The Supreme Court yesterday heard arguments in two cases probing the limits of the federal “honest services” fraud law. Added to the mail and wire fraud statutes in 1988, this law makes a federal crime out of any “scheme or artifice to deprive another of the intangible right of honest services.”
If that sounds vague, it is. Justice Antonin Scalia has suggested that the law “would seemingly cover a salaried employees phoning in sick to go to a ballgame.”
Federal prosecutors would of course eschew using the law to enforce such penny-ante fare, but theres little to constrain them from using the open-ended statute to target bigger fish. As Scalia notes, the statute “invites abuses by headline-grabbing prosecutors” who hope to advance their careers by collecting high-profile scalps.
One such high-profile scalp was on display at the Supreme Court yesterday: That of Conrad Black, a Canadian newspaper magnate whose holding company controlled various large periodicals, including the Chicago Sun-Times, in addition to hundreds of smaller papers around North America. Blacks company began divesting itself of many of these small papers early in the last decade, and in the course of one such divestiture, Mr. Black mischaracterized a hefty management fee as payment for a “non-compete agreement,” purportedly to lower the companys Canadian tax bill.
Some investors in Blacks business objected, which prompted an investigation by the Securities and Exchange Commission. A jury ultimately acquitted Black of nine of the 13 federal charges stemming from the investigation, but Black nevertheless is serving a six-and-one-half-year sentence for the four remaining counts -- offenses costing a pittance in relation to the companys profits, as well as the amount the government spent prosecuting the case.
Many of Blacks transactions certainly are questionable, and some clearly run afoul of traditional corporate-law fiduciary duties. The problem is trying to bootstrap those state civil-law remedies onto a broad, undefined criminal law -- such that virtually any corporate-law violation can become a federal honest-services indictment, absent the protections long developed in the civil arena.
With such a sweeping law, restraint lies solely at the discretion of prosecutors, too many of whom have shown little, even when investigations would more appropriately lie with state or foreign authorities. The federal prosecution of Black reached across international boundaries: Blacks obstruction-of-justice conviction concerned the removal of boxes of files from a Toronto office in apparent violation of a Canadian judicial order.
In a striking example of federal prosecutorial hubris, the second honest-services case argued before the Supreme Court yesterday -- United States v. Weyhrauch -- involves the federal policing of state political improprieties. Alaska state legislator Bruce Weyhrauch was convicted for voting on legislation affecting a company to which he had applied for a job, even though such conduct did not violate Alaska law.
For whatever reason, however, Alaska didnt require such disclosure. Weyhrauch had disclosed all that was required of him under state law, but not, apparently, federal laws requirement that he provide “honest services.”
Apart from the troublesome notion of allowing federal prosecutors to become the states and worlds policemen, the problem with the honest-services law is a basic question of notice. The law is too vague for anyone to know what constitutes its violation, and it is simply unfair to put people in prisons for “crimes” that were not clearly criminal in advance.
As my colleague Marie Gryphon details in her paper, “Its a Crime?” released today by the Manhattan Institute, weve forgotten a time-honored principle of American law that we should give offenders advance notice of whats criminal. The honest-services fraud law is one of the worst offenders in this regard. Lets hope that the Supreme Court adds some much-needed clarity.
Original Source: http://www.washingtonexaminer.com/opinion/columns/Manhattan-Moment/Vague-law-is-bad-law-8641004-78799292.html