Please E-mail suggested additions, comments and/or corrections to Kent@MoreLaw.Com.
Help support the publication of case reports on MoreLaw
Date: 09-17-2021
Case Style:
United States of America v. JOSEPH PERCOCO, STEVEN AIELLO, JOSEPH GERARDI, LOUIS CIMINELLI, ALAIN KALOYEROS, AKA DR. K and PETER GALBRAITH KELLY, JR., MICHAEL LAIPPLE, KEVIN SCHULER
Case Number: 18-3710
Judge: Denny Chin
Court: UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Plaintiff's Attorney: MATTHEW D. PODOLSKY, Assistant United States
Attorney (Robert L. Boone, Janis M. Echenberg,
and Won S. Shin, Assistant United States
Attorneys, on the brief), for Audrey Strauss, United
States Attorney for the Southern District of New
York, New York,
Defendant's Attorney:
Description:
New York, New York - Criminal defense lawyer represented defendants with conspiracy to engage in wire fraud by engaging in a scheme to rig the bidding processes for New York State-funded projects charges.
I. The Facts3
A. The Buffalo Billion Initiative
In 2012, then-Governor Andrew Cuomo launched an initiative to
develop the greater Buffalo area through the investment of $1 billion in taxpayer s
Nor are we required to reconsider our precedent by Kelly v. United States, 140 S. Ct. 1565
(2020). There, the Supreme Court ruled that a "scheme to reallocate the [George
Washington] Bridge's access lanes" was not property for purposes of the wire fraud
statute because lane realignment by the Port Authority was an "exercise of regulatory
power," not "the taking of property." Id. at 1573-74. Kelly is inapposite here because this
case does not concern the exercise of regulatory power. See United States v. Gatto, 986
F.3d 104, 116 (2d Cir. 2021) (distinguishing Kelly on basis that defendants there were
motivated by "political retaliation" and not taking of property). We further note that the
Supreme Court recently denied a petition for certiorari that presented challenges to the
right-to-control theory similar to those raised by defendants here. See Binday v. United
States, 140 S. Ct. 1105 (2020).
3 Because defendants appeal their convictions following a jury trial, "our statement
of the facts views the evidence in the light most favorable to the government, crediting
- 6 -
funds; the project became known as the "Buffalo Billion" initiative. App'x at
1034. At the time, Kaloyeros was the head of the College of Nanoscale Science
and Engineering ("CNSE"), an economic development and research organization
that formed part of the University of Albany -- itself part of the State University
of New York ("SUNY"). In late 2011, Kaloyeros hired Todd Howe, a consultant
and lobbyist with a longstanding relationship with the Cuomo administration, to
help improve his relationship with the Governor's office. In exchange for Howe's
help, Kaloyeros arranged to have SUNY's Research Foundation pay Howe
$25,000 per month.
With Howe's assistance, Kaloyeros's relationship with the
Governor's office improved and, in 2012, Kaloyeros was put in charge of
developing proposals for projects under the Buffalo Billion initiative. In this role,
Kaloyeros was to propose development projects he believed would attract
private industry to the upstate region. Once a proposed project was approved,
Kaloyeros would also oversee the development of the project, which was to be
any inferences that the jury might have drawn in its favor." See United States v.
Rosemond, 841 F.3d 95, 99-100 (2d Cir. 2016).
- 7 -
paid for by public funds but ultimately leased out for use to private companies
with the aim of generating jobs for the upstate economy.
Due to restrictions on state agencies engaging in public-private
partnerships, Kaloyeros used Fort Schuyler Management Corporation ("Fort
Schuyler"), a nonprofit corporation established to support the missions of SUNY
and other affiliated organizations, as the vehicle for purchasing the land and
developing the facilities for the Buffalo Billion development projects. Fort
Schuyler was controlled by a Board of Directors (the "FS Board") whose members
(among them Kaloyeros) were appointed by SUNY and the SUNY Research
Foundation.
B. The Scheme
By the summer of 2013, Howe had not only helped Kaloyeros secure
a central role in the Buffalo Billion initiative but was also helping Kaloyeros
pursue his additional goal of separating CNSE from the University of Albany
and becoming president of the newly independent university.4 At the same time
that the SUNY Research Foundation, at Kaloyeros's direction, was paying Howe
4 Kaloyeros ultimately received support from the most senior members of the
Governor's staff, commonly referred to as the Governor's "Executive Chamber,"
Gov't App'x at 500, to form a new university, SUNY Polytechnic Institute, and to
become that university's president.
- 8 -
to act as a consultant on these state-sponsored projects, two other construction
companies -- COR Development Company ("COR Development"), owned by
Aiello and Gerardi, and LPCiminelli, owned by Ciminelli -- were paying Howe
for his help in obtaining state-funded work Kaloyeros and Howe then began
conspiring to deliver the Buffalo Billion state contracts to Howe's clients.
Although Kaloyeros had substantial influence and control over the
Buffalo Billion projects, Fort Schuyler's role in the selection process foreclosed his
ability to immediately award the contracts to Howe's clients. In selecting
developers and construction managers, Fort Schuyler employed a request-forproposal ("RFP") process under which it would announce its needs for each
project through an RFP and then permit interested parties to compete for the
projects by submitting bids and a description of their qualifications.5 Although
Kaloyeros was responsible for designing and drafting the RFP documents, the
authority to award a contract rested with the FS Board, which typically did so
only after an evaluation team at Fort Schuyler reviewed the responses and made
a recommendation. But Kaloyeros and Howe circumvented Fort Schuyler's
typical bidding process in two ways.
5 The RFP process is generally used to help ensure that funds "are spent in a
transparent and a competitive way." App'x at 1037.
- 9 -
First, in August 2013, Kaloyeros successfully proposed that Fort
Schuyler issue two RFPs -- one for Syracuse (the "Syracuse RFP") and another for
Buffalo (the "Buffalo RFP") -- to identify "a strategic development partner" in
each region. Notably, unlike Fort Schuyler's usual RFPs, the Syracuse and
Buffalo RFPs would "not focus on a specific project." App'x at 1050. Indeed, the
then-chairman of Fort Schuyler's Board of Directors testified that Fort Schuyler
had no specific projects in mind for either region at the time of Kaloyeros's
proposal, and the Syracuse and Buffalo RFPs that were ultimately issued sought
generally "to establish a strategic research, technology outreach, business
development, manufacturing, and education and workforce training partnership
with a qualified developer" in those regions, "for potential research, technology
outreach, business development, manufacturing, and education and training
hubs," App'x at 1912. The successful bidders would be "designat[ed] . . . as the
PREFERRED DEVELOPER" for the region, App'x at 1912, and, thus, would have
the first opportunity to negotiate with Fort Schuyler for the specific projects Fort
Schuyler eventually identified.
