Warning: This is a machine-generated transcript. As such, there may be spelling, grammar, and accuracy errors throughout. Thank you for your understanding!
Greg: Despite what we were led to believe from the movie The Greatest Showman, P.T. Barnum, was actually kind of a dick. Apparently back in 1850, he got a hold of a bunch of blank telegraph dispatches and sent fake messages to his entire cast and crew. Some of the fake messages were supposed to be from other competing shows offering Barnum's people a lot more money if they left Barnum to go work for these competitors. He sent one of his guys a message [00:00:30] saying that his wife had given birth to their twin boys, which he was expecting. And he sent another guy a message saying that his home in Connecticut had burned to the ground. And somehow we don't know exactly how Barnum was able to arrange for all of these messages to be delivered to everyone, basically simultaneously. So everyone was wrapped up in their own very good or very bad news at the exact same time, which made it take even longer for people to figure out that it [00:01:00] was all just one big prank. And I guess some people who received those fake job offers actually went to P.T. Barnum and quit. They like gave their two weeks notice or whatever. And so this is part of the origin story of wire fraud. Now, to be clear, what P.T. Barnum did wasn't actually wire fraud. It was using telegraph paraphernalia and it was lying and it was clearly a dick move, but it wasn't wire fraud.
Blake: If you'd like to earn [00:01:30] CPE credit for listening to this episode, visit Earmark Cpcomm. Download the app, take a short quiz and get your CPE certificate. Continuing education has never been so easy. And now on to the episode.
Greg: Hello and welcome to Oh My Fraud, a true crime podcast where our criminals are interstate wire fraud perpetrators, not intrepid piano wire stranglers.
Caleb: I [00:02:00] am. I am pretty sure Strangulata is not a word.
Greg: And I'm pretty sure that you're right. I'm Greg Kite and.
Caleb: I'm pedantic Caleb Newquist.
Greg: They are our grammar Nazi in residence. Caleb, before we get into wire fraud and today's topic, I just want to read a listener review real quick as we've been doing lately. Michelle W says Love the podcast. Who says CPE can't [00:02:30] be fun? I never thought I'd get CPE credit where Sisterwives and escaping polygamy would be mentioned along with biodiesel fuel. Well done and entertaining.
Caleb: Thanks Michelle W. So if you like. Oh my fraud. Please take a minute to rate the show. Write us a review on the platform where you listen. Apple, Spotify, earmark, wherever. Yeah, do us a solid.
Greg: But anyways Caleb changing subjects. I'm interested because [00:03:00] you know since scams are it seems like it's really kind of become part of our everyday life. From scam phone calls to spam emails. I'm wanting to know, have you how close have you come to being the victim of an email scam, or have you ever actually been a victim of one of these types of scam? Like clicked on a bad link or inadvertently downloaded some ransomware or sent some money to a Nigerian prince? Anything [00:03:30] like that? How close have you come?
Caleb: I'm sorry to say. Not very close at all. Oh.
Greg: Or happy to say.
Caleb: Yeah, Well, yeah, I suppose. I suppose so, yeah. Email scams, I guess. I remember getting my first email address and so I, you know, I was a youth, of course, when email was the hottest technology out there. Right? And so, you know, I was one of those young people who was very tech savvy. And so I don't know if email scams were really [00:04:00] going to happen to me. Plus, they were always very obvious. You know, there was always typos or like bad syntax and stuff. And and I don't know, they were just kind of bizarre. And I just, I don't know, clearly fraudulent. And, you know, now that I've said all that, I'm excited to fall for one in like the next week or so. Right. But you know like the the things that come to mind, like more recently, do you remember the IRS scams that were running rampant for a few years there where people were just getting phone calls like mostly [00:04:30] from guys from from men with heavy like Indian accents and they and and they were they were threatening people with like, you know, you know, with arrest and imprisonment because they owed these taxes. Right. To the IRS And give us.
Greg: Your credit card number right now.
Caleb: Yeah. Yeah. And and there was and it was going on for years and I got many of those calls. And, you [00:05:00] know, I was, you know, I was still at going concern at the time. And so I was covering those stories and I did not fall for any of those either. But in any case, you know, I don't know the the the the scams of the Internet, the text messages are a little better. Yeah. But for the most part, there's always something there's they're always struck me as highly suspicious. Right. You know, it isn't it isn't like I don't know. [00:05:30] I can't be. We're all capable of being conned, right? Sure. But I don't know. I think I need a I need. I think I need a human touch if I'm going to be conned. You know what I mean?
Greg: Right? Right. You need you need somebody in the flesh who's. Who's stealing your money. Not just not just a a poorly written electronic message of some kind.
Caleb: Yeah. And hopefully they're, you know, they're they're good looking. At least, you know, that would make it a little bit. That makes me an easier mark, probably. [00:06:00] Gotcha. What about you, Greg?
Greg: Well, it's funny you talk about text messages because I actually had a very close call, I think it was just last month or maybe even just like 2 or 3 weeks ago, I received a text message. It it looked legit. It didn't have nothing that you said was in the text message that, you know, no bad grammar, no weird word choices, anything like that. What and what the text message said is it said that I had a package that some package I had ordered that [00:06:30] that couldn't be delivered and it was being held in a warehouse somewhere because it had an incomplete, incomplete address is what they said. And the text message included a link that you're supposed to click to be able to. Provide your full address so that they could deliver the package. And I think and I think you'll back me up on this Nowadays it feels like you probably have a 5050 chance of any particular day that there is a package that's on [00:07:00] its way to me from somewhere. Yeah, there's enough. I do enough Amazon. Et cetera. Ordering that I feel like, you know, I've got shipments come in pretty much just regularly and at that point I was waiting for a couple of things from Amazon, but I think it was like that Amazon marketplace where it wasn't Amazon Amazon, but it was a seller that was selling through Amazon, that kind of thing. So I was like going, Oh, I bet you it's I bet you it's that package and that, you know, that they that they screwed up the email address. And I, [00:07:30] I looking back I'm 100% certain that I absolutely would have clicked on the link to give them my address.
