18 U.S. Code § 1346 - Honest Services Fraud
The phrase “honest services fraud” has recently been featured in the national news due to some high-profile federal criminal cases related to celebrities and wealthy parents bribing specific universities to get their children admitted.
Honest services fraud is defined under 18 U.S.C. §1346 as a scheme to defraud another of the intangible right to honest services through a scheme that violates a fiduciary duty by bribery or kickbacks.
A fiduciary duty is defined as acting only for the benefit of the public, an employer, shareholders, or a union. The United States Congress created this statute in response to the government's limitation in using the 18 U.S.C. 1343 wire fraud statute.
18 U.S.C. 1346 says, “For the purposes of this chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.”
A primary purpose of this statute was to widen the scope of the mail fraud law so prosecutors could get convictions for more intangible fraud cases.
This statute was most recently used to prosecute several cases in the 2019 college admissions scandal, where celebrities Felicity Huffman and Lori Laughlin paid bribes to prestigious college admissions offices to modify admissions test scores so their children would be admitted over others.
This fraudulent scheme deprived other qualified applicants of the “honest services” of getting accepted into these universities.
In other words, 18 U.S.C. 1346 honest services fraud is a scheme to defraud another of the intangible right to honest services. You could face the same penalties as mail or wire fraud if convicted of honest services fraud. Let's review this federal statute further below.
What Is Honest Services Fraud?
Honest services fraud under 18 U.S.C. 1346 is a federal crime involving misusing someone's position or authority for personal advantage. This crime is usually committed by the following:
- Public officials,
- Corporate officers, and
- Private individuals with fiduciary duties to others.
Notably, under case law, honest services fraud has to include some bribe or kickback to be considered a crime. This means that honest services fraud involves separate actions, such as the following:
- Somebody offers a bribe or kickback;
- Somebody accepts the bribe or kickback; and
- A victim was deprived of the intangible right of honest services because of a bribe or kickback.
What Must a Federal Prosecutor Prove?
To convict a defendant charged with Section 1346, a federal prosecutor has to prove, beyond a reasonable doubt, all the elements of the crime, such as the following:
- A fiduciary duty is owed, such as to the public; and
- The defendant knowingly devised a scheme to defraud intended to deceive or cheat someone of the intangible right to honest services through bribery or kickbacks; giving someone an unfair advantage, and
- The defendant acted with the intent to defraud; and
- The scheme to defraud used a materially false or fraudulent pretense, representation, or promise, which could include an omission or the concealment of information to influence decision-making.
- The scheme used mail or wire services, including phone or Internet.
What Are the Related Federal Laws?
18 U.S. Code Chapter 63 mail fraud and other fraud offenses have numerous federal statutes that are related to 18 U.S.C. 1346 “scheme or artifice to defraud, such as the following:
- 18 U.S.C. 1341 – frauds and swindles (mail fraud);
- 18 U.S.C. 1342 – fictitious name or address;
- 18 U.S.C. 1343 – fraud by wire, radio, TV (wire fraud);
- 18 U.S.C. 1344 – bank fraud;
- 18 U.S.C. 1345 – injunctions against fraud;
- 18 U.S.C. 1347 – health care fraud;
- 18 U.S.C. 1348 – securities and commodities fraud;
- 18 U.S.C. 1349 – attempt and conspiracy;
- 18 U.S.C. 1350 – failure of officers to certify financial reports;
- 18 U.S.C. 1351 – fraud in foreign labor contracting.
What Are the Penalties for 18 U.S.C. 1346?
As noted, honest services fraud is punished like the mail and wire fraud statutes. Suppose you are convicted of violating this statute. In that case, the penalties include the following:
- For most violations of the honest services statute, the penalties include a fine of up to $250,000 and up to 20 years in federal prison.
- If the honest services fraud involves a financial institution or affects benefits being provided in a nationally declared emergency (42 U.S.C. 5122), the penalties include a fine of up to $1 million and up to 30 years in federal prison.
Defenses for Honest Services Fraud
To convict you of honest services fraud, prosecutors must prove some aspects of the crime beyond a reasonable doubt.
Thus, the most common defenses against honest services fraud used by a federal criminal defense lawyer will be to challenge these crucial elements, as discussed below.
Maybe we could argue that you were unaware of any scheme to defraud when you participated. Perhaps you were informed that if you paid a higher fee, you would be provided with a priority review for college admission.
Maybe you believed it was a legitimate routine procedure and not a bribe. As noted, for a federal prosecutor to obtain a conviction, they must prove you deliberately participated in a fraudulent scheme.
Maybe we can argue that there was no bribe or kickback exchanged. Perhaps you gave the individual a gift as a friend with no obligations attached to it. Maybe the other person did not provide you with an unfair advantage.
Suppose you are under a criminal investigation or indicted for Title 18 U.S. Code 1346 honest services fraud. In that case, contact us by phone or contact form for a free case evaluation.
If guilt is not in doubt, maybe we can negotiate with the federal prosecutor for a favorable plea bargain. The Hedding Law Firm is located in Los Angeles, California.
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