The Supreme Court's recent unanimous opinion in Kelly v. United States is the latest in a series of high court decisions curtailing the power of federal law enforcement to prosecute public corruption. Stemming from the so-called "Bridgegate" scandal, in which New Jersey officials intentionally caused a days-long traffic jam to serve the governor's re-election campaign, the case confirms that only a narrow band of corrupt practices by state or local officials runs afoul of federal fraud statutes—typically those that involve a concrete showing of cash flowing into the official's pockets in exchange for official action.

This result may put pressure on state law and state law enforcement as the locus of public corruption enforcement, but vigorous enforcement on the state level faces notorious political obstacles. Federal prosecutors intent on reining in official abuse of government power will still have the lead role, but they will now need to show that the official's acts were aimed at depriving the government of property—not merely that a scheme had the effect of misusing government resources.

Background

Kelly is the latest in a string of Supreme Court decision in recent years to narrow the scope of the federal laws used by prosecutors to investigate and prosecute corruption by public officials.

Between the 1940s and the 1980s, it was common for federal prosecutors to use federal fraud laws to prosecute public officials for "schemes to defraud citizens of their intangible rights to honest and impartial government." McNally v. United States, 483 U.S. 350, 355 (1987). That changed in McNally, where the Supreme Court held that a local official's self-dealing patronage scheme did not violate the federal mail fraud statute because the text of that statute is directed to deprivations of "property rights"—not the enforcement of "standards of disclosure and good government for state and local officials. Id. at 360.

Congress swiftly responded to McNally by enacting, the next year, a law expressly barring fraudulent schemes "to deprive another of the intangible right of honest services." §1346. But in Skilling v. United States, 561 U.S. 358, 405 (2010), the Supreme Court interpreted the honest-services fraud statute to prohibit only those schemes involving bribes or kickbacks. According to the court, construing the statue as covering a broader swath of corrupt acts than bribes and kickbacks—that is, official misconduct that didn't involve quid pro quo corruption—would raise the concerns underlying the due process void-for-vagueness doctrine.

In 2016, the Supreme Court's decision in McDonnell v. United States further narrowed the scope of federal corruption statutes involving purported bribes. 136 S.Ct. 2355. There, the former Virginia Governor Robert McDonnell and his wife were indicted for accepting $175,000 in loans, gifts, and other benefits from a Virginia businessman. To convict the McDonnells of bribery, the government was required to show that the governor had committed (or agreed to commit) an "official act" in return for the loans and gifts. See 18 U.S.C. §201(a)(3).

The court held, however, that the governor's acts in return for the favors—arranging meetings between the businessman and other Virginia officials, hosting events for his business, and contacting other government officials related to those business interests—were not "official acts" within the meaning of federal law.

According to the court, to commit an "official act," a public official must make a decision or take action on that question or matter, or agree to do so—and setting up a meeting or talking to another official does not, without more, fit the bill. Indeed, the court suggested that a broader definition of official act could encompass nearly any activity by a public official concerning any subject—and would cast a long and threatening shadow over the everyday actions of public officials.

The fallout from the court's McDonnell decision was immediate. Notably, the decision's narrow definition of "official act" led the U.S Court of Appeals for the Second Circuit to vacate the convictions of Sheldon Silver, the powerful former speaker of the New York State Assembly, on charges that he orchestrated bribery schemes in which he traded official acts for legal fees in his capacity as a private lawyer. United States v. Silver (Silver 1), 864 F.3d 102, 119 (2d Cir. 2017). And after Silver was successfully retried, the Second Circuit built upon McDonnell and again vacated 3 of Silver's convictions, holding that Hobbs act extortion and honest services fraud require that the official understand—at the time that he accepts the payment—the particular question or matter he will improperly influence. United States v. Silver (Silver II), 948 F.3d 538 (2020). In other words, it is not enough for an official to take money with a general intent to perform official acts on behalf of the party paying the bribe, as the opportunity arises—the official must intend to improperly influence a particular subject.

'Bridgegate'

Kelly, the Supreme Court's latest foray into federal public corruption prosecution, arises from one of the most high-profile political scandals in recent years. The defendant in the case, the serendipitously named Bridget Anne Kelly, was a Deputy Chief of Staff to former Governor Chris Christie. Frustrated that the local mayor of Fort Lee, New Jersey would not endorse the governor's campaign, Kelly and other officials concocted a plot to gum up traffic from Fort Lee onto the George Washington Bridge, the busiest motor-vehicle bridge in the world, to retaliate against the mayor. As Kelly put it in a now-infamous email, the mayor's actions meant it was "Time for some traffic problems in Fort Lee."

The officials created a cover story that the traffic redesign was part of a "traffic study" that would reduce the three lanes typically available to Fort Lee residents to one. To accomplish the scheme, traffic engineers were required to spend time conducting the "study," and an extra toll collector was paid to help manage the single remaining lane of traffic.

