For the last two months, it’s been difficult for me to think or post about anything other than Russia’s war against Ukraine—and how this crisis might relate, directly or indirectly, to issues of corruption. But for today, I’m going to write about something a bit closer to (my) home, and substantially lower-stakes: the U.S. college admissions scandal, often known as the “Varsity Blues” scandal, after the code name that U.S. prosecutors assigned to the investigation. A quick refresher: a number of affluent parents arranged for their children to be picked by colleges coaches as athletic recruits, even though these teenagers were not in fact gifted athletes, and in some cases did not even play the sports for which they were recruited; this virtually guaranteed that the children would be admitted to the colleges in question, because those colleges had the practice of giving the coaches substantial discretion in choosing a certain number of recruits each year. (There were other aspects of the fraud, including in some cases cheating on the admissions tests, but the fake athletic recruiting gambit was the heart of the scheme.) The coaches participated in this fraudulent activity because the parents bribed them, via the middleman at the center of the scandal (and the purported “charitable foundations” that he controlled). In some cases, the parents paid monetary bribes directly to the coaches. But in some cases, the parents also—or in addition—made substantial donations to the university’s athletic program or the individual team, in exchange for the coach falsely asserting that their child should be recruited as an athlete.
That last, rather unusual aspect of the scheme—that the payments sometimes went to the university’s athletic program, rather than into the coach’s pocket—gives rise to a question that some of the Varsity Blues defendants have been urging in court: Can a payment count as a bribe (in the legal or moral sense) if it goes to the university? Obviously, this is not an issue in those cases where the prosecution has proven that money or other things of value were offered directly to the coach. But what about those cases that involve donations to the university’s teams or athletic program? Some of the Varsity Blues defendants insist that these donations cannot be bribes—even if we stipulate that the purpose of the donation was to induce the coach to falsely claim that an applicant should be recruited as an athlete, and that the coach did so as part of an explicit quid pro quo. The reason, proponents of this argument insist, is that if the purported “victim” of the alleged bribery (here the university) is also the recipient of the payment, then the payment cannot not a bribe.
This is wrong. Indeed, it is nonsense, and that fact that at least some judges have been entertaining this as a serious objection to some of the Varsity Blues charges reveals a deep conceptual confusion about the nature of bribery and why it is wrongful.
When addressing the question whether it is possible for a payment to count as a bribe if the alleged victim is also the recipient of the payment, one can frame this question as either a general moral/conceptual question, or as a more narrowly legal question. Answering the legal version of the question would require parsing the exact text of the particular statute under which the defendant has been charged, and that text might vary from jurisdiction to jurisdiction or from case to case. For most of this post, I will therefore focus on the broader conceptual question, though at the end I will turn one of the specific U.S. bribery statutes under which most of the Varsity Blues have been charged.
The most useful way to think about an individual bribe transaction, and why it is wrongful, is in terms of a conventional principal-agent problem. In many settings, an entity, such as a government, firm, or nonprofit organizations, is supposed to act on behalf of, and for the benefit of, some person or group, commonly referred to as the principal (P). But since it is not feasible for P to make all the day-to-day decisions, P retains an agent (A)—or, more realistically, a large number of agents, organized in hierarchies of varying complexity—to make organizational decisions. If an outside party (B) offers an inducement of some sort to A, in exchange for A making a decision that serves B’s interests (while disregarding P’s interests), then A has been corrupted by B. And if we assume for the moment that it is socially and morally right for A to act in P’s interest, this is bad and ought to be prohibited. (One can identify circumstances in which it is morally right for A to disregard P’s interests, but we can set aside those situations for present purposes.)
That much is uncontroversial. In some of the Varsity Blues cases, the above characterization captures what happened: The university is the principal, the coach is the agent, and the parent (the outside party) makes a payment directly to the coach to induce her to abuse the power the university has granted her over admission decisions.
But what happens if the parent does not make any monetary or material payment directly to the coach, but instead makes a donation to the university (more specifically, to the university’s athletic program)? There are two arguments as to why this changes things such that the payment should no longer be considered a bribe, but neither withstands scrutiny.
The first argument is that because no money or other material benefit goes directly into the coach’s pocket, no bribery has taken place. As noted above, there may be some statutes that are drafted narrowly enough that a non-material inducement cannot count as a bribe. But most anti-bribery statutes (at least in the U.S.) are deliberately drafted more broadly to prohibit the corrupt offer or provision of “anything of value” to induce or reward the performance of an official act. As a moral or conceptual matter, this is correct. What matters is the corrupt inducement, not the form that inducement takes or whether the benefit to the agent is material or non-material. To extend the abstract example above, suppose again that P hires A to make certain decisions on P’s behalf; this time, B offers to confer a material benefit on a third party (C)—for example, by making a large donation to A’s favorite charity, or hire B’s relative, or something similar—if A makes the decision that B would prefer, without regard to P’s interests. The harm to P is the same as in the first case, as is the corruption of B and A’s motivation. To count as a bribe, there would still need to be a quid pro quo or similar connection between the conferral of the benefit and the official decision. But the fact that the benefit to A is intangible rather than material is irrelevant. And from the perspective of principal-agent theory, it’s proper to forbid this conduct for exactly the same reasons as before. In the college admissions context, if a parent offered to make a donation to the coach’s favorite charity, or hire the coach’s daughter for an entry-level position at the parent’s hedge fund, in exchange for the coach falsely telling the university admissions office that the child is a talented athlete who should be recruited for the team, very few people would seriously dispute the claim that this is a bribe.
