Telling Local Government Officials About Honest Services Fraud
One argument rarely made for effective government ethics programs is
that they will prevent government officials from being prosecuted for
"honest services fraud."<br>
<br>
Honest services fraud is to bribery what manslaughter is to murder.
Sort of. By this I mean that many officials accused of bribery plead
down to honest services fraud, a lesser, but still serious crime (the maximum sentence is 20 years).<br>
<br>
Here's the statutory definition of honest services fraud (18 U.S.C.
§ 1346, part of <a href="http://www4.law.cornell.edu/uscode/18/usc_sup_01_18_10_I_20_63.html" target="”_blank”">the mail and wire fraud statute</a>):
<ul>For the
purposes of this chapter, the term
'scheme or artifice to defraud' includes a scheme or artifice to
deprive another of the intangible right of honest services.
</ul>
Fraud is depriving someone of something by lying. That something was
originally limited to tangible things, especially money and property.
Honest services fraud extended, originally through court decisions,
what could be deprived to intangible
things.<br>
<br>
The creation of honest services fraud recognized that
government officials have fiduciary duties to citizens, and that
citizens have a right to their honest services fulfilling these duties.
Thus, lying on financial disclosure forms can lead to honest services
fraud, as can the failure to disclose a conflict. At the center of each
honest services fraud case, as varied as they are, is a lie or a
secret, and usually personal, although not necessarily financial, gain.<br>
<br>
In 1987, in <a href="http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=483&invol…; target="”_blank”">McNally
v. United States, </a>483 U.S. 350, the Supreme Court overruled prior
decisions on intangible rights fraud. The next year Congress brought it
back in statutory form, and it has continued to be an important way to
prosecute government corruption at every level.<br>
<br>
Honest services fraud is controversial for the vagueness of the
statutory language and the many ways it has been applied in different
jurisdictions. Most recently (last week, to be exact), in a dissent
from denial of certiorari in <a href="http://www.supremecourtus.gov/opinions/08pdf/08-410.pdf" target="”_blank”">Sorich
v. United States</a>*, Justice Scalia wanted the court to take the case
in order to place limits on the interpretation of the statute. He wrote
about "the prospect of federal prosecutors’ (or federal courts’)
creating ethics codes and setting disclosure requirements for local and
state officials. Is it the role of the Federal Government to define the
fiduciary duties that a town alderman or school board trustee owes to
his constituents?" And he called the statutory provision "nothing more
than an invitation for federal courts to develop a common-law crime of
unethical conduct."<br>
<br>
Although local government ethics practitioners don't deal directly with
this statute, it is important to know about and understand. It is
especially important to let local government officials know that one
other reason they should disclose and deal responsibly with all their
possible conflicts of interest is that they could be prosecuted by the
local U.S. Attorney. It's also another reason why ethics training and
clear ethics guidelines are important.<br>
<br>
Local government officials need to realize that ethics isn't so much
about catching them, as about protecting them, and prosecution for
honest services fraud is definitely something they will want to be
protected from. The Broward County (FL) Attorney tried to do this just
this week, according to <a href="http://www.browardbeat.com/broward-commissioners-warned-to-be-honest/&q…; target="”_blank”">an
article on Browardbeat.com</a>. Here are some excerpts from his memo to
county commissioners:
<ul>The U. S. Attorney’s Office is now using
this statute, and
particularly [the honest services fraud] provision, to criminally
charge and prosecute local public officials for ethical offenses,
including conflict of interest. .... As construed in recent cases, when
a political official uses
his/her office for personal gain, he or she deprives his/her
constituents of their right to have him/her perform his/her officials
duties in their best interest.
</ul>
The county attorney warned commissioners that the “statute is
extremely broad.”
He wrote that commissioners who have an undisclosed conflict
of
interest violate the law “regardless of how that intent manifests
itself.” Prosecution only requires that “the defendant knowingly
participated
in a scheme to defraud” and used the mail, wires or a private
commercial carrier to further the scheme.<br>
<p>
Unfortunately, the Broward County attorney waited until a
full-fledged scandal was underway. This sort of warning should be given
to local government officials before it is too late. It can't be
emphasized too much that government ethics provides guidelines that
help prevent officials getting into trouble. Telling them about the
honest services fraud provision is yet another guideline, and one that
might scare some officials on the fence into jumping back down onto the
ethical side.<br>
</p>
<p>For an excellent summary of honest services fraud law, although two
years old, see <a href="http://www.groom.com/media/publication/93_NAPPAArticle-Feb2006.pdf" target="”_blank”">an
article</a> by Ian D. Lanoff and Mark C. Nielsen. Also see <a href="http://online.wsj.com/article/SB123379864724350423.html" target="”_blank”">a
recent article in the Wall Street </a><span><a href="http://online.wsj.com/article/SB123379864724350423.html" target="”_blank”">Journal</a>,</span>
and <a href="http://www.signonsandiego.com/uniontrib/20060112/news_1n12compare.html&…; target="”_blank”">an
article from the San Diego <i>Union-Tribune</i></a>
(San Diego has been the site of many uses of the honest services fraud
provision).
</p>
<small>*<i>Sorich v. U.S</i>. is a
case where Chicago employees were found to have engaged in
fraudulent political-patronage hiring for local civil-service jobs. For more on
the situation that led to the case see <a href="http://www.cityethics.org/node/117" target="”_blank”">my blog entry</a>.</small><br>
<br>
Robert Wechsler<br>
Director of Research-Retired, City Ethics<br>
<br>
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