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What is Honest Services Fraud?

Honest Fraud Theory

There are many different types of fraud offenses that a person can face under federal law, from mail fraud and wire fraud to securities fraud and health care fraud. While many fraud offenses may be obvious based on their name—for example, mail fraud includes use of the mail, and tax fraud involves forms of fraudulent activity associated with your taxes—one type of fraud that might not be so obvious is honest services fraud. What is honest services fraud, and what should you do if you are facing charges? Our Dallas federal fraud defense attorneys can provide you with more information about honest services fraud and can assist you with defense strategies for federal fraud charges.

Background of Honest Services Fraud

Under Section 1346 of Title 18 of the U.S. Code, “for the purposes of 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 statutory language is applicable to federal mail and wire fraud statutes, and it builds on the general definition of frauds and swindles under federal law: “Whoever, having devised or intending to devise any scheme or artifice to defraud . . . shall be fined under this title or imprisoned not more than 20 years, or both.”

Congress created Section 1346 in response to the U.S. Supreme Court case McNally v. United States (1987), in which the Court held that the existing mail fraud statute did not include “schemes to defraud citizens of their intangible rights to honest and impartial government,” and noted that the existing statute was “limited in scope to the protection of property rights.”

What are intangible rights, and what, then, is an intangible right of honest services? The definition of an intangible right of honest services is not expressly defined under federal law, but interpretations of the statutory language help to clarify what constitutes an intangible right of honest services, and thus what constitutes honest services fraud.

Honest Services Fraud as a Theory of Mail and Wire Fraud

As we noted above, the addition of Section 1346 clarified that the mail and wire fraud statutes extended beyond “money or property” to include an “intangible right of honest services.” To be clear, mail and wire fraud charges can be brought on a theory of honest services fraud.

Historically, most honest services fraud cases involved bribes or kickbacks that a person received in exchange for another benefit. After Section 1346 was passed, courts developed varying definitions of an intangible right of honest services in order to define honest services fraud. In 2010, the U.S. Supreme Court heard the case of United States v. Killing, in which it clarified that Section 1346 is applicable to a “core” of cases involving bribery and kickbacks. Accordingly, a person can face charges for mail or wire fraud on a theory of honest service fraud when the person violates a fiduciary duty by participating in bribery or kickback schemes.”

Given that honest services fraud can be a theory for mail or wire fraud charges, defenses for other types of mail or wire fraud charges can apply.

Contact Our Federal Fraud Defense Lawyers in Texas

If you have questions about defending against any type of federal fraud charges, our Dallas federal fraud defense attorneys can assist you. Contact the Law Office of Patrick J. McLain, PLLC to learn more.

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