Honest services fraud is something you’ve probably seen in the news, though not using those words. One of the most high-profile cases in this area was the college admissions scandal in 2019, a large and complex scheme that defrauded universities. In this scandal, parents paid money to a ring of organizers, who then bribed exam administrators and took college admissions tests on behalf of students, or paid money to have students admitted to colleges on athletic grounds, even if the students had no athletic ability whatsoever. Numerous people in the organized conspiracy were charged with honest services fraud, including bribery and entrance exam cheating.
The definition of honest services fraud is that it is “a scheme or artifice to deprive another of the intangible right of honest services”, such as the right of others to believe that a public official will perform in an honest way in the pursuit of the public interest. The law was originally created to prevent and prosecute government corruption, though it can also be applied in the private sector if the breach of a fiduciary relationship results in “reasonably foreseeable economic harm.”
What is Honest Services Fraud?
Honest services fraud is when someone else is defrauded out of their “intangible right” to receive “honest services”. In most cases, the fraud will be something involving:
- Someone who pays a bribe or kickback and someone who accepts it, with intent to defraud someone else (a scheme to defraud)
- Someone who is harmed by this transaction, in terms of their right to receive a service honestly performed (deprivation of honest services)
- Use of the mails or wires
In its most basic form, it is a scheme intended to deprive someone of something using deceit or dishonesty. This offense fits under the wire and mail fraud section of the U.S. Code, which means that the mails or wires must be involved in the fraudulent transaction. This does not mean that the mails or wires need to be an essential part of the scheme, but only that they are a part of it, even incidentally. This part of the crime is usually easy to satisfy for prosecutors.
The interpretation of 18 U.S. Code § 1346 changed after the case of United States v Skilling, Skilling being the former CEO of Enron. The court found that “honest services mail or wire fraud must involve “offenders who, in violation of a fiduciary duty, participate in bribery or kickback schemes”, which limited the idea of honest services fraud somewhat. However, the definition of a bribe or kickback in this context was never defined by the court, leaving the interpretation open. After Skilling, courts have also typically interpreted honest services fraud as requiring the existence and breach of a fiduciary duty between the parties.
Education Fraud
Another kind of related fraud is education fraud. This can occur in two ways: either when someone attempts to defraud a school out of money or services (such as the college admissions example above) or when the school itself tries to claim federal funds with no (or an inaccurate) basis. Education fraud is common, and one survey found that in 38 percent of cases involving education fraud, corruption was involved: when an employee “misuses his or her influence in a business transaction. and includes bribery or conflicts of interest”.
In the 2019 college admissions scandal, for example, the schools were defrauded of receiving students admitted who actually met their admissions criteria, in terms of GPA, sports performance, or otherwise. In this case it was a mixture of public officials and private officials with fiduciary duties to the university, who accepted bribes to get students into college when the students otherwise would not have.
What Should You Do If You are Charged With Honest Services Fraud?
There are several aspects of the honest services fraud crime or investigation that you should consider if you are charged with this crime. Assess:
- Whether you are a public official, or a private official with a fiduciary duty
- Whether you accepted bribes or kickbacks
- Whether anybody was harmed by your acceptance of those bribes or kickbacks
As such, a defense can raise that:
- There was no duty of honest service owed, as there was no fiduciary duty or you were not a public official
- That you did not receive a bribe or kickback
- That you had a good faith belief that you made true representations (i.e. not fraudulent)
- Nobody was harmed by the action
Punishments for honest services fraud can include fines, but can also include imprisonment of up to 20 years. This penalty applies to each instance of fraud, meaning that if you sent multiple emails, money transfers, or made phone calls or sent letters in relation to the offense, you can be charged separately for each one. In addition, if you have worked with other people in this scheme, you may also be subject to racketeering charges, depending on the circumstances. This is a serious offense that can have serious consequences, and if you are charged with honest services fraud you will need a defense lawyer to represent you.
Call An Attorney For Honest Services Fraud Charges
If you have been charged with honest services mail or wire fraud, call the law firm of Stechschulte Nell today at 813-489-5379 to schedule a free case review. At our firm, you will receive personalized, one-on-one representation.
