Congress did not intend to extend RICO liability . . . beyond those who participated in the operation and management of an enterprise through a pattern of racketeering activity." Nevertheless, "liability under § 1962(c) is not limited to upper management … An enterprise is operated not just by upper management but also by lower rung participants."

The enterprise may be either any group of individuals, any legal entity, or any group "associated in fact." "Nevertheless, 'an association-in-fact enterprise must have at least three structural features: a purpose, relationships among those associated with the enterprise and longevity sufficient to permit those associates to pursue the enterprise's purpose.'" Moreover, qualified enterprises are only those that "engaged in, or the activities of which affect, interstate or foreign commerce."

RICO violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered when one of the predicate offenses is mail or wire fraud. RICO has one of the first contemporary forfeiture provisions, covering property and interests acquired through RICO violations. As noted earlier, any RICO predicate offense is by virtue of that fact a money laundering predicate. RICO violations create a cause of action for treble damages for the benefit of anyone injured in their business or property by the offense.

Mail and wire fraud are both money laundering predicate offenses by virtue of their status as RICO predicates. The most commonly prosecuted federal money laundering statute, 18 U.S.C. § 1956, outlaws, among other things, knowingly engaging in a financial transaction involving the proceeds generated by a "specified unlawful activity" (a predicate offense) for the purpose (1) of laundering the proceeds (i.e., concealing their source or ownership), or (2) of promoting further predicating offenses.

To establish the concealment offense, the government must establish that "(1) [the] defendant conducted, or attempted to conduct a financial transaction which in any way or degree affected interstate commerce or foreign commerce; (2) the financial transaction involved proceeds of illegal activity; (3) [the] defendant knew the property represented proceeds of some form of unlawful activity, [such as mail or wire fraud]; and (4) [the] defendant conducted or attempted to conduct the financial transaction knowing the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds of specified unlawful activity."

To prove the promotional offense, "the Government must show that the defendant: (1) conducted or attempted to conduct a financial transaction; (2) which the defendant then knew involved the proceeds of unlawful activity; (3) with the intent to promote or further unlawful activity."

Nothing in either provision suggests that the defendant must be shown to have committed the predicate offense. Moreover, simply establishing that the defendant spent or deposited the proceeds of the predicate offense is not enough without proof of an intent to promote or conceal.

Either offense is punishable by imprisonment for not more than 20 years and a fine of not more than $500,000. Property involved in a transaction in violation of Section 1956 is subject to civil and criminal forfeiture.

Merely depositing the proceeds of a money laundering predicate offense, like mail or wire fraud, does not alone constitute a violation of Section 1956. It is enough for a violation of 18 U.S.C. § 1957, however, if more than $10,000 is involved. Section 1957 uses Section 1956's definition of specified unlawful activities. Thus, mail and wire fraud violations may serve as the basis for the prosecution under Section 1957. "Section 1957 differs from Section 1956 in two critical respects: It requires that the property have a value greater than $10,000, but it does not require that the defendant know of [the] design to conceal aspects of the transaction or that anyone have such a design."

Violations are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000) for organizations. The property involved in a violation is subject to forfeiture under either civil or criminal procedures.

Fraud Under Other Jurisdictional Circumstances

This category includes the offenses that were made federal crimes because they involve fraud against the United States, or because they are other frauds that share elements with the mail and wire fraud. The most prominent are the proscriptions against defrauding the United States by the submission of false claims, conspiracy to defraud the United States, and material false statements in matters within the jurisdiction of the United States. Bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting are mail and wire fraud look-alikes.

Section 287 outlaws the knowing submission of a false claim against the United States. "To prove a false claim, the government must prove that (1) [the defendant] 'made and presented' to the government a claim, (2) 'the claim was false, fictitious, or fraudulent,' (3) [the defendant] knew the claim was false, fictitious, or fraudulent, and (4) 'the claim was material' to the government." The offense carries a sentence of imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). The crime is one for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, but either a private individual or the government may bring a civil action for treble damages under the False Claims Act. Section 287 offenses are neither RICO nor money laundering predicate offenses. Nevertheless, a defendant who presents his false claim by mail or email may find himself charged under both Section 287 and either the mail or wire fraud statutes.

