United States v. Percoco

• Decision Date: 10 May 2018
• Docket Number: 16-CR-776 (VEC)
• Citation: 317 F.Supp.3d 822
• 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

317 F.Supp.3d 822

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, S.D. New York.

Signed May 10, 2018

Janis Echenberg, Robert Lee Boone, David Zhou, Matthew D. Podolsky, United States Attorney's Office, New York, NY, for Plaintiff.

Andrew David Gladstein, Barry A. Bohrer, Gary Stein, Nicole Panayota Geoglis, Abigail Flynn Coster, Schulte Roth & Zabel LLP, Michael Lloyd Yaeger, Cahill Gordon & Reindel LLP, Jeffrey Adam Novack, Michael Campion Miller, Reid Weingarten, David Hirsch, Katherine Moira Dubyak, Michael Gerard Scavelli, Steptoe & Johnson, LLP, Daniel M. Gitner, Rachel S. Berkowitz, Samantha Jordan Reitz, Lankler Siffert & Wohl LLP, Deborah E. Landis, U.S. Attorney's Office, Avni Praful Patel, Jacob Samuel Gardener, Milton L. Williams, Jr., Walden Macht & Haran LLP, Jessica Ann Masella, John Michael Hillebrecht, DLA Piper US LLP, Paul Lewis Shechtman, Bracewell LLP, Jun Xiang, New York, NY, Stephen R. Coffey, Pamela A. Nichols, Scott Wendtworth Iseman, O'Connell & Aronowitz, P.C., Albany, NY, Spencer Leeds Durland, Daniel C. Oliverio, Timothy William Hoover, Hodgson Russ LLP, Caitlin Higgins, Terrence M. Connors, James William Grable, Jr., Nicholas A. Romano, Connors LLP, Buffalo, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

VALERIE CAPRONI, United States District Judge:

On March 13, 2018, a jury returned a verdict in the trial of Defendants Joseph Percoco, Peter Galbraith Kelly, Jr., Steven Aiello, and Joseph Gerardi (the "January Defendants").¹ Prior to charging the jury, the Court dismissed one count of extortion under color of official right as to Percoco, pursuant to Federal Rule of Criminal Procedure 29(a). See Order (Feb. 28, 2015), Dkt. 515. This opinion explains the reasons for the Court's ruling.

BACKGROUND

I. Facts²

The Government charged Percoco with engaging in two extortion schemes: one related to an energy company, Competitive Power Ventures ("CPV"), and the other related to a real estate company, COR Development Company LLC ("COR Development" or "COR"). See Complaint, Dkt. 1; Second Superseding Indictment (Sept. 19, 2017) ("S2 Indictment"), Dkt. 321. Only the scheme involving COR is relevant to this decision.

Until 2016, Percoco was a top aide to the Governor of New York, Andrew Cuomo. See Tr. 441–43. Percoco was a longtime friend of Cuomo, having served on Cuomo's staff when Cuomo was New York State's Attorney General and the U.S. Secretary of Housing and Urban Development. Tr. 459, 496–97, 2130–32, 3185, 3646.³ Under Andrew Cuomo, Percoco served as Executive Deputy Secretary in the Governor's office, also known as the Executive Chamber. See Tr. 443, 1103–05. In that position, Percoco oversaw numerous divisions within the Executive Chamber, including the divisions responsible for operations, appointments, and labor relations. Tr. 441–42, 457–58, 1103–05, 1119–20, 1248–49. By virtue of his position and his relationship to Cuomo, Percoco was known to be one of the most powerful members of the Cuomo administration. See Tr. 1119–20, 1183–85, 1231–32, 2092, 2098, 2197, 3185.

In April 2014, Percoco left state employment to work full time on Cuomo's reelection campaign. See GX-1206; SYR-3832; Tr. 444, 573–75, 912–14, 1016, 1185.⁴ Although he no longer held an official position, Percoco continued to use his office and telephone in the Executive Chamber, and he continued to exercise influence over numerous state projects, operations, and personnel. See, e.g. , GX-571, GX-669, GX-676, GX-1507, GX-1701, GX-1702; Tr. 1127–28, 1231–35, 1249–52, 2379–80, 2410–17, 2535–37, 4964–68. According to cooperating witness Todd Howe, "regardless of whether [Percoco] was [on] the campaign ... he had the ability to pick up the phone and get things done." Tr. 2098.

