Supreme Court to Hear “Honest Services” Fraud Appeal

Convicted former Enron CEO Jeffrey Skillings has successfully petitioned the United States Supreme Court to hear the appeal of his conviction. A primary focus of his appeal will be an attack on those counts of conviction that arose from “honest services” fraud. His lawyers will undoubtedly argue that the language of the “honest services” statute is so vague that it does not adequately advise people of what amounts to criminal conduct.

Federal prosecutors do not have a federal criminal statute addressing bribery involving state and local officials. To reach such crimes, traditionally, federal prosecutors invoked mail and wire fraud statutes to obtain criminal jurisdiction. These statutes make illegal participation in schemes to defraud that use either the U.S. Postal Service or interstate couriers for mail fraud or interstate wire transmissions for wire fraud. To combat local corruption federal prosecutors charged these crimes under the theory that the corrupt conduct was a scheme to defraud the citizens of the honest services of their public officials. This theory of prosecution was particularly popular in the 1970’s and 1980’s.

In the case of McNally v. United States, 483 U.S. 350 (1987), the U.S. Supreme Court held that the wire and mail fraud statutes did not apply to the theory of honest services fraud. The Congress addressed the McNally decision expeditiously, enacting the “McNally fix,” 18 U.S.C. Section 1346, in 1988. Section 1346 simply states that a “scheme or artifice to defraud another of the intangible right of honest services” satisfies the requirements of the “scheme or artifice to defraud” language in the mail fraud chapter (mail fraud, wire fraud, bank fraud, health care fraud, and securities fraud). The law does not provide a definition of the “intangible right to honest services.” The failure of a definition in the law is the basis of the concern with the statute.

Over the ensuing years, federal courts have interpreted “honest services” provisions in the public employee context to provide a rather clear understanding of what the law holds to be unlawful conduct. Generally, bribery or an undisclosed conflict of interest will cross the line into illegal conduct on the the public employee side.

Unfortunately, as the “honest services” provision has bee applied to those involved in private transactions, the standards of conduct are far less clear. Different courts have provided varying guidance on the level of breach of duty necessary to warrant a criminal charge of a scheme to defraud someone of honest services. The Supreme Court may rule that the statute is too vague as applied or may provide guidance on the use of the theory. The Court’s decision could have a profound influence on federal law enforcement in the white collar arena and bears watching.

For more information about the Skillings appeal, please see the following article in The New York Times, “Justices Will Hear Appeal of Former Enron Chief,”

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.