Post-Oral Argument Courthouse Steps: Percoco v. United States

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Chayila Kleist:  Hello, and welcome to The Federalist Society's webinar call. Today, November 28, 2022, we host a post oral argument courthouse steps on Percoco v. United States which was argued earlier today before the Court. My name is Chayila Kleist, and I'm assistant director of practice groups here at The Federalist Society. As always, please note that all expressions of opinion are those of the expert on today's call as The Federalist Society takes no position on particular legal or public policy issues.  In the interest of time, I'll keep my introduction of our speaker brief. But if you would like to know more, you can access his full bio at fedsoc.org.

 

Today, we are fortunate to have with us Mr. Gary Lawkowski who is counsel at Dhillon Law Group where he works on political law, election law, administrative law, appellate issues, and nonprofit issues. Prior to joining the Dhillon Law Group, Mr. Lawkowski served at the Department of the Interior and completed two tours at the Federal Election Commission. Additionally, Mr. Lawkowski is a senior fellow at the Institute for Free Speech, and perhaps the most pertinent to this event, he is council of record for an amicus brief submitted on behalf of Citizens United, Citizens United Foundation, and the Presidential Coalition of Percoco v. United States, and he tracked the argument today.

 

Throughout the panel, if you have any questions, please submit them through the question-and-answer feature so that our speaker will have access to them for when we get to that portion of today's webinar. With that, thank you for being with us today. Mr. Lawkowski, the floor is yours.

 

Gary M. Lawkowski:  Thank you very much. It's great to be here. So this is a case that, at its core, is about the continued criminalization of politics and the scope of the right to lobby government officials for the redress of grievances under the First Amendment. I would and, in fact on behalf of Citizens United, did argue that it's also about the risk of prosecutorial overreach particularly in what might be called the political or political corruption or government corruption type cases. I'll talk about that a little bit more later, but obviously that's a subject that these days is on a lot of people's minds as you look at some of the high-profile issues that are coming up.

 

So I think there are two themes that are running through this case and that bare watching. First is bad facts and second is government overreach in the law. So with bad facts, it's a legal axiom that bad facts make bad law. I think that's some of what's happening in this case. The petitioner's conduct here is hardly what I would describe, or many people would describe, as the platonic ideal of conduct, of good government, of good ethical conduct.

 

The petitioner has been described as a close personal friend of Governor Andrew Cuomo of New York. He worked for the governor in an official capacity for a while in the governor's office as the executive deputy secretary in the executive chamber. This was viewed as a fairly powerful position, someone who was fairly close to the governor. So you get to 2014, Governor Cuomo is running for reelection. The petitioner here, Mr. Percoco, is going to leave the governor's office. He's going to manage Governor Cuomo's reelection campaign. Now, while he was managing the campaign, he also maintained a desk at the executive offices of the governor and had other perks that would typically be more associated with a government employee than your normal outsider. So this is, again -- there are some bad facts in this case.

 

While he was managing the governor's campaign though, he was approached through an intermediary by a New York businessman who was looking for help resolving a labor issue. Now, this businessman had a bit of a problem. He wanted to do some work that required state funding. In order to do that, the state was telling him he had to reach what's called a labor peace agreement with a certain union. They were concerned this would be very expensive. This would slow up the project they were working on. They wanted someone to step in, particularly Mr. Percoco to step in and help them navigate that issue, get out of this labor peace agreement.

 

So they asked him, "While you're off the second floor, which is the floor he was working on for the governor, can you help us with this issue?" In order to secure the petitioner's cooperation and help on trying to influence the government on this issue, they transferred $35,000 to him in two payments through his wife. They were through an intermediary and through his wife. So again, it's a situation where they're doing something in a way that looks bad even if everything were up and above board. They're doing this in a way that looks like you're trying to get around something.

 

Now, after receiving the payment, Mr. Percoco contacted officials at the Empire State Development -- that's a state agency in New York -- and urged them to move forward with the businessman's deal without this particular labor peace agreement. Shortly thereafter, the Empire State Development in fact did reverse their position and allowed them to move forward. And then a few days after that happened, Mr. Percoco went back into government. So he came out, managed the governor's reelection campaign, lobbied, influenced government, whatever you want to call it on behalf of this businessman while he was out of government, and came back into government shortly thereafter.

 

So in looking at these facts, you can see where they might get the attention of DOJ and others. But you can see where they might think "Hey, there's something -- there might be something a little sketchy here." And there are some other facts that contribute to that perception. There were other tawdry details in this case that came out at trial. So there were two schemes that were at issue at his trial level. This one and another one that's not before the Supreme Court right now. And in the course of those discussions, they were referring to things like -- referring to money as "ziti" which is a reference to the Sopranos. And if you're making Sopranos references in your discussions with your business partners, that might be a sign that you might be doing something that could get some negative attention down the line.

 

He was also charged, like I said, in that other scheme that involved an energy company trying to hire his wife for what the government term and what others terms were a low show job. So again, a situation where there are a number of things that are coming together at the same time to create a situation where it looks like there's something sketchy going on here. It's a situation where there are some bad facts for the petitioner here. But as Justice Kagan previously wrote in another case dealing with similar federal corruption statutes, not every corrupt act by state or local officials is a federal crime. Or as Justice Scalia put it differently in an earlier case, "Bad men, like good men, are entitled to be tried and sentenced in accordance with the law."

