Sunday, January 26, 2014

Explaining U.S. v. Bob & Maureen McDonnell

Last week, the United States filed a 14 count indictment against former Virginia Governor Bob McDonnell and his wife Maureen for violating a number of federal laws based on the McDonnells' dealings with a company called Star Scientific and its CEO, Johnny Williams. The allegations would not be out of place in a straight-to-DVD movie, with bald-faced pleas by the McDonnells for money and luxury items and Williams' leveraging of his generosity into meetings with senior level governmental officials to get Anatabloc, a product manufactured by his company, studied by state researchers and touted by the Governor and his wife. [1]

Those rising to the Governor's defense like MSNBC's Joe Scarborough, have pointed out that under Virginia's state law elected officials are not precluded from receiving gifts and that somehow this should make the federal government stand down. [2] This baffling assertion, particularly by someone like Scarborough (who is himself an attorney), does not just fly in the face of the way the law operates, but gives short shrift to the entirety of the Department of Justice's case. The headlines all included the big ticket items - an engraved Rolex watch, a shopping spree for Mrs. McDonnell in New York City, the Governor's use of Mr. Williams's Ferrari and thousands spent on greens fees, apparel and food at a swanky country club. This impressive haul, which included $120,000 in "loans" and $15,000 in catering expenses for a McDonnell daughter's wedding, in addition to the designer dresses, free vacations and all the rest, form much of the core of the government's case. 

Counts One through Four - alleging both a conspiracy and action that defrauded the citizens of Virginia of the "honest services" asserts a quid pro quo between Governor McDonnell, his wife and Mr. Williams where in exchange for money and gifts, the Governor used his office to attempt to advance Mr. Williams's business interests. The "quid" is evident - indeed, the forfeiture request submitted by the U.S. Attorney's Office speaks for itself in terms of the largesse accumulated by the McDonnells; however, the "quo" is where the McDonnells will likely make their stand. The early outline of their defense is two-fold: (1) that one of the jobs of the Governor is to promote business and economic development and thus, arranging meetings and the like for companies with government officials is not suspicious and (2) that the goods the McDonnells received were merely gifts from a friend, not an incentive to violate federal law. 

The government lays out a persuasive case. Exchanges between the Governor or his wife and Mr. Williams occur closely with actions taken by the Governor or his office to arrange meetings or ensuring Mr. Williams's company's presence in front of government officials. [3] But even if the government failed to prove its case solely on the basis of these contemporaneous events, other claims made in the indictment bolster that case. For example, Mrs. McDonnell purchased, sold, re-purchased and then divested herself of thousands of shares of Star Scientific stock, all timed in a way to avoid certain reporting requirements. This is supported by communication with her broker [5] and the pattern of purchase, sale and divestiture all occurring near the end of the calendar year when these disclosure forms needed to be submitted. The McDonnells' personal financial interest in Star Scientific's success would explain their attempts to tout the company's product. Indeed, Mrs. McDonnell spoke at an event hosted by Star and the Governor told members of his cabinet about his use of Anatabloc. This was in addition to the meetings arranged for the company and the attempts to get state-run universities to conduct trials on the pill to gauge its efficacy. That Star could then publicize the support of the McDonnells and potentially secure beneficial research studies would all accrue to the company's stock price. Indeed, the Governor referenced the stock price favorably in two text messages to Mr. Williams in 2012. [6]

Counts Five through Eleven allege both a conspiracy and obtaining property under color of official right, an argument that will similarly hinge on whether what Mr. Williams gave the McDonnells would be considered gifts or property the Governor and his wife were not otherwise entitled to but received improperly because of his public office. [7] But the charging statute for these counts differs slightly, at least in my reading, because the government need only show that the Governor and his wife "obtain[ed] property from another … under color of official right." Indeed, because the McDonnells can't challenge their acceptance of the tens of thousands of dollars in "loans" (since repaid) or gifts, these counts, as well as Counts One through Four will have very little fact-based evidence and rely almost exclusively on competing interpretations of the federal statutes in question - as to Counts One through Four, whether a quid pro quo existed with regard to the exchange of goods and money for official acts versus Counts Five through Eleven, which are arguably read as to whether what was given to the McDonnells was obtained based on the Governor's position ("color of official right") or merely "gifts" given him and his wife from a friend. 

But even if the Governor and his wife were acquitted on Counts One through Eleven, they would both still be facing at least thirty years in prison on Counts Twelve and Thirteen and Mrs. McDonnell would be looking at another twenty under Count Fourteen. These allegations will be much harder for the McDonnells to disprove. Counts Twelve and Thirteen relate to filings the McDonnell made in October 2012 with financial institutions related to loans they wanted to refinance, including on their two rental properties. On those forms, the McDonnells omitted "liabilities," specifically, $120,000 in loans provided to the couple by Mr. Williams. [8] That the loans were omitted cannot be contested because the Governor sent one of the two institutions an "updated" version of the loan application three days after his wife was interviewed by federal agents about those loans. In other words, four months after submitting the forms, suddenly, in February 2013, just after his wife was interviewed by law enforcement agents, the Governor remembered that $120,000 in loans had been made to the couple and confirmed that they also owned $3,143 of stock in Star Scientific. [9] 

