The U.S. Supreme Court on Monday appeared likely to overturn the wire fraud convictions of Alain Kaloyeros and his co-defendants in the Buffalo Billion bid-rigging case that led to the downfall of the Albany Nanotech founder back in 2016.
The U.S. Supreme Court on Monday appeared likely to overturn the wire fraud convictions of Alain Kaloyeros and his co-defendants in the Buffalo Billion bid-rigging case that led to the 2016 downfall of the Albany Nanotech founder.
In a session in Washington, D.C. that took just over an hour to argue, justices seemed to agree with the defendants, who were convicted of wire fraud in 2018, that the so-called “right-to-control” theory employed by government prosecutors was flawed.
Eric Feigin, a deputy solicitor general with the U.S. Department of Justice, admitted to the justices that the controversial theory the case was prosecuted under was problematic.
Kaloyeros and upstate developers Louis Ciminelli, Steven Aiello and Joe Gerardi were convicted in 2018 in federal court in Manhattan on charges of wire fraud and wire fraud conspiracy and sentenced to federal prison. Kaloyeros received the longest sentence of 3 1/2 years; Ciminelli received 28 months; Aiello was sentenced to three years in prison; and Gerardi received 2 1/2 years.
All were released earlier this year after the Supreme Court decided to take up their appeal.
“The only proper judgment is a judgment of acquittal,” said Michael Dreeben, the attorney for Ciminelli, who argued the appeal on behalf of the four defendants.
Prosecutors alleged that Kaloyeros had conspired with Ciminelli, Aiello and Gerardi — major donors to the election campaign of former Gov. Andrew Cuomo — to fix the bidding process for Albany Nanotech construction projects in Buffalo and Syracuse in such a way that they would eventually be awarded the contracts. The developers were awarded nearly $1 billion in state construction contracts.
Ciminelli worked for LPCiminelli of Buffalo, while Aiello and Gerardi worked for COR Development of Syracuse.
The allegations did not involve any direct payments, bribes or kickbacks, but rather deceiving the board of Fort Schuyler Management Corp., a quasi-governmental non-profit that oversees real estate projects across upstate for Albany Nanotech.
The Second Circuit Court of Appeals, where the case was originally appealed, has long upheld the right-to-control theory of wire fraud, although that could become problematic going forward depending on how the Supreme Court rules.
After Monday’s oral arguments, the question appears to be whether or not the justices will send the case back to a lower court or rule against the government’s case entirely, which would essentially overturn the convictions of Kaloyeros and the other defendants.
The right-to-control theory, which was developed under case law essentially says that a person can be convicted of wire fraud if they deprive someone of their right to control information related to their finances.
That’s a much more intangible definition of property as it is laid out in the federal wire fraud statute, a result of specific case law decided over the years within the Second Circuit, a judicial region that includes Manhattan.
“It is not an ideal scenario,” Justice Neil Gorsuch said of the prosecutorial theory during Monday’s hearing.
“Why did anyone go down this road?” asked Justice Elena Kagan.
“It is possible for the theory to encompass too much,” Feigin admitted.
One of the issues with the government’s defense of the case is that it decided to essentially abandon the right-to-control theory in its filing with the Supreme Court in favor of a broader definition of wire fraud, admitting that the government could abuse the right-to-control theory for cases that should have instead been argued in civil and not criminal court
“Whether viewed through the lens of the right-to-control theory or not, the evidence was plainly sufficient to satisfy each of the elements of wire fraud,” attorneys for the Solicitor General’s office wrote in its brief filed with the court before Monday’s arguments. “Petitioner’s scheme sought and obtained hundreds of millions of dollars; it did so by materially misrepresenting that a rigged selection process had been open, fair, and competitive; and it did so with intent to defraud …. “
The Solicitor General’s office, part of the Department of Justice, argues cases before the Supreme Court on behalf of the government.
Kaloyeros began his prison term in March of this year, but stayed at the minimum-security facility in Otisville only a few months before being freed by the court’s decision to hear the appeal.
