Cutting Off the Stream: How United States v. Silver Affects "Stream of Benefits" or "Retainer" Bribery

Significantly, the Silver court limited its reasoning to the "as opportunities arise" bribery theory and distinguished that theory from other theories used to prosecute bribery — the "stream of benefits" and "retainer" theories — that many courts and observers have considered interchangeable with the "as opportunities arise theory." Put simply, the "stream of benefits" and "retainer" theories contemplate a scheme involving a payment or series of payments that put the public official "in the pocket" of a bribe payor with an understanding that the payor would specify official action at some point in the future. Id. at 579 (Lohier, J., concurring).

While Silver emphasized particularity requirements for proving "as opportunities arise" bribery, the court stressed that it was not taking up whether those particularity requirements applied to "stream of benefits" and "retainer" bribery and provided little explanation for distinguishing between these theories. However, unless courts explain the difference between the theories, or apply Silver's particularity requirement uniformly across them, Silver's distinctions threaten to confuse and undermine its key premise, and potentially frustrate law enforcement's efforts to combat corruption.

Stream of Benefits, Retainer, and the Silver Decision

It has long been possible for federal prosecutors to prove a bribery scheme "involving payments at regular intervals in exchange for specific official acts as the opportunities to commit those acts arise." United States v. Ganim, 510 F.3d 134, 147 (2d Cir. 2007). This "as opportunities arise" theory has been described by courts within the Circuit and elsewhere interchangeably with "stream of benefits," and "retainer." These theories all reflect the reality that "donors and recipients engaged in ongoing bribery schemes do not always spell out in advance the specific match between gift and act." Id. at 148.

Silver dispelled the notion that "as opportunities arise," "stream of benefits," and "retainer" were all the same. Sheldon Silver, the powerful former New York Assembly Speaker, was convicted of fraud, extortion, and other offenses arising from two bribery schemes. One involved a medical doctor who provided Silver with referrals of mesothelioma patients to a law firm Silver was affiliated with, and the other involved real estate developers who diverted law-firm referral fees to Silver. Prosecutors alleged that both series of payments were made in exchange for Silver taking official action for the bribe payors' benefit. The district court instructed the jury that the bribery and extortion offenses required the Government to prove that Silver "'understood that, in exchange for the client referrals, he was expected to 'take official action' 'for the benefit of' the payor 'as specific opportunities arose.'" Silver, 948 F.3d at 547. Silver challenged the adequacy of that instruction on appeal, contending that the Supreme Court's decision in McDonnell v. United States, 136 S. Ct. 2355 (2016), "eliminated [the] so-called 'as the opportunities arise' theory of bribery, under which an official need not have promised to perform any specific official acts at the time of payment." Id. at 552. (Silver and McDonnell considered bribery charges against state officials under the honest services fraud statute (18 U.S.C. §1346), which makes it a crime to commit mail or wire fraud by depriving victims of the defendant's honest services through his receipt of bribes or kickbacks, and extortion under the color of official right pursuant to the Hobbs Act (18 U.S.C. §1951). The requirements for proving bribes under these provisions are the same as in violation of 18 U.S.C. §201, which covers bribes involving federal officials.)

The Second Circuit disagreed with Silver's argument, but acknowledged that the "as opportunities arise" theory required the Government to prove that an official promised to take an official act in exchange for payment for "a particular question or matter," which "must be identified at the time the official makes a promise or accepts a payment." Id. at 558. Because some of the evidence related to the mesothelioma scheme was determined to be outside the statute of limitations, the evidence the government relied on provided only support for what the court determined to be a general agreement that Silver would treat the doctor favorably in exchange for the referrals. The admissible real estate scheme evidence, however, demonstrated that Silver offered his influence on public financing and rent legislation questions in exchange for the real estate referral fees. Id. at 571-72.

In a footnote, the court explained that "as opportunities arise" is distinct from the "stream of benefits" and "retainer" theories of bribery. The court acknowledged that the terms had been used "interchangeably," but suggested that they were, in fact, different theories, and that the "stream of benefits" and "retainer" theories were unaffected by its decision. Id. at 553 n.7. The court left for another day how the "particular question or matter" requirement applies when payment is provided for "a promise to perform an official act in the future upon designation of the official act by the bribe payor at that later date (in essence a retainer)." Id.

Circuit Judge Raymond Lohier's concurrence attempted to distinguish the three theories, not through a bright-line rule to follow, but rather by providing two examples of what "as opportunities arise" bribery was not. The first was a payment made "in exchange for a future favor, in the form of a future official act (a vote, for instance) that will be identified by the payor at a later date." Id. at 578 (Lohier, J., concurring). The second was a payment made exchange for a promise to "take all future actions to benefit the payor," rather than "at discrete moments to be determined only at the official's discretion." Id. Such a promise may be "broad in scope," Judge Lohier opined, but it "is not vague, amorphous, or subject only to the official's discretion of when and where to act." Id. at 579. According to Judge Lohier, both promises could serve as the basis for criminal liability. Id.

"As Opportunities Arise" vs. "Stream of Benefits" or "Retainer": A Distinction Without a Difference?

Insofar as Silver's central holding about the evidence required to prove "as opportunities arise" bribery is concerned, it is difficult to see why the distinction that the theory is conceptually different from "stream of benefits" or "retainer" bribery is "doctrinally significant," in Judge Lohier's words. A review of cases before Silver considering those theories reveals that it is difficult to detect any distinction at all.

