Commercial Litigation and Arbitration

Honest Services Mail Fraud Does Not Require Proof that Conduct Violated an Applicable State Law — Circuit Split

From United States v. Weyhrauch, 2008 U.S. App. LEXIS 24248 (9th Cir. Nov. 26, 2008):

This … interlocutory appeal … presents a matter of first impression in this circuit — whether a federal honest services mail fraud prosecution under 18 U.S.C. §§ 1341 and 1346 requires proof that the conduct at issue also violated an applicable state law. ***

The district court accurately observed that we have not considered what § 1346 requires of public officials and that our sister circuits have expressed divergent views on the proper meaning of "honest services" for public officials. The Fifth Circuit has adopted the so-called "state law limiting principle," which requires the government to prove that a public official violated an independent state law to support an honest services mail fraud conviction. See [United States v.] Brumley, 116 F.3d [728] at 734-35 [(5th Cir. 1997) (en banc)]. The Third Circuit has adopted a similar rule requiring the government to prove the public official violated a fiduciary duty specifically established by state or federal law. See United States v. Murphy, 323 F.3d 102, 116-17 (3d Cir. 2003).

The majority of circuits, however, have held that the meaning of "honest services" is governed by a uniform federal standard inherent in § 1346, although they have not uniformly defined the contours of that standard. See Sorich, 523 F.3d at 712 (holding that sources other than state law can establish a duty to provide honest services); Urciuoli, 513 F.3d at 298-99 (declining to read honest services fraud statute to require violation of state law); United States v. Walker, 490 F.3d 1282, 1299 (11th Cir. 2007) (holding that an honest services fraud conviction "does not require proof of a state law violation"); United States v. Bryan, 58 F.3d 933, 942 (4th Cir. 1994) (holding that the duty of honesty is defined irrespective of the existence of state law). The Seventh Circuit has read § 1346 to require public officials to breach a fiduciary duty with an intent to reap private gain to support an honest services mail fraud conviction, see Sorich, 523 F.3d at 708, and the First Circuit has suggested that the official's misconduct must involve more than a mere conflict of interest to support a conviction, see Urciuoli, 513 F.3d at 298-99. Finally, several circuits have read into § 1346 the requirement that a public official's breach of duty must be material and accompanied by fraudulent intent. See United States v. Cochran, 109 F.3d 660, 667 (10th Cir. 1997); United States v. Jain, 93 F.3d 436, 442 (8th Cir. 1996). In essence, our sister circuits have construed the meaning of "honest services" in ways that limit, to differing degrees, the reach of § 1346 into state and local public affairs.


Nonetheless, we decline to adopt the state law limiting principle. 5 As an initial matter, our pre-McNally decisions do not support the conclusion that the federal fraud statutes derive their content solely from state law. ***

We also cannot find any basis in the text or legislative history of § 1346 revealing that Congress intended to condition the meaning of "honest services" on state law. Because laws governing official conduct differ from state to state, conditioning mail fraud convictions on state law means that conduct in one state might violate the mail fraud statute, whereas identical conduct in a neighboring state would not. Congress has given no indication it intended the criminality of official conduct under federal law to depend on geography. ***

Finally, federal action based on a valid constitutional grant of authority is not improper simply because it intrudes on state interests.

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