In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 06-3676
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
GEORGIA L. THOMPSON,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Eastern District of Wisconsin.
No. 06-CR-20—Rudolph T. Randa, Chief Judge.
____________
ARGUED APRIL 5, 2007—DECIDED APRIL 5, 2007—
OPINION ISSUED APRIL 20, 2007
____________
Before EASTERBROOK, Chief Judge, and BAUER and
WOOD, Circuit Judges.
EASTERBROOK, Chief Judge. In 2005 Wisconsin selected
Adelman Travel Group as its travel agent for about 40% of
its annual travel budget of $75 million. The selection came
after an elaborate process presided over by Georgia
Thompson, a section chief in the state’s Bureau of Procure-
ment. Statutes and regulations require procurement
decisions to be made on the basis of cost and service rather
than politics. Wis. Stat. §§ 16.70-16.78; Wis. Admin. Code
§10.08. Thompson steered the contract to Adelman Travel,
the low bidder, even though other members of the selection
group rated its rivals more highly. A jury convicted
2 No. 06-3676
Thompson of violating 18 U.S.C. §666 and §1341. The
prosecution’s theory was that any politically motivated
departure from state administrative rules is a federal
crime, when either the mails or federal funds are involved.
Thompson was sentenced to 18 months’ imprisonment
and compelled to begin serving that term while her ap-
peal was pending. After concluding that Thompson is
innocent, we reversed her conviction so that she could be
released. This opinion is the explanation that our order of
April 5 promised.
Adelman Travel was the low bidder, but a low price for
lousy service is no bargain. Wisconsin’s rules give price
only a 25% weight (300 of 1200 points) in the selection
process. About 58% (700 points) goes to service, which a
working group evaluates subjectively based on written
presentations. Adelman had the second-best score for
service; Omega World Travel came in third. The combined
price-and-service rating had Adelman in the lead. (Fox
World Travel received the best service score but had a
noncompetitive price.) The final 17% of the score (200
points) depends on the working group’s assessment of oral
presentations. These presentations (often dubbed “beauty
contests” or “dog-and-pony shows” that may reward the
flashiest PowerPoint slides) need not be related to either
price or the pitchman’s probable quality of service; why
the state gives them any weight, independent of price or
quality, is a mystery, but not one we need unravel.
Adelman Travel must have made a bad presentation, for
six of the seven members of the working group gave it poor
marks (from a low of 120 points to a high of 165), while
awarding Omega scores between 155 and 200. Thompson
alone gave Adelman a higher score (185 for Adelman, 160
for Omega). Adelman Travel’s disastrous oral presentation
left Omega World Travel with the highest total score.
The prosecution’s theory is that Omega should have
received the contract on the spot but that for political
No. 06-3676 3
reasons Thompson ordered a delay. Thompson told her
colleagues that a decision for Omega, which is based on the
East Coast, would not go over well with her boss, Pat
Farley. A jury also could conclude that Thompson said
something to the effect that for “political reasons” Adelman
Travel had to get this contract. (Witnesses related differ-
ent versions of what Thompson said, but in each account
“politics” or “political” played some role.)
Thompson tried to engage in logrolling, offering to
change her scores for bidders on other travel contracts if
members of the working group would change their scores
on this contract. Horse-trading proved to be unacceptable
to the selection group, but a member other than Thompson
suggested that the contract be rebid on a best-and-final
basis, as state law permitted. Wis. Stat. §16.72(2m)(e), (g).
Adelman Travel reduced its price, which—keeping all
other elements of the score constant—left Adelman and
Omega with 1027 points apiece. The tie depended on
rounding to the nearest whole number. Adelman Travel’s
score was 1026.6, while Omega World Travel’s score was
1027.3. After Thompson (with her supervisors’ consent)
deemed the contest a draw—sensibly, as the difference was
trivial compared to the amount of subjectivity and vari-
ance in the committee members’ evaluations—Thompson
employed a tie-breaking procedure, specified by state law,
that gave weight to items not previously figured into
the price comparison and declared Adelman Travel to be
the winner.
The prosecutor contends that this episode played a role
in the Bureau of Procurement’s decision three months
later to give Thompson a $1,000 raise in her annual salary.
