WEYHRAUCH v. UNITED STATES
Bruce Weyhrauch was charged in the Alaska federal district court in part with a "scheme and artifice to defraud and deprive the State of Alaska of its intangible right to [his] honest services." Mr. Weyhrauch was a member of the Alaska House of Representatives and allegedly took actions favorable to an Alaska oil company, VECO Corp., in return for future employment. At trial, Mr. Weyhrauch moved to exclude evidence related to the honest services charge. The district court excluded the evidence because it would merely have shown that Alaska could have imposed a duty upon Mr. Weyhrauch to disclose the conflict of interest, and thus did not prove he had violated any duty imposed by state law.
On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed. It held that 18 U.S.C. Section 1346 established a uniform standard for "honest services" that governs every public official and that the government did not need to prove an independent violation of state law to sustain an honest services fraud conviction. Therefore, the court reasoned that because the district court excluded the evidence needed to prove that state law imposed an affirmative duty on Mr. Weyhrauch to disclose the conflict of interest, the evidence was admissible.
To convict a state official for depriving the public of its right to the defendant's honest services in violation of 18 U.S.C. Section 1341 and Section 1346, must the government prove that the defendant violated a disclosure duty imposed by state law?
Not answered. In a per curiam opinion, the Supreme Court vacated the judgment and remanded the case to the U.S. Court of Appeals for the Ninth Circuit in light of Skilling v. United States.
ORAL ARGUMENT OF DONALD B. AYER ON BEHALF OF THE PETITIONER
Chief Justice John G. Roberts: We'll hear argument next in Case 08-1196, Weyhrauch v. United States.
Mr. Ayer: Mr. Chief Justice, and may it please the Court: When counsel for the United States defended the McNally prosecution before this Court in 1987, the first thing he did was to acknowledge that many of the existing intangible rights cases contained what he called "extravagant" language that, on its face, extended the doctrine far beyond the principle that one can be guilty of fraudulently denying others the performance of a clear legal duty that he owes.
I know that because the government lawyer was me--
And that was the only thing I said that day that the 7-2 majority agreed with.
But 22 years later, and one 28-word statute later, the United States is now pressing to take that extravagant language of the pre-McNally cases to the bank.
It does that by contending that a public official commits honest services fraud simply by failing to disclose an arguable conflict of interest, even though he has no legal duty to disclose apart from the words of 1346.
And it -- and it is possible to do that under the extravagant words of the earlier cases by relying on a supposed Federal common law fiduciary duty of loyalty that is owed by all public officials, including State officials, to their constituents.
Chief Justice John G. Roberts: So if the -- there were a State law that said you must disclose anything that could reasonably be viewed as a conflict of interest, then -- then you would lose?
Mr. Ayer: Your Honor, you are now asking me the question about the outer perimeter of the statute.
My argument is that a duty -- some duty clear in the law is absolutely necessary.
What kind of a duty would be sufficient is a much more difficult question, and it's a difficult question for -- for, essentially, two reasons.
One is, the duty must be clear and not vague.
That's one point.
The more complex point is a point relating to this Court's clear statement rule and related concepts concerning particular duties.
If a State creates a system of contractual duties, those duties have certain consequences.
Generally speaking, contractual duties have a consequence of paying damages.
People conduct themselves in certain ways in a contractual system.
They don't expect to go to jail, usually, for breaching a contractual duty.
Justice Samuel Alito: I mean, the mail fraud statute carries a very heavy penalty, and are you -- you are arguing that Congress intended to impose this penalty on individuals who breach some Federal or State disclosure requirement, even if that is viewed by the body that is responsible for the disclosure requirement as a very minor thing.
Mr. Ayer: --Oh, I'm -- I'm -- Your Honor, if I left that impression, let me completely reject it.
That is not at all what I'm arguing.
To the contrary, I am arguing that -- that ultimately, the task this Court may decide it must pursue -- which, I think, frankly, is quite separate from our case, because our case is a case where there is no duty, period, in the law, which I want to explain procedurally why that's true -- if you are going to decide that some duties are enough and other duties are not, it is a very challenging thing to do, and a very--
Justice Samuel Alito: But that's what you're asking us to do.
I understand you are saying that -- that there cannot be a conviction without the violation of some duty.
But if we agree with that, then we are going down the road of deciding what sort of duty suffices, and does it have to be a duty that is backed up by a State criminal sanction?
What if -- what if it's a 1-year felony?
What if it's a misdemeanor?
What if it's a -- simply a civil penalty?
What if it's simply some sort of precatory code of ethics--
Mr. Ayer: --Right.
Justice Samuel Alito: --for legislators?
Mr. Ayer: Well, Your Honor, I -- let me -- I want to repeat again that -- that in -- in my view, our case doesn't turn on my ability to satisfactorily draw this line which no court has driven -- drawn effectively in 50 years.
But I would -- I would say this: There are two approaches that have been suggested that -- that have fewer problems than others.
And one -- if you begin with the question of duty and say, what duties will suffice -- and I'm not -- I'm not endorsing this; I'm simply saying it -- it pares the covered duties back significantly to a point where this Court might find it preferable to some other approaches -- would be the one Your Honor mentioned, criminal law duties, duties as to which the conduct breached already is criminal.
There's a subsidiary question, I think: Whether, in fact, you might want to require felony duties, because there are different penalties with regard to different duties.
Justice Ruth Bader Ginsburg: The real problem with your approach, which I take it is you have to find these duties in State law, is that some States will classify the same conduct as a felony that another will classify as a misdemeanor.
So that line won't work.
And then some States will make something criminal that other States won't.
So you're going to have, depending on geography, people potentially subject to a 20-year term because of the particularities of -- of a -- the State law.
Mr. Ayer: I agree, Your Honor.
That is -- that is a problem with it.
And I am not -- I am not here to endorse that as a satisfactory alternative.
I'm simply saying it's preferable to some of the others.
Justice Ruth Bader Ginsburg: But you are asking us to say State law is the reference.
Mr. Ayer: No, Your Honor, I'm not.
I'm asking the Court -- and that's a confusion in the question presented.
This is a case in which the government very clearly, and the trial court found, made no attempt to produce anything other than 1346 as the source of any Federal disclosure duty.
There was no Federal disclosure duty that they could point to specifically dealing with disclosure.
The court -- the trial court ended up focusing -- in fact, I'd like, if I could, to take a couple of minutes on the procedure to establish sort of the posture of this case, because I think it may otherwise be confusing.
Essentially, what we had here was an indictment that, when filed, in the vaguest of terms, it alleged as the purpose -- and this is at joint appendix page 35 -- the purpose of the scheme was for Company A to agree to provide things of value to the Petitioner to cause Petitioner to misuse his official authority for the benefit of Company A.
A traditional, simple allegation of -- of bribery.
And there has never been a question in this case that if the government thinks it can prove that case, they are welcome to try.
And -- and they can do that, and in the course of doing that, they have -- it's certainly open to them to show that the defendant didn't specifically stand up and make an announcement that he had submitted a job solicitation to Company A, as he had submitted solicitations to a half a dozen other employers, as is perfectly legal under Alaska law.
