Federal Program Fraud - Theft from Federal Programs

Welcome to Spodek Law Group. Our goal is to give you the reality of federal program fraud charges - not the sanitized version other attorneys present, not the legal textbook fiction, but the actual truth about what happens when the federal government decides your case belongs in their courtroom instead of state court.

Most people who face 18 U.S.C. § 666 charges have no idea how they got there. They thought they were dealing with a local embezzlement issue, maybe a dispute with an employer, something their state attorney could handle. Then the FBI showed up. The thing nobody tells you about federal program fraud is this: the government does not need to prove you stole federal money. They need to prove you stole from an organization that receives federal money. Those are two completely different things, and that distinction transforms virtually every significant theft in America into a potential federal crime carrying ten years per count.

The numbers matter here. The federal funding threshold is $10,000. The theft threshold is $5,000. If your employer received ten thousand dollars or more in federal assistance within the past year, and you took five thousand dollars or more of anything - their money, their property, their services - you are now facing federal prosecution. Your local hospital? They receive Medicare reimbursement. Your university? Research grants. Your contractor? Federal highway funds. The coffee shop in a federal building? Almost certainly qualifies. This is the trap that catches thousands of defendants every year who never imagined their conduct would attract federal attention.

The $10,000 Trap Nobody Explains

Heres the thing most defense websites wont tell you: the $10,000 threshold captures almost every organization of any significant size in America. Medicare and Medicaid payments alone bring virtually every hospital under federal jurisdiction. Universities receive research grants, student loan money, and countless other federal programs. Local governments receive everything from highway funds to law enforcement grants. Private contractors who do business with any level of government usualy receive some form of federal assistance.

The Department of Justice loves § 666 cases. Prosecutors call this statute "The Beast" because it gives them jurisdiction over crimes that would otherwise be purely state matters. Your bookkeeper at a community hospital steals from the payroll account? Thats not a state embezzlement case anymore. Your project manager at a construction company inflates invoices? Federal wire fraud AND federal program theft. The janitor at a public university who takes supplies home? Potentialy federal.

Think about the scope of this. Every public school receives federal education funding. Every hospital that accepts Medicare patients receives federal healthcare funding. Every state highway department receives federal transportation funding. Every county government receives federal assistance for everything from law enforcement to disaster relief. The federal funding web is so comprehensive that finding an organization that does NOT qualify for § 666 jurisdiction is genuinly difficult.

Think about what this means for anyone working in healthcare, education, government, or construction. Your employer almost certainly qualifies. You probably did not know this. Heres were it gets interesting: the Supreme Court says your ignorance does not matter at all.

Why Your "Local" Crime Became Federal Overnight

In 2004, the Supreme Court decided a case called Sabri v. United States that fundamentaly changed how federal program fraud works. A Minneapolis developer named Basim Omar Sabri was convicted of bribing city officials in connection with a housing project. He appealed, arguing that the government needed to prove his crime actualy affected federal funds - what lawyers call a "nexus requirement."

The Supreme Court unanimously rejected this argument. Their reasoning? Money is fungible. If an organization receives federal assistance, any corruption affecting that organization potentialy threatens federal interests. The government does not need to trace your theft to specific federal dollars. They do not need to prove you knew federal funds existed. They do not need to show any connection whatsoever between your conduct and the federal money.

Let that sink in for a moment.

Your defense attorney cannot argue you did not know the hospital received Medicare. Your defense attorney cannot argue your theft came from a completly seperate revenue stream. Your defense attorney cannot argue the federal government had no interest in your conduct. The Supreme Court eliminated all of these defenses in one decision. The ruling was unanimous - not a single justice dissented.

This is why people discover they are facing federal charges for what they thought was a local matter. The FBI does not show up becuase you stole federal money. They show up becuase you stole from someone who receives federal money. And in modern America, thats basicly everyone of any consequence.

The implications extend beyond individual defendants. This ruling means that any organization receiving federal funds must now consider its employees potential federal defendants for conduct that would otherwise be purely a state matter. The federalization of ordinary crime has expanded dramaticaly since Sabri, and prosecutors have enthusiasticaly embraced this expanded jurisdiction.

What Feeding Our Future Reveals About Federal Sentencing

OK so you might think federal program fraud means white-collar sentences - maybe probation, maybe house arrest, maybe a few months at a minimum security facility. Look at what actualy happens when these cases go to trial.

Feeding Our Future was a Minnesota nonprofit that claimed to provide meals to children during COVID-19. In reality, they stole $250 million while providing few or no actual meals. The sentences handed down by federal judges should terrify anyone facing similar charges. Aimee Bock, the founder and mastermind, received 28 years in federal prison. Twenty-eight years. For paperwork fraud.

