Friday, June 25, 2010
Ed. Note--The post below is by Mark Regan, and focuses on the state of the prosecution's case against former State Rep. Bruce Weyhrauch (R.-Juneau) in the wake of the U.S. Supreme Court's rulings yesterday on the honest services fraud statute. Mark Regan's posts will appear in Times font, while I will continue to post in Georgia font.--Cliff Groh
From Mark Regan--
What sort of case can the Government now make out against Bruce Weyhrauch?
Pete Kott got thousands of dollars in inflated payments to his flooring business. Vic Kohring got wads of cash. All Bruce Weyhrauch may have gotten was a promise that VECO would talk with him about some future legal work.
Now that the Supreme Court has said that Weyhrauch's failure to disclose that promise isn't enough by itself for the Government to convict him of honest services mail fraud, one big question is, can it convict him of something else?
The indictment in Bruce Weyhrauch's case charged him with four offenses: an extortion count (Count 3), a bribery count (Count 5), an honest services fraud count (Count 7), and a conspiracy to commit extortion, bribery, and honest services fraud count (Count 1). (The other counts in the indictment are against former State Rep. Pete Kott (R.-Eagle River), who was charged in the same indictment.) In the Skilling case, the Supreme Court has now invalidated honest services fraud charges that depend on a failure to disclose something. That leaves pending the extortion and bribery charges, along with whatever honest services fraud charge there might be that can be made to look like a bribe or kickback.
In the proceedings just before Weyhrauch's trial, the Government identified a state legislative ethics statute, AS 24.60.030(e)(3), that might provide a standard for an honest services fraud claim. It provides:
(e) A legislator may not directly, or by authorizing another to act on the legislator's behalf,
* * *
(3) unless required by the Uniform Rules of the Alaska State Legislature, take or withhold official action or exert official influence that could substantially benefit or harm the financial interest of another person with whom the legislator is negotiating for employment.
The Government's extortion and bribery theories are that Weyhrauch unlawfully attempted to obtain a promise of contract work from VECO in exchange for voting VECO's way on the legislation. An honest services fraud claim based on AS 24.60.030(e)(3) presumably would say that Weyhrauch voted VECO's way while he was negotiating for employment.
How solid would those charges be? It depends on what evidence the Government and Bruce Weyhrauch would have been able to present at trial. Trial didn't happen on schedule, and any statements witnesses might have made haven't become public. The Government's trial brief is also quite unhelpful in showing what evidence the Government might have tried to present to support these claims if the case had indeed gone to trial in 2007 -- but it's still possible to look at the indictment for some clues.
The indictment claims, citing a May 4, 2006 letter from Weyhrauch to Bill Allen, that Weyhrauch was trying to get legal business from VECO at the same time that he was voting VECO's way on oil tax legislation (paragraphs 36-41), and that during a conversation that same day in the infamous Room 604 of the Baranof Hotel, Bill Allen and Rick Smith discussed whether Weyhrauch's letter was connected to Weyhrauch's willingness to vote VECO's way on oil taxes (paragraph 38). Kott, Weyhrauch, Allen, and Smith then worked together on oil tax legislation, and on May 9, Allen said to Smith that if the PPT tax came out at 20%, they would have to give Weyhrauch some contract legal work. (Indictment, paragraph 49.)
On May 19 -- during a period in which the House was not in session while legislators heard a lengthy presentation at another location on the proposed gas pipeline contract -- Weyhrauch set up a meeting with VECO in Anchorage for May 24. Before the meeting, Allen and Smith agreed to "string him out" with legal work. A few days after the meeting, Weyhrauch wrote a note to VECO looking forward to working with Allen and VECO in the future. (Indictment, paragraphs 51-57.)
Later, during the early June special session, Weyhrauch again voted VECO's way, and in a conversation with Bill Allen Ben Stevens agreed with Allen that Weyhrauch had voted with VECO because Bill Allen had said that VECO would give Weyhrauch some contract work. (Indictment, paragraphs 60-62.)
