US v. Alladawi: New Ciminelli wire fraud decision

Overview. Adding to the list of court decisions where Courts have thrown out or acquitted defendants based on the Supreme Court’s decision in Ciminelli v. United States, 598 U.S. 306 (2023) is the recent decision in the Central District of California in United States v. Alladawi, a federal wire fraud case which was issued on December 15, 2023. This is a critical case to use when arguing the “right-to-control” theory of federal fraud cases in court.

Just the Facts. In a surprise, none of the facts were in dispute. In fact, the parties stipulated to all the facts, and proceeded to a “bench trial” before Judge Carney. The sole issue presented was whether the defendant’s conduct constitute federal wire fraud. The gist of the case is that the defendant was a store owner who had been disqualified from receiving or participating in the WIC program (food stamps). Alladawi wanted back in the federal program, as it constituted substantial revenue for his stores. So he duped the WIC program into giving him back his participation rights. He created fake login accounts, or posed as different stores, all to get the opportunity to receive food stamps at his store. But critically, there was no evidence that Alladawi “did not provide approved food items” in exchange for the food stamps. In other words, everything was legit except how Alladawi got into the program to begin with as a service provider.

The Decision. The Court first traced the arc of the various decisions interpreting federal wire fraud, walking readers through such seminal cases as Ciminelli and Cleveland v. United States, 531 US 12 (2000). The Court made clear that to be guilty of wire fraud, one must engage in not only deception, but, and most importantly, the objective of using that deception to deprive victims of money or property. Critically, the court addressed what is known as the “core concern” test. Effectively, the court asked, “what is the purpose of food stamps?” Deciding that the purpose of food stamps was to feed the recipients of those stamps, the Court determined that providing false information to WIC in order to have the ability accept food stamps did not frustrate the “core concern” of the WIC program. Alladawi, as the Court held, did not actually contemplate harm to the Government. “Yes, he scheduled to obtain government funds, but the true injury was to the agencies’ regulatory interest in administering the WIC program. The agencies’ core interest, the objective of supporting indigent mothers and children’s nutritional needs - i.e the objective that would implicate the “right to decide how to use” funds - was not frustrated.”