Greg: The only thing that stopped me was that the link in the text message wasn't like hot, you know, it wasn't it wasn't like underline and and in blue write text instead instead. And they had direction. They said they said you needed to copy and paste that link into your browser and even with that because that. Yeah, because I think what you're saying is you would have [00:08:00] been like, that's it, this has got to be fake. Me My first thought wasn't, Oh, this is a scam. My first thought was, well, they made this inconvenient for me. These guys suck at this, right? Their customer service could go up a notch, but because. But because I wasn't in a place where I could copy and paste the link into a browser, that bought me enough time to just, like, think through what was happening. And and so in those, you know, in that little bit of time that it bought me, I, I thought, oh, I've ordered tons of [00:08:30] stuff from Amazon and Amazon clearly has my correct address because of everything that got delivered easily without being held in a warehouse for an incomplete address. And I know third party sellers print shipping labels. They don't just like, you know, look at the screen and write down my address onto the front of a box, right? So, so there's no user error involved. And that's finally when I was like, oh, this, this text is bullshit bullshit. And the and the text was probably some sort of dangerous [00:09:00] link. And, and I seriously had like a, like a few kind of, you know, just dodged that one because I realized just how close I'd come to getting had.
Caleb: Yeah. These kind of digital fraud they they need like some good product managers. They need some people to be like, okay, guys, look, this is what people expect, you know? And so if you want to if you really want it to work.
Greg: Yeah, yeah. And, and like I said, if they did that one tweak where the link was hot, I think [00:09:30] I would have I would have done it so close. So close. And the reason that we're talking about all this kind of stuff is because it all falls under the umbrella of wire fraud.
Caleb: We've been interested in learning more about wire fraud since our second episode, Friends with Mutual Benefits. That's the title, episode two and where the guy behind a weird insurance settlement called Viatical, they're called Viatical Settlements. He ran a Ponzi scheme, but he was charged not with theft, [00:10:00] not with securities fraud, but with. Fyre fraud.
Greg: Yeah. And we and we couldn't quite figure it out. And I and I think if I'm, if my memory is right after we taped that episode, we were both kind of like, why, why are fraud? And at that point we were like, we need to know what wire fraud is. And so now 40 something episodes later, we're finally getting around to doing our homework of unpacking the history of wire fraud.
Caleb: Now, [00:10:30] we can't tell the history of wire fraud without getting into the history of mail fraud because the two are inextricably linked. The United States Postal Service was established not in 1776, but in 1775 by the Second Continental Congress. So technically, the US Postal Service is older than the United States. Which did you know that?
Greg: Greg I didn't know that. I [00:11:00] did not know that. I didn't think that was possible.
Caleb: I didn't think it would be possible. How could that be possible?
Greg: But but it kind of it kind of makes sense, I guess. It kind of makes sense. Sure. Yeah.
Caleb: I think they're still using a lot of the same methods, to be honest.
Greg: Right? Yeah. Anyway.
Caleb: Over the next 100 years or so, mail fraud was born and grew and began to impact a whole lot of people. Typical mail fraud schemes in those days were promises of land lotteries and gifts. Kind of along the same lines as the whole, you know, Nigerian prince scam. [00:11:30] Yeah. In order to get the land or the lottery winnings or the gift, you had to pay a fee or a tax of some kind, then the scammer pocketed the fee or the tax and you never got your land or lottery winnings or gift.
Greg: Which is crazy to me because that's that is exactly like you said. That's the formula for the Nigerian Prince scam. So it's just now they're sending emails instead of sending, you know, a 1980s handwritten letter that that [00:12:00] took, you know, four weeks to get to you through the.
Caleb: Delivered by.
Greg: Pony Express. Paul Revere.
Caleb: Someone far less heroic than. Exactly.
Greg: Yeah. Yep.
Caleb: Anyway, finally, Congress passed the federal mail fraud statute in 1872. The statute stated that, quote, Any person within or outside the United States who had intentions to use the mails. The mails, the mails.
Greg: Yeah, sure. All of it. Not just any of the.
Caleb: Mails, all the mails, uh, intentions to use the mails [00:12:30] to defraud another shall be charged with a misdemeanor and fined or imprisoned, end of quote. This, for the first time, gave postal inspectors the ability to federally, federally prosecute fraudsters.
Greg: Right. Which which is interesting because I, I think and the whole I think the emphasis there is that these crimes could be prosecuted at a federal level at that point, which makes sense because the post office is a federal organization. [00:13:00] So if you're interstate interstate activity. Yeah, exactly. So, so, so it's not that this stuff was necessarily legal, but it was just a it was kind of the patchwork state by state, you know, what could you do? And and I think, again, I think part of the problem, too, is since the Postal Service, like we said, is an interstate business, if you had a fraudster in one state and you had the victim in another state, then whose jurisdiction and what can happen there? And just all of the the difficulties of having, you know, [00:13:30] the the different states that were in statehood at that point in 1872 and and how to how to reconcile all their various laws and jurisdictions must have been a a hassle.
Caleb: To hell with all of that. Just to hell with all that. Yeah. Let the feds do it. Exactly.
Greg: We got we got a solution now and it only like you said, it only took 100 years to get it right.
