The United States Court of Appeals for the Ninth Circuit affirmed the conviction and sentence of Ethan Farid Jinian, who was found guilty on thirteen counts of wire fraud under 18 U.S.C. § 1343. The case stemmed from Jinian's scheme to defraud his employer, Bricsnet FM America, Inc., by diverting profits to a shell company, which then disbursed these profits as salaries, dividends, and bonuses. Jinian argued that the wire communications that occurred after he deposited funds into his Mechanics Bank account were not intended to defraud Bricsnet and thus should not be considered part of his fraudulent scheme. The panel rejected this assertion, stating that the wire transfers were essential to completing and concealing the fraud, as the checks needed to clear before Jinian could be certain of defrauding Bricsnet.
The panel clarified that a mens rea requirement is not necessary regarding the jurisdictional aspect of § 1343, which only requires the use of interstate wires in furtherance of the fraud. Additionally, the court ruled that § 1343 is a valid exercise of Congress's powers under the Commerce Clause, rendering Jinian's Tenth Amendment challenge ineffective. The panel denied both a petition for panel rehearing and a petition for rehearing en banc. An amendment to the opinion corrected a minor error in the language pertaining to jury instructions.
On page 13 of the slip opinion, the third and fourth sentences of the first full paragraph are replaced to clarify that Jinian's scheme relied on the successful clearing of checks through the federal reserve; if a bank held a dishonored check, the scheme would be exposed. The paragraph concludes that Jinian's actions resemble the fraud in Schmuck, where mailing was crucial to completing the scheme.
On page 15, the second sentence and the remainder of the second paragraph are deleted and replaced with a statement emphasizing the importance of the wire transfer in completing the fraud, as Jinian needed confirmation of swindling Bricsnet until the checks cleared.
On page 16, the first paragraph is revised to merge sentences and highlight that the government presented evidence showing Jinian's instruction to issue multiple smaller checks instead of a single large payment, indicating intent to conceal his actions from Bricsnet and Mechanics Bank. This conduct suggests that Jinian strategically used interstate wires to structure, perpetuate, and obscure his fraudulent scheme.
Judge Christen's concurrence is removed from pages 26–29 of the slip opinion. The panel voted to deny Jinian’s petition for rehearing, with Judges Murguia and Christen supporting the denial and Judge Nelson recommending it. The full court was informed of the petition for rehearing en banc, but no vote was requested.
Ethan Farid Jinian faced fourteen wire fraud counts for defrauding his employer, arguing that routine transmissions were not part of a fraudulent scheme, that the jury should have been instructed on the foreseeability of interstate communications, that evidence of such communications between California banks was insufficient, and that the wire fraud statute was unconstitutional as applied to him. The court rejected these arguments and upheld Jinian's conviction and sentence.
Jinian served as CEO of Bricsnet FM America, Inc. from 2004 to 2008, with authority to manage company funds and oversee daily expenditures. Despite having no authorization from the board for additional compensation, Jinian misled finance manager Leon Brown into issuing nearly 100 checks totaling over $1.5 million from Bricsnet’s account, which Jinian deposited into his personal account. Jinian was indicted on fourteen counts of wire fraud related to these transactions. The government demonstrated that the checks were processed through interstate wires involving the Federal Reserve Bank, which facilitated the clearing process. Jinian's defense argued insufficient evidence of his knowledge of interstate wire use for fraud, but the district court denied his motions for acquittal and new trial. The jury convicted him on thirteen counts, and he was sentenced to 64 months in prison, three years of supervised release, and ordered to pay restitution of $1,587,860.04. Jinian appealed, and the court retains jurisdiction under 28 U.S.C. 1291. The review standard for the district court’s decisions includes de novo interpretation of criminal statutes and evaluation of evidence favoring the prosecution.
