Transcript Honest Services Fraud - Florida League of Cities

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Honest Services Fraud
Avoid Finding Your Picture
in the Headlines as…
“Local Government Official Jailed”
Applicable Law
18 U.S.C. § 1341 (Frauds and swindles):
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by means of
false or fraudulent pretenses, representations, or promises, or to sell,
dispose of, loan, exchange, alter, give away, distribute, supply, or
furnish or procure for unlawful use any counterfeit or spurious coin,
obligation, security, or other article, or anything represented to be or
intimated or held out to be such counterfeit or spurious article, for
the purpose of executing such scheme or artifice or attempting so to
do, places in any post office or authorized depository for mail matter,
any matter or thing whatever to be sent or delivered by the Postal
Service, or deposits or causes to be deposited any matter or thing
whatever to be sent or delivered by any private or commercial
interstate carrier, or takes or receives therefrom, any such matter or
thing, or knowingly causes to be delivered by mail or such carrier
according to the direction thereon, or at the place at which it is
directed to be delivered by the person to whom it is addressed, any
such matter or thing, shall be fined under this title or imprisoned not
more than 20 years, or both.
Applicable Law
18 U.S.C. § 1343 (Fraud by wire, radio, or television):
Whoever, having devised or intending to devise any scheme or
artifice to defraud, or for obtaining money or property by means of
false or fraudulent pretenses, representations, or promises, transmits
or causes to be transmitted by means of wire, radio, or television
communication in interstate or foreign commerce, any writings,
signs, signals, pictures, or sounds for the purpose of executing such
scheme or artifice, shall be fined under this title or imprisoned not
more than 20 years, or both.
Applicable Law
“Scheme or artifice to defraud” defined by Congress in 1988 as “a
scheme or artifice to deprive another of the intangible right of honest
services” (18 U.S.C. § 1346)
Congress enacted 18 U.S.C. § 1346 (Definition of “scheme or artifice
to defraud”) in reaction to U.S. Supreme Court decision in McNally v.
United States, 483 U.S. 350 (1987)
McNally decision overruled a long line of lower court decisions,
finding that 18 U.S.C. § 1341 did not prohibit schemes to defraud
citizens of their intangible rights to honest and impartial government
In enacting 18 U.S.C. § 1346, members of Congress explained that
its purpose was to overturn McNally and restore “honest services”
mail fraud provision which existed prior to McNally
Pre-Skilling Law

Per United States v. Rybicki, the four elements to the crime
of honest services fraud are:

(1)
a scheme or artifice to defraud;

(2)
for the purpose of knowingly and intentionally
depriving another of the intangible right of honest
services as thus defined;

(3)
where the misrepresentations (or omissions) made
by the defendants are material in that they have the
natural tendency to influence or are capable of
influencing the employer to change its behavior; and

