Snyder v. United States – What is the impact of the Supreme Court’s decision?

In a recent decision, the Supreme Court reversed the conviction of a former Indiana mayor who had accepted $13,000 from a trucking company after awarding it two city contracts worth over $1 million, holding that 18 U.S.C. § 666, a federal law that criminalizes certain payments to state and local officials, applies only to bribes and not to gratuities. The decision, made on June 26, 2024, premised on a clear concern about criminalizing “routine gifts,” narrows the scope of the federal anti-corruption statute by effectively eliminating from the reach of the statute payments to state and local officials that lack a sufficient quid pro quo.

While Snyder may have limited the scope of § 666, companies and individuals who interface with state and local officials are advised to remain cautious before providing anything of value to a state or local government official or federal fund recipient. Such gifts, benefits, or payments, even if they are gratuities and are made without a quid pro quo, may violate other criminal and civil laws and contracts, and risk whistleblower complaints, bid protests, government investigations, and civil liability.

Our alert details the case and key takeaways for companies and individuals.

Background

Snyder v. United States involves James Snyder, who was the mayor of Portage, Indiana when he was convicted of federal funds bribery under 18 U.S.C. § 666(a)(1)(B) for soliciting and accepting $13,000 in connection with the city’s purchases of garbage trucks. Portage bought five garbage trucks from a local truck company for $1.125 million while Snyder was mayor. About three weeks later, Snyder solicited and accepted $13,000 from that local truck company. Snyder claimed that the money was a consulting fee. Federal prosecutors charged Snyder with violating the anti-corruption statute.

Section 666 prohibits federal program beneficiaries (often state and local officials) from “corruptly” soliciting anything of value offered with the intention of being “influenced or rewarded” in connection with government business. The issue before the Snyder court was “[w]hether section 666 criminalizes gratuities, i.e., payments in recognition of actions the official has already taken or committed to take, without any quid pro quo agreement to take those actions.” Snyder argued that there was insufficient evidence that he made an agreement to exchange money for the truck contracts before they were awarded, and thus § 666 could not apply without a quid pro quo agreement. Additionally, Snyder contended that § 666 only applied to bribes and not gratuities, and he described his $13,000 payment as a gratuity.

In 2021, Snyder was convicted of bribery in the US District Court for the Northern District of Indiana. In 2023, the US Court of Appeals for the Seventh Circuit affirmed the district court’s ruling and upheld Snyder’s convictions. Specifically, the Seventh Circuit noted that the language of the statute does not use the words “bribe” or “gratuity” – instead, the statutory language uses “influenced or rewarded.” Using this plain text of the statute, the Seventh Circuit rejected Snyder’s interpretation of § 666 and stated that the statute applies to gratuities and does not require evidence of a prior quid pro quo agreement.

The Supreme Court’s decision

The Supreme Court disagreed and overturned Snyder’s convictions, and held that § 666 only prohibits quid pro quo acts of bribery, criminalizing the solicitation, offer, and acceptance of payments or benefits that are agreed to or made before the official act. However, the Supreme Court stated that the statute does not apply to payments or benefits given after an official act, but with no prior agreement.

In his majority opinion, Justice Brett Kavanaugh discussed the difference between “bribes” and “gratuities.” He described bribes as “payments made or agreed to before an official act in order to influence the official with respect to that future official act,” whereas gratuities are “typically payments made to an official after an official act as a token of appreciation.”

Justice Kavanaugh points to six reasons backing the majority’s decision: “text, statutory history, statutory structure, statutory punishments, federalism, and fair notice.” The Court stated that the government’s interpretation of the statute “would radically upend gratuities rules and turn § 666 into a vague and unfair trap for 19 million state and local officials.” The majority opinion expressed concerns about where to draw the line, specifically for ordinary people who could be vulnerable to prison time for engaging in routine gift-giving.

The majority noted that the government provided no guidance for what conduct would suffice to distinguish an illegal gratuity from a routine gift. In order to preserve federalism principles, the Supreme Court left the decision about the legality of gratuities to the state and local governments.