So all of that is fair game.
But a few days before trial, what ended up happening here -- and this is where this case comes from.
A few days before trial, first in a trial brief and thereafter in a motion in limine dealing with submission of evidence, the government announced that it wanted to -- to pursue what it called -- what the trial court called its alternative theory; frankly, we think, because they couldn't prove their bribery case.
And what they said their theory was, was that when a public official -- this is in the trial brief.
There's an almost exact quote, similar, at J.A. 42 in the joint appendix.
"When a public official fails to disclose the existence of a conflict of interest, whether required by law to do so or whether required by fiduciary duty to do so, the public official can be found guilty of honest services fraud, irrespective of whether the public official took any action thereafter, much less a fraudulent or harmful act. "
In other words, Mr. Weyhrauch -- Mr. Weyhrauch sent a solicitation letter, and that's about the size of it.
He sent a solicitation letter to a number of people.
He is a part-time legislator in a State that has a citizen legislature that has made a decision specifically not to have its -- its disclosure rules be unduly burdensome.
That's their own specific language: They don't want them to be unduly burdensome.
They have required certain disclosures.
They have not required others.
The trial court here looked at the government's motion, which was to put in evidence about Alaska ethics rules in support of this alternative theory.
And, indeed, the court said -- and the court of appeals, at 3a of the -- of the Pet. App. said that the evidence was exclusively to pursue this alternative theory that all you needed to do was fail to disclose in breach of a fiduciary duty, and, bingo, if you go on doing your job, you have committed honest services fraud.
Justice Ruth Bader Ginsburg: But you have no objection to what they call the quid pro quo theory; that is, I -- I want you to hire me after I leave the legislature, and in return, I'm going to see what I can do to keep the tax level low on the--
Mr. Ayer: Absolutely right, Your Honor.
And, in fact, if there is any doubt about that, all you need to do is read at page 36a in the -- in the petition appendix, where the court says exactly where the case stands after his ruling.
He says at the end of his order,
"This leaves the United States to prove the honest services fraud charges in this case based on violations of the law other than a duty to disclose defendant's dealings with VECO. "
They can pursue any theory they want that -- that is a legitimate theory.
They just can't come in and say: You breached a duty to disclose.
Alaska law doesn't require that you disclose.
There's no Federal statute saying you have to disclose.
It's just implicit in the concept of honest services that you needed to disclose this.
Now, basically, I--
Justice Antonin Scalia: That's what the statute says.
Mr. Ayer: --I'm sorry.
Justice Antonin Scalia: That's what the statute says.
Mr. Ayer: Well, it--
Justice Antonin Scalia: It says "honest services".
Mr. Ayer: --Well, what happened here is that the Ninth Circuit reversed the court of -- the court of appeals excluded the evidence, which was offered only in pursuit of that theory.
Because it said: I don't have a State law violation; I don't have a clear Federal law violation; the only way I can do this is by invocation of Federal common law.
And then he said, for a variety of reasons, citing some cases: This is not something I'm going to do; I think it's inappropriate.
The Ninth Circuit reversed, and the Ninth Circuit essentially said -- and it's very much like what I heard this morning from government's counsel -- that section 1346 reinstated the pre-McNally law, including all of its wonderful dicta and -- and wild phrases about duties that exist, that nondisclosure -- and I think this is even highly dubious; in fact, I think it's flatly wrong -- that within that body of law, nondisclosure of material information -- and this is just standing alone.
It's not nondisclosure in the context of, I'm defrauding you; I'm tricking you out of money, or I'm tricking you out of some duty that I really -- sorry, Your Honor.
Justice Sonia Sotomayor: I understand them to be saying nondisclosure of a conflict of interest, so they are a little bit more--
Mr. Ayer: Well, I think that's right.
I think that's -- I think that's what -- and obviously there is the materiality requirement, as the government has said.
But -- but as--
Justice Sonia Sotomayor: --So why don't you take them at their face, which is, they are saying it has to be a nondisclosure of a conflict of interest that's material?
Mr. Ayer: --Right.
Justice Sonia Sotomayor: I think that's what--
Mr. Ayer: Well, that's right.
--they said earlier, and that's what I'm understanding them to say now.
No, I think you are right, Your Honor.
Justice Sonia Sotomayor: --So let's take it from there.
Mr. Ayer: Okay.
Justice Sonia Sotomayor: Why is that--
Mr. Ayer: Well, I think--
Justice Sonia Sotomayor: --not a limiting principle?
Mr. Ayer: --I think the -- the problem is that if you -- if you ask the question in the context of this pure nondisclosure theory, the materiality, as the -- as the government articulated it here today and as I think they have articulated it in their brief, was whether it's reasonably likely to affect the decision of the relevant whoever, the relevant person.
Now, as -- as Justice Breyer, I think, indicated, it's very easy to talk about materiality when you are talking about deception or concealment as a -- as a method of doing someone out of another thing--
Justice Sonia Sotomayor: It's -- it's much easier in the public sector, I agree with you, to--
Mr. Ayer: --But I'm -- but--
Justice Sonia Sotomayor: --to talk about it in the -- I'm sorry.
In the private sector, it's easier to talk about.
Mr. Ayer: --But I'm talking -- I mean, I -- I can -- I can well understand the concept of bribery, say, where a public official has a duty to award contracts to the lowest competent bidder, and instead, he takes a bribe, and he awards the contract to someone else.
He -- you know, I can accept the notion easily that he has defrauded -- in those terms, he has defrauded the public out of its right to have him do that job.
The materiality of a nondisclosure in that setting is -- is coherent in the context of what he did wrong.
In other words, I hid the fact that I took a bribe.
I took the money in cash.
I -- I put it in the freezer--
Justice Sonia Sotomayor: I'm not sure that -- that whether he did it with disclosure or nondisclosure, what would make the nondisclosure more meaningful?
Meaning, it's taking the bribe, whether he discloses it or not--
Mr. Ayer: --Well, but there are also--
Justice Sonia Sotomayor: --and if he gets up on the floor of -- of the legislature and says: You know, I am going to vote for this bill because somebody paid me money, he disclosed it.
It doesn't make it any better.
Mr. Ayer: --Well, I don't know if it does or not.
I mean, I guess there is a fraud requirement here.
And if somebody actually does that openly, I don't know if you can argue that he didn't -- that he didn't commit fraud.
But I don't want to push that, because that's not something I have any interest in -- in promoting.
But, in -- in any event, he certainly took a bribe.
But the -- but the point I am making is that the nondisclosure, in the abstract -- and that's what the government is charging here -- is impossible to evaluate the materiality of.
Justice Stephen G. Breyer: No, I think they're saying -- which I am getting gradually--
Mr. Ayer: --I'm sorry.
Justice Stephen G. Breyer: --I think what he's saying is: First, we know what bribery is; we can deal with that one.
Second, we know what kickbacks are; we can deal with that one.
And what he means by the honest services other than that is, imagine a list of 5 million bits of honest service that a workman has to perform for his employer.
Now, on that list, there might be 35 requirements to disclose something where the interest of the employer goes -- employee goes the other way.
