United States v. Percoco

• Decision Date: 08 September 2021
• Docket Number: 18-3712(CON),Docket Nos. 18-3710(CON),18-3715(CON),August Term 2019,18-3850(CON)
• Parties: UNITED STATES of America, Appellee, v. Joseph PERCOCO, Steven Aiello, Joseph Gerardi, Louis Ciminelli, Alain Kaloyeros, aka Dr. K, Defendants-Appellants, Peter Galbraith Kelly, Jr., Michael Laipple, Kevin Schuler, Defendants.
• Court: U.S. Court of Appeals — Second Circuit

13 F.4th 158

UNITED STATES of America, Appellee,

v.Joseph PERCOCO, Steven Aiello, Joseph Gerardi, Louis Ciminelli, Alain Kaloyeros, aka Dr. K, Defendants-Appellants,Peter Galbraith Kelly, Jr., Michael Laipple, Kevin Schuler, Defendants.

Docket Nos. 18-3710(CON)

18-3712(CON)

18-3715(CON)

18-3850(CON)

August Term 2019

United States Court of Appeals, Second Circuit.

Argued: March 12, 2020

Decided: September 8, 2021

Matthew D. Podolsky, Assistant United States Attorney (Robert L. Boone, Janis M. Echenberg, and Won S. Shin, Assistant United States Attorneys, on the brief), for Audrey Strauss, United States Attorney for the Southern District of New York, New York, New York, for Appellee.

Alexandra A.E. Shapiro (Daniel J. O'Neill and Fabien M. Thayamballi, on the brief), Shapiro Arato Bach LLP, New York, New York, for Defendant-Appellant Steven Aiello.

Paul L. Shechtman, Bracewell LLP, New York, New York, for Defendant-Appellant Louis Ciminelli.

Milton L. Williams (Jacob Gardener and Avni P. Patel, on the brief), Walden Macht & Haran LLP, New York, New York, for Defendant-Appellant Joseph Gerardi.

Michael C. Miller (Bruce C. Bishop, Reid H. Weingarten, Michael G. Scavelli and David B. Hirsch, on the brief), Steptoe & Johnson LLP, New York, New York and Washington, DC, for Defendant-Appellant Alain Kaloyeros.

Before: Raggi, Chin, and Sullivan, Circuit Judges.

Chin, Circuit Judge:

Defendants-appellants Steven Aiello, Joseph Gerardi, Louis Ciminelli, and Alain Kaloyeros appeal from judgments entered by the district court (Caproni, J. ), convicting them of conspiracy to engage in wire fraud by engaging in a scheme to rig the bidding processes for New York State-funded projects, in violation of 18 U.S.C. § 1349. Aiello, Gerardi, and Kaloyeros also appeal from their convictions for wire fraud, in violation of 18 U.S.C. §§ 1343 and 2, in connection with rigging the bidding for projects in Syracuse, New York, and Ciminelli and Kaloyeros appeal from their convictions for wire fraud under the same provisions for rigging the bidding for projects in Buffalo, New York. Gerardi also appeals his conviction for making false statements to federal officers, in violation of 18 U.S.C. § 1001(a)(2).¹

On appeal, defendants challenge the sufficiency of the evidence with respect to the charged wire fraud conspiracies, the instructions to the jury regarding the right-to-control theory of wire fraud and the good faith defense, the preclusion of evidence regarding the success of the projects awarded to defendants through the rigged bidding system and the admission of evidence from competitors regarding the range of fees typically charged by other companies in the market, and the district court's denial of Gerardi's motion to dismiss his false statement charge for alleged prosecutorial misconduct.²

We conclude that there was sufficient evidence to support each of defendants' convictions, the district court did not err in instructing the jury, it did not abuse its discretion in admitting the challenged evidence while precluding other evidence, and it did not err in denying Gerardi's motion to dismiss the false statement charge. Accordingly, the judgments of the district court are AFFIRMED.

BACKGROUND

I. The Facts³

A. The Buffalo Billion Initiative

In 2012, then-Governor Andrew Cuomo launched an initiative to develop the greater Buffalo area through the investment of $1 billion in taxpayer funds; the project became known as the "Buffalo Billion" initiative. App'x at 1034. At the time, Kaloyeros was the head of the College of Nanoscale Science and Engineering ("CNSE"), an economic development and research organization that formed part of the University of Albany -- itself part of the State University of New York ("SUNY"). In late 2011, Kaloyeros hired Todd Howe, a consultant and lobbyist with a longstanding relationship with the Cuomo administration, to help improve his relationship with the Governor's office. In exchange for Howe's help, Kaloyeros arranged to have SUNY's Research Foundation pay Howe $25,000 per month.

With Howe's assistance, Kaloyeros's relationship with the Governor's office improved and, in 2012, Kaloyeros was put in charge of developing proposals for projects under the Buffalo Billion initiative. In this role, Kaloyeros was to propose development projects he believed would attract private industry to the upstate region. Once a proposed project was approved, Kaloyeros would also oversee the development of the project, which was to be paid for by public funds but ultimately leased out for use to private companies with the aim of generating jobs for the upstate economy.

