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  • My Legal Analysis of What is Going on with FBI/DOJ Investigations

    . . . Or, How Federal Prosecutors and the FBI are Seeking to Transform NCAA Violations Into Criminal Misconduct

    As some of you may know, my day job is being a litigator in Manhattan. I don't do criminal work; but I know the reputation of the U.S. Attorneys' Office for the Southern District of New York, and have dealt with that office in civil cases.

    It is an office well-known for taking on high profile cases. Indeed, no prosecutor's office in the world is more renown on that score. The Southern District has a well-earned reputation for pushing novel legal theories in order to secure high profile convictions. The prosecutors who work in that Office ultimately, after they have made their bones, tend to graduate to positions as high-paid partners at prestigious law firms.

    PART ONE: THE CHARGE

    The central federal statute that the defendants in these cases have been charged with violating is 18 U.S.C. § 666. For your convenience, I will paste the full text of the statute below:


    (a)Whoever, if the circumstance described in subsection (b) of this section exists—
    (1)being an agent of an organization, or of a State, local, or Indian tribal government, or any agency thereof—
    (A)embezzles, steals, obtains by fraud, or otherwise without authority knowingly converts to the use of any person other than the rightful owner or intentionally misapplies, property that—
    (i) is valued at $5,000 or more, and
    (ii) is owned by, or is under the care, custody, or control of such organization, government, or agency; or
    (B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving any thing of value of $5,000 or more; or
    (2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more;


    shall be fined under this title, imprisoned not more than 10 years, or both.

    (b) The circumstance referred to in subsection (a) of this section is that the organization, government, or agency receives, in any one year period, benefits in excess of $10,000 under a Federal program involving a grant, contract, subsidy, loan, guarantee, insurance, or other form of Federal assistance.

    (c) This section does not apply to bona fide salary, wages, fees, or other compensation paid, or expenses paid or reimbursed, in the usual course of business.

    (d) As used in this section—
    (1) the term “agent” means a person authorized to act on behalf of another person or a government and, in the case of an organization or government, includes a servant or employee, and a partner, director, officer, manager, and representative;

    (2) the term “government agency” means a subdivision of the executive, legislative, judicial, or other branch of government, including a department, independent establishment, commission, administration, authority, board, and bureau, and a corporation or other legal entity established, and subject to control, by a government or governments for the execution of a governmental or intergovernmental program;

    (3) the term “local” means of or pertaining to a political subdivision within a State;

    (4) the term “State” includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States; and
    (5) the term “in any one-year period” means a continuous period that commences no earlier than twelve months before the commission of the offense or that ends no
    later than twelve months after the commission of the offense. Such period may include time both before and after the commission of the offense.


    The key thing to note here is that this statute is incredibly broad. It was enacted 70 years ago. Perhaps back then there simply weren't that many organizations in America which received more than $10,000 per year from the federal government. But, today, there are thousands, if not tens of thousands.


    PART TWO: THE LEGAL THEORY TO MAKE NCAA VIOLATIONS CRIMINAL

    The theory which the U.S. Attorneys' Office in the Southern District of New York has adopted for this case is that since essentially every college or university in the country receives in excess of $10,000 from the government of the United States, then every employee of every college is covered under the statute .... even if the alleged payment made has nothing to do with federal money.

    In other words, applying the theory set forth here, a university donor, and university employees, could be found criminally liable under this statute if the donor were to receive, in exchange for his or her donation, the family's name on a building or preferred admission for a play member. Routine donations could get swept up under this theory.

    But how could this be? Was the statute really intended for this purpose?

    It turns out, the answer is a clear: "No!"

    The legislative history of 18 USC § 666 is clear on its purpose, set forth on the U.S. Attorneys' own website, could not be more clear:

    The Senate Report states that 18 U.S.C. § 666 was 'designed to create new offenses to augment the ability of the United States to vindicate significant acts of theft, fraud, and bribery involving Federal monies that are disbursed to private organizations or state and local governments pursuant to a Federal program. (emphasis mine)'"
    As is self-obvious from reading the criminal complaints in these cases, there is no allegation that any of the bribery charges involve actual payment or disposition of federal money. So what the heck is going on here?

    The answer is the Southern District of New York U.S. Attorneys' Office has come up with a brand new legal theory on how to apply that statute -- and that theory involves taking the rules and By-Laws of the NCAA -- a private, non-profit organization -- and contorting them so that they can be applied as if they were federal statutes.

    The legal theory derives from the element of 18 USC § 666 requiring solicitations and payments (i.e., bribes) to be "corrupt": "corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person . . . ." 18 USC § 666 (a)(1)(B).

    From the text of the Complaints, it is plain that the U.S. Attorneys' Office seeks to differentiate payments made to college assistants and players from, for example, those made by fat cat donors by claiming that the payments involving college coaches and players are "corrupt." And, how do the US Attorneys seek to establish this "corrupt" element? By allege that these payments involving college coaches and players violate NCAA By-Laws, compromises the eligibility of student-athletes and places the universities at risk of NCAA sanctions.

    Don't believe me? Read the text of the Complaints. It's right there n black and white ... and could not be more clear.

    Thus, what is central to the allegation of criminal activity in these cases -- the sine qua non which makes the alleged conduct illegal -- is the violation of NCAA rules.

