Supreme Court Rules in Favor of Shapiro Arato Bach Clients’ Position on Federal Fraud Statutes in Pair of Unanimous Supreme Court Decisions
On May 11, 2023, the Supreme Court of the United States handed down a pair of unanimous decisions in favor of Shapiro Arato Bach clients Steven Aiello and Joseph Gerardi, principals in COR Development Company, LLC, a Syracuse developer. The decisions substantially curbed the government’s expansive use of the federal criminal fraud statutes and are likely to have significant implications for the interpretation of those statutes in the future.
The first case, Ciminelli v. United States, arose out of the “Buffalo Billion” revitalization projects in upstate New York and alleged that our clients engaged in bid-rigging. The case was prosecuted under a “right to control” theory of wire fraud, which posits that depriving a person of potentially valuable economic information is itself a form of wire fraud, even if no deprivation of actual money or property is contemplated. The district court instructed the jury on that theory, and the Second Circuit affirmed. But in a unanimous opinion written by Justice Clarence Thomas, the Supreme Court reversed and held that “[t]he right-to-control theory is invalid under the federal fraud statutes.” Largely adopting the arguments Shapiro Arato Bach made at both the Supreme Court and the Court of Appeals, the Court held that the theory “cannot be squared” with the statutes’ text, history or structure, and “vastly expands federal jurisdiction without statutory authorization.”
The second case, Percoco v. United States, involved payments that COR made to Cuomo aide Joseph Percoco after he had resigned from office, in exchange for his assistance in lobbying State officials. The government prosecuted the payments as bribery under the “honest services” statute, and the Second Circuit affirmed, endorsing jury instructions that Percoco owed the public a duty of honest services if he “dominated and controlled” government functions and was in some sense relied on by those in government, even if he was not himself a public official. The Supreme Court reversed in a unanimous opinion written by Justice Samuel Alito. Again embracing Shapiro Arato Bach’s arguments, the Court held that the honest-services statute does not have “an indeterminate breadth” and cannot be construed to encompass such an “ill-defined” set of circumstances. The Court held that the Second Circuit’s “domination and control” standard was impermissibly vague and rejected the government’s alternative theories to defend the convictions. In addition, Justice Gorsuch concurred in the judgment and argued—consistent with our merits brief to the Court—that the honest services fraud statute is unconstitutionally vague.
The Supreme Court’s decisions were issued in cases associated with our clients’ co-defendants, and are available here and here. Alexandra Shapiro, Ted Sampsell-Jones, Daniel O’Neill, and Fabien Thayamballi co-authored the clients’ petition for certiorari, as well as merits briefs in support of their co-defendants, which are available here, here, here and here.