Nancy and Lester Sadler ran pain clinics that sometimes serviced more than 100 patients a day–and that didn't even include the fake ones. They were convicted of several crimes and the Sixth Circuit affirmed all but one of the counts of conviction last week. Nancy Sadler's wire fraud conviction was vacated, however. According to the Court, "the government showed that Nancy lied to pharmaceutical distributors when she ordered pills for the clinic by using a fake name on her drug orders and by falsely telling the distributors that the drugs were being used to serve 'indigent' patients." But this did not "deprive" the distributors of their property, because Nancy paid full price. "[P]aying the going rate for a product does not square with the conventional understanding of 'deprive.'" The government argued that the distributors would not have sent the pills had Nancy told them the truth. The Sixth Circuit dubbed this a "right to accurate information" and noted that the federal mail and wire fraud statutes no longer cover this kind of intangible right in the post-McNally era. Congress' statutory fix of McNally only covers the intangible right of honest services, "which protects citizens from public-official corruption." Of course 18 U.S.C. Section 1346 does more than that, even after Skilling, as it also covers certain private deprivations of honest services. But the conduct at issue in Sadler did not involve Nancy's "honest services" to the pharmaceutical distributors. She provided no services to them–she simply fibbed, but paid full price. Here is the opinion in United States v. Nancy Sadler.
Tag: honest services fraud
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Oh well. Nobody ever accused Judge Posner of being subtle. Bottom line: the Seventh Circuit upholds the obstruction of justice and two fraud counts and sends one count back for retrial. But then Judge Posner suggests that the government move to dismiss the remanded count and that the trial court re-sentence Black to the original sentence based on the acquitted conduct. He also manages to hold forth on "the obviously nonexistent crime" of "carnal knowledge of a fictional mouse." You just have to read it. Here is yesterday's opinion in U.S. v. Conrad M. Black, et al.
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“[I expect] to see future litigation surrounding efforts by prosecutors to wedge their cases into the ‘bribe or kickback’ paradigm to which the Court has now limited this statute.”
NACDL President Cynthia Hujar Orr commenting upon the Supreme Court's decision in Skilling v. United States.
Consider the following hypothetical:
X is a well-known insurance industry executive who has had affiliations with many different insurance and reinsurance companies over the years. X has a relationship with ACME Credit Life Reinsurance, a company that re-insures the credit life insurance offered to purchasers of new and used boats. The policies are typically marketed through retail boat dealerships. Dealerships keep a portion of each premium and send a portion to the primary insurer. The primary insurer in turn sends a portion of the premium to ACME. Although X is not listed as an officer of ACME, he has a hidden interest in the company and receives a commission on every policy re-insured through ACME.
X accepts a job as President of Sterling Insurance. Sterling is a primary insurer, offering credit life insurance through high-end retail boat dealerships located in the northeastern United States. Sterling has a Conflict of Interest policy that X agrees to sign upon being hired. The Conflict of Interest policy prevents X from personally profiting in any way (outside of salary and bonuses) from his relationship with Sterling, unless he first notifies the Board of Directors and obtains the Board’s approval.
The Sterling Board is unaware of X's relationship with ACME when it hires X. Sterling re-insures its credit life policies through ACME and other companies. Under X's direction and control, Sterling continues to obtain reinsurance through ACME and increases ACME's share of that business. X also continues to receive a commission on each policy re-insured by ACME, including the policies written by Sterling, but does not inform anyone at Sterling of this fact. ACME's owners and managers are fully aware that X is not disclosing his special ACME relationship, or his ACME commissions, to Sterling.
Reinsurance obtained through ACME is a quality product that is competitively priced. Payments made by Sterling to ACME are wired in interstate commerce. X sends his Sterling Insurance Annual Conflict of Interest Acknowledgment and Disclosure Form, which never reveals the ACME commissions, through interstate wires to Sterling’s Compliance Department. A copy of each year’s form is mailed to the Connecticut Department of Insurance, which requires, through Regulation 326.59(b), all insurance companies doing business in Connecticut to maintain and enforce a Conflict of Interest policy.
Q: Are X's ACME commissions "kickbacks" in the post-Skilling world?
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GUEST BLOGGER-SOLOMON L. WISENBERG
Here is a press release from the National Association of Criminal Defense Lawyers ("NACDL") containing NACDL President Cynthia Orr's comments on today's U.S. Supreme Court honest services opinions. Orr is “heartened that the Court has unambiguously rejected government arguments that the ‘honest services’ fraud statute can be properly used across as broad a range of conduct as the government has sought to do in recent years.” Nonetheless she is"disappointed that the Court has held that there remains a place in our criminal justice system for a statute on whose meaning few can agree.” (In various friend of the court briefs, NACDL has taken the position, now shared by Justices Scalia, Thomas, and Kennedy, that 18 U.S.C. Section 1346 is unconstitutionally vague.)
Orr expects “to see future litigation surrounding efforts by prosecutors to wedge their cases into the ‘bribe or kickback’ paradigm to which the Court has now limited this statute.” Of this we can be sure.
The NACDL press release also bemoans the portion of the Skilling opinion which "shockingly found that pre-trial publicity and community prejudice did not prevent Mr. Skilling from obtaining a fair trial. In fact, though, there has not been a more poisoned jury pool since the notorious first robbery and murder trial of Wilbert Rideau in Louisiana."
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GUEST BLOGGER-SOLOMON L. WISENBERG
The breakdown is as follows. All nine justices agree that the judgments in the three honest services fraud cases must be vacated and remanded. The majority rules that Section 1346 honest services fraud encompasses only bribery and kickback schemes, and would be unconstitutionally vague if interpreted more broadly. The majority opinion in Skilling (and Black) is written by Justice Ginsburg, who is joined by five other justices. Justice Scalia (joined by Justices Thomas and Kennedy) concurs, but would simply hold Section 1346 unconstitutionally vague under the Due Process Clause and would not seek to salvage it through a narrowing interpretation.
The jury instructions in all of the cases allowed for conviction under the now-discredited broad view of honest services. The lower courts must decide whether the instructional errors were harmless.
Jefffrey Skilling's fair trial arguments were rejected 6-3, with Justice Sotomayor, joined by Justices Stevens and Breyer, dissenting.
Conrad Black and co-defendants properly preserved their objections to the jury charge.
All of this is based on my quick skim. More detailed analysis will come later.
Once more, here are the slip opions in Skilling, Black, and Weyhrauch.
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GUEST BLOGGER-SOLOMON L. WISENBERG
Here is the slip opinion. According to the Court's syllabus, Section 1346 is not unconstitutionally vague, but only proscribes the "bribe-and-kickback core of the pre-McNally case law." More to come.
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MattBray.net 