 

And the law is really where, in this case, it starts to take a turn and why it becomes a really interesting case for the Supreme Court and an interesting case going forward to see what happens. So you have the situation where you have bad facts but then in comes the government and then comes the Second Circuit and the New York District Court coming in in a way that really create an interesting legal question that the Supreme Court is looking at now. So in their briefing and in oral argument, government understandably places a lot of weight on the facts of the case. For example, focusing on "Well, Mr. Percoco is this former government employee. He was going back into government shortly thereafter. All this suggests -- did he really leave?"

 

But the problem with those facts and as came out in response to questioning from, I believe it was Justices Jackson and Sotomayor, is they don't actually matter to the government's theory of this case. Neither of those things actually matters to the relevant elements and facts and test under which Mr. Percoco was convicted. And that's where it gets really different. So in connection with the scheme described above, Mr. Percoco was charged with conspiracy to commit honest services wire fraud, Hobbs Act extortion, and solicitation of bribes and gratuities. At trial, he argued that he couldn't have committed these things because he wasn't a government official at the time. He couldn't have committed an official act as required under those things because he's not an official. He has no official power.

 

Now, on some of those counts that was enough. So on Hobbs Act, it was determined that was enough. He couldn't have committed it. That count went away. He was also acquitted on the solicitation of bribes and gratuities. However, he was convicted on this honest services conspiracy. And he appealed that conviction to the second circuit arguing in part again, you can't commit honest services fraud, because as a private citizen, he didn't owe any fiduciary duty to the people of New York. He wasn't an employee. He hadn't accepted this obligation. He was just Joe Schmoe on the street at the time this happened.

 

The Second Circuit and the trial court disagreed. They held that any private citizens who are relied on by the government and who in fact control some aspect of government business owe the same fiduciary duty to the government as public officials. Now, there's also an element going through the Second Circuit decision and going through the district court decision about relied on because of some special relationship, whatever that happens to mean. In his case, based on his prior service to the governor, his closeness to the governor as a friend, his service as the campaign manager.

 

But what's telling in that test is there's no reference to an intention to come back into government. There's no reference to previous government service. It's just you're someone who exerts such dominion and control over government and are actually relied on by the government that the Second Circuit and others think you are effectively a government employee regardless of what your technical status might be, regardless of what you might be considered. So elsewhere in the opinions, the Court described owing a fiduciary duty when a person dominated and controlled any governmental business and people working in the government actually relied on them because of this special relationship.

 

So figuring out how we get to this test requires a little bit of history, and it's actually kind of interesting, I think. But I'm nerdy and that's why I'm here. So the history of honest services and honest services fraud bubbled up through the Court. This started back in -- even back to the 1940s as a judicial doctrine. It wasn't originally a statutory provision. Traditionally, under wire fraud and these other federal fraud statutes, there had to be some sort of tangible deprivation of property. You had to make someone worse off.

 

Over time though, this theory developed and was periodically accepted by certain courts that you could commit fraud even if someone was not deprived of tangible property. So if you deprived them of what was called your honest services. Now, an easy way to think about or one way to understand this distinction is to say, let's say I'm hypothetically a contracting officer for the federal government. You offer me a $15,000 payment to give you a contract. You also happen to submit the lowest bid that will adequately deliver the services I'm supposed to be contracting for. I may not have tangibly harmed my employer if I accept that money and give you the contract because you're still the lowest bid, you're still providing the services, but I have deprived them of my honest services because I'm not giving them my judgment. I'm being influenced by this other payment. So that's the distinction that developed over time, and that's where this honest services thing came in. For a while, fraud, especially federal wire fraud you had to have a tangible harm of some sort of property deprivation. Honest services comes in to fill the gap where maybe you aren't harmed, but we think you did something wrong.

 

So this comes up through the case law up through into the 1980's. One of these cases of particular importance for this case is in 1982, it's out of the Second Circuit. It's a case called United States v. Margiotta. This involved a county political party chairman accepting money from outside persons to try to influence government decisions. And the accusation and the concern was that this was a situation where essentially, he was acting as the power behind the throne. So you have elected officials who are conducting government business and you have this powerful party chairman who's effectively telling them "Hey, do x. Do y. Do this. Do that." And they're doing it. So the government comes up with this theory that "Well, you're being deprived of his honest services because he's effectively acting as the government even though he doesn't technically hold a government position." So Margiotta is where the Second Circuit comes up with this test that you can still be convicted of fraud for denying the people of the county a duty of honest services even if you're not a public employee.

 

Now, this is an important case because it's one that the district court and the circuit court draw heavily from in their opinions. Now, one thing that's interesting, and this is skipping ahead a little bit, is the government kind of ran away from this case at oral argument today. They backed off the logic and acknowledged that some of the language in that case is too broad for what's happening here. One of the justices, and I'll double check who when the transcript comes out, but one of the justices called them out on that and noted that "Well, if this is the case that's underlying the jury instruction of the district court, this is the case that's underlying the test the Second Circuit applied, how can you run away from that?" And so that's where it gets interesting is you have this Second Circuit case from the 1980s that's forming the basis of a lot of what's happening in the Second Circuit and then the jury instructions in this case.

