The Supreme Court's Sekhar Decision: More Than A Pyrhhic Victory

Announced the same day as its path-breaking gay marriage decision, the Supreme Court’s ruling in Sekhar v. United States, addressing the definition of “property” for purposes of an extortion prosecution under the Hobbs Act, got a bit lost in the hubbub. Both because the Hobbs Act is an important and oft-used weapon in the government’s arsenal, and because the decision appears to be part of a broader trend to cut back on some judge-made rules that have expanded the reach of statutes used to prosecute white-collar crime, the decision is worth a closer look.

Sekhar, the managing partner of an investment fund, was prosecuted for sending anonymous threatening emails to the General Counsel of the Office of the Comptroller of the State of New York. The emails threatened to reveal that the General Counsel was engaging in an extramarital affair, unless the General Counsel recommended that the Comptroller issue a nonbinding “Commitment” approving an investment by the New York Common Retirement Fund into Sekhar’s investment fund. The government charged Sekhar with violating the Hobbs Act, which criminalizes interference with commerce by robbery or extortion, and defines “extortion” to mean “the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right.” At trial, the jury was provided a verdict form asking it to specify the property that Sekhar attempted to extort: (1) “the Commitment”; (2) “the Comptroller’s approval of the Commitment”; or (3) “the General Counsel’s recommendation to approve the Commitment.” The jury chose only the third option.

Sekhar argued on appeal that the recommendation of the General Counsel did not constitute property for purposes of the Hobbs Act. The Second Circuit upheld Sekhar’s conviction, holding that the General Counsel “had a property right in rendering sound legal advice to the Comptroller and, specifically, to recommend—free from threats—whether the Comptroller should issue a Commitment . . . .”

The Supreme Court unanimously rejected the Second Circuit’s ruling.  Writing for the Court and joined by five other justices, Justice Scalia traced the origin of the Hobbs Act, explaining that it did not reach the crime of coercion under New York law, which was the “interference with the exercise of a lawful trade or calling.”  To be within the scope of the Hobbs Act, property must be “obtainable” – that is, transferable. The Court rested its holding in significant part on its prior ruling in Scheidler v. National Organization for Women, where it held that protesters did not violate the Hobbs Act, even though they “interfered with, disrupted, and in some instances completely deprived” abortion clinics of their ability to run their business, because the protesters did not thereby acquire “‘something of value from’” the clinics that they could then “exercise, transfer, or sell” themselves.

The Second Circuit had reasoned that the requirement that the defendant acquire something he could “exercise, transfer or sell” could be met by “ordering the victim to exercise his or her rights in accordance with the extortionist’s wishes, such that the extortionist is essentially controlling those rights.” The Supreme Court rejected this view as inconsistent with the statutory language, ruling that Sekhar did not seek to obtain for himself the General Counsel’s right to give his advice on whether to issue a Commitment, but rather to force the General Counsel to provide the advice the defendant wanted, which is coercion, not extortion.

One able commentator, questioning whether Sekhar is a Pyrrhic victory for defendants, has asserted that its message is that the government should charge such cases more intelligently in the future, because both the majority and the concurrence make clear that if the property that was the object of the extortion was defined to be the money the Retirement Fund was to invest, the conviction would have been upheld.  [See White Collar Crime Prof Blog] But the government’s decision to pursue an intangible property theory rather than focusing on the ultimate investment was not an accident. The General Counsel’s recommendation was a step toward the Comptroller issuing a “Commitment,” which itself was not the final step to an investment – for that to occur, the Retirement Fund and the recipient of the investment had to then enter into a limited partnership agreement. Thus, on the facts, focusing on the General Counsel’s recommendation provided the government an easier and more direct path to conviction than focusing on the more remote investment itself. Indeed, the jury declined to go one step beyond the recommendation to find that the property extorted included the Commitment; it seems unlikely that the jury would have gone two steps to the investment itself.

Sekhar thus seems to be more than a Pyrhhic victory for white-collar defendants. The kind of fuzzy, intangible rights property theory that prosecutors used in Sekhar is valuable precisely because of its flexibility – it is a way for federal prosecutors to get at conduct that looks bad, but does not strictly violate the federal criminal law. It is a way to try to finesse around factual weaknesses, like the problem that the General Counsel’s recommendation might really not mean that much.

Sekhar can be seen as another example of something of a trend in recent white collar decisions to decline to accept expansive readings of criminal statutes that have lost, or at least loosened, their moorings to statutory language and have blurred the line between behavior that is and is not a federal crime. The Supreme Court’s Skilling decision is one example; another is the Second Circuit’s critical comments in United States v. Coplan regarding the expansive interpretation of the mail fraud statute to embrace interference with a lawful government function (the so-called “Klein conspiracy”) discussed here; two others are the recent circuit court decisions enforcing the mailing requirement of the mail-fraud statute, discussed here. One might trace these decisions to the principled position of Justice Scalia (and other judges) to scrupulously adhere to statutory language and the “original intent” of statutory terms, even when the result is contrary to what many see as these judges’ general law and order orientation.  Another view is that such judges tend to be more concerned about prosecutorial over-reaching when it reaches into the business world.

It is fair to argue that perhaps “trend” is too strong a word, in light of the far greater mass of court decisions upholding the theories pursued by federal prosecutors in the wide range of criminal cases. But for white collar criminal defense practitioners, the message seems to be that if the prosecution is pursuing a theory, even one based on years of court decisions, that you can argue does not square with the plain words of the statute, you should do so, with vigor. If you can get before Justice Scalia, you might even win.