Wire Fraud After Kousisis: Economic Loss Not Required, and Lost Profits May Measure Loss/Restitution in Export-Discount Diversion Schemes

1. Introduction

In United States v. Calh Holding Corp. (11th Cir. May 5, 2026) (unpublished), the Eleventh Circuit affirmed the convictions and sentences of Byramji Moneck Javat and Luis Alberto Soto arising from a diversion scheme that exploited “export-only” manufacturer pricing. Javat induced manufacturers to sell goods at steep export discounts by claiming the goods would be sent abroad—often purportedly for U.S. military or Afghan government use—then resold the same goods in the United States at a substantial profit. Soto, a Miami customs broker, served as Javat’s “logistics partner,” exporting shipments to Dubai and reimporting them through Miami while falsifying documentation to conceal the goods’ ultimate domestic destination.

The appeals presented wide-ranging issues: (i) whether the indictment alleged an unlawful “scheme to defraud”; (ii) evidentiary rulings (Rule 404(b) and expert exclusion); (iii) sufficiency of the evidence as to Soto’s knowledge/intent; (iv) multiple Guidelines enhancements (loss, victims, medical-products enhancement, government-agency misrepresentation, special skill, minor role); (v) restitution procedure and calculation; and (vi) forfeiture procedure, amount, money judgment, substitute assets, and third-party standing (Calh Holding Corp. and Pennco, LLC).

2. Summary of the Opinion

  • Convictions affirmed: The court held that the charged and proven conduct constituted wire fraud (and conspiracy), especially in light of Kousisis v. United States, which abrogated the Eleventh Circuit’s earlier economic-injury framing from United States v. Takhalov.
  • Trial rulings affirmed: Prior-act emails were properly admitted under Rule 404(b); Soto’s proposed expert testimony was properly excluded as irrelevant and unhelpful; evidence was sufficient to establish Soto’s knowledge and intent.
  • Sentences affirmed: Loss was properly measured via lost profits from fraudulently obtained discounts; “10 or more victims” supported; medical-products enhancement applied; government-agency misrepresentation enhancement for Javat applied; special skill enhancement and denial of minor role reduction for Soto upheld.
  • Restitution affirmed: The government could present restitution evidence; subpoenas were properly quashed as untimely; restitution calculated using discount-based lost profits was supported by reliable evidence.
  • Forfeiture largely affirmed: Wrong statutory citation in the indictment was harmless given notice; forfeiture amount traceable; money judgment authorized; Calh and Pennco lacked standing as “straw owners.”
  • Limited remand: The case was remanded only to correct clerical errors so Javat’s criminal judgment explicitly incorporates the forfeiture order and money judgment (Rule 32.2(b)(4)(B), Rule 36).

3. Analysis

3.1. Precedents Cited

A. What counts as “fraud” under the wire fraud statutes

  • United States v. Takhalov (abrogated): Takhalov’s “scheme to deceive” versus “scheme to defraud” distinction had been used to argue that if a victim received the “benefit of the bargain,” there was no fraud. The panel treated Takhalov as no longer controlling because it was abrogated by the Supreme Court.
  • Kousisis v. United States: The decisive authority. The opinion reads Kousisis to reject any “economic-loss requirement” in § 1343 and to confirm that the statute requires only: “(1) devise a scheme (2) to obtain money or property (3) by means of false or fraudulent pretenses, representations, or promises.” The panel applied that framework to hold that obtaining goods at export-only discounts by lying about destination satisfies wire fraud even if defendants argue victims were not “economically worse off” in a traditional sense.
  • Ciminelli v. United States: Invoked by Javat to argue “right-to-control” limitations. The panel distinguished Ciminelli, emphasizing the indictment alleged obtaining property (goods) by false representations, not merely depriving victims of “right to control.”
  • United States v. Bruchhausen (abrogated by Kousisis): Soto relied on Bruchhausen to frame the case as “destination control” rather than property fraud. The panel noted Kousisis abrogated Bruchhausen’s economic-injury-driven approach and further found the facts here involved discounted pricing—i.e., goods were acquired on terms induced by deception.

B. Guilty-plea waiver and “jurisdictional” indictment defects

  • United States v. Tomeny: An unconditional guilty plea waives non-jurisdictional defects.
  • United States v. Leonard, United States v. Brown: Define when an indictment defect is “jurisdictional” (i.e., fails to charge any federal offense or conduct is undoubtedly outside statutory sweep).
  • United States v. Peter, and the Supreme Court decision discussed within it, Cleveland v. United States: Peter stands for the exceptional scenario where post-plea controlling precedent places the charged conduct outside the statute’s reach (there, licenses not “property” under mail fraud as held in Cleveland). The panel held this case does not resemble Peter because the conduct alleged (obtaining discounted goods by false representations) falls squarely within § 1343/§ 1349.

