Major Fraud

18 U.S.C. § 1031 - Major Fraud Against the United States

Title 18 U.S. Code 1031 is a federal statute that addresses major fraud against the United States government.

It is designed to protect the integrity of government programs and operations by punishing those who defraud the government of its resources. It's often charged with other types of federal fraud, such as mail or wire fraud, especially when the total amount exceeds $1 million.

The crime of major fraud against the United States is serious. It was created in 1988 as part of the Major Fraud Act, which punishes large-scale schemes to defraud the federal government where the underlying contract or grant is highly valued.

This federal statute was amended in 2009 by the Fraud Enforcement and Recovery Act to prohibit virtually all types of fraud involving federal assistance, grants, contracts, and transactions made pursuant to the Troubled Asset Relief Program (TARP) when the underlying contract is valued at more than $1 million.

18 U.S.C. 1031 says, “(a) Whoever knowingly executes, or attempts to execute, any scheme or artifice with the intent (1) to defraud the United States; or (2) to obtain money or property by means of false or fraudulent pretenses, representations, or promises, in any grant, contract, subcontract, subsidy, loan, guarantee, insurance, or other forms of Federal assistance, including through the Troubled Asset Relief Program, an economic stimulus, recovery or rescue plan provided by the Government, or the Government's purchase of any troubled asset as defined in the Emergency Economic Stabilization Act of 2008, or in any procurement of property or services as a prime contractor with the United States or as a subcontractor or supplier on a contract….”

If convicted of this crime, you could face up to 10 years in prison and fines totaling millions of dollars. So let's review this federal law further below.

Background of the Law

As noted, 18 U.S.C. 1031 was initially established to codify the Major Fraud Act of 1988, which makes it a federal crime to knowingly execute, or attempt to execute, “any scheme or artifice to defraud the United States or any department or agency of the United States or to obtain money by false or fraudulent pretenses” in amounts exceeding $1 million.

This includes obtaining money from the government through improper means such as bribery, kickbacks, and contractual fraud.  

In 2008, the law was extended to protect government funds intended for emergency relief, including “any grant, contract, subcontract, subsidy, loan, guarantee, insurance, or another form of federal assistance...”

This law has more recently entered the public conversations over concerns that it could be used to prosecute individuals suspected of fraudulently procuring funds under the CARES Act of 2020, which was passed to provide emergency relief for businesses during the Coronavirus pandemic.

This includes programs such as the Paycheck Protection Program (PPP) and loans/grants made under the Coronavirus Economic Stabilization Act of 2020, allowing emergency funds to be granted over $1 million.

This article will provide an in-depth analysis of this statute, its implications, and the consequences for those found guilty of violating its provisions.

What Are the Key Elements of 18 U.S.C. 1031?

To procure a conviction under 18 U.S.C. 1031, federal prosecutors must prove several key elements:

1. Intentional fraud: The defendant knowingly and willfully participated in a scheme to defraud the United States.
2. Material misrepresentation: The defendant made false statements or representations that were material to the fraudulent scheme.
3. Government funds or property: The fraudulent scheme was designed to obtain money or property from the government.
4. Value of funds or property: The value of the funds or property at stake exceeded $1 million.

What Are Some Examples of Major Fraud?

Major fraud against the U.S. can take many forms, including:

• Government procurement fraud occurs when contractors or suppliers submit fraudulent bids, overcharge for goods or services, or fail to deliver the agreed-upon goods or services.
• Healthcare fraud involves submitting false claims to government healthcare programs, such as Medicare or Medicaid, to reimburse medical services that were not provided or medically unnecessary.
• Disaster relief fraud occurs when individuals or businesses submit fraudulent claims for disaster relief funds, such as those provided by the Federal Emergency Management Agency (FEMA), following a natural disaster.

What Are the Related Federal Statutes?

