Good Faith Defense

The most common defense to mail or wire fraud is that the defendant lacked any intent to defraud. This is known as the good faith defense. This is a complete defense, which means it shows an absence of fraud and therefore must result in acquittal. There is a current split of authority regarding jury instructions on this defense, and the issue is an important one. On one hand, some courts instruct the jury that government must disprove good faith beyond a reasonable doubt; in others, the courts hold that the jury instruction on specific intent is sufficient to insure good faith has been disproved.

It is important to note that honest belief in the ultimate success of the undertaking doesn’t negate false representations. Thus, for example, even if you believe that an investment will be successful, it is still fraud to misrepresent earnings or customer base. As many courts have stated in analyzing this defense to wire and mail fraud, one cannot purify a scheme that is in fact fraudulent. Various forms of evidence and testimony are permitted to establish the good faith defense. Examples include evidence that no one was in fact defrauded, compliance with state law requirements, reliance on advice of counsel, lack of financial motive by the defendant, and payment of refunds or expected returns to some (if not all) customers. An important caveat that tends to cause significant jury confusion is the fiduciary relationship, which entails a standard of utmost good faith between the parties. Depending on the jurisdiction, this can increase the amount of due diligence required prior to making a representation to a client, which in turn might raise the threshold for a successful good faith defense.