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The U.S. Supreme Court has had another furious run to end the term, with several decisions certain to have a significant impact on the U.S. legal landscape. These decisions have addressed issues including presidential immunity, gun control, abortion access, homelessness, and the power of federal agencies.
In the anti-corruption space, the June 26, 2024 Snyder v. United States decision is particularly noteworthy. Reflecting this Court’s trend of reining in the US government’s use of broadly worded statutes, Snyder held that state and local government officials can no longer be prosecuted under federal law 18 U. S. C. §666(a)(1)(B) (“Section 666”) for “accept[ing] gratuities for their past official acts.” The Court estimated that this statute applies to approximately 19 million state and local officials across the country.
This decision emphasizes that US bribery laws distinguish between bribes and gratuities, which may—but do not always—make the latter unlawful. It also serves as an important reminder that corporate gift policies should address both bribes and gratuities and provide clear guidance on when gratuities may cross the line. As always, companies should be extremely cautious before making any payments to a public official, whether before or after an official act is completed. And while the petitioner in this case avoided liability, the fact that three judges dissented, taking a broader view of Section 666 than the majority, makes clear that adherence to a well-crafted and consistently applied policy is critical to an organization’s overall risk management.
In the US, payments to public officials are regulated by a complex web of federal, state, and local legislation. These laws generally distinguish between two kinds of payments, namely bribes and gratuities, with the former paid or agreed to before an official act to influence the public official, and the latter paid after the official act as a reward or token of appreciation. Bribes are generally treated as inherently corrupt and unlawful, whereas the treatment of gratuities is more nuanced, with federal, state, and local governments drawing different lines on which gratuities and gifts are acceptable.
For example, Indiana, where Snyder arose, does not regulate the payment of gratuities to public officials at all—Indiana leaves this role to local governments. Some local governments impose gift limits of $50, $100, $200, or $300, while others prohibit gifts from business entities currently doing business with the local government, and others still restrict gifts from businesses bidding for government contracts. By contrast, New York regulates gratuities at the state level, with exceptions for certain types of gifts, such as gifts from friends or family, travel reimbursements, campaign contributions, and ceremonial gifts such as honorary degrees.
The distinction between bribes and gratuities is also significant when it comes to penalties. For example, at the federal level, 18 U. S. C. §201(b) and (c), respectively, provide for a 15-year maximum prison sentence if a federal official accepts a bribe or a two-year maximum prison sentence if a federal official accepts a prohibited gratuity. At the state level, states such as Delaware make accepting gifts for official conduct a misdemeanor, whereas others, such as Arizona, make it a felony.
James Snyder, the former mayor of Portage, Indiana was convicted by a jury and sentenced to 21 months in prison for accepting a $13,000 payment from a garbage truck company after over $1 million in city contracts were allegedly steered in the company’s direction. The Seventh Circuit affirmed the jury’s conviction.
In relevant part, Section 666 makes it a crime for most state and local officials to “corruptly” solicit, accept, or agree to accept “anything of value” “intending to be influenced or rewarded in connection with” any official business or transaction worth $5,000 or more. A violation of Section 666 carries up to 10-years in prison.
In a 6:3 decision, the Supreme Court reversed. Justices Roberts, Alito, Gorsuch, and Barrett joined Justice Kavanaugh’s majority opinion, while Justices Jackson, Sotomayor, and Kagan dissented. The majority held that Section 666 cannot criminalize gratuities for the following reasons:
The dissent labelled the majority’s interpretation of Section 666 as “absurd and atextual,” one that ignores the plain text of Section 666 (which expressly uses the word “rewarded”), and one that only “today’s Court could love.” According to the dissent, the majority’s “reasoning elevates nonexistent federalism concerns over the plain text of this statute and is the quintessential example of the tail wagging the dog.”
While the effects of this decision have yet to be seen, prosecutors have historically employed Section 666 as a tool in a wide range of public corruption cases. This decision could result in fewer prosecutions of state and local officials, as there will now need to be clear-cut evidence of quid quo pro bribery in these cases. We may also see more state and local governments adopting or updating their laws on gratuities to state and local officials now that they are not governed federally.
Companies operating in the US should stay abreast of developments in this area and use this opportunity to review their gift policies to ensure they address the provision of gratuities to public officials.
For more details regarding anti-bribery and corruption laws and enforcement practices across a wide range of jurisdictions, refer to our The Global Guide to Anti-Bribery and Corruption Law and Enforcement.