Key takeaways

The Snyder decision is the latest decision by the Supreme Court limiting the scope of federal fraud statutes governing state and local public corruption cases. Since approximately 2000, the Supreme Court has issued a series of decisions paring back what it sees as prosecutorial overreach that improperly ensnares people and conduct that these criminal statutes do not reach. McNally, 483 U.S. 350, 355 (1987).

In notable cases like Skilling v. United States, the Court has distinguished between conduct that constitutes a federal crime, and conduct that may be dishonest, inappropriate, or amount to self-dealing, but is beyond the reach of federal prosecution. Skilling v. United States, 561 U.S. 358, 405, 410 (2010) (confining “honest services” fraud to schemes involving bribes or kickbacks).

In May 2020, the Supreme Court unanimously reversed the convictions of two former New Jersey public officials who infamously realigned lanes to the George Washington Bridge in an act of political revenge, in what became known as the Bridgegate scandal. The Supreme Court held that while the defendants may have abused their power, they did not violate federal fraud statutes because their objectives were not to take money or property. Kelly v. United States, 18-1059, 2020 WL 2200833, at *4 (May 7, 2020); see also Olan, Robert, et al. v. United States, 20-306, – S.Ct. –, 2021 WL 78042 (Mem) (Jan. 11, 2021) and Blaszczak, David v. United States, 20-5649, – S.Ct. –, 2021 WL 78043 (Jan. 11, 2021) (vacating Second Circuit decisions affirming insider trading convictions and directing circuit reconsider findings in light of Kelly). We have discussed the implications of these decisions in our prior publications, available here, here, and here.

Many commentators have argued that the Snyder decision is narrow in scope, as the Supreme Court held that § 666 only criminalizes quid pro quo bribery, not gratuities. Moreover, Snyder does not affect the federal bribery or gratuity crimes for federal officials, 18 U.S.C. § 201(b) and (c). Snyder also does not affect the applicability of foreign, state, or local laws to proscribe gratuities criminally or civilly.

However, the majority’s rationale may limit prosecutors’ ability to prove violations of other federal public corruption statutes. One such example is the Foreign Corrupt Practices Act (FCPA), which prohibits payments, gifts, or offers of anything of value to improperly influence a foreign official. That said, the Snyder decision should not be considered authorization to provide gratuities to foreign officials. The line between a bribe and gratuity remains clouded, even after Snyder, and gratuities may remain illicit under foreign laws.

While the Snyder decision may have limited one of the avenues by which prosecutors have sought to hold alleged wrongdoers accountable, companies can expect the Department of Justice (DOJ) to remain focused on individual accountability and curbing corporate recidivism. Snyder will likely not constrain the DOJ’s investigation of domestic and foreign bribery. As such, companies and individuals involved in bribery investigations as targets, subjects, and witnesses may expect prosecutors to engage in exhaustive evidence gathering and interviews to determine whether a quid pro quo agreement existed.

To establish a quid pro quo agreement, prosecutors are not confined to documented agreements. Rather, prosecutors will look at the totality of the relationship and interactions between the payee and the state or local official, such as the number of payments (or benefits), the nature of the relationship between the payee and the government official (eg, is the payee a repeat player or a government contractor), and the nature of any benefits a payee received.

The ruling also poses potentially troubling issues for defendants. As prosecutors may now only bring § 666 cases under bribery theories, defendants may be foreclosed from seeking less serious outcomes during negotiations or at trial where a gratuity theory might previously have applied, absent other applicable statutes.

Companies are still strongly encouraged to ensure that policies and procedures comport with applicable bids, contracts, regulations, and laws surrounding gifts, entertainment, or benefits. Companies are advised to evaluate their existing policies and procedures in place to allow them to effectively detect and investigate potential misconduct, including their policies surrounding device usage, messaging applications, and data retention. Companies are also encouraged to continue to provide clear, consistent, and continual messaging and training to both employees and third parties acting on their behalf surrounding the company’s expectations regarding compliance at all levels.

For more information regarding the implications of Snyder v. United States, please contact any of the authors or your usual DLA Piper relationship attorney.