And he's saying it violates the statute not to do that in circumstances where the employee knows that the failure to disclose will, in fact, lead the employer, to whom he should have disclosed it, to make a significant decision; namely, that decision to avoid which was the reason he didn't disclose it.
Mr. Ayer: Right.
Justice Stephen G. Breyer: Now, I think what he is saying is that's rather precise.
That fits with what was there before, and therefore, all the government is saying is: Now we have those three things.
If you didn't quite -- I didn't quite get that out of the brief, but that may be my fault.
So anyway, it was probably there; when I go back, I'll see it.
And those are the three things.
So he's saying: You see?
It doesn't matter the source as long as there is a clear legal obligation, which could come from corporation law, for the employee to disclose the conflict in this situation.
I think that's what it is.
Well, and so what's your response to that?
Mr. Ayer: Well, I think -- I mean, I could argue with that, but I don't need to, because our principal submission, Your Honor, is that -- that we win this case because there is no clear duty to disclose.
And we win it because--
Justice Stephen G. Breyer: You are saying, I take it, that there was no duty in Alaska criminal law, disclosure law, to disclose.
I think you might find in a treatise on agency that there is a duty to disclose.
Mr. Ayer: --Well, there is no Alaska law -- it's absolutely clear and it is not disputed here.
The the trial court ruled there's no duty in Alaska law to disclose whatever--
Justice Stephen G. Breyer: Not even in the Uniform Commercial Code or the--
Mr. Ayer: --Well, one of the things -- well, the government certainly didn't offer anything other than what it offered, and the court looked at it and the court said there's no duty -- he went through several pages of saying there is no duty to disclose here, and the government did not appeal.
The government didn't challenge that.
Justice John Paul Stevens: Let me just ask you--
Mr. Ayer: The government said: Well, it doesn't matter.
Justice John Paul Stevens: --I'm learning something about the case that I didn't understand before.
Are you agreeing that if there were a duty to disclose exactly what happened in this case, that then the statute would have been violated?
Mr. Ayer: I'm not -- I'm not, Your Honor.
What I would do is bump the -- bump the inquiry to the next level, which is where the Court was earlier today.
You then have to go to the question about what kinds of duties would suffice.
My point is quite simple, and I don't think it's evasive.
You must have some duty--
Justice John Paul Stevens: I thought you were arguing that a duty to disclose could never qualify.
Mr. Ayer: --I -- well, I -- you could argue that.
I don't think -- you certainly don't need to assume that.
Justice John Paul Stevens: I'm trying to figure out what your position is, not what you could argue.
Mr. Ayer: Well, my position is that you must have some duty, and there's no duty here other than 1346.
Justice John Paul Stevens: But if you then -- but if you do have some duty, would the statute have been violated on these -- on these facts?
Mr. Ayer: You--
Justice John Paul Stevens: If there were a duty to disclose the negotiations of this prospective employer or--
Mr. Ayer: --Well, would you have -- you would have to ask -- you would have to ask a couple of questions, I think, further.
You would have to ask: What kind of a duty is it?
Justice John Paul Stevens: --Well, it's a duty to disclose those facts to the legislature.
Mr. Ayer: With a criminal penalty attached?
Justice John Paul Stevens: Well, I--
Mr. Ayer: Well, I think it matters, Your Honor, because I think what you get into, when you are evaluating whether a duty is sufficient, is you get into a clear statement--
Justice John Paul Stevens: --But your position is not that there's no duty; it's that there is not a duty with sufficiently severe penalties?
Is that what your position is?
Mr. Ayer: --No, the point I'm making is all about -- it's all about this Court's clear statement rule.
It's all about, when are we going to take Congress, by using 28 very vague words, to have decided to mix up and confuse an existing system of rules.
Let's say it's a State ethical process where there's an administrative penalty.
Maybe the maximum penalty is a $100 fine; maybe the maximum penalty is censure.
I talked about contracts earlier.
There's all kinds of regimes of rules and duties that we create in society.
Some of them are not even created by government.
Some of them are created by professional associations, where if you are a member you owe a duty to the professional association.
Which of these are we going to say are duties of sufficient moment -- and then there's all of the -- the common law corporate fiduciary duties.
There -- there's a whole array of duties.
And the question of which will suffice is not an easy question--
Justice John Paul Stevens: But that is not a -- your position is not that there be no duty to disclose; you are saying there is not a duty to disclose of sufficient moment to justify criminal penalties.
Mr. Ayer: --I -- I don't -- that's one way to say it, sufficient moment, or of a character that makes it appropriate.
I would say this: I think if the Court were to go down the road and think in terms of, well, the duties need to be criminal, and if they are criminal, then they at least are duties that the entity that created them -- it's (a) a government entity, it's a government norm, it has criminal consequences, and that -- that government body thought this conduct was important enough to give criminal penalties to, maybe -- I don't -- I can't judge this, but maybe the Court would look at that and say: Well, certainly, maybe we are comfortable with thinking that Congress, with these wonderful 28 words, actually meant to make the breach of that criminal duty punishable under this statute.
Justice Anthony Kennedy: One of your arguments -- an important argument in your brief is the -- the Federal balance, apart from vagueness for a moment--
Mr. Ayer: Right.
Justice Anthony Kennedy: --which was the lurking problem here.
You say it should be State law, because then the Federal courts would at least tell States that they can't enforce their own law strictly enough.
But if it's Federal law, then the Federal government tells the States: Well, regardless of your standards, we have our standards.
I don't see much to choose from in this--
Mr. Ayer: Well, I'm not sure I understand--
Justice Anthony Kennedy: --in those -- those two alternatives.
Mr. Ayer: --your question, Your Honor.
I -- it's certainly not our position that, for example, it would be--
Justice Anthony Kennedy: You say if there's a State law prohibition--
Mr. Ayer: --Uh-huh.
Justice Anthony Kennedy: --then this statute applies.
But then -- then the Federal government is telling the States: Well, we don't like the way you enforce your laws; we're going to do it.
Mr. Ayer: Well--
Justice Anthony Kennedy: So it seems to me there's not much to choose between -- between the two arguments.
Mr. Ayer: --Well, I guess the one thing I want to make real clear is that -- that we are in no way arguing that, for example, someone who violates the Hobbs Act and -- and does it by using the mail and otherwise satisfies the fraud provision, the fraud requirement of the mail fraud statute and the mailing requirement, we are certainly not here contending that you couldn't prosecute him if you wanted to under this statute.
We're not arguing this is only State law violations, in any way.
The point is, there's got to be--
Justice Ruth Bader Ginsburg: --But then I don't understand your question presented.
I thought the question presented is: Must the government prove the defendant violated a disclosure duty imposed by State law?
What you've been arguing isn't in sync with what I thought the question presented was: Must you look for the duty to State law?
Mr. Ayer: --Your Honor, there's a story there which I won't bore you with much of, but that's a question that the government rewrote and the Court adopted and I actually filed a motion.
We filed a motion suggesting a small insert, and the small insert, which was not adopted, was the point that when there is no Federal statute requiring disclosure -- in other words, the facts of this case, if you take them and internalize them, make that an accurate question presented, but it's only an accurate question because the government made no effort to come up with a Federal disclosure requirement--
Justice Ruth Bader Ginsburg: But you are asking for a State law reference, and that brings up the problem of the variety of State law.
