Kickback Schemes Prosecutions
What Are Kickback Schemes?
A kickback scheme involves a corrupt agreement where a person or company receives a portion of money or value in return for facilitating a contract, sale, or business advantage. The payment is typically hidden and violates laws related to fraud, bribery, or honest services.
Kickbacks are illegal under several federal laws, including:
Mail and Wire Fraud Statutes (18 U.S.C. §§ 1341, 1343)
Honest Services Fraud (18 U.S.C. § 1346)
The Hobbs Act (18 U.S.C. § 1951)
The Anti-Kickback Act (41 U.S.C. § 8701 et seq.) (for federal contracts)
Foreign Corrupt Practices Act (FCPA) (if involving foreign officials)
Key Cases Explaining Kickback Scheme Prosecutions
1. United States v. Skelos (2015)
Facts: Sheldon Silver and Dean Skelos, two New York politicians, were prosecuted for accepting kickbacks disguised as consulting fees from law firms and other businesses seeking government favors.
Legal Issues: The case involved honest services fraud and extortion under the color of official right, centered on hidden financial benefits in exchange for official actions.
Outcome: Both were convicted at trial, although Silver’s conviction was partially overturned on appeal, the key takeaway was the enforcement of honest services fraud for political kickbacks.
Significance: This case highlighted how political officials who accept kickbacks breach their fiduciary duty to the public, leading to federal fraud charges.
2. United States v. Evans (2013)
Facts: A government contractor bribed officials by giving them cash and kickbacks in exchange for steering contracts his way.
Legal Issues: The defendant was charged under the Anti-Kickback Act and wire fraud statutes.
Outcome: The contractor was convicted of conspiracy to commit bribery and kickback violations.
Significance: Reinforced that kickbacks in government contracting violate specific statutes aimed at preserving integrity in public procurement.
3. United States v. Conrad (2009)
Facts: An executive at a health care company conspired to pay kickbacks to doctors who referred patients to the company’s facilities.
Legal Issues: Charged under the Anti-Kickback Statute (42 U.S.C. § 1320a-7b(b)) and mail fraud.
Outcome: Conviction upheld; payments were deemed illegal kickbacks under healthcare fraud statutes.
Significance: Illustrated how kickbacks distort healthcare decisions, violating both criminal and regulatory frameworks.
4. United States v. Allen Stanford (2012)
Facts: Allen Stanford, a financier, paid kickbacks to third parties to facilitate investments and keep fraudulent Ponzi schemes running.
Legal Issues: Charged with mail fraud, wire fraud, and conspiracy, the kickbacks were part of a broader fraudulent scheme.
Outcome: Stanford was convicted and sentenced to over 100 years in prison.
Significance: Shows how kickbacks can be part of complex financial fraud schemes, enhancing criminal liability.
5. United States v. Pasquantino (2005)
Facts: Involved an illegal scheme where defendants paid kickbacks to foreign officials to facilitate smuggling and evade taxes on alcohol imports.
Legal Issues: Charged under mail fraud, racketeering, and foreign bribery statutes.
Outcome: Defendants convicted; kickbacks to foreign officials violated U.S. law under extraterritorial reach.
Significance: Demonstrated how kickbacks cross international boundaries and violate multiple statutes including the Foreign Corrupt Practices Act.
6. United States v. Tompkins (2011)
Facts: A contractor paid kickbacks to a municipal official in exchange for awarding construction contracts.
Legal Issues: Charges included honest services fraud, wire fraud, and bribery.
Outcome: Conviction affirmed on appeal, showing broad applicability of fraud statutes to kickbacks in public contracting.
Significance: Emphasized that both payer and recipient of kickbacks can be criminally liable.
Legal Principles in Kickback Scheme Prosecutions
Fraudulent Intent: Prosecutors must prove the parties knowingly concealed the kickback and intended to defraud an entity (government, company, or individuals).
Conspiracy: Many cases involve conspiracies where multiple parties coordinate kickback payments.
Breach of Fiduciary Duty: Especially in public corruption cases, kickbacks violate duties owed to the public or employer.
Statutory Violations: Kickbacks often violate specific statutes like the Anti-Kickback Act (government contracts), the Foreign Corrupt Practices Act (foreign bribery), and honest services fraud statutes.
Use of Mail/Wire: Mail and wire fraud charges frequently accompany kickback prosecutions due to use of communications for scheme execution.
Summary Table
| Case | Year | Key Facts | Charges Involved | Outcome |
|---|---|---|---|---|
| United States v. Skelos | 2015 | Political kickbacks disguised as fees | Honest services fraud, extortion | Conviction |
| United States v. Evans | 2013 | Kickbacks in government contracts | Anti-Kickback Act, wire fraud | Conviction |
| United States v. Conrad | 2009 | Kickbacks in healthcare referrals | Anti-Kickback Statute, mail fraud | Conviction |
| United States v. Stanford | 2012 | Kickbacks in Ponzi scheme | Mail/wire fraud, conspiracy | Conviction, 110+ years prison |
| United States v. Pasquantino | 2005 | Kickbacks to foreign officials | Foreign bribery, mail fraud | Conviction |
| United States v. Tompkins | 2011 | Kickbacks for municipal contracts | Honest services fraud, bribery | Conviction |
Conclusion
Kickback scheme prosecutions reveal the broad application of federal laws designed to prevent corruption and fraud in public and private sectors. The key to successful prosecution is proving a corrupt agreement to exchange payments for business or official advantage, often involving mail or wire fraud statutes, bribery laws, and specialized statutes like the Anti-Kickback Act.
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