Supreme Court’s Recent Interpretation of Wire Fraud Confirms Confidential Government Information Is Property

For nearly 40 years, regardless of whether confidential information belonged to a governmental entity or a private-sector business, its misappropriation could be prosecuted as a property crime. Lower federal courts relied on Carpenter v. United States,[1] a well-known Supreme Court decision that unanimously affirmed the federal mail and wire fraud convictions of a reporter and his co-conspirators who schemed to trade securities based on pre-publication information belonging to the reporter’s employer, the Wall Street Journal. Carpenter held that the misappropriated information constituted intangible “property” within the meaning of those statutes because the employer was deprived of its confidential information’s exclusive use.

But in 2021, the U.S. Department of Justice abruptly changed its position, maintaining that the misappropriation of confidential government information generally could no longer be prosecuted as a property crime. The DOJ was responding to the Supreme Court’s decision in Kelly v. United States.[2] More commonly known as the “Bridgegate” case, Kelly overturned the wire fraud convictions of two public officials appointed by then-New Jersey Governor Chris Christie. These officials tricked public transit workers into realigning traffic lanes on the George Washington Bridge, causing massive gridlock that infuriated the constituents of a rival politician. Although the Court recognized that the officials acted deceptively and corruptly, it unanimously held that the officials’ scheme to alter the exercise of an agency’s regulatory authority did not deprive the government of a “property” interest.

For many observers, the notion that confidential government information did not constitute “property” was stupefying because Kelly did not involve any use of confidential government information, and such information often has an exceptionally high market value – which is why unscrupulous securities traders sometimes scheme to obtain and use such information.[3] Yet, in United States v. Blaszczak,[4] a divided panel of the Second Circuit deferred to the DOJ’s post-Kelly position and reversed the wire fraud and other property crime convictions of four defendants who had been found guilty and sentenced to prison.

But even if years ago there were alternative, plausible ways to construe Kelly, there are now two reasons why the Court’s May 2025 wire-fraud decision in Kousisis v. United States[5] leaves little doubt that the DOJ and Second Circuit have been incorrectly extrapolating from Kelly. First, Kousisis clarifies that the precedent in Kelly precludes property-crime prosecutions only when a defendant’s interference with the exercise of regulatory authority was the actual “object” of the fraudulent scheme. Second, Kousisis held explicitly that governmental entities can be victims of wire fraud regardless of whether they suffer an “economic loss.”

The high-profile prosecution in Blaszczak went up once to the Supreme Court and twice to the Second Circuit, ending with a dismissal of all charges in December 2023. At the heart of the case was confidential information pertaining to upcoming changes in health-insurance reimbursement rates, which was obtained from the U.S. Centers for Medicare and Medicaid Services (CMS). The four defendants were the CMS official who leaked the confidential information, a political intelligence consultant who was the information’s initial recipient, and two hedge-fund analysts who generated more than $5 million in trading profits when they used the material nonpublic information to sell short the stock of several companies that would be negatively affected. In Blaszczak I, a 2-1 panel affirmed the jury verdict that convicted the defendants of crimes including wire fraud in violation of 18 U.S.C. Section 1343 and conversion of federal government property in violation of 18 U.S.C. Section 641.[6]

After the defendants successfully petitioned the Court to vacate Blaszczak I, the defendants on remand predictably argued that Kelly’s intervening precedent precluded their interference with CMS’ regulatory authority from being prosecuted as a property crime. But what happened next was surprising. Although the prosecutors initially sought to argue that Kelly was irrelevant to the property status of confidential government information, they were instructed by the U.S. Solicitor General not to do so. Instead, the SG construed Kelly to mean that an agency’s “predecisional” information is generally not “property” because...