McNALLY v. UNITED STATES
No. 86-234
Supreme Court of the United States
Argued April 22, 1987—Decided June 24, 1987
483 U.S. 350
*Together with No. 86-286, Gray v. United States, also on certiorari to the same court.
Carter G. Phillips argued the cause for petitioners in both cases. With him on the briefs for petitioner in No. 86-286 were James A. Shuffett, William E. Johnson, and Benjamin W. Heineman, Jr. Frank E. Haddad, Jr., filed briefs for petitioner in No. 86-234.
Deputy Solicitor General Ayer argued the cause for the United States in both cases. With him on the brief were Solicitor General Fried, Assistant Attorney General Weld, Christopher J. Wright, and Sara Criscitelli.
This action involves the prosecution of petitioner Gray, a former public official of the Commonwealth of Kentucky, and petitioner McNally, a private individual, for alleged violation of the federal mail fraud statute,
We accept for the sake of argument the Government‘s view of the evidence, as follows. Petitioners and a third individual, Howard P. “Sonny” Hunt, were politically active in the Democratic Party in the Commonwealth of Kentucky during the 1970‘s. After Democrat Julian Carroll was elected Governor of Kentucky in 1974, Hunt was made chairman of the state Democratic Party and given de facto control over selecting the insurance agencies from which the Commonwealth would purchase its policies. In 1975, the Wombwell Insurance Company of Lexington, Kentucky (Wombwell), which since 1971 had acted as the Commonwealth‘s agent for securing a workmen‘s compensation policy, agreed with Hunt that in exchange for a continued agency relationship it would share any resulting commissions in excess of $50,000 a year with other insurance agencies specified by him. The commissions in question were paid to Wombwell by the large in-
From 1975 to 1979, Wombwell funneled $851,000 in commissions to 21 separate insurance agencies designated by Hunt. Among the recipients of these payments was Seton Investments, Inc. (Seton), a company controlled by Hunt and petitioner Gray and nominally owned and operated by petitioner McNally.
Gray served as Secretary of Public Protection and Regulation from 1976 to 1978 and also as Secretary of the Governor‘s Cabinet from 1977 to 1979. Prior to his 1976 appointment, he and Hunt established Seton for the sole purpose of sharing in the commissions distributed by Wombwell. Wombwell paid some $200,000 to Seton between 1975 and 1979, and the money was used to benefit Gray and Hunt. Pursuant to Hunt‘s direction, Wombwell also made excess commission payments to the Snodgrass Insurance Agency, which in turn gave the money to McNally.
On account of the foregoing activities, Hunt was charged with and pleaded guilty to mail and tax fraud and was sentenced to three years’ imprisonment. Petitioners were charged with one count of conspiracy and seven counts of mail fraud, six of which were dismissed before trial.2 The remaining mail fraud count was based on the mailing of a commission check to Wombwell by the insurance company from which it had secured coverage for the State. This count alleged that petitioners had devised a scheme (1) to defraud the citizens and government of Kentucky of their right to have the Commonwealth‘s affairs conducted honestly, and (2) to obtain, directly and indirectly, money and other things
After informing the jury of the charges in the indictment,4 the District Court instructed that the scheme to defraud the
The jury convicted petitioners on both the mail fraud and conspiracy counts, and the Court of Appeals affirmed the convictions. 790 F. 2d 1290 (CA6 1986). In affirming the substantive mail fraud conviction, the court relied on a line of decisions from the Courts of Appeals holding that the mail fraud statute proscribes schemes to defraud citizens of their intangible rights to honest and impartial government. See, e. g., United States v. Mandel, 591 F. 2d 1347 (CA4 1979), aff‘d in relevant part, 602 F. 2d 653 (en banc), cert. denied, 445 U. S. 961 (1980). Under these cases, a public official owes a fiduciary duty to the public, and misuse of his office for private gain is a fraud. Also, an individual without formal office may be held to be a public fiduciary if others rely on him “because of a special relationship in the government” and he in fact makes governmental decisions. 790 F. 2d, at 1296 (quoting United States v. Margiotta, 688 F. 2d 108, 122 (CA2 1982), cert. denied, 461 U. S. 913 (1983)). The Court of Appeals held that Hunt was such a
We granted certiorari, 479 U. S. 1005 (1986), and now reverse.
