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The controversial honest-services fraud law, which federal prosecutors have used in numerous corruption cases in San Diego, is finally under the microscope of Supreme Court justices who could decide to scrap it.
Prosecutors and defense lawyers who are closely watching the cases said it’s premature to predict what will happen. But if the apparent skepticism of most — if not all — justices during the oral arguments Dec. 8 leads them to overturn the law, it could be applied retroactively, which would void all convictions since the law was enacted in 1988.
That would have implications for anyone convicted of or charged with honest services fraud — from former San Diego City Councilman Ralph Inzunza to former Congressman Randy “Duke” Cunningham, plus a few Superior Court judges and corporate executives.
“It isn’t worth getting into tea leaves and optimism, you just never know,” said Inzunza’s lawyer, Ben Coleman. “All this is so much speculation. I do think there’s a good chance, if the statute is totally invalidated, it would be retroactive. It would mean their convictions and sentences would be vacated.”
Legal experts said the fact that the high court has agreed to hear three separate cases related to the statute, which simply forbids depriving someone of the “intangible right of honest services,” is a clear signal they intend to take action by either wiping out the law altogether or modifying it.
If the court threw out the law, it wouldn’t necessarily mean Cunningham and others would walk. Cunningham pleaded guilty to other charges too — conspiracy to commit honest-services fraud, bribery and tax evasion. It’s unclear at this point whether the other charges would stand or whether they could be dismissed under the argument that the entire process was tainted by the honest-services charges.
Inzunza was also convicted of other charges and would be in the same boat.
“If the court determines the counts on which they’re reversing somehow could have infected a jury’s deliberation on other counts, they will consider reversing and having a new trial on other counts,” said criminal defense attorney Charles La Bella.
It’s also unclear whether someone like Kyle “Dusty” Foggo, the former CIA official and Cunningham friend who pleaded guilty only to honest services fraud, could be charged with a different crime based on admissions he made in his guilty plea. A five-year statute of limitations might prevent that, but a prosecutor said double-jeopardy would not apply in such a case.
A decision to void the law would also have implications for former San Diego City Councilman Michael Zucchet, who was convicted along with Inzunza by a jury, then acquitted by the trial judge of seven counts and granted a new trial on two honest-services counts. The government would not be able to re-try him on the remaining counts. The case could also impact other high-profile white-collar prosecutions, including those of the Peregrine executives earlier this decade and three Superior Court judges in the mid-1990s.
The debate is centered on how to interpret a 28-word statute that defense attorneys around the country have challenged as unconstitutionally vague.
It reads: “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.”
Courts in every circuit have made their own rules in the absence of clear guidelines.
Today’s honest services law was preceded by another statute that was struck down retroactively by the Supreme Court in 1987 in McNally v. United States. Congress responded by enacting the current law in 1988 with an expanded definition that adds the honest-services reference. Anyone convicted of the first law had their cases thrown out.
The Supreme Court has agreed to review three honest-services appeals this term, including convictions of former Alaska legislator Bruce Weyhrauch, newspaper executive Conrad Black and Enron CEO Jeffrey Skilling. The first two cases were argued back to back on Dec. 8; Skilling’s date has not been set. Lawyers watching the cases said the court will very likely rule only after hearing all three cases, by term’s end in June.
Both San Diego prosecutors and defense attorneys have said it appears very obvious from the tone of questions and comments that justices have issues with the law.
“It’s clear they’re going to do something. It’s clear they’re troubled by the issue,” said La Bella, the defense attorney who is also a former U.S. attorney. “By accepting cert (agreeing to hear the cases) they either want to make sure people know this is the law and we think it’s OK, or we need to make clarifications.”
Justice Antonin Scalia, in urging his colleagues to hear the honest-services cases, noted that the law has been applied to “a staggeringly broad swath of behavior” and could be used to prosecute “a salaried employee’s phoning in sick to go to a ball game.”
Prosecutors, anticipating the Supreme Court will act, have already become wary of charging honest services fraud.
In the San Diego pension case, prosecutors took the step of obtaining a second grand jury indictment on traditional mail and wire fraud charges to preserve their case should honest services fraud be struck down.
“Right now I don’t think there’s a prosecutor out there who wants to base a case on honest services fraud. It really will cut down on our ability to tackle governmental white-collar crime,” said a federal prosecutor, who asked not to be identified because he is not authorized to publicly discuss the issue.
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