Supreme Court Overrules the Nexus Requirement in 18 USC ' 666

Several U.S. appellate courts have expressed discomfort with the breadth of 18 U.S.C. ' 666 (“Theft or bribery concerning programs receiving federal funds”) because its literal language makes certain theft and bribery federal crimes even when there is arguably no federal interest. Some circuits construed the statute to require a federal nexus to the wrongdoing, but each circuit that did so adopted a different test. Others refused to limit the statute at all. The Supreme Court last term purported to resolve the circuit split by affirming Congress's power to prohibit the corruption of entities that receive at least $10,000 in federal funds, regardless whether the crime has a federal nexus. United States v. Sabri, 124 S. Ct. 1941 (2004). Sabri rejected the constitutional limits courts had added to the statute, but it did not address the view of some courts that certain words within ' 666 express Congress's intent to limit the statute's reach on grounds of federalism.

What It Says

The statute applies to any entity that receives more than $10,000 per year in federal 'benefits' (' 666(b)), which includes state, local and tribal governments and agencies as well as private organizations. Agents of such entities commit a federal crime if they embezzle or otherwise steal entity property (' 666(a)(1)(A)), or solicit a bribe regarding entity business (' 666(a)(1)(B)), that is valued at more than $5000. An outsider who bribes an agent of a covered entity in connection with business involving $5000 or more likewise commits a federal crime (' 666(a)(2)).

Various courts, opining that every jurisdiction in America receives at least $10,000 in federal benefits, balked at making a federal case out of every $5000 bribery. See, e.g., United States v. Zwick, 199 F.3d 672, 686 (3d Cir. 1999) (' 666, read literally, “would criminalize a host of corrupt acts committed by state agents … turning traditionally local conduct into a matter for federal enforcement involving a substantial extension of federal law enforcement resources.”). The Second Circuit asked, skeptically, whether the federal government could use ' 666 “to prosecute a bribe paid to a city's meat inspector in connection with a substantial transaction just because the city's parks department had received a federal grant of $10,000?” United States v. Santopietro, 166 F.3d 88, 93 (2d Cir. 1999) (answering no).

To prevent a construction of ' 666 that might extend beyond Congress's authority, the Second, Third and Eleventh Circuits read into ' 666 the requirement of a nexus between the alleged criminal conduct and the federal interest. See United States v. Edgar, 304 F.3d 1320, 1325 (11th Cir. 2002); Zwick, 199 F.3d at 687; Santopietro, 166 F.3d at 93. But whereas the Second Circuit implied into the statute an element that the offense have implicated the federal government's interest in protecting the integrity of the entity receiving federal benefits, the Third Circuit instead implied an element that the offense have implicated the purpose of the federal benefits, and the Eleventh Circuit held that the express language of the statute already contained a federalism limitation, within the $10,000-in-”benefits” requirement. Meanwhile, the Sixth, Seventh and Eighth Circuits refused to read any nexus requirement into the statute at all.

Court Rejects Implied Limits

In United States v. Sabri, 124 S. Ct. 1941 (2004), the Supreme Court rejected any implied limits on ' 666, affirming Congress's power to reach all crimes within the broad language of the statute. A Minneapolis developer, Basim Sabri, had been charged with three counts of bribing a city council-member. The district court dismissed the indictment, holding that the statute exceeded Congress's constitutional authority because it criminalized thefts and bribes that have no nexus to federal funds. A divided panel of the Eighth Circuit reinstated the indictment, holding that although the government need not prove a federal nexus, the theft-or-bribery statute was “necessary and proper to the execution of the Spending Power” and thus validly enacted. The Supreme Court granted certiorari to resolve the circuit split “over the need to require connection between forbidden conduct and federal funds.”

To the relief of prosecutors, the Supreme Court unanimously validated Congress's effort “to protect spending objects from the menace of local administrators on the take.” Justice Souter wrote for the Court:

“Congress has authority under the Spending Clause to appropriate federal monies to promote the general welfare, Art. I, ' 8, cl.1, and it has corresponding authority under the Necessary and Proper Clause, Art. I, ' at 8, cl. 18, to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare, and not frittered away in graft or on projects undermined when funds are siphoned off or corrupt public officers are derelict about demanding value for dollars.”