The mail fraud statute clearly protects property rights, but does not refer to the intangible right of the citizenry to good government. As first enacted in 1872, as part of a recodification of the postal laws, the statute contained a general proscription against using the mails to initiate correspondence in furtherance of “any scheme or artifice to defraud.” The sponsor of the recodification stated, in apparent reference to the antifraud provision, that measures were needed “to prevent the frauds which are mostly gotten up in the large cities . . . by thieves, forgers, and rapscallions generally, for the purpose of deceiving and fleecing the innocent people in the country.”5 Insofar as the sparse legislative history reveals anything, it indicates that the original impetus behind the mail fraud statute was to protect the people from schemes to deprive them of their money or property.
Durland v. United States, 161 U. S. 306 (1896), the first case in which this Court construed the meaning of the phrase “any scheme or artifice to defraud,” held that the phrase is to be interpreted broadly insofar as property rights are concerned, but did not indicate that the statute had a more extensive reach. The Court rejected the argument that “the statute reaches only such cases as, at common law, would
Congress codified the holding of Durland in 1909, and in doing so gave further indication that the statute‘s purpose is protecting property rights.6 The amendment added the words “or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises” after the original phrase “any scheme or artifice to defraud.” Act of Mar. 4, 1909, ch. 321, § 215, 35 Stat. 1130.7 The new
After 1909, therefore, the mail fraud statute criminalized schemes or artifices “to defraud” or “for obtaining money or property by means of false or fraudulent pretenses, representation, or promises. . . .” Because the two phrases identifying the proscribed schemes appear in the disjunctive, it is arguable that they are to be construed independently and that the money-or-property requirement of the latter phrase does not limit schemes to defraud to those aimed at causing deprivation of money or property. This is the approach that has been taken by each of the Courts of Appeals that has addressed the issue: schemes to defraud include those designed to deprive individuals, the people, or the government of intangible rights, such as the right to have public officials perform their duties honestly. See, e. g., United States v. Clapps, 732 F. 2d 1148, 1152 (CA3 1984); United States v. States, 488 F. 2d 761, 764 (CA8 1973).
As the Court long ago stated, however, the words “to defraud” commonly refer “to wronging one in his property rights by dishonest methods or schemes,” and “usually signify the deprivation of something of value by trick, deceit, chicane or overreaching.” Hammerschmidt v. United States, 265 U. S. 182, 188 (1924).8 The codification of the holding in Durland
which cited Durland in the margin of its Report. See S. Doc. No. 68, 57th Cong., 1st Sess., pt. 2, 63, 64 (1901). The sponsor of the 1909 legislation did not address the significance of the new language, stating that it was self-explanatory. 42 Cong. Rec. 1026 (1908) (remarks of Sen. Heyburn).
We believe that Congress’ intent in passing the mail fraud statute was to prevent the use of the mails in furtherance of such schemes. The Court has often stated that when there are two rational readings of a criminal statute, one harsher than the other, we are to choose the harsher only when Con-
schmidt indicates, in regard to that statute, that while “[t]o conspire to defraud the United States means primarily to cheat the Government out of property or money, . . . it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest.” 265 U. S., at 188. Other cases have held that
In Curley v. United States, 130 F. 1 (CA1 1904), cited with approval in Haas v. Henkel, supra, the court stated: “Quite likely the word ‘defraud,’ as ordinarily used in the common law, and as used in English statutes and in the statutes of our states, enacted with the object of protecting property and property rights of communities and individuals, as well as of municipal governments, which exist largely for the purpose of administering local financial affairs, has reference to frauds relating to money and property.” 130 F., at 6-7. The court concluded, however, that “[a] statute which . . . has for its object the protection of the individual property rights of the members of the civic body, is one thing; a statute which has for its object the protection and welfare of the government alone, which exists for the purpose of administering itself in the interests of the public, [is] quite another.” Id., at 7.
