United States v. Percoco

• Decision Date: 11 December 2017
• Docket Number: 16-CR-776 (VEC)
• Parties: UNITED STATES OF AMERICA, v. JOSEPH PERCOCO, a/k/a "Herb," ALAIN KALOYEROS, a/k/a "Dr. K," PETER GALBRAITH KELLY, JR., a/k/a "Braith," STEVEN AIELLO, JOSEPH GERARDI, LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, Defendants.
• Court: U.S. District Court — Southern District of New York

UNITED STATES OF AMERICA, v. JOSEPH PERCOCO, a/k/a "Herb," ALAIN KALOYEROS, a/k/a "Dr. K,"PETER GALBRAITH KELLY, JR., a/k/a "Braith," STEVEN AIELLO, JOSEPH GERARDI,LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, Defendants.

16-CR-776 (VEC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

December 11, 2017

ORDER AND OPINION

VALERIE CAPRONI, United States District Judge:

The allegations in this matter, which are captured in a 79-page Complaint and a 41-page Superseding Indictment, encompass a range of federal crimes including Hobbs Act extortion, honest services wire fraud, federal funds bribery, and false statements. See Complaint ("Compl.") [Dkt. 1]; Second Superseding Indictment ("S2" or "the Indictment") [Dkt. 321]. Defendants include individuals who were high-ranking state officials as well as private citizens, and collectively they have filed dozens of motions in advance of trial. These motions challenge, inter alia, the sufficiency of the Indictment, the constitutionality of a criminal statute, the joinder of the Defendants in their respective trials, the trials' venue in the Southern District of New York, the prosecution's conduct and pre-indictment public statements, and the lawfulness of certain searches.

These motions are largely without merit. As discussed below, the Court grants only portions of one of the Defendants' motions, primarily to ensure that the Government complies with the pretrial obligations it has already acknowledged that it bears. The balance of the motions misread or overstate the law, or are an unsuccessful attempt to evade the relatively low thresholds that apply at the pretrial stage of a prosecution.

I. BACKGROUND

The Indictment alleges an overlapping set of crimes involving eight Defendants: Joseph Percoco, formerly a senior aide to Andrew Cuomo, New York's Governor; Alain Kaloyeros, who formerly served as the head of SUNY Polytechnic Institute ("SUNY Poly") and as a board member of Fort Schuyler Management Corporation ("Fort Schuyler"), a SUNY Poly affiliate; Steven Aiello and Joseph Gerardi (the "Syracuse Defendants"), who founded a Syracuse-based real estate development company that received lucrative state contracts; Louis Ciminelli, Michael Laipple, and Kevin Schuler (the "Buffalo Defendants"), who were senior executives at a Buffalo-based real estate development company that also received lucrative state contracts; and Peter Kelly, an officer at an energy company, who was responsible for public and governmental affairs related to power plant development. S2 ¶¶ 3-4, 8, 13-15, 16-19, 20-21. The schemes also involved Todd Howe, a lobbyist and consultant who had connections to SUNY Poly and the Governor's office and who was a paid consultant for the Syracuse Defendants', Buffalo Defendants', and Kelly's companies. S2 ¶¶ 5, 9-12.

According to the Indictment, Howe worked with the Syracuse Defendants, Buffalo Defendants, and Kaloyeros to manipulate and tailor Fort Schuyler's Request for Proposal ("RFP") process to select preferred developers for SUNY Poly development projects. After providing the Syracuse and Buffalo Defendants with advance copies of the RFPs, Kaloyeros andHowe inserted qualifications into the RFPs that were favorable to these Defendants. That manipulation set up their companies for selection as preferred developers, which led to development contracts that were free from competitive bidding. S2 ¶¶ 22-27.

Additionally, Howe worked with the Syracuse Defendants and Kelly to obtain illicit favors from Percoco. Kelly allegedly gave Percoco's wife a low-show job in exchange for favorable action related to emissions credits and a power purchase agreement. Howe also allegedly arranged for the Syracuse Defendants to bribe Percoco in exchange for favorable treatment, including actions related to a labor union agreement, the release of state development funding, and a raise for Aiello's son, who worked in Governor Cuomo's office. S2 ¶¶ 28-36.

II. DISCUSSION

A. Motions to Dismiss the Indictment

The Defendants seek to dismiss the Indictment on various grounds. They argue that: 18 U.S.C. § 666, one of the criminal statutes with which they are charged, is unconstitutional; the Indictment fails to sufficiently charge certain legal theories; and the Indictment fails to align the factual allegations with the elements of the respective criminal statutes. Each argument is addressed in turn below.