 

So that happened in 1982, but there's an intervening event that limits its value today in addition to some of these other doctrines. In 1987, there was a Supreme Court case called McNally v. United States. The Court, in more polite considered language, held that the honest services theory of mail fraud doesn't fly. "This is a pile of malarkey. We're not going to do this. This doesn't apply under the statute." Now, they got there two ways. The main way is a matter of statutory interpretation. They looked at the wire fraud statute and said, "This honest services thing is not in the text for the statute. We don't think it's there." Then they apply a constitutional avoidance clause and say, "Okay. It's not there, but if it was, it would be problematic. It would have some vagueness concerns. At minimum, Congress, if you want to do this, you need to be a lot more explicit than you have been." And it cuts off the honest services line that's developed through the courts up to that point in the late '80s.

 

Now, Congress almost immediately takes the invitation to -- well, they miss the hint but take the invitation and decide to codify honest services. The result is 18 U.S.C. 1346 which reads "For purposes of this chapter, the term scheme or artifice due to fraud includes a scheme or artifice to deprive another of the intangible right to honest services." Now, again, if you go back to McNally, the Court's clear that honest services could have some difficulties. So they hint at the problem with this by saying, "Rather than construe the statute in a manner that leaves the outrebounds ambiguous and involves the federal government in setting standards of disclosure and good government to local and state officials, we read the mail fraud statute as limited in scope to the protection of property rights." And again, Congress decides they're not going to take that hint. We're going to codify the intangible right to honest services as part of the federal mail fraud statutes.

 

Now, perhaps unsurprisingly, this codification caused some problems over time. And so you get to 2010 and you get a case involving former Enron CEO Jeff Skilling where he's charged with honest services. Now, this is another theme is that when people tend to get these cases up to the Supreme Court on honest services, there tend to be some bad facts making bad law, and I think that's also the case in this case, but if you remember the -- if you're old enough to remember the Enron scandal and you remember Jeffrey Skilling, you remember that he was not exactly a popular figure circa the mid-2000s once a lot of that came to light.

 

Now, the one -- so you get to this case involving Skilling where one of the issues is he's charged with honest services. In Skilling, you get a number of different opinions from the justices. But the one thing that every justice seems to agree on is that as written unbounded, the honest services statute is vague and problematically vague. There's an issue here that we need to address. So what they disagree on though is what to do about it. So Justice Ginsburg says, in effect, "Yes, the statute is vague, but we can save it. We can adopt a limiting construction that'll cabin it enough that we can get around these vagueness concerns." And she writes that honest services is limited to bribery and kickback schemes and that anything broader would run into a "vagueness shoal." Again, we have this situation where even the person who's writing the limited construction is saying, "Hey, there could be some vagueness problems here, but we think we can save it if it's just bribery and kickbacks."

 

Justice Scalia disagreed. In his view, honest services as a concept was irredeemably vague and Justice Ginsburg was effectively rewriting the statute to avoid these types of concerns. Now, perhaps presciently as we see in this case, Justice Scalia warned that Justice Ginsburg's limiting construction would "not solve the most fundamental indeterminacy the character of the 'fiduciary character' with the bribe and kickback restriction applies." Now, presciently because that's exactly what we have in this case of what is the fiduciary relationship? How broad is that? So in other words, the very question we now face today, Justice Scalia predicted over a decade ago. But we're here today, so as you can infer, Justice Ginsburg won that argument. Her opinion prevailed. The Court adopted this limiting construction of the honest services fraud and in many ways, we've been dealing with the consequences of going that route rather than going the Scalia route ever since.

 

But, and this is the technical term for what's been happening since then, the Court's vibes have been towards limiting honest services and cabining it in and suggesting that maybe this is not an area where you want to adopt a broad expansive interpretation of the law. This isn't the place to get creative. Two cases particularly stand out since Skilling where this general attitude has been apparent. First is in 2016 where you get Bob McDonnell, the former governor of Virginia, in McDonnell v. United States. So if you recall, Bob McDonnell is the governor of Virginia. While he's the governor, he has this -- we'll call him a friend. He gives him a lot of money. He gives him a lot of expensive gifts which are legal under Virginia law. Bob McDonnell makes a couple calls, sets up a couple meetings, but does not take much more affirmative action to support this person in government. Once he leaves office, almost immediately, he's charged with honest services fraud for accepting these gifts and making these calls and setting up these meetings.

 

Now, a unanimous court stepped in and said, "No, that's not enough." They said that an official act has to be something more than basic constituent services. As the chief justice wrote, "There's no doubt that this case is distasteful, and 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." Again, the concern was "Hey, DOJ, take the hint, take the brushback. This is not a place where you can go super broad. This is a place where you really need to play it down the middle."

