The US Supreme Court Monday heard oral arguments in Percoco v. United States. The issue before the court was whether a private citizen, who is not a government employee but has informal governmental decision making power, owes a duty to the public and can be convicted of honest-services fraud.
The case stemmed from activities that occurred during former New York Governor Andrew Cuomo’s term. Cuomo started an initiative to develop the Buffalo, New York area. Joe Percoco was a friend and Cuomo’s executive deputy secretary. Percoco accepted payments in exchange for using his position to perform official actions in relation to the initiative.
In one scheme, Percoco used his position to grant Competitive Power Venture, a utility company, a state power contract in exchange for concealed payments to Percoco’s wife, equivalent to $90,000 per year. In another scheme, Percoco accepted multiple payments from a real estate company in exchange for advancing their interests.
At the time of the schemes, Percoco was not working in his official secretary position because he had temporarily left to work for Cuomo’s reelection campaign. Nevertheless, a district court convicted Percoco of both conspiracy to commit honest-services wire fraud and solicitation of bribes or gratuities. The US Court of Appeals for the Second Circuit affirmed, which is how Percoco’s case ended up before the US Supreme Court.
The Government argued that Percoco was functionally a government official and owed a fiduciary duty to the public because he had been selected to work by the government and exercised the functions of a government position, even while working for the campaign. For that reason, the government argued, Percoco’s convictions should stand. The justices pushed back on this argument, questioning how broadly the government wanted the court to interpret a “government official.”
Percoco argued that he did not owe a fiduciary duty to the public because he did not act in his official capacity as secretary, meaning a private citizen should not be convicted of honest-wire fraud. The justices took particular interest in this argument, questioning if such a finding could promote “boundless” opportunities for abuse. Percoco’s attorney argued to the court that bribery “is fundamentally inapplicable to someone who is not a public official.”
In response, the government stated:
[Percoco’s position] would permit individuals who function as government officials to accept bribes and kickbacks. His role would allow an individual to formally leave government for a single day, accept a bribe in exchange for ordering government employees to take official action, and return to formal employment without penalty.
In conjunction with Percoco’s case, the court also Monday heard arguments in the case of Ciminelli v. United States. In Ciminelli, although the case arose from the same facts, the court will decide whether the US Court of Appeals for the Second Circuit’s “right-to-control” theory of wire fraud is a valid basis for conviction.