Deprivation of Honest Services as a Basis for
Federal Mail and Wire Fraud Convictions
Anna C. Henning
Legislative Attorney
October 6, 2009
Congressional Research Service
7-5700
www.crs.gov
R40852
CRS Report for Congress
P
repared for Members and Committees of Congress
Deprivation of Honest Services as a Basis for Federal Mail or Wire Fraud
Summary
The federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, impose criminal penalties
for the use of mail or interstate wire communications to further a “scheme or artifice to defraud.”
In 1988, Congress enacted the “honest services” statute, 18 U.S.C. § 1346, which amended the
mail and wire fraud statutes to include within the definition of “scheme or artifice to defraud”
frauds which “deprive another of the intangible right of honest services.” Based in part on case
law predating its enactment, the statute has been interpreted to amend the mail and wire fraud
statutes in cases arising in both the public and private sectors. It does not extend to non-pecuniary
intangible rights other than the right of honest services. H.R. 1825, a bill introduced in the 111th
Congress, would make the mail and wire fraud statutes applicable to other intangible rights.
Types of fraudulent schemes which might be prosecuted using an honest services theory include,
among other things, a corporate officer’s attempt to defraud corporate shareholders, the bribery of
a public official, or the failure of a public official to disclose a conflict of interest.
Federal courts have noted various concerns—for example, a potential for excessive federal
intrusion into state political affairs—regarding the breadth of the honest services statute. In
response, the federal courts of appeals have adopted interpretations which narrow its scope.
However, they have employed differing standards to do so. Three prominent approaches include:
(1) the private gain test, which requires a showing that a defendant intended to obtain a private
gain for himself or another; (2) the state law limiting principle, which conditions federal liability
on a violation of state law; and (3) the foreseeable harm test, wherein a prosecutor must typically
prove that a defendant intended or was at least indifferent to the possibility that a scheme would
cause harm to economic or property rights. Several federal courts of appeals have rejected these
tests, having determined that they are unnecessary in light of existing limitations—namely
requirements that a defendant have a specific intent to commit fraud and that a fraud have a
material effect—inherent in the general framework for mail and wire fraud convictions.
In its 2009 term, the U.S. Supreme Court will interpret the honest services statute for the first
time since its enactment. The Court has granted writs of certiorari in two cases. In both cases, a
court of appeal rejected one of the limiting principles mentioned above. In Weyhrauch v. United
States, a public corruption case, the Court will consider the state law limiting principle. In Black
v. United States, it will review the foreseeable harm test in the context of private sector honest
services fraud. The decisions are likely to have far-reaching impact regarding the scope of federal
prosecutorial jurisdiction in mail and wire fraud cases.
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Deprivation of Honest Services as a Basis for Federal Mail or Wire Fraud
Contents
Introduction ................................................................................................................................ 1
Background: Mail and Wire Fraud............................................................................................... 2
Honest Services Statute............................................................................................................... 4
Historical Context ................................................................................................................. 4
Prosecutions.......................................................................................................................... 6
Constitutional Considerations...................................................................................................... 7
Federalism ............................................................................................................................ 7
Void-for-Vagueness ............................................................................................................... 8
Judicial Limitations on the Scope of the Honest Services Statute ................................................. 9
Private Gain ........................................................................................................................ 11
State Law Limiting Principle............................................................................................... 12
Foreseeable Harm ............................................................................................................... 15
Cases in Which the Supreme Court Has Granted Certiorari ....................................................... 16
United States v. Weyhrauch.................................................................................................. 16
United States v. Black.......................................................................................................... 17
Conclusion................................................................................................................................ 17
Contacts
Author Contact Information ...................................................................................................... 18
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Deprivation of Honest Services as a Basis for Federal Mail or Wire Fraud
Introduction
The federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, have been described as
federal prosecutors’ “true love,” because they provide a basis for criminal liability in a broad
spectrum of instances.1 For the purpose of mail and wire fraud prosecutions, federal jurisdiction is
triggered when a person utilizes the federal postal service or an interstate carrier or sends a wire
or radio communication. For example, the statutes may apply to schemes in which a FedEx
package or an e-mail was sent. Convictions are obtained after a prosecutor achieves the more
difficult step of proving that an intent to further a “scheme or artifice to defraud” accompanied
the use of mail or wire. Over time, the scope of “scheme or artifice to defraud” has been a subject
of contentious debate, particularly with regard to schemes to defraud victims of rights unrelated
to pecuniary assets.
Congress enacted the honest services statute, 18 U.S.C. § 1346, in 1988 to incorporate within the
ambit of the federal mail and wire fraud statutes schemes infringing on a victim’s right to an
official’s or employee’s “honest services”—i.e., an employee’s honest work on behalf of a
company or a public official’s honest representation of constituents. High-profile examples
include a guilty plea by the lobbyist Jack Abramoff to conspiracy to commit honest services fraud
and the indictment of former Illinois Governor Rod Blagojevich on honest services fraud and
related charges.2 In the private sector, a notable case involved the conviction of Jeffrey Skilling, a
former Enron executive.3
Although it is generally agreed that Congress has the authority to regulate the federal mail system
and interstate wire communications, the sparse text and potential breadth of the honest services
statute have prompted concerns regarding its constitutionality and scope. Critics of the statute
have argued that its mere “28 words” form a vague and unfair basis for federal criminal
jurisdiction in many cases.4 Likewise, in an opinion dissenting from the Supreme Court’s decision
to deny review in a 2008 honest services case, Justice Scalia suggested that the statute’s vague
language invites federal prosecution of seemingly commonplace actions, such as “a mayor’s
attempt to use the prestige of his office to obtain a restaurant table without a reservation.”5
Prompted by these and other considerations, federal courts have employed judicial interpretation
techniques to avoid an overly broad reading of the statute. However, the federal courts of appeals
disagree regarding the appropriate approach.
Perhaps in part to address the disagreement among the courts of appeals, the U.S. Supreme Court
granted writs of certiorari in two cases, Weyhrauch v. United States6 and Black v. United States,7
which present questions regarding the scope of the honest services statute. The cases will provide
1 See Geraldine Szott Moohr, Mail Fraud Meets Criminal Theory, 67 U. Cin. L. Rev. 1, 1 (1998-1999) (citing Jed S.
Rakoff, The Federal Mail Fraud Statute (Part I), 18 Duq. L. Rev. 771, 771-72 (1980)).
2 See Susan Schmidt and James V. Grimaldi, Abramoff Pleads Guilty to Three Counts: Lobbyist to Testify About
Lawmakers in Corruption Probe, Wash. Post, Jan. 4, 2006, at A1; U.S. Fed. News Service, Former Illinois Gov.
Blagojevich, His Brother, Two Former Top Aides, Two Businessmen Indicted, Apr. 4, 2009.
3 See United States v. Skilling, 554 F.3d. 529 (5th Cir. 2009).
4 See, e.g., Mike Robinson, Federal Law Under Attack, Dubuque Telegraph-Herald, Sep. 13, 2009, at A20.
5 Sorich v. United States, 129 S. Ct. 1308 (2009) (Scalia, J., dissenting from the denial of certiorari).
6 129 S. Ct. 2863 (2009) (No. 08-1196).
7 129 S. Ct. 2379 (2009) (No. 08-876).
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the U.S. Supreme Court’s first opportunity to interpret the honest services fraud statute since it
was enacted and will likely shape its breadth in federal mail and wire fraud cases.
