JOSEPH PERCOCO, PETITIONER v. UNITED STATES ET AL.
No. 21-1158
SUPREME COURT OF THE UNITED STATES
May 11, 2023
598 U.S. ___ (2023)
Argued November 28, 2022
(Slip Opinion) OCTOBER TERM, 2022
Syllabus
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 (1906).
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
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 (1987), “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 (2010). 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
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 (2021). But Skilling took care to avoid giving
(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
(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 (2016).
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.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, pio@supremecourt.gov, of any typographical or other formal errors.
SUPREME COURT OF THE UNITED STATES
No. 21-1158
JOSEPH PERCOCO, PETITIONER v. UNITED STATES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
[May 11, 2023]
JUSTICE ALITO delivered the opinion of the Court.*
In this case, we consider whether a private citizen with influence over government decision-making can be convicted for wire fraud on the theory that he or she deprived the public of its “intangible right of honest services.”
Percoco was a longtime political associate of former New York Govеrnor Andrew Cuomo. Except for a brief but important hiatus in 2014, Percoco served as the Governor‘s Executive Deputy Secretary from 2011 to 2016, and that position gave him a wide range of influence over state decision-making. In April 2014, Percoco resigned from this position to manage the Governor‘s reelection campaign, but after the Governor was reelected, he resumed his role as Executive Deputy Secretary in December 2014.
The question we address today arises from Percoco‘s activities during his break in government service. In July 2014, Empire State Development (ESD), a state agency, informed developer Steven Aiello that his real-estate company, COR Development, needed to еnter into a “Labor Peace Agreement” with local unions if he wished to receive state funding for a lucrative project. Id., at 597. Interested in avoiding the costs of such an agreement, Aiello reached out to Percoco through an intermediary so that Percoco could “help us with this issue while he is off the 2nd floor,” i.e., the floor that housed the Governor‘s office. Id., at 594. Percoco agreed and received two payments totaling $35,000 from Aiello‘s company in August and October 2014. On December 3, mere days before returning to his old job, Percoco called a senior official at ESD and urged him to drop the labor-peace requirement. ESD promptly reversed course the next day and informed Aiellо that the agreement was not necessary.
Percoco‘s dealings in this and other matters later came to the attention of the United States Department of Justice, which obtained a multi-count indictment against Percoco and others for engaging in several allegedly illegal schemes.1 Percoco was charged with two counts of conspiring to commit honest-services wire fraud, in violation of
bribes and gratuities, in violation of
That count alleged a conspiracy running “[f]rom at least in or about 2014, up to and including in or about 2015,” that is, both during the time when Percoco was formally employed in the Governor‘s office and during the period when he was working on the Governor‘s campaign. See id., at 100 (incorporating ¶4 and ¶¶33-35 of the indictment). Before trial, Percoco moved for dismissal of that count—and another conspiracy count overlapping with the campaign period—on the ground 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. See id., at 130, 133. The District Court denied that motion, noting that the indictment alleged that Percoco, while formally working on the Governor‘s campaign, had “‘continued to function in a senior advisory and supervisory role with regard to the Governor‘s Office’ and had ‘continued to be involved in the hiring of staff and the coordination of the Governor‘s official events and priorities . . . among other responsibilities.‘” Id., at 133 (quoting id., at 77, Indictment ¶4).
At trial, the prosecution introduced evidence to support the indictment‘s allegations about Percoco‘s activities during his
The court reserved decision on that motion, ibid., and the case was submitted to the jury. Over defense counsel‘s objection, the court instructed 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.” 2 App. 511. The jury convicted Percoco on count 10, as well as two other charged counts relating to additional conduct, but acquitted him on the other charges. The court then denied Percoco‘s motion for judgment of acquittal, and he was sentenсed to 72 months’ imprisonment. 13 F. 4th, at 187-188.
