Legal Docket: Identity theft at the Supreme Court

MARY REICHARD, HOST: It’s Monday morning and we’re ready to get back to work for The World and Everything in It. Today is Veteran’s Day, November 11th, 2019. 

Thank you to our veterans for your service to our country.

I’m Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. 

Well, the Supreme Court hears four oral arguments this week before taking a two-week break for Thanksgiving. We’ll use that time to get caught up on arguments heard so far this term.

Today, two cases. 

The first asks what seems to be a very simple question: Can states prosecute individuals in the United States illegally who use stolen Social Security numbers in order to get a job? 

It all turns on the paperwork.

REICHARD: And here are the facts. 

Local law enforcement in Kansas discovered three individuals to be using stolen Social Security numbers on the various forms you have to fill in to gain employment. 

Those forms are the federal W-4 withholding form, the state version of the form in Kansas, the K-4, as well as a federal I-9 form used to prove authorization to work in the United States. 

It’s the I-9 form that’s the crux of this case.

EICHER: I-9 falls under a federal law known as IRCA, I-R-C-A.  That stands for the Immigration Reform and Control Act.  It says any information on that form “may not be used for purposes other than for enforcement of” IRCA or certain other federal crimes. It specifically does not say the information can be used to prosecute state crimes, like identity theft.

REICHARD: The three individuals argue that prosecutors used I-9 information to convict them of identity theft. So, they argue, those convictions ought to be declared invalid.

The Kansas Supreme Court agreed and tossed out the convictions. But Kansas appealed that decision to the U.S. Supreme Court. 

Kansas Attorney General Derek Schmidt laid out his case straight up.

SCHMIDT: Our laws apply in all settings, to all people, citizen and alien alike. Respondents were convicted because they stole other people’s personal information with intent to defraud. But in respondents’ view, these state criminal laws that govern everybody else do not apply to them.

In Schmidt’s brief on behalf of Kansas, he laid out how pervasive identity theft is. In 2017 alone, for example, identity thieves stole an average of more than $1,000 each from 15 million American consumers. The losses totaled more than $17 billion.

That can take the form of lost disability or retirement benefits, lost student loans, even lawsuits for back taxes on income the victim didn’t even earn. 

But lawyer for the immigrants, Paul Hughes, underscored the plain language of that federal law, IRCA, that forbids using information contained on an I-9 for state prosecutions.

And he pointed out the Supreme Court struck down parts of Arizona’s law seven years ago that targeted immigrants in the country without proper documentation. There, the majority justices decided that in immigration matters, federal law trumps state law. 

But Hughes ran into some trouble. Listen to Justice Samuel Alito. 

ALITO: This is not a situation like Arizona, where a state has criminalized something that is not criminal under federal law. It’s a case where the same conduct is criminal under federal law and, Kansas says, under Kansas law. So where’s the conflict?

The conflict, Hughes replied, is that Kansas is misrepresenting its own motives. What’s really going on, he said, is the state’s targeting and punishing of immigrants. 

But several justices pointed out that you can’t get a job without submitting the whole package: an I-9, plus a federal and a state withholding form. So who’s to say from which form the information to prosecute comes?

Schmidt, again for Kansas, argued that putting all those required employment papers together doesn’t magically transform everything, like a resume or background check, into part of the I-9 system.

SCHMIDT: It is nearly nonsensical to think that Congress on the one hand would have created a specific crime for W-4 fraud and yet precluded its application in situations in which the W-4 is most commonly submitted, together with the I-9.

Justice Elena Kagan worried about making the 2012 Arizona ruling meaningless. Wouldn’t a decision in favor of Kansas here eviscerate federal control over immigration? 

Schmidt had a ready answer.

SCHMIDT: We aren’t targeting folks because of their status. We are enforcing our employment, our—our identity theft laws, and we don’t want to give special exception to that to people because of their status.

Hughes, lawyer for the immigrants, tried to assure the justices that IRCA wouldn’t keep states from prosecuting identity fraud that results in a benefit like a drivers license or a credit card. It depends on the state’s theory of prosecution.

But that hair-splitting raised the ire of Justice Neil Gorusch as well as Justices Kavanaugh and Alito.

