A unanimous Supreme Court upheld the fraud conviction of a man who lied to get PennDot contracts

The U.S. Supreme Court on Thursday upheld the fraud conviction of a Downingtown man who was sentenced to prison for lying when obtaining two PennDot contracts that net his company more than $20 million.

Stamatios Kousisis, who was a project manager for Alpha Painting & Construction Co., appealed his 2018 fraud conviction, arguing that while he misrepresented the role of a minority-owned business in the painting projects on I-95’s Girard Point Bridge over the Schuylkill and Amtrak’s 30th Street Station, the projects were completed as promised — and the government didn’t suffer economic losses.

Circuit courts have disagreed on the question of whether a federal fraud conviction is only valid when the victim incurred economic losses, sending the matter to the Supreme Court.

Justice Neil Gorsuch summarized the issue in his concurring opinion: “What is the difference between a lie and a criminal fraud?”

While justices appeared divided during oral arguments in December, all nine justices upheld the conviction, holding in a majority opinion and three concurring opinions that fraud can be proved in court without a direct economic loss to the victim.

“The common law did not establish a generally applicable rule that all fraud plaintiffs must plead and prove economic loss,” Justice Amy Coney Barrett wrote in the majority opinion," so we will not read such a requirement into the wire fraud statute."

Kousisis and Alpha secured roles in 2009 and 2010 PennDot contracts to renovate the Girard Point Bridge and make repairs around 30th Street Station.

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The contracts included a federal requirement that some of the funds go toward a disadvantaged business enterprise, a firm that is at least 51% owned by members of a historically disadvantaged group. Kousisis falsely told the government that he would buy $6.4 million worth of paint from one such business, Marakias Inc.

But Marakias did not provide paint supplies, according to the Supreme Court’s summary of the case, but instead filled the role of a “paper pusher, funneling checks to and from Alpha’s actual contractors.”

“By the time the last coat of paint had dried, Alpha had turned a gross profit of over $20 million,” Barrett wrote.

Kousisis was convicted of wire fraud and conspiracy in August 2018 after a 19-day trial. He was sentenced in 2019 to nearly six years in prison followed by three years’ probation.

Lawyers for Kousisis appealed the conviction, arguing that while he misrepresented Marakias’ role, PennDot got its money’s worth. The project was fulfilled and the government didn’t incur economic losses.

The Third Circuit Court rejected that argument, and Kousisis asked the Supreme Court to weigh in.

Lisa Mathewson, an attorney representing Kousisis, said she is disappointed with the outcome for her client.

“I expect we’ll see the Court grappling with similar line-drawing problems in a future case,” she said.

Among those interested in the case was the former dean of Temple University’s Fox School of Business, Moshe Porat, who was convicted in 2021 of orchestrating a fraud scheme to improve the college‘s ranking through misrepresentations.

He filed a “friend of the court” brief noting that students “received the education and degree for which they paid,” despite the misrepresentation-based rankings.

If the Supreme Court were to reverse Kousisis’ conviction, Porat’s conviction would have to be reversed as well, he said.

But the justices agreed that economic loss is not required to prove a federal fraud charge.

“In short, the wire fraud statute is agnostic about economic loss. The statute does not so much as mention loss, let alone require it,” Barrett wrote.

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In concurring opinions, some justices quibbled with nuances.

Gorsuch, for example, agreed with the overall ruling but took issue with a footnote that seems to suggest that misrepresentation by itself, even without injury, is enough to show that a person or a company was a victim of fraud.

The justice says the only way to resolve this issue is to hold that “lies without injury are not criminal frauds.” In Kousisis’ case, Gorsuch said, PennDot did not receive what the contractor agreed to, which was both the paint job and the use of a minority-owned firm.

Justice Clarence Thomas, among the most conservative members of the court who has vocally opposed diversity programs, questioned whether the diversity requirement was “material” to the bargain between PennDot and Alpha.

The “conditions had no bearing on petitioners’ ability to complete their projects,” Thomas wrote.

He further questioned the constitutionality of diversity goals in government contracts, but agreed the conviction should be upheld.