After almost five months of occupying the front pages of the legal press here in New York, the criminal trial of the top executives of the Dewey & LeBoeuf law firm has finally ended (without convictions) -- only to be replaced on those pages with each day's news from the next high-stakes trial, that of former Assembly Speaker Sheldon Silver. Silver is being prosecuted by the United States Attorney for the Southern District of New York principally for something known as "honest services fraud." I previously covered this prosecution back in January at the time it was initiated.
The Silver trial is giving something of a window into the highly corrupt transactional politics that are the hallmark of Albany and of Silver's leadership. But I continue to scratch my head in wonderment at why the events in the Silver indictment are claimed to be criminal while a hundred other things that are the fundamentals of Albany business are not.
Shortly after the initiation of the Silver prosecution, I wrote another article on the Silver situation, marveling that essentially all the facts in the Silver complaint had been either publicly known or obvious inferences from what was publicly known for years, yet essentially all of the local press supported and even lionized the guy. Then, literally the day after the federal prosecutors labeled one small corner of Silver's conduct criminal, the press suddenly turned on him, like they were suddenly "shocked, shocked" to find out that gambling was going on at Rick's Café.
So for today's quiz, I'm going to briefly set forth the law of "honest services fraud," and then see if you can figure out why what Silver is charged with is any different from much worse examples of the routine conduct of New York pols.
A longer summary of the law of "honest services fraud" appears in my January 25 article linked above, but in any event it's not very complicated. Basically, 18 U.S.C. Section 1341 makes it a federal crime to engage in "any scheme or artifice to defraud, or for [the] obtaining [of] money or property by means of false or fraudulent pretenses, representations, or promises." Then in 1988 Congress added the following words to 18 U.S.C. Section 1346: "For the purposes of this chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services." Unfortunately, nobody had any idea what that was supposed to mean, and in 2010 the Supreme Court unanimously reversed the conviction of Jeffrey Skilling (ex-CFO of Enron) on the grounds that the statute was too vague; but the Court went on to throw in that the statute was sufficiently un-vague to survive as long as what is alleged is a "bribery [or] kickback scheme." So as things stand today, essentially the words of the two statutes have been thrown out, and what is a federal crime under the "honest services fraud" rubric is "a bribery [or] kickback scheme" -- no more, no less.
So let's compare and contrast. First, the allegations in the current Silver trial. Silver became "of counsel" at a law firm called Weitz & Luxenberg, known for a prominent market share in the very lucrative field of cases of people with mesothelioma caused by exposure to asbestos. A prominent doctor at Columbia with a lab doing research in mesothelioma was in a position to refer certain mesothelioma patients to law firms. That doctor also was in need of funding to support his lab. The doctor made it known that he preferred to exercise his ability to refer cases in favor of law firms that supported his research. Silver, as Speaker of the Assembly, had discretionary state funds effectively in his sole control, and directed $500,000 of those funds to support the doctor's lab. The doctor referred a number of mesothelioma patients to W&L. Silver did minimal work on the cases, but was paid "referral" fees each time one of the cases settled. Over the course of several years, Silver got approximately $3 - 4 million in referral fees from this source. After Silver had directed two grants of $250,000 each to the lab, the doctor solicited more, but Silver said (according to the doctor's testimony) "I can't do that any more." Nevertheless, the doctor continued to refer patients to Silver and W&L. Asked why at the trial, the doctor responded: “I will keep giving cases to Shelly because I may need him in the future -- he is the most powerful man in New York State.” In agreeing to go easy on the doctor to obtain his testimony, the prosecutors asked him to concede in his plea agreement that the state research funding and the case referrals were explicit quid pro quos for each other; but the doctor refused, and that language was stricken from the agreement.
OK, that's pretty bad. But how about this (from an article in Crain's New York Business on July 15, 2014): Mayor Bill de Blasio is known for an obvious ambition to advance his "progressive" agenda on the national stage. To support that, he has created a non-profit group called "Campaign for One New York," and has sought to raise charitable contributions for it. On April 9, 2014 the non-profit received its largest donation, $350,000 from -- you guessed it -- the American Federation of Teachers, otherwise known as the union that represents public school teachers in New York City. At the time, the union and the City were in the thick of negotiations over a new contract. Indeed, prior to de Blasio taking office as Mayor in 2014 the City and teachers had gone multiple years without a contract, because prior Mayor Bloomberg had insisted that the City did not have sufficient funds for retroactive raises demanded by the union. Then, in early May 2014 -- less than a month after the AFT contribution -- the City and union entered into a new nine-year deal. The deal included substantial raises, both prospective and retro-active, and the City's outyear projected budget deficits were revised upward by some $5 billion. Asked whether the union's contribution and the contract concessions had anything to do with each other, a spokesman for de Blasio was quoted as saying that the contribution "had no impact." Right!
Now, as between these two, there's no question which one was worse. Silver got $3+ million for himself, but only gave away $500,000 of taxpayer funds, and arguably for a good cause. De Blasio got $350,000 for himself, and gave away $5 billion of taxpayer funds. Is one of these really much more clearly a "quid pro quo" than the other? If so, it's only based on nuances and subtleties rather than anything explicit.
And I don't mean to suggest that de Blasio is alone in doing dubious deals with unions representing teachers and other City employees. The City employee unions are in fact the dominant funders of the state Democratic party. On January 19 the New York Post reported that the teachers union had spent some $4.7 million during 2014 on political contributions (essentially all to Democrats) and lobbying. And in return they get endless obstructionism against charter schools, protection of teacher tenure, rules that make it impossible to fire anyone, no meaningful evaluations, etc., etc., etc. And minority kids get imprisoned in failing schools. Criminal?
The main conclusion that I draw is that the idea that the government and its politicians can act in a disinterested, neutral and non-corrupt manner to create fairness and justice in the world by passing out taxpayer funds is just a complete fantasy.