Varsity Blues Appeal Heads to the First Circuit
In March of 2019, federal prosecutors in Massachusetts charged about fifty people in the college admissions cheating scandal that became known as “Varsity Blues.” The ringleader, admissions counselor Rick Singer, has already pleaded guilty, as have dozens of parents, coaches, and college administrators. But a handful of defendants chose to go to trial. Two parents, John Wilson and Gamal Abdelaziz, were convicted in October 2021 and have appealed to the U.S. Court of Appeals for the First Circuit. The Varsity Blues appeal is set to be argued on November 7.
This will be the first time a Court of Appeals has examined the government’s legal theories in a Varsity Blues appeal. As I’ve written before (see posts here and here) some of those legal theories are pretty shaky. I believe Wilson and Abdelaziz are likely to get their convictions thrown out. Their actions may have been unfair, privileged, immoral -- a lot of things. But I don't believe they were federal crimes.
[Full disclosure: I was the lead “client” who worked on an amicus brief filed by a group of law professors in Wilson’s appeal, arguing that the government’s bribery theory is flawed. My discussion below will focus on Wilson, but Abdelaziz's appeal raises essentially the same issues.]
Facts of Wilson’s Case
Singer’s various schemes included telling parents he had a “side door” method that could virtually guarantee their child would be admitted to a prestigious university. According to Singer, the “front door” was applying through the regular process and being admitted on merit. The “back door” involved parents making a huge donation, such as paying millions for a building, and their child then being admitted. Singer’s side door involved parents making a smaller, although still sizable, donation to the university and their child obtaining one of the admissions slots set aside for recruited athletes in exchange. In addition to keeping a portion of the money himself, Singer was often paying off coaches or administrators to facilitate this side door process.
In 2013, Singer approached Wilson with a side door proposal to get Wilson’s son Johnny admitted to the University of Southern California as a water polo recruit. (Unlike the student athletes in a number of other Varsity Blues cases, Johnny actually played the sport in question; he was an accomplished high school water polo player.) Singer arranged with the USC water polo coach, Jovan Vavic, to support Johnny’s application in exchange for a contribution to the USC water polo team.
In April 2014 Wilson, at Singer’s direction, made a contribution of $220,000 to Singer’s foundation. Singer sent $100,000 to the USC water polo account and kept the rest. USC sent Wilson a thank-you note for the donation. At trial, both sides agreed that none of Wilson’s money went to Vavic or to any other USC employee. There was no dispute that Wilson believed he was making a donation to USC athletics, not to any individual. Johnny was admitted to USC but left the water polo team after his first semester.
In 2018, Wilson contacted Singer about helping with college admissions for his two daughters. Singer, who by then was cooperating with federal investigators, told Wilson he could help his daughters get into Harvard and Stanford on the sailing and crew teams. Singer directed Wilson to contribute $500,000 to each university through Singer’s foundation, which Wilson did. Again, it is undisputed that Wilson intended the money to go the universities as donations, not to any coach or other individual. Nothing further happened concerning Wilson’s daughters before the investigation was shut down and the defendants were arrested.
After a month-long trial Wilson was found guilty of mail and wire fraud, honest services fraud, federal program bribery, and conspiracy to commit those crimes. He was also found guilty of one count of filing a false tax return for claiming his contribution to USC as a charitable deduction. He was sentenced to fifteen months in prison. The first Varsity Blues appeal followed.
Varsity Blues Appeal: The Bribery Theory
Two of the crimes of which Wilson was convicted require the government to prove that he engaged in bribery. Federal program bribery, 18 U.S.C. §666, criminalizes paying bribes to the agent of any organization that receives more than $10,000 a year in federal funds – in this case, USC. Honest services fraud, 18 U.S.C. §1346, prohibits schemes to defraud a victim of the intangible right to honest services that they were owed by someone. After the Supreme Court’s 2010 decision in Skilling v. United States, honest services fraud is limited to cases where the government can prove bribery or kickbacks.
In short, to convict Wilson of these charges, the government had to prove that Wilson bribed Vavic, the USC water polo coach. A key issue in the Varsity Blues appeal is whether Wilson's conduct amounted to bribery. Bribery occurs when a third party gives something of value to an agent to influence them to violate their duty to their principal. In some of the Varsity Blues cases, bribes were paid directly to a coach or school administrator to influence them to admit a student. Those are straightforward bribery allegations.
But in Wilson’s case, it was undisputed that Wilson believed his donations were going only to the universities. The parties stipulated that neither Vavic nor any other individual USC employee received any of the money Wilson donated. The government’s theory was that a payment made directly to the University could constitute a bribe of Vavic.
