Mumbo Jumbo Over, Focus Finally on Corruption Again

Bruno trials continue
U.S. prosecutors will seek a second indictment alleging the ex-state Senate majority leader took illegal kickbacks
The Albany Times Union by Brendan J. Lyons  -  November 16, 2011

ALBANY, NY -- The Justice Department will seek a new indictment of former state Senate Majority Leader Joseph L. Bruno after a federal appeals court on Wednesday rejected Bruno's request that he not face a second trial.  The 2nd U.S. Circuit Court of Appeals, citing a U.S. Supreme Court ruling made last year, vacated Bruno's conviction on two counts of theft of honest services. But the panel of judges, pointing to the strength of the evidence, said the government may prosecute Bruno on allegations he received kickbacks from people who had an interest in his legislative influence.  In a statement issued Wednesday afternoon, U.S. Attorney Richard Hartunian of New York's Northern District said his office would swiftly seek a second grand jury indictment. That's expected to take place early next year.  A federal jury convicted Bruno in 2009 on two felonies related to his dealings with a Loudonville businessman, Jared E. Abbruzzese. Bruno's use of private jets supplied by Abbruzzese, who flew the senator to Kentucky horse country and exclusive Florida golf resorts, triggered the FBI investigation in late 2005.

Federal prosecutors had already conceded Bruno's conviction should be vacated under the U.S. Supreme Court's decision that said a federal honest services prosecution must include allegations of a bribe or kickback. Prosecutors had charged Bruno only with failing to publicly disclose material conflicts of interest between his Senate duties and private business interests.  The Justice Department did not oppose vacating Bruno's conviction but they argued he should face a new trial because their evidence was strong enough to support a conviction under the new standards set by the Supreme Court. The 2nd Circuit agreed in a unanimous decision.  Bruno's defense lawyers had argued before and after Bruno's trial that the Supreme Court ruling would unravel his conviction. They were right, but their assertion that it would be unfair for Bruno to face a new trial was shot down Wednesday.  Bruno's attorneys, Abbe D. Lowell and William Dreyer, said the court "had to agree with favorable inferences of the government's case -- but a jury hearing real evidence is a whole different and much more difficult test."  "We hope the U.S. Attorney will now let go of its pursuit of this 82-year-old man who has given so much to New York state and suffered for six years under wrongful charges," they said.  The government now has six months to seek a new indictment. Bruno's case was on appeal so the five-year statute of limitations for prosecuting his alleged crimes is tethered to the date of his January 2009 indictment, as long as he's indicted within six months.  The outcome of Wednesday's ruling had been proposed by federal prosecutors in an October 2010 letter to Bruno's defense team. That month, the Justice Department said they would not oppose vacating Bruno's conviction if Bruno agreed to a new trial. He rejected the idea and pursued an appeal. "The government's evidence would permit a reasonable jury to find that Bruno performed virtually non-existent consulting work for substantial payments," states the ruling, handed down Wednesday. "Bruno argues that the government failed to provide sufficient proof of a quid pro quo, an essential element of a bribery theory of honest services fraud. We disagree."  The jury concluded Bruno, who was Abbruzzese's horse-breeding partner, failed to disclose that he was on Abbruzzese's payroll as a "consultant" when Bruno steered $250,000 in state grants to a private company, Evident Technologies, bankrolled by Abbruzzese.  Bruno then accepted $200,000 in payments from two companies controlled by Abbruzzese, Communication Technology Advisors, LLC, and Capital & Technology Advisors, LLC.  Bruno's consulting company, Capital Business Consultants, existed primarily on paper and much of the firm's work was done from Bruno's Senate offices by state employees, including Senate lawyers and Bruno's secretaries.

"(T)he government's evidence showed that Bruno attempted to cover up the extent of his relationship with Abbruzzese, including the exorbitant consulting fees that Bruno was receiving from his companies," the ruling states. "Furthermore, when asked by (a Senate lawyer) whether Abbruzzese had any business before New York state, Bruno replied that he was not aware of any even though Bruno knew Abbruzzese was seeking funding on behalf of Evident."  The second conviction stemmed from Bruno's dealings in an undisclosed horse-breeding partnership with Abbruzzese and Jerry Bilinski, a Columbia County veterinarian. Abbruzzese conceded on the witness stand at Bruno's trial that he agreed to pay Bruno $80,000 for a horse the government characterized as "virtually worthless."  The payment, Abbruzzese said, was intended as his "global solution" to the fact a telecommunications company once controlled by Abbruzzese, TerreStar Networks, had terminated a $20,000-a-month consulting contract with Bruno after executives questioned whether Bruno was doing anything to earn the money. The early termination cost Bruno $80,000. Abbruzzese admitted he bought the overpriced horse to make up the difference, and at a time when he was seeking the state's NYRA franchise.  The horse was later given away for free to a child in Florida.

