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Decision on Web Sites Likely To Yield More Federal Fraud Prosecutions

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For years, Howard Kieffer -- a California resident -- held himself out as a criminal defense attorney, although he had never attended law school or passed any bar. He registered a domain name with a Virginia company, which also hosted the web site. Federal prosecutors charged him with wire fraud, asserting that the web site he maintained, which was accessed by two of his victims, in Colorado and Tennessee, was a "wire communication in interstate commerce" sufficient to establish jurisdiction under the federal wire fraud statute. In United States v. Kieffer, the United States Court of Appeals for the Tenth Circuit,recognized that the victims could have accessed Kieffer's website from local host servers in Colorado and Tennessee, in which case the "communication" made directly to them would not have traveled in interstate commerce. However, the court noted that before the website could reach the local host server, it had been uploaded by Kieffer to the Virginia company, and then transmitted from Virginia to Colorado and Tennessee. The court held that "[t]he presence of end users in different states, coupled with the very character of the internet" permitted the jury to infer transmission across state lines. Under Kieffer, an allegation that a web site was used to perpetrate fraud would give rise to federal wire fraud jurisdiction in nearly every case. Given "the very character of the internet," it is unlikely that a defendant will reside in the same state as his web site host and victims. If other courts follow Kieffer -- and indeed, unless other courts reject it -- there is likely to be a surge in federal wire fraud prosecutions.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


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The Manhattan Insitute's Center for Legal Policy.