The Ultimate Prosecutorial Weapon: Honest Services Fraud

As one who has studied and written on federal criminal law for the past seven years, I have concluded that the ultimate goal for federal prosecutors is to be able to target anyone and charge him or her with a crime. I hardly am exaggerating, as the following article from Slate demonstrates:

At the federal prosecutor's office in the Southern District of New York, the staff, over beer and pretzels, used to play a darkly humorous game. Junior and senior prosecutors would sit around, and someone would name a random celebrity – say, Mother Theresa or John Lennon.

It would then be up to the junior prosecutors to figure out a plausible crime for which to indict him or her. The crimes were not usually rape, murder, or other crimes you'd see on Law & Order but rather the incredibly broad yet obscure crimes that populate the U.S. Code like a kind of jurisprudential minefield: Crimes like "false statements" (a felony, up to five years), "obstructing the mails" (five years), or "false pretenses on the high seas" (also five years). The trick and the skill lay in finding the more obscure offenses that fit the character of the celebrity and carried the toughest sentences. The result, however, was inevitable: "prison time."

Today, they have the weapons to do the preceding with ease, and the weapons are so powerful that I can guarantee that everyone reading this article is a felon. That’s right; you, too, are a criminal and if a federal prosecutor targets you, then you are going to prison.

You might not have robbed a bank or stolen anything, or engaged in any of the 10,000 "crimes" that federal prosecutors have in their buffet line, but I can guarantee that you are "guilty" of "honest services fraud." Have you ever taken a longer lunch break than what you are supposed to do? Have you ever made a personal phone call at work or done personal business on your employer’s computer? Have you ever had a contract dispute with an employer or a client? All of those things can be criminalized by an enterprising federal prosecutor.

If you are an attorney and have signed forms even though you have not read every word in them (for example, the standard closing documents for real estate), then you have committed "honest services fraud." The list goes on and on, but most likely by now you have the picture: you are guilty even if you never are placed in the dock in federal criminal court.

As one person intimately familiar with these kinds of prosecutions told me, "This is better than RICO," and the RICO statutes have proven to be one of the ultimate weapons used by federal prosecutors. Just the threat of invoking RICO can make even tough defendants turn into pliable putty ready to plead out instead of going to trial. Just ask Michael Vick.

Jeffrey Skilling right now is serving more than 20 years in prison, as the former Enron CEO was convicted of "honest services fraud." Former Illinois Governor Rod Blagojevich is under indictment for the "crime," and the feds currently are investigating the archdiocese under Catholic Bishop Roger Mahony to see if they can secure indictments under this statute. From former college basketball coaches to politicians, "honest services fraud" has become the ultimate prosecutorial weapon, and prosecutors are quick to declare their support for it. According to the Wall Street Journal:

…prosecutors love it. Patricia Pileggi, a former prosecutor who has brought honest-services fraud cases, says "since you don't have to prove loss of money, the statute is easier for prosecutors to use" than extortion or bribery statutes.

In fact, this particular law, first passed by Congress as an amendment to a wire and mail-fraud statute in 1988, allows federal prosecutor to do what prosecutors always have dreamed of doing: circumvent Constitutional protections against the accused by both creating what essentially are bills of attainder and ex post facto law. Let me explain.

First, and most important, the law itself is vague. According to the statute, Congress has criminalized "a scheme or artifice to deprive another of the intangible right of honest services," but how does one define "honest services"? And who is deprived?

Those questions are answered by prosecutors seeking indictments and convictions, and it is they who decide what is "criminal" and what is not. Although the question of guilt ultimately is supposed to be left to a jury, the very presence of such broadly-interpreted criminal laws with draconian penalties of 20 years or more in prison will lead many innocent people to plead out to something because the risk of going to trial is too great. Because federal prosecutors see their job as being a "hammer" and they see everyone else as a "nail," it is clear that the loose and vague language in the statute involving an "intangible right" to services of others is an open-ended invitation for prosecutors to craft charges around whatever alleged act they wish to criminalize, even if the act itself is legal. This is the very essence of a bill of attainder.

Second, because all-too-often an act is interpreted as being "criminal" after the fact, in essence, prosecutors are able to go back to an act that everyone believed to be legal and effectively apply a criminal statute to it. This is the essence of ex post facto law, which is unconstitutional. In a remarkable joint move by two ideologically-opposing groups, the Heritage Foundation and the National Association of Criminal Defense Lawyers wrote in a February 11, 2009, letter to Congress that this law creates "a charter of authority for courts to decide, retroactively, what forms of unfair or questionable conduct in commercial, public and even private life should be deemed criminal."

There is another huge problem with this law (if we can dignify it as such by even calling it "law"): its vagueness and broad interpretation permits federal prosecutors to engage in tyrannical selective prosecution. When a law is so broad that nearly everyone who provides any services has broken it, then prosecutors are able to target people who might be politically unpopular.

For example, despite the fact that Jeffrey Skilling did not break the law by putting some of Enron’s assets in "special purpose entities," which were included in the company’s financial statements, nonetheless prosecutors were able to convince jurors that his actions were criminally fraudulent. Although Victoria Sprouse was not charged with "honest services fraud" when she recently was railroaded in federal court, nonetheless federal prosecutor Matt Martens told the jury that because she had admitted to not reading every word in every by-the-numbers legal document she signed, she had committed "honest services fraud."

Now, if someone like Martens wanted to launch prosecutions against professional people for not reading documents they sign, why is he not bringing criminal charges against members of Congress, who rarely read bills that either they approve or vote down? For example, John Conyers, D-Michigan, recently caused a stir when he admitted that he did not read bills before him. So, here is a lawmaker openly admitting that he does not read legislation, and he hardly is alone. (Few, if any, members of Congress read the Patriot Act or the Sarbanes-Oxley Act before approving them overwhelmingly.)

There is no substantive difference between what Martens deemed as "fraud" with Victoria Sprouse and what the nation’s elected representatives do every day they are in session. In fact, one could argue that at least Sprouse knew the substance of the documents before she signed; many senators and representatives cannot tell their constituents the content of the legislation before them. Yet, Sprouse is going to prison and members of Congress do not have to worry about prosecution (at least for violating that statute).

Journalist Gary S. Chafetz recently wrote about "honest services fraud," pointing out that even the language of the law itself is a fraud:

One of the cardinal rules of a grade-school vocabulary test is this: the word that the student must define cannot be used in its definition. However, honest-services fraud – "a scheme or artifice to deprive another of the intangible right of honest services" – is a term that no one seems able to define without using "honest-services" in its definition. Which a priori implies that because it cannot be defined, it is unconstitutionally vague.

This horrible law is 20 years old and only now is the U.S. Supreme Court even beginning to look seriously at it. The court has agreed to hear the appeal of recently-convicted media figure Conrad Black who is in prison after a federal jury convicted him of "honest services fraud." Unfortunately, I doubt the High Court will do anything to upset federal prosecutors, who pretty much own the federal "justice" (sic) system, lock, stock and barrel.

The Merriam-Webster Online Dictionary defines "tyranny" as "oppressive power exerted by government." Indeed, I cannot think of a better example of modern tyranny in the United States than the presence of a law that literally makes everyone a criminal. In the old U.S.S.R., the average citizen committed about three felonies a day, and American politicians condemned the Soviets for being oppressive and dictatorial. It seems that the U.S. Government has done the U.S.S.R. one better in that U.S. citizens now are felons all of the time.