The scheme was an early success—of sorts—resulting in gridlock that left the town's streets at a standstill for days. But when what Kelly and her co-conspirators had done came to light, they lost their jobs and came into the sights of federal prosecutors. The government charged Kelly and other officials in the conspiracy under the federal statutes prohibiting wire fraud and fraud on a federally funded program or entity. 18 U.S.C. §§1343, 666(a)(1)(A). A jury convicted Kelly on all counts and her conviction was affirmed by the U.S. Court of Appeals for the Third Circuit. The Supreme Court granted certiorari and reversed.

The 'Kelly' Decision

The unanimous decision, written by Justice Elena Kagan, did not spare its condemnation for the "deception, corruption, [and] abuse of power" by Kelly and her co-conspirators. Slip op. 2. But it emphasized that "not every corrupt act by state or local officials is a federal crime." Id. at 13. And it held that the federal fraud statutes at issue in Kelly's conviction—wire fraud and fraud on a federally funded program or entity—only criminalize official action that has its "object" government money or property.

As the court stressed, both the federal wire fraud statute and the statute prohibiting fraud on a federally funded program or entity by their terms, target fraudulent schemes for obtaining property. See §1343 (prohibiting fraudulent schemes "for obtaining money or property"); §666(a)(1)(A) (making it a crime to "obtain[] by fraud … property."). Accordingly, under either provision, the government had to prove not only that Kelly engaged in "deception," but that "an object of their fraud was property." Slip op. 7.

Agreeing with the court to that point, the government argued that Kelly's scheme did have the object of obtaining government property, for two reasons. First, because the point of the scheme was to commandeer the physical lanes of the bridge itself. And second, because the officials deprived the public of the funds needed to compensate the traffic engineers and toll collector enlisted to effectuate the scheme.

The court rejected those efforts to reformulate the scheme as aimed at property. As to the redirection of the lanes, it held that reorganizing traffic on the bridge was "a quintessential exercise of regulatory power" and that a "scheme to alter such a regulatory choice is not one to appropriate the government's property." After all, Kelly did not "walk away with the lanes" or "convert" the lanes to a "non-public use." Slip op. 9.

Kelly may have exercised the government's power for bad reasons, but what she did was alter the government's regulatory decision, not take its property. And the court had nearly two decades ago made clear in Cleveland v. United States that regulatory decisions by the state, such as issuance of a license, are not "property" under federal fraud statutes.

As for the scheme's use of government employee time, the court agreed that a plot to "usurp a public employee's paid time is one to take the government's property." Slip op. 8. As a result, a city parks commissioner who induced his employees into doing gardening work for political contributors would violate the statute. Id. at 10. But in order for the diversion of government resources to constitute fraud within the meaning of federal law, property "must play more than some bit part in a scheme: It must be an object of the fraud." Id.

Here, the court reasoned, the time and labor of the government employees were "just the implementation costs" of the scheme—an "incidental (even if foreseen) byproduct." Id. at 11. To rule otherwise would mean that any regulatory decision would involve the deprivation of government property, as any such decision requires the use of some labor by government employees. Id. at 12. And if that were so, then federal prosecutors could use the property fraud statutes, as they had before McNally, to set general standards for disclosure and good government—a bridge too far for the court.

Ramifications

After Kelly, federal prosecutors intent on cracking down on official abuse of government power will need to show either that the scheme lined the official's pockets through bribery or extortion as needed to trigger the honest services statute, or that the official's acts were aimed at depriving the government of property—not merely that a scheme had the effect of misusing government resources. Put differently, the government cannot use a money-or-property theory to make an end run around the court's warnings since McNally that federal criminal law is not the way for prosecutors to root out any official conduct they might find distasteful.

Kelly and its progeny reveal a court more concerned that federal prosecutors will abuse their power to investigate and prosecute public corruption than that official abuse of power will escape punishment. The court's special sensitivity to prosecutorial overreach in this area appears motivated, in part, by a concern that the line between routine (if unattractive) governmental practices and sanctionable corruption is difficult to police absent clear rules.

The court has thus reined in prosecutions even when the official's conduct appears "tawdry" at best (to use the Chief Justice's words in McDonnell) lest it unleash prosecutors to criminalize business as usual in the hurly burly of state and local politics. That concern is so acute that even conduct that the court unanimously characterized as an "abuse of power" can escape prosecution.

As it has circumscribed federal tools to fight corruption, the court has left open the field to state and local prosecutors to police their own officials—an enterprise that has historically seen mixed success, because of local political alliances and limited enforcement tools. And it may be that the court has ceded the criminal arena altogether, since the same constitutional vagueness concerns that plague federal anti-corruption statutes would equally apply to state statutes of similar scope.

Conclusion

As we head into another election season, with political pressures mounting on officials in their interactions with constituents and the public, will corruption law and federal prosecutors continue to play a key role in reining in misconduct? Or will the Supreme Court's concerns about the use of the criminal law to set standards of good government mean that ultimate questions of accountability will lie with the voters? If experience is any guide, federal prosecutions may be curbed, but federal prosecutors will be back.

Nicole M. Argentieri is a partner and Matt Cowan is counsel in the white collar defense & corporate investigations group at O'Melveny & Myers.