Trump, Clinton, and the Russia Dossier: Fallacies and False Comparisons

Special Counsel Robert Mueller is investigating Russian interference with the 2016 presidential election and possible collusion with the Russians by members of the Trump campaign. But news that the Clinton campaign and the Democratic National Committee helped fund the infamous “dossier” about President Trump has led to charges that the Clinton campaign also colluded with the Russians. Some, including the President himself, claim the preparation of the dossier is the real scandal and that prosecutors should be examining Clinton, not Trump. Others, including some prominent law professors, claim the dossier demonstrates that both campaigns were equally culpable and so if Trump’s  Russian collusion is fair game, Clinton’s should be as well.

These arguments capitalize on the vagueness of the word “collusion” which, as I wrote here, is not really a criminal law term. It’s easy to claim that if someone working for the Clinton campaign at some point met with someone from Russia, that qualifies as “collusion” and equally deserves to be investigated. But such claims ignore the crucial factual distinctions between the two situations. They also rely on various logical fallacies that only serve to obscure the real issues.

Mueller’s investigation is focused not on “collusion” but on allegations of conspiracy and related criminal offenses. When it comes to potential criminal violations, the preparation of the dossier has almost nothing in common with the allegations surrounding the Trump campaign. Claims to the contrary are simply a smokescreen.

Background: The Trump Dossier 

The dossier consists of information gathered about Trump’s activities and connections in Russia and possible coordination with Russia to influence the presidential campaign. Work on the dossier was initially funded during the GOP primaries by an anonymous Republican who was opposed to Trump. After Trump locked up the nomination, the Democratic National Committee and Clinton campaign agreed to continue funding the research.

The dossier was prepared by a company called Fusion GPS. To do the work, Fusion retained the services of Christopher Steele, a former British intelligence agent with extensive experience in Russia and ties to the U.S. intelligence community.

Steele was so troubled by what he found that he shared the information with the FBI. The intelligence community found the information sufficiently credible that FBI Director James Comey briefed both President Obama and President-elect Trump on the dossier’s contents after the election. U.S. intelligence reportedly has verified some of the allegations in the dossier and has been unable to verify others. There are recent reports that Steele believes the dossier will be proven to be 70-90% accurate.

White House Response: What About Hillary?

The White House has argued that the preparation of the dossier represents the real Russia scandal. President Trump has Tweeted:

White House press secretary Sarah Huckabee Sanders recently said: “The real collusion scandal as we’ve said several times before has everything to do with the Clinton campaign, Fusion GPS and Russia.”  Referring to Democratic funding of the dossier, Fox News commentator Chris Wallace opined that there was more evidence of Democractic collusion with the Russians than of Republican collusion.

This tactic is a rhetorical deflection commonly known as “whataboutism.”  When accused of something, the whataboutist doesn’t respond on the merits but essentially charges the accuser with hypocrisy by pointing to something the accuser has done that is allegedly similar. Ironically, “whataboutism” is thought to have originated as a Soviet propaganda technique.

The “whataboutist” response is a fallacy because it does not address the merits of the underlying charge. Assume for argument’s sake the Clinton campaign did do something wrong by participating in the preparation of the dossier. That would not detract from any culpability that those involved in the Trump campaign may have for working with the Russians. If I robbed the bank it doesn’t affect my guilt if I respond by saying, “Yeah, well, what about you — you robbed the liquor store!”

So even if the Clinton campaign may have something to answer for based on the preparation of the dossier, that doesn’t demonstrate the Trump campaign did nothing wrong or that Mueller’s investigation has no basis. And even if both campaigns were culpable, many would agree that investigation of the candidate who actually won the election and is the sitting President should be a higher priority than the investigation of a private citizen who lost.

But this is all hypothetical. In terms of potential criminal violations, the preparation of the dossier is not at all similar to the alleged activities of the Trump campaign. The “whatabout” arguments simply create confusion and deflect attention, which is, of course, precisely their purpose.

Langdell Library – Harvard Law School

The Law Professor Responses: The Fallacy of False Equivalence

A different logical flaw is displayed by two prominent law professors: Alan Dershowitz of Harvard and Jonathan Turley of George Washington University. Both have repeatedly argued that collusion is not a crime and that there is no basis for a criminal investigation of the Trump campaign. When the dossier allegations emerged, Dershowitz and Turley seized on them to accuse liberals of hypocrisy. If you support a criminal investigation of the Trump campaign, they argued, then you must also support a criminal investigation into the Clinton campaign’s role in the preparation of the dossier.

In a series of Tweets on November 5th and 6th, Dershowitz repeatedly claimed that the Trump and Clinton campaigns were basically on equal footing when it comes to Russia:

“Do you agree that Clinton shouldn’t be prosecuted for a non crime? Why is it irresponsible to make same argument re Trump?”

“Neither side should be making up crimes against the other”

And, in a masterful example of another fallacy, the straw man:

“Should there be one law for Democrats & a different one for Republicans?”

For his part, Turley wrote in an article for The Hill and on Twitter that he was skeptical of criminal allegations concerning either campaign, but that sauce for the Trump gander was sauce for the Clinton goose: “If seeking dirt from the Russians on Clinton is now a federal crime, how about seeking dirt from Russian sources against Trump?”

These arguments suffer from the fallacy known as false equivalence. They assert that the two cases are fundamentally the same and should result in the same outcome. But about the only thing the allegations against Clinton and Trump have in common is that both involve campaigns and Russia. Otherwise the facts and circumstances are not at all equivalent. And when it comes to criminal law and criminal investigations, facts matter.

The Trump Campaign vs. the Dossier

Profs. Dershowitz and Turley argue that if a criminal investigation of the Trump campaign is appropriate, then an investigation into the preparation of the dossier would be as well. But based on what we know so far, there are critical factual differences between the two.

Historical research v. proactive interference – The most important distinction is that between gathering historical information and proactively working to influence the campaign. Steele prepared his dossier by gathering intelligence about Trump and Russia. He did research and passed the information along. There is no allegation that he or anyone else in the Clinton campaign collaborated with any Russians to do anything in the future to influence the campaign or undermine Trump.

The Trump campaign, on the other hand, is suspected of possibly working proactively with Russian nationals to influence the outcome of the election. Mueller is investigating whether any members of the Trump campaign may have cooperated with Russians concerning leaks of emails stolen from the Democratic National Committee and Clinton campaign managerJohn Podesta, to create phony Twitter and Facebook accounts, and to flood social media with false stories intended to influence the election. There also are allegations that a data-crunching firm called Cambridge Analytica hired by Jared Kushner for the campaign may have helped the Russians target particular areas and demographic groups with their social media campaigns. Contrary to Prof. Turley’s claim, the investigation is not merely about “seeking dirt” about Clinton — it’s about working proactively to influence the election.

Campaign officials directly involved – The dossier was prepared by Steele, who was retained by Fusion GPS, which was hired by a law firm retained by the Clinton campaign and the DNC. There is no allegation that individuals who were part of the Clinton campaign met with any Russian individuals in connection with the dossier or knew what Steele was doing. In fact, Clinton and the leaders of her campaign apparently did not even know about the dossier until reports about it appeared in the press.

Within the Trump campaign, the allegations are that individuals at the very highest level met directly with Russians offering information on Hillary Clinton and claiming to have stolen emails. The infamous June 2016 meeting in Trump Tower with Russians promising dirt on Clinton included top members of the Trump campaign including the president’s own son and son-in-law and campaign manager Paul Manafort. Campaign officials such as Jared Kushner and now-attorney generalJeff Sessions failed to disclose meetings with Russians on their security clearance forms and only later admitted to such meetings. Foreign policy advisor George Papadopolous, who has pleaded guilty and is cooperating with Mueller,  was actively cultivating contacts with Russian nationals and sharing that information with others in the campaign, including at meetings that Trump himself attended.

Potentially dealing in stolen property – The Trump campaign may have accepted help from Russians on matters involving information illegally hacked from the DNC computer system and stolen emails. Computer hacking is a federal crime.  Mueller is investigating whether Trump campaign officials knowingly accepted the stolen emails and actively worked to exploit the information contained in them.

With the Steele dossier, again, the allegation is that it consisted of gathering historical intelligence information from contacts Steele had cultivated over many years. There is no allegation that any of the information stemmed from an illegal source.

Concealing information and false statements – A final distinction lies in how the information was handled by the respective parties. Steele was so alarmed by the information he uncovered that he shared it with the FBI. Those engaged in possibly unlawful collusion with a foreign power do not ordinarily report their own activities to federal authorities.

The Trump campaign, on the other hand, allegedly received information suggesting that a foreign power had unlawfully hacked the computers of a U.S. political party and campaign official. They did not report this information to the FBI. Instead, at a minimum they explored the idea of meeting with the Russians who did the hacking to obtain access to those emails and possibly use them against Clinton.

Trump campaign officials have repeatedly concealed information about their contacts with Russians, revealing that information only when confronted with new evidence that the contacts took place. The most recent example is Attorney General Jeff Sessions, who just this week in testimony on Capitol Hill revealed new information about potential campaign contacts with Russians that he previously claimed not to recall. In addition to constituting possible independent crimes, false statements and concealment provide evidence of corrupt intent and knowledge of wrongdoing.