Second, Kaloyeros and Howe worked to draft these RFPs in a way
that would give COR Development and LPCiminelli an advantage unbeknownst
- 10 -
to others at Fort Schuyler. Notably, Kaloyeros solicited, through Howe,
qualifications or attributes of COR Development and LPCiminelli to include as
requirements in the Syracuse RFP and Buffalo RFP so that the bidding process
would favor the selection of these companies as preferred developers.
Through a series of email and in-person communications in August
and September of 2013, Howe worked with Aiello, Gerardi, Ciminelli, and Kevin
Schuler, an executive at LPCiminelli, to come up with a list of qualifications --
which they referred to as "vitals" -- that, once incorporated into the RFPs, would
improve their chances of being selected for the Buffalo and Syracuse projects.6
See, e.g., App'x at 1560, 1647-49. This information was then relayed to Kaloyeros,
who, after asking for more specificity, see App'x at 1578, and even soliciting
feedback on proposed drafts, incorporated the doctored qualifications into the
RFP drafts that were ultimately submitted to the FS Board for approval.
In September and October of 2013, the Syracuse and Buffalo RFPs
were issued by the FS Board, as prepared by Kaloyeros. Notably, the final
Syracuse RFP contained a fifteen-year experience requirement, which directly
matched the experience of COR Development, along with a requirement that the
6 Schuler pleaded guilty shortly before trial pursuant to a cooperation agreement
with the government, and he testified at trial as a government witness.
- 11 -
preferred developer use a particular type of software (which COR Development
also used), and other language lifted directly from the list of qualifications Aiello
and Gerardi had prepared and sent to Howe. Similarly, the final Buffalo RFP
contained specifications unique to LPCiminelli, including "[o]ver 50 years of
proven experience" in the field, App'x at 1914, a requirement that the preferred
developer be headquartered in Buffalo, and additional language lifted directly
from talking points provided to Kaloyeros from Ciminelli and Schuler.
C. The Bidding
Both the Syracuse RFP and Buffalo RFP imposed a "blackout period"
between the time of their issuance and the deadline for bidders to submit
proposals, during which time all communication between interested vendors and
the RFP issuer were to occur in designated, open forums or through a designated
point person to ensure equal access to information and avoid any unfair
advantages among competitors. Notwithstanding this restraint, Aiello, Gerardi,
Ciminelli, and Schuler continued to discuss their applications with Howe and
Kaloyeros during this period. For example, Aiello emailed Howe to warn him
about a potential competitor for the Syracuse RFP, and Schuler reached out to
Kaloyeros, through Howe, to express concern over public statements made by
- 12 -
the Governor that he believed might remove their advantage in securing the
Buffalo RFP.
Kaloyeros, for his part, continued to provide secret assurances to
Aiello, Gerardi, and Schuler, through Howe, that they would be awarded the
contracts while simultaneously taking steps to ensure that the bidding process
appeared open and fair to the public. In one instance, Kaloyeros learned from
Howe (who had learned from Schuler) that another company was representing
itself to others as a gatekeeper for the Buffalo RFP project. Kaloyeros quickly
denied the rumor to Howe, and then went on to email the competitor, copying
Fort Schuyler employees and members of FS Board, reminding the competitor
that Fort Schuyler could "neither endorse nor support a pre-cooked process or
any process that singles out anyone" before the bidding period was closed. Gov't
App'x at 738.
Kaloyeros also made modifications to the Buffalo RFP in response to
public scrutiny. After the 50-year experience requirement caught the attention of
an investigative reporter who began to ask questions about its origin, Kaloyeros
claimed that the requirement was "a typographical error," and changed it back to
15 years, as in the Syracuse RFP. Gov't App'x at 733. Presumably also to combat
- 13 -
any perception that the RFP was tailored to a particular bidder, Kaloyeros
further decided that Fort Schuyler would name two preferred developers for the
Buffalo projects, instead of one, although he continued to allow Ciminelli and
Schuler to unduly influence the process. Not only did Kaloyeros continue to
assure Schuler and Ciminelli that LPCiminelli would still get the contract for the
larger of the two projects, but he allowed them to select the second preferred
developer.
D. The Final Selections and Awarding of Contracts
Once the RFP responses were submitted, evaluation teams made up
of Fort Schuyler employees reviewed and scored the bids. Kaloyeros recused
himself from the evaluation of the bids and the FS Board vote, but he failed to
disclose his relationships to any of the bidders. Ultimately, COR Development
submitted the only response to the Syracuse RFP and the Fort Schuyler
evaluation team recommended that COR Development be selected as the
preferred developer for Syracuse. Three companies submitted responses to the
Buffalo RFP, and the Fort Schuyler evaluation team recommended that
LPCiminelli and McGuire Development Company ("McGuire"), the bidder
- 14 -
Schuler and Ciminelli selected, be named preferred developers for the Buffalo
contracts.
Through resolutions adopted on December 19, 2013, and January 28,
2014, the FS Board formally announced that the Syracuse RFP would be awarded
to COR Development and that the Buffalo RFP would be awarded to LPCiminelli
and McGuire. Following passage of the resolutions, Kaloyeros awarded two
construction projects to COR Development -- the building of a film studio worth
approximately $15 million in revenue and the construction of a solar panel plant
valued at approximately $90 million. He awarded LPCiminelli the "Riverbend
project," which ultimately became a $750 million construction project.
E. Gerardi's Proffer
During its investigation into the rigging of the Buffalo and Syracuse
RFPs, the government had a proffer session with Gerardi. At the session,
Gerardi told federal officers that he did not ask for the Syracuse RFP to be
tailored to help COR Development and that his handwritten mark-up of the draft
Syracuse RFP reflected his freely given assistance in helping Howe's law firm,
which Gerardi stated was drafting the RFP to make the RFP broader and more
open to other competitors. Gerardi also stated that his written comment
- 15 -
regarding the inclusion of COR Development's software as a qualification in the
Syracuse RFP as being "too telegraphed," really meant "too telescoped," reflecting
his concern that the qualification might unfairly prevent other competitors from
applying. App'x at 1328.
