A brief section of the federal mail and wire fraud laws was added by Congress in 1988 to address public corruption and individuals who violated their duty to act honestly. This one-sentence new section, known as Section 1346, gave rise to what is now known as “honest services fraud.”
The sentence simply says, “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.” (x)
The goal of this amendment was to strengthen the mail fraud law and include more forms of dishonest behavior. It allowed prosecutors to bring fraud charges against individuals even in cases where the misconduct involved less evident or concrete forms of deception.
In 2019, the term “honest services fraud” gained a lot of attention after a number of well-known celebrities and affluent parents were accused in significant federal cases. In order to get their kids accepted instead of other students, they paid bribes to some colleges to alter test results.
The “honest services fraud” in these instances was that the cheating deprived other eligible students of an equal opportunity. When applying to those schools, those students were not given the fair and honest application process they were entitled to.
If you are facing federal charges, you don’t have to go it alone. Contact Aaron L. Wiley Law, P.C., to discuss your case with an experienced federal criminal defense attorney.
Honest Services Fraud Defined
Title 18 U.S. Code §1346 says that honest services fraud is a federal crime that arises when a person abuses their position or engages in dishonest acts in order to gain personal reward. This crime can be committed by private citizens, corporate executives, and public servants who are expected to act in the best interests of those whom they serve.
Since its implementation, case law (Skrilling v. United States, 2010) has been refined to include that honest services fraud has to involve some form of kickback or bribe in order to be considered a criminal act. Therefore, honest services fraud will always involve three parties:
- The party offering the kickback or bribe
- The party accepting the kickback or bribe
- The party that was deprived of the intangible right to honest services due to a kickback or bribe
Related Statutes
The mail fraud laws in 18 U.S. Code Chapter 63, along with other fraud laws, include several sections that relate to the definition of a “scheme to defraud” under 18 U.S.C. 1346. Related statutes include:
- 18 U.S.C. 1351: Fraud in foreign labor contracting
- 18 U.S.C. 1350: Failure of officers to certify financial reports
- 18 U.S.C. 1349: Attempt and conspiracy
- 18 U.S.C. 1348: Securities and commodities fraud
- 18 U.S.C. 1347: Health care fraud
- 18 U.S.C. 1345: Injunctions against fraud
- 18 U.S.C. 1344: Bank fraud
- 18 U.S.C. 1343: Wire fraud
- 18 U.S.C. 1342: Fictitious name or address
- 18 U.S.C. 1341: Mail fraud
Examples of Honest Services Fraud
Example 1: Winston is a state representative. He takes a “gift” from the owner of an oil refinery because the owner wants him to vote against a bill that would make it easier for people to buy electric cars.
Because this is basically a bribe, both Winston and the refinery owner could be charged under 18 U.S.C. 1346.
Example 2: Alastair is the CFO of a large company that needs to hire a contractor to build a new factory. A local contractor tells him he will give him a “lifetime discount” on future work if Alastair gives him the job. Alastair agrees.
Both Alastair and the contractor could be charged with honest services fraud because the discount is really a bribe or kickback, and it took away a fair chance for other contractors to compete.
Penalties for Honest Services Fraud
Since honest services fraud is a continuation of mail and wire fraud laws, the punishment for a conviction can be very serious indeed. Possible penalties include:
- If the honest services fraud involves a bank or affects benefits meant for people during a national disaster or emergency, the punishment can be much harsher. A person can face fines of up to $1 million and up to 30 years in federal prison.
- For most honest services fraud cases, the penalty can be a fine of up to $250,000 and up to 20 years in federal prison.
Are There Any Defenses for Honest Services Fraud?
In order to be convicted of honest services fraud, the following four elements must be proven beyond a reasonable doubt:
- You knowingly took part in a plan to cheat others, such as by giving or accepting a bribe or kickback.
- There was a plan in place that was meant to deceive people or give someone an unfair advantage.
- The plan could have hurt others by taking away the fair and honest services they were supposed to receive, even if no actual harm happened.
- Mail, phone, or Internet communication was used at some point as part of the plan.
With this in mind, a federal criminal defense lawyer will generally defend you by disproving as many of these elements as possible.
For example, we might be able to argue that you weren’t aware of the intent to defraud when you agreed to it.
Maybe you were told that the extra fee you paid for “priority consideration” in college admissions was a real, approved fast-track option, when it was actually a bribe. To be convicted, the government has to prove you knowingly took part in the scheme.
We might also be able to argue that kickbacks or bribes were not exchanged. For instance, maybe you gave someone a gift simply because you were friends, with no expectations of favoritism, or maybe the other person never gave you any special treatment in return.
Contact Aaron L. Wiley Law, P.C., Today
If you are under a criminal investigation or have already been indicted for Title 18 U.S. Code 1346 honest services fraud, contact Aaron L. Wiley Law, P.C. at (254) 566-3860 or fill out our online contact form to schedule a review of your case details and legal options.