Kann v. United States

Background

A company that made munitions for the Government (Triumph) and several of its officers set up a second firm (Elk Mills). The officers diverted contract profits to Elk Mills, gave themselves stock, salaries, and bonuses, and at least two checks connected to those payments passed through the mail after being cashed or credited by local banks. The president of Triumph was tried and convicted for using the mail in a scheme to defraud; lower courts had let the case go to a jury.

Reasoning

The core question was whether sending those checks through the mail was done “for the purpose of executing” the fraud — in other words, whether the mailings were part of carrying out the scheme. The majority said they were not. By the time the banks mailed the checks for collection, the people meant to get the money had already received it and the scheme had, as to those transactions, run its course. The Court concluded that routine banking and the later mailing of checks were incidental banking steps, not steps taken to execute the fraud, and therefore the mail element required by the federal statute was missing. The conviction was reversed.

Real world impact

This decision narrows the situations where ordinary bank clearances and subsequent mailings will trigger a federal mail-fraud charge. Corporate officers who receive payments that are later processed by banks may be less likely to face federal mail-fraud convictions based only on those mailings. Many disputes of this sort may instead be left to state law or other remedies.

Dissents or concurrances

A dissent argued the mailings were essential to the overall fraudulent venture and that cashing by collecting banks should not defeat federal liability, emphasizing the continuing nature of the scheme.