Thoughts on the Meaning of Extortion On November 22, 2011, The Chicago Tribune published an article that began with: "Hailed by prosecutors as a "wake-up call," Antoin Rezko was sentenced to 10 1/2 years in prison today for extorting millions of dollars from firms seeking state business or regulatory approval while he was a top fundraiser and adviser to then-Gov. Rod Blagojevich." A few days later, ABC News reported that federal prosecutors "asked a federal judge to hand down a sentence of 15-20 years because of '[Governor] Blagojevich’s extensive corruption of high office, the damage he caused to the integrity of Illinois government, and the need to deter others from similar acts.'" And what was Mr. Blagojevich’s crime? According to ABC News: "In June, after a second trial, the 54-year-old Blagojevich was found guilty of trying to sell Barack Obama's vacated Senate seat and shaking down constituents for campaign contributions." Extortion. Corruption. Shake-downs. What does this mean…and what does it have to do with Richardson? Extortion, the Crime The federal statute on extortion is rather spare: TITLE 18 > PART I > CHAPTER 95 > § 1951(b) "(2) The term "extortion" means the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right"” (From Cornell Law School website) Indeed, this statement is so lean that a little help in understanding it would be appreciated. LawBrain.com is sort of a Wikipedia for lawyers: "LawBrain[.com] is a project of FindLaw, a Thomson Reuters business, that is the world's leading provider of online legal information and Internet marketing solutions for law firms." The LawBrain.com website explains extortion in this way: "Under the common law, extortion is a misdemeanor consisting of an unlawful taking of money by a government officer. It is an oppressive misuse of the power with which the law clothes a public officer. Most jurisdictions have statutes governing extortion that broaden the common-law definition. Under such statutes, any person who takes money or property from another by means of illegal compulsion may be guilty of the offense. When used in this sense, extortion is synonymous with blackmail, which is extortion by a private person. In addition, under some statutes a corporation may be liable for extortion." This explanation covers two items: the original common law meaning of extortion referred to public officials, and most places have expanded the definition of extortion beyond its original scope. Now we understand why the federal statute says "The term "extortion" means the obtaining of property from another, … under color of official right." The most basic meaning of extortion is a public official demanding money that he or she is not due, using the power of his/her office to make the demand irresistible. "Irresistible"? Yes, this helps explain the curious phrase in the federal statute: "The term "extortion" means the obtaining of property from another, with his consent, …or under color of official right." Example 1 The victim of extortion consents in a way to the extortion. How can this be? Think about a typical case of extortion. A health inspector comes along to a brand new restaurant that is in its final stages of completion. The restaurant owner has sunk his life savings into the venture, and already has people on the payroll, so it is imperative to get the restaurant open and operating. But the health inspector stalls. He finds this or that trivial thing to delay the awarding of the permit that is required by the city to open the restaurant. Finally, in desperation, the restaurant owner asks the inspector what he wants, and the answer is that the fee for the permit is not $150 as required by city code, but $250 to help move the process along, with the extra $100 going into the inspector’s pocket. Does the owner "consent" to the payment? In a sense, of course - the owner has heard from other restaurant owners that the health inspector can hold up the permit for months, and this delay will bankrupt our restaurant owner. So the restaurant grudgingly writes the check or hands over the cash or whatever. The LawBrain.com website explains further: “The essence of extortion by a public officer is the oppressive use of official position to obtain a fee. The officer falsely claims authority to take that to which he or she is not lawfully entitled. This is known as acting under color of office. For example, a highway department officer who collects money from a tax delinquent automobile owner in excess of the authorized amount on the pretense of collecting a fine is extorting money under color of office. The victim, although consenting to payment, is not doing so voluntarily but is yielding to official authority.” How Extortion is Different from Bribery The last sentence shows a basic difference between bribery and extortion. In the case of bribery, both the person offering the bribe and the public official taking the bribe are guilty of crimes, but in the case of extortion, only the public official doing the extortion is guilty of a crime. Indeed, as the last sentence in the paragraph above makes clear, in the case of extortion, the person making the payment is actually considered a "victim" of crime under the law. There are many examples of how businesses can fall afoul of extortion schemes. The one for which Mr. Rezko was convicted was for "extorting millions of dollars from firms seeking state business or regulatory approval". That is, if you were a business that wanted to do business with the State of Illinois, the odds were good that you had to kick in some extra money to someone in order to be considered. This scheme is called "pay to play", and it was a well-known practice for years in Illinois while Mr. Rezko and Governor Blagojevich were in power. Example 2 – Two Real-Life Examples Here is a real-life description supplied by the federal prosecutors of two examples of how Antoin Rezko attempted to extort money from hospitals. The story is simple: to build a hospital, you had to get approval from a certain state board. But members of the board make it clear to the hospital that they won't get the approval unless they hire a certain contractor. Why this particular contractor? Because he has already agreed to make a large kickback to the board members if he gets the contract. One hospital agrees and builds its hospital, but the other does not so no hospital is built – a classic example of extortion. CapitalSoft and former Richardson Mayor Gary Slagel This brings us to the Richardson connection for this story. In 2004, CapitalSoft, a Richardson-based software company headed by then-Mayor Gary Slagel, was competing to sell its construction project management solution to the Illinois State Toll Highway Authority to track and manage toll road construction projects. CapitalSoft positioned itself in the high-end market - the Illinois agency