Justice News
Share
Department of
Justice
U.S. Attorney’s
Office
Southern District
of New York
FOR IMMEDIATE
RELEASE
Thursday,
September 22, 2016
Nine Defendants,
Including Joseph Percoco, Former Executive Deputy Secretary To The Governor,
And Alain Kaloyeros, President Of Suny Polytechnic Institute, Charged With
Federal Corruption And Fraud Offenses.
Percoco Charged
with Taking More than $315,000 in Bribes; Kaloyeros Charged with Fraud in
Connection with the Buffalo Billion Program.
Preet Bharara, the United States Attorney for the
Southern District of New York, Adam Cohen, Special Agent-in-Charge of the
Buffalo Field Office of the Federal Bureau of Investigation (“FBI”), and
Shantelle P. Kitchen, the Special Agent in Charge of the New York Field Office
of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced
today the unsealing of a Complaint charging eight defendants with federal
public corruption offenses, including JOSEPH PERCOCO, the former Executive
Deputy Secretary to the Governor of the State of New York, and ALAIN KALOYEROS,
the President of SUNY Polytechnic Institute (“SUNY Poly”). The charges
arise from two separate but overlapping schemes involving bribery, corruption,
and fraud in the award of hundreds of millions of dollars in New York State
contracts and other official state actions.
In the first scheme, PERCOCO is charged with soliciting
and accepting more than $315,000 in bribes in return for taking official state
action to benefit an energy company (the “Energy Company”) and a Syracuse-based
real estate developer (the “Syracuse Developer”). As part of this scheme,
PETER GALBRAITH KELLY JR., an executive at the Energy Company, and STEVEN AIELLO
and JOSEPH GERARDI, executives at the Syracuse Developer, are charged with
orchestrating the payment of bribes to PERCOCO.
In the second scheme, AIELLO and GERARDI, along with
LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, who are executives at a
Buffalo-based development company (the “Buffalo Developer”), are charged with
paying hundreds of thousands of dollars in bribes to TODD HOWE, a consultant
hired by KALOYEROS to help administer the state’s “Buffalo Billion” initiative
and related programs. As the charges allege, in exchange for the bribe
payments, HOWE and KALOYEROS secretly rigged the bids on lucrative state-funded
contracts to ensure that the Syracuse Developer and the Buffalo Developer would
win the contracts.
All eight defendants charged in the Complaint were
arrested this morning. PERCOCO, KELLY, and KALOYEROS are scheduled to be
presented later today before U.S. Magistrate Judge Sarah Netburn in Manhattan
federal court. AIELLO and GERARDI are scheduled to appear later today in
federal court in Syracuse. CIMINELLI, LAIPPLE, and SCHULER are scheduled
to appear later today in federal court in Buffalo.
Also unsealed today is the guilty plea of TODD HOWE in
connection with his participation in both corruption schemes described above.
HOWE pled guilty pursuant to an Information before U.S. District Judge
Richard M. Berman on September 20, 2016, and is cooperating with the
Government.
U.S. Attorney Preet Bharara said: “Today’s charges
shine a light on yet another sordid side of the show-me-the money culture that
has so plagued Albany. As alleged, Joseph Percoco, the former Executive
Deputy Secretary to the Governor, was on the take. And pervasive
corruption and fraud allegedly infected signature state development projects
like the Buffalo Billion program. The bids allegedly were rigged, the
results preordained; companies got rich and the public got bamboozled. As
alleged in the Complaint, it turns out the state legislature does not have a
monopoly on crass corruption in New York.”
FBI Special Agent-in-Charge Adam Cohen said: “These
arrests speak volumes to those who, as alleged in the complaint, arrogantly
took what was not theirs and who acted without morals and ignored ethics.
Each of them allegedly broke the law because they chose greed, and, as a
result, personally tarnished an historic opportunity. Their alleged
behavior compromised the integrity of government and impeded the promise of
liberty. We cannot say it often enough: It is the expectation of the
public that government officials are not in their positions to self-deal or to
serve their personal interests.”
IRS-CI SAC Shantelle P. Kitchen said: “The honest
taxpayer’s confidence in the tax system depends on everyone paying their fair
share, regardless of their occupation, wealth or prominence – or their public
office or public position. IRS Criminal Investigation takes allegations
of public corruption by public officials and public employees very seriously,
and we are always ready to contribute to an investigation when the allegation
has a financial component.”
