by Dennis Crouch
An expansive notion of “property” also allows for expansive criminal prosecution. As an example, the Federal Wire Fraud statute makes it a crime to use the “wires” to move forward with “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises.” 18 U.S.C. § 1343.
Case-in-point is Kelly v. U.S., 140 S. Ct. 1565 (2020). Kelly case involves George Washington Bridge lane closing scandal known lovingly as “Bridgegate.” In 2013, Chris Christie was Governor of New Jersey seeking reelection (he won). His deputy Chief of Staff Bridget Kelly (and others) had caused the bridge lanes to be closed (via text messages) “for a political reason—to punish the mayor of Fort Lee for refusing to support [Christie’s] reelection bid.” Kelly was prosecuted and criminally convicted for property fraud — both wire fraud as well as fraud on a federally funded program. The Second Circuit affirmed.
These statutes require the use of fraud for the purpose of obtaining “property.” The Supreme Court took up the case and reversed the convictions — holding that Kelly’s actions were not designed to obtain money or property and thus do not violate the statutes. The court recognized the abuse-of-power: “But not every corrupt act by state or local officials is a federal crime.” (Unanimous opinion authored by Justice Kagan).
The evidence the jury heard no doubt shows wrongdoing—deception, corruption, abuse of power. But the federal fraud statutes at issue do not criminalize all such conduct. Under settled precedent, the officials could violate those laws only if an object of their dishonesty was to obtain the Port Authority’s money or property.
The Government pointed to the following property frauds: commandeering of bridge lane access; diverting the “wage labor” of federal employees. While the bridge itself can be considered Property, the actions here, according to the court, were a “quintessential exercise of regulatory power” rather than a scheme to “appropriate the government’s property. The court noted that a “public employee’s paid time” is also the property of the government. According to the court, the use of employee time was “incidental to” the lane-closure purpose — the use of that portion of the government’s property was not the “object of the fraud” as required under Cleveland v. U.S., 531 U.S. 12, (2000) (the statute “requires the object of the fraud to be ‘property'”).
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The decision here offers an interesting dichotomy regarding property and property rights. On the one hand, the Court offers a broad conception of what counts as property — including a conclusion that an employer “owns” the time employees are spending working (this seems like a pre-civil war conclusion). On the other hand, the Court weakens property rights by reinforcing its prior conclusions that major regulatory actions that shift the owner’s ability to use its property do not count as property rights violations. This same dichotomy is seen in patent law with the advent of inter partes review; and is a longstanding element of zoning law.
In January 2011, the Supreme Court vacated and remanded (GVR) a parallel case in Blaszczak v. U.S., 20-5649, 2021 WL 78043 (U.S. Jan. 11, 2021) “for further consideration in light of Kelly v. United States, 590 U.S. –––– (2020).” In that case, the Second Circuit held that “confidential information” about an upcoming regulatory action was a property right whose “embezzlement” could serve as a basis for property fraud under the statute. In its decision, the Second Circuit did not use the term “trade secret” but rather suggested that the information was property because it was a “thing of value.” quoting U.S. v. Girard, 601 F.2d 69 (2d Cir. 1979). The outcome of Blaszczak will end up giving us a lot more information about the meaning of property in the US.