But the Varsity Blues defendants and their sympathizers point out that there’s a potentially important difference between (a) the case where the outside party offers a material benefit to a third party in order to induce an agent to abuse her authority, and (b) the case where the outside entity provides a material benefit to the principal itself in order to induce the agent to abuse her authority. If the principal got the money, the argument goes, it can’t claim to be a victim. And if there’s no victim, there’s no bribery!
But that’s wrong. If the principal (here the university) had no problem with giving out admissions slots in exchange for donations, then it would establish such a program as a matter of policy. (Indeed universities do this to some extent, though in my view the practice is deeply problematic. But popular commentary tends to grossly exaggerate how easy it is to “buy” a slot at a university by making a donation; this option is there for the super-duper-rich, but not for the merely rich; that’s exactly why the mastermind of the Varsity Blues scandal came up with an alternative route for converting money into admissions.) If the university, as the principal, would not have offered a given applicant a place at the school even if the parent offered to donate $100,000 to the sailing team, then by definition the school loses more than it gains from such an exchange. The university is therefore most certainly victimized when the sailing coach agrees that if a parent donates $100,000 to the sailing team, the coach will falsely tell the admissions office that the donor’s child is a superb sailor who should be on the school team. The harm to the university, though perhaps not as great as when the donation goes to an outside party, is still meaningful, and the corruption of the agent’s behavior is still present. (By the way, in case you’re wondering why this inducement would work, as Justin pointed out in a recent post, coaches at many universities are responsible for raising money for their programs. Though donations to the program go into a bank account that is legally owned by the university, the coach’s reputation and professional success—and her long-term job prospects—may depend on how effective a fundraiser she is.)
Perhaps a few additional stylized examples can drive the point home:
- To begin with a hypothetical example that, like Varsity Blues, involves school athletics, suppose that a private high school is looking to hire a new basketball coach, and delegates principal responsibility for screening candidates to the school’s athletic director. The athletic director discovers in a background check that the leading candidate for the job was fired from three previous coaching jobs for physical and emotional abuse of students. The applicant insists he’s turned over a new leaf, but the athletic director knows that if he honestly reports the results of the background check to the hiring committee, they will say no. The candidate’s wealthy parent offers to pay for the school to build a fancy new athletic center—routing the money through a charitable foundation to obscure the actual source of the donation—if the athletic director buries the results of the background check and recommends the candidate for the coaching position. Is this a bribe? Yes! There’s no way the school would or should put its students—and its reputation—in jeopardy by hiring a coach with this troubling background, even in exchange for a new athletic center. To say that the school has not been “victimized” by the scheme is absurd on its face. (It’s also worth noting that in this hypothetical example, as in the real Varsity Blues case, there are other victims as well—the students whom this coach will supervise in the hypothetical example, and the students who were denied admission in the Varsity Blues case.)
- Here’s another example, with a similar structure but in a different setting: Suppose there is a national nonprofit organization that advocates for a certain cause (such as gender equality, gun rights, environmental protection, religious freedom, or what have you). One of the things the organization does is to endorse candidates for public office. Let’s assume that these endorsements carry great weight with important blocs of voters. Because the national organization can’t screen all candidates, it relies on officers in its local branches to decide which candidates for local office the organization should endorse. Suppose a candidate wants the endorsement, but she knows that she doesn’t have a consistent record of supporting the organization’s cause. She tells the head of the local office that she will arrange for one of her rich supporters to make a substantial donation to the organization in exchange for the local head recommending her for the endorsement. Is this a bribe? Yes! Sure, the national organization cares about raising money, but it is also very clear that its endorsements are not for sale. Those endorsements are only valuable because voters believe they represent the organization’s careful and faithful vetting of candidates. In this example, if the local official accepts the offer, the national organization is the victim of bribery.