For purposes of this action, we assume that Hunt, as well as Gray, was a state officer. The issue is thus whether a state officer violates the mail fraud statute if he chooses an insurance agent to provide insurance for the State but specifies that the agent must share its commissions with other named insurance agencies, in one of which the officer has an ownership interest and hence profits when his agency receives part of the commissions. We note that as the action comes to us, there was no charge and the jury was not required to find that the Commonwealth itself was defrauded of any money or property. It was not charged that in the absence of the alleged scheme the Commonwealth would have paid a lower premium or secured better insurance. Hunt and Gray received part of the commissions but those commissions were not the Commonwealth‘s money. Nor was the jury charged that to convict it must find that the Commonwealth was deprived of control over how its money was spent. Indeed, the premium for insurance would have been paid to some agency, and what Hunt and Gray did was to assert control that the Commonwealth might not otherwise
The Government concedes that if petitioners’ substantive mail fraud convictions are reversed their conspiracy convictions should also be reversed. Id., at 36, n. 28.
The judgment of the Court of Appeals is reversed, and the case is remanded for proceedings consistent with this opinion.
It is so ordered.
Congress has broadly prohibited the use of the United States mails to carry out “any scheme or artifice to defraud.”
The same question of statutory construction has arisen in a variety of contexts over the past few decades. In the public sector, judges, State Governors, chairmen of state political parties, state cabinet officers, city aldermen, Congressmen and many other state and federal officials have been convicted of defrauding citizens of their right to the honest services of their governmental officials.1 In most of these cases,
U. S. 976 (1974); United States v. Classic, 35 F. Supp. 457 (ED La. 1940) (election commissioner). Some private defendants have also been convicted of devising schemes through which public servants defraud the public. See, e. g., United States v. Lovett, 811 F. 2d 979 (CA7 1987) (bribing mayor); United States v. Alexander, 741 F. 2d 962 (CA7 1984) (bribing judge), overruled on other grounds in United States v. Ginsburg, 773 F. 2d 798, 802 (CA7 1985) (en banc); United States v. Rauhoff, 525 F. 2d 1170 (CA7 1975) (bribing State Secretary of State); United States v. Faser, 303 F. Supp. 380 (ED La. 1969) (scheme to bribe state officials). In Shushan v. United States, 117 F. 2d 110 (CA5), cert. denied, 313 U. S. 574 (1941), the Fifth Circuit upheld the mail fraud prosecution of a member of a Louisiana parish levy board for receiving kickbacks from the underwriters of a plan to refund outstanding bonds of the levy district. Explaining why it rejected the argument that no actual fraud had occurred because the refunding operation had actually been profitable to the levy board, the court stated: “No trustee has more sacred duties than a public official and any scheme to obtain an advantage by corrupting such an one must in the federal law be considered a scheme to defraud.” 117 F. 2d, at 115.
I
The mail fraud statute sets forth three separate prohibitions. It prohibits the use of the United States mails for the purpose of executing
“[1] any scheme or artifice to defraud, [2] or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, [3] or to sell, dispose of, loan, exchange, alter, give away, distribute,
United States v. Curry, 681 F. 2d 406 (CA5 1982) (chairman of political action committee); United States v. Bronston, 658 F. 2d 920 (CA2 1981) (attorney), cert. denied, 456 U. S. 915 (1982); United States v. Von Barta, 635 F. 2d 999 (CA2 1980) (securities trader), cert. denied, 450 U. S. 998 (1981); United States v. Bohonus, 628 F. 2d 1167 (CA9) (insurance manager), cert. denied, 447 U. S. 928 (1980); United States v. Bryza, 522 F. 2d 414 (CA7 1975) (purchasing agent), cert. denied, 426 U. S. 912 (1976); United States v. George, 477 F. 2d 508 (CA7) (purchasing agent), cert. denied, 414 U. S. 827 (1973); United States v. Procter & Gamble Co., 47 F. Supp. 676 (Mass. 1942) (attempt to bribe competitor‘s employee).
supply, or furnish or procure for unlawful use any counterfeit or spurious coin, obligation, security, or other article, or anything represented to be or intimated or held out to be such counterfeit or spurious article. . . .”