 

Now, this comes up again in 2020 to a lesser extent because it was a little more indirect in Kelly v. United States. Now, this was not technically an honest services case though the Court discussed honest services jurisprudence in addressing the government's creative or aggressive approach to the law. Now, Kelly was a case dealing with the Bridgegate scandal in New York. So if you remember that, that was the accusation that certain lanes on a bridge were closed for political reasons. Now, they brought charges against certain aides of Governor Christie stemming from that incident alleging that by doing that, they were depriving the citizens -- they were basically committing a fraud.

 

Now, once again, the Court ruled unanimously that federal wire fraud statutes are not a free-floating tool for applying federal good government standards. That's been the concern with a lot of these cases is the sense that what's happening is the federal government is coming in and bigfooting state and local ethics rules with their own free floating ethics standards that are coming in through these wire fraud statutes and particularly through the honest services statute. So that brings us to today where once again, the government is before the Court applying a particularly broad interpretation of honest services in a way that could be seen as applying a federal good government standard that goes above and beyond even that under state law.

 

So what's the problem? Why do we care about this statute? We look at Percoco, we look at the facts. This seems like a guy who may have been up to something a little sketchy. Why do we care so much about this guy? So in our amicus brief on behalf of Citizens United and others, we focused on three arguments for why this case matters. First is vagueness. So the Second Circuit's test is incredibly vague. And this came up a bunch during oral argument today where -- particularly in questioning with the respondents. The justices seem to be trying to nail the government down on, what are the bounds of this? What are we really saying? And it can't just be that "Well, it's whatever a jury will agree to or you have to go through a trial to figure it out."

 

So what does it mean to dominate and control the policy process? How does a potential defendant have fair notice when they're crossing that line? Basically, put differently, how much winning is too much winning? If you're a lobbyist and your job is to try to influence the government policy process, how do you know where you've crossed into domination and control versus where you're just an effective lobbyist who's very good at getting their way?

 

Also, what does it mean for government officials to actually rely on outside people? So one dirty little secret about Washington is -- actually most state capitals at this point -- is that a lot of bills are written by outside groups, whether you view those people as lobbyists, whether you view those people as interest groups, as citizens who are coming and trying to influence government, as advocacy groups on behalf of certain issues. There are a lot of groups out there that write model legislation or that are actively involved in the process of writing legislation. Do government officials rely on those people when they introduce a bill with their involvement? Or is that something different? Do they make their own independent judgment about the merits of that proposal? And that's something that the government didn't really address and didn't really define those parameters well either in the lower court or frankly, today.

 

Moreover, government officials, particularly elected officials, have a certain incentive to flatter their constituents. If you're a government official and you're relying on these people next time, to vote for you, to contribute to you, it may be in your interest to tell them "Oh, yeah, no, I totally did that because of you. You're important. You're powerful. You're very important to me." Whether that's strictly true or not, whether you made an independent judgment about the matter or not, it's in your interest to portray that as something where this person was able to get what they want because that may make them feel good. That may make them more fondly disposed towards you in your next election. So how do third parties, particularly in the government looking at those types of communications or a jury looking at those types of communications, differentiate between what's flattery and what's actual reliance?

 

And finally, what's the special relationship? So the Second Circuit referenced it. There's some ambiguity about whether or not it's a necessary element. The government referenced it again today at oral argument, so it would seem that the answer is yes. But what's a special relationship? What does that mean? Is a president's son a special relationship? What about their brother? What about -- I believe it was Justice Alito who asked this question in today's argument of, what if it's someone who grew up with a public official, they've known each other all their lives, they were best man at their wedding, they were college roommates, they were this, they were that, they've known each other all their life and they know how they think, they're implicitly trusted by the public official. Is that a special relationship and if so, what differentiates that from normal lobbying? Criminal law particularly cannot leave people of ordinary intelligence to guess at the meaning of what may get them in trouble. The Second Circuit's test has, as we argued in our amicus brief and as their petitioners argued, has some vagueness issues.

 

So second, there's First Amendment concerns here. We're dealing with petitioning the government to address the people, to redress the grievances of the people. In our system, power derives from "we the people" not them the government. Now, in order for "we the people" to exercise that authority, there has to be some way that we can say what we want. It's fundamental to the principles behind the First Amendment and the right to petition the government for the redress of grievances that there be a way for "we the people" to communicate our views to the government. And sometimes that means banding together whether through interest groups, through other associations. Other times, that means hiring people to try to convince the government to do something on your behalf. Both these activities are protected by the First Amendment. And both of them are impacted by a vague broad test such as the one the Second Circuit adopted in this case.

 

As the Court's recognized, vague laws kill speech, and laws that leave the line between legitimate lobbying and criminal honest services fraud are likely to kill speech. Moreover, and more directly on this case, there's also a question of what type of action is illegitimate. So the jury instructions stated in this case that mere influence is not enough. Where's the line between mere influence and domination and control? And this is something that came up quite a bit during the argument today of "Well, isn't this just a back door to the criminalizing influence?" Which is something that the Court has said before, particularly in Citizens United, is not against the law. Just being influential is not illegal.