Post hoc ergo propter hoc is the name of a logical error, not
a reason to infer causation. But Thompson does not
contend that the evidence was insufficient to allow the
jury to find that the raise was related to the travel con-
tract, so we shall assume that this link has been estab-
4 No. 06-3676
lished. The jury also learned that Craig Adelman, one of
the principal owners and managers of Adelman Travel,
supported Wisconsin’s Governor and made contributions to
his campaign both before and after Adelman Travel was
selected for this contract. The prosecution does not con-
tend, however, that any of these contributions was
unlawful—they were properly disclosed, and no quid pro
quo was entailed. There is not so much as a whiff of a
kickback or any similar impropriety. Nor does the prosecu-
tion contend that Thompson knew or cared about these
contributions.
What, then, were the “political” considerations to which
Thompson referred? We may assume that Thompson
learned that her boss preferred Adelman Travel to Omega
World Travel, and Thompson knew that Farley held a
political rather than a civil-service appointment. But why
was Adelman Travel the favored bidder?
One possibility is that Farley knew about, and sought
to reward, Craig Adelman’s past and potential financial
support of the Governor. If that was Farley’s motive, then
the selection was open to question under O’Hare Truck
Service, Inc. v. Northlake, 518 U.S. 712 (1996), and Board
of County Commissioners v. Umbehr, 518 U.S. 668 (1996),
which hold that the first amendment limits the extent to
which political support of office holders may justify the
withholding of public contracts. But these decisions do
not say that the Constitution forbids all politically moti-
vated contracting practices—and they certainly do not hold
that any error in implementing the Supreme Court’s multi-
factor-balancing approach is a crime.
Perhaps, however, Farley favored Adelman Travel
because it was cheaper. This would be a political position
in the best sense of that term. Many a person runs for
office on a platform of cutting the cost of government.
Bureaucrats may call a preference for low price over high
No. 06-3676 5
levels of service a form of “political interference” with their
operations (especially when it is state employees who
may suffer inconvenience in order to save the taxpayers’
money), but no party has a monopoly on opposing gold-
plated wastebaskets and other excesses. Low prices may
advance the public interest even if they discomfit public
employees, and recognition that driving down the cost of
government is good politics for incumbents does not
transgress any federal statute of which we are aware.
Still another possibility is that Farley (and thus Thomp-
son) sought to favor a local firm over one from another
state. The Supreme Court has held that states, as market
participants, may buy preferentially from their own
citizens. See, e.g., White v. Massachusetts Council of
Construction Employers, Inc., 460 U.S. 204 (1983); Reeves,
Inc. v. Stake, 447 U.S. 429 (1980). A preference for in-state
suppliers who can vote, over competitors who can’t, may
be smart politics. Again no federal statute regulates
such behavior, let alone declares it to be a felony. Wiscon-
sin law specifies a preference for domestic bidders, though
only when the out-of-state bidder hales from a jurisdic-
tion that favors its own citizens in procurement decisions.
Wis. Stat. §16.75(1)(a) ¶2.
The evidence of record would not permit a jury to find
beyond a reasonable doubt which of these three “political”
reasons was Farley’s, let alone whether Farley’s reason
also was Thompson’s—for Thompson may have been try-
ing to be a faithful subordinate without questioning her
boss’s bona fides. Nor was the jury asked to determine
Thompson’s motive. The United States maintains that
Thompson’s objective is irrelevant. It is enough, the
prosecutor insists, that Thompson deflected the decision
from the one that should have been made under the
administrative process. When coupled with a personal
benefit (the raise), such a deflection is criminal under
federal law, the United States insists. In other words, the
6 No. 06-3676
prosecutor’s argument is that any public employee’s
knowing deviation from state procurement rules is a
federal felony, no matter why the employee chose to bend
the rules, as long as the employee gains in the process. (In
stating the argument this way, we are assuming that
the jury could and did find beyond a reasonable doubt
that Thompson knew that the state’s procurement rules
entitled Omega World Travel to the contract, given her
fellow employees’ favorable view of Omega’s oral presenta-
tion.)
Thompson was convicted of violating two federal stat-
utes, and we start with §666. This statute applies to
entities that receive more than $10,000 annually from the
federal government, as Wisconsin does. (The state’s annual
travel budget alone includes about $18 million in federal
contributions.) Under this statute,
(a) Whoever . . .
