Case No. 07-13163-B District Court Case No. 2:05-CR-119-MEF

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

Case No. 07-13163-BB District Court No. 05-00119-CR-MEF

UNITED STATES OF AMERICA,

Appellee-Plaintiff,

v.

RICHARD M. SCRUSHY,

Appellant-Defendant.

On Appeal from the United States District Court for the Middle District of Alabama

RICHARD M. SCRUSHY’S SUPPLEMENTAL BRIEF PURSUANT TO THE REMAND FROM THE SUPREME

COURT OF THE UNITED STATES JAMES K. JENKINS BRUCE S. ROGOW MALOY JENKINS PARKER CYNTHIA E. GUNTHER 75 Fourteenth Street, NW, 25TH FL BRUCE S. ROGOW, P.A. Atlanta, GA 30309 500 East Broward Blvd., Suite 1930 Fort Lauderdale, FL 33394 ARTHUR W. LEACH LESLIE V. MOORE 5780 Windward Parkway, Suite 225 MOORE & ASSOCIATES, LLC Alpharetta, GA 30005 15 Southlake Lane, Suite 260 Hoover, AL 35244

C-­‐1-­‐of-­‐2  

CASE NO. 07-13163-BB USA

vs.

SCRUSHY

CERTIFICATE OF INTERESTED PERSONS

Pursuant to Eleventh Circuit Rule 27-1(a)(9), and Rule 26.1, Fed. R. App.

P., Appellant Richard M. Scrushy certifies that the following persons and entities

may have an interest in the outcome of this case:

R. Martin Adams, Attorney for Richard Scrushy

George Robert Blakey, Attorney for Governor Siegelman

Honorable Charles S. Coody, United States Magistrate Judge

Hiram Chester Eastland, Jr., Attorney for Governor Siegelman

Stephen P. Feaga, Assistant United States Attorney

Louis V. Franklin, Sr., Acting United States Attorney

Joseph L. Fitzpatrick, Jr., Special Assistant United States Attorney

Honorable Mark E. Fuller, United States District Judge

Jennifer Garrett, Special Assistant United States Attorney

Cynthia E. Gunther, Attorney for Richard Scrushy

C-2-of-2

W. Perry Hall, Attorney for Governor Siegelman

Frederick George Helmsing, Sr., Attorney for Richard Scrushy

Carmen D. Hernandez, Attorney for Richard Scrushy

Susan Graham James, Attorney for Governor Siegelman

James K. Jenkins, Attorney for Richard Scrushy

Vincent F. Kilborn III, Attorney for Governor Siegelman

Arthur W. Leach, Attorney for Richard Scrushy

Andrew C. Lourie, Acting Chief of the Public Integrity Section

W. Bruce Maloy, Attorney for Richard Scrushy

David A. McDonald, Attorney for Governor Siegelman

Leslie V. Moore, Attorney for Richard Scrushy

J.B. Perrine, Assistant United States Attorney

Richard C. Pilger, Trial Attorney, Public Integrity Section

Charles Redding Pitt, Attorney for Governor Siegelman

Bruce S. Rogow, Attorney for Richard Scrushy

Morgan Stanley (Symbol MS ), awarded restitution at sentencing

William M. Welch II, Chief of Public Integrity Section

William C. White II, Attorney for Richard Scrushy

i

STATEMENT REGARDING ORAL ARGUMENT

Oral argument will assist the Court in this case, which is now being heard

pursuant to remand from the Supreme Court. This case presents important

questions concerning the interpretation, scope and application of the Supreme

Court’s recent holding in Skilling v. United States, 561 U.S. ___, 130 S.Ct. 2896

(2010). More particularly, it presents these issues in the context of First

Amendment protected activity--contributions to an issue-advocacy campaign – as

this Court recognized in its initial opinion. United States v. Siegelman, 561 F.3d

1215, 1224, n.13 (11th Cir. 2009). Oral argument will permit the Court to explore

this important issue with counsel for all parties.

