Yesterday’s indictment, however, marks a new chapter in the Santos saga, as the congressman now faces 13 federal charges that, according to the indictment, relate to three separate alleged schemes:

• Five counts of wire fraud and three counts of money laundering related to a campaign finance scheme;
• One count of theft of public money and two counts of wire fraud related to an unemployment benefits scheme; and
• Two counts of false statements based on lies on Congressional disclosure reports for his 2022 campaign and his earlier unsuccessful 2020 campaign.

A grand jury returned the indictment on May 9, which remained under seal until today when Santos was arrested and later taken to the federal courthouse in Central Islip, New York, for his arraignment.

The Charges

 All the charges stem from conduct that allegedly occurred between 2020 and 2022.

The Campaign Finance Scheme:  

According to the indictment, during his successful 2022 Congressional campaign, Santos, along with an unnamed “Person 1,” engaged in a scheme to solicit funds to support Santos’s campaign. Person 1, identified only as a political consultant from Queens, told contributors that they were contributing to a 501(c)(4) social welfare organization or an independent expenditure committee, the latter of which is commonly known as “Super PAC.” But according to the indictment, the contributions were not spent on Santos’s candidacy and instead were routed to Santos’s personal accounts and used by him to purchase luxury goods and other personal items.

The Unemployment Benefits Scheme:

The indictment next alleges that, before his unsuccessful 2020 Congressional campaign, Santos falsified documents to obtain unemployment benefits. He certified that he was unemployed from March 2020 through April 2021. But contrary to that certification, he was actually employed by a company identified as “Investment Firm #1” and earning approximately $120,000 per year. (News reports suggest that Investment Firm #1 was Harbor City Capital, a firm where Santos was a regional director.) The alleged scheme netted about $25,000 in unemployment benefits.

The False Statements on House Disclosure Report:

Finally, the indictment alleges that Santos lied on financial disclosures related to both his 2020 and 2022 Congressional campaigns. In 2020, Santos submitted disclosures to the House Committee that omitted about $54,000 in income from two different sources. In 2022, he (oddly) overstated his income and the amount in his bank accounts yet also still failed to report certain other income and the fraudulently obtained unemployment benefits.

Other Questions About the Santos Indictment — Answered

If the conduct involves campaign finance issues, why is Santos charged with “wire” fraud?

First, there are many complex and technical federal campaign-finance laws, many of which carry civil penalties but others that carry potential criminal consequences. But Santos isn’t charged with those types of violations. Rather, he’s charged with garden-variety fraud — deceiving someone to get money. It just happens that some of that alleged fraud occurred in the context of a political campaign.

Second, as to wire fraud specifically: Wire fraud, along with mail fraud, is one of the most commonly charged federal fraud offenses. It is usually easy to charge and, unlike with some more esoteric statues, federal prosecutors are very familiar with it. Once a fraud scheme of any type includes an interstate “wire communication” — essentially any call, email, wire, or other electronic transmission across state lines — bringing a wire fraud charge is straightforward.

Why money laundering?

There are several types of money laundering in the federal criminal code, and the Santos indictment charges just one – Section 1957 of Title 18. Section 1957 criminalizes any “monetary transactions” that involve over $10,000 of criminally derived property from certain types of unlawful activity. The definitions of those terms are quite broad. As a result, § 1957 essentially criminalizes any transaction (e.g., withdrawal, spending, transfer, etc.) of criminally tainted funds.

Here, Santos is charged with transferring the funds fraudulently obtained from contributors from one bank account to another in his control. Because the funds were tainted by the fraud and the amount exceeded $10,000, the transaction allegedly violates § 1957.

What kind of exposure does Santos have if he’s convicted?

All criminal statutes carry a statutory maximum penalty. In Santos’s case, the wire fraud charges each carry a 20-year statutory maximum, so theoretically if convicted of all seven counts, he could face 20 years on each (plus the penalties for any other counts of which he’s convicted.) But that’s theory only. In reality, the exposure, while still significant, is much less.

Federal fraud sentencing is driven by sentencing guidelines and other factors courts consider holistically, especially the amount of loss. While the specifics aren’t known yet, Santos still likely faces several years of incarceration if convicted at trial, along with potential fines and other collateral penalties that come with a felony conviction.

The news stated that Santos pleaded “not guilty” today. Does that mean he’s going to trial?

No. Santos appeared in court after his arrest for his initial appearance and arraignment, which is the first formal reading of the charges against him. As a matter of process, a criminal defendant enters a not-guilty plea at that proceeding. Next, the court case will move forward in the court process. Santos may later consider whether to negotiate a plea agreement or he could proceed to a jury trial. The overwhelming majority of federal criminal cases result in pleas.

What happens next?

Now that the case is in court, the parties will exchange “discovery” — materials and information related to the case — and the judge will schedule various deadlines, including a trial date. Unless there is some type of pre-trial motion that could result in the case being dismissed — unlikely here based on the nature of the charges — Santos will eventually have to plead guilty or take his chances with a jury at trial.