Public Corruption and the Limits of Federal Fraud Statutes

Public Corruption and the Limits of Federal Fraud Statutes

Public Corruption and the Limits of Federal Fraud Statutes

Updated January 9, 2026 (LSB11025)

Over time, Congress has shown interest in policing public-sector corruption, enacting a number of criminal provisions aimed at holding corrupt officials and those who entice them accountable for their actions under federal law. Federal prosecutors' most potent existing tools for combating such corruption include the federal mail and wire fraud statutes and a provision defining those crimes as including so-called "honest services" fraud. This Sidebar provides an overview of the federal mail and wire fraud statutes and the development and codification of the "honest services" theory of fraud; surveys some of the major Supreme Court decisions addressing the reach of those statutes; and explores some considerations for Congress.

In summary, the mail and wire fraud statutes have been a source of contention between the courts and Congress for years. While Congress has passed broadly worded legislation to cover the self-interested actions of federal, state, and local officials, among others, the Supreme Court has adopted narrow interpretations of the statutes in several cases, at times signaling that broad constructions could raise constitutional concerns about vagueness or federalism.

This trend continued in two cases the Supreme Court decided in May 2023—Ciminelli v. United States and Percoco v. United States—but appeared to reach a limit with the Court's 2025 decision in Kousisis v. United States. In Ciminelli and Percoco, the Court reversed two wire-fraud convictions: Ciminelli involved bid-rigging to obtain state-funded development projects, and Percoco involved bribery to assist a real-estate development company in its dealings with a state agency. The Court in both cases rejected statutory interpretations used by the lower courts that it viewed as "too vague" or as "vastly expand[ing] federal jurisdiction" to "an almost limitless variety of deceptive actions traditionally left to state . . . law." By contrast, the Court upheld wire fraud convictions based on false statements made in connection with bids for state contracts in Kousisis, potentially signaling a path to obtaining fraud convictions that Ciminelli seemed to have left in doubt.

Overview of Mail and Wire Fraud Statutes

18 U.S.C. § 1341 prohibits use of the mails (including the United States Postal Service and "any private or commercial interstate carrier") for the purpose of executing "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." 18 U.S.C. § 1343 likewise prohibits transmissions "by means of wire, radio, or television communication in interstate or foreign commerce" for the purpose of executing such schemes or artifices. These federal crimes, commonly known as "mail fraud" and "wire fraud," encompass multiple forms of fraudulent conduct using jurisdictional hooks that reach practically all forms of modern communication. Because the two statutes essentially mirror each other (save for the medium used in connection with the offense), interpretations and analyses of one statute will typically apply to the other. As discussed in more detail below, 18 U.S.C. § 1346 establishes that the phrase "scheme or artifice to defraud" as used in the two statutes "includes a scheme or artifice to deprive another of the intangible right of honest services."

To secure a mail or wire fraud conviction, the government must prove beyond a reasonable doubt the following elements: (1) a scheme to defraud; (2) foreseeable use of the mail, a private commercial carrier, or a wire or radio communication in furtherance of said scheme; and (3) intent to defraud another of (4) money, property, or honest services. A scheme to defraud generally encompasses conduct reasonably calculated to deceive. The Supreme Court has established that the deception contemplated by a scheme to defraud must be "material," meaning that the misrepresentation or concealment at issue must have "a natural tendency to influence, or [be] capable of influencing," the person "to [whom] it was addressed." The second element—foreseeable use of the mail or wire communication, among other things—potentially covers the use of most modern forms of remote communication when used "in furtherance of" the fraudulent scheme, that is, as "part of the execution of the scheme as conceived by the perpetrator at the time." The government must also prove that the defendant in a mail or wire fraud prosecution had the intent to defraud, described by one court as "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."

Finally, a scheme to defraud in violation of the mail or wire fraud statutes must have as its object money, property, or "honest services." These aspects of the statutes have been frequently litigated, and the subject of several notable Supreme Court decisions, over the past 25 years.

Money or Property

Sections 1341 and 1343 speak of schemes "for obtaining money or property." A straightforward example of covered fraud is filing an insurance claim for a car accident that never happened in order to obtain a payout from the insurance company. In addition to money and tangible property, the statutes also apply to intangible interests, such as confidential business information, that have "long been recognized as property." If an interest lacks value in the hands of the ostensible victim, however, it is not protected by the statutes as "property." For instance, the Supreme Court held in Kelly v. United States that "the regulatory rights of allocation, exclusion, and control" are not property interests of the government for purposes of the wire fraud statute, as they implicate the government's "role as sovereign wielding traditional police powers—not its role as property holder."

