Part 2- Crimes and Torts, Chapter 5: Criminal Law and Procedure, Doc 3

This lengthy passage provides a detailed legal examination of the development and interpretation of fraud under U.S. federal law, particularly concerning "honestservices fraud," and the standards required in criminal prosecutions. Here are the main points broken down into key sections: Honest-Services Doctrine • • • Development of Honest-Services Fraud: Initially, courts interpreted “scheme or artifice to defraud” broadly, covering not only financial losses but also “intangible rights,” such as the public’s right to honest services from officials. This interpretation allowed for prosecutions where, for example, a public official received bribes without directly harming public funds, but betrayed public trust. Pre-McNally Expansion: Courts began prosecuting both public and private-sector employees under this doctrine if they breached their duty of loyalty, even without direct financial harm to the employer. By 1982, all federal appeals courts accepted this broad interpretation. The McNally Decision: In 1987, the Supreme Court limited the scope of federal fraud statutes to protect “property rights,” rejecting the notion of an “intangible rights” doctrine without specific legislation. Congressional Response: Section 1346 • • Enactment of § 1346: Congress reacted by passing § 1346 in 1988, expressly covering “the intangible right of honest services,” thus restoring the doctrine rejected in McNally. Challenges to § 1346’s Vagueness: Jeffrey Skilling argued that the statute’s phrasing—“intangible right of honest services”—was vague and could lead to arbitrary enforcement. He contended that it failed to clearly define prohibited behavior or prevent potential prosecutorial abuse. Court’s Interpretation and Limiting of § 1346 • • Narrowing Construction: To address vagueness concerns, the Court chose not to invalidate § 1346. Instead, it limited its scope to bribes and kickbacks, the core areas consistently covered in pre-McNally honest-services cases. This restriction aimed to preserve the law's constitutionality and prevent it from being applied too broadly. Bribes and Kickbacks Only: Under this interpretation, the statute applies only to fraud involving fiduciary duty breaches through bribes or kickbacks, effectively reducing risks of arbitrary prosecutions. Skilling’s Case and Implications • Charges Against Skilling: Skilling was accused of conspiracy to commit honest-services fraud by misrepresenting Enron’s financial health for • personal financial gain. However, his actions did not involve third-party bribes or kickbacks, which, under the new interpretation, fell outside § 1346’s scope. Impact of Flawed Conviction: The Court found that, due to the inclusion of invalid honest-services fraud charges, Skilling’s conviction on this count was flawed. The case was remanded to determine whether this error affected his other convictions. Broader Legal Principles and Standards • • Criminal Intent and Proof Standards: U.S. criminal law generally requires proof beyond a reasonable doubt and a mens rea (criminal intent), which excludes mere negligence. Incapacities like insanity or extreme intoxication can affect liability but rarely serve as full defenses. Eighth Amendment and Equal Protection: The Eighth Amendment restricts excessively harsh punishment, and the Equal Protection Clause prevents discriminatory laws, demanding a rational basis for statutory classifications. This case exemplifies the judicial balance between enforcing anti-corruption measures and ensuring that laws are clear and constitutionally sound, with careful attention to potential overreach in prosecuting fraud based on ambiguous standards.