The White Collar Appeal: Fourth Circuit Pares Back Aggravated Identity Theft Statute

• United States v. McDonald dealt a blow to 18 U.S.C. § 1028A, the aggravated identity theft statute that carries a two-year consecutive mandatory minimum.
• The Fourth Circuit held that, unless the misuse of another’s identity was a “necessary element” of the underlying criminal offense, a 1028A charge is not available.
• McDonald’s necessity principle and otherwise narrow construction of Section 1028A has far-reaching implications for defendants seeking to resist what has been one of prosecutors’ favorite cudgels in plea negotiations.

Background

Jennifer McDonald was convicted on 33 counts of wire fraud, bank fraud, and money laundering and one count of aggravated identity theft under 18 U.S.C. § 1028A.  The case arose out of various embezzlement schemes she perpetrated while working as the executive director of the economic development authority in Warren County, Virginia. 

The allegations underlying the aggravated identity theft charge involved a two-part scheme. First, McDonald falsely told the economic development authority that the Virginia Department of Transportation required $2 million to be transferred to an escrow account to facilitate one of its projects.  But instead of providing the wiring instructions for the Department of Transportation, McDonald ensured that the economic development authority wired the $2 million to a settlement company.

Meanwhile, McDonald had told the settlement company that someone named Curt Tran was planning to purchase three properties using that $2 million.  She had provided the settlement company with the supposed contracts for sale, which appeared to have Tran’s signature and initials. 

The real Curt Tran, however, had no knowledge of these transactions.  After the settlement company received the $2 million and helped purchase the three properties for $1.9 million, McDonald claimed there were issues with Tran’s nationality that would prevent the property purchases after all.  Acting in the name of an LLC she claimed belonged to Tran, McDonald sold the properties back to the original owner for $1.3 million.  McDonald pocketed that $1.3 million.

Section 1028A prohibits unauthorized use of another person’s identity “during and in relation” to an underlying felony enumerated in the statute.  Here, the indictment charged the $2 million fraud on the economic development authority as the underlying felony. 

Holding

The Fourth Circuit reversed the aggravated identity theft conviction, holding that McDonald’s use of Tran’s identity did not take place “during and in relation to” the wire fraud on the economic development authority.  To reach that conclusion, the Fourth Circuit construed Dubin v. United States, 599 U.S. 110 (2023), and post-Dubin decisions from the Second, Fifth, and Eleventh Circuits.  In Dubin, the Supreme Court held that the “during and in relation to” nexus is satisfied when the unauthorized use of another person’s identity “is at the crux of what makes the conduct criminal.”  And a predicate offense, according to Dubin, can only have one “crux.”  The Fourth Circuit noted that decisions following Dubin have “distinguish[ed] identity theft that constitutes the means of effecting the predicate offense from identity theft that is ancillary to, or merely assists, the predicate offense.” (emphasis added). 

In applying that standard to the facts of McDonald, the Fourth Circuit concluded that, although her misuse of Tran’s identity was an element of her broader scheme, it was ancillary to the fraud on the economic development authority.  That conclusion followed from the fact that “Tran’s identity was not a necessary element of [the economic development authority]’s transfer of the $2 million, nor was it necessary to effect [the settlement company]’s receipt of the $2 million.” (emphasis added).

Key Takeaways

To be considered the “crux” of the predicate offense, the misuse of another’s identity must be necessary to completion of the crime.  The Fourth Circuit’s analysis of whether McDonald’s use of Tran’s identity was the “crux” of the predicate wire fraud suggests that the use of another’s identity must be a “necessary element” of the predicate offense. Where, as in McDonald, the defendant “could have been convicted” of the predicate offense “[e]ven if [the defendant] had decided not to engage in” the part of the scheme that involved misuse of another’s identity, such misuse cannot be the “crux” of the crime.

But that does not mean that such misuse is sufficient either. Defense counsel should not permit prosecutors to transform this necessity principle into something broader than it really is.  As McDonald says, “[a] predicate offense can have only one ‘crux.’”  In Dubin itself, the defendant submitted a claim for Medicaid reimbursement under a patient’s name, but he inflated the credentials of the employee who performed the medical services and thereby received a larger reimbursement.  It was necessary to the scheme that the defendant made unauthorized use of another’s identity.  But the crux of the fraud was “a misrepresentation about the qualifications of petitioner’s employee,” 599 U.S. at 132, which made Section 1028A inapplicable.

Defendants should narrowly define the scope of the predicate offense.  The Fourth Circuit suggested that McDonald’s theft of Tran’s identity was the crux of the second part of the scheme, in which she fraudulently caused the settlement company to disburse $1.3 million.  But because the predicate offense was the fraud on the economic development authority, the identity-theft count was unsupported.  Dubin did not address the level of precision with which courts should construe the predicate offense.  McDonald thus is useful precedent for defendants seeking to providing guidance to lower courts regarding the application of Dubin.

The Second, Fifth, and Eleventh Circuits also have scaled back Section 1028A in light of Dubin.  While the Supreme Court’s “crux” standard may be difficult to apply in certain fact patterns, the trend appears to be in favor of a narrow construction.  In addition to the Fourth Circuit in McDonald, the Second, Fifth, and Eleventh Circuits each has interpreted Dubin to require a narrow construction of “crux” and, on that basis, the Second and Eleventh Circuits have reversed aggravated identity theft convictions.

You can sign up to receive White Collar Appeal email updates by clicking here.