ii

TABLE OF CONTENTS

Page

CERTIFICATE OF INTERESTED PERSONS ………………………………. C-1

STATEMENT REGARDING ORAL ARGUMENT …………………………… i

TABLE OF CONTENTS…………………………………………………………. ii

TABLE OF CITATIONS ………………………………………………………... iv

STATEMENT REGARDING ADOPTION OF BRIEFS ……………………….. v

STATEMENT OF JURISDICTION ……………………………………………. vi

STATEMENT OF THE ISSUES ……………………………………………….. 1

INTRODUCTION AND SUMMARY OF THE ARGUMENT ………………… 2

I. UNITED STATES V. SKILLING REQUIRES REVERSAL OF THE HONEST SERVICES AND CONSPIRACY CHARGES AGAINST SCRUSHY AND, AT THE VERY LEAST, A NEW TRIAL ON THE FEDERAL FUNDS BRIBERY CHARGES………… 2 A. THIS COURT’S ORIGINAL DECISION …………… 2

B. THE SKILLING LESSON …………………………… 5

C. SKILLING REQUIRES DISMISSAL OF THE HONEST SERVICES AND CONSPIRACY CHARGES AGAINST SCRUSHY ………………….. 7

D. COUNTS 8 AND 9 RELY ON A NON-BRIBERY THEORY WHICH IS DIRECTLY PRECLUDED

BY THE HOLDING IN SKILLING….......................... 9

iii

E. SKILLING REQUIRES REVERSAL OF THE FEDERAL FUNDS BRIBERY CHARGE AGAINST SCRUSHY OR, AT A MINIMUM, A NEW TRIAL ON THIS CHARGE……………….………………… 10

CONCLUSION ………………………………………………………………… 12

CERTIFICATE OF COMPLIANCE …………………………………………… 14

CERTIFICATE OF SERVICE …………………………………………………. 15

APPENDIX......................................................................................................... TAB

iv

TABLE OF CITATIONS

CASES

Grayned v. City of Rockford, 408 U.S. 104 (1972) ………………………………12

McCormick v. United States, 500 U.S. 257 (1991) ………………………………. 8

Scrushy v. United States, 561 U.S. ___, 130 S.Ct. 3541 (June 29, 2010) …….. vi, 5

Siegelman v. United States, 562 U.S. ___, 130 S.Ct. 3542 (June 29, 2010) …….. 5

Skilling v. United States, 561 U.S.__, 130 S.Ct. 2896 (2010) …………….. passim

United States v. Siegelman and Scrushy, 561 F.3d 1215 (11th Cir. 2009) … passim

Yates v. United States, 354 U.S. 298, 77 S.Ct. 1064 (1957) …………………….. 9

STATUTES

18 U.S.C. § 666 …………………………………………………………… 7, 10-12

18 U.S.C. § 666(a)(1)(B) ………………………………………………………. 11

18 U.S.C. § 1346 ……………………………………………………………….. 6-7

v

STATEMENT REGARDING ADOPTION OF BRIEF OF OTHER PARTY

Richard Scrushy adopts the arguments in the Brief filed by Governor

Siegelman in this same proceeding insofar as those arguments address the

convictions of both Appellants for conspiracy, honest services fraud and federal

funds bribery.

vi

STATEMENT OF JURISDICTION

This Court has jurisdiction in this matter pursuant to the Supreme Court’s

decision vacating this Court’s previous opinion and remanding to this Court for

consideration in light of Skilling v. United States, 561 U.S. ___, 130 S.Ct. 2896

(2010). Scrushy v. United States, 561 U.S. ____, 130 S.Ct. 3541 (June 29, 2010).

1

STATEMENT OF THE ISSUES

I. Whether United States v. Skilling requires reversal of the honest services

and conspiracy charges against Scrushy and, at the very least, a new

trial on the federal funds bribery charges.

