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Cylvia Hayes Could Face Federal Fraud Charges, Legal Experts Say

Thursday, January 29, 2015

 

Cylvia Hayes could face federal fraud charges for her dual role as a private consultant and public official in the Governor’s office, a series of legal experts tell GoLocalPDX. 

The findings of an Oregon Ethics Commission investigation will determine whether Hayes violated state ethics laws when she accepted contracts for her private consulting firm while working in the governor’s office under the title of “Oregon’s First Lady.”

On Jan. 9, Willamette Week reported Hayes was under federal investigation, raising the specter of federal charges. 

Legal experts differ over whether Hayes could be vulnerable to federal mail and wire fraud charges if she misrepresented herself, or failed to disclose potential conflicts of interest via email, phone or mail in winning paid contracts and speaking appointments. 

Scott Coffina, former Associate White House Counsel and now a partner with Philadelphia firm Drinker, Biddle and Reath, pointed out that the breadth of wire and mail fraud is vast. 

“Using government resources to line your own pockets, and doing it over the wires or mails, that’s what mail fraud is,” he said. 

Contracts and engagements

In 2013, Hayes received $85,000 in consulting contracts from Resource Media, a non-profit PR firm; Demos, a public policy think tank; and climate change advocacy group Energy Foundation, according to media reports.

All three companies work to influence policy, and Hayes’ company, 3EStrategies, was awarded the contracts while she worked in the Governor’s office as an adviser to her fiancée, Oregon Governor John Kitzhaber. 

Hayes spoke at various events for a fee while billed as First Lady, rather than as a contractor for Resource Media, including an ocean acidification conference at U.C. Irvine and the Capitol Hill Ocean Week Conference in Washington, D.C. 

Fraud by mail or wire

The statute that experts said Hayes may have potentially opened herself up to, 18 U.S.C. 1343, covers communication via mail or wires “with the intent to obtain money or property by use of false pretenses or representations.” 

An email or phone transmission that does not directly discuss a potential fraud can be part of the crime, Portland criminal defense attorney Sam Kauffman said. 

“Public money for own gain by use of wires or mails, on the surface, that’s what a mail fraud is,” Coffina, the former White House Counsel, said.  “If I were investigating or defending the case, that’s a statute I’d be looking at.” 

Photo by Shelby Sebens

Tom Hagemann, who served as Assistant U.S. Attorney in Los Angeles, now partner and lead criminal defender at Gardere in Dallas, said a disclosure violation requires “material misrepresentation or material omission” of a potential conflict of interest. However, he noted that an undisclosed conflict of interest alone would not lead to a federal indictment because it would not survive an appellate hearing.

Federal prosecutors might look for statements Hayes made via email related to contracts with 3EStrategies for such representations or omissions, Hagemann said. “The key would be if her being a consultant while she was a public official was fully disclosed.” 

GoLocalPDX is waiting on a records request for these documents, filed under the Freedom of Information Act in October. 

“Prior to 2010, they would have been more likely to be honest services charges,” Hagemann said. A 2010 Supreme Court Ruling against Enron CEO Jeffrey Skilling determined a proven bribe or kickback was necessary to indict on honest services fraud charges, an amendment to mail and wire fraud. 

Scott L. Fredericksen, a former Assistant U.S. Attorney in the United State’s Attorney’s Office for the District of Columbia and Eastern District of Virginia, said the FBI could be interested in Hayes’ contracts, expense reports, and disclosures. Fredrickson was frequently sourced by East Coast media in the wake of former Virginia Governor Bob McDonnell's conviction of honest services fraud. 

“Worst case scenario,” he observed, “obtaining those contracts could be mail and wire fraud.” 

Fredericksen, once an appointed Department of Justice independent corporate monitor and now a criminal defender and partner at Washington, D.C. firm Foley & Lardner, said if Hayes and Kitzhaber faced criminal charges, it would be prudent for them quickly to hire a criminal defense attorney. 

