On May 11, 2023, the United States Supreme Court issued its decision in Ciminelli v. United States, rejecting the “right to control” theory of fraud. 

The “right to control” theory of fraud has been a controversial basis for convictions across the United States, dating back more than three decades. Under the “right to control” theory of fraud, depriving another of potentially valuable economic information that could impact economic decisions can provide the basis for a fraud conviction. The theory drastically expanded the bases for federal criminal liability under the wire fraud statute and created uncertainty as to the line between criminal and merely unethical conduct. 

The Supreme Court, in its Ciminelli decision, made clear that the government must prove a violation of an actual, tangible money or property interest. In Ciminelli, the government claimed that Louis Ciminelli had worked with New York state officials to ensure that his company would receive a $750 million state-funded development project. Specifically, Ciminelli paid a New York state official $100,000 to $180,000 per year to assist Ciminelli’s company in obtaining state-funded projects. The government’s theory was that Ciminelli’s coordination with state officials on his development plan deprived the state of New York the right to control the distribution of its funds through a fair and honest bidding process, and that such conduct therefore constituted wire fraud within the meaning of federal law. 

The Court rejected the government’s “right to control” theory within the meaning of wire fraud and reaffirmed the government’s burden to prove the plain language requirements of the wire fraud statute that a scheme to defraud be used for obtaining money or property by means of false or fraudulent pretenses, representations, or promises. The Ciminelli Court explained that because the “right to control” is not a traditional property interest under the Court’s earlier decisions, it could not satisfy the wire fraud statute’s “money or property” requirement. 

The implication of the Supreme Court's decision to eliminate the “right to control” as the basis of a mail or wire fraud offense likely means fewer federal criminal investigations into conduct involving alleged or suspected breaches of fiduciary duties related to conflict of interest schemes. As a result, there is now, more than ever, a heightened importance on rigorous compliance programs and workplace investigations.  

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.