On appeal, the Second Circuit affirmed. The court explained that the “fiduciary-duty [jury] instruction” given by the trial judge “fi[t] comfortably” with, and in fact restated, the understanding of honest-services fraud that the Second Circuit had adopted many years earlier in United States v. Margiotta, 688 F.2d 108 (1982). See 13 F. 4th, at 194 (noting that Percoco and his co-defendants “seem to agree that the district court‘s fiduciary-duty instruct[ion] falls within Margiotta“). Based on that precedent, the court also rejected Percoco‘s claim that there was insufficient evidence to prove that he had “owed New York State a duty of honest services while he was managing the Governor‘s campaign.” Id., at 201.
Percoco sought this Court‘s review, asking us to decide whether a private citizen who “hаs informal political or other influence over governmental decisionmaking” can be convicted of honest-services fraud. Pet. for Cert. i. We granted certiorari. 597 U.S. ___ (2022).2
II
A
As noted, the decision below was based squarely on the Second Circuit‘s 1982 decision in Margiotta, and we therefore begin by briefly recounting the events that led up to and followed that decision. The federal wire fraud statute,
In Margiotta, the Second Circuit faced a case that departed from this pattern. Joseph Margiotta chaired the Republican Party Committees for Nassau County and the town of Hempstead, New York, and he used the influence that came with those positions to carry out a kickback scheme. He was indicted for honest-services mail fraud, and although he held “no elective office,” the prosecution argued that he nevertheless breached a duty to render honest services because his party positions “afforded him sufficient power and prestige to exert substantial control over public officials.” 688 F. 2d, at 113.
A divided Second Circuit panel agreed. The majority found that “there is no precise litmus paper test” for determining when a private person “owes a fiduciary duty to the general citizenry” but that “two time-tested measures of fiduciary status [were] helpful.” Id., at 122. These were (1) whether “others rel[ied] upon [the accused] because of [his] special relationship in the government” аnd (2) whether he exercised “de facto control” over “governmental decisions.” Ibid. Admitting that the case before it was “novel” and that determining when a private person owes a duty of honest services was “a most difficult enterprise,” the majority nevertheless concluded that a private person could commit honest-services fraud if he or she “dominate[d] government.” Id., at 121-122. In a strongly worded partial dissent, Judge Winter complained that the majority‘s interpretation lacked “the slightest basis in Congressional intent, statutory language or common canons of statutory interpretation” and that it erroneously treated a variety of “politically active persons” who have informal but strong influence over government as subject to the same duties as officeholders. Id., at 142 (opinion concurring in part and dissenting in part).
This Court declined to review the Second Circuit‘s decision, 461 U.S. 913 (1983), but that decision‘s life as Second Circuit precedent was short-lived. In McNally v. United States, 483 U.S. 350 (1987), the Court considered a similar case, and rather than addressing the application of honest-services fraud to private persons, the Court rejected the entire concept of honest-services fraud and held that the mail fraud statute was “limited in scope to the protection of property rights.” Id., at 358, 360.
McNally‘s holding on honest-services fraud, however, lasted for less time than Margiotta‘s. “Congress responded swiftly” and enacted
Decades later, this Court considered and rejected the broad argument that
Skilling‘s approach informs our decision in this case. Here, the Second Circuit concluded that “Congress effectively reinstated the Margiotta-theory cases by adopting statutory language that covered the theory.” 13 F. 4th, at 196. But Skilling was careful to avoid giving
This is illustrated by Skilling‘s rejection of the Government‘s argument that
Because the pre-McNally lower court decisions involving such conduct were “inconsisten[t],” we concluded that this “amorphous category of cases” did not “constitute core applications of the honest-services doctrine.” 561 U.S., at 410.
Skilling‘s teaching is clear. “[T]he 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 smattering of pre-McNally decisions. With this lesson in mind, we turn to the question whether the theory endorsed by the lower courts in this case gave
B
As noted, Percoco moved before trial for dismissal of the honest-services conspiracy count at issue on the ground 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. See Defendant‘s Memorandum of Law in Support of Motion To Dismiss the Superseding Indictment in No. 1:16–cr-00776 (SDNY, May 19, 2017), ECF Doc. 187, pp. 25-30. He advanced a similar theory in his motion for acquittal, emphasizing that he was acting under “a short-term agreement [with Aiello‘s firm] within the period in which he was no longer a state employee.” 1 App. 447.