Gerardi further told federal officers that although it was true that
COR Development did not have audited financials, his requests to remove the
audited financial requirement from the Syracuse RFP was not to help COR
Development, but rather to loosen a requirement that might prevent other
companies from applying. Finally, Gerardi told investigators that he had no idea
why, after he requested that the Syracuse RFP permit a financial institution
reference letter in lieu of audited financials, Howe had emailed Gerardi to
confirm that Kaloyeros had included such a provision. According to Gerardi, he
had merely responded "[g]reat" and "[t]hank you" to Howe's email to be polite.
App'x at 1329.
II. Proceedings Below
On September 19, 2017, a federal grand jury returned a superseding
indictment charging eighteen counts, four of which are relevant to this appeal.
Count One charged Kaloyeros, Aiello, Gerardi, Ciminelli, and others with
- 16 -
conspiracy to commit wire fraud in connection with a scheme to rig the bidding
processes for the Buffalo and Syracuse RFPs, in violation of 18 U.S.C. § 1349.
Count Two charged Kaloyeros, Aiello, and Gerardi with wire fraud in
connection with rigging the bidding process for the projects in Syracuse, in
violation of 18 U.S.C. §§ 1343 and 2. Count Four charged Kaloyeros, Ciminelli,
and others with wire fraud in connection with rigging the bidding process for the
projects in Buffalo, in violation of 18 U.S.C. §§ 1343 and 2. And Count Sixteen
charged Gerardi with making false statements to federal officers in connection
with the conduct charged in Counts One and Two, in violation of 18 U.S.C. §
1001(a)(2).7
Trial on Counts One, Two, Four, and Sixteen commenced on June
11, 2018. At the close of the government's case, the defense made oral Rule 29
motions attacking the sufficiency of the government's evidence, which were
renewed after the district court permitted the government to reopen its case for
the limited purpose of supplementing its evidence of venue. After the
7 Although two other counts in the superseding indictment, Counts Three and
Five, also arose from the Buffalo Billion scheme, the government did not proceed to trial
on those counts, and they were dismissed at sentencing and in defendants' final
judgments.
- 17 -
government rested, the defense put on an affirmative case consisting of three
witnesses.
On July 12, 2018, the jury returned a verdict of guilty on all counts.
Defendants renewed their Rule 29 motions, which were denied by the district
court at each of the defendants' respective sentencings. During four separate
sentencing hearings held in December 2018, the district court sentenced
defendants as follows: Ciminelli to 28 months' imprisonment, Gerardi to 30
months' imprisonment, Aiello to 36 months' imprisonment, and Kaloyeros to
42 months' imprisonment. Defendants were also ordered to pay fines and forfeit
funds in varying amounts.
These appeals followed.
DISCUSSION
Four issues are presented: (1) the sufficiency of the evidence to
support the fraud counts of conviction and venue for Count Two; (2) the
instructions to the jury regarding the right-to-control theory of wire fraud and
the good faith defense; (3) the preclusion of evidence regarding the merits and
public benefits of the projects awarded to defendants and admission of evidence
from competitors regarding the range of fees typically charged by other
- 18 -
construction management companies in the market; and (4) the district court's
denial of Gerardi's motion to dismiss his false statement charge for alleged
prosecutorial misconduct. We address each issue in turn.
I. Sufficiency of the Evidence
Defendants challenge (1) the sufficiency of the evidence supporting
their convictions for the charged wire fraud conspiracy (Count One) and
substantive wire frauds (Counts Two and Four) and (2) the sufficiency of the
evidence supporting venue for Count Two. We conclude that the evidence was
sufficient as to both.
A. Standard of Review
We review preserved claims of insufficient evidence de novo. United
States v. Sabhnani, 599 F.3d 215, 241 (2d Cir. 2010). When assessing a sufficiency
of the evidence challenge, we "view the evidence in the light most favorable to
the government, crediting every inference that could have been drawn in the
government's favor, and deferring to the jury's assessment of witness credibility
and its assessment of the weight of the evidence." United States v. Chavez, 549
F.3d 119, 124 (2d Cir. 2008) (citations, alteration, and quotation marks omitted),
abrogated on other grounds by Dean v. United States, 137 S. Ct. 1170 (2017). We will
- 19 -
not set aside a conviction as long as "any rational trier of fact could have found
the essential elements of the crime beyond a reasonable doubt." Jackson v.
Virginia, 443 U.S. 307, 319 (1979); see also United States v. Guadagna, 183 F.3d 122,
130 (2d Cir. 1999).
Unlike the elements of a charged crime, the government is required
to prove venue only by a preponderance of the evidence. United States v. Smith,
198 F.3d 377, 382 (2d Cir. 1999). "We review de novo the District Court's
determination that the evidence was sufficient to support a finding that venue
was proper." United States v. Kirk Tang Yuk, 885 F.3d 57, 71 (2d Cir. 2018). Where
a defendant challenges venue following a jury verdict, we "review the record
evidence in the light most favorable to the government, drawing every
reasonable inference in support of the jury's verdict." Id.
B. The Right-to-Control Theory of Wire Fraud
Defendants first contend that the evidence was insufficient to
support their convictions under a right-to-control theory of wire fraud because
the government failed to prove economic harm or the requisite intent to defraud.
- 20 -
1. Applicable Law
"The federal mail and wire fraud statutes penalize using the mails or
a wire communication to execute 'any scheme or artifice to defraud, or for
obtaining money or property by means of false or fraudulent pretenses,
representations, or promises.'" United States v. Greenberg, 835 F.3d 295, 305 (2d
Cir. 2016) (quoting 18 U.S.C. §§ 1341, 1343). "Since a defining feature of most
property is the right to control the asset in question, . . . property interests
protected by the wire fraud statute include the interest of a victim in controlling
his or her own assets." United States v. Lebedev, 932 F.3d 40, 48 (2d Cir. 2019)
(internal quotation marks and alteration omitted), cert. denied sub nom. Gross v.