In the summer of 2014, Empire State Development ("ESD"), a state agency, told COR that the company would need to enter into a "labor peace agreement" ("LPA") in order to receive a state grant to help finance a project that COR was developing in the Syracuse Inner Harbor area. See GX-513, GX-551; Tr. 643–46, 660–61, 2533–34. Because COR believed that having an LPA would make the project more costly, Aiello and Gerardi, two executives at COR, sought assistance from Percoco to reverse ESD's decision to require the LPA. See GX-551, GX-556A, GX-1706. In late July 2014, Aiello emailed Howe, who was a consultant for COR, asking, "[I]s there any way [Percoco] can help us with this issue while he is off the 2nd floor [i.e. , not employed by the Governor's office] working on the Campaign[?]" GX-550. Less than two weeks later, COR paid Percoco $15,000, routed through Howe. GX-1401I, GX1420H, GX-1606A; Tr. 2098–99, 2479–80.⁵ Howe, Aiello, Gerardi, and Percoco exchanged a number of emails about the LPA throughout the summer and fall of 2014. See, e.g. , GX-1707 (collecting emails). In October 2014, COR paid Percoco another $20,000, again routed through Howe. GX-1401J, GX-1420L, GX-1606B; Tr. 2098–99, 2483–84.

In early December 2014, Gerardi reached out to Percoco through Howe because ESD was continuing to press COR to enter into an LPA. See GX-583, GX-586, GX-588, GX-1706. Approximately one hour later, Percoco called Andrew Kennedy, an employee in the Governor's office, and told Kennedy to stop ESD from requiring COR to enter into the LPA. See GX-1706; Tr. 475–76, 1272–76. Kennedy subsequently contacted an official at ESD, causing a flurry of calls and emails among the agency's staff. See GX-1706; Tr. 682–85, 1274–76. The next day, ESD told COR that it would no longer require an LPA for the project. See GX-590, GX-1706; Tr. 685–86.

A few days later, Percoco returned to state employment. See GX-1206; Tr. 444, 1016. Subsequently, in mid-2015, Percoco pressured state officials to release funds that had been allocated to one of COR's projects, see GX-1703, and, later that year, he secured a raise for Aiello's son, who worked in the Executive Chamber, see GX-1704.

II. Procedural History

Before the case was submitted to the jury, the Court asked the parties to address whether Count Eight,⁶ which charged Percoco with extortion under color of official right, 18 U.S.C. § 1951, in relation to the COR Development scheme, must be dismissed because Percoco did not hold any official position at the time that he received payments from COR Development. Tr. 3689–90. The Court entertained numerous arguments on this question in the following days. See Tr. 3985–90, 4228–46, 5489–5502, 5740–61; Percoco Ltr. (Feb. 19, 2018), Dkt. 490; Gov. Ltr. (Feb. 20, 2018), Dkt. 494. At the close of all of the evidence, the Court dismissed Count Eight pursuant to Rule 29(a) and indicated that a written opinion would follow. See Order (Feb. 28, 2018), Dkt. 515; Tr. 5757.⁷

DISCUSSION

I. Legal Standard

Under Rule 29(a), a court must "enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." Fed. R. Crim. P. 29(a). "[T]he relevant question is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt." United States v. Taylor , 475 Fed.Appx. 780, 781 (2d Cir. 2012) (quoting Jackson v. Virginia , 443 U.S. 307, 319, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979) ). " ‘A judgment of acquittal’ is warranted ‘only if the evidence that the defendant committed the crime alleged is nonexistent or so meager that no reasonable jury could find guilt beyond a reasonable doubt.’ " United States v. Jiau , 734 F.3d 147, 152 (2d Cir. 2013) (quoting United States v. Espaillet , 380 F.3d 713, 718 (2d Cir. 2004) ).

II. Percoco Was Entitled to a Judgment of Acquittal on Count Eight

This case presents the question whether a private individual can be guilty of extortion under color of official right and, if so, under what circumstances. The Court will address this question in three parts. First, does the offense require that a defendant be a "public official," that is, a person who holds an official position within government, or does the offense also apply to private citizens if they wield "unofficial" influence and control within the government? Second, if an official position is required, at what point in time during the commission of the offense must the defendant be a public official? And third, did the facts of this case warrant sending Count Eight to the jury on the theory that, pursuant to 18 U.S.C. § 2(b), Percoco "willfully caused" others to commit extortion under color of official right?

A. Extortion Under Color of Official Right Generally

The Hobbs Act, 18 U.S.C. § 1951, provides, "Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by ... extortion ... shall be fined under this title or imprisoned not more than twenty years, or both." 18 U.S.C. § 1951(a). "Extortion" is defined as "the obtaining of property from another, with his consent, induced by wrongful use of actual or threatened force, violence, or fear, or under color of official right." 18 U.S.C. § 1951(b)(2).

The "official right" theory of extortion imposes liability on "a public official [who] has obtained a payment to which he was not entitled, knowing that the payment was made in return for official acts." Evans v. United States , 504 U.S. 255, 268, 112 S.Ct. 1881, 119 L.Ed.2d 57 (1992) ; see also United States v. Ganim , 510 F.3d 134, 143 (2d Cir. 2007). Both extortion under color of official right and extortion by force, violence, or fear involve coercing another person to make a payment. See United States v. Tillem , 906 F.2d 814, 821 (2d Cir. 1990) (quoting United States v. Margiotta , 688 F.2d 108, 130–31 (2d Cir. 1982) ). In "official act" extortion, the defendant's public office "supplies...