Background: Mail and Wire Fraud
In 1872, Congress enacted the mail fraud statute “to curtail an epidemic of ‘large-scale swindles,
get-rich-quick schemes, and financial frauds.’”8 In 1952, it established an analogous federal
crime, wire fraud, which applies to frauds committed by the use of wire, radio, or television
communications in interstate commerce. Because the triggering activities for federal
jurisdiction—use of mail or wire, including the Internet—are very common modes of
communication, the federal mail and wire fraud statutes, 18 U.S.C. §§ 1341 and 1343, provide
federal criminal jurisdiction over a broad range of fraudulent schemes.9
Except for the instrument (the mail system versus radio or wire) used to trigger federal
jurisdiction, the mail and wire fraud statutes involve identical criminal conduct and are generally
interpreted in the same manner by the federal courts.10 The mail fraud statute subjects anyone to
criminal liability who, “having devised or intending to devise any scheme or artifice to defraud,
or for obtaining money or property by means of false or fraudulent pretenses, representations, or
promises,” deposits or causes to be deposited, knowingly causes to be delivered, or takes or
receives, any “matter or thing whatever” in a post office or “authorized mail depository” or with
“any private or commercial interstate carrier ... for the purpose of executing [a fraudulent]
scheme.”11 The wire fraud statute includes the same “having devised or intending to devise any
scheme or artifice to defraud ...” and “for the purpose of executing such scheme” language but
applies to transmittals of “any writings, signs, signals, pictures, or sounds” “by means of wire,
radio, or television communication in interstate or foreign commerce.”12
Generally speaking, criminal convictions require the government to prove both an actus reus
(action) and a mens rea (mental state). As mentioned, the actus reus component of the federal
8 United States v. Svete, 556 F.3d 1157, 1162 (11th Cir. 2009) (quoting Jed S. Rakoff, The Federal Mail Fraud Statute
(Part I), 18 Duq. L. Rev. 771, 780 (1980)). The focus in the legislative history on financial frauds provides some
indication that Congress initially intended to limit the statute’s scope to those activities involving money or property. In
1909, it appeared to codify this limitation when it amended the statute to clarify that it covered schemes for the purpose
of “obtaining money or property” through fraud. Act of Mar. 4, 1909, 35 Stat. 1130.
9 See Jack E. Robinson, The Federal Mail and Wire Fraud Statutes: Correct Standards for Determining Jurisdiction
and Venue, 44 Willamette L. Rev. 479 (2007-2008) (noting that “[t]he federal mail and wire fraud statutes, particularly
since their amendment in 2002, have become the most prevalent and lethal weapon in the federal prosecutor’s arsenal”
and have enabled the U.S. Department of Justice to “root out new and increasingly more sophisticated frauds,” but
arguing that the expanded federal authority “has also led to the ‘federalization’ of fraudulent conduct that is more
appropriately dealt with by state prosecutors under state law”).
10 See Pasquantino v. United States, 544 U.S. 349, 355 n.2 (2005) (“we have construed identical language in the wire
and mail fraud statutes in pari materia”) (citing Neder v. United States, 527 U.S. 1, 20 (1999), Carpenter v. United
States, 484 U.S. 19, 25 and n.6 (1987)). See also United States v. Ward, 486 F.3d 1212, 1221 (11th Cir. 2007) (“Aside
from the means by which a fraud is effectuated, the elements of mail fraud, 18 U.S.C. 1341, and wire fraud, 18 U.S.C.
1343, are identical.”). However, one difference is that the wire fraud provision is based on Congress’s commerce clause
authority, whereas the mail fraud statute also applies in cases involving only intrastate communications. See United
States v. Elliott, 89 F.3d 1360, 1364 (8th Cir. 1996); United States v. Photogrammertric Data Services, Inc., 259 F.3d
229, 247 (4th Cir. 2001).
11 18 U.S.C. §1341.
12 18 U.S.C. §1343.
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mail and wire fraud statutes is satisfied with proof of a relatively innocuous action—namely, the
very common act of using mail or telecommunications. For example, in United States v.
Weyhrauch,13 the defendant’s alleged scheme involved voting a particular way on state legislation
regarding taxation of oil companies in exchange for an oil company hiring the defendant to
provide legal services. However, the event triggering jurisdiction for purposes of the mail fraud
statute was the defendant mailing his resumé to the oil company. Furthermore, in most cases, a
prosecutor need not prove that a person actually used the mail or sent a wire or radio
communication. Instead, it is generally sufficient that a defendant knew or should have foreseen
that mail or wire would be used.14 In addition, it is usually not necessary to prove that a victim
was actually harmed—i.e., that a person was deprived of property or other rights.15
Thus, the success of mail or wire fraud prosecutions typically turns on whether a defendant had
the requisite mental state—namely, whether he or she intended to devise a “scheme or artifice to
defraud.” For both crimes, a prosecutor must prove that a defendant had specifically intended to
perpetrate a fraud.16 Thus, the statutes are sometimes described as having a “specific intent”
requirement.17 In the public corruption context, some courts of appeals have adopted relatively
strict interpretations of this requirement. For example, the U.S. Court of Appeals for the First
Circuit has noted that the intent requirement in the mail and wire fraud statutes requires that a
prosecutor “indicate wrongdoing by a public official, [but] also demonstrate that the wrongdoing
at issue [was] intended to prevent or call into question the proper or impartial performance of that
public servant’s official duties.”18 Other decisions have tempered the extent of the specific intent
hurdle, however. In a later case, the First Circuit allowed that the “prosecution may prove this
requisite intent to defraud through circumstantial evidence.”19 In addition, the scope of activities
which may constitute fraud for the purpose of fulfilling the intent requirement is relatively broad.
The Supreme Court has held that “scheme or artifice to defraud” extends to “any act or omission
that ‘wrong[s] one in his property rights by dishonest methods or schemes and usually signif[ies]
the deprivation of something of value by trick, deceit, chicane or overreaching.’”20
13 548 F.3d 1237 (9th Cir. 2008), cert. granted, 129 S. Ct. 2863 (2009).
14 See Pereira v. United States, 347 U.S. 1, 8-9 (1954) (“Where one does an act with knowledge that the use of the
mails will follow in the ordinary course of business, or where such use can reasonably be foreseen, even though not
actually intended, then he ‘causes’ the mails to be used.”) (citing United States v. Kenofskey, 243 U.S. 440 (1917)).
15 In that regard, the mail and wire fraud statutes resemble “inchoate offenses,” such as attempt and conspiracy, for
which a prosecutor must prove only that a defendant took sufficient steps toward the commission of a crime and had
the requisite intent to commit the crime, rather than any particular outcome. However, unlike the crimes of attempt and
conspiracy, the federal mail and wire fraud crimes also address crimes in which the fraud was “successful”—i.e., where
harm actually occurred.
16 See United States v. Galex, 2009 U.S. App. LEXIS 17800 (3d Cir. 2009) (requiring proof beyond a reasonable doubt
that a defendant knowingly and willfully participated in a scheme or artifice to defraud “‘with the specific intent to
defraud.’”) (quoting United States v. Antico, 275 F.3d 245, 261 (3d Cir. 2001); United States v. Sloan, 492 F.3d 884,
891 (7th Cir. 2007) (“To show an intent to defraud, we require a willful act by the defendant with the specific intent to
deceive or cheat, usually for the purpose of getting financial gain for one’s self or causing financial loss to another.”).
17 See United States v. Sawyer, 239 F.3d 31, 46-47 (1st Cir. 2001).
18 United States v. Czubinski, 106 F.3d 1069, 1076 (1st Cir. 1997). But see United States v. Woodward, 149 F.3d 46,
61-62 (1st Cir. 1998) (distinguishing Czubinski where the defendant had received tangible benefits in the form of
gratuities and a “connection between the gratuities and [the defendant]’s official acts could have been justifiably
inferred from the fact that [he] had discretion to act or not act in ways that would further the insurance industry’s
interests”).