According to the allegations contained in the Complaint[1] unsealed today
in Manhattan federal court:
The PERCOCO
Bribery Scheme
In the first scheme alleged in the Complaint, PERCOCO,
who served as the Executive Deputy Secretary to the Governor between January
2012 and mid-2014, and again in 2015, is charged with abusing his official
position and extensive influence within the Executive Branch of New York State
(the “State”) by seeking and accepting bribe payments from executives at
companies that were seeking benefits and business from the State, in exchange
for PERCOCO’s use of his official authority and influence to benefit those
companies.
PERCOCO solicited the bribe payments from two clients of
HOWE –the Energy Company and the Syracuse Developer – both of which had
retained HOWE as a consultant to help them obtain official State action.
In email correspondence between HOWE and PERCOCO obtained through
judicially-authorized search warrants, PERCOCO and HOWE referred to the bribe
payments as “ziti,” a reference to a term for money used by the characters in
the television show “The Sopranos.”
Bribes from KELLY
and the Energy Company
The bribes paid to PERCOCO from the Energy Company were
orchestrated by KELLY, the head of external affairs and government relations
for the Energy Company. Kelly conspired with PERCOCO and HOWE to funnel
more than $287,000 in bribe payments from the Energy Company to PERCOCO and
PERCOCO’s wife in exchange for PERCOCO’s official assistance for the Energy
Company on an as-needed basis.
As alleged in the Complaint: (a) State action was
critical to the Energy Company’s business; (b) starting as early as 2010, KELLY
provided personal benefits to PERCOCO, including expensive meals and a Hamptons
fishing trip, in an effort to cultivate access to PERCOCO; (c) in response to
KELLY’s requests for official State assistance, PERCOCO, who was experiencing
financial difficulties at the time, requested that the Energy Company hire his
then-unemployed wife; (d) in or around the end of 2012, KELLY caused the Energy
Company to create a position for PERCOCO’s wife that paid approximately $90,000
per year while requiring PERCOCO’s wife to do little work. In exchange
for these payments, PERCOCO agreed to use his official position and influence,
and did in fact use his official position and influence, to help the Energy
Company with specific State matters as the opportunities arose. Among
other things, PERCOCO agreed to use his official position and influence to
assist the Energy Company’s efforts to obtain (i) a valuable agreement from the
State allowing the Energy Company to buy lower-cost emissions credits in New
York for a power plant proposed to be built in New Jersey and (ii) a lucrative long-term
power purchase agreement (the “PPA”) with the State guaranteeing a buyer for
the power to be produced at a power plant proposed to be built in New York,
which was expected to save the Energy Company approximately $100 million in
development costs.
The Energy Company’s payments to PERCOCO’s wife were
concealed in various ways to hide their true source. KELLY ran the
monthly payments to PERCOCO and his wife through a consultant who worked for
the Energy Company in order to disguise the source of the payments. KELLY
also made sure that PERCOCO’s wife’s photograph and full name were not included
in promotional materials for the Energy Company, and he falsely told his
superiors at the Energy Company – on two separate occasions – that PERCOCO had
obtained an ethics opinion from the Governor’s Office approving of PERCOCO’s
wife’s employment with the Energy Company, when in fact no such opinion
existed. For his part, PERCOCO concealed the criminal scheme by failing
to include the Energy Company as the source of payments on his State-mandated
financial disclosure forms.
Bribes from
AIELLO, GERARDI, and the Syracuse Developer
Beginning in early 2014, PERCOCO was also paid bribes
totaling approximately $35,000 from the Syracuse Developer. These bribe
payments were orchestrated by AIELLO, the president of the Syracuse Developer,
and GERARDI, its general counsel. AIELLO and GERARDI arranged for the
payment of these bribes in exchange for PERCOCO’s official assistance for the
Syracuse Developer on an as-needed basis.
Specifically, PERCOCO agreed to, and did, take official
action for the benefit of the Syracuse Developer to (a) reverse an adverse
decision by the Empire State Development Corporation (“ESD”), which is the
State’s main economic development agency, that would have required the Syracuse
Developer to enter into a costly labor peace agreement, (b) free up a backlog
of more than $14 million in State funds that had already been awarded to the
Syracuse Developer but were delayed in payment, and (c) secure a substantial
pay raise for AIELLO’s son, who worked in the Executive Chamber.
