Conrad Black, the Supreme Court, and Honest Services Fraud
What makes the federal fraud statutes so potent is the so-called “honest services” provision, which was added by Congress in 1988 to overturn a Supreme Court decision in McNally v. United States that had read the statutes restrictively. Deceptively short, the honest services provision, 18 U.S.C. § 1346, states that “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”
The federal courts of appeals have struggled to explain what honest services means and when conduct does – or does not – constitute a fraud. In a recent case in which the Supreme Court declined to review the conviction of former Chicago city workers responsible for hiring civil service workers, Justice Scalia wrote: “Without some coherent limiting principle to define what ‘the intangible right of honest services’ is, whence it derives, and how it is violated, this expansive phrase invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.”
The honest services theory of fraud applies not only to public officials, but also to private parties, such as former Enron CEO Jeff Skilling. Unlike honest services cases involving public officials, private mail and wire fraud prosecutions raise sticky issues as to exactly what constitutes the dishonesty required for a conviction.
The Supreme Court’s decision to review the conviction of former media baron Conrad Black will be its first opportunity to interpret the honest services provision. What the Court will do is, of course, anyone’s guess, but there are a few issues I think it is likely to decide in the case.
WSJ Law Blog
5/24/9
