by Dana M. Grimes, Esq.
On November 3, 2009, Bob McDonnell was elected the 71st Governor of Virginia. His campaign slogan was “Bob’s for Jobs,” and his focus in office was on promoting business in Virginia. Several years later, he and his wife, Maureen, were convicted under the federal bribery statute, 18 U.S.C. §201. At their trial, the government presented evidence that from 2010 to 2014, businessman Williams provided Governor McDonnell and his wife with $175,000 in luxury products, loans, and vacations as part of a corrupt bargain in which Governor McDonnell reciprocated by using his office to help Williams’ business, a supplement company.
At one point, Williams went to the Governor’s Mansion for a meeting with Mrs. McDonnell. At the meeting, Mrs. McDonnell described the family’s financial woes, including their struggling rental properties in Virginia Beach and their daughter’s wedding expenses, (tear-jerking for the jury, we can be sure.) Mrs. McDonnell, who had apparently had experience prior to her First Ladydom of Virginia selling nutritional supplements, told Williams that she had a background in the area and could help him with his business. According to Mrs. Williams, Mrs. McDonnell told Williams, the “Governor says it’s okay for me to help you and—but I need you to help me. I need you to help me with this financial situation.” App. at *2231. Mrs. McDonnell then asked Williams for a $50,000 loan, in addition to a $15,000 gift to help pay for her daughter’s wedding, and Williams agreed.
Mr. Williams testified that he called Governor McDonnell after the meeting and said, “I understand the financial problems and I’m willing to help. I just wanted to make sure that you knew about this.” Id. at *2233. According to Williams, Governor McDonnell thanked him for his help. Ibid. Governor McDonnell testified, in contrast, that he did not know about the loan at the time, and that when he learned of it he was upset that Mrs. McDonnell had requested the loan. Id. at *6095–6096. The Governor set up more meetings for Williams with state agencies, and Williams lent the McDonnells his vacation home and Ferrari. Id. at *2363. Apparently, at Mrs. McDonnell’s suggestion, Williams also purchased the Governor a Rolex. Id.
Were McDonnell’s $175,000 in gifts, loans, and vacations to a sitting governor while trying to secure his state’s help in launching his business illegal? As it turns out, no. McDonnell v. United States, 579 U.S. ___ (2016), decided by a unanimous Supreme Court on June 27, 2016, is a favorable decision for white collar criminal defendants. Virginia did not at the time have laws restricting gifts from lobbyists (such laws were enacted in Virginia after McDonnell’s conviction).
The Quid pro quo Element
In 2010, a 5-4 Supreme Court held in the highly controversial Citizens’ United decision, that “ingratiation and access” are not corruption. The McDonnell decision does not expressly refer to Citizens United, but the reasoning of the two cases is similar. The McDonnell court referred to its previous decisions defining the quid pro quo element of bribery in cases including Skilling v. United States, 561 U.S. 358 (2010). See The Collapse of Enron and the Narrowing of ‘Honest-Services Fraud, Trial Bar News, Volume 33, Issue 10, November 2010.
In Skilling, the Government’s theory was essentially that Skilling and other top Enron executives committed honest services fraud by conspiring to deceive investors by exaggerating public reports of the company’s fiscal health – thereby artificially inflating its stock price – and that they subsequently profited greatly through salary, exorbitant bonuses, and the sale of Enron stock. At trial, there was no evidence that Skilling solicited or accepted bribes.
After a four-month trial before 12 angry Houstonians, the jury found Skilling guilty of 19 counts, including the honest-services-fraud conspiracy charge, along with securities fraud, making false statements to accountants, and one count of insider trading. He was acquitted of nine insider-trading counts. He was sentenced to 24 years of imprisonment and $45 million in restitution (after appeal, the sentence was reduced to 14 years) With respect to Title 18 U.S.C. §1346, Skilling v. United States narrowed the honest services portion of the federal fraud statutes and deterred prosecutors from bringing mail and wire fraud charges against corporate executives whose conduct did not involve the receipt of bribes or kickbacks. This marked a major change in federal corruption law, since for the past few decades, United States Attorneys had used Title 18 U.S.C. §1346 broadly, and after Skilling, the statute was applicable only to bribery or kickback schemes.
Turning back to the lavish gifts in McDonnell, the last page of the 28-page decision is a good summary of the case. Chief Justice Roberts, speaking for a unanimous (8-0) Court, states:
There is no doubt that this case is distasteful; it may be worse than that. But our concern is not with tawdry tales of Ferraris, Rolexes, and ball gowns. It is instead with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute. A more limited interpretation of the term “official act” leaves ample room for prosecuting corruption, while comporting with the text of the statute and precedent of this court.