And we do have in the mail fraud property area a decision, the Cleveland decision--
Mr. Ayer: --Right.
Justice Ruth Bader Ginsburg: --that says: Don't look to how the States define property.
Mr. Ayer: Right.
Justice Ruth Bader Ginsburg: There should be a uniform Federal definition.
Why -- if we have done that, the mail fraud statute in -- in connection with property, why shouldn't we do it also with honest services?
Mr. Ayer: Well, Your Honor, I think -- I think this is the situation -- it's certainly true -- the government cites the Jerome case as well for the general proposition that you don't take a Federal statute and just leap off and start applying State law norms.
But -- but when the inherent nature of the statute, like this one, which says -- we're talking about public officials; mostly we're talking about State officials; we're talking about rights, and therefore, we're talking about duties -- most of the legal duties -- if you are going to be requiring legal duties, most of the legal duties that a State official owes are State law duties.
He owes them on account of his role in the State government.
Plus, we are talking about the Federal government, the Federal criminal statute, injecting itself into the relationship of State officials with their citizens and their government.
And so the notion that you -- you know, there's the De Sylva case from 1956, there's the Kamen case, the Brosnan case -- these are all cases where the Court has recognized a sensitivity about there are times when it makes sense to look to, or at least consider as one of the elements, State law norms.
And that's really all we are saying here, is that State law rules, perhaps, could be sufficient.
But I want to just emphasize, again, we are not here -- I'm -- I'm less helpful to you than perhaps I should be, but we have a case to argue.
And our case should win on the simple ground that the government has cited no real direct, you know, disclosure obligation.
All they have cited, and all they want to rely on, are the words of 1346.
Now, that violates this Court's clear statement rule, going in and messing around with Alaska's existing rules of when you have to disclose and when you don't.
Can Congress really have thought about that and meant to do that?
I'm sure not.
Justice Samuel Alito: What if there's a statute that prohibits a legislator from engaging in certain conduct and attaches a significant penalty to it, but there is no statute that requires the disclosure of the conduct?
Mr. Ayer: Well, there's -- there's an argument to be made that the -- that the government could pursue, and I don't want to say they could, but if it's a criminal statute, there's an argument the government could pursue their case on that theory.
It's not a disclosure theory.
It's a theory about -- you know, it's like a bribe.
It's like, the State said you can't do X; you did X, and you fraudulently did X--
Justice John Paul Stevens: Let me give you this example: Take the Judge Holzer case we all know about.
Suppose, in 49 States, it always violates State law, but there's some State that has a special rule that, unless the bribery exceeds $1,000, there's no violation.
Would -- could he be prosecuted in the 49th State?
Mr. Ayer: --Well, I think -- the first thing I want to say is that I think that is counterfactual, and they were talking about bribery.
Bribery is basically flatly illegal in every State.
Justice John Paul Stevens: But if it's not illegal--
Mr. Ayer: If it's not illegal--
Justice John Paul Stevens: --in the State I'm asking you about?
Mr. Ayer: --If it's not illegal, then I would say that there has to be -- the conduct he engaged in must be illegal under some law or it -- he didn't breach a duty.
Justice John Paul Stevens: It does not have to be Alaska law, then?
Mr. Ayer: I'm sorry?
Justice John Paul Stevens: In this case, it does not have to be Alaska law, then?
Mr. Ayer: It wouldn't have to be Alaska law.
It has got to be some law, and it can't be 1346.
The other problem with it, I want to say quickly and then sit down, is -- is this is making Federal common law.
This is courts coming in and saying: You must disclose this and this and this, in these circumstances and not in those.
Justice John Paul Stevens: But I'm just trying -- if it's -- it's illegal in 47 States, but not in the State in which the prosecution is brought, you say the Federal rule could not apply?
Mr. Ayer: I would say that -- that -- yes, that is my answer.
And my answer is that because what you have to find is that this person breached a duty.
If what he did was perfectly legal under the State law where he was, just hypothetical -- hard to imagine -- if he's committing bribery.
Hard to imagine.
Not true in reality, but if that were true, he hasn't violated any duty there.
Is there a Federal duty that that act of taking a bribe violates?
Well, if there is, then you can prosecute it, and if there is not, then you can't.
And what I'm saying is, you can't make up a duty out of 28 words in 1346.
If I could reserve the rest of my time, Your Honor?
Chief Justice John G. Roberts: Thank you, counsel.
Mr. Dreeben, welcome back.
ORAL ARGUMENT OF MICHAEL R. DREEBEN ON BEHALF OF THE RESPONDENT
Mr. Dreeben: Thank you, Mr. Chief Justice.
It's good to be back.
The one thing that I think the parties, the cases, and this Court, in its description of section 1346 in Cleveland, agree on is that the purpose of the statute was to restore at least some part of the pre-McNally doctrine of intangible rights.
It, therefore, makes sense to take a look at the theory of intangible rights violation that Mr. Ayer very ably argued for the government when he argued the McNally case.
Justice Ruth Bader Ginsburg: Before we do that, Mr. Dreeben--
Mr. Dreeben: And that case -- that theory--
Justice Ruth Bader Ginsburg: --Mr. Dreeben, I would like to ask you about this case particularly: One thing that the prosecutor did, one thing that the Ninth Circuit did.
So before we get to your larger theory of anything, we have a particular case to deal with.
We have an Assistant U.S. Attorney who came to the judge and said, we have alternate theories of this case.
One is the quid pro quo theory; the other -- and I am reading from 42 of the appendix -- is that
"a public official can be found guilty of honest services fraud, irrespective of whether the public official took any act thereafter. "
Just the bare nondisclosure.
That was what the Assistant U.S. Attorney was asking for.
Mr. Dreeben: --That's what the document that you are reading from said, Justice Ginsburg.
One week later, the government filed a clarification of its -- of its position in response to Petitioner's briefing of the issue, and this appears at pages 68 and 69 of the joint appendix.
And in that filing, the government made clear that its theory, consistent with the theory that I am arguing here today, is that when the legislator takes official action having an undisclosed conflict of interest, that's when he violates the honest services statute under the nondisclosure theory.
We are not here to urge that there is a general duty of disclosure that is separate and apart from any official act that the official takes.
We are not here to argue that there's a free-standing Federal duty of disclosure that applies in all cases, regardless of the other elements of the mail fraud statute--
Justice Ruth Bader Ginsburg: Then you must agree that the Ninth Circuit was wrong, at least in this particular -- this -- I'm now reading from 19a.
One is bribe, and that's -- everyone seems to agree that that could come within the statute.
The second is (2) nondisclosure of material information.
That's got to be wrong.
Mr. Dreeben: --Well, Justice Ginsburg, I think that's -- that's a shorthand summary of the nondisclosure theory.
The more accurate summary of the government's theory is on page 20a, on the first full paragraph that begins with the bracketed 9.