United States, 140 S. Ct. 1224 (2020). This Court has endorsed a "right-to-control
theory" of wire fraud that allows for conviction on "a showing that the
defendant, through the withholding or inaccurate reporting of information that
could impact on economic decisions, deprived some person or entity of
potentially valuable economic information." Id. (internal quotation marks and
alteration omitted); accord United States v. Gatto, 986 F.3d 104, 126 (2d Cir. 2021).
The right-to-control theory requires proof that "misrepresentations
or non-disclosures can or do result in tangible economic harm." United States v.
- 21 -
Finazzo, 850 F.3d 94, 111 (2d Cir. 2017). A "cognizable harm occurs where the
defendant's scheme denies the victim the right to control its assets by depriving it
of information necessary to make discretionary economic decisions." United
States v. Binday, 804 F.3d 558, 570 (2d Cir. 2015) (internal quotation marks and
alteration omitted). Examples include when the scheme "affected the victim's
economic calculus or the benefits and burdens of the agreement," "pertained to
the quality of services bargained for," or "exposed the [victim] to unexpected
economic risk." Id. at 570-71. It is, however, "not sufficient . . . to show merely
that the victim would not have entered into a discretionary economic transaction
but for the defendant's misrepresentations." Id. at 570.
To prove a scheme to defraud, "[i]t need not be shown that the
intended victim of the fraud was actually harmed; it is enough to show
defendants contemplated doing actual harm." United States v. Schwartz,
924 F.2d 410, 420 (2d Cir. 1991). In a right-to-control case, "it is not necessary that
a defendant intend that his misrepresentation actually inflict a financial loss -- it
suffices that a defendant intend that his misrepresentations induce a
counterparty to enter a transaction without the relevant facts necessary to make
an informed economic decision." Binday, 804 F.3d at 579. Thus, the requisite
- 22 -
intent is established if "the defendant's misrepresentations foreseeably concealed
economic risk or deprived the victim of the ability to make an informed
economic decision." Id. at 578.
2. Analysis
i. Economic Harm
The trial evidence demonstrated that the defendants, by secretly
tailoring the Buffalo and Syracuse RFPs, took steps to reduce the possibility that
companies other than their own would be seen as competitive, or even qualified
at all, for the bids at issue. There was also evidence that Fort Schuyler employed
the RFP process precisely because of its desire for free and open competition, and
that the FS Board relied on this aspect of the process to achieve its economic
objective -- selecting the lowest-priced or best-qualified vendor. Thus, in rigging
the RFPs to favor their companies, defendants deprived Fort Schuyler of
"potentially valuable economic information," id. at 570 (internal quotation marks
omitted), that would have resulted from a truly fair and competitive RFP
process.
Defendants nevertheless insist that the government failed to prove
economic harm for two interrelated reasons. First, defendants maintain that
- 23 -
even if the Syracuse and Buffalo RFPs were not competitive, the absence of
competition could not have caused harm to Fort Schuyler, because the rigged
RFPs merely awarded COR Development and LPCiminelli preferred developer
status, and did not affect the terms of the separate, subsequently negotiated
development contracts. In other words, the rigged RFPs only afforded these
companies "the right to negotiate with Fort Schuyler for work that would be
forthcoming." Ciminelli Br. at 3-4. Second, defendants assert that the
government did not offer evidence that another company with lower prices,
better quality, or better value would have applied and been selected for either
the Syracuse or the Buffalo contracts. We are not persuaded by either argument.
As to the first argument, as an initial matter, the record does not
support the clean division between the award of preferred developer status and
the subsequent awards of particular development contracts that defendants
describe. Although COR Development and LPCiminelli were not guaranteed
any project once they were chosen preferred developers, they indisputably had
"a leg up because they had been preselected," Trial Tr. at 221, as the designation
"guaranteed them the beginning of a partnership with . . . Fort Schuyler," Trial
Tr. at 341. Further, Fort Schuyler had an interest in seeing its proposed projects
- 24 -
come to fruition, and the costs attendant to identifying another developer after
investing in identifying preferred developers would be a strong disincentive to
walking away from those developers. Indeed, if preferred developer status were
as inconsequential as defendants suggest, no developers would bother
responding to the RFP. Accordingly, the rigged RFP process constituted more
than mere "fraudulent inducements to gain access to" the development contracts,
which would not be sufficient to support the wire fraud convictions here. See
Schwartz, 924 F.2d at 421. Rather, COR Development and LPCiminelli's selection
as preferred developers made it much more likely that they would be awarded
the contracts. Moreover, while we have recognized "a fine line between schemes
that do no more than cause their victims to enter into transactions they would
otherwise avoid -- which do not violate the mail and wire fraud statutes -- and
schemes that depend for their completion on a misrepresentation of an essential
element of the bargain -- which do," United States v. Shellef, 507 F.3d 82, 108 (2d
Cir. 2007), the evidence, viewed in the light most favorable to the government,
see Rosemond, 841 F.3d at 99-100, demonstrated that a competitive process was
"essential" both to the selection of preferred developers and -- in light of the
- 25 -
preferred developers' "leg up" for projects that then arose -- to the award of the
subsequent development contracts.
As to the second argument, we recognize that many of our right-tocontrol precedents have involved more tangible evidence of economic harm than
is presented in this case. See, e.g., Finazzo, 850 F.3d at 100-02, 114-15 (discussing
merchandising company employees' testimony that company executive who
steered company to particular vendor in exchange for kickbacks deprived
company of specific cost savings and better-quality goods); Binday, 804 F.3d at
572-74 (finding economic harm in misrepresentation to insurers that insurance
policies were not intended for sale to third parties where insurance executives
"testified unequivocally and at length that their companies refused to issue [such
policies] for economic reasons," including that those policies "ha[d] different
economic characteristics that could reduce their profitability"). Here, the
government offered little evidence that other companies would have successfully
bid for the projects and then either charged less or produced a more valuable
product absent the fraud.8 But "[i]t is not required that the victim[] of the scheme
8 There was evidence introduced at trial that absent the fraud, Fort Schuyler
would have considered more, and perhaps stronger, applications in response to the
RFPs. One representative from a rival company testified that he considered submitting
- 26 -
in fact suffered harm." Binday, 804 F.3d at 569; accord Gatto, 986 F.3d at 123-24
(rejecting argument that wire fraud statute "requires that property or money be
obtained by the defendant from the victim"). And that evidence of actual
economic harm was presented in other right-to-control cases does not make such
evidence a requisite for conviction.