2

INTRODUCTION AND SUMMARY OF THE ARGUMENT

This Court ordered simultaneous supplemental briefing in light of the

Supreme Court’s vacation of the Court’s decision in United States v. Siegelman

and Scrushy, 561 F.3d 1215 (11th Cir. 2009), and remand to this Court to consider

the effect of Skilling v. United States, 561 U.S.__, 130 S.Ct. 2896 (2010).

For the reasons that follow, we submit that Skilling requires reversal of the

conspiracy and honest services bribery charges and, at a minimum, a new trial on

the federal funds bribery charge that were affirmed by this Court.

I. UNITED STATES V. SKILLING REQUIRES REVERSAL OF THE HONEST SERVICES AND CONSPIRACY CHARGES AGAINST SCRUSHY AND, AT THE VERY LEAST, A NEW TRIAL ON THE FEDERAL FUNDS BRIBERY CHARGES.

A. THIS COURT’S ORIGINAL DECISION

On March 6, 2009, this Court affirmed Richard Scrushy’s convictions on

charges of federal funds bribery, honest services mail fraud, and conspiracy. The

Court wrote:

The defendants’ [Scrushy and Siegelman] bribery convictions were based on allegations that they made and executed a corrupt agreement whereby Scrushy gave Siegelman $500,000 in exchange for Siegelman’s appointing him to Alabama’s Certificate of Need Review Board (the “CON” Board). The honest services mail fraud convictions

3

incorporated the same bribery allegations but also alleged [Counts 8 and 9] Scrushy used the CON Board seat obtained from Siegelman to further HealthSouth’s interests.

United States v. Siegelman, 561 F.3d 1215, 1218 (11th Cir. 2009). That statement

glossed over the critical distinction between giving money to Siegelman and giving

it to support an issue, not a person.

The Court, which ultimately reversed Siegelman’s convictions on Counts 8

and 9, was later careful to recognize both the differences between giving money to

Siegelman or to an issue fund, and the uniqueness of the Scrushy/Siegelman

prosecution and its constitutional implications:

The bribery, conspiracy and honest services mail fraud convictions in this case are based upon the donation Scrushy gave to Siegelman’s education lottery campaign [fn. 12]. As such, they impact the First Amendment’s core values – protection of free political speech and the right to support issues of great public importance.

561 F.3d at 1218. Footnote 12 made it clear that Counts 8 and 9 – Scrushy’s

alleged CON Board benefits for which Siegelman was exonerated on appeal –

were different from, although part and parcel of the honest services charges:

“Although the conspiracy and mail fraud counts allege a broader scheme for

4

Scrushy to self-deal once on the Board, these counts also incorporated the

allegations of an agreement between Siegelman and Scrushy to exchange money

for the seat on the Board.” 561 F.3d at 1224, n.12. Again the exchange of money

was not between Scrushy and Siegelman, an important distinction.

The Court’s sensitivity to the First Amendment implications were stressed in

the very next footnote:

Arguably, the potential negative impact of these statutes on issue-advocacy campaigns is even more dangerous than it is to candidate-election campaigns. Issue-advocacy campaigns are a fundamental right in a free and democratic society and contributions to them do not financially benefit the individual politician in the same way that a candidate-election campaign contribution does. Defendants assert, and we do not know otherwise, that this is the first case to be based upon issue-advocacy campaign contributions.

561 F.3d at 1224.

Nevertheless, the Court affirmed Scrushy’s convictions, rejecting all of his

arguments. Siegelman suffered the same result, except for Counts 8 and 9, as to

which the Court found insufficient evidence to support charges that Siegelman

knew “that Scrushy intended to defraud Alabama of his honest services” (id. at

1231) by virtue of the CON Board approving “Certificates of Need in connection

5

with the rehabilitation hospital (Count 8) and the PET Scanner (Count 9).” Id. at

1229.

Scrushy (and Siegelman) sought certiorari and the Supreme Court granted

certiorari, vacated this Court’s opinion, and remanded to this Court for it to

consider the effect of Skilling v. United States, 561 U.S. ___, 130 S.Ct. 2896

(2010) upon the Scrushy/Siegelman convictions. Scrushy v. United States, 130

S.Ct. 3541 (June 29, 2010); Siegelman v. United States, 130 S. Ct. 3542 (June 29,

2010).

