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Honest Mistake vs. Fraud: Building Your Defense
Honest Mistake vs. Fraud: Building Your Defense
What Prosecutors Believe Before You Speak
Every fraud prosecution is, at its foundation, a story about what the defendant understood and when the understanding arrived. The facts matter. The timeline matters. But the federal government does not charge people for making errors on a form or misreading a regulation. It charges them for possessing a particular kind of knowledge at a particular moment.
This distinction, if we are being precise, is less a line than a region. On one end, the person who transposes two digits on an invoice. On the other, the executive who constructs an architecture of misrepresentation across fourteen months of filings. Between them lies the territory where most cases are decided, and where most defenses succeed or collapse.
Prosecutors do not enter that territory as neutral observers. They arrive with a theory. By the time a case is referred for criminal investigation, someone has already decided that the conduct looks intentional. The honest mistake defense does not operate in a vacuum of fair consideration. It operates against a narrative that has been forming, in some instances, for years before the defendant becomes aware of it.
A mistake, in the legal sense, must be both honest and reasonable. The honesty component concerns what the defendant believed at the time of the conduct. The reasonableness component, which courts assess with varying degrees of sympathy depending on jurisdiction and context, concerns whether that belief was one a rational person could have held given the information available. One without the other does not satisfy the standard.
The Supreme Court’s 2023 decision in Schutte v. SuperValu reshaped how these assessments proceed. The question is no longer whether an objectively reasonable person would have known the claim was false. The question is whether this defendant, with this knowledge, at this moment, believed the submission was accurate. The shift from objective to subjective inquiry sounds favorable to defendants on first reading. In practice, it opens every internal email, every deleted file, every conversation reconstructed from metadata to prosecutorial scrutiny. Your state of mind has always been the issue. After SuperValu, the court has confirmed that it examines what you thought at the time of the conduct, not what a hypothetical person in your position might have concluded.
The Ground Between Not Knowing and Choosing Not to Know
Willful blindness is the doctrine that dismantles the most common instinct defendants possess: the instinct to not ask questions.
The theory operates on a principle the Supreme Court endorsed in Global-Tech Appliances v. SEB S.A.: that a person who suspects wrongdoing and takes deliberate steps to avoid confirming it is as culpable as a person who possesses actual knowledge. The Court established a two-part test. The defendant must have believed there was a high probability that a fact existed. And the defendant must have taken deliberate action to avoid learning that fact.
Most people who find themselves on the wrong side of a fraud investigation did not set out to deceive anyone. They set out to not know what they suspected was true. The distinction matters less than they expect it to.
In the white collar context, this doctrine transforms entire categories of behavior into evidence of intent. The compliance officer who receives a flagged transaction report and routes it to a subordinate without reading it. The physician whose billing staff submits codes she has never reviewed despite three prior audits. The contractor who accepts terms from a subcontractor and does not inquire into how the pricing was derived, though the pricing sits well below market rate. Each of these behaviors, viewed in isolation, looks like negligence. Viewed through the lens of willful blindness, each becomes a conscious choice to remain ignorant.
There are defenses to this, though in practice they tend to confirm how narrow the safe ground is. The defendant must demonstrate that they did not believe there was a high probability of illegality. That is a subjective standard, and it requires the defendant to account for everything they did know at the time, which is the material prosecutors are most equipped to assemble.
I have reviewed cases where the willful blindness instruction was requested by the government on the basis of an unreturned email. Whether the instruction should have been given in that instance is a question the appellate court never reached. The jury had already convicted.
The doctrine has migrated well beyond its origins in narcotics trafficking. Federal circuits now apply it to tax fraud, securities violations, healthcare billing, procurement fraud, and a range of regulatory offenses where the government alleges that the defendant structured their own ignorance. In the Southern District, willful blindness arguments have appeared in something like a third of the white collar trials we have observed over the past four years, though I would not call that figure scientific.
What makes willful blindness so dangerous to the honest mistake defense is that it redefines the very concept of a mistake. If you did not know, but you arranged your affairs so that you would not know, the law treats your ignorance as equivalent to knowledge. The architecture of avoidance becomes the architecture of intent.
And prosecutors are skilled at constructing that narrative from materials the defendant generated. The email you did not open. The report you did not request. The meeting you declined to attend. None of these, alone, constitute evidence of fraud. Together, assembled in a timeline and presented to a jury, they tell a story about a person who was not surprised by what was discovered, because that person had been managing their own proximity to the truth.
The documentary record is what resolves the question. Not the defendant’s testimony. Not counsel’s characterization. The record.
Documents That Testify Without Permission
Before the investigation, before opposing counsel has reviewed a single filing, the paper trail has already composed a version of events that may or may not correspond to the defendant’s memory.
In fraud cases, the most powerful evidence of honest mistake is contemporaneous documentation. An email to a supervisor asking whether a procedure is correct. A memo requesting clarification on a regulatory term. A browser search history showing the defendant researched proper compliance methods before the conduct at issue. In a 2025 Eastern District case, the fact that the defendant had forwarded an ambiguous regulation to his compliance team with a subject line requesting guidance became the single most persuasive exhibit in his defense. The email predated the conduct by three weeks.
The converse is also true. The absence of questions, the absence of any attempt to verify or clarify, is the silence that prosecutors interpret as confidence. Not the confidence of someone who knows they are right. The confidence of someone who knows they are wrong and has decided not to create a record of doubt.
Whether any given court would draw that inference from silence alone is a question that depends on the totality of circumstances, and I am less certain about the answer than the preceding sentences might suggest. Courts vary. Judges vary. But the pattern holds often enough that it warrants attention.
What Good Faith Requires After the Court Changed the Question
SuperValu did not invent the good faith defense. It altered what the defense must prove and, more consequentially, what it must withstand.