And it says,
"Here, Weyhrauch allegedly voted and took other official acts on legislation at the direction of VECO while engaged in undisclosed negotiations for future legal work from VECO. "
And then it goes on to say,
"These allegations describe an undisclosed conflict of interest and could also support an inference of a quid pro quo. "
Justice Antonin Scalia: Excuse me.
I have been trying to find out what you were referring to on pages 68 to 69.
Mr. Dreeben: --On the bottom of page 68, Justice Scalia, there's a italicized word, "first".
And it describes--
Justice Antonin Scalia: Yes.
Mr. Dreeben: --the more detailed theory that the government is elaborating, and then on page 69, it says, quote,
"By introducing amendments to and voting on legislation that each defendant knew would affect Company A, an entity with whom each defendant either had or was negotiating for a financial relationship, each defendant knowingly breached that duty of disclosure. "
So I think the government tied up the nondisclosure to the official act and that the Ninth Circuit was not under an incorrect impression about that.
And more fundamentally, Petitioner says -- I believe it's in footnote 6 of his opening brief -- that that's not the issue before the Court, how to instruct the jury on the duty of disclosure.
That's an issue that will arise, and I think Petitioner's counsel said this to the district court -- it's in a page of the joint appendix that I don't have at my fingertips -- that's a matter for jury instructions.
And we agree.
Justice Ruth Bader Ginsburg: But this is an opinion that's going to govern district judges in the Ninth Circuit.
So I take it that your answer is that nondisclosure of material information certainly is not enough--
Mr. Dreeben: No, it's not enough, Justice Ginsburg, not standing alone.
It's when the official takes action that furthers his undisclosed interest without telling the decision-making body to which he belongs that he becomes a fraud.
It's just like O'Hagan, Justice Ginsburg.
When O'Hagan, the lawyer, took the information from his firm, posed as a loyal employee, the partner who comes to work every day just doing his job, it became a fraud when he took that information and used it in his own securities trading.
Here, too, this is not a pure nondisclosure theory.
This is another form of corruption.
It's the kind of--
Justice Sonia Sotomayor: What if he had voted against the legislation?
Mr. Dreeben: --If he did not further his undisclosed interests, then he does not breach the duty that the government alleges--
Justice Sonia Sotomayor: So it's not merely the taking official action; it's taking official action that benefits him?
Mr. Dreeben: --Correct.
Justice Samuel Alito: I imagine -- I'm sorry.
I imagine legislators must vote on all sorts of things that have a -- an impact on their own financial interests or the financial interests of their family or associates.
For example, suppose this -- the Petitioner was a practicing attorney.
Suppose he's voting on an overhaul of the rules of civil procedure, and some of them may benefit him and his practice.
Or suppose he's voting on a new tax code, and the provisions may benefit him or his family or his associates in a -- in a variety of ways.
Don't you need some kind of a disclosure code to separate the things that have to be disclosed from the things that don't have to be disclosed, because they are just too common?
Mr. Dreeben: --You -- you could do it that way, Justice Alito, but the way that the mail fraud statute does it is it looks for the kind of personal conflicting financial interest that, in the universal view of the common law, raised a problem.
Those are interests that are different from the public at large and that are not widely held by a large segment of the community.
Justice Stephen G. Breyer: And this is supposed to be something that the average citizen who works there just knows all about?
Mr. Dreeben: I think that when we are talking about State legislative officers, when we are talking about public officials, they know that they are fiduciaries.
They have a set of fiduciary obligations.
But to answer most directly, Justice Breyer, your concern, which I believe goes to notice, and whether a State legislator can be held criminally liable for violating a standard stated as I have just stated it, the government must prove in a criminal case an intent to defraud.
That means that the government must show that the defendant sought to deceive the body to which he belongs--
Justice Stephen G. Breyer: He intended not to disclose something, right.
Mr. Dreeben: --And that he knew he was breaching a duty.
He does not need to know the legal source of the duty.
That's conventional law as in Bryan v. United States.
You can know that you are acting illegally without knowing that it's Federal law, State law, or local law--
Justice Stephen G. Breyer: Okay, okay.
Mr. Dreeben: --but the government needs to show that.
And that means that in the typical case, the government will point to some external standard, be it a State criminal law, a State civil law, and--
Chief Justice John G. Roberts: But what if -- what if that external standard imposed penalties vastly different from the mail fraud statute?
For example, what if Alaska had a law here that said you must disclose this, and if you fail to disclose it, you are subject to 6 months in jail or a $500 fine?
Mr. Dreeben: --Well, there's--
Chief Justice John G. Roberts: It's a light sentence because the disclosure obligations are confusing, but -- and then the Federal prosecutor comes along and says, well, you -- you are going away for 20 years because this violates 1346.
Mr. Dreeben: --Well, we would have to show, first of all, that he knew that he was breaching a legal duty.
Chief Justice John G. Roberts: Yes, he knows that he should disclose this, and--
Mr. Dreeben: Okay.
Chief Justice John G. Roberts: --Yes.
Mr. Dreeben: Then my answer is we live in a dual system in which citizens are governed by and accountable both by their States and by the Federal government.
Chief Justice John G. Roberts: So, you have no problem with the idea that the State law, the source of the duty to disclose, imposes a penalty of 6 months, and the Federal law you say you can still go after him not only 20 years but an additional 20 years?
Mr. Dreeben: But this is fundamental to the government's position here, Mr. Chief Justice.
It's not imposing a criminal penalty for violation of the State law duty.
There is an independent Federal duty.
Congress was well aware that--
Justice Sonia Sotomayor: Please articulate it again for me.
I -- I am -- I don't think I'm being thick.
I'm trying to understand exactly what that duty is, because I think I just heard something that doesn't make sense to me.
You are saying if there's a State duty to disclose, a Federal duty to disclose, if they are legal duties, that would violate it, and now something else?
Mr. Dreeben: --Well, Justice Sotomayor, what I am trying to say to this Court this morning is that what 1346 reinstated was the notion that if fiduciaries have a duty not to further their own personal conflicting financial interests by taking official action, it becomes a Federal crime only when there is both materiality and intent to defraud.
And to prove the intent to defraud element that the individual intended to deprive the citizens of their right of honest services, the government has to know -- show that he knew he was breaching a fiduciary duty.
And the government can do that by offering evidence, for example, that State law precluded the action that he took -- the underlying action in this case by Mr. Weyhrauch was prohibited by State law.
You are not permitted to vote on legislation when you were negotiating for employment.
Justice John Paul Stevens: Let me ask you right at that point: Does the prohibited action, namely, voting -- does that vote have to be contrary to -- serve the interest of the other party?
Mr. Dreeben: Yes, it does, Justice Stevens.
He has to be furthering his undisclosed interest.
And in this case he did it--
Justice Stephen G. Breyer: So, now -- now think of that answer -- complete that answer, if you can.
Mr. Dreeben: --He did it in violation of a State substantive duty, and the government's burden will be to show he knew he was acting wrongfully.
And often we will do that by pointing to State law and saying he violated State law or he violated an ethics code that attached to him as a fiduciary.
If not, we are going to have to find some evidence of circumvention, structuring transactions, nominee accounts, surreptitious meetings, things that indicate that an individual knows that he is acting fraudulently.