    In other words, these federal prosecutors have taken a 70-year-old statute, which was intended to prevent bribery in the disposition of federal grants and programs, and contorted in such a way that violations of NCAA By-Laws are implicitly codified under federal criminal law.



    PART III: A DUBIOUS LEGAL THEORY FROM AN OFFICE KNOWN FOR PUSHING THE ENVELOPE

    Suffice it to say, 18 USC § 666 was never intended for this purpose. Not only do we have a statement of intent in the Senate Report, but we also have many court decisions discussion the scope of the statute. Some of those decisions are: United States v. Frega, 933 F. Supp. 1536 (S.D. Cal. 1996); United States v. Cicco, 938 F.2d 441 (3d Cir. 1991); and United States v. Roberts, 28 F. Supp.2d 741(E.D.N.Y. 1998).

    The cases make clear that, in order to be held criminally liable under 18 USC § 666, there must be some nexus between the federal funds and the bribery/payments. In other words, the bribery must involve the federal money in some way. Clearly, that is not the case with these basketball programs. Indeed, the fact that universities receive federal funding is entirely incidental to their sports programs. Those sports programs in almost all cases, in fact, predated any federal money going into the university.

    By eliminating the required nexus between the bribery and federal money as an element of the crime, the U.S. Attorneys' legal theory would, in principle, sweep up all sorts of other payments . . . so long as they were at least $5,000 in value. Thus, beyond quid pro quos with donations being illegal, activities like sponsoring university faculty for an event or symposium, mandating that students use the professor's textbook for a class, and paying faculty or administration to sit on a board of trustees or directors would all theoretically be illegal -- if more than $4,999.99 -- and the activity was outside "the ordinary course of business" -- a term of art that takes on quite the special meaning if this statute were applied in such a way so as to remove the nexus with federal monies.



    PART IV: OBSCURED BY BUZZ WORDS

    This is probably a good time for me to admonish readers not to pay attention to attention-seekers who throw out buzz words like "wire fraud," "bribery" and "money laundering." I have read all three criminal complaints, and none of them involve conventional understandings of those crimes. Wire fraud and money laundering are easy to dispense with. The term "wire fraud" does not really involve conventional notions of fraud. Historically, "fraud" involved a misrepresentation offered to someone in order to induce the transfer or payment of something of value; a paradigm case is exchanging a bogus deed for money. Unfortunately, when Congress passed the mail and wire fraud statutes, they were written in such a way so as to encompass many of types of arguably immoral conduct which utilized the mail and/or federal communication wires, even though alleged schemes did not necessarily involve defrauding people out of money. Certainly, in the three complaints filed on Tuesday, there is no allegation that anyone was defrauded out of any money.

    As to "money laundering," while not part of the complaints in these cases, I have read various people argue that the clandestine payments somehow constituted an illicit funneling scheme or a conspiracy to evade taxes. The plain truth is that paying people in cash, even secretly, is still legal in this country. Money laundering involves taking money procured from illegal means -- typically either stolen or a product of vice -- and transferring it through various account vehicles in order for the money to have the appearance of legitimate business. That, of course, has nothing to do with the allegations here. Nor is there any merit to the tax evasion claims. Monies transferred over the summer don't have to be reported, at the earliest, until April 2018.

    Finally, let's discuss bribery. Historically, bribery, as a criminal act, had to involve payments to either government officials or people who controlled government monies. This ties directly into the concept of rent-seeking, to wit: seeking to implement laws and regulations in order to derive economic gain without providing corresponding benefits to society. A paradigm case of rent-seeking is for an existing business to convince the government to impose licensing on new providers the business's competitors. Money or benefits given to convince the rule-makers to enact such a licensing requirement would be a common law bribe.

    Given money to a private person in order to derive an economic advantage is not historically considered a bribe, but a commission or a fee. For example, the monies paid to a realtor in order to facilitate a real estate transaction, or given to a person who identifies possible investors, or handed to employees who bring in new business tend to be referred tend to be referred to as fees or commissions, not bribes.

    * * * MORE TO COME * * *
    Last edited by chaseinmanhattan; 09-27-2017, 06:30 PM.

  • #2
    Cliffhanger, you tease!

    Comment


    • #3
      Interesting stuff. Did seem like a major overreach by FBI. I understand if a public university is using taxpayer dollars to pay players, that’s an issue. What was unclear to me was why the FBI should care if a private individual decides to try and bribe college players / coaches using private funds. Obviously an NCAA issue but doesn’t seem like a federal issue.

      Comment


      • #4
        What I took away from what Chase is saying is that there are much bigger fish to fry. Maybe it's the shoe companies, the University's, or even the NCAA. This office doesn't care about a dumb agent or assistant coach. They want to build a case that takes someone very big down. And that may be the shoe companies.

        Comment


        • #5
          Chase - just to confirm the $$ amount that causes it to be a crime is anything above $5k?

          Comment


          • #6
            Originally posted by TrojanMindSC View Post
            Chase - just to confirm the $$ amount that causes it to be a crime is anything above $5k?
            Correct.

            Comment


            • #7
              Thanks very much for pulling this together. My dime store summary would be:

              Ambitious prosecutors got their hands on a guy who, to semi save his own hide, offered to help them in the world of college sports
              Ambitious prosecutors, being ambitious, see this as a great way to make their mark
              Ambitious prosecutors then need to come up with a way to a make this stuff illegal
              Ambitious and creative prosecutors come up with what Chase has described, and away we go.

