Term: 2009
Docket: 08-876
Conrad M. Black, John A. Boultbee, And Mark S. Kipnis v. United States
- Pro
08-876 BLACK V. UNITED STATES DECISION BELOW: 530 F.3d 596 CERT. GRANTED 5/18/2009 QUESTION PRESENTED: This Court held in McNally v. United States, 483 U.S. 350 (1987), a public corruption case, that the mail fraud statute could not be used to prosecute schemes to deprive the citizenry of the intangible right to good government. Congress responded in 1988 by enacting 18 U.S.C. § 1346, which expands the definition of a "scheme or artifice to defraud" under the mail and wire fraud statutes to encompass schemes that "deprive another of the intangible right of honest services." Twenty years later, the courts of appeals are hopelessly divided on the application of Section 1346 to purely private conduct. In this case, the Seventh Circuit disagreed with at least five other circuits and held that Section 1346 may be applied in a purely private setting irrespective of whether the defendant's conduct risked any foreseeable economic harm to the putative victim. In the alternative, the Seventh Circuit ruled that the defendants forfeited their objection to the improper instructions by opposing the government's bid to have the jury return a "special verdict," a procedure not contemplated by the criminal rules and universally disfavored by other circuits as prejudicial to a defendant's Sixth Amendment rights. 1. Whether 18 U.S.C. § 1346 applies to the conduct of a private individual whose alleged "scheme to defraud" did not contemplate economic or other property harm to the private party to whom honest services were owed. 2. Whether a court of appeals may avoid review of prejudicial instructional error by retroactively imposing an onerous preservation requirement not found in the federal rules. LOWER COURT CASE NUMBER: 07-4080, 08-1072, 08-1106
In the 2009 case of Conrad M. Black et al. v United States, media mogul Conrad Black and two other executives were convicted on charges of mail fraud and obstruction of justice related to their roles at Hollinger International Inc., a global newspaper publisher. The defendants argued that they did not commit fraud because they did not intend to cause harm or financial loss to the company, but rather sought personal financial gain through non-compete fees from sales transactions which was approved by corporate directors. However, prosecutors claimed these payments were unauthorized bonuses disguised as non-competition fees in order to evade taxes and shareholders' scrutiny. The Supreme Court ruled that while it is possible for an executive's actions aimed at self-enrichment can also be intended to harm a corporation under certain circumstances (known as "honest services" theory), this concept was misapplied in this case since there wasn't evidence showing intent to harm Hollinger International Inc.. Thus, the court vacated their convictions on honest-services fraud charges but upheld conviction for obstruction of justice against Mr.Black.
In the dissenting opinion for Conrad M. Black, John A. Boultbee, and Mark S. Kipnis v United States (2009), Justice Scalia disagreed with the majority's interpretation of "honest services" fraud statute as it was applied to private-sector cases involving undisclosed self-dealing by a corporate officer or director. He argued that this interpretation expanded federal criminal jurisdiction in a manner never intended by Congress when they enacted the law in 1988. According to him, such an expansive reading could potentially make any unethical conduct within private organizations a federal crime if not disclosed to potential victims - even if no state laws were violated and regardless of whether there was any tangible harm done or personal gain received from said actions.