As the language makes clear, each of these restrictions is independent. One can violate the second clause—obtaining money or property by false pretenses—even though one does not violate the third clause—counterfeiting. Similarly, one can violate the first clause—devising a scheme or artifice to defraud—without violating the counterfeiting provision. Until today it was also obvious that one could violate the first clause by devising a scheme or artifice to defraud, even though one did not violate the second clause by seeking to obtain money or property from his victim through false pretenses. Cf. Streep v. United States, 160 U. S. 128, 132-133 (1895). Every court to consider the matter had so held.5
Yet, today, the Court, for all practical purposes, rejects this longstanding construction of the statute by imposing a requirement that a scheme or artifice to defraud does not violate the statute unless its purpose is to defraud someone of money or property. I am at a loss to understand the source or justification for this holding. Certainly no canon of statutory construction requires us to ignore the plain language of the provision.
In considering the scope of the mail fraud statute it is essential to remember Congress’ purpose in enacting it. Congress sought to protect the integrity of the United States mails by not allowing them to be used as “instruments of crime.” United States v. Brewer, 528 F. 2d 492, 498 (CA4 1975). See Durland v. United States, 161 U. S. 306, 314
The limitation the Court adopts today shows no fidelity to Congress’ words or purpose. The Court recognizes that the “money or property” limitation of the second clause may not actually apply to prosecutions under the first clause. See ante, at 358. But where else can such a limitation be derived from? A few examples of the types of frauds that have been prosecuted under the “intangible right” theory reveal that these schemes constitute “fraud” in every sense of the word, and that the “intangible right” theory plays an indispensable role in effectuating Congress’ goal of preserving the integrity of the Postal Service.
In States, supra, two candidates running for the office of Committeeman in St. Louis, Missouri, used the United States mails in their scheme to falsify voter registration affi-
In United States v. Rauhoff, 525 F. 2d 1170 (CA7 1975), the defendant was part of a scheme that used the United States mail to facilitate its paying the Illinois Secretary of State approximately $50,000 a year in return for the Secretary‘s awarding the State‘s license plate contract to a certain company. In response to the argument that all parties to the scheme were reaping profits, and that nobody was defrauded, the Court of Appeals explained that the victims of the scheme were the “people of Illinois, who were defrauded of their right to have the business of the office of the Secretary of State conducted free from bribery.” Id., at 1175. Although it was not proved that the State or its citizens lost any money, it was and is clear that this was a scheme to defraud under
There are scores of other examples of such schemes which, although not depriving anyone of money or property, are clearly schemes to defraud, and are clearly within the scope of Congress’ purpose in enacting the mail fraud statute. See nn. 1-5, supra. Discussing the peculiar facts of each of them would only confirm the observation that fraud is “as old as falsehood and as versable as human ingenuity.” Weiss v.
II
The cases discussed above demonstrate that the construction the courts have consistently given the statute is consistent with the common understanding of the term “fraud,” and Congress’ intent in enacting the statute. It is also consistent with the manner in which the term has been interpreted in an analogous federal statute; the way the term was interpreted at the time of this statute‘s enactment; and the statute‘s scant legislative history. There is no reason, therefore, to upset the settled, sensible construction that the federal courts have consistently endorsed.
The term “defraud” is not unique to
There is no basis for concluding that the term “defraud” means something different in
The Court nonetheless suggests that interpreting the two statutes differently can be justified because
Examination of the way the term “defraud” has long been defined, and was defined at the time of the statute‘s enactment, makes it clear that Congress’ use of the term showed no intent to limit the statute to property loss. Cf. Saint Francis College v. Al-Khazraji, 481 U. S. 604 (1987) (looking to contemporaneous dictionary definitions in construing the word “race“). For example, Justice Story cites the definition of “fraud” as “applied to every artifice made use of by one person for the purpose of deceiving another,” or as “any cunning, deception, or artifice used to circumvent cheat, or deceive another.” 1 J. Story, Equity Jurisprudence § 186, pp. 189-190 (1870). Similarly, the law dictionaries of the era broadly defined the type of interests subject to deprivation by fraudulent action. One leading dictionary stated that “[t]o defraud is to withhold from another that which is justly due to him, or to deprive him of a right by deception or artifice.” 1 Bouvier‘s Law Dictionary 530 (1897). Another dictionary defined “defraud” as “[t]o cheat; to deceive; to deprive of a right by an act of fraud . . . to withhold from another what is justly due him, or to deprive him of a right, by deception or artifice.” W. Anderson, A Dictionary of
gible losses. See SEC v. Texas Gulf Sulphur Co., 401 F. 2d 833, 848 (CA2 1968), cert. denied sub nom. Coates v. SEC, 394 U. S. 976 (1969). By its terms, that language is broad enough to “reach any person engaged in any fraudulent scheme.” Chiarella v. United States, 445 U. S. 222, 240 (1980) (Burger, C. J., dissenting). See also Myzel v. Fields, 386 F. 2d 718, 739 (CA8 1967), cert. denied, 390 U. S. 951 (1968); A. T. Brod & Co. v. Perlow, 375 F. 2d 393, 397 (CA2 1967).
