Is Sheldon Silver A Criminal?

Those of you West of the Hudson may not know the name Sheldon Silver, but as Speaker of the New York State Assembly he is one of the three most powerful men in New York politics (the other two being the Governor and the Majority Leader of the State Senate).  On Thursday Silver was arrested by Federal authorities under the direction of the U.S. Attorney for the Southern District of New York, Preet Bharara.

Before getting to the specifics of the allegations against Silver, I must say that I can't stop thinking about a story that a friend told me a number of years ago.  She stepped out onto the porch of her suburban house and spotted on the front step two different-color snakes coiled around each other.  She was wondering why this would be, when suddenly the two tensed up tightly, and then after some seconds, relaxed again.  And after a little more time, they tensed again, and then again relaxed.  And this behavior was repeated several times.  Gradually, she realized that they were locked in a struggle to the death.   After a while she left, but came back later, to find only one snake where before there had been two -- except that the tail of the second snake was protruding slightly from the mouth of the one that remained.

When it's two serpents, the good thing is that you don't really much care which one wins.

Silver is the complete antithesis of what I would want in a politician.  In his world state politicians exist to pass out favors to special interests, and the special interests then fund the political campaigns to keep the politicians perpetually in power.  Special interest Exhibit A is the teachers union, which according to the New York Post on January 19 spent $4.7 million in 2014 on political contributions (essentially all to Democrats) and lobbying.  Silver is then the key guy for the union in preventing the expansion of charter schools, watering down proposals for teacher evaluations, stopping merit pay, keeping it impossible to fire a teacher, and so on.  For the public employee unions more generally -- who collectively are the dominant political donors in New York -- Silver prevents pension reform, and also undermines employer bargaining power by insuring that pay increases continue even after contracts have expired.  Other major donors include real estate interests and taxi medallion owners who live off state-granted political favors.  It's all completely corrupt and greatly undermines the economic competitiveness of New York.  But none of this is a subject of this new Federal Complaint against Silver.  Also, all this information is well-known, and Silver's constituents keep electing him, most recently with 76% of the vote.

The fact that Silver is completely corrupt does not mean that Bharara has charged him with anything that does or should constitute a crime.   Here's a copy of the prosecutors' Complaint setting out the charges against Silver.  My main take is that there is almost nothing there.

The main charges against Silver are mail and wire fraud under 18 U.S.C. Section 1341, combined with "deprivation of the intangible right to honest services" under 18 U.S.C. 1346.  Section 1341 makes it a crime to engage in "any scheme or artifice to defraud, or for [the] obtaining [of] money or property by means of false or fraudulent pretenses, representations, or promises."  In reading the Silver Complaint, be on the lookout for any of those "fraudulent pretenses, representations, or promises."  You won't find any.   It's not that Silver hasn't made lots of false statements to the public, and this Complaint is full of them.  But if that were a crime every politician would be in jail.  "Fraud" requires not just the false promise but also reliance on it in giving up something of value.  In most to all political corruption cases, the crooked pol hasn't made a false promise to anybody to extract money, and that very issue became a persistent problem for federal prosecutors trying to put away state politicians under the mail and wire fraud statute.  And so Congress in 1988 added the following words in Section 1346:

For the purposes of this chapter, the term “scheme or artifice to defraud” includes a scheme or artifice to deprive another of the intangible right of honest services.

Can you understand what that one means?  Neither can I.  And we're in good company -- neither could the Supreme Court.  In 2010 the conviction of Jeffrey Skilling, one-time CFO of Enron, reached the Supremes.  Now, if ever there was a corrupt guy, he was it.  But he was convicted under this "deprivation of the intangible right to honest services" thing, and on appeal he very appropriately challenged that statute as void for vagueness.  The Supreme Court agreed, and vacated his conviction.  In my view it should have invalidated the statute entirely, but it did not; instead (per Justice Ginsburg) it held:

Construing the honest-services statute to extend beyond that core meaning, we conclude, would encounter a vagueness shoal. We therefore hold that § 1346 covers only bribery and kickback schemes. 

I won't even try to explain to you how Justice Ginsburg was able to discern from the statute that it clearly covered "bribery" and "kickbacks," but was too vague as to everything else, when the statute doesn't ever use the words "bribery" or "kickback" or say anything about those things.  But at least as to everything other than bribery and kickbacks, this was not even close.  The decision was unanimous, 9-0.  Three justices -- Scalia, Thomas and Kennedy -- joined a concurring opinion that said the statute should have been invalidated in its entirety. 