18 U.S. Code Chapter 47 fraud and false statements have several federal statutes that are related to 18 U.S. Code 1031 major fraud against the United States, including the following:

• 18 U.S.C. 1001 – Statements or entries generally;
• 18 U.S.C. 1002 – Possession of false papers to defraud;
• 18 U.S.C. 1003 – Demands against the United States;
• 18 U.S.C. 1004 – Certification of checks;
• 18 U.S.C. 1005 – Bank entries, reports, and transactions;
• 18 U.S.C. 1006 – Federal credit institution entries;
• 18 U.S.C. 1007 – Federal Deposit Insurance Corporation transactions;
• 18 U.S.C. 1010 – Department of Housing transactions;
• 18 U.S.C. 1011 – Federal land bank mortgage transactions;
• 18 U.S.C. 1012 – Housing and Urban Development transactions;
• 18 U.S.C. 1013 – Farm loan bonds and credit bank debentures;
• 18 U.S.C. 1014 – Loan and credit applications generally;
• 18 U.S.C. 1015 – Naturalization, citizenship or alien registry;
• 18 U.S.C. 1016 – Acknowledgment of appearance or oath;
• 18 U.S.C. 1017 – Government seals wrongfully used;
• 18 U.S.C. 1018 – Official certificates or writings;
• 18 U.S.C. 1019 – Certificates by consular officers;
• 18 U.S.C. 1020 – Highway projects;
• 18 U.S.C. 1021 – Title records;
• 18 U.S.C. 1022 – Delivery of certificate;
• 18 U.S.C. 1023 – Insufficient delivery of money or property;
• 18 U.S.C. 1024 – Purchase or receipt of military property;
• 18 U.S.C. 1025 – False pretenses on high seas;
• 18 U.S.C. 1026 – Compromise of farm indebtedness;
• 18 U.S.C. 1027 – False statements and concealment of facts;
• 18 U.S.C. 1028 – Fraud and related activity with ID documents;
• 18 U.S.C. 1028A – Aggravated identity theft;
• 18 U.S.C. 1029 – Fraud and related activity with access devices;
• 18 U.S.C. 1030 – Fraud and related activity with computers;
• 18 U.S.C. 1032 – Concealment of assets from conservator;
• 18 U.S.C. 1033 – Crimes affecting insurance interstate commerce;
• 18 U.S.C. 1034 – Civil penalties and injunctions for section 1033;
• 18 U.S.C. 1035 – False statements relating to health care matters;
• 18 U.S.C. 1036 – Entry by false pretenses to any real property;
• 18 U.S.C. 1037 – Fraud and related activity with electronic mail;
• 18 U.S.C. 1038 – False information and hoaxes;
• 18 U.S.C. 1039 – Fraud with obtaining confidential phone records;
• 18 U.S.C. 1040 – Fraud with major disaster or emergency benefits.

What Are the Penalties for 18 U.S.C. 1031?

If you're found guilty of major fraud against the U.S., you could face significant penalties, which can include:

• Imprisonment. You could face a maximum prison sentence of up to 10 years.
• Fines. The standard fine for this type of violation is up to $1 million; however, U.S.C. 1031 makes special provisions for judges to assess fines over recommended guidelines, up to a maximum of $5 million for one offense and up to $10 million total for multiple counts.
• Restitution. The court may order you to pay restitution to the government, which includes the return of fraudulently obtained funds or property and compensation for any losses suffered by the government as a result of the fraud.

 What Are the Defenses for 18 U.S.C. 1031?

If you're charged with a crime under 18 U.S.C. 1031, a skilled federal criminal defense attorney may assert various defenses on your behalf, as discussed below.

Perhaps we can argue that was a lack of intent. The attorney can argue you they did not knowingly or willfully participate in the fraudulent scheme.

Perhaps we can argue that there was good faith. The attorney can assert that you acted in good faith and believed your actions were lawful or that the information you provided was accurate.

Perhaps we can argue that there is insufficient evidence. The attorney may argue that the prosecution has failed to present sufficient evidence to prove the elements of the offense beyond a reasonable doubt.

Perhaps we can negotiate a favorable plea bargain with the federal prosecutor if guilt is not doubted. You can contact our law firm to review the case details by phone or using the contact form.

We provide legal representation throughout the United States on federal criminal matters. Eisner Gorin LLP is located in Los Angeles, California.