Due to restrictions on state agencies engaging in public-private partnerships, Kaloyeros used Fort Schuyler Management Corporation ("Fort Schuyler"), a nonprofit corporation established to support the missions of SUNY and other affiliated organizations, as the vehicle for purchasing the land and developing the facilities for the Buffalo Billion development projects. Fort Schuyler was controlled by a Board of Directors (the "FS Board") whose members (among them Kaloyeros) were appointed by SUNY and the SUNY Research Foundation.

B. The Scheme

By the summer of 2013, Howe had not only helped Kaloyeros secure a central role in the Buffalo Billion initiative but was also helping Kaloyeros pursue his additional goal of separating CNSE from the University of Albany and becoming president of the newly independent university.⁴ At the same time that the SUNY Research Foundation, at Kaloyeros's direction, was paying Howe to act as a consultant on these state-sponsored projects, two other construction companies -- COR Development Company ("COR Development"), owned by Aiello and Gerardi, and LPCiminelli, owned by Ciminelli -- were paying Howe for his help in obtaining state-funded work Kaloyeros and Howe then began conspiring to deliver the Buffalo Billion state contracts to Howe's clients.

Although Kaloyeros had substantial influence and control over the Buffalo Billion projects, Fort Schuyler's role in the selection process foreclosed his ability to immediately award the contracts to Howe's clients. In selecting developers and construction managers, Fort Schuyler employed a request-for-proposal ("RFP") process under which it would announce its needs for each project through an RFP and then permit interested parties to compete for the projects by submitting bids and a description of their qualifications.⁵

Although Kaloyeros was responsible for designing and drafting the RFP documents, the authority to award a contract rested with the FS Board, which typically did so only after an evaluation team at Fort Schuyler reviewed the responses and made a recommendation. But Kaloyeros and Howe circumvented Fort Schuyler's typical bidding process in two ways.

First, in August 2013, Kaloyeros successfully proposed that Fort Schuyler issue two RFPs -- one for Syracuse (the "Syracuse RFP") and another for Buffalo (the "Buffalo RFP") -- to identify "a strategic development partner" in each region. Notably, unlike Fort Schuyler's usual RFPs, the Syracuse and Buffalo RFPs would "not focus on a specific project." App'x at 1050. Indeed, the then-chairman of Fort Schuyler's Board of Directors testified that Fort Schuyler had no specific projects in mind for either region at the time of Kaloyeros's proposal, and the Syracuse and Buffalo RFPs that were ultimately issued sought generally "to establish a strategic research, technology outreach, business development, manufacturing, and education and workforce training partnership with a qualified developer" in those regions, "for potential research, technology outreach, business development, manufacturing, and education and training hubs," App'x at 1912. The successful bidders would be "designat[ed] ... as the PREFERRED DEVELOPER" for the region, App'x at 1912, and, thus, would have the first opportunity to negotiate with Fort Schuyler for the specific projects Fort Schuyler eventually identified.

Second, Kaloyeros and Howe worked to draft these RFPs in a way that would give COR Development and LPCiminelli an advantage unbeknownst to others at Fort Schuyler. Notably, Kaloyeros solicited, through Howe, qualifications or attributes of COR Development and LPCiminelli to include as requirements in the Syracuse RFP and Buffalo RFP so that the bidding process would favor the selection of these companies as preferred developers.

Through a series of email and in-person communications in August and September of 2013, Howe worked with Aiello, Gerardi, Ciminelli, and Kevin Schuler, an executive at LPCiminelli, to come up with a list of qualifications -- which they referred to as "vitals" -- that, once incorporated into the RFPs, would improve their chances of being selected for the Buffalo and Syracuse projects.⁶ See, e.g. , App'x at 1560, 1647-49. This information was then relayed to Kaloyeros, who, after asking for more specificity, see App'x at 1578, and even soliciting feedback on proposed drafts, incorporated the doctored qualifications into the RFP drafts that were ultimately submitted to the FS Board for approval.

In September and October of 2013, the Syracuse and Buffalo RFPs were issued by the FS Board, as prepared by Kaloyeros. Notably, the final Syracuse RFP contained a fifteen-year experience requirement, which directly matched the experience of COR Development, along with a requirement that the preferred developer use a particular type of software (which COR Development also used), and other language lifted directly from the list of qualifications Aiello and Gerardi had prepared and sent to Howe. Similarly, the final Buffalo RFP contained specifications unique to LPCiminelli, including "[o]ver 50 years of proven experience" in the field, App'x at 1914, a requirement that the preferred developer be headquartered in Buffalo, and additional language lifted directly from talking points provided to Kaloyeros from Ciminelli and Schuler.

C. The Bidding

Both the Syracuse RFP...