United States v. Weaver
2017 U.S. App. LEXIS 10930
2d Cir.2017Background
- Edward Weaver was CEO of Vendstar, which sold low-value candy-vending "business opportunities" to ~7,000 customers, collecting about $62 million from investors.
- Vendstar salespeople routinely made false oral representations (guaranteed profits, salespeople claimed to be owners, locating services would secure high-traffic placements) that induced purchases.
- Customers signed purchase agreements containing prominent disclaimers stating they did not rely on any oral representations and that no earnings were guaranteed.
- Salespeople downplayed those disclaimers as mere "legalese" when customers objected.
- A jury convicted Weaver of conspiracy, mail and wire fraud, and making a false statement; Weaver appealed, arguing the contractual disclaimers rendered the prior oral misrepresentations immaterial as a matter of law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether contractual disclaimers that purchasers acknowledged and signed render prior oral misrepresentations immaterial under the mail/wire fraud statutes | Government: materiality is distinct from reliance; misrepresentations were capable of influencing victims and thus material | Weaver: disclaimers stating no reliance mean prior oral statements could not be material, so no fraud | Held: Disclaimers do not make misrepresentations immaterial; materiality looks to tendency to influence, not actual reliance |
| Whether reliance is an element of mail/wire fraud | Government: reliance is not required; materiality and intent suffice | Weaver: equates materiality with reliance to defeat criminal liability | Held: Reliance is not a separate element; Supreme Court precedent bars adding reliance to criminal fraud elements |
| Whether actual harm/successful fraud is required for conviction | Government: no need to prove actual successful fraud; scheme and use of mails/wires with intent suffice | Weaver: assumes fraud must succeed (contract signed) to be criminal | Held: No proof of actual victim injury required; use of mails/wires in furtherance of scheme with intent completes the offense |
| Whether contractual allocation of risk affects criminal liability | Government: contract risk-allocation may bar civil damages but does not excuse criminal deception | Weaver: contractual disclaimers allocate risk and preclude criminal materiality | Held: Contractual allocation has force in civil law but does not negate criminal liability for schemes to defraud |
Key Cases Cited
- Neder v. United States, 527 U.S. 1 (1999) (reliance and damages are not required elements of federal mail/wire fraud)
- Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989 (2016) (materiality measured by effect on likely or actual behavior of recipient)
- United States v. Rybicki, 354 F.3d 124 (2d Cir. 2003) (en banc) (materiality defined as tendency to influence reasonable person)
- United States v. Corsey, 723 F.3d 366 (2d Cir. 2013) (false statement material if capable of influencing decisionmaker)
- United States v. Ghilarducci, 480 F.3d 542 (7th Cir. 2007) (contractual disclaimer does not render prior oral misrepresentations immaterial for criminal fraud)
- United States v. Lucas, 516 F.3d 316 (5th Cir. 2008) (disclaimer in sales contracts does not insulate defendants from federal mail/wire fraud charges)
- United States v. Rosby, 454 F.3d 670 (7th Cir. 2006) (distinguishes materiality from reliance; courts should not fold reliance into materiality)
- United States v. Starr, 816 F.2d 94 (2d Cir. 1987) (government need not prove an intended victim was actually defrauded to establish mail/wire fraud)