B. THE SKILLING LESSON

Skilling’s lesson is simple: “[W]e now hold that § 1346 criminalizes only the

bribe-and-kickback core of the pre-McNally case law.” 130 S.Ct. at 2931

(emphasis in original). In Skilling, the Supreme Court specifically rejected the

very construct upon which the Government built its honest services case against

Scrushy and Siegelman. Quoting from the Government’s Brief in Skilling, the

Court wrote:

The Government urges us to go further by locating within § 1346’s compass another category of proscribed conduct: “undisclosed self-dealing by a public official or private employee – i.e., the taking of official action by the employee [or public official] that furthers his own undisclosed financial interests while purporting to act in

6

the interests of those to whom he owes a fiduciary duty.”

130 S.Ct. at 2931. The Supreme Court dismissed the Government’s theory of

honest services culpability with these words: “Reading § 1346 to proscribe bribes

and kickbacks – and nothing more – satisfies Congress’ undoubted aim to reverse

McNally on its facts.” 130 S. Ct. at 2931. (emphasis supplied). In that vein, the

Supreme Court warned that “[r]eading the statute to proscribe a wider range of

offensive conduct, we acknowledge, would raise the due process concerns

underlying the vagueness doctrine.” Id. at 2931 (footnote omitted).

It takes no special talent to glean Skilling’s lesson: § 1346 can only be used

against parties who commit or conspire to commit bribery or accept kickbacks.

But the question now for Scrushy (and Siegelman) is whether the protected First

Amendment contribution to the Alabama Education Lottery Foundation constituted

“honest services” bribery, and how do we reconcile his § 666 federal funds bribery

conviction with the argument that we now make: contributing money to issue-

advocacy is not honest services bribery.

7

C. SKILLING REQUIRES DISMISSAL OF THE CONSPIRACY AND HONEST SERVICES CHARGES AGAINST SCRUSHY The Scrushy/Siegelman prosecution clearly did not involve any kickback. So

the question here is whether contributing to an issue-advocacy fund constitutes

honest services bribery. Or, put another way, can it be bribery under § 666 and not

honest services bribery under § 1346? The answer is that Scrushy’s contribution

and subsequent appointment to the CON Board is not within the pre-McNally

bribery paradigm, and therefore not § 1346 honest services bribery. This Court

recognized that the Scrushy/Siegelman bribery/honest services prosecution “is the

first case to be based on issue-advocacy campaign contributions.” 561 F.3d at

1224, n.13. Thus, in addition to the acknowledged First Amendment overlay, this

prosecution was, like Skilling, “not ’prototypical’” in the honest services arena.

130 S.Ct. at 2932. Siegelman was not paid anything. The prototypical bribe

involves a pay-off. Here, at best, the Government may claim that Scrushy’s

contribution could have theoretically relieved some subsequent Siegelman liability

on a bank loan the Foundation had borrowed for the education lottery campaign,

561 F.3d at 1220, but no case, nor any principled interpretation of “bribe,” supports

the notion that an issue-advocacy contribution can be transformed into a “bribe,”

8

where the public official receives no tangible benefit for himself.1 Siegelman did

not solicit or accept side payments for himself, his family, or anyone else. Scrushy

paid no money to Siegelman, his family, or anyone else. There was no honest

services bribery. Skilling speaks of honest services bribery as it is commonly

understood: a public official (or private employee) taking something of tangible

value in exchange for doing some act benefitting the payor. Scrushy gave nothing

to Siegelman.