The statute did not exceed the “scope of the federal interest” because it “condition[ed] the offense on a threshold amount of federal dollars defining the federal interest … and on a bribe that goes well beyond liquor and cigars.”

Justices Kennedy and Scalia joined all but the “afterword” of the Court's opinion, which had criticized the lower courts for allowing this suit to proceed as a “facial challenge” in the first place. Justice Thomas concurred only in the judgment, opining that the statute was appropriate under the Court's Commerce Clause jurisprudence (with which he disagreed), without resolving his “doubts” as to whether ' 666 is necessary and proper to the Spending Clause.

No Limits?

Sabri does not mean that ' 666 has no limits, however, because the Supreme Court did not address those cases that found limits within the statute's express language. For example, Sabri did not mention the Eleventh Circuit's holding that ' 666(a)(1) applies only to entities “with programs defined by a sufficiently comprehensive 'structure, operation, and purpose' to merit characterization of the [federal] funds as benefits under ' 666(b).” Edgar, 304 F.3d at 1327 (emphasis added). This analysis was based on Fischer v. United States, 529 U.S. 667, 681 (2000), in which the Supreme Court rejected a reading of ' 666 by which all funds received under a federal assistance program are “benefits.” Instead, it held that the term “benefits” contains federalism-based limits:

“Any receipt of federal funds can, at some level of generality, be characterized as a benefit. The statute does not employ this broad, almost limitless use of the term. Doing so would turn almost every act of fraud or bribery into a federal offense, upsetting the proper federal balance. To determine whether an organization participating in a federal assistance program receives 'benefits,' an examination must be undertaken of the program's structure, operation, and purpose.”

The Eleventh Circuit concluded that Fischer “confirmed the existence of the constitutional limits suspected by the Second and Third Circuits, while also clarifying that these limits are built into ' 666(b)'s requirement that recipient entities receive at least $10,000 in federal 'benefits.'” Edgar, 304 F.3d at 1325.

Other circuits have found constitutional limits on the scope of ' 666 within other express terms of the statute. For example, the Fifth Circuit has narrowly construed the statutory term “agent” to avoid a constitutional question regarding the scope of ' 666. See United States v. Phillips, 219 F.3d 404, 413-15 (5th Cir. 2000) (“[T]he absence of any federal interest in this prosecution militates in favor of our analysis that the statutory term 'agent' should not be given the broadest possible meaning … but instead should be construed in the context of ' 666 to tie the agency relationship to the authority that a defendant has with respect to control and expenditure of the funds of an entity that receives federal monies.”); United States v. Moeller, 987 F.2d 1134, 1137 (5th Cir. 1993) (requiring a “nexus between the criminal conduct and the agency receiving federal assistance”). And the Ninth Circuit after Sabri has reaffirmed a prior holding that for ' 666 to reach a government agent, “his agency must directly receive federal funding.” United States v. Shelton, 99 Fed. Appx. 136, 141, 2004 WL 1202971, *3-4 (9th Cir. June 1, 2004) (unpublished) (emphasis added).

Unresolved Question

Sabri's rejection of an implied nexus requirement, therefore, does not answer the Second Circuit's question whether ' 666 can be used to prosecute bribing a city meat inspector “just because the city's parks department had received a federal grant of $10,000.” There is language in Sabri suggesting that ' 666 would reach corruption of an agent of a local government agency even where another agency received the federal funds: “Money is fungible … [M]oney can be drained off here because a federal grant is pouring in there.” Sabri 124 S. Ct. at 1946. But a prosecutor or defense attorney contemplating a case under ' 666 should consider whether the defendant is an “agent” of the particular entity that received the federal funds, as the Fifth and Ninth Circuits require, and whether the “structure, operation and purpose” of the federal payments were sufficiently comprehensive to deem them “benefits,” as the Eleventh Circuit requires. Sabri does not prevent lower courts from construing the words of ' 666 to answer federalism concerns.