But there is no allegation that VECO ever did give Bruce Weyhrauch any contract work, let alone give him the kind of money-for-no-work payoff that it gave Pete Kott and Vic Kohring. Also absent from any of this is any statement by Weyhrauch himself, even a hearsay statement, tying his vote to his desire to do work for VECO. Nor is there any suggestion that Bruce Weyhrauch might have said to Bill Allen, as Pete Kott said to Allen, that "I had to cheat, steal, beg, borrow, and lie" in order to face Allen, or that Bill Allen might have responded to Bruce Weyhrauch, as he responded to Pete Kott, "I own your ass." (Indictment, para. 45.) And the indictment does not quote any VECO document, or make any direct claim about any particular conversation between VECO officials and Weyhrauch, where a promise of future work might have been made in exchange for a commitment by the legislator to vote a particular way. In fact, one paragraph of the indictment says that at the May 24, 2006 meeting in Anchorage, Weyhrauch and VECO discussed jobs and discussed oil taxes -- but it is probably significant that this paragraph does not try to link the two topics beyond saying that they were both discussed at that meeting. (Indictment, paragraph 54.) If the conversation indicated a quid pro quo, you'd expect that particular paragraph to have said so.
So the quid pro quo that justifies extortion and bribery cases is hard to find among these facts. It might be easier to find support for a charge that Weyhrauch violated the Alaska legislative ethics statute, AS 24.60.030(e)(3), by negotiating for work with VECO at the same time he was taking official action to support VECO on oil taxes -- but would that be close enough to bribery or kickbacks to satisfy the Supreme Court's new standard for honest services fraud federal prosecutions?
The Government has the first crack at deciding what to do, and if it decides to proceed, the Ninth Circuit and Judge Sedwick will have to try to sort things out.
Thursday, June 24, 2010
I also have been interviewed by Ted Land, a reporter for Anchorage's KTUU-TV (Channel 2), about the Supreme Court's rulings this morning on the honest fraud services statute. A story on those decisions appears likely to run on that station this evening.
Libby Casey of the Alaska Public Radio Network interviewed me for a story on the U.S. Supreme Court's ruling this morning on the honest services fraud statute in the case of U.S. v. Bruce Weyhrauch. I talked about the dilemmas the prosecution now faces in pursuing that case against the former lawmaker, who served in the Alaska House of Representatives as a Republican from Juneau. Libby Casey's story should be aired on public radio stations around the state later today as well as findable at http://www.aprn.org/ on the Internet.
In the interview, I also brought up--as I always try to do when I discuss this case--that Bruce Weyhrauch is the defendant in the cases arising from the federal probe into Alaska public corruption that I know the best personally. I worked with Bruce Weyhrauch when we both served on the staff of the Alaska Legislature in the early 1980s and have socialized with him some since then. I have seen him less since I moved away from Juneau in the early 1990s, and he has never discussed this case with me.
Mark Regan writes:
The Supreme Court has called into question the federal “honest services fraud” charges against Bruce Weyhrauch. Weyhrauch has been charged under a federal mail fraud statute, 18 U.S.C. secs. 1341 and 1346, with depriving Alaska citizens of the intangible right to his honest services. As with Pete Kott and Vic Kohring, the charges against Bruce Weyhrauch came out of the 2006 legislative session, when Bill Allen and VECO orchestrated legislative resistance to higher oil taxes. The Court has remanded Weyhrauch's case to the Ninth Circuit for further consideration in light of its decision in Skilling v. U.S., which held that the honest services fraud statute covered only bribes and kickbacks, not undisclosed self-dealing.
