Ken Klukowski: Court Gets Federal Honest-Services Law Half-Right


ACRU Staff


June 29, 2010

ACRU Senior Legal Analyst Ken Klukowski wrote this column appearing on on June 28, 2010.

On June 24, the Supreme Court sent back for a new hearings one of the Enron villains, Jeffrey Skilling, and two other unrelated defendants. The Court did this in part by severely curtailing the scope of the federal honest-services fraud law. But the Court should have just struck the law down, so they got this one only half-right.

Federal law makes it a crime to use the U.S. mail or wire-transfer services in a fraudulent scheme. Over time the lower federal courts developed a much broader doctrine, saying that the law in question allows the government to convict for fraud anyone who denies someone their “honest services” if they owe that party any sort of duty, including at the workplace.

The Supreme Court yanked the chain on that doctrine in the 1987 McNally case, saying such a theory went far beyond the words of the statute. Congress responded by passing a new law shortly thereafter, officially giving prosecutors the power to go after anyone who denies anyone else his “honest services.”

(As I mentioned in my December column when the Court heard the first of these cases, the way this law is written, if you lied to your employer that you were busy at your workstation when in fact you were just wasting time, perhaps surfing the web, you could be convicted of a federal felony and imprisoned for twenty years. It seems a bit excessive.)

So in the last of these three cases, Skilling v. U.S., the Court held that the honest-services fraud statute, 18 U.S.C. § 1346, needs to be scaled back. Recognizing that this law was originally applied only to bribes and kickbacks before McNally, the Court held that those are the only two things covered by the statute. No bribe or kickback, no conviction. Such was the decision of seven of the justices, written by Ruth Bader Ginsburg.

Justices Antonin Scalia and Clarence Thomas agreed that Skilling’s conviction needed to be set aside, but for the reason that § 1346 was unconstitutionally vague, and so should be completely discarded. That would have been the best result in this case, as Justice Scalia noted that the statute nowhere referenced bribes or kickbacks, and so rather than just assume that those two actions are what Congress intended by this vague law, that instead the law should just be declared too vague to be enforceable.

But the majority wouldn’t go there. Instead, the conviction was vacated (set aside) and the case sent back to the lower court to determine if Skilling had received a bribe or kickback.

Another two cases involving honest-services fraud—one of which was Black v. U.S., argued by one of the greatest Supreme Court lawyers in America, Miguel Estrada—was also sent back to the lower court for the same reasons.

So this was a partial victory for individual freedom. Those who commit crimes need to be punished. Those engaged in fraud need to be held to full account.

But there is a serious pandemic of overcriminalization going on at the federal law, as recently discussed in a book by the Heritage Foundation, and endorsed by Attorney General Ed Meese. Most crimes—like murder, rape, arson, theft, assault, battery, or negligence—are matters of state law. This stems from the police power that states have to pass laws involving public health, safety, welfare and morality.

The federal government has no police power. Instead, as emphasized by the Tenth Amendment, it is a government limited to only those powers granted to it in the Constitution. Such issues include interstate commerce, foreign diplomacy, copyrights, currency, and military matters. Without a constitutional provision on point, the federal government has no authority to act. It has no police power.

The power to imprison is the power to destroy. It’s one of the most potent powers that government wields over human beings. This power needs to be strictly confined at all times.

Yet § 1346 is far too vague, and thus too broad, to be strictly confined. The Supreme Court has repeatedly held that it violates due process to imprison someone for violating a law that is so vague that a reasonable person who investigates the law cannot know what it forbids.

The Court did well to limit its scope to kickbacks and bribes. But since the law itself uses words that are virtually unlimited—words that you as a reader have doubtless violated sometime in the past month or so—this federal felony statute should instead have been struck down.

An essentially-unlimited authority to lock people up is too dangerous a power to be entrusted to the federal government. Let’s hope Elena Kagan feels the same way.



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