Circuit Applies Skilling, Reverses Honest Services Conviction

In United States v. Riley, 2010 WL 3584066 (3d. Cir. Sept. 16, 2010), the Court held that the district court’s instruction to the jury that honest services fraud did not require scheme to defraud another to obtain money or property, and could instead be based on violation of duty of honest, faithful, and disinterested service, was plainly erroneous. Riley is the Third Circuit’s first application of the Supreme Court’s recent decision in Skilling v. United States, --- U.S. ----, 130 S.Ct. 2896 (2010), holding that to remain within constitutional limitations, the honest services statute at § 1346 is limited to “fraudulent schemes to deprive another of honest services through bribes or kickbacks.”

Defendants here were convicted of three counts of mail fraud as part of a scheme to convey City-owned property in violation of 18 U.S.C. § 1341 and 2, one count of fraud involving a local government receiving federal funds in connection with the fraudulent sale of City-owned properties in violation of 18 U.S.C. § 666(a)(1)(A) and 2, and one count of conspiracy to defraud the public of Defendant James's honest services in violation of 18 U.S.C. §§ 1341 and 1346, in violation of 18 U.S.C. § 371. At trial, the District Court instructed the jury that honest services fraud did not require a scheme to defraud another to obtain money or property, and could instead be based on a violation of the duty of honest, faithful, and disinterested service. The Circuit here reversed.

The Court rejected defendants’ arguments that (1) the evidence in support of the honest services charge had an improper spillover effect; (2) the evidence was insufficient to prove “scheme to defraud”; and (3) the district court abused its discretion in not severing the charges.