Updated 3:40 p.m.
The U.S. Supreme Court's decision that narrowed the scope of honest services fraud prosecutions significantly threatens the Justice Department's ability to fight public and corporate misconduct, Assistant Attorney General Lanny Breuer said on Capitol Hill today.
Breuer, testifying before the Senate Judiciary Committee, urged Congress to fill what he called a “void” created by the high court's decision in June in Skilling v. United States. The Court in Skilling limited honest services prosecutions to bribery and kickback cases, rejecting a broader interpretation that prosecutors had relied on for years.
But the crimes that public officials and corporate executives commit do not sometimes easily fit into the definition of bribery and extortion, Breuer said. The honest services fraud theory of wire and mail fraud, he said, was used widely to fight “creative” criminals.
“In short, the Skilling decision removed a category of deceptive, fraudulent, and corrupt conduct from the scope of the honest services fraud statute and placed that conduct beyond the reach of federal criminal law,” Breuer said in written testimony (.pdf).
In his submitted testimony, Breuer (above) noted several high-profile examples of honest services prosecution, including the cases against lobbyist Jack Abramoff and former Reps. William Jefferson (D-La.) and Robert Ney (R-Ohio).
Breuer called the impact of the Skilling decision “real.” Without identifying a specific investigation, Breuer declared there are examples of misconduct that would have been prosecuted before the high court’s ruling.
“A public official who conceals his financial interests and then takes official action to advance those interests engages in behavior every bit as corrupt as if he accepts a clear bribe from a third party,” Breuer said. “The Department urges Congress to act quickly to restore our ability to prosecute individuals for this kind of undisclosed self-dealing.”
Breuer said DOJ supports a statute that restores the department’s ability to use mail and wire fraud laws to prosecute public officials.
To minimize the risk of convicting a person for a mistake or an unwitting conflict of interest, Breuer said any new statute should require the government to prove both a knowing concealment of material information and a specific intent to defraud.
Senate Judiciary Chairman Patrick Leahy (D-Vt.) said in a prepared statement today: “I understand the concerns in many circles about vague or undefined Federal laws which could leave some public officials or executives uncertain about what kind of conduct could leave them susceptible to criminal charges. But that is no reason for us to let corrupt or fraudulent conduct go unchecked.”
At the hearing, Sen. Jeff Sessions (R-Ala.), the ranking Republican on the judiciary committee, said any work on a new statute must steer from what he called prosecutorial over-reaching.
"Otherwise the prosecution can become a tool of political power for punishment of opponents," Sessions said. "The vaguer you get, the harder it is to defend against political and abusive prosecution."
White & Case partner George Terwilliger III, who heads the firm's white collar practice group, said at the hearing that the lines should be drawn on the state and local level with the federal government acting as a "safety net."
"I think we have to be very very careful that we don't have anything again as amorphous" as the honest services fraud laws, Terwilliger said today. His prepared testimony is here.
Leahy on Tuesday introduced legislation called the "Honest Services Restoration Act" that would expand the statute to include "self-dealing" financial transactions by public officials and corporate officers of publicly traded companies. The bill focuses on cases in which a public official or executive fails to disclose material information about financial interests in which the person benefited. The text of the legislation is here.
Photo by Diego M. Radzinschi / The National Law Journal