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 schemes involving honest-services wire fraud and bribery. Percoco, while serving as a high-level official and later as a campaign manager, accepted payments in exchange for using his influence to secure government contracts and favorable regulatory decisions for the payors. The schemes involved an energy company, Competitive Power Venture, and Aiello's real estate firm, COR Development. The defendants appealed, challenging the jury instructions on the definition of 'official acts' and the theory that a non-employee could owe a fiduciary duty to the public. They argued that the instructions were too broad and that the evidence did not support the conviction for acts committed while Percoco was technically out of office.
The court addressed two primary legal issues. First, regarding the 'as opportunities arise' instruction, the court acknowledged that under recent precedents like United States v. Silver, the instruction was imprecise because it failed to require a specific commitment to act on a particular question or matter. However, the court applied a harmless error analysis, concluding that the evidence overwhelmingly showed that the defendants agreed to act on specific matters—the Power Purchase Agreement and the Labor Peace Agreement. The jury would have reached the same verdict even with a properly instructed jury. Second, the court addressed whether Percoco owed a fiduciary duty while not formally employed. Relying on United States v. Margiotta, the court reaffirmed that a person who is not technically employed by the government may owe a fiduciary duty if they dominate and control governmental business and are relied upon by officials. The court rejected arguments that the Supreme Court's decision in McDonnell v. United States or constitutional concerns required overturning this decades-old precedent. The court found that Percoco maintained significant control and influence over state business during his time as a campaign manager, satisfying the Margiotta test.
The decision affirms the convictions and forfeiture orders against Percoco and Aiello without remand. It solidifies the Second Circuit's application of the Margiotta fiduciary-duty theory in the public sector, ensuring that individuals who functionally control government business can be held liable for honest-services fraud even without formal employment. It also clarifies that while jury instructions must specify a particular matter for 'as opportunities arise' theories, convictions will stand if the evidence of a specific quid pro quo is overwhelming.
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