On this point, Percoco‘s arguments sweep too broadly. To be sure, the pre-McNally record on honest-services fraud is clearest when the Government seeks to prоsecute actual public officials. Most of the pre-McNally honest-services prosecutions, including what appears to be the first case to adopt that theory, involved actual public officials. See Skilling, 561 U.S., at 400-401 (citing Shushan v. United States, 117 F.2d 110, 115 (CA5 1941)). But we reject the argument that a person nominally outside public employment can never have the necessary fiduciary duty to the public. Without becoming a government employee, individuals not formally employed by a government entity may enter into agreements that make them actual agents of the government. An “agent owes a fiduciary
Rejecting this absolute rule, however, is not enough to sustain Percoco‘s convictions on the wire fraud conspiracy counts. “[T]he intangible right of honest services” codified in
C
Percoco challenges the Margiotta theory that underlay the jury instructions in this case, and we must therefore decide whether those instructions are correct. We hold that they are not.
1
Directly applying Margiotta, the trial judge told the jury that Percoco owed a duty of honest services to the public if (1) he “dominated and controlled any governmental business” and (2) “people working in the government actually relied on him because of a special relationship he had with the government.” 2 App. 511; see Margiotta, 688 F.2d, at 122. But Margiotta‘s standard is too vague. From time immemorial, there have been éminence grises, individuals who lacked any formal government position but nevertheless exercised very strong influence over government decisions. Some of these individuals have been reviled; others have been respected as wise counselors. The Margiotta test could be said to apply to many who fell into both of these camps. It could also be used to charge particularly well-connected and effective lobbyists. See 688 F.2d at 142 (opinion of Winter, J.). Margiotta acknowledged that “the public has no right to disinterested service” from lobbyists and political party officials, but the rule it developed—which was embodied in the jury instructions given in this case—implies that the public does hold such a right whenever such persons’ clout exceeds some ill-defined threshold. Id., at 122. Margiotta set a low bar, i.e., the point at which a defendant‘s influence goes beyond “minimum participation in the processes of government.” Ibid. The instructions in this case demanded more, viz., proof of “dominat[ion],” but what does that mean in concrete terms? Is it enough if an elected official almost always heeds the advice of a long-time political adviser? Is it enough if an officeholder leans very heavily on recommendations provided by a highly respected predecessor, family member, or old friend? Without further constraint, Margiotta does not (and thus, 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 (2016) (quoting Skilling, 561 U.S., at 402-403).
2
The
The first theory differs substantially from the jury instructions, which did not tell the jury that Percoco could be found to owe a duty of honest services because he had been selected for future government service. While the prosecution offered evidence that Percoco intended to rеturn to government service after the election and had made plans to do so, the jury could have found that the requirements set out in the jury instructions were satisfied without relying on that evidence. Thus, even if we assume for the sake of argument that there is some merit in the Government‘s first new theory, it is far from clear that the erroneous jury instructions would be harmless.
The Government‘s second new theory—i.e., that a private citizen owes a duty to render honest services “when the person exercises the functions of a government position with the acquiescence of relevant government personnel“—appears, as defined in its brief, to restate Margiotta‘s erroneous construction of the law. See Brief for United States 33 (instructions “as a whole and in the context of this case . . .
correctly conveyed” this test). Moreover, the jury was not told that it was necessary to find that “relevant government personnel” “acquiesce[d]” in Percoco‘s exercise of government functions.
In short, the jury instructions are substantially different from either of the Government‘s new theories, and the Second Circuit—which treated even the language the Government now disclaims in Margiotta as good law—did not affirm on either of these theories. We decline to do so here.
*
*
*
For these reasons, the judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.
It is so ordered.