(1) being an agent of an organization, or of a
State, local, or Indian tribal government, or
any agency thereof—
(A) embezzles, steals, obtains by fraud, or
otherwise without authority knowingly
converts to the use of any person other
than the rightful owner or intentionally
misapplies, property that—
(i) is valued at $5,000 or more, and (ii)
is owned by, or is under the care, cus-
tody, or control of such organization,
government, or agency
commits a felony. The prosecution’s theory is that Thomp-
son “intentionally misapplie[d]” more than $5,000 by
diverting it from Omega World Travel to Adelman Travel.
This assumes, however, that a mistake is the same thing
as a misapplication, and the statute does not say this. (It
isn’t even clear that Thompson made a mistake: She had
No. 06-3676 7
authority to order the best-and-final procedure, a statisti-
cal tie ensued, and the tiebreakers were carried out
accurately.) Approving a payment for goods or services not
supplied would be a misapplication, but hiring the low
bidder does not sound like “misapplication” of funds. The
federal government saved money because of Thompson’s
decisions.
Section 666 is captioned “Theft or bribery concerning
programs receiving Federal funds”, and the Supreme
Court refers to it as an anti-bribery rule. See Sabri v.
United States, 541 U.S. 600 (2004); Fischer v. United
States, 529 U.S. 667 (2000); Salinas v. United States, 522
U.S. 52 (1997). Neither Thompson nor anyone else in state
government was accused of taking a bribe or receiving
a kickback. A statute’s caption does not override its text,
but the word “misapplies” is not a defined term. We could
read that word broadly, so that it means any disburse-
ment that would not have occurred had all state laws
been enforced without any political considerations. Or we
could read it narrowly, so that it means a disbursement
in exchange for services not rendered (as with ghost
workers), or to suppliers that would not have received any
contract but for bribes, or for services that were over-
priced (to cover the cost of baksheesh), or for shoddy goods
at the price prevailing for high-quality goods. All of these
conditions were satisfied in cases such as United States v.
Spano, 421 F.3d 599 (7th Cir. 2005), and United States v.
Martin, 195 F.3d 961 (7th Cir. 1999). None is satisfied
here.
Faced with a choice between a broad reading that turns
all (or a goodly fraction of ) state-law errors or political
considerations in state procurement into federal crimes,
and a narrow reading that limits §666 to theft, extortion,
bribery, and similarly corrupt acts, a court properly uses
the statute’s caption for guidance. That plus the Rule of
Lenity, which insists that ambiguity in criminal legislation
8 No. 06-3676
be read against the prosecutor, lest the judiciary create,
in common-law fashion, offenses that have never received
legislative approbation, and about which adequate notice
has not been given to those who might be ensnared. See,
e.g., Staples v. United States, 511 U.S. 600, 619 n.17
(1994).
Imagine how the prosecutor’s reading of §666 would
apply to a state official charged with implementing the
Medicaid program. Someone applies for payment of
medical expenses; a state employee approves; later it
comes to light that the applicant made just a little too
much money to be eligible, so the decision was erroneous.
A violation of regulations and perhaps of some statutes
has occurred, but is the error a crime? As we read §666,
the answer is no unless the public employee is on the take
or the applicant is a relative (for indirect benefits are
another form of payoff). An error—even a deliberate one,
in which the employee winks at the rules in order to
help out someone he believes deserving but barely over
the eligibility threshold—is a civil rather than a criminal
transgression. Likewise the sin is civil (if it is any
wrong at all) when a public employee manipulates the
rules, as Thompson did, to save the state money or favor a
home-state producer that supports elected officials.
Public employees often implement rules with which they
disagree, and they are tempted to bend these rules to
achieve what they deem better outcomes. As long as the
state gets what it contracts for, at the market price, no
funds have been misapplied, even if the state’s rules
should have led it to buy something more expensive (and
perhaps of higher quality too). Evidence showing that
Thompson believed that Adelman Travel provided less
value for money than its competitors might support an
inference that funds had been misapplied, but this rec-
ord does not imply that Thompson’s deeds were at vari-
ance with her thoughts.
