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 schemes involving honest-services wire fraud and solicitation of gratuities. The government alleged that Percoco accepted payments in exchange for using his influence to secure government contracts and favorable regulatory decisions for the payors. Specifically, Percoco accepted payments to help an energy company, Competitive Power Venture, secure a Power Purchase Agreement, and to help Aiello's company, COR Development, avoid a required Labor Peace Agreement. The jury found Percoco guilty of conspiracy to commit honest-services wire fraud and solicitation of gratuities, and Aiello guilty of conspiracy to commit honest-services wire fraud. On appeal, the defendants challenged the jury instructions, arguing they were too broad regarding the definition of an 'official act' and that Percoco owed no fiduciary duty when he was technically out of office managing the Governor's campaign.
The Second Circuit addressed two primary legal challenges. First, the court analyzed the jury instruction that allowed conviction if Percoco accepted payment to take official action 'as opportunities arise.' Citing United States v. Silver and the Supreme Court's decision in McDonnell v. United States, the court clarified that honest-services fraud requires a commitment to take official action on a 'particular question or matter,' not a vague promise to act whenever opportunities arise. The court agreed the instruction was technically erroneous but applied the harmless error standard. It found that the evidence overwhelmingly showed the defendants agreed to act on specific matters: the Power Purchase Agreement and the Reciprocity Agreement in the first scheme, and the Labor Peace Agreement in the second. Because the jury would have convicted even with a proper instruction, the error did not warrant reversal. Second, the court addressed whether Percoco owed a fiduciary duty to the public while he was temporarily managing the Governor's campaign and not formally employed by the state. The defendants argued that without a formal title, he could not be liable. The court rejected this, reaffirming its decades-old decision in United States v. Margiotta. The court held that 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 'actually relied on' by government officials due to a special relationship. The evidence showed Percoco retained his office, phone, and influence, and that government officials continued to rely on him to make decisions. Consequently, the court found the instruction on fiduciary duty was correct and the evidence sufficient to support the conviction.
The decision stands as a significant affirmation of the reach of federal anti-corruption statutes into the realm of informal political influence. It clarifies that while the 'as opportunities arise' theory of bribery is too vague to support a conviction, prosecutors can still secure convictions if they prove a specific quid pro quo on a particular matter. Furthermore, it solidifies the Margiotta standard, ensuring that individuals who function as de facto government officials, even without a formal title, remain subject to honest-services fraud liability if they control government business. The judgment is affirmed without remand, meaning the convictions and forfeiture orders remain in full effect.
Podcast (federal-narrative-summaries): Play in new window | Download