The Fraud of Honest-Services Fraud

Essentially, honest-services fraud makes prosecutors omnipotent, because they can charge anybody they want with a federal felony.
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On June 22, The Boston Globe reported that the now disgraced, former Massachusetts House Speaker Salvatore DiMasi announced that he would challenge the legal and intellectual validity of the controversial and nebulous honest-services fraud statute, for which he had been recently indicted. Windmill tilting notwithstanding, his challenge is both welcomed and justified.

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.

Making matters murkier and more unreasonable, the law is divided into two categories: public and private honest-services fraud. The public version involves elected or appointed public officials who allegedly have not provided their honest services to their constituents. The second version involves private citizens who have allegedly failed to provide their honest services in their dealings with other citizens. For example, who has not failed to provide his or her honest services as a friend, lover, father, mother, husband, wife, brother, sister, co-worker, boss, or subordinate? Hence, private honest-services is a universal crime, of which every man, woman, and child is guilty. A dispute between a contractor and a homeowner -- ordinarily settled in civil court -- may be a federal felony, private honest-services fraud, punishable by five years in prison, a $250,000 fine, or both.

This raises the additionally thorny issue of selective prosecution. Why is only a microscopic fraction of the guilty population indicted, condemned, and imprisoned for private honest-services fraud?

Essentially, honest-services fraud makes prosecutors omnipotent, because they can charge anybody they want with a federal felony. Prosecutors already have unlimited resources and leverage. More often than not, they threaten a defendant with a lengthy sentence in a maximum-security prison with violent offenders. This terrifies virtually any white-collar defendant into pleading guilty to honest-services fraud, in return for a reduced sentence in a relatively cushy prison camp -- even if the defendant does not necessarily believe that he or she is guilty. This means prosecutors are routinely committing a felony called suborning perjury, in addition to another felony called honest-services fraud.

Even U.S. Supreme Court Justice Antonin Scalia has expressed his concerns. In a recent dissenting opinion, he wrote, "Without some coherent limiting principle to define what 'the intangible right of honest services' is, whence it derives, and how it is violated, this expansive phrase invites abuse by headline-grabbing prosecutors in pursuit of local officials, state legislators, and corporate CEOs who engage in any manner of unappealing or ethically questionable conduct.''

As unappealing as this may sound, even the much maligned, now imprisoned, former Washington lobbyist Jack Abramoff was actually not guilty of anything much at all, except private honest-services fraud. I spent two years secretly and exclusively interviewing Abramoff before and after he went to prison. I also had access to thousands of documents never released to the public. For the first time, he was afforded an opportunity to give his side of the story. As a liberal, I was not inclined to give Abramoff, an arch conservative, much slack. But in the final analysis, the evidence was clear and convincing. He never defrauded his wealthy and sophisticated tribal clients, all of whom ran very lucrative casinos and therefore could hire the best lawyers, accountants, and consultants. His infamous "kickback scheme" with public-relations specialist Michael Scanlon was a perfectly legal undisclosed referral fee, enjoyed daily by mortgage brokers, orthopedic surgeons, and lawyers.* Abramoff did not bribe a single elected or appointed official. There were no "quid pro quos." And the "favors" he obtained for his clients did not corrupt the democratic process or undermine the integrity of America's foreign or domestic policy. These frivolous favors included remarks placed in the Congressional Records Extensions, a publication that virtually no one reads; or his persuading the federal government to sell back to an Indian tribe (a) 8,000 acres of land that it had originally owned, and (b) for which it had applied to the Bureau of Indian Affairs in 1927, upon which no action had ever been taken until Abramoff came along and asked House Majority Leader Tom DeLay to help out his long-suffering client.

Abramoff's capital crimes included common lobbying practices: providing some free sports tickets and meals to and subsidizing a few golf trips for some elected and appointed federal officials. And for these minor offenses, he was terrorized into pleading guilty to private honest-services fraud, for which he is spending nearly six years in prison.

I doubt former Massachusetts House Speaker Salvatore DiMasi will succeed in persuading the courts to throw out his indictment (and almost-certain conviction) for honest-services fraud. But if you ask most defense attorneys and many constitutional law professors across the land, they will tell you that honest-services fraud is the kind of law that Nazi Germany would have enthusiastically embraced.

* If you've ever purchased a house or a condo, your closing attorney urges (if it's an all-cash deal) and the lender requires that you buy something expensive called title insurance, which essentially covers your attorney's liability in case he erred in conducting the title search. But what no one knows is that the title insurance company, whom your attorney has hired, kicks back a large undisclosed referral fee to your attorney. (In a sense, you unwittingly pay your attorney's fee twice.) Although it's all perfectly legal, it would also appear to be a blatant example of private honest-services fraud, for which no closing attorney has ever been charged.

Gary S. Chafetz is the author of the recently published book, The Perfect Villain: John McCain and the Demonization of Lobbyist Jack Abramoff

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