Comparing Apples and Oranges

The allegations about the Trump campaign may ultimately prove to be unfounded. That often happens in white collar investigations. But the allegations provide a solid basis for an investigation to determine whether any criminal laws may have been violated. When it comes to the dossier, there are no comparable allegations of potential criminality.

We really need to look no further than how the FBI reacted to the two matters. The allegations in the Steele dossier were found by the FBI to justify a counter-intelligence investigation and later a criminal investigation. The allegations were also considered sufficiently serious by the Trump Department of Justice to warrant the appointment of an independent counsel. When it comes to the preparation of the dossier, the FBI not only did not see a basis for a criminal investigation into its preparation, but expressed interest in continuing to fund Steele’s research itself.

Professors Dershowitz and Turley, without the benefit of access to the confidential grand jury investigation or the FBI files, feel confident in saying there is no basis for criminal charges. They apparently believe that Mueller and the team of professionals he has assembled either are incompetent or are political hacks. But the prosecutors’ actions thus far reveal just the opposite.

Saying “what about Clinton” is a convenient diversion, but it’s a sloppy argument that ignores the facts and doesn’t respond to the serious allegations about the Trump campaign. Fortunately, Mueller and his team are unlikely to be distracted.

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Mueller Monday: Breaking Down the Charges and Looking Ahead

This past Monday Special Counsel Robert Mueller unveiled the first criminal charges in his ongoing probe of potential ties between Russia and the Trump campaign. Word of an impending indictment leaked last Friday, and Washington was buzzing all weekend about who might be the target. On what the Internet quickly dubbed #MuellerMonday, prosecutors unsealed a twelve-count indictment charging former Trump campaign manager Paul Manafort and his associate Richard Gates.

The charges against Manafort were not a great surprise. The FBI had executed a search warrant at his house last July, and there were reports he had been told to expect an indictment. But Mueller’s other announcement was unexpected: he also unsealed a guilty plea by a former foreign policy advisor to the Trump campaign, George Papadopoulos. It turns out Papadopoulos was arrested last July, was charged under seal, and has been cooperating with Mueller’s office.

The charges indicate that Mueller’s team is moving forward aggressively and effectively. There are likely many more shoes to drop before he is done. And with Monday’s moves he’s sent an unmistakable message to others who may have been involved in any criminal conduct. 

Special Counsel Robert S. Mueller, III

Breaking Down the Charges

Manafort and Gates Overview

The indictment encompasses activity from 2006 to 2017. During that time Manafort ran two different political consulting firms. Gates worked for Manafort and the indictment identifies him as Manafort’s “right hand man.” Beginning in 2006, various pro-Russia political parties and individuals in Ukraine hired Manafort’s firms for lobbying and political consulting, and that work continued for a decade. The defendants allegedly concealed this work from the federal government by failing to register as foreign agents as required.

The defendants used an entity called the European Centre for a Modern Ukraine (the Centre) to retain other lobbying firms in the United States. The Centre was in fact controlled by political leaders in Ukraine working with the defendants. Using the Centre as a front allowed the defendants to distance themselves from the Ukrainian work and conceal it from the government.

Manafort and Gates also allegedly concealed the money they were earning from Ukraine by routing that money through a large number of corporations, partnerships, and bank accounts, including foreign corporations and accounts established in Cyprus, Saint Vincent & the Grenadines, and the Seychelles. To hide the existence of these foreign bank accounts they allegedly failed to report their control over those accounts to the federal government as required, both on their income tax returns and by separate required filings.

In addition, the defendants allegedly used nearly three dozen different offshore entities, primarily located in Cyprus, to wire millions of dollars into the United States to pay for goods, services, and real estate for themselves. None of this money was reported as income by the defendants or by Manafort’s companies. The indictment includes a seven-page detailed list of these payments, which included more than $5 million to a home improvement company in the Hamptons, nearly $1 million to an antique rug store, more than $800,000 to landscape companies in the Hamptons, and more than $1.3 million to clothing stores.

Paul Manafort

Criminal Charges Against Paul Manafort and Richard Gates

 Count One: Conspiracy, 18 U.S.C. 371

Count one charges both defendants with conspiracy under 18 U.S.C. 371. This is an overarching charge that encompasses the entire scheme from 2006 to 2017. The federal conspiracy statute prohibits conspiracies to defraud the United States and conspiracies to commit an offense against the United States. The indictment charges both.

A conspiracy to defraud the United States includes an agreement to impair, obstruct, or impede the lawful functions of the U.S. government. The indictment charges that the defendants’ activities impaired and obstructed the lawful functions of the Department of Justice (which is charged with monitoring the activities of foreign agents) and the Department of the Treasury (which includes the Internal Revenue Service).

The indictment also charges the defendants with conspiracy to commit offenses against the United States, which means a conspiracy to commit any federal crime. It alleges that they conspired to commit the federal crimes contained in the subsequent counts of the indictment.

This is a pretty common structure for a white collar crime indictment. The conspiracy charge up front tells the story of the entire criminal scheme, and it is followed by individual counts of the crimes the defendants allegedly conspired to commit. Conspiracy under 18 U.S.C. 371 is punishable by a maximum of five years in prison.

Count Two: Conspiracy to Launder Money, 18 U.S.C. 1956(h) 

Count two charges that by moving millions of dollars through their various partnerships, corporations, and foreign accounts, the defendants conspired to commit money laundering. Several different money laundering theories are charged as the objects of the conspiracy. The first is that the defendants transferred funds across international borders in order to promote criminal activity, in violation of 18 U.S.C. 1956(a)(2)(A). The second is that the defendants engaged in financial transactions in criminal proceeds with the intent to evade income taxes, in violation of 18 U.S.C. 1956(a)(1)(A)(ii), and knowing that those transactions were designed to conceal and disguise the source, ownership, and control of the proceeds, in violation of 18 U.S.C. 1956(a)(1)(B)(i).

Put more simply, this charge focuses on the defendants’ use of their extensive network of foreign companies and bank accounts to promote their business, conceal their activities and sources of income from the government, and avoid paying taxes. The money laundering conspiracy is the most serious charge in the indictment, carrying a maximum penalty of twenty years in prison.

Counts Three to Nine: Failure to File Reports of Foreign Bank Accounts, 31 U.S.C. 5314, 5322(b)

The Bank Secrecy Act requires U.S. citizens to file reports with the U.S. Treasury concerning any foreign bank accounts they own or have signatory authority over if the balance exceeds $10,000 at any time during the year. These are called foreign bank account reports, or “FBARs.” Willfully failing to file a required FBAR while engaged in other criminal activity is a ten-year felony.

Counts three to six charge Manafort with failing to file a required FBAR for the years 2011, 2012, 2013 and 2014, thus concealing his interest in multiple foreign bank accounts.  Counts seven to nine charge Gates with the same offense for the years 2011, 2012, and 2013.

Count Ten: Failure to Register as Foreign Agent, 22 U.S.C. 612, 618

The Foreign Agents Registration Act (FARA) requires persons who engage in lobbying or public relations work in the United States on behalf of a foreign principal to file detailed reports, under oath, with the Department of Justice. The reports must include the identity of the principal and the nature of the work being done. Count ten charges that between 2008 and 2014 both defendants failed to register as required by FARA for their work on behalf of the Ukrainian government and Ukrainian officials. The FARA violation is punishable by up to five years in prison.

Count Eleven: False and Misleading FARA statements, 22 U.S.C. 612, 618

FARA also makes it a crime to make false or misleading statements in connection with a FARA report. Count eleven charges that in November 2016 and February 2017, both defendants filed documents with the Department of Justice that contained false and misleading statements about their work on behalf of Ukraine. In particular, it alleges that they lied about their own role in the lobbying and falsely claimed that all such work was actually coordinated by the Centre.

Count Twelve: False Statements, 18 U.S.C. 1001

Count twelve charges essentially the same false and misleading FARA statements alleged in count eleven but charges them under a different statute, 18 U.S.C. 1001, the general false statements statute. That statute criminalizes any material false statement made in a matter within the jurisdiction of one of the branches of the federal government. It is also punishable by up to five years in prison.

Summary:

Manafort: Charged in counts 1-6 and 10-12, maximum statutory exposure 80 years.

Gates: Charged in counts 1-2 and 7-12, maximum statutory exposure 70 years.

George Papadopoulos

Criminal Charges Against George Papadopoulos

Papadopoulos pleaded guilty under seal to one count of lying to the FBI in violation of 18 U.S.C. 1001, false statements. His maximum exposure is five years, although his plea agreement indicates he may be sentenced to as little as 0-6  months.

The plea documents contain a statement of facts, which Papadopoulos has admitted as true. He admits he lied to the FBI during an interview on January 27, 2017 about his contacts with Russian individuals while working on the campaign. (Note that this interview was only a week after President Trump was inaugurated, and took place four months before Mueller was appointed Special Counsel.) During that interview Papadopoulos falsely downplayed his interactions with Russian individuals and claimed those interactions took place prior to his work on the campaign.

