“Convergence” Element of Wire Fraud On Thin Ice?

On August 7, 2023, the US Court of Appeals for the Third Circuit became the most recent federal appellate court to reject the argument that a wire fraud conviction requires the government to establish that the entity that was deceived was also ultimately defrauded, sometimes called the “convergence” element.

The case – United States v. Moshe Porat, No. 22-1560, –F. 4th– (3d Cir. 2023) – involved the former dean of Temple University’s business school, who was convicted for scheming to boost the school’s position in the annual US News and World Report academic rankings.

Porat served as dean of the Fox School of Business at Temple for over 20 years and placed a heavy emphasis on its national rank.  According to the government, although Porat initially endeavored to improve Fox’s rank through legitimate methods, such as through a data analysis and strategy committee, he eventually began submitting fake data to various academic ranking services.  For example, Porat and his co-conspirators inflated the percentage of Fox students who sat for the Graduate Management Admission Test (GMAT) and tweaked other student background information, all of which was integral to the statistical methodology employed by US News.

As a result of the scheme, Fox’s virtual Master of Business Administration (MBA) program rapidly ascended to the Number One ranking, and its part-time MBA program climbed nearly 50 spots in only a three-year time span.  Porat touted those rankings in Fox’s marketing materials and on social media, leading many former students to select Fox rather than another school. Fox’s enrollment surged as a result, gaining almost $40 million in tuition payments following the marketing campaign. The alleged scheme unraveled after multiple administrators questioned the school’s suspicious self-reported statistics, leading US News to downgrade both programs to 41 in the nation.

In April 2021, a grand jury charged Porat with one count of conspiracy to commit wire fraud, in violation of 18 U.S.C. § 371, and one count of wire fraud, in violation of 18 U.S.C. § 1343. The government alleged that Porat schemed with two Fox employees to defraud Fox applicants, students, and donors of money and property by means of false and fraudulent pretenses, representations, and promises.

After a two-week trial, a jury convicted Porat of wire fraud and conspiracy to commit wire fraud, and the district court sentenced him to 14 months’ imprisonment and $250,000 in fines and assessments. On appeal, Porat argued that the federal wire fraud statute requires the element of “convergence,” i.e., that the defendant must have deceived the victim that he defrauded through his conduct, not a third party. Porat argued that convergence was lacking in his case because even if the students were defrauded of tuition money they would have spent elsewhere, he only deceived US News

A three-judge panel of the Third Circuit flatly rejected Porat’s theory, holding that the text of the wire fraud statute contains no support for such an element, but even if it did, the evidence established that Porat had directly deceived students and recruiters through email correspondence and other statements.

Notably, the Third Circuit observed that nearly all of the federal Courts of Appeals have now rejected the requirement of a “convergence” element to obtain a conviction of wire fraud.[1]  Only the Ninth Circuit has squarely ruled that the element is necessary, see United States v. Lew, 875 F.2d 291, 221-22 (9th Cir. 1989), and the DC Circuit has held that it may be required depending upon the allegations in the indictment, see United States v. Abou-Khatwa, 40 F.4th 666, 675 (D.C. Cir. 2022).  Because of the likelihood of disparate grounds for wire fraud convictions across federal circuits, the US Supreme Court may eventually be called upon to definitively resolve the issue.

In the meantime, defendants accused of fraud may be able to use the facts of non-convergence to attack the sufficiency of the evidence required to satisfy the other, well-settled elements required by the federal fraud statutes. For example, a defendant might use the fact of non-convergence to argue that the government cannot prove the materiality element, because a misrepresentation is arguably not material if none of the victims were privy to the misrepresentation, and the victims would have parted with their money or property even absent the charged misrepresentation. Similarly, a defendant might use the fact of non-convergence to argue that the object of the scheme was not to obtain money or property from the victim, or that the defendant lacked fraudulent intent. Thus, even if the jurisdiction does not require convergence as a separate element under the federal fraud statutes, a defendant may be able to assert non-convergence to advance his or her theory of defense. 

We will continue to monitor this issue and provide further guidance.

[1] See United States v. Christopher, 142 F.3d 46, 54 (1st Cir. 1998); United States v. Greenberg, 835 F.3d 295, 306-07 (2d Cir. 2016); United States v. McMillan, 600 F.3d 434, 449-50 (5th Cir. 2010); United States v. Seidling, 737 F.3d 1155, 1161 (7th Cir. 2013); United States v. Blumeyer, 114 F.3d 758, 767-68 (8th Cir. 1997); United States v. Kennedy, 64 F.3d 1465, 1476 (10th Cir. 1995). The Fourth, Sixth, and Eleventh Circuits have yet to opine on the issue.


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