              I am interested to see you next installment on the bribery aspect. As you said, Bland getting money from someone to steer potential clients their way sounds way more like a sales commission than a bribe.

              Comment


              • #8
                I think one of the scary things so far about this is the wide range of schools so far. Different shoe schools, different conferences, etc. So far: USC, Arizona, OK State, Louisville, Miami, Auburn, and Alabama. Only the Big10 is clean out of the Big 5. These 7 schools are some very big hitters. I think this number could grow very quickly and you could be looking at 20-30 schools or even more.

                Comment


                • #9
                  Im just hoping the guys from westwood get in on this too. Tired of them getting away with all of their crap.

                  Comment


                  • #10
                    Where to begin with this. So much wrong. I'm a member of BRO and spend most of my time on the premium board behind the paywall. But I noted your invitation below so I thought I would take you up on it.

                    Originally posted by chaseinmanhattan View Post
                    . . . Or, How Federal Prosecutors and the FBI are Seeking to Transform NCAA Violations Into Criminal Misconduct

                    As some of you may know, my day job is being a litigator in Manhattan. I don't do criminal work; but I know the reputation of the U.S. Attorneys' Office for the Southern District of New York, and have dealt with that office in civil cases.

                    My job for 23 years was as a federal prosecutor. I'm now in private practice doing plaintiff's litigation and some criminal defense work.

                    It is an office well-known for taking on high profile cases. Indeed, no prosecutor's office in the world is more renown on that score. The Southern District has a well-earned reputation for pushing novel legal theories in order to secure high profile convictions. The prosecutors who work in that Office ultimately, after they have made their bones, tend to graduate to positions as high-paid partners at prestigious law firms.

                    There's nothing novel about the theory upon which they are basing their Sec. 666 claims -- if you understand the statute, its history, and the case law that has been relatively consistent and non-controversial for almost four decades.

                    PART ONE: THE CHARGE

                    The central federal statute that the defendants in these cases have been charged with violating is 18 U.S.C. § 666. For your convenience, I will paste the full text of the statute below:




                    [SIZE=16px]The key thing to note here is thatthis statute is incredibly broad. It was enacted 70 years ago. Perhaps back then there simply weren't that many organizations in America which received more than $10,000 per year from the federal government. But, today, there are thousands, if not tens of thousands.[/SIZE]

                    Yes, the statute is incredibly broad -- that's the way Congress wrote it, and Courts -- including the Supreme Court -- have noted how broad the language is in upholding its application in a myriad of different prosecutorial contexts.

                    It is not 70 years old. Sec. 666 was first enacted in 1984, and its been amended 3 times -- 1986, 1990, and 1994. It is considered a companion statute to 18 USC Sec. 201, which basically covers the same kinds of activities, except 201 is limited to federal officials and employees. Sec. 666 was intended to reach state and local officials, and anyone who works for an enterprise that receives federal money.

                    Sec 201 was created by Congress in 1962 -- so that statute is 55 years old.


                    PART TWO: THE LEGAL THEORY TO MAKE NCAA VIOLATIONS CRIMINAL

                    [SIZE=16px]The theory which the U.S. Attorneys' Office in the Southern District of New York has adopted for this case is that since essentially every college or university in the country receives in excess of $10,000 from the government of the United States, then every employee of every college is covered under the statute .... even if the alleged payment made has nothing to do with federal money.

                    That's right -- every college that receives more than $10,000 (let's skip the issue of the time frame and how its determined) is subject to the prohibitions and penalties of Sec. 666.

                    I believe there are only 2 colleges in the country that purposely take no federal money -- Hillsdale College is one, and I can't remember the other. The purpose for not doing so is to avoid being ensnared by these types of federal laws.


                    In other words, applying the theory set forth here, a university donor, and university employees, could be found criminally liable under this statute if the donor were to receive, in exchange for his or her donation, the family's name on a building or preferred admission for a play member. Routine donations could get swept up under this theory.

                    No, that's incorrect. The statute has an element of the offense in a quid pro quo arrangement that in committing the action alleged to be a crime, the defendant must have acted "corruptly". We'll get to that in a bit. A donor who is given the honor of having a building named after them is not acting "corruptly".

                    But how could this be? Was the statute really intended for this purpose?

                    It turns out, the answer is a clear: "No!"

                    The legislative history of 18 USC § 666 is clear on its purpose, set forth on the U.S. Attorneys' own website, could not be more clear
                    :


                    A Senate Report doesn't speak for the House of Representatives, and it doesn't speak for the President who signed the bill into law. It speaks for the author of the report, and in most instances the Reports do not identify the Senators who author them. Nor does it speak for each and every Senator who voted Aye. That's why legis history is not considered when the text of the statute is not ambiguous.

                    Sec. 666 has been the subject of scholarly debate over whether, as drafted, it constitutes and overcriminalization of federal law. Does it reach conduct that wisdom might caution against extending federal law to cover. I happen to sympathize with that point of view, but that doesn't mean Congress didn't have the authority to write Sec. 666 just as they did, or that the use of Sec. 666 in an aggressive and expansive fashion is inappropriate.


                    The is legislative history supports the proposition that Sec. 666 was not meant to be a general "anti-corruption" statute -- but Courts have noted that because of the language of the statute, that's exactly what Congress created. If Congress is unhappy with how the Executive has made use of a very broadly worded law, Congress can change the language. So far, they have failed to do so.