Making the hiring of a criminal defense attorney public record is not required, Frederickson said. “Usually, you would try not to.” 

Hayes’ Issues 

Hayes conducted business for her consulting firm on a taxpayer-funded trip to Seattle in 2013, emails obtained by the Willamette Week revealed. 

“In a fraud case, you have to find the lie. If you don’t have a clear cut lie, it’s hard to prosecute,” Kauffman, the Portland criminal defense attorney, said. 

For any taxpayer-funded trip, Kauffman said, Hayes would need to file an expense report. Investigators would have to look to these documents to determine whether a false statement was made. 

Hayes also enlisted government staff to prepare notes for lectures she delivered for personal financial gain, the Portland Tribune reported. A person abusing public office for personal interest suggests a conflict of interest, said Robert Weisberg, a professor of law at Stanford University widely published in academic law journals and Slate Magazine for his expertise in criminal law and criminal justice. 

Kauffman, Coffina, and Weisberg all agreed that Hayes’ failure to disclose a conflict of interest in taking private consulting contracts from which she profited and obtained through her work in the Governor’s office while serving as a public official could constitute mail and wire fraud if concrete, documented false omissions were made. 

Misrepresentations or omissions?

The FBI would not confirm or deny whether Hayes is being investigated, as is the Bureau’s practice. However, documents filed with the Oregon Ethics Commission may offer some insight in the wake of a Jan. 27 revelation, first reported by the East Oregonian, that Hayes was awarded a paid fellowship, worth $30,000 in 2011 and $88,000 in 2012, with the D.C.-based Clean Economy Development Center. 

Statements of Economic Interests are documents elected officials are required to file each year to disclose sources of income and assets in his or her possession. Signatures are signed under a preamble that states that disclosures are true, “Under penalty for false swearing/false affirmation.” 

One section in a 2012 Statement of Economic Interests form, signed by Kitzhaber in 2013, calls for disclosure of household members receiving income from an individual or business with interest in the government. "Respond if you or a member of your household received a source of income exceeding an aggregate amount of $1,000 during 2012, and that income was derived from an individual or business that has been doing business, does business, or could reasonably be expected to do business with, or has a legislative or administrative interest in the government body that you serve," it reads.  Kitzhaber wrote "none."

Hayes did not disclose the $88,000 in earnings on her 2012 return, according to media reports, further raising questions of possible material omissions or misrepresentation.  

Another section calls on Kitzhaber to declare the name of any compensated lobbyist associated with a business with which he or a member of the household was associated with in 2012. He wrote N/A. The Clean Economy Development Center works with public officials to support renewable energy initiatives and create jobs. 

Federal fraud legislation was originally written under the belief that state adjudicators could not fairly try their own officials, said Weisberg, the law professor. He noted that the Governor not disclosing any relationships Hayes had with lobbyists in a Statement of Economic Interest could be used as evidence, but is not enough for bringing an indictment.

Earlier  in January, Kitzhaber’s office disclosed the Governor and Hayes hired two high-powered Oregon lawyers in November in response to the pending state ethics review. Findings are set to be heard March 13. 

 

Related Slideshow: Timeline of Cylvia Hayes’ Life and Misdeeds

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Marriages

March 28, 1989

Hayes divorced Todd Hayes in the state of Washington 

Dec. 17, 1996

Hayes divorced Doug McCarthy

July 19, 1997

King County, Washington marriage records revealed Hayes married an 18-year-old Ethiopian immigrant, Abraham B. Abraham. There was no record of the couple living together and four years and three months later they filed for divorce, which was finalized in 2002. Hayes admitted to being paid $5,000 for the marriage, which she said she used to pay for school expenses and did not report in her taxes.

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Evergreen State College

1994-1997

Hayes transferred to Evergreen from Bellevue Community College to earn a bachelor's degree in environmental studies in 1994. There she played on the woman's soccer team and was awarded academic and athletic scholarships.  She stayed on at Evergreen to earn a master's degree in Environmental Studies in 1997. 

