Thursday, December 10, 2009

Without Honest Services, the Government Will Live

The WSJ Blog asks - "If Honest-Services Law is Struck, Will an "Earthquake Ensue?" During the hearing on Mortgage Fraud, Securities Fraud, and the Financial Meltdown: Prosecuting Those Responsible, Assistant AG Lanny Breuer, in response to a question, talked about the importance of having a statute such as the honest services statute. (see here

But is it really necessary? And will it really hurt the government's ability to prosecute criminal cases if the Supreme Court decides otherwise?

After the Supreme Court in McNally struck down "intangible rights," some convictions needed to be re-evaluated - most noteworthy here were cases from Chicago's Operation Greylord. From the defense side there was a growth of the Writ of Corum Nobis to assist those who had been convicted and finished their sentences. And yes, some convictions were overturned.

What happened from the government side post-McNally, was that cases being brought that included "money or property" for the mail or wire fraud charge survived the Supreme Court decision. Most interesting after McNally was the fact that the Supreme Court came back on its heels and issued the Carpenter case, a case that expanded property to include "intangible property."  This provided a new avenue for government prosecutions.  The government was not put out of business by the Supreme Court decision in McNally as they could still bring mail and wire fraud cases alleging a deprivation of money or property.  But even here, the government pushed the envelope, such as trying to include regulatory licenses as property.  The Supreme Court saw otherwise. (Cleveland

The government was given a second chance with the passage of section 1346 on intangible rights to honest services. But they pushed the envelope, over-used the statute, and now we all wonder whether the Court will react by eliminating the definition statute. After all, the 28 words in the statute leave many wondering what is criminal and what is not. 

But to answer the WSJ Blog's question, one needs to examine the cases that have been brought under 1346. The question that really needs to be considered is whether these cases could still have been brought.  Clearly if there was a false statement or bribery, other federal statutes allow for the prosecution.  Likewise, if there was a money or property deprivation, then the prosecution could proceed with mail or wire fraud.   

The bottom line is that the arsenal of federal statutes remains strong (perhaps too strong with enormous overlapping crimes and disorganization in the federal code).  Yes, removing honest services may make it more difficult for the prosecution to proceed in some cases. (for background see here) But what is important is that people understand that the conduct they are committing is a violation of law and subject to criminal penalties.  In the white collar world, this realization can often suffice to avoid the commission of the wrongful act as people are not inclined to do something criminal if they know the act is subject to a prison term.  And this certainly will cost us all a lot less time and money then having a statute that people have no clue as to what it includes and what is excludes.

(esp) 

http://lawprofessors.typepad.com/whitecollarcrime_blog/2009/12/honest-services.html

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