Several U.S. appellate courts have expressed discomfort with the breadth of 18 U.S.C. ' 666 (“Theft or bribery concerning programs receiving federal funds”) because its literal language makes certain theft and bribery federal crimes even when there is arguably no federal interest. Some circuits construed the statute to require a federal nexus to the wrongdoing, but each circuit that did so adopted a different test. Others refused to limit the statute at all. The Supreme Court last term purported to resolve the circuit split by affirming Congress's power to prohibit the corruption of entities that receive at least $10,000 in federal funds, regardless whether the crime has a federal nexus. United States v. Sabri , 124 S. Ct. 1941 (2004). Sabri rejected the constitutional limits courts had added to the statute, but it did not address the view of some courts that certain words within ' 666 express Congress's intent to limit the statute's reach on grounds of federalism.

What It Says

The statute applies to any entity that receives more than $10,000 per year in federal 'benefits' (' 666(b)), which includes state, local and tribal governments and agencies as well as private organizations. Agents of such entities commit a federal crime if they embezzle or otherwise steal entity property (' 666(a)(1)(A)), or solicit a bribe regarding entity business (' 666(a)(1)(B)), that is valued at more than $5000. An outsider who bribes an agent of a covered entity in connection with business involving $5000 or more likewise commits a federal crime (' 666(a)(2)).

Various courts, opining that every jurisdiction in America receives at least $10,000 in federal benefits, balked at making a federal case out of every $5000 bribery. See, e.g., United States v. Zwick , 199 F.3d 672, 686 (3d Cir. 1999) (' 666, read literally, “would criminalize a host of corrupt acts committed by state agents … turning traditionally local conduct into a matter for federal enforcement involving a substantial extension of federal law enforcement resources.”). The Second Circuit asked, skeptically, whether the federal government could use ' 666 “to prosecute a bribe paid to a city's meat inspector in connection with a substantial transaction just because the city's parks department had received a federal grant of $10,000?” United States v. Santopietro , 166 F.3d 88, 93 (2d Cir. 1999) (answering no).

To prevent a construction of ' 666 that might extend beyond Congress's authority, the Second, Third and Eleventh Circuits read into ' 666 the requirement of a nexus between the alleged criminal conduct and the federal interest. See United States v. Edgar , 304 F.3d 1320, 1325 (11th Cir. 2002); Zwick, 199 F.3d at 687; Santopietro, 166 F.3d at 93. But whereas the Second Circuit implied into the statute an element that the offense have implicated the federal government's interest in protecting the integrity of the entity receiving federal benefits, the Third Circuit instead implied an element that the offense have implicated the purpose of the federal benefits, and the Eleventh Circuit held that the express language of the statute already contained a federalism limitation, within the $10,000-in-”benefits” requirement. Meanwhile, the Sixth, Seventh and Eighth Circuits refused to read any nexus requirement into the statute at all.

Court Rejects Implied Limits

In United States v. Sabri , 124 S. Ct. 1941 (2004), the Supreme Court rejected any implied limits on ' 666, affirming Congress's power to reach all crimes within the broad language of the statute. A Minneapolis developer, Basim Sabri, had been charged with three counts of bribing a city council-member. The district court dismissed the indictment, holding that the statute exceeded Congress's constitutional authority because it criminalized thefts and bribes that have no nexus to federal funds. A divided panel of the Eighth Circuit reinstated the indictment, holding that although the government need not prove a federal nexus, the theft-or-bribery statute was “necessary and proper to the execution of the Spending Power” and thus validly enacted. The Supreme Court granted certiorari to resolve the circuit split “over the need to require connection between forbidden conduct and federal funds.”

To the relief of prosecutors, the Supreme Court unanimously validated Congress's effort “to protect spending objects from the menace of local administrators on the take.” Justice Souter wrote for the Court:

“Congress has authority under the Spending Clause to appropriate federal monies to promote the general welfare, Art. I, ' 8, cl.1, and it has corresponding authority under the Necessary and Proper Clause, Art. I, ' at 8, cl. 18, to see to it that taxpayer dollars appropriated under that power are in fact spent for the general welfare, and not frittered away in graft or on projects undermined when funds are siphoned off or corrupt public officers are derelict about demanding value for dollars.”

