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Supreme Court sides with ex-Cuomo aide and Buffalo developer in disputes over corruption convictions

<i>Elizabeth Frantz/Reuters</i><br/>The Supreme Court sided with a former aide of then-New York Gov. Andrew Cuomo
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Elizabeth Frantz/Reuters
The Supreme Court sided with a former aide of then-New York Gov. Andrew Cuomo

By Ariane de Vogue, CNN Supreme Court Reporter

The Supreme Court on Thursday sided with a former aide of then-New York Gov. Andrew Cuomo, Joseph Percoco, who argued that a federal anti-bribery statute should not have been used to convict him.

The court’s opinion continues a recent trend of narrowing the government’s ability to prosecute defendants under certain public corruption statutes. In a separate case Thursday, the court also ruled in favor of a prominent Buffalo developer who was awarded a $750 million project to improve the city as part of an initiative put forward by Cuomo.

The man, Louis Ciminelli, was later convicted for taking part in rigging the bid process and property fraud. The justices reversed a lower court that had ruled against Ciminelli under a theory of law that the government later abandoned.

Both decisions were unanimous.

“They’re two additional data points of how hostile the current Court is to expansive interpretations of federal corruption and anti-bribery laws — and to aggressive white collar prosecutions by federal prosecutors,” said Steve Vladeck, CNN Supreme Court analyst and professor at the University of Texas School of Law.

“The stakes of these cases aren’t likely to be high, but the stakes of this broader pattern could be enormous — especially so long as Congress, which could clarify the reach of all of these statutes, continues to sit on the sidelines,” Vladeck added.

In recent years, the justices have narrowed the scope of the law in high-profile cases concerning Jeff Skilling, the former CEO of Enron, and former Virginia Gov. Robert F. McDonnell.

Honest services wire fraud statute

The Percoco case tested the scope of the “honest services” wire fraud statutes that make it a crime for public employees to defraud the government.

Percoco served as a senior aide to Cuomo from 2011 to 2016 except for several months in 2014 when he managed the reelection campaign. During that time, he informed others he intended to eventually return to government.

The government contended that even though he was working on the campaign, he still had access to his offices and continued to use them to conduct state business.

While on the campaign, he received $35,000 from a real estate developer to pressure a state agency concerning issues related to labor law. He was charged with honest services fraud.

But his lawyer contends that private citizens — who hold no elected office or government office — do not trigger the law because they do not owe any fiduciary duty to the public.

“When a public official accepts money to convince the government to do something, we call him a crook,” Yaakov M. Roth, a lawyer for Percoco, argued in court papers. “But when a private citizen accepts money to convince the government to do something, we call him a lobbyist.”

“Pressure counts only when one uses his official position for private gain,” he added.

A lawyer for the government said that Percoco had continued to have key access to internal government meetings and could be prosecuted under fraud statutes because he accepted the bribes as a “former, future and functional public official.” Solicitor General Elizabeth Prelogar told the justices that he did not have to have “formal employment”.

Justice Samuel Alito, in an opinion, said the instruction given to the jury that was meant to determine whether a private person may be convicted of honest services fraud was in error and “too vague.”

The jury was told that Percoco could be found guilty if it found that he “dominated and controlled any government business” and if “people working in the government actually relied on him because of a special relationship he had with the government.”

Alito added that the jury instructions needed more specificity. “Is it enough if an elected official almost always heeds the advice of a long-time political advisor?” he asked rhetorically. “Is it enough if an officeholder leans very heavily on recommendations provided by a highly respected predecessor, family member or old friend?”

“We conclude that this is not the proper test for determining whether a private person may be convicted of honest-services fraud, and we therefore reverse and remand for further proceedings,” Alito wrote.

The court’s decision sends the case back to the lower court and could lead to the reversal of Percoco’s conviction.

Percoco has other convictions against him, but the court was only considering one of those based on “honest services.”

“Right-to-control” theory

The second case the court decided Thursday dates back to 2012 when Cuomo, then a governor, announced an initiative to improve the city of Buffalo, New York.

The state partnered with a nonprofit to request bids. It ultimately awarded the $750 million project to LPCiminelli — a construction firm.

It was later revealed, however, that a board member at the nonprofit drafted the bid proposal in a way that favored Louis Ciminelli’s company. Ciminelli was charged under a federal wire-fraud statute which criminalizes the use of interstate wires for any scheme for obtaining money or property by means of false or fraudulent pretenses.

The 2nd US Circuit Court of Appeals upheld the conviction under a “right-to-control” theory that states property fraud occurs when a scheme deprives a victim of economic information necessary to make decisions.

Cimenelli challenged his conviction.

When the case arrived at the Supreme Court, the government effectively abandoned the “right-to-control” theory, and presented a new theory of “fraudulent inducement.”

In court, Cimenelli’s lawyer, Michael R. Dreeben, urged the justices to reverse the 2nd Circuit and order his client’s acquittal based on the fact that the government was no longer supporting the theory that was the basis of his conviction.

The Biden administration urged the justices not to reverse, but did distance itself from the 2nd Circuit opinion.

In a brief unanimous opinion penned by Justice Clarence Thomas, the court said that the lower court’s theory in the case could not serve as the basis for conviction under federal fraud statutes because the wire fraud statute “reaches only traditional property interests” and not the “right to valuable economic information.”

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