Saturday, December 22, 2012

The Substance and Thinking Involved in the Ted Stevens Indictment


Here is the latest installment of my column for the Alaska Bar Rag, the official publication of the Last Frontier's lawyers.    It is one of a series of pieces on the Ted Stevens case.

The Substance and Thinking

Involved in the Ted Stevens Indictment

by Cliff Groh

The last Bar Rag column described how the Department of Justice ended up not charging U.S. Sen. Ted Stevens with the offenses of bribery, honest-services fraud, receipt of illegal gratuities, and conversion of government services prosecutors considered during a probe that ran at least 33 months.

This installment in a multi-part series on the Ted Stevens case looks at the counts of failure to disclose gifts and/or liabilities that did appear in the indictment handed down on July 29, 2008.   This piece also includes an examination of some of the other factors involved in the indictment.      

Charges:  Items, Dollars, and Years

Recall that the indictment charged seven felony counts of failing to report gifts and/or liabilities on disclosure forms required annually from each U.S. Senator.   The prosecution alleged that Ted Stevens failed to report such colorful gifts as a massage chair from Girdwood restaurant owner Bob Persons, a blue-eyed puppy and a stained-glass window from Alaska real estate developer Bob Penney, and a bronze salmon statue from the Kenai River Sportfishing Association.   That first gift—a vibrating lounger that stayed in Stevens’ home in Washington, D.C. for seven years while Stevens said he thought it was a loan—left a lasting image that hurt the defendant at trial.  

Yet the great bulk of the unreported gifts and/or liabilities contained in the government’s case came from the oil-services giant VECO and its long-time CEO Bill Allen in the form of renovation work, repair, and improvements at the Senator’s Girdwood home.   The indictment alleged that over a period of more than six years Stevens failed to report more than $250,000 in free labor, materials, and other things of value provided by VECO and/or Allen at the Girdwood residence.   Items on the government’s  list of “freebies” included hardwood floors, work on one deck and all the work on another deck, a roof over the second deck, a professional gas grill, a Jacuzzi, and other furniture.   The indictment included one more benefit going from Allen to Ted Stevens that was unrelated to the Girdwood residence, a car trade in which one of the Senator’s children allegedly ended up with a vehicle substantially more valuable than the vehicle the Senator put up as his part of the trade.

The benefits from VECO and/or Allen were loaded into the early years of the period covered by the indictment handed down on July 29, 2008.   The charging document stated that approximately $200,000 of those things of value came in the period between the summer of 2000 and the end of 2001 and that another approximately $55,000 worth of benefits came in 2002.    

Six counts in the indictment covered the annual reports filed for the six calendar years 2001 through 2006, and alleged that Stevens had violated a federal statute (18 U.S.C. Subsec. 1001(a)(2)) criminalizing the making of “any materially false, fictitious, or fraudulent statement or representation.”   A seventh count alleged a scheme by Stevens running from calendar year 1999 through calendar year 2006 to conceal his receipt of things of value from Allen and VECO.   That seventh count alleged that the Senator had violated 18 U.S.C. Subsec. 1001(a)(1), which targets one “who falsifies, conceals, or covers up by any trick, scheme, or device a material fact.”   

Limiting Elements of the Offenses Charged

This statute has two critical limiting features:   a required mental state and a restriction on the statements covered.  

The mental state on the counts differed.  In the six counts for individual years it was “knowingly and willfully,” and the mental state in the count for the alleged multi-year scheme was “knowingly and intentionally.”  

Except for listed exceptions, the statute covers statements “in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States.”   Importantly for lawyers, one of those exceptions is that the statute does not apply to a party to a judicial proceeding or that party’s counsel “for statements, representations, writings or documents submitted by such party or counsel to a judge or magistrate in that proceeding.”   More importantly for this case, as to any matter within the jurisdiction of the legislative branch, the statute applies only in a limited set of circumstances, including “a document required by law, rule, or regulation to be submitted to the Congress or any office or officer within the legislative branch.”

The Source of the Requirement to Disclose:  The Ethics in Government Act

The indictment alleged that the relevant false statements by Ted Stevens appeared in annual disclosure forms required by the Ethics in Government Act of 1978 (5 U.S.C. App. 4 Secs. 101-111).  That Act requires various federal officials, including Members of Congress, to file annual disclosure statements detailing, with certain exceptions, their income, gifts, assets, financial liabilities, and securities and commercial real estate transactions. This statute was a child of the reforms adopted after the Watergate scandals (as was the Public Integrity Section that spearheaded the prosecution of Ted Stevens).  Particularly because of its restrictions on outside income for Members of Congress, the legislation was highly controversial on Capitol Hill when adopted—one Member of the House told the New Yorker that the bill was so unpopular that the legislation would have failed 2-1 if put to a secret ballot.   

As a statute, the Ethics in Government Act was not a favorite of prosecutors, either.  In conjunction with the statute criminalizing some false statements, the adoption of the Ethics in Government Act made it possible to prosecute public officials for false statements on their disclosure forms, but such prosecutions were not common.  According to James B. Stewart’s 1987 book The Prosecutors, the Justice Department had adopted an informal policy that disfavored prosecution for disclosure violations “except in the most egregious cases.”   

The subjective state of mind required by the statute was the practical problem prosecutors often found with charging public officials with the crime of failing to disclose gifts, loans, and income.   Prosecutors were worried that juries would be sympathetic to a defendant claiming he or she just forgot the matters that did not appear on the disclosure forms.  As Stewart reported in 1987, prosecutors evaluating charges against a number of federal officials—including Attorney General nominee Edwin Meese—ended up declining to prosecute on disclosure violations based on fears of inability to approve the required criminal intent to conceal.    And it was of course the mental element that turned out to be where all the action was in the Ted Stevens case.