19 Sawyer, 239 F.3d at 46-47 (citing United States v. Ervasti, 201 F.3d 1029, 1037 (8th Cir. 2000)).
20 McNally v. United States, 483 U.S. 350, 358 (1987) (quoting Hammerschmidt v. United States, 265 U.S. 182, 188
(1924)).
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Materiality presents a final component to the analysis in mail and wire fraud cases. In general,
federal courts require that a scheme to defraud must be material; that is, it must have a natural
tendency to induce reliance to the victim’s detriment or to the offender’s benefit.21 However, as
discussed, mail and wire fraud are typically punishable regardless of the ultimate success of a
fraudulent scheme.22
Congress substantially increased the penalties associated with the federal mail and wire fraud
statutes as part of the Sarbanes-Oxley Act of 2002.23 The maximum penalties for the statutes,
including in cases proceeding under an honest services theory, now include imprisonment for up
to 20 years.24
Honest Services Statute
The honest services statute, 18 U.S.C. § 1346, states that for the purposes of the federal crimes of
mail and wire fraud, “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to
deprive another of the intangible right of honest services.” As discussed, because of the sparse
text but broad application, questions remain regarding the scope of the statute and the range of
situations to which it applies.25 The provision’s historical context, together with case law
predating the provision and various constitutional considerations, inform judicial interpretation of
the statute.
Historical Context
Beginning in the 1930s and 1940s, federal courts applied the federal mail fraud statute to frauds
stemming from a breach of fiduciary duty.26 During the late 1970s and 1980s, using fiduciary
duty as an analogy, federal courts first included public corruption within the types of activities
which could give rise to a mail or wire fraud conviction.27 A theory suggested to justify honest
services convictions in the public sector context “relie[d] on the idea that a public official acts as
21 See, e.g., Neder v. United States, 527 U.S. 1, 21-22 (1999) (holding that materiality is an element of mail, wire, and
bank fraud because the statutory language drew from common law, and at common law, “fraud” had to be material).
22 See United States v. Gale, 468 F.3d 929, 937 (6th Cir. 2006); United States v. Schuler, 458 F.3d 1148, 1153 (10th Cir.
2006); United States v. Reifler, 446 F.3d 65, 96 (2d Cir. 2006).
23 P.L. 107-204, 116 Stat. 745, 800 (2002).
24 18 U.S.C. §§ 1341, 1343. Prior to the passage of the Sarbanes-Oxley Act, the maximum prison sentence that could be
imposed was five years.
25 United States v. Urciuoli, 513 F.3d 290, 294 (1st Cir. 2008) (“as one moves beyond core misconduct covered by the
statute (e.g., taking a bribe for a legislative vote), difficult questions arise in giving coherent content to the phrase
through judicial glosses”).
26 See, e.g., Alexander v. United States, 95 F.2d 873 (8th Cir. 1938) (affirming the conviction for mail fraud of
defendants who had mailed fictitious medical licenses, where they were found to have “devised a scheme and artifice to
defraud numerous persons, including the public generally, and particularly those persons who would in the future desire
the services of legally licensed and professionally competent doctors, surgeons, and chiropractors”); United States v.
Procter & Gamble Co., 47 F.Supp. 676, 678 (D.Mass. 1942) (applying the mail fraud statute to a private sector
employee’s breach of his fiduciary duty).
27 See, e.g., United States v. Mandel, 591 F.2d 1347 (4th Cir. 1979); United States v. Silvano, 812 F.2d 754 (1st Cir.
1987).
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trustee for the citizens and the State ... and thus owes the normal fiduciary duties of a trustee, e.g.,
honesty and loyalty to them.”28
In 1987, the Supreme Court halted such “honest services” convictions when it held, in McNally v.
United States,29 that the definition of “any scheme or artifice to defraud” extends only to schemes
targeting tangible property rights, not intangible ones, such as a breach of fiduciary duty.30 The
Court explained that it had chosen the narrow interpretation, “[r]ather than construe the statute in
a manner that leaves its outer boundaries ambiguous and involves the Federal Government in
setting standards of disclosure and good government for local and state officials.”31 It added that
“[i]f Congress desires to go further, it must speak more clearly than it has.”32
The following year, in response to the McNally decision,33 Congress amended the statutory
definition of “scheme or artifice to defraud” for purposes of mail and wire fraud, as discussed, to
encompass any “scheme or artifice to deprive another of the intangible right of honest services.”34
Some courts have interpreted the new statute as having “reinstated the line of cases preceding
[McNally]”35 with respect to the honest services theory, whereas other courts have concluded that
Congress could not have intended to reinstate the pre-McNally case law.36
The honest services fraud amendment has been interpreted as overruling McNally only with
regard to the right of honest services, and not with regard to other intangible rights.37 Before
Congress enacted the honest services statute, the Supreme Court, in United States v. Carpenter,38
applied the mail fraud statute to intangible property—specifically, to confidential information that
would affect stock trading. However, the Carpenter holding appeared to extend only to interests
that could be construed as property interests, rather than to other intangible rights, such as those
contemplated by the honest services provision. Thus, it could be argued that three categories of
mail and wire fraud now exist—traditional fraud affecting tangible pecuniary interests, fraud
28 United States v. Kincaid-Chauncey, 556 F.3d 923, 939 (9th Cir. 2009) (quoting United States v. Silvano, 812 F.2d
754, 759 (1st Cir. 1987), United States v. Mandel, 591 F.2d 1347, 1363 (4th Cir. 1979) (internal quotation marks
omitted)). However, in general, breach of a fiduciary duty is not considered a necessary element for a mail or wire
fraud conviction proceeding on an honest services theory. See United States v. Ervasti, 201 F.3d 1029, 1036 (8th Cir.
2000).
29 483 U.S. 350, 358 (1987).
30 Id. at 358. The Court relied on the legislative history of the mail fraud statute.
31 Id. at 360.
32 McNally, 483 U.S. at 360.
33 See 134 Cong. Rec. S 17,376 (Nov. 10, 1988) (section-by-section analysis inserted into the record by Senator Biden
on behalf of the Senate Judiciary Committee) (“This section overturns the decision in McNally v. United States in
which the Supreme Court held that the mail and wire fraud statutes protect property but not intangible rights. Under the
amendment, those statutes will protect any person’s intangible right to the honest services of another, including the
right of the public to the honest services of public officials. The intent is to reinstate all of the pre-McNally caselaw
pertaining to the mail and wire fraud statutes without change.”).
34 P.L. 100-690, § 7603, 102 Stat. 4181 (codified at 18 U.S.C. §1346) (emphasis added).
35 United States v. Sorich, 523 F.3d 702, 707 (7th Cir. 2008) (citing United States v. Rybicki, 354 F.3d 124, 136-37 (2d
Cir. 2003) (en banc)).
36 See, e.g., United States v. Brumley, 116 F.3d 728, 733 (5th Cir. 1997) (“Congress could not have intended to bless
each and every pre-McNally lower court ‘honest services’ opinion.”).
37 See Cleveland v. United States, 531 U.S. 12 (2000) (“Congress amended the law specifically to cover one of the
‘intangible rights’ that lower courts had protected under § 1341 prior to McNally: ‘the intangible right of honest
services.’”).
38 484 U.S. 19 (1988).