Caleb: So now the Telegraph was invented in 1837, 35 years before the mail fraud statute was passed into law. So [00:14:00] that's why Section 301 of the mail fraud statute specifically prohibited use of telegraph communications to promote fraudulent transactions. The statute uses the term, quote, the wires instead of, quote, telegraph. I'm doing air quotes. You can hear them. I know I.
Greg: Could hear him so clearly.
Caleb: Which explains the origin of the term wire fraud. It also allowed the statute to be more broadly applied to include telephone fraud, [00:14:30] even though the telephone wasn't invented until 1876. Now, I have to say, there are people alive today who think that the Constitution is the same document today than it was in 1776 or 1787. Whenever the hell it was, you know, it came into existence. And yet they had the foresight in the 19th century to write a law that would allow for frauds to cover frauds using devices [00:15:00] that had not been invented. So that to me is quite remarkable. And I know it's kind of a sidebar, but I that just came to mind right now. Right? So anyway, so thanks for indulging me is what I'm saying.
Greg: Exactly. And it's and it's good that you said that. But also, as you will see, the the the statute, the mail fraud statute, even though it included the wires and because telephones obviously also use wires, that's why they were able to be this the same law was able to [00:15:30] be applied to them. But once you get to things like. Cell phones and email and Internet. Then all of a sudden you're going, How much is wires and how much isn't? And when does it get beamed up to satellites and things like that. So they did have to make some changes and they do have to continually make changes to these statutes to make them effective for all forms of communication, to make sure it's broad enough to to get all the bad guys.
Caleb: Yep. Snag snagging everybody.
Caleb: So according to the statute, there [00:16:00] are three necessary elements required for something to be considered mail fraud or wire fraud. Number one, the intent to defraud.
Caleb: Good one.
Greg: Yep. Well, good. Which. Which is. Which is kind of ties back into the P.T. Barnum story. That's why that wasn't fraud, because he didn't he wasn't. He lied, but he wasn't trying to steal anybody's money. So he had no intent to defraud.
Caleb: Right. To false representations that were material to the scheme [00:16:30] to defraud and three, transmission of the material misrepresentation by mail or wire.
Greg: So we found a great story about a guy with a great name. His name was Soapy Smith. He went by Soapy Smith. His birth name was Jefferson Randolph Smith. The second which.
Caleb: Yeah. Go by Soapy.
Greg: Exactly. Yeah.
Caleb: Yeah. Just.
Greg: Just like we had a president Soapy Clinton.
Caleb: Yes, that's [00:17:00] right.
Greg: So back in the late it was it was in the late 1890s, Soapy Smith opened a telegraph office in Skagway, Alaska. Now, if you're not familiar with the geography of Alaska.
Caleb: I am not.
Greg: I am not either. So Skagway was this town that gold prospectors would regularly pass through on their way to the Klondike gold rush, and so Soapy [00:17:30] would charge these prospectors five bucks to send a telegram over his telegraph service. But and here's the rub. Soapy didn't have a telegraph. What he had was he had he had a guy sitting at the desk. I'm envisioning him with a with some sort of visor and his head down and he was clicking away at something that kind of looked like a telegraph, but was not in fact a telegraph. But it was hooked up to, as the story goes, about 50ft of [00:18:00] wire. But again, more rub that wire wasn't hooked up to anything. It just like just like trailed out into the next room or something like that. Yep. And so but but listen, so what Soapy found was that people sending telegrams always were hoping that they would get a telegram in reply. And so Soapy started not just sending fake telegrams, but he started telling them to come. It's like, come back in an hour or so. And I'll tell you if you got a reply. [00:18:30] And they'd come back. And sure enough, there was some very sweet, pleasant reply waiting for them. But Soapy would tell his victim that the replies came collect and so they'd have to pay him either 10 or 15 bucks just to get these fake replies to fake messages that never really went out. And Soapy went even further where he would end every fake reply with a please send [00:19:00] money kind of sentiment. So then if these guys did send money, Soapy would just pocket that too. So. Well, almost almost everybody who came through Soapy's Telegraph office was was probably swindled out of at least 15 bucks, likely more. And I did the math to adjust that for inflation and 15 bucks back in the late 1890s would be the same [00:19:30] as about 550 bucks today. So Soapy was making some good money. Interesting side note, Soapy died when a disgruntled customer shot him down.
Caleb: Yeah. Yeah, that seems about right.
Greg: That seems. Yeah. It's no surprise that that was coming.
Caleb: It's also one of those things where, you know, in the gold rush days or like the, you know, the people looking for gold didn't get rich. The pick and ax guys are the ones that got rich. But also the guys with the phony telegraphs probably also got right [00:20:00] seems which.
Greg: Also just sounds so funny where it's like hey your job is to just here's it's like, here's a stapler and your job is to just click the stapler and don't look up. But, but, but wear, wear a bow tie and wear a visor and click a stapler. And that's it's like, that's what I'm doing. It's like, just shut up.
Caleb: Like, you're concentrating a lot of concentration.
Greg: Exactly. So just to be clear, though, this story doesn't actually qualify [00:20:30] as wire fraud. I think what I think I think this isn't technically wire fraud because although a soapy had criminal intent to defraud and be soapy did make false representations, he never actually used a telegraph to communicate those material misrepresentations. He told his material misrepresentations to his victims faces.
Caleb: The current [00:21:00] wire fraud statute is basically the same as the mail fraud statute, except it applies to schemes where the false or fraudulent pretenses are, quote, transmitted by means of wire radio or television communication in interstate or foreign commerce. If convicted, the perpetrator can be fined and imprisoned up to 20 years. But it's 30 years. If your wire defrauding during a presidentially declared disaster or emergency like a pandemic or a hurricane. [00:21:30] Mayor okay. Yeah. All right. The current statute is broad enough to cover the Internet and email. It is kind of fun to think about the irony of how much wire fraud one could commit using a wireless device. I mean, you mentioned this earlier, Greg, but like technically, you know, if you're going to get literal about the interpretation, then, right? Yeah.
