Disgraced ex-NBA referee Tim Donaghy was sentenced this week to 15 months behind bars for his participation in a gambling scandal. (As his defense attorney has noted, “Every news account begins with the words ‘disgraced referee.’” So there you go.)
Anyway, there was an interesting article by Mark Fass in yesterday’s New York Law Journal on the legal theory underpinning Donaghy’s conviction. In addition to the gambling charges, Donaghy was convicted of fraud for depriving the NBA ‘intangible right’ to his ‘honest services.’
Fass details the strange history of how such deprivation of ‘honest services’ was defined as fraud in a last-second amendment to the Anti-Drug Abuse Act of 1988. The amendment, which had nothing to do with narcotics per se, was Congress’ effective overturning of a 1987 U.S. Supreme Court decision which narrowed the longstanding definition of the ‘schemes’ that constitute fraud. That 28-word amendment (codified as 18 U.S.C. 1346) serves as “a robust weapon for fighting not just fraud, but even mere dishonesty.” Not everyone thinks this is a good thing. From Fass’ article:
Is honesty, [critics] ask, an enforceable right? Should the federal government be charged with forcing private employees to comply with their company's rules? … "I don't see why we have to call that 'fraud,'" [law professor Michael McCann] said. "The effect is that we criminalize the law of employment relations. Instead of just having an employment problem, you have a criminal problem."
[Donaghy's attorney] John Lauro, called §1346 "a prosecutor's best dream." Under the law, Mr. Lauro said, "virtually any violation of a corporate rule," such as using the Internet for personal e-mail, "could be charged as a deprivation of the right to honest services."
"The scope of the law," Mr. Lauro said, "is unlimited."
Presumably it’s not ‘unlimited,’ but the law’s breadth is pretty amazing. Consider that the law has been applied to both to a degenerate gambler basketball official as well as corporate villain Jeffrey “I thought the stock was a great buy” Skilling. In Vault’s forthcoming “State of the Law,” our writer Ben Fuchs notes that Skilling’s pending appeal “asserts that the government’s so-called ‘honest services’ argument—used to win convictions during the original trial—was inherently flawed since Skilling was merely a faithful employee carrying out directives from the powers that were; the government responded to O’Melveny’s September 2007 salvo by firing back a 200-page rebuttal that essentially paints Skilling as more Geppetto than Pinocchio.”
-posted by brian
A government view of Jeffrey Skilling
Want to be found by top employers? Upload Your Resume
Join Gold to Unlock Company Reviews