GORSUCH, J., concurring in judgment
SUPREME COURT OF THE UNITED STATES
No. 21-1158
JOSEPH PERCOCO, PETITIONER v. UNITED STATES
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
[May 11, 2023]
JUSTICE GORSUCH, with whom JUSTICE THOMAS joins, concurring in the judgment.
The Court holds that the jury instructions in this case were “too vague.” Ante, at 10. I agree. But to my mind, the problem runs deeper than that because no set of instructions could have made things any better. To this day, no one knows what “honest-services fraud” encompasses. And the Constitution‘s promise of due process does not tolerate that kind of uncertainty in our laws—especially when criminal sanctions loom. “Vague laws” impermissibly “hand off the legislature‘s responsibility for defining criminal behavior to unelected prosecutors and judges, and they leave people with no sure
Honest-services fraud and this Court‘s vagueness jurisprudence are old friends. The story traces back to the early 1940s whеn a string of lower courts began stretching the federal mail-fraud statute‘s phrase “scheme or artifice to defraud.”
Eventually, that uncertainty demanded this Court‘s attention. In McNally v. United States, 483 U.S. 350 (1987), the Court held that, while
Soon Congress did speak. It enacted
These problems resurfaced in Skilling. There, a majority of the Court acknowledged that a “vagueness challenge [to
Justice Scalia, Justice Kennedy, and JUSTICE THOMAS declined to participate
Even on its own terms, the dissenters noted, the majority‘s reconstruction of the statute failed “to eliminate [its] vagueness.” Id., at 421. The majority had not attempted to define what constitutes a breach of the “‘honest services’ obligation,” but sought to identify only conduct that fell within its “core.” Ibid. Nor had the majority done anything to “solve the most fundamental indeterminacy” in honest-services-fraud theory, ibid., for nothing in its decision explained what kinds of fiduciary relationships are sufficient to trigger a duty of honest services in the first place. Is the duty of honest services limited “to public officials” serving the government? Ibid. Does it also apply “to private individuals who contract with the public?” Ibid. Or does it apply to “everyone” who owes some sort of fiduciary responsibility to others, including (say) a corporate officer? Ibid. What source of law, too, should a court consult to answer these questions? Must a fiduciary duty arise from positive state or federal law, or can it arise from general trust law, “a corpus juris festooned with various duties“? Id., at 417-418. All these questions, the dissenters observed, had long divided lower courts and remained unanswered.
Today, the Court returns to these quandaries. The jury instructions in this case sought to identify at least one instance when a duty of honest services arises—namely, when a private individual has “‘dominated and controlled any governmental business‘” and “‘people working in the government actually relied on him because of a special relationship he had with the government.‘” Ante, at 9-10. But that formulation, the Court holds, is “too vague” to pass constitutional muster. Ante, at 10. That is so, the Court reasons, because it could result in the conviction of anyone whose “clout exceeds some ill-defined threshold” and thus sweep in “effective lobbyists” exercising their First Amendment right to petition the government. Ibid. The Court also pauses briefly to address two alternative tests the government suggests for defining when a duty of honest services may attach. But the Court takes no view on the first and rejects the second. Ante, at 11-12. In the end, we may now know a little bit more about when a duty of honest services does not arise, but we still have no idea when it does.
It‘s a situation that leaves prosecutors and lower courts in a bind. They must continue guessing what kind of fiduciary relationships this Court will find sufficient to give rise to a duty of honest services. For them, it is back to the drawing board in their indictments and their jury instructions. But they are not the main victims here. That plight belongs to private citizens. In this country, a criminal law is supposed to provide “ordinary people fair notice of the conduct it punishes.” Johnson v. United States, 576 U.S. 591, 595 (2015); see also Connally v. General Constr. Co., 269 U.S. 385, 391 (1926). Yet even 80 years after lower courts began experimenting with the honest-services-fraud theory, no one can say
To be sure, I cannot fault the Court for the problem. The difficulty here stems from the statute and the lower court decisions that inspired it. I have no doubt that if all nine Justices put our heads together, we could rewrite
Doubtless, Congress had high and worthy intentions when it enacted