                    As is self-obvious from reading the criminal complaints in these cases, there is no allegation that any of the bribery charges involve actual payment or disposition of federal money. So what the heck is going on here?

                    That's because the US Supreme Court has expressly held that the statute does not require that the funds involved in the alleged criminal transaction be federal moneys. That was an issue that was aggressively litigated by the criminal defense bar across the US, and the matter was put to rest by the US Supreme Court in Salinas v. US, 522 US 22, (1997). There the Court dealt with the question of whether Sec. 666 required the Gov't to prove that the bribe in some way involved or affected federal funds. A unanimous Court ruled "The enactment's expansive, unqualified language, both as to the bribes forbidden and the entities covered, does not support the interpretation that federal funds must be affected to violate § 666(a)(1)(B). Subject to the $5,000 threshold for the business or transaction in question, the statute forbids acceptance of a bribe by a covered official who intends "to be influenced or rewarded in connection with any business, transaction, or series of transactions of [the defined] organization, government or agency." § 666(a)(1)(B). The prohibition is not confined to a business or transaction which affects federal funds."

                    So much for that point.


                    The answer is the Southern District of New York U.S. Attorneys' Office has come up with a brand new legal theory on how to apply that statute -- and that theory involves taking the rules and By-Laws of the NCAA -- a private, non-profit organization -- and contorting them so that they can be applied as if they were federal statutes.

                    The legal theory derives from the element of 18 USC § 666 requiring solicitations and payments (i.e., bribes) to be "corrupt": "corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person . . . ." 18 USC § 666 (a)(1)(B).

                    From the text of the Complaints, it is plain that the U.S. Attorneys' Office seeks to differentiate payments made to college assistants and players from, for example, those made by fat cat donors by claiming that the payments involving college coaches and players are "corrupt." And, how do the US Attorneys seek to establish this "corrupt" element? By allege that these payments involving college coaches and players violate NCAA By-Laws, compromises the eligibility of student-athletes and places the universities at risk of NCAA sanctions.

                    Don't believe me? Read the text of the Complaints. It's right there n black and white ... and could not be more clear.

                    Thus, what is central to the allegation of criminal activity in these cases -- the sine qua non which makes the alleged conduct illegal -- is the violation of NCAA rules.

                    In other words, these federal prosecutors have taken a 70-year-old statute, which was intended to prevent bribery in the disposition of federal grants and programs, and contorted in such a way that violations of NCAA By-Laws are implicitly codified under federal criminal law.[/SIZE]

                    Ummmmmm -- No.

                    This investigation is in the 2nd Circuit. This is how the 2nd Circuit considers the "corruptly" element of the statute:
                    As is evident in many of our cases dealing with bribery, a fundamental component of a "corrupt" act is a breach of some official duty owed to the government or the public at large. In United States ex rel. Sollazzo v. Esperdy, 285 F.2d 341 (2d Cir.), cert. denied, 366 U.S. 905, 81 S.Ct. 1049, 6 L.Ed.2d 204 (1961), we said that "[b]ribery in essence is an attempt to influence another to disregard his duty while continuing to appear devoted to it or to repay trust with disloyalty." Id. at 342. Similarly, in United States v. Jacobs, 431 F.2d 754 (2d Cir.1970), cert. denied, 402 U.S. 950, 91 S.Ct. 1613, 29 L.Ed.2d 120 (1971), we pointed out that "[t]he evil sought to be prevented by the deterrent effect of [the bribery statute] is the aftermath suffered by the public when an official is corrupted and thereby perfidiously fails to perform his public service and duty." Id. at 759. Finally, in United States v. Zacher, 586 F.2d 912 (2d Cir.1978), we recognized that "[t]he common thread that runs through common law and statutory formulations of the crime of bribery is the element of corruption, breach of trust, or violation of duty." Id. at 915.

                    The reference to the NCAA rules and regulations is to establish that by taking the bribes as alleged, the assistant coaches violated the duties to their school and the NCAA that they had agreed to abide by. They willingly took on an obligation to act in a certain manner, and then in exchange for money they disregarded that obligation. That establishes the "corrupt" element in the conduct. Taking the money is the actus rea. Violating the duty freely taken is the mens rea.


                    PART III: A DUBIOUS LEGAL THEORY FROM AN OFFICE KNOWN FOR PUSHING THE ENVELOPE

                    Suffice it to say, 18 USC § 666 was never intended for this purpose. Not only do we have a statement of intent in the Senate Report, but we also have many court decisions discussion the scope of the statute. Some of those decisions are: United States v. Frega, 933 F. Supp. 1536 (S.D. Cal. 1996); United States v. Cicco, 938 F.2d 441 (3d Cir. 1991); and United States v. Roberts, 28 F. Supp.2d 741(E.D.N.Y. 1998).

                    Please please tell me you make more of an effort on behalf of clients who pay you. Two district court opinions and a Circuit Court decision from 1991?

                    Couldn't you find Salinas v. US, Fischer v. US, or Sabri v. US -- three US Supreme Court cases within the past 20 years, all of which address issues surrounding the aggressive application of Sec. 666, including some of the points made by you. And every case upheld the theory of prosecution pursued by the government.


                    The cases make clear that, in order to be held criminally liable under 18 USC § 666, there must be some nexus between the federal funds and the bribery/payments.

                    No. Justice Kennedy said so for a unanimous Court in Salinas.

                    In other words, the bribery must involve the federal money in some way.