Greg: Yeah. Well.
Caleb: I mean, I'm sure I mean, there's wires underground. I'm sure. I'm sure you know, we're we're using [00:22:00] wires right now. Yeah. I don't know. There's probably no getting around it.
Greg: There's no well and yeah, exactly. And again, I think at this point wire fraud is more, you know, it's a it's a cute what vernacular that includes a lot of things that include wire like you said, wire wireless technology.
Caleb: Yeah I'm sure there's a Supreme Court case that kind of like settled this long, long ago. Right. That said, somebody like, excuse me, there were no wires and the judge is [00:22:30] like, it's wire fraud. Right. Right. Well, the end of it.
Greg: But when they codified so they when they codified a lot of the the different federal regulations, that's when they. That's also my understanding when they updated the wire fraud statute so that it does and you read an actual quote from it. So it is it does include radio or television communication, which is which is beamed to you. It's not over the wires. So it's it's explicit in there. And like I said, I think that they continue to update the [00:23:00] statute so that so it's like, hey, listen, Bluetooth, it's still in there, you know, that kind of thing.
Caleb: So yeah, yeah, yeah. The statute of limitations for wire fraud is five years. However, it is extended to ten years. If the fraud affects a financial institution, banks get all the breaks, man, don't they?
Greg: They do. Well, and again, as we'll see in a second, there's a there's a lot of fraud that includes banks. Banks Yeah. Financial institutions.
Caleb: What did Chris, what did Chris Marquette say? That's [00:23:30] where the money is, right?
Greg: That's that's it.
Caleb: Since mail fraud and wire fraud, statutes are exceptionally broad and have a long statute of limitations, they make prosecutor's jobs easier. That's why we see so many wire fraud convictions. Some critics and even some judges have argued that mail and wire fraud statutes are actually too broad.
Greg: Yeah. Did you read any of the arguments for or against that?
Caleb: I did not get a chance. But now that you mention it, I'm kind of interested.
Greg: They're [00:24:00] not I don't find them compelling at all because. Yeah, they were. They were kind of like saying, well it makes, it makes a like contract law more difficult because. And I'm like, Why? Because you're afraid that you're going to you're afraid that your lies are going to be I don't know the lies that you put in a contract and then email or somehow going to be a it's still a lie. Why? Why are we worried about this?
Caleb: Yeah, misrepresentation. I don't know. I kind of feel like I kind [00:24:30] of feel, you know, again, I'm a goody two shoes when it comes to this, but I kind of want I want aggressive wire wire fraud laws. Yeah, I don't know about you, but, like, I want them to be aggressive.
Greg: I'm good with it. And again, you know this. Yeah. They call these types of laws. They call them federal auxiliary laws. Yeah. Because it takes laws that are enacted in most if not all states, but then elevates them to the federal level so that the crimes [00:25:00] can be prosecuted on a federal level. Right.
Caleb: And so, like any time even if there's a even if there's a Ponzi scheme and your little country club that doesn't go outside of your home state, if it's a big enough crime, the FBI is coming in to take your ass down because of of the wire fraud statutes.
Greg: Yep. And because of federal auxiliary laws. That's the that's the vocabulary word for today.
Caleb: Right. Greg Greg pulling out the pulling out the technical lingo. Man, I did. [00:25:30]
Greg: Some I did some research for this one.
Caleb: So he does research for all of them folks.
Greg: Uh. So, Caleb, of all of the fraud cases that we've covered on this podcast, here are this isn't an exhaustive list, but here's a bunch of the ones that we've covered that resulted either in mail fraud or wire fraud convictions. And just to be clear to the listeners, [00:26:00] we are going to be engaging in some heavy speculation because again, it would have taken just a ridiculous amount of research and it might even be impossible to find exactly how wire fraud charges were like ham fistedly crammed into these different cases. Because we're not we weren't in the court. And, you know, short of a transcript of an entire hearing, we might not be [00:26:30] able to figure that out.
Caleb: We're we're not prosecuting attorneys, Greg. We're not. We're not we're not we're not DA's. We're not assistant US attorneys.
Greg: We're none of those things.
Caleb: We're none of those things.
Greg: And we weren't part of the teams that were prosecuting these cases because as you'll see, as we go through this, I'd say the majority of them were seeing the the the fraudster who's pleading guilty to wire fraud cases. So in that case, it didn't even get, you know, I'm sure it was spelled out there, but it wasn't. They [00:27:00] were just like, how do you plead with wire fraud? And they go guilty. And you go, okay, then we're good. Then we don't have to get into the nitty gritty of how we got there, so. Right. So, yeah, but but it's also the speculation is going to be pretty fun, I think. Caleb, because a lot of these cases, it's not real clear how you get from the from the crime to a to wire fraud.
Caleb: But we're in charge of wire fraud.
Greg: But we're we're up to the we're up to the task.
Caleb: We're going to try. [00:27:30] Right.
Greg: We're going to give it our best shot. Some of these are easy. So, um, starting with our very, very first episode we ever did, Gilbert Michaels, he was the printer toner pirate king, and he was convicted of mail fraud, but strangely not wire fraud. The mail fraud charge came because he would send these phony invoices to companies for toner that was either way, overpriced for what they asked for. It was just false [00:28:00] all around. It was interesting that it wasn't wire fraud because if you remember, there was a they did kind of a boiler room sort of situation. Yep. So they had people who would call and would just aggressively harangue these, you know, secretaries in these public schools for orders for for for toner. And, you know, you need.
Caleb: The ink lady. [00:28:30] Come on.
