United States v. Percoco

• Decision Date: 08 February 2019
• Docket Number: 16-CR-776 (VEC)
• Parties: UNITED STATES OF AMERICA, v. JOSEPH PERCOCO and STEVEN AIELLO, Defendants.
• Court: U.S. District Court — Southern District of New York

UNITED STATES OF AMERICA, v. JOSEPH PERCOCO and STEVEN AIELLO, Defendants.

16-CR-776 (VEC)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

February 8, 2019

OPINION AND ORDER

VALERIE CAPRONI, United States District Judge:

Defendants Joseph Percoco and Steven Aiello were convicted at trial of bribery and related corruption offenses. They have moved for bail pending appeal, pursuant to 18 U.S.C. § 3143(b). For the following reasons, the motions are DENIED. Percoco and Aiello must surrender to begin serving their sentences of imprisonment no later than March 1, 2019 at 2:00 p.m. See Order (Jan. 7, 2019), Dkt. 974; Aiello Judgment (Dec. 11, 2018), Dkt. 946; Percoco Judgment (Sept. 25, 2018), Dkt. 867.

TABLE OF CONTENTS

BACKGROUND ............................................................................................................................ 4

I. Overview ................................................................................................................. 4

II. The January Trial .................................................................................................... 5

A. Factual Background .................................................................................... 5

B. Procedural Background ............................................................................... 7

III. The June Trial ......................................................................................................... 8

DISCUSSION ................................................................................................................................. 9

I. The Applicable Law ................................................................................................ 9

A. Standard for Bail Pending Appeal .............................................................. 9

B. The Relevant Elements of Federal-Program Bribery and Honest Services Wire Fraud Conspiracy .............................................................. 11

C. McDonnell v. United States ...................................................................... 12

II. The Question Whether McDonnell Overruled the So-Called "Retainer Theory" of Bribery Does Not Warrant Bail Pending Appeal ............................... 13

A. Introduction ............................................................................................... 13

B. The Court's Jury Instructions .................................................................... 14

C. Defendants' Argument Does Not Raise a Substantial Question of Law or Fact ....................................................................................................... 15

III. Defendants' Arguments Relating to the "Duty of Honest Services" Element of Count Ten Do Not Warrant Bail Pending Appeal ............................................ 17

A. The Court Correctly Instructed the Jury on the Duty of Honest Services ..................................................................................................... 17

1. The Court's Jury Instruction ......................................................... 17

2. The Defendants' Argument ........................................................... 18

3. A Person May Owe a Duty of Honest Services to the Public if He Exercises "De Facto Control" over the Government .............. 20

B. There Was Sufficient Evidence that Percoco Owed a Duty of Honest Services to the Public While He Worked on the Campaign ..................... 23

IV. The Question Whether Official Acts Can Be Performed Only by State Officials Does Not Warrant Bail Pending Appeal ................................................ 28

A. Introduction ............................................................................................... 28

B. The Defense's McDonnell Argument Does Not Raise a Substantial Question of Law or Fact ........................................................................... 291. The Federal Bribery Statutes, Not McDonnell, Determine Who Can Be Prosecuted for Corruption Offenses ................................. 29

2. McDonnell's Definition of "Official Action" Does Not Limit the Class of Persons to Whom the Bribery Laws Apply .............. 33

3. The Court's May 10 Opinion Does Not Compel a Different Conclusion .................................................................................... 39

C. Any Error in Defining the Class of Persons Capable of Performing Official Actions Would Be Harmless as to Counts Nine and Eleven, Percoco's Convictions Relating to the CPV Scheme ............................... 41

V. The Question Whether There Was Sufficient Evidence on Counts Nine and Eleven Does Not Warrant Bail Pending Appeal ................................................... 44

A. The Applicable Law .................................................................................. 44

B. Background ............................................................................................... 45

1. The Origins of the CPV Scheme ................................................... 45

2. The PPA ........................................................................................ 47

3. The Reciprocity Agreement .......................................................... 49

C. There Was Sufficient Evidence that Percoco Agreed to Perform Official Acts as Part of the CPV Scheme ................................................. 50

VI. Concluding Note ................................................................................................... 53CONCLUSION ............................................................................................................................. 54BACKGROUND¹