No. 06-3676 9
Thompson was convicted under 18 U.S.C. §1341 as well
as under §666. Section 1341 forbids “any scheme or artifice
to defraud” that predictably employs the United States
mails. What “fraud” did Thompson commit, and who was
the victim? Thompson did not bilk the state out of any
money or pocket any of the funds that were supposed to be
used to buy travel. But in response to McNally v. United
States, 483 U.S. 350 (1987), Congress enlarged the scope of
criminal fraud by enacting 18 U.S.C. §1346. This
statute provides:
For the purposes of this chapter, the term “scheme
or artifice to defraud” includes a scheme or artifice
to deprive another of the intangible right of honest
services.
The prosecutor’s theory, which the jury accepted, is that
Thompson deprived Wisconsin of her “honest services”—
that is, of her duty to implement state law the way the
administrative code laid it down, with only 300 of 1,200
points apportioned according to price, while 200 points
were available to the best-looking or most mellifluous
oral presenter, even if Thompson deemed that allocation
silly or counterproductive.
Once again that approach has the potential to turn
violations of state rules into federal crimes. When the
Supreme Court reverses a court of appeals, it is apt to say
(as the prosecutor says about Thompson) that public
officials have failed to implement the law correctly. Does
it follow that judges who are reversed have deprived the
United States of their honest services and thus com-
mitted mail fraud? (Judicial decisions are mailed.) How
about the thousands of federal officials who contract for
everything from pencils to aircraft carriers? Disappointed
would-be vendors may appeal through an elaborate bid-
protest system—first to a Board of Contract Appeals, then
to the Court of Federal Claims, and finally to the Fed-
10 No. 06-3676
eral Circuit. Reversals are common: Boards reverse
contracting officers, the Court of Federal Claims reverses
the Board only to be reversed in turn by the Federal
Circuit. At each stage a reversal represents a conclusion
that the predecessor has not implemented statutes and
regulations correctly. But has anyone committed a crime
in this sequence, unless he is on the take? Because no one
really thinks that §1346 treats all legal errors by
public employees as criminal, it has been necessary to
cabin the reach of that statute.
We held in United States v. Bloom, 149 F.3d 649, 655
(7th Cir. 1998), that “[m]isuse of office (more broadly,
misuse of position) for private gain is the line that sepa-
rates run of the mill violations of state-law fiduciary
duty . . . from federal crimes.” The United States accepts
this as the governing legal standard. According to the
prosecutor, Thompson “misused” her office when she lent
it to political ends (even if the “political” end was just a
lower price, about which incumbents could crow) and
obtained a “private gain” when she got a raise. The
prosecutor adds that, by currying favor with Farley,
Thompson improved her job security. This is implausible;
Thompson already had security as a civil servant. But
cash is a form of gain. As we have explained, we proceed
on the assumption that steering the contract to Adelman
Travel is why Thompson received a raise.
Treating an incorrect application of state procurement
law as a “misuse of office” and a raise as a “private gain”
would land us back in the soup—once again, simple
violations of administrative rules would become crimes.
Nothing in the language of §1341 or §1346 suggests that
Congress has created such an equation, which would
imply that every time a court sets aside a decision under
the Administrative Procedures Act, a crime has occurred
if anyone involved in the administrative decision received
No. 06-3676 11
a good performance review that led to a step increase
under the General Schedule of compensation.
Suppose that a city’s mayor supports building a football
stadium or power plant in Neighborhood A rather than B
because residents of A want the project while residents
of B have a NIMBY reaction, and the mayor concludes that
he is more likely to be reelected if he can keep residents
of both neighborhoods happy by ensuring that Neighbor-
hood A gets the project. That is both self-interested (the
mayor secures extra tenure) and public-interested (the
populace as a whole is more satisfied). That’s politics:
people get and keep office by giving the people what they
want, even if that is not what they “need” by some higher
calculus. Imagine a governor who throws support (and
public funding) behind coal-fired power plants because
people fear nuclear power rather than because of a cost-
benefit analysis; that may be a blunder but is not a crime
even if the governor privately thinks that nuclear power
would be superior. Similarly, supporting local vendors, a
form of “pork,” may or may not be good government but
is not a “misuse of office” in the criminal sense. The idea
that it is a federal crime for any official in state or local
government to take account of political considerations
when deciding how to spend public money is preposterous.
