The Second Circuit Overturns Watershed Conviction Of Sheldon Silvery Based On Recent Supreme Court Decision

by Shearman & Sterling LLP

On July 13, 2017, the U.S. Court of Appeals for the Second Circuit overturned the high-profile, political corruption conviction of one of the most powerful politicians in New York State— former Speaker of the New York State Assembly, Sheldon Silver. United States v. Silver, 2017 WL 2978386, at *17 (2d Cir. July 13, 2017).  The Second Circuit grounded its decision on erroneous jury instructions, which it believed tainted all counts of conviction.  Though the instructions were consistent with Second Circuit law at the time they were provided to the jury, the Second Circuit held that they did not comport with the Supreme Court’s recent interpretation of what constitutes an “official act” for purposes of the “honest services fraud” and extortion statutes, as set forth in McDonnell v. United States, 136 S. Ct. 2355 (2016).  The Court further held that this error was not harmless, and vacated all counts of Silver’s conviction.

By way of background, a Grand Jury indicted Silver on four counts of honest services fraud, two counts of extortion, and one count of money laundering.  The charges relate to two general schemes. First, the government alleged that Silver performed favors for a doctor in exchange for the doctor’s referral of mesothelioma patients to Silver’s law firm.  Second, the government further alleged that Silver separately performed favors for two real estate developers who, in return, hired at Silver’s request a law firm that paid referral fees to Silver.  Silver allegedly collected nearly $4 million in connection with these schemes.

To prevail on the honest services fraud and extortion counts, the Government needed to establish beyond a reasonable doubt the existence of a quid pro quo agreement — i.e. that the defendant received, or intended to receive, something of value in exchange for “an official act.” At trial, Silver and the Government proposed different jury instructions regarding what constituted an “official act.”  Silver requested a narrow definition, which tracked the federal bribery statute and basically applied to decisions or actions on any “question, matter, cause, suit, proceeding, or controversy.”  Silver, 2017 WL 2978386, at *7; see 18 U.S.C. § 201(a)(3). The government sought a broader definition, which defined an “official act” to be “any act taken under color of official authority.” Silver, 2017 WL 2978386, at *7.  The District Court ultimately adopted the government’s language, to which Silver preserved his objection.  The jury found Silver guilty on all counts, and Judge Caproni sentenced him to twelve years’ imprisonment.  In addition, Judge Caproni imposed a fine of $1.75 million, and ordered Silver to forfeit $5.4 million.

On appeal, Silver raised a number of claims, including that the evidence was insufficient to sustain his conviction and that the jury instructions were erroneous.  The Circuit easily rejected the former ground, finding ample evidence to support the jury’s verdict.  On the latter ground, the Circuit devoted the bulk of its opinion to reviewing the Supreme Court’s recent decision in McDonnell, and whether that decision rendered the jury instructions in Silver’s case to be infirm. 

In McDonnell, the Court narrowed the interpretation of an “official act” for purposes of “honest services” fraud and extortion statutes.  Specifically, the Court held that such an act “is a decision or action on a ‘question, matter, cause, suit, proceeding, or controversy.’”  McDonnell, 136 S. Ct. at 2371.  The Supreme Court went on to make clear that to satisfy this definition, the Government must establish both that: (1) the “‘question, matter, cause, suit, proceeding or controversy’ must involve a formal exercise of power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee”; and (2) that “the public official must make a decision or take an action on that ‘question, matter, cause, suit, proceeding, or controversy,’ or agreed to do so.” Id. at 2372 (quoting 18 U.S.C. § 201(a)(3)).

Given that Silver preserved his objection, the Circuit reviewed the jury charge de novo and applied a “harmless error” standard

The Circuit first found that the instructions were erroneous, since they “captured lawful conduct, such as arranging meetings or hosting events with constituents.”  The Circuit elaborated that “an official action must be a decision or action on a matter involving the formal exercise of government power akin to a lawsuit, hearing, or agency determination,” and that the instructions in Silver did not contain such limitations.  In so holding, however, the Circuit noted that the instructions “were consistent with our precedent at the time” and did “not ascribe fault to the District Court or to the Government.” Silver, 2017 WL 2978386, at *13.

The Circuit then held that this error was not “harmless,” as the Circuit could not conclude beyond a reasonable doubt that a rational jury would have found Silver guilty had it been properly instructed.  The Circuit emphasized that while the Government did present evidence of acts that would be deemed “official” post-McDonnell, the jury very well may have convicted Silver on the basis of acts that were not “official.”  Because the Circuit harbored doubts on those points, it vacated all counts of conviction. 

The Second Circuit’s reversal is no doubt a setback for the Government in its highly-publicized efforts at combatting perceived corruption by elected officials — a campaign that is no longer focused on politicians, but has expanded to include businessmen and corporations as targets and subjects of investigations.  McDonnell — and now Silver — will necessarily temper these sprawling investigations and prosecutions, especially where there is limited evidence of what the courts have defined to be “official actions.”  Indeed, Government officials have alluded to this reality in recent statements relating to their decision not to pursue certain charges. 

That said, the Government has indicated its desire to re-try Silver for these counts, and the Circuit emphasized the sufficiency the evidence it presented in the first trial.  This will serve as a good test to see whether the Government can sustain its burden, with the new guidelines provided in McDonnell.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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