And thus, since 2010, to convict someone of this "deprivation of the intangible right to honest services" thing, the federal prosecutor must prove either "bribery" or a "kickback."

That brings us to the prosecution of Joe Bruno.  Not so long ago -- up to 2008 -- Joe Bruno was the other legislative member (along with Silver and then-Governors Pataki and Spitzer) of the three most powerful men in New York, namely Bruno was the Majority Leader of the State Senate.  That is, he was until he attracted the attention of the federal prosecutors, this time from the Northern District of New York.  And what do you think they charged him with?  You guessed it: "deprivation of the intangible right to honest services."  The basic allegation was that Bruno had gotten paid for "consulting" when he had done little or no work, while the guy paying him had business of some kind before the state.  So what was the "bribery" or "kickback" there?  The prosecutors were completely vague about it, but this was before the Skilling case.  After charges were brought, Bruno retired from the State Senate in 2008.   In 2009 he was convicted on two counts (although acquitted on many others).  While Bruno's case was on appeal, the Skilling case came down from the Supreme Court.  Oops!  In 2011 the Second Circuit reversed Bruno's conviction in light of Skilling.  If the prosecutors had had any decency, they would have walked away at that point; but they don't have any decency.  Bruno was then re-tried in early 2014, but the prosecution now struggled to prove what it was that Bruno had supposedly done as a quid pro quo for his client that made the consulting payment a "bribe."  The jury acquitted Bruno on all charges.  In the final insult in the Bruno case, the Post reported in its Christmas 2014 edition that the State of New York had grudgingly agreed to pay Bruno's legal fees for his completely successful defense.  Yes, that was just a month ago.

OK then, what is the "bribe" or "kickback" that Silver is charged with -- in other words, what is the explicit quid pro quo between Silver and the briber and/or kickback recipient? Given the holding of the Supreme Court in the Skilling case and the extremely recent debacle of the Bruno prosecution, you would think that the prosecutors would know that this point is their Achilles heel and would address the issue squarely and directly in their Complaint.  You would think.

Back to the Federal Complaint.  Starting on page one we find that the prosecutors are savvy enough to use the magic words "bribes" and "kickbacks" in their opening allegations ("SILVER used the power and influence of his official position to obtain for himself millions of dollars in bribes and kickbacks masked as legitimate income").  OK, we can see that at least you have read the Skilling case.  But how about some specifics as to quids and quos?

And then we go all the way to page 17 with lots of allegations obviously designed to paint Silver as a bad man, but only evasiveness as to the quids and quos.  Are you starting to get the sense that they are dodging something? 

  • In paragraph 9: "For more than a decade SILVER repeatedly has represented publicly that his outside income as a private lawyer is derived from private citizens who seek him out for legal services in personal injury matters, and that none of his clients has any business before the state."  OK, suppose this is all false.  Why is it a Federal crime?  Where is the bribe or kickback?
  • On pages 10 to 13, quoting and flyspecking of Silver's state financial disclosure forms.  He said his income was "predominantly" from a personal injury law firm, but got an eighth or so of it from a real estate law firm!  It's a state crime to make a false statement on one of these disclosure forms!  (OK, but is it a Federal crime?  If not, why are you wasting our time?)
  • On page 17, a long list of payments received.  OK, why is it a crime?

Finally, on page 17, paragraph 27:

SILVER . . . obtained approximately $4 million of the income described above in exchange for his corrupt and secret use of his official position through at least two different means and methods: (i) steering real estate developers with significant and continuing business before the State to the Real Estate Law Firm, in exchange to kickbacks paid to him by CC-1 for such referrals, and (ii) soliciting and obtaining referrals to Weitz & Luxenberg from Doctor-1 in return for directing State grants to Doctor-1's research . . . ."

