Leaderboard 728 X 90

Wednesday, September 19, 2007

Mail Fraud: A Primer

In order to understand the Paul Minor case in Mississippi, it helps to understand honest-services mail fraud. And that's not an easy task because many legal professionals disagree about what the statute (18 U.S. Code 1346) means and how it should be applied.

But as I noted earlier, half of the counts in the Minor case--and two-thirds of the counts in the Don Siegelman case in Alabama--involved honest-services mail fraud.

The Minor and Siegelman cases involved a very similar set of charges--bribery, conspiracy, racketeering, etc. I suspect most citizens have a fairly good idea of what bribery and conspiracy are. Racketeering probably is a little more fuzzy, but a lot of folks have a general idea of what that means.

But honest-services mail fraud? Ask most people about that, and you are likely to draw a blank stare. The statute, however, is a powerful tool in the hands of federal prosecutors. Take a look at most any corruption case involving public officials, and you are likely to find charges of honest-services mail/wire fraud.

So what exactly is honest-services mail fraud?

First, a little history. Prior to 1987, a long line of court cases had held that the federal mail and wire fraud statues encompassed schemes to defraud citizens of an intangible right to honest government from public officials. But in McNally v. U.S., 483 U.S. 350 (1987), the U.S. Supreme Court ruled that the fraud statutes encompassed only property interests and not intangible rights to honest services. Congress responded in 1988 by enacting 18 U.S. 1346, essentially overturning McNally and reinstating the honest services provision.

Another point to keep in mind: State criminal statutes tend to be fairly precise in their wording. Federal statutes, as we will see, tend to be much more broadly written. And that puts huge amounts of discretion in the hands of federal prosecutors--a frightening amount, some might say.

So what do the statutes actually say. Here is 18 U.S. 1341, the mail fraud statute. And here is 18 U.S. 1343, which is pretty much the same thing, only for wire fraud. And here is 18 U.S. 1346, which reinstates the honest-services provision into the law.

Does reading that leave you with a glazed look in your eyes? Join the crowd. The legalese is mind-numbing isn't it?

To come to some understanding of federal fraud law, you need to read the case law. And that is much easier to decipher. Here is the crux of the matter:

* A person commits mail or wire fraud if he has (A) Perpetuated a scheme to defraud that includes a material deception; (B) with the intent to defraud; (C) while using the mails in furtherance of the scheme. Neder v. U.S., 527 U.S. 1 (1999).

So is that it? Well, not quite. Let's consider a few more key questions:

* What is a scheme to defraud? Courts have defined it as "a departure from community standards of 'fair play and candid dealings.'" U.S. v. Autori 212F. 3d 105 (2000)

* What is intent to defraud? Courts have defined it as "a willful act by defendant with specific intent to deceive or cheat." U.S. v. Stephens, 421F.3d 503, (2005)

* When does a person cause the mails to be used? Courts have said this occurs when he or she "acts with knowledge that the use of the mails will follow in the ordinary course of business." Pereira v. U.S., 347 U.S. 1 (1954)

* What about the "in furtherance" element? This requirement is satisfied by showing that the mailing was "incident to an essential part of the scheme."Schmuck v. U.S. 489 U.S. 705, (1989)

Is that it? We're getting there. A few other key considerations:

* Did the scheme succeed? Success of the scheme is irrelevant. The prosecution simply must show that "the defendants' scheme, if successful, would have deprived an individual of interests protected under the statute." U.S. v. Brown, 79 F. 3d, 1550 (1996)

* What about the "honest services" component included under Sec. 1346? Courts have stated that a public official has a duty to disclose information regarding a personal interest that may affect his judgment and therefore "undisclosed, biased decision making . . . regardless of tangible loss to the public . . . constitutes a deprivation of honest services." U.S. v.Lopez-Lukis, 102 F.3d 1164, (1997)

* Do public officials have to receive personal gain from their scheme? This is a matter of considerable debate. At least one judicial circuit has said yes. Most circuits have said no. In general, courts have held: "The prosecution need not prove that the scheme was successful or that the intended victim suffered a loss, or that the defendant secured a gain. The gist of the offense is a scheme to defraud and the use of interstate communications to further that scheme." U.S. vs. Louderman, 576 F. 2d 1383, (1978)

* Need a summary? Here it is: "The loss of good faith services alone establishes the breach." U.S. v. Silvana, 812 F. 2d 754, (1987)

Are we done yet? Yep, we're done for now. There are a few other specifics to consider, and we will address those when I go into the clear honest-services mail fraud that has been committed by judges and attorneys in the Legal Schnauzer case.

But this gives us some baseline knowledge for understanding the Paul Minor case in Mississippi, and to a great extent, the Don Siegelman case in Alabama. You can now consider yourself a certified pseudo expert in federal fraud law. Even the Unfrozen Caveman Lawyer would be impressed.

Now, onward to Mississippi!

1 comment:

Anonymous said...

It would be nice if Sen. Christopher "Sweetheart Mortgage" Dodd and Congressman Barney "Romantically involved with Fannie Mae official" Frank could be held to this standard.

Courts have stated that a public official has a duty to disclose information regarding a personal interest that may affect his judgment and therefore "undisclosed, biased decision making . . . regardless of tangible loss to the public . . . constitutes a deprivation of honest services."