Friday, March 29, 2013

White Collar: 11th Circuit Decision re Honest Services Fraud

In United States v. Nelson, 12-11066 (March 13, 2013), the Eleventh Circuit Court of Appeals upheld the wire fraud conviction of a former member of the board of directors of the Jacksonville, Florida, port authority.  The case involved the payment by a port authority vendor to Tony Nelson for his lobbying efforts on behalf of the vendor.  The government had charged the defendant in connection with 18 U.S.C. Section 1346, the "honest services" provision of the mail fraud statute. 
The United States Supreme Court preserved the "honest services" cases from a vagueness challenge by holding that honest services fraud violations are limited to cases of breaches of fiduciary duties involving bribes or kickbacks.  Skilling v. United States, 130 S.Ct. 2896 (2010).  In a concurrence Justice Scalia argued that vagueness also infected the analysis of the extent of the fiduciary duty at issue.
The defendant, before the Eleventh Circuit, sought to press the issue that Scalia had noted.  Nelson argued that the statute was vague as applied because there was no guidance as to the breach of the fiduciary duty.  He suggested that payment for lobbying would be permitted.  Thus, there was an insufficient bright line standard by which he could judge an action to be unlawful.
As the Supreme Court majority had done in Skilling, the Eleventh Circuit rejected the Scalia argument.  The court determined that Nelson's case did not fall outside the parameters of a typical "honest services" case.  He was a public official.  Moreover, he received payments to put his patron's interests ahead of the public's interests.  This was a clear violation of his fiduciary duty.  Finally, the court pointed out that Nelson had take surreptitious actions to hide the source and amount of monies he received, thus raising the inference of his knowledge of the fiduciary breach.
The Eleventh Circuit rejected Nelson's arguments and upheld his conviction.  The full opinion may be viewed by clicking,

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