Second Circuit ruling on “honest services fraud” empowers DOJ enforcement strategy

A recent decision from the US Court of Appeals for the Second Circuit will likely reinvigorate the US Department of Justice (DOJ)’s use of the “honest services wire fraud” statute to pursue international fraud and corruption – adding to the complicated and sometimes thorny history of the honest services fraud statute.

The case, United States v. Lopez, involves a former media executive’s scheme to pay millions of dollars in bribes as part of a FIFA corruption scandal. Two years ago, in September 2023, Judge Pamela Chen of the US District Court for the Eastern District of New York startled observers by throwing out executive Hernan Lopez’s conviction after a lengthy trial.

Lopez and a South American sports marketing company (Full Play Group, SA) were convicted of conspiracy to commit “honest services wire fraud” under Section 1346 of Title 18. But Judge Chen overruled the jury verdict, holding that Section 1346 does not reach conduct relating to a foreign (non-US) private actor who deprives a foreign private entity of honest services.

DOJ was criticized for trying to be the “world’s policeman” in prosecuting the case, and the court’s ruling signaled a potential reining-in of DOJ’s global reach. Those hopes were shot down in July 2025, when a unanimous Second Circuit panel reversed Judge Chen’s decision, holding that foreign commercial bribery schemes fall within the honest services wire fraud statute and reinstating the convictions. United States v. Lopez, 143 F.4th 99, 116 (2d Cir. 2025).

The wider FIFA case involved dozens of defendants and marked a high-profile instance of DOJ’s aggressive pursuit of foreign commercial bribery. It also underscored important questions about the source of the fiduciary duty in the context of honest services fraud, discussed in our prior alert here.

This recent series of prosecutions reflects DOJ’s aggressive approach to policing overseas corruption – even, notably, wholly private commercial bribery with little or no direct impact on the US. In certain contexts, this would still be in keeping with DOJ’s new enforcement priorities, which include a new focus specifically on foreign companies. The Lopez decision will likely reinvigorate DOJ’s use of this statute to pursue international fraud and corruption cases when such cases fit within those priorities. As such, the case highlights the risks of prosecutions for non-US organizations and individuals operating abroad.

Background

The case grew out of the wider prosecution of over 30 individuals involved with international soccer. As press reports around the world observed, virtually all the conduct at issue occurred outside the US. The appellants’ brief on appeal of an earlier trial put the question nicely:

[B]y what authority does the United States purport to police the relationship between a Paraguayan employee and his Paraguayan employer, and an alleged scheme involving South Americans that took place almost entirely in South America.

In that earlier appeal, United States v. Napout, the Second Circuit rejected the argument that the prosecution was an impermissible extraterritorial application of the wire fraud statute. However, the Napout court also noted that “whether a foreign employee’s duty to his foreign employer qualifies as an actionable element under § 1346 is a question that remains unsettled, at best.” 963 F.3d 163, 184 (2d Cir. 2020).

FIFA is the international body governing organized soccer. It comprises more than 200 member associations, including national federations. Lopez involved a scheme to bribe the federation presidents of six Latin American nations in exchange for World Cup broadcasting rights. Lopez (an American citizen) “perpetuated, protected, and hid the bribes,” which were funded by his employer. Lopez and co-conspirators held meetings in the US to further the scheme, and many payments “were wired through United States bank accounts.” Lopez, 143 F.4th at 103-04.

The crux of the government’s theory was that the bribe recipients – all officials of confederations that had adopted codes of ethics prohibiting receipt of personal benefits – breached duties to their employers (the various federations) in collusion with Lopez and Full Play. The government argued this constituted the “scheme or artifice to deprive another of the intangible right of honest services” required under Section 1346.

As Lopez argued in his appeal:

[T]he government claims § 1346 criminalizes payments to South American officials of a private South American soccer confederation, for the rights to broadcast South American soccer tournaments. Neither the payments, nor commercial bribery generally, is a crime in the countries where the officials resided, where the confederation was based, or where the soccer matches were played. Nor is the Anglo-American legal concept of “fiduciary duty” even recognized in these countries. Yet the government maintains that these payments proved an “honest services” fraud conspiracy because the South Americans who received the money violated a duty supposedly created by the private codes of conduct of a foreign soccer confederation.

