The Supreme Court yet again unanimously overturned bribery convictions based on prosecutorial overreach via the honest services wire fraud statute. The steady stream of reversals fundamentally challenges the DOJ’s approach in public corruption cases.

Introduction

The Supreme Court handed down two unanimous bribery reversals on May 11th, adding to its decisions reining in the DOJ’s application of the wire fraud statute to an appropriately defined theory of criminal liability affording defendants fair notice. The latest setbacks hold that a private citizen does not owe the public a duty of honest services and rejects a "right-to-control" theory of property.

Percoco v. United States¹

Joseph Percoco served as former New York Governor Andrew Cuomo’s Executive Deputy Secretary from 2011 to 2016, except between April and December 2014 when he left government to manage Cuomo’s reelection campaign.² During that hiatus, Percoco accepted $35,000 from a developer in exchange for pressuring a senior public official to drop a state requirement that hampered the developer’s ability to win state funding.³ The United States Attorney’s Office for the Southern District of New York brought various bribery-related charges including, as relevant to the United States Supreme Court’s review, one count of conspiracy to commit honest services wire fraud in violation of 18 U.S.C. §§ 1343, 1346, and 1349.⁴

Percoco argued that his status as a private citizen at the time of the alleged scheme relieved him of a duty to provide honest services to the public.⁵ The government contended that Percoco continued to function in a senior advisory and supervisory role to Cuomo’s office, and planned to resume public service following the election.⁶ Relying on the Second Circuit’s decision in United States v. Margiotta,⁷ the trial judge instructed the jury that it could find that Percoco owed a duty of honest services to the public if he “dominated and controlled any governmental business” and that “people working in the government actually relied on him because of a special relationship he had with the government."⁸ The jury returned a conviction.

The Supreme Court overturned the Second Circuit’s affirmance, finding Margiotta’s standard unconstitutionally vague.⁹ Congress enacted § 1346 to explicitly allow for an honest services fraud theory, in response to the Supreme Court’s 1987 holding in McNally v. United States that deprivation of honest services was not a property right within the mail fraud statute.¹⁰ But, Percoco emphasized, the honest services standard “must be defined with the clarity typical of criminal statutes and should not be held to reach an ill-defined category of circumstances simply because of a smattering pre-McNally decisions."¹¹

The Court found that the Margiotta’s “domination” standard was too broad and too vague, potentially sweeping in “particularly well-connected and effective lobbyists” and others who “[f]rom time immemorial” have “lacked any formal government position but nevertheless exercise[] very strong influence over governmental decisions."¹² While holding that a defendant need not necessarily be employed by the government to have a duty to provide honest services to the public,¹³ the Court offered few clues as to when that duty exists, outside of an explicit agency relationship.

In a concurrence arguing that the honest services statute should be overturned altogether, Justice Gorsuch observed that, to provide defendants with fair notice of what conduct may constitute a crime, Congress must do more than “invoke an aspirational phrase and leave it to prosecutors and judges to make things up as they go along” or “give the Judiciary uncut marble with instructions to chip away all that does not resemble David.”¹⁴

Ciminelli v. United States¹⁵

Louis Ciminelli owned a development company that completed a $750 million construction project as part of Cuomo’s Buffalo Billion initiative.¹⁶ The government’s investigation revealed that Ciminelli – through his lobbyist – participated in a scheme to rig the request for proposal process for the project to favor Ciminelli’s company by, among other things, adding certain requirements that were unique to Ciminelli’s company.¹⁷ Because the government could not prove that a public official received or agreed to receive a bribe or kickback as part of the scheme, it proceeded on the theory that Ciminelli’s bid rigging scheme attempted to take government property. Specifically, the government relied on the Second Circuit’s longstanding “right to control” theory where one is guilty of wire fraud if they “scheme[] to deprive the victim of ‘potentially valuable economic information’ ‘necessary to make discretionary economic decisions.’”¹⁸ In this case, the scheme allegedly deprived the contracting authority of competitive proposals from other companies that had been improperly excluded from the process.

The Supreme Court rejected the Second Circuit’s “right to control” theory because it did not implicate “traditional property interests” as required in Cleveland v. United States.^{19 20} Similar to its decision in Percoco, the Court reasoned that the government theory sweeps too broadly, here because treatment of “mere information as the protected interest” transforms “almost any deceptive act” into a crime. The Court criticized the government, as it has done in the past, for attempting to transform the mail and wire fraud statutes into a tool to “set standards of disclosure and good government for state and local officials.”²¹

Another Step in a Series of Unanimous Corruption Reversals

The Percoco and Ciminelli decisions are hardly the first in which the Court has not allowed bad facts to create what the Court deems bad law. And the decisions have not been close or of the kind that can be written off as ideology; they have been unanimous and involved defendants affiliated with both political parties.

