Albany

Federal prosecutors brought corruption charges against top state government insiders and business development executives Thursday, scorching Gov. Andrew Cuomo's hallmark upstate economic initiatives.

It is the third seismic political scandal in less than two years to rock state government.

Joseph Percoco, a former top aide and confidant of Cuomo, as well as SUNY Polytechnic Institute's founding President and CEO Alain Kaloyeros and officials at some of upstate New York's most prominent development firms were charged in a federal complaint with allegedly engaging in two overlapping schemes involving bribery, corruption and fraud in the award of hundreds of millions of dollars in state contracts and other official benefits.

A total of eight people, including Buffalo developer Louis Ciminelli and Syracuse executive Steven Aiello, were named in a 12-count federal criminal complaint unveiled by U.S. Attorney for the Southern District Preet Bharara. A guilty plea by a ninth person, former lobbyist and longtime Cuomo ally Todd Howe, was unsealed as well.

Kaloyeros also was hit with state charges on Thursday related to alleged bid-rigging alongside Joseph Nicolla, a prominent Albany developer.

"It turns out that the state Legislature does not have any kind of monopoly on crass corruption in New York," said Bharara, whose office won convictions of former top lawmakers Sheldon Silver and Dean Skelos last year, at a noontime press conference. " ... (If) we prove the allegations in this case, it's not just about particular transgressions on the part of particular people, but a systemic problem."

The investigation is the most serious corruption crisis to face Cuomo's administration, which since its inception in 2011 has pointed to the words printed on a custom-made pin given to all staffers: performance, integrity and pride. Not only is Percoco, who left the administration in 2015 to take a job as senior vice president for the Madison Square Garden Co., a longtime friend of Cuomo — once described by the governor as "my father's third son" — the case touches on two of his hallmark upstate initiatives: the Buffalo Billion and nanotechnology-driven development.

In a statement, Cuomo said he learned of the charges facing "a former member of my administration" and others Thursday morning.

"If the allegations are true, I am saddened and profoundly disappointed," he said. "I hold my administration to the highest level of integrity. I have zero tolerance for abuse of the public trust from anyone. If anything, a friend should be held to an even higher standard. Like my father before me, I believe public integrity is paramount. This sort of breach, if true, should be and will be punished."

Cuomo added that SUNY has "rightly relieved" Kaloyeros from his duties and has suspended him without pay, effective immediately.

The complaint alleges that Percoco, from January 2012 until 2014 and then again in 2015, used his official position as executive deputy secretary to the governor to seek bribes from executives at companies with business before the state. Those bribes at times came through an intermediary, bank accounts and a shell company set up by Howe, a lawyer and lobbyist who first met Percoco and Cuomo while working for the future governor's father, the late Gov. Mario Cuomo.

The complaint alleges that Howe arranged for more than $315,000 in bribe payments to go to Percoco and his wife, Lisa Toscano-Percoco, who is not named in the complaint. Howe and Percoco repeatedly referred to the alleged bribe money as "ziti," the complaint says — a code word for money apparently lifted from an episode of HBO's mafia drama "The Sopranos," Bharara said.

Howe began cooperating with prosecutors in June, according to the complaint, and pleaded guilty to several federal crimes on Wednesday. The information provided by Howe has been corroborated by emails, documents and other witness statements, the complaint says.

"Mr. Howe has accepted responsibility for his actions and will testify truthfully if he is called upon," Howe's attorney Richard Morvillo said Thursday.

Percoco and Kaloyeros appeared in federal court Thursday afternoon in Manhattan; neither offered a plea. They were released on bond.

"This prosecution, based on information provided by someone of utterly unreliable credibility, seeks to criminalize conduct that the Supreme Court of the United States recently found to be not unlawful," Percoco's attorney Barry Bohrer said in a statement, referring to the high court's recent decision in a case involving former Virginia Gov. Bob McDonnell. "It is an overreach of classic proportions. Mr. Percoco performed services honestly and within the bounds of the law at all times."

Neither Kaloyeros nor SUNY Polytechnic offered comment.

The federal complaint involves other players and projects that have been reported for months to be central to Bharara's investigation, including Ciminelli, a prominent developer who secured work on part of Cuomo's Buffalo Billion program; Aiello, president of Syracuse-based COR Development, a company that won contracts for nanotechnology development upstate; and Peter Galbraith Kelly Jr., who is in charge of external affairs and government relations for Competitive Power Ventures, which is building an Orange County power plant

But Percoco sits at the center of the complaint.

Federal investigators' interest in the former gubernatorial aide came to light in late April, when the administration acknowledged that it had received a wide-ranging subpoena from Bharara's office seeking information about actions taken by a half-dozen current or former members of the administration, including Percoco, that might have benefited two dozen companies that had received state funds or other benefits.

