Courthouse Steps Oral Argument: Wire and Federal Program Fraud: A ‘Bridgegate’ Too Far?

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Bridget Anne Kelly and William Baroni were convicted of wire fraud, federal program fraud and conspiracy for orchestrating lane closures on the George Washington Bridge in September, 2013, as an elaborate punishment to the mayor of Fort Lee, New Jersey for refusing to endorse Governor Chris Christie for re-election. In Bridget Anne Kelly v. United States, the latest in a series of political corruption cases to reach the Supreme Court, the justices will consider whether these acts can amount to defrauding the government. 

Steve Klein, a partner at Barr & Klein PLLC and a member of the Free Speech & Election Law Executive Committee, will discuss the implications of the case and give his thoughts on oral argument. 

Featuring:

Mr. Steve Klein, Partner, Barr & Klein PLLC

 

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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Free Speech and Election Law Practice Group, was recorded on Tuesday, January 14, 2020, during a live teleforum conference call held exclusively for Federalist Society members.    

 

Wesley Hodges:  Welcome to The Federalist Society's teleforum conference call. This afternoon's topic is a Courthouse Steps Oral Arguments discussion on “Wire and Federal Program Fraud: A 'Bridgegate' Too Far?" My name is Wesley Hodges, and I am the Associate Director of Practice Groups at The Federalist Society.

 

      As always, please note that all expressions of opinion are those of the expert on today's call.

 

      Today, we are very fortunate to have with us Mr. Steve Klein, who is a Partner at Barr & Klein PLLC and a member of the Free Speech and Election Law Practice Group Executive Committee. After our speaker gives his remarks, we will have time for your questions.

 

Thank you very much for sharing with us today. Steve, the floor is yours.

 

Steve Klein:  Thank you, Wes.

 

      Bridget Anne Kelly v. United States arises from the Bridgegate scandal of 2013. If you're unfamiliar with it, it was a conspiracy by three individuals: Bridget Anne Kelly, then, the Deputy Chief of Staff to New Jersey Governor Chris Christie, William Baroni, then, the Deputy Executive Director of the Port Authority of New York and New Jersey, and David Wildstein, Baroni's Chief of Staff.

 

      They hatched a plot to inflict political pain on the mayor of Fort Lee, New Jersey, for refusing to endorse Governor Christie for re-election in 2014. To do so, they reduced the number of lanes entering the George Washington Bridge coming out of Fort Lee from three down to one. This caused massive traffic backups and grid lock in Fort Lee. The rerouting lasted for four days before the executive director of the Port Authority stepped in and restored the previous arrangement.

 

      Kelly, Baroni, and Wildstein all lost their jobs in the coming months, and the scheme unraveled when Wildstein pled guilty to various charges and cooperated in the prosecutions of Kelly and Baroni, who were convicted of various offenses. At the Supreme Court, the only convictions left are wire fraud, federal program fraud, and conspiracy.

 

      At the outset, I want to be very clear that by any ethical or moral definition, what happened here was public corruption. Sure, it has all the makings of a Sopranos episode, right down to its New Jersey setting, and in that sense, we can perhaps chuckle a little about it. But it's, nonetheless, a shocking and disturbing abuse of power. A mayor doesn't make an endorsement so three public officials are going to subject tens of thousands, perhaps hundreds of thousands of citizens to unnecessary grief?

 

As despotism, it's objectively soft despotism, but it has no place at any level of government in America. Yet, in that very same spirit, we afford even the most corrupt officials due process of law, which, among other things, requires that our laws be understandable and predictable. And in my opinion, nowhere has that principle been more tested in the 21st century than in public corruption cases.

 

I'm not a criminal law practitioner per say, but a free speech and election lawyer. I come at this with a background in campaign finance law, which is ostensibly aimed at combating corruption or its appearance. At their best, campaign finance laws do just that along with bribery and other laws. But far too often, these laws are abused in order to go not after violations of the law, but in most nebulously defined corruption. Too often, theories of bribery, or at least in this case, fraud, threaten to leave prosecutors with far too much power.

 

Of course, and you'll see how ironic it is in light of this case, vague and overbroad applications of law come with the danger of arbitrary and discriminatory enforcement, including politically motivated arbitrary and discriminatory enforcement. It's not just my concern.

 

It's hard to believe it was nearly four years ago that the last high-profile political corruption case to come to the High Court was McDonnell v. United States. That, also, was not a campaign finance case, but an honest-services fraud or bribery case. Nevertheless, owing to the narrowing of corruption as the governmental interest in the Citizens United case, campaign finance still came up. I attended that oral argument, and with 20/20 hindsight, I believe that was perhaps the best predictor in the case, was when Justice Breyer, weighing in on the government's argument that Governor McDonnell accepted bribes or that he performed official acts as quid pro quo.