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affecting intangible pecuniary interests, and honest services fraud—whereas other types of
intangible rights are not included within the ambit of mail and wire fraud. For example, in a 2000
case, Cleveland v. United States,39 the Court overturned a conviction in which the lower courts
found that the State of Louisiana was fraudulently induced to issue a video poker license. The
Court held that the mail and wire fraud statutes were inapplicable because the license was not
“money or property” while in the state’s hands, nor was a deprivation of honest services
implicated.
Legislative proposals have been introduced that would extend the scope of the mail and wire
fraud statutes to apply to other intangible rights such as regulatory interests which might be
implicated by election misconduct or licensing schemes. For example, H.R. 1825, a bill
introduced in the 111th Congress, would amend the federal mail and wire fraud statutes to include
fraudulent behavior in which “any thing of value” was sought or obtained.40
Prosecutions
Based in part on the pre-McNally case law, federal courts have interpreted the honest services
provision as encompassing services owed by both publicly elected officials and private
employees. In both private sector and public corruption cases, prosecutions have not been limited
to the public official or employee who owes honest services.41 For example, a third party may be
criminally liable for concealing a conflict of interest on behalf of a public official or engaging in a
conspiracy with an employee to defraud a corporation.42
In the private sector, a typical case might involve various people involved in a fraudulent scheme
(e.g., to award a company’s contracts or services in exchange for kickbacks).43 It has been
described as applying to schemes that would “enable an officer or employee of a private entity ...
purporting to act for and in the interests of his or her employer ... secretly to act in his or her or
the defendant’s own interests instead.”44 Over time, it has been applied to corporate officers,
purchasing agents, stock brokers, “and others with clear fiduciary duties to their employees or
unions.”45
In the public corruption context, honest services cases arise when a defendant is alleged to have
deprived the public of its right to an elected official’s honest services.46 Courts have noted that the
39 531 U.S. 12 (2000).
40 Clean Up Government Act of 2009, H.R. 1825, 111th Cong. (2009).
41 See United States v. Sorich, 523 F.3d 702, 707 (7th Cir. 2008) (describing the private sector type of honest services
fraud as that in which “an employer is defrauded of its employee’s honest services by the employee or by another”)
(emphasis added).
42 Alternatively, a third party is sometimes charged as an accessory in an honest services case. For example, in United
States v. Panarella, 277 F.3d 678 (3d Cir. 2002), the Third Circuit upheld the conviction of an owner of a tax collection
business on charges of having been an accessory after the fact to an official’s commission of honest services fraud.
43 See, e.g., United States v. George, 477 F.2d 508 (7th Cir. 1973).
44 United States v. Rybicki, 354 F.3d 124, 126-27 (2d Cir. 2003) (en banc), cert. denied, 543 U.S. 809 (2004).
45 See McNally v. United States, 483 U.S. 350, 364 (1987).
46 See, e.g., United States v. Silvano, 812 F.2d 754, 759 (1st Cir. 1987) (describing courts’ pre-McNally interpretation of
the mail and wire fraud statutes as including an honest services component “premised upon an underlying theory that a
public official acts as trustee for the citizens and the State ... and thus owes the normal fiduciary duties of a trustee, e.g.,
honesty and loyalty to them” (internal quotations omitted)).
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two most common situations in which the honest services statute is implicated include bribery of
a public official and undisclosed conflicts of interest.47 Convictions for both types of schemes, as
well as patronage schemes, were upheld in various cases prior to McNally.48 Bribery of a public
official has been described as the “most obvious” form of honest services fraud,49 but courts have
occasionally characterized the receipt of benefits as a result of an undisclosed conflict of interest
as a more subtle version of having accepted a bribe.50
Constitutional Considerations
The sparse yet broad text of the honest services statute prompts some special constitutional
considerations. Related to the specific issues discussed below are overarching separation-of-
powers questions. For example, which branch—Congress or the judiciary—is best suited to
delineate the scope of federal criminal jurisdiction in honest services cases?
Federalism
Congress’s authority to enact the mail and wire fraud statutes is derived from its Article I powers
to establish a postal system and regulate interstate commerce.51 Principles of federalism may
impose outer limits on the reach of federal authority, particularly as applied to state political
activities. Federalism, derived from the constitutional structure which creates a federal
government of limited powers, and from the Tenth Amendment to the Constitution,52 recognizes
that the states and the federal government exist as dual sovereigns. Although the extent to which
the Tenth Amendment or general principles of federalism impose an affirmative limit on the
federal government is somewhat unsettled, the Supreme Court has historically invoked these
principles to justify a narrow reading of federal criminal statutes.53 Likewise, in the mail and wire
47 See, e.g., United States v. Gordon, 183 Fed.Appx. 202, 208 (3d Cir. 2006) (“Honest services fraud typically is found
in two situations: ‘(1) bribery, where a legislator was paid for a particular decision or action; or (2) failure to disclose a
conflict of interest resulting in personal gain,’ which, ‘[i]n the public sector ... is oftentimes prescribed by state and
local ethics laws.’”) (quoting United States v. Antico, 275 F.3d 245, 262-63 (3d Cir. 2001))).
48 See, e.g., United States v. Isaacs, 493 F.2d 1124 (5th Cir. 1975) (upholding a conviction for the accepting of bribes);
United States v. Keane, 522 F.2d 534 (7th Cir. 1975) (upheld a Chicago Alderman’s honest services fraud conviction
for, among other things, failing to disclose his personal interest in property); United States v. Bush, 522 F.2d 641 (7th
Cir. 1975) (upheld the conviction of a Chicago mayor’s Press Secretary, who had failed to disclose that his ownership
interest in a business that had an exclusive contract with the city); United States v. Margiotta, 688 F.2d 108 (2d Cir.
1982) (upholding the conviction of a political party official in connection with his alleged distribution of insurance
commission positions to his political allies).
49 See United States v. Carbo, 572 F.3d 112, 115 (3d Cir. 2009).
50 United States v. Panarella, 277 F.3d 678, 697 (3d Cir. 2002) (“The only difference between a public official who
accepts a bribe and a public official who receives payments while [taking steps to benefit from an undisclosed conflict
of interest] is the existence of a quid pro quo whereby the public official and the payor agree that the discretionary
action taken by the public official is in exchange for payment. Recognizing the practical difficulties in proving the
existence of such a quid pro quo, disclosure laws permit the public to judge for itself whether an official has acted on a
conflict of interest.”).
51 See U.S. Const. art. I, § 8 (“The Congress shall have Power ... To regulate Commerce with foreign Nations, and
among the several States ... [and] To establish Post Offices and post Roads”).
52 U.S. Const. amdt. X (“The powers not delegated to the United States by the Constitution, nor prohibited by it to the
States, are reserved to the States respectively, or to the people”).
53 See, e.g., Linder v. United States, 268 U.S. 5, 17 (1925) (“And we accept as established doctrine that any provision
of an act of Congress ostensibly enacted under power granted by the Constitution, not naturally and reasonably adapted
(continued...)
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fraud context, in particular, the Court has indicated that it requires a clear statement from
Congress before it will interpret the statutes as intruding on areas traditionally governed by the
states.54
As mentioned, such concerns are perhaps most strongly implicated by the honest services statute
in the context of federal prosecutions against state and local officials. They are likely to inform
the Supreme Court’s decision in Weyhrauch, in which the Court will resolve the question
“[w]hether, to convict a state official for depriving the public of its right to the defendant’s honest
services through the disclosure of material information, in violation of the mail-fraud statute ...
the government must prove that the defendant violated a disclosure duty imposed by state law.”55
In some cases, federal courts have argued that an approach to the honest services fraud statute that
was not subject to the state law limiting principle, rejected by the lower court in Weyhrauch and
discussed infra, might be inconsistent with principles of federalism.56
Void-for-Vagueness
Criminal statutes are held to violate the due process clauses of the Fifth and Fourteenth
Amendments57 when they are sufficiently vague that people “of common intelligence must
necessarily guess at [their] meaning.”58 This “void-for-vagueness” doctrine is rooted in due
process concerns regarding notice to citizens and the arbitrary enforcement of laws.59 Courts may
declare statutes void if the conduct giving rise to criminal liability, the persons to which it applies,
or the punishment which may be imposed are unclear.
