Federal White Collar Fraud Conviction Reversed on Appeal: Pattern Jury Instruction on Fraud Held to be Deficient

A federal conviction in a white collar fraud prosecution out of Alabama was recently reversed by the United States Court of Appeals for the Eleventh Circuit. This case could be a very important decision for many people who have faced federal fraud charges. The decision in United States v. Svete might even impact some cases where the defendant was convicted years ago.

Here’s what happened. Mr. Svete and another man were prosecuted for a supposed fraud involving the “viaticals” component of the insurance business. One of the charges alleged that the defendants committed federal mail fraud, which requires proof of “a scheme to defraud.” About ten years ago, the Eleventh Circuit Court of Appeals issued a very sensible ruling, pointing out that not all people who lose money in an investment are victims of mail fraud. Instead, this earlier decision explained that before a person could be convicted of federal fraud charges, there had to be proof that the defendant concocted a scheme “reasonably calculated to deceive persons of ordinary prudence and comprehension.” In other words, just because some people lose money does not make the person who got their money a criminal, if the victims did not use “ordinary prudence and comprehension.”

Now, here’s the important part of the Svete case. Like most courts, the Eleventh Circuit puts out a standard set of Pattern Jury Instructions that judges and lawyers can use during a trial. A judge who decides to use one of these Pattern Instructions to tell a jury about a particular point of law will rarely get reversed on appeal. However, the Pattern Instruction in the Eleventh Circuit does not include the language about the need for the prosecutor to prove that a scheme was “reasonably calculated to deceive persons of ordinary prudence and comprehension.” Because this language is good law, and because the Pattern Instruction does not have such language, the Court reversed the fraud convictions in the Svete case.

This might be an important ruling, for several reasons. First, there are several other Pattern Instructions used in the Eleventh Circuit dealing with other varieties of fraud, and none of these other instructions contain the crucial language that led to the reversal in the Svete decision. Also, this problem might even affect cases that have already been decided. Careful lawyers who handle federal fraud cases need to look over their current and previous cases to see if this recent decision might help their clients.

At our firm, we do quite a few federal appeals. This case is yet one more example showing why lawyers need to try and keep current with recent changes in the law.