A deeper dive into the law of wire fraud

Note: This is the second of three blog posts on the case of U.S. v. Porat.

Michael Levy, a former federal prosecutor, has written up a brief but excellent analysis (see here) of some of the legal issues in the case of Moshe Porat, the disgraced former dean of the Temple University business school, who was charged with wire fraud by the U.S. Attorney’s Office in Philadelphia. In brief, the indictment, a copy of which is available here, alleges that Dean Porat provided false information about his school to U.S. News & World Reports in order to boost his school’s ranking in U.S. News’ annual survey of graduate programs. According to Levy’s expert analysis, the Porat case poses three tricky legal questions:

1. Does the person deceived have to be the person defrauded? In this case, for example, it was U.S. News & World Reports that was directly deceived (allegedly) by Porat. Aside from being lied to, however, what economic harm did U.S. News suffer as a result of Porat’s alleged fraudulent scheme? For his part, Levy notes that to the extent U.S. News was the “unwitting transmitter” of the false statements to the victims “the people deceived and the people defrauded [are] the same,” but I would pose the following second-order question: Is U.S. News, in fact, an “unwitting transmitter” of Porat’s fake date, or does the magazine have an independent duty to verify the information that it publishes? If so, shouldn’t the magazine be jointly liable, along with Porat, for this fraud?

2. Were the students who decided to attend Porat’s business school based on the school’s inflated ranking “defrauded” in any real sense? That is, even if the person deceived (U.S. News) does not have to be the person defrauded (the students), are you a victim of fraud if you are lied to but nevertheless get what you paid for? Or in Levy’s words: “Even if the students opted to go to [Temple] because of the fraudulently obtained rating, they got what they paid for–a [Temple] business school education and MBA.” Furthermore, according to the facts alleged in the indictment of this case, the price of tuition during the scheme either remained the same or went down! So, if Dean Porat did not charge more for his school’s degrees, and if students got what they paid for (a Temple business school education), then where is the harm? What money or valuable property did Porat or the business school obtain as a result of Porat’s (allegedly) fraudulent scheme?

3. Last but not least, even if we were to assume for the sake of argument that the students in Porat’s case were, in fact, harmed or defrauded, was the harm in this case the object or main purpose of Porat’s (allegedly) fraudulent scheme or was this harm merely incidental to it? In other words, remember the infamous “Bridgegate” case? Back in 2013, public officials in New Jersey had conspired to create major traffic jams in the town of Fort Lee after the mayor of that town refused to endorse the re-election bid of then-Governor Chris Christie. Among other things, these public officials were charged with, and convicted of, wire fraud. On appeal, however, a unanimous U.S. Supreme Court reversed the conviction because “the scheme … did not aim to obtain money or property.” See Kelly v. United States, 590 U.S. ___ (2020). In other words, to prove wire fraud, the prosecution has to prove not only that the defendants engaged in a fraudulent scheme; it also has to prove that the main purpose of the scheme was to obtain money or property.

To sum up, contrary to my initial assessment of the Temple business school case (see here), it looks like Porat has a real good chance of getting the wire fraud charges against him dismissed by the judge in his case. Yet, assuming that Dean Porat did, in fact, submit doctored data about his school to U.S. News to inflate his school’s ranking, would a dismissal of the criminal charges against him be the “right” result? In my next post (the last one in this series), I will offer a common-sense interpretation of the federal wire fraud statute and of the facts in the Porat case.

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About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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