Kelly v. United States concerns New Jersey’s well-known Bridgegate scandal, where officials with ties to Gov. Chris Christie decided to punish the residents of Ft. Lee because their mayor would not endorse Christie for reelection in 2013. So, beginning on the first day of school, and under the guise of a traffic study, the defendants arranged for the three toll lanes of the George Washington Bridge usually reserved for Ft. Lee traffic to be reduced to one. This created a traffic armageddon in Ft. Lee, jeopardizing community safety.
The defendants were fired, federally indicted, and convicted of crimes involving wire fraud and federal program fraud. The convictions were affirmed by the Third Circuit.
On May 8, the Supreme Court unanimously reversed the convictions in an opinion by Justice Kagan. The Court agreed that corruption and abuse of power occurred in this case, but “not every corrupt act by state or local officials is a federal crime.”
The Court observed that wire fraud (18 USC § 1343) involves “obtaining money or property by means of false or fraudulent pretenses.” Similarly, federal program fraud (18 USC § 666(a)(3)(A)) bars obtaining the “property” (including money) of a federally funded program or entity by fraud. Thus, under either of these fraud provisions, the government has to show not only that the defendant engaged in deception, but that obtaining money or property was an object of the fraud. Because the scheme here did not aim to obtain money or property, those statutes were not violated. (The Court acknowledged that bribes and kickbacks to public officials are also outlawed, but neither was involved in this case.)
The government contended that the realignment of the toll lanes and the salary expense of the workers involved in the traffic study were each a commandeering of property. But the Court explained that changing the toll lanes was “a quintessential exercise of regulatory power,” and “a scheme to alter … a regulatory choice is not one to appropriate the government’s property.” See Cleveland v. United States, 531 US 12 (2000). And, although a plan to redirect a public employee’s paid time to one’s private use would constitute an attempt to take property belonging to the government, that loss must be an object of the deceitful scheme. Here, the time and labor of the employees engaged in the “traffic study” was only an incidental byproduct of the regulatory change in the bridge lanes, not an object of the plan.
In short, “federal prosecutors may not use property fraud statutes to set standards of disclosure and good government for local and state officials.” See McNally v. US, 483 US 350 (1987).