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SCOTUS Issues Two Opinions Limiting the Scope of Federal Fraud Statutes

This month, the Supreme Court issued two noteworthy opinions limiting the scope of federal fraud statutes, specifically those that prohibit “honest services fraud.” Under 18 USC 1346, a “scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services.”

In Ciminelli v. United States, the Court unanimously invalidated the conviction of a construction company owner who had engaged in bid rigging for government contracts, which deprived the government of “potentially valuable economic information necessary to make discretionary economic decisions.” As a result, the trial court instructed the jury that “property” as defined under the fraud statute, included “intangible interests such as the right to control the use of one’s assets.”

The Court held that this was error, as the right to such intangible but “valuable economic information” was not a “traditional property interest” protected by the statute. The Court’s holding will likely be used to challenge future fraud prosecutions involving intangible losses.

In Percoco v. United States, the Court invalidated another defendant’s conviction, this time that of a former official in the Governor’s office in New York who, while on hiatus from his official role to assist in the governor’s campaign, accepted money to advise a real estate development company in its dealings with a state agency. Specifically, Percoco had lobbied internally to urge other officials to ease certain work requirements for the company, which received government funding.

The Court held that the trial court erred in instructing the jury that it could convict Percoco of honest services fraud, even while not serving as a public official, if it found that he “dominated and controlled any government business” and that “people working in the government actually relied on him because of a special relationship he had with the government.” The Court held these instructions were too vague and swept too broadly. However, the Court rejected the defendant’s argument that a private citizen cannot be convicted of depriving the public of honest services, reserving the question whether some private citizens could have the “necessary fiduciary duty to the public.”

DOJ Releases First Step Act Annual Report, April 2023

ast month, the Department of Justice released its “First Step Act Annual Report,” summarizing efforts to implement the sentencing reforms enacted under the First Step Act of 2018.he report covers the BOP’s implementation of its recidivism risk assessment (the controversial PATTERN score, which allegedly is racially biased), its implementation of recidivism-reducing programs that allow inmates to earn time off their sentences, the status of prison work programs, and other important reforms under the FSA.

The report also provides brief summaries of some of the most significant steps taken since the last report issued in April 2022 Among those developments, the BOP reports that it has finalized its policy for awarding “earned time credits” and has been awarding those credits as quickly as possible. The BOP also reports that it has expanded the use of home confinement for eligible inmates, wherein they allow inmates to serve the last months of their sentence in home confinement.

Sentencing Commission Considers “Retroactivity” of Proposed Guidelines Amendments

Yesterday, the U.S. Sentencing Commission issued a memorandum regarding the amendments to the U.S. Sentencing Guidelines and whether two amendments should apply retroactively– 1) the amendment that reduces the potential criminal history points assessed for defendants who commit their offense while under another sentence, and 2) the amendment providing a two-level downward adjustment for defendants with zero criminal history points.

In its conclusion, the Commission estimates that 11,49 offenders in BOP custody would have faced a lower sentencing range under the new amendment reducing the potential criminal history points for defendants who committed their offense while under another sentence. The average sentence reduction, based on those potential lower Guidelines ranges, would be 11.7, and 2,000 inmates would be eligible for release by November 1, 2023, when the amendments are slated to go into effect. Additionally, the Commission estimates that 7,272 inmates in BOP custody would have a lower Guidelines range if re-sentenced under the amendment providing a 2-level downward departure for having zero criminal history points, with an average reduction of 17.6%. An estimated 1,200 offenders would be eligible for release by November 1, 2023 if the amendment is made retroactive.

Recent Supreme Court Opinions

SCOTUS Issues Two Opinions Limiting the Scope of Federal Fraud Statutes

This month, the Supreme Court issued two noteworthy opinions limiting the scope of federal fraud statutes, specifically those that prohibit “honest services fraud.” Under 18 USC 1346, a “scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services.”