Stop and think about that number. Twenty-eight years is longer then many murder sentences in state court. It is longer then most armed robbery sentences. It is longer then what many violent offenders serve. For submitting false documents to a federal program.

The other defendants did not fare much better. Mohamed Jama Ismail got 12 years for his role laundering $2.2 million. Mukhtar Shariff received 17.5 years for operating as CEO of a company used to launder stolen funds. Abdimajid Mohamed Nur, the youngest defendant at 24 years old, got 10 years - plus $47.9 million in restitution he will never be able to pay in his lifetime.

Seventy-eight people have been charged in the Feeding Our Future case. Most have pled guilty rather then face trial. Attorney General Merrick Garland called it the largest pandemic relief fraud scheme in the country. But heres what practioners know that most defendants fail to understand: these sentences are not unusual. They are exactly what the federal sentencing guidelines predict for these dollar amounts. The guidelines operate like a mathmatical formula, and the math is brutal.

The sentencing guidelines work like a calculator. They start with a base offense level, then add enhancements for the amount of money involved. Over $6,500 adds levels. Over $15,000 adds more. Over $250,000 adds even more. Large embezzlements can mean decade-plus sentences automaticaly - before the judge even considers other factors like abuse of trust or obstruction. A defendant who abused a position of trust, obstructed the investigation, and stole over $1 million could easily face 15-20 years under the guidelines.

The Cooperation Trap: Why Talking Destroys Cases

When federal agents show up at your door, they are trained to do one thing: gather evidence for prosecution. They might seem friendly. They might suggest that cooperation will help you. They might imply that things will go worse if you refuse to talk to them right now. They might tell you this is your chance to "get ahead of things" or "clear up misunderstandings."

Heres the reality nobody wants to hear: federal agents are legaly permitted to lie to you during questioning. They can misrepresent evidence. They can claim they have witnesses against you who dont exist. They can suggest consequences will worsen if you dont cooperate immediately - even when thats completly untrue. The courts have consistantly upheld the governments right to use deception during investigations.

And heres the kicker that destroys cases. Under 18 U.S.C. § 1001, making false statements to federal agents is a seperate federal crime carrying up to five years in prison. Even if the underlying investigation reveals no wrongdoing, if you misspoke, misremembered, or contradicted yourself during questioning, youve commited a federal felony. Federal prosecutors have built entire careers prosecuting people for "false statements" rather then the original suspected offense. Martha Stewart was not convicted of insider trading - she was convicted of lying to investigators about it.

See the problem here?

Talk to agents without an attorney, and you risk accidently incriminating yourself on the original charge. Talk to agents without an attorney, and you risk creating a new "false statements" charge even if your totaly innocent of the underlying conduct. Refuse to talk, and they might interpret your silence as consciousness of guilt - though legaly they cannot use silence against you at trial.

As Todd Spodek tells clients facing federal investigation: the only thing you should say to federal agents is "I want to speak with my attorney." Not "I did not do anything wrong." Not "Let me explain what happened." Not "Can I just clarify a few things?" Just: "I want to speak with my attorney." Then stop talking completly. This is not being difficult. This is protecting yourself from a system designed to maximize convictions.

From Accusation to Federal Prison: The Cascade

Let me show you what this looks like in practice. Consider a hospital bookkeeper - someone whos worked at a community hospital for fifteen years, respected by collegues, never been in trouble before, raising two children, paying a mortgage. They discover a way to redirect payments into their own account. Over two years, they take $75,000.

The hospital discovers the theft during an audit. They report to local police, expecting state prosecution. But the hospitals compliance department also reports to federal authorities - because hospitals receiving Medicare funds have mandatory reporting obligations. Now the case gets flagged for potential federal prosecution. The bookkeepers local attorney, expecting state charges, has no idea whats coming.

FBI and IRS Criminal Investigation review the case. The hospital received millions in Medicare reimbursement last year. The theft exceeds $5,000. Both thresholds are satisfied. This is not a state embezzlement case anymore. This is 18 U.S.C. § 666.

Federal agents contact the bookkeeper, maybe at home on a Saturday morning, maybe at their new job in front of collegues. They ask to "just talk" about what happened. The bookkeeper, thinking they are being cooperative and can explain everything, answers questions without an attorney present. They downplay the amounts. They suggest it was more of a loan they intended to repay. They contradict their earlier statement to local police about the timeline.

