SCOTUS Reverses “Bridgegate” Convictions: Conduct was Corrupt – But Not a Federal Crime

On Thursday, the U.S. Supreme Court reversed the convictions of two of the principles of the scheme to exact political revenge by altering the traffic patterns at the entrance of the George Washington Bridge in 2013. The Court ruled that because the scheme itself did not aim to obtain money or property, the defendants could not have committed wire fraud or federal program fraud. The decision by a unanimous Court reversed the decision of the Third Circuit Court of Appeals, which had affirmed the convictions of Bridget Anne Kelly and William Baroni.

The convictions at issue in the case arose out of a plan to cause major traffic problems for residents of Fort Lee, New Jersey as retribution for the refusal by its Mayor to endorse then Governor Chris Christie’s bid for reelection. The architects of the plan were Kelly, then governor Christie’s Deputy Chief of Staff; Baroni, then Deputy Executive Director of the Port Authority of New York and New Jersey; and David Wildstein, another Port Authority official, who, like Baroni, had been appointed to the post by Governor Christie. 

In 2013, there was a significant effort on behalf of the Governor, with Kelly leading the way, to garner widespread support for Governor Christie’s reelection from local officials. In the summer of 2013, one such local official, Fort Lee Mayor Mark Sokolich, informed Kelly that he would not being endorsing Governor Christie. When Kelly reached out to Wildstein for ideas on how to retaliate against Sokolich, Wildstein suggested that eliminating the dedicated Fort Lee lanes on the toll plaza of the George Washington Bridge would cause rush-hour traffic to back up onto lo­cal streets, leading to gridlock there. Kelly thought that was a good idea, and wrote an email to that effect back to Wildstein. Kelly and Wildstein then secured Baroni’s approval of the plan. 

When fully operational the George Washington Bridge, which spans the Hudson River between Fort Lee and Manhattan, has twelve lanes with tollbooths that feed into the bridge’s upper level from the Fort Lee side. For decades the basic mode of operation for morning commutes on the bridge was for 9 of the 12 lanes to carry traffic coming from nearby highways, with the three remaining lanes to serve only cars coming from Fort Lee. The plan agreed upon by Wildstein, Kelly and Baroni was to reduce those three lanes available to Fort Lee residents down to one

The cover story for the scheme was that the planned lane change was part of a traffic study. In an attempt to add some authenticity, Wildstein told the Port Authority’s engineers to collect some numbers on how far back the traffic was delayed. In addition to tasking the engineers with fake data collection, Baroni, Wildstein, and Kelly also agreed that the Port Authority should incur the cost of additional toll collectors to provide relief to the toll collectors working at the single remaining Fort Lee designated toll both.    

On September 9, 2013, the plan was put into action, with predicable results. The town’s streets almost immediately came to a standstill, school buses stood in place for hours, and first responders were hindered in attending to emergencies. Despite the overwhelming adverse impact, Kelly, Baroni, and Wildstein kept the plan in place for three more days.  

When the scheme and resulting chaos came to light, each of the three individuals were removed from their positions, and eventually were charged with wire fraud, federal program fraud and conspiracy to commit each of those crimes. Wildstein pleaded guilty to conspiracy charges and agreed to cooperate with the Government. Baroni and Kelly went to trial and were eventually found guilty of all charges. On appeal to Third Circuit, where Baroni and Kelly argued that the evidence was insufficient to sustain a conviction, the convictions were affirmed. 

In delivering the opinion of the Court, Associate Justice Elena Kagan noted that both of the principal substantive charges at issue, wire fraud and federal program fraud, target fraudulent schemes to obtain property. The critical question before the Court, therefore, was not whether the trial evidence demonstrated “wrongdoing—deception, corruption, abuse of power.” The question rather was whether the defendants committed property fraud. The Court reasoned that under either of the wire fraud or federal program fraud statutes, the Government had to show not only that Baroni and Kelly engaged in de­ception, but that an object of their fraud was property, citing the Court’s prior decision in Cleveland v. United States, 531 U. S. 12, 26 (2000). 

The government argued that the deceit of Baroni and Kelly had property as its object in two ways by (1) taking control over the physical lanes on the bridge for the wrongful purpose and (2) depriving the Port Authority of the costs of compensating the engineers and toll-collectors for the tasks they carried out at the direction of Wildstein and Baroni. The Court disagreed, finding instead that the realignment was a “quintessential exercise of regulatory power.” As a result, neither the use of the bridge or the taking of the time of the Port Authority engineers and toll collectors were objects of the fraud. The Court contrasted those actions with examples of cases where a public official uses a public employee’s time to provide personal services to the public official or to provide services for a political contributor. 

