In Ciminelli v. U.S., the U.S. Supreme Court will decide whether the Second Circuit’s “right to control” theory of fraud—which treats the deprivation of complete and accurate information bearing on a person’s economic decision as a species of property fraud—states a valid basis for liability under the federal wire-fraud statute, 18 U.S.C. § 1343. In 2012, the governor of New York initiated a program to invest one billion dollars in upstate development projects, known as the “Buffalo Billion” plan. In early 2014, two developers were selected as preferred developers for Buffalo-area projects—Ciminelli, then among the most prominent construction companies in upstate New York, and McGuire Development Company. Following negotiations, Ciminelli was awarded a contract for $750 million project to build a high-tech facility in Buffalo. Investigators subsequently uncovered evidence that a member of the board who helped developed the criteria on who would be awarded contracts also had worked on Ciminelli’s proposal for the bidding process. Ciminelli was charged with conspiracy to commit wire fraud in connection with a scheme to rig the bidding processes, in violation of 18 U.S.C. § 1349 and wire fraud in connection with rigging the bidding process for the projects in Buffalo, in violation of 18 U.S.C. § 1343. At trial, the government sought to prove that Ciminelli and the board member that assisted development of the criteria as to who would be awarded contracts and Ciminelli’s proposal tailored the criteria so that Ciminelli’s proposal would be selected as a preferred developer. The tailoring allegedly consisted of adding terms to the criteria that favored Ciminelli over other companies. The government did not allege that Mr. Ciminelli deprived New York of a fair price, fair terms, or quality workmanship. The district court instructed that under the right-to-control theory, the deprivation of “money or property” “includes intangible interests such as the right to control the use of one’s assets” and that interest “is injured,” “when [the victim] is deprived of potentially valuable economic information that it would consider valuable in deciding how to use its assets.” The district court further instructed that “‘potentially valuable economic information’ is information that affects the victim’s assessment of the benefits or burdens of a transaction or relates to the quality of goods or services received or the economic risks of the transaction.” The Second Circuit affirmed. Defendant Ciminelli argues that “the ‘right-to-control theory’ of wire and mail fraud” is invalid, because, among other reasons, “the right to control one’s own assets is not ‘property’ within the meaning of the wire fraud statute.”
The Supreme Court’s decisions in these two cases will impact what “schemes” prosecutors can charge. Further, it will be interesting to see if the Supreme Court continues its trend toward a narrower interpretation of federal criminal statutes. See Kelly v. United States, 140 S. Ct. 1565 (2020); McDonnell, 136 S. Ct. 2355 (2016); Skilling, 561 U.S. 358 (2010). Of note, after the authors prepared this Practice Point, an opinion piece on these two cases was published in the November 26–27, 2022, Wall Street Journal entitled “Government Sleaze and Punishment.” The authors of this Practice Point recommend readers check out this opinion piece as it provides an expanded slippery-slope argument that could take place if the Supreme Court upholds these decisions.