                    Saying it over and over doesn't make it true. "The prohibition [on bribery] is not confined to a business or transaction which affects federal funds." Anthony Kennedy, 1997.

                    Clearly, that is not the case with these basketball programs. Indeed, the fact that universities receive federal funding is entirely incidental to their sports programs. Those sports programs in almost all cases, in fact, predated any federal money going into the university.

                    And this fact has absolutely no limiting effect on what Congress can do. As an enterprise, universities receive federal funds. That allows Congress to impose rules on those enterprises. "
                    Money is fungible, bribed officials are untrustworthy stewards of federal funds, and corrupt contractors do not deliver dollar-for-dollar value. Liquidity is not a financial term for nothing; money can be drained off here because a federal grant is pouring in there..... The power to keep a watchful eye on expenditures and on the reliability of those who use public money is bound up with congressional authority to spend in the first place...
                    Justice David Souter. Sabri v. United States, 2000.

                    By eliminating the required nexus between the bribery and federal money as an element of the crime, the U.S. Attorneys' legal theory would, in principle, sweep up all sorts of other payments . . . so long as they were at least $5,000 in value. Thus, beyond quid pro quos with donations being illegal, activities like sponsoring university faculty for an event or symposium, mandating that students use the professor's textbook for a class, and paying faculty or administration to sit on a board of trustees or directors would all theoretically be illegal -- if more than $4,999.99 -- and the activity was outside "the ordinary course of business" -- a term of art that takes on quite the special meaning if this statute were applied in such a way so as to remove the nexus with federal monies.


                    Sophistry and nonsense. None of that is "corrupt" in that it violates a duty freely accepted.


                    PART IV: OBSCURED BY BUZZ WORDS

                    This is probably a good time for me to admonish readers not to pay attention to attention-seekers who throw out buzz words like "wire fraud," "bribery" and "money laundering." I have read all three criminal complaints, and none of them involve conventional understandings of those crimes. Wire fraud and money laundering are easy to dispense with. The term "wire fraud" does not really involve conventional notions of fraud. Historically, "fraud" involved a misrepresentation offered to someone in order to induce the transfer or payment of something of value; a paradigm case is exchanging a bogus deed for money. Unfortunately, when Congress passed the mail and wire fraud statutes, they were written in such a way so as to encompass many of types of arguably immoral conduct which utilized the mail and/or federal communication wires, even though alleged schemes did not necessarily involve defrauding people out of money. Certainly, in the three complaints filed on Tuesday, there is no allegation that anyone was defrauded out of any money.

                    How about if they pay attention to people who know what they are writing about?

                    Now you are really straying far afield of your area of competence. You should have checked yourself before going here. Wire fraud -- 18 USC Sec. 1343. You could not be more wrong in suggesting that "wire fraud does not really involve conventional notions of fraud." Sure, except for the fact that in charging wire fraud in and indictment, you have to describe the "scheme to defraud", and the misrepresentations or omissions that constituted the fraudulent acts. "Wire" fraud simply means that in the execution of a scheme to defraud -- by whatever means -- a wire communication of some form was used. The historical significance is purely one of jurisdiction -- the federal government regulated interstate wire communications, wire communications generally crossed state lines, so if you used a "wire" as part of a scheme to defraud, that made it a federal crime.

                    In its modern application, wire fraud now is primarily involved in using internet transmissions in the execution of a fraudulent scheme. It can be any type of scheme, and once you sit down at a computer and send an email -- or use your smart phone to send a text message -- you've employed a "wire", and made it a federal crime.
                    But its still necessary as an evidentiary matter for the government to prove that the email or text message crossed state lines. If not stipulate to, a prosecutor has to bring someone from AOL or Yahoo or Google to say that their email servers are located in California, Virginia, or some other state, so by virtue of that fact, an email originating in New York and ending up in Los Angeles had to travel in interstate commerce.

                    As to "money laundering," while not part of the complaints in these cases, I have read various people argue that the clandestine payments somehow constituted an illicit funneling scheme or a conspiracy to evade taxes. The plain truth is that paying people in cash, even secretly, is still legal in this country. Money laundering involves taking money procured from illegal means -- typically either stolen or a product of vice -- and transferring it through various account vehicles in order for the money to have the appearance of legitimate business. That, of course, has nothing to do with the allegations here. Nor is there any merit to the tax evasion claims. Monies transferred over the summer don't have to be reported, at the earliest, until April 2018.

                    You're actually not too far off here -- its a decent uniformed explanation of what constitutes money laundering, although it really only addresses one form of money laundering (Sec. 1956) and not the second form (Sec. 1957). Sec.1956 makes it a crime to engage in a financial transaction with the proceeds of specified unlawful activity, knowing that the property is the product of some criminal enterprise, and intending to promote the specified unlawful activity or to disguise the true source of the funds.

                    So, the crime of money laundering actually involves "down-stream" transactions using money or property that is derived from earlier criminal activity. In this case, money laundering counts could be charged based on what the assistant coaches did with the money they were given. Taking the money in the first instance is not a laundering act -- its the original criminal act. If the coaches took the money and bought gold with it, or if they deposited the money into their already existing Roth IRA account, thereby comingling it with "clean" money, those would both be laundering acts that could be charged. So further investigation may lead to money laundering charges, but it does not seem to me like the agents and prosecutors were too interested in that angle. That's more likely to be found in the paper chase of looking through financial records for evidence of earlier payments.