The "stream of benefits" theory is described as bribery in the form of a "course of conduct of favors and gifts flowing to a public official in exchange for a pattern of official actions favorable to the donor." United States v. Kemp, 500 F.3d 257, 282 (3d Cir. 2007) (internal quotation marks omitted). (Similarly, "retainer" theory bribery is described as occurring where "the government official has been put on 'retainer' — that is … [he] has received payments or other items of value with the understanding that when the payor comes calling, the government official will do whatever is asked." United States v. Kincaid-Chauncey, 556 F.3d 923, 942 n.15 (9th Cir. 2009).)

These descriptions, however, are no different from the "as opportunities arise" theory first articulated by the Second Circuit in Ganim and employed post-McDonnell in Silver. Ganim, 510 F.3d at 149 ("[B]ribery can be accomplished through an ongoing course of conduct, so long as the evidence shows that 'the favors and gifts flowing to a public official [are] in exchange for a pattern of official actions favorable to the donor.'"). It is therefore unsurprising that courts discuss the "as opportunities arise," "stream of benefits" and "retainer" theories of bribery as one and the same — as far as the elements are concerned, they are. United States v. Percoco, 2019 WL 493962, 6 (S.D.N.Y. Feb. 8, 2019) ("Under the retainer theory, the quid pro quo … may be satisfied if a defendant agrees to receive payments in exchange for his commitment to perform official acts 'as the opportunities to commit those acts arise.' … the specific official acts … do not need to be identified at the time the quid pro quo arrangement first comes into existence.") (citations omitted); accord United States v. Mangano, 2018 WL 851860, 2 (E.D.N.Y. Feb. 9, 2018); United States v. Menendez, 291 F. Supp. 3d 606, 614 (D.N.J. 2018); United States v. Gilbert, 2018 WL 2095853, 6 n.9 (N.D. Ala. May 4, 2018). "As opportunities arise" is shorthand for a kind of promise, while "stream of benefits" is shorthand for the frequency with which payments and promises are made.

To be sure, there are hypothetical instances in which one of these characteristics may be stressed while the other may not. Judge Lohier's hypothetical of the rubber-stamping politician that agrees to do everything in exchange for a series of payments would be an instance of "stream of benefits" bribery, but not "as opportunities arise" bribery, as the politician has been stripped of discretion. Conversely, if one lump sum is paid for the politician to act favorably for a payor on a particular subject matter over a period of time, it may be more appropriate to call that arrangement "as opportunities arise" bribery, but not "stream of benefits" bribery.

But such examples notwithstanding, many cases of "as opportunities arise" bribery can also be accurately described as "stream of benefits" bribery, and vice-versa. See, Rosen, 716 F.3d at 700 ("federal bribery and honest services statutes … criminalize schemes involving payments at regular intervals in exchange for specific official acts as the opportunities to commit those acts arose" (emphasis added)). Indeed, Silver and Ganim both involved multiple payments in exchange for the promise of multiple acts performed as opportunities arose.

The Need for Clarification

Silver's modest efforts to identify a distinction between these "interchangeable" theories of bribery, without further explanation, may have the unintended consequence of undermining the case's ultimate holding, unless the theories' differences are clarified. Courts may draw a distinction in one of two ways. First, they could identify characteristics of a "stream of benefits" and/or "retainer" bribery that meaningfully distinguishes them from "as opportunities arise" bribery and explain why those characteristics warrant differential treatment. Perhaps a difference is in the fact that stream of benefits or retainer bribery requires a defined "pattern" of favorable official conduct. Judge Lohier's example of an official entirely beholden to his corrupt benefactor (see, Silver, 938 F.3d at 578-79) suggests that, perhaps the more expansive an official's contemplated actions on behalf of the bribe payor, the less particular the agreement needs to be with respect to the official matters that are the subject of the corrupt agreement. On the other hand, if courts cannot draw meaningful distinctions, then they may instead apply Silver's "particular matter" requirement with equal force to charges brought under the "stream of benefits" or "retainer" theories. This would not mean, however, that federal prosecutors will necessarily be precluded from certain bribery charges by the requirements imposed by Silver. The facts of a case may support bribery charges under other statutes where the quid pro quo components are subject to the McDonnell "official act" standard. E.g., 18 U.S.C. §666(a)(1)(B); United States v. Ng, 934 F.3d 110, 132-33 (2d Cir. 2019); United States v. Boyland, 862 F.3d 279, 291 (2d Cir. 2017).

If the Government is to maintain the same latitude "to combat public corruption that it has long enjoyed" (id. at 579), the Second Circuit should address Silver's distinctions between "as opportunities arise" and "stream of benefits" and "retainer" bribery soon. The opportunity to provide such clarity may present itself in pending appeals of bribery cases in which the government's charging theory was both "as opportunities arise" and "stream of benefits" (as one and the same). E.g., United States v. Percoco, No. 19-1272 (2d Cir.) (presenting the question whether jury instructions based on the "stream of benefits" or "retainer" theory were adequate in light of McDonnell). But until the Second Circuit provides such guidance, the lack of clarity may only serve to frustrate the efforts of federal prosecutors to root out self-dealing.

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James D. Gatta is a partner in Goodwin Procter LLP's Government Investigations and Enforcement and White Collar Defense practices. Before joining the firm, he served as an Assistant U.S. Attorney and the Chief of the Criminal Division at the United States Attorney's Office for the Eastern District of New York. Andrew Kim is an associate in Goodwin Procter's Appellate Litigation practice, and Emily M. Notini is an associate in the firm's Litigation Department.