Percoco v. United States
598 U. S. ____ (2023) (2023)
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Rule of Law:
A private citizen does not owe a fiduciary duty of honest services to the public merely because they have significant influence over government affairs. A conviction for honest-services fraud requires a more definite legal standard than a jury finding that the person 'dominated and controlled' government business, a test which is unconstitutionally vague.
Facts:
- Joseph Percoco served as the Executive Deputy Secretary to New York Governor Andrew Cuomo.
- In April 2014, Percoco resigned from his government position to manage the Governor's reelection campaign.
- During this eight-month hiatus, a real-estate development company owned by Steven Aiello paid Percoco $35,000.
- The payment was for Percoco to assist the company in its dealings with Empire State Development (ESD), a state agency.
- Aiello's company wanted ESD to drop a requirement that it enter into a 'Labor Peace Agreement' with local unions to receive state funding.
- Percoco contacted a senior official at ESD and urged him to remove the requirement.
- The day after Percoco's call, ESD informed Aiello that the agreement was no longer necessary.
- In December 2014, after the election, Percoco resumed his official role as Executive Deputy Secretary.
Procedural Posture:
- The United States indicted Joseph Percoco in the U.S. District Court for the Southern District of New York (trial court) for conspiracy to commit honest-services wire fraud and other charges.
- Percoco filed a motion to dismiss the charge, arguing a private citizen cannot owe a duty of honest services, which the trial court denied.
- At trial, the court instructed the jury that Percoco could be found to owe a duty of honest services if he 'dominated and controlled' government business and was relied upon due to a 'special relationship.'
- The jury convicted Percoco on the honest-services wire fraud conspiracy count.
- Percoco, as appellant, appealed his conviction to the U.S. Court of Appeals for the Second Circuit.
- The Second Circuit (intermediate appellate court) affirmed the conviction, finding the jury instruction consistent with its precedent.
- Percoco petitioned the U.S. Supreme Court for a writ of certiorari, which the Court granted.
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Issue:
Is a jury instruction that allows a private citizen to be convicted of honest-services fraud if they 'dominated and controlled' government business and were relied upon by government officials due to a 'special relationship' a valid legal standard under 18 U.S.C. § 1346?
Opinions:
Majority - Justice Alito
No. The jury instruction based on the theory that a private citizen owes a duty of honest services if they 'dominate and control' government business is unconstitutionally vague. The Court's decision in Skilling v. United States clarified that the honest-services fraud statute, § 1346, must be interpreted with clarity to avoid due process vagueness concerns and should be confined to its 'core' of pre-McNally case law, mainly bribery and kickback schemes. The 'dominate and control' standard is an ill-defined threshold that could criminalize the conduct of effective lobbyists and influential political advisors, failing to provide 'sufficient definiteness that ordinary people can understand what conduct is prohibited.' While the Court rejected Percoco's argument that a private citizen can never owe a duty of honest services—noting that principles of agency could establish such a duty—the instructions given to the jury in this case were erroneous and did not rely on such a theory.
Concurring in the judgment - Justice Gorsuch
No. The jury instructions were too vague, but the underlying problem is that the entire concept of 'honest-services fraud' is unconstitutionally vague. Congress's enactment of § 1346 after McNally v. United States failed to provide any definition for the 'intangible right of honest services.' This Court's attempt in Skilling to narrow the statute to its 'core' was an act of judicial invention, not interpretation, and failed to resolve the fundamental uncertainty about when a duty of honest services arises. Leaving prosecutors and courts to define a criminal law 'bit by bit' violates the separation of powers and the due process requirement of fair notice. It is Congress's role, not the judiciary's, to write clear criminal laws.
Analysis:
This decision significantly curtails the 'functional public official' theory of honest-services fraud by invalidating the vague 'domination and control' test. It continues the Supreme Court's trend, seen in cases like Skilling and McDonnell, of demanding greater clarity and specificity in federal public corruption statutes to mitigate due process vagueness issues. The ruling forces prosecutors to ground honest-services cases against private individuals on more concrete legal theories, such as a formal agency relationship with the government, rather than on informal political influence. Consequently, prosecuting influential lobbyists or political consultants for honest-services fraud is now substantially more difficult, as de facto power alone is insufficient to establish the required fiduciary duty to the public.
