Honest Services Fraud: Constancy in Change
Volume 83, No. 4, Summer 2011
By Brian Nichilo

In 1927, Richard Wilhelm, a professor of Chinese studies at the University of Frankfurt in Germany, delivered a series of lectures entitled Constancy in Change. In the lecture series, Professor Wilhelm explained possible interpretations and applications of certain passages within the I Ching, an ancient Chinese philosophical text whose meaning is often difficult to extract from its obscure and mysterious sayings. Wilhelm pointed to the following passage to express the overarching theme of his lectures: “The town may be changed, but the well cannot be changed. It neither decreases nor increases. They come and go and draw from the well.” The history of mankind has been one of continual change, yet underneath the movement, explained Wilhelm, the “ultimate bases of life remain unchanging,” like the well in the center of the ever expanding and contracting town.

Several decades later the Swiss psychiatrist Carl G. Jung, a one-time collaborator of Wilhelm’s, approached a theological problem from a similar vantage point. One of Jung’s observations was that the labels individuals place on certain experiences do not actually change the nature of the experience itself, but rather, only affect the individual’s relationship to it.

This Comment contends that the concept of outward change and inner consistency, exemplified by the work of these two European scholars, is helpful in understanding the past, present, and future of a specific area within federal criminal law: honest services mail fraud. Honest services fraud is not, of course, steeped in the type of philosophical discussions that Wilhelm and Jung were engaged in, but its legal and factual history nonetheless demonstrate the concepts of constancy and change that they observed in their respective fields.

Honest services fraud has often been used by the federal government to charge state and local public officials and employees with depriving their respective government entities and constituents of an intangible right to honest services. In order to charge and convict an individual for violating this statute, the federal government does not have to prove a tangible loss to the victim, or even the contemplation of a tangible loss. For example, in 2007, Bruce Weyhrauch, an attorney and member of Alaska’s House of Representatives, was charged with honest services fraud. Specifically, the government’s indictment said Weyhrauch had “devis[ed] a scheme and artifice to defraud and deprive the State of Alaska of its intangible right to [his] honest services . . . performed free from deceit, self-dealing, bias, and concealment.” The alleged crime occurred when Weyhrauch was negotiating his own future legal work with an Alaskan oil company while also taking legislative steps favorable to the company, without publicly disclosing this relationship and/or recusing himself.

The potentially ambiguous nature of this type of fraud has troubled many over the years. How can a victim be defrauded without losing any money or property? What does it mean to deprive someone of their right to honest services? Does a state official have to violate a state law to commit honest serves fraud, or does the federal statute impose its own code of conduct on state and local officials? If so, how? These are some of the questions and concerns that have cropped up time and time again throughout the history of the crime. Most recently, the Supreme Court, in Skilling v. United States, weighed in on the discussion by holding that honest services fraud only consists of “bribes and kickbacks.” But exactly what conduct constitutes a bribe or kickback? Does a state law violation still matter? Should it? And on and on.

The purpose of this Comment is to help (partially) shift the honest services fraud discussion away from criticizing the possible reach of this federal crime or providing policy reasons to justify its use by federal prosecutors, towards a discussion about the underlying values that have enabled prosecution of the offense to find such a broad base of support—executive, legislative, judicial, and public—over the years. More specifically, by re-telling the story of honest services fraud to include case facts from the early, not just recent, years and then identifying the consistent facts amidst the changing legal landscape, this Comment will demonstrate that a shared sense of what constitutes public corruption is the true guiding force in this area of federal criminal law.

The Comment is organized as follows: Part II.A provides a general overview of the federal mail fraud statute. Part II.B is a brief chronicle of mail fraud cases involving public officials that did not always result in tangible losses, but which, nevertheless, federal district and appellate courts across the nation concluded were properly charged as federal crimes. Part II.C describes the interaction between the Supreme Court and Congress in 1987 and 1988 that gave birth to 18 U.S.C. § 1346, i.e. the “honest services” fraud statute. Part II.D provides an overview of the federal circuit split that arose over exactly how to define the deprivation of “honest services.” Part II.E is a synopsis of Skilling, the Supreme Court decision that pared the honest services fraud statute down to only bribes and kickbacks, excluding the undisclosed conflict-of-interest theory.

Part III.A details the evolution of legal challenges to honest services fraud—past, present, and future—to demonstrate the continual change in this area of criminal law. Part III.B shows that, despite changes to the law, and despite theoretical concerns about the crime’s near limitless reach, the crime of honest services fraud has consistently been applied to convict legitimately corrupt public officials. Finally, Part III.C argues that regardless of the precise legal terminology used in defining the crime, when a public official deceives the people or government he serves about a thing of value he received solely because of his public position, a prosecution and conviction for honest services fraud will find support from federal prosecutors, juries, courts, and Congress alike.

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