The plea documents contain a detailed timeline showing that Papadopoulos in fact had extensive contacts with Russian individuals while working on the campaign. These included Russian operatives with shadowy nicknames such as the “professor” and a “female Russian national” who claimed she was related to Vladimir Putin. Papadopoulos had repeated contacts with these individuals, trying to broker meetings between Russian government officials and members of the Trump campaign. They reportedly told Papadopoulos that Russia could offer “dirt” on Hillary Clinton and that they had “thousands of emails.” At one point the “female Russian national” told him, “We are all very excited by the possibility of a good relationship with Mr. Trump.”

Papadopoulos repeatedly advised other members of the Trump campaign (including an unidentified “senior policy advisor” and “high-ranking campaign official”) of his progress in his contacts with the Russians, and was encouraged to keep pursuing them. These included communications about the Russia ministry of foreign affair’s interest in a possible meeting with Trump in Russia. After repeated communications about a possible “off the record” meeting with Russian officials, a “campaign supervisor” encouraged Papadopoulos to make the trip, if feasible. The proposed trip never actually took place.

Although the Papadopoulos plea contains detailed information about his efforts to work with Russian nationals on behalf of the campaign, he is not actually charged with any crimes related to his Russian contacts. Instead, he pled guilty to lying to the FBI when interviewed about those contacts.

What to Expect Going Forward

The release of both sets of charges on the same day was a shrewd strategic move by Mueller. Manafort, who apparently has refused to cooperate, ends up indicted and potentially facing a decade or more in prison. Papadopoulos, who chose to cooperate and plead guilty, faces a single, relatively minor felony charge and may avoid jail altogether. The message to future witnesses is clear: be like George, not like Paul.

President Trump himself was quick to point out that the charges against Manafort primarily involve conduct that took place before he was involved in the campaign:

It’s true that most — though not all — of the alleged crimes in the indictment predate Manafort’s work on the campaign, but that’s largely beside the point. Mueller’s purpose, in addition to pursuing criminal charges that are fully justified in and of themselves, is to pressure Manafort into cooperating in the broader investigation. The indictment gives him the leverage to do that. As a campaign manager who also had extensive ties to Russia, Manafort may be uniquely situated to provide information central to Mueller’s investigation. He will now be under tremendous pressure to cooperate and share that information to help himself out in his own case.

The nature of the charges is particularly bad news for Manafort and Gates. These financial charges are tough to defend against. They don’t depend on a lot of nuance or witness credibility. The indictment spells out the paper trail in excruciating detail, and the jury needs only to follow the money. There are not many obvious defenses that leap off the pages of the indictment.

Manafort and Gates also need to be aware that this could be just the beginning. The allegations in the indictment suggest other potential charges that have not yet been filed, including tax crimes and bank fraud. Mueller’s team always has the option of bringing a superseding indictment to add more charges. It’s also possible the New York Attorney General could file state charges — and those would be outside the reach of President Trump’s pardon power.

The case against Manafort and Gates will move forward now in the ordinary course, with motions, discovery, and potentially a trial. It will occupy the time of a couple of members of Mueller’s team, but the rest will continue to move the broader investigation forward. Either or both of the defendants could decide to plead guilty at any time. Presumably they will have discussions with the Special Counsel’s office about possible cooperation — a prospect that has to make others involved in the campaign extremely uneasy.

A “Proactive Cooperator”

As for Papadopoulos, there has been a lot of speculation about what his cooperation over the past few months may have entailed. It’s all guesswork for now  – but keep in mind that Mueller had him charged under seal, to keep it a secret. One reason to do that would be if Papadopoulos was covertly assisting in the investigation. Speculation that this might have happened was further fueled by a paragraph in his plea agreement referring to him as a “proactive cooperator.”

Whether Papadopoulos actually worked with the FBI will be revealed in due course. It’s certainly possible that investigators could have had him make recorded phone calls, or arrange meetings with other targets while wearing a wire, to talk about the events under investigation. Or his cooperation may have simply involved providing testimony and documents about past conduct.

The other important aspect of Papadopoulos’s case is the detailed timeline and statement of facts in support of his plea. Although it contains pseudonyms like “senior campaign official,” everyone knows that Bob Mueller’s team knows who those people are. Investigators appear to know in great detail what happened during the campaign. And if future witnesses try to come in and lie to them, they will find themselves in the same boat as Papadopoulos. Once again, the strength of the charges and the amount of detail in the documents sends a clear signal that these investigators aren’t playing around and won’t be easily fooled.

The documents in Papadopoulos’s case don’t prove that collusion with Russia took place — although to steal a phrase from John Dickerson, they certainly establish that the Trump campaign was “collusion curious.” Whether any collusion or attempted collusion that did take place actually amounts to a crime is yet another question. But the guilty plea does make it clear that Mueller’s team is deep into examining the operations of the campaign and potential ties to Russia, and already knows a great deal.

Finally, the release of Papadopoulos’s documents further highlights the jeopardy in which Manafort finds himself. There is widespread agreement that the “senior campaign official” referred to in Papadopoulos’s plea is Manafort, who is now on notice that Mueller has an insider telling him all about the campaign, Russia, and the role played by Manafort and others. If Manafort ends up meeting with Mueller’s team about those issues, he knows he can’t get away with hiding the ball.

Mueller’s team appears to be pursuing a classic investigative strategy of building cases against lower-level players, persuading the to “flip” and cooperate, and moving up the ladder. Whether Manafort flips or not remains to be seen, but regardless, there’s every reason to believe the Special Counsel is just getting started.

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September Madness: The Problem with the NCAA Basketball Corruption Case

On Tuesday, September 26, the U.S. Attorney’s Office for the Southern District of New York announced with great fanfare that the office had filed charges against ten individuals in a fraud and corruption case involving college basketball. Acting U.S. Attorney Joon H. Kim outlined the charges against four NCAA Division I coaches, a senior executive at Adidas, and five others. A chart in the press release noted that each defendant faces a maximum of between 80 and 200 years in prison.

The charges are the result of a two-year investigation that involved wiretaps, a confidential cooperating witness, and FBI undercover agents. The three criminal complaints outline two different corruption schemes. Although the complaints name several universities as the victims of these schemes, there is no allegation that any university actually lost any money or property. There are no claims that any of the student athletes or their families were financially harmed. The public was not harmed in any way.

But the defendants did violate NCAA rules. Those rules require that student athletes be amateurs and prohibit them from receiving any outside compensation. The rules also prohibit coaches from facilitating any contacts between athletes and outside agents and from receiving any outside compensation for acts related to their athletes. These rules violations (which were, of course, created by the undercover investigation itself) exposed the universities to potential financial penalties and sanctions from the NCAA. That exposure is what’s at the heart of the prosecution. The government’s case effectively takes the rules of the NCAA, a private non-profit corporation, and leverages violations of those rules into federal felony charges.

There’s no doubt the behavior of the defendants was deplorable. But are criminal sanctions exposing them to decades in prison the proper remedy? I’m not saying the charges are legally flawed – not all of them, anyway. But I do question whether this case represents a good use of two years of the time and resources of the agents and prosecutors involved. And I question whether bringing multiple felony charges on these facts is a sound exercise of prosecutorial discretion.

At the U.S. Attorney’s press conference, the very first question was from a reporter who asked (I’m paraphrasing), “It seems like everyone involved was actually benefitting financially. Who’s the victim here?” (19:40)

It’s a good question.

The Complaints

 The Coach Bribery Scheme

The coach bribery scheme is charged in two separate criminal complaints. The first complaint charges three coaches: Lamont Evans, an assistant coach at Oklahoma State and former assistant coach at South Carolina; Emanuel Richardson, an assistant coach at Arizona; and Anthony Bland, an associate head coach at University of Southern California. It also charges Christian Dawkins, an employee of a sports management company that represents NBA basketball players, and Munish Sood, a financial advisor.

The complaint alleges that the three coaches accepted cash bribes from Dawkins and Sood. The total amount of the bribes ranged from about $13,000 to about $22,000. In return, the coaches agreed to introduce student athletes to Dawkins and Sood and to encourage the athletes to hire Dawkins and Sood once the athletes left college and began playing in the NBA. The deals were brokered by another former financial advisor, Marty Blazer. Blazer, who was facing securities fraud charges of his own, was cooperating with the FBI and recording many of the meetings and phone calls. The complaint also charges that the defendants made improper payments to student athletes and concealed those payments from their universities.

The second complaint related to the coach bribery scheme charges only one coach: Chuck Person, an associate head coach at Auburn. It also charges Rashan Michel, the owner of a clothing store in Atlanta that specializes in making custom suits for athletes. The basic nature of the scheme is the same: Person allegedly accepted more than $90,000 in bribes from Blazer (the cooperating witness) and Michel. In exchange, Person agreed to introduce student athletes to Blazer and Michel and to encourage the athletes to retain them once they left college. Once again, the complaint also charges that the defendants made improper, undisclosed payments to current student athletes.

The charges in the coach bribery scheme include multiple counts of honest services fraud, bribery, honest services fraud conspiracy, bribery conspiracy, wire fraud conspiracy, and travel act conspiracy.

The High School Players Scheme

The scheme set forth in a third complaint involves a conspiracy to pay high school basketball players and their families. The defendants are James Gatto, the global marketing director for basketball at Adidas; Merl Code, an individual identified as affiliated with Adidas and its high school basketball programs; and Jonathan Augustine, program director for an amateur high school basketball program sponsored by Adidas. Also charged in this complaint are Christian Dawkins and Munish Sood, the same sports manager and financial adviser charged in the first complaint of the coach bribery scheme.