I. Overview

This case involves three corrupt schemes: one involving Competitive Power Ventures, Inc. ("CPV"), a national energy company (the "CPV Scheme"); one involving COR Development Company, LLC ("COR Development" or "COR"), a real estate development company based in Syracuse, New York (the "COR Development Scheme"); and one involving Fort Schuyler Management Corporation ("Fort Schuyler"), a nonprofit affiliate of the State University of New York Polytechnic Institute (the "Fort Schuyler Scheme"). See generally Second Superseding Indictment ("S2 Indictment"), Dkt. 321; Compl., Dkt. 1. The CPV Scheme and the COR Development Scheme were the subject of a trial that began on January 22, 2018 (the "January Trial"), and the Fort Schuyler Scheme was the subject of a trial that began on June 18, 2018 (the "June Trial"). Percoco was a defendant only in the January Trial. Aiello was a defendant in both trials, but his convictions relating to the June Trial are not at issue in the present motion, as this Court has already ruled that bail pending appeal is appropriate for all convictions arising out of the June Trial. See Order (Jan. 4, 2019), Dkt. 973; Kaloyeros Sentencing Tr. (Dec. 11, 2018), Dkt. 961, at 48-50; Aiello Sentencing Tr. (Dec. 7, 2018), Dkt. 959, at 37-42; Ciminelli Sentencing Tr. (Dec. 3, 2018), Dkt. 948, at 43-45, 47.²

II. The January Trial

A. Factual Background

Percoco, Aiello, Joseph Gerardi, and Peter Galbraith Kelly, Jr. were tried in the January Trial. Percoco was a high-level official in the office of New York Governor Andrew Cuomo. See Mem. Opinion and Order (the "May 10 Opinion"), Dkt. 648, at 2-3, available at 317 F. Supp. 3d 822, 825 (S.D.N.Y. May 10, 2018).³ As a longtime friend of Cuomo, Percoco was one of the most powerful members of the Governor's administration. See id.; see also Tr. 459-64, 519-21, 1104, 1118-35, 2092, 2131-32, 2197-2201, 2414-15. Between January 2011 and April 2014, Percoco served as Executive Deputy Secretary to the Governor. See May 10 Opinion, 317 F. Supp. 3d at 825 (slip op. at 2-3). In April 2014, he resigned from the Governor's office to serve as Cuomo's campaign manager. See id. Although Percoco was not a government employee while he worked on the campaign, he continued to wield tremendous influence over state government during that time. See id.; see also Tr. 582, 1199-1200, 1232-35, 2098, 2379-80, 2414-15, 3736-37. In December 2014, after Cuomo was re-elected, Percoco returned to his prior position in the Governor's office. See May 10 Opinion, 317 F. Supp. 3d at 826 (slip op. at 4). Percoco remained in that position until early 2016, when he resigned to take a job in the private sector. See id. at 825 (slip op. at 2); see also Tr. 441-44, 610-11, 2202-03, 2406.

In both the CPV and the COR Development Schemes, Percoco agreed with executives of those companies to accept bribe payments in exchange for the promise of official action as the opportunity arose. See Tr. 2089-2102. Todd Howe, a corrupt lobbyist and a longtime friend of Percoco and other officials in the Governor's office, was a co-conspirator in both schemes;Howe testified as a cooperating witness in the January Trial. See id. at 1259-60, 1317-18, 1424-28, 2089-2102, 2116-21, 2127-32.

The CPV Scheme centered around an illicit agreement between Percoco and Kelly, who was an executive at CPV. See id. at 2089-92, 2135-40, 2242-52. Between 2012 and 2016, Percoco accepted approximately $285,000 in payments from CPV, funneled through a "low-show" job for his wife. See id. at 2135-40, 2242-52; GX-1602, GX-1603-N, GX-1604D. In exchange, Percoco pressured state officials to approve two agreements in order to benefit CPV: a Power Purchase Agreement ("PPA"), which would have facilitated financing for a power plant CPV wanted to build by locking in the state as a customer of the plant; and a Reciprocity Agreement, an interstate compact between New York and New Jersey that allowed CPV to purchase low-cost emissions credits across state lines. See Tr. 1531-55, 1579-98, 1880-83; 2138-39, 2320-70, 2243; GX-77, GX-81, GX-82, GX-85, GX-284, GX-1708. Although Percoco was not successful in ensuring that CPV obtained the PPA, he was successful in securing the Reciprocity Agreement. See Tr. 1882-83, 2337-39, 2353, 2369-70, 2404-07; GX-284, GX-425, GX-1017. Percoco's actions...