A reason it was difficult to make charges such as bribery and extortion stick against Bruce Weyhrauch was that the facts of his case differed significantly from the facts of Pete Kott’s and Vic Kohring’s cases. They got money, allegedly in return for voting VECO’s way on oil tax issues, and the exchange of money for votes looks like bribery and extortion. Weyhrauch did not get any money. He allegedly got the promise that VECO would talk with him about giving him some legal work at a date after the legislative session. He might have disclosed that he was negotiating with VECO about employment at the same time he was voting on various bills, but he didn’t disclose this. Just before trial, Judge John Sedwick ruled that Weyhrauch’s failure to disclose his ongoing discussions with VECO could not by itself be grounds for convicting him of honest services fraud. So, given that ruling and the facts of Weyhrauch’s case, the Federal Government decided to appeal Judge Sedwick’s ruling instead of going to trial.
Judge Sedwick didn't rule that the honest services fraud statute was unconstitutional. He ruled that it couldn’t be used to convict a public official of performing official acts while failing to disclose a conflict of interest, unless the public official’s failing to disclose that conflict of interest was illegal under state law -- which Bruce Weyhrauch’s failure-to-disclose wasn’t. The Ninth Circuit reversed this ruling about the honest services fraud statute, and the Supreme Court then granted Weyhrauch’s petition for certiorari.
Weyhrauch’s case was one of three honest services fraud cases pending before the Supreme Court. The other two involved a media financier, Conrad Black, who had allegedly gotten extra compensation from his company, and an Enron executive, Jeffrey Skilling, who had allegedly made false statements while trying to talk up the company’s share price. The issue principally raised in the Black case was whether the Government had to prove that Black’s conduct caused economic harm to the company. The issues principally raised in the Skilling case were whether the statements in question had to have led to economic gain for the person making the statements, and whether the honest services fraud statute is unconstitutionally vague.
The Supreme Court’s main discussion of the honest services fraud statute appears in its Skilling decision. Justice Ginsburg's conclusion for six members of the Court (herself, Chief Justice Roberts, and Justices Stevens, Breyer, Alito, and Sotomayor) is that the statute is not unconstitutionally vague, but only when it's limited to its "core" cases -- bribes and kickbacks. The opinion rejects the idea that the statute ought to be read to cover undisclosed self-dealing. Justice Scalia, for himself and Justices Thomas and Kennedy, would have struck down the honest services fraud statute as unconstitutionally vague in all its possible applications.
The honest services fraud statute is a Congressional response to a 1987 U.S. Supreme Court decision, McNally v. U.S. In the McNally case, a Kentucky public official (and his co-conspirators) had failed to disclose their financial interest in a company that had gotten a share of state insurance commissions. The company they owned had gotten a share of those commissions because the official and his associates had required a second company, which actually provided the insurance to the state, to turn a share of the commissions over to the company they owned. There was no allegation that the Kentucky state government itself had lost any money in the deal. The Supreme Court decided in the McNally case that the federal mail/wire fraud statute did not cover depriving state citizens of their intangible rights to honest and impartial government, so the official’s and cohorts’ convictions were reversed.
Congress responded to the McNally decision by amending the mail/wire fraud statutes to say that “the term ‘scheme or artifice to defraud’ includes a scheme or artifice to deprive another of the intangible right of honest services.“
The Supreme Court has now said in the Skilling decision that the amended statute properly covers the conduct at issue in the McNally case (a classic kickback) but not undisclosed self-dealing, which is what it says Skilling himself was accused of. It has noted that Black's honest services fraud case did not involve any bribes or kickbacks, and sent that case back to the Seventh Circuit for further consideration. And, finally, it has sent Bruce Weyhrauch's case back to the Ninth Circuit for further consideration. At oral argument, there was some discussion of whether Weyhrauch could properly be tried on a bribery/extortion/quid pro quo theory, and one would expect that question to be the focus of the Ninth Circuit's inquiry. Trying him for undisclosed self-dealing would appear to be contrary to the Skilling decision.
