Could the US Attorney have invited Jayson Blair, the disgraced former reporter for the New York Times, to do the “perp walk” for his fabricated stories? 

Absolutely. Given the evidence developed in the Times’s own investigation, Blair could have been prosecuted for the federal felony of mail or wire fraud. Only the exercise of prosecutorial discretion saved him from joining the parade behind Quattrone, Kozlowski, and Fastow. 

What about the First Amendment’s protections of the press? Forget it. Those do not extend to reporters engaged in intentional falsehood. We can debate about where to draw the line that distinguishes intentional lies from more innocent mistakes, but there’s no question that Blair crossed it by a mile. L’Affair Blair serves as a case study illustrating how the Justice Department has gained the authority not only to attack the press, but also to punish almost any dishonesty that offends it. 

The mail fraud law was enacted in 1872 to combat Ponzi-type schemes. As it evolved (along with its wire-fraud cousin), it became a malleable tool for converting almost any kind of deceit into a federal felony. The government need only prove an attempt to defraud by means of misrepresentation (with the trivial addition, for purposes of federal jurisdiction, of a letter being mailed or wire communication being made). Lest you think there must be demonstrable economic harm to a defrauded person, well, perhaps that was true years ago, but not any longer. 

The turning point in the expansion of these fraud laws came in the late 1980s in a case involving R. Foster Winans, a reporter for the Wall Street Journal. He was convicted of insider trading, because he profited from pre-publication knowledge of truthful information about the contents of a column that regularly moved stock prices. 

Winans was charged under both the mail fraud and securities laws, but only the mail fraud conviction survived Supreme Court review. Key to that charge was the notion that fraud is a species of theft, requiring the taking of some form of property. The government successfully argued that the taking of intangible property could suffice, i.e., the Wall Street Journal’s “property interest” was in maintaining control of the nature and timing of disclosure of its stories; Winans’s behavior infringed on that property interest.

 In 1988, the Supreme Court refused to extend the law to an even vaguer social harm called “loss of honest services.” Congress responded by extending the mail/wire fraud laws to anyone who, by a “scheme to defraud,” deprives anyone else of his entitlement to the deceiver’s “honest services.” So the government today can prosecute anyone for any act that might constitute an intentional breach of a contract, or a violation of a workplace rule. Because the government could have argued that Blair intentionally deprived the Times of its right to his honest services, he could easily have been prosecuted. 

While the government would not have been required to demonstrate specific economic harm, it could have done so—and there was certainly incentive to follow that path. Under the federal sentencing guidelines, Blair’s actual prison sentence would depend on the provable dollar amount of the loss he inflicted. The easiest harm to argue is the cost of his lies to the newspaper’s reputation. Just consider the stock market’s response to the disclosure of Blair’s deceits. On the first trading day after the disclosure, the Times’s stock price was briefly off by 1 percent while the Standard & Poor 500 was up by a half of 1 percent. Although this gap quickly disappeared, a transitory “Blair effect” is plainly visible in stock price data. 

The legal distinction between Blair and the latest arrested corporate fraudsters is also gossamer thin. To be liable under the most frequently employed provision of the federal securities laws, a defendant must act with “scienter,” a state of mind that the Supreme Court has defined as “embracing an intent to deceive.” This is essentially the standard that would be used to determine whether a false story crosses the line separating constitutionally protected mistakes from indictable frauds. 

Federal prosecutors briefly considered looking into Blair’s case but wisely decided to let it go after Times officials declined to cooperate. Journalists, however, cannot count on such discretion in the future. Given the expansive interpretations of the mail and wire fraud provisions, it may be only a matter of time before a reporter faces a felony indictment on such charges.