 

And finally, there are some fairly significant federalism concerns that are underlying this, and this is something that really didn't get a lot of play in the argument today. It came up a little bit in Justice Thomas's opening question. It didn't get as much play as I might have expected. It got a lot more in say McDonnell and other cases where you have the federal government coming in and touching on very sensitive issues of state self-government. What are the rules for government officials in the state? Who can do what? States have ethics rules. New York has ethics rules that bind former employees, that bind future employees if you've already committed to accept an offer, that bind people who have certain close relationships such as spouses to public officials. What gives the federal government the ability to come in and step in and say, "We don't think the state is enforcing its laws properly" or "We don't think the state law properly covers what we think it should cover, so we're going to step in and apply our own free floating ethics standards." That poses some federalism concerns. That's something that, again, didn't get as much discussion in this case as I might have expected. It did come up a little bit in one of Justice Thomas's questions. It had a lot more play in McDonnell. And it's something that I think is very important in looking at some of these honest services cases where you're going above and beyond state laws. What gives the federal government the right to step in and prosecute state officials for things that maybe the state doesn't view as a problem?

 

So that leads into our second point of government overreach and the Department of Justice. So you have this broad standard from the Second Circuit, and this may be one of those cases where DOJ regrets winning the broad jury instruction they got here. Again, there are a lot of bad facts. I think if they had gone narrower, this would be a much harder case. I mean, we'll see what happens. We'll see where the Court comes out. Based on the questions, I think if they had gone narrower, they would've had an easier time certainly with the questioning today. They didn't, and what they seem to be doing is saying, "Hey, you can trust us." Implicitly they seem to be saying, "Hey, you can trust us to only apply these tests to these really egregious cases." Basically, "Trust us. We're from the government. We would never do something that would seem to be wrong." But the problem is there's very few reasons in the recent history of the Department of Justice, particularly in these politically charged political corruption type cases that would cause one to believe they are capable of exercising the level of humility necessary to apply that standard.

 

So again, you go back to -- we have McDonnell. We have a case where they were charging a prominent governor under a very aggressive theory. They lose unanimously before the Supreme Court. You have Kelly, you have a case where you're charging officials in a very high-profile political scandal lose unanimously before the Supreme Court. And you've had other examples of things like that. For example, the John Edwards trial where DOJ went forward on a very aggressive theory of the law against an unpopular official and ended up not winning the case. So the DOJ and the FBI are under a lot of fire right now for perceived politicalization, but what might almost be a bigger problem, particularly in this case for them, is just an overly aggressive view of the law that may come back and bite them when the opinion comes out. We'll see. There are only nine people who can really say what that's going to end up saying, and I'm not one of them. But it's entirely possible that they may come to regret taking a very broad view of the law at the district court and at the circuit level now that it's time to defend that before the Supreme Court.

 

So what happened today? And then I'll wrap up and take questions. I think what you saw was generally some skepticism directed at the government. I think you saw a fair bit of concern that this test is not really cabined and kind of become circular. The government, in defending their test, adjusted the test that the Second Circuit uses. They reframed it, they readopted it to focus on things like whether you can command government officials to do things, whether you have certain indicia of being a government employee. I think the justices presented some skepticism of that approach about whether or not that really provides fair notice to people. Again, I think you had Justices Sotomayor and Justices Jackson particularly asking questions about whether or not this was limited to cases where you have either someone leaving government or someone who has committed to go back in government. The answer was no. I think that's an answer that may end up being problematic for the government. We'll see though what ends up happening with the opinion.

 

I think where you also saw was the justices searching for limits on both sides. That's where they're really asking is, what's the test here and what are the limits of that test? So in their questioning of petitioner, there was a lot of questions about, what's the limit to this? Is it literally just people who have formal governmental titles or can it be broader? The example for one of the justices' questions was, let's say you have a governor who is term limited. Their wife then runs, wins, and the perception and the understanding is that the governor is still running the show, that this person is really just a figurehead for them. Would that be something where there would still be an honest services element that could apply? Petitioner's response was to focus on an agency theory. We'll see what the Court wants to do with that. It's certainly one way of potentially limiting the implications of what they're saying, and it would be much more limited than what the government said. It's not the only way though, so we'll see what ends up happening. And again, I think on the other side, there's a lot more skepticism towards the government's test. Again, we'll see what happens. I think there's certainly though some skepticism of the breadth and the ambiguity in the test that the government has put forward and that the Second Circuit has put forward.

 

And so with that, I'll go ahead and take questions. So it looks like we have one about who prosecuted the defendant. So this came out with the -- this came out in New York. It would've been the US Attorney's office up there, but I'd have to double check. I don't recall if there was a grand jury indictment. It would seem likely, but I'd have to check the record.

 

It looks like we have another question about undue influence -- whether undue influence undermines an honest services argument. Can there be an argument that too much money or too strong influence is excuses? I think that's the challenge in this case is, how do you separate domination and control from just influence? So the government wants to draw that distinction and they drew that distinction in the jury instructions in this case where mere influences on one side is okay. Domination and control on the other side is not. This came up in a number of the questions today from some of the justices is, where's that line? And personally, I don't think it's that clear. I think it's very ambiguous where you slip into domination and control, particularly if you're a very effective lobbyist and where you enter the mere influence category. I'll pause there if anyone else would like to ask anything.