It is, in fact, apparent that the common law criminalized frauds beyond those involving “tangible rights.” For example, in a case remarkably similar to the one before us, a public official was convicted for depriving the government of his honest services. See Trial of Valentine Jones, 31 How. St. Tr. 251 (1809). The case has been abstracted as follows:
“A, a commissary-general of stores in the West Indies, makes contracts with B to supply stores, on the condition that B should divide the profits with A. A commits a misdemeanor.” J. Stephen, Digest of The Criminal Law, Art. 121, p. 85 (3d ed. 1883).
By the same token, the crime of fraud has often included deceptive seduction, although that crime often includes no property or monetary loss. See State v. Parker, 114 Wash. 428, 195 P. 229 (1921); cf. United States v. Condolon, 600 F. 2d 7 (CA4 1979) (fraudulent scheme to seduce women supported wire fraud conviction). Of course, even if the term was not that expansively defined at common law, we have held that Congress went beyond the common-law definitions in enacting this statute. Durland, 161 U. S., at 313-314.
In a recent decision upholding the mail fraud conviction of an Illinois judge, despite the absence of proof that anyone suffered loss of tangible property, the Court of Appeals for the Seventh Circuit reaffirmed the broad meaning of the word “defraud.” United States v. Holzer, 816 F. 2d 304 (1987). Writing for the court, Judge Posner explained:
“Fraud in its elementary common law sense of deceit—and this is one of the meanings that fraud bears
in the statute, see United States v. Dial, 757 F. 2d 163, 168 (7th Cir. 1985)—includes the deliberate concealment of material information in a setting of fiduciary obligation. A public official is a fiduciary toward the public, including, in the case of a judge, the litigants who appear before him, and if he deliberately conceals material information from them he is guilty of fraud. When a judge is busily soliciting loans from counsel to one party, and not telling the opposing counsel (let alone the public), he is concealing material information in violation of his fiduciary obligations.
“Second, the systematic and long-continued receipt of bribes by a public official, coupled with active efforts to conceal the bribe-taking from the public and the authorities . . . is fraud (again in its elementary sense of deceit, and quite possibly in other senses as well), even if it is the public rather than counsel that is being kept in the dark. It is irrelevant that, so far as appears, Holzer never ruled differently in a case because of a lawyer‘s willingness or unwillingness to make him a loan, so that his conduct caused no demonstrable loss either to a litigant or to the public at large. See, e. g., United States v. Keane, 522 F. 2d 534, 541, 546 (7th Cir. 1975); United States v. Lovett, 811 F. 2d 979, 985 (7th Cir. 1987); United States v. Manton, 107 F. 2d 834, 846 (2d Cir. 1939). How can anyone prove how a judge would have ruled if he had not been bribed?” Id., at 307-308.
The general definition of the term “defraud” does not support, much less compel, today‘s decision.
Even if there were historical evidence of a limited definition of “fraud,” the Court‘s holding would reflect a strange interpretation of legislation enacted by the Congress in the 19th century. Statutes like the Sherman Act, the civil rights legislation, and the mail fraud statute were written in broad general language on the understanding that the courts would
“The argument depends on the view that the meaning of fraud in the mail-fraud statute was frozen by the conception of fraud held by the framers of the statute when it was first passed back in the nineteenth century. This seems to us the opposite and equally untenable extreme from arguing that fraud is whatever strikes a judge as bad, but in any event the ‘intangible rights’ concept that the argument attacks is too well established in the courts of appeals for us to disturb.” Holzer, 816 F. 2d, at 310.
