The People, Respondent-Appellant,v.V. Reddy Kancharla, Appellant-Respondent.BriefN.Y.March 26, 2014To be Argued by: PAUL SHECHTMAN (Time Requested: 30 Minutes) New York County Clerk’s Indictment No. 5248/08 Court of Appeals of the State of New York THE PEOPLE OF THE STATE OF NEW YORK, Respondent, – against – V. REDDY KANCHARLA, Defendant-Appellant. BRIEF FOR DEFENDANT-APPELLANT V. REDDY KANCHARLA PAUL SHECHTMAN ZUCKERMAN SPAEDER LLP 1185 Avenue of the Americas, 31st Floor New York, New York 10036-2603 pshechtman@zuckerman.com Tel.: (212) 704-9600 Fax: (212) 704-4256 – and – WILLIAM A. WETZEL HARRIS BEACH PLLC 445 Hamilton Avenue, Suite 1206 White Plains, New York 10601 wwetzel@harrisbeach.com Tel.: (914) 298-3004 Fax: (914) 683-1210 Attorneys for Defendant-Appellant TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii QUESTIONS PRESENTED ...... ...................... ............................... ........................... 1 PROCEDURAL HISTORY ............... ............................................... ........................ 1 INTRODUCTION ................................................................. .................................... 2 THE TRIAL EVIDENCE ....... .................... ............................................................... 3 1 . The Mix Design Scheme ................................. ...................................... 4 2. The Field Tests Scheme ........................................................................ 6 3. The CompressivelFlexural Strength Alterations Scheme ..................... 7 4. The Steel Inspections Scheme ............................................................... 8 5 . The Certified Inspectors Scheme ................................................ .......... 8 ARGUMENT ............................................................................................................. 9 POINT ONE: POINT TWO: THE SPILLOVER PREJUDICE FROM THE ENTERPRISE CORRUPTION CHARGE DENIED MR. KANCHARLA A FAIR TRIAL ON THE REMAINING COUNTS ............................................. 9 THERE WAS INSUFFICIENT EVIDENCE THAT MR. KANCHARLA PARTICIPATED IN A SCHEME TO DEFRAUD RELATING TO STEEL INSPECTIONS ...... 1 9 A. Factual Background ............................................. .................... ....... ............... 1 9 1 . DASNY .................................... ............. ........... ........................ . .......... 1 9 2. Tishman ............................................................................................... 24 1 3 . Silverstein .................................................................................. .......... 25 B. Discussion ........................................................................................ .............. 26 POINT THREE: THE COURT ERRED IN EXCLUDING EVIDENCE SUPPORTING MR. KANCHARLA' S DEFENSE ON THE MIX DESIGN COUNTS ........................ 29 A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 1 . The Proof Against Mr. Kancharla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 0 2 . Intent to Defraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 B. The Excluded Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 1 . Industry Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 2 . Quick-Turnaround-Time Evidence ..................................................... 36 C. Summary ........................................................................................................ 39 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 11 TABLE OF AUTHORITIES PAGE CASES In re Adler, Coleman Clearing Corp. , 1998 WL 5 5 1 972 (Bankr. S.D.N.Y.) .......... 3 8 People v. Baghai-Kermani, 84 N.Y.2d 525 ( 1 994) ................................................. 1 1 People v. Castillo, 47 N.Y.2d 270 ( 1979) .......................................................... 17, 1 8 People v. Colletti, 73 A.D.3d 1 203 (2d Dept. 20 1 0) ............................................... 1 1 People v. Gilman, 28 Misc.3d 1 2 1 7(A) (S. Ct. N.Y. Cty. 20 1 0) ............................ 3 5 People v. Kisina, 1 4 N.Y.3d 1 53 (20 1 0) ............................................................ 29, 34 People v. Morales, 20 N.Y.3d 240 (20 12) ................................................... 1 0, 1 1 , 1 8 People v. Rayam, 94 N.Y.2d 557 (2000) ........................................................... 28-29 United States v. Bruno, 3 83 F.3d 65 (2d Cir. 2004) ................................................ 1 2 United States v. Christo, 6 1 4 F.2d 486 (5th Cir. 1 980) ........................................... 3 5 United States v. D e Cavalcante, 440 F.2d 1 264 (3d Cir. 1 97 1) .............................. 1 6 United States v. Guiliano, 644 F.2d 85 (2d Cir. 1 98 1) ............................................ 1 8 United States v. Pelullo, 14 F.3d 8 8 1 (3d Cir. 1994) .............................................. 1 4 United States v. Riley, 550 F.2d 233 (5th Cir. 1977) .............................................. 3 5 United States v. Rooney, 37 F.3d 847 (2d Cir. 1 994) ................................. 1 2, 1 3 , 1 6 United States v. Seelig, 622 F.2d 207 (6th Cir. 1 980) ............................................. 3 5 United States v. Tellier, 8 3 F.3d 5 7 8 (2d Cir. 1 996) ............................................... 1 1 United States v. Wittig, 2005 WL 122793 8 (D. Kan.) ............................................ 3 5 111 OTHER AUTHORITIES Barker & Alexander, Evidence in New York State and Federal Courts, §2.2 ........ 3 8 IV QUESTIONS PRESENTED 1. Should a new trial be granted because of the prejudicial spillover from the now dismissed Enterprise Corruption charge? 2. Was the evidence legally sufficient to prove that Mr. Kancharla engaged in a scheme to defraud relating to steel inspections (Count 27)? 3. Did the trial court err in excluding evidence that would have supported Mr. Kancharla' s defense on the mix design counts? PROCEDURAL HISTORY In October 2008, a New York County grand jury returned a 109-count indictment against appellant V. Reddy Kancharla, Testwell Laboratories, Inc. ("Testwell") and six other individuals. At the heart of the indictment was the allegation that Mr. Kancharla was the leader of the "Testwell Group," a "criminal enterprise" whose purpose was "to make money for its members by engaging in . . . criminal schemes relating to the testing of building materials." Four of the defendants -- Mr. Kancharla, Vincent Barone, Wilfred Sanchez and Testwell -- went to trial before a jury on a modified indictment that contained 50 counts. (A-6-A-65).1 After a nine-week trial and ten days of jury deliberations, Mr. Kancharla was convicted of 15 counts -- the Enterprise Corruption charge, "A" refers to pages in the Appendix filed with this brief; "Tr." refers to the trial transcript. 1 1 3 false filing charges, and one scheme to defraud charge. On May 26, 20 1 0, he was sentenced to 7 to 2 1 years ' imprisonment. 2 On appeal, the Appellate Division, First Department, vacated Mr. Kancharla' s conviction for Enterprise Corruption and two of the false filing convictions. It affirmed the remaining convictions but reduced Mr. Kancharla 's sentence to 16 months ' to 4 years ' imprisonment. On December 27, 20 1 2, Justice Catterson granted Mr. Kancharla leave to appeal his remaining convictions to this Court. (A-600). Mr. Kancharla is at liberty on bail.3 INTRODUCTION Reddy Kancharla was convicted at trial of being the leader of the "Testwell Group," "a criminal enterprise" whose purpose was "to make money for its members by engaging in criminal schemes relating to the testing of building materials." In a stinging opinion, the First Department reversed the Enterprise 2 Barone was convicted of 1 3 counts and sentenced to 5 1 /3 to 1 6 years ' imprisonment. Sanchez was acquitted of all charges. Testwell was convicted of all 43 counts that were submitted to the jury. 3 The First Department also vacated Barone ' s Enterprise Corruption conviction and reduced his sentence to 1 6 months to 4 years, and Justice Catterson granted him leave to appeal as well. Except for the sentence reductions and the reversal of the two false filing charges on which it was unanimous, the First Department was divided (4 to 1 ) on the other issues. F our justices voted to vacate the Enterprise Corruption convictions (in an opinion by Justice Catterson from which Justice Manzanet-Daniels dissented), and four justices voted to affirm the remaining convictions (in an opinion by Justice Manzanet-Daniels from which Justice Catterson dissented). (A-60 1 -A-645). 