June 10, 2025
Kousisis et al. v. United States, 605 U.S. ____, 145 S. Ct. 1382 (2025) (Barrett, J.)
Response by Jessica Tillipman
Geo. Wash. L. Rev. On the Docket (Oct. Term 2024)
Slip Opinion | SCOTUSblog
The Cost of a Lie: Kousisis Affirms Criminal Fraud Liability Without Economic Harm
In the United States, federal, state, and local governments collectively award hundreds of billions of dollars each year to small businesses primarily through set-aside and contract-preference policies aimed at promoting government procurement participation by small, women-owned, veteran-owned, and other disadvantaged firms.1 These initiatives, although central to public procurement policy and aimed at leveling the playing field for small businesses, also carry inherent risks. Like any program involving the substantial expenditure of public funds, small business contracting is highly vulnerable to fraud.2 Most small business fraud common schemes involve ineligible firms misrepresenting their size or ownership status to secure contracts they are not entitled to, effectively stealing opportunities from legitimate small businesses.
Against this backdrop, the U.S. Supreme Court’s recent decision in Kousisis v. United States considers the scope of criminal liability for material misrepresentations even in the absence of economic harm. The case arose from two construction contracts awarded by the Pennsylvania Department of Transportation (“PennDOT”) in Philadelphia to Alpha Painting and Construction Co. (“Alpha”), where Stamatios Kousisis served as project manager.3 A substantial portion of the project funding came from the U.S. Department of Transportation (“DOT”), which requires grant recipients to implement programs supporting disadvantaged business enterprises (“DBEs”).4 To comply with this mandate, PennDOT required bidders to subcontract a portion of their work to DBEs that perform a “commercially useful function.”5
During the procurement process, Kousisis falsely represented that Alpha would obtain $6.4 million in paint supplies from Markias, Inc., a certified DBE.6 In reality, Markias served as a pass-through entity for the federal construction funds, handling checks and invoices but supplying no painting materials.7 Although Alpha failed to comply with the DBE participation requirement, it completed the projects to PennDOT’s satisfaction and earned approximately $20 million in gross profit.8 PennDOT remained unaware of the scheme until after Alpha completed the project.9
Once the government discovered the misrepresentation, it charged Alpha and Kousisis (the “Petitioners”) with three counts of wire fraud under 18 U.S.C. § 1343 and one count of conspiracy to commit wire fraud under 18 U.S.C. § 1349, relying on a theory of “fraudulent-inducement.”10
After a jury convicted the Petitioners of these charges, they moved for an acquittal, arguing that because PennDOT ultimately received the full economic benefit of the contract, the government could not prove that Kousisis and Alpha had either conspired to defraud or defrauded PennDOT under § 1343.11 The Petitioners then appealed to the Third Circuit, which rejected this argument and affirmed the trial court’s conviction.12 The Supreme Court thereafter granted certiorari to settle a six-to-five circuit split on the scope of the federal wire fraud statute.13 Specifically, the issue before the Court was whether a defendant may be convicted of federal fraud even when the defendant did not intend to cause financial harm to the victim.14
Writing for a unanimous Court, Justice Amy Coney Barrett rejected the Petitioners’ argument. The Court held that § 1343 liability hinges on whether a material misrepresentation induced payment, not on proof of actual loss.15 Justice Barrett made clear at the outset that §§ 1343 and 1346 (honest-services fraud) are interpreted broadly under common law principles: Any scheme to obtain money or property by materially false pretenses, even if no economic loss results, falls within the scope of the wire fraud statute.16 In particular, the “fraudulent-inducement” theory requires proof that a defendant (1) “devised” a “scheme” (2) “to induce the victim into a contract to obtain” its money or property (3) “by means of false or fraudulent pretenses.”17 Under this theory, the government need not show that the victim suffered pecuniary harm; it is sufficient to demonstrate that the lie was a but‐for cause of the payment or property transfer.18
As Justice Barrett explained, the statutory language focuses on whether the defendant “obtained” money or property, not whether the misrepresentation economically harmed the victim.19 To “obtain” simply means to gain possession or control; it does not require the victim to be economically harmed.20 Thus, if a contractor lies about a required qualification to obtain a government contract and the government awards the contract based on that misrepresentation, the statute is satisfied even if the government ultimately receives the promised work at the agreed-upon price.21
The Court also imposed a significant limitation on its holding: The misrepresentation must be “material.”22 Citing the landmark False Claims Act (“FCA”) decision in Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”), the Court emphasized that materiality is a “rigorous” and “demanding” standard requiring that the misrepresentation influence the victim’s decision.23 In other words, not every lie is actionable. The misrepresentation must go to the “very essence of the bargain.”24
The Court further distinguished this theory from the “right-to-control” doctrine it rejected in Ciminelli v. United States, emphasizing that fraudulent-inducement must target traditional property interests (i.e., money or property), not intangible regulatory concerns or procedural violations.25
Applying these principles, the Court affirmed the convictions, finding that Kousisis and Alpha intentionally misrepresented their DBE compliance to obtain approximately $20 million from PennDOT.26 Petitioners would not have obtained millions of dollars from PennDOT but-for their fraudulent representations.27 Even though PennDOT received bridge repair work consistent with the contracts’ terms, the misrepresentation concerning DBE participation was material to the agency’s payment decision.28 That alone was sufficient under § 1343.