A defendant challenging the sufficiency of an indictment on a motion to dismiss faces a high hurdle. Pursuant to Federal Rule of Criminal Procedure 7, an indictment need only contain "a plain, concise, and definite written statement of the essential facts constituting the offense charged . . . ." "An indictment is sufficient if it 'first, contains the elements of the offense charged and fairly informs a defendant of the charge against which he must defend, and, second, enables him to plead an acquittal or conviction in bar of future prosecutions for the same offense.'" United States v. Stringer, 730 F.3d 120, 124 (2d Cir. 2013) (quoting Hamling v.United States, 418 U.S. 87, 117 (1974)); see also United States v. Resendiz-Ponce, 549 U.S. 102, 108 (2007). "[T]o satisfy the pleading requirements of Rule 7(c)(1), an indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime." Stringer, 730 F.3d at 124 (quoting United States v. Pirro, 212 F.3d 86, 92 (2d Cir. 2000)) (internal quotation marks omitted).

"'Unless the government has made what can fairly be described as a full proffer of the evidence it intends to present at trial[,] the sufficiency of the evidence is not appropriately addressed on a pretrial motion to dismiss an indictment.'" United States v. Perez, 575 F.3d 164, 166-67 (2d Cir. 2009) (quoting United States v. Alfonso, 143 F.3d 772, 776-77 (2d Cir. 1998)) (alteration omitted). Instead, the indictment's allegations are taken as true, and the Court reads the indictment in its entirety. United States v. Hernandez, 980 F.2d 868, 871 (2d Cir. 1992); United States v. Goldberg, 756 F.2d 949, 950 (2d Cir. 1985).

1. 18 U.S.C. § 666 Is Constitutional

Percoco and Kelly challenge the constitutionality of the federal funds bribery statute, 18 U.S.C. § 666, in light of the Supreme Court's decision in United States v. McDonnell, 136 S. Ct. 2355 (2016). More specifically, they claim that the McDonnell Court's construction of the term "official act" in 18 U.S.C. § 201(a)(3) was motivated by constitutional concerns that implicitly require all federal bribery statutes to contain an "official act" element. Because section 666 on its face does not require an "official act," they contend, it is unconstitutionally vague and overbroad and violates principles of federalism.¹

A statute is unconstitutionally vague if it "fails to provide people of ordinary intelligence a reasonable opportunity to understand what conduct it prohibits [or] if it authorizes or even encourages arbitrary and discriminatory enforcement." Farrell v. Burke, 449 F.3d 470, 485 (2d Cir. 2006) (quoting Hill v. Colorado, 530 U.S. 703, 732 (2000)) (internal quotation marks omitted).

Relatedly, a statute is unconstitutionally overbroad if it prohibits constitutionally-protected conduct. Farrell, 449 F.3d. at 498-99 (quoting Grayned v. City of Rockford, 408 U.S. 104, 114 (1972)). "In order to prevail on an overbreadth challenge, the overbreadth of a statute must not only be real, but substantial as well, judged in relation to the statute's plainly legitimate sweep." Id. at 499 (quoting Broadrick v. Oklahoma, 413 U.S. 601, 615 (1973)) (internal quotation marks omitted).

Section 666 criminalizes bribery relating to organizations that receive more than $10,000 annually in federal funds. See 18 U.S.C. § 666. In particular, it prohibits corruptly soliciting, accepting, or agreeing to accept, and corruptly giving, offering, or agreeing to give, "anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving any thing of value of $5,000 or more . . . ." Id. The statute is intended to "protect the integrity of the vast sums of money distributed through Federal programs from theft, fraud, and undue influence by bribery." Sabri v. United States, 541 U.S. 600, 606 (2004) (internal quotation marks and citation omitted).

Defendants' argument that McDonnell renders 18 U.S.C. § 666 unconstitutional is rooted in a misreading of McDonnell. The Court granted certiorari in McDonnell "to clarify the meaning of 'official act'" in the federal bribery statute, 18 U.S.C. § 201(a)(3). 136 S. Ct. at2361, 2365. During the trial of Virginia's Governor McDonnell and his wife, that statutory definition had been used, per the parties' agreement, in the jury instructions for Hobbs Act extortion and honest services fraud. Id. at 2365-67. Seeking to determine the proper interpretation of "official act," the Court "adopt[ed] a more bounded interpretation [such that] setting up a meeting, calling another public official, or hosting an event [would] not, standing alone, qualify as an 'official act.'" Id. at 2368. The Court, considering the text of the statute and its own precedents, as well as constitutional concerns related to constituent representation and federalism, defined an "official act" as

[A] decision or action on a "question, matter, cause, suit, proceeding or controversy." The "question, matter, cause, suit, proceeding or controversy" must involve a formal exercise of governmental power that is similar in nature to a lawsuit before a court, a determination before an agency, or a hearing before a committee. It must also be something specific and focused that is "pending" or "may by law be brought" before a public official.

Id. at 2371-72, 73. The Court vacated the McDonnells' convictions and remanded the case in light of...