After reversal by the Supreme Court, Circuit vacates fraud convictions based on invalid legal theories, but allows new trial of two defendants on traditional fraud theories

On May 11, 2023, the Supreme Court reversed the Second Circuit in Ciminelli v. United States, 598 U.S. 306 (2023), and Percoco v. United States, 598 U.S. 319 (2023) holding invalid both the Circuit’s “right to control” theory of fraud (Ciminelli) and its theory that a private citizen with a “special relationship” with the government, who “dominated and controlled” government business may be convicted of honest services fraud (Percoco). See Blog May 15, 2023. Given the Supreme Court’s holding, the Circuit had to vacate their convictions, which were based on the invalid theories.

The Circuit did vacate those convictions, just this week, in United States v. Aiello, No 18-2990 (2d Cir. September 23, 2024) (Chin, Raggi, Sullivan) but remanded for retrial of Ciminelli and Percoco on traditional fraud theories, even though traditional fraud theories were not pursued at the first trial. Aiello’s conviction was vacated and remanded to be dismissed, on the government’s agreement that it would not retry him. The Circuit held that the false statement conviction of the fourth defendant, Gerardi was neither affected by the Supreme Court reversals nor prejudiced by spillover and affirmed his conviction.

The main issues were Ciminelli’s and Percoco’s arguments that retrial was barred by double jeopardy and that the Circuit should address the sufficiency of the evidence under the correct legal standard. The Circuit rejected the double jeopardy argument against a second trial for the same offense on the ground that “a change in the governing law” is a “type of trial error” that does not prevent retrial. The Court relied on its decision in United States v. Bruno, 661 F.3d 733, 742 (2d Cir. 2011), in which it invented this theory that a whole first trial on an invalid theory of fraud is only a trial error that allows the government to try the same fraud charge again on a valid theory. At the same time, the Circuit refused – again relying on Bruno – to review the sufficiency of the evidence to reverse on the basis, on the ground that this would “‘deny the government an opportunity to present its evidence’ under the correct legal standard.”  Maybe these cases will go up again!