Section 1031 criminalizes knowingly carrying out, or attempting to carry out, a scheme intended to defraud the United States or obtain money or property through fraudulent pretenses in specified federal transactions. The covered transaction or a constituent part must be worth at least $1 million. That threshold concerns transaction value, rather than necessarily requiring a million-dollar government loss. [1]
Which transactions can qualify?
The statute covers more than traditional prime procurement contracts. Its text reaches grants, subcontracts, subsidies, loans, guarantees, insurance, and other specified federal assistance, as well as covered procurement through contractors, subcontractors, and suppliers. Identify the actual transaction and federal connection before assuming a private invoice falls within this offense. [1]
A civil disagreement over contract quality does not by itself prove a knowing criminal scheme. Investigators and defense counsel examine what was represented, who knew it was false, what the person intended, and whether the charged execution or attempt occurred.
What evidence addresses the elements?
Relevant records can include the solicitation, contract and modifications, billing instructions, certifications, invoices, inspection results, emails, accounting entries, and the basis for any cost allocation. Preserve the versions available when the representation was made, rather than relying solely on a later corrected spreadsheet.
For example, a supplier accused of knowingly billing for an unapproved substitute should identify the specification, any approval, the actual shipment, and the people responsible for the certification. Evidence of an authorized substitution differs from an unsupported assertion that everybody in the industry does it.
Potential defenses depend on the charge: lack of fraudulent intent, an inaccurate attribution of conduct, or failure to establish a covered qualifying transaction can matter. Repayment or a later correction does not automatically eliminate an already completed offense.
Penalties require more than one number
The ordinary statutory maximum is 10 years in prison and a $1 million fine, or both. Section 1031 also has enhanced fine provisions, and expressly preserves an alternative fine tied to gross gain or loss under section 3571(d). A headline maximum therefore does not fully describe every possible financial consequence. [1][2]
The actual sentence requires a separate analysis of the proven conduct, applicable sentencing rules, and the defendant’s circumstances. A statutory maximum is not a prediction of the sentence in an individual case.
Respond to an investigation with records
Determine the agency, allegation, time period, and requested materials. Preserve relevant documents and obtain advice before making an explanatory submission or interview statement. A defense should address the government’s precise theory with accurate evidence; inventing an approval or backdating a record creates a different problem.
An investigation may also raise obstruction issues under section 1505. Sentencing itself involves a separate hearing and decision process.
Primary sources
Sources checked: October 31, 2026.