Should it be a crime for someone to sell life insurance policies to investors without the insurance companies consent? More importantly, should one go to jail for fraud even when the defendant didn't actually steal any property? Michael Binday doesn’t think so, and he’s taken his case all the way to the Supreme Court.
In a petition filed with the court on March 10, former insurance broker Binday asked that the appeals court’s ruling in his case be overturned, arguing that although he may have breached his contracts with insurance companies, he did not commit a crime in doing so. Binday argues that he didn’t actually steal anything from the insurance companies and so cannot be guilty of fraud under the statutes.
Is It Fraud If the Defendant Restricts the Victim’s “Right to Control Property?”
It depends on who you ask. Prosecutors considered the information on the insurance applications Binday obtained to be the insurance companies “property,” because the information influenced the companies “right to control” who they do business with, and charged him with mail and wire fraud based on their interpretation of federal fraud statutes. One of these statutes states, in part, that whoever uses the mail “for obtaining money or property by means of false or fraudulent pretenses” is guilty of mail fraud.
Another federal fraud statute similarly states that whoever uses means of interstate communication “for obtaining money or property by means of false or fraudulent pretenses” is guilty of wire fraud. In documents presented to the Supreme Court, prosecutors argue that Binday’s actions deprived the insurance companies of their right to make an informed decision about what to do with their money or property.
Binday’s defense team fired back that the insurance companies had not actually suffered a loss of tangible property as the prosecution never even attempted to prove that the insurance companies had lost money on the policies Binday procured. The defense further argued: “if depriving an insurance company of information necessarily deprives that company of property, then all lies to insurers are mail or wire fraud, full stop.” The defense went on to say that the “right to control property” doctrine worked to dramatically expand the scope of the federal fraud statutes.
So How Will the Supreme Court Rule in United States v. Binday?
Binday’s defense argued that that the Supreme Court’s review is especially important in their case because of how easily federal prosecutors could then apply the same “right to control property” reasoning to other cases. With these remarks, the defense recognized the Supreme Court’s power to set a precedent in how future, similar cases will be decided.
The prosecution argued that the harm suffered by the insurance companies in Binday’s case was significant, and that damages included fewer than expected premium payments as a result of Binday’s “fraudulent inflation” of the insurance applicants’ net worth due to insurers expectations that applicants with higher net worth tend to live longer and that insurers would supposedly receive less income than expected because while third-party investors typically fund policies at or near the minimum amount necessary, people with insurance often pay more than the required premiums.
Additionally, the prosecution asserted that, as a result of Bindery’s scheme, insurers would have to pay out on more policies than anticipated, because while a proportion of insured people terminate their policies, third-party investors do not.
In spite of the damages Binday’s insurance scheme supposedly caused insurance companies, it seems unlikely that the Supreme Court will apply the broad language of federal fraud statutes against him. Binday’s defense argued that the fraud statutes cited by the prosecutors were not a license to “punish all wrongdoing wherever found” with federal prosecution.
Binday’s own defense team admits that he violated the terms of his agreements with the insurance companies. However, in their petition to the Supreme Court, they argue that what should have been, at most, a state civil dispute was unjustly transformed into a federal criminal case. They suggest that a more appropriate way for the insurance companies to address their issues with Binday would be to sue him for breach of contract or terminate him as a broker.
Instead, it appears that the appeals court in Binday v. United States overstepped its boundaries to make an example out of the defendant. The Supreme Court should right this wrong and rule in Binday’s favor.
Authored by Andrea Babinec, LegalMatch Legal Writer
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