In Jackson v. Virginia, the court reviews jury instructions de novo to determine if they adequately presented the defendant’s theory of the case and covered all elements of the crime. If the instructions are deemed adequate, the specific formulation is reviewed for abuse of discretion. The constitutionality of a federal statute is also reviewed de novo. The wire fraud statute (18 U.S.C. § 1343) criminalizes schemes to defraud that involve the transmission of communications via wire in interstate or foreign commerce. It applies only to instances where wire use is integral to the fraud, with the elements of wire fraud being: 1) a scheme to defraud, 2) the use of wire communication to further this scheme, and 3) specific intent to defraud. Specific intent is necessary for a fraudulent scheme to exist. A party 'causes' wire communication where its use is reasonably foreseeable. Wire communications are considered 'in furtherance' of a scheme if they are incidental to its execution, not necessarily essential. However, wire communications that occur after the fact and do not contribute to the execution of the scheme cannot be included in the fraud charge. Relevant factors include whether the wire communication was part of the scheme as conceived by the perpetrator at the time, regardless of whether the perpetrator had already received the expected funds.
Jinian argues that the Supreme Court's decision in Kann, where employees diverted company profits through a shell company and were convicted of mail fraud despite claiming the mailings were not part of the scheme's execution, is analogous to his case and should lead to his acquittal.
The Supreme Court ruled in favor of Kann, determining that the defendants irrevocably obtained the money once the checks were cashed or deposited, marking the completion of their fraudulent scheme. The banks became the rightful owners of the checks at that moment and had no defenses against payment from the drawee bank. The Court found that the subsequent banking transactions were incidental to the scheme and did not affect its execution. Consequently, the Court reversed Kann’s conviction since the mailings in question were not intended to execute the fraud.
In contrast, Jinian's case involved an ongoing scheme to defraud Bricsnet, as he deposited nearly 100 checks over two years, relying on the completion of the check clearing process for each fraudulent act. The government charged him with fourteen counts of wire fraud, emphasizing that his scheme was continuous and dependent on the success of each transaction, unlike the discrete transactions in Kann. While Kann imposes limitations on the application of the mail fraud statute, it must be understood alongside the Supreme Court’s ruling in Schmuck, which did not overrule Kann but highlighted the importance of the completion of fraudulent transactions in assessing the nature of the schemes.
Schmuck was indicted and convicted on twelve counts of mail fraud, claiming the mailings were routine and not directly related to the fraud. The Supreme Court rejected this view, emphasizing that Schmuck's actions constituted an ongoing fraudulent scheme rather than a single transaction. The Court noted that the fraud was not complete until the retail dealers resold the cars and transferred titles, indicating that the mailings were essential for this process. Unlike the intrabanking mailings in Kann, which were merely post-fraud accounting, the title-registration mailings were crucial for executing Schmuck’s scheme. Consequently, a rational jury could find the mailings integral to Schmuck's fraudulent activities.
The analysis extends to Jinian’s conduct, which is compared to Schmuck's fraud, as Jinian's scheme also relied on each check clearing through the federal reserve to avoid detection. If a dishonored check remained, Jinian's fraud would be exposed. The ruling aligns with interpretations of similar cases, such as Shipsey and Lack, where mailings or wire transfers were deemed essential to the fraudulent schemes. In Tiller, the ongoing nature of the fraud was highlighted, akin to Schmuck, while Mills reiterated that the defendant's actions constituted an ongoing venture rather than a one-off operation.
The Seventh Circuit distinguishes the case from Kann due to its timing before the Uniform Commercial Code, which simplified the reversal of credits by banks if checks could not be collected. Even if each check Jinian deposited is viewed as a separate scheme, Kann is not applicable. The Supreme Court allows exceptions to the Kann rule, noting that when interstate wires are used as a means of concealment for ongoing fraud, the connection to fraudulent conduct is significantly closer than mere check clearing. In Jinian's case, the clearing of checks was essential for completing and concealing the fraud, as he needed to ensure Bricsnet would be swindled before the checks cleared. Evidence showed Jinian instructed Brown to issue multiple smaller checks to obscure the transactions from Bricsnet and to evade scrutiny from Mechanics Bank regarding large deposits. Therefore, a reasonable jury could infer that Jinian used interstate wires to structure, perpetuate, and conceal his fraudulent scheme, upholding his wire fraud conviction.