The Second Circuit rejected this argument.

Honest services statute analysis

Deceptively simple, the honest services fraud statue consists of a single declarative statement that a “scheme or artifice to defraud” for purposes of the wire, mail, or other related fraud statutes, “includes a scheme or artifice to deprive another of the intangible right of honest services.” Congress saw fit to enact the law in reaction to the Supreme Court’s 1987 decision in McNally v. United States, which determined that federal fraud statutes could not reach schemes to defraud victims of intangible rights such as “honest services.” Rather than settle the issue, however, the enactment of 18 USC § 1346 has led to continued litigation over the parameters of honest services fraud, including several cases reaching the Supreme Court.

Under existing case law, liability under the honest services statute requires the existence of an applicable fiduciary duty and a breach of that duty. As the US Supreme Court held in Skilling v. United States, the statute punishes defendants who, “in violation of a fiduciary duty, participated in bribery or kickback schemes.” 561 U.S. 358, 407 (2010). Not everything that looks like bribery is covered – the existence of a breached fiduciary duty is required.

In Percoco v. United States, the Supreme Court reversed the honest services conviction of a defendant who had accepted a payment to influence government action because he, as a former government employee, did not owe a fiduciary duty to the public. 598 U.S. 319, 329-33 (2023).

Because of the vagueness of the statutory language, the Supreme Court has held that the applicable fiduciary duty “must be defined with the clarity typical of criminal statutes.” The definition must come from “the core” of honest services case law decided prior to its decision in McNally v. United States, 483 U. S. 350, 356 (1987). See Skilling, 561 U.S. at 408-09.

In Lopez, Judge Chen held that a foreign employee’s duty to a foreign employer was not actionable under Section 1346 because there was “not even a smattering” of such pre-McNally caselaw that applied honest services fraud to foreign commercial bribery. 690 F. Supp. 3d 5, 36-37 (E.D.N.Y. 2023). The Second Circuit rejected this analysis, holding that there need not be “exact replicas of the fact pattern” at issue and that the pre-McNally cases are not the “only sources that inform our analysis of § 1346.” The court went on to hold that the employer-employee relationship “is a well-recognized fiduciary relationship that falls within the scope” of the statute, even when it is a foreign employee-employer relationship. 143 F.4th at 111-12. The court found so even though the Latin American countries at issue did not recognize any such fiduciary duty. 143 F.4th at 112-13.

Having found that the requisite fiduciary duty existed and that it was proper to apply Section 1346 to the alleged breach of that duty, the Second Circuit turned to the extraterritoriality argument. It made short shrift of that argument, relying on precedent that the focus of wire fraud is not on the scheme to defraud but on the use of the wires and that the “identity and location of the victim are irrelevant.” 143 F.4th at 113.

The court also stressed that there are existing limitations on the international application of the statute because US wire transmissions must be “essential, rather than merely incidental to the scheme to defraud” in order to prosecute foreign defendants in US courts. Id. at 114. However, that pro forma language ignored arguments that “essential” has come to mean simply not “merely incidental,” and that a given defendant need not personally send or receive the wire (or intend that it be sent).

Similarly, transfers of US dollars – even from one non-US person to another, neither of whom has set foot in the US or maintained a US bank account – routed through US correspondent bank accounts can establish jurisdiction, even if defendants knew nothing about the correspondent account (as they typically would not).

Additionally, an email or text – even from one non-US person to another, neither of whom has ever set foot in the US – will frequently (unbeknownst to the sender or receiver) be routed through US-based servers and can establish jurisdiction. Thus, the safeguards stressed by the Second Circuit may not be as meaningful as the panel suggests.