Shorn of any charges of bribery or honest-services fraud, the 
indictment against Ted Stevens seemed to many observers to contain only technical violations.   Alaska historian John Strohmeyer branded them “pussycat charges,” and Fairbanks newspaper columnist Dermot Cole suggested after the trial that all the government had proved was that Stevens “may have failed to fill out the paperwork correctly to report such gifts as a gas grill, massage chair, sled dog and ugly artwork.”

With Bill Allen pleading guilty to bribing Ted Stevens’ son Ben—and given the very close personal relationship between Bill Allen and Ted Stevens over a number of years—the federal investigators and prosecutors on the Polar Pen probe would disagree.  Although they would never say it this way publicly, it seemed like some of those prosecutors and investigators pursuing Ted Stevens saw the charges of failure to disclose as equivalent to the charges of income tax evasion that brought down notorious mobster Al Capone.

The indictment had some distinctive touches, including a number of official acts that Ted Stevens took to benefit VECO.   Prosecutors could have inserted the list to offer a motive for why Stevens wanted to hide his receipt of benefits.   The list also seemed to be a residue of the years the Justice Department spent investigating Stevens for crimes with a quid pro quo element, almost like spots left on a dish after a hasty handwashing.   

One of those listed official acts reads particularly odd to Alaska eyes.  The indictment’s statement that Ted Stevens “received and accepted solicitations…from Allen and other VECO employees” for “assistance on both federal and state issues in connection with the effort to construct a natural gas pipeline from Alaska’s North Slope Region” betrayed a certain cluelessness about political realities in the Great Land.   Everybody with the slightest understanding of how things work on the Last Frontier knows that Ted Stevens would have strongly supported the gasline if Bill Allen had never been born and VECO had never existed.

Some Additional Factors in the Indictment

The Justice Department’s motivations for bringing the charges against Ted Stevens triggered much discussion in Alaska and on Capitol Hill, both because of the big political impacts of the case and because decisions on white-collar crime cases involve more prosecutorial discretion than do blue-collar crime cases.      

It was the Justice Department in the administration of President George W. Bush that brought the charges against the longest-serving Republican Senator ever.   When the case melted down due to revelations of prosecutorial misconduct, however, some commentators pointed to the Democratic leanings of some of the government’s attorneys to account for the Justice Department’s handling of the case.    The evidence suggests that any accusation of Democratic partisanship is a bum rap as an explanation for either the indictment or the discovery violations.    Two of the biggest players—Public Integrity Section Trial Attorney Nicholas Marsh and Public Integrity Section Chief William Welch—were Democrats, but this shouldn’t matter and did not seem to matter in this case.  

A more relevant factor in the decision to indict Ted Stevens was a lack of focus and management by the Justice Department throughout the process.   As one experienced Alaska lawyer observed, the Public Integrity Section and the higher-ups in Washington never seemed to understand what they had in the “Polar Pen” prosecution, treating Alaska as a backwater even after a Congressional powerhouse became a target.    The best way to see this is to contrast the Justice Department’s handling of the Ted Stevens case with how federal prosecutors dealt in the 1990s with another powerful politician, U.S. Rep. Dan Rostenkowski, D.-Ill.

There were a number of similarities between the cases of the two Capitol Hill titans.    Each served in Congress for more than 35 years and ended up as legends at home.   Both were long-time chairmen of critical Congressional committees—Rostenkowski helmed the tax-writing House Ways and Ways Committee, while Stevens had served for years at the top of Senate Appropriations.   Each had their lengthy careers ended by charges arising out of investigations that initially did not target them (the probe of Rostenkowski was an outgrowth of an examination of irregularities in the House post office system, and he ultimately pleaded guilty to two counts of mail fraud and served 15 months in custody).    Each faced charges brought by the executive branch under the control of the same party as that of the defendant (Rostenkowski was indicted in May of 1994 during the Clinton administration).

There were key differences as well between the Rostenkowski and Stevens cases.   The Rostenkowski case was brought by the Washington, D.C. U.S. Attorney's Office, while that office was excluded from the Stevens case.   Rostenkowski was charged with an unexpectedly wide-ranging 17-count indictment that covered fraud and embezzlement, conversion of public funds to private use, witness-tampering, concealing a material fact from Congress, wire fraud, and aiding and abetting a crime.   Prosecutors charged Stevens, on the other hand, with an unexpectedly narrow set of counts alleging failure to disclose his receipt of gifts and/or his liability for debts.   

Most importantly, prosecutors substantially experienced in high-profile public corruption cases seemed to pay more attention to the Rostenkowski case for a longer period of time than the Stevens case.   As detailed in the New York Times, Eric Holder took over as U.S. Attorney for Washington, D.C. after the investigation into Rostenkowski had run on for a number of months.  Holder had previously prosecuted a Congressman in an Abscam public corruption case.  The new U.S. Attorney quickly instructed the chief of the office’s public corruption section—a prosecutor who had successfully brought cases against a governor and a federal judge—to drop or re-assign other matters and work full-time on the Rostenkowski case, and the indictment came approximately seven months later. 

Contrast that intensive focus of attorneys with extensive experience in high-level public corruption cases with that of the lawyers most actively involved in the Ted Stevens case before the indictment.   The smart and hard-working Marsh had only been a prosecutor for about a year when he started working on the Polar Pen probe, and he had no previous experience being in charge day-to-day of a high-profile public corruption case.    Assistant U.S. Attorney Joseph Bottini was a highly experienced federal prosecutor with a strong reputation for straight shooting, but had no experience in a case like the one against Ted Stevens.

Next installment:   The indictment’s curious timing and the false choice it represented