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On June 26, 2024, the Supreme Court handed down a controversial decision in Snyder v. United States that will likely have major ripple effects on the anti-corruption landscape.&nbsp; In a 6-3 decision, the Supreme Court held that 18 U.S.C. § 666 only criminalizes bribes received in exchange for official acts.&nbsp; The Court held that the statute does not apply to “gratuities” or gifts – such as gift cards or lunches – given for past acts, absent a quid pro quo agreement between the payor and the official.&nbsp;

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The Court explained that “[b]ribes” are “payments made or agreed to before an official act” to influence the official to carry out “that future official act.”&nbsp; By contrast, “gratuities” are payments made “after an official act,” “with no agreement beforehand,” and “are not the same as bribes before the official act.” &nbsp;Having made that distinction about what separates “bribes” from “gratuities,” the Court said that “American law generally treats bribes as inherently corrupt and unlawful . . . [b]ut the law’s treatment of gratuities is more nuanced.”

In this article, we discuss the specifics of the Court’s ruling and practical tips companies should keep in mind in the wake of this decision.

In 2012 and 2013, while James Snyder was the mayor of Portage, Indiana, the city purchased garbage trucks from local trucking company Great Lakes Peterbilt for roughly $1.1 million.&nbsp; A few months later, Snyder solicited and eventually accepted $13,000 from Peterbilt’s owners, which Snyder said he received for providing the company with independent consulting services.&nbsp; In November 2016, Snyder was charged with and indicted for federal fund fraud in violation of 18 U.S.C. § 666.&nbsp; After he was convicted and then granted a new trial on the same charges, he was convicted a second time in March 2021.&nbsp; Snyder appealed his conviction to the Seventh Circuit, arguing that § 666 does not apply to after-the-fact gratuities.&nbsp; Snyder said that § 666 was inapplicable because there was no agreement made in exchange for the $13,000 payment prior to the city awarding the contract to Peterbilt.&nbsp; The Seventh Circuit rejected that argument and affirmed Snyder’s conviction.

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The Supreme Court’s Decision

In holding that § 666 only applies to bribes, not gratuities, the Court looked to the statute’s origins and explained that it was modeled after 18 U.S.C. § 201(b), the federal bribery statute for federal officials.&nbsp; Both statutes have express mens rea requirements: § 201(b) “requires an official to have a corrupt state of mind and to accept (or agree to accept) a payment intending to be influenced in an official act”; § 666 requires an official to “corruptly” solicit, accept, or agree to accept “anything of value.”&nbsp; The Court contrasted this with 18 U.S.C. § 201(c), the federal anti-gratuity provision, which contains no express mens rea requirement.

The Court also expressed federalism concerns, noting that the application of § 666 to all gratuities would significantly infringe states’ rights, as § 666 “covers virtually all state and local officials – about 19 million nationwide.” &nbsp;The Court reasoned that the government’s position would subject state and local officials to a “new and different regulatory regime for gratuities.”&nbsp; The opinion highlighted the risk that an overbroad application of § 666 could lead to unfortunate unintended results.&nbsp; For example, a county official could face up to 10 years in federal prison for accepting a $100 gift card from a grateful neighbor for their work on a new city park.&nbsp; The Court said that interpreting § 666 to criminalize this interaction “would significantly infringe on bedrock federalism principles,” and that states should have the “prerogative to regulate the permissible scope of interactions between state officials and their constituents.”

What Does This Mean for Companies?

Snyder raises several issues that companies must strongly consider going forward:

‘Thank You’ Gifts: Snyder confirms that companies engaging with state, local, and tribal governments may offer small, more traditional corporate marketing items as gifts to their government customers after their work is awarded or completed.&nbsp; However, best practices dictate that companies refrain from these types of interactions or wait a significant amount of time after the companies’ work is complete.

Stay Vigilant: While Snyder limits the reach of § 666, it underscores the need for companies dealing with government officials to carefully navigate the complex patchwork of local, state, and federal laws and regulations with respect to gift giving and lobbying.&nbsp; As the Court noted, “different governments draw lines in different places.”&nbsp; As the Court also indicated, even if a gratuity does not breach § 666, “a gratuity offered and accepted after the official act may be unethical or illegal under other federal, state, or local laws.”

Review Existing Policies and Procedures: Businesses that interact with state and local officials should thoroughly review existing policies and procedures regarding government interactions and gift giving.&nbsp; Additionally, companies should bolster employee training on government interactions to cover the above nuances and ensure future conduct will not be viewed as bribery.

Document Retention Is Key: To prove that an agreement between a payor and an official was reached before undertaking any official act, prosecutors will likely be required to have cooperator testimony and/or documentary evidence, such as texts, emails, and agreements, tying the potential after-the-fact payment to the official act before that act is undertaken. Companies are advised to retain accurate gift records to clarify the timing of the relevant conduct.

The BakerHostetler White Collar, Investigations, and Securities Enforcement and Litigation team is composed of dozens of experienced individuals, including attorneys who have served in the DOJ and at the SEC.&nbsp; Our team includes a former U.S. attorney, former assistant U.S. attorneys, branch chiefs and unit chiefs as well as partners who have served in the SEC’s Division of Enforcement and the SEC’s Office of the General Counsel, and attorneys with extensive experience in regulatory investigations, litigation, and enterprise compliance counseling.&nbsp; Please feel free to contact any of our experienced professionals if you have questions about this alert.

‘Bribe’ vs. ‘Tip’ – The Implications of Snyder v. United States for Companies

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