Prosecutors have argued that while they did not charge Bruno with receiving a bribe or kickback, they proved it. They said the evidence at his first trial two years ago would support a second conviction under the Supreme Court's decision.  Wednesday's unanimous ruling states "there is sufficient evidence of a quid pro quo for a reasonable jury to convict Bruno."  Bruno, 82, of Brunswick, was a state senator for more than three decades and Senate majority leader for 13 years before stepping down in 2008 as an FBI investigation of his private business dealings intensified.  A jury acquitted Bruno on five counts and reached no verdict on another. He was sentenced last year to 24 months in prison but U.S. District Judge Gary L. Sharpe stayed the punishment pending the outcome of Bruno's appeal.  If Bruno faces a new trial the government's case will stay within the framework of the two counts on which he was convicted and the third count that resulted in no verdict. The jury deadlocked on a charge alleging Bruno was paid $468,000 in consulting fees from a Westchester County businessman, Leonard J. Fassler, who was seeking state government contracts for his telecommunications companies.  Bruno was acquitted of the top count in the indictment, which centered on his receipt of $1.37 million from Wright Investors' Service and another $632,116 from an Albany investment banker. Wright, a Connecticut investment firm, had won hundreds of millions of dollars of pension investments from New York labor union leaders and fiduciaries who were solicited with Bruno's help.  Two prominent area attorneys who have been staunch supporters of Bruno, Stephen Coffey and E. Stewart Jones Jr., held a news conference Wednesday to criticize the government's decision to move forward in its prosecution of the Brunswick Republican, who was once one of New York's most powerful lawmakers.  "The right thing is to move on," Jones said. "Allow this man who has done so much to enjoy his life."  They said Bruno is financially drained now faces the prospect of a second trial.  "He's told me emphatically 'I'm not guilty ... and I will defend myself until the day I die,'" Coffey said. "Is it really moral to force him to walk the plank?"  Reach Lyons at 454-5547 or by e-mail at blyons@timesunion.com.

• December 2005: FBI opens investigation of Joseph L. Bruno related to his use of private jets
• June 2008: Bruno resigns from the state Senate as probe intensifies into his public duties/private dealings
• January 2009: Federal grand jury indicts Bruno on eight counts of honest services fraud
• December 2009: Bruno convicted of two felonies, pledges to appeal
• June 2010: U.S. Supreme Court revamps honest services statute in ruling on former Enron CEO Jeff Skilling. Court finds bribery and kickback must be part of honest services prosecution.  November 16, 2011: U.S. Second Circuit Court of Appeals grants government's request to seek a new indictment against Bruno. Bruno's conviction is vacated.

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Appeals Court Allows New Trial for Bruno
The New York Times by William Glaberson  -  November 16, 2011

A federal appeals court on Wednesday overturned, as was expected, the corruption conviction of Joseph L. Bruno, the upstate Republican who was once one of the most powerful men in New York State government.  But the three-judge court rejected Mr. Bruno’s effort to avoid a new trial on charges that he committed fraud by taking bribes or kickbacks totaling at least $240,000 from a businessman seeking his help in the Legislature. Mr. Bruno, who had been the Republican majority leader in the State Senate, resigned in 2008 while he was under investigation.  Federal prosecutors conceded during his appeal that his 2009 conviction should be overturned because of a ruling last year by the United States Supreme Court that undermined the government’s legal claims against him.

