Client Alert

The Supreme Court Limits the Scope of the Federal Criminal Honest Services Fraud Statute to Conduct Involving Bribes or Kickbacks

June 25, 2010

The White Collar Crime and Regulatory Enforcement Group

The Supreme Court this week limited the scope of an important federal criminal statute that has been frequently relied upon by prosecutors in investigating and prosecuting business leaders, public officials and professionals. The Court held, in an opinion arising out of the case against former Enron CEO Jeffrey Skilling, and in related rulings in cases involving newspaper magnate Conrad Black and Alaska legislator Bruce Weyhrauch, that the federal honest services fraud statute, 18 U.S.C. § 1346, may only be used to prosecute breaches of fiduciary duty involving bribes or kickbacks. The import of the holding is that the statute can no longer be used -- as it has been frequently -- to prosecute conduct such as self-dealing, undisclosed conflicts of interest, and breach of fiduciary duty that, while unethical and unsavory, is otherwise typically the subject of civil litigation. Going forward, in order to make out an honest services fraud violation, a prosecutor will need to establish that a defendant solicited or received a side payment from a third party in exchange for a fraudulent act or a breach of duty

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