In the years since the U.S. Supreme Court decision in McDonnell v. United States, 136 S. Ct. 2355 (2016), courts have required prosecutors to be more focused when alleging and proving that an “official act” has been performed in exchange for a bribe in violation of mail and wire fraud statutes and the Hobbs Act. In McDonnell, Chief Justice John Roberts was mindful of the ways in which our representative government functions. “Conscientious public officials arrange meetings for constituents, contact other officials on their behalf, and include them in events all the time. The basic compact underlying representative government assumes that public officials will hear from their constituents and act appropriately on their concerns.” Id. at 2372.
After McDonnell, the Second Circuit considered the sufficiency of the evidence and the jury instructions in two criminal trials of Sheldon Silver. As the Speaker of the New York State Assembly and an Assemblyman for close to 40 years, Sheldon Silver was one of New York’s most powerful public officials. In each of the trials, Sheldon Silver was convicted of extortion and honest services fraud. In the first appeal, decided after the Supreme Court’s 2016 McDonnell decision, the Second Circuit held that a jury instruction failed to meet the McDonnell’s narrowed definition of “official act” and reversed Silver’s conviction. United States v. Silver (Silver I), 864 F.3d 102, 119 (2d Cir. 2017). After a second jury convicted Silver of extortion and honest services fraud, the Second Circuit held that extortion under color of right and honest services fraud requires evidence that an official understand, at the time he accepts payment, the particular question or matter to be influenced. United States v. Sheldon Silver, Docket No. 18-2380, 2020 WL 284426, at *2 (2d Cir. Jan. 21, 2020). Applying this standard, the Second Circuit determined that the jury instructions failed to convey that, in order to convict Silver of extortion and honest services fraud, Silver had to take official action on a specific and focused question or matter. Because the evidence pertaining to certain counts failed to establish that Silver undertook official action on a specific question or matter, Silver’s conviction on those counts was reversed.
The government alleged that, between 2002 and 2015, Silver orchestrated two separate bribery schemes in which he received referral fees from law firms. In one scheme, Silver performed official acts beneficial to a doctor who referred mesothelioma patients to Silver’s law firm (the “Mesothelioma Scheme”). In the other, he performed official acts beneficial to two real estate developers who hired a different law firm that paid referral fees to Silver (“the Real Estate Scheme”). Id. at *2-3.
The Mesothelioma Scheme. In 2002, Silver became “of counsel” to Weitz & Luxenberg (W&L), a law firm that specializes in cases involving mesothelioma. At Silver’s request, Dr. Robert Taub, a physician-researcher at Columbia University, agreed to refer his mesothelioma patients to W&L. Dr. Taub understood that in exchange for the mesothelioma referrals, Sheldon Silver “would be incentivized to be an advocate for mesothelioma research.” As a result of Dr. Taub’s referrals, Silver received more than $3 million in referral fees from W&L.
In exchange for these referrals, the government alleged that Silver performed “at least five official actions” that benefited Dr. Taub. Silver secured grants totaling $500,000 during 2005 and 2006 to fund the doctor’s research; he directed funding during 2008 to a nonprofit for which the doctor’s wife served as a board member; he secured an assembly resolution honoring Taub during May 2011; and he secured permits needed for a charity race in Silver’s Lower Manhattan Assembly district in the fall of 2011. Id. at *15-16.
The Real Estate Scheme. In the real estate scheme, at Silver’s request, two developers agreed to send legal work to the law firm of a friend of Silver’s. Both developers thought that they were benefiting Silver’s friend at Silver’s request. In 2011, both developers learned that Silver was receiving referral fees as a result of work the law firm did for the developers. One of the developers testified that he complied with Silver’s request to refer work to the law firm because Silver was “a powerful man” who the developer did not want to “alienate;” Silver could affect “my industry, my business and how I exist in my business.” The other developer testified that he went along with the referral fees because “he was concerned” that there would be “repercussions legislatively” if the company cut Silver off. Id. at *17-18.
