Federal Honest Services Fraud Crackdown Yields More Arrests

Roberto Ruiz, former managing director for the Bear Stearns Dallas office, and Christopher Chol-Su Pak, former vice president of the Bear Stearns Dallas office, pleaded guilty to charges related to an ongoing federal public corruption scandal in El Paso County.^[1]

Ruiz pleaded guilty to four counts of conspiracy to commit mail and wire fraud and a scheme to defraud the citizens of their right to the honest services of elected officials at the El Paso Independent School District, the El Paso Community College District, the city of El Paso and members of the El Paso County Commissioners Court.^[2]

Ruiz tried to bribe elected officials from those offices to win votes for particular vendors trying to do business with the city, according to his guilty plea.^[3] Pak pleaded guilty to engaging in a scheme to bribe county commissioners to win votes for a specific vendor.^[4]

The two are the latest officials accused of wrongdoing in a massive corruption investigation that became public earlier this year when federal agents raided the officials of County Judge Anthony Cobos, two commissioners and a local hospital board member.^[5]

Honest Services Fraud
When a person is convicted of some type of “honest services” fraud, it really means that 18 U.S.C. § 1346 is being used, which it is in Bryant’s case. Under section 1346, the term “scheme or artifice to defraud,” as found in the mail fraud statute, is understood to include a scheme or artifice to deprive another of the intangible right of honest services.

Mail fraud
Mail Fraud is criminalized by 18 U.S.C. § 1341. Section 1341 is a rather dense and convoluted statute. Under this section, it is a crime for a person who has devised or intends to devise any scheme or artifice, to defraud, or to obtain money or property by means of false or fraudulent pretenses, representations, or promises, or to sell, dispose of, loan, exchange, alter, give away, distribute, 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, for the purpose of executing such scheme or artifice, to place in any post office or authorized depository for mail matter, any matter or thing whatever to be sent or delivered by the Postal Service, or to deposit or cause to be deposited any matter or thing whatever to be sent or delivered by any private or commercial interstate carrier, or to take or receive therefrom, any such matter or thing, or to knowingly cause to be delivered by mail or such carrier according to the direction thereon, or at the place at which it is directed to be delivered by the person to whom it is addressed, any such matter or thing.

Federal criminal defense attorney Douglas McNabb has previously discussed the federal crime of mail fraud in his blog; these posts can be found here. His discussions on wire fraud can be found here.

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^[1] AP Staff, Former execs plead guilty in El Paso corruption case, Associated Press Newswire, December 22, 2007, available at LEXIS, News Library, Wire News Services File.
^[2] Id.
^[3] Id.
^[4] Id.
^[5] Id.