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.