In Kelly v. United States, 590 U.S. — (May 7, 2020), the Supreme Court recently reversed the federal fraud convictions of former public officials Bridget Kelly and William Baroni arising out of the Bridgegate scandal.  The decision limits the applicability of the federal wire fraud statute to public corruption, and it will affect how such cases are investigated and tried in the future.

What Happened

As Justice Kagan’s opinion for a unanimous Court recounts, in 2013, Kelly—then the deputy chief of staff to New Jersey Governor Chris Christie—and Baroni—the second in command at the Port Authority of New York and New Jersey (the top appointee to that agency by New Jersey)—arranged to reduce the number of lanes reserved for traffic from Fort Lee to Manhattan across the George Washington Bridge. They claimed that the reduction was for a traffic study, and employees of the Port Authority carried it out for four days, causing traffic that delayed school buses and ambulances, along with everyone else. A federal grand jury, however, alleged that their true motivation was political payback, a punishment for the mayor of Fort Lee’s refusal to support Governor Christie’s reelection bid. Kelly and Baroni were charged with wire fraud, fraud against federally funded programs, and conspiracy to commit those crimes, among other offenses, and they were convicted after a jury trial.

Abuse of Power Versus Fraud

Although the Supreme Court characterized this conduct as an abuse of power, it held that Kelly and Baroni had not committed federal wire fraud or fraud against a federally funded program because both laws criminalize schemes to obtain money or property—and the defendants here sought political punishment, not property. The government had advanced two theories in support of a contrary conclusion. One was that the scheme amounted to commandeering two lanes of a bridge, thus obtaining property. Pointing out that the defendants hadn’t walked away with the lanes or converted them to a nonpublic use, the Court reasoned that the lane-reduction decision was a regulatory one—albeit for bad reasons and through lies—not a taking of property.

The government’s second theory was that the defendants had obtained the intangible property of the efforts of Port Authority employees who unknowingly carried out the scheme. But obtaining that property was not an object of the fraud, the Court ruled. It was an incidental byproduct of the defendants’ regulatory object. In so holding, the Court contrasted the facts at issue with a case where a public official uses deception to get on-the-clock government employees to work on outside projects for his personal benefit—say, renovating his daughter’s home. Those kinds of facts could support a wire fraud conviction against a public official because the object of the scheme is to obtain the employees’ time and labor. Here, on the other hand, the employees’ time and labor was a means to the end of shutting down lanes to punish a mayor politically. In rejecting both of the theories advanced by the government, the Court relied principally on Cleveland v. United States, 531 U.S. 12 (2000).

Unanimous Supreme Court opinions have a way of making conclusions look obvious that were anything but beforehand. Not only did the U.S. Attorney’s Office think the theory of intangible property rights was sufficient in this case, so did the district judge, United States Court of Appeals for the Third Circuit, and the current Solicitor General. Supreme Court review of a criminal case like this is very much the exception, not the rule.

Substantively, the Kelly decision does cut back somewhat on federal prosecutors’ ability to use wire fraud in charging public corruption. It gives additional force to arguments that the use of public employees’ time and labor must be an object of the scheme, not incidental to it. But it does not cut back that statute in nearly the way that Skilling v. United States, 561 U.S. 358 (2010), narrowed the construction of honest services fraud. (Note that Kelly and Baroni were not charged with honest services wire fraud, presumably because their conduct involved neither bribes nor kickbacks—which Skilling held the statute to require.) As noted, the Court provided several examples where the misappropriation of public employees’ time or labor would support a wire fraud charge. Savvy agents and prosecutors will undoubtedly look to tailor investigations and draft charges so that they are closer to fact patterns that the Court approved. Future cases will determine how many shades of grey are between the two.

Lessons for the Future

The decision also points to some possible tactical implications for both prosecutors and defense counsel. One was explicit in the opinion: the Court said that “federal fraud law leaves much public corruption to the States” and cited a potentially applicable New Jersey statute. In this context as in so many others, collaboration between federal, state, and local prosecutors can reach more conduct than any one alone. From a defense perspective, the case highlights the virtue in challenging the legal theory behind a prosecution early and often. At the Supreme Court this wasn’t really a case about what the evidence showed; the Court’s conclusion was that the evidence showed everything the prosecutors said it would—and that did not amount to a federal crime.

Kelly and Baroni had challenged the theory of the case against them by motion before trial, and they raised at least a variant of the ultimately winning argument again at the Rule 29 stage and again on direct appeal. That solid foundation in the record is often helpful in appellate advocacy. It was certainly necessary in securing review and reversal in the Supreme Court in this case. And the decision will likely be helpful to future defendants seeking to dismiss charges pretrial by challenging the theory of the case against them.