The Court found that the time and labor of Port Au­thority employees were just “an incidental (even if foreseen) byproduct of Baroni’s and Kelly’s regulatory object.” The Court’s opinion leaves little doubt that the trial evidence demonstrated that the actions of the defendants constituted an abuse of power. Nonetheless, it found that the scheme here did not aim to obtain money or property, and as a result Baroni and Kelly could not have violated the federal-program fraud or wire fraud laws. A copy of the full opinion can be found here.

Medicare Fraud Sentence that Applied Vulnerable Victims Enhancement Upheld by Third Circuit

A laboratory sales representative, who had pleaded guilty to using a sham charity to direct unnecessary genetic testing to laboratories in exchange for kickbacks, has lost his bid in the Third Circuit to reduce his 50-month sentence.  On Wednesday, the Third Circuit issued an opinion rejecting the argument by Seth Rehfuss that the U.S. District Court for the District of New Jersey should not have applied the vulnerable victim enhancement and two others under the U.S. Sentencing Guidelines in determining his sentence. 

Rehfuss had an arrangement with two laboratories in Virginia and California to recruit patients to undergo genetic testing.  The testing, which was not recommended by any of the patients’ physicians, was paid for by Medicare.  Rehfuss was paid kickbacks by the laboratories for each test performed.

Rehfuss didn’t outwardly recruit for the laboratories.  Instead, he held himself out in presentations to elderly citizens as a representative of a charity called the Good Samaritans of America (Good Samaritans). At his change of plea hearing, Rehfuss admitted that the charity was a sham used to gain the trust of potential patients.  When making presentations at senior centers about a variety of subjects, Rehfuss would invariably reach the subject of genetic testing and suggest that the members of the audience were at risk for numerous, serious health conditions if they didn’t undergo the testing.  Thousands of elderly patients agreed to the testing and samples were sent to one of the two laboratories. 

Rehfuss eventually recruited physicians, who never met any of the patients, to execute Medicare approval forms, paying them $2,000 per week for work that took only a couple of hours.  The laboratories performed the tests, submitted the reimbursement forms to Medicare, and upon payment would send the kick-backs to Good Samaritans.

The essential facts of the scheme were admitted by Rehfuss when he pleaded guilty to a single healthcare fraud conspiracy count.  At sentencing, over Rehfuss’ opposition, the Court granted the Government’s request for three Guidelines enhancements:

  • a two-level enhancement for targeting vulnerable victims (U.S.S.G. §3A1.1(b)(1));
  • a two-level enhancement for exploiting a charity’s guise for personal gain (U.S.S.G. §2B1.1(b)(9)(A); and
  • a four-level enhancement for his leadership role in the offense (U.S.S.G. § 3B1.1(a)).

This resulted in a guideline range of 51 – 63 months being calculated by the District Court, which then, considering all factors, sentenced Rehfuss to 50 months. 

Rehfuss acknowledged that the elderly patients counted as victims and that he targeted an elderly population.  He argued, however, that the vulnerable victims enhancement didn’t apply because the District Court made no individualized determination and instead generalized that all elderly individuals are vulnerable.  The Third Circuit rejected Rehfuss’ argument, laying out 4 reasons supporting this “broad brush” approach:

  • Only one of the more than a thousand seniors had to be vulnerable for the enhancement to apply.
  • Rehfuss admitted to targeting Medicare participants living in low-income housing.
  • He bypassed the victims’ personal doctors.
  • His presentation worked by scaring seniors into undergoing his tests.

The Court found that preying on these vulnerabilities ‘made it easier to [perpetrate] the fraud,’ quoting U.S. v. Hawes, 523 F.3d 245, 255 (3d Cir. 2008). 

Rehfuss also argued that, even though he used the sham charity as a pretense, the two-point enhancement for misrepresentation regarding a charity did not apply because he did not divert any of the donations received by the charity.  Instead, all of his profits came from the laboratory kickbacks.  The Court rejected this explaining that the enhancement applies whenever a defendant commits fraud by “misrepresent[ing] that he was conducting an activity wholly on behalf of [a charitable] organization,” quoting U.S. v. Kinney, 211 F.3d 13, 20 (2d Cir. 2000).

The Court also rejected Rehfuss’ argument that the four-level enhancement for status as an “organizer or leader” should not have been applied by the District Court.  The Court found several examples in the record demonstrating Rehfuss to be an organizer or leader:

  • He wrote the script for, and gave, the presentations at senior centers as the “front man.”
  • He admitted that he “was key to designing the [scheme’s] system.”
  • He negotiated with the labs for bigger kickbacks.
  • He recruited and controlled other participants.

Ultimately the Court, with Circuit Judge Stephanos Bibas writing for the panel, affirmed the District Court’s sentencing decision based on Rehfuss’ use of a sham charity to scare seniors into undergoing needless genetic tests, bypassing their doctors and pocketing Medicare kickbacks.  The complete opinion can be found here.