Proposed Legislation - Honest Services after Skilling v. U.S. - Final PART (us)
Auteurs : Richard C. Smith, Kimberly Walker, Mark Emery, Tracy DeMarco
Avocats au barreau du District de Columbia, D.C. Bar
Publié le 15/05/2011 dans Journal of the Bar Association of the District of Columbia (B.A.D.C.)
Voir aussi PART I of Honest Services after Killing v. U.S.: Less Is Still More, PART II of Honest Services after Killing v. U.S.: Less Is Still More et PART III of Honest Services after Killing v. U.S.: Less Is Still More
It did not take long for members of Congress to react to Skilling. On September 28, 2010, the Senate Judiciary Committee held hearings on the effect of the Skilling decision, which Senator Patrick Leahy described as “another in series of cases in which the Supreme Court appears to have undermined Congressional efforts to protect hardworking Americans from powerful interests.”
During the hearing, Professor Michael Seigel testified that while “few experts would take issue” with Skilling’s holding that the concept of honest services was constitutionally vague, the Court’s solution was “far from ideal.” The statute “suffers from the very same ills as before.” As an example, he noted that a DMV employee could be charged with an honest services violation for taking a $20 bribe to let an applicant cut in line. Because Skilling did not clarify an authoritative definition of “bribery,” however, it remains unclear whether all bribery-related honest services charges require a quid pro quo. If they do, it may not be possible to use the statute to convict what would appear to be a clear deprivation of “honest services,” such as a state legislator who is secretly on the payroll of a corporation that has an interest in a wide variety of matters that are the constant subject of legislation, but to whom a clear quid pro quo is not provable. Professor Seigel urged Congress to limit honest services fraud to “carefully circumscribed and well defined conduct that is of true federal significance.”
Yet, Professor Samuel Buell differed in emphasis, arguing that there is nothing “novel, or unworkable, or imprudent” about allowing courts to apply Congress’ “general prohibitions on fraud” to new and developing forms of deception. Accordingly, he found a “somewhat unrealistic quality” in Skilling decision and worried that the Court’s “somewhat arbitrary” decision risks “leaving important forms of abusive deception outside the scope of federal criminal law.” Arguing that the Supreme Court’s concerns regarding vagueness were manifestations of a greater concern over the statute’s overbreadth, Professor Buell suggested that the problem could be solved in legislation without curbing the statute’s ability to reach the deceptive deprivation of important information. Such a statute would need to (1) clarify the requisite mental state, (2) specify the kinds of relationships that involve instances of intangible harm, and (3) set thresholds for culpable conduct. While acknowledging the need for statutory action, he emphasized that the role of the courts in developing the doctrines should not abandoned.
Assistant Attorney General Lanny A. Breuer testified at the hearing, and provided some indication that the DOJ’s priorities may include elements of both positions in the new legislation. See Restoring Key Tools, (statement of Lanny A. Breuer). He provided an example that echoed Professor Seigel’s comments, noting:
[I]f a mayor were to solicit tens of thousands of dollars in bribes in return for giving out city contracts to unqualified bidders, that mayor could be charged with bribery. But if the same Mayor decides that he wants to make even more money through the abuse of his official position, he might secretly create his own company, and use the authority and power of his office to funnel city contracts to that company. Although this second kind of scheme is corrupt, and undermines public confidence in the integrity of their government, it is not bribery.
To address the latter scenario, Assistant Attorney General Breuer acknowledged the need for new legislation. Specifically, he argued that the new legislation should include four elements: (1) clear and specific language to ensure compliance with Supreme Court’s Skilling directive that future legislation provide citizens with notice of prohibited conduct; (2) the ability to craft a criminal charge that fully encompasses the scope of a criminal scheme, achieved through reliance on mail and wire fraud statutes, which provide an established jurisdictional basis for prosecution, enabling; (3) a defined scope of the financial interests that trigger improper self-dealing, achieved through reflection of the federal conflict of interest statute, 18 U.S.C. § 208, applicable to the Executive Branch; and (4) the exemption of public officials unless he/she “knowingly conceals, covers up, or fails to disclose material information” that he/she is legally required to disclose. That the government must prove both knowing concealment and specific intent to defraud under this proposed scheme obviates any risk of conviction for mere mistake or chance conflict of interest.
