Policy

POLICY

Public Corruption: The Supreme Court Eviscerates the Honest Services Statute

The Supreme Court Eviscerates the "Honest Services" Statute

Courts have long interpreted the mail fraud and wire fraud statutes (18 U.S.C. §§ 1341-1351) as criminalizing not only schemes to defraud victims of money and property, but also schemes to defraud victims of intangible rights such as "honest services."

The statute, codified at 18 U.S.C. § 1346, provided that a "scheme or artifice to defraud" includes a "scheme or artifice to deprive another of the intangible right of honest services." Critics of § 1346 suggest that honest services fraud is a made-up crime with no real foundation. Courts, however, have found violations when there has been a breach of duty of loyalty, an intent to deceive, and conflicts of interest while taking official action that furthers that undisclosed interest, or when there has been undisclosed self-dealing, as well as when someone has received a bribe or kickback from a third party as a quid pro quo for some advantage from the employer.

Last term, the Supreme Court heard three cases concerning the honest services fraud statute: Black v. United States, Weyhrauch v. United States, and Skilling v. United States. On June 24, 2010, as anticipated, the Court sharply limited the scope of § 1346, invalidating the use of the statute except in cases involving bribery and kickbacks. Skilling v. United States, 561 U. S. __ (2010).

The ruling is a devastating blow that deprives prosecutors of an important tool in their efforts to fight public corruption and a disaster for good political governance. Prosecutors have long used § 1346 to target public officials who engage in malfeasance without evidence of a quid pro quo - the direct exchange of an official act for something of value. Honest services fraud typically has been charged when politicians have been offered a stream of value: i.e. meals, tickets and trips in exchange for a series of acts, but prosecutors are unable to tie any specific gift to a specific official act.

Despite the Court's assertion that the core of the honest services statute remains intact, a rash of prior convictions likely will be vacated and in the future, corrupt officials will have an easier time escaping accountability for their misdeeds. If Congress fails to rectify this disastrous decision, a broad range of public corruption will be largely immune from federal prosecution.

The Supreme Court stated specifically that if Congress wants to allow honest services fraud to be used in cases beyond those involving bribes and kickbacks, it needs to specify exactly what conduct is prohibited.