                    You know -- the kinds of banking records that Reggie Bush repeatedly refused to give to the NCAA because they were likely to show deposits of cash into his bank account, which would have supported the claims by Leonard Lake that he had been giving Reggie Bush cash for two years while he was playing at USC.



                    Finally, let's discuss bribery. Historically, bribery, as a criminal act, had to involve payments to either government officials or people who controlled government monies. This ties directly into the concept of rent-seeking, to wit: seeking to implement laws and regulations in order to derive economic gain without providing corresponding benefits to society. A paradigm case of rent-seeking is for an existing business to convince the government to impose licensing on new providers the business's competitors. Money or benefits given to convince the rule-makers to enact such a licensing requirement would be a common law bribe.

                    Given money to a private person in order to derive an economic advantage is not historically considered a bribe, but a commission or a fee. For example, the monies paid to a realtor in order to facilitate a real estate transaction, or given to a person who identifies possible investors, or handed to employees who bring in new business tend to be referred tend to be referred to as fees or commissions, not bribes.

                    * * * MORE TO COME * * *
                    The coaches, in official positions with schools that received federal funds, accepted payments of money in violation of a duty they owed to the schools that employed them, in exchange for directing student athletes to employ the person paying the bribes, without disclosing that they received money to make the recommendation.

                    I can come back tomorrow if you want to post more uninformed and misleading nonsense.


                    Comment


                    • USCJohnMac
                      USCJohnMac commented
                      Editing a comment
                      You, my friend, are guilty of the very common crime of fighting the last war. You saw that SC was in trouble and it is Bruin vs Trojan... hoorah! Let's bring up Leonard Lake! The fact of the matter is this is a college basketball thing, and if you think UCLA hasn't had a player come through the program without pocketing cash in the last fifteen years then you got your head in the sand.

                    • Jacobsmith
                      Jacobsmith commented
                      Editing a comment
                      You, my friend Mr John Mac...have your head in the sand. All major athletic departments are in trouble here and shipwreck never claims that UCLA is innocent or won't be affected by this. If you think this won't bleed into football, you truly are an ostrich!

                    • USCJohnMac
                      USCJohnMac commented
                      Editing a comment
                      Yes, and with UCLA being an Adidas school I think you are 100% correct.

                  • #11
                    Shipwreckcrew, I appreciate your response.

                    As you can imagine, I disagree with your legal analysis, which I’ll flush out when I get more time.

                    i will note just initially that on the subject federal statute, 18 USC 666, you rewrote my argument by clamining I said the bribe had to “affect” the federal money. That was not the argument I made. I said there had to be a nexus, not a direct affect on the money. That critical difference is readily apparent in the Salinas case.

                    Interestingly, you spent two paragraphs discussing Lloyd Lake and Reggie Bush, and zero words describing what happened in the central case to your argument: Salinas. That’s always telling, and when people read what happened in Salinas, they’ll immediately realize why you didn’t discuss it.
                    Last edited by chaseinmanhattan; 09-29-2017, 07:58 AM.

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                    • Jacobsmith
                      Jacobsmith commented
                      Editing a comment
                      How did 1 sentence turn into "two paragraphs"?

                  • #12
                    Rather than get bogged down in the tertiary issues, let's get right to your central argument on the scope of the statute under the Supreme Court's decision in Salinas v. United States. (Obviously, I realize that a Senate Report does not constitute the sum total of legislative history, and that legislative history is not a substitute for the statute itself; the reason I referred to that specific history is because it is the legislative history the Offices of the U.S. Attorneys choose to quote on their own website: https://www.justice.gov/usam/crimina...ory-18-usc-666. In a better world, a federal prosecutors would be familiar with their own offices' website when dealing with specific criminal statutes.)

                    So .... let's talk about what happened in Salinas. The case arose from a federal contract by which the U.S. Marshals Service agreed to pay the Hidalgo County Sheriff's Office in exchange for taking custody of federal prisoners. One of the federal prisoners housed in the Sheriff's jail under this arrangement paid a Deputy and Chief Deputy Sheriff a series of bribes (for the Deputy, $6,000 per month and $1,000 per incident; for the Chief Deputy, a pair of designer watches and a pickup truck) in exchange for so-called “contact visits” in which he remained alone with his wife or, on other occasions, his girlfriend. Salinas was the Chief Deputy.

                    Upon indictment and conviction, Salinas appealed up the ladder arguing that, while he did receive bribes, he didn't actually pay out the federal money/benefits that had been provided under the arrangement with the U.S. Marshal Service. In other words, federal monies were not "affected." Finally up to the Supreme Court, the conviction was unanimously affirmed.

                    So, straight away, let's look at what is key in this Salinas case -- and how it is completely different that what we are seeing in these new cases filed this week. First, the bribe was paid by a federal (not a state or local) prisoner. That prisoner was only in the custody of the Hidalgo County Sheiff's Department because of the federal contract it had reached with the U.S. Marshal Service. So, while the federal money was not the subject of the bribe, money under the federal contract was wholly connected to the bribe under a conventional "but for" causation analysis: but for the federal money and federal contract, there is no federal prisoner being held in custody by a county sheriff department.