Last December, Cliff pointed out that only six of the 12 people charged in the Alaska public corruption cases were charged with honest services fraud, and that Pete Kott was acquitted of that charge, while Bill Allen, Rick Smith, Jim Clark, and Bill Weimar all pled guilty to that charge, or to a conspiracy charge. So the only person getting immediate benefit from today’s decision is Bruce Weyhrauch.
Addendum from Mark Regan--
The oral argument in the Weyhrauch case can be found at http://www.supremecourt.gov/oral_argument/argument%20transcripts/08-1196.pdf on the Internet. The points in the transcript where there are questions about whether the Government could prove a case under something other than a nondisclosure theory, for example, under what Bruce Weyhrauch's attorney called "a traditional, simple allegation of bribery," are at pages 8-11, 26, 29-33, 38-39, 53-57, 58-59, and 61.
Sunday, June 6, 2010
The Department of Justice has filed its opposition to Vic Kohring’s motion seeking a dismissal of his convictions or—short of that—a new trial. The government’s message can be boiled down to four points:
1. We screwed up. The government admits “regrettable missteps” in the original prosecution team’s sharing of evidence with the defense before the trial of the former Alaska legislator.
2. We didn’t mean to mess up on the discovery. The government says it doesn’t seek to make “excuses” while asserting that “There are many reasons for these errors” in providing evidence to the defense before the trial. The prosecution's filing does not discuss or elaborate on those "many reasons." Knowing that a belief by the court that the trial prosecutors showed bad faith in the handling of discovery makes it particularly likely that the convictions will go away, however, the Department of Justice wants the court to know that those “many reasons” do not include any malice on the part of the original government lawyers. Accordingly, the Department of Justice stresses that Kohring’s lawyers are long on “overheated rhetoric” alleging that the government’s original lawyers intentionally withheld evidence but have not pointed to any evidence of “any plot to violate his rights.”
3. Even though we made some “mistakes,” we have sure cleaned up our act now. While acknowledging the “missteps” made in this case, the government insists that the failures have resulted in reforms. “In an effort to avoid these problems in the future, the Department has taken significant steps to establish clear guidelines and better training” for all federal prosecutors in the handling of discovery. Specifically, the reforms triggered by last year’s high-profile collapse of the prosecution of former U.S. Sen. Ted Stevens include improved training and the promulgation of more discovery policies within the Department. The government wants the court to believe that there is no need to deter future misconduct by dismissing this case, because the Department of Justice’s post-Stevens reforms will prevent that misconduct.
4. Most importantly, the “mistakes” in the provision of discovery do not mean that Vic Kohring’s case should be dismissed, because the surveillance tapes of his interactions with Bill Allen prove that the former legislator is a criminal irrespective of any screw-ups in providing discovery. Once again, the government’s twin arguments are “The tapes trump” and “No harm, no foul.” The government asserts that the evidence against Kohring—particularly on the FBI’s tapes—was so strong that the ex-Republican lawmaker from Wasilla would have been convicted even if the defense had received all the materials that should have been turned over. The government particularly focuses on the meeting where Rep. Kohring asked former VECO CEO Bill Allen for help regarding his $17,000 credit card bill and ended up by getting cash from the powerbroker, ostensibly for an Easter gift for the legislator’s stepdaughter. This incident occurred in front of VECO VP Rick Smith in the infamous VECO-rented Suite 604 of the Baranof Hotel during the 2006 legislative session, and was all caught on videotape made by an FBI bug. The government points out that the most Kohring should get is a new trial, but with all its other problems in the “POLAR PEN” probe into Alaska public corruption the prosecution particularly does not want to re-try this case. The government’s position is summarized thusly: “Kohring was a corrupt public official who betrayed the public trust in exchange for cash handed to him by businessmen seeking to buy his official acts, exchanges captured on tape for the jury.”
The defense gets the final word on this motion before U.S. District Judge John Sedwick will make his decision. The judge has already rejected the similar arguments made by former State Rep. Pete Kott (R.-Eagle River).