The Justices hear two major cases on prosecutorial overreach.
by The Wall Street Journal Editorial Board, November 25, 2022
George Washington Plunkitt’s quip about the difference between honest and dishonest graft comes to mind in two important public corruption cases the Supreme Court will hear on Monday. Defendants are asking the Court to throw out their convictions for sleazy conduct that they argue isn’t illegal under U.S. fraud laws.
The first case (Percoco v. U.S.) involves the ill-defined honest-services fraud statute. Joseph Percoco, a former state official who was at the time serving as campaign manager for former New York Gov. Andrew Cuomo, was paid $35,000 by a real-estate developer, allegedly to help obtain government approval for a project that didn’t have a labor peace agreement with local unions.
Prosecutors say Mr. Percoco was “functionally a public official” because he commanded clout with state agencies and therefore committed honest-services fraud by allegedly accepting a bribe. Congress defined a “scheme or artifice to defraud” to include “a scheme or artifice to deprive another of the intangible right of honest services.”
But as Justice Antonin Scalia noted, the law’s ambiguity has given rise to “chaos” in lower courts since nowhere is the “right of honest services” defined. The Court’s Skilling (2010) precedent limited criminal liability under the statute to kickback and bribery schemes, but three Justices also believed the law’s vagueness made it unconstitutional.
Lower courts have held that public officials owe a “right of honest services” to their constituents, but the High Court has never ruled that private individuals owe a fiduciary duty to the public. Prosecutors say Mr. Percoco owed the public such a duty because his “grip on [state] power never changed, diminished, or dissipated as he managed the campaign.”
Was Mr. Percoco paid to leverage his political clout? Of course. His simultaneous employment as Mr. Cuomo’s campaign manager and a business consultant is certainly sketchy. But the government’s theory in this case could be used to prosecute any powerful lobbyist, including former lawmakers who don’t act in the putative public interest.
This would present First Amendment concerns since citizens have the right to petition their government. It would also impair due process for private citizens who have no way of knowing if they are covered by the honest-services law. The Court tried to cabin criminal liability under the law in Skilling, but now prosecutors want to expand it again.
Monday’s second case (Ciminelli v. U.S.) also involves prosecutorial overreach against a Cuomo crony. The government charged contractor Louis Ciminelli, a Cuomo campaign contributor, with conspiracy to commit fraud by allegedly helping rig the procurement for a state-subsidized solar panel plant in Buffalo.
A member of a nonprofit overseeing the project drafted “requests for proposals” (RFP) to favor Mr. Ciminelli’s construction firm. There was no evidence Mr. Ciminelli directed the RFP’s terms, nor that the state or nonprofit suffered economic harm or loss of property as a result of Mr. Ciminelli’s firm being chosen.
Yet according to the government, Mr. Ciminelli defrauded the nonprofit of its “right to control its assets” by exposing it to the risk of economic harm through false representations about the fairness and competitiveness of the bidding process. If you’re struggling to understand the government’s convoluted theory, you’re not alone.
Prosecutors in recent years have increasingly resorted to this vague “right to control” theory to charge individuals they can’t prove defrauded anyone of actual property. This theory allows prosecutors to sidestep the traditional requirements of fraud, which are evidence of guilty intent, economic harm and deprivation of property.
The Second Circuit Court of Appeals in this case and others has ruled defendants can be prosecuted for fraud under this “right to control” theory if they withhold or misrepresent information that could affect an economic decision even if no one was harmed as a result. This transforms ordinary contract disputes and civil torts into federal crimes.
Businesses could be prosecuted if the government decides they withheld economically valuable information in transactions regardless of whether their lapse was intentional or harmed another party. Workers could be charged with fraud for not telling a prospective employer the reason they were laid off from their last job.
There’s no limiting principle on the government’s prosecutorial power under its theories of fraud in Monday’s two cases. The Court has repeatedly ruled that mere deception and unethical behavior don’t constitute fraud under existing U.S. law. Congress and states can pass laws to prevent political conflicts of interest from affecting government decisions. But prosecutors can’t rewrite the law on their own to charge individuals merely for profiting from their political connections.