Lastly, the former First Lady's attempt at concealment of her receipt of dresses for various events such as her daughter's wedding and the couple's 35th wedding anniversary, form the basis of the Fourteenth, and final count of the indictment. Specifically, the government alleges Mrs. McDonnell engaged in obstruction of the investigation into her and her husband's activity by attempting to return gowns purchased for her by Mr. Williams to him. [10] The government points to a handwritten note by Mrs. McDonnell delivered to Mr. Williams (along with the merchandise) after she was interviewed by federal law enforcement. Mrs. McDonnell's letter indicates that she is returning the dresses for Mr. Williams's daughter's use or to be auctioned off for charity, yet the events referenced in the letter occurred in 2011, while the return of the gifts did not occur until 2013. As the government notes, Mrs. McDonnell initiated a request that Mr. Williams take her shopping in April 2011 and Mr. Williams not only accompanied her on the trip and paid for the gowns, but was then seated next to the Governor at an event that night. [11] No mention of returning the gowns occurred until after Mrs. McDonnell was interviewed by federal agents, at which point, the government asserts, Mrs. McDonnell wrote the note, attempting to return the gowns and conceal the fact they had been purchased for her permanent use. [12] On this one charge alone, Mrs. McDonnell risks twenty years in prison. 

And if any of these activities in isolation might be explained away, the totality of the evidence provided in the indictment strongly suggests the Governor and his wife knew exactly what they were doing. Mrs. McDonnell was advised against accepting gifts from Mr. Williams as early as 2009 but less than 2 years later, went on that lavish New York City shopping trip. Clear direction was given from the Governor and the First Lady about getting Star Scientific employees in front of senior government officials, even going so far as having Star Scientific pay money to two state-run universities in an effort to jump start their interest in doing research on Anatabloc. According to a contemporaneous letter written by the McDonnells' broker, Mrs. McDonnell sought to skirt disclosure rules by dumping stock before the end of the year, and then turned around and repurchased it three weeks into the next calendar yar. Lastly, the flurry of activity the McDonnells' engaged in the days after Mrs. McDonnell's interview with law enforcement all suggest that both the Governor and his wife well knew the jeopardy their actions had placed them in. 

So, while some in the media try to explain away this conduct or put some odd, legalistic spin on it, my guess is that both McDonnells will be seeking plea agreements to avoid decades in federal prison. 


1. U.S. v. McDonnell & McDonnell, filed in U.S. District Court for the Eastern District of Virginia, Case 3:14-cr-0012-JRS (hereinafter "Indictment"). See, e.g., paras. 15-19, 23-29, 35-40, 50, 80-86, 108-123.
3. Indictment, paras. 83, 86.
4. Indictment, paras., 61, 66, 67, 71, 96-97
5. See, e.g., indictment, paras. 62-65, 83-84, 87-89, 111.
6. Indictment, paras. 92 and 93.
7. Under 18 U.S.C. 1951(a) "extortion" (a predicate element to a violation of the statute) includes "obtaining of property from another … under color of official right." 
8. Indictment, paras. 118-121. 
9. Indictment, para. 105. It is also worth noting that the one of the loans, a $50,000 check, had to be re-cut by Mr. Williams's assistant because the "memo" line included Mrs. McDonnell's name. Indictment, para. 86. 
10. Indictment, paras. 107, 122-123. 
11. Indictment, paras. 23-24. 
12. Indictment, paras. 107, 122-123. Mrs. McDonnell also requested an accounting for work done by employees of Mr. Williams months earlier. See, indictment, para. 106. 


  1. Do you think they'll actually do any time? Although I think Mrs McDonnell knew what she was doing was questionable at the least, *technically* she broke no laws with the timing of her stock sales and purchases, right? On the one hand, I get a warm, fuzzy feeling when I see karma in action; on the other hand, if the Feds hadn't interviewed her and her husband then they wouldn't have felt cornered into calling the gifts "loans," which might invalidate the charges of falsifying the loan app, right? Jesus, no wonder the law is scary, ha!

    1. The stock sales and after-the-fact claim of "loans" are part of what the feds are using as evidence to show the conspiracy. However, on the counts related to failing to disclose those loans when they refinanced the mortgages, I think you'd have a hard time arguing to a jury that a former state Attorney General (and lawyer) forgot to include that information.

      As with many prosecutions, the defendants' risk of significant jail time, legal fees and the forfeiture of assets will put enormous pressure on both of them to cut a deal. I would not be at all surprised if at least one of them does some time, even if it's nominal (maybe 12-18 months).

  2. I read that Gov. McDonnell tried to have a separate trial from his wife-- is that a legal strategy, or just a preliminary to a divorce?
    ps Your blog and twitter are great! Interesting commentary and the adorable Pumpkin :)

    1. I can't speak to the inner workings of the McDonnell marriage, but the one thing they are likely trying to protect/maintain is the spousal privilege, which (generally) precludes either from testifying against the other (as all things in the law, exceptions exist).