The complaint alleges that these defendants conspired to make secret payments to three different high school athletes and their families. In exchange, the families agreed the student would attend particular universities sponsored by Adidas, and that the student would sign deals with Adidas and use the services of Dawkins and Sood after joining the NBA.

The defendants allegedly agreed to pay $100,000 to the family of a top high school graduate from the class of 2017, although apparently only the first installment of $25,000 was actually paid. In return, the student allegedly agreed to attend University of Louisville. They also allegedly conspired to funnel $150,000 to the family of another high school student graduating in 2018, this time to induce that student to attend what appears to be University of Miami. Unnamed coaches at the two universities also were allegedly involved in the schemes.

The charges in the high school players scheme include wire fraud, conspiracy to commit wire fraud, and money laundering.

Analyzing the Criminal Charges

 Bribery and Bribery Conspiracy

 The coach bribery scheme complaints charge bribery and bribery conspiracy using three different theories: 18 U.S.C. § 666, federal program bribery (applies because the universities receive more than $10,000 a year in federal funds); 18 U.S.C. § 1343 and 1346, honest services wire fraud (applies to an employee who takes bribes or kickbacks in breach of a duty owed the employer); and 18 U.S.C. § 1952, the travel act (applies to interstate travel to further violations of state bribery law).

Under each statute the bribery theory is basically the same: the outside advisors (or undercover agents posing as outside advisors) paid the coaches to induce them to violate their duties to their university employers by violating NCAA rules, thereby exposing the universities to potential sanctions.

The bribery charges highlight the centrality of the NCAA rules to these complaints. There is no direct harm to the universities, financial or otherwise. This isn’t a case where an employee took bribes to disclose trade secrets to a competitor or to award a contract to an unqualified contractor, or took some other step that directly harmed the employer. There is only potential harm, and only because of possible sanctions by the NCAA for violating its rules.

Wire Fraud and Wire Fraud Conspiracy

The wire fraud and wire fraud conspiracy allegations (18 U.S.C. § 1343) charge that the defendants defrauded the universities by causing them to pay scholarship money to athletes who were actually ineligible due to the secret payments that were made to them. The high school players scheme also charges that the universities were defrauded of their right to control their limited scholarship assets and how they would be disbursed. Again, any potential harm results only from the possible violations of NCAA rules and penalties that might result. Paying the scholarships didn’t harm the universities, because they received the services of the players they wanted in return. The only potential harm would come if the improper payments were later discovered and the schools were sanctioned.

Money Laundering

Money laundering charges (18 U.S.C. § 1956) appear only in the high school players scheme. The complaint alleges that Gatto and the other defendants tried to conceal the payments going from Adidas to the families by running them through other entities and bank accounts controlled by the defendants and by creating fictitious invoices to cover their tracks.

I think the money laundering charges may be flawed. Money laundering requires that the charged financial transaction involve the “proceeds” of a crime – money generated by a completed unlawful activity. If the parents had received the money and then done something with it to disguise where it came from, that might be a laundering transaction involving the proceeds of the bribery scheme. But here the charged transactions appear to involve the money used to pay the bribes themselves. That money is not yet proceeds of the bribe for money laundering purposes. It only becomes proceeds once the bribes have been paid and the money is in the hands of the families.

There are plenty of cases throwing out convictions where prosecutors charged money laundering when in fact the financial transactions did not involve proceeds of a completed crime but represented the underlying criminal activity itself. This requires a more detailed discussion that I will probably return to in a future post. But unless there are more facts out there that don’t appear on the face of the complaint, I believe it’s likely the money laundering charges will not survive.

The problem with the NCAA basketball corruption case

Criminalizing the NCAA Rules

Review of the charges makes it clear that the entire criminal case hinges on violations of the NCAA rules. The only harm to the alleged victims – the universities – stems from any sanctions that might potentially result from the violation of those rules. Take away the NCAA rules, and there is no criminal case.

As the complaints note, the NCAA rules provide that schools violating the rules may suffer penalties including limitations on post-season play, fines, and limitations on the ability to grant scholarships or recruit athletes. But the rules do not suggest that those who violate them may be subject to federal criminal prosecution.

The defendants could be forgiven for thinking that if they got caught violating the rules, the worst that would happen is they would be fired. Maybe the university would come after them to try to recoup any financial penalties. Their careers would certainly be over. But they likely didn’t believe that violating the internal rules of a private athletic organization would potentially subject them to decades in federal prison.

Prosecution seems even more questionable when you consider that virtually all of the conduct here likely would be legal if it related to professional athletes. The payments would be called finder’s fees or product endorsement deals. The purported criminality stems only from the NCAA’s insistence on maintaining the fiction that these athletes are amateurs and that high-level college basketball is actually about college, rather than about big business and providing farm teams for the NBA.

There’s a lot of behavior that can be squeezed into white collar violations but where criminal sanctions aren’t required. That’s where the exercise of prosecutorial discretion comes in. This case is really about the violation of NCAA rules. NCAA sanctions against the offending schools and individuals would be the more appropriate remedy.

The players weren’t harmed. Their families weren’t harmed. The teams weren’t harmed. The public wasn’t harmed. The coaches were still coaching, and the games were not affected. The universities were only potentially harmed — and only because of the rules of a private organization they voluntarily joined in support of athletics programs that earn them millions of dollars.

And this is where the Department of Justice chooses to devote its resources? Look, I love DOJ, but I can hear the critics now: “You can crash the entire financial system and no one gets prosecuted. But don’t you dare mess with college basketball!”

This year it appears the madness didn’t wait until March.

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What to Watch For at the Bob Menendez Trial

After more than two years of legal maneuvering, the trial of U.S. Senator Robert Menendez begins today in New Jersey. Menendez and his co-defendant, Florida ophthalmologist Salomon Melgen, face eighteen counts of bribery and related offenses.

Menendez and Melgen were indicted in April of 2015. The trial has been delayed while Menendez pursued claims that his prosecution is barred by the Constitution’s Speech or Debate clause. The trail judge rejected his arguments and the U.S. Court of Appeals for the Third Circuit affirmed that decision. The Supreme Court declined to hear Menendez’s appeal, which finally cleared the way for trial to begin this fall.

This is the first criminal trial of a United States Senator in nearly a decade. It’s the highest profile corruption case to go to trial since the Supreme Court’s 2016 decision in McDonnell v. United States dramatically altered the landscape for corruption prosecutions. And given the close balance of power in the U.S. Senate, Menendez’s fate could have significant political implications for the entire country.

So in addition to all the nonstop drama in Washington these days, the drama unfolding in a Newark federal courtroom for the next six to eight weeks is worthy of attention. Here are some things to watch for at Menendez’s trial.

Federal courthouse, Newark NJ

The Allegations

The government alleges Menendez and Melgen engaged in a bribery scheme that began shortly after Menendez was first elected to the Senate in 2006 and lasted for about seven years. The government charges that Menendez agreed to use the power of his office to seek to benefit Melgen in exchange for a series of valuable gifts and donations.

Melgen’s gifts to Menendez allegedly included the following:

  • On multiple occasions Menendez, sometimes with a guest, stayed free of charge at Melgen’s villa in a luxury resort in the Dominican Republic.
  • On more than a dozen occasions Melgen flew Menendez, and sometimes his guest, to and from the Dominican villa on Melgen’s private jet. When Melgen’s jet wasn’t available, he arranged for other private jet transport for Menendez or purchased a first-class ticket for him.
  • In 2010 Melgen used his American Express points to book a suite at a Paris hotel, valued at nearly $5,000, for Menendez to use for a three day vacation.
  • In 2012 Melgen made more than $750,000 in campaign donations to benefit Menendez, as well as a $20,000 contribution to Menendez’s legal defense fund.

In return, the government alleges Menendez did the following for Melgen:

  • Menendez pressured the State Department to influence the government of the Dominican Republic to move forward on a valuable contract owned by Melgen to provide cargo screening services in Dominican ports.
  • Menendez tried to stop U.S. Customs and Border Protection from donating shipping container monitoring and inspection equipment to the Dominican Republic, because that equipment would have undermined the value of Melgen’s contract.
  • Menendez personally and repeatedly intervened on Melgen’s behalf with the Department of Health and Human Services (including meeting personally with the Secretary of HHS) in a proceeding where HHS claimed Melgen had overbilled Medicare by about $9 million.
  • Menendez and his staff worked to influence State Department officials to grant visas for three foreign girlfriends of Melgen to visit the United States.

The indictment charges Menendez and Melgen with conspiracy, bribery, honest services fraud, and the travel act. It also charges Menendez with false statements for failing to disclose the gifts from Melgen on his annual Ethics in Government Act reports. (For a more detailed analysis of the particular charges, you can read my post here.)

Melgen has separate legal problems of his own related to his Medicare billings. This past April he was convicted of dozens of counts of Medicare fraud in Florida. His sentencing in that case has been postponed pending the outcome of this trial.

The Central Issue: Was There Corrupt Intent?