However, assessments of vagueness are determined in light of judicial precedents that have
construed a statute’s scope or meaning. Thus, a key question with regard to the honest services
statute is whether existing judicial precedents—including case law before and after the Supreme
Court’s decision in McNally—provide a sufficient degree of clarity to satisfy due process
requirements. Some commentators argue that the case law is inconsistent and does not provide
any firm boundaries for the scope of the statute.60 As a theoretical matter, vagueness questions
(...continued)
to the effective exercise of such power but solely to the achievement of something plainly within power reserved to the
States, is invalid and cannot be enforced.”).
54 See Cleveland v. United States, 531 U.S. 12, 25 (2000) (“unless Congress conveys its purpose clearly, it will not be
deemed to have significantly changed the federal-state balance in the prosecution of crimes”).
55 129 S. Ct. 2863 (2009).
56 See, e.g., United States v. Gordon, 183 Fed. Appx. 202, 210 (3d Cir. 2006) (describing a broad interpretation of the
statute as “inconsistent with principles of federalism that are preserved when federal honest services fraud is tied to a
violation of a fiduciary relationship arising under state or local law”) (citing United States v. Murphy, 323 F.3d 102,
117 (3d Cir. 2003)).
57 U.S. Const. amdt. V; U.S. Const. amdt. XIV, § 1.
58 Connally v. General Construction Co., 269 U.S. 385, 391 (1926).
59 The Supreme Court has noted that the threat of arbitrary or discriminatory enforcement of the laws is the more
pressing of the two concerns. See Kolender v. Lawson, 461 U.S. 352, 357-58 (1983) (“Although the doctrine focuses
both on actual notice to citizens and arbitrary enforcement, we have recognized recently that the more important aspect
of the vagueness doctrine ‘is not actual notice, but the other principal element of the doctrine—the requirement that a
legislature establish minimal guidelines to govern law enforcement.’” (quoting Smith v. Goguen, 415 U.S. 566, 574
(1974)).
60 See, e.g., Andrew B. Matheson, A Critique of United States v. Rybicki: Why Foreseeable Harm Should Be an Aspect
of the Mens Rea of Honest Services Fraud, 28 Am. J. Trial Advoc. 355, 356 (2004-2005).
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arise in part because judicial opinions in honest services cases have relied upon concepts such as
fiduciary duty, which is borrowed from the context of civil liability and arguably does not provide
sufficient clarity to satisfy the constitutional requirements for penal statutes, which are subject to
a heightened level of scrutiny before the government may place a defendant’s life, liberty, or
property at stake.
Although it is unclear how the Supreme Court will rule on the question,61 the federal courts of
appeals which have addressed the issue have rejected void-for-vagueness challenges. The most
notable case is United States v. Rybicki,62 a 2003 decision in which the U.S. Court of Appeals for
the Second Circuit, sitting en banc, upheld the honest services statute against a void-for-
vagueness challenge. The court noted that case law predating the enactment of the honest services
statute clarifies the scope of the crime. In contrast, several dissenting judges argued that the
judicial doctrines that the court characterized as having formed the backdrop for the honest
services fraud provision are “as standardless as the statute itself.”63 However, that characterization
would appear to apply to standards governing the application of the mail and wire fraud statutes,
generally, rather than only honest services cases.
To avoid statutory constructions which implicate vagueness or other due process concerns, some
courts have invoked the “rule of lenity,” which is one of many canons of statutory construction—
i.e., “rules of thumb that help courts determine the meaning of legislation”64—to reach a narrow
interpretation of the honest services statute.65 Derived from due process guarantees, the rule of
lenity requires that legislatures provide a “clear statement” before a statute will be found to
provide a basis for criminal liability.
Judicial Limitations on the Scope of the
Honest Services Statute
Prompted in part by the constitutional considerations discussed above, the courts of appeals have
generally recognized a “need to find limiting principles to cabin the broad scope of § 1346.”66
Despite their agreement on this point, however, they have adopted differing approaches. Some
have established special tests which must be satisfied before a defendant may be convicted for
mail and wire fraud based on an honest services theory. As discussed, the three most prominent
tests include the “private gain” test, the “state law limiting principle,” and the “foreseeable harm”
test. When explaining the need for such standards, some courts have asserted that the text of the
honest services statute would otherwise seemingly justify absurd convictions. For example, at
61 Justice Scalia has suggested that void-for-vagueness issues are implicated by the honest services fraud provision; see
Sorich v. United States, 129 S. Ct. 1308 (2009) (Scalia, J., dissenting from the denial of certiorari); but the Court has
not yet ruled on the issue.
62 354 F.3d 124 (2d Cir. 2003) (en banc), cert. denied, 543 U.S. 809 (2004).
63 Rybicki, 354 F.3d at 161 (Jacobs, J., dissenting).
64 Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 253 (1992).
65 See, e.g., United States v. Murphy, 323 F.3d 102, 113 (3d Cir. 2003).
66 See United States v. Inzunza, 2009 WL 2750488, *9 (9th Cir. 2009). See also Andrew B. Matheson, A Critique of
United States v. Rybicki: Why Foreseeable Harm Should Be an Aspect of the Mens Rea of Honest Services Fraud, 28
Am. J. Trial Advoc. 355, 372 (2004-2005) (noting that a “broad consensus” exists that “there must be a limiting
element for honest services fraud, lest every ethical lapse be treated as a crime”).
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least one court has suggested that in private sector cases, “the plain language of the ‘honest
services’ doctrine codified in § 1346 suggests that ‘dishonesty by an employee, standing alone, is
a crime.’”67 Thus, although “[u]nder such an application of the statute, [a defendant’s] conduct
[might be] clearly within the scope of § 1346 ... courts generally have been reluctant to apply
§ 1346 in a way that would expose employees to mail fraud prosecution for ‘every breach of
contract or every misstatement made in the course of dealing.’”68 Dissenting to denial of certiorari
in an honest services case, Justice Scalia appeared to agree that a limiting principle is necessary.
He stated: “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.”69
Other courts of appeals have declined to adopt tests which apply only in honest services cases and
have relied instead on specific intent and materiality requirements, required elements for mail and
wire fraud convictions generally. The U.S. Court of Appeals for the Tenth Circuit has perhaps
articulated this view most forcefully. In United States v. Welch,70 it criticized the special tests as
requiring courts “to judicially legislate by adding an element to honest services fraud which the
text and the structure of the fraud statutes do not justify.”71 Defendants in the case were members
of the Salt Lake City Olympic Bid Committee who allegedly bribed members of the International
Olympic Committee in an effort to secure Salt Lake City’s chances to host the 2002 Winter
Olympic Games. In rejecting various proposed limiting principles, the Tenth Circuit noted that the
honest services statute “‘must be read against a backdrop of the mail and wire fraud statutes,
thereby requiring fraudulent intent and a showing of materiality’” and concluded that these
existing requirements provided sufficient checks against the statute’s potential overbreadth.72 In
September 2009, the U.S. Court of Appeals for the Ninth Circuit took a similar approach in
United States v. Inzunza,73 a case involving former members of the San Diego City Council. It
joined what it characterized as the “majority rule,” holding that the intent and materiality
requirements implicit in the mail and wire fraud statutes rendered the private gain and state law
limiting principles unnecessary. Although courts sometimes characterize materiality and specific
intent requirements as alternatives to the limiting principles established for honest services, they
tend to emphasize that such tests are “inherent” in the mail and wire fraud framework.74
67 United States v. Vinyard, 266 F.3d 320, 326-27 (4th Cir. 2001) (quoting United States v. Frost, 125 F.3d 346, 368 (6th
Cir. 1997)).
