From Coaches to Church Officials, an Honesty Law Gets a Workout, Dan Slater, Wall Street Journal, February 5, 2009

From Coaches to Church Officials, an Honesty Law Gets a Workout

By Dan Slater
Wall Street Journal
February 5, 2009

http://online.wsj.com/article/SB123379864724350423.html?mod=googlenews_wsj

Cardinal Roger Mahony's archdiocese is under investigation.

Other than public humiliation, former New York Senate majority leader Joe Bruno and former Illinois Gov. Rod Blagojevich have something in common: They are both being investigated for the unusual crime of "honest services" fraud.

The concept is simple enough. One court has described honest-services fraud as "the public not getting what it wants and deserves: honest, faithful, disinterested service from a public employee."

The federal law seems ideal for prosecuting public officials. But the creative application of the honest-services theory to go after private individuals has led to it being used in ways that some critics say is a real stretch.

Judges are increasingly criticizing the statute for being vague, suggesting that either Congress should redraft it or the Supreme Court should strike it down. Lawyers argue that it shouldn't be a default federal criminal claim for prosecutors who can't find another charge to bring. "In a sense, it's become a catch-all claim," says Notre Dame Law School Professor G. Robert Blakey, who had a role in drafting the honest-services fraud statute.

Federal appellate Judge Barrington Parker Jr. wrote in a 2003 opinion: "It is quite clear that the statute imposes insufficient constraint on prosecutors, gives insufficient guidance to judges, and affords insufficient notice to defendants."

For that reason, prosecutors love it. Patricia Pileggi, a former prosecutor who has brought honest-services fraud cases, says "since you don't have to prove loss of money, the statute is easier for prosecutors to use" than extortion or bribery statutes.

In 1988, Congress criminalized "a scheme or artifice to deprive another of the intangible right of honest services" under the mail- and wire-fraud statutes. Conviction carries a maximum sentence of 20 years.

In the public sector, cases typically involve bribery or some other personal gain by a public official, such as a failure to disclose a conflict of interest that benefited the official. Last month, prosecutors used the statute to go after Mr. Bruno, who was indicted on charges that he allegedly reaped millions of dollars from companies that sought to do business with New York State and labor unions. Mr. Blagojevich also was charged with the crime in a criminal complaint that alleged he conspired with another to defraud Illinois of his honest services.

Prosecutors use the honest-services charge against private-sector individuals, too, such as corporate executives, usually in cases involving kickbacks or circumstances where the executives have cheated a company. Unlike garden-variety criminal fraud, which requires that a victim was bilked out of tangible property, such as money, honest-services fraud redresses the deprivation of an intangible right to another's honest services.

But prosecutors have also applied the law in surprising ways. In the mid-1990's, federal prosecutors in Texas successfully brought a charge against three men's-basketball coaches at Baylor University, a private school, for scheming to obtain credits and scholarships for players, in violation of National Collegiate Athletic Association rules. Baylor, the court found, was deprived of honest services.

Now federal prosecutors in Los Angeles are investigating the largest Roman Catholic archdiocese in the U.S., according to people familiar with the matter. They say that the honest-services law is one possible weapon federal prosecutors could use against church officials, if they find sufficient evidence of criminal activity to bring charges. Though they may not end up bringing charges, investigators are looking into whether Cardinal Roger Mahony, who heads the Catholic Archdiocese in Los Angeles, and other top church officials tried to cover up the sexual abuse of minors by priests.

A spokesman for the archdiocese declined to comment but has said previously that it is cooperating with the investigation and believes any pertinent matters are in the distant past. The U.S. attorney's office in Los Angeles declined to comment.

Lawyers say it's not clear how an honest-services legal theory would apply here. Though Prof. Blakey envisioned how the law might be applied, his hypothesis required some maneuvering: An abusive priest would injure a child, but the priest would simply be moved to another parish, without anyone notifying the new parishioners about the priest's history. By not being candid with the new parishioners, the thinking goes, the church hierarchy is denying them honest services.

"The Cardinal is like the chairman of the board of a company," said Frank Razzano, a lawyer who criticizes the way the honest-services doctrine has sometimes been used. "If it can be proven that he knew people were engaged in illegal conduct and he allowed them to be moved around without advising his parishioners, then that, as much as I'd hate to see it happen, could be enough to make an honest services fraud case."

Critics argue that many of the grievances that the honest-services fraud charge address are best left to victims' filing suit in civil court. In fact, in 2007, the L.A. archdiocese agreed to pay $660 million to 508 alleged victims, among the largest settlements in the U.S. priest scandal.

"There are things the prosecutor should be looking at and this is not one of them," said Prof. Blakey. "Don't you have something better to do, like terrorism?"

Write to By at george.melloan@wsj.com and Dan Slater at dan.slater@wsj.com