The Supreme Court of the United States has imposed new restrictions on prosecutions related to white-collar fraud. The court handed down two decisions on Thursday that criticized the legal theories commonly employed by the Justice Department.
The rulings centered around convictions arising from the enforcement actions led by former U.S. Attorney Preet Bharara, who aimed to combat what he described as a “show-me-the-money culture in Albany” during the tenure of former Democratic New York Governor Andrew Cuomo.
Firstly, which was titled Percoco v. United States, the court ruled in favor of Joseph Percoco, a former top adviser to Cuomo.
Percoco challenged his 2018 conviction on charges of fraud and bribery. The court unanimously curtailed the Justice Department’s use of the “honest-services fraud statute,” which limited its applicability to private citizens.
Regarding this decision, Barry Bohrer, Percoco’s trial lawyer, expressed satisfaction, stating, “We are extremely gratified by the Supreme Court’s unanimous decision that Mr. Percoco was wrongly convicted of honest-services fraud, as we have long argued.” Percoco’s appellate lawyer, Yaakov Roth, criticized the prosecution, claiming that it abused the federal fraud statutes and blurred the line between private citizens and public officials.
Secondly, titled Ciminelli v. United States, the court overturned the criminal conviction of real estate developer Louis Ciminelli. Ciminelli was accused of conspiring to manipulate bids on a $750 million manufacturing project, which was part of Governor Cuomo’s initiative to boost Buffalo’s economy.
The court invalidated the “right-to-control” theory of fraud, an approach frequently used by prosecutors, thus narrowing the scope of the federal wire fraud statute.
Also, Michael R. Dreeben, Ciminelli’s appellate lawyer, welcomed the court’s decision, stating, “We are gratified by the Supreme Court’s unanimous holding today that the government’s theory of prosecution of Louis Ciminelli was invalid, root and branch.”
Joseph Percoco, who was a prominent aide to Governor Cuomo during his initial election in 2010, faced charges for his actions in 2014 when he temporarily left his state position to manage Cuomo’s re-election campaign. During that period, Percoco assisted a development firm in obtaining a favorable decision from a state agency.
In return, the firm paid Percoco $35,000 through intermediaries. The prosecution alleged that this constituted a bribery scheme, asserting that Percoco was effectively a state employee at the time.
The Supreme Court ruled that Percoco faced charges of honest-services fraud and other offenses. However, the court determined that the jury had received incorrect instructions regarding honest-services fraud, resulting in an improper conviction.
The case against Louis Ciminelli revolved around the “right-to-control” theory of fraud, which treated the withholding of complete and accurate information in economic decision-making as a form of property fraud. The Supreme Court declared that this theory cannot serve as a basis for conviction under the federal wire fraud statute.
Finally, These decisions by the Supreme Court are in line with previous cases that have restricted federal fraud statutes in public-corruption prosecutions.
The court has consistently demonstrated its concern about the expansion of federal jurisdiction beyond the intended scope defined by Congress, as stated by Nicole Engisch, a former federal prosecutor.