68 Id. (quoting United States v. Cochran, 109 F.3d 660, 667 (10th Cir. 1997)).
69 Sorich v. United States, 129 S. Ct. 1308 (2009) (Scalia, J., dissenting from the denial of certiorari).
70 327 F.3d 1081 (10th Cir. 2003).
71 Id. at 1107.
72 Id. at 1107 (quoting United States v. Cochran, 109 F.3d 660, 667 (10th Cir. 1997)).
73 2009 WL 2750488 (9th Cir. 2009).
74 See, e.g., United States v. Rybicki, 354 F.3d 124, 146 (2003) (en banc) (adopting a “materiality test” in lieu of the
foreseeable harm test, “because it has the virtue of arising out of fundamental principles of the law of fraud: A material
misrepresentation is an element of the crime”).
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Private Gain
The “private gain,” or “personal gain,”75 limitation, which has been adopted by the U.S. Court of
Appeals for the Seventh Circuit, limits the scope of the honest services provision by requiring a
showing that a defendant aimed to secure a private gain for himself or another. In United States v.
Bloom,76 a Chicago alderman, who also worked as a private attorney, had advised a client to plant
a proxy buyer at a real estate auction as part of a scheme to obtain tax advantages. The court
dismissed the honest services count because the prosecutor had not alleged that these actions had
been intended for the alderman’s personal gain. The Seventh Circuit held that the “[m]isuse of
office (more broadly, misuse of position) for private gain is the line that separates run of the mill
violations of state-law fiduciary duty ... from federal crime.”77
A later Seventh Circuit case, United States v. Sorich,78 involved a “corrupt and far-reaching
scheme, based out of the [Chicago mayor’s office], that doled out thousands of city civil service
jobs based on political patronage and nepotism.”79 The court upheld a jury instruction which
required proof that the defendants intended “to deprive a governmental entity of the honest
services of its employees for personal gain to a member of the scheme or another.”80
Bloom left unresolved whether conviction may be obtained where a defendant has sought gain on
behalf of a third party. In Sorich, the court clarified that “private gain ... simply mean[s]
illegitimate gain, which usually will go to the defendant, but need not.”81 It then affirmed the
convictions resulting from the patronage scheme, signaling that at least in some circumstances,
private gain may include gain sought on behalf of third parties. The test’s application to third
parties has not been further explored.
Other parameters of the Seventh Circuit’s conception of “private gain” are not clearly defined.
The Seventh Circuit appears to have limited the definition of “private gain” to benefits that are
received in secret or outside of regular procedures. In a 2007 case, United States v. Thompson,82
the defendant, a section chief in a state procurement office, was alleged to have influenced the
selection process for a state travel agent contract for political reasons. However, the gain that the
defendant was alleged to have obtained was characterized as favor with her supervisor and a pay
raise through the ordinary compensation process. The court held that strengthened job security
and the pay raise could not be construed as a “private gain” for the purpose of a mail fraud
conviction. In reaching this conclusion, the court contrasted these alleged gains with examples of
75 Although other courts of appeals’ opinions and earlier Seventh Circuit opinions have in some cases referred to the
test as requiring a showing of “personal gain,” the Seventh Circuit stated in its most recent honest services case that
“private gain” is the more appropriate term for the test. See United States v. Sorich, 523 F.3d 702, 709 (7th Cir. 2008)
(noting that although the “semantic difference between ‘private’ and ‘personal’ gain may be insignificant ... to the
extent that ‘personal’ connotes gain only by the defendant, it is misleading”).
76 149 F.3d 649 (7th Cir. 1998).
77 Id. at 655.
78 523 F.3d 702 (7th Cir. 2008).
79 Id. at 705.
80 Id. at 708-09. The court determined that the phrases “private gain” and “personal gain” were not meaningfully
different.
81 Id. at 709.
82 484 F.3d 877, 882 (7th Cir. 2007).
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“private gain” given in Bloom, all of which involved “payoffs outside the proper channels.”83
However, one could imagine factual scenarios in which a gain might be difficult to categorize as
being clearly inside or outside the boundaries of typical compensation procedures. For example, it
is unclear how the standard would apply in conflict-of-interest cases in which a payment related
to an undisclosed interest might be received through “proper channels” within the meaning of that
phrase as articulated in Bloom and Thompson—e.g., in the form of ordinary compensation for
services rendered to satisfy a legal contract obligation.
Other federal courts of appeals have explicitly rejected the “private gain” analysis.84 Reasons for
the rejection include a view that it simply “substitut[es] one ambiguous standard for another” and
a concern that the private gain test has the potential to make § 1346 under-inclusive, for example
by failing to apply in conflict-of-interest cases.85 As mentioned, in some cases, courts of appeals
have rejected the private gain test in favor of reliance on the specific intent requirement inherent
in the mail and wire fraud framework. For example, the U.S. Court of Appeals for the Ninth
Circuit, in Inzunza, stated that “careful attention to the intent element dispels concerns about the
statute’s overbreadth.”86 However, it held that evidence of intent to obtain a private gain, although
not a necessary prerequisite for conviction, provides some evidence of the requisite mental state.87
State Law Limiting Principle
A few federal courts of appeals have adopted the “state law limiting principle,” which dictates
that a conviction for mail or wire fraud on an honest services theory requires a showing that a
defendant’s activity violated state law. Courts which have adopted the principle emphasize
principles of federalism and the importance of state law as a dividing line between criminal
behavior and common political maneuvering.88
The Fifth Circuit first adopted the principle in United States v. Brumley,89 in which it noted the
importance of federalism concerns for its holding.90 The defendant in Brumley had served on the
Texas Industrial Accident Board, which administered workers compensation claims in the state.91
He allegedly borrowed money from several lawyers who represented claimants whose claims
were to be resolved by the Board. The court held that “services must be owed under state law”
and that “the government must prove in a federal prosecution that they were in fact not
83 Id. at 883.
84 See, e.g., United States v. Gordon, 183 Fed.Appx. 202, 210 (3d Cir. 2006) (noting that the Third Circuit has
“specifically refused to limit the offense to situations in which a public official uses his or her office for personal
gain”).
85 United States v. Panarella, 277 F.3d 678, 691-92, 699 (3d Cir. 2002).
86 2009 WL 2750488, *10 (9th Cir. 2009) (“Evidence of private gain may bolster a showing of deceptive intent, but
such a showing could also rest heavily on evidence of harm and deceit.”).
87 Id.
88 See, e.g., United States v. Carbo, 572 F.3d 112, 118 (3d Cir. 2009) (“[T]he violation of state law is critical to
distinguishing between acceptable political deal-making and criminal deprivation of the public’s right to the honest
services of public officials—in other words, between normal politics and fraud.”).
89 116 F.3d 728 (5th Cir. 1997).
90 See Id. at 735 (“The federalism arguments that inform the definition of ‘honest services’ under federal criminal law
are powerful, and we acknowledge them in our holdings today.”).
