Strange Bedfellows: Politics, Friendship, and Bribery

White-Collar

Strange Bedfellows: Politics, Friendship, and Bribery

 

C-Suite executives often form productive relationships with federal, state, or local politicians and bureaucrats. These interactions are often part and parcel of doing business in a highly-regulated economy. Public officials play a significant role in the business world and wield enormous power that can make or break many companies, particularly those that receive government funds. Therefore, it is not surprising that developing and maintaining relationships with the public sector is more than just good business, it is necessary in order to survive in today’s economy.

These relationships often morph into friendships that go beyond dealing with government issues. Politicians look to business leaders for political support and often times seek campaign contributions. Money is the lifeblood of U.S. politics and public officials are constantly raising vast sums of it.  It is not uncommon for C-Suite executives to contribute to the campaigns of public officials who are generally aligned with their business interests. Usually, none of these activities result in criminal charges.

Sometimes, however, dealings between a C-Suite executive and a politician land both in hot water. Such is the case of U.S senator Robert Menendez of New Jersey and his close friend Salomon Melgen, a prominent Florida ophthalmologist and businessman, who have both been indicted on federal bribery charges.

The facts alleged in the Menendez/Melgen indictment suggest a close and genuine friendship between a politician and a high-level business executive. In fact, the two defendants have known each other for many years and have long interacted both socially and personally. According to the indictment, Melgen paid for or took the senator on a number of trips, some of which included the use of private jets. In addition, the government alleges that Melgen paid for hotel rooms and a private car service for the senator, and also made very substantial campaign contributions on behalf of the politician.

At the same time, it is alleged that Melgen requested help from Menendez in working with various government agencies. In particular, Melgen had a series of girlfriends who needed immigration assistance. The senator’s office reportedly intervened on their behalf. More significantly, Melgen had a major issue with the Department of Health and Human Services regarding an alleged overbilling issue in connection with his ophthalmology practice. The government claimed that Melgen owed over eight million dollars in improper Medicare payments.

Melgen sought and obtained Menendez’s help in interacting with high-level officials at the Department, including the Secretary of HHS, Kathleen Sebelius. Menendez, however, was apparently unpersuasive, and the secretary refused to provide any relief to Melgen. Despite this inability to obtain any actual government assitance, Menendez and Melgen were indicted for bribery.

In its theory of the case, the government tries to connect the various gifts and campaign contributions with the official government actions Menendez took on Melgen’s behalf. Moreover, the government alleges and is required to prove that Melgen acted with a corrupt intent to influence Menendez, who in turn had a corrupt intent to be influenced to perform official acts as a result of Melgen’s favors.

All of this may seem very esoteric, but the government’s position tracks years of bribery prosecutions. What is most surprising here is that the government characterizes campaign contributions as bribes, which is very rare. Typically, a campaign contribution made by someone who generally “hopes” that a politician will act favorably in the future is not considered a bribe. On the other hand, a campaign contribution made in exchange for a specific promise to perform an official act is a bribe. In the Menendez case, the prosecution alleges the latter.

In his defense, Menendez maintains that the prosecution has tried to twist a decades-long friendship into something corrupt. In other words, the gifts had nothing to do with official acts, but instead were based on years of fellowship. It remains to be seen if this argument will carry the day.

So where does this leave the C-Suite executive? First and foremost, giving gifts, presents, or things of value to a politician or bureaucrat—even on the basis of an actual friendship—creates enormous potential criminal liability. Prosecutors look to connect gifts to official acts and simply ask the jurors to infer that there was corrupt intent. Frankly, no C-Suite executive should place himself or herself in this kind of danger zone. Regardless of the outcome of the Menendez case (and I’m certainly not suggesting any foregone presumption of guilt) simply being indicted has caused incredible damage to the lives of both Menendez and Melgen.

Finally, I’m also not suggesting that C-Suite executives stop making campaign contributions. The Menendez case, however, provides an excellent roadmap as to what needs to be avoided under all circumstances: a contribution in exchange for a specific promise to perform or not perform an official act.

 

Remember, be careful out there.

 

Previous post

Psst, I Got a Tip On a Hot Stock

Next post

The Power of the Prosecutor