Here is the Second Circuit's opinion (U.S. v. Mahaffy) from last Thursday in the EDNY's Squawk-Box case, vacating the convictions due to Brady violations and an untenable honest services jury charge.
Tag: honest services
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The Third Circuit in United States v. Wright held that the Skilling decision requires an new trial in this case on the honest services fraud convictions and that "prejudicial spillover tainted their traditional fraud convictions." The court stated:
"An honest services fraud prosecution for bribery after Skilling thus requires the factfinder to determine two things. First, it must conclude that the payor provided a benefit to a public official intending that he will thereby take favorable official acts that he would not otherwise take. Second, it must conclude that the official accepted those benefits with the intent to take official acts to benefit the payor."
The court also stated that, "[i]n light of Skilling, the jury should have been instructed on the bribery theory but not the conflict-of-interest theory."
The defense counsel on this case were Lisa A. Mathewson, Peter Goldberger, Ellen Brotman, and William A. DeStefano.
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Second Circuit – United States v. Bahel – Honest Services - Post-Skilling, courts have struggled with what gets included as bribery and kickbacks and what gets omitted from the new contours of honest services. In Bahel, the defendant was convicted of four counts of mail and wire fraud premised on a deprivation of the United Nations, his former employer, and a 666 violation and conspiracy. Issues of immunity were considered, but the court said that the "United Nations expressly waived Bahel's immunity" and that irrespective he waived the issue. The court held that "Section 1346 is broad enough to encompass honest services fraud committed by a foreign worker at the United Nations."
Bahel also argued "that ‘[n]o reading of [18 U.S.C. § 666] could plausibly be extended to the charges in this case,’ because ‘[t]he United States’ membership in the United Nations is not a "federal program" under [Section] 666(b), and the contributions made to the United Nations under the United States treaty obligation in the U.N. Convention and Charter is not a "benefit" or "form of Federal assistance" under that same sub-section.’ Bahel argues accordingly that Section 666 cannot reach the conduct at issue in this case." The court, however, held that "the United Nations Participation Act, which authorizes the payment of the United States' dues to the United Nations (UN), is both a "federal program" and a "benefit" within the meaning of section 666, which encompasses bribes as well as illegal gratuities."
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In United States v. Langford, the Eleventh Circuit Court of Appeals found sufficient evidence in reviewing a post-Skilling case. The court notes in this decision that "[w]e have not expressly explored at length what manner of concealment, if any, is necessary to prove honest services mail or wire fraud. However, we have said that honest services fraud 'may be proved through the defendant's non-action or non-disclosure of material facts intended to create a false and fraudulent representation."(citations omitted). There is also an interesting question of "in furtherance" here.
(esp)(w/ a hat tip to Linda Friedman Ramirez)
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In Skilling, the Court limited section 1346 to bribes and kickbacks. But this decision has left courts with several unresolved issues. The Stinn case raises an important issue, and the briefs highlight an interesting position being taken by the government.
The defense files a 2255 motion in Stinn saying that Skilling applies and the conviction should be vacated. - Download Omnibus Memo of Law ISO Stinn's Mtn to Vacate They note that "[i]t is immaterial that the government and the trial court did not use the phrase 'honest services' in the indictment or the jury instructions. The government argued the same invalid theory as it did in Skilling throughout the trial and relied on that theory to convince the jury to convict Stinn."
The government argues that Skilling does not apply because they did not file the case under 1346. Download Gov's Memo in Opp to D's Mtn to Vacate Convictions & Grant Bail They note "the Supreme Court's holding in Skilling is irrelevant to the defendant's case, as he was not prosecuted under an honest services theory of fraud."
The defense replies, however, with several arguments including - isn't this the exact opposite position the government took in the Redzic case. Download REPLY TO GOVT'S OPP TO MTN TO VACATE Redzic, an unusual case, had the court finding that the "money or property" portion of the case was problematic and could not stand. But even though the defendant was not charged under 1346, the court went on to uphold the conviction saying that 1346 did not "create a separate substantive offense, it merely defines a term contained in sections 1341 and 1343." The court held it was not necessary to cite 1346 in the charging instrument.
Redzic raised issues of whether the accused had truly been advised under due process of the charges against the defendant since the government was using an uncharged basis for asking that the conviction be upheld. But now the government in Stinn is saying that it makes a difference whether the government charges a case under 1346. Is the government taking the opposite position in these two cases (Redzic and Stinn), and is this problematic?
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The 11th Circuit remanded a case, Cabrera, premised on Skilling, vacating all counts of the conviction. But it allowed the lower court to determine whether a retrial was possible or whether the Fifth Amendment prohibited a retrial. Obviously, on remand the court prohibited the retrial as it would violate the Fifth Amendment's double jeopardy provisions.
It is interesting to contrast the initial portion of this case with the cases of Conrad Black, Jeffrey Skilling, and former Governor Ryan. In the Cabrera case, the jury was instructed on honest services. It was not limited to acts of bribery or kickbacks. The jury limited their decision to the scheme to defraud being premised on an alleged defrauding of investors of the intangible right to honest services. The government admitted in their sentencing memo that the "jury had not convicted defendant of a scheme to defraud investors of money." But the government in the Cabrera case tried to use this acquitted conduct for sentencing.
