Academic journal article Law and Contemporary Problems

Corrupt Intentions: Bribery, Unlawful Gratuity, and Honest-Services Fraud

Academic journal article Law and Contemporary Problems

Corrupt Intentions: Bribery, Unlawful Gratuity, and Honest-Services Fraud

Article excerpt

I

INTRODUCTION

This article advances the understanding of bribery and related offenses from an economic standpoint. (1) Economic theory holds that the legal system should impose criminal liability on a person who advances his goals by using force or artifice instead of a voluntary exchange. Force and artifice are inherently coercive behaviors, unresponsive to the market mechanisms that put exchange prices on what people want to achieve. Because market mechanisms cannot control such behaviors, the state should step in and impose criminal punishments on the perpetrators. These punishments should discourage future coercive behavior. Therefore, they ought to be high enough to offset the benefits that perpetrators expect to gain from acting coercively against other people's interests. (2)

Bribery and related offenses have a uniform structure: A public official receives something of value from a private person in exchange for acting or promising to act to the private person's benefit. Any such transaction divides between the parties some asset or opportunity belonging to the government. The private person derives profit from misappropriating or obliterating the government's interest and gives part of this profit to the public official. Any such transaction is necessarily coercive toward the government. For, as a consequence of the official's betrayal, the government suffers a deprivation of its interest, asset, or opportunity. Both parties to this transaction gain from bypassing the market. Each of them generates an off-market benefit not obtainable through voluntary exchange and the system of rules governing that exchange. (3) Presence of this two-sided off-market benefit separates bribery and related offenses from noncriminal transactions and, in particular, from noncriminal--but still unethical--violations of the various conflict-of-interest rules.

This market-focused criterion helps identify evidence that conclusively establishes the mens rea and the actus reus for bribery and related offenses. This criterion also helps identify the proper scope of the honest-services fraud offense. In two precedential decisions, Sun-Diamond (4) and Skilling, (5) the Supreme Court has narrowed the government's ability to prosecute individuals for those offenses. In Sun-Diamond, it held that proof of bribery and unlawful gratuity incorporates the government's duty to identify the specific official act for which the bribe or gratuity was given. (6) In Skilling, the Court decided that presence of a bribe or a kickback payment is one of the elements of honest-services fraud under 18 U.S.C. [section] 1346. (7) This interpretation created an overlap between bribery and unlawful gratuity on the one hand, and honest-services fraud on the other. (8) By creating this overlap, the Court introduced the stringent requirement for establishing mens rea, set up in Sun-Diamond, into the definition of honest-services fraud.

These narrow interpretations of core corruption offenses have removed the threat of criminal responsibility from a wide variety of off-market transactions that benefit public officials and private individuals at the government's expense. By adopting these interpretations, the Court undercut Congress's anti-corruption policies and weakened the deterrence against corruption. Under my "two-sided off-market benefit" criterion for identifying criminal corruption, these interpretations are economically misguided and therefore wrong.

This article proceeds as follows. In Part II, I carry out an economic analysis of bribery and related offenses and identify their common characteristic: presence of an off-market benefit on both sides of the illicit transaction. In Parts III and IV, respectively, I use this analysis to demonstrate that the Supreme Court's precedential decisions in Sun-Diamond and Skilling are mistaken. A short conclusion follows.

II

THE ECONOMICS OF BRIBERY

The economic approach to law calls for an imposition of criminal liability upon people who act coercively, and only upon those people. …

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