Blog 13

Clarify the Honest Services Fraud

On Tuesday December 8, the Supreme Court will hear two separate cases related to the Honest Services Law, originally of 1988.  This law requires private company owners and managers and public officials to, “act in the best interests of their constituents or employers” (NewYorkTimes).  The law was originally designed to protect the consumer or constituents “intangible” right to honest services.  It is extremely unclear as to what these “honest services” are and to what extent of violation they pose. The most extreme example being an individual working for a company who decides to spend time during the work day looking on the internet at new flat screen TVs for sale.  The company is paying for this man’s work, not for him to look on the Internet, technically, the company is being cheated out of honest services.  However, for the obvious reasons, this law is only applied to high-ranking CEOs and public officials.  The most famous of these cases was against the former Enron executive Jeffrey Skilling.

Mr. Skilling was just one of the few convicted of honest services fraud that has attempted to overturn his conviction.  The two cases being heard by the Supreme Court this Tuesday involve Conrad Black, ex- executive from Hollinger International, and Bruce Weyhrauch an ex- Alaskan State Legislature. Mr. Black is not arguing that he did not defraud the company Hollinger International but that he did not contemplate economic harm.  Weyhrauch is arguing that the honest service law violates the principles of federalism.  Mr. Skilling’s case will not be heard until later on.  Mr. Skilling challenges his conviction on the grounds that the honest services law is “unconstitutionally vague”.

Critics say the honest services law has been used when prosecutors cannot get enough evidence to convict a guilty person of any other major crimes, it becomes the back up charge.  The true flaw with the honest services law is the vague nature of the conviction. However, the only way to clear up this unclear law is not to expand the definitions or influence but to expand the regulatory powers whose jobs were to watch these officials in the first place.  The powers of the regulatory mechanisms are too weak to deal with the broad scope of corruption that taints both the public and private sectors.