91 Id. at 730-31.
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delivered.”92 It concluded that the defendant’s behavior violated a state statute which prohibited
“a public servant with judicial authority” from accepting “any benefit” from a person with an
interest in a matter before the public servant.93
The Fifth Circuit has reaffirmed the principle in later cases, most recently in several cases
involving former executives of Enron. In United States v. Skilling,94 defendant Jeffrey Skilling
argued that his actions did not breach his fiduciary duty to his employer, Enron, because he had
acted in Enron’s interest. The court rejected that argument, primarily because it appeared that no
one at Enron had approved measures taken by Skilling. Thus, it clarified that where an employer
did not sanction a fraudulent scheme, a defendant may be found to have violated a state law
fiduciary duty even if he purports to have acted in his employer’s best interest.95
Although it has declined to formally adopt it,96 the U.S. Court of Appeals for the Third Circuit has
also followed the state law limiting principle. In United States v. Panarella,97 a state senator had
allegedly failed to disclose compensation he had obtained from the owner of a tax collection
business. The Third Circuit concluded that “[s]tate law offers a better limiting principle for
purposes of determining when an official’s failure to disclose a conflict of interest amounts to
honest services fraud” than is offered by the private gain test or other alternatives.98 Applying the
principle, it upheld the conviction of an accessory to the senator’s crime, holding that the senator
had taken a discretionary action which he knew would directly benefit a financial interest that he
had concealed in violation of a state criminal law. In a subsequent case, the court clarified that the
violation of state law “does not require a violation of criminal law, but rather a violation of a
state-created fiduciary duty.”99
In a 2009 case, United States v Carbo,100 the Third Circuit considered what mental state is
required in connection with the violation of a state law. Like Panarella, the case involved a
failure to disclose a conflict of interest. However, in Carbo, the defendant was a third party, rather
than a public official or his accessory. Specifically, he was a business owner in Norristown,
Pennsylvania, who was charged with honest services fraud as a result of a scheme with the
borough administrator in which favors were allegedly provided in return for government
contracts. The administrator allegedly failed to disclose his interest in the business in violation of
state law.101 An issue on appeal was whether a knowledge requirement—i.e., a showing that a
defendant knew that a public official’s failure to disclose would violate state law—should be
92 Id. at 734.
93 Id. at 735-36.
94 554 F.3d. 529 (5th Cir. 2009).
95 Id. at 545-47.
96 See United States v. Carbo, 572 F.3d 112, 117 n. 4 (3d Cir. 2009) (stating that the court has so far viewed the
violation of state law as sufficient to support an honest services conviction but has not yet resolved the question of
whether such a violation is necessary).
97 277 F.3d 678 (3d Cir. 2002).
98 Id. at 692-93.
99 United States v. Gordon, 183 Fed.Appx. 202, 211 (2006) (emphasis in original).
100 572 F.3d 112 (3d Cir. 2009).
101 The administrator had purchased a truck, which he rented to local contractors, whom he had the authority to choose
for contracts with the borough. The administrator failed to disclose his income from the truck rental business on an
annual disclosure form required by the Pennsylvania Public Official and Employee Ethics Act, 65 Pa. Cons. Stat.
§ 1104(a), and he failed to disclose his interest in businesses proposing to contract with the borough and to recuse
himself from decisions regarding such contracts, as was required by the borough’s charter.
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applied in cases involving a third party defendant.102 The court adopted such a requirement, but it
construed it so as not to present an “insurmountable obstacle to prosecutors.”103 Specifically, the
court stated that “it is not necessary to demonstrate that the defendant knew the fine details of an
official’s reporting requirements.”104 It further clarified that “if the evidence is sufficient for a
reasonable jury to conclude that the defendant participated in a scheme to assist a public official
in hiding a conflict of interest, and that the defendant knew that the law forbade the official from
engaging in that form of undisclosed conflict of interest, a conviction for honest services mail
fraud should be upheld.”105
In United States v. Murphy,106 a 2003 case, the Third Circuit characterized a sister circuit’s
rejection of the state law limiting principle as an outlier approach and criticized it as having
“extend[ed] the mail fraud statute beyond any reasonable bounds.”107 However, since that time, a
majority of federal courts which have considered the issue have declined to adopt the principle.108
A notable example is the opinion by the U.S. Court of Appeals for the Ninth Circuit in
Weyhrauch,109 discussed infra.
In federal circuits in which the state law limiting principle has been rejected, some courts have
applied a “federal common law standard of good government” to determine whether a
defendant’s actions are covered by the statute.110 Even in such cases, however, the violation of
state law is often viewed as relevant evidence to establish that a defendant had the requisite intent
to deprive a government or employer of its right to an official or employee’s honest services. This
principle has been demonstrated most clearly in the context of conflict-of-interest cases. For
example, in United States v. Woodward,111 the U.S. Court of Appeals for the First Circuit held that
specific intent was demonstrated by the defendant’s failure to disclose a conflict of interest which
he was required by law to disclose.
It is unclear whether courts of appeals that have rejected the state law limiting principle in public
corruption cases might be willing to apply the principle in private sector honest services cases.112
Some federal courts have “crafted special requirements in the limited context of honest services
fraud in the private sector.”113
102 The court acknowledged that the issue had not arisen in Panarella because that case focused on the wrongdoing of a
public official, who was presumably aware of state disclosure requirements.
103 Carbo, 572 F.3d at 118.
104 Id.
105 Id.
106 323 F.3d 102 (3d Cir. 2003).
107 Id. at 104, 111 (characterizing the Second Circuit’s rejection of the state law limiting principle in United States v.
Margiotta, 688 F.2d 108 (2d Cir. 1982)).
108 See, e.g., United States v. Walker, 490 F.3d 1282, 1299 (11th Cir. 2007) (“an honest services mail fraud or mail
fraud conviction does not require proof of a state law violation”).
109 548 F.3d 1237 (9th Cir. 2008), cert. granted, 129 S. Ct. 2863 (2009).
110 See Michael K. Avery, Whose Rights? Why States Should Set the Parameters for Federal Honest Services Mail and
Wire Fraud Prosecutions, 49 B.C.L. Rev. 1431 (2008).
111 149 F.3d 46 (1st Cir. 1998).
112 See, e.g., Id. at 1245 n. 5 (“Although we reject the state law limiting principle in the context of honest services
prosecutions of public officials, we express no opinion on the role of state law in honest services fraud prosecutions in
the private context.”) (emphasis in original).
113 United States v. Sorich, 523 F.3d 702, 708 (7th Cir. 2008).
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Foreseeable Harm
Several federal circuit courts have adopted a “foreseeable harm” test to limit the scope of the
honest services provision.114 The U.S. Court of Appeals for the Sixth Circuit adopted the test in
United States v. Frost,115 a case involving a professors and graduate students at the University of
Tennessee who allegedly defrauded the University and government agencies in order to secure
government research contracts. It held that in order for a conviction on an honest services theory
to stand, “the prosecution must prove that the employee foresaw or reasonably should have
foreseen that his employer might suffer an economic harm as a result of [a] breach” of fiduciary
duty.116 In United States v. Vinyard,117 the U.S. Court of Appeals for the Fourth Circuit applied the
Sixth Circuit’s approach to a case involving two brothers who allegedly misrepresented their joint
venture’s relationship with one brother’s employer for the purpose of defrauding the employer.