 

Chayila Kleist:  While we wait for questions to come in, I have one I'd love to pose. You mentioned that the federalism issue was perhaps under addressed in oral argument. Are there other issues of constitutionality that were not raised or perhaps were under addressed in the argument that might affect this case or at least how it could be applied?

 

Gary M. Lawkowski:  Federalism was -- I think that's been one that I think has been less addressed than I might have expected certainly after looking at the record in McDonnell where you had a lot of people write in with amicus briefs writing in to argue "Hey, you can't supplant state ethics standards." I think it's a little more complicated here because it's not clear to me what would have happened under state ethics law. I think there was a decent chance the petitioner might have had a problem if he was charged under state law, and that's what Justice Thomas was hinting at in his question and that might be one reason why -- I don't represent Mr. Percoco. I don't know what their strategic choices are, but that might be one reason why petitioners in this case might not have wanted to hit that argument as hard as perhaps a petitioner in another case would is because if you said, "Let's look at state law," that may not have gone quite the way they would hope, but again that's just speculation.

 

So we have a question, "Is there a circuit split about this or is this a problem of the Court's own making?" I would say this is a problem of the Second Circuit's making and probably more directly of DOJ's making in pursuing this aggressive theory of the law here. I don't believe that -- well, there's a bit of a circuit split in the sense that other circuits have not bought on to this theory. I want to say that a case out of the Third Circuit went the other way on this broad approach but that's also an older case. There does not seem to be a lot of other circuits that are buying onto this. The circuit split element didn't really come up as much, it seems in the -- didn't come up at all in the argument today other than some references to the judge's opinions there. So it doesn't seem like that's a -- I take that back. I think there might have been a couple references to some of the opinions from some of the other -- from that other circuit opinion that went the other way, but by and large, this seems to be a problem mainly of DOJ and the Second Circuit's own making of taking a very broad view of the law where you have some strong facts that frankly, I think if you had taken a more narrow approach, you could've got -- we'll see what happens. If you had taken a more narrow approach though, I think it would've been a stronger argument for them than what they had today.

 

So we have, "What are the avenues open to the Court on this? Can they further cabin the doctrine or would they have to seize this and adopt Scalia's dissent finding the language void for vagueness?" So there are actually a lot of avenues open to the Court on this one, and that's what I think will be interesting to see whenever the opinion comes down on this case. So there are a number of different ways you could go. You could go the full Scalia way and just say "Look, we tried this honest services thing. It's not working." I don't -- well, it's always hard to want to be out there predicting what the Court will do. They're very smart people and oral arguments not necessarily a representative of their thinking on this. I would be surprised if the Court goes that route. It wasn't really argued that way as a "This is your opportunity to get rid of honest services." So I'd be very surprised if they want to go the full Scalia route. Maybe you get an opinion that goes there. Maybe one or two of them want to say "Hey, we should revisit this in the future." But I don't think this is going to be the case, that's going to be the vehicle to do that.

 

But that still leaves a number of options open for the Court depending on what type of test they want to adopt. So they could just outright overturn the conviction, say "This is a ridiculous doctrine. You need to be a public official. Anything else doesn't count." That's probably the maximalist option for them on this case or at least the more plausible one. You could take a narrower read and say, "We're going to adopt some sort of agency theory and send it back to the lower courts to sort out what that means, and send it back to say -- and remand to figure that out." You could take something in between where you're looking at whether or not someone's intending to come back into government. There are a number of different options the Court could take that result in a remand basically and a potential retrial. And that I think is going to be interesting is how those opinions break down, whether you get -- you can see a number of different options. Frankly, I don't know what one the Court's going to take, and I don't know that anyone outside of those nine people know what one the Court's going to take. Even they may not know it. But you could see anything from something like you had in Kelly and McDonnell where you had a narrow unanimous opinion saying "You can't do this" to something that's broader and sets forward a more prescriptive test or to something where you get maybe a couple different people writing with a couple different tests. And we'll see what ends up coming out of that.

 

So we have another question. "Can the Court declare that domination and control was forbidden while influence alone is okay, but disclosure filings must be required?" So I think as a legal rule you could get there. I don't think -- I think you'd be legislating at that point though, so I think that's one of those things where they could write that "Hey this" -- you could -- this is one of those areas where I think that if they wanted to go that direction, they could try to send a strong hint to Congress about it. But I mean, there are lobbying requirements both at the state and federal level in most states. That's another area where you're using honest services to rewrite the lobbying disclosure laws if you were to try to go that direction. So the short answer is, no I don't think you could mandate that in any opinion, and I don't think you'd want them to. If someone really wanted to highlight that though in writing an opinion, there might be a way to do that as a "Wink, wink, nudge, nod. Hey, Congress, you want to consider this." The problem you're going to run into though is this is a state issue, and it really should be an issue of state lobbying laws. So I don't know that you could get there in this case. I think that you can do that federally and I think there are federal disclosure laws you could encourage in the state legislature, although again, there are state lobbying laws, and that's where again, that federalism issue comes into play.

