Percoco v. United States

by Supreme Court of the United States

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

PERCOCO v. UNITED STATES ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
No. 21–1158. Argued November 28, 2022—Decided May 11, 2023

Petitioner Joseph Percoco served as the Executive Deputy Secretary to New York Governor Andrew Cuomo from 2011 to 2016, a position that gave him a wide range of influence over state decision-making, with one brief hiatus. During an eight-month period in 2014, Percoco resigned from government service to manage the Governor’s reelection campaign. During this hiatus, Percoco accepted payments totaling $35,000 to assist a real-estate development company owned by Steven Aiello in its dealings with Empire State Development, a state agency. After Percoco urged a senior official at ESD to drop a requirement that Aiello’s company enter into a “Labor Peace Agreement” with local unions as a precondition to receiving state funding for a lucrative project, ESD informed Aiello the following day that the agreement was not necessary. When Percoco’s dealings came to the attention of the U. S. Department of Justice, he was indicted and charged with, among other things, conspiracy to commit honest-services wire fraud in relation to the labor-peace requirement (count 10). See 18 U. S. C. §§1343, 1346, 1349. Throughout the proceedings, Percoco argued unsuccessfully that a private citizen cannot commit or conspire to commit honest-services wire fraud based on his own duty of honest services to the public. Over Percoco’s objection, the trial court instructed the jury that Percoco could be found to have had a duty to provide honest services to the public during the time when he was not serving as a public official if the jury concluded, first, that “he dominated and controlled any governmental business” and, second, that “people working in the government actually relied on him because of a special relationship he had with the government.” As relevant here, the jury convicted Percoco on count 10. On appeal, the Second Circuit affirmed, explaining that the challenged jury instruction fit the Second Circuit’s understanding of honest-services fraud as adopted many years earlier in United States v. Margiotta, 688 F. 2d 108.

Held: Instructing the jury based on the Second Circuit’s 1982 decision in Margiotta on the legal standard for finding that a private citizen owes the government a duty of honest services was error. Pp. 5–12.

(a) Prior to this Court’s 1987 decision in McNally v. United States, 483 U. S. 350, “all Courts of Appeals had embraced” the view that the federal wire fraud and mail fraud statutes proscribe what came to be known as “honest-services fraud.” Skilling v. United States, 561 U. S. 358, 401. Most cases prosecuted under these statutes involved public employees accepting a bribe or kickback that did not necessarily result in a financial loss for the government employer but did deprive the government of the right to receive honest services. See id., at 400–401. The Second Circuit considered a different fact pattern in Margiotta, in which the government had charged an unelected individual with honest-services mail fraud for using his position as a political-party chair to exert substantial control over public officials. The court held that a private person could commit honest-services fraud if he or she “dominate[d] government.” 688 F. 2d, at 122. Shortly after Margiotta, however, this Court rejected the entire concept of honest-services fraud in McNally. But “Congress responded swiftly” to McNally, and enacted 18 U. S. C. §1346, which provides that “ ‘the term “scheme or artifice to defraud,” ’ ” which appears in both §1341 and §1343, “ ‘includes a scheme or artifice to deprive another of the intangible right of honest services.’ ” Skilling, 561 U. S., at 402 (quoting §1346). Decades later in Skilling, this Court rejected the broad argument that §1346 is unconstitutionally vague and clarified that “the intangible right of honest services” in §1346 relates to “fraudulent schemes to deprive another of honest services through bribes or kickbacks supplied by a third party who had not been deceived.” 561 U. S., at 404.

Skilling’s approach informs the Court’s decision in this case. The Second Circuit concluded that “Congress effectively reinstated the Margiotta-theory cases by adopting statutory language that covered the theory.” 13 F. 4th 180, 196. But Skilling took care to avoid giving §1346 an indeterminate breadth that would sweep in any conception of “intangible rights of honest services” recognized by some courts prior to McNally. By rejecting the Government’s argument that §1346 should apply to cases involving “ ‘undisclosed self-dealing by a public official or private employee,’ ” 561 U. S., at 409, the Skilling Court made clear that “the intangible right of honest services” 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 few pre-McNally decisions. Pp. 5–8.

(b) Percoco’s arguments challenging the honest-services conspiracy count against him—that he was out of public office during part of the time period within the indictment and that a private citizen cannot be convicted of depriving the public of honest services—sweep too broadly. The Court rejects the idea that a person nominally outside public employment can never have the necessary fiduciary duty to the public. Through principles of agency, an individual who is not a formal employee of a government may become an actual agent of the government by agreement, and thereby have a fiduciary duty to the government and thus to the public it serves. While the Court rejects the absolute rule, “the intangible duty of honest services” codified in §1346 plainly does not extend a duty to the public to all private persons, and the Court therefore addresses if Margiotta states the correct test. Pp. 8–9.

(c) The jury instructions based on the Margiotta theory in Percoco’s case were erroneous. Margiotta’s standard in the instructions—implying that the public has a right to a private person’s honest services whenever that private person’s clout exceeds some ill-defined threshold—is too vague. Without further constraint, the jury instructions did not define “the intangible right of honest services” “ ‘with sufficient definiteness that ordinary people can understand what conduct is prohibited’ ” or “ ‘in a manner that does not encourage arbitrary and discriminatory enforcement.’ ” McDonnell v. United States, 579 U. S. 550, 576.

The Government does not defend the jury instructions as an accurate statement of the law, but instead claims that the imprecision in the jury instructions was harmless error. The Government argues that a private individual owes a duty of honest services in the discrete circumstances (1) “when the person has been selected to work for the government” in the future and (2) “when the person exercises the functions of a government position with the acquiescence of relevant government personnel.” Brief for United States 25. These theories, however, differ substantially from the instructions given the jury in this case, and the Second Circuit did not affirm on the basis of either of them. Pp. 9–12.

13 F. 4th 180, reversed and remanded.

Alito, J., delivered the opinion of the Court, in which Roberts, C. J., and Sotomayor, Kagan, Kavanaugh, and Barrett, JJ., joined, and in which Jackson, J., joined as to all but Part II–C–2. Gorsuch, J., filed an opinion concurring in the judgment, in which Thomas, J., joined.

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