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.

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.”

Thus, the Supreme Court unanimously agreed to reverse the Second Circuit’s decision because it applies to traditional property and cannot be the basis for a conviction of federal fraud. Originally, Mr. Ciminelli and the other defendants had begun their prison sentences but were later ordered to be released when the case was to be heard by the Supreme Court.

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