A Bridge Too Far? Supreme Court Agrees to Hear the Bridgegate Case

In a series of decisions over the past thirty years, the Supreme Court has narrowly interpreted federal public corruption statutes and made it more difficult for prosecutors to bring such cases. A common theme of those decisions is the Court’s fear of giving federal prosecutors too much power to police political misconduct through criminal prosecutions. Now the Court appears poised to act again: it has agreed to hear the appeal of two New Jersey officials convicted in the “Bridgegate” scandal, and is likely to reverse their convictions. Although I disagree with some of the Court’s earlier rulings in corruption cases, in this case that’s probably the right result.

Chris Christie

The Bridgegate Scandal

The George Washington Bridge, which connects Fort Lee, NJ to New York City over the Hudson river, is the busiest bridge in the world. On a normal day, twelve lanes carry traffic inbound to New York City, with three lanes reserved for local commuter traffic from New Jersey. The bridge is operated by the Port Authority of New York and New Jersey, an interstate agency that controls bridges, tunnels, and other transportation infrastructure  in the NY/NJ area.

Chris Christie, the governor of New Jersey, was running for re-election in 2013. Bridget Ann Kelly was Christie’s Deputy Chief of Staff. In the months leading up to the election,  she was responsible for seeking endorsements of Christie from local elected officials. Despite repeated requests, the Democratic mayor of Fort Lee told Kelly that local political considerations would not allow him to endorse Christie, a Republican.

William Baroni was the Executive Director of the Port Authority and David Wildstein was his Chief of Staff. Both had been appointed by Christie. Wildstein suggested to Kelly that the Port Authority could shut down the inbound access lanes on the bridge in order to put pressure on Fort Lee’s mayor. Kelly responded in an email, “Time for some traffic problems in Fort Lee.” Wildstein then told Baroni that Kelly wanted the lanes shut down to “punish” the mayor for his refusal to endorse Christie.

To justify the lane closures, Wildstein and Baroni made up a cover story that the Port Authority was conducting a traffic study on the bridge. They also agreed that the closure would begin on September 9, the first day of school in Fort Lee. Because there would only be a single lane of traffic open from New Jersey, the Port Authority would have to pay an extra worker to back up the sole toll taker in that booth. Baroni approved that extra expense.

When the lane closures took place, they created massive gridlock across all of Fort Lee. In addition to being a nightmare for commuters and school buses, it created a public safety issue because fire fighters, paramedics, and police could not travel to areas where they were needed. The mayor of Fort Lee made frantic efforts to contact the Port Authority about the closure and the safety hazards it was creating, but Baroni refused to take his calls. The closures lasted for four days until the Executive Director of the Port Authority learned about them and ordered the regular traffic lanes restored.

The Criminal Charges

 Federal prosecutors indicted Kelly and Baroni on federal charges including wire fraud, 18 U.S.C. 1343, and theft from a federally-funded entity, 18 U.S.C. 666. Wildstein agreed to plead guilty and cooperate with prosecutors. He testified that the traffic study was a pretext and that the true reason for the lane closures was to punish Fort Lee’s mayor.

The government’s criminal theory under both statutes is essentially the same. Prosecutors argue that the defendants deprived the Port Authority of its property through the lane closure scheme. That property allegedly included wages paid to the workers required to execute the lane closures, including the salaries paid to the extra toll both worker and even the salaries of Baroni and Wildstein themselves. The government also argues the defendants deprived the Authority of the intangible right to control the physical assets of the bridge lanes and toll booths. And these alleged deprivations of property were fraud, the government claims, because the defendants lied about the true reason for the lane closures.

Baroni and Kelly were convicted at trial. Kelly was sentenced to 18 months in prison and Baroni to 24 months, although they were allowed to remain free pending appeal. The Third Circuit Court of Appeals upheld the convictions. The defendants asked the Supreme Court to hear the case, arguing that their convictions were inconsistent with a long line of Supreme Court precedents concerning political corruption prosecutions. On June 28, in the final week of its term, the Supreme Court granted the petition for certiorari. The case should be argued this fall.

