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The recent indictment of the securities class-action powerhouse Milberg Weiss Bershad & Schulman and two of its named partners has been the topic of much recent discussion, centering on the law firm's notable refusal to waive the attorney-client privilege during the government investigation, which likely contributed to the government's decision to indict the firm. But the indictment is also notable as the latest high-profile use of the federal mail and wire fraud statutes to combat private-sector corruption.
Under the category of fraud based on the deprivation of the intangible right of honest services, the government has long attacked kickbacks and other forms of concealed self-dealing by agents, employees, and fiduciaries. The crime is now firmly established in the landscape of federal prosecution despite its history of controversy among courts, commentators, and the defense bar.
Honest-services fraud is sufficiently complicated, however, that defense counsel need to be ever vigilant as to its contours, and prosecutors need to be reminded that those contours are not limitless. The Fifth Circuit recently issued a stark admonition to that effect in the Enron 'Nigerian Barge' case, reversing all convictions in that case that were predicated on an honest-services theory of wire fraud. United States v. Brown, 2006 WL 2130525 (5th Cir. August 1, 2006).
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