2 Corruption conviction, fmding that "the evidence necessary to establish [its] elements . . . was wholly missing from the People ' s proof." (A-6 1 0). The court, however, left the remainder of Mr. Kancharla' s convictions intact (except for two false filing counts). The thrust of this appeal is that those convictions should be reversed. As discussed below, the prejudicial spillover from the Enterprise Conviction count inevitably tainted the jury ' s consideration of the remaining counts. No jury could segregate the proof and fairly assess Mr. Kancharla' s culpability on the remaining counts when it was repeatedly told that he was the head of a criminal enterprise which jeopardized the safety of New York City -- an enterprise that we now know did not exist. For that reason and others, Mr. Kancharla is entitled to further relief. THE TRIAL EVIDENCE In 1 995, Reddy Kancharla joined Testwell Craig, a materials testing company headquartered in Ossining, New York, as its laboratory director. (A-223- A-224). Three years later, he acquired the company and renamed it Testwell Laboratories. (A-224). Under Mr. Kancharla' s leadership, Testwell grew rapidly and provided a wide variety of services, including concrete testing and steel testing. (A-227-A-243). Prior to the indictment, Testwell was considered the preeminent materials testing laboratory in the New York region. 3 The indictment charged five separate criminal schemes involving concrete and steel testing. Mr. Kancharla was named in three of them: the "Mix Design Scheme," the "Steel Inspections Scheme," and the "Certified Inspectors Scheme." He was not named in the "Field Tests Scheme" or the "CompressivelFlexural Strength Alterations Scheme." The five schemes are described below. 1. The Mix Design Scheme A mix design is a recipe for concrete that sets out the proportions of cement, stone, sand and other ingredients needed to produce one cubic yard of concrete having the strength and other characteristics called for in the project specifications. The New York City Building Code calls for a testing laboratory to prepare a "a mix design report" for any concrete that is intended to support a load of more than 3 ,000 pounds per square inch ("psi"). See (A-464-A-47 1). The purpose of the report is to demonstrate that the recommended mix will produce concrete of the specified strength. The report is transmitted to the structural engineer on the project for his review before a concrete contractor can use the recipe to produce the concrete in bulk. (A- 1 19-A- 12 1). The Building Code sets out three approved methods for preparing a mix design. Of the three, the "preliminary tests method" figured most prominently at trial. That method requires a laboratory to design four different mixes, each 4 with a distinct water-cement ratio, and to test four cylindrical specimens of each mix. (A-467). A mix is acceptable if it produces concrete that, after hardening for 28 days, has an average strength that is 25% higher than the required strength. (A-467; see also A- 1 65 , A- 1 84-A- 1 86).4 The standard Testwell mix design report appears to show compliance with the preliminary tests method. 5 The proof, however, showed that Testwell did not employ the preliminary tests method in preparing its standard reports. Instead, a Testwell employee, using his professional training and experience, created a recipe that he believed would meet the project specifications. The employee then used a computer program to generate expected test results. (A- 1 48-A- 1 5 1 , A- 1 96- A-200, A-208-A-2 1 0). Thus, the reported results were the product of a computer algorithm, and not of actual testing. 6 At trial, Mr. Kancharla acknowledged that Testwell ' s mix design reports did not comply with the Building Code but maintained that he lacked an 4 The strength of a mix is determined by applying pressure to the cylinders until they break. (A-l 00). 5 For example, People ' s Exhibit 54, a mix design report for 4,000 psi concrete for the Yankee Stadium project, appears to indicate that Testwell prepared four different mixes and conducted compressive strength test on each mix before recommending Mix No. 3. See A-597-A-598. 6 During the indictment period, most of the mix designs were created by Edward Porter. Porter pleaded guilty to one felony count of filing a false instrument, was sentenced to a conditional discharge and forfeited $ 1 00,000. 5 intent to defraud. See Point Three infra. The jury convicted him of 1 3 mix design counts. 7 2. The Field Tests Scheme The second scheme alleged in the indictment was the Field Tests Scheme. Under the Building Code, a field inspector is required to perform several rudimentary tests on concrete as it is poured from the truck. In one test, for example, the technician uses a cone to measure the consistency of the concrete. (A- 1 42-A- 1 45). The People ' s theory here was that a Testwell technician on the Yankee Stadium project failed to perform some of the required field tests, but that Testwell reported results as if the test had been performed. (A- 1 56-A- 1 62). Someone at Testwell ' s Ossining headquarters, the People argued, made up the results and disseminated them to the project 's engineers. Mr. Kancharla was not charged in these counts, and there was no proof that he was involved. 8 7 The mix design counts were class E felonies: if the mix design report at issue was filed with a public agency, the charge was Offering a False Instrument for Filing in the First Degree, Penal Law § 1 75.3 5 ; if it was submitted to a private entity, the charge was Falsifying Business Records in the First Degree, Penal Law § 175. 10. 8 Counts 17 through 1 9 charged crimes relating to the Field Tests Scheme. Testwell was convicted of all three counts. Alfredo Caruso, who was the head of Testwell ' s Concrete Department, allegedly directed the Field Tests Scheme; his trial was severed from that of the other defendants and has not yet been scheduled. 6 3. The CompressivelFlexural Strength Alterations Scheme Under the Building Code, a laboratory is required to test the strength of the concrete produced by the concrete contractor. (A-I03-A- 1 1 5). To this end, a field inspector prepares a series of cylindrical specimens as the concrete is poured from the truck at the job site. The cylinders are then transported to the laboratory where the concrete is allowed to harden. They are then tested at specified intervals -- �, 7 days, 1 4 days and 28 days -- by applying pressure until they break. The People ' s proof at trial showed that compressive strength test results for more than 3 ,000 cylinders on 1 1 9 different projects were altered before the results were sent out for review. (A- 1 75-A- 1 76). The People ' s theory was that results were changed to eliminate anomalous outcomes so as to keep the projects ' engineers from asking questions. (A- 1 90)("[i]t may have raised an eye . .. depend[ing] on . . . the number of anomalies"). 9 Mr. Kancharla was not charged in the CompressivelFlexural Strength Alterations Scheme, and there was no proof that he was involved. 10 9 A typical anomaly would be that the result of a 7-day test (�, 4660 psi) was higher than the result of a 1 4-day test (�, 4250 psi). That should not occur, since concrete hardens with age. The altered results would reverse the two numbers and thereby eliminate the anomaly. 10 The charges here were contained in Counts 20 through 23 and 26; Barone and Testwell were convicted of those counts. Caruso still faces trial for altering compressive strength test results. 