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Alleged pot farm property

1997-1998

Hayes and her then boyfriend bought property in Okanogan, Washington near the Canadian border. Hayes admitted the property was intended for marijuana growth, although she said the operation “never materialized” and that she was never financially involved. However, the person who took over the property said that Hayes and her boyfriend stopped making payments and that there was evidence of marijuana being grown there. She gave up her interest in the property in April 1998. 

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Bend

1998

Hayes moved from Washington to Bend, Oregon. Hayes has said she lived in a tent on Bureau of Land Management (BLM) land over the summer while she got established in the area and finished her thesis. 

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3EStrategies

1998

Hayes founded 3EStraegies in Bend, a clean economy consulting firm. The business was built from Earth Connections, a nonprofit organization Hayes created two years earlier. In 2009 she converted 3EStraegies into a for-profit company. 

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Run for office

2002

Hayes ran for the Oregon State Legislature as the House Democratic nominee. She lost to Rep. Ben Westlund from Bend. 

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Kitzhaber Divorce

2003

Governor John Kitzhaber divorced his second wife of eight years, Sharon Kitzhaber, after he left the governor’s office in 2003. The two had become engaged during Kitzhaber’s first governor campaign.

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Kitzhaber and Hayes

2009

The first media report that Kitzhaber had a new relationship with Hayes appeared in the Bend Bulletin.

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Kitzhaber Reelection

2010

Kitzhaber won a third non-consecutive term and took office as governor. He had held the title previously for two terms from 1995 to 2003. He told the press that Hayes would take on the responsibilities and roles of a first lady.

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Investigation by DOJ

August 2010

Hayes was the center of a criminal investigation by the Oregon Department of Justice surrounding a consulting contract she received from the Oregon Department of Energy. Although her firm was ranked last, it was still granted work. Hayes was never accused of any wrongdoing, but the investigation showed state officials had guided a $60,000 contract to her firm.

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Move into Mahonia Hall

December 2010

After Kitzhaber was reelected in 2010, he announced that while he'd be spending most of his time in his Portland home, when in Salem his girlfriend Cylvia Hayes would stay with him in the Governor's mansion, Mahonia Hall. 

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Work for the Governor

2011-present

Hayes was placed on a seven-member team by Kitzhaber to write a 10-year energy plan. Hayes also gave speeches as the first lady and policy adviser in the area of energy issues.

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3E Contracts with Demos

March 2013

Hayes signed a $20,611 consulting contract with Resource Media, a firm that had contacted Kitzhaber’s office the year before to promote a Pacific Coast climate and energy initiative. 

May 2013

Hayes signed a $40,000 contract with the nonprofit Energy Foundation, who she had worked with as part of her duties as a Kitzhaber adviser. Hayes had spoken at an Energy Foundation event in 2012 and emailed them in the start of 2013, mentioning funding for the company. 

June 2013

Hayes signed a $25,000 contract with Demos. Hayes spoke and moderated a Demos panel, but was introduced as Oregon’s first lady, rather than a paid consultant.

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Engagement

Aug 2014

Kitzhaber and Hayes announced their engagement. However, no wedding date was announced.

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Expose on Hayes

Oct. 8 2014

The Willamette Week published an expose on Hayes alleging that her role as a private consultant and her position as Oregon's "first lady" presented a conflict of interest and an ethics violation. 

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Confession

Oct. 9, 2014

In a press conference, Hayes admitted to an illegal green card marriage in 1997. She said that she told Governor Kitzhaber about the illegal marriage only a day before the news went public. 

Oct. 13, 2014

Hayes admitted to KOIN 6 NEWS that she had lived on a property in Okanogan, WA used for growing and selling marijuana.

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Investigation called for

Oct. 14, 2014

The Oregon GOP called for an investigation into both Cylvia Hayes and the governor over allegations of self-dealing outlined in the Willamette Week.

