Antonin Scalia

Now We Know What Honest Services Fraud Is (Sort Of)

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Yesterday the Supreme Court unanimously ruled that a federal statute making it a crime to deprive someone of "the intangible right to honest services" is unconstitutionally vague. The law is handy for prosecutors taking on allegedly corrupt politicians and businessmen—a little too handy, since no one is sure exactly what it covers. If you are reading this at work, thereby depriving your employer of your "honest services," you could be violating the statute right now. During oral arguments in December, Justice Antonin Scalia noted that prosecutors are "all over the place" in their interpretation of the law. "And if the Justice Department can't figure out what is embraced by this statute," he said, "I don't know how you can expect the average citizen to figure it out." Because clear guidelines for staying on the right side of the law are a basic requirement of due process, the statute in its current form had to go. Six justices decided to fix it by interpreting it to cover only cases involving bribes or kickbacks. Three others—Scalia, Clarence Thomas, and Anthony Kennedy—would have gone further, overturning the law entirely. In Scalia's view, the reading adopted by the majority "requires not interpretation but invention."

The honest services statute was challenged by three defendants. Former Enron CEO Jeffrey Skilling was convicted of honest services fraud based on allegations that he misled investors by manipulating the company's publicly reported financial results. Under the majority's reading of the statute, that conviction cannot stand, since the prosecution did not claim that Skilling was bribed to fiddle with Enron's numbers. Conrad Black, former chairman of Hollinger International, was convicted of honest services fraud for failing to disclose noncompetition fees that he paid himself with company funds. Similarly, Bruce Weyhrauch, a former Alaska legislator, was convicted under the statute for failing to disclose that he had solicited legal work from the oil-field service company Veco Corp. when Veco was lobbying the legislature for lower oil taxes. Both of those convictions now also look wobbly, since there was no clear bribe or kickback in either case. The Court sent all three cases back to lower courts for further consideration.

This decision slightly narrows the dangerously broad discretion that federal prosecutors have to indict people who may not have realized they were breaking the law and to arbitrarily pile on penalties by linking one vague statute to another. The honest services law, for instance, can be combined with equally sweeping wire fraud, racketeering, money laundering, and obstruction of justice statutes to punish the same underlying actions over and over again, generally much more severely than the offense would have been treated under state law. For more on the federalization of crime, see William Anderson and Candice Jackson's Reason articles here and here.

The Skilling decision, in which the Court narrowed the scope of the honest services statute, is here. The Black case is here. Previous Reason coverage of the subject here.

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  1. So does this mean Skilling gets out of jail?

    1. No.

  2. Now that they’ve discovered “unconstitutionally vague” what are the chances they’ll progress to “unconstitutionally specific”?

  3. So CEO are now free to rip off shareholders.

    1. No.

  4. The decision is not a great victory for fair trials either – the court actually rubber stamped a witch hunt instead of granting a simple venue change.

  5. The decision is not a great victory for fair trials either – the court actually rubber stamped a witch hunt instead of granting a simple venue change.

  6. I never understood the “save the statute” reasoning that runs through courts. I mean, if the statute is vague, then the whole thing needs to go – no need to interpret it into “salvation”.

    1. I’m with you. They basically decided to add language to the law stating “depriving of honest services – in exchange for a bribe, kickback or other favors”. That might be a fine solution, bit the legislature never put that into law, and the President never signed it. They just judicial fiatted it into existence. Damn, Roberts. I had high hopes for you…

  7. So CEO are now free to rip off shareholders.

    Of course; what else could it possibly mean?

    1. Yeah, I think they even used that exact phrasing in the write-up, followed by “as he adjusted his monocle and laughed.”

      1. Don’t forget the part about twirling his mustache.

  8. I never understood the “save the statute” reasoning that runs through courts.

    As Scalia pointed out, “interpretation” can easily turn into “amendment”. This allows judges to act as unelected legislatures.

    See, also, the amendment of the Constitution to allow eminent domain for public “purposes” rather than public “use”. And they didn’t even have the fig leaf of vagueness there.

    Also, the CA Supreme Court decision rewriting, rather than overturning, the marriage statute to permit gay marriage.

  9. So does this affect the Blagojevich trial?

    1. So does this affect the Blagojevich trial?

      Not much.

      Blago was re-indicted with other charges in anticipation of this ruling.

  10. “If you are reading this at work, thereby depriving your employer of your “honest services,” you could be violating the statute right now”

    Fresno Dan: Oh Sh*t!!! I swear officer, I was just looking – not reading.

    Fresno Dan LAWER: Your honor, my client is a moron. If he did unintentionally look at something and unintentionally read it, I think you will agree he does not have the intellectual capacity to understand it. And isn’t reading understanding? And I note under Maryland wiretap provisions, the recordings of him reading out loud must be excluded from the evidence.

    1. Dave Weigel has resigned.

      1. Somehow, I find that news fitting in a post on “honest services fraud.”

        Reporting 101, if you’re going to cover a beat, maybe the place you should be networking is ON THAT BEAT, not on its exact opposite.

      2. From the comments on your link:

        Its ok, Petraeus has agreed to step in.

      3. In some ways I was sort of hoping he’d go out in a “blaze of glory”.

      4. Zounds! Also from the comments at the link, an appearance from LoneWacko!

  11. I thought “honest services fraud” was defined by Weigel passing himself off as a libertarian.

  12. This gives Weigel more time to pretend to know what to do with that shotgun.

  13. Weigel’s byline appears at HuffPo in three, two…

  14. So bigwigs and politicians get treated the same as us “little people”. Am I supposed to get upset or something?

  15. It’s hard for me not to think that when the bill was drafted, it was assumed to be obvious that it was aimed at someone taking money to serve another master. (The concepts of money, and loyalty to the one paying it, being sort of built in to “honest service.”) So the stretching of the concept to cover “doing anything we don’t like” does seem overreach to me.

  16. Does this mean we can sue the government finally? 🙂

  17. How does this effect David Kernell, to college student that was convicted of this change during the Sarah Palin email breach. He deleted five screen shots of her inbox from his computer then ran a defrag program.

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