Several of those companies were clients of Howe, a lobbyist and consultant who is another longtime Cuomo associate who formerly ran a Washington, D.C.-based lobbying branch of the Albany-based law firm Whiteman Osterman & Hanna. Like Percoco, Howe not only worked with Cuomo during his father's administration, he worked with him at the federal Department of Housing and Urban Development, which Cuomo was secretary of, in the 1990s.

After the subpoena was revealed, Howe was fired and the lobbying shop was shuttered. Howe also ran a consulting firm called Potomac Strategies, another company mentioned in the federal subpoena given to the Cuomo administration, out of his suburban Washington home, though its clients remain unknown.

In the wake of the subpoena, it emerged that Percoco had taken between $50,000 and $75,000 in consulting payments in 2014 from two upstate development companies, CHA Consulting and COR Development, during a seven-month period in which he managed Cuomo's re-election campaign. (COR has denied it ever paid Percoco; last month, it sued Howe for what COR said was an unpaid $85,000 loan it made to him in the summer of 2015.) Those payments were noted in Percoco's 2014 financial disclosure form filed with the state Joint Commission on Public Ethics.

Percoco left the executive chamber for a brief time to manage Cuomo's 2014 re-election campaign before rejoining in 2015. Bharara's complaint says that Percoco, in July 2014, misled an assistant counsel in the Cuomo administration about the nature of his expected work while he was away from state government, stating that he expected to work for a law firm on labor issues, and only on matters before municipal governments.

Cuomo has said that while Percoco told him he might take private clients during his tenure as campaign manager, the governor never subsequently inquired if his aide did so, or who they were.

The complaint alleges that COR Development officials and those from Buffalo developer LPCiminelli paid bribes to Howe in exchange for his influence working as a paid representative for SUNY Polytechnic and Kaloyeros, who had control over upstate development projects funded by the Fort Schuyler Development Corp., a nonprofit development arm that gets substantial state funding.

Howe worked with Kaloyeros to rig bids in favor of the developers, the federal complaint alleges, issuing requests for proposals (RFPs) that were tailored for the favored companies and virtually precluded competing bids.

Howe was retained by the SUNY Research Foundation to work as a consultant for SUNY Poly and Fort Schuyler at a rate of $25,000 a month, according to the complaint, and worked twice a week at an office near Kaloyeros at the school's sleek headquarters off Fuller Road in Albany.

Despite being a lobbyist, Howe even had his own parking space.

According to the complaint, Howe shared a draft copy of the RFP for a major Syracuse nanotech project with COR executives and allowed company officials to tailor the RFP to meet the needs of the company. For instance, a requirement that bidders provide an audited financial statement was amended at COR's behest.

LPCiminelli was provided information about the RFP for the major Riverbend project in Buffalo, a hub for high-tech and green manufacturing that's a major part of the Buffalo Billion initiative. Similarly, the RFP was tailored to the firm's specifications with a requirement that the chosen developer must have "over 50 years of proven experience," the complaint says. It was later changed to 15 years.

Both COR and LPCiminelli won the contracts, which were worth $105 million and $750 million respectively, Bharara said. Prior to the Fort Schuyler bids, the companies and their officials made heavy contributions to Cuomo's reelection campaign that were meant to further curry favor, the complaint says.

In another aspect of the alleged schemes, officials at COR Development paid tens of thousands of dollars to Percoco — using Howe as a pass-through to conceal the payments — in exchange for official favors that included reversing a state decision that would have forced the company to enter into a costly "labor peace agreement"; freeing up a backlog of state funds that had been promised to the developer; and securing a $5,000 raise for Steven L. Aiello, the son of COR president Steven F. Aiello. The younger Aiello held a position in the governor's office until earlier this year.

Both the senior Aiello and another COR official, Joseph Gerardi, were charged Thursday. In addition to Louis Ciminelli, two other LPCiminelli officials, Michael Laipple and Kevin Schuler, were charged.

Ciminelli's attorney maintained his client's innocence.

"Our clients have committed no crimes," attorney Daniel Oliverio said by phone. "The allegations that they have are baseless, and we intend to vigorously defend these cases fast as we can."

Terrence Connors, Schuler's attorney, also said his client is innocent. "Kevin is prepared to defend his charges," Connors said by phone.

An attorney for Laipple could not be reached for comment.

Albany attorney Stephen Coffey, who is representing Aiello and Gerardi, declined to comment. The complaint alleges that both men in June made false statements to federal law enforcement officials about the matters.

At his news conference Thursday, Bharara said the investigation — like others, as is general practice — remains open. Asked if Cuomo still can receive a "clean bill of health," the prosecutor noted that the complaint does not detail any allegations of wrongdoing or misconduct against the governor.

Bharara was asked if it was realistic for people to believe that the governor would have no knowledge of the actions alleged to have been committed by two men he had known for decades.

"It's not my job to comment on what is realistic or not realistic," he said.

To read the complaints please visit Capitol Confidential.

mhamilton@timesunion.com • 518-454-5449 • @matt_hamilton10