Greg: Exactly. And and so here's my here's my guess is that they weren't able to get well not that they weren't able to get wire fraud charges to stick but that wire fraud was probably a harder case to make because with the telephone, it's highly unlikely when this was happening that people were actually recording the phone conversations where instead someone could just go to court and say, you know, here's here's evidence, [00:29:00] A, it's a fake invoice. And they go, yep, that's what that is. Mail fraud done. Slam dunk. Next case.
Caleb: Next case. Oh, next case.
Greg: Next case.
Caleb: The Honorable Reverend Jim Baker. Honorable. Sure. Uh, he was from. That's. That was our episode 11. Our. Our pod. Yeah. The episode on religion and fraud. Yep. Jim Baker was indicted on eight counts of mail fraud and 15 counts of wire fraud. The current [00:29:30] wire fraud statute specifically covers television. As you may or may not remember, Jim Baker was a famous televangelist. Uh, is. He's still alive.
Greg: Is. Yeah, that's true. Yeah. And he still does it.
Caleb: He's still on TV. Yep. Uh, anyway, uh, he, um. As I recall, Greg, that was. That was an investment scam. Yes. Because they were selling. They were. They were selling timeshares, essentially. Right.
Greg: Basically, [00:30:00] it was kind of a weird bastardization of timeshares because what they did, if you gave a donation towards this Heritage village, you got.
Caleb: The vacation.
Greg: Then. Yeah. If you give if you give a large enough donation, they'd give you a certain number of nights to stay per year. Yep. And, and what was awesome was they, they gave so many people gave these thousand dollar donations that they didn't have enough room to house all of them in a [00:30:30] year. Right.
Caleb: So like they they would have needed a hotel the size of Texas or something like that. Something like that. Yeah. Like to make good on all the donations.
Greg: Exactly. And again. And he you know, he asked for those donations on the TV. And if you've ever been if you know anyone who's ever donated to really any kind of I guess really any charity at all, you end up getting just so much junk mail from them in the United States Postal [00:31:00] Service. And I know that's the case for him. And so I'm sure that he sent out lots and lots of letters to people asking for those same donations for the same benefit to them.
Caleb: I guess the last thing that comes to mind for me in this case is if. Wire fraud can be committed through the television. I mean, you would have to think that. How can televangelists even be on TV?
Greg: Yeah, well, [00:31:30] I think it's because it's hard to quantify blessings. You send in, you send in the money and and God will send you blessings if it's according to his will. So there's a lot of you just there's a lot of fine print that I think they put in there to to kind of keep him out of out of the, you know, out of the FBI's crosshairs.
Caleb: Oh, man, That must be the lawyers that have to write the that fine print. Yeah, it must be. [00:32:00] That must they must get a kick out of that.
Greg: It must. Yeah. That's that's a job I don't want the next, the next case that we're going to talk about with wire fraud was Michael Mann. He was the guy behind the MyPayrollHR fraud in episode 15 an and he pleaded guilty to one conspiracy to commit wire fraud amongst a myriad of other things that he pleaded guilty to. So if [00:32:30] you don't remember, what he did is he created fake invoices in order to create fake accounts receivable balances for his businesses. And then he would go to banks and he would get the banks to loan him real money using the fake accounts receivable as collateral. And and this is one of those things where you go, okay, so, so far I see what he did, but I don't see the wire fraud. It's not like in your face, not like a televangelist [00:33:00] using a television. Um, what if he faxed over?
Caleb: What if he faxed over the applications for the loans?
Greg: That's a that's exactly what I was thinking, too. Yeah. Is that. Yeah. Like, maybe he emailed.
Caleb: Or emailed.
Greg: Him. Yeah.
Caleb: This wasn't that. That this wasn't that long ago. We could have emailed him.
Greg: Exactly. So he could or, or like, I don't know if they had like most accounting firms nowadays will have like a secure portal. And my I know my bank. I work closely with a bank for my day job. [00:33:30] They also have a secure portal where we can electronically deliver documents back and forth. So that would all be since the Internet. Like we said, internet and email are concluded under the broad and the broad, but also very specific statute of wire fraud. So yeah, anything you deliver electronically is going to if it's a lie, that's a that's wire fraud.
Caleb: You're going down.
Caleb: All right. Charles Percher from episode 19 about, [00:34:00] uh, employee leasing companies, aka Peos. Yep. He pleaded guilty to mail fraud instead of remitting 133 million of Social Security and Medicare payments to the IRS on behalf of his customers. He just kept the money. I just love those are my favorite frauds, to be honest, where it's just like yoink. It's a yoink fraud. Yeah, don't.
Greg: Worry. Don't worry. I'll pass this on to the parties that need it.
Caleb: Yeah. Yeah. [00:34:30] If he mailed any W-2s with false information to his clients via the US Postal Service, then he committed mail fraud. Yes, absolutely. Absolutely.
Greg: And those. No doubt. And that's why. Because I think when I when I think about that, because the W-2 would say we remitted this much FICA on your behalf to the IRS, and that's the material misrepresentation. So and that was sent in the mail. So yeah, that makes sense. Um, this one, this one's another, another one that was a little [00:35:00] tricky for me to nail down Cody Easterday, the Ghost Cow rancher from episode 27. He he pleaded guilty to wire fraud. And and it was it was a pretty complicated case. It's a very interesting story. If you haven't listened to episode 27, I highly recommend it. But one of the things that got him in trouble was he was speculating on livestock futures, on the Chicago Mercantile Exchange and the Chicago Mercantile [00:35:30] Exchange. It's going to it's going to limit you on your losses that you can take on the exchange, but it gives exemptions based on people's financial statements. So he would submit falsified financial statements to the Chicago Mercantile Exchange. And so, again, I'm assuming since it was wire fraud, not mail fraud, he that likely he submitted those false documents electronically, which would then get him in trouble with wire fraud. Also, [00:36:00] there was also the part of this whole problem with Cody Easterday was that he would receive advance payments from Tyson Foods. So he would be raising this cattle and once it was slaughtered, it would eventually be purchased. By Tyson Foods. But it's such a Tyson.