The Second Circuit decision also ignores the fact that there is a serious Circuit split on various elements of wire fraud and its extraterritorial application. While in prosecutions brought in the Second Circuit (comprising the states of New York, Connecticut, and Vermont) the wire transmissions that hit the jurisdiction must be “essential, rather than merely incidental,” that is not the law in all parts of the United States. Consider the case of Lee Elbaz, an Israeli citizen charged with participating in a fraud scheme. Elbaz worked for an Israeli company, in Israel, and never set foot in the United States in connection with the scheme. Although it appeared that almost all of her conduct occurred in Israel, she was alleged to have caused a total of three wire transmissions (two emails and a phone call) to persons in Maryland. On appeal to the Fourth Circuit (which includes the states of Maryland, North Carolina, South Carolina, Virginia, and West Virginia) she argued that these were “merely incidental” to the scheme and her overall conduct, and that in the Second Circuit and those that followed it (including the First Circuit) she would not have been convicted. The Fourth Circuit rejected the argument and seemingly the Second Circuit’s “essential” standard, affirming the conviction and her sentence of 22 years in prison (along with a USD 28 million penalty). United States v. Elbaz, 52 F.4th 593, 602– 605, 614 (4th Cir. 2022). The case was widely interpreted as establishing that any use of US wires – regardless of whether those transmissions were core components of and essential to the scheme or where the alleged perpetrator or victim were located – sufficed. Elbaz sought review by the Supreme Court, arguing in part that these differing standards increased the uncertainty faced by foreigners haled into US courts and was deeply unfair to her. Her petition also pointed out that there was an even more fundamental split, with at least the US Court of Appeals for the Third Circuit having held that wire fraud always can be applied extraterritorially because the statute refers to “foreign commerce” (a position rejected by the other circuits that considered the argument). See Georgiou v. United States, 777 F.3d 125, 137–138 (3d Cir 2015). Unfortunately, the Supreme Court declined to hear the Elbaz case in 2023. The uncertainty continues.

The Second Circuit recently doubled down on its broad application of criminal fraud statutes to allow prosecution of extraterritorial conduct in United States v. Phillips, No. 24-CR-1908, 2025 U.S. App. LEXIS 22652 (2d Cir. Sept. 3, 2025). In Phillips, the Second Circuit interpreted the Commodities Exchange Act (CEA) to allow US jurisdiction over manipulation of the derivatives market when the activity at issue occurs overseas. Neil Phillips, a UK citizen and hedge fund manager, purchased a “one-touch barrier option” that would pay out USD 20 million if the South African rand/USD exchange rate fell below a certain amount. All of Phillips’s trading at issue was executed abroad. Nonetheless, Phillips was convicted of commodities fraud in violation of the CEA based on the theory that he traded with the intent to deceive a counterparty into paying out the option. In affirming his conviction, the Second Circuit held the CEA’s jurisdiction extends to foreign conduct so long as it has a “direct and significant connection” to US commerce. Phillips, at *46. The court found there was a sufficient nexus because the financial institutions obligated to pay out the option were based in the US (irrespective of whether their identity was known to Phillips at the time). Phillips, at *2-3, 35-36, 39-46. Following Phillips, foreign commodities and derivatives trading with any connections to the US (even if unforeseeable that a US person or entity may face economic exposure) may subject foreign defendants to US prosecutions.

It remains to be seen how an expanded threat of honest services fraud prosecutions, and wire fraud prosecutions more generally, will fit with DOJ’s enforcement priorities.[1] Current DOJ leadership has staked out an America-first approach to federal criminal enforcement, including focusing resources on prosecuting federal offenses in a manner that promotes US interests and prioritizes protecting US citizens and companies. This focus could mean greater use of the honest services fraud statute to investigate and prosecute non-US companies and individuals, particularly those who operate in industries or in certain regions or countries that have significant risk in the context of other US interests.

Reading the tea leaves for foreign defendants

Time will tell precisely how DOJ will use its reaffirmed power to use an honest services theory to prosecute foreign commercial bribery based on some use of wires that touch the US. If history is any guide, an aggressive approach can be expected. In the wake of the Lopez decision, after years in which many compliance programs have focused on improper payments to government officials, compliance officers and executives are encouraged to be aware of the enhanced, broader risk of US prosecution of private commercial bribery.

This new tool is reminiscent of DOJ’s use of the Travel Act (18 USC § 1952) to prosecute commercial bribery of overseas private entity employees. See J. Hillebrecht, “US Anti-Corruption Efforts Targeting Commercial Private Bribery Abroad,” Corporate Secretary (November 2010).

DOJ will likely continue to use every tool at its disposal to expand its global reach, including the honest services wire fraud theory endorsed in Lopez, Travel Act prosecutions, and the extraterritorial scope of the CEA adopted in Phillips.

For more information, please contact the authors.