7 4. The Steel Inspections Scheme The Steel Inspections Scheme centered on inspections that two Testwell inspectors performed in 2007 for the Dormitory Authority of New York ("DASNY") at a South Carolina steel fabrication plant. The People alleged that the inspectors falsified their reports and that Testwell double-billed for their work. (During the same time period, the two inspectors also worked on projects for Tishman Construction and Silverstein Developers.) Mr. Kancharla was convicted of only one of the 22 steel inspections charges. 1 1 In Point Two below, we demonstrate that the evidence was insufficient to support that conviction. 5. The Certified Inspectors Scheme The fifth scheme was the Certified Inspectors Scheme. The proof here showed that Testwell had wrongly certified that two of its employees were qualified to perform concrete field testing on a School Construction Authority ("SCA") project. The two employees had worked one day each, and the SCA was billed $630.08 for their services. (A-354-A-3 55). Mr. Kancharla was found not to have committed this pattern act.I2 11 Testwell was convicted of all 22 steel inspection charges, and Barone was convicted of seven. 12 Because venue for this alleged false filing lay in Queens County, it was charged as an Enterprise Corruption Pattern Act (pattern Act 53) but not as a separate count. The jury found that Testwell and Barone had committed this pattern act. 8 ARGUMENT POINT ONE THE SPILLOVER PREJUDICE FROM THE ENTERPRISE CORRUPTION CHARGE DENIED MR. KANCHARLA A FAIR TRIAL ON THE REMAINING COUNTS The First Department dismissed Mr. Kancharla' s Enterprise Corruption conviction in an opinion as strongly worded as any that court has issued. The majority wrote this : In our view, the evidence necessary to establish the elements of enterprise corruption was wholly missing from the People ' s proof. Indeed, the entire theory of the People ' s case is made of conjecture, surmise and innuendo rather than proof beyond a reasonable doubt Simply put, the People failed to introduce any evidence of leadership structure, overall planning of the criminal enterprise, or any communications between Kancharla, Barone, and any of the Testwell employees in furtherance of [ a] criminal enterprise. (A-6 10-A-6 16); see also A-6 16 (" [i]n the[ir] brief on appeal and at oral argument, the People offered a series of wholly unsupported arguments and significant misrepresentations of the record to sidestep the absence of proof on the criminal enterprise issue,,). 13 13 In another portion of its opinion, the majority wrote : Defendant Kancharla asserts, and we concur, that the People failed to introduce any evidence that Kancharla knew that anyone at Testwell altered the results from the compressive tests or that the field test results from the Yankee Stadium Project were fabricated. Similarly, the 9 Although four justices found that the Enterprise Corruption count was built on "innuendo rather than proof," the court rejected Mr. Kancharla' s claim that if that count failed, the remaining counts should be retried because of prejudicial spillover. It did so in one conclusory sentence. See A-633 (" [t]here is nothing in any of the acquittals that would undermine the sufficiency or weight of the evidence supporting the convictions,,). 14 As discussed below, that conclusion is wrong. Especially in light of this Court' s recent decision in People v. Morales, 20 N.Y.3d 240 (20 1 2), the "spillover effect [from the reversal of the Enterprise Corruption count] requires reversal and a new trial on the [remaining] offenses." Id. at 250. Morales teaches that reversal of a defendant' s conviction on a compound offense (there, a terrorism charge) will require reversal of any People failed to introduce evidence that Kancharla knew that there was any problem with the inspection reports for the John Jay Project or that the certifications submitted to the School Construction Authority were inaccurate. There is also no evidence that Kancharla discussed any alleged illegal activity with anyone at Testwell but for an extremely brief exchange sometime in 2004 . . . concerning the mix design reports. Absent this proof, the enterprise corruption count cannot stand. (A-6 1 4-A-6 1 5). 1 4 Justice Catterson dissented on the point. See A-626 (" [i]n my opinion, any viable defenses that Kancharla . . . had to the [remaining] crimes . . . were consumed by the vision conjured by the People of Testwell as a continuing criminal enterprise"). 1 0 remaining convictions on the underlying offenses (there, manslaughter, weapons possession, and conspiracy to commit a gang assault) if there is a "reasonable possibility that the jury' s findings were prejudicially influenced." Id. Although Morales arose in a new context, its lesson is an established one. Cases in this State and elsewhere have recognized that the potential for prejudicial spillover in such circumstances is great. See, �, People v. Colletti, 73 A.D.3d 1 203 , 1 207-08 (2d Dept. 20 1 0)(reversal of Enterprise Corruption conviction required new trial on predicate offenses where "various offenses of which the defendant was convicted [were] factually intertwined . . . and the references to organized crime . . . pervade[d] the record"); United States v. Tellier, 83 F.3d 578 , 5 82 (2d Cir. 1 996)(" [i]f the RICO counts fail, prejudice on other counts is highly likely"). As this Court has emphasized, the determination of whether a reversal of one count for insufficient evidence requires reversal of convictions on other jointly tried counts "is a question that can only be resolved on a case-by-case basis." People v. Baghai-Kermani, 84 N.Y.2d 525 , 532 ( 1 994). Although case-by case analysis' is required, the Court of Appeals for the Second Circuit has formulated a useful approach. That court looks to three principle factors : first, it asks whether the evidence introduced on the reversed count would have been admissible on the remaining counts; second, it considers whether the evidence on the reversed count had a "decidedly pejorative connotation that was of the sort to 1 1 arouse the jury" ; and third, it assesses the strength of the government ' s case on the remaining counts. See United States v. Rooney, 3 7 F.3d 847, 855 (2d Cir. 1994). It is "in those cases in which evidence is introduced on the invalidated count that would otherwise be inadmissible on the remaining counts, and this evidence is presented in such a manner that tends to indicate that the jury probably utilized [it] in reaching a verdict on the remaining counts, that spillover prejudice is likely to occur." Id. at 856 (emphasis in original). Applying that test here requires a reversal of Mr. Kancharla' s remaining convictions. Plainly, without the Enterprise Corruption charge, Mr. Kancharla 's trial would have been far different. As Justice Catterson noted below, "the enterprise corruption count allowed the People to join five separate criminal schemes into one prosecution." (A-624). Mr. Kancharla was not charged in two of those schemes -- the Compressive Strength Alterations Scheme and the Field Tests Scheme. And a third scheme -- the Certified Inspectors Scheme -- was not venued in New York County. It was charged only as a pattern act, and not a substantive crime. See supra at 8 n. 1 2. Thus, Mr. Kancharla 's jury heard a mountain of evidence that would have been inadmissible had there been no Enterprise Corruption charge. See United States v. Bruno, 3 83 F.3d 65 , 9 1 (2d Cir. 2004)(reversal of the RICO conviction "requires that we vacate [the] false-statement conviction given the 1 2 enormous amount of prejudicial spillover evidence admitted to prove the RICO enterprise"). Without the Enterprise Corruption count, the jury would not have learned that someone at Testwell had altered test results on more than 3 ,000 cylinders on 1 1 9 different projects, including some of New York City ' s most iconic buildings. Nor would it have learned that someone at Testwell had falsely