The Supreme Court will hear oral argument on Monday in the latest in a series of cases involving the reach of federal public-corruption laws. The question before the justices in Percoco v. United States is whether an individual can be convicted of violating those laws even when he is not a government official or employee. The defendant in the case, Joseph Percoco, warns that allowing his conviction to stand would be a “startling expansion of federal bribery law” that could leave “lobbyists, donors, and virtually every other politically active individual at the mercy of headline-hungry prosecutors.”
Percoco served as a senior aide to Andrew Cuomo, then the governor of New York, from 2011 to 2016. In April 2014, Percoco stepped down from his position in Cuomo’s office to manage Cuomo’s re-election campaign. In the summer and fall of 2014, while Percoco was still a private citizen, a real estate developer paid Percoco $35,000 to help him avoid having to enter into a “labor peace agreement” with local unions. In December 2014, five days before Percoco officially returned to his position in the governor’s office, he called the head of a state development agency and urged him to let the development move ahead without the agreement; after the call, the agency head told another agency executive that he was receiving “pressure” from his “principals.” The next day, state officials reversed the decision that the developer needed to reach an agreement with the unions.
In 2018, Percoco was convicted and sentenced to six years in prison for violating (among other things) a federal fraud law that makes it a crime to deprive members of the public of the intangible right to honest services. On appeal, the U.S. Court of Appeals for the 2nd Circuit agreed with the government that Percoco owed the general public a duty of honest services. Because of his relationship with Cuomo and the likelihood that Percoco would return to state government, the court of appeals concluded, he had a “position of power and trust.” Percoco came to the Supreme Court in February, and in June the justices agreed to weigh in.
In his brief in the Supreme Court, Percoco stresses that the court of appeals’ decision upholding his conviction relied on that court’s 1982 decision in United States v. Margiotta, holding that private citizens can owe a duty to the public if they effectively control government officials or influence government action.
But the Supreme Court’s recent decisions make clear, Percoco argues, that Margiotta is no longer good law. In 2010, in Skilling v. United States, the Supreme Court ruled that the honest-services fraud law applies only to “paradigmatic cases of bribery and kickbacks.” Six years later, in McDonnell v. United States, the court explained that bribery laws are “concerned not with influence in the abstract, but rather with the sale of one’s official position.” Because private citizens cannot take official action or use their positions to bring about government action, Percoco contends, they cannot violate federal fraud laws.
Percoco also cautions that the 2nd Circuit’s rule could have sweeping implications not only for lobbyists and donors but also for the family members of public officials, who “hold unparalleled access and influence” and whose “independent business interests may be in a position to benefit from state action.”
The federal government counters that there is no bright-line rule requiring an individual to hold a government position before he has an obligation to provide the public with honest services. An individual can still have a duty of honest services, U.S. Solicitor General Elizabeth Prelogar writes, if he “has been selected to work for the government” or if he “actually exercises the powers of a government position with the acquiescence of the relevant government personnel.” Percoco’s contrary suggestion that honest-services fraud laws do not apply to private citizens, Prelogar argues, would create a “readily manipulable exception” that would allow someone to avoid liability simply by not signing an employment contract.
In this case, the government insists, the facts show that Percoco had “the functional control and authority that mattered” for purposes of the honest-services law. While Percoco was working on Cuomo’s re-election campaign, the government stresses, his position in the governor’s office remained vacant. Percoco continued to use his government offices in Albany and New York City while working on the campaign, and he “continued to participate in state operations and policy decisions.” By August 2014, Percoco was already telling his bank and others that he would be returning to the Cuomo administration, and he made the phone calls that led to his conviction after he had signed papers to return to state government – and just a few days before he actually returned. In those phone calls, the government adds, Percoco gave instructions to government employees who believed that they were compelled to follow them.
The government dismisses Percoco’s warnings about the possible repercussions if his conviction is upheld. Family members or lobbyists would not face criminal liability, the government reasons, because they are neither incoming government officials nor effectively acting as government officials.
On the same day that they hear oral argument in Percoco’s case, the justices will also hear the case of Louis Ciminelli, a government contractor who was convicted of wire fraud for his work with a state insider to obtain a $750 million contract to develop the greater Buffalo area. As David Kwok explains in his preview of the case for SCOTUSblog, Ciminelli’s conviction rested on the theory that he had deprived the non-profit tasked with allocating the development funds of its right to control the bidding process. Both Percoco and Ciminelli hope that, as it has in the past, the Supreme Court will use their cases to further narrow the reach of public-corruption laws, but they (and we) will know more after Monday’s argument.
This post is also published on SCOTUSblog.
