Quid Pro Quo: Deepening the Lines Between “Politics as Usual” and “Honest Services Fraud”

January 27, 2016

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The Supreme Court recently granted certiorari in McDonnell v. United States, the case in which former Virginia Governor Robert F. McDonnell was convicted of fraud and extortion because of his dealings with Virginia businessman Jonnie R. Williams, Sr. The United States accused McDonnell of “intervening with state officials on Williams’ behalf in exchange for $177,000 in loans, vacations and luxury goods.” After the Fourth Circuit Court of Appeals upheld McDonnell’s conviction, the Court seems poised to address the role of the public corruption statutes in the modern political climate.

In the United States’ brief in opposition, Solicitor General Donald B. Verrilli, Jr. argued that this case did not represent the type of attention given to routine campaign donors, and that McDonnell actively sought government attention for Williams as a result of his contributions to McDonnell and his wife, which included gifts of a Rolex, vacations, payment towards their daughter’s wedding reception, and a shopping trip in New York. These gifts themselves are not illegal under Virginia law, but the United States contends that it was McDonnell’s role in promoting Williams’ dietary supplement that created the violation.

Though Solicitor General Verrilli argued that there was nothing that made this case look like “business as usual,” the line between business and criminality is not as clear as it ought to be, argues Jeffrey Bellin of William & Mary Law School: “The real stars of this drama were the vague public corruption statutes that took down the former governor and the elusive distinction they draw….” McDonnell was charged based on the U.S. wire fraud statute, 18 U.S.C. § 1343, and extortion from a statute preventing politicians from obtaining property because of their position, or “under color of official right.” 18 U.S.C. § 1951. The theory the prosecution advanced is that under § 1343, McDonnell deprived Virginia of a small portion of the “honest services” he owed them by failing to disclose his relationship with Williams, and that he took the Rolex and shopping trips in return for helping to usher Williams’ supplement through the government.

The issue Professor Bellin raises is that this looks an awful lot like the same sort of favors for phone calls that politicians engage in all the time, and from a legal standpoint, the answer to the difference between the two is “who knows?” The Supreme Court has essentially declared that the difference between the two is the contents of the politician’s mind, whether they know they are taking gifts and intend, in return, to put their thumb on the scale somewhere in government, which the jurors are supposed to infer from “knowing nods and winks”—the actual terminology used in the jury instructions. Professor Bellin argues that this relationship, repeated in most every political relationship today, only distinguishable from crime by circumstantial evidence, gives prosecutors tremendous discretion to choose their targets—in other words, potentially everyone is guilty, it’s just whether or not they’ve been charged.

How did this happen? The most likely culprit appears to be the Supreme Court, which has consistently muddied the waters of its jurisprudence and taken from prosecutors a tool that would otherwise have given them a cleaner shot at actual offending politicians.

How Did We Get Here?

It is notable that McDonnell was charged under a wire fraud statute, 18 U.S.C. § 1343, and not under the statute Congress specifically created for cases of this type, 18 U.S.C. § 1346. Section 1346, otherwise known as the honest services fraud statute, was created for the purpose of addressing public corruption after the Supreme Court ended the practice of prosecutors charging politicians under the federal mail and wire fraud statutes. The Court in McNally v. United States held that officials involved with the Democratic Party of Kentucky who traded a continued agency relationship for a share of the commissions of an insurance company did not deprive the citizens of Kentucky of property or money, only intangible rights, and therefore the wire and mail fraud statutes did not apply.

Reacting to this curtailment, Congress passed § 1346 to prohibit honest services fraud, establishing that politicians could deprive citizens of the intangible right of their honest services. Given teeth once again by this statute, prosecutors typically charged under two prongs of the statute—the first prevented bribery and kickbacks, and the second prevented politicians from failing to disclose a material conflict of interest resulting in their personal gain. The theory behind the second prong is that the politician, in failing to disclose this conflict of interest, deprived the public of its right to disinterested decisionmaking or full personal disclosure—the bias itself became the harm. Prosecutors could therefore criminalize a wide variety of behavior, including gifts from businesses politicians have decisionmaking power over, business loans, and promises of future employment.

Once again, the Supreme Court curtailed the reach of the statute, holding in United States v. Skilling that the second prong of the statute was too vague, and that until Congress chose to “speak more clearly than it has,” prosecutors may only use the statute against bribery and kickbacks. The result of this is that prosecutors have tremendous latitude when deciding who to charge, and for what, based partially on whether the acts at issue can “fit” into the box of bribery or kickbacks, and based partially on the blurry lines Professor Bellin defines above.

A Second (Third?) Bite at the Apple

The Supreme Court’s jurisprudence since Skilling suggests that McDonnell stands to have his conviction overturned. Citizens United suggested that the Court does not view the provision of money for favors to be unconstitutional, and at other times they have called this provision of money “a central feature of democracy” rather than corruption. At the same time, they may also have an opportunity to reverse themselves and, in the process, deepen the divide between what constitutes “business as usual” and what constitutes “criminal corruption.” Professor Bellin argues that the Court ought to make clear that McDonnell’s conduct was both politics as usual, as he argues, and also a federal felony, as the government claims. This gives proper deference to Congress’ actions in passing the honest services fraud statutes and helps repair the damages the Court did when deregulating campaign finance. In their absence, Congress has yet to “speak more clearly” than it did when passing § 1346, allowing questions such as those raised by the McDonnell case to continue to be asked, potentially granting prosecutors enormous latitude, and giving politicians no real way to know whether their wealthiest donors are friends or potential liabilities.