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More Federal Fraud Cases Dropped Under 'Bridgegate' Ruling

Fraud doesn’t mean what it used to. High-profile federal prosecutions are falling apart as courts apply a narrowed legal definition of the crime, the Wall Street Journal reports. The latest case came this week in a "steal the exam" auditing case. Prosecutions in the Varsity Blues college-admissions scandal and a hedge-fund trading case involving confidential government data also were dismissed. The cases are casualties of the Supreme Court's overturning the fraud convictions of two aides to former New Jersey Gov. Chris Christie. The "Bridgegate" scandal involved a political retribution scheme to cripple a town near the George Washington Bridge with traffic jams. The case wasn’t fraud because it didn’t take money or property, the justices found.

Manhattan federal prosecutors said this week that David Middendorf, the former No. 2 auditor at Big Four accounting firm KPMG LLP, shouldn’t have been convicted of wire fraud in a scheme to obtain confidential information from his regulator. The conviction of Jeffrey Wada, who worked at the regulatory agency, also should be set aside, the Manhattan U.S. Attorney’s Office said. Middendorf and other partners at KPMG improperly obtained advance information about which audits would be inspected by the Public Company Accounting Oversight Board. Wada, who prosecutors said was unhappy with how the board treated him, allegedly funneled the tips to KPMG. Four other former KPMG auditors pleaded guilty in the case. Prosecutors use wire fraud to go after a variety of white-collar crimes because the law is written broadly. The recent dismissals are a sign that enforcers have less flexibility to use wire fraud to go after conduct that looks dodgy but isn’t always criminal.

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