Will prosecutors sing the varsity blues?
Two fathers convicted by Boston jury of paying bribes to secure college places for their children have little in common with two bank executives convicted in Portland, Ore. Of bank fraud and related offenses. But their cases are on a collision course that could meet in the United States Supreme Court, with ramifications for white-collar lawsuits across the country.
On October 8, 2021, a jury convicted the first group of defendants in the government’s “Varsity Blues” inquiry, which saw 57 defendants indicted, 47 of whom pleaded guilty.
Also on October 8, a split panel of the United States Court of Appeals for the Ninth Circuit, in United States v. Yates, quashed the convictions on all counts against two bank executives. The alleged plots have little in common: In both parents’ varsity blues indictment, money was funneled to college sports teams through a private counselor to secure college admissions ; in Yates, funds were moved to hide the health of a bank.
The main charges are also different: wire fraud in the first case and bank fraud in the second (as well as related charges in both cases). But both sets of laws target people who obtain property from victims through fraud, an area of ââlaw that has recently received unusual attention from the Supreme Court – and not the kind of attention the government was looking for.
The government’s dilemma
The government’s problem in both trials is similar to the one it faced in the âBridgegateâ indictment. There, a Supreme Court unanimously overturned the convictions of two officials who closed lanes on the George Washington Bridge in revenge on a city mayor who refused to back their boss.
Paying someone to secure college admission, just like moving funds around to make loans appear non-delinquent – and closing bridge lanes – is conduct that most would agree is bad, contrary to the law. ethical and possibly even criminal. But whether such conduct constitutes a federal crime, specifically designed to punish people who deceive victims for property, is a different question, which the government must answer whenever it accuses bank fraud, mail fraud. or wire fraud – crimes punishable by decades. in federal prison.
Is admission to a school property?
The government’s main theory in the Varsity Blues case was that the parents had fraudulently obtained property in the form of college admissions. But they paid the full tuition fee for those slots. The schools have not lost money; in fact, at least one of the parents made an additional contribution.
Therefore, the fundamental and new question is whether a person can be guilty of fraudulently obtaining property for which he is paying in full. Even if the government goes beyond this question, it still has to face the question that has already divided two judges from the same courthouse: Do the admission slots constitute property?
The fundamental problem for the government is the mismatch between legal theory and reality. The victims, as presented by the indictment, are the universities, but the direct victims of the scheme are the university applicants who allegedly received offers of admission that were allegedly extended to the children of the accused.
Of course, universities have also suffered; their integrity and reputation were called into question, and they were deceived in the admissions process. But even the government would admit that none of these things constitute property. As a result, the government is forced to insert square pegs into round holes.
Yates crystallizes the problem. In the part of the opinion which relied on the Supreme Court’s decision in Bridgegate, the Ninth Circuit explained that “the loss suffered by the victim must be an object of the fraud, and not a mere cost of setting up. work or an incidental by-product of the scheme â. But when the target of the deception is a person or entity (the schools in the Varsity Blues case) and the victim who suffers the direct harm is another (the qualified but rejected candidate who was the last to come out) , the loss to the victim is necessarily the by-product of the regime, rather than its object.
Like the Bridgegate defendants who sought to slow traffic on the bridge and during this program created unnecessary work for the employees, the Varsity Blues defendants wanted their children admitted and, in the process, likely did harmed qualified but rejected applicants. The extra work in the first regime, deemed insufficient by the court, was just as much a by-product, as was the damage to qualified candidates in the second.
In addition, in Yates even the government conceded – but not before appeal pleading – that there is “no recognizable proprietary interest in the ethereal right to accurate information.” Basically, that’s all the victims identified in the Varsity Blues lawsuit can claim to have lost – a proprietary right to the right to accurate information during the admissions process.
To be fair, the government has secured more charges against both parents (with their own legal issues) and may well appeal.
But the incongruity of the loss of victims and property is not a one-off problem for the government. For example, he recently indicted an employee of an airline company with wire fraud for deceiving authorities about a theft system, but as far as the indictment reveals, the accused has failed. not committed the alleged fraud to obtain property from identified victims.
As Justice Kagan reminded us, âNot all acts of corruption are. . . is a federal crime â, and this is true whether it is an abuse of power by a government official, a deceptive act by a bank officer or a reward for admitting a child at University.
The trial judge in Yates predicts that the government’s legal theories could lead to a “really interesting decision on appeal or in the Supreme Court”; Judge Varsity Blues made a similar prediction (albeit in the context of a ruling on a different issue). Both can be right.
This column does not necessarily reflect the opinion of the Bureau of National Affairs, Inc. or its owner.
Andrey Spektor is a litigation partner at Bryan Cave Leighton Paisner and former New York federal prosecutor.