Then came the Skilling decision and having stretched the statute beyond its limits, the government in the Cabrera case was caught in a bind. The Court admitted in Skilling that this "'flaw' [not limiting the statute to bribes and kickbacks] did not necessarily require reversal of the conviction because it could have been harmless error." And in Skilling, the case was sent back on remand for consideration, which the Fifth Circuit found harmless for Skilling. In contrast, in the Eleventh Circuit in Cabrera, the court found the jury instructions incorrect and vacated the conviction. One could stop here and note that the differences in harmless error analysis may be an interesting question for later Court decisions.
But what is more interesting is that the government conceded the evidence in Cabrera did not meet 1346 as interpreted under Skilling. Why didn't they take this same posture in Ryan, Black and Skilling? Did the special verdicts work in this case, just because the jury had only checked the honest services box? Did the government not want this case to be the testing ground should a case go up on appeal?
But the government then attempted to retry the Cabrera case, despite their concessions that a Skilling reversal was warranted.. The court on remand in Cabrera starts its analysis with "The Double Jeopardy Clause of the Fifth Amendment to the United States Constitution provides in relevant part: '[N]or shall any person be subject for the same offence to be twice put in jeopardy of life or limb." The order provides a wonderful double jeopardy analysis.
Court's Order –Download Samir Cabrera
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The Ninth Circuit Court of Appeals in U.S. v. Pelisamen ruled that "where the jury returned a special verdict form indicating that it had convicted the defendant on both theories" ("money and propery" and "honest services") the conviction remains valid post-Skilling because the jury has designated that it convicted the defendant on both theories. This case differs from the Skilling remand, where there was an alternative theory issue. Here in Pelisamen it is clear that the jury looked at both items and convicted on both. But one also has to wonder if evidence of honest services taints the jury with prejudicial evidence. And one additionally has to wonder why the government felt it necessary to charge honest services if they had such a strong case premised on "money or property."
(esp)(hat tip to Linda Friedman Ramirez)
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The Fifth Circuit issued its decision on the Skilling remand here.
The US Supreme Court had "invalidated one of the objects of the conspiracy charge – honest-services" and sent it back to the 5th Circuit to determine if the error was harmless. The 5th Circuit ruling today found it to be harmless error, and they now sent the case back to the trial court for resentencing.
The 16-page decision commences with a review of how to analyze harmlessness of an alternative-theory error. The court concludes that "based on [its] own thorough examination of the considerable record in this case, we find that the jury was presented with overwhelming evidence that Skilling conspired to commit securities fraud, and thus we conclude beyond a reasonable doubt that the verdict would have been the same absent the alternative-theory error." The court later states that because it finds "that the alternative-instruction error in this case was harmless with respect to the conspiracy conviction, it follows that Skilling has no basis on which to challenge the remaining convictions."
More later.
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This panel was moderated by Professor Julie O'Sullivan of Georgetown Law School.
It started with Denis J. McInerney, Chief of the Fraud Section of the Criminal Division of the Department of Justice, who gave the history of the mail fraud statute from its inception up to the Court's decision in Skilling.
The second panelist was Martha Boersch of Jones Day. She spoke about the 110 cases that have been examined post-Skilling. Some circuits have said a fiduciary duty is required – but not all circuits have held this. Another big issue is whether the government has to prove a quid pro quo – she noted the split in some court cases on this issue. There is also uncertainty as to what a quid pro quo would be in this context. Does the government have to prove a contemplated economic harm? There are likely to be future cases on the definition of honest services coming from instructions given in mail fraud cases.
The third speaker wasFrank Razzano, Pepper Hamilton,who spoke about five open questions: 1) Does it require a fiduciary duty? (He said you should make sure that there is a breach on the part of the payor); 2) Is legislation necessary to address this issue or is there a way around this for prosecutors; (He spoke about the case of U.S. v. Jain here- how you can use a pecuniary theory of mail fraud; 3) Does Skilling limit the stream of benefits theory? 4) He noted that you need to analyze the intent of the payor and payee carefully 5) Gratuities – does honest services fraud include this, or is it limited to bribery? He looked at some of the cases where these issues had arisen.
Finally Professor Julie O'Sullivan talked about congressional acts that have been introduced since Skilling.
(esp)(blogging from San Diego)
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The Skilling case proved consequential in the discussion before the the Eleventh Circuit in the Siegelman and Scrushy cases. Check out this story on the oral argument –
John Schwartz, NYTimes, Judges Take Another Look at Ex-Alabama Governor’s Conviction
Some may claim that it is cases like this that should influence Congress to re-examine section 1346. Perhaps – but only to void the entire statute as recommended by Justice Scalia. One lesson that should be learned from both the McNally case, and now Skilling is that if the government is criminalizing conduct, it is necessary to require strict legal lines and those lines should not cross into legitimate conduct. 1346 should be voided because it is unnecessary. The basic mail fraud statute, 1341, and wire fraud, 1343, as well as the other fraud statutes, criminalize deprivations of "money or property." The Supreme Court has clearly held that "money or property" includes intangible property (Cleveland). To include "intangible rights" is therefore unnecessary for the prosecution of criminal misconduct. If the self-dealing does not involve money or property, should we really waste government resources on the prosecution?
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MattBray.net 