Unpacking the Cuellar Indictment

Husband and wife corruption

On April 30 federal prosecutors in the Southern District of Texas indicted U.S. Congressman Henry Cuellar and his wife Imelda on corruption charges. Cuellar is a Democrat who has represented Texas’s 29th Congressional District since 2005. The District is in Southern Texas, stretching from the Mexican border to the Houston suburbs. He and Imelda have been married since 1992. She worked for 25 years in Texas state government before retiring in 2012.

Prosecutors charge that beginning in 2014, the Cuellars engaged in two separate years-long bribery schemes. One alleged scheme involved a state-owned oil and gas company in Azerbaijan, and the other involved a large retail bank chain based in Mexico. The Cuellars allegedly accepted nearly $600,000 from these companies in exchange for the Congressman’s agreement to perform official acts on their behalf and unlawfully act as their agent.

The case looks compelling. Much of the evidence comes from the Congressman’s own emails and text messages, which appear to demonstrate his eagerness to work on behalf of these foreign interests. There’s a long paper trail of bank records and money transfers that appear to lack any innocent explanation. At least three other people involved in the schemes have already pleaded guilty and agreed to testify for the prosecution.

The defendants have pleaded not guilty and Cuellar has said he still intends to run for re-election in the fall.

Here’s a breakdown of the allegations, the criminal charges, and possible defenses.

Rep. Enrique Roberto “Henry” Cuellar (D-TX)

The Azerbaijani Oil and Gas Company Scheme

Azerbaijan is a former Soviet republic located on the Caspian Sea just north of Iran. Its economy relies heavily on oil and gas. The Azerbaijan scheme involves Cuellar allegedly accepting bribes in exchange for agreeing to exercise his power in Congress on behalf of the Azerbaijani national oil and gas company. That company is wholly owned and controlled by the government of Azerbaijan. Cuellar allegedly worked directly with the Azerbaijani ambassador to the U.S., along with others employed or funded by the oil company, to further Azerbaijan’s interests.

In January 2013, a Texas nonprofit run by an individual with ties to the oil company sponsored a trip for Henry and Imelda Cuellar to Turkey and Azerbaijan. That trip, which cost about $26,000, was lawful and properly disclosed. During the trip, Cuellar was briefed by high level Azerbaijani officials and oil company executives. Shortly after his return, Cuellar joined the powerful House Appropriations Committee, and Azerbaijani officials and those working with them in the U.S. began cultivating Cuellar as a Congressional ally.

The indictment alleges that beginning in 2014 a subsidiary of the oil company, located in Azerbaijan, entered into a sham consulting agreement with a Texas shell company owned and controlled by Imelda Cuellar. It provided for a fee of $20,000 per month for unspecified “strategic consulting and advising services.” Over the next few years the Cuellars negotiated two additional “consulting agreements” between entities controlled by the state oil and gas company and two Texas shell corporations controlled by Imelda Cuellar. 

The indictment alleges that Imelda did “little or no work” under these agreements. In reality, the agreements were shams designed to disguise payments made to influence Congressman Cuellar in the performance of official acts. From 2014 to 2019, payments under these sham consulting agreements totaled $360,000. Imelda sometimes sent allegedly false invoices for payment, purporting to reflect services performed under the contracts.

The indictment alleges that, in return, Cuellar promised to undertake a number of legislative actions to benefit Azerbaijan’s interests. These included actions on legislation related to U.S. security and development programs of interest to Azerbaijan, issues related to Azerbaijan’s ongoing conflict with neighboring Armenia, and acts to promote Azerbaijan’s image as an ally and partner of the United States. 

The indictment quotes a number of text and email exchanges in which Cuellar is communicating directly with the Azerbaijani ambassador to the U.S. and promises to introduce certain legislation or take other official actions to benefit Azerbaijan. In one exchange, for example, the ambassador sends Cuellar information about a Congressional proposal to appropriate funds for a project favored by Armenia and opposed by Azerbaijan. Cuellar responds: “I see it. We [sic] work on it.” The ambassador responds: “Thank you boss!”  In another exchange, Cuellar texts that he just introduced legislative language favored by Azerbaijan and the ambassador responds, “You are the best El Jefe!”