Caleb: Did the slaughtering.
Greg: And maybe Tyson did do the slaughtering because he just he he was a he was a feedlot. He was a what do they call it? Finishing. Finishing. [00:36:30]
Caleb: Finishing. Operation.
Greg: Operation. Yeah. Yeah. And so so basically after the cattle was weaned or something like that from weaning till slaughter, he'd make sure that he'd fatten them up for slaughter is what he'd do. And but Tyson would basically front him the money for the for his inventory to make sure that he could get it to them. And then he'd they'd pay him, you know, a little bit more or whatever once they actually got the, the cows. But he was sending a Tyson for like [00:37:00] fake invoices saying, hey, I bought another hundred cattle and they'd go, Cool, here's your advance. And he never really bought that cattle and they were just giving him money for nothing. And one day they showed up at his farm saying, Hey, where's all those cows? And he goes, Yeah, I about that I, I don't, I don't have those.
Caleb: And that again, just so I love a story where somebody just shows up one day looking for the thing, you know, like the crazy Eddie, The crazy Eddie stories like that to where they're, [00:37:30] they're looking up like, hey, can we see some of those TVs? And like. Sure, right over here. Right. And like, the boxes are fucking empty. Exactly.
Greg: They're the best. And so so again, with wire fraud, my other assumption is that he probably delivered those invoices to Tyson food that would result in the advance advance payment to him that he probably emailed them. And so, again, that's your that's your wire fraud. So, [00:38:00] Caleb, now let's get into a few cases that I think were harder ones and buy harder ones. I mean, these are the ones where I was having a tough time trying to figure out exactly how wire fraud or mail fraud came into the equation on these. And and so we're going to look at these two cases at a time. So the first two cases because because the cases were very, very similar. We're going to look at Rita Crundwell. She's the she was the the quarter horse [00:38:30] queen of Dixon, Illinois, who stole $53 million from the city. And and that was from episodes three and episode 20. And then also, we're going to look at Sister Mary Margaret. She was the nun who stole $835,000 from the Catholic elementary school, of which she was the principal. So great case. Great case. Both of them are great. Yeah, but but what they did, they did very, very [00:39:00] they were very, very similar schemes because what Rita did is she had these legitimate accounts that were part of the Dixon, Illinois City municipal government accounts. And then she opened another account that was presumably a municipal city government account, but she was the only one who knew about it, and she's the only one who had access to it.
Greg: And what she would do is she would transfer money from the legit accounts to the secret account and then from the secret account, she would end up using [00:39:30] that money just for her own personal, you know, whatever she wanted, her horses, her horse, RVs. Yeah. Those her travel, her her fancy parties, all that sort of stuff. And then Sister Mary Margaret did basically the same thing where she had she had a account that was the like basically the checking account for the school. And then there was another account that was the account for the Oh, shoot, what do they call the nuns live in a what [00:40:00] convent? It was a convent account. It was an account for the convent. And she so the elementary school had a lot of scrutiny over that. They the convent account. She was basically the only one in charge of that, and there was much less scrutiny on that. So she transferred money from the elementary school account to the convent account, and then she'd used the convent account to basically pay off her gambling debts because. That's right. This nun who swore an oath of poverty was had $800,000 of gambling debts, [00:40:30] which is which is wonderful in its own right. But Caleb, when you think about that, this is where my mind went, trying to figure out how how wire fraud, because they both in both of those cases, they both pleaded guilty to wire fraud.
Greg: And the one thing I can think of is it's like, okay, so if if Rita was was making the transfers from the legitimate accounts to the secret account using online banking, while online banking is the Internet, the Internet [00:41:00] is under the umbrella of wire fraud. Boom. That's where the wire fraud happens. But where my where my brain gets stuck is this is that the three components of wire fraud is you have to intend to defraud and you have to make a false representation. And that false representation goes over, in this case, the Internet. And I don't see what the false representation is just by transferring money from one account to another account I can go online [00:41:30] to. I have multiple bank accounts with my bank and I can go on and I can transfer money from one to the other. And I'm not saying why I'm transferring the money, I'm just doing it. So there's no representation at all. There's just an order placed to transfer money. Do you see what I'm saying? So that's where that's where I get stumped and I go, I'm not sure exactly how this was wire fraud unless there's this is and again, this is my this [00:42:00] is where we get really deep.
Caleb: In the misrepresentation. The misrepresentation is that that they then absconded with the money, right? Yeah.
Greg: Yes. And that's what I'm. Because I think you're going the same way my brain was, where it's like is the implication of transferring money that it's implied that the transfer of money is for a legitimate purpose. Right. And so the the so it's an implied representation of this [00:42:30] is a legitimate transfer. And so that's where that's the misrepresentation.
Caleb: Right? Well, because what the the is it is it. Scienter.
Greg: Yeah. Scienter is the, the intent, the, the criminal intent. Yeah.
Caleb: And the and there is criminal intent there. Yes. Right. But you're also but you're also saying there's got to be a false misrepresentation.
Greg: Yeah. And that's that's what I'm saying.
Caleb: It's a false representation, not a not a false misrepresentation. Right. That's a double negative.
Greg: Right. It is a.
Caleb: False false representation [00:43:00] that the that the money that the. It was a legitimate purpose for. For transferring the money.