Image of US Supreme Court, which decided the Bob McDonnell case

The Supreme Court and Public Corruption

Kelly and Baroni’s main argument is that the prosecutors in their case have tried to do an improper end run around the Supreme Court’s public corruption precedents, particularly those concerning honest services fraud. I think the Court is likely to agree.

Honest services mail and wire fraud became a very popular public corruption theory in the post-Watergate area. Fraud typically requires that the defendant deprived the victim of money or property. But in an honest services fraud case, the defendant is charged with depriving the victim of the intangible right of fair and honest services that the victim was owed by someone. Most honest services fraud cases involve political corruption, because politicians owe a duty of fair and honest services to their constituents. Although less common, the theory applies in private sector relationships as well; for example, an employee may deprive his or her employer of its right to the employee’s honest services by taking some action against the employer’s interests.

Federal prosecutors used honest services fraud to prosecute a wide range of political misconduct that was corrupt, sleazy, or dishonest, even if it did not clearly violate other criminal laws. It was particularly useful in cases involving state and local corruption, because the key federal bribery statute does not apply to state and local officials. But in the 1987 case of McNally v. United States, the Supreme Court brought this to a screeching halt. In a surprise decision, the Court threw out the honest services fraud theory as too vague, even though it had been upheld by every lower court to consider it. Due process requires that criminal laws provide fair notice of what is prohibited, but no defendant, the Supreme Court held, could be sure what qualified as honest services fraud. The sweeping ability to prosecute any potentially “dishonest” behavior gave prosecutors too much authority to set “standards of good government for state and local officials.” The Court held that to “defraud” someone in federal criminal law meant to deprive them of money or property, not of intangible rights like the right to honest services. If Congress wanted fraud to include the honest services theory, the Court said, it needed to “speak more clearly.”

Congress responded the following year by passing 18 U.S.C. 1346, which explicitly says that honest services fraud is a valid theory under federal fraud statutes. But although Congress said its purpose was to overturn McNally, it didn’t further explain what it meant by honest services. This led to another two decades of confusion and inconsistency in the lower courts, as they tried to define the parameters of the sweeping theory. Finally, the Supreme Court stepped again in 2010 in Skilling v. United States, where Jeff Skilling, the former CEO of Enron, challenged his conviction for private sector honest services fraud. The Court declined Skilling’s request to strike down the theory completely, but it held that honest services fraud must be limited to cases involving bribery or kickbacks – core political corruption. Self-dealing, conflicts of interest, or other forms of sleazy political behavior will no longer support an honest services fraud prosecution.

The Court has narrowed public corruption law in other areas as well. In United States v. Sun-Diamond Growers of California the Court held that prosecutors in a gratuity case must prove a direct link between a particular gift to a politician and an identified official act. This struck down a popular prosecution theory known as a status gratuity, where someone gave gifts to an official because of his or her position and ability to benefit the donor in the future but not necessarily because of any particular official act. It also invalidated prosecutions based on relationships involving a string of gifts to an official and a series of official actions benefiting the donor, but not necessarily a one-to-one correlation between gift and action. This kind of ongoing relationship, where someone effectively has a politician on retainer, may be extremely corrupt. But it is now out of reach of federal corruption laws unless prosecutors can link a specific gift to a specific official act beyond a reasonable doubt.

Most recently  — and most dramatically — the Court limited the scope of federal bribery law in the 2016 case of McDonnell v. United States. In McDonnell the Court adopted a very narrow definition of what qualifies as an “official act” that will support a federal bribery conviction. Virginia governor Bob McDonnell had accepted about $170,000 in secret gifts from businessman Jonnie Williams, who was seeking benefits from the state government. But the Court held that the things McDonnell did in return – making some calls, setting up some meetings, and holding an event for Williams at the governor’s mansion – did not constitute “official acts” under federal bribery law. (For a more detailed critique of the Court’s decision in McDonnell and its implications, see my post here.)

(As an aside, it was kind of amusing to see that former governor McDonnell filed an amicus brief urging the Court to accept review of the Bridgegate case. He was joined on the brief by media mogul Conrad Black, whose honest services fraud conviction was reviewed and overturned at the same time as the Skilling decision. Those two former defendants argued that the Bridgegate prosecution is another example — supposedly like their own cases — of federal prosecutors who are running amok and need to be reined in. At least it’s good to know the former governor is keeping himself busy.)

