Can Misusing Your Employer's Confidential Information Be Wire Fraud?

Yes. Using your employer's confidential information for personal gain, at the company's expense, can be charged as federal mail or wire fraud. In United States v. Hager, the Fifth Circuit held that the mail and wire fraud laws cover schemes to take confidential business information. Many employees have access to information like this, so the case is worth understanding.

Is Confidential Business Information "Property"?

Wire Fraud and Stealing Confidential Business Information

The mail and wire fraud laws cover any "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses." In Carpenter v. United States, 484 U.S. 19 (1987), the Supreme Court held that confidential business information can be "property" under these laws. The Court noted the information had been "acquired or compiled [by the corporation] in the course and conduct of its business."

The Supreme Court has since stressed that these laws protect only money or property, so the scheme must aim to take one or the other. Kelly v. United States, 590 U.S. 391 (2020).

The Facts of Hager

In United States v. Hager, 879 F.3d 550 (5th Cir. 2018), Sean Hager used his employer's confidential information about profit margins and customer needs for computer parts. He set up his own company and sold parts to his employer for its customers, keeping the markup low enough to avoid internal alerts. He made about $1.16 million.

His employer had him sign agreements stating that profit margins were confidential. He was convicted of mail, wire, and tax fraud and money laundering, and sentenced to 42 months in prison on the fraud and money laundering counts.

On appeal, Hager argued that Skilling v. United States, 561 U.S. 358 (2010), meant confidential business information is not "property." In the alternative, he argued only true "trade secrets" count.

The Fifth Circuit's Ruling

The court upheld his convictions. Skilling was about a different theory, fraud depriving someone of "the intangible right of honest services," which the Supreme Court limited to bribery and kickback schemes. It did not overrule Carpenter, which treats confidential business information as property.

What This Means If You Are Charged

Hager is not good news for people accused of misusing confidential information, but the facts still matter a great deal. Hager signed agreements that spelled out what the company considered confidential. In other cases, whether the information is really confidential property may be much less clear.

Hager also challenged the exclusion of evidence that the company's founders had taken confidential information themselves. Even if evidence like that does not change the verdict, helpful facts can matter at sentencing.

Mail and wire fraud cases raise many complex evidence issues. If you are charged, have a defense lawyer review any evidence about the supposedly confidential information as early as possible, including employment agreements, company policies and how widely the information was shared. The sooner that happens, the better your chance of getting helpful evidence admitted at trial and reducing your sentencing exposure.

Facing a federal sentence? Book a consultation to talk it through with Brandon Sample.