Kelly v. United States, 140 S. Ct. 1565

In September 2013 defendants Bridget Kelly (Gov. Christie deputy chief of staff) and William Baroni (Port Authority deputy executive director), with David Wildstein, ordered a reduction of Fort Lee’s dedicated morning lanes at the George Washington Bridge from three to one, causing four days of severe traffic gridlock.
The lane change was taken to punish Fort Lee’s mayor for refusing to endorse Christie; the defendants used a sham “traffic study” as a cover story.
Port Authority traffic engineers were asked to collect data and an extra toll collector was put on call (overtime) so the single lane would not close for breaks; the work produced little useful data and was not actually reviewed by Baroni or Kelly.
Wildstein pleaded guilty and cooperated; Baroni and Kelly were tried, convicted of wire fraud (18 U.S.C. §1343), program fraud (18 U.S.C. §666), and related conspiracies; the Third Circuit affirmed.
The Supreme Court reversed: it held the fraud statutes require the scheme’s object to be money or property, and here the lane realignment was a regulatory act (not property) while employee labor was only an incidental implementation cost, not an object of the fraud.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether commandeering Bridge lanes constituted taking government "property" under the wire-fraud/§666 property requirement	The lane reallocation effectively "commandeered" physical lanes — a property interest the defendants fraudulently took	Lane allocation was an exercise of regulatory power (allocation/exclusion/control), not a transfer or conversion of government property	Realignment was a regulatory choice, not a property taking; cannot satisfy the statutes' money-or-property requirement (Cleveland governs)
Whether the Port Authority employees' time/labor was an object of the fraud	Defendants sought to deprive the Authority of the costs (wages/overtime) for engineers and backup toll collectors — a property loss	Employee labor/time was an incidental implementation cost of a regulatory scheme, not the object the defendants sought to obtain	Employee time was incidental and not an object of the scheme; incidental costs cannot sustain property-fraud convictions
Whether the federal fraud statutes can be used to punish this form of public-corruption deception	The statutes protect government property and so apply here to stop deceit used to effect the lane change	The statutes are limited to schemes targeting money/property and do not reach all dishonest regulatory acts by state/local officials	Statutes cannot be stretched to criminalize all deceitful regulatory decisions; prosecutions must show property as an object of the fraud

McNally v. United States, 483 U.S. 350 (1987) (wire fraud is limited to schemes to deprive victims of money or property)
Cleveland v. United States, 531 U.S. 12 (2000) (government’s regulatory allocation/selection powers are not property for fraud statutes)
Pasquantino v. United States, 544 U.S. 349 (2005) (describing property as valuable rights or interests relevant to fraud statutes)
Skilling v. United States, 561 U.S. 358 (2010) (construes honest-services fraud narrowly to bribery/kickbacks)
United States v. Walters, 997 F.2d 1219 (7th Cir. 1993) (loss must be an objective of the scheme, not a byproduct)
United States v. Pabey, 664 F.3d 1084 (7th Cir. 2011) (employee time/services can be government property when they are the object obtained)
United States v. Delano, 55 F.3d 720 (2d Cir. 1995) (employee services may constitute property when procured for private benefit)