The general conspiracy statute has two parts. It outlaws conspiracies to violate the laws of the United States. More relevant here, it also outlaws conspiracies to defraud the United States. "To convict on a charge under the 'defraud' clause, the government must show that the defendant (1) entered into an agreement (2) to obstruct a lawful government function (3) by deceitful or dishonest means and (4) committed at least one overt act in furtherance of the conspiracy." Thus, the "fraud covered by the statute reaches any conspiracy for the purpose of impairing, obstructing or defeating the lawful functions of any department of the Government" by "deceit, craft or trickery, or at least by means that are dishonest." Unlike mail and wire fraud, the government need not show that the scheme was designed to deprive another of money, property, or honest services; it is enough to show that the scheme is designed to obstruct governmental functions.

Conspiracy to defraud the United States is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense.

Section 1001 outlaws knowingly and willfully making a material false statement on a matter within the jurisdiction of the executive, legislative, or judicial branch of the federal government. A matter is material for purposes of Section 1001 when "it has a natural tendency to influence, or [is] capable of influencing, the decision of" the individual or entity to whom it is addressed. A matter is within the jurisdiction of a federal entity "when it has the power to exercise authority in a particular matter," and federal jurisdiction "may exist when false statements [are] made to state or local government agencies receiving federal support or subject to federal regulation."

A violation of Section 1001 is punishable by imprisonment for not more than five years and a fine of not more than $250,000 (not more than $500,000 for organizations). It is neither a RICO nor a money laundering predicate offense. It is an offense for which restitution must be ordered. There is no explicit authority for confiscation of property tainted by the offense, unless the offense relates to the activities of various federal financial receivers and conservators. Moreover, in a situation where the offense involves the submission of a false claim, either a private individual or the government may bring a civil action for treble damages under the False Claims Act.

Chapter 63 contains four other fraud proscriptions in addition to mail and wire fraud: bank fraud, health care fraud, securities and commodities fraud, and fraud in foreign labor contracting. Each relies on a jurisdictional base other than use of the mail or wire communications.

The bank fraud statute outlaws (1) schemes to defraud a federally insured financial institution, and (2) schemes to falsely obtain property from such an institution. To establish the bank- property scheme to defraud offense, "the Government must prove: (1) the defendant knowingly executed or attempted to execute a scheme or artifice to defraud a financial institution; (2) the defendant did so with the intent to defraud a financial institution; and (3) the financial institution was federally insured."

As for the bank-custody offense, "the government must prove (1) that a scheme existed to obtain moneys, funds, or credit in the custody of a federally-insured bank by fraud; (2) that the defendant participated in the scheme by means of material false pretenses, representations, or promises; and (3) that the defendant acted knowingly."

Violation of either offense is punishable by imprisonment for not more than 30 years and a fine of not more than $1 million. Bank fraud is both a RICO and a money laundering predicate offense. Conviction also requires an order for victim restitution. Property constituting the proceeds of a violation is subject to forfeiture under either civil or criminal procedure.

The health care fraud provision follows the pattern of other Chapter 63 offenses. It condemns schemes to defraud. The schemes it proscribes include honest services fraud in the form of bribery and kickbacks. Attempts and conspiracies to violate its prohibitions carry the same penalties as the complete offense it describes. It is often prosecuted along with other related offenses. Parsed to its elements, the section declares:

(1) to defraud any health care benefit program, or

(2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any money or property owned by, or under the custody or control of, any health care benefit program

[e] in connection with the delivery of or payment for health care benefits, items, or services shall be …

Section 1347's penalty structure is somewhat distinctive. General violations are punishable by imprisonment for not more than 10 years and fines of not more than $250,000. Should serious bodily injury result, however, the maximum penalty is increased to imprisonment for not more than 20 years; should death result, the maximum penalty is imprisonment for life or any term of years. Section 1347 offenses are neither money laundering nor RICO predicate offenses, and proceeds of a violation of Section 1347 are not subject to confiscation. Victims, however, are entitled to restitution.

