Joseph Percoco, a longtime aide to former 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 distinct schemes: the CPV scheme, where Percoco accepted payments for his wife's consulting work in exchange for using his influence to secure a Power Purchase Agreement for an energy company, and the COR Development scheme, where Aiello paid Percoco to pressure state officials to waive a Labor Peace Agreement requirement. The district court instructed the jury that Percoco could be liable even if he was not a formal state employee, provided he dominated government business, and that he could be convicted if he accepted payments to take official action 'as opportunities arose.' Percoco and Aiello appealed, challenging the jury instructions, the sufficiency of the evidence, and the constructive amendment of their indictments.
The Second Circuit addressed two primary legal issues. First, regarding the 'as opportunities arise' instruction, the court acknowledged that under its recent decision in United States v. Silver, such an instruction is technically flawed because it fails to require the government to prove a promise to take official action on a specific question or matter. However, the court applied the harmless error doctrine, concluding that the evidence overwhelmingly demonstrated that Percoco and Aiello agreed to act on specific, focused matters: the Power Purchase Agreement and the Labor Peace Agreement. The court found that a rational jury would have convicted the defendants even with a properly instructed jury, as the quid pro quo was clear and concrete. Second, the court addressed whether a non-employee could owe a fiduciary duty to the public. The defendants argued that the Supreme Court's decision in McDonnell v. United States and the earlier McNally v. United States decision limited the scope of honest-services fraud to formal government employees. The court rejected this, reaffirming its precedent in United States v. Margiotta. The court reasoned that Congress enacted 18 U.S.C. § 1346 to restore the pre-McNally doctrine of honest-services fraud, which included the Margiotta theory. The court held that the statute covers individuals who, while not formally employed, dominate and control governmental business and are relied upon by government officials due to a special relationship. The court found that Percoco, despite temporarily leaving his official post to manage the Governor's campaign, maintained significant control over government business and was relied upon by state officials, thus satisfying the fiduciary duty requirement.
The decision affirms the convictions and sentences of Percoco and Aiello, maintaining their prison terms and forfeiture orders. It clarifies that the 'as opportunities arise' theory of bribery is permissible only when the official promises to act on a specific matter, but errors in this instruction will not automatically reverse convictions if the evidence of a specific quid pro quo is overwhelming. Furthermore, the ruling solidifies the 'Margiotta' standard in the Second Circuit, ensuring that individuals who function as de facto government officials can be held liable for honest-services fraud even without a formal employment contract, provided they exercise dominance and control over government business.
Podcast (federal-narrative-summaries): Play in new window | Download