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CRM 500-999

947. Fiduciary Duty

QUERY: Whether a fiduciary duty or relationship is a necessary ingredient to frauds relating to intangible property rights. See generally Laura A. Eilers & Harvey B. Silikovitz, Mail and Wire Fraud, 31 Am. Crim. L. Rev. 703, 706 n. 19 (1994) ("Unlike traditional frauds which may arise regardless of the relationship between the defendant and the victim, frauds related to intangible rights stem from a fiduciary relationship between the defendant and the defrauded party or entity."). "At the core of the judicially defined 'scheme to defraud' is the notion of a trust owed to another and a subsequent breach of that trust." United States v. Lemire, 720 F.2d 1327, 1335 (D.C. Cir. 1983) ("But '[n]ot every breach of a fiduciary duty works a criminal fraud.'") (quoting United States v. George, 477 F.2d 508 (7th Cir.), cert. denied, 414 U.S. 827 (1973)), cert. denied, 467 U.S. 1226 (1984). But cf. United States v. Sawyer, 878 F. Supp. 279, 288-90 (D. Mass. 1995) (mail fraud statutes do not require that a public fiduciary be a participant in the scheme). It may follow that to defraud one of the "right to honest services" would generally require a fiduciary relationship that creates the right to provide or protect honest services. It does not necessarily follow, however, that the existence or protection of an intangible property right must depend upon the existence of a fiduciary relationship or duty. Nonfiduciaries can steal, embezzle and defraud others of property interests, regardless of whether the property interest is tangible or intangible. Cf. United States v. Allen, 554 F.2d 398, 410 (10th Cir.) ("While the existence of a fiduciary duty is relevant and an ingredient in some mail fraud prosecutions, . . . it is not an essential in all such cases.") (citations omitted), cert. denied, 434 U.S. 836 (1977); Eilers & Silikovitz, 31 Am. Crim. L. Rev. at 711 ("There is some debate in the Circuit Courts about whether intangible rights can be violated if they are not premised upon fiduciary duty.").

Courts have held nonfiduciaries criminally liable for frauds related to intangible rights when a co-schemer or co-conspirator was a fiduciary. See United States v. Alexander, 741 F.2d 962, 964 (7th Cir. 1984) (an intangible rights scheme is cognizable when at least one of the schemers has a fiduciary relationship with the defrauded person or entity), overruled on other grounds by, United States v. Ginsburg, 773 F.2d 798 (7th Cir. 1985), cert. denied, 475 U.S. 1011 (1986); see also Sawyer, 878 F. Supp. at 289 (describing situation of nonfiduciary) (citing United States v. Margiotta, 688 F.2d 108, 121-23 (2d Cir. 1982), cert. denied, 461 U.S. 913 (1983), and Alexander, 741 F.2d at 964).

[cited in JM 9-43.100]