Section 1348, the securities and commodities fraud prohibition, continues the progression of separating its defrauding feature from its obtaining-property feature. The elements of defrauding offense "are (1) fraudulent intent, (2) a scheme or artifice to defraud, and (3) a nexus with a security." To prove a violation of Section 1348(2), the government must establish that the defendant (1) executed, or attempted to execute, a scheme or artifice; (2) with fraudulent intent; (3) in order to obtain money or property; (4) by material false or fraudulent pretenses, representations, or promises.

A conviction for mail fraud or wire fraud, or both, sometimes accompanies a conviction for securities fraud under Section 1348.

Under either version of Section 1348, offenders face imprisonment for not more than 25 years and fines of not more than $250,000 (not more than $500,000 for organizations). The offense s are neither money laundering nor RICO predicate offense s . Victim restitution must be ordered upon conviction, but forfeiture is not authorized.

"The substantive offense of fraud in foreign labor contracting [under 18 U.S.C. § 1351] occurs when someone: (1) recruits, solicits, or hires a person outside the United States, or causes another person to do so, or attempts to do so; (2) does so by means of materially false or fraudulent pretenses, representations or promises regarding that employment; and (3) acts knowingly and with intent to defraud." The offense occurs outside the United States when related to a federal contract or U.S. presence abroad.

The offense is a RICO predicate offense and consequently a money laundering predicate offense as well. A restitution order is required at sentencing, but forfeiture is not authorized.

After the Supreme Court's 2010 decision in Skillin g v. United States , honest services mail and wire fraud consists of bribery and kickback schemes furthered by use of the mail or wire communications. Mail and wire fraud aside, the principal bribery and kickback statutes include 18 U.S.C. §§ 201(b)(1) (bribery of federal officials), 666 (bribery relating to federal programs), 1951 (extortion under color of official right); 15 U.S.C §§ 78dd-1 to 78dd-3 (foreign corrupt practices); and 42 U.S.C. § 1320a-7b (Medicare/Medicaid anti-kickback).

Conviction for violation of Section 201(b)(1) "requires a showing that something of value was corruptly ... offered or promised to a public official ... or corruptly ... sought ... or agreed to be received by a public official with intent ... to influence any official act ... or in return for 'being influenced in the performance of any official act."

The hallmark of the offense is a corrupt quid pro quo, "a specific intent to give or receive something of value in exchange for an official act." The public officials covered include federal officers and employees, those of the District of Columbia, and those who perform tasks for or on behalf of the United States or any of its departments or agencies. The official acts that constitute the objective of the corrupt bargain include any decision or action relating to any matter coming before an individual in his official capacity.

Section 201 punishes bribery with imprisonment for up to 15 years, a fine of up to $250,000 (up to $500,000 for an organization), and disqualification from future federal office or employment. Section 201 is a RICO predicate offense and consequently also a money laundering predicate offense. The proceeds of a bribe in violation of Section 201 are subject to forfeiture under either civil or criminal procedure.

Bribery and Fraud Related to Federal Programs

Section 666 outlaws both (1) fraud and (2) bribery by the faithless agents of state, local, tribal, or private entities—that receive more than $10,000 in federal benefits—in relation to a transaction of $5,000 or more. "A violation of Section 666(a)(1)(A) requires proof of five elements. The government must prove that: (1) a defendant was an agent of an organization, government, or agency; (2) in a one-year period that organization, government, or agency received federal benefits in excess of $10,000; (3) a defendant … obtained by fraud … ; (4) … property owned by, or in the care, custody, or control of, the organization, government, or entity; and (5) the value of that property was at least $5,000."

"A person is guilty under § 666[(a)(1)(B)] if he, being an agent of an organization, government, or governmental agency that receives federal-program funds, corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more."

