On May 7, 2020, the United States Supreme Court issued its decision Kelly v. United States, No. 18-1059, holding unanimously that for purposes of the federal wire fraud or federal-program fraud statutes, there can be no criminal violation without an intent to obtain “money or property.”

The case represents the latest in a series of Supreme Court decisions to scale back federal corruption laws for state and federal public officials, stemming from a long line of decisions narrowly interpreting the rules of the road for public servants.  The ruling did not come as a total surprise, as the justices have consistently pushed back against efforts by federal prosecutors to use federal fraud laws to combat public corruption.

In September 2013, then-New Jersey Governor Chris Christie’s Deputy Chief of Staff Bridget Kelly and Port Authority Director Bill Baroni, along with officials of the Port Authority of New York and New Jersey, closed toll lanes on the George Washington Bridge into Manhattan normally occupied by commuters from Fort Lee, New Jersey. Kelly said she wanted to “‘create a traffic jam that would punish’” the Democratic mayor and “‘send him a message’” because he had declined to support Christie’s reelection campaign. After several days of traffic, the plan was uncovered and labeled the “Bridgegate” scandal.

Federal prosecutors charged Kelly and Baroni with federal wire fraud (18 U.S.C. § 1343), fraud upon a federally funded program or entity (18 U.S.C. § 666(a)(1)(A)), and conspiracy to commit those crimes, and they were convicted. The Third Circuit Court of Appeals affirmed the convictions.

Last week, a unanimous Supreme Court reversed, holding the government “needed to prove property fraud.” What does that mean? An intent to obtain money or property from the victim consistent with the language of the federal wire fraud statute, which makes it a crime to effect “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises,” and the federal program fraud statute, which makes it a crime to obtain “by fraud” the “property” of a federally funded program or entity.

On these facts, the Supreme Court found no property-based intent. Specifically, the lane-change decision was found to be an abuse of the “regulatory powers” of “allocation, exclusion, and control” of governmental property, instead of a plan to “appropriate the government’s property” outright. Accordingly, the fact that this scheme also brought about certain staff changes would not support the fraud convictions, because depriving the government of employee wages was not the “object of the fraud.”

Because the sole goal of the Bridgegate scheme was “political payback,” Kelly and Baroni could not be convicted of fraud as a federal crime. The Justices emphasized that accepting the government’s argument would allow federal prosecutors to “use the criminal law to enforce (its view of) integrity in broad swaths of state and local policymaking.”

The Court’s decision should not be read as approving of the staffers’ actions—in fact, it noted that for “no reason other than political payback, Baroni and Kelly used deception to reduce Fort Lee’s access lanes to the George Washington Bridge—and thereby jeopardized the safety of the town’s residents.” Importantly, however, the court concluded, “not every corrupt act by state or local officials is a federal crime.”

For officials facing government investigations or public scrutiny for their actions, the attorneys of Graves Garrett LLC regularly counsel clients on ethical rules and applicable state and federal laws.

The opinion is available here.

The attorneys of Graves Garrett include former federal and state prosecutors with extensive experience litigating complex federal and state criminal cases. The firm also regularly counsels public officials, state and federal employees, and candidates for public office facing civil and criminal enforcement actions.