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Thursday, November 25, 2010

Deprivation of Honest Services as a Basis for Federal Mail and Wire Fraud Convictions

Charles Doyle
Senior Specialist in American Public Law

The United States Supreme Court in Skilling v. United States construed the honest services branch of the federal mail and wire fraud statutes to reach no more than cases involving bribery or kickbacks. The mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, impose criminal penalties for the use of mail or interstate wire communications to deprive another of money or property through a “scheme or artifice to defraud.” In its 1987 McNally decision, the Court had held that while the fraud statutes reached schemes to deprive another of property rights, they did not cover “the intangible right of the citizenry to good government.” Congress responded almost immediately by enacting the “honest services” statute, 18 U.S.C. § 1346, which declares that the phrase “scheme or artifice to defraud” in the mail and wire statutes also encompasses depriving “another of the intangible right of honest services.”

In its 2009 term, the Court was presented with three honest services cases—Skilling, Black and Weyhrauch. Each offered the Court a slightly different prerequisite for an honest services conviction—for Weyhrauch, a public official, it was an underlying state law violation; for Black, in the private sector, it was foreseeable harm; for Skilling, an Enron executive, it was private gain. The Court instead returned to the pre-McNally case law which it felt Congress intended the honest services statute to revive. In the pre-McNally world, most of the honest services cases, the core cases, involved bribery or kickbacks. This, the Court said, is what Congress meant when it spoke of honest services: the deprivation of honest services, public or private, by bribery or kickbacks.

To construe the statute otherwise, the Court felt, would ground the statute on “a vagueness shoal.” In fact, three members of the Court refused to endorse the majority opinion in full because they thought the honest services statute unconstitutionally vague on due process grounds. Should Congress desire a more inclusive definition of honest services fraud, the Court urged that it “employ standards of sufficient definiteness and specificity to overcome due process concerns.”

The Court sent each of the three cases back to the lower courts—Black and Skilling, for a determination of whether erroneous jury instructions on honest services fraud had so tainted their convictions as to require a new trial or whether the instructions simply constituted harmless error; Weyhrauch, for the reconsideration in light of the Court’s Skilling decision.

Thereafter, the Justice Department urged that the definition of honest services be expanded to cover undisclosed self-dealing deprivations of honest services. Two bills, S. 3854 (Senator Leahy) and H.R. 6391 (Representative Weiner), both captioned the Honest Services Restoration Act, would do so. H.R. 6391 covers only undisclosed self-dealing by public officials—federal, state, and local. S. 3854 reaches both public and private undisclosed self-dealing.

Date of Report: November 12, 2010
Number of Pages: 28
Order Number: R40852
Price: $29.95

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