Under the prior framework favored by the Seventh Circuit, a defendant could defeat the scienter element of a False Claims Act case by demonstrating that their conduct was consistent with an objectively reasonable interpretation of the law. The interpretation did not need to be correct. It needed to be defensible. The Supreme Court, in a unanimous decision authored by Justice Thomas, rejected that framework. The FCA’s knowledge standard, the Court held, refers to the defendant’s subjective beliefs at the time the claims were submitted. Post hoc interpretations, however reasonable, cannot undo what the defendant believed in the moment.
The practical consequence is this: a defendant who believed their claims were false cannot escape liability by hiring counsel after the fact to construct an interpretation under which the claims would have been accurate. The temporal dimension of good faith is now explicit. What you believed at the time is the question. What you could have believed, or what a reasonable person might have believed, is no longer sufficient.
The good faith defense is stronger than it was a decade ago. It is also more difficult to sustain.
For businesses operating under ambiguous regulations, the SuperValu standard creates a documentation imperative. Three steps have become essential:
- Record your interpretation of ambiguous requirements before acting on them.
- Obtain and preserve written guidance from counsel, compliance officers, or regulatory contacts.
- Document how your interpretation was applied with consistency, not selectively.
These are not formalities. In the post-SuperValu environment, they are the materials from which a good faith defense is constructed. Without them, the defense rests on testimony alone, which is to say it rests on the jury’s willingness to believe the defendant’s account of their own state of mind, years after the conduct at issue.
A jury in the Central District of Illinois reached a verdict in the SuperValu trial itself in March 2025. The jury found that the company had knowingly submitted false claims. It also found that the government had not proved damages. The defendant prevailed, but not on the ground it preferred. Ambiguity alone will not save a defendant from a finding of scienter. That much the trial confirmed.
The good faith defense remains viable, though it is not the shield it was before 2023. It requires evidence that the defendant’s belief was formed in real time, documented in real time, and acted upon with consistency rather than convenience. Where the belief was genuine but unreasonable, the defense may still hold, because the standard is subjective. But where the belief was reasonable yet not held in fact by the defendant, the standard now reaches it.
I have yet to encounter a case where robust contemporaneous documentation failed to support a good faith defense. I have encountered several where the absence of such documentation made the defense, if we are being honest about it, an exercise in optimism.
Counsel as Shield and as Surrender
The advice of counsel defense is, on its surface, one of the most intuitive protections available to a defendant. I consulted an attorney. The attorney told me this was permissible. I acted on that guidance. The logic is clean.
The complication (which defendants and, it must be said, some counsel do not grasp until the defense is invoked) is that asserting reliance on advice of counsel waives the attorney-client privilege as to the communications that informed the belief. The Second Circuit established this principle in United States v. Bilzerian, and courts have applied it with increasing rigor since. In the Musk securities litigation, a federal court declined to permit the defendants to advance an advice of counsel defense while also withholding the communications on which the advice was based. The court held, consistent with the implied waiver doctrine, that a party cannot rely on counsel’s involvement to demonstrate good faith while shielding the substance of that counsel’s guidance.
The defendant who asserts the defense surrenders the privilege. There is no path that preserves both, though defendants who believe otherwise continue to attempt one.
The strategic question is whether the advice, once disclosed, will support the narrative of good faith or complicate it. If the attorney’s guidance was equivocal, if it contained caveats that the defendant disregarded, or if the defendant failed to provide counsel with complete information, the disclosure may do more harm than the defense was intended to repair. Counsel who advise clients to invoke this defense without first reviewing the full scope of what disclosure would reveal are, in my view, not advising at all.
There are alternative paths. A defendant may seek to negate scienter through reliance on nonlegal professionals, through compliance program evidence, or through circumstantial evidence that undermines the government’s theory of intent. These paths do not trigger the implied waiver. They also lack the rhetorical force of “my attorney said this was lawful,” which is why defendants prefer the more direct route.
The preference is understandable. The cost is not always.
What the Law Holds and What It Leaves Open
Fraud is a word that carries a moral charge the law does not require. One can commit fraud without malice, without greed, without any of the qualities the word conjures in ordinary conversation. The statute requires knowledge. It requires falsity. It requires materiality. It does not require that the defendant be a person anyone would recognize as dishonest.
This is the feature of fraud law that most defendants find difficult to accept. The person who cut corners to meet a deadline, who relied on a subordinate’s assurances without verification, who submitted a claim they had not reviewed because the volume of claims made individual review impracticable: each of these people may, under the right circumstances, satisfy the elements of the offense. That they did not intend harm in the colloquial sense is, in the legal sense, beside the point.
The defense begins not with assertions of innocence but with an accounting of knowledge. What did you know. When did you know it. What did you do with what you knew, and what did you choose not to look into. These questions, whether posed by your own counsel in preparation or by a federal prosecutor before a grand jury, form the raw material from which every other argument is either constructed or foreclosed. The answers determine whether the path forward runs through good faith, through a challenge to the government’s evidence of scienter, or through a negotiated resolution that accounts for what the record can and cannot bear.
Most people do not call until the investigation has already commenced. I understand why. The hope is that the matter will resolve itself, that the inquiry is routine, that the government will examine the facts and conclude that no further action is warranted. Sometimes that hope is justified. But the documents have been testifying since before the investigation began, and they do not pause to wait for counsel.
A consultation is where this work begins: the reconstruction of a timeline, the identification of what the record shows and what it does not, and the development of a defense that addresses what prosecutors will argue rather than what the defendant wishes they would accept. A first conversation costs nothing and assumes nothing. It is the beginning of a diagnosis, not a commitment to treatment.
The distance between an honest mistake and a prosecutable fraud is measured in documents, in decisions, and in the silence where questions should have been. That distance is smaller than most people suppose.