To disguise the nature and source of the bribe payments,
the Syracuse Developer’s bribes to PERCOCO were funneled through bank accounts
and a shell company set up by HOWE.
The “Buffalo
Billion” Fraud and Bribery Scheme
The second scheme alleged in the Complaint involves
bribery, corruption, and fraud in the award of contracts under the “Buffalo
Billion” initiative and similar programs. In that scheme, executives at
two companies, one of which was the Syracuse Developer, conspired with
KALOYEROS and HOWE to deceive Fort Schuyler Management Corporation (“Fort
Schuyler”), a State-funded entity charged with awarding State contracts worth
hundreds of millions of dollars, by secretly rigging the bidding process so
that the contracts would be awarded to those two companies.
KALOYEROS, who oversaw the application process for many
of the State grants awarded under the Buffalo Billion and similar programs,
retained HOWE to assist with developing the projects and identifying developers
for those projects. HOWE in turn solicited and received bribe and
gratuity payments from (a) the Syracuse Developer, facilitated by AIELLO and
GERARDI, when the Syracuse Developer was seeking State development grants for
projects in Syracuse, New York, and (b) the Buffalo Developer, facilitated by
LOUIS CIMINELLI, MICHAEL LAIPPLE, and KEVIN SCHULER, when the Buffalo Developer
was seeking State development grants for projects in Buffalo, New York.
In exchange for the bribe payments, HOWE worked with KALOYEROS to deceive Fort
Schuyler by secretly tailoring the required qualifications for those
development deals so that the Syracuse Developer and the Buffalo Developer
would be awarded the contracts, in Syracuse and Buffalo respectively, without
any meaningful competition, while falsely representing to Fort Schuyler that
the bidding process was fair, open, and competitive.
More specifically, in or about October 2013, Fort
Schuyler issued requests for proposals (“RFPs”) to solicit bids from interested
and qualified developers for the Syracuse and Buffalo projects.
KALOYEROS, with HOWE’s assistance, oversaw the drafting of the RFPs and,
unbeknownst to Fort Schuyler, KALOYEROS and HOWE secretly solicited from
AIELLO, GERARDI, CIMINELLI, LAIPPLE, and SCHULER qualifications of the Syracuse
Developer and Buffalo Developer to put in the RFPs so that the RFPs would
request qualifications specifically held by those companies. For example,
the Syracuse RFP requested the use of specific project management software used
by the Syracuse Developer. After HOWE emailed GERARDI and AIELLO a draft
of the Syracuse RFP approximately two weeks before its public issuance, GERARDI
sent back to HOWE and AIELLO a handwritten mark-up of the draft RFP, on which
GERARDI had, among other things, underlined the software names and wrote “too
telegraphed?? I would leave out these specific programs.” For its
part, the Buffalo RFP, as initially issued, required 50 years of experience by
a local developer – a qualification touted by the Buffalo Developer in
promotion materials provided to KALOYEROS. This requirement was later
changed and claimed to be a “typographical error.” The Buffalo Developer
also was provided internal State documents to use in its submission.
False Statements
by Aiello and Gerardi
On or about June 21, 2016, AIELLO and GERARDI were
voluntarily interviewed by law enforcement agents conducting the investigation
in this case. As alleged in the Complaint, both AIELLO and GERARDI made
false statements during their respective interviews. Specifically, they
both denied (i) hiring or making payments to PERCOCO and (ii) being asked by
HOWE to make any campaign contributions to the Governor. GERARDI further
claimed that his handwritten edits and suggestions on the early nonpublic draft
of the RFP were intended not to help the Syracuse Developer win the RFP, but to
ensure that a broader, more open RFP was created so more companies could
compete to be SUNY Poly’s preferred developer in Syracuse. As alleged in
the Complaint, those statements were false.
A chart containing the names, ages, residences, charges,
and maximum penalties for the defendants is attached. The maximum
potential sentences in this case are prescribed by Congress and are provided
here for informational purposes only, as any sentencing of the defendants will
be determined by a judge.
U.S. Attorney Bharara praised the work of the FBI and
Internal Revenue Service-Criminal Investigation, which jointly conducted this
investigation with investigators from the U.S. Attorney’s Office. Mr.
