Honest Services Fraud (18 U.S.C. § 1346)
“For the purposes of this chapter [mail and wire fraud], the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”
Enacted 1988 to overturn McNally v. United States (1987), which had held that mail and wire fraud statutes protect only tangible property, not intangible rights.
Scope After Skilling
Skilling v. United States (2010): To avoid constitutional vagueness, § 1346 is limited to schemes involving bribery or kickbacks — not self-dealing or undisclosed conflicts of interest absent a kickback. The Court refused to extend § 1346 to all schemes in which an employee deprives an employer of the employee’s honest services.
Elements (Post-Skilling)
- Bribery or kickback scheme — the scheme must involve either:
- A public official or private employee demanding/accepting payment in exchange for favorable action (bribe), OR
- A person accepting a secret payment for steering business to a third party (kickback)
- Transmitted by mail or wire — the mail or wire fraud predicate (§§ 1341, 1343)
- Intent to defraud — specific intent to deprive another of honest services
- Materiality — the scheme involved a material misrepresentation or omission
Public vs. Private Sector
- Public officials: honest services fraud largely parallels bribery under § 201 but uses the mail/wire fraud vehicle; McDonnell limits on “official acts” apply
- Private sector: employer-employee relationship; private fiduciary duty; kickback must be in the employee’s own interest at the employer’s expense
Key Cases
- McNally v. United States (1987) — limited fraud statutes to tangible property; prompted § 1346
- Skilling v. United States (2010) — narrowed § 1346 to bribery/kickbacks to avoid vagueness
- United States v. Black (2009) — pre-Skilling; illustrated scope of honest services prosecutions
- Percoco v. United States (2023) — private citizen who “dominated and controlled” a government agency could not be convicted under § 1346 without a jury instruction on fiduciary duty