Jinian also argued that under 18 U.S.C. § 1343, the government must prove he intended to use interstate wire communications as part of the fraud scheme and that the jury should have been instructed on the foreseeability of such use. The district court's jury instructions required the government to prove that Jinian knowingly devised a fraudulent scheme, acted with intent to defraud, and used interstate wire communication as part of the scheme. The instructions clarified that a wire communication includes any transmission across state lines and that a wiring occurs when a person knows or reasonably foresees the use of a wire in the ordinary course of business. The court found that the instructions adequately covered the elements of wire fraud, and the Supreme Court has differentiated between general conduct and that which is regulated by Congress.
A statutory requirement can confer federal jurisdiction for state crimes if it involves factors of federal concern. The significance of labeling a requirement as 'jurisdictional' lies not in its exclusion from the intended scope of the law but in the fact that the actor need not be aware of the jurisdictional fact at the time of the crime. The interstate nexus under 18 U.S.C. 1343 serves as the basis for federal jurisdiction, as Congress's power over intrastate activities is limited by the Commerce Clause. The interstate requirement is determined to be jurisdictional, not a substantive element of wire fraud, meaning that the government does not need to prove that the defendant knew the communication was interstate. The focus is on the defendant's knowledge of their wrongful conduct rather than their awareness of the interstate aspect. A specific intent to defraud is the only mens rea requirement under the wire fraud statute. The Supreme Court case Pereira v. United States establishes that a defendant causes an interstate wire if they act with knowledge that such use will ordinarily occur or can be reasonably foreseen, but this does not require the defendant to specifically foresee interstate communication. Jinian's argument, citing Fowler v. United States, suggesting that the government must prove the defendant foresaw the interstate nature of the wire, is deemed misplaced.
The Supreme Court's decision in Fowler focused on the federal witness tampering statute (18 U.S.C. § 1512(a)(1)(C)), which criminalizes killing or attempting to kill someone with the intent to prevent communication regarding a federal offense to law enforcement. The Court clarified that for the government to establish a violation, it must demonstrate a reasonable likelihood that the victim would have communicated with federal officers, even if the defendant did not specifically target federal law enforcement. The statute does not require proof of the defendant’s knowledge of the victim's status as a federal officer, meaning intent to prevent communication with federal officers does not necessitate knowledge about their federal status. The Court adopted a foreseeability standard, indicating that witness tampering is more severe when it happens before any communication occurs, in contrast to the wire fraud statute, which mandates actual wire communication. The Fowler decision emphasized that the likelihood of communication must be more than speculative or remote, rejecting a "mere possibility" standard as insufficient for proving intent. Consequently, arguments claiming insufficient evidence for a conviction based on interstate wire communication were dismissed.
No mens rea requirement applies to the jurisdictional component of Jinian’s actions under 18 U.S.C. § 1343, which mandates only that he used or caused the use of interstate wires to further his scheme to defraud Bricsnet. The government demonstrated each element of wire fraud: (1) Jinian devised a scheme with intent to defraud Bricsnet, (2) it was foreseeable to him that wire communications between Mechanics Bank and Silicon Valley Bank would occur in furtherance of this scheme, and (3) such interstate wire communications indeed took place. The district court correctly instructed the jury and did not err in denying Jinian’s proposed jury instruction.
Jinian's argument that the district court erred by denying his motion for acquittal, claiming the wire fraud statute infringes on congressional authority under the Necessary and Proper Clause and violates the Tenth Amendment, is rejected. The Necessary and Proper Clause grants Congress broad legislative authority, and the wire fraud statute is valid under the Commerce Clause. Congress can regulate channels and instrumentalities of interstate commerce, including telecommunications. The statute is viewed as a valid extension of congressional power under the Commerce Clause, making a Necessary and Proper Clause analysis unnecessary. Since the statute is grounded in an enumerated power, Jinian's Tenth Amendment challenge is unfounded. The court concludes that Jinian's fraudulent actions align more closely with established fraud cases and confirms that the interstate requirement in 18 U.S.C. § 1343 is jurisdictional, not substantive. Ultimately, the court affirms Jinian's conviction and sentence.