Therefore Siegelman deprived no one of honest services, and Scrushy cannot

be convicted of honest services bribery or conspiracy to commit honest services

bribery.2

1 There is no evidence that Scrushy knew, or had any inkling of the fact that there was an extant bank loan for the lottery campaign, or that Siegelman was a co-guarantor of that loan. 2 Scrushy emphasized in this Court, and in his certiorari petition, the importance of explicit compliance, in proof and in jury instructions, with the McCormick v. United States, 500 U.S. 257, 273 (1991) requirement of an explicit quid pro quo. Skilling buttresses those arguments because if honest services bribery is going to be applied to issue-advocacy contributions where the public official is not “on the take” then explicit proof of an explicit quid pro quo is a sine qua non.

9

D. COUNTS 8 AND 9 RELY ON A NON-BRIBERY HONEST SERVICES THEORY WHICH IS DIRECTLY PRECLUDED BY THE HOLDING IN SKILLING

In reversing Governor Siegelman’s convictions on Counts 8 and 9 in its

previous decision, this Court held that Counts 8 and 9 “alleged that the scheme

included not only the exchange of the seat on the CON Board for the $500,000

lottery campaign, but also that Scrushy ‘would and did use his seat on the CON

Board to attempt to affect the interests of HealthSouth and its competitors,’ and

that Scrushy ‘would and did offer things of value to another Board member to

attempt to affect the interests of HealthSouth and its competitors.” 561 F.3d at

1229. As this Court held, Counts 8 and 9 charged a broader scheme, which

encompassed the allegation that Scrushy deprived the citizens of Alabama of his

honest services as a CON Board member. Id. at 1231.

Simply put, these are neither allegations of bribery or kick-backs, and are

therefore precluded under the plain holding in Skilling. And, as the Supreme Court

held in Skilling: “Because the indictment alleged three objects of the conspiracy-

honest-services wire fraud, money-or-property wire fraud and securities fraud,

Skilling’s convictions is flawed” since the jury returned only a general verdict.”

130 S.Ct. at 2934, citing Yates v. United States, 354 U.S. 298, 77 S.Ct. 1064 (1957)

10

(constitutional error occurs when a jury is instructed on alternative theories of guilt

and returns a general verdict that may rest on a legally invalid theory).

Because Counts 8 and 9 were not “bribery or kickbacks,” those convictions

must be reversed under Skilling.

E. SKILLING REQUIRES REVERSAL OF THE FEDERAL FUNDS BRIBERY CHARGE AGAINST SCRUSHY OR, AT A MINIMUM, A NEW TRIAL ON THIS THIS CHARGE

Because the § 666 federal funds bribery charge was intertwined with the

flawed honest services charges, Scrushy is entitled, at the least, to a new trial on

the § 666 charge.

Here, the Government cannot show that Scrushy’s federal funds bribery

conspiracy convictions rested only on their § 666 theory rather than the legally

flawed honest services theory. Indeed, all the charges were hopelessly intertwined.

The bribery/honest services prosecution was premised on the Lottery Foundation

contribution and the appointment to the CON Board. See 561 F.3d at 1218 (“The

bribery conspiracy and honest services mail fraud convictions in this case are

based upon the donation Scrushy gave to Siegelman’s education lottery

campaign.”). The federal funds bribery conviction in this case was likewise tied

directly to the same donation Scrushy gave to Siegelman’s education lottery fund.

Id. at 1224. This Court’s previous decision explicitly relied on the intertwinement

11

of the conspiracy and honest services fraud charges with the federal funds bribery

charges in finding that the omission of a quid pro quo jury instruction was

harmless error:

Because the court charged in the conspiracy and honest services mail fraud counts incorporates the conduct alleged in the federal funds bribery counts, on which the jury was instructed to find a quid pro quo, any failure to adequately instruct the jury on a quid pro quo requirement for the conspiracy and honest services counts was harmless.

561. F.3d at 1227, n. 17.

If we are correct, then the § 666 conviction must also be set aside because

where constitutional error occurs when a jury is instructed on alternative theories

of guilt and returns a general verdict that may rest on a legally invalid theory, a

conviction must be set aside unless the error is harmless. Skilling, 130 U.S. at

2934. As a consequence, at a minimum, Scrushy must be granted a new trial on

the federal funds bribery charge.