                    Now let's look at who was accused of taking the bribe. In the case of Salinas, it is two deputies who have been tasked with administering the very duties which arise from, and go hand-in-glove with, the federal money. As with the analysis of the circumstances giving rise to the payer of illicit bribe money, the very same "but for" test applies to the recipients of the bribe, to wit: but for the federal money and federal contract, there are no local deputies being charged with the duty to supervise the custody of a federal prison.

                    Here is the factual fulcrum of the Salinas case: the prisoner who bribed the deputies was a federal prisoner. He was only there because there was a federal contract, resting on federal money. There is little doubt that these county sheriff deputies had also taken bribes from other prisoners for special treatment with "contact" visits. And they had probably been doing it for years. But that had never been a federal crime -- because those bribes did not have any connection to a federal program funded by federal money.

                    Now .... let's look at the new cases here: this "but for" connection completely fails. Collegiate basketball programs operate entirely outside the parameters of federal monies being paid to the universities. If the federal monies go away, it has no bearing on the basketball program. The coaches, who accepted the "bribes," wer
                    e not carrying out any duties connected to any contract or program which arose from federal money.

                    I have repeatedly pointed out that, if the statute had been historically interpreted that there did not need to be any connection between the payment and the money at all (as we see in these cases), then not only would NCAA violations (for more than $5,000) have been prosecuted for years, but all kinds of other payments would get swept into this statute.

                    In underscoring this point, let's look at how the Supreme Court concluded its analysis of the statute as applied in the Salinas case: "
                    We simply decide that, as a matter of statutory construction, §666(a)(1)(B) does not require the Government to prove the bribe in question had any particular influence on federal funds and that under this construction the statute is constitutional as applied in this case." In other words, Salinas did not hold that someone could be convicted of bribery under 18 USC § 666 wholly independent of the federal money; rather it was simply that the federal money itself did not have to be influenced by the bribe.
                    Last edited by chaseinmanhattan; 09-29-2017, 11:20 AM.

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                    • #13
                      Very much appreciate the back and forth guys. Glad to see it. I too wondered about the FBI taking so much time on payments between shoe companies and athletes. Is your take that as long as the University is not involved than there is no crime? I mean it really seems to just be an NCAA issue at that point. Now once a BBall coach starts directing payments that strikes me as closer to fraud (still weak/small) and the non profit abuse would seem to be a more clear cut criminal case. Mostly what I see is potential tax (IRS) and NCAA related issues rather than Fraud as I think of it.

                      Comment


                      • #14
                        Before getting to your citation to the cases analyzing the "corruptly" element -- which are lethal to your argument about the overall application of the statute to the circumstances here -- I just want to address Sabri v. United States very briefly. What's interesting about that decision is that it addresses the issues which I raise more closely.

                        Sabri was a Minneapolis real estate developer who gave bribes to a local city councilman; the councilman sat on the board of the local community development agency, which had received $23 million in federal funds. The indictment charged that the bribe was paid to receive regulatory approval from the agency for a hotel and retail structure to be built by Sabri's development company.

                        What's more similar in the Sabri case to these new case filed this week is that this Minneapolis community development agency and its regulatory powers would, in all likelihood, still exist, even if the agency was not federally funded. That somewhat differs from the Salinas case in the sense that, while a county jail administered by the local sheriff's department would still exist even without the U.S. Marshal Service contract, it would not otherwise house federal prisoners. Whether the specific regulatory powers Sabri sought to corrupt would still exist without the federal money isn't as clear, although they very well may have.

                        However, there are two things about the Sabri case that make it quite different than the situation here. First off, Sabri did not challenge the application of the statute to his conduct; rather, he challenged the facial constitutionality of the entire statute. That is the sole issue that went up to the Supreme Court, which unanimously ruled the statute was constitutional. The Court did not rule on whether the statute encompassed the specific conduct of which he was accused.

                        The other big difference, and I will get into this more in the discussion of the "corrupt" element cases, is that the bribe in Sabri was paid to an official who specifically administered the federal funds, and federal money was central to operation of the budget which that official administered. That is very different than the cases filed this week in the sense that assistant basketball coaches do not have control over any federal money or even to any budgets into which federal money flows.

                        Now .... Shipwreckedcrew pointed to Souter's opinion in the Sabri case that money is fungible. However, Souter's discussion of that concept is in the context of whether the entire statute is constitutional on its face, not whether the statute could be applied to any particular circumstances. The very next words written by Souter are: "bribed officials are untrustworthy stewards of federal funds." There are two critical elements packed into that clause: first, that the person bribed be "an official"; and, secondly, that the official be a "steward of federal funds."

                        The question is do those elements apply to basketball coaches?
                        Last edited by chaseinmanhattan; 09-29-2017, 10:00 AM.

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                        • #15
                          So, let's get into an analysis of the "corruptly" element of the statute. Here is your argument, riffing on mine (emphasis in all cases is yours):

                          Originally posted by shipwreckedcrew View Post

                          From the text of the Complaints, it is plain that the U.S. Attorneys' Office seeks to differentiate payments made to college assistants and players from, for example, those made by fat cat donors by claiming that the payments involving college coaches and players are "corrupt." And, how do the US Attorneys seek to establish this "corrupt" element? By alleging that these payments involving college coaches and players violate NCAA By-Laws, compromise the eligibility of student-athletes and place the universities at risk of NCAA sanctions.

                          Don't believe me? Read the text of the Complaints. It's right there n black and white ... and could not be more clear.

                          Thus, what is central to the allegation of criminal activity in these cases -- the sine qua non which makes the alleged conduct illegal -- is the violation of NCAA rules.

