Honest Services Fraud Defense Lawyer

A violation of Section §1346 typically involves at least three actors: 

1. an offender who breaches their fiduciary duty to provide honest services, through a scheme, in exchange for a bribe or kick-back;
2. a party harmed by this scheme — by the denial of their right to receive the offender’s honest services; and,
3. a third party, not deceived by the scheme, who provides the bribe or kick-back to the offender.

An example of honest services fraud would include a mayor, an offender, who accepted a bribe from a building contractor in exchange for awarding the building contractor a city contract over competing contractor bids. In this scenario the city is the party harmed by this scheme, since the offender mayor breached their fiduciary duty owed to the city (to negotiate with contractors submitting bids for the contract at arm’s length) by accepting the bribe.  

What does a federal prosecutor need to prove?

To convict a defendant for a violation of Section 1346, a federal prosecutor must prove the following elements beyond a reasonable doubt:

1. A fiduciary duty is owed (e.g., to the public by a public official, to an employer by an employee, to the shareholders by a corporation, etc.); and
2. The defendant knowingly devised or participated in a scheme to defraud – a scheme that is intended to deceive or cheat another and to deprive another of the intangible right to honest services through bribery or kickbacks; and
3. The defendant did so with the intent to defraud; and
4. The scheme to defraud involved a materially false or fraudulent pretense, representation, or promise, which may include an omission or the concealment of material information – information capable of influencing the decision of others.

Individuals charged with honest services fraud need to be aware of a few additional aspects of this charge. A defendant facing this charge need not owe the fiduciary duty personally, so long as they devise or participate in a bribery or kickback scheme intended to deprive the public (or their employer, union, or shareholders) of the right to a fiduciary’s honest services. Also, it is not necessary that the defendant (or other individual with a fiduciary duty) had the power to or did perform the act for which they were promised or agreed to receive something of value; it is sufficient if the matter was brought before them in their official capacity. Nor is it necessary that the defendant (or other individual with a fiduciary duty) in fact intended to perform the specific official act. It is sufficient if the defendant (or other individual with a fiduciary duty) knew that the thing of value was offered with the intent to exchange the thing of value for the performance of the official act. Additionally, Section 1346 can be violated even there is no loss or damage to the victim of the crime or gain to the defendant – the government does not need to prove that the scheme to defraud actually succeeded. Lastly, in considering whether the government has proven a scheme to defraud, the government must prove that one or more of the false or fraudulent pretenses, representations or promise, or bribes or kickbacks, charged in the portion of the indictment describing the scheme be proved beyond a reasonable doubt. The government, however, is not required to prove all of them.

What are the penalties?

A conviction under Section 1346 carries a maximum sentence of 20 years in prison and fines of up to $250,000.

However, the prison sentence can increase to 30 years and the fine to $1,000,000, if the Section 1346 violation:

1. occurs in relation to, or involving any benefit authorized, transported, transmitted, transferred, disbursed, or paid in connection with, a presidentially declared major disaster or emergency (as defined by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122)), or 
2. affects a financial institution. 

Although penalties for a conviction under Section 1346 include imprisonment for not more than 30 years, a fine for as much as $1,000,000, or both, the role a defendant plays in the offense and the specific characteristics of the offense may impact their penalty if convicted. A common sentencing enhancement, or increase, is considered if the defendant was an organizer or leader in the alleged honest services fraud. Additional factors may result in a further increase to the sentence may be imposed, including: the amount of loss, the number of victims, the number of victims who sustained substantial financial hardship, the presence of a conscious or reckless risk of death or serious bodily injury, and other factors. Conversely, defendants who played a minor or minimal role may qualify for a mitigating adjustment, or a decrease in their penalty. However, the defendant bears the burden of proof in qualifying for a mitigating role reduction.

How has Section 1346 been used by the Government?

Section 1346 has a long history of being applied to a markedly broad category of behaviors, and to a similarly broad range of alleged offenders – a local housing official who failed to disclose a conflict of interest (United States v. Hasner), students who schemed with their professors to turn in plagiarized work (United States v. Frost), and even lawyers who made ancillary payments to insurance adjusters to expedite processing of their clients’ pending claims (United States v. Rybicki). 

Other (more notable) individuals convicted of honest services fraud include former Enron CEO Jeffrey Skilling and former Illinois governor George Ryan, in 2006. Perhaps the most notable application of the honest services fraud statute was seen in the 2019 college admissions scandal which allegedly involved dozens of individuals, including athletic coaches, college exam administrators, parents and students – who were allegedly involved in a conspiracy that resulted in cheating on entrance exams and admission to some of the most elite universities in the country.