Monday, December 7, 2009

Honest Services Day - Preview

The media and blogs have been buzzing for the last few days, all discussing the big oral arguments of today.  For at long last, the Supreme Court will examine the "honest services" statute (18 U.S.C. 1346), a statute that claims itself to be a definition statute for use with many of the fraud statutes.  Defendants in mail and wire fraud cases have long argued issues of vagueness with respect to the statute that allows for prosecutions for a deprivation of an intangible right to honest services. 

Up today for discussion is the Conrad Black case  (for background see here) and the Bruce Weyhrauch case (for background see here).  The Court will look at whether section 1346 requires that the defendants ‚Äúreasonably contemplated identifiable economic harm" and "whether to convict a state official for depriving the public of its right to the defendant's honest services through the non-disclosure of material information, in violation of the mail-fraud statute (18 U.S.C. Sec. 1341 and 1346), the government must prove that the defendant violated a disclosure duty imposed by state law."  And in the backdrop we have Justice Scalia's pronouncement that the "28 words" in the statute had "been invoked to impose criminal penalties upon a staggeringly broad swath of behaviour, including misconduct not only by public officials and employees but also by private employees and corporate fiduciaries." He makes it clear that "it seems to [him] quite irresponsible to let the current chaos prevail."  (See discussion of Sorich here) On the government side, will likely be arguments on the necessity of having a "stopgap device" in the statutes to criminalize conduct prior to Congress acting. (Maze)

This is not the first time that the Court will examine "intangible rights."  It's 1987 decision in McNally tossed out cases that failed to be premised on "money or property" a requirement of the mail fraud statute according to the Court.  Congress came back in response to the McNally decision with section 1346, the statute now under review in these two cases and also in the forthcoming Skilling case.

The issue raises an interesting question of how specific a statute needs to be. In 1999, I wrote an article titled Criminal Fraud that emphasized the need to have fraud statutes that clearly outlined the criminal conduct. On the other hand, in an essay a year later, Do We Need A Beanie Baby Fraud Statute, I noted how there are limits to how much specificity should be required for a fraud statute. The line between letting the public know what is criminal and yet also allowing the government some leeway is at stake here. But that said, my own bias is that the existing statute - 1346 -  allows for absurd applications.  The net result is that prosecutors have greater power to pick and choose who they want to prosecute and for what acts.  The absurd example I use is whether a potential President could be prosecuted for saying "read my lips, no new taxes" and then raising taxes (see here) - of course using the mails or wires in disseminating the political message.  Will every dishonesty, or statement later found to be untrue, be the subject of criminal conduct?  And if intent can be inferred from the circumstances, will it allow for absurd examples such as this one to be the subject of a prosecution? Will  prosecutors have the power to decide what is and is not subject to criminal charges?  And how best to balance the three branches of government in stopping criminal conduct. (see here) Stay tuned for a discussion of the Court arguments.


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