Supreme Court of the United States again to answer the lawsuit of the DOJ for “fraud of honest services” | jackson walker

Can a private citizen who holds no elective or governmental office have a fiduciary duty to the general public so that he can be found guilty of honest service fraud? On June 30, 2022, the Supreme Court granted certiorari in Percoco v. United States (#21-1158) to answer this question. Simply put, will the Court continue its trend of restricting the government’s use of the Honest Services Fraud Act, 18 USC § 1346, to combat public corruption?

As Joseph Percoco explained in his petition, “when a public official accepts money to convince the government to do something, we call him a crook”, but “when a private citizen accepts money to convince the government to do something, we call him a lobbyist.” In Percocohowever, the government appears to have ignored this distinction.

The United States government sued Percoco for being paid $35,000 to help a real estate developer navigate a government approval process. Prosecutors say Percoco owed a “duty of honest service” to the public because he previously worked for the governor of New York and apparently had “influence.” Percoco was convicted while not holding public office, and the Second Circuit upheld his conviction. United States vs. Percoco13 F. 4th 180 (2nd Cir. 2001).

Prior to 1987, the government prosecuted cases of public corruption through the Mail and Wire Fraud Acts, 18 USC §§ 1341 and 1343, under the theory that the public had a right to receive “honest services” from public officials. The government has applied this theory to a wide variety of cases in which a public official has received personal benefits in return for government action – this could be described as a fraud on public theory.

In 1987, the United States Supreme Court struck down suits under such a theory of intangible rights in McNally v. United States, believing that the government’s theory was too vague and potentially open-ended. 483 US 350 (1987). In response, Congress today enacted the Honest Services Fraud Act, 18 USC §1346, which expressly makes it a crime to defraud another of the “intangible right of honest services.” And federal prosecutors quickly began to treat the corrupt purchase of government services as theft of public property.

Congressional action did not end the debate, however. Defendants continued to argue that the law was unconstitutionally vague, and the Supreme Court generally agreed. In Skilling v. United States561 US 358 (2010), the Court held that honest services fraud is limited to situations where the defendant

  1. breached his fiduciary duty because of
  2. genuine bribes or bribes.

Recently, in Kelly v. United States, 140 S.Ct. 1565 (2020), the so-called “Bridgegate” case, the Court held that acts of political retaliation are not covered by the Honest Services Fraud Act.

Despite the Supreme Court’s long-standing and consistent review of the Honest Services Act, in this case, the Justice Department prosecuted a private citizen for helping another private citizen navigate an approval process. of state development because the defendant had worked for the governor of New York, was working on the governor’s re-election campaign, and generally had “influence.” To do this, the trial court instructed the jury that a private citizen may have a fiduciary duty to the public. The Second Circuit agreed, relying on a 1982 case, United States vs. Margiotta688 F.2d 108 (2d Cir. 1982), arguing that the “honest services” theory could be applied to private citizens.

Percoco maintains that Daisy was repealed by the 1987 Act McNally decision and subsequently the Supreme Court restricted the theory of honest services. He told the Court, “the notion that private citizens have a duty of honest service to the public as long as a jury deems them influential enoughhas no basis in law. (Percoco Cert. Pet. at 2 (emphasis added).) Indeed, Percoco’s conviction appears to open the door to prosecution of any lobbyist who has a personal relationship with a government official.

The boundary between legal lobbying and the decision of a jury that a lobbyist has de facto control over a government official will be thin and vague. Many lobbyists previously held public office or worked for public officials. Likewise, friends, media personalities and even family members can be targeted by aggressive or politically motivated prosecutors. Under the Percoco and Daisy Logically, a jury might conclude that all of these individuals have sufficient influence over a public official to discharge their own duty of honest service to the public.

Under the Percoco and Daisy Logically, a jury might conclude that all of these individuals have sufficient influence over a public official to discharge their own duty of honest service to the public.

By agreeing to review Percoco In light of its constant review of government lawsuits in this area, the Supreme Court has signaled that it may share these concerns.

About Jessica J. Bass

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