Oklahoma Criminal Defense Blog

A federal jury brought back verdicts in Alabama recently on an indictment charging 39 counts against 9 defendants with bribery.  After a two-year investigation by the F.B.I, two months of jury trial with evidence that included thousands of tape-recorded telephone conversations, and finally by a week of jury deliberations, the prosecution score was zero.

No one was convicted: All acquittals and mistrials.  The main target, Milton McGregor, was found not guilty on three counts and got a hung jury on 14 counts including one count of conspiracy.  (There is always a conspiracy count in federal court, at least when there has been an extensive investigation.)   McGregor is the multimillionaire owner of one of the largest casino complexes (including a greyhound racetrack) in the country name VictoryLand.   He was tried with two serving state senators, four former state senators, and four other people.

Two defendants, State Senator Quinton Ross and VictoryLand lobbyist Bob Geddie, were completely cleared by the jury’s verdict.   The jury could not reach a verdict on 33 other counts, so the government could seek a new trial for the seven remaining defendants, who include Senator Harri Anne Smith, former Senators Larry Means and Jim Preuitt, and McGregor.

All of this arose from some new gambling machines that were proposed for use in the casinos, called electronic bingo machines.  They looked like slot machines and were common for some time around the state.  However, the Governor Bob Riley declared them illegal, and several judges agreed with him, so legalizing them was proposed in the Alabama legislature. That is where the F.B.I. investigation took place.

As the casino-sponsored bill to legalize the machines was debated in the legislature, rumors floated of a federal investigation of money offered or paid for votes in favor of the new machines.   The F.B.I. made surprise visits to some of the legislators.  Indeed, when the 65-page indictment was unsealed last year, two of those originally charged pled guilty and testified at trial for the government as “cooperating witnesses.”  They and the recorded telephone conversations were the sum and substance of the government’s case.  Much discussion of money, contributions, promises, and deals were offered into evidence, but the criminal defense lawyers argued none of that constituted bribery.  The cooperating witnesses gave their opinions that bribery was implied or understood, but all of it fell short.  The jury obviously looked past all the theater of the government’s display, looked into all the mountains of evidence, and found it unpersuasive when held to the burden that is required in American courts: beyond a reasonable doubt.

The government’s case fell short of connecting McGregor to any discussion of money or votes.  And the government’s case was not helped by tape-recordings from one of its own witnesses, Senator Scott Beason.   One of the informant legislators, he referred on one of his tapes referring to customers of a gambling hall in a predominantly black counties as “aborigines.” Beason also recorded himself talking to Republican colleagues about how passage of the bill could hurt Republicans because the bill wouldn’t take effect unless approved by voters in the November election. He argued having the issue on the ballot would bring out more black voters, who traditionally favor Democratic candidates.

On a retrial, the government is sure to omit those tapes from the jury.  But jurors in that case will also know that legislators are constantly raising money, swapping favors, and trading deals on legislation on a daily basis, and the jury will still need evidence of bribery.

Federal prosecutors have been using a shortcut for years to get convictions in white collar crimes.  The shortcut is prosecution for what is called “intangible right to honest services” under the United States Code, Title 18, §1346, which provides that “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.”

In Skilling v. United States, the U.S. Supreme Court put a crimp in the federal government’s routine prosecution of white collar crimes by its calling everything a depravation of honest services.  The decision this week involved Jeffrey Skilling, the former chief executive for Enron, the Houston corporation that famously crashed, eliminating many pensions and savings accounts in the process.  According to the Supreme Court, evidence that an executive had a conflict of interest or acted against the best interests of the company or its shareholders is no longer sufficient, of itself, to establish a case of mail or wire fraud.

Federal prosecutors have been prosecuting under this statute since 1988, and, as so often happens, have become more and more aggressive, that is to say, more creative, claiming a theory of undisclosed breach of fiduciary duties by public and private officials as the basis for fraud.  Even a conflict of interest in which the defendant did not benefit personally has become enough for a conviction, on the theory that the harm suffered by the company or the public was sufficient violation of the statute. .