The Mexican Bank Scheme

The second alleged bribery scheme involves a retail banking chain based in Mexico City and owned by a large Mexican corporate conglomerate. The indictment alleges that, also beginning in 2014, the Cuellars began negotiating a similar sham consulting agreement between the Mexican bank and Imelda’s shell company. They used a number of middlemen (including a Mexican politician) and related corporate entities to disguise where the money was ultimately going.

From 2016 to 2019, the Mexican bank allegedly paid $236,390 to Imelda’s shell company, running the payments first through two different corporate intermediaries, one run by a longtime business associate of Congressman Cuellar and one run by his former campaign manager. These businesses each took a cut before forwarding the payments along.

Once again, the indictment alleges that Imelda Cuellar did little or no legitimate work under these consulting agreements. The payments allegedly were actually in return for Congressman Cuellar’s agreement to perform official acts that would benefit the Mexican bank.

The indictment lists a number of instances from 2015 through 2019 where Congressman Cuellar was directly communicating with executives at the Mexican bank. He would update them and seek their input on legislation he was introducing, his meetings with U.S. executive branch officials, and other steps he was taking to pursue their interests. On one occasion, Cuellar solicited and received from a bank executive suggested edits to language in a committee report Cuellar was preparing. The issues involved U.S. legislative and regulatory matters concerning international banking, payday lending, and other issues of interest to the Mexican bank.

Use of the Bribery Proceeds

The indictment alleges that the Cuellars used the bribery proceeds for a variety of personal expenses, including taxes, credit card payments, car payments, clothing, and payments to restaurants and retail stores. In addition, the indictment alleges that from 2015 to 2019 Imelda wrote monthly $600 checks from her shell company bank accounts to Congressman Cuellar or his business, purportedly for rent for office space for the shell companies. These companies allegedly had no real business or need for an office, but did use Cuellar’s business as a mailing address. The indictment alleges that these rent checks were a sham and simply a way to launder the bribery proceeds so the funds would look legitimate. The checks, totaling $17,800, simply went into Cuellar’s personal bank account.

Foreign Agents Registration Act

Some of the charges in this indictment are based on the Foreign Agents Registration Act. FARA requires those who are engaged in political consulting, lobbying, or similar activities in the U.S. on behalf of a foreign principal to register and file periodic public disclosures of those relationships and what they are paid. The purpose is to allow the government and the public to evaluate the person’s actions in light of the fact that they are a foreign agent, and to avoid secret efforts by foreign governments and entities to influence U.S. political activity.

Members of Congress are forbidden by law from acting as agents for a foreign principal in a manner that would require disclosure under FARA.

The Criminal Charges

There are 14 counts in the indictment. Both defendants are charged in each count.

Count 1: Conspiracy

Charges a criminal conspiracy under 18 U.S.C. 371 to commit two separate offenses against the United States in connection with the Azerbaijan scheme: bribery and having a member of Congress unlawfully act as a foreign agent. Conspiracy carries a maximum penalty of five years in prison.

Count 2: Bribery

Charges both defendants under the general federal bribery statute, 18 U.S.C. 201(b), for the Azerbaijan scheme. It alleges that Cuellar, as a federal public official, corruptly agreed to accept things of value in exchange for being influenced in the performance of official acts and for violating his official duty. Imelda is charged with aiding and abetting the bribery of her husband (she’s not a public official so can’t be charged directly with this crime). Bribery is a 15-year felony.

Count 3: Conspiracy

Charges a conspiracy under 18 U.S.C. 1349 to commit honest service wire fraud, in connection with the Azerbaijan scheme. Honest services fraud is another common way to charge bribery. The allegation is that the defendants conspired to deprive Congressman Cuellar’s constituents of their right to the fair and honest services of their Congressman, free from corruption. What the prosecutors have to prove is a scheme to engage in bribery and that the defendants caused the use of an interstate wire transmission, such as a bank transfer or email, in furtherance of the scheme. This is a 20-year felony.

