18 U.S.C. § 1031 – Major Fraud Against the United States
18 U.S.C. § 1031 makes it a federal crime to engage in a scheme to defraud the United States government when the value of the contract, grant, or federal assistance involved exceeds $1 million.
Known as the Major Fraud Act, this statute targets large-scale fraud involving federal contracts, grants, loans, subsidies, procurement agreements, and government assistance programs.
It is frequently charged in conjunction with wire fraud, mail fraud, false statements, and conspiracy.
A conviction can result in up to 10 years in federal prison per count, multimillion-dollar fines, restitution, and severe professional consequences.
If you are under investigation for federal contract fraud, disaster relief fraud, PPP loan fraud, or other government funding fraud, an early defense strategy is critical.
Your best hope for a favorable outcome is with an experienced criminal defense attorney at Eisner Gorin LLP. To schedule a consultation, call (818) 781-1570 or contact us here.
What Is Major Fraud Against the United States?
Section 1031 prohibits knowingly executing, or attempting to execute:
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A scheme to defraud the United States; or
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A scheme to obtain government money or property through false or fraudulent pretenses
The statute applies to fraud involving:
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Federal contracts
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Subcontracts
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Grants
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Loans
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Guarantees
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Subsidies
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Insurance
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Disaster relief programs
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Economic stimulus programs
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TARP and CARES Act funds
The threshold is that the underlying contract, grant, or assistance program must have a value of more than $1 million.
What Must Prosecutors Prove Under 18 U.S.C. § 1031?
To secure a conviction, federal prosecutors must prove beyond a reasonable doubt:
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The defendant knowingly executed or attempted a fraudulent scheme
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The defendant acted with the intent to defraud the United States
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The fraud involved a federal contract, grant, or assistance program
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The value of the contract or assistance exceeded $1 million
Intent is a key element. Honest mistakes, accounting errors, or contract disputes alone do not constitute criminal fraud.
Examples of Major Fraud Cases
Federal major fraud prosecutions commonly involve:
Government Procurement Fraud
Submitting inflated invoices, falsifying bids, or delivering substandard goods under federal contracts.
Healthcare Program Fraud
Fraud involving Medicare, Medicaid, or federally funded healthcare programs exceeding the $1 million threshold.
Disaster Relief and Emergency Funding Fraud
False claims involving FEMA assistance, PPP loans, CARES Act funds, or other emergency federal programs.
Defense Contract Fraud
Misrepresentations involving Department of Defense contracts.
The statute is frequently used when the total financial exposure is substantial.
How 18 U.S.C. § 1031 Differs From Other Fraud Charges
Major fraud under § 1031 specifically requires:
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Federal involvement; and
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A $1 million valuation threshold
Related statutes commonly charged alongside § 1031 include:
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18 U.S.C. § 1001 – False statements
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18 U.S.C. § 1343 – Wire fraud
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18 U.S.C. § 1028A – Aggravated identity theft
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18 U.S.C. § 1040 – Disaster benefit fraud
Prosecutors often stack multiple counts to increase sentencing exposure.
Penalties for Major Fraud Against the United States
A conviction under 18 U.S.C. § 1031 carries:
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Up to 10 years in federal prison per count
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Fines up to $1 million per offense
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Potential aggregate fines of up to $10 million
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Restitution to the federal government
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Supervised release
Federal sentencing guidelines may increase penalties based on:
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Total financial loss
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Number of victims
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Sophisticated means
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Leadership role
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Obstruction of justice
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Abuse of a position of trust
Loss amount is often the most significant sentencing factor.
How Federal Investigations Begin
Major fraud investigations typically arise from:
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Inspector General audits
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Federal agency compliance reviews
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Subpoenas and grand jury proceedings
Agencies involved may include:
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Department of Justice
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FBI
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Department of Defense Inspector General
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Health and Human Services OIG
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SBA OIG
Investigations often begin quietly and can last months before charges are filed.
Common Defenses to 18 U.S.C. § 1031 Charges
Each case depends on specific facts and documentation. Potential defenses include:
Lack of Intent
The government must prove knowing and intentional fraud, not negligence or business disputes.
Good Faith Defense
Demonstrating reliance on accountants, attorneys, or compliance professionals.
No Material Misrepresentation
Arguing that alleged inaccuracies were not material to government decision-making.
Insufficient Evidence
Challenging the strength of documentary evidence or witness credibility.
Contract Valuation Disputes
If the $1 million threshold is not properly established, the charge may be challenged.
Early legal intervention may reduce exposure or prevent indictment.
Impact Beyond Criminal Penalties
Major fraud convictions can lead to:
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Debarment from federal contracting
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Loss of professional licenses
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Civil False Claims Act liability
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Asset forfeiture
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Reputational damage
The financial consequences can extend far beyond prison exposure.
Frequently Asked Questions
What is the $1 million requirement under § 1031?
The underlying federal contract, grant, or assistance program must be valued at more than $1 million.
Does the government have to lose $1 million?
Not necessarily. The value of the contract must exceed $1 million, even if the actual loss is lower.
Can PPP loan fraud be charged under § 1031?
Yes, if the underlying federal assistance meets the statutory threshold.
Is major fraud always charged alone?
No. It is often combined with wire fraud, false statements, or conspiracy charges.
Can these cases be resolved without trial?
In some situations, negotiated plea agreements may be possible depending on evidence and exposure.
Contact a Federal White Collar Defense Attorney
Major fraud against the United States is one of the most serious federal white collar offenses. Prosecutors aggressively pursue large-scale government fraud cases, especially involving emergency relief funds and procurement contracts.
If you are under investigation or have been charged under 18 U.S.C. § 1031, immediate legal representation is essential.
Eisner Gorin LLP is a nationally recognized criminal defense law firm based in Los Angeles, California. We represent clients nationwide in complex federal fraud and white collar matters.
Contact our office today for a confidential consultation to protect your rights and develop a strategic defense plan.