Joseph Percoco, a longtime aide to former New York Governor Andrew Cuomo, and Steven Aiello, a real estate developer, were convicted in federal district court for their roles in two public corruption schemes. In the first scheme, Percoco accepted payments for his wife's sham employment in exchange for using his influence to secure a Power Purchase Agreement for an energy company. In the second, Percoco accepted payments to help a developer avoid a mandatory Labor Peace Agreement, even after he had temporarily left his official state position to manage the Governor's reelection campaign. The defendants appealed, challenging the jury instructions on the definition of 'official acts' and the legal theory that a non-employee could owe a fiduciary duty to the public.
The Second Circuit addressed two primary legal challenges. First, regarding the jury instruction, the court acknowledged that the district court's charge allowing conviction if Percoco accepted payments to act 'as opportunities arose' was erroneous under the Supreme Court's decision in McDonnell and the Second Circuit's clarification in United States v. Silver. The court held that honest-services fraud requires a commitment to take official action on a specific question or matter, not just a general expectation of influence. However, the court found this error harmless. The evidence showed that the defendants and Percoco had a clear, specific agreement to act on the Power Purchase Agreement and the Labor Peace Agreement. Because the 'specific matter' was uncontested and supported by overwhelming evidence, a properly instructed jury would have reached the same verdict. Second, the court addressed whether Percoco owed a fiduciary duty while he was technically not employed by the state, having moved to run the Governor's campaign. The defendants argued that the court's reliance on the 1982 decision United States v. Margiotta was invalid after the Supreme Court's McNally decision. The Second Circuit rejected this, reaffirming that Congress enacted the honest-services statute (18 U.S.C. § 1346) specifically to restore the pre-McNally caselaw, including Margiotta. The court held that a private citizen can owe a fiduciary duty if they 'dominate and control' governmental business and are 'relied upon' by officials. The evidence showed Percoco maintained his office, phone, and influence, and that government officials continued to rely on him for decisions even while he was on the campaign trail. Thus, the instruction was legally sound, and the evidence was sufficient to support the conviction.
The decision solidifies the Second Circuit's interpretation of honest-services fraud, confirming that the 'as opportunities arise' theory is permissible only when tied to a specific matter or question. It also reinforces the reach of federal corruption laws to private individuals who function as de facto government officials, ensuring that those who dominate state business cannot evade liability simply by lacking a formal title. The convictions stand, and the forfeiture of the bribes is upheld, signaling that sham employment arrangements used to conceal bribery are treated as inherently unlawful proceeds.
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