** If I may be pedantic for a moment for white collar law nerds (non-nerds can skip this paragraph): the indictment charges a conspiracy to commit honest services wire fraud “in violation of 18 U.S.C. 1349.” Section 1349 is merely a penalty provision that says conspiracies or attempts to engage in federal fraud carry the same penalty as the underlying offense. It means that mail and wire fraud conspiracies carry the 20-year penalty for mail and wire fraud, instead of the typical 5- year penalty under the conspiracy statute, 18 U.S.C. 371. But you can’t “violate” 18 U.S.C. 1349, it doesn’t define an offense. (Go ahead - read it!) The statute violated is 18 U.S.C. 371, conspiracy, with the object offense being wire fraud, 18 U.S.C. 1343. Section 1349 only becomes relevant at the sentencing stage if there is a conviction. So this indictment, like others I’ve seen, technically cites the wrong criminal statute. I doubt it will end up making any legal difference, but it’s one of my pet peeves. End of rant.

Count 4: Unlawful Foreign Agent

Charges a violation of 18 U.S.C. 219, which prohibits federal public officials, including members of Congress, from acting as foreign agents in a way that would implicate FARA. The Congressman is charged with acting as an agent for Azerbaijan, and Imelda is charged with aiding and abetting. This is a 2-year felony.

Count 5: Conspiracy

Charges the same conspiracy as alleged in Count 1, conspiracy to commit bribery and to act as an unlawful foreign agent, but this time for the Mexican bank scheme.

Count 6: Bribery

Parallels Count 2, charges bribery for the Mexican bank scheme.

Count 7: Conspiracy

Parallels Count 3, charges honest services fraud conspiracy for the Mexican bank scheme.

Count 8: Unlawful Foreign Agent

Parallels Count 4, charges that Cuellar unlawfully acted as a foreign agent for the Mexican banking company.

Count 9:  Money Laundering Conspiracy

Charges the defendants with a years-long money laundering conspiracy under 18 U.S.C. 1956(h) to conceal the nature, origin, and source of the bribery proceeds through the use of multiple corporate intermediaries, shell companies, and the bogus rent checks. This is a 20-year felony.

If you’re interested in a basic primer on money laundering, here’s a post I wrote during the Mueller investigation. It even has a Stormy Daniels angle!

The Definition of Money Laundering (Part 1): Porn Star Payoffs and Dirty Money

Counts 10-14:  Money Laundering

Charges the five most recent sham rent checks in 2019 as individual acts of money laundering, alleging that by claiming the checks were rent payments the defendants were trying to “clean up” the bribery proceeds and make them appear legitimate when they landed in their personal bank accounts. These are small dollar transactions - $600 per check - but many of the larger wire transfers and payments are outside the five-year statute of limitations (and some may not meet the legal definition of “proceeds,” an issue discussed in the post above).

Each count of money laundering is a 20-year felony.

Cooperating Co-Conspirators

At least three people involved in the schemes have already pleaded guilty and agreed to cooperate with prosecutors. Irada Akhoundova, the leader of a Texas nonprofit that works on Azerbaijan-American ties, has pleaded guilty to being an unregistered agent of Azerbaijan and admitted that she helped facilitate a $60,000 payment from the Azerbaijan oil company to Imelda Cuellar’s nonprofit. Cuellar’s former campaign manager and another Texas consultant have also pleaded guilty to helping launder the bribes from the Mexican banks. They acted as the intermediaries, each taking a cut of the payment before passing it along, ultimately to the Cuellar shell company.

Proving corruption cases is always challenging, but having co-conspirators “flip,” plead guilty and cooperate is one of the best ways. This will be difficult for the Cuellars to overcome.

Potential Issues and Defenses

Speech or Debate

When a member of Congress is indicted for official corruption, the Speech or Debate clause almost always becomes an issue. (For another recent example, see the corruption trial of Senator Bob Menendez, where jury selection began this week.)

Article 1 of the Constitution provides that “for any Speech or Debate in either House,” members of Congress “shall not be questioned in any other Place.” The Supreme Court has limited this protection to “legislative acts,” actions related to researching, proposing, debating, or voting on legislation. The clause does not prohibit inquiry into many other things that politicians do, including campaigning, public speaking, constituent services, or meeting with or lobbying executive branch officials. 

This indictment refers to a number of legislative acts, including Cuellar proposing language to be inserted in various bills or Committee reports. But in a bribery case there is a key distinction: prosecutors can’t put on evidence of legislative acts themselves, but they can prove an agreement to take legislative acts. The crime of bribery is completed with the agreement to sell the power of your office. The crime is making the deal; it doesn’t require that the deal actually be consummated.

