Major Fraud

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

The federal offense of major fraud against the United States is serious and is often filed together with mail fraud or wire fraud counts. This law was created in 1988 as part of the Major Fraud Act, which penalizes large-scale schemes to defraud the federal government where the underlying contract or grant is valued at over $1 million.

This federal statute was initially enacted to deter large-scale defense contractors from committing procurement fraud and war profiteering. It imposes much steeper fines than the more general fraud statutes. The reach of this law has been greatly expanded and now addresses most sizeable federally funded contracts. 

18 U.S. Code 1031 says that whoever knowingly executes or attempts any scheme to defraud the United States or obtains property or money through a fraudulent or false representation could face major fraud charges.

A typical example could include any fraudulent behavior relating to any grant, contract, or subcontract authorized by the federal government valued at more than $1 million.

This federal law focuses on protecting the integrity of government programs by severely punishing anyone who defrauds the government resources.  Federal government fraud is a white-collar crime that the United States Department of Justice (DOJ) prosecutes.

In 2009, this law was amended by the Fraud Enforcement and Recovery Act, prohibiting all forms of fraud involving federal assistance, grants, contracts, and transactions under the Troubled Asset Relief Program (TARP) when the underlying contract is valued at over $1 million.

Section 1031 is a broad law that covers most types of fraud against federal government programs. It imposes harsh penalties for successful and attempted fraud. Let's review this law in more detail below.

What Does Federal Law Say?

18 U.S. Code § 1031 - Major fraud against the United States says, “(a) Whoever knowingly executes, or attempts to execute, any scheme or artifice with the intent

18 U.S.C. § 1031 - Major Fraud Against the United States
Federal government fraud charges under 18 U.S.C. 1031 typically involve large-scale schemes.

(1) to defraud the United States; or

(2) to obtain money or property using false or fraudulent pretenses, representations, or promises.

In any grant, contract, subcontract, subsidy, loan, guarantee, insurance, or other form 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 any procurement of property or services as a prime contractor with the United States or as a subcontractor or supplier on a contract in which there is a prime contract with the United States, if the value of such grant, contract, subcontract, subsidy, loan, guarantee, insurance, or other form of Federal assistance, or any constituent part thereof, is $1,000,000 or more shall be….”

Section 1031(f) says, “A prosecution of an offense under this section may be commenced any time not later than seven years after the offense is committed, plus any additional time otherwise allowed by law.”

What Factors Must Be Proven?

Notably, charges can be filed against individuals and businesses. To convict you of violating 18 U.S.C. 1031 major fraud, federal prosecutors must prove all the elements of the crime beyond a reasonable doubt, such as the following:

  • You knowingly and willfully participated in a scheme to defraud the United States. It also covers any “attempts” to execute.
  • You made false statements or representations that were material to the fraudulent scheme.
  • The fraudulent scheme was designed to obtain money or property from the United States government.
  • The value of the funds or property at stake exceeded $1 million.

Major Fraud – Quick Facts

There are some essential facts you should know about Section 1031, major fraud against the United States, such as the following:

  • This federal law covers obtaining money from the government through improper means such as bribery, kickbacks, and contractual fraud.  
  • In 2008, it was expanded to protect government funds for emergency relief, including any form of federal assistance.
  • There were concerns it would be used to prosecute people fraudulently getting funds under the CARES Act of 2020, which was designed for emergency relief for businesses during the Coronavirus pandemic.
  • Programs where this law might apply include the Paycheck Protection Program (PPP) and loans under the Coronavirus Economic Stabilization Act of 2020 for emergency funds over $1 million.
  • Government procurement fraud occurs when contractors submit fraudulent bids or overcharge for goods or services.
  • Healthcare fraud often involves submitting false claims to government healthcare programs like Medicare or Medicaid.
  • Disaster relief fraud occurs through fraudulent claims for funds provided by the Federal Emergency Management Agency (FEMA).

What Are the Related Federal Laws?

18 U.S. Code Chapter 47 fraud and false statements have numerous federal laws related to 18 U.S. Code 1031 major fraud against the United States, such as 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, reports and transactions;
  • 18 U.S.C. 1007 – Federal Deposit Insurance Corporation transactions;
  • 18 U.S.C. 1010 – Department of Housing and Urban Development and Federal Housing Administration transactions;
  • 18 U.S.C. 1011 – Federal land bank mortgage transactions;
  • 18 U.S.C. 1012 – Department of 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; renewals and discounts; crop insurance;
  • 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 and instruments wrongfully sealed;
  • 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, voucher, receipt for military or naval property;
  • 18 U.S.C. 1023 – Insufficient delivery of money or property for military or naval service;
  • 18 U.S.C. 1024 – Purchase or receipt of military, naval, or veteran's facilities property;
  • 18 U.S.C. 1025 – False pretenses on high seas and other waters;
  • 18 U.S.C. 1026 – Compromise, adjustment, or cancellation of farm indebtedness;
  • 18 U.S.C. 1027 – False statements and concealment of facts about documents required by the Employee Retirement Income Security Act of 1974;
  • 18 U.S.C. 1028 – Fraud and related activity in connection with identification documents, authentication features, and information;
  • 18 U.S.C. 1028A – Aggravated identity theft;
  • 18 U.S.C. 1029 – Fraud and related activity in connection with access devices;
  • 18 U.S.C. 1030 – Fraud and related activity in connection with computers;
  • 18 U.S.C. 1032 – Concealment of assets from conservator, receiver, or liquidating agent;
  • 18 U.S.C. 1033 – Crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce;
  • 18 U.S.C. 1034 – Civil penalties and injunctions for violations of 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, vessel, or aircraft of the United States or secure area of any airport or seaport;
  • 18 U.S.C. 1037 – Fraud and related activity in connection with electronic mail;
  • 18 U.S.C. 1038 – False information and hoaxes;
  • 18 U.S.C. 1039 – Fraud and related activity in connection with obtaining confidential phone records information of a covered entity;
  • 18 U.S.C. 1040 – Fraud in connection with major disaster or emergency benefits.

Penalties for 18 U.S.C. 1031

If convicted of section 1031 federal government fraud, you are facing the following penalties under the federal sentencing guidelines:

  • A maximum prison sentence of up to ten years.
  • The standard fine is up to $1 million. Still, there are provisions when a judge can impose fines over recommended guidelines, up to $5 million for one offense and up to $10 million total for multiple counts.
  • The court could order restitution to the government, including the return of fraudulently obtained funds or property.

Factors Considered 

Section 1031(e) provides explicitly that federal judges should consider three main factors during sentencing:

  • The need to reflect the seriousness of the offense,
  • Whether the defendant previously has been fined for a similar offense,
  • Any other pertinent equitable considerations.

Defenses for Federal Government Fraud

Suppose you are accused of 18 USC 1031. In that case, our federal criminal defense attorneys could use different strategies, as discussed below.

Defenses for Federal Government Fraud
Contact us for a free case evaluation.

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

Maybe we can make a good-faith argument. Perhaps we can show that you reasonably believed your actions were lawful or provided accurate information.

Maybe we can argue that there is insufficient evidence to obtain a conviction.  Perhaps we can show 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 in doubt. Contact us for a free case review. The Hedding Law Firm is located in Los Angeles, California.

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