If the whole thing depends on that, it’d be easy to circumvent. Here’s an exchange between Hughes and Justice Gorsuch:

HUGHES: It was exclusively eligibility for employment that’s tethered to federal —

GORSUCH: So Kansas—will never make that mistake again, Mr. Hughes. And in every future case, they will say the benefit that the defendant is seeking is the opportunity to comply with our tax laws and our—our revenue laws. And—and that will be the end of that. So we are—we are deciding how many angels are dancing on the head of this pin? Is that what—is that what this case is about?

The liberal-leaning justices seemed more sympathetic to the unlawful immigrants, but most of the justices worried about thwarting state prosecutions for identity theft. 

It’s hard to guess an outcome on this one, but I’d guess a narrow ruling— or else even a DIG, dismissed as improvidently granted, because the facts here don’t lend themselves cleanly to a judicial solution.

This last case today is at its core an enormous bankruptcy proceeding. 

We’re talking about Puerto Rico. You might remember the headline news in the fall of 20-13. This from CNBC:

ANCHOR: …to assuage investors about concerns that have mounted about their $70 billion dollar debt load at this point..eventually maybe there’s as much as a 90 percent haircut when it comes to debt from Puerto Rico…

To deal with the crisis, Congress in 2016 authorized an Oversight Board to begin adjusting the debt, sort of like a bankruptcy case. 

But those board members aren’t accountable to anybody. And that’s the problem, according to challengers who don’t like the Oversight Board’s actions. Challengers include a hedge fund and a local union. 

The U-S Constitution in Article II, Section 2, Clause 2 (the Appointments Clause) empowers the President of the United States to nominate and appoint public officials, with the advice and consent of the Senate.

That didn’t happen here. So the Oversight Board can’t be legitimate, as far as the hedge fund and union are concerned. 

So the question for the court is how to characterize the Oversight Board: is it a federal agency whose members must be nominated by the president and confirmed by the Senate? Or under the authority of Congress to administer U-S territories? 

Former U-S Solicitor General Ted Olson represented those opposed to the board and argues that the Oversight Board definitely violates the Constitution because it is a federal agency. 

Justice Samuel Alito was a tad suspicious of the motivations involved. He mentions Aurelius. That’s the hedge fund.

ALITO: Mr. Olson, are you and your client here just to defend the integrity of the Constitution, or would one be excessively cynical to think that something else is involved here involving money? And, if so, what is it? What did the Board do that hurt your client?

OLSON: Well, with… aside from the constitutional right to an officer—

ALITO: Well, I mean, are you—are you and Aurelius here just as—as amici to defend the Constitution, or do you have some kind of a concrete grievance?

ALITO: The process is not complete, Justice Alito. The process is ongoing. My client is being subjected to a process that is governed by officials that were appointed in violation of the separation of powers.

Lawyer for the Oversight Board, Donald Verrilli, underscored that Congress used its legitimate power over the territories to create the Oversight Board, with three-year terms for members to insulate them from political maneuvering.

VERRILLI: The Constitution’s text, structure, and history and this court’s precedence all make clear that the proper focus in answering that question is the nature of the authority the board exercises.

And he argued the nature of that authority is local, not federal. Congress directed the Oversight Board to act in the interests of Puerto Rico, and that is what it is doing. 

The Oversight Board appealed this case from a federal appeals court that declared board members are federal officers, and that requires confirmation by the Senate. But the appeals court pointed out an easy fix: get the Senate to confirm what is already a de facto, functioning board. 

But short of that, Verilli for the Oversight Board did a vocal fist pump in his rebuttal, asking the court to look at the nature of the Oversight Board’s authority as local and territorial.

VERRILLI: So really it needs to be our test.  Our test is one that’s faithful to the text, it’s faithful to the history, it rests on principle, it avoids threats to home rule, and it’s administrable…This is not a hard case. This is exclusively territorial authority…but what you can be sure of…is that they are going to fight ratification by the Board tooth and nail for years and years and do everything possible…to get a different Board that will  accomplish their objectives. So that’s what will happen if we go down that path. And I would strongly urge the court not to do that…

My guess is that will carry the day, and the Oversight Board will survive to resolve the biggest municipal bankruptcy in American history.

And that’s this week’s Legal Docket.

The Supreme Court is shown in Washington. (AP Photo/J. Scott Applewhite)

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