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In any U.S. bank’s anti-bribery and anti-corruption compliance program, one of the fundamental federal criminal offenses that the program must address is the Bank Bribery Act (Act), 18 U.S.C. § 215.[1] Subsection 215(a) of the Act sets out two separate offenses:
(1) “corruptly giv[ing], offer[ing], or promis[ing] anything of value to any person, with intent to influence or reward an officer, director, employee, agent, or attorney of a financial institution in connection with any business or transaction of such institution”[2]; and
(2) “as an officer, director, employee, agent, or attorney of a financial institution, corruptly solicit[ing] or demand[ing] for the benefit of any person, or corruptly accept[ing] or agree[ing] to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business or transaction of such institution.”[3]
Maximum penalties for a violation of either offense include 30 years’ imprisonment and a fine not more than $1,000,000 or three times the value of the thing given, offered, promised, solicited, demanded, accepted, or agreed to be accepted, whichever is greater.[4]
Surprisingly — given New York’s status as the world’s leading financial center[5], and the fact that section 215, with periodic revisions, has been in force for more than 75 years — the United States Court of Appeals for the Second Circuit had no occasion to construe the scope of section 215 until November 28, in United States v. Calk.[6] This post will summarize and discuss the key elements of Calk.
Background
Stephen Calk was, until 2019, the Chairman and Chief Executive Officer of The Federal Savings Bank (“TFSB”), a federal savings association headquartered in Illinois with an office in Manhattan. National Bancorp Holdings, Inc. (the “Holding Company”) owns TFSB, and Calk was the Holding Company’s principal shareholder. In 2016, Paul Manafort, then a prominent lobbyist and political consultant[7], approached TFSB on several occasions to secure loans. By June 2016, Manafort had been appointed Chairman of the Presidential campaign of then-candidate Donald Trump (the “Trump Campaign”). In the words of the court, “[e]ach of Manafort’s loan applications to TFSB presented some technical or regulatory challenge, but TFSB found a workaround to each obstacle, either at Calk’s express instruction or with Calk’s assent.”[8]
In 2021, Calk was the subject of a superseding indictment in the Southern District of New York for financial institution bribery under subsection 215(a)(2) and conspiracy to commit financial institution bribery under 18 U.S.C. §371.[9] The government alleged that, taking advantage of his position as a TSFB officer, Calk sought to facilitate approval of Manafort’s loan applications in exchange for assistance in securing an appointment to a position with the Trump Campaign and later with the 2017 incoming Presidential administration of Donald Trump (the “Trump Administration”).[10]
In 2021, after a three-week trial, Calk was convicted of both financial institution bribery and conspiracy to commit financial institution bribery.[11] In 2022, he was sentenced to a year and a day imprisonment.[12] Calk then appealed on four grounds. First, he challenged (1) what constitutes “corrupt” conduct under section 215(a); (2) what constitutes a “thing of value” under section 215(a); and (c) how to determine the monetary value of a “thing of value” under section 215(a) – each of which was an element of the crime. Second, he argued that there was insufficient evidence in the record to uphold his convictions. Third, he argued that the district court’s jury instructions were erroneous. Fourth, he claimed that the district court failed to exclude prejudicial testimony that the prosecution allegedly procured through the improper use of a grand jury subpoena.[13]
The Decision
A three-judge panel of the Second Circuit concluded that all of Calk’s claims were without merit. Its reasoning on each of Calk’s challenges was as follows.
Challenges to Elements of the Offense: The court rejected Calk’s assertions that the term “corruptly” prohibits only a bank officer’s actual betrayal of a bank’s interests and applies only if he breached a duty to his financial institution and only if his actions were against the financial interests of the bank.”[14]
Sufficiency of the Evidence: The court rejected Calk’s argument that the evidence was insufficient to prove that he acted “corruptly.” As the court explained.
“… there is much evidence in the record that Calk’s efforts to influence TFSB’s review and eventual approval of Manafort’s loan applications were motivated by Calk’s desire to build a political relationship with Manafort and to secure his assistance in seeking an appointment in the Trump Administration. Furthermore, the evidence shows that Calk intermingled and connected TFSB’s expedited review and approval of Manafort’s loan applications to Manafort’s assistance in Calk’s pursuit of an appointment in the Trump Administration. The evidence presented at trial, including witness testimony, also showed that Calk was aware that Manafort had defaulted on prior loans and that some of his properties were in foreclosure while TFSB was reviewing Manafort’s loan applications. And the evidence shows that Calk nonetheless pushed repeatedly for Manafort’s loans to be approved by TFSB.”[15]
“Thing of Value”: The court rejected Calk’s assertion that his convictions must be reversed because a “thing of value” under subsection 215(a)(2) “must have an ‘objective market value’ and cannot include intangibles or things that are subjectively valuable to the defendant.” It further held that there was sufficient evidence to establish that Calk’s solicitation and receipt of Manafort’s in exchange for facilitating Manafort’s loans from TFSB constituted a “thing of value.”[16]
Jury Instructions: The court found no error in the jury instructions “that the Government was required to “prove beyond a reasonable doubt . . . that the thing of value accepted, or agreed to be accepted, or solicited, or demanded by [Calk] had a value greater than $1,000”, and that the “government need not prove the exact value of the thing of value, as long as there is proof beyond a reasonable doubt that the value exceeded $1,000” and that “[t]he value of the thing of value may be measured by its value to the parties, the value of what it is exchanged for or its market value.”[17]
