Honest services fraud

Honest services fraud is a crime defined in 18 U.S.C. § 1346 (the federal mail and wire fraud statute), added by the United States Congress in 1988, which states: "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."

The statute has been applied by federal prosecutors in cases of public corruption as well as in cases in which private individuals breached a fiduciary duty to another. In the former, the courts have been divided on the question of whether a state law violation is necessary for honest services fraud to have occurred. In the latter, the courts have taken differing approaches to determining whether a private individual has committed honest services fraud—a test based on reasonably foreseeable economic harm and a test based on materiality. The statute, which has been a target of criticism, was given a narrow construction by the Supreme Court of the United States in the case of Skilling v. United States (2010). In order to avoid finding the statute to be unconstitutionally vague, the Court interpreted the statute to only cover "fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who ha[s] not been deceived".

Since at least 1941, particularly in the 1970s and 1980s, and prior to 1987, the courts had interpreted the mail fraud and wire fraud statutes as criminalizing not only schemes to defraud victims of money and property, but also schemes to defraud victims of intangible rights such as the "honest services" of a public official. In 1987, the Supreme Court of the United States ruled in McNally v. United States that the mail fraud and wire fraud statutes pertained strictly to schemes to defraud victims of tangible property, including money. In 1988, Congress enacted a new law that specifically criminalized schemes to defraud victims of "the intangible right of honest services."

...
Wikipedia