McNally v. United States
Encyclopedia
McNally v. United States, 483 U.S. 350
(1987) was a case in which the United States Supreme Court decided that the federal statute criminalizing mail fraud applied only to the schemes and artifices defrauding victims of money or property, as opposed to those defrauding citizens of their rights to good government. The case was superseded one year later when the United States Congress
amended the law to specifically include honest services fraud
in the mail and wire
fraud statutes, but that statute would itself be struck down in 2010 as being too vague, reinstating the holding in this case.
became Governor of Kentucky
in 1974; that same year, Howard P. Hunt became the chairman of the Kentucky Democratic Party
. Kentucky purchased workmen's compensation insurance
from Wombwell Insurance Agency; Hunt conspired with Robert Tabeling, the vice president of the insurance agency, to award the state's insurance business to Wombwell in exchange for kickbacks being sent to other insurance agencies specified by Hunt. $200,000 in kickbacks made it to Seton Investments, Inc., which was nominally headed by Charles McNally but actually run by Hunt and Carroll's Secretary of Public Protection and Regulation, James E. Gray. McNally received $75,500 for acting as frontman for Seton, while Hunt and Gray used the rest of the money to purchase condominiums in Florida
and an automobile, among others.
In 1983, Hunt, McNally, and Gray were indicted
by a federal grand jury
on charges of mail fraud for defrauding the citizens of Kentucky
of "their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud," and of "money and other things of value," using the United States mail. Hunt pleaded guilty to mail and tax fraud, and he was sentenced to three years in prison. Six of the eight charges against the defendants were dismissed before the trial, but they were convicted by a jury on the remaining two counts of conspiracy and fraud.
, arguing that Hunt's fraud, which they had been convicted of abetting, was not honest services fraud because he had no fiduciary duty to the people of Kentucky. The Sixth Circuit, noting Gray's fiduciary duty to the people of Kentucky as Secretary of Public Protection and Regulation, concluded that Hunt also had a fiduciary duty to the people of Kentucky as a de facto public official due to his substantial participation in governmental affairs and "de facto control" of the awarding of the insurance contract to Wombwell.
The appellants also argued that their rights to due process of law were violated by the indictment, contending that it failed to allege that Hunt and Gray had a fiduciary duty to the citizens of Kentucky, a fact of which they necessarily had to be informed in order to understand the elements of the charges against them. The Sixth Circuit rejected this argument as well, stating that the indictment contained sufficient information for the defendants to be apprised of the charges, including the identification of the roles Hunt and Gray played in the conspiracy to defraud.
The Sixth Circuit affirmed the convictions on May 12, 1986. The Supreme Court of the United States
granted certiorari
; the case was argued before the Court on April 22, 1987, and decided on June 24 of that year.
The law, passed in 1872 during a postal law
recodification, originally only criminalized "any scheme or artifice to defraud." In March 1909, Congress added another clause, reading "or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." In McNally, the Court therefore concluded that Congress intended the mail fraud statute's scope to be limited to protecting money and property, citing its ruling in United States v. Universal C. I. T. Credit Corp., which stated that "when choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite. We should not derive criminal outlawry from some ambiguous implication."
The convictions of McNally and Gray were thus reversed.
wrote the dissenting opinion, arguing that "nothing in the words 'any scheme or artifice to defraud,' or in the purpose of the statute, justifies limiting its application to schemes intended to deprive victims of money, property, freedom, love, or America."
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1987) was a case in which the United States Supreme Court decided that the federal statute criminalizing mail fraud applied only to the schemes and artifices defrauding victims of money or property, as opposed to those defrauding citizens of their rights to good government. The case was superseded one year later when the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
amended the law to specifically include honest services fraud
Honest services fraud
Honest services fraud refers to a 28-word sentence of , added by the United States Congress in 1988, which states: "For the purposes of this chapter, the term, scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services."The statute...
in the mail and wire
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
fraud statutes, but that statute would itself be struck down in 2010 as being too vague, reinstating the holding in this case.
Background of case
Julian CarrollJulian Carroll
Julian Morton Carroll is a politician from the US state of Kentucky. A Democrat, he is presently a member of the Kentucky Senate, representing Anderson, Franklin, Woodford, and part of Fayette counties. From 1974 to 1979, he served as the 54th Governor of Kentucky, succeeding Wendell H. Ford, who...
became Governor of Kentucky
Governor of Kentucky
The Governor of the Commonwealth of Kentucky is the head of the executive branch of government in the U.S. state of Kentucky. Fifty-six men and one woman have served as Governor of Kentucky. The governor's term is four years in length; since 1992, incumbents have been able to seek re-election once...
in 1974; that same year, Howard P. Hunt became the chairman of the Kentucky Democratic Party
Kentucky Democratic Party
The Kentucky Democratic Party is the local branch of the Democratic Party in the Commonwealth of Kentucky, USA. The party Chairman is Daniel Logsdon, Jr., Party Vice-Chair is Susie Watkins, and David Tandy is Treasurer...
