Cylvia Hayes Could Face Federal Fraud Charges, Legal Experts Say
Thursday, January 29, 2015
The findings of an Oregon Ethics Commission investigation will determine whether Hayes violated state ethics laws when she accepted contracts for her private consulting firm while working in the governor’s office under the title of “Oregon’s First Lady.”
On Jan. 9, Willamette Week reported Hayes was under federal investigation, raising the specter of federal charges.
Legal experts differ over whether Hayes could be vulnerable to federal mail and wire fraud charges if she misrepresented herself, or failed to disclose potential conflicts of interest via email, phone or mail in winning paid contracts and speaking appointments.
Scott Coffina, former Associate White House Counsel and now a partner with Philadelphia firm Drinker, Biddle and Reath, pointed out that the breadth of wire and mail fraud is vast.
“Using government resources to line your own pockets, and doing it over the wires or mails, that’s what mail fraud is,” he said.
Contracts and engagements
In 2013, Hayes received $85,000 in consulting contracts from Resource Media, a non-profit PR firm; Demos, a public policy think tank; and climate change advocacy group Energy Foundation, according to media reports.
All three companies work to influence policy, and Hayes’ company, 3EStrategies, was awarded the contracts while she worked in the Governor’s office as an adviser to her fiancée, Oregon Governor John Kitzhaber.
Hayes spoke at various events for a fee while billed as First Lady, rather than as a contractor for Resource Media, including an ocean acidification conference at U.C. Irvine and the Capitol Hill Ocean Week Conference in Washington, D.C.
Fraud by mail or wire
The statute that experts said Hayes may have potentially opened herself up to, 18 U.S.C. 1343, covers communication via mail or wires “with the intent to obtain money or property by use of false pretenses or representations.”
An email or phone transmission that does not directly discuss a potential fraud can be part of the crime, Portland criminal defense attorney Sam Kauffman said.
“Public money for own gain by use of wires or mails, on the surface, that’s what a mail fraud is,” Coffina, the former White House Counsel, said. “If I were investigating or defending the case, that’s a statute I’d be looking at.”
Photo by Shelby Sebens
Federal prosecutors might look for statements Hayes made via email related to contracts with 3EStrategies for such representations or omissions, Hagemann said. “The key would be if her being a consultant while she was a public official was fully disclosed.”
GoLocalPDX is waiting on a records request for these documents, filed under the Freedom of Information Act in October.
“Prior to 2010, they would have been more likely to be honest services charges,” Hagemann said. A 2010 Supreme Court Ruling against Enron CEO Jeffrey Skilling determined a proven bribe or kickback was necessary to indict on honest services fraud charges, an amendment to mail and wire fraud.
Scott L. Fredericksen, a former Assistant U.S. Attorney in the United State’s Attorney’s Office for the District of Columbia and Eastern District of Virginia, said the FBI could be interested in Hayes’ contracts, expense reports, and disclosures. Fredrickson was frequently sourced by East Coast media in the wake of former Virginia Governor Bob McDonnell's conviction of honest services fraud.
“Worst case scenario,” he observed, “obtaining those contracts could be mail and wire fraud.”
Fredericksen, once an appointed Department of Justice independent corporate monitor and now a criminal defender and partner at Washington, D.C. firm Foley & Lardner, said if Hayes and Kitzhaber faced criminal charges, it would be prudent for them quickly to hire a criminal defense attorney.
Making the hiring of a criminal defense attorney public record is not required, Frederickson said. “Usually, you would try not to.”
Hayes’ Issues
Hayes conducted business for her consulting firm on a taxpayer-funded trip to Seattle in 2013, emails obtained by the Willamette Week revealed.
“In a fraud case, you have to find the lie. If you don’t have a clear cut lie, it’s hard to prosecute,” Kauffman, the Portland criminal defense attorney, said.
For any taxpayer-funded trip, Kauffman said, Hayes would need to file an expense report. Investigators would have to look to these documents to determine whether a false statement was made.
Hayes also enlisted government staff to prepare notes for lectures she delivered for personal financial gain, the Portland Tribune reported. A person abusing public office for personal interest suggests a conflict of interest, said Robert Weisberg, a professor of law at Stanford University widely published in academic law journals and Slate Magazine for his expertise in criminal law and criminal justice.
Kauffman, Coffina, and Weisberg all agreed that Hayes’ failure to disclose a conflict of interest in taking private consulting contracts from which she profited and obtained through her work in the Governor’s office while serving as a public official could constitute mail and wire fraud if concrete, documented false omissions were made.
Misrepresentations or omissions?
The FBI would not confirm or deny whether Hayes is being investigated, as is the Bureau’s practice. However, documents filed with the Oregon Ethics Commission may offer some insight in the wake of a Jan. 27 revelation, first reported by the East Oregonian, that Hayes was awarded a paid fellowship, worth $30,000 in 2011 and $88,000 in 2012, with the D.C.-based Clean Economy Development Center.
Statements of Economic Interests are documents elected officials are required to file each year to disclose sources of income and assets in his or her possession. Signatures are signed under a preamble that states that disclosures are true, “Under penalty for false swearing/false affirmation.”
One section in a 2012 Statement of Economic Interests form, signed by Kitzhaber in 2013, calls for disclosure of household members receiving income from an individual or business with interest in the government. "Respond if you or a member of your household received a source of income exceeding an aggregate amount of $1,000 during 2012, and that income was derived from an individual or business that has been doing business, does business, or could reasonably be expected to do business with, or has a legislative or administrative interest in the government body that you serve," it reads. Kitzhaber wrote "none."
Hayes did not disclose the $88,000 in earnings on her 2012 return, according to media reports, further raising questions of possible material omissions or misrepresentation.
Another section calls on Kitzhaber to declare the name of any compensated lobbyist associated with a business with which he or a member of the household was associated with in 2012. He wrote N/A. The Clean Economy Development Center works with public officials to support renewable energy initiatives and create jobs.
Federal fraud legislation was originally written under the belief that state adjudicators could not fairly try their own officials, said Weisberg, the law professor. He noted that the Governor not disclosing any relationships Hayes had with lobbyists in a Statement of Economic Interest could be used as evidence, but is not enough for bringing an indictment.
Earlier in January, Kitzhaber’s office disclosed the Governor and Hayes hired two high-powered Oregon lawyers in November in response to the pending state ethics review. Findings are set to be heard March 13.
Related Slideshow: Timeline of Cylvia Hayes’ Life and Misdeeds
Marriages
Evergreen State College
Alleged pot farm property
Bend
3EStrategies
Run for office
Kitzhaber Divorce
Kitzhaber and Hayes
Kitzhaber Reelection
Investigation by DOJ
Move into Mahonia Hall
Work for the Governor
3E Contracts with Demos
Engagement
Expose on Hayes
Confession
Investigation called for
The bank loan
Ethics Commission
Rep. Berger complaint
Former boyfriend speaks
Ethics document
Open records complaint
Opponents demand records
Kitzhaber leads polls
Hayes Speaks Out
Federal Investigation
Press Conference
Plagiarism
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