United States v. Matthew Clark
In United States v. Clark, No. 24-20271 (5th Cir. Mar. 13, 2025) (unpublished), the Fifth Circuit affirmed the defendant’s nine convictions for crimes including honest services fraud and insider trading. The court rejected Clark’s arguments that he was convicted under unconstitutionally vague statutes and regulations that violate the doctrines of separation of powers and nondelegation.
Issue 1: Is the statute prohibiting honest services fraud, 18 U.S.C. § 1346, unconstitutionally vague? Held: No.
In Skilling v. United States, 561 U.S. 358 (2010), the Supreme Court chose to “construe, not condemn” § 1346, upholding the statute as constitutional under the court’s new interpretation of it. Since then, two Supreme Court justices have questioned the constitutionality of § 1346, but the full court has not overruled Skilling. Therefore, the Fifth Circuit was bound to reject Clark’s first argument.
Issue 2: Are the statutes and regulations prohibiting “fictitious sales,” sales without a “true and bona fide price,” and insider trading unconstitutionally vague? Held: No.
The court found the first two phrases clear under their ordinary meanings, so there was no vagueness issue. In short, both provisions apply to deception, and “the Constitution surely does not forbid Congress from prohibiting deception.”
For insider trading, the law uses the phrase “manipulative or deceptive device or contrivance” in 7 U.S.C. § 9(1) and 17 C.F.R. § 180.1. But the Supreme Court previously approved the same language as used in another statute, United States v. O’Hagan, 521 U.S. 642 (1997), and “[w]hen a statutory term is obviously transplanted from another legal source, it brings the old soil with it.” Taggart v. Lorenzen, 587 U.S. 554, 560 (2019) (cleaned up) (citation omitted). Because the earlier statute was constitutional, the latter must be too.
Issue 3: Did Congress violate the separation of powers and nondelegation doctrines by giving the CFTC authority to create rules with criminal penalties? Held: No.
“There is no absolute rule . . . against Congress’ delegation of authority to define criminal punishments.” Loving v. United States, 517 U.S. 748, 768 (1996). A permissible delegation follows this structure: (1) Congress makes the violation of a regulation a crime, (2) Congress sets the punishment for that crime, and (3) the regulation confines itself within “the field covered by the statute.” Id. Here, the scheme satisfies all three requirements.
Note: Our firm represented a defendant in a related case.