Legislation that roughly conforms to the guidelines laid out by Assistant Attorney General Breuer was proposed in both houses of Congress under the name “Honest Services Restoration Act.” The more detailed and extensive legislation introduced in the Senate would amend the mail and wire fraud statutes by adding a new Section 1346A. The proposed Section 1346A(a)(1)–(2) would address, respectively, “undisclosed self-dealing” by public officials and “undisclosed private self-dealing” by “officers and directors.” Self-dealing in both respects is defined as the defendant using his or her official position to, in whole or in part, benefit the financial interest of certain associated parties, such as spouses, children or organizations, generally tracking the language of the federal conflict-of-interest statute, 18 U.S.C. § 208. The legislation also requires that the defendant knowingly falsify, conceal, cover up, or omit “material information that is required to be disclosed regarding that financial interest by any Federal, State, or local statute, rule, regulation, or charter applicable to the [defendant].” Similar provisions exist for private officers, with the added requirement that the self-dealing must also cause or be intended to cause actual harm to the officer’s or director’s employer. The House version of the bill would also add a much simpler Section 1346A, but contains only a provision regarding public officials.
Several items are noteworthy. Both bills would appear to retain the same vexing problem of pegging the honest services statute to a large variety of legal bases by basing liability on falsification or a failure to disclose information required by “by any Federal, State, or local statute, rule, regulation, or charter.” That improvisation is unlikely to reduce the variety of disclosure of fiduciary duties that can create liability under the statute, or therefore is unlikely to reduce the confusion and inconsistently in the courts. Both bills define “public official,” but the Senate bill fails to define “officers and directors.” Thus, it has still not solved a basic problem of how far the statute reaches into private conduct, although it would at least provide a clear statutory basis to create criminal liability for private actors and define the relevant harm. The legislation also fails to clarify what criminal intent is required. A defendant must “knowingly” falsify, conceal, cover up, or omit material information that is required to be disclosed regarding the relevant financial interest. Assistant Attorney General Breuer’s statement had recommended “specific intent,” not “knowingly,” and the latter term can acquire different meanings in different jurisdictions and contexts.
The proposed legislation—though in its infancy—does not seem to tackle the primary issues left unaddressed by Skilling. One general impression from the DOJ’s focus (exemplified by Assistant Attorney General Breuer’s private company example) and the early legislative proposals is that the primary item on the law enforcement “wish list” is statutory authority to be able to pursue crimes of concealment, cover-ups, and other kinds of non-disclosure. The proposed statute does not appear to provide a basis to criminalize disclosed wrongdoing.
Conclusion: The “Honest Services” Tide Will Likely Rise Again
There is little doubt that “honest services” law reached a high tide prior to the Court’s decision to address it during the 2009 term. That the circuit courts had adopted such an expansive interpretation of the vague statute dictated the need to concretely determine what the statute criminalized. In limiting the scope of § 1346 to bribery and kickbacks, the Skilling majority held that the statute should draw content, at least in part, from federal statutes that define bribery and other similar crimes. The Court provided as example of appropriate statutes on which to rely. But, the Court did not render this list exclusive of other statutes. In an important footnote, the Court emphasized that the overlap with other federal statutes, such as bribery, did not render § 1346 superfluous because, to the extent those statutes apply only to federal actors, § 1346 applies to state and local corruption and other private-sector fraud that “might otherwise go unpunished.” This statement alone takes a significant step in providing § 1346 with a raison d’être. The Court’s remark indicates a full confirmation that § 1346 is intended to not only reach the conduct of the state and local officials, and “corrupting” schemes involving them, but also that the statute equally applies to private sector fraud. The latter inference could be particularly important as the current administration will continue to seek ways to prosecute financial sector corporate fraud, and early legislative efforts show an interest in reliance on violations of both private sector fraud and state- and locally-imposed duties as sources of “honest services” duties.