But the federal prosecutors in Albany have long said that they planned to retry Mr. Bruno, and they said Wednesday that they would seek a new indictment. In its unanimous ruling, a panel of the United States Court of Appeals for the Second Circuit, in New York, rebuffed Mr. Bruno’s claim that a new trial would violate his right to avoid double jeopardy.  In unvarnished language, the panel said the prosecutors had presented evidence from which a new jury could conclude that Mr. Bruno violated a federal law that makes it a crime to deprive people of “honest services.”  “The government’s evidence,” the ruling said, “would permit a reasonable jury to find that Bruno performed virtually nonexistent consulting work for substantial payments” and “attempted to cover up” his dealings.  The court said a new jury could conclude, for example, that one $40,000 payment was “an illegitimate gift” disguised as payment for a racehorse, Christy’s Night Out, that was not worth much.  Mr. Bruno has insisted that the case reflected nothing more than the fact that New York’s legislators often have other jobs. But the case was widely seen as a test of whether the courts could limit what have often been seen as lax ethical standards in Albany. The case highlighted how Mr. Bruno mixed private and government duties and, the appeals court said, showed that he used state employees to help him collect “exorbitant consulting fees.”  Mr. Bruno was sentenced to two years, but he has remained free during the appeal.  In a statement on Wednesday, Mr. Bruno’s lawyer, Abbe David Lowell, asserted that he and Mr. Bruno were “delighted” that the court had agreed Mr. Bruno “was charged with something that was not a crime.”  But the statement also appeared to seek negotiations with federal prosecutors to try to bring an end to the case. “We hope,” the statement said, “the U.S. attorney will now let go of its pursuit of this 82-year-old man who has given so much to New York State and suffered for six years under wrongful charges.”  In their initial case, the federal prosecutors charged that Mr. Bruno committed fraud by failing to disclose conflicts of interest when he took money in exchange for help on government matters.  But in a decision on an unrelated case in 2010, the Supreme Court ruled that the federal honest-services law could not be used to prosecute defendants for hiding conflicts of interest. The court left open, however, the possibility of prosecution based on kickbacks and bribery.  The decision on Mr. Bruno’s case was written by Circuit Judge Barrington D. Parker, and was joined in by Circuit Judge Denny Chin and District Judge Edward R. Korman, who was sitting on the panel by designation.

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Bruno Faces Retrial After Panel Vacates Corruption Convictions
The New York Law Journal by Mark Hamblett  -  November 17, 2011

Former New York State Senate Majority Leader Joseph L. Bruno is entitled to a retrial on political corruption charges following a decision yesterday by the U.S. Court of Appeals for the Second Circuit.  As expected in light of the U.S. Supreme Court's 2010 decision in United States v. Skilling, 130 S.Ct. 2896 (2010), the circuit vacated two convictions for theft of honest services delivered by a federal jury in Albany in 2009, convictions based on Mr. Bruno's failure to disclose alleged conflicts of interest.  But the court's unanimous ruling did not leave the former Republican leader off the hook, as it found there was sufficient evidence for the government to try Mr. Bruno on an honest services theory alleging actual bribery or kickbacks. The panel also held that Mr. Bruno can be retried on a single count of honest services fraud on which the jury was hung and Northern District Judge Gary L. Sharpe declared a mistrial.  "We are delighted that the court of appeals agreed with us that Senator Bruno was charged with something that was not a crime and his case has to be dismissed," Mr. Bruno's attorneys, Abbe D. Lowell of Chadbourne & Parke and William Dreyer of Dreyer Boyajian, said in a statement.  They added, "We hope the U.S. attorney will now let go of its pursuit of this 82-year-old man who has given so much to New York state and suffered for six years under wrongful charges."

