How do you determine the value of a thing?
Normally, in our free-market (or heavily regulated free-market) economy, we think that the value of a thing is set by what people are willing to pay for it.
If I'll sell you my collection of neckties for $10,000, and you'll pay $10,000 to buy my collection of neckties, then we know my collection of neckties is worth $10,000.
But does that way of determining value work when talking about government action bought by a bribe?
The Seventh Circuit's case in United States v. Owens illustrates why this is a hard problem.
How To Do Business In Chicago
Dominick Owens worked for the City of Chicago as a zoning inspector. Christoir McPhillip was an "expediter" - a guy who worked with folks who needed things from zoning inspectors to make sure they got the things they needed.
Not surprisingly, for someone working in the shadow of the law, he came into some trouble and wound up cooperating with the federal government. (I'm assuming he came into trouble. The opinion only says that he was a cooperator. My bet is that he wasn't doing it out of a sense of patriotism.)
Mr. McPhillip recorded Mr. Owens taking $600 for issuing certificates of occupancy for single family homes. He recorded him twice taking one bribe each time. Mr. Owens was indicted for two counts of violating 18 U.S.C. § 666(a)(1)(B) - once for each bribe.
The $5,000 Question
Mr. Owens was convicted at trial and appealed. His only issue on appeal was whether the government proved that he violated the bribery statute.
The only element he said the government didn't prove was the value threshold.
According to 18 U.S.C. § 666(a)(1)(B), the thing that was provided in exchange for a bribe - here the certificates of occupancy - has to be worth more than $5,000.
The Value Of A Thing Bribed For
How do you determine the value of the government action that was purchased by a bribe? There are two ways.
First, you can look at the value of the bribe. This is a basic market analysis. If you'd pay $14,000 for the government to indict your ex-wife, then the value of an indictment against your ex-wife is at least $14,000.
As the Seventh Circuit describes it:
at how much someone in the market was willing to pay for the benefit and an official was willing to take to provide the benefit--the value of the bribe. This means that the bribe amount may suffice as a proxy for value; at least it provides a floor for the valuation question.
Of course, that answer cuts against the government in Mr. Owens' case - the bribes were only $600.
The second way is to look at the value of the thing purchased or the value of the benefit to the person paying the bribe received from what he got from the bribe.
In United States v. Curescu, 674 F.3d 735 (7th Cir. 2012), for example, a developer had used an unlicensed plumber to add plumbing to four newly constructed residential units. A plumbing inspector discovered the violation and told the developer that he had to redo the plumbing using a licensed plumber. Id. at 738. Rather than removing the old plumbing and replacing it using a licensed plumber, a different plumbing inspector was bribed to certify falsely that a licensed plumber had completed the plumbing in the four units, which allowed the illegal plumbing to remain. Id. Thus, the value of the false certification was the money the developer did not have to spend redoing the plumbing, an amount that exceeded $5,000.
The government in Mr. Owens case argued that the mortgages at issue in Mr. Owens bribes ranged from $200,000 to $600,000. So, since certificates of occupancy were necessary for the mortgages to be funded, the government said, the certificates of occupancy were worth well more than $5,000.
Not so fast, said the Seventh Circuit.
It cannot be that simple, though, as anyone who complies with the Board of Zoning procedures and has a home that passes inspection can receive a certificate of occupancy for free. Obtaining the issuance of the certificates through greasing a palm rather than through legitimate means must therefore create value in some other way.
What's the other way that a certificate of occupancy issued through a bribe can be valuable?
Perhaps, as the Government suggests, it is obtaining a certificate without an inspection. This could be valuable in at least two ways. First and most obviously, if the home's construction was defective and the home would not pass inspection, paying a bribe and avoiding an inspection would save the cost of performing repairs. Alternatively, a home could be free of zoning violations, but a developer or homeowner places a premium on expediting the issuance of a certificate due to a pressing need to sell or occupy the home or obtain a mortgage with favorable and time sensitive terms.
So, if it's the first way, the value of the benefit from the bribe would be the value of the repairs avoided. If it's the second way, the value would be the value of not losing the time it would take to wait for a legitimate certificate.
The problem for the Government, though, is that it failed to present any evidence of either of these situations in this case, or of any situation in which the issuance of the certificates as a result of the bribes benefitted the developers or homeowners in some way that the issuance of the certificates through legitimate means would not have.
And, without that proof, Mr. Owens conviction was reversed by the Seventh Circuit.