(4)
use of the mails or wires in furtherance of the
scheme.
Not So Fast My Friend…
Jeffrey K. Skilling, former Enron
CEO…
Enron was the 7th largest revenue
producing company in America, with
stock selling at $90 per share, before
crashing into bankruptcy in 2001
Skilling was charged with one count
of conspiracy to commit honest
services wire fraud, plus over 25
counts of securities fraud, making
false representations to Enron’s
auditors, and insider trading
He appealed, arguing that the honest
services law was unconstitutionally
vague…
Skilling Aftermath
In Skilling v. United States, 130 S. Ct. 2896 (2010), the
Supreme Court held that § 1346 (mail fraud statute)
criminalizes only those schemes that involve bribes or
kickbacks…
Supreme Court also found that non-disclosure of a conflict
of interest is not a violation of the honest services fraud
statute…
Therefore, honest services fraud statute is not
unconstitutionally vague when properly confined to bribery
and kickback schemes…
Cases with
National Recognition
United States v. Kemp, 379 F. Supp. 2d 690 (E.D. Penn. 2005), aff’d 500
F.3d 257 (3rd Cir. 2007), cert. den. 128 S.Ct. 1329 (2008)
Corey Kemp, former treasurer of the City of Philadelphia, and others
were convicted for various offenses, including honest services
mail/wire fraud
Kemp allegedly rec’d payments & gifts (NBA All-Star game tickets, Super
Bowl tickets, trips, home improvements, personal loans, loans for his
relatives & church) in exchange for City business
Received a 10-year sentence and appealed… U.S. Court of Appeal, Third
Circuit, affirmed the conviction
Cases with
National Recognition
United States v. Sorich, 523 F.3d 702 (7th Cir. 2008)
Involved high level employees of the City of Chicago, who doled
out thousands of city civil service jobs based on political
patronage and nepotism
Scheme had been going on for years… included filling out sham
interview forms to assure certain persons would be hired
Convicted by a jury of mail fraud
Longest sentence was 46 months
Cases with
National Recognition
United States v. Walker, 490 F.3d 1282 (11th Cir. 2007)
Former Georgia state legislator Charles W. Walker…
Owned a personnel agency that provided temporary
workers for hospitals and other businesses… used his
influence to get legislation passed to benefit Grady Hospital
in Atlanta… rec’d business favors from Grady Hospital,
which utilized his personnel agency
Convicted of 127 counts of conspiracy, mail fraud, and
income tax evasion… sentenced to over 10 years in prison
Cases with
National Recognition
DON SIEGELMAN
FORMER GOV. OF ALABAMA
Convicted of bribery, conspiracy to
commit mail fraud, mail fraud and
obstruction of justice, for receiving
$500,000 donation to establish state
lottery, in exchange for appointing the
donor of the money to a public board
Sentenced to 7 years in prison but
appealed… U.S. Supreme Court vacated
the judgment and remanded in light of
Skilling
Cases with
National Recognition
11 Charged in Alabama in Bingo
Legislation Conspiracy…
► State Senator Larry P. Means
► State Senator James E. Preuitt
► State Senator Quinton T. Ross, Jr.
► State Senator Harri Anne H. Smith
Allegations: solicited, demanded,
accepted, agreed to accept money &
things of value in exchange for
favorable votes & influence on
legislation to allow electronic Bingo
gambling machines in the State
Cases with
National Recognition
Former Illinois Governor Rod R.
Blagojevich…
Indicted for committing racketeering
conspiracy, wire fraud, extortion
conspiracy, attempted extortion and
making false statements to federal
agents
But… the jury was deadlocked, failing
to reach a verdict on 23 of the 24
counts against the former governor
He was convicted of one count of
making false statements to the FBI
Cases with
National Recognition
Detroit City Council President Pro
Tem Monica A. Conyers…
Pleaded guilty to one count of
conspiracy to commit bribery
Admitted to receiving payments
from a representative of a waste
management company in exchange
for her vote in favor of a contract
between the City and the company
Sentenced to 37 months in federal
prison plus two years probation
Cases with
National Recognition
OPERATION BID RIG
FBI sting netted the arrest of 44 prominent political &
religious leaders in New York & New Jersey…
► Peter Cammarano III, youngest ever elected mayor of Hoboken
► Leona Beldini, former deputy mayor of Jersey City
► Dennis Elwell, former mayor of Secaucus
Florida Cases
W.D. CHILDERS, former president
of the Florida Senate and chairman
of the Escambia County
Commission…
Found guilty of two charges of
bribery & unlawful compensation, for
allegedly orchestrating county’s
purchase of property for a $6.2
million soccer complex
Served 3-1/2 year prison sentence,
and was released June 2009
Florida Cases
FORMER PALM BEACH
COUNTY COMMISSIONERS
PLEAD GUILTY
► Anthony R. Masilotti
► Warren H. Newell
► Mary B. McCarty
Florida Cases
OPERATION DIRTY WATER
► 13 Arrested on Bribery &
Racketeering Charges
► Engineering contractor gave
$90,000 in gifts to public utility
employees in exchange for water &
sewer contracts
► Included current / former
employees of Wellington, Port St.
Lucie, Boynton Beach, West Palm
Beach, Delray Beach, Sarasota
County & Palm Beach County
Florida Cases
FORMER DIXIE COUNTY
OFFICIALS CONVICTED
► Former Dixie County
Commissioner Alton Land
► Former Dixie County
Commissioner John Lee Driggers
► Retired building and zoning
inspector Billy Keen, Jr.
Florida Cases
Former Dixie County Attorney JOSEPH T.
(JOEY) LANDER…
Convicted of six felony counts of mail fraud
& 11 felony counts of money laundering, for
requiring developers to pay him personally
for performance bonds… plus used his
position to entice others to invest in his
start-up vitamin business
It is estimated he pocketed over $1 million
during a period of 18 months
Sentenced to 87 months in federal prison
Also ordered to pay $50,000 fine, $1,600 in
court costs, & forfeit co-ownership in local
newspaper
Florida Cases
OPERATION FLAT SCREEN
Former Broward County Commissioner
Josephus Eggelletion… pled guilty to
conspiring to launder money & filing a
false tax return… sentenced to 30
months in prison
Former Broward County School Board
member Beverly Gallagher… pled
guilty to bribery, sentenced to 37 months
in prison
Former Miramar City Commissioner
Fitzroy Salesman… convicted of two
counts of bribery, two counts of
extortion, but acquitted of honest
services fraud… sentenced to 51 months
in prison
Florida Cases
ARRESTED & CHARGED
► Diana Wasserman-Rubin
(Broward County)
► Stephanie Kraft
(Broward County School Bd.)
► Patricia Atkins-Grad
(City of Tamarac)
► Cesar Raul Carasa
(City of West Miami)
► Mildred Fernandez
(Orange County)
Statewide Grand Jury
Statewide grand jury was impaneled to investigate crimes committed
by local & state officials when acting in their official capacity
First Interim Report issued December 29, 2010: “A Study of Public
Corruption in Florida and Recommended Solutions”
According to the Report…
Florida led the nation in the number of public officials convicted of a
federal offense
From 1998 - 2007, 824 public officials in Florida were convicted of a
federal offense... New York was second (704 convicted public
officials), and Nebraska had the fewest
Questions & Answers