Finally, there is nothing in the legislative history of the mail fraud statute that suggests that Congress intended the word “fraud” to have a narrower meaning in that statute than its common meaning and the meaning that it has in
Reviewing the general history of Congress’ reactions to the courts’ decisions interpreting the mail fraud statute also supports the reading the lower courts have attributed to
“First enacted in 1872, the mail fraud statute, together with its lineal descendant, the wire fraud statute, has been characterized as the ‘first line of defense’ against virtually every new area of fraud to develop in the United States in the past century. Its applications, too numerous to catalog, cover not only the full range of consumer frauds, stock frauds, land frauds, bank frauds, insurance frauds, and commodity stock frauds, but have extended even to such areas as blackmail, counterfeiting, election fraud, and bribery. In many of these and other areas, where legislatures have sometimes been slow to enact specific prohibitory legislation, the mail fraud statute has frequently represented the sole instrument of justice that could be wielded against the ever-innovative practitioners of deceit.
“During the past century, both Congress and the Supreme Court have repeatedly placed their stamps of approval on expansive use of the mail fraud statute. Indeed, each of the five legislative revisions of the statute has served to enlarge its coverage.” Rakoff, The Federal Mail Fraud Statute, 18 Duquesne L. Rev. 772-773 (1980).
III
To support its crabbed construction of the Act, the Court makes a straightforward but unpersuasive argument. Since there is no explicit, unambiguous evidence that Congress ac-
To begin with, “although ‘criminal statutes are to be construed strictly . . . this does not mean that every criminal statute must be given the narrowest possible meaning in complete disregard of the purpose of the legislature.‘” McElroy v. United States, 455 U. S., at 658, quoting United States v. Bramblett, 348 U. S. 503, 509-510 (1955). Especially in light of the statutory purpose, I believe that
In any event, this asserted ambiguity in the meaning of the word “defraud,” if it ever existed, was removed by judicial construction long ago. Even if Chief Justice Taft‘s opinion for the Court in the Hammerschmidt case was not sufficient to make it perfectly clear that a fraud on the public need not deprive it of tangible property, the series of Court of Appeals’ opinions applying this very statute to schemes to defraud a State and its citizens of their intangible right to honest and faithful government, notwithstanding the absence of evidence of tangible loss, removed any relevant ambiguity in this statute. Surely these petitioners knew that it would be unlawful to place Kentucky‘s insurance coverage with an agent who would secretly make hundreds of thousands of dollars available for the private use of petitioners, their relatives, and their paramours. This is, indeed, a strange application of the doctrine of lenity.9
IV
Perhaps the most distressing aspect of the Court‘s action today is its casual—almost summary—rejection of the accumulated wisdom of the many distinguished federal judges who have thoughtfully considered and correctly answered the question these cases present. The quality of this Court‘s work is most suspect when it stands alone, or virtually so, against a tide of well-considered opinions issued by state or federal courts. In these cases I am convinced that those judges correctly understood the intent of the Congress that enacted this statute. Even if I were not so persuaded, I could not join a rejection of such a longstanding, consistent interpretation of a federal statute. See Commissioner of Internal Revenue v. Fink, 483 U. S. 89, 101 (1987) (STEVENS, J., dissenting); Citicorp Industrial Credit, Inc. v.
among us. There is an element of fiction in the presumption that every citizen is charged with a responsibility to know what the law is. But the array of government executives, judges, and legislators who have been accused, and convicted, of mail fraud under the well-settled construction of the statute that the Court renounces today are people who unquestionably knew that their conduct was unlawful. Cf. Nash v. United States, 229 U. S. 373, 377 (1913).
In the long run, it is not clear how grave the ramifications of today‘s decision will be. Congress can, of course, negate it by amending the statute. Even without congressional action, prosecutions of corrupt officials who use the mails to further their schemes may continue since it will frequently be possible to prove some loss of money or property.10 But many other types of fraudulent use of the mail will now be immune from prosecution. The possibilities that the decision‘s impact will be mitigated do not moderate my conviction that the Court has made a serious mistake. Nor do they erase my lingering questions about why a Court that has not been particularly receptive to the rights of criminal defendants in recent years has acted so dramatically to protect the elite class of powerful individuals who will benefit from this decision.
I respectfully dissent.