The George Washington Bridge

The Defense Arguments

The Bridgegate defendants argue that prosecutors essentially have dressed up what might have been an honest services fraud case before McNally and Skilling to disguise it as a traditional fraud case. They couldn’t charge honest services fraud because no bribes or kickbacks were involved. So they charged traditional wire fraud, alleging the defendants deprived the Port Authority of property in the form of lost wages and the right to control the lanes and toll booths. And the reason this is fraud, the government argues, is that the defendants lied about their true reason for closing the lanes.

In their successful petition for certiorari, Kelly’s attorneys wrote that the appeal presents the following question:

Does a public official “defraud” the government of its property by advancing a “public policy reason” for an official decision that is not her subjective “real reason” for making the decision?

If the answer to this question is “yes,” they argue, then all of the Court’s precedents from McNally on down will be invalidated. Prosecutors would be free to charge a public official with fraud any time he or she lied about the true political motivation behind some official action. Almost any such case will involve the use of at least some government resources, particularly if those resources may include the salaries of the official himself or herself, as alleged in the Bridgegate prosecution. If lying about the true reason for some politically-motivated action constitutes fraud, they argue, potential criminal liability for political misconduct would become almost unlimited.

I think the Court is likely to agree with the defendants. The lane closure itself was not inherently unlawful. The Port Authority had the right to adjust the lanes, and no law or regulation required those three lanes to be kept open for Fort Lee. The defendants did not profit or line their own pockets through the scheme. In short, they did something they had the authority to do for a nakedly political reason, and then lied about that reason. It was a deplorable act that harmed the Fort Lee community. But I think the Court is likely to agree with the defendants that it should not be criminal.

The Court’s decisions have tended to limit criminal corruption to core, quid pro quo transactions where politicians are enriching themselves through abuse of their office. That’s not the case here. And all of the Court’s historical concerns about giving prosecutors the power to criminalize political misconduct that falls short of core criminality will come into play in this case. For better or worse, politicians routinely act for political reasons while claiming to act only in the public interest. They engage in “spin” or otherwise mislead or even lie to the public about their true motivations. But however distasteful or sleazy, that alone has never been considered criminal. The Court is not likely to sanction making such political machinations the subject of a federal prosecution.

The Court may decide the Port Authority was not really deprived of property and so was not defrauded. The alleged loss was relatively trivial; the salaries involved most likely would have been paid anyway, and the Port Authority did still maintain control of the traffic lanes. Or the Court may simply conclude that the definition of “fraud” in federal criminal law does not encompass a politician lying about the true reason for some political act that was otherwise lawful. But whatever the rationale, I expect a pretty resounding rejection of this prosecution.

Political Acts and Criminal Remedies

There is a tendency these days to reach immediately for criminal remedies in cases of misconduct by public officials. We have a president who led chants of “lock her up!” when talking about the supposed misdeeds of his political opponent. If an administration official says something untrue during testimony before Congress, there are immediate calls for a perjury prosecution. But as I always tell my students on the first day of class, there is a lot of sleazy, unethical, rotten, immoral stuff that goes on in the world that isn’t criminal. We should hesitate to embrace legal theories that make it too easy to punish political misconduct with criminal prosecutions.

This concern about over-criminalization is another theme in recent Supreme Court decisions.  In cases like Yates (fisherman charged with  obstruction of justice for throwing undersized fish overboard) and Bond (woman charged with chemical weapons violation for putting a caustic chemical on a doorknob, causing a minor skin irritation) the Court has demonstrated its unhappiness with prosecutors seeking harsh criminal sanctions for behavior that may not call for them. Such cases figure prominently in the Bridgegate briefs.

I think McDonnell was wrongly decided. I’d like to see Congress step in and amend the public corruption statutes to respond to the decisions in McNally, Skilling, and Sun-DiamondBut in this case, I think the Bridgegate defendants are right. They lost their jobs in disgrace. There could have been some appropriate civil remedies in the form of lawsuits by those harmed by the traffic snarls. Certainly their boss Christie suffered great political damage from the scandal and saw his presidential ambitions flame out in a hurry. All of these remedies and consequences, and probably more, are appropriate. But a federal criminal prosecution is not the appropriate remedy for this kind of political mischief.