 

So let's see "Does the honest services theory have any preincarnate history in the common law? Seems likely the effect will cause problems the way it's framed undermining the criminal actus rea requirement." The short answer is, I don't know. It seems to have arisen in the federal court from the '40s. I don't recall if there's any common law basis for it. I don't think there's a direct descendant. So the federal fraud statute I believe was adopted in the late 1800's. It was initially understood to have a property requirement. Then again, when we get the '40s a little bit later, you have this honest service thing creeping in. Get to the '80s -- the Court says "Wait, that's not part of the law here. That's not what the statute says. If you want to do that, you, Congress have to go back and do that." Congress takes the invitation, goes back and does it. So the short answer is, I'm not sure if there's any predicate in common law, but the way the statute was written would seem to suggest that they did not view that statute as importing anything prior to honest services, at least not the McNally accord.

 

Chayila Kleist:  I'll pose a question. If the Court embraces the Second Circuit's theory of the case, is there going to be a change where Mr. Percoco and those like him as to the restrictions and rules that would generally only apply to public servants but now might apply to them since they fit in this weird role?

 

Gary M. Lawkowski:  I think there would be. I mean, I think the problem is, and this goes back to the vagueness problem with the Second Circuit, as to what magnitude that is and how at risk you feel if you're one of those people who could have this problem. I think you'd see a lot more concern about compliance issues. I think you could see people pulling back on some of their lobbying efforts. I think you could see, particularly people who have a special relationship, being a lot more nervous and maybe wanting to stay a little more behind the scenes. But again, it goes back to the vagueness problem of, there's not a clear line so maybe the Court can write one in their opinion if they were to go that direction. But if they were to just adopt the Second Circuit, I would say there's not a clear enough line to really figure out what that looks like other than I think people who are risk averse are going to try to stay away from more of this.

 

Chayila Kleist:  Are there other cases pending or precedents that may be affected by such a decision for whichever way the Court rules?

 

Gary M. Lawkowski:  Yeah. So there was another case they talked about a bit called Dixon and that case also dealt with a situation where someone who was not a federal employee was charged under an honest services charge. Now, Justice Barrett distinguished that case -- the government tried to rely on it and is trying to say, "If you rule against us, you effectively have to overturn this case." Justice Barrett, I believe it was and some of the others were a little -- seemed to be expressing some skepticism that you have to go that far. So there's a little bit of open question of how far that case gets you. What was complicating about that case is you had a situation where you had federal funds that had to be distributed a certain way through certain entities. And one of those entities was the one that was being charged in that situation. It was someone who -- they aren't a federal official, but there's a little bit more of a direct relationship to a federal function than there is say here where you have someone trying to come in from the outside. So personally, I tend to agree with the justices who, and with the petitioner seemed to be expressing a little skepticism that's directly on point here. But it is a case that -- I would expect to see some discussion about it, and it is a case that could be affected depending on how you want to interpret this. I think if they rule against the government though, there's a pretty high chance they try to distinguish that case and notwithstanding the government's efforts to try to tie themselves to that.

 

Chayila Kleist:  Got it. You addressed this a little bit when an earlier question was asked, but what alternative arguments could the Court apply, or might we see the Court apply if they came to the same decision as the Second Circuit, but they didn't want to go as far in expanding it?

 

Gary M. Lawkowski:  Yeah. So I think there are a couple different ways the Court could go if they want to uphold the conviction or go a similar direction as the Second Circuit that aren't as broad as the Second Circuit's test. You could see a situation where maybe they try to write a test around someone who's anticipating going back into government. You could see a situation where they're drawing it to some other factors that are in this case and some of the other facts in this case and there are a number of them where you could've looked. You could see it around maybe say former employees. You could see it around "Well, okay. We're going to say only people who are attending internal government meetings count." The problem is I think any of those approaches are getting awfully close to legislation. I mean, drawing those types of lines is really a legislative action, and this is another point we made in our amicus brief on behalf of CU was, "Yeah, you can draw a number of different standards, but drawing some of those standards is really a legislative act. It's not really a judicial act at that point." So you could conceivably see that happen and if the Court wanted to go that way, I suppose it could. But I would argue and did argue that that would be more of a legislative action at that point.

 

Chayila Kleist:  What are the ramifications of this case if the Court sides with Mr. Percoco?

 

Gary M. Lawkowski:  I think if they rule for petitioner, I think you're looking at probably more of a status quo situation. There aren't going to be -- there are a lot of former employees who end up going into lobbying. There aren't going to be a whole lot of people who are employed, private sector, back into government who don't trip up a more traditional bribery standard doing something like this or don't trip up frankly, a state or federal disclosure law or some of the other preexisting ethics laws that aren't honest services. So for example, if you're a federal employee, a lot of times there will be limits on who you can lobby on behalf of or on your ability to lobby on behalf of former employers. There will be -- a lot of places have cooling off period for lobbyists when you leave government. So you could see a situation where -- I think you'd rely on those laws. I don't really see a big change if Mr. Percoco wins. I think that's likely to be more status quo ante. I could see big changes if he loses and that's this theory applies where especially if you're a risk averse person, you're going to be real careful about wading into some of this.