Here’s how that will work in this case: prosecutors will seek to prove, in some cases using Cuellar’s own text messages and emails, that he agreed to perform legislative acts on behalf of these foreign entities that were paying him. They won’t be allowed to introduce evidence of him actually drafting legislation, or voting on it, or similar actions – that would be prohibited by the Speech or Debate clause. But they don’t have to put on evidence of those to prove the bribery deal. All they have to prove is that he promised to do it as part of a quid pro quo.

It doesn’t look like the Speech or Debate clause will be a significant problem for this prosecution. It will prohibit the prosecutors from introducing some noncritical details into evidence, but it won’t prevent them from proving the charges. Still, I’d expect Cuellar to file motions to dismiss based on Speech or Debate. Those motions could delay the trial for some time, because if they are denied Cuellar will be entitled to a pretrial appeal.

Constituent Services

In a corruption case a politician often tries to argue that he was engaged in routine official duties and constituent services. After he was indicted, Cuellar released a statement saying his actions were “consistent with the actions of many of my colleagues and in the interest of the American people.”

Given the location of his district, Cuellar almost certainly has a large number of constituents with ties to or family in Mexico and potential interest in banking issues involving the U.S. and Mexico. He will argue that anything he did was to further the interests of those constituents, not the result of a corrupt deal.

If there is a significant Azerbaijani community in Cuellar’s district, look for him to make similar arguments concerning his efforts on behalf of Azerbaijan.

Lack of Corrupt Intent

In the statement he issued following his indictment, Cuellar claimed: “Before I took any action, I proactively sought legal advice from the House Ethics Committee, who gave me more than one written opinion, along with an additional opinion from a national law firm.” If that’s true, those opinions could lead to a defense that Cuellar lacked criminal intent and thought his actions were legal and appropriate. Of course, a great deal will depend upon exactly what those opinions say and whether Cuellar was fully forthcoming about his intended actions when he sought the opinions.

Lack of Agency

FARA requires that the defendant was an agent of the foreign entity. That generally means the defendant was taking orders or direction from the foreign principal and was under their control. Cuellar likely will argue that he was never acting as an agent of either foreign entity here. He will say that he sought their input and kept them informed — all in the interest of his constituents — but that he never took direction from them and was not under their control. He remained independent at all times, taking their input into account but in the end acting based on his own judgment and the interests of his constituents and the country.

“Little or No Work”

I’m curious about the indictment repeatedly saying that Imelda Cuellar did “little or no work” under these supposedly sham consulting contracts. That seems to suggest that maybe she did do something.

The defense may argue these weren’t sham contracts at all, and she was actually performing legitimate services. In his statement when they were indicted, Congressman Cuellar said this about his wife, hinting at such a defense: “On top of being an amazing wife and mother, she’s an accomplished businesswoman with two degrees. She spent her career working with banking, tax, and consulting. The allegation that she is anything but qualified and hard working is both wrong and offensive.”

If Imelda actually did do some work under the contracts, perhaps there will be a defense related to that. Of course, that would not explain the convoluted nature of some of the transactions, which would be unnecessary if the contracts were legitimate.

Proving the Quid Pro Quo

On the face of the indictment we have suspicious timing - the “consulting” contracts and payments being made at the same time as various official acts by Cuellar. But the indictment doesn’t specify any “smoking gun” meeting or document where Cuellar makes the quid pro quo agreement: “because of these contracts, I will do the following for you.”

A key at trial will be the prosecution’s ability to link the payments to the official acts. Maybe they have that smoking gun lurking in the wings, or maybe it will come from some of the cooperators who have pleaded guilty. Or they may end up proving it largely through circumstantial evidence.

One possible weak point in the prosecution is that many of the allegations are quite old. The beginning of the schemes dates back to 2014, and the most recent bribe payments were in 2019. That can make things more challenging to prove, as memories fade over time or witnesses become unavailable.

The bottom line, though, is that this case looks very strong for the government and extremely grave for the Cuellars, especially in light of the others who have already pleaded guilty and will cooperate.

I’ll be tracking the case and will keep you posted.