- Here’s another example, this time involving public sector bribery. Suppose a city mayor is up for re-election. A safety inspection reveals that a real estate development company’s apartment buildings don’t conform to local building codes. Refurbishing the buildings to address the safety problems would be hugely expensive for the developer. So, the developer tells the mayor that if the mayor will arrange for the results of the inspection to be buried and the safety inspectors to be warned not to scrutinize the developer’s projects further, the developer will redirect its entire “corporate social responsibility” budget to popular local government projects of the mayor’s choosing, such as refurbishing parks, playgrounds, and schools. The mayor reasons that these high-profile projects will improve her chances of re-election, while the dangers associated with the below-code buildings may not manifest for many years. So she accepts the offer. Is this a bribe? It’s arguably a closer case, but I think the answer is yes, at least if the prosecution can show corrupt intent (for example, through efforts of the mayor and developer to keep the quid pro quo secret, violations of local laws and guidelines, etc.).
What these examples have in common with each other, and with the real Varsity Blues cases, is that the principal values some things more than money (or other material benefits). To take the position that the payments to university athletic departments in the real case—and to the high school, the nonprofit organization, and the city in the hypothetical examples—cannot be bribes because the payments went to the alleged “victim” is to refuse to recognize that fact. Are such cases common? No, and for obvious reasons. Usually bad actors—bribe payers and bribe takers—will find direct material inducements more attractive and efficient, and it is rare that an agent will benefit substantially from a benefit that is conferred on the principal. But the rarity of such cases is irrelevant. What matters is whether, as a conceptual or moral matter, these cases are distinguishable from “ordinary” bribery cases. They are not. In all these cases, when we want to know whether the agent has acted wrongfully, we should ask what the principal would have done if the principal had all the available information and was able to make the decision itself. In each of the above cases, the principals (the school, the nonprofit, the citizens of the town, the universities) would not accept the proffered material benefit in exchange for making the decision preferred by the party offering that benefit. But the agent benefits sufficiently from the (indirect, intangible) benefit of securing an apparent benefit for the principal that she would make a decision that, from the principal’s perspective, is a bad and irresponsible decision. The agent, in other words, would have abused her entrusted power to secure a private gain—the essence of corruption.
Three other quick things before concluding what I realize has been quite a long post on what might seem like a pretty narrow topic:
- First, those arguing on behalf of the Varsity Blues defendants sometimes invoke the analogy of a CEO who owns stock options. They assert that if the CEO makes a decision that she expects will increase the company’s share price—and she is proven correct in this prediction—she can’t possibly have defrauded the board, even though the increase in the share price will benefit her (because of the stock options), and even if she lied to the board about her decision. First of all, this claim is not clearly correct as a matter of corporate law. If the board has a strict bylaw prohibiting transactions of this type, or if the CEO sought and was refused Board permission for this specific transaction, her conduct might be unlawful. But put that aside. Even if the board and other shareholders would not have grounds to sue for fraud, the analogy is inapposite, because in this case the decision (by stipulation) does benefit the principal on net. In these other examples, including the university admission example, it doesn’t—because these principals care about things other than money. The better analogy might be the manager of a special fund that pledges only to invest in accordance with certain moral or religious principles. (Such things exist.) Suppose the manager, who is himself invested substantially in the fund, makes certain decisions that he believes will be hugely profitable but that flatly contradict the fund’s moral or religious commitments—and express terms in his employment contract—and when questioned by the board about his investment strategy blatantly lies. While the damages in this case are intangible, and so perhaps hard to calculate, I doubt many people would seriously deny that a fraud has taken place.
- Second, I noted at the beginning that I would address the question whether payments of the sort at issue in this subset of Varsity Blues cases should be considered bribes from a conceptual/moral perspective, rather than a legal perspective. For what it’s worth, my quick read of the most relevant statutes strongly suggests that these payments were also illegal under those statutes. Perhaps the most important federal anti-bribery statute at issue in these cases is the prohibition on theft or bribery concerning programs receiving federal funds (a category that includes almost all U.S. colleges and universities), codified at 18 U.S.C. §666. That provision covers, as relevant here, any person who “corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization [that receives more than $10,000 per year in federal funds] … in connection with any business [or] transaction … of such organization… involving anything of value of $5,000 or more,” unless the payment involves legitimate salaries, wages, fees, or other compensation (emphasis mine). Nothing in that broad statutory language seems to exclude from coverage cases in which the thing of value is intangible, nor indeed cases in which the thing of value is transferred to the organization itself in order to corruptly influence some other person.
- Third, out of an abundance of caution I should mention a rather attenuated personal connection to this case: My cousin’s husband, who is now an attorney in private practice, worked on the Varsity Blues cases when he was employed by the U.S. Attorney’s Office in Boston. I doubt that this fact influences, or could be reasonably construed to influence, my analysis of the issues discussed here, but I felt like I should mention it.
Returning to substance, I want to emphasize again that the key to understanding why inducing a coach to lie about an applicant’s athletic qualifications in exchange for a hefty donation to that coach’s program is the recognition that some things are more important than money, and not every relationship is or should be transactional. The fact that the Varsity Blues defendants still don’t seem to get this is precisely why the law needs to come down hard on them.