Joseph Percoco, a longtime aide to New York Governor Andrew Cuomo, and Steven Aiello, a real estate developer, were convicted in federal district court for conspiring to commit honest-services wire fraud and soliciting bribes. The government alleged two distinct schemes: the first involved Percoco using his influence to secure a Power Purchase Agreement and a Reciprocity Agreement for an energy company, Competitive Power Venture (CPV), in exchange for payments routed to his wife; the second involved Percoco, while temporarily managing the Governor's campaign, using his influence to waive a Labor Peace Agreement requirement for Aiello's company, COR Development, in exchange for payments. Percoco and Aiello appealed, challenging the jury instructions on the definition of 'official acts' and the scope of fiduciary duty, arguing that Percoco was not a public official during the second scheme and that the instructions were too broad.
The court addressed two primary legal issues. First, regarding the jury instruction, the court acknowledged that instructing the jury that a defendant could be liable for taking official action 'as opportunities arise' fell short of the standard set by the Supreme Court in McDonnell and clarified by the Second Circuit in United States v. Silver. Under Silver, a defendant must promise to take official action on a specific and focused question or matter. However, the court found this error harmless. The evidence showed that in both the CPV and COR Development schemes, the payments were explicitly linked to specific matters: the Power Purchase Agreement, the Reciprocity Agreement, and the Labor Peace Agreement. The jury could not have reasonably concluded that the payments were for general goodwill rather than specific official acts. Second, the court addressed whether Percoco owed a fiduciary duty while managing the Governor's campaign, a period when he was not formally employed by the state. Relying on United States v. Margiotta, the court held that a formal employment relationship is not a rigid prerequisite for honest-services fraud. Instead, a private citizen owes a fiduciary duty if they dominate and control governmental business and are actually relied upon by government officials due to a special relationship. The evidence demonstrated that Percoco maintained significant control over state operations, retained his office and phone, and was relied upon by state officials to make decisions even while on the campaign trail. The court rejected arguments that McDonnell or constitutional concerns required overturning Margiotta, noting that Congress enacted 18 U.S.C. § 1346 to restore the pre-McNally caselaw protecting the intangible right of honest services.
The decision solidifies the Second Circuit's interpretation of honest-services fraud, confirming that the 'as opportunities arise' theory remains valid only when tied to a specific, focused matter. It reinforces the Margiotta doctrine, ensuring that individuals who functionally control government business can be held liable for corruption even if they lack a formal government title. The ruling means that Percoco and Aiello must serve their prison terms and pay their forfeitures, with no new trial required. The decision leaves open the question of how 'dominance and control' is measured in future cases involving campaign staff or advisors, but sets a clear precedent that reliance by government officials is the key factor.
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