Greg: Yeah. And like I said, that's the best I can get to. Is that. That maybe there's, you know, again, that's a.
Caleb: Decent hunch.
Greg: Greg. It is. And, and I don't think it's a bad one too, because I don't know I don't know how much how much you remember like studying tax law back when we were in school. I hated that because you'd have to find the one case where they made precedent. You know, they set precedent for things like this. So [00:43:30] if one case that a prosecutor convinced a judge that by making a transfer of money between, you know, an online banking transfer, that you're implying that that's exactly what we said, that that was for a legitimate purpose and that that was the false representation. The judge buys it. Then from then on, anybody who does that, you're you're committing wire fraud based on case precedents. So it's. Yeah, that's that's the US legal system. So that's that's where I can get to with [00:44:00] with Rita and Mary Margaret.
Caleb: Now let's look at Nathan Mueller and Sandy Jenkins.
Greg: Two great cases. Love em.
Caleb: Cases. Yep. Nathan Mueller. He's the guy who stole $8.5 million from ING episodes four and Episodes 28 where we actually talked to Nathan. We interviewed, we interviewed him. He pleaded guilty to mail fraud because he mailed checks from ING to himself and to his credit card company. And I totally remember that it was yes, [00:44:30] he he he did it all by snail mail. Yep. Um, so pretty straightforward. Yep. Sandy Jenkins, He's the guy who embezzled over $16 million from the Collin Street Bakery in Corsicana, Texas. They make fruitcakes. They're world famous fruitcakes that Greg and I have never tried and have never had sent to us by someone from the factory.
Greg: Seems like that should happen.
Caleb: Should happen. Hasn't happened. Just waiting. [00:45:00] Yep.
Greg: Eventually it'll anyway.
Caleb: Episode Episode 23 Sandy pleaded guilty to mail fraud. He sent checks in the mail from the bakery to his personal credit card company. Just like Nathan Mueller. But again, I think the material misrepresentation that's made just by sending a check in the mail again, I think the misrepresentation is that it was under false pretenses. Right. Like they're sending money through the mail to [00:45:30] pay a credit card bill. Right. And I think credit card bill. Their own credit card bills. Yeah. Uh, that they don't have the authority to do that. And so therefore, you got a false representation. That's how I kind of see that.
Greg: Yeah. And I. It seems like those are like we were saying, they're like parallel, parallel arguments, one for snail mail and one for electronic transfers where it's like just by what there's not it doesn't seem like [00:46:00] there's an explicit. False misrepresentation by a check from a from a company being sent to some other place that it's not intended to go. But again, it must be like you're saying, what'd you say? Just a because like.
Caleb: If you think about it. So what's a false representation? Yeah, a false representation.
Caleb: What is it?
Greg: It's, I guess. Yeah, I guess that's true. If you think of those words, you're saying it's a.
Caleb: Lie, right? Yeah, it's just a lie. [00:46:30]
Greg: It's that this and I. And again, I can easily see where you could build a case saying if you're requesting a check and authorizing a check from a company that you work for to be sent to another entity, there's an implied representation that that's for a legitimate.
Caleb: A legitimate.
Greg: Purpose expense. Yeah, a legitimate purpose. And so, yeah. So it's a false it's not a false statement. Maybe that's where I'm getting hung up. Is that when I think false representation, I'm thinking false statement?
Caleb: Oh, yeah. No, I don't think so. I think it's an implied representation [00:47:00] by the action. Yeah, right. The action of authorizing, Authorizing a check. Executing the check. You know that that implies that you have the authority to do those things and and they're for a legitimate purpose. And in each case, they were not. Yeah, yeah, yeah.
Greg: I think I'm I think I'm convinced I like it. But again, again, just disclaimers upon disclaimers disclaimers. This is [00:47:30] speculation. So this is we're those are our best guesses of how that works. But but if you're listening and.
Caleb: You're a US attorney and would like to come on and talk about it with us, we would love to have you.
Greg: Exactly. Send us a line at oh, my email@example.com. But Caleb, just to round out all these things, I did think this this was fascinating and you might be surprised, but maybe not especially at this point that that Ken Lay, the founder and chairman of Enron, was he was [00:48:00] convicted of two counts of wire fraud, also amongst a whole basket of other charges that he was convicted of. But and and now, at this point, I think this is the more interesting fact. Jeff Skilling, who was the CEO of Enron when everything went down, he was not convicted of any wire fraud charges. Skilling was convicted of one count of conspiracy, 12 counts of securities fraud and one count of insider trading and five counts of making false statements to auditors. [00:48:30] But nothing on Jeff Skilling about wire fraud.
Greg: What I think is interesting about that is that's obviously one of the biggest cases in US history. It's definitely played a you know, just it was so much a centerpiece of my entire accounting education when I was in college that, that and, and I got to imagine that it still plays a prominent role in people's educations [00:49:00] today. And again, a fraud that clearly was securities fraud. But and not that they didn't get charged of securities fraud, but they were able to just say, hey, also wire fraud is part of that. And they tack that on. Also, another interesting just end note for this podcast is that Bernie Madoff was convicted of both mail fraud and wire fraud for his Ponzi scheme. So to I would say, the two most [00:49:30] notable fraud cases of our careers, both involved mail and or wire fraud.
Caleb: All right, Greg. Did we learn anything?
Greg: Which I think is a funny question, because this this this whole thing felt like a book report. Where was we were telling what? What did we learn? Yeah, all everything. Everything was things that we learned. But I [00:50:00] do. I mean, I guess I guess just to wrap up my thoughts, we started this by saying we were interested in what wire fraud was because we were seeing it come up in so many of the cases that we covered. And the reason so many fraudsters are charged with wire fraud is because it's really broadly written. It's very easy to prove. And as we said a couple of times already, in today's technological environment, it's almost impossible to not communicate some false [00:50:30] representation electronically, which is going to get you in trouble with wire fraud. What about you, Caleb? What? Was there anything particular that stuck out to you? That was a real light bulb for this podcast.