Controversially, the Court’s strong—albeit unsettled—statement of the statute’s ongoing usefulness offers more content than Congress has yet saw fit to provide. As some commentators have argued, “[i]n not only ‘blue penciling’ Section 1346 to reach bribery and kickbacks, but also countenancing courts’ prospective elaboration of what these offenses constitute, it seems undeniable that, in the words of Justice Scalia, this is not ‘interpretation’ but ‘invention’ of criminal law.” Of course, confirmation of the “honest services” statute’s purpose is not the same thing as an elaboration of its standards. The Court’s failure to specifically define covered content may have been an effort to avoid the perception that it was essentially writing a statute.
The immediate practical result is that Congress is not prompted to start fresh with new legislation that will avoid the vagueness defects identified by the Skilling concurrence. Instead, Congress has likely been encouraged to craft a new statute that will draw more broadly from the multiple legislative and judicial sources (federal, state and local statutes and rules) to define conduct, to delay fundamental questions about mens rea requirements, to keep open the possibility that the statute’s scope can continue to be extended beyond public officials into the private sector. Thus, while the Skilling decision will doubtless curb prosecutorial discretion, its manner of limiting the statute to conduct involving bribery and kickbacks is likely to magnify the remaining uncertainties in the statute’s application, and intensify the trench warfare to delineate the contours of the criminal conduct within true bribery and kickback contexts. With or without the new legislation, the work of the lower courts has only just begun and the tide of uncertainty regarding “honest services” will likely rise again.
Notes et références
- Restoring Key Tools to Combat Fraud and Corruption After the Supreme Court’s Skilling Decision: Hearing Before the Senate Committee on the Judiciary, 111th Cong. (statement of Sen. Patrick Leahy, Member, Senate Comm. on the Judiciary) (Sept. 28, 2010), available at www.judiciary.senate.gov/hearings/hearing.cfm?id=4816.
- Restoring Key Tools, supra note 163, at 2 (statement of Michael Seigel).
- Id. at 2
- Id. at 3
- Restoring Key Tools, supra note 163, at 2 (statement of Samuel A. Buell).
- Id. at 2.
- Id. at 5.
- Id. at 6.
- Id. at 7.
- See S. 3854, 111th Cong. (2010) (Sen. Leahy) (introduced Sept. 28, 2010); H.R. 6391, 111th Cong. (2010) (Rep. Weiner) (introduced Sept. 29, 2010).
- See S. 3854 (proposed § 1346A(a)(1) and (2)).
- Id. (proposed § 1346A(b)(1)(VI)(ii)).
- Id. (proposed § 1346A(b)(2)(i)).
- See H.R. 6391, 111th Cong. (2010).
- See 41 U.S.C. § 52(2) (2010); 18 U.S.C. § 201(b) (giving or receiving a gratuity); 18 U.S.C. §666(a)(2) (bribery involving federal funds).
- Skilling, 130 S. Ct. at 2934 n.46.
- See id. at n.2.
- Frank C. Razzano & Jeremy D. Frey, U.S. Supreme Court’s Recent Decisions on ‘Honest Services’ Fraud Raise Questions About Fiduciary Duty, Quid Pro Quo, Mens Rea and Other Issues, 5 BNA WHITE COLLAR CRIME REP. 508, 512 (July 16, 2010).
- See Skilling, 130 S. Ct. at 2935 (Scalia, J., concurring) (“in transforming the prohibition of ‘honest-services fraud’ into a prohibition of ‘bribery and kick-backs’ it is wielding a power we long ago abjured: the power to define new federal crimes”).
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