The key issue in the case is going to be proving corrupt intent, the quid pro quo required for a bribery conviction. There’s not going to be much dispute about the underlying events. No one will deny that the private jet trips, vacations, and political donations took place. Menendez will dispute some details of his various meetings on Melgen’s behalf, but no one will deny the meetings happened.

As in so many white collar cases, the key will be proving what was going on in the defendants’ minds. The government needs to show that Melgen gave the gifts because he wanted some official action from Menendez in return, and that Menendez accepted the gifts with that same understanding.

The defendants claim there was no corrupt intent. Melgen says the things he provided to Menendez were strictly out of friendship. Menendez claims that anything he did on Melgen’s behalf was not because of the gifts but was either part of his Senate legislative and oversight duties or simply favors on behalf of an old friend.

Of course friendship and corruption are not mutually exclusive. Just as my friend and I can rob a bank together, my Senator friend and I can engage in a corruption scheme. Even if friendship was part of the motivation for Melgen’s largess, that is not a defense so long as at least part of the motive was a corrupt intent to influence – and to be influenced in – the performance of official acts.

The sheer lavishness of the gifts will make the “friendship” argument challenging for the defense. There will likely not be many jurors who can relate to the idea of friends giving each other private jet travel and luxury vacations.

The other challenge for the “friendship” defense is that it seems to paint a picture of an oddly one-sided friendship. Friends do give each other gifts, but it is typically more of a two-way street. Melgen gave Menendez about a million dollars worth of gifts, but what did Menendez ever give Melgen in return — other than the exercise of his official powers?

Senator Menendez faces multiple counts of corruption

Senator Bob Menendez

Proving Corrupt Intent

The best way for the government to prove intent in a bribery scheme is to have the cooperation and testimony of one side of the corrupt transaction. For example, in the Bob McDonnell case the man alleged to have bribed McDonnell was granted immunity and testified as the government’s star witness.

There has been a lot of speculation that Melgen might plead guilty and agree to testify against Menendez. Certainly he is under a lot of pressure to cut a deal to benefit himself, given his separate conviction in Florida where he faces substantial prison time. When the sentencing in that case was delayed, I thought it might mean Melgen was about to cooperate. But there has been no sign Melgen is going to roll over on Menendez. If it were going to happen, it probably would have happened by now.

Absent testimony from Melgen, the government will be left to prove intent largely by circumstantial evidence. Timing of gifts and corresponding actions will be important, and can raise an inference of a quid pro quo. For example, the most significant gifts from Melgen – more than $750,000 in contributions to various campaign funds and a legal defense fund – came in 2012. That was the same time Menendez was working most vigorously on Melgen’s behalf in both the port contract dispute and the Medicare billing dispute. In some instances, Menendez met with executive branch officials on Melgen’s behalf the same week – or even the same day — that Melgen made a substantial campaign contribution.

Concealment also is important for proof of intent. That’s where the evidence that Menendez failed to report the gifts on his financial disclosure forms will come into play. Although the false statements charge for failing to report the gifts is only a single count of the indictment, its significance is in helping to establish corrupt intent for the entire case. The government will argue Menendez failed to disclose the gifts because he knew they were corrupt and improper.

Other examples of deception also will help prove corrupt intent. For example, the government will present evidence that once the private jet trips came to light, Menendez made false public statements claiming there had only been three such trips when in fact there were more than a dozen.

In addition, there will be evidence that some of the campaign donations were made by Melgen’s family members, to keep them within legal limits, but that Melgen then used corporate funds to pay the family members back. This amounts to laundering of campaign contributions to disguise the fact that all of the money is actually coming from Melgen’s corporation and helps conceal the depth of the connection between Melgen and Menendez.

McDonnell and “Official Acts”

A key legal issue is whether the Supreme Court’s recent decision in the Bob McDonnell case provides any cover for Menendez. In McDonnell the Court ruled that in a corruption case the government must prove the public official agreed to perform “official acts.” The Court defined official acts very narrowly, and thereby dramatically restricted the scope of federal corruption law.

Menendez has repeatedly argued that his actions on behalf of Melgen did not amount to official acts as defined by McDonnell. This is a strictly legal defense, of a different character than the factual defense based on lack of corrupt intent. Relying on McDonnell Menendez can basically argue, “Even if there was a quid pro quo and I acted in exchange for the gifts that Melgen gave me, that can’t amount to bribery because the actions I took were not significant enough to be official acts.”

Menendez actually undercut his own “official acts” arguments earlier in the case. When arguing that his actions were protected by the Speech or Debate clause, he characterized them as a central part of his duties as a Senator. As the government has pointed out, in one pleading he argued that invoking oversight authority and threatening to use his power as a Senator would qualify as “official acts.” But now that his Speech or Debate arguments have been rejected, his earlier statements have come back to bite him.

With the McDonnell case itself and other cases that have been overturned since McDonnell, such as the  conviction of Sheldon Silver, former Speaker of the New York General Assembly, the problem was the jury instructions. In neither case did the courts say there was no way the defendants could be found guilty of corruption. The problem was that the trials took place before the Supreme Court announced its new “official act” requirement and so the jury instructions didn’t comply with that requirement. The government won’t have that problem here; in an entirely post-McDonnell trial it can ensure that the jury instructions comply with the McDonnell standard.

Menendez has tried unsuccessfully several times to get the judge to dismiss his case based on McDonnell. For reasons that I’ve explained in detail here and here, in the end I don’t expect this to be a problem for the prosecution. I believe the government will be able to demonstrate that Menendez did agree to perform official acts under the McDonnell standard. The key question, as noted above, is going to be why he did so – was there corrupt intent.

Possible Door Opening

The defense will have to tread lightly in some areas to avoid opening the door to the introduction of potentially damaging information. For example, the initial investigation of Menendez and Melgen was based on allegations that the two had consorted with underage prostitutes while at Melgen’s Dominican villa. Those allegations did not result in any criminal charges, but during that investigation the government learned of the other information that led to this indictment.

At various times Menendez has argued his prosecution is politically motivated, claiming, for example, that the Obama administration brought the case to punish him for his opposition to Obama’s policy towards Cuba. The government has said it has no reason to introduce evidence of the prostitution allegations and has no intention of doing so. But if the defense attacks the motives of the prosecution and raises its conspiracy theories, it may open the door to the government bringing in that evidence to explain why the case was actually begun.

Information about Melgen’s conviction for Medicare fraud, or Menendez’s protected Speech or Debate activity, also should not be a part of the case but potentially could be introduced if the defense make arguments or puts on testimony that would allow the government to raise those issues in response.

The Bottom Line

Unlike McDonnell, I don’t expect this case to turn on a technical legal argument. The case is going to come down to whether the government can prove that Menendez corruptly agreed to sell the powers of his office. That’s a factual question that ultimately will be decided by the jury.

The defense has repeatedly shown it is not afraid to be aggressive in responding to the government’s allegations. This will be a hard-fought case. The indictment paints a compelling picture of corruption, but anything can happen at a trial. Stay tuned.

Update: On November 16, 2017, the Menendez trial ended with a hung jury and a mistrial.

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Sheldon Silver, Bob McDonnell, and the Sorry State of Public Corruption Law

The Supreme Court’s Bob McDonnell decision claimed its highest-profile casualty last week. On July 13 the United States Court of Appeals for the Second Circuit threw out the corruption convictions of Sheldon Silver, the former Speaker of the New York State General Assembly. The court ruled that, in light of McDonnell, Silver’s jury was not properly instructed on what constitutes an “official act” in a corruption case.

Silver is not out of the woods yet; he may well be convicted again after a new trial. But his case does highlight how much easier it is in the post-McDonnell era for public officials to sell government access to the highest bidder.

Regular readers know I’ve written extensively, and critically, about McDonnell. By adopting an artificially narrow definition of “official act,” the Court in McDonnell cleared the way for public officials to enrich themselves through secret gifts and payments. The Silver case highlights the safe harbors McDonnell creates for corrupt behavior and the sorry state of public corruption law.

Sheldon Silver

Facts of the Silver Case

Sheldon Silver was first elected to the New York State Assembly in 1976, representing much of lower Manhattan. He was elected Speaker in 1994 and held that position until he resigned in 2015. As Speaker, he was one of the most powerful politicians in the state.

In 2015 the United States Attorney’s Office for the Southern District of New York (then headed by the recently-fired Preet Bharara) indicted Silver. The charges were based on two different corruption schemes.

In the first, the government charged that Silver agreed to do political favors for Dr. Robert Taub, a physician and researcher at Columbia-Presbyterian Hospital who specialized in mesothelioma. Silver obtained state grants worth $500,000 to support Dr. Taub’s research, introduced a state resolution commending Dr. Taub, worked to help secure jobs for his children, and did other favors for him.

In return, and to curry favor with Silver, Dr. Taub regularly referred mesothelioma patients who needed legal representation to a law firm with which Silver was affiliated. Silver received a percentage of any legal fees that resulted. Over a ten-year period, Silver earned about $3 million from Dr. Taub’s referrals.

The second scheme involved two major New York real estate developers. Over a number of years Silver took actions in the state legislature to benefit the developers on issues related to real estate taxes and rent legislation. In return, the developers sent tax-related work to another law firm that also had an arrangement with Silver. These referrals resulted in nearly another $1 million in fees for Silver.