created field test results for the construction of the new Yankee Stadium. And it would not have learned that Testwell had wrongly certified that two of its employees were qualified to perform concrete testing on a School Construction Authority ("SCA") project. Although none of this evidence involved violent acts, all of it had a "decidedly pejorative connotation." Rooney, 3 7 F.3d at 855. It implicated the safety of major construction projects in New York City. One need only read the prosecutor' s summation to confirm the point. In her summation, the prosecutor told the jury that on the Yankee Stadium project, an inspector "didn't bother to make the [required] cylinders" but "casually and blatantly skip[ped]" those tests because he was "so accustomed to [Testwell ' s] lack of supervision" (A-392- A-393); that the Compressive Strength Alterations Scheme "created a crisis of confidence in . . . structural safety" (Tr. 5546); that the affected projects included "schools, hospitals . . . every type of building we know" and involved "all of Manhattan and out of Manhattan" (Tr. 5550, 5689); and that the SeA, to which an 1 3 inaccurate certificate had been submitted, was "responsible for making sure that [our] schools are inspected appropriately" (Tr. 56 1 5- 1 6). Any juror who heard such arguments could not have helped but be alarmed. Nor is this a case in which the jury could segregate the Enterprise Corruption proof from that on the remaining counts. See United States v. Pelullo, 1 4 F.3d 88 1 , 898 (3d Cir. 1 994)(" [i] f the evidence was distinct, it is likely that there was no prejudicial spillover effect"). References to the "Testwell Group" pervaded the record and inevitably poisoned the jury 's consideration of the other counts. Again, the prosecutor' s summation proves the point. The jury was told that "fraud [was] thoroughly entrenched at Testwell" (A-373); that "fraud became the master plan" (A-3 74); that "fraud [was the] deliberate business strategy" (A-375) ; that fraudulent representations [were Testwell ' s] gravy train" (Tr. 5503) ; that "every engineer abides by [the City Code] . . . except the ones at Testwell" (A-3 80); and that "at Testwell a PE' s license was . . . a license to steal" (A-3 83). 1 5 1 5 The same themes were sounded in the People ' s opening. The jury was told that "the defendants falsified thousands of concrete and steel test reports that assured the integrity of buildings" ; that theirs was "an intricate web of deceit at nearly every stage of the inspection process" ; that "the frauds perpetrated were ongoing and widespread"; and that "the fraud at Testwell continued from the phony mix design test reports to out to the field and then back to the lab where the defendants continued to phony-up reports and pass them off as legitimate, extracting millions of dollars [in] undeserved fees from private and public victims." (Tr. 1 6, 1 8 , 20, 3 8). 1 4 Indeed, the prosecutor worked feverishly to ensure that the jurors would not segregate the proof. At the very outset of her summation, she told the jury this : Fraud so thoroughly entrenched at Testwell that you can see the pattern repeated over and over literally for years . . . . Over ten years of ownership Reddy Kancharla and his confederates at Testwell used the enormous trust placed in them by the public and private builders and structural engineers alike to provide the illusion of inspection while cutting comers at every opportunity. Every false mix design test report, and every every shoddy steel inspection report and every lie told to cover up these cut comers by his trusted lieutenants Vincent Barone and Wilfred Sanchez benefited Testwell and its bottom line. And these frauds, ladies and gentlemen, were not accidental, coincidental or separate or disconnected. (Tr. 5487-88)(emphasis added); see also A-4 1 0 ("[t]hese crimes work together [and] ha[ve] a cadence, they are not ad hoc or occasional and they all conform to a pattern of criminal activity" (emphasis added); Tr. 5627 ("the fraud in [Testwell ' s] concrete and steel divisions were simultaneous and layered and that simultaneous institutionalized fraud is .. . obvious"). 16 On this record, it blinks reality to 16 The prosecutor also told the jury that all five schemes followed the same script, the "Testwell Techniques of the Criminal Enterprise" book: Let ' s look at the pattern and the common techniques and we've talked about the book of the trial . Let' s look at the book of the fraud and we' ll call this . . . Testwell, the Techniques of the Criminal Enterprise. 15 conclude that the Enterprise Corruption charge did not taint the jury's consideration of the others. See United States v. De Cavalcante, 440 F.2d 1 264, 1 276 (3d Cir. 1 97 1 )("evidence pertaining to each count was not, and probably could not have been, segregated at the trial and in the minds of the jurors"). Worse still, by charging a criminal enterprise, the prosecution was able to portray Mr. Kancharla as its leader. He supposedly "trained his people in the fine art of half-truth, fake respons[es] and belated discounts for work done incompetently or not done at all," (A-378), even though there was no proof of such training. He supposedly "fueled" the Field Tests Scheme in order to make Testwell "the most lucrative testing lab in New York City," (A-3 89), even though there was no proof that he knew of it. He supposedly "delegated" the "details of the Compressive Strength Alterations Scheme to others," even though there was no proof of delegation. And he supposedly "built [Testwell] on a culture of fraud." (A-3 78). When a defendant is charged with being the leader of a non-existent criminal enterprise, the possibility of his receiving a fair trial on the underlying offenses is remote. See Rooney, 3 7 F.3d at 857 (" [i]n light of the government' s pejorative depiction of [the defendant] based on the . . . evidence" on the reversed count, the remaining counts could not stand). (Tr. 5627). The prosecutor also displayed a timeline showing that many of the alleged pattern acts making up the five schemes occurred contemporaneously. (Tr. 5623-26). 1 6 Finally, this is not a case in which the proof on the remaining charges was strong. As discussed in Point Two, there was no proof that Mr. Kancharla was involved in the Steel Inspections Scheme, yet he was convicted of one Scheme to Defraud count. His conviction on that count can be attributed only to spillover prejudice from the evidence admitted on the Enterprise Corruption count. And as discussed in Point Three, Mr. Kancharla had a viable defense to the mix design counts -- that he lacked the intent to defraud -- but the oft-repeated refrain that Testwell was a fraud mill prevented the jury from properly assessing it. That drumbeat deafened the jury to the distinction between a Building Code violation (which was committed) and a criminal fraud (which was not), and thereby deprived him of a fair trial. In this respect, this case recalls People v. Castillo, 47 N.Y.2d 270 ( 1979). There, the Appellate Division reversed the defendant' s convictions relating to one burglary, finding that there was a reasonable likelihood of misidentification, but left in place his conviction on a second. On reviewing the matter, the Court held that that "limited remedy was insufficient." It wrote this : [T]he joinder of the [second incident] with the counts [from the first incident] that must now be viewed as based entirely upon a misidentification worked ineradicable prejudice on Castillo ' s right to a fair trial on the [second incident]. That prejudice was preordained by the very tenor of defendant' s trial, the product of an assiduous effort by the prosecutor to orchestrate the evidence relevant to both incidents into a single theme : 1 7 that Castillo was engaged in a pattern of criminal activity . . . . Thus, the trial strategy blurred the separate features of each incident to a point where it cannot be said that the proofs relating to one episode did not supplement deficiencies in the proof on key elements of the other. Id. at 275. The same is true here : it cannot be said that the proof relating to the Enterprise Corruption count did not supplement deficiencies in the proof on the other counts. More than 30 years ago, Judge Jon Newman noted that " [o]ne of the hazards of a RICO count is that when the Government is unable to sustain a conviction under this statute, it will have to face the claim that the prejudicial effect of tarring a defendant with the label of 'racketeer' tainted the conviction on [the] otherwise valid count[s]." United States v. Guiliano, 644 F.2d 85 , 89 (2d Cir. 1 98 1 ). Enterprise Corruption, of course, is New York' s version of the RICO statute. Here, Mr. Kancharla was falsely tarred as the leader of a corrupt enterprise that endangered public safety in New York City. As a result, there is a "reasonable possibility that the jury 's findings [on the remaining counts] were prejudicially influenced," Morales, 20 N.Y.3d at 250, and a new trial of those counts should be ordered. 