In United States v. Aiello, the Second Circuit (Raggi, Chin, Sullivan) remanded the cases of Steven Aiello, Joseph Gerardi, Louis Ciminelli, and Alain Kaloyeros (collectively, the “defendant-appellants”) for retrial on their convictions for wire fraud and conspiracy to commit wire fraud, in violation of 18 U.S.C. §§ 1343 and 1349. In 2024, the Supreme Court vacated the defendant-appellants’ convictions, concluding that the “right-to-control” theory relied upon by the government could not be reconciled with the text of the wire fraud statute. See Ciminelli v. United States, 598 U.S. 306 (2023).
In remanding to the district court for retrial, the Court of Appeals rejected arguments from the defendant-appellants that retrial was barred by the Double Jeopardy Clause of the Fifth Amendment, and that the Court of Appeals should review the sufficiency of the evidence before remand and conclude that the evidence is insufficient to support fraud convictions on a traditional property fraud theory that the government had not pursued at trial. The Court of Appeals reasoned that the Double Jeopardy Clause is not implicated when a trial error results from an intervening change of the law, and that appellate sufficiency review is inappropriate when there has been a change of the law.
Background
In 2012, then-Governor of New York Andrew Cuomo announced the “Buffalo Billion” initiative to induce economic development in upstate New York through a massive investment of taxpayer funds. This case arises out of an alleged bid-rigging scheme related to the Buffalo Billion initiative. Defendant-appellant Kaloyeros was a senior official in the State University of New York system. Kaloyeros worked with Todd Howe, a lobbyist and consultant, to obtain a leadership position in the Fort Schuyler Management Corporation, a nonprofit organization created to disburse funds for Buffalo Billion development projects. Kaloyeros then is alleged to have manipulated Fort Schuyler’s internal processes to ensure that development funds were directed to construction companies managed by defendant-appellants Aiello, Ciminelli, and Gerardi, who were also clients of Howe.
Aiello, Ciminelli, Gerardi, and Kaloyeros were indicted on, among other things, wire fraud and wire fraud conspiracy charges in 2017. The initial indictments against the defendants alleged that the defendants had committed “traditional” wire fraud, in which they obtained property from Fort Schuyler. But after the defendants moved to dismiss, the government sought a second superseding indictment that alleged the defendants had committed wire fraud under a “right-to-control” theory. The right-to-control theory, which had been recognized by the Second Circuit at the time of trial, required the government to prove only that the defendants had deprived the victim of potentially valuable economic information, not money or other traditional property interests. In this case, the government contended that, by manipulating the project selection process, the defendants had deprived Fort Schuyler of potentially valuable economic information on the merits of various projects and developers that the company would have considered valuable in using its assets. This deprived Fort Schuyler of its “right to control” its own assets.
All four defendants went to trial in 2018. Consistent with its second superseding indictment, the government chose to advance only a “right-to-control” theory of wire fraud at trial. At the close of the government’s case, the four defendants made Rule 29 motions for judgments of acquittal. The jury convicted each of the four defendants, and prior to sentencing, the defendants renewed their Rule 29 motions. The district court again denied the defendants’ Rule 29 motions and sentenced each defendant to a period of incarceration.
After unsuccessfully appealing their convictions to the Second Circuit, the defendants sought Supreme Court review. The Supreme Court unanimously reversed, with the Solicitor General conceding error and agreeing that the right-to-control doctrine could not be sustained. In an opinion by Justice Thomas, the Court held that the right-to-control theory could not support liability under the federal fraud statutes because the federal fraud statutes prohibit only schemes to deprive a victim of a traditionally recognized property interest, and do not cover schemes to deprive a victim of potentially valuable economic information. Accordingly, the Supreme Court vacated each of the defendants’ wire fraud convictions and remanded to the Second Circuit for “further proceedings consistent with [its] opinion.” In his concurrence, Justice Alito alone described the Court’s ruling as one based on incorrect jury instructions and asserted that the government retained the “ability to retry petitioner on the theory that he conspired to obtain, and did in fact obtain, by fraud, a traditional form of property[.]”
Opinion
On remand to the Second Circuit, the defendants argued that they were entitled to judgments of acquittal on the wire fraud charges for two reasons: first, on double jeopardy grounds, and second, because the evidence presented at their first trial was insufficient to sustain a wire fraud conviction on a “traditional” property-based theory of wire fraud. The panel rejected those arguments and remanded for a new trial on the wire fraud charges.
The panel concluded that the Fifth Amendment’s Double Jeopardy Clause did not bar retrial on the wire fraud charges under a traditional property theory. It explained that the Supreme Court’s Double Jeopardy case law distinguishes between convictions that are vacated for insufficient evidence, which are characterized as acquittals for which jeopardy attaches, and convictions that are vacated for trial error, which are not characterized as acquittals. It then explained that a vacatur based on a change in governing law after trial—such as the one that occurred when the Supreme Court rejected the right-to-control theory—constitutes a vacatur for trial error, not one for insufficient evidence. Accordingly, the Double Jeopardy Clause did not constitute a barrier to retrial.
