RSSWhat Is Honest Services Fraud?
Honest services fraud is defined in United States Code Title 18 Section 1346 – also known as the federal mail and wire fraud statute – as “a scheme or artifice to deprive another of the intangible right of honest services.” It is a federal crime, and it is broadly applied across the United States.
However, there has been some contention as to how it is interpreted. Honest services are not defined by federal law, but have ranged from money to property to “intangible rights” given to the public. Though this law was originally meant to prosecute government corruption, alleged interference with hard-to-define “intangible rights” has been used to prosecute people in the private sector. At our L.A.-based law firm, we’ve contested allegations of this crime many times. Here are some facts:
What Are Intangible Rights?
Originally, you were denied your intangible rights when government officials did not function “openly and faithfully” in their service to their constituents. Now, most fiduciary, privileged, or employment relationships – in which any kind of breach would have been covered by tort law – are held to a similar standard. No money or property needs to change hands, and the attempt to deprive someone of honest services does not need to be successful. A breach of fiduciary duty, or a failure to disclose a conflict of interest, can now be charged as wire or mail fraud.
In 2010, the Supreme Court ruled in a case called Skilling vs. United States that this statute can be applied only to “bribery and kickback schemes,” not to “undisclosed self-dealing by a public official or private employee.” Though this helped narrow down the letter of the law, many people are still being charged with a vague offense that is left up to the courts to define.
Proving Honest Services Fraud
Since honest services fraud is an extension of the mail fraud and wire fraud statute, it is prosecuted similarly. To find someone guilty of this crime, the prosecutor must prove:
- There was a scheme or artifice in place intending to defraud others.
- It was meant to deny them “the intangible right of honest services.”
- It was reasonably foreseeable that the scheme or artifice could cause more than de minimis monetary harm to the victim or victims, even if it did not.
- The scheme or artifice used the mails or wires.
The court has the discretion to decide what “honest services” are in each instance. And since there are no hard and set rules, an experienced criminal defense attorney can be priceless to those accused of honest services fraud.
Penalties for Honest Services Fraud
Honest services fraud is a felony. It carries a maximum penalty of up to 20 years in state or federal prison and a fine of up to $250,000 for individuals, along with three years of supervised release. (In cases involving financial institutions, the maximum is 30 years.) Each mail or wire transaction related to the fraud is a separate offense. Also, the Federal Sentencing Guidelines allow for higher sentencing calculations for those convicted of honest services fraud, as opposed to those convicted of traditional mail fraud. For this reason, prosecutors choose to charge honest services mail fraud more often.
How Does the College Admission Scandal Tie In?
Federal prosecutors charged all 50 people involved in the recent college admissions bribery scheme with honest services mail fraud – 33 of them parents, not administrative or other officials. In general, one can only be charged with honest services fraud “where a fiduciary duty exists” to another, though what qualifies as a “fiduciary duty” is rather vague. Sometimes, state law can be used to impose a fiduciary duty for the purposes of an honest services fraud charge.
Regardless, the defendants also face felony conspiracy to commit mail fraud charges and (for those who refused to plead guilty) felony conspiracy to commit money laundering charges – serious allegations that could add another 20 years to their sentences, if they’re convicted.
For a federal crime, you need a federal defense lawyer. Werksman Jackson & Quinn LLP is a top-rated white-collar criminal defense firm located in the heart of Los Angeles. We offer a free initial consultation to meet you and get to know your case. Call (213) 688-0460 to set up and appointment today.