Friday, September 23, 2011

Honest Services Fraud and Bribery convictions upheld

In US v. Wayne R. Bryant and R. Michael Gallagher, Nos. 09-3243 & 09-3275 (click here) (Aug. 25, 2011), the Circuit affirmed the convictions of Bryant and Gallagher for honest services fraud and bribery in connection Gallagher, dean of a NJ medical school, giving Bryant, a state senator, a "low-show" job in exchange for Bryant funneling state money to the medical school. The Circuit rejected defense arguments that the government interfered with defense access to witnesses, that the evidence was insufficient, and that the jury instructions were defective.

Due Process/Interference with the Defense

The Court rejected a due process challenge to language that the government had placed on the face of every grand jury subpoena issued in the case, warning witnesses that “disclosure of the nature and existence of this subpoena could [and, in at least one case, “would”] obstruct and impede a criminal investigation . . . .” The defense contended that that language interfered with its access to witnesses by restricting the witnesses’ free choice whether to speak with the defense. Even though the warning language tracked the language of the obstruction of justice statute, and even though the U.S. Attorney implied a judicial imprimatur by placing the language on the face of the subpoenas, the Court characterized the language as a mere “request[] that witnesses practice discretion,” which “forthright citizens” would be inclined to heed. Thus it found no due process violation.

When defending its warning language in the district court, the U.S. Attorney’s Office for the District of New Jersey had cited an office policy of putting that language on every single grand jury subpoena. The Bryant Court criticized that blanket approach as “bad policy,” but preserved the prosecutors’ discretion to decide when to warn witnesses that they risk prosecution for obstruction if they speak with the defense.

Honest Services Fraud

The jury in Bryant was instructed solely on a bribery theory of honest services fraud, which survived the Supreme Court’s 2009 Skilling decision. Thus, the defense challenged the contours of the bribery theory, with respect to evidentiary insufficiency and instructional error.

In sum, the Court reaffirmed that honest services fraud bribery requires a quid pro quo exchange of a thing of value for an official act; that is, an intent to influence an official action (by the payor) and to be influenced (by the payee). It found the evidence plainly sufficient, and declined to adopt a more restrictive interpretation of bribery in light of Skilling. On the latter point, it rejected a defense challenge to the “stream of benefits” (or “retainer”) theory of bribery. The Court also endorsed, for the first time, an instruction that permits conviction in the presence of a “dual purpose” for the challenged payments. That is, a payor who makes a payment with the intent to influence official action is guilty even if he also intends to compensate the payee for legitimate work. The Court does not appear to have intended to use “dual purpose” to dilute the requirement of a quid pro quo, however. It referred to the secondary purpose as an “additional hope” of receiving legitimate work – in addition, that is, to the required corrupt intent to influence official action. Thus “dual purpose” will likely function in the future as another in a string of engraftments to the honest services fraud instruction that tell juries what is not a defense, rather than what the government must prove.
Section 666 Bribery

The Bryant Court declined to reach the most significant open issue in this circuit with respect to Section 666 bribery: does it require a quid pro quo exchange? Because the Court found that the jury instructions did require an exchange, it did not have to decide whether omitting an exchange was error.

The defense had contended that the jury instructions improperly substituted the mere temporal overlap of payment and official action for the required exchange, by using the phrase “while intending to influence [or to be influenced],” “while” being a temporal concept rather than a causal one. The Court held that the inclusion of the word “while” did not dilute the central concept of exchange that the intent language embodies.

Mail Fraud in Connection with Pension

The Court also addressed several arguments related to “traditional” mail fraud, in connection with counts alleging that Bryant had defrauded the New Jersey Board of Pensions and Benefits. Here the Court left open another significant issue: whether to join other circuits in rejecting the doctrine of mail fraud convergence. The doctrine requires proof that the defendant made a false statement to the actual victim. Finding that Bryant had in fact made a false statement directly the victim, the Court declined to decide whether convergence is required.

A practice note on this point: the government typically argues that the circuit already rejected mail fraud convergence in United States v. Olatunji, 872 F.2d 1161 (3d Cir. 1989), even though (as the defense contended in Bryant) any such ruling in Olatunji would have been dicta. Bryant makes clear that the circuit views the issue as open.

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