The panel then addressed the sufficiency issue. It began by turning to the question of whether it should itself consider whether the evidence presented at the first trial would be sufficient to support a conviction on a traditional property-based wire fraud theory, or whether it should remand for a new trial on a traditional wire fraud theory. The panel noted that Circuit precedent generally requires the Court of Appeals itself to consider a preserved sufficiency challenge, like the one here, before ordering a new trial based on a trial error. That is because, in most cases, the elements of the offense have not changed between the time of conviction and the time of appellate review, meaning that the government would not need to present additional evidence at a retrial. Accordingly, in most cases, there is no concern that sufficiency review by the Court of Appeals would deprive the government of an opportunity to present its full case. If the government would present the same evidence at a retrial that it had presented at the initial trial, the Court of Appeals can conduct a sufficiency review with confidence that it is reviewing the same evidentiary record that the government would present to the jury at a retrial. And if there is no need for a retrial to give the government an opportunity to present additional evidence, sufficiency review by the Court of Appeals is in keeping with principles of judicial economy.
However, the panel went on to explain that this presumption in favor of appellate sufficiency review does not apply with the same force when there has been a trial error resulting from an intervening change of the law. That is because the government chooses what evidence to present at trial based on the state of the law at the time of trial and may choose not to present certain evidence in its possession if that evidence is unnecessary to prove the elements of the offense. If the state of the law changes between trial and appellate sufficiency review, it is possible that the evidence presented at trial was sufficient to prove the elements of the offense at the time of trial, but insufficient to prove the elements of the offense at the time of appellate sufficiency review because the elements of the offense changed between trial and appellate sufficiency review. The panel reasoned that in such a case, the Court of Appeals should not conduct a sufficiency review and remand for a retrial, because appellate sufficiency review could deprive the government of an opportunity to present evidence that it had not needed to present due to the state of the law at the time of trial.
The panel concluded that this scenario played out here. On appeal, the government represented that it had evidence of how the defendants’ conduct had caused tangible financial harm to Fort Schuyler. It had chosen not to present that evidence at the initial trial because it had not needed to: showing that the defendants had deprived Fort Schuyler of potentially valuable economic information was sufficient to satisfy the government’s burden. But after the Supreme Court invalidated the right-to-control theory, the panel reasoned that it was appropriate to remand for a retrial in order to give the government an opportunity to craft a trial case based on the correct legal standard.
Accordingly, the panel held that when a trial error results from a change in the governing law after trial, the Court of Appeals may decline to review a preserved sufficiency challenge if that review would deprive the government of an opportunity to make a full presentation at a retrial. The panel rejected the defendants’ sufficiency challenge on that basis and remanded for a new trial on the wire fraud charges.
Commentary
Prevailing before the Supreme Court and setting nationwide precedent is a rare and impressive accomplishment. Yet the Aiello decision demonstrates that even a Supreme Court victory may not end a client’s criminal jeopardy. In Aiello, the panel showed a willingness to give the government another bite at the apple even after the government put the defendant-appellants to the burden of a full trial and appeal based on a discredited legal theory rejected by the Supreme Court.
The Aiello panel held that the Double Jeopardy Clause was not a constitutional bar to a renewed prosecution. The panel was also reluctant to evaluate the sufficiency of the government’s case against the defendant-appellants in light of the new legal framework set forth by the Supreme Court, instead giving the government a second opportunity to present its case before a jury.
The decision to remand for a new trial was by no means a foregone conclusion when the case returned to the Second Circuit. Relevant decisional law and the long history of this case suggested that the Second Circuit might conduct a sufficiency analysis, comparing the trial evidence with the current legal standard. First, in McDonnell v. United States, a case with many similarities to Ciminelli, the Fourth Circuit conducted a sufficiency analysis upon remand, measuring the trial evidence against the Supreme Court’s clarified legal standard and finding the evidence insufficient. If the Court had followed the Fourth Circuit’s approach, it would have dismissed the case.
Second, while the panel here framed the Supreme Court’s reversal as based on a legal error, the error in the government’s case was not a mere instructional error. Rather, the petition for certiorari in Ciminelli framed the issue as a sufficiency claim, arguing that the government’s entire theory of the prosecution was flawed and based on an interpretation of the wire fraud statute that was so far afield that not even the Solicitor General would defend it in the Supreme Court. If the evidence was insufficient to sustain the conviction under the correct legal standard, then the government should not receive a chance for a do-over.
Third, the government initially charged this case under a traditional property fraud theory and only changed course when the defendants moved to dismiss. In other words, the decision not to present a traditional property fraud case was deliberate, made for a strategic benefit—to take advantage of a less challenging standard. Defendants are typically forced to live with the ramifications of their strategic decisions, and one might expect that the government should do the same.
In short, the panel’s holdings are well-grounded in logic and precedent, and it is perhaps unsurprising that the panel thought it unfair to the government for its trial evidence tailored for one legal standard would be measured using the new legal standard. That said, the decision limits the ways in which a criminal defendant may benefit from a favorable Supreme Court ruling when the government makes a strategic decision that proved unwise.
In the wake of the panel’s decision, the defendant-appellants sought a stay from the Supreme Court that would have barred a retrial, arguing that the panel’s Double Jeopardy and sufficiency holdings were inconsistent with Supreme Court precedent. Justice Sotomayor, in her capacity as circuit justice, denied the stay application, so there is no obstacle to retrial at this time. However, the defendant-appellants have filed a petition for certiorari on these issues, and it will be interesting to see if this case returns to the Supreme Court for a second time, either now or in the future.