The government argued that Skilling was guilty under the honest services theory as part of a conspiracy with Ken Lay, Enron’s chairman to mislead investors about Enron’s true financial condition.  Lay, now deceased, was himself convicted under this theory, for inflating artificially the company’s stock price.  The evidence in Skilling’s trial was that Skilling did not benefit directly from the misrepresentations, notwithstanding the shareholders suffered extremely and the company itself undeniably suffered annihilation.

The Supreme Court in the Skilling ruling narrowed use of the statute to a more limited range of activities.  Honest-services fraud “does not encompass conduct more wide-ranging than the paradigmatic cases of bribes and kickbacks,” the Court stated.  From now on, defendants accused of violating §1346 of Title 18 of the U.S. Code must have received some benefit from his or her conduct, regardless some harm was in fact inflicted as a result of that breach of duty.

The government argued to the Supreme Court that “undisclosed self-dealing by a public official or private employee.”  The Supreme Court was unpersuaded and said that, even if Congress really did intend to criminalize such conflict of interest without proving a bribe or kickback, composing such a statute would be difficult without being so vague as to be unconstitutional.

But the Supreme Court did not define exactly what constitutes a bribe or a kickback, although it said honest services fraud usually involved payments from a third party who is not a deceived party.  With common fraud, the victim is deceived into paying money or delivering property; honest services fraud, however, does not require the victim to receive any benefit, the victim being a company or the public, so long as the defendant obtained the benefit, a bribe or kickback.

Although the Supreme Court found error in Jeffrey Skilling’s conviction and remanded the case back to the Fifth Circuit Court of Appeals for reconsideration of a new trial, the Court did not find §1346 unconstitutional.  That would have been a serious problem for the government, considering the number of convictions obtained over the years under this statute.    Instead of invalidating the statute, the Supreme Court construed the statute as capable of narrower application and therefore salvageable.

The biggest impact on this limitation of §1346 will more likely be in the prosecution of corporate executives for conduct that harms their companies.  From now on, §1346 will not apply to simply deceiving a company or keeping one’s position or the value of one’s stock options because there is no type of bribe or kickback.   Misleading investors or inflating a company’s stock would not support a mail or wire fraud prosecution unless there were some proof the defendant received financial benefits that were undeserved.

The impact on the prosecution of public corruption cases likely will not be as great, since most such cases usually involve a defendant receiving some financial benefit to which he is not entitled.  Such cases will stay within the tighter kickback parameters of an honest services fraud prosecution as required by the Skilling decision.

The scorecard in this opinion was extremely complicated.  The Skilling opinion was written by Justice Goldberg, Part I of which was joined by Chief Justice Roberts, Justices Stevens, Scalia, Kennedy, Thomas, and Alito; Part II of which was joined by Chief Justice Roberts, Justices Scalia, Kennedy and Thomas; Part III of which was joined by Chief Justice Roberts, Justices Roberts, Justices Stevens, Breyer, Alito, and Sotomayer.  Justice Scalia filed a separate opinion concurring in part and concurring in the judgment, joined by Justice Thomas and Justice Kennedy joined except as to Part III; Justice Alito filed an opinion concurring in part and concurring in the judgment; Justice Sotomayer filed an opinion concurring in part and dissenting in part, in which Justices Stevens and Breyer joined.

Much of the opinion dealt with impartial jury and voir dire issues due to widespread negative publicity of the Enron matter, but the Court found no error in the district court’s handling of those issues.  The district court had incorporated many of the defense’s suggestions for question into a 14-page questionnaire sent to all potential jurors and then conducted individual voir dire of the panel before the 4-month jury trial.

William Jefferson, former Congressman from New Orleans, was sentenced to 13 years in federal prison for using his office to enrich himself and his family.  His sentence was less than the 27 years recommended by the U.S. Attorney.  He was convicted by a jury last August for bribery, racketeering and money laundering.  Some of his schemes involved business ventures in Africa.

Since Jefferson is 62 years old, his sentence could be a life sentence, since there is no parole in the federal prison system, although he could get 15 per cent of his sentence off for good behavior.