Agents are statutorily defined as "person[s] authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative." The circuits appear divided over whether the government must establish a quid pro quo as in a Section 201 bribery case. The government, however, need not establish that the tainted transaction involves federal funds.

Violations of Section 666 are punishable by imprisonment for not more than 10 years and a fine of not more than $250,000 (not more than $500,000 for organizations). Section 666 offenses are money laundering predicate offenses. Section 666 offenses are not among the RICO federal predicate offenses, although bribery in violation of state felony laws is a RICO predicate offense. The proceeds of a bribe in violation of Section 666 are subject to forfeiture under either civil or criminal procedure.

The Hobbs Act, 18 U.S.C. § 1951, outlaws obtaining the property of another under "color of official right," in a manner that has an effect on interstate commerce. Conviction requires the government to prove that the defendant "(1) was a government official; (2) who accepted property to which she was not entitled; (3) knowing that she was not entitled to the property; and (4) knowing that the payment was given in return for officials acts: (5) which had at least a de minimis effect on commerce." Conviction does not require that the public official sought or induced payment: "the government need only show that a public official has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts."

Hobbs Act violations are punishable by imprisonment for not more than 20 years and a fine of not more than $250,000 (not more than $500,000 for an organization). Hobbs Act violations are RICO predicate offenses and thus money laundering predicates as well. The proceeds of a Hobbs Act violation are subject to forfeiture under either civil or criminal procedure.

The bribery provisions of the Foreign Corrupt Practices Act (FCPA) are three: 15 U.S.C. §§ 78dd-1 (trade practices by issuers), 78dd-2 (trade practices by domestic concerns), and 78dd-3 (trade practices by others within the United States). Other than the class of potential defendants, the elements of the three are comparable. They

make[] it a crime to: (1) willfully; (2) make use of the mail or any means or instrumentality of interstate commerce; (3) corruptly; (4) in furtherance of an offer, payment, promise to pay, or authorization of the payment of any money, or offer, gift, promise to give, or authorization of the giving of anything of value to; (5) any foreign official; (6) for purposes of [either] influencing any act or decision of such foreign official in his official capacity [or] inducing such foreign official to do or omit to do any act in violation of the lawful duty of such official [or] securing any improper advantage; (7) in order to assist such [corporation] in obtaining or retaining business for or with, or directing business to, any person.

None of the three proscriptions apply to payments "to expedite or to secure the performance of a routine governmental action," and each affords defendants an affirmative defense for payments that are lawful under the applicable foreign law or regulation.

Violations are punishable by imprisonment for not more than five years and by a fine of not more than $100,000 (not more than $2 million for organizations). Foreign Corrupt Practices Act violations are not RICO predicate offenses, but they are money laundering predicates. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure.

The Medicare/Medicaid kickback prohibition in 42 U.S.C. 1320a-7b(b) outlaws "knowingly and willfully [offering or paying], soliciting [or] receiving, any remuneration (including any kickback) ... (A) to induce the referral of [, or (B) the purchase with respect to] Medicare [or] Medicaid beneficiaries ... any item or service for which payment may be made in whole or in part under the Medicare [or] Medicaid programs...."

Violations are punishable by imprisonment for not more than five years and by a fine of not more than $25,000. Section 1320a-7b kickback violations are money laundering, but not RICO, predicate offenses. The proceeds of a violation are subject to forfeiture under either civil or criminal procedure.

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article, for the purpose of executing such scheme or artifice or attempting so to do, places in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or deposits or causes to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or takes or receives therefrom, any such matter or thing, or knowingly causes to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both. If the violation occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as those terms are defined in section 102 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( 42 U.S.C. 5122 )), or affects a financial institution, such person shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both.

For the purposes of this chapter, the term "scheme or artifice to defraud" includes a scheme or artifice to deprive another of the intangible right of honest services.

18 U.S.C. 1349 (Attempt and Conspiracy) (Text)

Any person who attempts or conspires to commit any offense under this chapter shall be subject to the same penalties as those prescribed for the offense, the commission of which was the object of the attempt or conspiracy.