Wait a minute -- payments from people having "business before the state" without any specifics as to a quid pro quo -- wasn't that exactly where the Bruno prosecution foundered?  OK, let's take the two pieces one at a time.     The next seven pages of the Complaint, 17-24, deal with item (i), steering real estate developers to the Real Estate Law Firm.  And for page after page it's all about technicalities of when lawyers can do fee-splitting under the ethical rules and whether Silver complied with all the technicalities -- yes, yet again, it is seven more pages of nothing to do with a Federal crime.  And then finally on page 24, we get to all they've got on the supposed quid pro quo:  "A document . . . from the Moreland Commission, which was prepared by an entity that represents real estate developers, stated in connection with the 2011 rent regulation reauthorization that SILVER was considerably more favorable to the real estate industry than expected. . . .  It would appear that he [Silver] could have successfully pushed for more."

Well, there's a gigantic nothing-burger!  Can't they even name the specific favor that was sought and delivered?  Oh, and did I mention that they conceded back on page 22 that the main entity ("Developer-1") whose real estate business was referred to the "Real Estate Law Firm" only had disclosed to it that Silver was receiving a part of the fees in December 2011 -- several months after the rent regulation reauthorization was complete -- and that that developer was then "concerned and surprised that Silver appeared to have been getting money from Developer-1 through the Real Estate Law Firm."  What exactly kind of "bribe" is that, where the alleged briber doesn't even know that the bribee is getting any money, doesn't find out about it until after the supposed "quo" has been delivered, and is "concerned and surprised" when he finds out? 

And one final thing about this alleged "bribe" from the real estate industry.  Not "successfully pushing for more" in the 2011 rent regulation reauthorization -- if Silver actually did it, which is dubious -- would probably be the only time Silver has ever done the right thing for the bulk of the voters and taxpayers in New York in his entire career.   In this Complaint, doing the right thing by voters and taxpayers is considered payoff for a bribe.

So we turn to item (ii) in paragraph 27 of the Complaint, Silver's relationship with Weitz & Luxenberg.  Over a period exceeding ten years, Silver is alleged to have received several million dollars of fees from W&L, apparently almost entirely based on case referrals from a "Doctor-1," identified as a leading mesothelioma researcher in New York.  The gist of the allegations is that Doctor-1 referred his patients to W&L to bring their cases and in return Silver directed some $500,000 in state money to Doctor-1's mesothelioma institute to support his research.  OK, that's at least a start.  But permit me to mention at least a few issues on the way to trying to prove that this was a bribe:

  • There is no mention in the complaint that Silver or anyone on his behalf ever told Doctor-1 that he could get state money for his research if he referred cases to W&L.  Rather, the Complaint states that Doctor-1 first asked Silver if W&L would support his research, and Silver said it would not, and in the face of that Doctor-1 referred cases without any other promise (page 26).  The state money came several years later.
  • There is no mention of what portion, if any, of the $500,000 went to Doctor-1 himself.
  • After the state funding ended in about 2008, Doctor-1 continued to refer cases to W&L through Silver. 

And I should mention that there appears to be a significant statute of limitations problem in these allegations.  I don't claim to be an expert in criminal statutes of limitations, but the general statute for Federal crimes is 5 years.  So what state benefit has Silver directed to Doctor-1 in the past 5 years?  You need to get all the way to page 29 for that, and it consists of presentation of an award and making a speech praising Doctor-1 for his research, and helping a family member get a job.  Really?

Don't get me wrong -- I think that Sheldon Silver is corrupt through and through and in every pore of his being.  But that doesn't mean that he is guilty of a Federal crime.  Sheldon Silver is just the inevitable product of the New York progressive fantasy.  We concede to the state more and more power supposedly to create perfect fairness by redistribution of economic resources, and what we get is pols who pull the levers of a vast state favor mill to create benefits for the pols' friends and supporters, and those friends and supporters then pass on business opportunities that make the pols rich.  It is not within the possibilities of the criminal law to do away with this. 

And is Preet Bharara any less corrupt?  This is the guy who has convicted dozens of people for the non-crime of non-insider insider trading and engaged in one shakedown after another of the big banks.  Bringing the full resources of the Federal Government to bear to seek to convict someone or coerce a settlement for something that is not a crime -- is that any less evil than what Silver is accused of in this Complaint?  On the same day that Bharara's office arrested Silver, a judge in the Southern District of New York vacated four of Bharara's convictions for non-insider insider trading in light of the Second Circuit's Newman/Chiasson decision.  I'll bet you didn't even notice that one -- it was wiped off the front pages by the Silver arrest.

Can't say I really care which of these two serpents wins.