 

Here's the quote. "I'm not in the business of sending messages in a case like this. I'm in the business of trying to figure out the structure of the government. And that's part of the separation of powers, and I expressed my concern. I        dissented in Citizens United, so whatever is said there. But point is that the one I raised at the beginning that every single one of us has raised. We're worried about -- because like any other organization, the prosecutors, too, can be overly zealous. That can happen. And so we need some protection on both sides even though the line won't be perfect, and it will fail to catch some crooks.”

 

That brings us to this case. What Kelly and Baroni did was corrupt, but was it fraud? Before I discuss oral argument in detail, I want to mention this case is confusing. Even the justices were having some trouble tussling with the legal theory. So with all the blame I'll take if I trip up over it, I take solace that it's universally muddy.

 

Let's look generally at both fraud statutes at issue. Elementally, criminal fraud comes down to this: false representation that's material to the government conduct or "that a reasonable person might have considered important in making his or her decision to commit resources for that endeavor." And for furthermore, the scheme was carried out by means of the false statements. Finally, the objective of the scheme must constitute government property.

 

Of those four or so elements, two are in play here. The first is false representation. The government alleged that the way the lanes were redirected was that Baroni represented to various parties within the Port Authority that they needed to conduct a traffic study. In tandem with this, it was via that representation that he misrepresented the authority by which to reroute the lanes.

 

The second issue, and one that struck me particularly in the briefing of the United States, is whether government property was actually at issue here. The lanes were rerouted, and as a result, some toll workers had to work overtime and, otherwise, labor was expended by civil servants to accomplish the task of the rerouting. Is that property? If it was, was that the object of the scheme?

 

Moreover, and I saw this a lot -- it comes up, all the parallels, the string citations in the United States’ briefing, all seem to point to cases where the property actually comes home to benefit the people portraying the fraud; sending government workers home to paint your house was an example that came up in oral argument. And I think people would certainly agree, yes, that is an actual taking of government property, and there's clearly object of a misrepresentation.

 

So, nevertheless, I wish I could make this perfectly cut and dry with the elements of fraud, but I cannot. So let's turn to oral arguments. Moshe Roth, arguing for Kelly, split argument with Michael Levy, who argued on behalf of Baroni. Roth zeroed in on the lack of specificity in this case regarding property and analogized it to honest-services fraud prior to the Skilling and McNally cases. Responding to Justice Ginsburg, Roth noted that the lanes were still used by the public. That is, rerouting them did not bestow some benefit on either Kelly or Baroni.

 

Responding to a pointed question from Justice Kagan, Roth noted, "Even if Kelly or Baroni had done this rerouting in an effort to ease their own commute, it would still have not constituted an act of acquisition of property." Justice Roberts joined in and asked, "Well, if the lanes had been utilized to benefit some business interest in Fort Lee, would that have constituted?" And Roth noted that probably would fit in to the kick-back provision of honest-services fraud, but that's not what happened here.

 

In the larger scheme of things—and this is stepping back a little bit—Kelly and Baroni both argued that the breadth of property under the government's theory and noted that every government action involves some kind of staff time, as here, most apparently, toll booth workers. Thus, improperly motivated decisions could come under investigation and, as here, the possible convictions for fraud.

 

Responding to questions from both Justices Alito and Kagan, Roth emphasized that the closing of the lanes cannot amount to obtaining property under the statute. This is where the State's legal theory of the U.S. government gets especially muddled. Michael Levy focused his arguments on Baroni's plenary authority; that is he had the authority to direct all the resources in question, whatever his reason.

 

In briefing by the United States, this popped up a few times. I was especially floored that the U.S. brief actually noted that in closing that, "The Port Authority's practices and procedures were not generally reduced to writing." It was thus a question of fact for the jury to determine Baroni's legal authority. I found that particularly disturbing, and it seems the Court did as well.

 

Now, Eric Fagan arguing for the United States had a pretty tough time of it. This is -- enter Justice Breyer. If you thought that quote from McDonnell was just superfluous, it was not. I don't have a direct quote for you now, but Justice Breyer zeroed in on honest-services fraud, just as Roth did in his opening. And an inquiry as pointed as his questioning in McDonnell differentiating between legitimate and illegitimate government conduct strictly because of one's motivation is to return us to honest-services fraud pre-McNally, especially if the so-called property being taken is just the work done to carry out the government action. I don't think any of Fagan's answers placated Breyer's line of questioning. He came back to it multiple times.