Sufficiency of the Evidence – “Worth More Than $1,000”: The court identified sufficient evidence for a reasonable jury to conclude that Calk valued Manafort’s assistance at more than $1,000. As the court noted,
“Calk was willing to put millions of dollars of TFSB’s resources on the line by approving Manafort’s loans. As the primary shareholder of the Holding Company that controlled TFSB, by risking TFSB’s resources, Calk was indirectly putting his own assets on the line. At the time TFSB was reviewing the Union Street Loan, Calk was aware that Manafort was facing an imminent foreclosure on his Brooklyn townhouse, which was valued at several million dollars. By facilitating and expediting review of the Union Street Loan, Calk offered Manafort a lifeline that the evidence suggests, under the circumstances, few, if any, other banks would have been willing to undertake. And, in assisting Manafort’s loan applications, Calk also risked incurring significant regulatory investigations or fines.”[18]
Grand Jury Proceedings: Finally, the court rejected Calk’s claim that the district court erroneously failed to preclude the testimony of a witness, a member of the TFSB board, who had resisted giving testimony in the investigation. Calk asserted that the grand jury subpoena of that witness was designed impermissibly to facilitate trial preparation, instead of supporting an investigation into a superseding indictment for conspiracy. The court, however, determined that the Government’s representations concerning the timing of the subpoena suggest that the Government had bona fide reasons for delaying the issuance of the subpoena. It further concluded that Calk did not “offer any evidence that might suggest that the Government’s valid interest in expanding its investigation into a potential conspiracy charge through the grand jury was mere pretext.”[19]
Observations
Law firms and bank compliance officers should take note of Calk’s principal conclusions, particularly with reference to the court’s construction of key elements of subsection 215(a)(2), and promptly incorporate key points from the decision into briefings of bank executives and training of bank employees. Although most bank-bribery cases are likely to involve receipt of actual bribe money or other tangible items of value[20], Calk clearly establishes that subsection 215(a)(2) extends to receipt of intangible benefits, and that bank employees who receive tangible or intangible benefits as a quid pro quo for improper actions cannot justify those actions on the basis that they acted in their bank’s interests or did not intend to betray their bank’s interests.
Footnotes
[1] See, e.g., Federal Deposit Insurance Corporation, Corporate Codes Of Conduct: Guidance on Implementing an Effective Ethics Program, FIL-105-2005 (October 21, 2005), https://www.fdic.gov/news/financial-institution-letters/2005/fil10505.html; TD Bank, Code of Conduct and Ethics, https://www.tdbank.com/aboutus/code_conduct_ethics_integrity.html.
[2] 18 U.S.C. §215(a)(1).
[3] Id. §215(a)(2).
[4] Id. §215(a).
[5] See New York remains top financial centre, London clings to second place, survey shows, Reuters, September 28, 2023, https://www.reuters.com/business/new-york-remains-top-financial-centre-london-clings-second-place-survey-2023-09-28/.
[6] No. 22-313 (November 28, 2023) (hereinafter Calk), available at https://ww3.ca2.uscourts.gov/decisions/isysquery/021163b6-1c5e-4b6f-b9e4-2955f9893585/3/doc/22-313_opn.pdf#xml=https://ww3.ca2.uscourts.gov/decisions/isysquery/021163b6-1c5e-4b6f-b9e4-2955f9893585/3/hilite/.
[7] See, e.g., Meghan Keneally, Who is Paul Manafort, the former Trump campaign chairman found guilty?, ABC News, August 21, 2018, https://abcnews.go.com/Politics/paul-manafort-trump-campaign-chairman-found-guilty/story?id=50809368.
[8] Calk, supra note 6, at 5.
[9] See United States Attorney’s Office, Southern District of New York, Bank CEO Stephen M. Calk Charged With Corruptly Soliciting A Presidential Administration Position In Exchange For Approving $16 Million In Loans, May 23, 2019, https://www.justice.gov/usao-sdny/pr/bank-ceo-stephen-m-calk-charged-corruptly-soliciting-presidential-administration.
[10] Calk, supra note 6, at 5.
[11] See United States Attorney’s Office, Southern District of New York, Bank CEO Stephen M. Calk Convicted Of Corruptly Soliciting A Presidential Administration Position In Exchange For Approving $16 Million In Loans, July 13, 2021, https://www.justice.gov/usao-sdny/pr/bank-ceo-stephen-m-calk-convicted-corruptly-soliciting-presidential-administration.
[12] See United States Attorney’s Office, Southern District of New York, Bank CEO Stephen M. Calk Sentenced To One Year And One Day For Corruptly Soliciting A Presidential Administration Position In Exchange For Approving $16 Million In Loans, February 7, 2022, https://www.justice.gov/usao-sdny/pr/bank-ceo-stephen-m-calk-sentenced-one-year-and-one-day-corruptly-soliciting.
[13] Calk, supra note 6, at 3.
[14] See id. 22-28.
[15] Id. 29.
[16] Id. 30-32.
[17] Id. 33.
[18] Id. 36.
[19] Id. 42.
[20] See, e.g., United States Attorney’s Office, Southern District of New York, U.S. Senator Robert Menendez, His Wife, And Three New Jersey Businessmen Charged With Bribery Offenses, September 22, 2023, https://www.justice.gov/usao-sdny/pr/us-senator-robert-menendez-his-wife-and-three-new-jersey-businessmen-charged-bribery.
Jonathan J. Rusch is Director of the U.S. and International Anti-Corruption Law Program and Adjunct Professor at American University Washington College of Law; Adjunct Professor at Georgetown University Law Center; a Senior Fellow at New York University School of Law’s Program on Corporate Compliance and Enforcement; and Principal of DTG Risk & Compliance LLC. He is a former Deputy Chief in the U.S. Department of Justice’s Fraud Section, and former Senior Vice President and Head of Anti-Bribery & Corruption Governance at Wells Fargo.
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