Former State University President, Alain Kaloyeros, And Three Corporate Executives Sentenced To Prison For Fraud In Connection With Buffalo Billion Bid-Rigging
Geoffrey S. Berman, the United States Attorney for the Southern District of New York, announced today that ALAIN KALOYEROS, the former President of the State University of New York Polytechnic Institute; STEVEN AIELLO, a founder and partner of COR Development (“COR”), a real estate development company based in the Syracuse, New York, area; JOSEPH GERARDI, also a founder and partner of COR; and LOUIS CIMINELLI, the former Chairman and CEO of LPCiminelli, a construction company based in Buffalo, New York, were sentenced to prison for fraud in connection with the rigging of bids for hundreds of millions of dollars of State-funded contracts under New York State’s “Buffalo Billion” economic development program. KALOYEROS was sentenced today by U.S. District Judge Valerie E. Caproni, and AIELLO, GERARDI, and CIMINELLI were all sentenced last week by Judge Caproni. The defendants received the following sentences:
ALAIN KALOYEROS – 42 months in prison
STEVEN AIELLO – 36 months in prison
JOSEPH GERARDI – 30 months in prison
LOUIS CIMINELLI – 28 months in prison
On July 12, 2018, KALOYEROS, AIELLO, GERARDI, and CIMINELLI were each convicted of wire fraud and wire fraud conspiracy, following a three-week trial before Judge Caproni, who imposed sentence on each of the defendants. GERARDI was also convicted of making false statements to federal officers. In addition to the bid-rigging offense, AIELLO’s sentence also reflected his conviction for paying bribes to Joseph Percoco, a former executive aide and campaign manager to the Governor of New York.
U.S. Attorney Geoffrey Berman said: “The Buffalo Billion program is an economic initiative intended to stimulate economic growth, and ultimately benefit the people of New York. But a well-connected group of Albany insiders exploited the project to benefit themselves instead. By manipulating the application process for awarding bids, these men effectively corrupted the bidding process to ensure that companies with which they had financial interests would be awarded the lucrative work. Public corruption – especially at such a disconcertingly high level in Albany – contributes to the frustration and eroding faith of the people of New York in the integrity of their government. We will continue to do everything within our power to ensure that funds intended for the greater good of New Yorkers will be used for just that – and not to line the pockets of influence-peddlers with high-level access.”
Judge Caproni said during AIELLO’s sentencing: “I want this sentence to be heard around the state. . . . This prosecution . . . should serve as a warning to others who interact with the government everywhere . . . when competing for projects from an entity like Fort Schuyler, you are playing with state money. That means you have to be purer than Caesar’s wife, because the money you were trying to get comes from the hardworking men and women of New York State. If you can’t live with that standard, then stick with private sector work, because if you remain at the public trough and you engage in corrupt means to get to public money, even if you did a good job for the public, the Court will show you no mercy. . . .”
According to the evidence introduced at trial, other proceedings in this case, and documents previously filed in Manhattan federal court:
KALOYEROS, AIELLO, GERARDI, and CIMINELLI conspired 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 offered in connection with the Buffalo Billion program would be awarded to COR and LPCiminelli. KALOYEROS, who oversaw the application process for many of the State grants awarded under the Buffalo Billion and similar programs, retained Todd Howe to lobby the New York Governor’s office in order to maintain and expand KALOYEROS’s position. KALOYEROS and Howe, who also worked for both COR and LPCiminelli, then conspired with AIELLO, GERARDI, and CIMINELLI to defraud Fort Schuyler by secretly tailoring the required qualifications for development deals in Syracuse and Buffalo so that COR and LPCiminelli would be awarded significant projects without any meaningful competition. All the while, the defendants falsely represented 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 oversaw the drafting of the RFPs and, unbeknownst to Fort Schuyler, KALOYEROS and Howe secretly solicited from AIELLO, GERARDI, CIMINELLI, and others at LPCiminelli: (1) qualifications of COR and LPCiminelli to put in the RFPs, so that the RFPs would request qualifications specifically held by those companies, and (2) feedback on the RFPs, before they were released publicly. For example, the Syracuse RFP requested the use of specific project management software used by COR. 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 LPCiminelli in promotional materials provided to KALOYEROS.
Additionally, after the Government’s investigation became public, both KALOYEROS and CIMINELLI deleted incriminating evidence from their personal email accounts. GERARDI voluntarily met with government agents and lied about his criminal conduct.
In addition to his convictions for fraud in connection with the Buffalo Billion program, AIELLO was convicted in connection with a bribery conspiracy involving Percoco, who was also convicted and sentenced by Judge Caproni to 72 months in prison. Beginning in early 2014, Percoco was paid bribes totaling approximately $35,000 from COR. These bribe payments were orchestrated by AIELLO, who arranged them in exchange for Percoco’s official assistance for COR on an as-needed basis.
Specifically, Percoco agreed with AIELLO to, and did, take official action for the benefit of COR to (a) reverse an adverse decision by the Empire State Development Corporation, which is the State’s main economic development agency, that would have required COR to enter into a costly labor peace agreement in connection with a development project in Syracuse, (b) free up a backlog of more than $14 million in State funds that had already been awarded to COR but were delayed in payment, and (c) secure a substantial pay raise for AIELLO’s son, who worked in the Governor’s office. To disguise the nature and source of the bribe payments, COR’s bribes to Percoco were funneled through bank accounts and a shell company set up by Howe.
In addition to the prison term, KALOYEROS, 62, of Slingerlands, New York, was sentenced to 2 years of supervised release. Judge Caproni also ordered KALOYEROS to pay a fine of $100,000.
In addition to the prison terms, AIELLO, 60, of Fayetteville, New York, GERARDI, 59, of Fayetteville, New York, and CIMINELLI, 63, of Buffalo, New York, were each sentenced to two years of supervised release. Judge Caproni also ordered AIELLO, GERARDI, and CIMINELLI each to pay a fine of $500,000 and to forfeit ill-gotten gains.
Mr. Berman praised the outstanding work of the Buffalo Field Office of the Federal Bureau of Investigation and the New York Office of the Internal Revenue Service-Criminal Investigation, which jointly conducted this investigation with Special Agents from the U.S. Attorney’s Office.
This case is being handled 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.