United States v. Binday
Citation: 804 F.3d 558 (2d Cir. 2015) Court: United States Court of Appeals for the Second Circuit
Facts
Jeffrey Binday and co-defendants operated a scheme in which they submitted life insurance applications containing material misrepresentations that concealed the true purpose of the policies: the insureds had no genuine need for life insurance and the policies were actually being acquired for investor-owned life insurance (IOLI or STOLI) arrangements, in which third-party investors would immediately acquire beneficial interests. The insurers’ underwriting guidelines expressly prohibited STOLI policies, and the insurers would not have issued the policies had they known the true purpose. The government argued that the defendants deprived insurers of their right to control their own assets by making decisions based on false information, even though the insurers suffered no net monetary loss (premiums received exceeded claims paid).
Issue
Whether wire fraud is established when the government proves the victim was deprived of economically valuable information needed to make an informed decision about its assets, even without proof of a net financial loss to the victim.
Holding
The wire fraud statute reaches schemes that deprive victims of the right to control their assets by making decisions based on materially false information — the “right-to-control” theory of property — even where no net financial loss is shown.
Rule
Wire fraud under 18 U.S.C. § 1343 encompasses a “right-to-control” theory: a defendant defrauds a victim of property when the defendant deprives the victim of economically valuable information necessary to make informed decisions about the disposition of its assets, regardless of whether the victim suffers a net monetary loss.
Significance
Binday became the leading Second Circuit articulation of the right-to-control theory of wire fraud, significantly expanding the statute’s reach in that circuit to cover information deprivation without traditional financial loss. The theory enabled prosecution of a broad range of fraud schemes involving false information that influenced business decisions. However, the right-to-control theory’s viability was later sharply curtailed by the Supreme Court in Ciminelli v. United States, 598 U.S. 306 (2023), which unanimously held that the right-to-control theory — as articulated in Binday and related Second Circuit cases — is not a valid basis for wire fraud because it criminalizes the deprivation of “potentially valuable economic information” rather than traditional property. Binday thus illustrates both the expansive prosecutorial use of wire fraud and the Supreme Court’s subsequent pushback. It should be read alongside Skilling v. United States and United States v. Takhalov for the contours of federal fraud doctrine.