One version of “white collar crime” that often winds in federal court is called “honest services fraud”. The basic version of the crime is when someone (usually a person who works either for some large organization, like a business or government) engages in a “scheme to defraud” that is intended to deceive or cheat another and to obtain money or property or cause the potential loss of money or property to another by means of materially false or fraudulent pretenses, representations or promises, or to deprive another of the intangible rights to honest services. In 2010, the Supreme Court limited the words “intangible rights to honest services” to mean this law only applies to situations involving either a bribery or a kickback. As a general rule, prosecutors need to prove an exchange, or “quid pro quo”, and must prove that the Defendant did, or refrained from doing, an “official act”, in exchange for money or something else of value. However, there have been questions as to the type of “official act” which forms the basis of this crime. Last Friday, the United States Supreme Court agreed to review the case of former Virginia Governor Robert McDonnell which could provide some answers in this area.
As noted above, honest services bribery or kickback requires an exchange of an official act for money or property. Some earlier decisions rejected efforts by prosecutors to expand the phrase “official acts” to include actions that are “customary” in the performance of many jobs. One court reversed the conviction of a state official who offered, for a fee, to introduce an architectural firm to high-ranking officials who could then secure contracts for the firm. The Defendant there promised to make introductions, but no evidence established that he promised to use his official position to influence those to whom the architectural firm was introduced. That court recognized a distinction between affording access versus actions that influence a decision.
Another federal court of appeals seems to take the same position. That Court said a legislator could not be convicted for taking money from a hospital in return for lobbying mayors to comply with state law in a way that benefited the hospital. That case also seemed to distinguish between actions that use or threaten the use of official powers versus actions that merely trade on reputation or access that accompanies the holding of a certain office. Yet one more federal appellate court said that “official acts” are limited to those that influence an actual decision about real policies. That case involved a policeman who took payments in exchange for using an official police database to perform license plate and outstanding warrant searches. While accessing the database was part of the officer’s duties, he did not perform an “official act” in return for the money, in that the officer did not exercise any inappropriate influence on decisions made by the organization for which he worked.
In contrast to these three decisions, the Fourth Circuit affirmed the conviction of former Governor Robert McDonnell. On appeal Governor McDonnell’s lawyers argued that he had merely extended “routine political courtesies” to the person who paid him money. “This is the first time in our history that a public official has been convicted of corruption despite never agreeing to put a thumb on the scales of any government decision,” their brief said.
I am currently handling several matters involving potential or actual prosecutions under the “honest services” theory. I will keep looking at the McDonnell case, as it likely will impact these and future cases we handle in this area.