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Congress Resuscitating Honest Services Fraud

| August 29, 2011

Since its inception in 1988, the honest services fraud statute has faced boisterous criticism.  The statute was designed to criminalize corruption of public officials, but it has been abused by prosecutors to press charges against unpopular public figures.  The statute is extremely vague, and it has been stretched to cover a number of activities that are not necessarily blameworthy.

Last year, the U.S. Supreme Court stepped in and limited the scope of the honest services fraud statute to criminalize only bribes and kickbacks in Skilling v. United States.  Justice Ginsburg wrote for the majority, “to satisfy due process, a penal statute [must] define the criminal offense [1] with sufficient definiteness that ordinary people can understand what conduct is prohibited and [2] in a manner that does not encourage arbitrary and discriminatory enforcement.”

The Wall Street Journal warns, however, that honest services fraud may not be done yet.  Congress has taken it upon itself to remedy the Court’s “mistake,” and it has introduced a total of three new bills in the House and Senate designed to resuscitate “Honest Services.”  Several of the suggested “fixes” will almost certainly violate the Skilling vagueness test, criminalizing an unknown behavior called “self-dealing.”

Even worse, in order to fill the honest services fraud void, federal prosecutors are stretching other similar statutes to recriminalize the same behavior.  For example, the Justice Department has doubled its enforcement of the Foreign Corrupt Practices Act in the last year, and it now considers a “foreign official” to be essentially every foreign citizen.

Not only do vague laws breed uncertainty amongst governing officials and invite expensive legislation, but they often fail to stop the targeted behavior.  Governmental corruption is a problem, but overreaching laws are not the way to stop it.

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