Now the bookkeeper faces not just federal program fraud, but potentialy wire fraud (because the transfers were electronic) and false statements charges. What started as a $75,000 theft has become a multi-count federal indictment with combined exposure exceeding twenty years.

This cascade happens constanty. At Spodek Law Group, we have watched clients make decisions in the first 48 hours that destroyed any chance of a favorable resolution. The federal system is designed to maximize leverage against defendants. Every statement, every document, every communication becomes potential evidence. Every attempt to "explain" becomes a potential false statements charge. The cascade moves fast, and most people dont realize they are in it until they are drowning.

Defense Strategies That Actually Work Against Section 666

The good news is that defenses exist - real ones that actualy work in federal court. But they require understanding how the government builds these cases and where the weak points are. They require experienced federal counsel who knows the judges, the prosecutors, and the system.

Lack of Intent

Section 666 requires that you act "knowingly and willfully." If you can demonstrate you made an accounting error, misunderstood financial procedures, or genuinly believed you were entitled to the money, this undermines the governments case. Courts have dismissed charges when defendants successfuly argued their actions lacked criminal intent. But this defense requires documentation and expert testimony - not just your word against the governments. You need contemporaneous records, accounting experts, and a coherent narrative that explains your conduct as something other than theft.

Challenging the Federal Nexus

While Sabri eliminated the nexus defense for bribery cases, some circuits have applied different rules to theft cases. An experienced federal defense attorney may be able to challenge whether the $10,000 threshold was actualy met in the relevant time period, whether the funds genuinly constituted "federal assistance" under the statutes definition, or whether technical requirements were properly satisfied. These arguments rarely succeed - but they create leverage for negotiations and sometimes produce unexpected results.

Suppression of Evidence

Federal investigations rely heavily on wiretaps, emails, text messages, and surveillance. If investigators violated your Fourth Amendment rights, obtained overbroad subpoenas, lacked probable cause, or violated attorney-client privilege, evidence may be suppressable. This does not happen often in well-run investigations - federal agents are generaly more carefull than state investigators - but mistakes occur, and aggressive defense counsel look for them.

Cooperation Agreements

If your involved in a larger scheme - multiple defendants, ongoing criminal activity, bigger fish the government wants - you may have leverage to negotiate a cooperation agreement. This is extremly dangerous territory requiring experienced counsel, but it can sometimes result in dramaticaly reduced sentences. The government values information and testimony against other defendants, and they are willing to pay for it with sentencing recommendations.

Sentencing Mitigation

Even if conviction is inevitable, substantial work can reduce sentences. Early acceptance of responsibility, genuine remorse, restitution payments, evidence of rehabilitation, mental health treatment, and family circumstances all matter under the sentencing guidelines. The difference between a sympathetic pre-sentence report and a hostile one can be years of your life. This is where having counsel who knows how to present mitigation evidence makes an enormous difference.

What Happens in the Next 48 Hours Matters

If your reading this because federal agents have contacted you - or because you suspect they might - understand that the clock is already running. The investigation probably started months or years ago. The government has already built most of their case. What you do right now determines whether you preserve your options or destroy them.

Do not speak to federal agents without an attorney present. Not to "clear things up." Not to "get ahead of the situation." Not becuase you have "nothing to hide." The agents questioning you are trained interrogators with one goal: gathering evidence for prosecution. Every word you say will be documented and potentialy used against you at trial.

Do not destroy, alter, or hide documents. This creates obstruction charges that often carry harsher penalties then the original conduct. Prosecutors love obstruction charges becuase they demonstrate consciousness of guilt and are remarkably easy to prove.

Do not discuss the situation with anyone except your attorney. Conversations with friends, family, and collegues are not privileged. Anyone you talk to can be compelled to testify about what you said. Even supportive conversations become evidence.

Do contact an experienced federal criminal defense attorney immediately. Not a state criminal lawyer who "also handles federal cases." Not your divorce attorney or your business lawyer. Someone who regularly appears in federal court, understands federal sentencing guidelines, and has relationships with the prosecutors and agents in your district.

The federal conviction rate exceeds 90%. Prosecutors only bring cases they expect to win. But within that system, there is enormous variation in outcomes. The difference between 15 years and 5 years, between prison and probation, between conviction and dismissal - these differences come down to how the case is handled from the very beginning.

They had years to build this case against you. You have days to mount your defense. At Spodek Law Group, we understand that federal program fraud charges transform ordinary lives into federal nightmares. The system is not designed to be fair - its designed to convict. But it can be navigated. It can be fought. And sometimes, it can be beaten.

Call us at 212-300-5196. The next 48 hours determine the next 20 years.