Mr. Esposito retired as Brooklyn Democratic leader in late 1983, but remained one of the state's most powerful behind-the-scenes politicians until his indictment and conviction in 1987 for having given an illegal gratuity to another one-time power broker, former Representative Mario Biaggi of the Bronx. He was given a suspended two-year prison term and fined $500,000.

In the fall of 1985, during an FBI investigation into the Genovese crime family, Esposito was heard speaking with gangster and lifelong friend Federico "Fritzy" Giovanelli. This led to a direct wiretap of Esposito's phone. Later in 1985, Esposito was recorded speaking with Bronx Rep. Mario Biaggi, claiming to have "made" 42 judges in Brooklyn. Esposito was found to be involved in bribery with Biaggi, having given him a Florida vacation in return for government assistance in a financially troubled drydock firm that owed Esposito's insurance company $280,000. Esposito was found guilty in 1988, put on probation, sentenced to community service and fined $500,000. Biaggi was sent to jail and lost his seat in Congress. In 1989, Esposito faced additional charges of bribery and tax fraud; however a federal judge determined Esposito was too sick and elderly to maintain a proper defense.