Judge: Error may be 'fatal'
Posted June 29, 2018 7:10 a.m. EDT
NEW YORK _ Federal prosecutors in Manhattan may have been better off trying their "Buffalo Billion" corruption case in Buffalo.
The government rested its bid-rigging case Thursday against SUNY Polytechnic Institute founder Alain Kaloyeros and three co-defendants, but now must reopen it after failing to prove wire fraud took place within the Manhattan-based Southern District of New York, where its case is being tried.
The prosecution's failure to establish the proper venue prompted U.S. District Court Judge Valerie Caproni to nearly toss those charges against Kaloyeros and Buffalo developer Louis Ciminelli. Instead, she relented and will permit the government to reopen its case Monday _ a highly unusual set of circumstances.
"I came out here prepared to dismiss these counts," the judge said. "This is putting into tension the issue of the public has an interest in seeing the criminal laws enforced. The public has an interest in having the jury decide this question."
Kaloyereos, 62, is accused of conspiring with consultant Todd Howe to fix the bids for two companies, LPCiminelli of Buffalo and COR Development of Syracuse, to steer more than $850 million in state contracts their way as part of Gov. Andrew Cuomo's Buffalo Billion economic development efforts.
Kaloyeros and Ciminelli are on trial with COR President Steve Aiello, 60, and COR General Counsel Joseph Gerardi, 58. All stand accused of wire fraud and wire-fraud conspiracy. Gerardi is also charged with lying to the FBI.
The judge was prepared to dismiss wire fraud counts but not the wire fraud conspiracy allegations. She said the wire fraud case against Aiello and Gerardi was "thin."
Caproni made it clear the prosecution - Assistant U.S. Attorneys Matthew Podolsky, Robert Boone and David Zhou - had dropped the ball.
"This was a mistake that shouldn't have been made," said Caproni, a former federal prosecutor and one-time FBI general counsel. "I'm confident the assistants are not happy it was made. The question is whether justice is better served by letting the government reopen its case, prove this fact, and then send this case to the jury. I have been very clear: this is a difficult case for the government. It's a difficult case for the defense, a difficult case for everybody."
The judge asked the defense for its view, noting the error involved a "real basic requirement of a wire fraud case."
Paul Shechtman, the attorney for Ciminelli, had earlier argued emphatically that prosecutors failed to establish the proper grounds. He wanted the charges tossed.
"Judge, they rested. They rested without proving the most basic element of a wire fraud case, that there was a wire in Manhattan," the lawyer said. "I don't know what more to say."
Shechtman said: "The government gets through a case and doesn't prove venue. The question is who should suffer the consequences of that."
Podolsky told the judge: "We are not thrilled. I will point out there is law that indicates that it is appropriate to reopen a case for this kind of threshold jurisdictional issue."
The judge at one point said: "I have to confess I don't think I've ever seen a case where the answer to (the law in question) which reveals that there is a fatal venue problem in the government's case, the government says we can cure it."
The contracts were approved by the Fort Schuyler Management Corp, a nonprofit development arm of SUNY Poly. Podolsky said to prove jurisdiction, prosecutors would show that in furtherance of a scheme between Ciminelli and Kaloyeros, an email was sent from Fort Schuyler President Alicia Dicks to Dean Fuleihan, at the time the chair of the Fort Schuyler board. He is now top deputy to New York City Mayor Bill de Blasio.
"How does that get you to Manhattan?" the judge asked.
Podolsky said Fuleihan testified earlier in the trial that by this time he was working in the mayor's office in Manhattan and had an AOL email address.
Kaloyeros attorney Michael Miller told the judge he understood that Fuleihan lived in Brooklyn at the time, which would put the case in the Eastern District of New York, and had a second home in Albany, part of the Northern District.
The prosecution is expected to call an AOL custodian.
Meanwhile, Howe, who in September 2016 pleaded guilty to multiple felonies, will not make the quick trip from the Metropolitan Correctional Center to the Manhattan federal courthouse to testify at the trial.
But Kaloyeros' attorney planned to introduce segments of the multiple felon's prior testimony as a witness for federal prosecutors. Howe's testimony will be part of the defense case.
Prosecutors initially rested their case following the testimony of former SUNY Poly spokesman David Doyle and additional documents entered into evidence.
After hinting he might call the former lobbyist, Kaloyeros' attorney Reid Weingarten said late Wednesday that he was leaning against putting Howe on the stand.
"The truth is, part of that would be fascinating," Weingarten said. "Me having an interesting legal experience as a lawyer is something I look forward to, but everybody else in this room would kill me.
"So if you say you've got to call him or you have no chance of getting the transcript in, just being completely honest, we would not."
Weingarten convinced Caproni to allow the jury to hear part of the transcript of Howe's testimony at the earlier corruption trial of Joseph Percoco, a former top aide to Cuomo who was later convicted.
Howe, a Troy native and longtime government insider, pleaded guilty to eight felonies. He also faces charges in bilking his credit card company for a $600 night stay at the Waldorf-Astoria in Manhattan while he was negotiating a deal with the government. That alleged crime was revealed while Howe was in the middle of his testimony in the Percoco case.
The testimony read to the jury will not include his arrest in that case. Howe is being held at the downtown jail. Caproni raised the possibility Howe could have invoked his Fifth Amendment right against self-incrimination if confronted with new allegations of wrongdoing. The judge noted that Howe's misdeeds were complex.
"I've said Todd Howe is a scoundrel. But Todd Howe was an incredibly successful fixer," Caproni said.
The U.S. attorney's office highlighted emails between Kaloyeros and Howe in its effort to convince the jury that the two men worked together to help the two firms win contracts.
The emails included exchanges from Aug. 23, 2013, when Kaloyeros emailed Howe with "vitals." It was an alleged reference to information Kaloyeros included in requests for proposals to unfairly steer the contracts.
Howe once worked as an aide for late Gov. Mario Cuomo and later worked for Andrew Cuomo when the younger Cuomo served as the federal housing secretary for President Bill Clinton.
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