18 U.S. Code § 1346 - Honest Services Fraud
In 1988, Congress aimed to combat public corruption and private fiduciary breaches by adding Section 1346 to the federal mail and wire fraud statute, Title 18 U.S.C. Chapter 63. This addition consists of a single sentence that defines "honest services fraud."
This sentence states: "For this chapter, the term 'scheme or artifice to defraud' includes a scheme or artifice to deprive another of the intangible right of honest services."
This addition aimed to strengthen the mail fraud law and expand its definition of fraud, enabling prosecutors to secure convictions in more abstract cases.
The term "honest services fraud" has attracted media attention amid several high-profile federal criminal cases involving celebrities and wealthy parents who bribed colleges to admit their children.
College Admissions Scandal
This statute gained renewed attention recently when it was used to prosecute several cases in the 2019 College Admissions Scandal. In this scheme, several celebrities, such as Felicity Huffman and Lori Laughlin, paid bribes to elite college admissions offices to manipulate standardized test scores, ensuring their children gained admission over other applicants.
The honest services fraud involved this scheme, denying other qualified applicants the "honest services" of acceptance into these schools.
In simple terms, honest services fraud, as defined by federal law under 18 U.S.C. 1346, involves a scheme to deprive someone of their right to honest services through a violation of fiduciary duty, often via bribery or kickbacks.
Fiduciary duty involves an obligation to act in the best interest of the public, employer, shareholders, or a union, and violating this duty through bribery or kickbacks constitutes honest services fraud.
Convictions for honest services fraud can result in penalties similar to those for other fraud crimes, including up to 20 years in prison and, in certain cases, up to 30 years, highlighting the serious legal consequences.
What Exactly is Honest Services Fraud?
Honest Services fraud, defined under Title 18 U.S. Code 1346, is a federal offense that involves misusing one's position or authority for personal benefit. It can be committed by public officials, corporate officers, or private individuals who have fiduciary duties to another person or entity.
Since 18 U.S.C. 1346 was enacted, case law has clarified that honest services fraud requires the use of a bribe or kickback to qualify as a crime. (Skrilling v. United States, 2010) Therefore, honest services fraud involves three entities:
- Someone offering a bribe or kickback.
- Someone accepting a bribe or kickback; and
- A victim is someone who loses the intangible right to honest services because of a bribe or kickback.
Which Statutes are Related?
Chapter 63 of 18 U.S. Code covers mail fraud and other related offenses, including several federal laws connected to the definition of "scheme or artifice to defraud" in 18 U.S.C. 1346, such as the following:
- 18 U.S.C. 1341 - Mail fraud
- 18 U.S.C. 1342 - Fictitious name or address
- 18 U.S.C. 1343 - Wire fraud
- 18 U.S.C. 1344 - Bank fraud
- 18 U.S.C. 1345 - Injunctions against fraud
- 18 U.S.C. 1347 - Healthcare fraud
- 18 U.S.C. 1348 - Securities and commodities fraud
- 18 U.S.C. 1349 - Attempt and conspiracy
- 18 U.S.C. 1350 - Failure of officers to certify financial reports
- 18 U.S.C. 1351 - Fraud in foreign labor contracting
What Are the Penalties Under 18 U.S.C. 1346?
Honest services fraud, as an extension of mail and wire fraud laws, can lead to severe penalties if convicted. The potential punishments include:
- For typical cases of honest services fraud, penalties can include fines reaching $250,000 and a maximum of 20 years in federal prison.
- For cases of honest services fraud related to a financial institution or impacting benefits during a nationally declared disaster or emergency, penalties include fines of up to $1 million and imprisonment for up to 30 years.
What Are the Potential Defenses?
To convict you of honest services fraud, prosecutors must prove four key elements beyond a reasonable doubt: a scheme to deceive, your voluntary participation, harm to others' honest services, and use of mail or wire services.
- There was a "scheme or artifice' intended to deceive others, such as granting someone an unfair advantage over another;
- You voluntarily engaged in this scheme to defraud, whether by giving or accepting a bribe or kickback.
- The scheme could have harmed others by depriving them of tangible or intangible "honest services," even if it ultimately did not do so.
- The scheme utilized mail or wire services, such as telephone or Internet.
Therefore, most defenses a federal criminal defense lawyer employs against honest services fraud aim to challenge one or more of these key elements. These are outlined below.
Maybe we can argue that you didn't know about the fraud scheme when you participated. For instance, you might have been told that the additional fee for "priority consideration" in college admissions was a legitimate "fast-track" process, but in reality, it was a bribe. To be convicted, there must be evidence of deliberate participation in the scheme.
We might argue that no bribe or kickback was exchanged. For instance, perhaps you gave a gift to a friend without expecting anything in return, or the other person did not gain any unfair advantage.
If you are facing a criminal investigation or have been indicted for Title 18 U.S. Code 1346 honest services fraud, contact our law firm by phone or use the contact form to review your case details and legal options.
We might be able to negotiate a favorable plea bargain with the federal prosecutor if guilt is clear. Cron, Israels & Stark is based in Los Angeles, California.
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