Recently, the Supreme Court of the United States tossed the convictions of two defendants found guilty of public corruption charges during former New York Gov. Andrew Cuomo’s term. The opinions, Ciminelli v. United States and Percoco v. United States, continue the Court’s recent trend of narrowing the government’s ability to prosecute defendants under outlier theories of liability for white collar crimes. In Part 1 of this two-part series, we’ll outline Ciminelli, and in Part 2, we’ll focus on Percoco and explain how the two decisions may impact strategies of both prosecutors and defense counsel alike.
Ciminelli v. United States – “Right to Control” Theory out of Control
In Ciminelli, the defendant, Louis Ciminelli, was convicted of federal wire fraud for his involvement in a bid-rigging scheme related to then-Gov. Cuomo’s Buffalo Billion initiative, which was administered by a nonprofit corporation. Through his construction company, Ciminelli paid a lobbyist up to $180,000 annually to help it win state-funded contracts. In 2013, Ciminelli, a board member of the nonprofit, and the lobbyist created an arrangement whereby they would tailor the bid process to effectively guarantee that the defendant’s construction company would win the contracts. Ciminelli received a $750 million project using this approach.
In indicting and convicting Ciminelli, the government relied solely on the Second Circuit’s “right to control” theory of wire fraud. Under this theory, a defendant is guilty of wire fraud if he or she schemes to deprive the victim of “potentially valuable economic information . . . necessary to make discretionary economic decisions.” Though the Second Circuit has employed this theory for decades, no other circuit has adopted it, and the Sixth and the Ninth circuits have held that it is unconstitutional. On appeal, Ciminelli argued that the right to control one’s assets is not “property” for purposes of the federal wire fraud charge. The Second Circuit rejected this argument and affirmed his conviction.
The Supreme Court reversed. Writing for a unanimous court, Justice Clarence Thomas held that the longstanding “right to control” theory of liability “cannot form the basis for a conviction under the federal fraud statutes.” The Court found that the “right to control” theory was inconsistent with the text and history of the statute, which limited its reach to only traditional notions of property interests. In line with its other recent decisions narrowing the scope of federal white-collar prosecutions, the Court also noted that the theory “vastly expands federal jurisdiction to an almost limitless variety of deceptive actions,” including those traditionally left to state law, by “criminaliz[ing] traditionally civil matters and federaliz[ing] traditionally state matters.”
Stay tuned for Part 2, where we’ll explore Percoco and the implications the two opinions may have on the future of white-collar enforcement actions.