Honest Services Fraud: We Know It When We See It

The Supreme Court has agreed to hear two cases involving the federal statute that makes it a crime to "deprive another of the intangible right of honest services." The law is a handy tool for going after corrupt public officials, such as those Pennsylvania judges who took kickbacks from the juvenile detention centers they kept full. But as New York Times legal columnist Adam Liptak notes, the definition of "honest services fraud" is maddeningly, and possibly unconstitutionally, vague. "How can the public be expected to know what the statute means when the judges and prosecutors themselves do not know, or must make it up as they go along?” a 2nd Circuit judge asked in a 2003 dissent. Supreme Court Justice Antonin Scalia notes that the law "has been invoked to impose criminal penalties upon a staggeringly broad swath of behavior." The idea behind the statute, as Scalia summarizes it, is that "officeholders and employees owe a duty to act only in the best interests of their constituents and employers." Taken literally, he says, this principle "would seemingly cover a salaried employee’s phoning in sick to go to a ballgame."

One of the cases the Supreme Court will hear involves former Enron CEO Jeffrey Skilling, who argues that his role in the company's demise did not amount to honest services fraud because his actions "were not intended to advance his own interests instead of Enron's." The other case involves former Hollinger International CEO Conrad Black, who says his controversial uses of company resources were not illegal under the statute because he did not envision that his employer would suffer "some identifiable economic injury." The circuit courts are split on whether the law requires economic injury to the victim and/or economic benefit to the defendant. According to the U.S. Court of Appeals for the 7th Circuit, the "fraud" has to yield some gain, but it needn't benefit the defendant himself. Hence public officials who hook up their cronies with government jobs, a very common practice across the country, can be charged under the statute.

While that might sound like a welcome prospect, it raises some serious concerns about political vendettas and federal interference with local matters. More generally, the statute does seem dangerously broad. As Liptak notes, civil liberties attorney (and Reason contributor) Harvey Silverglate, in his new book Three Felonies a Day, cites honest services fraud as a catch-all charge that, like mail fraud, conspiracy, and racketeering, invites abuse by ambitious or vindictive prosecutors.

William Anderson and Candice Jackson highlighted the hazards of sweeping federal criminal statutes in the April 2004 issue of Reason.

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  • oaktownadam||

    So, how does this law not make it illegal for workers to go on strike, especially if the "strike" is just a work slowdown?

  • Attorney||

    Vaguely defined crimes are an engraved invitation to tyranny and corruption.

  • ||

    This. See mail fraud, money laundering, obstruction of justice, obstructing a police officer...could probably think of a few others after a bit.

  • skr||

    disturbing the peace, disorderly conduct

  • oaktownadam||

    loitering, jaywalking, bicycling under the influence

  • BakedPenguin||

    It would be nice if politicians knew about "fraud", and that it is already a crime (imagine the tons of regulations that could be dispensed with). Considering 99% of them are lawyers, you would assume they heard of "fraud" at some point, but I've never been to law school, so I wouldn't know.

  • BeesInTheBrain||

    Hmmmm so does this mean that everyone who posts comments on here at work is committing a crime?

  • Morris||

    Off topic, but does anybody know the story behind the bankrpcy of Simmons the maker Beautyrest mattresses?

  • Chud||

    No, but it sounds juicy. Don't hold back! Tell us everything you've heard. Wait until Myrtle finds out! She's been sleeping on one of those things for years. Won't she be chagrined!

  • Morris||

    http://www.newser.com/story/70.....-amok.html

    The mattress company Simmons will be filing for bankruptcy protection soon, wiping out bondholders and jeopardizing more jobs at a company that's already fired a quarter of its work force. While Simmons watched its debts balloon nearly tenfold since 1991, a string of private equity firms bought and sold the company seven times, making $750 million as the company collapsed. Simmons is only one of several firms pumped up and sold in what the New York Times calls "a Wall Street version of Flip This House."