We are similarly unpersuaded by defendants' arguments that
rigging the Buffalo and Syracuse RFPs was not wire fraud because it merely
induced negotiations, see Shellef, 507 F.3d at 109, or because Fort Schuyler still
received the benefit of its bargain, see Binday, 804 F.3d at 570. The bargain at
issue was not the terms of the contracts ultimately negotiated, but instead Fort
Schuyler's ability to contract in the first instance, armed with the potentially
valuable economic information that would have resulted from a legitimate and
a bid for the Buffalo RFP but decided not to because aspects of the RFP, including its
"vagueness" and fifty-year experience requirement, left him with the impression that
the project "was being steered towards a local competitor." App'x at 1296. Notably,
both that company's representative and a representative of another regional
construction management company that applied to the Buffalo RFP as part of a team
testified to having construction management fees were typically lower than those of
both LPCiminelli and COR Development. Accordingly, if Fort Schuyler had been able
to consider additional applications, it might have selected a preferred developer who
could offer more favorable economic terms for development contracts that Fort
Schuyler eventually negotiated.
- 27 -
competitive RFP process. Depriving Fort Schuyler of that information was
precisely the object of defendants' fraudulent scheme, and for Fort Schuyler, it
was an essential element of the bargain.9 This was plainly sufficient for a wire
fraud conviction under our caselaw. See Shellef, 507 F.3d at 108 ("Our cases have
drawn a fine line between schemes that do no more than cause their victims to
enter into transactions they would otherwise avoid -- which do not violate the
mail or wire fraud statutes -- and schemes that depend for their completion on a
misrepresentation of an essential element of the bargain -- which do violate the
mail and wire fraud statutes.").
ii. Fraudulent Intent
We also reject the arguments made by Aiello, Gerardi, and Ciminelli
that there was insufficient evidence of their intent to defraud. Emails introduced
at trial showed all three defendants communicating with Howe on how to rig the
RFP process. See, e.g., App'x at 1644 (email from Howe to Aiello discussing
LPCiminelli's initial ideas for rigging the RFP); App'x at 1685-86 (email from
9 See, e.g., App'x at 1809 (Memorandum of Understanding ("MOU") between Fort
Schuyler and COR Development indicating that COR Development was selected "after
a competitive process, including the RFP"); Gov't App'x at 780 (same as to LPCiminelli);
see also Gov't App'x at 766 (Notice to Proceed with COR Development describing the
MOU with COR as the result of a "competitive bidding process under the RFP"); Gov't
App'x at 788 (same as to LPCiminelli).
- 28 -
Howe to Aiello containing advance copy of Syracuse RFP, which Aiello
forwarded to Gerardi and others at COR Development); App'x at 1656 (email
from Gerardi with a written markup of the advance copy of the Syracuse RFP, in
which he expressed his concern that Kaloyeros had made it "too telegraphed");
App'x at 1593-61 (email from Kaloyeros to Ciminelli containing draft Syracuse
RFP with message: "Draft of relevant sections from RFP enclosed [. . .] obviously,
we need to replace Syracuse with Buffalo and fine tune the developer
requirements to fit [. . .] hopefully, this should give you a sense where we're
going with this [. . .] thoughts?"). On this evidence, a reasonable jury could have
found beyond a reasonable doubt that Aiello, Gerardi, and Ciminelli knew about
the scheme to rig the RFPs, and that it was at least foreseeable to them that doing
so would deprive Fort Schuyler of its ability to award contracts that were the
result of a fair and competitive bidding process. The evidence of intent to
defraud was therefore sufficient to uphold their convictions. See Binday, 804 F.3d
at 578 (intent established where shown that "the defendant's misrepresentations
- 29 -
foreseeably concealed economic risk or deprived the victim of the ability to make
an informed economic decision").10
C. Venue for Count Two
Gerardi also argues that there was insufficient evidence to establish
venue for Count Two, which charged him, Kaloyeros, and Aiello with wire fraud
in connection with rigging the bidding process for the Syracuse RFP. Although
criminal prosecutions are to be brought in the district in which the crime was
committed, see U.S. Const. art. III § 2; U.S. Const. Amend. VI; Fed. R. Crim. P. 18,
where "the acts constituting the crime and the nature of the crime charged
implicate more than one location, the constitution does not command a single
exclusive venue," United States v. Reed, 773 F.2d 477, 480 (2d Cir. 1985). Instead,
an offense committed in more than one district may be "prosecuted in any
10 Gerardi argues that "the RFP underwent multiple layers of drafting, review, and
approval within Fort Schuyler . . . and by outside counsel, and there was no evidence of
any objections raised by those parties or pressure applied by the defendants." Gerardi
Br. at 40. The fact that others did not object, however, shows only that defendants
managed to conceal their scheme. That a victim may have been negligent or gullible is
not a defense to fraud. See United States v. Thomas, 377 F.3d 232, 243 (2d Cir. 2004).
- 30 -
district in which such offense was begun, continued, or completed." 18 U.S.C.
§ 3237(a).
Here, to establish venue for Count Two, it was enough for the
government to show by a preponderance of the evidence that Gerardi used, or
caused others to use, a wire to communicate with others in the Southern District
and did so in furtherance of the scheme to rig the Syracuse RFP. See United States
v. Rutigliano, 790 F.3d 389, 397 (2d Cir. 2015) (noting that for a wire fraud charge
"venue lies where a wire in furtherance of a scheme begins its course, continues
or ends"); United States v. Gilboe, 684 F.2d 235, 239 (2d Cir. 1982) (finding venue
proper in light of "numerous telexes and telephone calls" by defendant and
caused by him to advance the alleged fraud in New York).11 The trial record
contained various wires relating to the Syracuse RFP sufficient to satisfy this
burden. See, e.g., App'x at 2217 (email from Howe to Kaloyeros sent in July 2013
11 The Southern District of New York includes Manhattan and the Bronx, as well as
Westchester, Rockland, Putnam, Dutchess, Orange, and Sullivan Counties. Both COR
Development and LPCiminelli are based outside of New York City, and the contracts
ultimately awarded to them by the RFPs were for construction projects that took place
in different venues in the Western and Northern Districts of New York. Still, neither the
venue statute nor the Constitution requires the majority of the charged conduct to have
occurred in the charged venue, as long as the offense was begun, continued, or
concluded there.