Honest Services

Although the text and legislative history of the mail and wire fraud statutes arguably suggest that Congress initially contemplated only frauds involving money or property, lower federal courts up to 1987 had interpreted the statutes also to cover deprivations of some intangible, nonproperty rights. "Most" of these cases involved public officials who "made governmental decisions with the objective of benefitting themselves or promoting their own interests, instead of fulfilling their legal commitment to provide the citizens of the State or local government with their loyal service and honest government." Regardless of whether the betrayed party (the citizenry) was or would be financially harmed, under this theory, the violation lay in the deprivation of that party's intangible right to the official's "honest services." Some courts also applied the statutes to deprivations of other intangible rights like the right to privacy and the right to honest elections.

In 1987, in McNally v. United States, the Supreme Court halted these applications of the statutes, concluding that the mail fraud statute was "limited in scope to the protection of property rights." In the Court's view, a broader reading would "leave [the statute's] outer boundaries ambiguous and involve[] the Federal Government in setting standards of disclosure and good government for local and state officials." Ultimately, the Court in McNally declined to adopt a reading of the mail fraud statute that would risk these results absent a decision by Congress to "speak more clearly than it has."

Within a short time, Congress had accepted the Court's invitation to speak by passing legislation, now codified at 18 U.S.C. § 1346, which clarified that "the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services." Following the enactment of 18 U.S.C. § 1346, the lower federal courts continued to apply the mail and wire fraud statutes to a range of fraudulent conduct on the part of both public officials and private parties implicating the deprivation of an intangible right of honest services. Typical cases involved "either bribery . . . or [the] failure to disclose a conflict of interest, resulting in personal gain."

Once again, however, the Supreme Court stepped in to limit the scope of the mail and wire fraud statutes based on concerns about vagueness. In United States v. Skilling, the Court held that honest services mail or wire fraud must involve "offenders who, in violation of a fiduciary duty, participate[] in bribery or kickback schemes." The Court expressly rejected applications of the wire fraud statute to broader forms of dishonest conduct like undisclosed self-dealing, which the Court worried would "encounter a vagueness shoal."

Following Skilling, caselaw developments regarding honest services fraud have primarily centered on fleshing out the scope of the terms "bribery" and "kickbacks," as well as the source and scope of requisite fiduciary duties. For instance, the Supreme Court in a 2016 case applied a narrow definition of bribery requiring some "formal exercise of governmental power" in exchange for remuneration. Additionally, in response to the Court's limiting constructions, some federal prosecutors have appeared to reframe cases that might previously have been brought on an honest services theory as traditional "money or property" wire fraud, aided by lower-court decisions recognizing intangible property interests based on things like a right to control one's assets.

Ciminelli and Percoco

On May 11, 2023, the Supreme Court issued two opinions stemming from federal corruption prosecutions in New York State. One of the cases—Ciminelli v. United States—involved the wire fraud conviction of a developer named Louis Ciminelli in connection with a $750 million state-funded project in Buffalo. Ciminelli's company had obtained the contract through a bid process rigged to "effectively guarant[ee]" that it would have "priority status to negotiate for specific projects." Two associates of the then-Governor of New York engineered the process. One of them had been paid by Ciminelli's company to help it obtain state-funded projects. The other served on the board of directors of the nonprofit tasked with negotiating with developers for the Buffalo project. Federal prosecutors charged Ciminelli with wire fraud and relied on the Second Circuit's "right to control" theory, under which "the Government can establish wire fraud by showing that the defendant schemed to deprive a victim of potentially valuable economic information necessary to make discretionary economic decisions." Prosecutors argued that Ciminelli was guilty of wire fraud if the scheme he participated in deprived the nonprofit of information relevant to its selection of contractors for the projects it administered for the state. A jury convicted Ciminelli.

Ciminelli challenged the right to control theory on appeal. In a unanimous opinion authored by Justice Thomas, the Supreme Court rejected the "right to control" theory as irreconcilable with the text of the wire and mail fraud statutes. According to the Court, those statutes are limited to "traditional property interests" and the "so-called 'right to control'" is not one of them. The Court held that "[b]ecause 'potentially valuable economic information' 'necessary to make discretionary economic decisions' is not a traditional property interest . . . the right-to-control theory is not a valid basis" for wire fraud liability. The Ciminelli Court further emphasized that a broad reading of the wire fraud statute encompassing a right to control as a protected property interest could criminalize "almost any deceptive act," and would "criminalize[] traditionally civil matters and federalize[] traditionally state matters."

