One argument rarely made for effective government ethics programs is that they will prevent government officials from being prosecuted for "honest services fraud."

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).

Here's the statutory definition of honest services fraud (18 U.S.C. § 1346, part of the mail and wire fraud statute [1]):

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.

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.

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.

In 1987, in McNally v. United States, [2]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.

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 Sorich v. United States [3]*, 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."

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.

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 an article on Browardbeat.com [4]. Here are some excerpts from his memo to county commissioners:

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.

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.

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.

For an excellent summary of honest services fraud law, although two years old, see an article [5] by Ian D. Lanoff and Mark C. Nielsen. Also see a recent article in the Wall Street [6]Journal [6], and an article from the San Diego Union-Tribune [7] (San Diego has been the site of many uses of the honest services fraud provision).

*Sorich v. U.S. 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 my blog entry [8].

Robert Wechsler
Director of Research, City Ethics

203-230-2548