Rodrigo Santos, 65, pleaded guilty in January to bank fraud, wire fraud and tax evasion charges in three separate cases stemming from the checks he misappropriated and the donations he asked his clients to make to a youth sports charity favored by Bernie Curran, who was at the time a senior building inspector.
Curran was also charged in connection with the donations scheme. Last month, he was sentenced to a year and a day in prison for accepting illegal gratuities, and he still has a separate state case pending. Both Curran and Santos are among more than a dozen city officials, contractors and businesspeople who were caught up in a wide-sweeping corruption scandal that continues to unfold around San Francisco City Hall.
From the affidavit supporting the criminal complaint, here is the part that implicates nonprofit organizations:
4. I submit that there is probable cause to find that CURRAN and SANTOS committed honest services wire fraud. As set forth in greater detail below, SANTOS knew that CURRAN supported and participated in activities at the San Francisco Golden Gate Rugby Association, a non-profit organization where CURRAN volunteers and where one of CURRAN’s children plays rugby. SANTOS leveraged CURRAN’s affinity for the organization to influence CURRAN ’s official duties as a DBI inspector. Specifically, SANTOS urged his clients to make charitable contributions to the Golden Gate Rugby Association, and in exchange for the stream of benefits flowing to the charity, CURRAN gave SANTOS ’ clients favorable official treatment. In at least two instances, CURRAN gave final inspection approval on permits for SANTOS’ clients without the work necessary to comply with the permit ever being completed. Most of the projects for which CURRAN gave approval for SANTOS’ donor-clients were outside of the district to which CURRAN was assigned with DBI, and as such, the inspections should have been the responsibility of another Senior Building Inspector or their subordinates.
We have all unknowingly heard of “honest services wire fraud.” It’s what happened in the Varsity Blues scandal, where nonprofit fiduciaries received indirect and direct bribes to admit students with wealthy parents. Here is a law review article on the subject. And here is a succinct description:
The term “honest services fraud” has been making its way through the news due to a string of high profile federal criminal cases involving celebrities and other wealthy parents essentially bribing their children’s admission to certain universities. But what is honest services fraud? Honest services fraud is defined in federal statute 18 U.S.C. §1346 as a scheme to defraud another of the intangible right to honest services through a scheme to violate a fiduciary duty by bribery or kickbacks. A fiduciary duty is a duty to act only for the benefit of the public, an employer, shareholders, or a union. The statute was created by congress as a response to the government’s limitation in its use of the wire fraud statute.
The Supreme Court recently addressed the statute in a case involving a donation made to a nonprofit director in hopes of nudging the Cuomo administration into taking action favorable to the donor. I am not an expert and I don’t have time to read the opinion closely but it appears to hold, reasonably, that the nonprofit fiduciaries don’t commit honest service fraud by accepting the payment unless the fiduciary is also government’s agent.
So in most cases the behested payee maybe can’t be charged. But the payee organization is probably an unindicted co-conspirator undeserving of tax exemption by their facilitation of illegality or acts against public policy. And by the way, we should apply this statute to Clarence and the rest of the Supremes. Because the amount of SWAG Justice Thomas and even the liberal justices get every year, often from nonprofit law schools but also from billionaires, is depriving us all of the “intangible right of honest public services” to which everybody is entitled.
darryll k. jones