“Misuse of office” may be almost as slippery a phrase as
“honest services.” An error in carrying out one’s duties
differs from “misuse” of position, but it is possible to
imagine action as a result of impermissible motives that
turns a mistake into a misuse of power. This would be
a hard case if the prosecutor had established that Thomp-
son acted because of political contributions rather than,
say, because she (and her boss) thought that buying
services for less, or from local suppliers, is a form of good
government from which incumbents would gain. One of
these days we may need to gloss the phrase to reduce the
risk that uncertainty poses to public servants. Today,
12 No. 06-3676
however, it suffices to say that a raise approved through
normal civil-service means is not the sort of “private gain”
to which Bloom refers.
Section 1346 establishes that fraud committed against
an employer need not put the employer out of pocket. To
give one example, a state judge who accepts bribes has
deprived the state of the service that it sought to pur-
chase—adjudication that is impartial between the liti-
gants. See United States v. Murphy, 768 F.2d 1518 (7th
Cir. 1985); United States v. Holzer, 816 F.2d 304 (7th Cir.
1987). And the bribe produces private gain for the office-
holder. All of the examples in Bloom involved payoffs
outside proper channels. Suppose, however, that the judge
is wilful rather than corrupt—for example, a judge in
traffic court who dismisses speeding prosecutions in order
to leave work early and play tennis on a sunny afternoon.
Such a judge fails to provide the state with the adjudica-
tion service the populace wants and needs, but there is
no side payment. There might be a personal gain beyond
the tan; perhaps judges who resolve their cases with
dispatch get promoted. This is often true with federal
administrative law judges, who are more likely to receive
step increases on the General Schedule if they are cur-
rent in their work.
It would stretch the ordinary understanding of
language, however, to call a public employee’s regular
compensation, approved through above-board channels, a
kind of “private gain.” Treating exercise or companion-
ship on the tennis court as a private gain would be an
even greater stretch, though leisure, friendship, and
health all are substitutes for cash. It is linguistically
possible to understand “private gain” as whatever adds
to the employee’s income or psyche—anything the em-
ployee would pay to have, rather than pay to avoid—but
the Rule of Lenity counsels us not to read criminal statutes
for everything they can be worth. The history of honest-
No. 06-3676 13
services prosecutions is one in which the “private gain”
comes from third parties who suborn the employee with
side payments, often derived via kickbacks skimmed from
a public contract. Treating §1346 as limited to such
situations is consistent with its language: recall that it
defines a means to implement a “scheme or artifice,” and
getting a raise through normal personnel practices does
not sound like an aspect of a “scheme or artifice.”
The United States has not cited, and we have not found,
any appellate decision holding that an increase in official
salary, or a psychic benefit such as basking in a superior’s
approbation (and thinking one’s job more secure), is the
sort of “private gain” that makes an act criminal under
§1341 and §1346. The United States does rely on a few
decisions of district courts, e.g., United States v. Sorich,
427 F. Supp. 2d 820, 829 (N.D. Ill. 2006); United States
v. Munson, 2004 U.S. Dist. LEXIS 14274 *3 (N.D. Ill. July
27, 2004), but we do not find them persuasive. We now
hold that neither an increase in salary for doing what
one’s superiors deem a good job, nor an addition to one’s
peace of mind, is a “private benefit” for the purpose of
§1346.
Sections 666 and 1346 have an open-ended quality that
makes it possible for prosecutors to believe, and public
employees to deny, that a crime has occurred, and for both
sides to act in good faith with support in the case law.
Courts can curtail some effects of statutory ambiguity
but cannot deal with the source. This prosecution, which
led to the conviction and imprisonment of a civil servant
for conduct that, as far as this record shows, was designed
to pursue the public interest as the employee understood
it, may well induce Congress to take another look at the
wisdom of enacting ambulatory criminal prohibitions.
Haziness designed to avoid loopholes through which bad
persons can wriggle can impose high costs on people the
statute was not designed to catch.
14 No. 06-3676
Thompson’s conviction is reversed, and the case is
remanded with instructions to enter a judgment of acquit-
tal.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—4-20-07