. Kentucky purchased workmen's compensation insurance
Workers' compensation
Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence...
from Wombwell Insurance Agency; Hunt conspired with Robert Tabeling, the vice president of the insurance agency, to award the state's insurance business to Wombwell in exchange for kickbacks being sent to other insurance agencies specified by Hunt. $200,000 in kickbacks made it to Seton Investments, Inc., which was nominally headed by Charles McNally but actually run by Hunt and Carroll's Secretary of Public Protection and Regulation, James E. Gray. McNally received $75,500 for acting as frontman for Seton, while Hunt and Gray used the rest of the money to purchase condominiums in Florida
Florida
Florida is a state in the southeastern United States, located on the nation's Atlantic and Gulf coasts. It is bordered to the west by the Gulf of Mexico, to the north by Alabama and Georgia and to the east by the Atlantic Ocean. With a population of 18,801,310 as measured by the 2010 census, it...
and an automobile, among others.
In 1983, Hunt, McNally, and Gray were indicted
Indictment
An indictment , in the common-law legal system, is a formal accusation that a person has committed a crime. In jurisdictions that maintain the concept of felonies, the serious criminal offence is a felony; jurisdictions that lack the concept of felonies often use that of an indictable offence—an...
by a federal grand jury
Grand jury
A grand jury is a type of jury that determines whether a criminal indictment will issue. Currently, only the United States retains grand juries, although some other common law jurisdictions formerly employed them, and most other jurisdictions employ some other type of preliminary hearing...
on charges of mail fraud for defrauding the citizens of Kentucky
Kentucky
The Commonwealth of Kentucky is a state located in the East Central United States of America. As classified by the United States Census Bureau, Kentucky is a Southern state, more specifically in the East South Central region. Kentucky is one of four U.S. states constituted as a commonwealth...
of "their right to have the Commonwealth's business and its affairs conducted honestly, impartially, free from corruption, bias, dishonesty, deceit, official misconduct, and fraud," and of "money and other things of value," using the United States mail. Hunt pleaded guilty to mail and tax fraud, and he was sentenced to three years in prison. Six of the eight charges against the defendants were dismissed before the trial, but they were convicted by a jury on the remaining two counts of conspiracy and fraud.
Appeal
McNally and Gray appealed to the United States Court of Appeals for the Sixth CircuitUnited States Court of Appeals for the Sixth Circuit
The United States Court of Appeals for the Sixth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Kentucky* Western District of Kentucky...
, arguing that Hunt's fraud, which they had been convicted of abetting, was not honest services fraud because he had no fiduciary duty to the people of Kentucky. The Sixth Circuit, noting Gray's fiduciary duty to the people of Kentucky as Secretary of Public Protection and Regulation, concluded that Hunt also had a fiduciary duty to the people of Kentucky as a de facto public official due to his substantial participation in governmental affairs and "de facto control" of the awarding of the insurance contract to Wombwell.
The appellants also argued that their rights to due process of law were violated by the indictment, contending that it failed to allege that Hunt and Gray had a fiduciary duty to the citizens of Kentucky, a fact of which they necessarily had to be informed in order to understand the elements of the charges against them. The Sixth Circuit rejected this argument as well, stating that the indictment contained sufficient information for the defendants to be apprised of the charges, including the identification of the roles Hunt and Gray played in the conspiracy to defraud.
The Sixth Circuit affirmed the convictions on May 12, 1986. The Supreme Court of the United States
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
granted certiorari
Certiorari
Certiorari is a type of writ seeking judicial review, recognized in U.S., Roman, English, Philippine, and other law. Certiorari is the present passive infinitive of the Latin certiorare...
; the case was argued before the Court on April 22, 1987, and decided on June 24 of that year.
Majority
Justice White wrote the opinion of the Court, holding that the federal mail fraud statute only protected money and property, not the public's intangible right to honest government:Rather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read 1341 as limited in scope to the protection of property rights. If Congress desires to go further, it must speak more clearly than it has.
The law, passed in 1872 during a postal law
United States Postal Service
The United States Postal Service is an independent agency of the United States government responsible for providing postal service in the United States...
recodification, originally only criminalized "any scheme or artifice to defraud." In March 1909, Congress added another clause, reading "or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." In McNally, the Court therefore concluded that Congress intended the mail fraud statute's scope to be limited to protecting money and property, citing its ruling in United States v. Universal C. I. T. Credit Corp., which stated that "when choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we choose the harsher alternative, to require that Congress should have spoken in language that is clear and definite. We should not derive criminal outlawry from some ambiguous implication."
The convictions of McNally and Gray were thus reversed.
Dissent
Justice StevensJohn Paul Stevens
John Paul Stevens served as an Associate Justice of the Supreme Court of the United States from December 19, 1975 until his retirement on June 29, 2010. At the time of his retirement, he was the oldest member of the Court and the third-longest serving justice in the Court's history...
wrote the dissenting opinion, arguing that "nothing in the words 'any scheme or artifice to defraud,' or in the purpose of the statute, justifies limiting its application to schemes intended to deprive victims of money, property, freedom, love, or America."
See also
- List of United States Supreme Court cases, volume 483
- List of United States Supreme Court cases
- Lists of United States Supreme Court cases by volume
- List of United States Supreme Court cases by the Rehnquist Court