Some courts have characterized the foreseeable harm test as an alternative to a “materiality” test,
which appears to be the same as or similar to the test for materiality applied in mail and wire
fraud cases generally.118 Both the Fourth and Sixth Circuits have asserted that the foreseeable
harm test is superior to the materiality test for two reasons: (1) its focus on a defendant’s mental
state ensures that only criminal behavior is included; and (2) it excludes what the Fourth Circuit
termed “trivial frauds”—i.e., infractions that are minor but nonetheless instigate a material
change in business practices—from the scope of the honest services fraud statute.119
Courts’ formulations of the foreseeable harm test have varied somewhat.120 However, the most
common approach appears to integrate the test within an examination of a defendant’s mental
state. A representative articulation requires “that the defendant was at least reckless as to the
likelihood that his breach of the duty of honest services would harm the party to whom the duty is
owed.”121
Although some judicial opinions suggest that the foreseeable harm test applies only in private
sector cases,122 some have suggested that the test be employed in all honest services cases.123 In
the private sector cases in which it has primarily been applied, the “harm” contemplated by the
test has generally been characterized as harm to economic or property interests.124 However,
114 See, e.g., United States v. Vinyard, 266 F.3d 320 (4th Cir. 2001), cert. denied, 536 U.S. 922 (2002) ; United States v.
Sun-Diamond Growers, 138 F.3d 961 (D.C. Cir. 1998).
115 125 F.3d 346 (6th Cir. 1997).
116 Id. at 368.
117 266 F.3d 320 (4th Cir. 2001), cert. denied, 536 U.S. 922 (2002).
118 See, e.g., United States v. Vinyard, 266 F.3d 320, 327 (4th Cir. 2001).
119 See Frost, 125 F.3d at 368-69; Vinyard, 266 F.3d at 328-29.
120 See Andrew B. Matheson, A Critique of United States v. Rybicki: Why Foreseeable Harm Should Be an Aspect of
the Mens Rea of Honest Services Fraud, 28 Am. J. Trial Advoc. 355 (2004-2005) (asserting that some courts have
employed a foreseeable harm test as part of a mens rea requirement, whereas others, by introducing an element of
“reasonableness” to the foreseeable harm requirement, appear to require foreseeable harm as an element of actus reus).
121 Id. at 357.
122 See, e.g., Vinyard, 266 F.3d at 327-328 (describing the foreseeable harm test as its approach “in the private
employment context”); United States v. Martin, 228 F.3d 1, 17 (1st Cir. 2000) (characterizing the foreseeable harm test
as a court-imposed limit on the honest services statute in cases involving alleged frauds by employees against their
employers).
123 See, e.g., Matheson, 28 Am. J. Trial Advoc. 355.
124 See, e.g., Defendants’ Petition for a Writ of Certiorari at 19, Black v. United States, No. 08-876 (Jan. 9, 2009)
(continued...)
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“property” in this context has been interpreted to include confidential information such as trade
secrets.125
Some of the courts of appeals have explicitly rejected the foreseeable harm test.126 Most notably,
the U.S. Court of Appeals for the Seventh Circuit joined this latter group in Black, discussed
infra.
Cases in Which the Supreme Court Has Granted
Certiorari
The U.S. Supreme Court will consider the honest services statute in two cases, Weyhrauch v.
United States127 and Black v. United States,128 in its 2009 term. In both of the lower court
decisions, federal courts of appeals explicitly rejected judicial standards created to limit the scope
of the honest services statute.
United States v. Weyhrauch
In United States v. Weyhrauch,129 the U.S. Court of Appeals for the Ninth Circuit declined to
adopt the state law limiting principle. The defendant was an Alaska state legislator who allegedly
failed to disclose a conflict of interest regarding his relationship with an oil company prior to his
vote on a bill addressing the taxation of oil production. At trial, federal prosecutors sought to
introduce legislative ethics publications which recommend that such conflicts be disclosed,
together with evidence suggesting that Alaskan legislators customarily disclose them. However,
there was no evidence that the defendant had violated any state statute. The question in the case
was whether a mail fraud conviction on an honest services theory required a showing that a
defendant’s actions violated state law. The court found that no evidence in the statutory text or the
legislative history indicated a congressional intent to limit the honest services statute to only those
cases that involve a breach of a state-law duty. It also emphasized that Congress has sufficient
constitutional authority to regulate and punish the use of mail and interstate wire communications
when they are used for fraudulent purposes and that the circuit had “never limited the reach of the
federal fraud statutes only to conduct that violates state law.”130
(...continued)
(“Nearly half of the federal courts of appeals that have addressed [the honest services statute] in the private sector
context have concluded that the statute requires proof that the defendant intended, or at least reasonably could have
foreseen, that the scheme would cause economic or property harm to the victim.”).
125 See Martin, 228 F.3d at 16 (requiring that “either some articulable harm must befall the [corporation or other entity]
as a result of the defendant’s activities, or some gainful use must be intended by the [employee]”).
126 See, e.g., United States v. Brown, 459 F.3d 509 (5th Cir. 2006); United States v. Welch, 327 F.3d 1081 (10th Cir.
2003).
127 129 S. Ct. 2863 (2009).
128 129 S. Ct. 2379 (2009).
129 548 F.3d 1237 (9th Cir. 2008), cert. granted, 129 S. Ct. 2863 (2009).
130 Id. at 1245.
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Deprivation of Honest Services as a Basis for Federal Mail or Wire Fraud
United States v. Black
In United States v. Black,131 the U.S. Court of Appeals for the Seventh Circuit rejected the
foreseeable harm test. The defendants were executives of a corporation which owned a large
number of newspapers. In connection with the corporation’s sale of various newspapers in
Canada, the defendants received substantial payments from several small newspapers, which they
purported had been negotiated in exchange for agreements by the defendants not to compete in
the newspapers’ markets within a given time frame. The payments were made to the defendants,
personally, rather than their corporation. There was a factual dispute regarding the extent to which
the corporation’s board had knowledge of this arrangement. The defendants argued that the board
had been aware of the deal and that the payments they received constituted legitimate
compensation for the do-not-compete agreements. In contrast, the government alleged that the do-
not-compete payments were actually management payments received without corporate approval.
The defendants urged the court to adopt the foreseeable harm test. They argued that their
convictions would fail under that test because they had arranged for the do-not-compete
agreements in order to take advantage of a favorable Canadian tax ruling rather than to harm their
employer corporation. However, the Seventh Circuit rejected the test, which it characterized as an
argument equivalent to “no harm, no foul.”132 Instead, the court applied the private gain test,
discussed supra. Thus, it focused on whether the defendants intended to reap a private gain by
fraudulent means. Affirming a jury instruction which relied on the private gain test, the court
upheld the defendants’ convictions.
Conclusion
By interpreting what has been called “[q]uite a potent federal prosecutorial tool,”133 the Supreme
Court’s upcoming decisions in Weyhrauch and Black are likely to have far-reaching impact
regarding the scope of federal prosecutorial jurisdiction in mail and wire fraud cases. It is possible
that the Court will adopt one of the approaches that were rejected by the courts of appeals in those
cases. Alternatively, the Court may adopt the view that requirements inherent in the mail and wire
fraud statutes provide a sufficient limitation to overcome vagueness problems, principles of
federalism, or other concerns which might otherwise call for a narrow statutory construction.
Finally, because one of the cases arises in the public corruption context whereas the other is a
private sector case, the decisions might also answer questions regarding differing applications of
various standards in the public and private contexts.
131 530 F.3d 596 (7th Cir. 2008), cert. granted, 129 S. Ct. 2379 (2009).
132 Id. at 600.
133 Sorich v. United States, 129 S. Ct. 1308 (2009) (Scalia, J., dissenting from the denial of certiorari).
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Author Contact Information
Anna C. Henning
Legislative Attorney
ahenning@crs.loc.gov, 7-4067
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