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Ninth Circuit Joins Other Circuits in Ruling that Honest Services Fraud Conviction of a Public Official Does Not Require a Violation of State Law




by:
Patrick Hamilton
Day Pitney LLP - Boston Office

Michael G. Considine
Andrew P. Gaillard
Day Pitney LLP - Stamford Office

Dennis T. Kearney
Day Pitney LLP - Morristown Office

Helen Harris
Day Pitney LLP - Stamford Office

John J. O'Reilly
Day Pitney LLP - Morristown Office

Jeffrey Plotkin
Edgardo Ramos
Day Pitney LLP - New York Office

 
March 5, 2009

Previously published on Winter 2009

The Ninth Circuit recently ruled that the federal “honest services fraud” statute (18 U.S.C. § 1346) establishes a uniform standard of conduct governing every public official nationwide and that the prosecution need not prove an independent violation of state law in order to secure a conviction.  In so ruling, the Ninth Circuit joined four other circuits in rejecting the Fifth Circuit’s adoption of a “state law limiting principle” requiring proof that a public official violated a state law in order to sustain a federal honest services fraud conviction, and a similar Third Circuit requirement that a public official’s conduct violate a fiduciary duty specifically established by state or federal law.

As part of its larger probe into the relationship between VECO Corp., an oil field services company, and state and federal officials in Alaska, the government indicted Bruce Weyhrauch, a member of the Alaska House of Representatives, on corruption charges, including use of the mails to commit honest services fraud.  The indictment alleged that Weyhrauch solicited by mail, telephone and personal contact future legal work from VECO in exchange for voting on oil tax legislation as VECO instructed and taking other actions as a state legislator favorable to VECO, such as maneuvering the legislation and reporting to VECO concerning proposed changes to the legislation.  The indictment did not allege that Weyhrauch had actually received any compensation or other benefits from VECO, but suggested that Weyhrauch had taken actions favorable to VECO on the understanding that the company would hire him in the future to provide legal services. 

However, the district court found that the government’s evidence of Weyhrauch’s failure to disclose his conflict of interest did not violate any Alaska state statute.  Recognizing that the Ninth Circuit had yet to rule on the issue, the district court considered and adopted the approach outlined by the Fifth Circuit in United States v. Brumley, 116 F.3d 728 (5th Cir. 1997), and excluded the government’s proffered evidence on the grounds that an honest services fraud conviction required proof that a state law had been violated.  The government filed an interlocutory appeal.

Because the appeal presented an issue of first impression, the Ninth Circuit initially reviewed the history of federal honest services prosecutions.  Prior to 1987, federal courts interpreted the mail and wire fraud statutes (18 U.S.C. §§ 1341 and 1342) as criminalizing schemes to defraud victims not just of money and property, but also of “intangible rights” such as the right of citizens to have public officials perform their duties honestly.  Then, in McNally v. United States, 483 U.S. 350 (1987), the Supreme Court read the mail fraud (and, by inference, the wire fraud) statute as limited to the protection of tangible property rights.  The very next year, Congress enacted § 1346, specifying that the term “scheme or artifice to defraud” as used in the mail, wire and bank fraud statutes includes a scheme or artifice to deprive another of the intangible right of honest services.  However, Congress did not define the concept “honest services,” thereby creating the issue on appeal.

The Ninth Circuit acknowledged that the Fifth Circuit’s requirement of a violation of state law to support an honest services fraud conviction served the objectives of:  giving public officials fair notice of what conduct would subject them to federal prosecution; minimizing the potential for selective enforcement against public officials; and limiting the influence federal prosecutors would have over state and local public ethics standards.  Nevertheless, the Ninth Circuit joined the majority of circuits, including the First, Fourth and Eleventh, holding that § 1346 prescribes a uniform federal standard for “honest services,” neither tethered to nor limited by applicable state statutes, even though those circuits could not agree on the precise contours of that standard.  The Ninth Circuit found no evidence that Congress had intended to condition the meaning of “honest services” on state law or that it “intended the criminality of official conduct under federal law to depend on geography.”  It also reasoned that Congress has a legitimate interest in ensuring that legitimate state action affecting federal priorities (such as energy policy) is not improperly influenced and that Congress’ ability to protect federal interests through the federal fraud statutes should not be unduly hampered by the vagaries of and variations between state ethics laws. 

The Ninth Circuit concluded that, in reinstating the honest services doctrine after McNally, Congress intended to bring at least two “core categories” of official misconduct within the reach of § 1346, regardless of whether a state law had been violated: “(1) taking a bribe or otherwise being paid for a decision while purporting to be exercising independent discretion and (2) nondisclosure of material information.”   Accordingly, the district court’s exclusion order was reversed and the government was free to proceed with its prosecution of Weyhrauch for honest services fraud.  However, the Ninth Circuit made it clear that it was expressing no opinion on what effect, if any, state law would have if it expressly condoned or excused the conduct involved in the federal prosecution of a public official or on the role of state law in honest services fraud prosecutions in the private context.  The full text of the Ninth Circuit decision can be found at United States v. Weyhrauch, 548 F.3d 1247 (9th Cir. 2008).



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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