 

That's a good question. "How successful has DOJ been using the statute interpretation? Have there been significant convictions, plea bargains, or has it largely been a waste of taxpayer money?" I'm not aware of a whole lot of other applications of this statute. Now, it's possible someone plead, and it was a lower profile case, and it's just not on my personal radar. So I'm not aware of that having happened that often. Now, again, it's possible they're out there. There was certainly -- there were cases that were more similar to this pre-McNally. Those generally stopped after McNally. And there's been some discussion about "Well, did McNally -- how much of that was revived by the honest services statute?" That's one of the arguments that the Second Circuit made, that the government made was that all this was revived. The government backed away from that argument a little bit in part because as was asked in one of the questions, there wasn't really a unified view of all the courts about some of this even pre-McNally and Justice Scalia pointed this out in one of his dissents in the early 2010s about it, is that courts took very different views about some of this even pre-McNally. So then that undermined the argument that 1346 revived all the implications and all the pre-McNally case law where you would've seen more of this theory. And that's another case, again we made it in the brief, I think others made it is, we don't think Congress meant to be that broad or it could've because it wasn't unified enough.

 

Chayila Kleist:  You mentioned that in the history of how this standard has developed, Congress seems to respond to the decisions. Assuming that the Court -- whichever way the Court decides, what might the legislative responses be either to clarify or to codify in light of this case and the fact that there may be bad facts to which someone might want to respond?

 

Gary M. Lawkowski:  I think it would be tough for Congress to respond. I mean, you can see a situation where, if you go back to what are those other options, where maybe you try to define public official in a broader way than just someone who holds an official job or you try to expand it to agency or you try to say, "Honest services applies to someone who's actively negotiating to be employed by the government as well as someone who's"-- sort of like you do with federal ethics law now. Again, this is a case though where I don't know that there's going to be a whole lot of legislative fixes either way. So if the Second Circuit test is upheld and Mr. Percoco loses, I have a hard time seeing a quick legislative fix because I think a lot of congressmen are not going to want to be on record voting for loser lobbying restrictions. That's not typically a popular position to take even if a lot of them would agree with it. So I don't necessarily see a reaction there.

 

And on the other side, I think it'd be tough to craft legislation that gets at this problem that wouldn't have bigger problems. I think it's really a situation where -- my two cents of it, it is better left to state ethics laws and better -- well, state and federal ethics laws depending on what level of government you're dealing with to determine what outsiders have a covered relationship that needs to be addressed through ethics law rather than trying to do it through the back door of this honest services aspect. Now, if you wanted to do it, could you do it? Maybe. You would probably do it by defining public official differently or putting some definition of public official there. The problem is where they've defined public official, for example, for the Hobbs Act, I think it was, is a much narrower definition that probably wouldn't save them here. So you could try to do it. It would be a pretty broad change, and I think it would be tough for them to write it in a way that wouldn't have these vagueness concerns.

 

Chayila Kleist:  Got it. And last question from me barring any from our audience. I know you said it's hard to read, but might you have a reading -- a general or unsolidified one -- of how the Court might break out on this, who might end up on what side, or just the general coalitions that may exist?

 

Gary M. Lawkowski:  So if I was a poker player, I would rather be holding petitioner's hand right now. I think you saw skepticism on a pretty broad ideological spectrum of justices. People who were appointed by republicans, people who were appointed by democrats seemed to have skepticism of this to varying degrees. So I would rather be petitioner coming out of that argument. What happens next, I think, will be the interesting question. I mean, the past practice with McDonnell with Kelly has been a narrow unanimous opinion saying, "You can't do this." You could see that, and I think that's certainly one potential option is a broadly supported narrow opinion that says, "No, this is not allowed." You could also see a situation where certain people might want to write a concurrence or might want to write some other opinion that has a different test. I think that would be where you would end up getting more of the variety and more of those types of splits.

 

I want to say it was Justice Jackson and Sotomayor who seemed concerned with the idea this wasn't cabined into just people who were going back into government. You could see them writing something about that. They could -- might even be able to pick up others. I don't know. You could see a situation where someone else wanted to come in. Justice Gorsuch, I believe it was asked a question about, what's the textual support for this? You could see him coming in and writing a broader opinion that goes the other direction on that saying, "There's not textual support for this type of broad theory."

 

So once you get into that type of situation where you have different justices wanting to write different tests, I think you could end up with a couple different alignments. But if I'm a poker player, I'd rather be holding petitioner's hand coming out of argument. And again, take that with the caveat that what someone says at oral argument is not necessarily their opinion. They're trying to make sense of where they want to go, they're trying to understand the issues. They're dutifully asking skeptical and probing questions of both petitioner and respondent. So take that for what you will of -- oral argument is not always indicative of where a justice is or what they might want to do. But I would rather, if I'm predicting, I would rather be petitioner than the government coming out of that argument. And we'll see what the opinion or opinions end up looking like.

 

Chayila Kleist:  Got it. Well, thank you. Barring no questions, we'll wrap slightly early. Mr. Lawkowski, on behalf of The Federalist Society, I want to say thank you for the benefit of your time and expertise today, and to our audience, thank you for joining and participating. We welcome listener feedback by email at [email protected]. And as always, please keep an eye on our website and your emails for announcements about other upcoming virtual events. Thank you all for joining us today. We're adjourned.