Justice Stephen G. Breyer: Now, go back to -- I'm trying to get you back to your general answer that you wanted to give.
And I -- I -- remember my list of 6,000 things--
Mr. Dreeben: Yes.
Justice Stephen G. Breyer: --which I made up, and these are all the things that--
Mr. Dreeben: Yes.
Justice Stephen G. Breyer: --an employee owes an employer.
Mr. Dreeben: Right.
Justice Stephen G. Breyer: Now, some of them -- you have taken out three -- no bribes, no kickbacks and no conflicts of interest where that's defined in the narrow way you've defined it.
You have to know you are not disclosing, you know you have the obligation, you know action will be taken on it, and the action will be taken to help somebody else or to the detriment of the employer or something like that.
Mr. Dreeben: Something like that.
Justice Stephen G. Breyer: Something like that.
So, now, I think, well, I go back to Justice Scalia's language of that statute.
And I say, oh, my goodness, why did you pick these three?
I mean, I can easily -- I make up comical examples because they illustrate the point.
Mr. Dreeben: Well, Justice Breyer, I--
Justice Stephen G. Breyer: But I don't mean them to be comical.
Look, think of a person who is really angry at his employer and he changes all the direction signs around in the building to mislead him so that the employer will miss the key meeting and make the wrong decision.
Mr. Dreeben: --Justice Breyer--
Justice Stephen G. Breyer: I mean, why not that one?
Mr. Dreeben: --I really don't think that this Court needs to worry about that as a type of honest services prosecution, because this was a defined universe of cases--
Justice Stephen G. Breyer: No, no.
That's not my point.
I don't believe the way you've interpreted the statute that you could or would -- could prosecute what I just made up as a funny example.
Mr. Dreeben: --Right.
Justice Stephen G. Breyer: But I can make up thousands of examples from the list, and I think Justice Scalia's original point was something like, well, you've taken some words, 28 words that cover 6,000 things, and out of those 6,000 things, you have picked, perhaps randomly, 3 which--
Mr. Dreeben: Well, I -- I think--
Justice Stephen G. Breyer: --you say it covers.
Mr. Dreeben: --To say that we picked them randomly--
Justice Stephen G. Breyer: No, no, you picked them -- all right.
Mr. Dreeben: --ignores the story of McNally.
And I think that if I could take a minute to walk the Court through the legal history that brought us to this, I think it would be helpful.
Before McNally, there was a body of case law that made very clear that there was a substratum fiduciary duty -- and I'll limit this to the public official context for now, because that's the most critical and important context.
If you look at the common law in every State, public officials are fiduciaries.
The core obligation of a fiduciary is the duty of loyalty, the duty not to advance your personal interests at the expense of the government who you serve.
That core understanding of the duty of loyalty informed the honest services cases that arose in the courts of appeals, and for the most part, they involved, as their core set of violations, bribes, in which somebody is selling his office, so he's clearly not serving the public; kickbacks, where the individual is profiting at the expense of the government, oftentimes in his official capacity, and sometimes not profiting at the expense of the government, because the government couldn't be harmed in a pecuniary way by the kickback; and undisclosed conflicts of interest when the official takes action to further that interest.
Justice Antonin Scalia: Why didn't Congress say that instead of -- instead of -- of setting up this mush of language that doesn't even mention McNally, does not use a phrase that any opinion pre-McNally used?
That -- that phrase does not appear, as I understand, it in any of the cases.
Mr. Dreeben: --Justice -- Justice Scalia, the phrase "intangible rights" is at the center of the McNally majority opinion.
The language "honest services" is in the McNally dissent and in many of the pre-McNally opinions.
Justice Antonin Scalia: What is a citizen supposed to do?
He's supposed to go back and read all those pre-McNally cases?
Mr. Dreeben: --Well, I--
Justice Antonin Scalia: Why would it have been so difficult for Congress to say no bribes, no kickbacks, and -- and -- and the third thing, however you want to describe it?
I mean, I think it's -- if -- if -- if you have a -- a principle that the citizen is supposed to know when he's violating a criminal statute, this is -- I mean, it is just too much.
Mr. Dreeben: --I think we would all agree, Justice Scalia, that had Congress taken your counsel, I would not be here today--
--defending what the Congress attempted to do.
But I think that Congress viewed it as a permissible and in some ways clearer way of getting to the result it wanted, to point to the body of case law with the recognition that it was understood in its core aspects to cover what I have just described.
Justice Stephen G. Breyer: I thought there was a principle that a citizen is supposed to be able to understand the criminal law that was around even before Justice Scalia.
Mr. Dreeben: --I understand that, Justice Breyer--
--but this would not -- this is not an isolated area where the Court has recognized that criminal sanctions need to take into account decisional law.
Chief Justice John G. Roberts: I thought the principle was that a citizen has to be able to understand the law, and if he can't, then the law is invalid.
Mr. Dreeben: Well, I think the principle is that the Court has recognized -- and it has done so most prominently in the Sherman Act and in the civil rights statutes, 18 U.S.C., Section 241 and 242, that these are broad statutes with general language, and in order to be made susceptible of criminal punishment, you need two things.
You need clarifying judicial decisions that articulate the rights, and you need a standard of scienter that will allow the government to convict only those people who are on fair notice and act with a -- the bad purpose--
Justice Antonin Scalia: Number one, I am -- I am not going to draw any generalities from the civil rights statutes.
I mean, this is an area unto itself, and, number two, the Sherman Act explicitly -- "explicitly" -- clearly confers upon courts a common law, a common law ability to define the crime.
And that doesn't appear from this statute.
Mr. Dreeben: --Well, I wasn't citing the Sherman Act as an example of formulating a common law of crimes, but there is only one Due Process Clause, Justice Scalia, so if it is constitutional to prosecute under the civil rights statutes and under the Sherman Act, then it is constitutional for this Court to divine from the pre-McNally case law principles and to articulate them.
Justice Stephen G. Breyer: Well, the Sherman Act criminalizes price fixing.
You see, I can say that in two words, intentional price fixing.
Do you think what we have been talking about this morning can be reduced to anything like those two words?
Mr. Dreeben: I think I've got it down to around eight.
Let me -- let me just mention, in the civil rights area, it may not answer your concerns, Justice Scalia, but I think the Court should know that, in the United States v. Kozminski, the Court recognized -- and I am going to quote here -- that,
"Congress intended the statute to incorporate, by reference, a large body of potentially evolving federal law. "
And the Court recognized that that was a dilemma because you cannot have citizens criminally prosecuted for evolving law of which the citizens have no notice.
And the Court's response was to say that, when the right has been made specific by a decision of this Court and there's the requisite level of scienter, there is no due process problem in prosecuting--
Justice Antonin Scalia: There's no such thing as a vague law, so long as this Court says, oh, what the law -- the law -- it's absolutely unclear what the law means, so long as this Court says, oh, we think the law means -- what do you want to pick -- bribery, then -- then it's okay.
Mr. Dreeben: --Justice Scalia--
Justice Antonin Scalia: Is that the system we have, that Congress can say, nobody shall do any bad things?