That is our “at the least” contention. At the most, the contribution and

appointment do not constitute “bribery” under § 666(a)(1)(B). The statute “makes

it a crime for a state official to accept anything of value from another person

‘intending to be influenced’ in that person’s favor in an official action.” 561 F.3d

at 1224. A contribution to an issue-advocacy fund does not equate with “accepting

12

anything of value,” and if it could be interpreted that way, the statute violates the

void for vagueness doctrine. “To satisfy due process, ‘a penal statute [must] define

the criminal offense [1] with sufficient definiteness that ordinary people can

understand what conduct is prohibited and [2] in a manner that does not encourage

arbitrary and discriminatory enforcement.’ Kolender v. Lawson, 461 U.S. 352, 357

(1983). The void for vagueness doctrine embraces those requirements.” Skilling,

130 U.S. at 2904.

“Anything of value,” as applied to a contribution to an issue-advocacy

campaign, is too vague and too broad. An overbroad statute sweeps within its

ambit both protected and unprotected conduct. See Grayned v. City of Rockford,

408 U.S. 104, 108-109, 92 S.Ct. 2294 (1972). The vagueness and overbreadth

principles apply here and require the dismissal of the § 666 charges.

CONCLUSION

Scrushy’s convictions on Counts 5 - 9 on honest services fraud and

conspiracy should be set aside pursuant to Skilling. His federal funds bribery

conviction on Count 4 should be set aside because, as applied, § 666 is vague and

overbroad. At the least, Scrushy is entitled to a new trial on those counts. Scrushy

should be released from prison pending the completion of these proceedings.

13

Respectfully submitted,

ARTHUR W. LEACH Georgia Bar No. 442025 5780 Windward Parkway, Suite 225 Alpharetta, GA 30005

BRUCE S. ROGOW Florida Bar No. 0554812 CYNTHIA E. GUNTHER Florida Bar No. 0554812 BRUCE S. ROGOW, P.A 500 East Broward Blvd., Suite 1930 Fort Lauderdale, FL 33394 Ph; (954)-767-8909

LESLIE V. MOORE MOORE & ASSOCIATES Alabama Bar No. 7306L74M 15 Southlake Lane, Suite 260 Hoover, AL 35244

JAMES K. JENKINS Georgia Bar No. 390650 MALOY JENKINS PARKER 75 Fourteenth Street, NW, 25th FL Atlanta, GA 30309 Ph: (404)-875-2700

By: _____________________ BRUCE S. ROGOW Counsel for Appellant-Defendant Richard M. Scrushy

14

CERTIFICATE OF COMPLIANCE

This brief complies with the type-volume and limitations and typeface

requirements of Fed.R.App.P. 32(a)(7)(B) because this brief is typed in Times New

Roman 14-pont proportionally spaced typeface and contains 2,401 words, as

determined by MS Word 1997-2004.

15

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been

furnished to counsel listed below, by Federal Express this day of August, 2010:

LOUIS V. FRANKLIN, SR. Acting United States Attorney P.O. Box 197 Montgomery, Alabama 36101

SAM HELDMAN THE GARDNER FIRM 2805 31st Street, NW Washington, DC 20008

JOHN-ALEX ROMANO Appellate Section, Criminal Division JACK L. SMITH Chief, Public Integrity Section RICHARD C. PILGER Trial Attorney - Public Integrity Sec. Department of Justice 950 Pennsylvania Ave., NW Room 1264 Washington, DC 20530

REDDING PITT FARRIS, RILEY & PITT, LLC Massey Building, Suite 400 2025 Third Ave., North Birmingham, AL 35203

NEAL KUMAR KATYAL ACTING SOLICITOR GENERAL DEPARTMENT OF JUSTICE 950 Pennsylvania Ave., NW Washington, DC 20530

VINCENT F. KILBORN, III DAVID A. McDONALD KILBOUN, ROEBUCK & McDONALD Post Office Box 66710 Mobile, Alabama 36606

______________________ BRUCE S. ROGOW