agreed to pay $2.5 million for the product - which means that the number of potential buyers nationwide was relatively small. For this reason, each sale was quite important to the company. Having been in management in a small software company, I can tell the reader from personal experience of the excruciating pressure placed on small companies to do whatever it takes to stay in business. Simply blowing off even a single potential sale was not an option, as it could lead to layoffs and worse. As Mr. Slagel explained in response to a question at a candidate's forum a while ago, a consultant familiar with operations in Illinois suggested that Illinois was a "pay to play" environment. If a company didn't make a contribution to the Governor’s election campaign, the company wouldn't be considered eligible for state business - a textbook case of extortion. Some three months after CapitalSoft made a $5,000 contribution to the Friends of Blagojevich campaign fund, it was awarded a $2.5 million contract with the State Toll Highway Authority. Although this was public information in 2004, there was no mention of this in the press, presumably because this event was so routine in Illinois as to not excite any comment. However, in 2006, the State Toll Highway Authority decided to terminate the CapitalSoft contract, citing "poor performance". At that point, the Chicago Tribune ran a story reciting the events that led to CapitalSoft being chosen over several other companies in a complicated scoring process that changed after CapitalSoft made its contribution. The clear intention of the article was to imply that CapitalSoft had bribed its way to the top of the list. However, the 2006 article was very carefully worded to give an impression without actually saying anything. Did other companies in the competition also give money? The reporter says that they did not - but by his admission, the reporter checked only the year 2004. Was the scoring of the companies altered to illegally benefit CapitalSoft? The reporter presents no evidence of illegal behavior, but only that he saw documents that show the scoring changed for whatever reason. Did the contribution by CapitalSoft cause the change in scoring that placed CapitalSoft first in line for the contract? This is a classic case of the fallacy "post hoc ergo propter hoc"- just because B happened after A in time, doesn't mean that B was caused by A. The article was carefully written the way it was precisely because the reporter had no hard evidence of any wrongdoing - so he reported what few facts he knew and hoped that the reader would draw the "right" conclusion. Extortion is More Likely than Bribery But the facts as reported by the Chicago Tribune fit the extortion scenario as well as the bribery scenario. First, thinking that the Governor could have been bribed for as little as $5,000 is rather odd - after all, this was the governor who just a few years later, was quoted on wiretaps on how he was going to sell the US Senate seat vacated by Barack Obama – thinking small was not the Governor's M.O. Does anyone really believe that on a $2.5 million contract, that all the Governor would have wanted was 0.2% of the total as a kickback? And in 2011, the Tribune reported that Mr. Rezko was convicted of raking in "millions of dollars" from companies wanting to do business with the State. If we consider that $5,000 might have been an average "contribution" and that the total was at least $2,000,000 in extorted funds, then there must have been hundreds of companies - if not thousands - who made these "contributions". Rather than thinking that there are hundreds of companies hanging on the governor's doorstep offering bribes, it's more reasonable to assume that there were hundreds of companies who found that they would be unable to do business with the State without paying to play. Furthermore, the time frame supports the "pay to play" scenario. Given the long lead-time for large scale software sales - often more than a year - CapitalSoft had likely been in the sales cycle for many months before making the contribution to the Friends of Blagojevich campaign fund. This fits with the Mayor's statement that a consultant told the company that the reason they weren't getting anywhere was because they hadn’t made a contribution to the election fund. Looking for the Open Minded There are those who are so full of animosity against former Mayor Slagel that they will never believe any suggestion that the former mayor is not an arch-criminal. Their reason has been so twisted by hatred that nothing - not even the revered George Washington coming down in swirling clouds accompanied by the goddesses Liberty on one hand and Justice on the other to testify to Mr. Slagel’s lack of culpability - would be enough to sway these steel-trap closed minds. However, for those open-minded Richardson residents who have long wondered what the whole commotion has been about, please consider these simple facts: Antoin Rezko, top fundraiser and advisor to impeached Illinois Governor Rod Blagojevich, and Governor Blagojevich himself have been convicted in federal court of a variety of crimes including extorting millions of dollars from companies wanting to do business with the State of Illinois. Federal prosecutors argued that the former governor's actions were not isolated, but "part and parcel of an approach to public office that defendant adopted from the moment he became governor in 2002". In the act of extortion, the public official making the demand for money is the criminal; the person making the payment is considered the "victim" for making the payment under duress. CapitalSoft was one of literally hundreds (if not thousands) of companies that had to "pay to play" in order to do business with the State; thus, it appears that CapitalSoft was one of many companies to be the victim of extortion. In the years since the Chicago Tribune article detailed the process by which CapitalSoft was chosen to sell its software to the State Toll Highway Authority, there has not been a single mention of CapitalSoft by the Tribune. There has been no pursuit of the company by officials looking for bribe giving, there have been no further investigations by the newspaper, there has been total silence. The story was never about CapitalSoft, it was about the Governor, and CapitalSoft was yet another unfortunate business caught up in the Governor's web of corruption.   There are those who are convinced that that single Chicago Tribune article is proof that CapitalSoft engaged in illegal activities; however, the US District Attorneys and the federal juries beg to disagree - there was plenty of illegal activity, but it wasn't done by companies desperately trying to stay in business by selling to the state government run by a now well-documented corrupt administration. William J. ‘Bill’ McCalpin Richardson, Texas