The statute did not exceed the “scope of the federal interest” because it “condition[ed] the offense on a threshold amount of federal dollars defining the federal interest … and on a bribe that goes well beyond liquor and cigars.”

Justices Kennedy and Scalia joined all but the “afterword” of the Court's opinion, which had criticized the lower courts for allowing this suit to proceed as a “facial challenge” in the first place. Justice Thomas concurred only in the judgment, opining that the statute was appropriate under the Court's Commerce Clause jurisprudence (with which he disagreed), without resolving his “doubts” as to whether ' 666 is necessary and proper to the Spending Clause.

No Limits?

Sabri does not mean that ' 666 has no limits, however, because the Supreme Court did not address those cases that found limits within the statute's express language. For example, Sabri did not mention the Eleventh Circuit's holding that ' 666(a)(1) applies only to entities “with programs defined by a sufficiently comprehensive 'structure, operation, and purpose' to merit characterization of the [federal] funds as benefits under ' 666(b).” Edgar, 304 F.3d at 1327 (emphasis added). This analysis was based on Fischer v. United States , 529 U.S. 667, 681 (2000), in which the Supreme Court rejected a reading of ' 666 by which all funds received under a federal assistance program are “benefits.” Instead, it held that the term “benefits” contains federalism-based limits:

“Any receipt of federal funds can, at some level of generality, be characterized as a benefit. The statute does not employ this broad, almost limitless use of the term. Doing so would turn almost every act of fraud or bribery into a federal offense, upsetting the proper federal balance. To determine whether an organization participating in a federal assistance program receives 'benefits,' an examination must be undertaken of the program's structure, operation, and purpose.”

The Eleventh Circuit concluded that Fischer “confirmed the existence of the constitutional limits suspected by the Second and Third Circuits, while also clarifying that these limits are built into ' 666(b)'s requirement that recipient entities receive at least $10,000 in federal 'benefits.'” Edgar, 304 F.3d at 1325.

Other circuits have found constitutional limits on the scope of ' 666 within other express terms of the statute. For example, the Fifth Circuit has narrowly construed the statutory term “agent” to avoid a constitutional question regarding the scope of ' 666. See United States v. Phillips , 219 F.3d 404, 413-15 (5th Cir. 2000) (“[T]he absence of any federal interest in this prosecution militates in favor of our analysis that the statutory term 'agent' should not be given the broadest possible meaning … but instead should be construed in the context of ' 666 to tie the agency relationship to the authority that a defendant has with respect to control and expenditure of the funds of an entity that receives federal monies.”); United States v. Moeller , 987 F.2d 1134, 1137 (5th Cir. 1993) (requiring a “nexus between the criminal conduct and the agency receiving federal assistance”). And the Ninth Circuit after Sabri has reaffirmed a prior holding that for ' 666 to reach a government agent, “his agency must directly receive federal funding.” United States v. Shelton , 99 Fed. Appx. 136, 141, 2004 WL 1202971, *3-4 (9th Cir. June 1, 2004) (unpublished) (emphasis added).

Unresolved Question

Sabri's rejection of an implied nexus requirement, therefore, does not answer the Second Circuit's question whether ' 666 can be used to prosecute bribing a city meat inspector “just because the city's parks department had received a federal grant of $10,000.” There is language in Sabri suggesting that ' 666 would reach corruption of an agent of a local government agency even where another agency received the federal funds: “Money is fungible … [M]oney can be drained off here because a federal grant is pouring in there.” Sabri 124 S. Ct. at 1946. But a prosecutor or defense attorney contemplating a case under ' 666 should consider whether the defendant is an “agent” of the particular entity that received the federal funds, as the Fifth and Ninth Circuits require, and whether the “structure, operation and purpose” of the federal payments were sufficiently comprehensive to deem them “benefits,” as the Eleventh Circuit requires. Sabri does not prevent lower courts from construing the words of ' 666 to answer federalism concerns.