18 POINT TWO THERE WAS INSUFFICIENT EVIDENCE THAT MR. KANCHARLA PARTICIPATED IN A SCHEME TO DEFRAUD RELATING TO STEEL INSPECTIONS Reddy Kancharla was convicted of one of the 22 charges involving the Steel Inspections Scheme (Count 27). 1 7 That count alleged a scheme to defraud the Dormitory Authority of New York ("DASNY"), Tishman Construction and Silverstein Developers. The gist of the charge was that Testwell had "double billed" those entities for work performed by its inspectors at a South Carolina plant. As discussed below, however, the evidence was legally insufficient to support the conviction. I 8 A. Factual Background 1 . DASNY In early April 2007, two Testwell inspectors -- Clyde Finklea and Tommy Dowd -- began inspecting steel that was being fabricated at Owen Steel in South Carolina for the John Jay College expansion, a DASNY project. Both Finklea and Dowd were certified steel inspectors who lived in South Carolina. 1 7 Although the issue was fully briefed, neither the majority nor the dissent below addressed the sufficiency of the evidence on Count 27. 1 8 The other Steel Inspections Scheme counts charged Mr. Kancharla with larcenies from DASNY (Count 28), Tishman (Count 42) and Silverstein (Count 46) and with submitting false inspection reports and/or false invoices to those entities (Counts 29 through 40, DASNY; 43 through 45 , Tishman; and Counts 47 and 48, Silverstein). 19 (A-96, A-295). At that time, Finklea was also inspecting steel that Owen was fabricating for the Bank of America Tower at One Bryant Park, a Tishman project. On July 3 , 2007, DASNY requested a meeting with Testwell to discuss its concerns about the inspections. Vincent Barone, Steven Latus, and Wilfred Sanchez were present for Testwell, and Richard Visconti and Bob Leask for DASNY. 1 9 At the meeting, DASNY complained that the inspection reports were "vague" and seemed to contain errors. One report, for example, indicated that an inspector had examined welding on a piece that did not require welding. (A-439). DASNY also expressed its awareness that Testwell was inspecting steel for John Jay and One Bryant Park, and it questioned how Testwell was accounting for work on two projects. (A-442). Testwell promised to review the inspection reports with Finklea and Dowd and to direct them to issue more detailed reports in the future. (A-439)?0 1 9 Latus was tried separately for his alleged role in the Steel Inspections Scheme and acquitted of all charges. 20 On July 9, 2007, Visconti e-mailed Barone asking him to "explain [Testwell ' s] typical protocol for keeping track of testing agent inspection times relative to multiple projects." (A-442). On July 20, Latus responded that " [c]urrently John Jay College is the only project that Testwell is inspecting at . . . Owen Steel." (A-504). That statement was incorrect. The inspections for One Bryant Park were completed on June 2 1 , 2007, but Finklea and Dowd had begun inspecting steel for a Silverstein project, River Place II, on July 9. (A-28 1 -A-282, A-456). 20 On August 1 , 2007, Barone, Latus and Sanchez met again with Visconti and Leask, who were joined by their supervisor, Keith LaPlante. Leask announced that he had reviewed the steel inspection reports and discovered even more errors. Welding inspections were reportedly performed on numerous pieces that did not require welding, and pieces were listed as having been inspected as many as 39 separate times. Once again Testwell was asked to review the reports and explain these "deficiencies." (A-287, A-505). Two weeks later, on August 14, 2007, Barone e-mailed LaPlarite that Testwell had begun its review and that " [t]he volume of errors [was more than] anticipated." (A-444). In early September 2007, Testwell began supplying DASNY with revised inspection reports. (A_443).21 And on September 24, it began delivering invoices to DASNY for the inspectors ' work. (A-502). By mid-September 2007, Testwell had sent DASNY all of the reports and invoices that are alleged in the indictment to be false. The invoices totaled $45 ,644.50. (A-456-A-458). There was no proof that Mr. Kancharla knew what had been submitted. Indeed, there 21 The jury heard considerable testimony regarding the quality of the revised reports. (Tr. 3664-3763 , 3 898-3986). The defense argued that Finklea and Dowd had corrected the errors in their original reports so that the revised reports were accurate. The jury convicted Testwell (but not Mr. Kancharla or Barone) of seven counts of filing a false instrument (Counts 29 through 3 5) in connection with the revised reports. 2 1 was no proof that he knew that DASNY had raised concerns about the quality of the inspections or that the inspectors were working on two jobs at once. 22 What occurred next was this : First, on November 1 6, 2007, LaPlante wrote to Mr. Kancharla to apprise him of certain "performance issues with Testwell." (A-506). Among the issues was "the level of steel inspection fabrication services being provided by Testwell at Owen Steel for the John Jay project." (A-509). LaPlante also requested payroll reports and time charges for Finklea and Dowd for the other projects that they had worked on while the John 22 Mr. Visconti, for example, gave this testimony: Q. Now, those revised reports, I 'd be correct came to you in August and September of 2007? A. Those dates sound about right. Q. And, again, Mr. Kancharla had no involvement to your knowledge in preparing or sending those reports to you? A. That ' s correct. Q. Now, in September, the end of September, you also got invoices for the first time? A. yes . . . . Q. And again as to those invoices, Mr. Kancharla was not involved to your knowledge not involved in their preparation in any way? . . . A. To my knowledge Mr. Kancharla was not involved. (A-297-A-298). 22 Jay project was underway. As Visconti and LaPlante testified, the purpose in writing was to "elevate" the issues to Mr. Kancharla' s attention. (A-299, A-339- A-340). Second, on December 5 , 2007, Testwell responded to LaPlante. 23 The letter indicated that Finklea and Dowd had worked "a 1 4 hr. day shift" for DANSY but that DASNY had been "invoiced 1 0 hrs. , a savings of 4 hrs. per day shift" in recognition of the fact that the two inspectors had been "perform[ing] work concurrently for another client." (A-450). Third, five days later, on December 1 0, 2007, Testwell forwarded the requested time sheets and billing records, which showed (i) that Finklea had worked on the John Jay and One Bryant Park projects in April , May and June 2007 and (ii) that Finklea and Dowd had worked on the John Jay and River Place II projects in July and August. (PX 84-97 et seq.). Fourth, on December 27, 2007, Latus e-mailed LaPlante to correct an error in the December 5 letter. He explained that Finklea had "worked at Owen for 1 0 hours . . . on John Jay and One Bryant Park," and not 1 4 hours as the December 5 letter had mistakenly stated. That meant that DASNY had not, in fact, received a discount on the invoices. (A-5 1 1 )("Testwell . . . bill [ ed] DASNY for all of the 23 The December 5 letter begins : "I . . . have requested our Mr. Vincent Barone to prepare a response [to your November 1 6 letter]." (A-446). The letter bears Mr. Kancharla ' s signature and his secretary's initials above it. From the face of the letter, it is clear that Barone supplied its content and that Mr. Kancharla 's secretary affixed Mr. Kancharla' s signature to it. (A-300-A-30 1 ). 