In Ciminelli v. United States, the Court unanimously invalidated the conviction of a construction company owner who had engaged in bid rigging for government contracts, which deprived the government of “potentially valuable economic information necessary to make discretionary economic decisions.” As a result, the trial court instructed the jury that “property” as defined under the fraud statute, included “intangible interests such as the right to control the use of one’s assets.”

The Court held that this was error, as the right to such intangible but “valuable economic information” was not a “traditional property interest” protected by the statute. The Court’s holding will likely be used to challenge future fraud prosecutions involving intangible losses.

In Percoco v. United States, the Court invalidated another defendant’s conviction, this time that of a former official in the Governor’s office in New York who, while on hiatus from his official role to assist in the governor’s campaign, accepted money to advise a real estate development company in its dealings with a state agency. Specifically, Percoco had lobbied internally to urge other officials to ease certain work requirements for the company, which received government funding.

The Court held that the trial court erred in instructing the jury that it could convict Percoco of honest services fraud, even while not serving as a public official, if it found that he “dominated and controlled any government business” and that “people working in the government actually relied on him because of a special relationship he had with the government.” The Court held these instructions were too vague and swept too broadly. However, the Court rejected the defendant’s argument that a private citizen cannot be convicted of depriving the public of honest services, reserving the question whether some private citizens could have the “necessary fiduciary duty to the public.”

Ruan v. United States (U.S. Supreme Court, June 2022)

In a 6-3 opinion, the Supreme Court held that the prosecution in a “pill mill” case, where a doctor has been charged with unlawfully prescribing drugs, must prove beyond a reasonable doubt that the doctor was acting in a manner not authorized by the statute, i.e. that the doctor knew that their prescribing practices were unauthorized and was not acting in “good faith.” Previously, doctors could be convicted if their prescriptions were not for a legitimate purpose or otherwise not within the usual course of a professional medical practice–a standard resembling negligence.

Concepcion v. United States (U.S. Supreme Court, June 2022)

In a 5-4 opinion, the Supreme Court held that courts considering an inmate’s motion to reduce sentence pursuant to Section 404(b) of the First Step Act, which applies to crack-cocaine convictions, may consider all relevant materials when considering whether to modify, and by how much, the inmate’s sentence. Some legal scholars believe the opinion should help resolve the circuit split regarding what circumstances a court can consider when reviewing an inmate’s motion for “compassionate release.”

Recent Circuit Court Opinions

United States v. Soler-Montalvo (1st Cir. August 2022)

The First Circuit vacated a defendant’s conviction for attempted coercion and enticement of a minor. The Court held that the trial court erred in excluding certain expert testimony from a clinical psychologist. While the trial court had allowed the witness to testify as an expert in the field of internet sexual behaviors, it erred in prohibiting the witness from opining on the defendant’s internet chats and whether chats like his met the pattern shown by child predators who communicate with minors online.

United States v. Rivera-Ruiz (1st Cir. August 2022)

The First Circuit vacated the sentence of a former police officer convicted of RICO conspiracy. The Court held that the district court erred in considering the PSR’s mere mentioning of the defendant’s prior administrative complaints, without more to substantiate them, as a basis for an upwards variance from the Guidelines.

United States v. Petties (4th Cir. August 2022)

The Fourth Circuit vacated a defendant’s convictions for committing a crime of violence while failing to register as a sex offender. The Government dismissed other charges against the defendant and allowed him to plead guilty to one charge conditionally so he could appeal whether his underlying kidnapping offense was a “crime of violence,” and after an intervening opinion held that kidnapping isn’t, the Court held that the district court erred in allowing the Government to reinstate the original charges against the defendant since the Government was still bound by its prior plea agreement.

The Federal Docket

The Federal Docket is a monthly newsletter providing lawyers and the community a summary of recent important decisions in the area of federal criminal law from the United States Supreme Court and the Circuit Courts of Appeal. The opinions are compiled, summarized and analyzed by Tom Church, an attorney in our firm’s federal criminal defense practice.

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