The law firm paid Silver approximately $800,000 in referral fees related to work done for the developers. In exchange for these referrals, Silver supported provisions of the Rent Act of 2011 that were important to the developers. Silver asserted his control, as Speaker, over which legislation went to the Assembly floor for a vote. In addition, Silver helped the developers secure tax exempt financing from the Public Authority Control Board (PACB), of which he was a voting member. PACB financing applications require unanimous approval. As a result, Silver could have unilaterally denied a PACB financing. Silver voted in favor of all PACB requests on behalf of one of the developers. Id. at *18.
Relying on McDonnell, the Second Circuit noted that extortion under color of right and honest services fraud both require that an official promise to “make a decision or take an action on a question, matter, cause, suit, proceeding or controversy.” Silver, WL 284426 at *9 (quoting McDonnell, 136 S. Ct. at 2371). Neither offense, however, requires that the official “specify the means that he will use to perform his end of the bargain.” Silver, WL 284426 at *9. “So long as the jury finds that an official accepted gifts in exchange for a promise to perform official acts for the giver, it need not find that the specific act to be performed was identified at the time of the promise.” Id.; see also United States v. Ganim, 510 F.3d 134 (2d Cir. 2007) (affirming Hobbs Act extortion and honest services bribery convictions predicated on the theory of exchange for official acts as opportunities arose). The Second Circuit noted, however, the “as the opportunities arise” theory of bribery, approved in Ganim, requires a promise to exercise particular kinds of influence as specific opportunities arise.” Id. at *10. In other words, “the public official must, at a minimum, promise to influence a ‘focused and concrete’ ‘question or matter’ that ‘involves a formal exercise of governmental power.” See McDonnell, 136 S. Ct. at 2369-70. Because the jury instructions failed to convey that Silver had to take official action on a specific and focused question or matter as the opportunity to do so arose, the jury instructions were erroneous. Silver, WL 284426 at *22
In connection with the mesothelioma scheme, Silver’s work to secure $500,000 in grants in exchange for the referrals of mesothelioma cases to W&L would have satisfied the requirement of “a promise to exercise a particular kind of influence as specific opportunities arose.” Dr. Taub understood that, in exchange for the referrals, Silver would advocate for mesothelioma research. Silver did, in fact, act as an advocate for mesothelioma research, securing $500,000 in grants. The court described these actions as “a quintessential example of a public official extorting a constituent under color of right and committing honest services fraud.” Id. at *16. These actions, however, occurred during 2005 and 2006 and were outside the statute of limitations. Id. at *16. Similarly, Silver’s 2008 work to secure funding for Taub’s wife was outside the statute of limitations. Id. at *17.
The only acts in the mesothelioma scheme that were within the statute of limitations were Silver’s assistance in (1) obtaining permits for a charity event and (2) directing an assembly resolution honoring Taub. To the first act, the court determined that Silver was only attempting to help Taub understand the permit procedure: a promise to “help … navigate the process” is not a “formal exercise of government power.” Regarding the second act, because there was no evidence the assembly resolution was one of the “specific,” “focused, and concrete” matters or questions that Silver was expected to influence, the court concluded that the evidence was legally insufficient to charge Silver on the mesothelioma extortion and honest services fraud counts. Id. at *24.
The real estate scheme, on the other hand, was much more focused. The developers needed Silver’s assistance with tax abatement and rent stabilization legislation as well as PACB financing. The evidence established that the developers referred matters to the law firm because they were concerned that Silver might otherwise act against their interests on specific real estate legislation as well as PACB financing. Id. at *25.
The Second Circuit has clarified that to sustain a conviction for extortion or honest services fraud, the government must allege and prove more than a public official’s general agreement to perform official acts as the opportunity arises. Although the government does not have to allege or prove that an official agrees to perform a particular act at the time the official accepts a payment or makes a promise, the official must agree to take official action on a particular question or matter.
Reprinted with permission from the March 27, 2020 edition of the New York Law Journal © 2019 ALM Media Properties, LLC. All rights reserved.
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