In short, the government charged that Silver enriched himself to the tune of about $4 million through these referral schemes, which were not disclosed to the public. In return, he used the considerable powers of his office to benefit those providing the referrals.

The charges against Silver included honest services fraud and Hobbs Act extortion under color of official right. These were also two of the primary statutes used in the McDonnell indictment. Both charges, which are essentially bribery by another name, are commonly used in public corruption cases.

Bob and Maureen McDonnell

Bob and Maureen McDonnell

The Bob McDonnell Decision

Former Virginia Governor Robert McDonnell and his wife Maureen were convicted on multiple counts of corruption in 2014. Prosecutors charged that the two accepted more than $175,000 in secret gifts and loans from businessman Jonnie Williams. In return, Williams sought to have the McDonnells promote his company’s dietary supplement, Anatabloc, within the Virginia government.

In exchange for the gifts, McDonnell introduced Williams to Virginia health researchers and arranged meetings for him with other government employees. He also held a product launch event for Anatabloc at the Virginia Governor’s mansion, attended by other state employees and health officials.

The U.S. Court of Appeals for the Fourth Circuit unanimously upheld the McDonnell convictions. But in June 2016 the U.S. Supreme Court unanimously reversed.

Bribery requires a quid pro quo, an exercise of government power in exchange for something of value. There was no doubt Williams had showered the McDonnells with secret gifts that satisfied the quid side of the equation. But the Supreme Court ruled that in a federal corruption case the quo agreed to by a public official must fit a specific definition of an “official act.” McDonnell’s actions, the Court concluded, did not rise to that level.

The McDonnell Court held that an official act must be a “decision or action on any question, matter, cause, suit, proceeding or controversy” that is or may be pending before the public official. It must be specific and focused, and involve a “formal exercise of government power” similar to a lawsuit before a court or a hearing before an agency. The public official must take an action “on” that matter, such as taking steps to resolve it somehow or pressuring another to do so.

Merely arranging a meeting or holding an event, the Court held, does not constitute an official act. These are simply routine political courtesies and interactions with constituents, not decisions or actions on a particular matter or controversy. If they could form the basis of a corruption case, the Court said, politicians would be unable to perform routine services for any supporter without fearing a potential criminal prosecution.

Timing Is Everything

The McDonnell case was on appeal when Silver went to trial, but the Supreme Court had not yet decided it. Silver’s attorneys requested a narrow definition of “official act” similar to the one argued for by McDonnell. Consistent with Second Circuit law at the time, the trial judge rejected this request. The judge told the jury that official acts included anything the public official did “under the color of official authority.”

As the Court of Appeals noted, this was completely correct at the time. The trial court and prosecutors could not be faulted for the instruction. But the McDonnell decision, which came down just a few weeks after Silver was sentenced, changed the rules.

In light of McDonnell, Silver was convicted based on a broader definition of “official act” that is no longer the law. The Court of Appeals noted that some of the things Silver did, such as obtaining state grants or introducing official resolutions in the House, could still quality as official acts after McDonnell. But other things included in the indictment, such as writing letters or attending meetings on behalf of his benefactors, would not.

It was impossible for the Court of Appeals to be certain which of Silver’s actions the jury actually relied upon, or how they would have viewed those actions if they had been instructed consistent with the McDonnell holding. That meant it was possible Silver was convicted for political favors that would not meet McDonnell’s definition of official acts and so would not be a crime. Accordingly, the Court of Appeals vacated the convictions and ordered a new trial to allow a properly instructed jury to consider the evidence.

The Post-McDonnell World

The Silver case provides a good case study of the state of public corruption law in the post-McDonnell world. Silver received about $4 million in secret benefits from individuals and companies that were seeking his help in his official capacity. Whether these corrupt deals were actually criminal has now been cast into doubt by the McDonnell case.

McDonnell and his supporters argued that his convictions risked criminalizing routine political courtesies and constituent services for those who support a politician. Such interactions are indeed an integral part of politics. And as long as we have a system of privately funded campaigns, politicians inevitably will respond to their supporters.

But Silver was not simply acting on behalf of routine political supporters — individuals who gave him campaign contributions or helped him raise legal contributions from others. Like Governor McDonnell, Silver was receiving personal benefits that went into his own pocket. Those gifts were secret, not publicly disclosed for the voters to see.

The essence of corruption is politicians acting not for the good of those they are elected to represent but in order to enrich themselves. Corrupt politicians abuse the trust of their public office by acting not on behalf of all their constituents but on behalf of those who are secretly paying them off. And access to the corridors of power becomes simply another commodity available to those willing and able to pay.

By its obsessive focus on a narrow and overly legalistic definition of “official acts,” the McDonnell Court missed the corruption forest for the trees. The key to corruption is not the precise nature of what the politician does. It’s the overall corrupt relationship, including whether support is public or secret, whether it is within any applicable legal limits, and whether it goes to the politician’s campaign or into his or her personal bank account. McDonnell imposes precise limitations on the quo side of a bribery transaction, while ignoring the overall corrupt relationship that allows a public official to secretly profit from his or her position.

The original jury instructions in Silver’s case embodied this concept: corruption may be found when there are secret payoffs to a politician in exchange for any actions done “under the color of official authority.” There are many things done under the color of official authority that do not meet the McDonnell definition of “official act.” But regardless of how large the personal benefit or how corrupt and secret the relationship, sale of those political favors is now outside the reach of federal corruption law.

This is the unfortunate result of the McDonnell case. The wealthy and connected are free to keep politicians in their back pockets through secret, personal gifts. In return, those politicians may provide political favors, grease the wheels of government, and provide access to government power. They are free to skate right up the “official act” line, personally enriching themselves through their public office, while the general public is kept in the dark.

It’s Not Over for Silver

It’s important to recognize that the Second Circuit did not find the evidence against Silver was insufficient, just that the jury was not properly instructed. The United States Attorney’s Office promptly announced that it intends to re-try the case. Former U.S. Attorney Bharara Tweeted that the evidence was strong and he expects Silver to be convicted again after a new trial.

The case on retrial will certainly be more challenging for the government. The universe of actions that may qualify as “official acts” has been substantially narrowed. Some of Silver’s actions fall outside of the statute of limitations, and that may be an issue in the new trial as well. The Court of Appeals also suggested that some of Silver’s actions, even if they did amount to official acts, might have been so insubstantial that a jury would not find they satisfied the quo requirement for a corrupt relationship. That defense argument will likely be a focus of the new trial as well.

Silver clearly won the battle in the Second Circuit. It remains to be seen whether he ultimately will win the war. But there’s no doubt the McDonnell decision has made rooting out and prosecuting public corruption significantly more challenging.

That’s the true legacy of Bob McDonnell: making life easier for corrupt politicians everywhere.

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You can read more of my commentary on the McDonnell case here:

Supreme Court Narrows Federal Bribery Law in a Win for Bob McDonnell

The Bob McDonnell Case May Have Been Won Months Before Trial

Bob McDonnell’s New Trial Motion and the Definition of “Official Act”

Bob McDonnell, Bribery, and “Official Acts” – Part II

Charging Foreign Officials Who Take Bribes with Conspiracy to Violate the FCPA

The Foreign Corrupt Practices Act prohibits U.S. persons and companies from paying bribes to foreign officials to obtain or retain business. The statute applies only to those who pay the bribes, not to foreign officials who receive them. But a recent Supreme Court decision may revive a long-dormant legal theory: charging foreign officials with conspiracy to violate the FCPA.

Congress passed the FCPA in 1977 to combat U.S. companies participating in foreign corruption. In recent years FCPA enforcement has become a major priority for the Department of Justice and the SEC. FCPA cases have resulted in some of the largest criminal and civil fines in history. And although private citizen Donald Trump criticized the law in the past, Attorney General Sessions recently affirmed the Trump administration remains committed to its enforcement.

The FCPA is an unusual corruption statute in at least one respect. Bribery laws generally apply to both sides of a corrupt transaction, prohibiting the receipt of bribes by a public official as well as the payment of those bribes. The FCPA, by contrast, applies only to the bribe payer. Foreign officials who receive bribes may be subject to prosecution in their own country, but the language of the FCPA does not prohibit their actions.

Forty years after the FCPA’s passage, the economy is more global and interconnected than ever. DOJ is much more aggressive about asserting criminal jurisdiction over events that take place primarily in other countries. There are cases where DOJ may want to charge the foreign official accepting FCPA bribes. This may be particularly true when the official has extensive ties to and activities within the United States, or when prosecution in the official’s own country seems unlikely.

Because the FCPA does not apply to the bribe recipients, DOJ must look to other theories to hold them accountable. For example, in some recent cases DOJ has charged foreign officials with money laundering of funds received as part of an FCPA scheme.

But DOJ may have a more direct option: charging foreign officials who receive bribes with conspiracy to violate the FCPA. Conventional wisdom has been that such conspiracy charges are improper. This is based in large part on a single 1991 Court of Appeals case, United States v. Castle. But a recent Supreme Court decision casts doubt on Castle and may breathe new life into the conspiracy theory.