In McDonnell, Justice Roberts states “Section 201 prohibits quid pro quo corruption – the exchange of a thing of value for an “official act”. In the Government’s view, nearly anything a public official accepts-from a campaign contribution to a lunch-counts as a quid; and nearly anything a public official does-from arranging a meeting to inviting a guest to an event- counts as a quo.” Justice Roberts concedes that the facts of the McDonnell case are far from the typical interaction between public officials and their constituents. However, he felt it necessary to set clear limits in the law (and the jury instructions) in this type of case. He went on to say,
…the Government’s legal interpretation is not confined to cases involving extravagant gifts or large sums of money, and we cannot construe a criminal statute on the assumptions that the government will use it responsibly… ‘a statute in this field that can linguistically be interpreted to be either a meat axe or a scalpel should reasonably be interpreted to be the latter.’ McDonnell quoting Sun-Diamond 526 U.S. 398 at *412.
The Court goes on to describe in detail the manner in which the District Court’s jury instructions did not convey any meaningful limits on “official act”, and reverses the conviction.
Decisions Limiting Prosecutorial Power in White Collar Cases
United States v. Barry Bonds and United States v. Newman are two other recent cases, which restrict prosecutorial power in white collar cases (there has been a long trend towards increasing prosecutorial power in cases involving firearms or violence, but that is another story).
In his trial for perjury and obstruction of justice for his grand jury testimony regarding the use of performance enhancing drugs, Bonds was asked, “did Greg ever give you anything that required a syringe to inject yourself with?” Bonds gave a rambling non-responsive answer, which the trial jury concluded was deceptive, and he was convicted of obstruction of justice, 18 U.S.C. §1503. A three-justice panel of the Ninth Circuit affirmed the conviction. However, in April 2015, the Ninth Circuit issued an en banc opinion reversing the conviction. The 11 justices in the majority were deeply divided in their reasoning, but agreed that Bond’s non-responsive answer was not material.
In United States v. Newman, a jury in the Southern District of New York convicted two portfolio managers of insider trading. The Second Circuit Court of Appeals reversed, ruling that it was not sufficient for the prosecution to prove that the “tippee” portfolio managers knew that the information from the “tipper” was the result of a breach of confidentiality. Newman held that the government must also prove that the “tippee” was aware that the “tipper” received a personal benefit for providing the confidential information.
The Ninth Circuit and the Second Circuit are two of the most influential federal Circuits in the country.
The prosecution in federal court in San Diego of City Councilmen Michael Zucchet and Ralph Inzunza presented the question of quid pro quo that was similar to that in McDonnell. The two councilmen were convicted, along with Las Vegas lobbyist Lance Malone, of extortion, wire fraud, and conspiracy to commit wire fraud, in a scheme to trade campaign contributions for political favors. Malone worked for Cheetahs strip club owner Michael Galardi, who wanted to repeal the law banning touching between strippers and customers at the San Diego Cheetahs location. Judge Jeffrey Miller sentenced Inzunza to 21 months in prison. Malone was sentenced to 36 months. After carefully analyzing the evidence, Judge Miller entered a judgment of acquittal on 7 of the 9 counts on which Malone had been convicted, and reset the remaining two for retrial. The judge agreed with Zucchet’s lawyer, Jerry Coughlan, that even though Zucchet had received campaign contributions from Malone, and had indicated some willingness to have the San Diego “no touch” law reviewed, there was insufficient evidence that Zucchet’s actions amounted to a quid pro quo.
In September of 2009, the Ninth Circuit Court of Appeals upheld Judge Miller’s acquittal of Zucchet. The justices of the Ninth Circuit expressed concern that campaign contributions can sometimes be mistaken for bribes by jurors (a concern that the Supreme Court had in their above decision in McDonnell.) In Zucchet’s case, the justices ruled that there was insufficient evidence of the quid pro quo, but as to Inzunza, they affirmed his conviction, stating “there was no absence of very explicit promises, made directly to the person delivering the contributions, regarding actions Inzunza would take toward repealing the No-Touch ordinance.”
The federal bribery statute, 18 U.S.C. §201, makes it a crime for a public official to “receive or accept anything of value” in exchange for being “influenced in the performance of any official act.” An “official act” is a decision or action on a “question, matter, cause, suit, proceeding or controversy”; that question or matter must involve a formal exercise of governmental power, and must also be something specific and focused that is “pending” or “may by law be brought” before a public official. To qualify as an “official act,” the public official must make a decision to take an action on that question or matter, or agree to do so. Setting up a meeting, talking to another official, or organizing an event — without more — does not fit that definition of “official act.” Because jury instructions in the case of former Virginia governor Bob McDonnell were erroneous, and those errors are not harmless beyond a reasonable doubt, McDonnell’s convictions are vacated.
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