Joseph Percoco, a longtime aide to New York Governor Andrew Cuomo, and Steven Aiello, a real estate developer, were convicted in the Southern District of New York for conspiring to commit honest-services wire fraud and soliciting bribes. The government alleged two schemes: one involving an energy company, Competitive Power Venture (CPV), and another involving Aiello's COR Development Company. In the CPV scheme, Percoco accepted payments for his wife's sham employment in exchange for using his influence to secure a Power Purchase Agreement and a Reciprocity Agreement. In the COR Development scheme, Aiello paid Percoco to help avoid a costly Labor Peace Agreement. Percoco was convicted on counts related to both schemes, while Aiello was convicted on the COR Development scheme. The defendants appealed, challenging the jury instructions on the 'as opportunities arise' theory and the scope of fiduciary duty for non-employees, as well as the sufficiency of the evidence and the forfeiture order.
The Second Circuit addressed two primary legal issues. First, regarding the jury instruction, the court acknowledged that the district court's instruction allowing conviction if Percoco accepted payment to act 'as opportunities arose' fell short of the standard clarified in United States v. Silver and McDonnell v. United States. These precedents require that the official promise to take action on a specific, focused question or matter. However, the court found this error harmless. The evidence overwhelmingly showed that the payments were explicitly linked to specific matters: the Power Purchase Agreement, the Reciprocity Agreement, and the Labor Peace Agreement. The jury was presented with clear evidence of a quid pro quo on these concrete issues, meaning a properly instructed jury would have reached the same verdict. Second, the court addressed whether a non-employee could owe a fiduciary duty. The defendants argued that because Percoco was not a formal state employee when he took actions for COR Development, he could not be liable. The court rejected this, reaffirming its decision in United States v. Margiotta. The court held that under 18 U.S.C. § 1346, a person who is not technically employed by the government may still owe a fiduciary duty if they dominate and control governmental business and are relied upon by government officials due to a special relationship. The evidence showed Percoco maintained significant control over state business and was relied upon by officials even while managing the Governor's campaign. The court also rejected arguments that the indictment was constructively amended or that the evidence was insufficient, finding that the indictment provided notice of the core criminality and the evidence supported the jury's findings.
The decision solidifies the Second Circuit's interpretation of honest-services fraud, confirming that the 'as opportunities arise' theory is valid only when tied to a specific matter. It also reinforces the 'Margiotta' standard, ensuring that individuals who function as government officials through dominance and reliance can be held criminally liable even without a formal employment contract. The ruling clarifies that sham jobs used to conceal bribes are treated as proceeds of inherently unlawful activity, subject to full forfeiture without deduction for any nominal services rendered.
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