Bribery usually punishes both sides of the corrupt transaction

The Conspiracy Precedent: United States v. Castle

There was a time when DOJ believed it could charge foreign officials with conspiracy to violate the FCPA. In Castle the government used that theory to prosecute four individuals – two U.S. citizens and two Canadian officials. The Americans had allegedly paid the Canadians a $50,000 bribe to secure a contract to provide buses to the Saskatchewan government.

The conduct of the Americans plainly fell within the statute. But the Canadian defendants claimed they could not be charged with conspiracy to violate the FCPA. They argued the conspiracy charge was an improper attempt to circumvent Congress’s decision not to criminalize the foreign officials’s conduct.

The U.S. Court of Appeals for the Fifth Circuit agreed. The court said Congress knew any FCPA bribery transaction would necessarily involve a foreign official. But Congress chose not to criminalize the receipt of the bribe. Prosecuting foreign officials for conspiracy, the court held, would amount to an improper end run around this Congressional policy decision.

The Mann Act and Gebardi v. United States

The Castle court relied primarily on a 1932 Supreme Court case, Gebardi v. United States. Gebardi involved a prosecution under the Mann Act, which prohibited the transportation of women across state lines for “immoral purposes.” The Mann Act punished those doing the transporting but did not criminalize the actions of the woman being transported.

In Gebardi a woman agreed to cross state lines with her lover to have sex. When they were charged with conspiracy to violate the Mann Act, she argued the charge was improper. She noted that Congress deliberately chose not to criminalize her conduct in the Mann Act itself. To allow a conspiracy charge, she claimed, would subvert this Congressional decision. The Supreme Court agreed and dismissed the conspiracy case.

The Castle court held that the reasoning of Gebardi squarely applied to the FCPA. Failing to criminalize the receipt of bribes by foreign officials, the court said, represented “an affirmative legislative policy to leave unpunished a well-defined group of persons who were necessary parties to the acts constituting a violation of the substantive law.” Given that legislative decision, it was improper for prosecutors to use conspiracy to charge the foreign officials that the FCPA left unpunished.

Baltimore police were charged with extortion in Ocasio

Conspiracy and Ocasio v. United States

Since 1991 Castle has been widely cited for the proposition that it’s improper to charge foreign officials with conspiracy to violate the FCPA. But the Supreme Court’s decision last term in Ocasio v. United States suggests the high court would not agree.

In Ocasio the defendant was a Baltimore police officer. He, some fellow officers, and the owners of an auto garage took part in a scheme in which the garage owners paid the officers to refer car accident victims to the garage for repairs.

Officer Ocasio and the garage owners were charged with conspiracy to violate the Hobbs Act. That act prohibits extortion “under color of official right” by a public official. This is a common federal corruption charge, particularly in cases involving state or local officials.

In Evans v. United States the Supreme Court held that extortion under color of official right is basically equivalent to the receipt of a bribe. But the Hobbs Act applies only to the public official, not to the person who pays. So as interpreted by Evans the Hobbs Act, like the FCPA, is an odd bribery statute: it prohibits only one side of a two-sided corrupt transaction.

In Officer Ocasio’s case, that meant prosecutors couldn’t charge the garage owners with violating the Hobbs Act directly. So they charged the garage owners and the officers with conspiracy to violate the Hobbs Act. The government’s theory was that although the garage owners could not violate the Hobbs Act, they were still capable of conspiring to help the officers violate it. In effect, the garage owners were charged with conspiring to help the police officers extort money from the garage owners themselves.

Ocasio argued the conspiracy charge was improper. Part of his argument was similar to that made by the defendant in Gebardi. Although every Hobbs Act extortion case necessarily involves at least two parties, Congress expressly chose not to punish the person who pays the public official. Prosecuting the payer for conspiracy to violate the Hobbs Act, Ocasio argued, would undermine this Congressional decision.

Supreme Court precedent supports charging foreign officials with conspiracy to violate the FCPA

The Supreme Court on the Nature of Conspiracy

The Supreme Court disagreed with Officer Ocasio. The Court relied on basic principles of conspiracy law. It noted that conspiracy has always been a separate offense from the underlying crime. In a conspiracy charge, the crime is the agreement itself – the joint undertaking to engage in criminal activity.

Conspiracy does not require that the co-conspirators successfully commit the crime that is the object of the conspiracy. It does not require that each co-conspirator agree to commit or facilitate each and every element of the underlying crime. In fact, a conspirator may be convicted even if he was legally incapable of committing the underlying offense. Conspirators need only agree to help some member of the conspiracy commit the crime.

In Ocasio’s case, the garage owners conspired with the police officers to help the officers violate the Hobbs Act. The Court held this conspiracy theory was sound even though the garage owners, who were not public officials, would be legally incapable of committing extortion under color of official right: “It is sufficient to prove that the conspirators agreed that the underlying crime be committed by a member of the conspiracy who was capable of committing it. In other words, each conspirator must have specifically intended that some conspirator commit each element of the substantive offense.”

The Mann Act Precedents

The Ocasio Court also discussed Gebardi, as well as an even earlier Mann Act case, United States v. Holte (1915). In Holte the Court rejected the claim that it was impossible for the woman transported across state lines to be guilty of conspiracy to violate the Mann Act. The Court gave an example of a prostitute who buys the train tickets, arranges for the travel, and then crosses state lines with a companion. In such a case, the Court said, there was no reason the woman could not be charged with conspiracy even though the terms of the Mann Act did not cover her conduct.

The Court in Ocasio concluded Holte and Gebardi mean that merely participating in a two-sided transaction will not always be enough to charge the person not covered by the statute  with conspiracy. However, there could be cases where the active participation of the other party would rise to the level where a conspiracy charge would be warranted. Gebardi, the Court held, rejected the conspiracy charge not because it was inherently improper but simply because there was no evidence that the woman in that case had actually joined the conspiracy.

The Court concluded: “Holte and Gebardi make perfectly clear that a person may be convicted of conspiring to commit a substantive offense that he or she cannot personally commit. They also show that when that person’s consent or acquiescence is inherent in the underlying substantive offense, something more than bare consent or acquiescence may be needed to prove that the person was a conspirator.”

Charging Foreign Officials with Conspiracy to Violate the FCPA

Ocasio suggests the current Supreme Court would not agree with the Castle court’s reading of Gebardi. Like the FCPA, the Hobbs Act expressly fails to criminalize the acts of one of the two necessary parties in a criminal transaction. The court in Castle held that this Congressional judgment meant a conspiracy charge would always be improper. But the Supreme Court in Ocasio rejected a similar claim.

Castle essentially concluded that Congress’s failure to include foreign officials in the FCPA immunizes those officials from any FCPA-related charge, even under separate statutes. The current Supreme Court is unlikely to be sympathetic to that argument. If Congress wants to pass a statute prohibiting any charges of any kind against foreign officials who accept bribes, it is free to do so. But the Court is unlikely to infer such a broad policy decision from the silence in the FCPA. It is much more likely to find, as it did with the Hobbs Act, that nothing in the FCPA alters the basic law of conspiracy.

This suggests DOJ could properly charge a foreign official who receives bribes with conspiracy to violate the FCPA. The theory would be that the foreign official conspired to help U.S. persons violate the FCPA by bribing that official. Just as the garage owners in Ocasio conspired to help others extort money from the owners, foreign officials could conspire to help others pay bribes to the foreign officials.

This charge would be most appropriate where the foreign official was aggressively encouraging the bribes. As the Court noted in Ocasio, something more than mere passive participation likely would be required to find the officials guilty of a conspiracy. But if they were actively engaged in the scheme, a conspiracy charge may be warranted.

In a case where the foreign official is aggressively demanding bribes, punishment of the official may be particularly justified. The bribe payers arguably are being “shaken down.” They may feel they have little choice but to pay. Charging only the bribe payers in such a case is akin to charging only the victims of extortion in a Hobbs Act case – it may let the most culpable party off the hook.

Of course, cases where DOJ is interested in prosecuting the foreign official may be relatively rare. Where the official is more of a passive recipient, conspiracy charges may not be warranted. In many cases diplomatic, jurisdictional, evidentiary, or other concerns will counsel against filing charges.

But in appropriate cases, DOJ should consider charging foreign officials who accept bribes with conspiracy to violate the FCPA. Ocasio suggests the Department’s legal position more than twenty-five years ago in Castle was correct: conspiracy is a separate crime and there is no barrier to prosecution.

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Selling Access: President Trump, Corruption, and the Legacy of Bob McDonnell

President Donald Trump took office last week amid a storm of controversy over ethics and potential conflicts of interest. There are widespread concerns about possible corruption in the Trump administration. A key focus has been the Emoluments Clause of the Constitution, which forbids federal officials to accept any payments or gifts from foreign governments. Trump’s extensive international business holdings appear to make violations of that clause almost inevitable. (I wrote last November about the Emoluments Clause and how it relates to bribery; you can find that post here.)

Trump recently did announce some steps to transfer control of his businesses to his sons, although it is unclear to what extent that has actually taken place. The head of the U.S. Office of Government Ethics, Walter Shaub, pronounced these efforts wholly inadequate  – and promptly found himself summoned to Capitol Hill to explain his temerity to a Congressional committee. Then this past Monday a public watchdog group and several prominent law professors filed a lawsuit asking a federal court to rule that the new president is already violating the Emoluments Clause.