23 inspectors ' time"). Fifth, on January 1 0, 2008, LaPlante e-mailed back, asking Latus "what [he] was proposing regarding the situation referenced in your e-mail." (A-459). Later that day, Latus proposed a 20 percent discount to reflect the fact that the inspectors had worked on two jobs simultaneously. Id. ; see also A-345- A-347. And sixth, when a month passed without a response to Latus ' proposal, Mr. Kancharla wrote LaPlante, hoping to resolve the matter. In his letter, Mr. Kancharla acknowledged that "in several instances a given inspector' s time 'was billed to more than one client." Mr. Kancharla asked DASNY for "direction or guidelines . . . on this matter." And he promised to "submit . . . revised invoices after an agreement [was] reached with the Authority as to [proper] billing protocol for the inspectors ' time." (A-452). Mr. Kancharla ' s letter went unanswered. Instead, DASNY announced that it was discontinuing Testwell ' s services, and it never paid for the inspections. 2. Tishman John DeLeone, a Tishman executive, testified that Tishman hired Testwell to inspect steel that was being fabricated at Owen Steel for its One Bryant Park project. (A-3 1 5-A-3 1 6). The fabrication started sometime in 2005 and "wrapped up" in June 2007. (A-3 1 7). Testwell billed Tishman $200 a day for a full day (eight hours) of Clyde Finklea' s services. (A-32 1 ). DeLeone testified that Tishman did not know that Finklea was also inspecting steel for the John Jay 24 expanSIOn. (A-324). Had it known, it "would have looked [to Testwell] for a prorated payment." (Id.). During the time that Finklea was working on both the John Jay project and the One Bryant Park project, Testwell billed Tishman a total of $ 1 6,500. (A-457). On cross-examination, DeLeone acknowledged that Tishman's contract with Testwell was silent as to whether an inspector must work exclusively for Tishman during a given period. 24 3. Silverstein John Klein, a Silverstein executive, testified that Silverstein hired Testwell to inspect steel that was being fabricated at Owen Steel for its River Place II project, an apartment building in Manhattan. (A-328). Klein received two bills 24 DeLeone gave this testimony: Q. Is it your testimony, sir, . . . that [if the] inspector had to be there from . . . seven 0' clock to five thirty . . . that ' s full time in order to do work on your project, you would pay for the full time even if there was some down time during that shift? A. If it was dedicated to One Bryant Park, yes .. . . Q. As soon as the down time is used for something else, your view is you're entitled to some prorated [sh] are? A. Yes. Q. Nothing in the contract speaks to that? A. I don't believe so. (A-325-A-326). 25 from Testwell -- for inspections that Finklea and Dowd had performed in July and August 2007. Each bill showed that the inspectors had regularly worked a 1 0-hour day. Klein testified that he believed Finklea and Dowd were working exclusively on his project. (A-33 1 ). Had he known that they were also inspecting steel for DASNY, he would have "had a conversation with Mr. Kancharla" about it. (A-332). During the time that the inspectors were working on both the John Jay project and the River Place II project, Testwell billed Silverstein a total of $34,600. (A-456-A-458). Klein also testified that in April 2008, he received a telephone call from Mr. Kancharla, informing him that Testwell had overbilled Silverstein for the River Place II inspections and would be sending him a credit. Soon thereafter, a credit for $ 1 7,637.50 arrived, bearing the notation "credit issued for inspection . . . as another project was inspected simultaneously." (A-455 ). B. Discussion On this record, no reasonable juror could convict Reddy Kancharla of participating in a scheme to defraud DASNY, Tishman and Silverstein by double billing them for inspection services. As for DASNY, the relevant sequence of events was this : In September 2007, Testwell billed DASNY for 1 0-hour inspection days, believing that its inspectors had worked 1 4-hour days and that it was giving DASNY a substantial discount. Realizing that it had made a mistake -- 26 i.e. , that the inspectors had worked only 1 0-hour days -- it immediately offered a new discount. It would bill DASNY for only an 8-hour work day. When DASNY did not respond to the offer, Mr. Kancharla became involved. He sought "direction or guidance" and promised to submit revised invoices as "soon [as] an agreement is reached." That is all that he did. Surely, offering to settle a billing dispute is not engaging in a fraudulent scheme. The proof as to Tishman and Silverstein was no stronger. There was no showing that Mr. Kancharla was aware that the two companies had been "double-billed" until well after the invoices were paid. Subsequent thereto, his only action was to call John Klein at Silverstein and offer him a credit because Testwell had inspected two projects simultaneously. 25 To suggest that that action provides a basis for criminal liability is to put all businessmen at risk. 26 In the First Department, the People argued that "Kancharla personally played a key role in this . . . scheme; it was Kancharla, after all , who negotiated the contract with Silverstein and who decided to ' sub the work out' to Finklea and 25 Mr. Kancharla did not offer a similar credit to Tishman most likely because it was already paying for inspection services at a rate ($3 7.50 per hour) far lower than Silverstein' s ($67.50 per hour). See A-456-A-457. 26 Neither the Tishman, Silverstein nor DASNY contracts contained an exclusivity provision requiring Testwell ' s inspectors to work on one job at a time. As several witnesses acknowledged, if a Testwell inspector was working only for Tishman, he would have "down time" -- i.e. , time when there was no Tishman steel to inspect. See, �, A-3 09-A-3 1 0, A-325-A-326. The People conceded that an inspector could sit idly and bill Tishman for the down time. 27 Dowd (Klein 3467-8 , 3476-77, 3 506) despite the fact that they were already assigned to a full-time job for DASNY." (P. Br. 68). If one reads the cited pages, however, one learns only this : Q. And were you [Mr. Klein] particularly familiar of which inspectors were going to be working on your project in South Carolina? A. I had had a conversation with Mr. Kancharla, he had told me that he was going to sub the work out to a local testing company that had done work for him, a local engineer who had done work for him in the past. I had no issue with it. (Tr. 3475-76)?7 The fact that Mr. Kancharla told Klein the work would be "sub [bed] . . . out to a local . . . company" is hardly evidence that he knew Silverstein would be misbilled for it. That the Scheme to Defraud conviction is defective is further evidenced by Mr. Kancharla' s acquittals on the related charges. If Mr. Kancharla did not steal from Tishman and Silverstein or attempt to steal from DASNY, as the jury found, then how did he participate in a scheme to defraud them? The verdicts may not be legally repugnant, but they strongly suggest that the jury got it wrong when it convicted Mr. Kancharla of the Scheme to Defraud charge. See People v. 27 As noted, the People ' s First Department brief also cited pages 3467-68 and 3506 of the trial transcript. Those pages, however, are not on point: the former contains testimony that the Silverstein project was "99 percent . . . supported by structural concrete" and the latter that only 1 1 pieces of steel and a shim pack were fabricated for it. 28 Rayam, 94 N.Y.2d 557 , 563 n. * (2000)(a court may consider acquittals on some counts in assessing the sufficiency of the evidence on other counts). Because there is no proof that he engaged in a scheme to defraud DASNY, Tishman or Silverstein, the anomalous conviction on Count 27 should be reversed. POINT THREE THE COURT ERRED IN EXCLUDING EVIDENCE SUPPORTING MR. KANCHARLA'S DEFENSE ON THE MIX DESIGN COUNTS Reddy Kancharla' s defense on the mix design counts was that he had no intent to defraud. Two evidentiary rulings impaired his ability to present that defense : First, the court excluded evidence showing that virtually every materials testing laboratory in the New York area employed the same mix design practice as Testwell -- i.e . , they reported estimated results. Second, the court excluded evidence showing that the concrete contractors who purchased the Testwell mix designs were well aware that Testwell was not following the preliminary tests method. As discussed below, both rulings were erroneous. See People v. Kisina, 1 4 N.Y.3d 153 , 1 60 (20 1 0)("a defendant should be permitted to offer any evidence which bears directly and not too remotely on his intention to defraud")( emphasis added). 