In extortion case, US Supreme Court to decide what constitutes ‘property’

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Defining “property” may seem an easy task. But for the justices of the U.S. Supreme Court it may be much trickier as they consider whether a nonbinding recommendation for an investment fund qualifies as “property” that can be the subject of attempted extortion.

In the case Sekhar v. U.S., the managing partner of an investment fund was convicted of extorting the general counsel of the New York State comptroller’s office in violation of the Hobbs Act. A jury found that the defendant threatened to disclose that the general counsel was having an affair unless he gave the defendant’s investment fund a positive recommendation. The recommendation did not guarantee approval by the comptroller’s office.

The defendant appealed the conviction, arguing that the statute requires an “attempt to obtain property,” and that the recommendation was not “property” because it had no independent value.

But the 2nd U.S. Circuit Court of Appeals affirmed the defendant’s conviction, holding that the recommendation rose to the level of a property right because it was designed to lead to a profit.

At arguments Tuesday at the Supreme Court, Paul Clement, a partner in the Washington office of Bancroft PLLC, argued on the defendant’s behalf that “the government has offered you a definition of property that only a prosecutor could love.”

“What is your definition of property?” asked Justice Samuel Alito Jr., pointing out that even the defendant’s brief conceded that property need not be tangible.

“It has to be alienable, transferable, moveable,” Clement said, noting that intangible rights such as patents also fall within the definition.

Sarah Harrington, assistant to the U.S. solicitor general, argued that the extortion in this case involved the general counsel’s “exclusive control of property” rights — namely his ability to make recommendations as he saw fit as part of his job.

Justice Stephen Breyer noted that the Court has already ruled that the “honest services” fraud statute only applies to bribery or kickbacks and rejected its application to other amorphous things such as doing one’s job.

“We’re back to the honest services statute, because anyone in government and anyone in business — indeed everybody — has a job, and those jobs always require you to do things,” Breyer said.

Harrington argued that the defendant was “trying to take from the general counsel his service of making a recommendation that’s in his client’s best interest, and he’s trying to dictate the substance of the recommendation.”

“Why is that valuable to me [if I were the general counsel]?” Justice Antonin Scalia asked. “I can see how the job is valuable to me. I get paid to do the job. But why making one recommendation rather than another is valuable to me? I don’t think it’s valuable to me.”

A decision is expected later this term.