But the Emoluments Clause is only one of the conflict of interest issues surrounding President Trump. A related ethical concern is the potential for access to the President and his administration to be used as a bargaining chip in his private business dealings. Businesses or governments could secretly agree to provide benefits to Trump-owned businesses in exchange for a private audience with the President or other Executive Branch officials, where they could lobby for government actions that would benefit them. The breadth of the President’s business holdings — and his refusal to divest himself of those holdings – creates an unprecedented risk of such conflicts.

Trump and his family have already demonstrated what might charitably be called a lack of sensitivity to the ethical issues that surround selling access to the White House. In December a nonprofit where Trump’s sons were registered as directors promoted an inaugural event called “Opening Day,” supposedly to benefit unnamed charities related to conservation. It offered donors of $1 million attendance at a private reception with the President-elect, as well as a four-day hunting or fishing excursion with one of his sons. In another incident, a charitable group ran an on-line auction of an opportunity to have coffee with Trump’s daughter Ivanka. The bidding was above $70,000 before the effort was shut down following media inquiries.

Even though the money from such events may go to charity, the buyer’s motives are not necessarily charitable. For example, the high bidder in the auction for coffee with Ms. Trump told the New York Times that he wanted to urge her to persuade her father not to go too far in restricting immigration. Another bidder hoped to speak to her about the Trump administration’s relationship with the Turkish government.

These efforts to sell access to the President and his family raised ethical red flags for a simple reason: access is valuable. Time on any senior government official’s schedule is a scarce commodity. Those able to meet personally with that official (or his family) have an advantage generally unavailable to ordinary citizens: the ability to directly and privately advocate for their own interests. Attempts to cash in on access to government officials – even for charitable causes – are deemed inappropriate because time with those who are supposed to serve all citizens should not be auctioned off to the highest bidder.

But public charity sales of access are just the tip of the potential ethics iceberg. Of far greater concern are transactions that could take place entirely out of public view. For example, imagine this hypothetical: a foreign company is negotiating some kind of deal with a Trump organization business. The company’s officers make it known that they will offer a sweetheart deal at substantial savings if, in exchange, Trump sets up a meeting for them with the Secretary of Commerce to discuss removing certain import restrictions that apply to the company’s products. (Note that because this hypo involves a private company, not a foreign government, the Emoluments Clause would not apply.)

Trump agrees and the deal goes through. Because it involves two private companies, it is not publicly disclosed. Trump then calls the Secretary of Commerce and says, “These guys are friends of mine, I’d like you to meet with them and hear what they have to say about these import sanctions.” Trump doesn’t tell the Secretary about the art of his deal with the company. He also doesn’t tell the Secretary how to decide the question, but the Secretary is no dummy and can read between the lines to see what would please the boss. The meeting happens, the import restrictions are lifted, both sides are happy, and the country is none the wiser.

Remarkable as it may seem, if such a scheme took place it would not violate federal bribery law. And for that, President Trump can thank the former Governor of Virginia – and the U.S. Supreme Court.

Image of Bob McDonnell, former governor of Virginia, whose case paved the way for corruption in the Trump administration

Access for Sale: McDonnell v. United States

Regular readers know that I’ve written a number of posts about McDonnellhere, here, and here, for example – that provide more details about the case. In brief, former Virginia Governor Robert McDonnell and his wife Maureen were prosecuted for essentially selling access to Virginia government officials. Businessman Jonnie Williams was interested in having Virginia universities conduct research on his company’s dietary supplement Anatabloc. Over a two-year period he gave the McDonnells a variety of personal gifts and loans worth more than $170,000.

In exchange, the McDonnells agreed to help promote Anatabloc within the Virginia government. Governor McDonnell arranged meetings for Williams with various government health officials and researchers so Williams could make his pitch. He also held a product launch event for Anatabloc at the Governor’s mansion, attended by state health officials and other government employees.

The McDonnells were found guilty of multiple counts of corruption following a jury trial, and the Fourth Circuit Court of Appeals unanimously upheld their convictions. But last June the U.S. Supreme Court unanimously reversed, holding that the actions taken by McDonnell on Williams’ behalf were too inconsequential to support a bribery conviction.

The Supreme Court held that simply arranging a meeting, making a phone call, or holding an event did not constitute an “official act” under federal bribery law. An official act, the Court said, requires the public official to take some more substantive steps to resolve a particular question or matter that may be pending before the government, or to pressure another official to do so. Preliminary actions or political courtesies such as arranging a meeting, the Court held, do not rise to that level.

After McDonnell, merely arranging access to government officials may not form the basis of a corruption conviction, even in extreme circumstances. For example, a governor could establish a policy whereby anyone who wanted to meet with a member of his administration had to pay the governor $10,000 to arrange the meeting. Similarly, a company could offer millions of dollars in secret benefits or concessions to a Trump business in exchange for a private dinner with the President or meeting with a Cabinet official. Neither arrangement would violate federal bribery law.

Bribery laws aim to prevent government officials from using their public office to enrich themselves by offering favorable treatment to those willing to pay. Determining whether such a corrupt arrangement exists requires looking at the entire agreement – the quid, the pro, and the quo – and not just focusing on a single side of the equation. The McDonnell decision, through its myopic focus on the meaning of “official act,” effectively took off the table an entire area of public corruption law: the sale of access to government officials.

Image of a bribe taking place - bribery is a key corruption offense

Not All Access is Created Equal

Those familiar with the ways of Washington may observe that access is always up for sale to some extent. It’s just a reality of politics. Large campaign or PAC donors are regularly treated to private events with public officials. For example, large donors to the Presidential Inaugural last week were rewarded with access in the form of a candlelight dinner with Trump and Vice-President Pence at Washington’s Union Station.

This is part of what motivated the Supreme Court in McDonnell. The Court was concerned that if providing access could support a bribery conviction, then many routine interactions with supporters and political courtesies might end up being prosecuted. But again, this mistakenly focuses only on one side of the equation. It’s true that arranging a meeting may be an innocent political courtesy, just as voting on a bill may be a routine political act. But if either is done in direct exchange for a corrupt, secret gift that enriches the politician, that is neither innocent nor routine.

In deciding whether a sale of access might be corrupt, one should consider the whole picture. For example, donations to campaigns take place within a legal framework that generally involves at least some public disclosure and contribution limits. The public is able to see who is supporting the official and to what extent, and to judge the official’s actions accordingly. Sunlight is the best antidote for corruption.

Our current campaign finance system, whatever its flaws, is legal. Contributions made within the framework of that system come with almost a presumption of regularity, and are on a completely different footing from secret, undisclosed gifts. Access may be provided after such contributions, but proving corrupt intent in a case involving lawful contributions will be extremely difficult.

Another distinction is the type of access provided. There’s a big difference between attending a dinner or reception with a few hundred other donors (even by candlelight) and a one-on-one private meeting with an official. The former is more likely to be just a social event where the donors enjoy simply being in the presence of power and perhaps get a chance for a selfie; that is not a setting conducive to corrupt, secret deals.

But the most crucial factor on the quid side of the analysis can be summed up in the immortal words of Watergate’s Deep Throat: follow the money. Campaign contributions go to the campaign, a separate legal entity, as do donations for things such as PACs or Inaugural events. The public official is benefitting indirectly, to be sure, but the support is directed more at the office and campaign and not to line the official’s own pockets.

Contrast this with what Jonnie Williams gave to the McDonnells – secret gifts that enriched the family personally. These were not campaign contributions or other legitimate donations. Rolex watches, New York shopping sprees, and sweetheart loans do not show up on campaign finance reports, are not subject to any legal limits, and personally enrich the official. Unlike routine campaign or PAC contributions, secret gifts to a politician have no legitimate or legally recognized purpose and automatically have the whiff of corruption about them.

The point of all this is simply that it should not be enough to say, “Well, all he did was arrange a meeting, so there can be no corruption.” All of the circumstances surrounding any alleged deal have to be examined. The secret sale of access to public officials causes the exact harm that laws against bribery are intended to prevent: politicians enriching themselves by handing out favors only to those willing to pay. Unfortunately, the McDonnell decision has created a safe harbor for just that kind of corruption.

The Need for Divestiture

Some might suggest this is not a serious problem because there are other potential controls besides the criminal law. For example, the attempts to sell access for charitable causes that I mentioned at the top of this article were exposed and then cancelled. Perhaps the voters and the media can police any such misconduct and shame officials into proper behavior. Ultimately, unhappy voters can always express their displeasure at the ballot box.

But the problem with relying on public pressure and media scrutiny to police such actions is that it assumes full access to information. Most corruption takes place in secret. Although the charitable fundraising efforts were necessarily public, backdoor deals are not. Corruption and conflicts of interest can be very difficult to detect. This is why divestiture of assets that pose a potential conflict is so important: it removes even the possibility of using the power of one’s office to profit off of those assets.

The scenarios outlined here are hypothetical, of course. But the potential for this President to enrich himself and his family through the power of his office is truly extraordinary. With a green light from the Supreme Court, Trump and his family are free to use access to Washington power as a bargaining chip in his private business dealings, taking comfort in the fact that even if their actions come to light, they will not be unlawful.

Yet another way in which the Trump presidency is unprecedented.

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