2. With Intent to Defraud
The phrase "knowingly and with intent to defraud" is not defined by section 1030. Very little case law under section 1030 exists as to its meaning, leaving open the question of how broadly a court will interpret the phrase. On one hand, courts might interpret "intent to defraud" as requiring proof of the elements of common law fraud.[
FN2] On the other hand, courts might give more liberal meaning to the phrase "intent to defraud" and allow proof of mere wrongdoing or dishonesty to suffice.
In examining the phrase "to defraud" in the mail and wire fraud statutes,[
FN3]
the Supreme Court rejected the notion that every "scheme or artifice that in its necessary consequence is one which is calculated to injure another [or] to deprive him of his property wrongfully" constitutes fraud under the mail fraud provision. Fasulo v. United States, 272 U.S. 620, 629 (1926). In
Fasulo, the court stated that "broad as are the words 'to defraud,' they do not include threat and coercion through fear or force."
Id. at 628. Instead, the Supreme Court placed emphasis on the central role of
deception to the concept of fraud—"the words 'to defraud' ... primarily mean to cheat, ... usually signify the deprivation of something of value by trick, deceit, chicane, or overreaching, and ... do not extend to theft by violence, or to robbery or burglary."
Id. at 627 (construing
Hammerschmidt v. United States, 265 U.S. 182 (1924)).
A broader alternative definition can be found in
Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121, 1123 (W.D. Wash. 2000), a civil case involving section 1030(a)(4). In that case, the court favored an expansive interpretation of "intent to defraud." In denying the defendant's motion to dismiss, the court held that the word "fraud" as used in section 1030(a)(4) simply means "wrongdoing" and does not require proof of the common law elements of fraud.
Id. at 1126 (construing
United States v. Czubinski, 106 F.3d 1069, 1078 (1st Cir. 1997)). Thus, the plaintiff stated a sufficient cause of action under section 1030(a)(4) by alleging that the defendant participated in "dishonest methods to obtain the plaintiff's secret information."
Id.
Shurgard does not directly address the Supreme Court decision in
Fasulo, but nevertheless provides some basis for interpreting "fraud" in its broadest sense (i.e., finding "fraud" when there is evidence of "wrongdoing," as opposed to requiring proof of "trick, deceit, chicane, or overreaching").
Cf. 132 Cong. Rec. S4072-02, 99th Cong., 2d. Sess. (1986) ("The acts of 'fraud' that we are addressing in proposed § 1030(a)(4) are essentially thefts in which someone uses a [protected computer] to wrongly obtain something of value from another").
In discussing the creation of section 1030(a)(4), Congress specifically noted that "[t]he scienter requirement for this subsection, 'knowingly and with intent to defraud,' is the same as the standard used for
18 U.S.C. § 1029 relating to credit card fraud."
See S. Rep. No. 99-432, at 10,
reprinted in 1986 U.S.C.C.A.N. 2479, 2488. Interestingly, despite having specifically discussed the mail and wire fraud statutes in the context of section 1030(a)(4), the Committee did not relate the scienter requirement of the term "to defraud" to the use of the term in the mail and wire fraud statutes, leaving open the question of whether the meaning and proof of "to defraud" is the same for sections 1030(a)(4) and 1029, as it is for the mail and wire fraud statutes. As it is, there are no reported cases discussing the meaning of "to defraud" under section 1029.
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