This bribery theory makes no sense. Bribery occurs when a third party provides a private benefit to an agent that influences the agent and corrupts the relationship that the agent has with his principal. The University cannot be both the victim of and the beneficiary of a bribery scheme. Wilson’s lawyers note in their briefs that they have found no case anywhere in recorded legal history where a payment to the principal has been found to be a bribe of the agent. Nor has the government cited any such case.
It's true that bribe payments do not have to go directly into the agent’s pocket. For example, a politician may be bribed by agreeing to be influenced in exchange for a donation to her favorite charity. But in such cases, the duty of loyalty owed by the agent (or politician) is still disrupted; the agent is acting to benefit the charity, not the principal. The benefits provided go to someone other than the principal. That’s not true when the agent directs that the benefits go to the principal itself and the principal knows about it and gladly accepts those benefits.
The government also argues that Vavic may have derived some personal benefits from the scheme, such as professional advancement or accolades from USC for his fundraising. But these potential benefits cannot constitute a bribe from Wilson. In addition to being intangible and uncertain, any such benefits are provided by the University itself, not by a third party. Again, it makes no sense to say the University could complete a bribe of Vavic by providing employment benefits to Vavic to reward him for a job well done.
It may be true that Vavic violated USC rules about how water polo slots were supposed to be awarded and lied to his employer. But not every form of misconduct is bribery. To allow the government to prosecute this case as honest services fraud would effectively overrule Skilling and return to the days when that sweeping theory was used to prosecute all kinds of employee misbehavior. As the First Circuit ruled in an earlier, pre-Skilling case, the federal crime of honest services fraud was not intended to be a “draconian personnel regulation.” Vavic misbehaved, but he did not accept “bribes” by directing donations to his employer.
Vavic Is Granted a New Trial
Vavic’s own case went to trial separately before a different judge, and he also was convicted. But last month, Judge Indira Talwani granted Vavic’s motion for a new trial. The judge ruled that the jury may have found Vavic guilty of bribery or honest services fraud based solely on payments made to USC and that such payments would not be bribes.
Judge Talwani rejected the government's analogy to bribe payments directed to a charity or other third party, because here it was "the entity to whom Vavic owed a duty of honest services, not a third party, that received Singer's funds.” The court also rejected the argument that any "professional boost" Vavic may have obtained from bringing in the donations could be the kind of personal benefit provided by a third party that would support a bribery conviction.
I believe Judge Talwani got it right. Her decision will not be binding on the First Circuit, of course. But it certainly bolsters Wilson’s argument that he was convicted based on a flawed bribery theory.
Varsity Blues Appeal: The Property Fraud Theory
Wilson was also convicted of traditional mail and wire fraud. Prosecutors charged that Wilson defrauded USC of property in the form of an admission slot at the university. The judge at Wilson’s trial adopted this theory and instructed the jury that admissions slots are property. I don’t think that’s correct.
The Supreme Court has repeatedly held, in a line of cases going back to McNally v. United States in 1987, that the federal fraud statutes require that the object of the fraud was to deprive the victim of money or property. With the exception of honest services fraud (which is specifically covered by another statute), deprivation of intangible rights or economic interests that are not property will not constitute fraud.
In Cleveland v. United States, prosecutors charged that the defendants defrauded Louisiana by lying on applications for video poker licenses. The Court rejected that theory, holding that the unissued licenses were not property in the hands of the state. The power to issue the licenses was a state regulatory power, not a property interest.
More recently in the “Bridgegate” case, Kelly v. United States, prosecutors charged that the defendants defrauded the Port Authority of New York and New Jersey by altering the flow of traffic on the George Washington Bridge. The Court rejected that fraud theory as well, holding that the right of “allocation, exclusion, and control” over the use of the lanes was not a property interest.
I think the same is true of admissions slots at a university. An admissions slot is a right of the university to determine who will receive an offer of admission. It’s analogous to granting a license to attend the university– the right of exclusion, allocation, and control over the student body. As in Cleveland and Kelly, that power is not a property interest covered by the federal fraud laws.
As Wilson points out in his brief, if an offer of college admission is property the same would be true for any desirable institution. That would transform lying about a child’s reading ability on a preschool application or lying about your golf handicap on a country club application into a federal felony.
The Definition of Property
A good working definition of property is a bundle of rights in something that can be exclusively possessed, enjoyed, and transferred to others. But there is no “market” for admissions slots; the control over such slots has no value to anyone other than the university itself. Certainly a student who receives a slot cannot sell it to someone else. The government argues that “property” requires merely exclusivity and economic value, but this is insufficient. The unissued licenses in Cleveland had economic value as well and were exclusive to the state. The same was true of the right to control traffic lanes in Kelly. Merely because an interest has economic value does not make it a property interest.