C. Evidence—Rule 404(b), relevance, expert testimony, and the right to present a defense

  • United States v. Edouard: The three-part test for Rule 404(b) admissibility (relevance to non-character issue, proof, Rule 403 balancing).
  • United States v. Ellisor, United States v. Stephens: Rule 404(b) as a “rule of inclusion” unless it proves only propensity.
  • United States v. Ramirez: Similarity of prior act increases probative value on intent.
  • United States v. Perry: Limiting instructions reduce prejudice; also supports admitting embedded statements for “effect on the listener.”
  • Daubert v. Merrell Dow Pharms., Inc.: Expert testimony must relate to an issue in the case to be relevant/helpful.
  • United States v. Svete (citing Durland v. United States and quoting United States v. Coyle): Victim negligence is not a defense; the focus is defendant intent, not victim reasonableness—supporting exclusion of “manufacturers could have protected themselves” testimony.
  • United States v. Hurn, Chapman v. California, United States v. Mitrovic, United States v. Scheffer, United States v. Frazier: The panel rejected Soto’s constitutional “complete defense” claim because the exclusion was a proper evidentiary ruling—consistent with Scheffer’s “broad latitude” to exclude evidence and Mitrovic’s observation that the Supreme Court has not held a Federal Rule of Evidence unconstitutional in this way.

D. Sentencing and restitution methodology for “discount diversion” schemes

  • United States v. Stein: Loss causation/reasonable foreseeability in fraud; distinguished because manufacturers here relied on misrepresentations and no intervening cause was shown.
  • United States v. Annamalai, United States v. Medina: Loss may be estimated reasonably; fraud loss is often difficult to calculate precisely.
  • Out-of-circuit cases approving lost-profit/discount-differential computations: United States v. Marti-Lon, United States v. White, United States v. Farano, United States v. Ali. These authorities were used to validate “lost profits from fraudulently obtained discounts” as a reasonable proxy for pecuniary harm.
  • United States v. Cavallo, United States v. Futrell: Restitution calculation is “largely the same” as Guidelines loss; courts may approximate.
  • United States v. Gatlin: Restitution proof need not be sworn if it bears sufficient indicia of reliability.
  • United States v. Robertson, United States v. Goldman: Restitution requires direct and proximate causation and identifiable victim pecuniary loss.

E. Forfeiture procedure, money judgments, and third-party standing

  • United States v. Waked Hatum, United States v. Farias: Confirm forfeiture money judgments are authorized; Rule 32.2 errors can be harmless when notice and opportunity to contest exist.
  • United States v. Annabi: Distinguished because there the government never corrected the forfeiture statute error before final judgment.
  • United States v. Pease: Limited by the modern text of Rule 32.2(b)(4)(B), which now states omission from the judgment may be corrected under Rule 36.
  • Honeycutt, v. United States, United States v. Goldstein: Honeycutt’s “no joint-and-several forfeiture for property a defendant didn’t acquire” was assumed arguendo; forfeiture upheld because proceeds were found “jointly acquired” under the Eleventh Circuit’s approach in Goldstein.
  • Standing / straw ownership: Via Mat Int'l S. Am. Ltd. v. United States, United States v. 900 Rio Vista Blvd., and the cited out-of-circuit straw-owner standing cases (United States v. Cambio Exacto, United States v. 500 Delaware St., United States v. Contents of Accts. Nos. 3034504504 & 144-07143 at Merrill Lynch, Pierce, Fenner & Smith, Inc.). The panel emphasized that bare legal title without dominion/control does not create Article III injury.
  • Ancillary proceedings / third-party limits: United States v. Davenport (third parties cannot relitigate forfeitability), and the earlier appeal United States v. Javat (2022 WL 703940) discussed in the opinion’s background.
  • Jurisdiction/standing framing: Christian Coal. of Fla., Inc. v. United States, In re Breland, Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., and the state-law irrelevance point supported by Hollingsworth v. Perry.

3.2. Legal Reasoning

A. The central doctrinal move: applying Kousisis to pricing/discount diversion

The opinion’s most consequential legal reasoning is its explicit reliance on Kousisis v. United States to reject the defendants’ Takhalov-style argument that wire fraud requires proof the victim was “economically worse off” or failed to receive the “benefit of the bargain.” Post-Kousisis, the panel treated the statutory elements as complete without an extra “economic loss” element, so long as defendants devised a scheme to obtain property by false representations.

On these facts, the “property” was the manufacturers’ goods obtained on export-only discount terms, induced by a false destination story. The panel did not need to decide whether the manufacturers would have made the same or different profits in a counterfactual world; it was enough that defendants obtained property “by means of” false representations that were material to the transaction terms.

B. Evidentiary rulings reflect intent-centric fraud trials

The Rule 404(b) emails were admitted because they bore directly on Soto’s knowledge and intent—the contested trial issue. The court’s analysis follows the Eleventh Circuit’s inclusionary posture (Edouard/Ellisor) and relies heavily on similarity: Soto previously facilitated export-and-reimport cycles to generate “proof of exportation” and conceal domestic diversion—mirroring the charged conduct. Limiting instructions (Perry) were key to the Rule 403 balance.