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The bank loan

Oct. 15, 2014

The Willamette Week wrote that the Governor’s office had helped extend a government loan for a former client of Hayes’ consulting business in Bend, Oregon. The owner of a golf course was given an extension on his loan from the Oregon Department of Energy after the Department was persuaded by Kitzhaber's staff. The owner wrote a thank-you note to Hayes, Kitzhaber’s chief of staff and his business advisor for their help with the situation. 

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Ethics Commission

Oct. 15, 2014

The GOP filed a complaint with the Oregon Government Ethics Commission against Kitzhaber, Hayes, and the governor's unpaid advisor Patricia McCaig. It claimed there was a “conflict of interest transactions, employment relationships, benefits from public contracts, usage of public buildings and staff for personal financial gain and business."

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Rep. Berger complaint

Oct. 16, 2014
State Representative Vicki Berger (R-Salem) filed a complaint against Hayes with the Oregon Government Ethics Commission. Berger said in her statement, “I am asking for a full investigation of the possible misuse of state resources by Ms. Hayes.” 

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Former boyfriend speaks

Oct. 21, 2014

Karl Topinka, Hayes' former boyfriend she owned the pot farm in Washington with, told the Daily Mail that Hayes couldn't be trusted. He also said the pot farm was all her idea and she had done the planning. Topinka said Hayes failed to tell him of her illegal marriage that had taken place shortly before. 

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Ethics document

Oct. 25, 2014

Governor Kitzhaber did not list Hayes in an ethics document consisting of lobbyists he had a relationship with, GoLocalPDX reported. In a section where he was supposed to disclose “any compensated lobbyist who was associated with a business with which you or a member or your household was associated during 2013,” Kitzhaber wrote “N/A” or not applicable.
 

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Open records complaint

Oct. 29, 2014

GoLocalPDX.com filed a complaint with the Attorney General of Oregon against the Governor’s office for failure to comply with the open records law. A request for information to determine if the Governor had received income from Hayes’ consulting contracts was ignored for over two weeks, prompting the official complaint. 

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Opponents demand records

Oct. 30, 2014

Republican governor candidate Dennis Richardson was joined by Democrat Ifeanyichukwu Diru, Kitzhaber’s primary opponent, in a press conference demanding the Governor release records relating to the scandal. 

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Kitzhaber leads polls

Oct. 31, 2014

Governor Kitzhaber led by 10 points over opponent Richardson in a recent poll released by KATU a few days before the 2014 election.

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Hayes Speaks Out

Nov. 6, 2014

Cylvia Hayes made her first public statement since her confession that she had been part of an illegal sham marriage. The statement which she made via her Facebook page reads: 

"I just want to thank all of you who have sent such support and encouragement over these past very challenging weeks. In the midst of the storm the positive incoming from friends, family and colleagues has been enormously helpful. Thank you for taking time to reach out."

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Federal Investigation

Cylvia Hayes could face federal fraud charges for her dual role as a private consultant and public official in the Governor’s office, a series of legal experts told GoLocalPDX. 

The findings of an Oregon Ethics Commission investigation will determine whether Hayes violated state ethics laws when she accepted contracts for her private consulting firm while working in the governor’s office under the title of “Oregon’s First Lady.”

On Jan. 9, Willamette Week reported Hayes was under federal investigation, raising the specter of federal charges. 

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Press Conference

Jan. 30, 2014

Governor John Kitzhaber held a press conference and responded to questions surrounding investigations, ethics violations and Cylvia Hayes. When asked if he would resign, he said “I was elected by the people of this state to do a job, and I intend to do it.”

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Plagiarism

Feb. 11, 2014

A GoLocalPDX investigation into the writings of Cylvia Hayes found portions of her Green Jobs Growth Plan: 2011-2019 report were plagiarized from a pre-existing state report.

 
 

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