In 2020, the Supreme Court in Kelly v. United States unanimously overturned convictions stemming from former New Jersey Governor Chris Christie’s “Bridgegate” scandal.²² There, public officials agreed to reallocate toll lanes in a way that they knew would cause a massive traffic jam in Fort Lee, New Jersey, all in order to punish the mayor of that town for failing to endorse Christie.²³ Because no bribes or kickbacks were involved, the government pursued a traditional property rights theory rather than an honest services case. The Court rejected the government’s argument that commandeering and reallocating lanes on a roadway constituted the taking of property and instead found it was a “quintessential exercise of regulatory power” that the Court had long held did not implicate traditional property rights.²⁴ Finding the conduct to be an outrageous abuse of power that “jeopardized the safety of [a] town’s residents” for “no reason other than political payback,”²⁵ the Court nonetheless counseled that the United States cannot use the property fraud statute to “set[] standards of disclosure and good government for local and state officials” or to prosecute “every lie a state or local officials tells in making [a regulatory choice].”²⁶

In 2016, a unanimous Court in McDonnell v. United States overturned convictions of the former governor of Virginia, Bob McDonnell, and his wife, who had accepted hundreds of thousands of dollars of lavish gifts from a businessman, while the McDonnell set up meetings, hosted events, and contacted government officials to help promote the businessman’s product.²⁷ The government alleged that McDonnell deprived the public of honest services by accepting bribes in exchange for official action, and the jury was instructed that an official act could be any “act[] that a public official customarily performs.”²⁸

The Court rejected the “any act” definition as too broad in that it would sweep up ordinary constituent contact forming the ”basic compact underlying representative government.”²⁹ The Court noted that while the “facts of this case” do not “typify normal political interaction between public officials and their constitutions,” the government’s “legal interpretation is not confined to cases involving extravagant gifts or large sums of money, and we cannot construe a criminal statute on the assumption that the Government will use it responsibly.”³⁰ While there was “no doubt that this case is distasteful,” the Court emphasized that its “concern is not with tawdry tales of Ferraries, Rolexes, and ball gowns” but “with the broader legal implications of the Government’s boundless interpretation of the federal bribery statute."³¹

Notwithstanding the repeated rebukes from the Court, there has been little evidence of a course correction by the DOJ, which has relied on careful and deliberate prosecutors to craft creative legal theories that capture seedy conduct while attempting to elude the increasingly challenging maze of adverse precedent. As measured by the government’s success at obtaining jury verdicts, the government’s judgment on what the general public finds offensive is quite sound. Nevertheless, the Court has continued to decline the so-called ‘I know it when I see it’ approach to public corruption prosecutions, resulting in a steady and unsustainable stream of adverse precedent. The government may soon face the prospect of embarrassing early-stage dismissals by judges wary of subjecting even the most unsympathetic and high-profile of defendants to the extreme burdens of a federal prosecution that is likely to be reversed.

At the very least, the Court’s most recent decisions evidence a need for closer coordination between trial and appellate attorneys within the DOJ. Percoco and Ciminelli both featured the Solicitor General’s Office conceding that prosecutors had pushed for and had been granted erroneous jury instructions, and then arguing post-hoc that more circumscribed theories of liability supported the convictions based on the record.³² Those arguments did not go well.

Another striking example of invited instructional error undermining the DOJ’s case is the First Circuit’s recent reversal of two Varsity Blues convictions.³³ After the government persuaded the trial court to instruct that “for purposes of the mail and wire fraud statutes admissions slots are the property of the universities,”³⁴ the First Circuit held that while admission slots are not necessarily property, they could be if supported by a developed factual and legal record.³⁵ In short, had the property question been presented as a factual question to the jury rather than presented in the form of a directed verdict, the convictions may well have withstood appellate review.

There is no shortage of cases in the pipeline, including perhaps most immediately additional Varsity Blues convictions, to further test the parameters of the DOJ’s corruption prosecutions. As the Supreme Court’s decisions trickle down to the circuit and trial courts, so, too, may they be incorporated into the DOJ’s charging decisions.

1. 598 U.S. ___ (2023).
2. Id. at 1-2.
3. Id. at 2.
4. Ibid.
5. Percoco v. United States, 598 U.S. ___ (2023) at 3.
6. Ibid.
7. 688 F.2d. 108 (1982).
8. Percoco v. United States, 598 U.S. ___ (2023) at 4.
9. Id. at 10.
10. 483 U.S. 350 (1987); 18 U.S.C. § 1346.
11. Percoco v. United States, 598 U.S. ___ (2023), at 8.
12. Id. at 10.
13. Id. at 8-9.
14. Percoco v. United States, 598 U.S. ___ (2023), Gorsuch, J., concurring in judgment, at 5.
15. 598 U.S. ____ (2023).
16. Id. at 2-3.
17. Ibid.
18. Id. at 1.
19. 531 U.S. 12 (2000).
20. Ciminelli v. United States, 598 U.S. ___ (2023), at 5-7.
21. Id. at 8 (internal quotations and citations omitted).
22. 590 U.S. ___ (2020).
23. Id. at 1.
24. Id. at 8.
25. Id. at 12-13.
26. Id. at 12.
27. 576 U.S. ___ (2016) at 1-2.
28. Id. at 11.
29. Id. at 22.
30. Id. at 23 (internal quotations and citations omitted).
31. Ibid.
32. Percoco v. United States, 598 U.S. ___ (2023), at 10 (“The Government does not defend these jury instructions as an accurate statement of the law, but it argues that their imprecision was harmless”); Ciminelli v. United States, 598 U.S. __ (2023), at 9 (“[T]he Government now concedes that the theory as articulated below is erroneous.”).
33. United States v. Abdelaziz, No 22-1129, (1st Cir. 2023).
34. Id. at 57.
35. See, e.g., id. at 59.