Supreme Court Reverses Second Circuit Ruling On Right To Control Theory

The U.S. Supreme Court ruled last month on Ciminelli v. United States, which was first heard in November 2022. The Supreme Court unanimously overturned the Second Circuit ruling in which Mr. Ciminelli and others had been convicted of wire fraud based on the right-to-control theory.

Buffalo Billion Initiative

In 2012, then-governor of New York, Andrew Cuomo, announced the Buffalo Billion initiative, a project that was administered by the nonprofit Fort Schuyler Management Corporation, intending to develop the greater Buffalo, NY area. Louis Ciminelli and other individuals were convicted of federal wire fraud for their involvement in the scheme, in which they were found guilty of rigging the bidding process as they sought to obtain roles in state-funded development projects through lobbying and bribery.

The CEO of SUNY Polytechnic, Alain Kaloyeros, secured an influential role in the Buffalo Billion initiative and awarded the contracts to developers he knew instead of honoring the bidding process. After an extensive court process, Mr. Kaloyeros, Mr. Ciminelli, and others who were involved were found guilty of conspiracy to engage in wire fraud and commission of wire fraud in 2018. The defendants received prison sentences of various lengths.

Appeal To The Second Circuit Court

Mr. Ciminelli appealed the ruling in the Second Circuit of the U.S. Court of Appeals, but the original conviction was upheld by the Second Circuit, who indicated that their ruling relied upon a right to control” theory. This theory holds that individuals have a right to control any of their assets that qualify as property. Even if the defendant did not intend to cause harm, they can be convicted if they withheld “potentially valuable economic information” which deprived individuals of their right to control their assets.

Supreme Court Decision

The Supreme Court heard the case in November 2022, asking if the Second Circuit’s “right to control” theory of fraud indicated a valid basis for liability under the federal wire fraud statute. In their ruling, the Supreme Court decision authored by Justice Clarence Thomas stated that “because the right to valuable economic information needed to make discretionary economic decisions is not a traditional property interest, the Second Circuit’s right-to-control theory cannot form the basis for a conviction under the federal fraud statutes.”

Implications of Supreme Court Ruling on Wire Fraud for Arizona Businesses

Although this case is based in New York, the Supreme Court’s ruling has far-reaching implications for federal wire fraud cases nationwide, including in Arizona. Local business owners and professionals should take note of this ruling, as it impacts how fraud cases will be prosecuted, especially in complex white-collar crimes. The stricter standard means that Arizona prosecutors, like those across the U.S., must prove that fraud schemes are aimed at acquiring tangible assets or money, not just misleading information. This change could affect how cases are handled locally, particularly those involving business fraud, public procurement, or government contracts.

Obtain Representation For White Collar Crime In Arizona

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