Blackmail & Extortion

Difference Between Blackmail & Extortion

Blackmail and extortion are separate crimes in the federal system but they involve similar elements, namely some act of force or coercion.  Whether it’s a disgruntled employee threatening to release the confidential information of a company or an individual seeking monetary payment for withholding information from law enforcement, these acts have the potential to cross the line of hardball tactics that often get employed in the business world to criminal conduct.

What Is “Blackmail” Under Federal Law?

The federal statute addressing blackmail is found at 18 U.S.C. § 873.  The statute provides that “whoever, under a threat of informing, or as a consideration for not informing, against any violation of any law of the United States, demands or receives any money or other valuable thing, shall be fined under this title or imprisoned not more than one year or both.”  Under federal law, blackmail is a misdemeanor rather than a felony. 

In order to convict a person of the federal crime of blackmail, a prosecutor must prove beyond a reasonable doubt that

The key, and limiting, element of this crime is that it only applies to threats involving the disclosure or non-disclosure of violations of federal law.  Threats to reveal embarrassing, salacious or otherwise lurid (but non-criminal) conduct will not, by themselves, trigger a violation of the federal blackmail statute. 

So, for example, one person threatening another person with disclosure of an extramarital affair would not constitute federal blackmail (although it may qualify as a state crime).  On the other hand, an employee of a construction company that is aware his company is violating federal environmental laws by dumping materials into a river can be guilty of blackmail if he threatens the company by demanding money in exchange for not disclosing the environmental violations.  The central aspect of federal blackmail is that there must be the threat of disclosing or not disclosing some underlying violation of federal law.  In the absence of this, there can be no crime.        

The main point to understand about the federal blackmail statute is that the “crime” is the demand for something of value in exchange for silence about some type of federal offense.  Extortion, as discussed below, is a much broader crime and can apply to a broader array of conduct. 

What Is “Extortion” Under Federal Law?

In the federal system, the crime of “extortion” requires the government to prove some act or practice of obtaining something of value or compelling some action by illegal means, as by force or coercion.  The main criminal statute under which most federal extortion cases are prosecuted is 18 U.S.C. § 1951.  This criminal statute, entitled “Interference with commerce by threats or violence,” is also commonly referred to as the “Hobbs Act” because it was introduced into law in 1946 by United States Congressman Sam Hobbs of Alabama. 

Originally, it was intended as a tool to combat organized crime.  However, over time, the use of the statute has evolved significantly and today it is commonly utilized by federal prosecutors in cases that have little or nothing to do with organized crime.  The statute defines “extortion” as “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.”  The statute imposes significant penalties, including a term of imprisonment of up to 20 years per extortionate act.   

A key element of the Hobbs Act is that it requires, as an element of the offence, some activity that in one way or another “obstructs, delays, or affects commerce or the movement of any article or commodity in commerce.”  The obstruction or effect on commerce need not be significant.  All that prosecutors need to show is some minimal effect on interstate commerce.  Also, while the language of the Hobbs Act appears focused only upon property interests, the United States Supreme Court in United States v. Nardello held the statute can also apply to reputational harm.

A good example of the Hobbs Act being applied to threats of reputational harm can be found in the federal prosecution of attorney Michael Avenatti.  Mr. Avenatti, an outspoken critic of President Donald Trump, shot to fame with his representation of adult-film actress Stormy Daniels.  However, he was later prosecuted by the United States Attorney’s Office for the Southern District of New York for allegedly engaging in a scheme to extort money from Nike, Inc. (the shoe and sportswear).  According to the government’s indictment, Mr. Avenatti “used threats of economic harm in an attempt to obtain multi-million dollar payments from Nike, a multinational company.”  He was later found guilty by a federal jury in New York.

While the Hobbs Act was originally a tool to combat organized crime, it has evolved over the years to become a statute that gets applied by prosecutors to a range of situations that have little or nothing to do with organized crime.  A good and illustrative example of how broadly the Hobbs Act has been applied by federal prosecutors can be found in the case of Sekhar v. United States.  The issue presented in that case was whether attempting to compel a person to recommend that his employer approve an investment constitutes the “obtaining of property from another” within the meaning of the Hobbs Act.  The Supreme Court of the United States answered the question with a “no.” 

In the Sekhar case, the General Counsel of the Office of the State Comptroller of New York advised against investing in a fund managed by a company called FA Technology Ventures.  A managing partner of FA Technology Ventures was Giridahr Sekhar.  The investment would have given FA Technology millions of dollars in service fees.  Upset at the recommendation by the General Counsel and presumably motivated by his personal financial interests, Mr. Sekhar sent the General Counsel an anonymous email threatening to expose his extramarital affair to his wife.  The General Counsel contacted the FBI which was able to trace the email back to Mr. Sekhar.  Subsequently, Mr. Sekhar was prosecuted under the Hobbs Act for extortion. 

Speaking for the majority of the Supreme Court, Justice Antonin Scalia found that attempting to compel a person to issue a favorable recommendation does not amount to “extortion” under the Hobbs Act because the law requires the “property” at issue to be “obtainable” and “transferable” from one person to another in the same manner that cash would be clearly transferable.  Justice Scalia and the other Justices of the Supreme Court were skeptical of Mr. Sekhar’s prosecution for a Hobbs Act violation concluding that the right to give a recommendation is not “property” in and of itself. 

Ultimately, Mr. Sekhar’s Hobbs Act conviction was set aside.  The takeaway from the Sekhar case is that in order for the government to successfully prosecute a person under the federal extortion law, the “property” at issue must be something that is tangible and transferable from one person to another.  In the Michael Avenatti case this issue did not arise because the “property” at issue was millions of dollars that were clearly transferable from Nike to Mr. Avenatti.  The Sekhar case perfectly illustrates how criminal law can turn on the slightest interpretation and meaning of words.

THE KEY TO A FIVE STAR DEFENSE

The law is very nuanced. Federal prosecutors have almost unlimited advantages and resources at their disposal. Having attorneys on your team that understand the law, keep abreast of legal developments in the law, have the experience dealing with the complexities of federal statutes and, finally, possess the skills to stand before a jury to make a compelling case on behalf of a client are not just important qualities, they’re critical. At The Federal Defenders. we pride ourselves on being advocates for our clients. With decades of experience with all variety and manner of federal criminal issues and defenses, we understand what it takes to put our clients in a winning position. For a free and confidential consultation, call us today at (800) 712-0000. Just like our toll-free number, we operate nationwide.