                          In other words, these federal prosecutors have taken a 70-year-old statute, which was intended to prevent bribery in the disposition of federal grants and programs, and contorted in such a way that violations of NCAA By-Laws are implicitly codified under federal criminal law.[/SIZE]

                          Ummmmmm -- No.

                          This investigation is in the 2nd Circuit. This is how the 2nd Circuit considers the "corruptly" element of the statute:

                          As is evident in many of our cases dealing with bribery, a fundamental component of a "corrupt" act is a breach of some official duty owed to the government or the public at large. In United States ex rel. Sollazzo v. Esperdy, 285 F.2d 341 (2d Cir.), cert. denied, 366 U.S. 905, 81 S.Ct. 1049, 6 L.Ed.2d 204 (1961), we said that "[b]ribery in essence is an attempt to influence another to disregard his duty while continuing to appear devoted to it or to repay trust with disloyalty." Id. at 342. Similarly, in United States v. Jacobs, 431 F.2d 754 (2d Cir.1970), cert. denied, 402 U.S. 950, 91 S.Ct. 1613, 29 L.Ed.2d 120 (1971), we pointed out that "[t]he evil sought to be prevented by the deterrent effect of [the bribery statute] is the aftermath suffered by the public when an official is corrupted and thereby perfidiously fails to perform his public service and duty." Id. at 759. Finally, in United States v. Zacher, 586 F.2d 912 (2d Cir.1978), we recognized that "[t]he common thread that runs through common law and statutory formulations of the crime of bribery is the element of corruption, breach of trust, or violation of duty." Id. at 915.

                          The reference to the NCAA rules and regulations is to establish that by taking the bribes as alleged, the assistant coaches violated the duties to their school and the NCAA that they had agreed to abide by. They willingly took on an obligation to act in a certain manner, and then in exchange for money they disregarded that obligation. That establishes the "corrupt" element in the conduct. Taking the money is the actus rea. Violating the duty freely taken is the mens rea.

                          So, I have to start out with the observation that first you say I am dead wrong about applying the "corrupt" element of this statute as a means of codifying NCAA By-Laws under federal criminal law, but then conclude by saying the incorporation of NCAA By-Laws into the criminal complaints was, in actuality, to establish that the "corrupt" argument had been met by the coaches breaching duties to their schools ..... in the form of violating those NCAA By-Laws.

                          In your haste to call bullshit on my post, you didn't seem to notice that your conclusion merely restates my argument, using different words. In reality, you are agreeing with me, to wit: NCAA By-Laws are incorporated into the criminal complaint for the express purpose of satisfying the "corrupt" element of the statute. The conclusion I draw from this is rather self-obvious: if NCAA By-Laws fall under this "corruptly" element (as you agree the prosecutors as seeking to argue), then that means that NCAA By-Laws have been implicitly incorporated into federal criminal law (at least as it applies to payments of $5,000 or more) by virtue of every single NCAA institution receiving $10,000 or more from the federal government.


                          So, let's talk about these cases you cite on the "corrupt" element, and how they actually illustrate my point, and are fatal to yours. First up is Sollazzo v. Esperdy, which is not a criminal case at all, but a immigration case, and does not analyze this element.

                          United States v. Jacobs, however, does. In that case, the criminal defendants were accused of seeking to bribe an IRS official; the bribe was unsuccessful, and the defendants appealed their convictions arguing they had failed to "corrupt" the office; the court simply ruled that the attempt to corrupt, i.e., influence the official to disregard his public service duty, was enough. Note the reference to "public service and duty." The Jacobs court is very clear about the types of acts that fall under the "corruption" element, and that they are squarely within the administration of public services and duties.

                          Finally, there is United States v. Zacher, which involved a physician who was providing health care services paid for in the form of federal Medicaid payments; the physician was illegally charging patients on top of the Medicaid reimbursement to make up the shortfall in his usual fee. In analyzing the federal bribery/extortion charge, the court first spells out the common law rule on bribery, which 100% reconciles with my original post, to wit: common law bribery entailed "the voluntary giving or receiving of anything of value in corrupt payment for an official act done or to be done or with the corrupt intent to influence the action of a public official or of any other person professionally concerned with the administration of public affairs." (Emphasis mine.) The court concludes by quote the Jacobs court: "The evil sought to be prevented by the [federal bribery statute] is the aftermath suffered by the public when an official is corrupted and thereby perfidiously fails to perform his public service and duty." (Emphasis again mine.)

                          Do we all see a running theme here? The "corrupt" element is always connected to public services and public duties -- whether it be things like the proper collection of federal taxes, the use of federal Medicaid money, or access to federally-funded student loan collection programs (United States v. Evans, cited in Zacher).

                          These cases all underscore the difference between the cases brought this week from the historical use of this "corruptly" element -- which in every case appears to involve a person with a specific designation to administer a service or duty directly paid for by federal money, in conjunction with the misuse of that service or duty in exchange for the payment. Not only are the coaches who were indicted not in any way charged with a duty or service to administer a federally-funded program or contract, but the allegations against them do not appear to involve any misuse of a service or duty that involves this public-funded component.

                          This is all to raise these basic questions: Is abiding by NCAA By-Laws a public service or duty? Is violating NCAA By-Laws a breach of a public service or duty?

                          Last edited by chaseinmanhattan; 09-29-2017, 11:59 AM.

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