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The College Admissions Scandal Indictment Flunks Out

Last March the U.S. Attorney’s Office in Massachusetts charged fifty people in a massive college admissions scandal. The defendants include parents, college coaches, test administrators, and the mastermind at the center of it all: William “Rick” Singer, owner of a college admissions counseling company. Singer and some of the coaches have already pleaded guilty. To date, fourteen parents also have pleaded guilty or agreed to do so, including actress Felicity Huffman and prominent attorney Gordon Caplan.

The nineteen parents who are fighting the charges were joined together in a single indictment last month. But I believe that indictment has some serious legal flaws. Investigators have dubbed this investigation “Operation Varsity Blues.” By the time the legal wrangling is over, I think the prosecutors may be singing some blues of their own.

Rick Singer, the man at the hub of the college admissions scandal

The College Admissions Scandal

The case involves two different cheating schemes designed to help students gain admission to elite universities. In the first, parents allegedly paid Singer to help their children cheat on the ACT and SAT college admissions exams. Singer would bribe test administrators to look the other way while his co-conspirator Mark Riddell coached the students on the proper answers or changed their answers after they were done. Parents typically paid Singer between $15,000 and $75,000 for this service.

The second type of scheme involved Singer bribing university coaches to admit unqualified students as recruited athletes. Parents and associates of Singer allegedly created application materials and profiles that falsely portrayed the students as star high school athletes. Parents in these cases paid Singer upwards of several hundred thousand dollars. One family in China reportedly paid Singer $6.5 million to secure their daughter’s admission to Stanford – although those parents have not been charged.

The Parents’ Indictment

All of the parents were originally charged by criminal complaint. Those who did not agree to plead guilty were subsequently indicted together. The indictment describes fourteen different incidents of cheating involving the nineteen defendants, Singer, and his associates (some of the parents are married couples involved in the same incident). The indictment charges that all of the parents, along with Singer and his associates, participated together in two different conspiracies: a conspiracy to commit mail and wire fraud and a conspiracy to commit money laundering.

Single vs. Multiple Conspiracies

Prosecutors have charged all the parents with being part of the same two large conspiracies. But the indictment demonstrates there were actually fourteen different conspiracies, one for each parent or couple that worked with Singer.

A conspiracy is a partnership in crime. The government must show that a defendant knowingly joined the conspiracy with the intent to further its criminal goals. A defendant does not need to know every detail of the conspiracy, and does not even need to know the actual identity of every other co-conspirator. But to charge defendants together in a single conspiracy, the government must be able to prove that the defendants were at least aware that other co-conspirators existed and that they were somehow mutually dependent.

In a large, far-flung criminal enterprise, sometimes the government charges one big conspiracy when there were actually a number of separate, smaller ones. The leading Supreme Court case on this is Kotteakos v. United States, decided in 1946. The man at the center of that case was Simon Brown, who had become an expert at fraudulently obtaining loans insured by the Federal Housing Administration. He acted as a broker to help a few dozen people wrongfully obtain such loans.

The government ultimately charged thirty-two defendants, including Mr. Kotteakos, with taking part with Brown in one grand conspiracy to defraud the FHA. But although each of the individual defendants had transacted with Brown to obtain their loans, they had no connection to each other at all. The government’s evidence actually showed there were at least eight separate conspiracies, with nothing in common other than that they involved the same kind of crime and Brown took part in all of them.

The Supreme Court ruled that this error in how the conspiracies were charged required the convictions to be reversed. The government had characterized the arrangement of the defendants as spokes on a wheel, with Brown at the hub. But the problem, the Court said, was that there was no rim to enclose the spokes – nothing connected them to each other. And without a rim you did not have a single “wheel” – or a single conspiracy.

The Court concluded that the individual defendants were potentially prejudiced as a result. It noted that with a massive trial of multiple defendants there was a substantial risk that evidence against one defendant would “spill over” and the jury would improperly use it against other defendants as well. As Justice Rutledge wrote:

Guilt with us remains individual and personal, even as respects conspiracies. It is not a matter of mass application. . . True, this may be inconvenient for prosecution. But our government is not one of mere convenience or efficiency. It too has a stake, with every citizen, in his being afforded our historic individual protections, including those surrounding criminal trials.