Bharara also recognized the New York State Attorney General’s Office, which
This case is being prosecuted by the Office’s Public Corruption Unit.
Assistant U.S. Attorneys Janis Echenberg, Robert Boone, David Zhou, and Matthew
Podolsky are in charge of the prosecution.
The charges contained in the Complaint are merely
accusations, and the defendants are presumed innocent unless and until proven
guilty.
United States v.
Joseph Percoco, et al. 16 Mag, 6005
DEFENDANT
|
AGE
|
RESIDENCE
|
CHARGE(S)
|
MAXIMUM
SENTENCE(S)
|
JOSEPH
PERCOCO
|
47
|
South
Salem, NY
|
Conspiracy
to Commit Extortion Under the Color of Official Right,
18 U.S.C. §
1951 (Count One)
Extortion
Under the Color of Official Right,
18 U.S.C. §
1951 (Counts Two and Three)
Conspiracy
to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)
Solicitation
of Bribes and Gratuities,
18 U.S.C. §
666 (Counts Five and Six)
|
20 years
20 years
20 years
10 years
(on each count)
|
ALAIN
KALOYEROS
|
60
|
Slingerlands,
NY
|
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
|
20 years
|
PETER
GALBRAITH KELLY, JR.
|
53
|
Canterbury,
CT
|
Conspiracy
to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)
Payment of
Bribes and Gratuities,
18 U.S.C. §
666 (Count Seven)
|
20 years
10 years
|
STEVEN
AIELLO
|
58
|
Fayetteville,
NY
|
Conspiracy
to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)
Payment of
Bribes and Gratuities,
18 U.S.C. §
666 (Counts Eight and Ten)
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
False
Statements to Federal Officers,
18 U.S.C. §
1001 (Count Twelve)
|
20 years
10 years
(on each count)
20 years
5 years
|
JOSEPH
GERARDI
|
57
|
Fayetteville,
NY
|
Conspiracy
to Commit Honest Services Fraud, 18 U.S.C. § 1349 (Count Four)
Payment of
Bribes and Gratuities,
18 U.S.C. §
666 (Counts Eight and Ten)
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
False
Statements to Federal Officers,
18 U.S.C. §
1001 (Count Twelve)
|
20 years
10 years
(on each count)
20 years
5 years
|
LOUIS
CIMINELLI
|
61
|
Buffalo, NY
|
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
Payment of
Bribes and Gratuities,
18 U.S.C. §
666 (Count Eleven)
|
20 years
10 years
|
MICHAEL
LAIPPLE
|
51
|
Orchard
Park, NY
|
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
Payment of
Bribes and Gratuities,
18 U.S.C. §
666 (Count Eleven)
|
20 years
10 years
|
KEVIN
SCHULER
|
45
|
North Tonawanda,
NY
|
Conspiracy
to Commit Wire Fraud,
18 U.S.C. §
1349 (Count Nine)
Payment of
Bribe and Gratuities,
18 U.S.C. §
666 (Count Eleven)
|
20 years
10 years
|
United
States v. Todd Howe
(Information)
|
||||
TODD HOWE
|
56
|
Washington,
DC
|
Conspiracy
to Commit Honest Services Fraud,
18 U.S.C. §
1349 (Count One)
Conspiracy
to Commit Extortion Under the Color of Official Right,
18 U.S.C. §
1951 (Count Two)
Extortion
Under the Color of Official Right,
18 U.S.C. §
1951 (Count Three)
Conspiracy
to Commit Wire Fraud
Wire Fraud,
18 U.S.C. §
1349 (Count Four)
Wire Fraud,
18 U.S.C. §
1343 (Counts Five and Seven)
Conspiracy
to Commit Bribery,
18 U.S.C. §
371 (Count Six)
Tax Fraud
26 U.S.C. §
7201 (Count Eight)
|
20 years
20 years
20 years
20 years
20 years
(on each count)
5 years
5 years
|
[1] As the
introductory phrase signifies, the entirety of the text of the Complaint and
the description of the Complaint set forth herein constitute only allegations,
and every fact described should be treated as an allegation.
16-253
Topic:
Public Corruption
Updated September 22, 2016.
No comments:
Post a Comment