Mr. Dreeben: --That's not what this--
Justice Antonin Scalia: And it comes to this Court, and this Court says, bad things means bribery.
And that law is a valid law, right?
Mr. Dreeben: --That's not what this law says, and that's not what this Court has done in response to other criminal law.
Justice Antonin Scalia: The principle that you're arguing for, that -- that a law that is, on its face, inherently vague can somehow be rendered valid to the citizens by a decision of this Court?
Mr. Dreeben: But that's common.
This Court takes common law terms of art, such as fraud, and it reads into them elements that are not on their face on the basis of the common law.
Take, for example, 18 U.S.C. 1111, which is the federal murder statute.
It uses the phrase "malice aforethought".
Chief Justice John G. Roberts: Well, that's a familiar common law term.
"Honest services" is not.
Mr. Dreeben: But it is a term of art that had reference to a specific body of case law that could not have been given a higher degree of prominence than it was by this Court's decision in McNally, which acknowledged that body of law, rejected it because it said the mail fraud statute did not protect intangible rights.
Chief Justice John G. Roberts: I'm not remembering.
Was the phrase "honest services" used in Lemire?
Mr. Dreeben: I don't recall, either, Mr. Chief Justice--
Chief Justice John G. Roberts: Okay.
Mr. Dreeben: --whether the phrase--
Justice Antonin Scalia: Well, you say it was a body of law.
It wasn't about a body of law.
We said it was wrong.
So Congress is not here referring to some established common law crimes at all.
It's referring to a mistaken series of decisions by the courts of appeals.
Mr. Dreeben: --Well, I can't--
Justice Antonin Scalia: And that's quite different from -- from harking back to a common law term, such as fraud.
Mr. Dreeben: --In McNally, this Court said that body of law was not a valid implementation of the mail fraud statute, and it invited Congress to come back and legislate if it wanted to protect intangible rights, and Congress did that in a way that doesn't have the commendable clarity of the statute that you just drafted for us, Justice Scalia, but it does refer -- and I think, for those members of the Court who read legislative history, legislative history was replete with references to the key cases on which we rely here, such as United States v. Mandel and United States v. Margiotta.
And it said this is a term of art.
We know that this is a term of art.
It's been shaped by the judiciary, but it doesn't just sit there as a pre-standing duty that had no antecedents in the law whatsoever.
Justice Ruth Bader Ginsburg: --The problem is that -- that, even if the U.S. attorney got it right in the end, if the U.S. attorney could think that all that's involved is nondisclosure, even if no action is taken thereafter, the U.S. attorney could write that down twice, that suggests that this statute is open to a high degree of interpretation.
Mr. Dreeben: Well, Justice Ginsburg, I don't think that the Court should decide whether Congress validly accepted this Court's invitation to reinstate an important public corruption principle by looking to what one United States attorney, one set of federal prosecutors said in a pleading that was filed on very short notice and that was--
Justice Antonin Scalia: But it's -- it's not -- it's not just one.
One of the briefs in one or the other of these cases describes the great variety of "pushing the envelope" prosecutions that the Justice Department has, indeed, pursued, and they are all over the place.
And if the Justice Department can't figure out what -- what is embraced by this statute, I don't know how you can expect the average citizen to figure it out.
Mr. Dreeben: --Well, this body of law evolved post-McNally, without this Court's intervention and guidance to provide clarification.
I think that the core understanding of what honest services is may have been strayed from in some of those cases, and some courts of appeals affirmed it.
That doesn't mean that the statute is vague.
This Court accepted review in Cleveland v. United States because the courts of appeals were divided on whether defrauding a government agency of a license constituted a deprivation of money or property.
The U.S. attorneys on one side of the split were very aggressively pushing that theory.
This Court held that it wasn't a valid interpretation.
I think that it's the role of this Court and the -- within the proper disposition of this Court's authority to attempt to figure out what Congress did, and then to implement it in accordance with doctrines that are standard tools of the trade here -- rule of lenity, concerns about federalism -- and recognize that there is a core that Congress was looking at in the pre -- McNally cases, and that that core can be implemented consistent with concerns about notice and clarity of definition, without either creating a statute that is totally freeform or without invalidating Congress's effort to respond to the Court's invitation in McNally.
And, if I could turn to the question presented in this case, which is whether State law duties need to be violated, State law disclosure obligations need to be violated in order to sustain a valid mail fraud prosecution.
The pre-McNally cases and McNally itself answers that because, in the McNally decision, this Court acknowledged that the government's theory of prosecution was that McNally and his cohorts were accepting kickbacks in the form of commissions on insurance contracts.
And the courts recognized that the government's theory was they failed to disclose their interest to persons in State government who were in a position to take action with respect to that information.
And the Court specifically said: We should assume that there was no violation of any State law obligations in holding those interests or no violation of any State law duty to disclose.
That was the theory of prosecution that the Court recognized the government was pursuing, and it was entirely consistent with the pre-McNally cases, Mandel and Margiotta, which were repeatedly cited in the legislative history.
And I won't take the Court's time to read language -- we've cited it in our brief -- where those cases clearly said no State law duty was required to be breached in order to state a prosecution.
There is still protection in this statute against prosecutions of citizens without notice because, as I said earlier, the government has to prove a violation of the duty to disclose by the officials taking action to further his undisclosed personal interest, and the citizen cannot be prosecuted and convicted without the government being able to show that he knew that he was violating a duty to disclose.
Justice Stephen G. Breyer: Well, let me ask a quick question here.
I notice, in the Skilling case, the first question is whether the statute requires the government to prove the defendant's conduct was intended to achieve private gain, et cetera, and if not, whether the statute is unconstitutionally vague.
Now, does that first question give the government an opportunity sufficient to say whatever it wants in its brief about the constitutional question?
Mr. Dreeben: Justice Breyer, until Mr. Skilling files his brief and explains the kind of argument that he wants to make, I can't answer you that question.
All I know is that in one of--
Justice Stephen G. Breyer: All right.
So we could assume that, if you need time, at that time, you could ask for whatever you wanted to ask for?
Mr. Dreeben: --Certainly.
And I don't -- the government is not shying away from the question of vagueness.
The question of vagueness has been raised by members of this Court as a legitimate concern.
I think it's a legitimate concern.
That is why the government has offered to this Court a theory based on the prototypical and paradigm pre-McNally cases that explains what Congress said when it effectively pointed at that body of law and said those are the intangible rights that we want to protect.
Justice Antonin Scalia: I have one--
Justice John Paul Stevens: May I ask you this question?
You -- you have described the issue in this case as not merely a nondisclosure, but as you spell it out, it seems to me it is actually a quid pro quo theory.
Mr. Dreeben: It doesn't have to be quid pro quo, Justice Stevens, because even if Mr. Weyhrauch had not made an agreement with VECO that he was going to vote the way that VECO wanted him to, and the government does allege that, but even if he didn't do that, he knew that he had a personal financial interest in securing employment with VECO--
Justice John Paul Stevens: Yes, but you say that in order for the violation to be complete, he must follow up by voting in the interest of the company rather than the polls?
Mr. Dreeben: --He has to take official action.