Justices Thomas, Gorsuch, and Sotomayor each filed concurrences agreeing that § 1343 does not require proof of economic loss. Justice Thomas, who authored Escobar, questioned whether the DBE requirement was material in this case. He noted that the contract’s primary purpose was historic preservation and suggested that PennDOT’s lack of awareness of the misrepresentation undermined the claim that the DBE provision was material.29 Justice Sotomayor, however, parted ways with Justice Thomas on materiality. She found the DBE requirement met the standard under both common law and the FCA, emphasizing that it was the only contractual term expressly identified as grounds for material breach and that PennDOT risked legal sanction for noncompliance.30
Justice Gorsuch, expressing concerns about overcriminalization, underscored the distinction between deception and criminal fraud, cautioning against expanding federal fraud statutes to cover transactions where the government suffered no actual injury but received the benefit of its bargain.31 Both Justices Gorsuch and Sotomayor expressed concern that allowing convictions based solely on a misrepresentation leading to payment without harm risks capturing conduct better addressed by civil remedies.32
Kousisis: Impact & Legacy
Kousisis marks a departure from a recent trend in Supreme Court decisions that have narrowed the reach of federal fraud and corruption statutes.33 By upholding the fraudulent-inducement theory even without a showing of pecuniary harm, Kousisis adopts a broad interpretation of the wire fraud statute, contrary to widespread expectations that the Court would narrow or reject the theory altogether.34 The decision may encourage prosecutors to bring wire fraud charges more aggressively—particularly given the Trump administration’s designation of procurement and federal program fraud as a top enforcement priority.35
Under Kousisis, prosecutors no longer need to prove that the government suffered an economic loss. Any material misrepresentation that induces the transfer of money or property suffices under 18 U.S.C. § 1343. This shift may prove especially consequential in false certification cases, where contract and grant recipients make numerous representations in their interactions with federal agencies. Although misrepresentations have always carried the risk of criminal exposure, the decision lowers the government’s burden, as it no longer needs to show that the misrepresentation caused actual financial harm.
Although arising in a different legal context, Kousisis reflects principles similar to the Small Business Jobs Act of 2010’s Presumed Loss Rule, which establishes a presumption that the government suffers a loss equal to the full value of a contract when a contractor willfully misrepresents its size or status, without requiring proof of actual harm.36 Both approaches underscore a growing emphasis on the integrity of representations made in connection with government funds, regardless of whether economic damage can be demonstrated.
The Court’s reliance on Escobar in Kousisis increasingly aligns the standards governing civil FCA enforcement with those governing criminal wire fraud. Defendants in FCA cases may now argue that Escobar’s “rigorous” and “demanding” materiality requirement applies equally in the criminal context. At the same time, Kousisis heightens the risk that FCA investigations will result in parallel criminal charges, as it offers prosecutors a more direct pathway to pursue wire fraud based on the same underlying conduct.
By grounding both civil and criminal liability in whether a misrepresentation would influence the government’s payment decision, Kousisis and Escobar move fraud enforcement toward a fact-intensive standard. Although the Court reaffirmed that materiality under § 1343 serves as a limiting principle, it left the contours of that requirement largely undefined. This lack of clarity regarding what constitutes a term “essential to the deal” is likely to generate further litigation and inconsistent results in lower courts.
In addition to limiting the scope of this theory through the concept of materiality, the Court in Kousisis also drew a clear distinction between fraudulent-inducement and the “right-to-control” theory it rejected in Ciminelli. In Ciminelli, the scheme involved depriving the government of accurate information necessary for discretionary decision-making but did not result in the transfer of money or property. In contrast, Kousisis involved a pass-through scheme directed at obtaining government payments. The Court reaffirmed that a wire fraud prosecution must target money or property, rather than simply interfering with regulatory processes. As a result, future attempts to charge wire fraud based solely on the deprivation of information without showing a resulting payment or transfer of property are likely to fail. Government prosecutors must now focus more closely on establishing that a defendant made the misrepresentations with the intent to obtain or attempt to obtain government funds or other property interests.
In the wake of the Kousisis decision, individuals and entities should prepare for increased exposure to parallel civil, criminal, and administrative proceedings. The decision not only endorses a broad theory of liability under the wire fraud statute, but it does so against the backdrop of recent Department of Justice policy initiatives that emphasize the use of antifraud tools to promote regulatory compliance.37 Open questions relating to materiality will play out in the years to come as courts apply Escobar’s framework in the criminal context. Until that clarification comes, materiality will continue to play a critical role in the evolving federal fraud doctrine.
Jessica Tillipman is the Associate Dean for Government Procurement Law Studies at The George Washington University Law School. She thanks Tessa Jones (J.D. ‘27) for her outstanding contributions to this Response.
Recommended Citation
Jessica Tillipman, Kousisis v. United States, Geo. Wash. L. Rev. On the Docket (June 10, 2025), https://www.gwlr.org/kousisis-the-cost-of-a-lie/.