A wheel needs a rim

The Kotteakos Problem

If I were writing a final exam to test my students’ knowledge of the principles underlying Kotteakos, it would be hard to come up with a better example than this college admissions case. The indictment alleges fourteen different cheating schemes, each involving Singer and one parent or couple. But the different schemes have no connection to each other. Each is like a spoke in a wheel, with Singer at the hub, but there is no rim to connect the spokes. The success or failure of one parent’s scheme had nothing to do with what happened with any other parent. Indeed, they had no reason to know the other parents even existed. This is a textbook Kotteakos problem: the government has charged as a single conspiracy what really should be fourteen  different conspiracy cases.

Like the defendants in Kotteakos, the defendants in the college admissions case are entitled to their own trials. If you are a parent who paid Singer $25,000 one time to cheat on one exam, you don’t want to be in a massive trial with a dozen other parents who paid him hundreds of thousands of dollars and concocted phony athletic profiles for their children. Your individual case is going to look a whole lot worse in that context, and there’s a risk the jury would hold it against you.

This particular flaw likely won’t be fatal to the government’s case. The parents who want to go to trial should be able to move to have their cases severed from each other and prosecuted separately. But it does mean the government is not going to be able to present the entire story of Singer’s years of misconduct with multiple parents in one massive trial, as it would like to do. It’s going to need to proceed in separate cases. And if that means Singer and others end up testifying multiple times,  then with each successive trial there is more prior testimony to impeach them with and a greater likelihood someone will testify inconsistently.

The parents have already raised this issue with the court. Lawyers for a number of them wrote a letter to the chief judge before they were even indicted, claiming the government was “judge shopping” by indicting them all together in order to get all the cases before a particular judge. And one couple, Gregory and Amy Colburn, have already filed a motion to dismiss based in part on Kotteakos. (They are unlikely to get a dismissal on that ground; the most likely remedy is a severance from the other defendants and a separate trial.)

The Money Laundering Charge

The second count in the indictment charges all of the parents with engaging in a single money laundering conspiracy with Singer. In addition to the Kotteakos issue, I believe this conspiracy suffers from a second flaw: the underlying money laundering allegation is legally deficient.

Money laundering prohibits engaging in financial transactions with criminal proceeds in order to disguise where the money came from or otherwise “clean it up” so the funds will appear to be legitimate if they are discovered. Saul Goodman in “Breaking Bad” provided this classic explanation:

In the college admissions case, the parents did not pay the coaches or universities directly. They sent their money to a nonprofit that Singer created called the Key Worldwide Foundation. Singer then used money from the foundation bank account to pay bribes to the coaches and test administrators. He would also send a receipt to the parents for their “charitable contribution,” and many of them used that to claim a tax deduction.

The government has charged that using the foundation account to make the bribe payments disguised the nature and origin of those payments and thus constituted money laundering. In paragraph 272, the indictment says this was designed to “conceal and disguise the nature, location, source, ownership, and control of bribe and other payments in furtherance of the fraud scheme.” But concealing the source of bribe payments is not money laundering, unless those payments themselves are criminal proceeds.

The Proceeds Problem

Money laundering must involve dirty money – that’s why it needs to be laundered. Laundering must involve criminal “proceeds,” defined in the statute as property “derived from or obtained or retained . . . through some form of unlawful activity.” An easy way to remember this is that money laundering needs to be a “downstream transaction” – it’s something you do with the money you made from criminal activity once you’ve got that money in your control.

As an analogy, imagine you were starting a business. You wouldn’t consider the seed money that you use to get it off the ground to be “proceeds” of the business. The proceeds would be the money generated by the business once you get it up and running.

The payments by Singer, with money received from the parents, involved “clean” money. As to Singer and the parents, the funds were not money “derived from or obtained” by criminal activity; it was the money used to engage in that activity. Those payments are not money laundering, they are the predicate crimes that will generate proceeds. It’s like the seed money for starting the business. But the government has improperly charged the execution of the predicate crime itself as money laundering.