    After Thomas H. Lee Partners bought Simmons in 2003, using borrowed cash, it then sucked out millions in fees and used more borrowed money to pay itself dividends, which only pushed Simmons deeper into debt. Now that cheap money is a thing of the past, Simmons is drowning in debt. And it's not alone: Of the 220 companies that defaulted this year, more than half were once owned by private equity.

  • ||

    Damned free market! Damned deregulation! Why can't someone run the economy for us and stop the insanity?

  • Oh no not this again||

    Just keep telling yourself, there are no crimes of capitalism, and you can continue feeding your ignorance.

    Pathetic

  • Attorney||

    Poor Simmons. I wish I could buy it a Coke and teach it to sing.

  • ||

    Hmmmm so does this mean that everyone who posts comments on here at work is committing a crime?

    So many crimes . . . .

  • ||

    I'm thinking evil thoughts. Is that a crime?

  • Rich||

    "How can the public be expected to know what the statute means when the judges and prosecutors themselves do not know, or must make it up as they go along?”

    So why should *this* statute be any different?

  • Lester Hunt||

    I love to see holes blasted in sovereign immunity, so I was conflicted about this law -- until I got to the bottom of this post and saw that Harvey Silverglate is against it. That did it. Harvey is my guru in matters legal.

  • BakedPenguin||

    While Simmons watched its debts balloon nearly tenfold since 1991

    Gosh! They need Obama to teach them financial discipline.

  • Attorney||

    I love it when writers anthropomorphize a business entity.

  • oaktownadam||

    Corporations are People Too.

    http://en.wikipedia.org/wiki/S.....c_Railroad

  • ||

    When we all sleep on the same government issued cot, the nightmare of Simmons will finally be behind us.

  • ||

    Not the answer Morris was looking for from Dan Savage.

    A question in the spirit of the season: can zombie sex ever be consensual? Because I think if confronted with a zombified Zac Efron, I might go for it if he were properly restrained. Can you teach a zombie a safe word? Does it count if it’s “braaaains?” It’s not necrophilia with the WALKING dead, is it? What would you say is the sexual morality of this situation? — Hope In Zombie Zac If Ethical

    If you’d seen Zombieland, HIZZIE, you’d know that a hot person, once transformed into a zombie, isn’t hot anymore. A pretty girl is bitten by a zombie, falls asleep in the arms of Zombieland’s nebbishy hero, and awakes as a thoroughly hideous flesh-eating monster. Even a zombified Zac Efron — I’m going to resist making the obvious joke here — would be too repulsive to fuck. Think of the gore, the viscera; think of the Axe body spray.

    As for the morality of the situation, fucking zombies — the walking dead — is necrophilia, technically speaking, but practically speaking, it comes closer to bestiality. A human being who has been zombified is nothing but an animal, hungry for brains, incapable of thought much less consent. We can kill animals for their flesh, but we mustn’t fuck them, HIZZIE; and we can kill zombies for wanting our flesh, but likewise we mustn’t fuck them.
  • ||

    Hence public officials who hook up their cronies with government jobs, a very common practice across the country, can be charged under the statute.

    How in the world are the .001% of public officials who are honest and trustworthy going to handle the workload of prosecuting and punishing all the ones who aren't?

    -jcr

  • ||

    Re: Simmons

    This ain't a new phenomenon. Note the date.

  • robc||

    J sub D,

    That article left 1 question for me: Do sewing patterns still exist?

  • skr||

    Yes, they certainly do. They are all being purchased buy immigrants and hipster crafters at Michael Levine's in downtown Los Angeles.

  • BakedPenguin||

    SugarFree, I think Morris still believes he's in the clear, b/c he's looking to fuck the zombified Jonas Brothers, not Zac Efron.

  • LC||

    An abused statue at times, the principal behind the law sounds good, but leave it to the good old boy network and it’s widely abused see it for yourself at www.honestservicefraud.com

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