U.S. Congressman Mike Quigley and U.S. Senator Mark Kirk have launched a bipartisan, bicameral effort to fight corruption and unethical conduct by public servants. Part of their effort includes introducing The Public Officials Accountability Act to restore the honest services fraud statute to some of its former self before the Skilling and Conrad Black cases last year.

The prosecution of schemes and artifices that deprived someone of his intangible right to honest services used to include two theories:
1) cases of kickback and bribery; and
2) cases of undisclosed conflicts of interest resulting in personal financial gain.

The Supreme Court reasoned that honest services fraud was too vague and swept too broadly. Instead of invalidating the whole law, the Court limited its scope. After Skilling and Black were decided, the second theory of cases was narrowed to only include instances in which the undisclosed conflict was the actual payment of a kickback or bribe paid by a third party. The Court effectively negated the second theory of honest services fraud by rolling it into the first. However, the new bill from Quigley and Kirk, which has not yet been formally introduced in Congress, would target public officials with “undisclosed conflicts of interest resulting in personal financial gain” in addition to bribes and kickbacks. The former jurisprudence of honest services fraud targeted officials in both the public and private settings.

Randall Eliason, the former chief of the public corruption section of the U.S. Attorney’s Office for the District of Columbia, says the proposed bill would close a small but important legal loophole. Eliason stated that “a state legislator could be steering massive public contracts to a company he secretly owned, and not disclosing it to anyone, and that would no longer be honest services fraud — but if he was taking bribes to steer them to a company owned by someone else, it would.”

That form of self dealing is currently outside the definition of honest services fraud because of the Court’s decisions last year. The proposed bill by Quigley and Kirk would criminalize that kind of self dealing by adding a disclosure requirement for public officials. The bill will also stipulate that the officials in question must be seeking financial gain. These two steps will likely solve the prior issues of vagueness by introducing more definable elements to the second theory of honest services fraud. Not only does a conflict have to exist, the official must be seeking to financially gain from the conflict at the expense of the public’s right to honest services.

However, the greatest tool for prosecutors probably lies with the disclosure requirement. Prosecutors will be able to fashion more convincing arguments against public officials because they will now have an affirmative obligation to disclose such conflicts. An official who either discloses or fails to disclose opens himself up to the scrutiny of federal prosecutors. Accordingly honest services fraud may soon be restored as a favorite tool of federal prosecutors against state and local officials.

The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.

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