This Report summarizes cases granted review on June 27 and 30, 2022 (Part II).

Case Granted Review: Percoco v. United States, 21-1158

Percoco v. United States, 21-1158. At issue is whether “a private citizen who holds no elected office or government employment, but has informal political or other influence over governmental decisionmaking, owe[s] a fiduciary duty to the general public such that he can be convicted of honest-services fraud.” Joseph Percoco served as then-Governor Andrew Cuomo’s Executive Deputy Secretary. He left that job to manage Governor Cuomo’s reelection campaign, but he still used his Executive Chamber office and represented that he ”had a guaranteed position with Cuomo’s administration after the election.” While Percoco was working on the campaign (and thus no longer employed by the government), he was approached by Steven Aiello, who wanted state officials to excuse his company, COR Development (COR), from having to enter a costly agreement with a local union, known as a labor peace agreement (LPA). After receiving $35,000 from Aiello, Percoco reached out to a state official to press him to waive the LPA. The state official interpreted the call as “pressure” from one of his “principals.” State officials later reversed their position and waived the LPA. In November 2016, Percoco was charged with a number of federal offenses, including conspiring to commit honest-services wire fraud, see 18 U.S.C. §§1346, 1349, in connection with his efforts on behalf of COR. Percoco moved to dismiss the COR charges on the ground that he could not commit these offenses when he was out of public office. The district court denied the motion, and a jury convicted Percoco of honest-services fraud conspiracy. The Second Circuit affirmed the conviction. 13 F.4th 180.

The Second Circuit panel relied on its precedent, United States v. Margiotta, 688 F.2d 108 (1982). The court reasoned that “the statute’s capacious language is certainly broad enough to cover the honest services that members of the public are owed by their fiduciaries, even if those fiduciaries happen to lack a government title and salary.” The court stated that “[i]n our view, §1346 covers those individuals who are government officials as well as private individuals who are relied on by the government and who in fact control some aspect of government business.” The panel concluded that Percoco owed a fiduciary duty to the public because he “maintained” a “position of power and trust in the state,” attributable to his “unique relationship with Governor Cuomo,” “being close to him and his family,” the likelihood that he would regain the same position after the campaign, and his continued access to the Governor’s Office. And the panel found sufficient evidence that Percoco had agreed to take official action by calling the agency about the LPA.

Percoco argues in this petition that “[u]nder the decision below, the only thing separating lawful lobbying from illegal bribery is a jury’s finding that the lobbyist’s de facto control or others’ ‘reliance’ on him crossed some unspecified line. An entire industry—one engaged in core First Amendment activity, at that—is thus placed in the prosecutorial crosshairs.” He maintains that “[i]t is public officials—alone—who represent the public and owe duties to act in its best interest.” Percoco insists that Margiotta and the Second Circuit decision in his case conflict with Skilling v. United States, 561 U.S. 358 (2010), “which sharply narrowed the scope of honest-services fraud under 18 U.S.C. §1346 to ‘heartland’ cases” or bribes and kickbacks “to avoid constitutional concerns.” Yet “[t]he Second Circuit’s recognition of the right to honest government as a basis for a fraud conviction of a private citizen extended the statute to new bounds—without question outside the realm of the ‘paramount’ or ‘heartland’ cases that survive Skilling.” Percoco adds that the Second Circuit decision conflicts with principles of lenity and federalism, and “threatens to chill protected speech of politically active individuals, harming their ability to petition the government and impeding public officials’ ability to hear from and make decisions based on the voices of their constituents.” And, he says, the Second Circuit’s “reasoning ‘lodge[d] unbridled power in federal prosecutors to prosecute political activists’ and created ‘the potential for abuse through selective prosecution.’”

The United States responds that “[t]he lower courts correctly eschewed an invariable requirement that a person ‘have a formal employment relationship with the state in order to owe . . . a duty of honest services to the public.’ A person who lacks such a relationship can still owe such a duty in limited circumstances.” (Citation omitted.) It notes that “Section 201, which likewise informs the scope of honest-services fraud, defines a ‘‘public official’ subject to federal bribery law to include not only ‘an officer or employee,’ but also a ‘person acting for or on behalf of the United States . . . in any official function.’ 18 U.S.C. 201(a)(1); see Skilling, 561 U.S. at 412. As this Court has recognized, Section 201’s text is therefore not limited to ‘persons in a formal employment or agency relationship with the Government.’ Dixson v. United States, 465 U.S. 482, 494 (1984).” The United States maintains that “[t]he evidence showed that Percoco was ‘in reality’ a public official at the time of the bribery scheme at issue. Although Percoco had nominally left his post in the Executive Chamber, he in fact continued to carry out that role: he ‘held onto and used his Executive Chamber telephone, desk, and office’; he ‘continued to conduct state business’; and he ‘maintained control over official matters.’ In fact, Percoco ‘was at his desk in the Executive Chamber’ when he called another state official to pressure him to waive the required labor peace agreement.” (Citations omitted.) And so the United States says the Second Circuit decision does not “raise First Amendment concerns. Percoco was not, as petitioners suggest, a ‘private citizen’ who received money to ‘lobby the government’; he was a high-ranking government official who continued to oversee official business despite taking an effective leave of absence from his post, and he accepted large bribes in return for wielding his authority to pressure subordinate government officials to perform official acts.” (Citations omitted.)