 

I would also point out Justice Sotomayor actually asked straight up, near the end of the question, “did Baroni have the authority?” And Fagan actually answered, "He might have." So in that sense, I think that's where, between Breyer's questioning and between Sotomayor's question there, I actually have in my notes and in parentheses, "Fagan in a pit," which, again, take that for a present sense impression.

 

The final point, and this is where it gets interesting, is the evolving part of the United States’ theory. There's some concerns, a lot of concerns, about the jury instructions, whether the jury was informed or actually did make a decision regarding Baroni's authority. Moreover, and this is an argument put forth pretty forcefully, is the United States conceded at trial that Baroni actually did have the authority and claimed at the time it didn't matter but has now pivoted into this mushy kind of an argument that well, he misrepresented what the purpose was in order to commandeer the authority of the actual executive director of the Port Authority in order to get these lanes closed. So that was a real interesting soup going there.

 

I think that's pretty much all the original notes I have on the argument. I really got the impression -- it didn't seem that there were too many sympathetic to what was going on. I think the most pointed questions came -- Justice Alito and I think Kagan as well really asking well, what's the statutory basis for not convicting? And I think, actually, a lot of the strongest briefing from the United States until they get to the end and start acknowledging all the things going again them really does point that statutorily, this looks fairly cut and dry. I think Roth wisely focused in on the definition of property and the definition of whether that was actually the object of what was being sought here.

 

I certainly, again, as I mentioned earlier, kept coming back to this point that there's something very fundamentally different here. And, again, it's hard to say this because this was such a bizarre and yet an overly, obviously corrupt action, but was it fraud? And with the idea that no personal enrichment happened here, I have a lot of trouble really having any sympathy with the United States' argument.

 

My predictions are about as reliable as a ‘90s psychic hotline and should not be relied upon in any way, shape, or form. I take a bit of comfort that the facts of this case are about as unique as the legal applications of the fraud schemes here, but I sense, yes, predict, an unanimous or near unanimous ruling that will either determine that Baroni had the power to do what he did and that power overrides false representation under the statutes or that the actual object of the scheme, the closing of the lanes, was either not government property and/or that any property actually obtained, that is the time spent by toll booth workers of the like, was not the object of the scheme. And with that, I'm certainly happy to take questions.

 

Wesley Hodges:  Looks like we do have one question right out of the queue. Here's our caller.

 

Caller 1:  Steve, I very much appreciate your summary of the argument today. I guess what I'm concerned about is has the government, do you think, in general, taken to heart the past decisions from the Supreme Court and the McDonnell case and the Skilling case and what is your sense about the number of prosecutions that are out there that continue to adopt the kind of honest-fraud theories that were adopted by prosecutors in the Kelly case?

 

Steve Klein:  My impression is there's far too many. And I think especially -- I was making a list here thinking about this going in today, I don't know what the culture is within certain offices, certain U.S. Attorney's offices, and of certain prosecutor's offices, and don't get me started on various state ethics commissions or so-called public integrity units, but it almost becomes a -- when you're dealing with people, particularly people engaged in the political process, it's a really terrifying, chilling effect when you look at things like Tom DeLay's appeal out of Texas a few years ago. Three legal campaign finance contributions became money laundering, and that had to go all the way up to the Texas Court of Criminal Appeals to shut down that theory after he had already been convicted.

 

      More recently, Rick Perry, having veto power, a little more similar to the Kelly case here. He had a veto power to veto a law, and the fact that he told someone, "You can either resign or I'm going to veto the funding of your agency," which he was fully in power to do, that became coercion of a public servant. Again, taken all the way up to the Texas Court of Criminal Appeals just to get that quashed.

     

      McDonnell, right? And McDonnell was a tougher one. You have free rides in a Ferrari. You have things that I certainly can understand people calling corrupt activity, right? And dresses for his wife and other monetary benefits, but the fact was he didn't engage, what the government alleged, were the official acts that he took as a quid pro quo were really not official acts. I believe there needs, at some point, there needs to be some self-examination as to the idea that prosecutors have some kind of duty to come up with novel ways to apply law in order to get at this corruption.

 

      And, again, this goes back into campaign finance law, that campaign finance begins with this premise that all politicians are corrupt, etc. etc. And therefore, we need to do something, anything we can to smite that and what goes out the door first is due process, First Amendment protections, take your pick.