Universities do have an interest in the composition of their student body and the integrity of their admissions systems. But such internal interests in management and administration are not property interests. Again, the state in Cleveland had an interest in the integrity of its licensing system, and the Port Authority in Kelly had an interest in the proper use and allocation of the bridge lanes.
It's true that USC was deceived by Vavic regarding the student’s qualifications, just as the state was deceived in Cleveland in connection with the license applications. But the law draws a distinction between being deceived and being defrauded. The latter requires a deprivation of property, and that is absent here.
The property fraud charge here is similar to a “right to control” theory, which holds that a victim is defrauded if they are deprived of information that would help them make economic decisions about their property. That theory is controversial and has not been adopted by all Courts of Appeal. The Supreme Court recently granted certiorari in a case, Ciminelli v. United States, challenging the theory, and the case should be decided next spring. I expect the Court is going to rule that a deprivation of the right to control is not property fraud. But in any event, the government in Wilson’s case did not expressly rely on the right to control and the theory was not presented to the jury. His conviction could not be affirmed on that basis now.
In a pre-trail ruling in Vavic’s case, Judge Talwani also ruled that admissions slots are not property. Once again, I believe Judge Talwani has it right, and I believe the First Circuit will agree.
Varsity Blues Appeal: The Kotteakos Issue
Another legal issue in Wilson’s case is how the conspiracy was charged and presented. When the several dozen defendants were all arrested back in 2019, the government charged most of them in a single, massive conspiracy. As I wrote at the time, this charge was almost certainly legally flawed. Now that issue is squarely presented in Wilson’s appeal.
The problem stems from charging a single conspiracy when the facts show there really were multiple conspiracies. The Supreme Court addressed this problem in a 1946 case called Kotteakos v. United States. In Kotteakos one individual, Simon Brown, helped several dozen people submit false applications to a government loan program. The basic scheme was the same in each case, but the different people who worked with Brown had no connection to each other and were not dependent on each other’s success in any way. The only thing the cases had in common was the nature of the offense and that Brown was involved in each of them.
The case was tried as one big conspiracy but the evidence at trial ended up proving there were at least eight different conspiracies. The Court described the case as a wheel, with Brown at the hub and multiple spokes involving the different individuals who schemed with Brown. But there was no rim to connect the spokes – nothing that joined the different individuals in a common enterprise. The Court held that this error entitled Kotteakos to a new trial.
Such cases now are commonly referred to as “rimless wheel” conspiracies. The danger to an individual defendant in such a case is that the acts of others, who are not his true co-conspirators, will be held against him. Some of those individuals may have behaved more egregiously than the defendant. The spillover evidence from the other defendants may unfairly prejudice a defendant who is entitled to an individual determination of his guilt or innocence.
That is exactly what happened to Wilson. There were only two defendants on trial in the case: Wilson and Abdelaziz. But their indictment charged them as part of a much larger conspiracy involving fifteen parents, most of whom had already pleaded guilty. Because they were named as co-conspirators, the government was able to introduce considerable evidence of actions by these other parents who were not in the courtroom. Some of that evidence involved parents who knowingly participated in direct bribes to coaches or administrators, participated in creating fake athletic profiles for their children, or paid to cheat on college admissions tests. Wilson did none of that.
A good portion of Wilson’s trial was taken up by evidence of the actions of these other parents. As Wilson points out in his brief, it wasn’t until the third day of his trial that the government introduced any evidence at all that directly related to Wilson’s own conduct. Wilson almost certainly was unfairly prejudiced by that evidence.
The hallmark of a case with a Kotteakos problem is indifference among the spokes. Different defendants may engage in same kind of criminal behavior. But they do not depend on each other, care what happens to the others, or even necessarily know that the others exist. Indeed, in these cases the parents, far from being united in a single scheme, were arguably competitors going after the same scarce admissions slots. To be a single conspiracy they needed to have a single, shared objective, not just commit parallel crimes.
In my white collar crime class, I use the Varsity Blues case as a teaching example of a classic Kotteakos problem. What happened to Wilson is precisely what the rule from Kotteakos is supposed to prevent.
Unlike the bribery and property issues discussed above, if Wilson wins only on this issue he will only get a new trial, not have the charges dismissed entirely. But win he should.
Faced with Supreme Court decisions limiting the scope of federal fraud laws, prosecutors sometimes stretch to characterize misconduct in a way that will avoid those limitations. In at least some of the Varsity Blues cases – including Wilson’s -- they have done it again, charging bribery where there is no bribe and property fraud where there is no property.
As my students have heard me say repeatedly: there’s a lot of rotten, unethical, unfair, bad stuff that happens that isn’t criminal. Not all bad behavior has a federal criminal remedy. When it comes to these Varsity Blues convictions, I expect the First Circuit is going to agree.
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