However, Northern District U.S. Attorney Richard S. Hartunian said in a statement that his office would move "expeditiously" to present a superseding indictment against Mr. Bruno.  In Skilling, the Supreme Court held that the honest services statute, 18 U.S.C. §1346, criminalizes only fraudulent schemes involving bribes or kickbacks, not the failure to disclose conflicts of interest.  Mr. Bruno was convicted on Count Four of an eight-count indictment of accepting $200,000 disguised as payments for consulting services from his friend and close business associate, Jared E. Abbruzzese, who then received favorable treatment from the state government for his companies.  He was also convicted on Count Eight of disguising that he had accepted a $40,000 payment from Mr. Abbruzzese for a horse, Christy's Night Out, a payment that the jury found was an illegitimate gift.  Citing the acknowledgment by the government that Skilling changed the legal landscape, the Second Circuit vacated the two convictions, but rejected Mr. Bruno's claim under the double jeopardy clause.  "Although we hold that Skilling requires us to vacate the convictions on Counts Four and Eight, because our review of the record convinces us that the government adduced sufficient evidence under the Skilling standard, double jeopardy does not bar retrial on those two counts," Judge Barrington D. Parker (See Profile) wrote for the panel in United States v. Bruno, 10-1885.  The court's 21-page decision follows oral arguments held on June 17 before Judges Parker and Denny Chin (See Profile) and, sitting by designation, Eastern District Judge Edward R. Korman (See Profile) (NYLJ, June 20).  At the trial of Mr. Bruno, who served as state Senate majority leader from 1995 to 2008, prosecutors argued that the veteran politician enriched himself to the tune of some $3.2 million from 1993 through 2006 through income as a consultant.  The defense claimed that Mr. Bruno's disclosure forms had been thoroughly vetted by Senate attorneys because Mr. Bruno insisted on full disclosure of his business dealings outside the Senate. Moreover, it contended that, with state legislator being a part-time job, he was entitled to earn income outside the Senate.  The trial ended on Dec. 7, 2009, with the jury, after seven days of deliberation, deciding to convict Mr. Bruno on the two counts, acquit him of five counts and deadlocking on the single count of theft of honest services. He declined to testify at trial (NYLJ, Dec. 8, 2009).  Mr. Bruno was unapologetic as he was sentenced to two years in prison by Judge Sharpe on May 6, 2010, telling reporters afterward, "I am proud of my public service, and I don't believe that I have anything to apologize for" (NYLJ, May 7, 2010).  Given the pending Skilling case before the Supreme Court, Judge Sharpe allowed him to remain free on bail pending appeal.

Incorrect Jury Instructions

Yesterday, in light of Skilling, Judge Parker said, Judge Sharpe erred in his jury instructions.  Judge Sharpe had told the jury that Mr. Bruno was accused of committing honest services wire fraud by failing to disclose material conflicts of interest, and a conflict exists when the public's interest "in the proper administration of the official's office" and "the official's interest in his private economic affairs…clash or appear to clash."  Judge Sharpe's failure to require the jury to find that Mr. Bruno accepted bribes or kickbacks was the error, Judge Parker said.  The government, he said, now contends "the indictment can also be read as charging a bribery or kickback theory."  Judge Parker said that "it would be preferable and fairer, of course, for the government to proceed on explicit rather than implicit charges."  In arguing he was facing double jeopardy, Mr. Bruno told the Second Circuit that the court must review the sufficiency of the evidence under Skilling. The government countered that there should be no review of the sufficiency of the evidence where there is an intervening change in the law.  Mr. Bruno had argued the whole case was built on the honest services fraud as applied to conflict of interest, and as invalidated by Skilling, so he was entitled to a judgment of acquittal if there was insufficient evidence in the record to support conviction on bribery or kickback honest services fraud that Skilling required, even though it was not charged in the indictment.  "This distinction is important because although we have previously held that sufficiency of the evidence review is appropriate when a conviction has been reversed for trial error," Judge Parker said, "we have not previously considered whether such a review is appropriate where, as here, the error is due to an intervening change in the law."  In the end, the circuit decided it was appropriate "to accept Bruno's invitation to evaluate the sufficiency of the evidence."  Mr. Bruno had argued prosecutors had failed to present proof of a quid pro quo that is necessary to win a conviction on a bribery theory of honest services fraud.  The panel disagreed.  On the count involving the $200,000 payment, Judge Parker said, "the government's evidence would permit a reasonable jury to find that Bruno performed virtually non-existent consulting work for substantial payments."  Second, a jury could find the government's "evidence showed that Bruno attempted to cover up the extent of his relationship with Abbruzzese, including the exorbitant consulting fees that Bruno was receiving from his companies."  On the payment for the horse, Judge Parker said that "a jury could find that Abbruzzese's $40,000 payment for Christy's Night Out was an illegitimate gift disguised as a horse payment" and "the government provided credible evidence that the horse was not worth anything like the $80,000 that Abbruzzese promised Bruno or the $40,000 that Abbruzzese ultimately paid."  Northern District Assistant U.S. Attorney Elizabeth Coombe argued for the government.  Mark Hamblett can be contacted at mhamblett@alm.com.