- 31 -
while Howe was in the Washington, D.C./Maryland area and Kaloyeros was in
Manhattan, setting up a time for Aiello and Kaloyeros to meet to discuss the bidrigging scheme); App'x at 2209-20 (email sent from Howe while in the
Washington, D.C./Maryland area to various employees at the Governor's
Manhattan office encouraging the State to approve funds for Fort Schuyler to be
used to pay COR Development); App'x at 2206-08 (emails among Aiello, Gerardi,
Howe, and Joseph Percoco while Howe was in the Maryland/Washington D.C.
area and Percoco was in Manhattan, in which Gerardi and Aiello asked for
assistance getting State funds to pay vendors for work associated with the
Syracuse RFP projects).
Accordingly, there was evidence from which a reasonable jury could
conclude that venue in the Southern District of New York was established by a
preponderance of the evidence as to Count Two, and we reject Gerardi's
argument that the evidence was insufficient.12
12 Gerardi argues that we cannot rely on these wires because they were admitted
only after the district court granted the government's motion to reopen its case to
supplement its venue evidence as to Count Four but not, in his view, as to Count Two.
Because Gerardi raises this argument only in a footnote, we need not reach it. See
United States v. Svoboda, 347 F.3d 471, 480 (2d Cir. 2003) ("It is well-established in this
Circuit that we do not consider an argument mentioned only in a footnote to be
adequately raised or preserved for appellate review." (internal quotation marks and
- 32 -
II. Jury Instructions
Next, Aiello and Kaloyeros argue that their convictions should be set
aside for errors in the jury instruction. Specifically, Aiello and Kaloyeros
contend that the district court erred in instructing the jury on the right-to-control
theory of wire fraud, and Kaloyeros also argues that the district court erred in
instructing the jury regarding the good faith defense to wire fraud. We conclude
that neither instruction was erroneous, and therefore we reject their challenges.
A. Standard of Review
We review de novo a defendant's challenge to the district court's jury
instructions. United States v. Roy, 783 F.3d 418, 420 (2d Cir. 2015). An
"instruction is erroneous if it misleads the jury as to the correct legal standard or
does not adequately inform the jury on the law." Id. (internal quotation marks
omitted). Even where an instruction is found to contain errors, reversal is not
warranted if the error was harmless. See Fed. R. Crim. P. 52(a); United States v.
alteration omitted)). It also bears noting that Gerardi makes only a passing reference to
the district court's error in admitting these wires, and that reference is unsupported by
any citation to any legal authority. See Allen v. Credit Suisse Sec. (USA) LLC, 895 F.3d
214, 223 n.13 (2d Cir. 2018) (cursory argument without relevant authority need not be
addressed). In any event, although the government initially moved to reopen with
respect to Count Four (relating to the Buffalo RFP), it eventually sought to offer
evidence as to both the Buffalo RFP and the Syracuse RFP, and the district court
allowed admission of the evidence.
- 33 -
DeMizio, 741 F.3d 373, 384 (2d Cir. 2014). Thus, a conviction should be affirmed
despite instructional error if it "appears beyond a reasonable doubt that the error
complained of did not contribute to the verdict obtained." Neder v. United States,
527 U.S. 1, 15 (1999) (internal quotation marks omitted).
B. The Right-to-Control Instruction
Aiello and Kaloyeros contend that the district court's wire fraud
instruction was erroneous because it permitted the jury to convict even if it
found that Fort Schuyler received, and was intended to receive, the full economic
benefit of its bargain. See Binday, 804 F.3d at 570 ("[W]e have repeatedly rejected
application of the mail and wire fraud statutes where the purported victim
received the full economic benefit of its bargain.").
We reject this argument because the relevant instruction clearly
explained the right-to-control theory. The jury charge began in relevant part by
defining property to include "intangible interests such as the right to control the
use of one's assets" and explaining that the right to control "is injured" when the
victim "is deprived of potentially valuable economic information that it would
consider valuable in deciding how to use its assets." App'x at 1554. It went on to
define "potentially valuable economic information" as "information that affects
- 34 -
the victim's assessment of the benefits or burdens of a transaction, or relates to
the quality of goods or services received or the economic risks of the transaction."
App'x at 1554. Importantly, the charge then expressly cautioned that:
If all the government proves is that the defendant
caused Fort Schuyler to enter into an agreement it
otherwise would not have, or caused Fort Schuyler to
transact with a counterparty it otherwise would not
have, without proving that Fort Schuyler was thereby
exposed to tangible economic harm, then the
government will not have met its burden of proof.
App'x at 1554-55.
The charge then explained "economic harm is not limited to
monetary loss. Instead, tangible economic harm has been proven if the
government has proven that the scheme, if successful, would have created an
economic discrepancy between what Fort Schuyler reasonably anticipated it
would receive and what it actually received." App'x at 1555. The charge defined
"intent to defraud" to mean "act[ing] knowingly and with a specific intent to
deceive, for the purpose of causing Fort Schuyler to enter into a transaction
without potentially valuable economic information." App'x at 1555. The charge
also explicitly provided that the government could not meet its burden by
merely showing that the defendants caused Fort Schuyler to enter into an
- 35 -
agreement or transaction "without proving that Fort Schuyler was thereby
exposed to tangible economic harm." App'x at 1554-55. The charge went on to
define "tangible economic harm" as "an economic discrepancy between what Fort
Schuyler reasonably anticipated it would receive and what it actually received."
App'x at 1555.
Although this charge closely tracked the language set forth in our
prior opinions, see, e.g., Finazzo, 850 F.3d at 111; Binday, 804 F.3d at 570-71,
Kaloyeros and Aiello nonetheless argue that the instructions were inadequate
because they failed to explain that receiving the full benefit of a bargain is not
wire fraud and they purportedly allowed for convictions "based on a merely
hypothetical possibility of harm." Aiello Br. at 75. We see no merit to these
arguments.