 

      I want to come back to this case because the Kelly case makes that so understandable, to a certain extent, why the prosecutor would try to find a way to go after this because this was such an, again, pretty egregious form of corruption that they weren't placated by the fact that they lost their jobs and probably never will get a job in government again. It's just not enough for people.

 

But I think generally speaking, this kind of rerouting -- and I just couldn't say it better than Roth's opening or when Justice Breyer chimed in, the fact that they're just trying to go back on honest-services fraud. Again, I don’t know that their motivations, which were -- again, I'm not going to fall down that route of questioning them, which is what they really want to do with these kind of cases. The results re toxic.

 

Wesley Hodges:  Looks like we do have one more question in the queue. You are next.

 

Caller 2:  Was there any discussion of Section 666, which I believe was part of the case?

 

Steve Klein:  If you could remind me what that is.

 

Caller 2:  That is the federal program bribery statute, which was used here on the theory that there had been a misapplication of property.

 

Steve Klein:  In that sense, that was kind of the focus. And I think they did it both -- and, again, they really, it seems, under both wire fraud and the federal program fraud, just lumped them together, in the briefing and in the oral arguments. And the focus really was is what was the property at issue here? And there's a lot of different precedent, very different cases, and different circumstances. They seem to be split on this idea well, government time, the time spent by civil servants engaging in stuff, is that property?

 

      Moreover, the authority itself, is that property? That’s where this whole mess comes into play over whether Baroni had the authority or not. Did he have to lie about it and, thereby, by lying about it, he commandeered the power? And that power is a property interest, and that seems to be pretty universally rejected that the authority to do something is not a property interest that can be taken.

 

      As far as my understanding of the precedent, it looks like a pretty mixed bag out there as to when you get government activity, but, again, I think not just property but whether you've actually acquired it is this most important distinction or whether it's the object of what you're trying to acquire.

 

Wesley Hodges:  Steve, while we wait on any questions from the audience, is there any part that you'd like to dive into more detail or share with the audience?

 

Wesley Hodges:  I think I'd riff off a little bit the caller's earlier question that I really appreciate that -- it's very interesting that when you parallel this or at least compare it to the campaign finance cases, I just appreciate that the concerns here get heightened. It seems campaign finances are a particularly toxic area.

 

We're coming up on the fact, very soon, on the 10th anniversary of the Citizens United opinion, and it has entered on the left, but I wouldn't call it a strictly partisan thing, has entered the lexicon of the cases that must be overturned. And in that sense, might still see 5-4 rulings, and they're just some, in my opinion, some very important campaign finances have been denied cert, as often as good ones or more often than good cases go up.

 

      And so, but, here, but for these kind of public corruption cases, there seems and we saw a unanimous if not nearly unanimous ruling in McDonnell and even before that, years before that Skilling, which was on honest-services fraud, was a fallout of Enron and things of that nature. There's a, I think, a good understanding by the Court that for prosecuting fraud in this capacity, there has to be more attention, so I do like to see, and I hope again, that there will be a unanimous ruling here.

 

Even in the face of such terrible fact, the idea that these kind of laws were ever meant by their own language to apply to such activity, we put in that sense the law is not to be manipulated or discarded, just to get at this kind of corruption.

 

Wesley Hodges:  Steve, you mentioned that you are hoping for a unanimous decision here. What are your expectations that the decision will be reversed? What probability would you set it at that? Either, obviously very hopeful --

 

Steve Klein:  Okay. Okay. Wes, I don't know what you're doing on your fantasy SCOTUS league right now. As far as the most skeptical questions, I think Justice Sotomayor expressed the more broader concerns and really did try to tie the prosecution more to well, look what the actual scheme here was to actually go after.

 

And I'm trying to look at my notes here to see if I have any quotes from her. It was just a general sense that she probably saw that look, there was at least some legitimate reasons to bring this prosecution, but Justice Kagan, Breyer, Ginsburg, I think pretty much all of their questions were really critical and concerned that if they couldn't find a limiting principle here, that ultimately, the theory's not going to work.

 

Wesley Hodges:  Very good. Well, seeing that there are no more questions from the audience, I'd like to thank you, Steve, for a wonderful presentation. On behalf of The Federalist Society, I'd like to thank you for the benefit of your valuable time and expertise. We welcome all listener feedback by email at info@fedsoc.org. Thank you all for joining us for this call. We are now adjourned.

 

Operator:  Thank you for listening. We hope you enjoyed this practice group podcast. For materials related to this podcast and other Federalist Society multimedia, please visit The Federalist Society's website at fedsoc.org/multimedia.