29 A. Background At trial, Mr. Kancharla conceded that for more than 20 years, Testwell did not comply with the New York City Building Code ' s "preliminary tests method" in preparing its mix design reports. Rather than performing the required 28-day strength tests on the mixes, Testwell employed a technician who used his professional training and experience to create a recipe and then generated "expected" results using a computer algorithm. The question for the jury was this : did Mr. Kancharla commit a regulatory violation or did he act with an intent to defraud? 1. The Proof Against Mr. Kancharla As required by the Building Code, each of Testwell ' s mix design reports bears the stamp and signature of a licensed engineer. Between 1 998 and 2004, Mr. Kancharla or another Testwell engineer stamped and signed the reports. (A-2 1 0-A-2 1 1 ). Sometime in 2004, Mr. Kancharla asked Dr. Kaspal Thumma, Testwell ' s laboratory director, to assume the role. Knowing that Testwell was using a computer program to generate the reports, Dr. Thumma asked Mr. Kancharla if that practice was acceptable. (A-2 1 2). According to Dr. Thumma, Mr. Kancharla assured him that it was "okay" -- that it was "an industry active practice." (Id.). Having received that assurance, Dr. Thumma stamped and signed 30 hundreds of mix design reports over the next four years. (A-26 1 )("maybe 250 a year"). 28 2. Intent to Defraud To support Mr. Kancharla's contention that he lacked fraudulent intent, the defense pointed to four undisputed facts. First, Testwell had used the same computer program since at least 1 987, well before Mr. Kancharla joined the company. (A- 1 64-A- 1 7 1 , A-460-A-463). Thus, in signing and stamping reports and enlisting Dr. Thumma, Mr. Kancharla was merely carrying on an established practice. Second, on many of the mix design reports, the results were labeled "expected" to indicate that actual tests had not been performed. (A-266-A-269, A-500 ; RK EE- I -RK EE-3). A laboratory would not use the word "expected," the defense argued, if it were trying to deceive its customers into believing that the reported results were real. Third, Testwell typically charged $300 for a mix design report, which was paid for by the concrete contractor. As Dr. Thumma testified, the testing required by the preliminary tests method could not be performed for that sum. (A-270-A-27 1 ). Indeed, on the occasions when Testwell used the preliminary tests method, the cost was as much as $4,000 for a report. (A-27 1 - A-272). Fourth, Testwell often issued mix design reports within a day or two of a 28 Dr. Thumma cooperated with the prosecution and was a witness at trial ; he pleaded guilty to a misdemeanor and received a conditional discharge. (A-204- A-206). 3 1 customer' s request. By definition, the required 28-day tests could not be performed in two days, yet Testwell made no effort to hide the quick turnaround time. (A-274-A-275). 29 Numerous structural engineers, however, testified that they believed Testwell ' s mix design reports were prepared using the preliminary tests method. Primarily on the basis of their testimony, the jury convicted Mr. Kancharla of the 1 3 mix design counts. 29 Notably, on cross-examination, Dr. Thumma essentially admitted that he did not intend to defraud anyone when he signed and stamped the reports : Q. [Y]ou weren't intending to defraud [the structural . ] ? engmeers , were you. . . . A. It' s not a question of defrauding and not defrauding . . . . I put my seal , signed saying that these are right results, these are results generated in the laboratory which in fact were not generated . . . . Whether this mix, if you use this, whether you get the right product, right concrete or not is still I made a mistake . . . . I should not have stamped that report. Q. But you weren't intending to defraud anyone, were you? . . A. At the time that I signed, I knew that these are not real results and . . . the consequences were not in my mind. (A-255-A-258) ; see also A-22 1 (Dr. Thumma: I did not believe it was "a serious matter"). 32 B. The Excluded Evidence 1. Industry Practice Prior to the start of trial, Mr. Kancharla moved to introduce "proof that numerous other testing laboratories employed the same approach as Testwell in their preparation of mix design reports." (A-7S). Like Testwell, those companies were preparing mix designs based on professional judgment and experience, charging $300 for a report, and providing reports with quick turnaround time (far less than 28 days). And like Testwell, those companies were reporting results that were "illustrative [but] not real." (A-78). The motion went on to demonstrate that at least eight companies followed such an approach. (A-78- A-8 1). The People ' s response acknowledged that the defense had "establish[ ed] probable cause to believe that these firms may have been engaging in the same 'practice ' as the defendant and his accomplices at Testwell." (A-83- A-84); see also (A-88)(" [t]he evidence Kancharla has offered . . . certainly seems to provide a basis to conclude that many others in the materials-testing industry have been [following the same approach]"). And they conceded that "in appropriate cases with a proper foundation, evidence about routine practices within an industry or company may be relevant to . . . mens rea issues." (A-84). The 33 People, however, resisted the offer on the ground that the defense had failed to establish a proper foundation for the evidence. The trial court rejected evidence of industry practice on a broader ground. It found that "on the issue of . . . intent, the fact that [Mr. Kancharla] knew that other companies were preparing [mix design reports] in the same manner [as Testwell] [was] irrelevant." (A-93)(emphasis added). The issue resurfaced after Dr. Thumma testified that Mr. Kancharla had asked him to sign and stamp the mix design reports. According to Dr. Thumma, Mr. Kancharla had assured him that "this [was] an industry active practice." (A-2 1 2). That testimony prompted the defense to renew its motion to admit industry practice evidence. Although the court expressed a willingness to allow Mr. Kancharla to testify to his belief, it maintained its ruling that evidence of industry practice was inadmissible. (A-247)("if he wants to say that up here under oath subject to her cross examination, he can do that"). Otherwise, industry practice was an issue for sentencing, if Mr. Kancharla was convicted, and not for trial. (A-249). The trial judge ' s ruling excluding evidence of industry practice was error. As noted above, it is well settled that "a defendant should be permitted to offer any evidence which bears directly and not too remotely on his intention to defraud." Kisina, 1 4 N.Y.3d at 1 60 (emphasis added). Applying that principle, numerous courts have permitted defendants to introduce evidence of industry 34 practice to show that they lacked criminal intent. See, �, United States v. Seelig, 622 F.2d 207, 2 1 6 (6th Cir. 1 980)(evidence of routine procedures of pharmacists should have been admitted on issue of good faith); United States v. Christo, 6 14 F.2d 486, 492 n.7 (5th Cir. 1 980)(evidence "regarding the purposes and effects of overdrafting in the banking industry [was] highly relevant on the issue[] [of] intent"); United States v. Riley, 550 F.2d 233 , 236 (5th Cir. 1 977)(" [w]hile a general practice is not an absolute defense to criminality we think the wiser . . . approach is to let the jury consider the practice in determining whether [the defendant] intended to . . . defraud"); United States v. Wittig, 2005 WL 1 22793 8 at *4 (D. Kan.)