As indicated above, our cases have stressed time and again that "the
Government need not prove 'that the victims of the fraud were actually injured,'
but only 'that defendants contemplated some actual harm or injury to their
victims.'" Greenberg, 835 F.3d at 306 (quoting United States v. Novak, 443 F.3d 150,
156 (2d Cir. 2006)); accord Gatto, 986 F.3d at 124; Binday, 804 F.3d at 569. Though
defendants rely on Binday's statement that our precedent has "repeatedly rejected
- 36 -
application of the mail and wire fraud statutes where the purported victim
received the full economic benefit of its bargain," 804 F.3d at 570, Binday's
description of our cases did not undercut the rule that economic harm need only
be contemplated. The cases Binday cited dealt with scenarios in which the victim
faced no exposure to economic harm due to the fraud. See id. at 570 n.10; id. at
599 n.46. In fact, Binday expressly rejected nearly the same argument defendants
raise here, underscoring that the "mail and wire fraud statutes do not require a
showing that the contemplated harm actually materialized." Id. at 574; see also id.
at 576 ("The indictment need not allege, and the government need not prove, that
the specified harms had materialized for the particular policies at issue or were
certain to materialize in the future."). Thus, there was no error, and certainly no
harmful error, in the district court's right-to-control jury instruction.
C. The No-Ultimate-Harm Instruction
Kaloyeros also argues that the district court erred in instructing the
jury on the good faith defense to wire fraud by including a no-ultimate-harm
- 37 -
instruction that, in his view, undermined both the court's good faith instruction
and the instruction regarding the requisite intent necessary for conviction.
After explaining that " good faith on the part of a defendant is a
complete defense to a charge of wire fraud," the district court went on to state:
In considering whether a defendant acted in good faith,
you are instructed that if a defendant knowingly and
willfully participated in the scheme to deprive Fort
Schuyler of potentially valuable economic information,
a belief by the defendant that eventually everything
would work out so that Fort Schuyler would get a good
deal does not mean that the defendant acted in good
faith.
App'x at 1555.
Kaloyeros argues that this "no ultimate harm" instruction fails to
comply with our precedent in United States v. Rossomando, 144 F.3d 197, 200-03
(2d Cir. 1998). In Rossomando, we rejected the instruction that "[n]o amount of
honest belief on the part of the defendant that the scheme would not ultimately
result in a financial loss to the [victim] will excuse fraudulent actions or false
representations by him," id. at 199, in a case where the defendant firefighter had
underreported his post-retirement income on pension forms but claimed that he
did not believe any harm would result, id. at 198. We have since clarified that
Rossomando is "limited to the quite peculiar facts that compelled [its] result,"
- 38 -
United States v. Ferguson, 676 F.3d 260, 280 (2d Cir. 2011) (internal quotation
marks omitted), and explained that "a 'no ultimate harm' instruction given by the
district court is proper where (1) there was sufficient factual predicate to
necessitate the instruction, (2) the instruction required the jury to find intent to
defraud to convict, and (3) there was no evidence that the instruction caused
confusion," United States v. Lange, 834 F.3d 58, 79 (2d Cir. 2016). The requisite
predicate for such an instruction is present where there is evidence that a
defendant intended an immediate cognizable harm, but he argues that there was
no harm in the long run. See id.
Here, the district court did not err in giving the no-ultimate-harm
instruction. The necessary factual predicate for the instruction was satisfied
because there was evidence that the defendants intended immediate cognizable
harm -- depriving Fort Schuyler of potentially valuable economic information in
connection with the Buffalo Billion projects -- even though defendants argued at
trial that ultimately the projects were a success and Fort Schuyler was not
harmed. See, e.g., App'x at 1480 ("[W]hen the dust settled, Fort Schuyler got great
contractors for important work at Riverbend, the IT center, the film hub, Soraa.").
Moreover, the instructions properly required the jury to find that fraud was
- 39 -
intended. Finally, nothing in the record indicates that the instruction caused
confusion; in fact, it clearly stated that "[a]n honest belief in the truth of the
representations made by a defendant is a complete defense." App'x at 1555.
Accordingly, we find no error in this instruction.
III. Evidentiary Rulings
The defendants also challenge a pair of evidentiary rulings made by
the district court during trial. First, Kaloyeros, Aiello, and Gerardi argue that the
district court denied them the right to present a defense by precluding evidence
that the buildings constructed by COR Development and LPCiminelli were built
"on time" and were of "high-quality," and that the fees charged were
"reasonable." See Kaloyeros Br. at 33, 35. Second, Kaloyeros and Ciminelli argue
that the district court should not have permitted witnesses from rival
construction companies to testify regarding the prevailing range of construction
management fees.
A. Applicable Law
We review evidentiary rulings for abuse of discretion. United States
v. White, 692 F.3d 235, 244 (2d Cir. 2012). "We will find an abuse of discretion
only where the trial judge ruled in an arbitrary or irrational fashion." United
- 40 -
States v. Kelley, 551 F.3d 171, 175 (2d Cir. 2009) (internal quotation marks
omitted). Even when a district court's evidentiary ruling is "manifestly
erroneous," however, the defendant is not entitled to a new trial if the error was
harmless. United States v. Siddiqui, 699 F.3d 690, 702 (2d Cir. 2012). An
evidentiary error is harmless if this Court determines with "fair assurance that
the jury's judgment was not substantially swayed by the error." United States v.
Paulino, 445 F.3d 211, 219 (2d Cir. 2006) (internal quotation marks omitted).
"The right to call witnesses in order to present a meaningful defense
at a criminal trial is a fundamental constitutional right secured by both the
Compulsory Process Clause of the Sixth Amendment and the Due Process Clause
of the Fourteenth Amendment," Washington v. Schriver, 255 F.3d 45, 56 (2d Cir.
2001), as well as by the Due Process Clause of the Fifth Amendment, United States
v. Almonte, 956 F.2d 27, 30 (2d Cir. 1992). "The right is not, of course, unlimited;
the defendant 'must comply with established rules of procedure and evidence
designed to assure both fairness and reliability."' Schriver, 255 F.3d at 56 (quoting
Chambers v. Mississippi, 410 U.S. 284, 302 (1973)); see also United States v.
Valenzuela-Bernal, 458 U.S. 858, 867 n.7 (1982) (noting that "the Sixth Amendment
- 41 -
does not guarantee criminal defendants the right to compel the attendance of any
and all witnesses").
B. Analysis
1. Quality-of-Construction Evidence
Prior to trial, the district court granted the government's motion to
preclude the defense from offering evidence of the alleged merits or public
benefits of the projects awarded to COR Development and LPCiminelli,
concluding that the evidence was not relevant because "the defendants are
accused of defrauding Fort Schuyler of the right to make a fully informed
decision and not the right to a building that satisfied the terms of the
development contracts." App'x at 1292.