For the coaches and test administrators, bribe money received would be proceeds obtained through criminal activity that could later be laundered. For the parents, the proceeds of the fraud scheme is actually the college admissions slots that they obtained. But paying the bribes, using clean money, is not a laundering event just because it was done through a separate foundation. Running the payments through the foundation is part of the underlying fraud scheme and may give rise to tax charges for improper deductions, but it’s not money laundering.

There is one allegation in the indictment of international money laundering – money sent across the U.S. border to promote criminal activity. That allegation involves one parent, David Sidoo, who sent money from Canada. Under that money laundering theory the funds do not need to be criminal proceeds, so that one allegation could survive. But if Sidoo’s case gets severed from the rest of the parents, as ultimately seems likely, then I believe the money laundering allegations against all the other parents will not hold up.

The Mail and Wire Fraud Theories

The government has charged two different kinds of mail and wire fraud. Traditional mail and wire fraud requires the government to prove the defendants defrauded the victim of money or property. The other theory, honest services fraud, requires the government to prove the defendants deprived the victim of fair and honest services that someone owed that victim.

Honest services fraud requires a relationship of special trust and confidence that gives rise to the duty of honest services. It’s a common theory in political corruption cases, because politicians are deemed to owe a duty of honest services to their constituents. If a politician accepts bribes or kickbacks, he or she can be charged with defrauding the public of its right to the politician’s honest services. The theory also applies to private sector relationships where such a duty exists, including the duty an employee owes to an employer. An employee who accepts bribes in connection with his or her employment may be charged with defrauding the employer of its right to the employee’s honest services.

The government relies on two different honest services theories in this case. The first is that the university coaches owed a duty of honest services to the universities that employed them and that duty was violated when they took bribes to admit unqualified students. The second is that the test administrators who allowed Singer’s associate to facilitate cheating on the ACT and SAT in exchange for bribes violated a duty of honest services that they owed to the testing companies.

The coaches clearly owed a duty of honest services to the universities, so that won’t be an issue. For the test administrators, it’s a closer call. They apparently are not employees but independent contractors. Normally an arms-length contractual relationship will not give rise to a duty of honest services. The government will have to argue that the testing companies were unusually reliant upon the integrity and expertise of the test administrators, and that gave rise to a fiduciary duty greater than that involved in a typical contractual relationship. That may ultimately hold up, but it will be contested and I don’t think it’s a slam-dunk for the government.

The greater issue when it comes to honest services fraud is going to be proving the parents actually conspired to commit that offense. Honest services is essentially a bribery theory. To enter into a conspiracy to commit honest services fraud, the parents would have to know that bribes were being paid, or at least be willfully blind to that fact. Singer clearly knew that, but it’s far less clear that any of the parents did. Parents may be able to argue they thought Singer was just making hefty contributions to the universities or paying someone to cheat on the tests  but knew nothing about any bribery or honest services violations.

I think the government’s strongest theory is mail and wire fraud involving property. The allegation is that the parents and Singer conspired to deprive the universities of property in the form of valuable admissions slots that could have been given to deserving students. There’s no question the parents knew they were involved in that scheme. They would not need to know all the details concerning the bribes; they knew they were depriving the university of that admissions slot through some deceptive means.

A secondary theory in the indictment is that test scores and the tests themselves were property of the testing agencies and that the defendants defrauded the agencies of that property. That seems shakier to me, particularly the allegation that test scores qualify as “property” for purposes of mail and wire fraud. In their motion to dismiss the Colburns have also challenged this theory.

What Lies Ahead

Prosecutors have indicated that other parents were involved in the schemes, and more charges may be coming. Some of the students involved also have received target letters, indicating they potentially could be charged as well.

As for the cases already pending, expect a lot of legal wrangling. The parents should be able to get their cases severed from each other. Legally, some of the mail and wire fraud charges will likely hold up, but I don’t expect the money laundering charges to survive. Factually, it’s going to vary case by case, and some of the parents are going to be able to mount a strong defense. Prosecutors are going to face some hurdles trying to prove that the parents’ actions were criminal and not merely sleazy.

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