Jefferson was convicted after a six-week trial in Alexandria, Virginia. He was found guilty of 11 of 16 counts after he was indicted in June, 2007.  But his indictment followed highly publicized activity in the case.  Jefferson was videotaped by the FBI in July, 2005, receiving $100,000 of $100 bills in a briefcase in Arlington, Virginia.  Captured by a wire on one of the participants, Jefferson allegedly advised an informant to give Nigerian Vice President Atiku Abubakar $500,000 to make sure their business interests obtained contracts for their companies in Nigeria.

A few days later the FBI raided Jefferson’s home in Washington, D.C. and claimed to have found $90,000 of the cash in the freezer in $10,000 increments, wrapped in aluminum foil and stuffed inside frozen-food containers.”  The FBI claimed the serial numbers found on the bills in Jefferson’s home matched serial numbers of the money the FBI had given to their informant.

It was nine months later that the really big raid took place.  FBI agents executed a search warrant on Jefferson’s office in the House of Representatives, the Rayburn House Office Building.  Jefferson was a sitting Congressman at the time, and the FBI raid is believed to be the first time a raid was ever conducted on the office of member of Congress.

The separation of powers implications raised great concerns.  Members of Congress feared the precedent of law enforcement officers raiding legislators’ offices.   If legislators’ offices could be raided whenever agents of the executive branch claimed they were on the trail of criminal evidence, the legislative branch of government could be at the mercy of the executive branch.  These are the kinds of raids Russia’s Premier Putin has conducted to crush the formerly free press and private businessmen who challenged Putin.  These are the kinds of raids governments around the world have used as a pretext to force legislators to follow the command of the executive.

Congressional leaders immediately demanded the FBI return documents seized from the raid of Congressman Jefferson’s House office.  House Speaker Dennis Hastert and Minority Leader Nancy Pelosi spoke out together.  Reportedly Attorney General Alberto Gonzales and FBI Director Robert Mueller threatened to quit if the Justice Department had to return the documents.  Meanwhile, the House of Representatives was threatening to axe the Justice Department’s budget.  President Bush ultimately directed the Justice Department to seal all seized evidence for 45 days.

At the time, an ABC News poll in June, 2006 found 86% in the United States supported the FBI’s right to search congressional offices when they obtain a warrant.  This should be no surprise. The public’s support of law enforcement always outweighs support of Constitutional restraints.  At least the poll dealt with a search warrant.

As any criminal defense lawyer will tell you, members of the general public for the most part always will see the justification of unconstitutional actions in the results.  If the police acted without probable cause or a trumped up justification, the public does not often question the action.  There are significant exceptions, but for the most part, the safeguards of the Constitution are not appreciated by the general public when weighed against the value of “getting bad guys.”.

The public wants crimes solved, and the restraints on government placed by the Constitution are seen as speed bumps to be ignored only “a case at a time.”  The “case at a time,” of course, becomes the rule rather than the exception because in every case there is a “good reason” to go ahead with ignoring the restraints, to go ahead and get this guy because “this guy really needs getting” or “this crime really needs solving.”  The Constitution remains on the sidelines from little use until that member of the public or this person has an experience when they are surprised at how easy the rules have made it to convict someone innocent of a crime.

William Jefferson challenged the raid on his office to the District Court of the District of Columbia.  The Court held that the broad protections of the Speech or Debate Clause, which give absolute immunity from prosecution for legislative acts does not shield members of Congress from the execution of valid search warrants.  For those who fear executive overreach, it is noteworthy that search warrants would necessarily require approval from the judicial branch of government.  Oddly, Chief Hogan, who made this finding was the one who had approved the original search.

The decision of the District Court was appealed to a three-judge panel held that Department of Justice could not review Jefferson’s filed until Jefferson had seen what files had been taken from his office and which pertained to his legislative duties.

Thereafter the House of Representatives stripped Jefferson of his committee assignment in the House.  Jefferson was reelected in 2006, but after being indicted in 2007, he lost election in 2008, upset by a Republican in an overwhelmingly Democratic district.  Jefferson went to trial as an ex-Congressman.