Defendants argue that the district court should have admitted
evidence regarding the quality of the construction project as evidence that Fort
Schuyler obtained the benefit of its bargain. As already noted, however, the
quality of defendants' construction projects was not the bargain compromised by
defendants' fraudulent scheme, and it is not a defense to a right-to-control wire
fraud that the product the victim was fraudulently induced into buying did not
harm the victim or was generally a good product. Because this evidence was not
- 42 -
material, we conclude that the district court did not abuse its discretion in
precluding it, and that its exclusion did not violate defendants' right to present a
meaningful defense. See Valenzuela-Bernal, 458 U.S. at 867.
2. Testimony Regarding Construction Management Fees
Kaloyeros and Ciminelli also challenge the district court's
evidentiary ruling allowing the government to elicit testimony from two
witnesses employed by competing construction companies that were interested
in bidding on the Buffalo RFP. On appeal, Kaloyeros and Ciminelli principally
contend that it was unfairly prejudicial to them to admit this evidence while
precluding evidence that Fort Schuyler ultimately received a good deal in its
contracts with the defendants. See Fed. R. Evid. 403.
The challenged witnesses testified to the range of fees typically
charged by other construction management companies in the market. This
evidence, unlike the evidence that defendants sought to admit, was relevant
under the right-to-control theory of wire fraud because it demonstrated that
defendants contemplated economic harm by preventing Fort Schuyler from
fairly considering bids in a marketplace where lower prices might have been
available. The construction-fee evidence was relevant to the right-to-control
- 43 -
theory because, if there is a reasonable range of fees for projects generally, a
factfinder could infer such a range for particular projects. While the witnesses
did not specify what range of fees might be available for the particular projects
COR Development and LPCiminelli actually undertook, defendants were able to
-- and indeed did -- cross-examine the witnesses on this and other purported
deficiencies, thereby avoiding prejudice. In these circumstances, the district
court acted within its discretion in admitting the fee evidence.
IV. Gerardi's False Statements Conviction
Finally, Gerardi argues that the district court erred in denying his
motion to dismiss the false statements count for purported prosecutorial
misconduct.13 Such a dismissal, following a conviction, "is an extraordinary
remedy," United States v. Casamento, 887 F.2d 1141, 1182 (2d Cir. 1989) (internal
quotation marks omitted), but "pursuant to [this court's] supervisory power," we
"may dismiss an indictment for prosecutorial misconduct if the grand jury was
misled or misinformed, or possibly if there is a history of prosecutorial
13 Gerardi also argues that if his convictions for wire fraud conspiracy and wire
fraud are overturned, he would be entitled to a new trial on his false statement
conviction on account of "prejudicial spillover." Gerardi Appellant Br. at 49; see also
United States v. Rooney, 37 F.3d 847, 855 (2d Cir. 1994). Because we find no basis for
overturning Gerardi's wire fraud convictions, we do not reach this argument.
- 44 -
misconduct, spanning several cases, that is so systematic and pervasive as to
raise a substantial and serious question about the fundamental fairness of the
process," United States v. Brito, 907 F.2d 392, 394 (2d Cir. 1990) (internal quotation
marks and citations omitted). We review the denial of a motion to dismiss for
prosecutorial misconduct de novo. United States v. Walters, 910 F.3d 11, 22 (2d Cir.
2018).
Gerardi's claim of prosecutorial misconduct stems from the
government's conduct during his June 21, 2016 proffer session that became the
subject of his Count Sixteen conviction. He argues that the prosecutors misled
him into thinking that he was not a target of the investigation before his proffer.
Relying on United States v. Jacobs ("Jacobs I"), 531 F.2d 87 (2d Cir. 1976), he
contends that this rose to the level of prosecutorial misconduct and warranted
dismissal of the count. In Jacobs I, we affirmed the suppression of grand jury
testimony, and the resultant dismissal of a perjury charge based on that
testimony, where the government failed to warn the witness that he was a target
of the investigation. Id. at 89-90. Notably, however, we subsequently clarified
that Jacobs I was to be narrowly interpreted -- "a one-time sanction to encourage
- 45 -
uniformity of practice . . . between the Strike Force and the United States
Attorney." United States v. Jacobs ("Jacobs II"), 547 F.2d 772, 773 (2d Cir. 1976).
Although Jacobs I is relevant, it is not entirely on-point as it related to
a grand jury investigation and not to a pre-indictment proffer session.
Regardless, Gerardi's argument lacks merit because he had no right to lie in the
proffer session, and he does not have a constitutional right to a warning that he is
a target. See United States v. Washington, 431 U.S. 181, 189 (1977) ("It is firmly
settled that the prospect of being indicted does not entitle a witness to commit
perjury, and witnesses who are not grand jury targets are protected from
compulsory self-incrimination to the same extent as those who are. Because
target witness status neither enlarges nor diminishes the constitutional
protection against compelled self-incrimination, potential-defendant warnings
add nothing of value to protection of Fifth Amendment rights."); United States v.
Remington, 208 F.2d 567, 570 (2d Cir. 1953) (stating that "to call the perjury a fruit
of the government's conduct . . . is to assume that a defendant will perjure
himself in his defense" and identifying no cognizable "causal relation . . . between
the government's wrong and the defendant's act of perjury"); see also United States
v. Babb, 807 F.2d 272, 277, 279 (1st Cir. 1979) (rejecting contention that
- 46 -
prosecutor's representation, at defendant's grand jury appearance, that
defendant was neither a target nor a subject "undermined the fundamental
fairness of the proceedings" because "it defies logic to argue that assurances that
might have lulled a witness into giving incriminating statements had the effect of
inducing the witness to commit perjury").
Thus, even assuming that the government failed to warn Gerardi
that he was a subject of an investigation during his proffer -- something the
government disputes -- such a failure would not rise to the level of misconduct
required to justify dismissal of the charge. Accordingly, the district court did not
err in denying Gerardi's motion to dismiss his conviction for making a false
statement.
Outcome: For the reasons set forth above, the judgments of the district court
are AFFIRMED
Plaintiff's Experts:
Defendant's Experts:
Comments: