Supreme Court overturns fraud convictions related to Cuomo project

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The Supreme Court overturned the fraud convictions of four businessmen, three of whom were connected to the scandal-plagued “Buffalo Billion” development plan in upstate New York.

The plan, led at the time by then-New York Gov. Andrew Cuomo, envisioned the construction of a solar panel factory, among other projects, and was aimed at attracting more than $8 billion in investments for Buffalo and the rest of western New York, creating about 14,000 jobs.

The court issued unsigned orders (pdf) on May 22 summarily vacating the convictions of petitioners Steven Aiello, Joseph Gerardi, and Alain Kaloyeros, who were connected to the Buffalo Billion saga, and of Michael Binday, who was not.

The court did not explain why it was issuing the orders. No justices dissented. All the cases were remanded to the U.S. Court of Appeals for the 2nd Circuit for reconsideration in light of two rulings the Supreme Court handed down earlier this month limiting the application of the federal honest-services fraud statute and the right-to-control theory of fraud.

The Supreme Court simultaneously granted the petitioners’ requests seeking review while skipping over the oral argument phase when the merits of the case would have been considered. Some lawyers call this process GVR, which stands for grant, vacate, and remand.

The orders followed the Supreme Court’s unanimous May 11 decision to overturn the 2018 public corruption conviction of Joe Percoco, formerly a longtime senior aide to Cuomo. Cuomo resigned in August 2021 amidst allegations of sexual improprieties and of concealing COVID-19 deaths in nursing homes.

In the ruling, the Supreme Court limited the reach of the federal honest-services fraud statute, which some lawyers and civil libertarians say is vague and overbroad.

Federal law defines honest-services fraud as “a scheme or artifice to deprive another of the intangible right of honest services.” Although the law was created to combat government corruption, its application isn’t limited just to government officials and can cover private citizens. The phrase “honest services” is not defined, which has allowed the courts to decide on the law’s reach.

For honest-services fraud to take place, someone must pay a bribe and someone must be harmed by it. The thinking behind the law is that the person accepting the bribe owes a duty to someone else, such as the citizenry.

Percoco was convicted of two counts of conspiracy to commit honest-services fraud for taking money from companies that hoped to gain influence with the Cuomo administration. But at the time of the payments that the federal government characterized as bribes, Percoco had temporarily stepped down from his state office to run Cuomo’s reelection campaign. This meant he was not a government official at the time he accepted the funds and therefore no corruption was involved, Percoco argued.

The May 22 orders also came after the Supreme Court unanimously overturned on May 11 the conviction of Louis Ciminelli in a separate case related to the Buffalo Billion project.

Prosecutors claimed Ciminelli rigged bids for state contracts. He was convicted of conspiracy to commit wire fraud and other charges by a federal court in Manhattan in 2018. Aiello, Gerardi, and Kaloyeros, a former president of SUNY Polytechnic Institute, were also convicted at the same time.

Ciminelli claimed that the right-to-control theory of fraud the government argued and the 2nd Circuit upheld in the case, was invalid. The theory holds that the deprivation of complete and accurate information a person needs to make an economic decision constitutes property fraud.

The Supreme Court rejected the right-to-control theory under which “a defendant is guilty of wire fraud if he schemes to deprive the victim of ‘potentially valuable economic information’ ‘necessary to make discretionary economic decisions,” Justice Clarence Thomas wrote for the court.

“We have held, however, that the federal fraud statutes criminalize only schemes to deprive people of traditional property interests,” Thomas added.

Binday, an insurance broker, obtained life insurance policies for clients intending from the beginning to facilitate the resale of those policies to investors, his petition (pdf) stated. Once sold, such policies are called “stranger-owned life insurance,” or STOLI policies.

But Binday “falsely told the insurance companies that his clients did not intend to sell the policies,” according to the petition. Binday was convicted of mail and wire fraud in 2013.

Generally, insurers cannot prevent an insured from selling their life insurance policy to someone else, and “in fact, they are required by law to permit the resale of policies,” the petition stated.

“But insurers may refuse to sell life insurance policies to individuals who admit they plan to later sell them. So insurers will ask in an insurance application whether the proposed insured intends to sell the policies. For example, insurers require applicants to affirm that they do not intend to sell their policies to investors; they require brokers to affirm that policies are not intended for investors; and they void policies or pursue breach of contract claims against insureds or brokers who misrepresent their intentions.”

Binday’s lawyer conceded at trial that the broker’s clients “falsely represented in their insurance applications that they had no intent to re-sell their policies,” a move that could have led the insurance companies to sue Binday for breach of contract, terminate him as a broker of their policies, or sue to void the policies issued in violation of the insurance companies’ rules, the petition stated.

Instead, Binday’s “misrepresentations were transformed into a federal criminal prosecution.”

Prosecutors argued that to obtain a fraud conviction under the right-to-control theory the government only had to prove that Binday deprived the insurance companies of information needed to make informed economic decisions.

Binday’s counsel, David W. Shapiro of the Norton Law Firm in Oakland, California, lauded the Supreme Court’s decision to vacate his client’s conviction.

“We are pleased that the Supreme Court took up the question whether a person’s thought process is ‘property’ under the fraud statutes and rejected the Second Circuit’s case law,” Shapiro told The Epoch Times in an email.

“Mr. Binday argued that point multiple times in the lower courts and in the Supreme Court, and his position has now been vindicated.”

Attorneys for Aiello, Gerardi, and Kaloyeros did not respond to requests for comment by press time.

The Epoch Times also reached out to the U.S. Department of Justice for comment on the May 22 orders but had not received a reply as of press time.

This article by Matthew Vadum appeared May 25, 2023, in The Epoch Times.

Photo: Former New York Gov. Andrew Cuomo, a Democrat