Conspiracy to Defraud the U.S. Defenses

The defraud clause of 18 U.S.C. § 371 is broad, and that breadth is exactly why it is defensible on grounds that do not exist in an ordinary fraud case. The government does not have to prove a loss, but it does have to prove an agreement, dishonest means, an impaired government function, and an overt act. Each is contestable.

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There Was No Agreement

A conspiracy requires a meeting of minds on the objective. That is not established by a commercial relationship, by parallel conduct among people each pursuing their own interest, or by a pattern of dealings that looks unusual in hindsight.

In procurement and tax matters this argument has particular force, because the participants are frequently a company, its advisers, and its counterparties, all of whom had ordinary reasons to deal with one another. Proof that they transacted is not proof that they agreed to obstruct an agency.

Where the government’s case rests on inference from a pattern rather than on any communication about a shared objective, identifying that gap is the defence. Inference is permitted, but evidence equally consistent with lawful commercial conduct does not establish agreement.

The Means Were Not Dishonest

This is the most useful defence under the defraud clause and the one most often available. The clause reaches interference by deceit, craft, trickery, or dishonest means. It does not reach conduct that was merely aggressive, uncooperative, or legally mistaken.

Taking an aggressive but disclosed tax position is not dishonesty. Structuring a transaction in a manner a regulator would prefer to see structured differently is not dishonesty. Disputing an agency’s interpretation of a rule, declining to volunteer information the agency did not require, or exercising a right to say nothing are not dishonesty.

The line matters because prosecutors sometimes charge the clause where the underlying complaint is really about a legal position rather than a lie. Forcing the government to identify the specific deception, and when it occurred, frequently exposes that.

Disclosure defeats the theory outright. Where the information said to have been concealed was in fact provided, in a filing, a certification, or correspondence, there was no deceit to impair anything.

No Government Function Was Impaired

The indictment must identify a lawful government function and explain how the agreement impaired, obstructed, or defeated it. That requirement is doing real work, and the agency’s own records are the evidence.

Where the agency already held the information, where it did not require the item said to have been withheld, or where it proceeded exactly as it would have regardless, the impairment theory fails on the government’s own file. This is why obtaining the complete agency record, rather than the portion produced in discovery, is central in these cases.

There is also a limit worth pressing: not every interaction with a government agency is a protected function for these purposes, and characterising ordinary regulatory friction as obstruction stretches the clause beyond its purpose.

The Overt Act, Knowledge, and Scope

Section 371 requires an overt act in furtherance of the agreement, alleged in the indictment and proved at trial. Unlike the fraud conspiracy provision at § 1349, this gives the defence a concrete target. An act that predated the agreement, that was unrelated to it, or that the defence can show did not occur does not satisfy the element.

Knowing participation is separate. Mere association with conspirators, presence when matters were discussed, or performing ordinary professional work on information supplied by a client does not establish membership. Accountants, lawyers, brokers, and administrative staff frequently sit on this line, and what they were told and what documents they actually saw is what resolves it.

Scope governs both liability and sentencing. A defendant is accountable only within the boundary of what they agreed to and could reasonably foresee, which limits both the acts attributable to them and the tax or government loss used to calculate the range.

Withdrawal is available but demanding, requiring affirmative action inconsistent with the conspiracy communicated to the coconspirators. It does not undo prior liability, but it can start the limitations period running.

Frequently Asked Questions

Can I defend a Klein conspiracy by showing no loss?

Not as to conviction. The defraud clause does not require proof that anyone lost money, because the alleged harm is to the integrity of a government function. The absence of loss matters at sentencing, where the advisory Guidelines range is driven by the tax loss or government loss, and where a nominal figure substantially reduces exposure.

Is an aggressive tax position dishonest?

Not by itself. The clause requires deceit, craft, trickery, or dishonest means. Adopting an aggressive but disclosed position, structuring a transaction in a way a regulator dislikes, or disputing an agency’s interpretation is a legal dispute rather than a deception. Forcing the government to identify the specific lie, and when it was told, often exposes the difference.

What if we disclosed the information?

Then the theory generally fails. Where the material said to have been concealed was in fact provided in a filing, certification, or correspondence, there was no deceit capable of impairing the agency’s function. Establishing what was actually disclosed, and when, is usually the most productive documentary exercise in these cases.

Does the overt act have to be a crime?

No. Any act in furtherance of the agreement suffices, including a telephone call, a meeting, or an ordinary filing. But it must genuinely have furthered the conspiracy and must be alleged in the indictment, so acts predating the agreement or unrelated to it are open to challenge. This target does not exist under the fraud conspiracy statute at § 1349.

I was the accountant. Am I a conspirator?

Not without knowledge of the essential nature of the plan and a deliberate decision to join it. Preparing returns, filings, or submissions on information supplied by a client is ordinary professional work. What resolves the question is what you were told, what you asked, and which documents you actually saw, which is why the engagement file matters.

How do I get the agency’s records?

Through discovery in the first instance and by subpoena where necessary. It matters here more than in most cases, because the impairment theory depends on what the agency knew, required, and did. Where its own file shows it held the information or proceeded unaffected, the government’s theory is undermined on its own records.

Working With Law Offices Of SRIS, P.C.

Under the defraud clause the productive defences are the ones the government cannot avoid: identifying the specific deception rather than a disputed legal position, and establishing from the agency’s own file what it actually knew and required. Both require the complete government record rather than the produced extract.

Mr. Sris, Owner and Founder of Law Offices Of SRIS, P.C., is a former prosecutor and is admitted in Virginia, Maryland, the District of Columbia, New Jersey, and New York. The firm has been practicing since 1997. Mr. Sris and the firm’s Of Counsel attorneys handle criminal defense matters across those jurisdictions, which matters in federal practice because a single investigation frequently reaches conduct, witnesses, and records in more than one state. Mr. Sris brings a background in accounting and information systems from George Mason University, applied to complex financial and technology-related cases.

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This page provides general information about defences under the § 371 defraud clause and does not create an attorney-client relationship. Case results depend on a variety of factors unique to each case. Results may vary.

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These defences apply to one offence. Our page on conspiracy to defraud the US charges sets out that offence from start to finish.