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Ex-Bergen County Democratic Party boss was convicted on 'honest services' charges
BY AVI FRISCH
NEWJERSEYNEWSROOM.COM
Recently, the former Bergen County Democratic Party Chairman, Joseph A. Ferriero was convicted of one count of conspiracy to commit mail fraud and two counts of mail fraud.
The charges against Ferriero were related to a scheme to defraud the Borough of Begenfield of the honest services of its municipal attorney, Joseph Oury. Ferriero was acquitted on five other counts.
Typically, those convicted at trial in the Federal courts do not win on appeal. Ferriero's case, however, might be a little different, as three cases challenging the law regarding honest services are pending before the United States Supreme Court.
Interestingly, the other cases involve some pretty prominent defendants, including Jeffrey Skilling, the CFO of Enron who was convicted in the wake of the Enron scandal, and Conrad Black, the Canadian publisher convicted of looting his company.The charges against Ferriero (Oury pled guilty on the eve of trial and testified against Ferriero) involved his secretly owning a company that consulted municipalities on obtaining government grants. Ferriero and Oury hid their involvement with the company and the fact that it was a new start-up company when marketing its services to Bergenfield.
Oury served as the counsel to the Borough and worked as an attorney on the grant application and associated transactions at the same time he stood to gain from his interest in the grant writing company.
As it turns out, while Ferriero and Oury hid their involvement with the grant writing company, they were successful in getting grants totaling $1.4 million from Bergen County and from the New Jersey Green Acres program. In exchange, the company was paid approximately $130,000. Oury never disclosed his involvement in the grant company and filed false tax returns that did not include his profits.
The jury acquitted Ferriero on all of the charges that he defrauded Bergenfield of money. They convicted only on the charges that accused Ferriero and Oury of depriving Bergenfield of Oury's "honest services." Federal law makes this as much a crime as defrauding someone of money or property, despite the fact that "honest services" is a fairly intangible concept that has given the courts trouble since the statute was enacted in the late 1980's.
What is clear is that Oury should have recused himself from dealings in which he had a conflict of interest. To convict Ferriero, the jury had to believe that Ferriero conspired with Oury to conceal their involvement with the grant writing company; otherwise there would have been no conspiracy. One might ask, however, what exactly did they take from Bergenfield?
The cases before the Supreme Court raise the question as to whether this statute is so vague and criminalizes so much as to be unconstitutional. Various federal courts have reached different conclusions on the scope of the statute, so it is not currently clear what it covers. Oury's breach of his duties as an attorney to Bergenfield were fairly minor in the scheme of things, so should this be a federal crime?
Now, I am not here to judge the ethics of Ferriero's behavior, and Oury has clearly admitted to some serious lapses. The question is whether a breach of some ethical rules should be leading to prison time, especially considering that Ferriero was not even an elected official and appears to have provided the service that Bergenfield contracted for.
When the Supreme Court takes three cases in one term about the same subject, you can be sure that the Court has some serious doubts, which Justice Scalia has noted it would be irresponsible to "allow the current chaos to prevail" (of course, the rest of the court disagreed at that point and just reveled in their irresponsibility).
Upon reading the honest services statute, one is struck by its amazing breadth. Judges have been trying to limit the reach of this statute since it was first enacted in 1988, but have served only to confuse the issue. Skilling, in fact, argues that if the statute is deemed to apply to his conduct, then it is unconstitutional due to its vagueness (courts have long held that a vague criminal statute is unconstitutional).
Skilling says that the prosecutors in his case did not prove that he received any private gain from his fraud. Rather, he deceived regulators, accountants and the public and helped increase Enron's share price, and according to the Government he defrauded Enron of his honest services.
Skilling argues that he was working to advance Enron's interests and not to defraud the company. While it is not possible to determine how the Court will rule, it is clear that if the Court accepts Skilling's argument – that one must be attempting to deprive his employer of something tangible to be guilty – then Ferriero will be able to argue that his conviction is similarly infirm, as he hid his involvement with the consulting company, but in no way attempted to use that deception to defraud Bergenfield.
Black, the former newspaper magnate, has several complaints about his conviction, but is essentially arguing the same point as Skilling, that he should not be guilty because the government did not prove that his scheme would lead to financial or other tangible harm to his employer.
Most importantly for Ferriero is the one case involving a public official, Weyrauch v. United States. In this case, the lower court allowed a prosecution against an Alaskan legislator to proceed to trial, even though his lack of disclosure of a conflict of interest was not prohibited by state law. The Supreme Court will decide what instances of a lack of disclosure constitute a deprivation of honest services.
In this case, Ferriero's personal lack of disclosure was not fraudulent, as he clearly had no duty to reveal his stockholding in the consulting company, unlike Oury's lack of disclosure of his conflict of interest, which is clearly required by law. But as a co-conspirator, Ferriero became guilty of all of Oury's crimes.
The question to be appealed is whether there truly was a conspiracy. If the only act that was illegal was Oury's hiding of his conflict of interest (he was a public official and had legally binding obligations of disclosure), then what was the conspiracy, did Ferriero truly agree with Oury to deprive Bergenfield of Oury's ethical obligations?
None of the three cases will necessarily help Ferriero, assuming the Supreme Court decides them narrowly and limits them to the specific facts. If the Court invalidates the entire statute, then Ferriero will clearly be exonerated.
The remaining question is whether Ferriero will benefit from modifications of the application of the honest services statute, which cannot be answered until the Supreme Court actually rules.
Avi Frisch is a lawyer in Paramus and Manhattan. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