In the other decision, Percoco v. United States, the Supreme Court examined "whether a private citizen with influence over government decision-making" can be convicted of wire fraud on an honest-services theory. The defendant in the case, Joseph Percoco, was a high-ranking gubernatorial aide except for a brief period when he resigned his official position to manage the Governor's reelection campaign. During that hiatus, Percoco accepted payments from a real-estate company to use his influence with state officials to help it avoid a labor requirement imposed by a state agency. The agency dropped the requirement soon after one of its senior officials received a call from Percoco "mere days" before he was scheduled to return to his job in the Governor's office. Relying on Second Circuit precedent, the trial judge instructed the jury that during his time as a private citizen, Percoco still "owed a duty of honest services to the public if (1) he 'dominated and controlled any governmental business' and (2) 'people working in the government actually relied on him because of a special relationship he had with the government.'" The jury convicted Percoco.

In an opinion authored by Justice Alito, the Court rejected this standard for honest-services fraud on vagueness grounds, expressing concern that it could be used to "charge particularly well-connected and effective lobbyists." According to the Court, the Second Circuit standard would have implied a public right to "'disinterested service' from lobbyists and political party officials . . . whenever such persons' clout exceeds some ill-defined threshold." Nevertheless, the Court recognized that individuals "nominally outside public employment" may sometimes owe a duty of honest services to the public—particularly if they "enter into agreements that make them actual agents of the government." In a concurring opinion, Justice Gorsuch (joined by Justice Thomas) argued that no jury instructions could have resolved the vagueness issue, writing that "to this day, no one knows what 'honest-services fraud' encompasses." Justice Gorsuch called on Congress to clarify the honest-services statute's scope.

Kousisis

As described in a separate Legal Sidebar, Kousisis involved alleged fraud in connection with bids for two government contracts for painting projects in Philadelphia. Kousisis and his construction company were charged with wire fraud, among other things, for submitting bids for the contracts that falsely represented the role a third party would play in the projects. After winning the contracts, Kousisis's company completed the painting projects in a satisfactory manner, and none of the state agencies involved suffered an economic loss. Nevertheless, prosecutors alleged that by falsely certifying that painting supplies would be acquired from a certain third party, as required by federal regulations, when that third party actually acted only as a "pass-through" for a different supplier, Kousisis and his company had fraudulently induced the state to award them the contracts and thus violated the wire fraud statute.

The Supreme Court granted certiorari in Kousisis to determine whether the absence of any net pecuniary loss required acquittal on the wire fraud charges. At first blush, the theory of liability in Kousisis appeared similar to one the Court had previously rejected in Ciminelli—i.e., that depriving a party to a commercial transaction "of information necessary to make discretionary economic decisions" could violate the wire fraud statute by defrauding the party of the "right to control its assets." In a 9-0 decision, however, the Court upheld the convictions in Kousisis, concluding that nothing in the text of 18 U.S.C. § 1343 provided a basis for an economic loss requirement. With respect to Ciminelli, the Court rejected the defendants' arguments that the fraudulent inducement theory was a mere repackaging of the right-to-control theory from that case. According to the Court, "[u]nlike the right-to-control theory, fraudulent inducement does not treat 'mere information as the protected interest.' Rather, it protects money and property. And nothing we said in Ciminelli is at odds with our holding here." Additionally, the Court dismissed concerns that the absence of an economic-loss requirement could make the fraud statutes applicable to a wide range of relatively benign deceptions, observing that the statutes' "demanding materiality requirement" would help courts continue to distinguish "everyday misstatements from actionable fraud."

Considerations for Congress

Some commentators have lamented what they view as the Supreme Court's blunting of a previously sharp weapon to combat public corruption through decisions limiting the statutes' reach, arguing that the Court's decisions have placed too little weight on "the interests of citizens in honest government" and urging Congress to find a legislative fix. Other observers, however, have suggested that the deleterious impact of some of the Court's decisions is overstated, pointing out that federal prosecutors still have multiple legal means to combat corruption in the public sphere. Indeed, as the Court's recent decision in Kousisis reflects, the "undeniably broad" language of the mail and wire fraud statutes may leave room for some theories of liability that overlap with theories the Court previously rejected, provided the activities at issue in the prosecutions are framed in a way that centers on the money or property interests at stake.

In any event, should Congress revisit and reconsider the scope of mail and wire fraud, understanding the vagueness and federalism concerns that have animated limiting constructions of the statutes may help prevent further judicial limitations. One place to start could be the questions that the Skilling Court identified as relevant to "the enterprise of criminalizing undisclosed self-dealing." These questions include (1) how "direct or significant" a conflicting financial interest must be; (2) the extent to which an "official" act or action must further the conflicting financial interest in order to constitute fraud; and (3) to whom a disclosure must be made, and what information it must contain, for a conflicted official to avoid criminal liability.