Criminal law and business

Criminal Law and Business

A particular type of fraudulent activity involving the use of mail or wire transmission is the subject of the case of Schmuck v. United States. The specifics of the case involve an odometer rollback scheme perpetrated by Wayne Schmuck a used-car distributor. At issue in the case is whether Schmuck committed mail fraud by the "submission of the title-application form" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008) to the Wisconsin Department of Transportation by dealers servicing their retail customers.

What was the factual basis of the fraudulent scheme used by Schmuck in this case?

In granting certiorari the Supreme Court looked to "define further the scope of the mail fraud statute" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). In completing this task the court must establish the factual basis of the case, defined as a statement of the facts detailing a defendant's crime, stipulated by the prosecution and the defense (or the defendant may admit those facts on the record in open court), which forms the basis by which a judge can accept a guilty or no contest plea to a felony charge. (Legal Dictionary. N.D.).

Wayne Schmuck a used-car distributor engaged in a fraudulent scheme to rollback the odometer on used vehicles; proceed to sell them to unsuspecting dealers at a price premium, who then subsequently sold them to retail consumers. Over the course of 15 years Schmuck arranged for approximately 150 cars to have their odometers rolled back for the purpose of fraudulent sales (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). The process by which Schmuck engineered the transaction is the critical component in elucidating whether actual mail fraud was committed. After rolling back the odometer on the vehicle, dealers with whom Schmuck had engendered a positive relationship over 15 years were sold the vehicles, who then "resold the cars to consumers, who in turn paid prices reflecting Schmuck's fraud" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). If this were the extent of the transaction there would be insufficient evidence to convict Schmuck of mail fraud.

The successful sale of the vehicle though to the consumer depends on a properly transferred title; "the receipt of a Wisconsin title was a prerequisite for completing the resale; with-out it, the dealer could not transfer title to the customer and the customer could not obtain Wisconsin tags" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). The crux of the case falls on the submission of the title application to the Wisconsin Department of Transportation. By virtue of the submission a communication was sent through the mail which then elevated the status of the case to a potential mail fraud scenario.

How was the mail associated with this factual situation?

The act of mailing the title application to the Wisconsin Department of Transportation provided the substance for application of the mail fraud statute. The question at hand however, involves whether the mailing is germane to the actual fraud scheme which was committed. On this point two issues arise, first was the mailing an essential part of the scheme, and second did the mailing further the execution of the fraudulent scheme the defendant suggests that the mailing of the application was only an innocuous step in the process; "innocent in and of itself… merely tangentially related to the fraud… and far from furthering the execution of the fraud, occurs after the fraud has come to fruition" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008).

To the Court however, the mailings constitute activity which while not potentially "an essential element of the scheme" was incident to an essential part of the scheme or a step in the plot" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). The mailing of the title applications and the subsequent issuance of Wisconsin tags to the retailers completed the fraudulent process, for as the court contends "the success of Schmuck's venture depended on his continuous harmonious relations with, and good reputation, among retail dealers" (Reed, O. Shedd, P. Morehead, J. & Pagnattaro, M. 2008). Without the "successful passage of the title among the various parties" the scheme would have collapsed.

Why does the Supreme Court conclude that mail fraud existed in this case?