Conversely, Soto’s expert was excluded because the proffer did not map to any disputed element. Whether “gray market” transactions can be lawful or whether FDA rules were violated was not the government’s theory of criminality. And victim “self-protection” evidence ran into United States v. Svete’s core principle: fraud turns on defendant intent, not victim prudence.

C. Sentencing and restitution: “lost profits” as the harm from fraudulently induced discounts

The court treated the manufacturers’ lost ability to charge domestic wholesale pricing as a foreseeable pecuniary harm. It approved a discount-differential method (supported by out-of-circuit authority like Marti-Lon/Ali/White/Farano), and distinguished United States v. Stein on reliance and causation. This reasoning was then carried into restitution under MVRA principles, relying on the “largely the same” methodology (Cavallo) and permissibility of approximation (Futrell).

D. Forfeiture: notice, harmless error, and clerical correction

Although the indictment cited an inapplicable forfeiture statute, the panel held any Rule 32.2(a) problem harmless under Rule 52(a) because Javat had actual notice well before pleading guilty and contested forfeiture on the merits. That treatment narrows the practical force of indictment citation errors when defendants cannot show prejudice.

On the judgment’s failure to expressly include the forfeiture order/money judgment, the panel emphasized Rule 32.2(b)(4)(B)’s modern remedy: omissions “may be corrected at any time under Rule 36,” and it ordered a limited remand to correct the judgment accordingly, explicitly recognizing that older case law like United States v. Pease rested on predecessor rules.

E. Third-party challenges: dominion/control over title

The panel affirmed dismissal of Calh’s and Pennco’s ancillary petitions for lack of standing after finding them to be straw owners. The court used the Eleventh Circuit’s long-standing “look behind title” approach (United States v. 900 Rio Vista Blvd.) and reiterated that Article III standing turns on injury (Via Mat), not formal ownership. Trust structures and “beneficial owner” documentation mattered more than record title.

3.3. Impact

  • Fraud prosecutions in the Eleventh Circuit post-Kousisis: The decision operationalizes Kousisis’s rejection of an “economic-loss requirement” and signals that defendants cannot avoid wire fraud liability by arguing victims received the contracted-for price—if property was obtained via false representations.
  • Discount diversion schemes are easier to characterize as fraud: The case provides a template for treating export-only pricing misrepresentations as obtaining property by deception, not merely “right-to-control” interference.
  • Loss and restitution may be anchored in lost profits: The court’s approval of discount-differential calculations—grounded in foreseeability and reasonable estimation—will likely influence future Guidelines disputes, especially where diversion undermines manufacturer channel pricing.
  • Forfeiture practice: The opinion reinforces (i) forgiving harmless statute-citation mistakes when notice exists, (ii) broad acceptance of forfeiture money judgments, and (iii) routine use of Rule 36 to cure judgment omissions—reducing defendants’ ability to secure substantive relief from clerical noncompliance.
  • Third-party property litigation: Title-holding entities should expect close scrutiny of beneficial ownership and control; trusts and corporate forms will not, standing alone, create standing.

4. Complex Concepts Simplified

  • “Scheme to defraud” vs. “scheme to deceive”: Older Eleventh Circuit framing (Takhalov) emphasized that deception without intended harm might not be “fraud.” After Kousisis v. United States, the focus is on whether defendants devised a scheme to obtain money or property by false representations—without a separate economic-loss element.
  • Rule 404(b) evidence: Evidence of other acts can be admitted not to show “bad character,” but to prove intent, knowledge, or absence of mistake. Courts often admit it when the defendant’s mental state is the key disputed issue and the prior act is similar.
  • “Lost profits” as “loss”: In discount-fraud cases, “loss” can be the difference between what the victim charged and what it would have charged absent fraud—because the discount itself was induced by deception.
  • MVRA restitution: Restitution compensates victims for losses directly and proximately caused by the offense. Courts can approximate amounts using reliable business records.
  • Forfeiture money judgment: A personal judgment for the amount of criminal proceeds, collectible even if particular dollars cannot be found—often paired with substitute-asset forfeiture.
  • Ancillary proceedings and “straw owners”: Third parties may challenge forfeiture in ancillary proceedings, but must show a real injury and meaningful ownership (dominion/control), not merely paper title.

5. Conclusion

This decision’s lasting significance lies in its straightforward application of Kousisis v. United States to a modern diversion/pricing-fraud scheme: wire fraud liability does not turn on proving the victim’s net economic harm as a separate element, but on a scheme to obtain property by false representations. The court also endorsed lost-profit/discount-differential approaches for Guidelines loss and MVRA restitution in discount-induced transactions, reinforced the practical curability of forfeiture-judgment omissions under Rule 36, and reaffirmed that nominal titleholders lacking dominion and control lack standing to contest forfeiture.