Former Virginia Governor Bob McDonnell may not have violated any Virginia statutes, yet he and his wife both face criminal prosecution under the federal “Honest Services” statute
On Tuesday, January 21, 2014, former Virginia Governor Robert F. McDonnell and his wife, Maureen McDonnell, were indicted on federal corruption charges. The 14-count indictment consisted of conspiracy, wire fraud, and other charges. The wire fraud charges are based upon alleged violations of the federal “Honest Services” statute and are predicated on the allegation that for nearly two years, the governor and his wife repeatedly asked a campaign donor for loans and gifts of money, clothes, golf fees and equipment, trips, and private plane rides totaling at least $165,000.
While the receipt of lavish gifts from a political donor may appear unseemly, the federal indictment of Governor McDonnell and his wife does not allege that either violated any state statute. Unlike New York State, Virginia’s laws apparently place no financial limit on the gifts a state or local official can receive. While Virginia’s laws require a governor to disclose gifts worth more than $50, they do not require disclosure of gifts to spouses or children. The majority of the gifts were provided to the governor’s family, and apparently under Virginia law the private loan provided for the governor’s real estate business does not fall under the category of a gift. The indictment alleges multiple acts of promotion of the campaign donor’s business over the course of the two years that Governor McDonnell and his wife received gifts from that donor.
The federal mail fraud statute (18 U.S.C. § 1341) provides that “[w]hoever, having devised or intending to devise any scheme or artifice to defraud, ... for the purpose of executing such scheme or artifice or attempting so to do,” places with the United States Postal Service or any private or commercial interstate carrier any matter or thing whatever shall be liable for fine or imprisonment for up to 20 years, or both. The federal honest services statute (18 U.S.C. § 1346) provides simply that, for purposes of the federal mail fraud statute, that “...the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.” Thus, the allegation of the receipt of gifts by the governor’s family in conjunction with his promotion of the campaign donor’s business is enough to warrant an indictment under the federal honest services statute.
The federal honest services statute is often used by federal prosecutors to enforce good governance on state and local officials. The theory is that when a local or state official takes a bribe or a kickback, he or she defrauds the people of the state or locality of their right to that public official’s honest services.
The U.S. Supreme Court has indicated that “honest services” fraud covers only bribery and kickbacks, and does not criminalize mere failures to disclose conflicts of interest. A criminal conviction under the “Honest Services” statute is a felony, punishable by up to twenty years in prison.
In order to convict a defendant based upon a scheme to defraud another of the intangible right of honest services, as contemplated by the “Honest Services” statute, it is unnecessary to prove that defendant intended economic or pecuniary harm or that any such harm actually resulted from fraud. All that is required is proof (1) that the defendant engaged in a scheme to defraud, (2) with intent to deprive another of the intangible right of honest services by accepting a bribe or kickback, (3) that it was reasonably foreseeable to the defendant that the scheme could result in some economic or pecuniary harm to the victim that is more than de minimis, and (4) that mails or wires were used in furtherance of said scheme. While the Supreme Court did not define the elements of “bribery” or “kickback,” prosecutors are only required to demonstrate that (a) a gift was given with an expectation with respect to a specific act, or (b) there was a “stream of benefits” intended to influence actions.
State and local officials should be aware that unethical conduct which does not violate any state or local statute could form the basis of a prosecution under the federal honest services statute.