("evidence of [corporate] airplane use by others is relevant to defendants ' alleged personal use of corporate aircraft, a specific intent crime"); People v. Gilman, 28 Misc.3d 1 2 1 7(A) at *4 (Sup. Ct. N.Y. Cty. 20 1 0)(admitting documents to demonstrate that bidding process used by defendant company "was standard in the industry, used by other brokers, and known to clients, [because evidence] challeng[ ed] the allegations of a fraudulent scheme"). That rule should have been followed here to admit relevant evidence of intent. Dr. Thumma' s testimony compounded the harm that flowed from the court 's erroneous ruling. The jury may well have received the misimpression that Mr. Kancharla' s reference to an "active industry practice" was a lie intended to induce Dr. Thumma to go along. During their deliberations, the jury asked to 35 "hear [the] transcript of Kaspal Thumma regarding [computer] generated results and Reddy Kancharla' s answer regarding this being standard industry practice ." (A-4 1 4) . The jurors heard the testimony, but never learned that Mr. Kancharla' s answer was true. As a result, powerful evidence for the defense (that Mr. Kancharla was following industry practice) became evidence for the prosecution (that Mr. Kancharla may have lied to Dr. Thumma), which was wholly unfair. Our position is not that Mr. Kancharla was entitled to violate the law because others were doing it. A rash of robberies does not give others license to steal . Nor does the fact that everyone is speeding immunize a driver who is stopped for exceeding the limit. A person who commits a robbery, however, cannot reasonably claim lack of intent, and speeding is a strict liability offense. By contrast, the mix design counts on which Mr. Kancharla was convicted required proof that he acted with intent to defraud, and the issue was hotly contested. Lack of criminal intent was the heart of his defense. The fact that Testwell prepared its mix design reports in accordance with longstanding industry practice was strong evidence that he had no such intent. 2. Ouick-Turnaround-Time Evidence Mr. Kancharla also offered evidence that concrete contractors regularly requested Testwell to produce mix design reports in a few days ' time. One request, for example, sought two reports "by this time next week." Another 36 sought reports "ASAP for placement tomorrow." Yet another stated " [p ] lease rush, since we want to pour on Tuesday." And one dated "7/ 1 1 102" asked for "mix design Friday 71 1 2/02 ." (A-496-A-499). In all, 3 1 such requests by 1 4 different concrete contractors were offered as evidence of the quick turnaround time that was routine to the business. Obviously, a concrete contractor seeking a mix design report for a "pour on Tuesday" could not believe that Testwell was following the preliminary tests method, which takes 28-days. The court excluded the evidence on the ground that the concrete contractors were "unindicted coconspirators." (A-9 1 ) . It said this : THE COURT: . . . . I view the [concrete] contractors as unindicted coconspirators . . . . [It] two people complicit in a scheme to defraud know exactly what' s going on, but the alleged victim doesn't, [that] does not permit you [a] defense . . . . The trial is about whether or not DASNY, Tishman and Silverstein were fooled. And so notwithstanding the cogent arguments that you made, succinctly presented, properly numbered, that is irrelevant from my standpoint as I view what is at issue here, what 's not at issue here. The [concrete] contractors are properly viewed as unindicted coconspirators . (A-90-A-9 1 ) . In finding that the concrete contractors were "unindicted coconspirators" and on that basis excluding their communications with Testwell, the trial court committed reversible error. The quick-turnaround evidence was offered to show that Testwell was not hiding the fact that the reported results were 37 not real. Concealment, after all, is a hallmark of fraud, and transparency is its antithesis. See In re Adler, Coleman Clearing Corp. , 1 998 WL 5 5 1 972 at *24 (Bankr. S.D.N.Y.)("open conduct is the antithesis of fraud or deceit essential to scienter"). Rather than allow the jury to hear the evidence and give it appropriate weight, the court took judicial notice that a whole segment of the construction industry was an accessory to crime. Plainly, nothing in the rules of evidence permits a court to make such a finding. See Barker & Alexander, Evidence in New York State and Federal Courts, §2.2 at 44 (" [t]he doctrine of judicial notice . . . is based on the principle that some matters of fact are so generally well established outside the courtroom that the taking of evidence would be unnecessary and inefficient"). To be sure, the court later permitted Mr. Kancharla to introduce a few documents to show that some general contractors also understood that Testwell was producing mix design reports in far less than 28-days. (A-364, A-472- A_495).30 On summation, however, the prosecutor was able to blunt the force of that proof by arguing that it involved only " [a] handful of documents" and that the structural engineers could easily have missed their significance because the engineers "weren't plotting dates." (A-3 84). Because the jury did not learn of the 30 There were only a few such documents because Testwell ' s customers for mix design reports were typically the concrete contractor, and not the general contractor. See supra at 4. 3 8 many documents evidencing that 1 4 concrete contractors knew of the quick turnaround time, it could easily have concluded that Testwell was hiding the ball to cover up fraud. C. Summary Mr. Kancharla hoped to persuade the jury that Testwell was following standard industry practice when it produced inexpensive mix design reports with a quick tum-around time. The trial court, however, excluded that evidence, leaving the jury with the misimpression that anyone who would produce computer generated mix design reports was a fraudster. Had the jury known the truth, Mr. Kancharla 's defense would have been bolstered, and the jury's verdict on the mix design counts might well have' been different. CONCLUSION With the First Department' s decision, Reddy Kancharla' s lot is much better. He no longer stands convicted of Enterprise Corruption and his sentence, which was 7 to 2 1 years, is now 1 1 13 to 4 years. But that outcome is still not just. The prejudicial spillover from an Enterprise Conviction charge ineradicably prejudiced the jury' s fair consideration of the remaining counts. There was no proof that he was involved in the one Steel Inspections Scheme count of which he was convicted. And two erroneous evidentiary rulings excluded evidence of his lack of criminal intent on the mix design counts. Accordingly, Mr. Kancharla 's 39 remaining convictions should be reversed, and a new trial ordered on the mix design counts. Dated: New York, New York February 26, 20 1 3 Respectfully submitted, ZUCKERMAN SPAEDER, LLP f)� /�, By:_-----'r'---_) _______ _ Paul Shechtman Christina P. Skinner 1 1 85 Avenue of the Americas New York, New York 1 0036 Tel (2 1 2) 704-9600 Fax (2 1 2) 704-4256 Attorneys for Defendant-Appellant V. Reddy Kancharla Of Counsel : William A. Wetzel 445 Hamilton Avenue, Suite 1 206 White Plains, NY 1 060 1 Tel (9 1 4) 298-3004 Fax (9 1 4) 683- 1 2 1 0 40