Caleb: I don't know. I think I should do some reading up on this soapy, soapy Smith guy. It sounds like a fun.
Greg: There were some great stories that got unearthed from this.
Caleb: From this one. Yeah. Yeah. Um, what do I think? I think I think what I learned and I mentioned [00:51:00] this earlier, is that the statutes are written in such a way, and the interpretations of those over the, you know, over the course of time and the case law not to be thrown out like the fancy words, but like the case law. I mean, it really had it. I think prosecutors have a lot of tools. Yeah. For pursuing white collar crimes because of these statutes. And it [00:51:30] it's I don't know, man. I don't like it's just so easy to prove because it's all right there. You know, you you can have the communications especially like these days like all the emails they're they just have to they just have to subpoena Google and they probably don't have to subpoena Google. They probably just say, hey, Google, we think a crime was committed. Can you give us the shit? And they just hand it right over, you know? Right. I mean, maybe they don't. I don't know. But like, between that and then the [00:52:00] paper trail of how the money moves, it's just. It's just all there. Yeah. You know. Yeah. And when they, when they it and it's kind of, it's kind of crazy to think about. It's like how they piece this stuff all together when they prosecute somebody.
Caleb: Like, that's a lot of work right. Like but you but the the the wire fraud and the mail fraud statutes are such that it makes their job pretty easy. Yeah. Because it's so broad and the courts have been [00:52:30] have given them leeway to pursue those crimes because and I guess I would say again, what I said earlier is that I think, you know, now, knowing what I know, I want my wire fraud laws to be aggressive. Yeah, yeah, yeah. I don't want anybody fucking around totally, you know, because and I mean, here's, here's the other thing I'll bring up that is kind of off topic, but what I don't understand is like the sentencing. So like a lot of the cases that we listen to these people, some people [00:53:00] steal a lot of money, some people steal a relatively small amount of money. They all get charged with wire fraud and they get these they get very long prison sentences in some cases. Right. And then you have and then you have violent criminals who end up in prison for, you know, less time. Yeah. And that's the kind of thing that I'm always puzzled by is is just like, well, are we just pulling these sentences out of our asses? Right? Like, I don't know.
Greg: But [00:53:30] it's the it's the that seems like something that we we've circled back around to a lot when we really get deep and reflective on the podcast is like, what is justice? Just just in in general and how you know if somebody steals stealing money and being locked in a cell, those those are two very different things. So it's, you know, it's it's hard to really have a concrete feel on what what is justice [00:54:00] and when is it served.
Greg: I did think I liked what you said about the prosecutors having a lot of tools in their tool belt to go after white collar crime. And I would say that the wire fraud statute is is basically the Phillips head screwdriver of that tool belt because it's like you can use that on every well, anytime, anytime you need tools, you need a Phillips head screwdriver.
Caleb: Oh, my God. It's like we've got a ratcheting. We've got a Milwaukee [00:54:30] ratcheting screwdriver in our in our garage. And it is it is one of the is most one of the useful tools I've ever had. I mean, like we use it so much and it's like that is. That is kind of the wire fraud statute.
Greg: And the one reason why and this I don't know, this might just be me being jaded, but the one reason why I think Jeff Skilling didn't have wire fraud as one of his charges is I think they kind of looked around each other and said, we got enough on this guy, right? Yeah, we got it. Do we need to do wire fraud, too? And they're like, no, no, no. We got plenty. We got [00:55:00] plenty. Forget, forget wire fraud. We're good to go. So. Well, all right. That's it for this episode. Remember, even in the 21st century, carrier pigeons are still considered the all around best way to avoid wire fraud charges.
Caleb: And also, remember, if P.T. Barnum hands you a telegram, you tell him to cram it up his ass.
Greg: If you want to drop us a line because you are a prosecuting attorney and want to tell us everything that we got wrong in this podcast, we would love to hear from you. Please send us an email at Omi. [00:55:30] Fraud@earmarks.com. And Caleb, where can people find you out there in the Internet?
Caleb: I'm on the website formerly known as Twitter at Newquist and also LinkedIn Backslash. Caleb Newquist. Greg. Where can you be found? Orem, Utah.
Greg: Orem, Utah. Yeah. Just come to Orem and shout my name loud. I will hear it and I will come find you also. At this point, I'm. I'm so tired of Twitter. I barely get on there. Linkedin. [00:56:00] I'm only a little bit better nowadays, but at LinkedIn is a good place to drop me a message if you need to. I'm there backslash. Greg Kite. You can also just send me an email. Greg at Greg Wkyt.com pretty easy.
Caleb: Oh my Fraud is written by Greg Kite and myself. Our producer is Zach Franc. If you like the show, rate it on, rate the show, write a review, share it with a friend, and subscribe on Apple, Spotify, wherever you listen to podcasts. And [00:56:30] if you're an accountant and you need CPA, this episode, I don't know when this episode will drop. This episode will drop soon ish, and even if it doesn't, accountants, you need CPA, so get some CPA by listening on earmark. Did I finally say it? Earmark. Earmark. Cpa. Get some CPA. An earmark. I should stop talking.
Greg: It's so easy.
Caleb: Yeah, it is easy. Yeah. As easy as wire fraud.
Greg: Uh, I'd say even easier than easier than wire fraud. It's easier than wire [00:57:00] fraud.
Caleb: All right. Join us next Time for more average swindlers and scams from stories that will make you say, Oh, my friend, my fraud.