That's where the breach of his duty and loyalty--
Justice John Paul Stevens: And it has to be a specific kind of official action.
Mr. Dreeben: --Official action that furthers his undisclosed interest.
And to criminally prosecute him, he has to know that's what he is doing, and just to top it off, there are materiality ingredients both in the conflict of interest and in the implied misrepresentation of--
Justice Antonin Scalia: --You -- you say he violated State law?
I -- I thought that the -- that the court found that he didn't.
You say he violated State law when he voted.
Mr. Dreeben: --Substantive State law prohibited him from taking official action with respect to a company whose interests would be benefited when he was negotiating employment--
Justice Antonin Scalia: I thought they -- I thought it was accepted in this case that -- that there was no violation of Alaska law.
Mr. Dreeben: --It's accepted Justice Scalia that there's no duty to disclose under State law.
Justice Antonin Scalia: I -- I see.
Mr. Dreeben: That is solely what Petitioner argues as being the deficiency in the government's case; there's no State law duty to disclose.
Justice Antonin Scalia: Right.
Mr. Dreeben: My response is naturally there's no duty under State law to disclose as a matter of express State law.
Justice Antonin Scalia: Well, even--
Mr. Dreeben: State laws prohibit--
Justice Antonin Scalia: --Even after he discloses he still couldn't vote that way, so he's supposed to vote against it even though he thinks it's a good thing for the State to do?
Mr. Dreeben: --He's supposed to abstain.
When he has a conflict of interest, he is supposed to note that conflict and he's supposed to abstain.
And we argued--
Chief Justice John G. Roberts: Well, what if a public official -- you said in response to Justice Stevens that this actionable conduct has to benefit the defendant's interest.
What if his interest is a particular policy contrary to that of his employer?
In other words, he is a subordinate official.
His employer says, I want you to do this and this to advance our policy.
He doesn't like the policy, so he does something you can characterize as dishonest that undermines the policy or advanced a different policy that he agrees with.
Mr. Dreeben: --That's not the sort of theory of honest services that we're arguing for, Mr. Chief Justice.
Chief Justice John G. Roberts: Why?
Because it doesn't involve tangible--
Mr. Dreeben: A personal, conflicting financial interest.
It may involve--
Chief Justice John G. Roberts: --Financial.
Mr. Dreeben: --That's right.
Chief Justice John G. Roberts: It has to involve financial--
Mr. Dreeben: That's right.
These -- the core of public corruption is about adverse pecuniary interests or benefits that an official is taking at the expense of the citizenry by virtue of his position.
Chief Justice John G. Roberts: --Well, where does the right to honest services say "financial"?
Mr. Dreeben: I think it says it, Mr. Chief Justice, by looking at the body of case law that involved violations of the right of honest services and seeing that that's what the government was after, personal conflicting financial interests.
And this is not a subtle or obscure principle of fiduciary law -- if I might finish my last sentence.
Chief Justice John G. Roberts: Yes.
Mr. Dreeben: This is a bedrock principle of the common law that exists in all 50 States, and the mistake that the lower courts made in the pre-McNally era was in thinking that the mail fraud statute protected it, but there was no obscurity whatsoever that the fiduciaries owe an obligation of undivided loyalty to their principal.
That's what this statute is about.
Chief Justice John G. Roberts: Thank you, counsel.
Now, Mr. Ayer, you have 3 minutes remaining.
REBUTTAL ARGUMENT OF DONALD B. AYER ON BEHALF OF THE PETITIONER
Mr. Ayer: Thank you, Your Honor.
I have four quick points I'd like to make.
The first one is that McNally is a case -- there were issues about the jury instructions, but the basic fact pattern was clear.
It was a kickback scheme.
It was illegal under the Kentucky constitution.
There's no question that if it were charged properly, it could be convicted, and that's clear I think at page 11 of our yellow brief.
The second point I want to make is that this talk about whether or not Petitioner violated the statute about voting when he was in negotiations -- number one, the first answer to that is the government is perfectly free to prove that case if they want to; that's not before the Court.
That's -- that's a different theory that they can pursue.
It's not the disclosure theory.
But just by the way, he didn't violate it, and the reason he didn't violate it, particularly in light of what Mr. Dreeben has said -- first of all we don't think he was in negotiations.
He sent a letter.
There was never an offer either way.
There weren't negotiations, and that's been something that has been talked about in the court.
Secondly, he voted; when he voted he actually ended up voting twice on the bill in a form that -- that VECO didn't want.
So he actually -- and I learned today -- and this is all, you know, shifting sands -- that he has to have voted for the -- the way that the conflicting interest would have had him vote.
So there's not, I think, a problem there.
If they want to pursue that, go to it.
They have every right to.
Justice John Paul Stevens: You're saying that you'll win on the facts, not the theory.
Mr. Ayer: Yes.
Yes, and they have the right--
Justice John Paul Stevens: But that's not what we have to decide.
Mr. Ayer: --to pursue it.
And -- and the third point I want to make is -- is that there is absolutely no doubt about this question with regard to what -- what the issue was in the court below.
And I would simply direct a few references to the -- and I'll read them very quickly.
But 23a -- these are all the district court opinion: 23a, the district court says he is dealing with the more general proposition -- the government's more general proposition -- that honest services fraud may be proved by showing a violation of the duty to disclose.
Then on 29a, the district court says
"the proposition advanced by the United States, that honest services may be proved by establishing that a public official knowingly concealed a conflict of interest. "
Then, on 36a, at the end the court says, you can bring any other theory you want other than the nondisclosure theory.
Now, did the government object?
Did the government at any time say, oh, no, that's not our theory?
They didn't; they adopted that, and that's the theory they argued on appeal in the Ninth Circuit.
And that's exactly the theory that the Ninth Circuit talked about when it has these two forms of core conduct, one of which is -- is the conduct about failing to disclose material information, period.
Not in doing anything else, just failing to disclose material information re a conflict.
Finally, the government in this Court has itself argued the case in a way that I think concedes the point.
And -- and that is, essentially, if you look at the main heading in their brief on page 13, their point is -- they finally say this, and then I think they contradict themselves elsewhere, but they say in their heading a
"State official's violation of the honest services statute by taking official action while intentionally concealing a material conflict of interest. "
No action for--
Justice John Paul Stevens: May I ask this question?
We might then say the theory that they described there is inadequate.
But would we then send the case back and say decide it on the theory that Mr. Dreeben has explained today?
Mr. Ayer: --No, I think they made their argument.
They lost in the trial court.
They are pursuing this extreme, overreaching theory that -- that they only can get to by the -- by the extravagant language in the -- in the pre-McNally cases.
Thank you, Your Honor.
Chief Justice John G. Roberts: Thank you, counsel.
The case is submitted.
Unidentified Justice: The Honorable Court is now adjourned until tomorrow at 10 a.m..
Justice Sonia Sotomayor: Finally, I announced the decisions in numbers 08-1196 Weyhrauch v. United States.
In this case the court states unanimously and per curium, the judgment is vacated and the case is remanded to the United States, Court of Appeals for the Ninth Circuit for further consideration in light of Skilling v. United States.