In the Courts

Between 1999 and 2003, Mr. Bahel provided inside bidding information and other improper advantages to a long-time friend, allowing the individual and his associates to obtain supply contracts with the U.N. Bahel received numerous benefits in return for his assistance, including cash payments. Id. at *4. In 2007, Bahel was convicted of several criminal offenses based on this conduct, including mail fraud, wire fraud and conspiracy to commit fraud, under the theory that he had deprived the U.N. of his “honest services.” Id. at *1. He was also convicted of “corrupt[ly] recei[ving] things of value with an intent to be rewarded” under 18 U.S.C. ' 666. Id. He was sentenced to 97 months in prison and ordered to pay restitution in the amount of $932,156.39 as well as to forfeit $103,500 and title to an apartment he owned in Manhattan. Id. at *6.

Bahel appealed his conviction on multiple grounds, all of which were rejected by the Second Circuit. Notably, he argued that ' 666 did not apply because the U.N. was not a federal program receiving benefits in excess of $10,000, as required under the statute. Id. at *10. The Second Circuit disagreed, holding that the U.N. was, in fact, a federal program based on the United Nations Participation Act by which Congress authorized payment of dues to the U.N. Id. at *10-13. Furthermore, the court found that those dues amounted to benefits in excess of $10,000, as required under ' 666. Id.

The court similarly rejected Bahel's argument that “honest services” fraud under 18 U.S.C. ' 1346 does not prohibit bribery of a foreign employee of an international organization such as the U.N. Bahel based his argument in large part on precedent that “Congress did not intend that the intangible right to honest services encompass bribery of foreign officials in foreign countries.” Id. at *16 (citing United States v. Giffen, 326 F.Supp. 2d 497, 506 (S.D.N.Y. 2004) (dismissing charges of honest services fraud where bribe was paid to Kazakh official resulting in Kazakh citizens being deprived of honest services)). The Second Circuit agreed with the proposition that “honest services” fraud did not apply to foreign bribery of foreign officials, but found that this matter was distinguishable because Bahel's conduct took place in the United States and the victim of Bahel's fraud was an international organization located in the United States and receiving its greatest financial support from the United States. Id.

Finally, Bahel asserted that he was improperly sentenced as a “public official” under ' 2C1.1 of the United States Sentencing Guidelines, which allows for a higher potential penalty for corruption related to “public officials” than might otherwise be permitted under the guidelines. Id. at *27. The Second Circuit rejected this argument, however, holding that the U.N. is a public international organization and high-ranking employees such as Mr. Bahel are “public officials” under the sentencing guidelines. Id. at 27-29. Notably, the court held that the term “public official” encompasses more than just diplomats and others with high-level decision-making authority, but the court also left open the prospect that some that some low levels of ministerial emplyment may not raise the employee's status to the the level of “public official.” Id. at 28.

In the Courts and Business Crimes Hotline were written by Associate Editors Jaime Schafer and Matthew J. Alexander, respectively. Both are associates at Kirkland & Ellis LLP, Washington, DC.

Second Circuit: U.N. Officials Are Subject to Prosecution for 'Honest Services' Fraud

In United States v. Bahel, No. 08-3327-cr, 2011 WL 5067095 (2d Cir. Oct. 26, 2011), the U.S. Court of Appeals for the Second Circuit addressed many interesting issues related to application of U.S. public corruption prohibitions to officials of international organizations. The court held that: 1) the United Nations (U.N.) is a “federal program” for the purposes of conviction under 18 U.S.C. ' 666, which applies to bribery and theft related to such programs; 2) foreign employees of international organizations can be subject to prosecution for “honest services” fraud; and 3) as a high-ranking U.N. official, Mr. Bahel was properly sentenced as a “public official” under the United States Sentencing Guidelines. Id. at *1.

Sanjaya Bahel was convicted of violating ' 666 as well as mail and wire fraud statutes for “depriving the United Nations, his former employer, of its intangible right to his honest services” by providing inside bidding information and other assistance to a U.N. contactor in exchange for financial benefits. During the relevant period, Bahel was the Chief of the Commodity Procurement Section of the U.N. Procurement Division.

Between 1999 and 2003, Mr. Bahel provided inside bidding information and other improper advantages to a long-time friend, allowing the individual and his associates to obtain supply contracts with the U.N. Bahel received numerous benefits in return for his assistance, including cash payments. Id. at *4. In 2007, Bahel was convicted of several criminal offenses based on this conduct, including mail fraud, wire fraud and conspiracy to commit fraud, under the theory that he had deprived the U.N. of his “honest services.” Id. at *1. He was also convicted of “corrupt[ly] recei[ving] things of value with an intent to be rewarded” under 18 U.S.C. ' 666. Id. He was sentenced to 97 months in prison and ordered to pay restitution in the amount of $932,156.39 as well as to forfeit $103,500 and title to an apartment he owned in Manhattan. Id. at *6.

Bahel appealed his conviction on multiple grounds, all of which were rejected by the Second Circuit. Notably, he argued that ' 666 did not apply because the U.N. was not a federal program receiving benefits in excess of $10,000, as required under the statute. Id. at *10. The Second Circuit disagreed, holding that the U.N. was, in fact, a federal program based on the United Nations Participation Act by which Congress authorized payment of dues to the U.N. Id. at *10-13. Furthermore, the court found that those dues amounted to benefits in excess of $10,000, as required under ' 666. Id.

The court similarly rejected Bahel's argument that “honest services” fraud under 18 U.S.C. ' 1346 does not prohibit bribery of a foreign employee of an international organization such as the U.N. Bahel based his argument in large part on precedent that “Congress did not intend that the intangible right to honest services encompass bribery of foreign officials in foreign countries.” Id . at *16 (citing United States v. Giffen , 326 F.Supp. 2d 497, 506 (S.D.N.Y. 2004) (dismissing charges of honest services fraud where bribe was paid to Kazakh official resulting in Kazakh citizens being deprived of honest services)). The Second Circuit agreed with the proposition that “honest services” fraud did not apply to foreign bribery of foreign officials, but found that this matter was distinguishable because Bahel's conduct took place in the United States and the victim of Bahel's fraud was an international organization located in the United States and receiving its greatest financial support from the United States. Id.

Finally, Bahel asserted that he was improperly sentenced as a “public official” under ' 2C1.1 of the United States Sentencing Guidelines, which allows for a higher potential penalty for corruption related to “public officials” than might otherwise be permitted under the guidelines. Id. at *27. The Second Circuit rejected this argument, however, holding that the U.N. is a public international organization and high-ranking employees such as Mr. Bahel are “public officials” under the sentencing guidelines. Id. at 27-29. Notably, the court held that the term “public official” encompasses more than just diplomats and others with high-level decision-making authority, but the court also left open the prospect that some that some low levels of ministerial emplyment may not raise the employee's status to the the level of “public official.” Id. at 28.

In the Courts and Business Crimes Hotline were written by Associate Editors Jaime Schafer and Matthew J. Alexander, respectively. Both are associates at Kirkland & Ellis LLP, Washington, DC.