The People, Respondent-Appellant,v.V. Reddy Kancharla, Appellant-Respondent.BriefN.Y.March 26, 2014To be Argued by: PAUL SHECHTMAN (Time Requested: 30 Minutes) APL-2013-00012 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-Appellant, – against – V. REDDY KANCHARLA, Defendant-Appellant-Respondent. REPLY AND RESPONDENT’S BRIEF and SECOND SUPPLEMENTAL APPENDIX FOR DEFENDANT- APPELLANT-RESPONDENT 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-Respondent Date Completed: January 6, 2014 TABLE OF CONTENTS PAGE TABLE OF AUTHORITIES ..................................................................................... ii INTRODUCTION .................................................................................................... 1 BACKGROUND ....................................................................................................... 2 ARGUMENT ............................................................................................................ 3 POINT A: THE EVIDENCE WAS LEGALLY INSUFFICIENT TO SUPPORT MR. KANCHARLA'S CONVICTION FOR ENTERPRISE CORRUPTION ................................................... 3 A. Our Position .......................................................................................... 4 B. The People's Arguments ..................................................................... 12 POINT ONE: THE SPILLOVER PREJUDICE FROM THE ENTERPRISE CORRUPTION CHARGE DENIED MR. KANCHARLA A FAIR TRIAL ON THE REMAINING COUNTS ................ 22 POINT TWO: THERE WAS INSUFFICIENT EVIDENCE THAT MR. KANCHARLA PARTICIPATED IN A SCHEME TO DEFRAUD RELATIVE TO STEEL INSPECTIONS ...... 29 POINT THREE: THE COURT ERRED IN EXCLUDING EVIDENCE SUPPORTING MR. KANCHARLA'S DEFENSE ON THE MIX DESIGN COUNTS ....................... 35 CONCLUSION ....................................................................................................... 39 1 TABLE OF AUTHORITIES PAGE CASES Boyle v. United States, 556 U.S. 938 (2009) ............................................................ 5 Limestone Development Corp. v. Village ofLimestone Development, Ill., 520 F.3d 797 (7th Cir. 2008) ........................................................................ 7-8 Newton v. Merrill Lynch, 135 F.3d 266 (3d Cir. 1998) .......................................... 37 People v. Abraham, 2013 WL 6164490 .................................................................. 30 People v. Besser, 96 N.Y.2d 136 (2001) ............................................................. 7, 10 People v. Buie, 86 N.Y.2d 501 (1995) .................................................................... 39 People v. Castillo, 47 N.Y.2d 270 (1979) ............................................................... 22 People v. D.H. Blair & Co., Inc., 2002 WL 766119 (Sup. Ct. N.Y. Co. 2002) ........................................................................ 8-9, 11 People v. Forson, N.Y.L.J. 5/12/94 at 29 col. 3 (Sup. Ct. N.Y. Co. 1994) ......... 8, 11 People v. Joseph Stevens & Co. Inc., 31 Misc.3d 1223(A) (Sup. Ct. N.Y. Co. 2011) ........................................................................... 9, 11 People v. Latta, 2008 N.Y. Misc. LEXIS 4967 (Sup. Ct. N.Y. Co. Aug. 1, 2008) ................................................................. 6-7 People v. Marquez, N.Y.L.J. 7/22/96 at 25 col. 6 (Sup. Ct. N.Y. Co. 1996) ............ 9 People v. Morales, 20 N.Y.3d 240 (2012) .............................................................. 28 People v. Pierce, 14 N.Y.3d 564 (2010) .................................................................. 23 People v. Pustilnik, 14 Misc.3d 1237(A)(Sup. Ct. N.Y. Co. 2007) .................... 9, 11 People v. Till, 87 N.Y.2d 835 (1995) ...................................................................... 24 11 People v. Wakefield Fin. Corp., 155 Misc.2d 775 (Sup. Ct. N.Y. Co. 1992) ....................................................................... 6, 9, 11 People v. Western Express Intern. Inc., 19 N.Y.3d 652 (2012) ................................ 6 People v. Yarmy, 171 Misc.2d 13 (Sup. Ct. N.Y. Co. 1996) .................................... 7 United States v. Altese, 542 F.2d 104 (2d Cir. 1976) ............................................... 5 United States v. Anderson, 626 F.2d 1358 (8th Cir. 1980) ....................................... 5 STATUTES AND RULES 18 U.S.C. §1961 et ~· (1970) ................................................................................. 5 CPL §200.40(1) ....................................................................................................... 23 Penal Law §460.00 .................................................................................................... 5 Penal Law §460.1 0(3) ............................................................................................... 4 Penal Law §460.20(1)(a) ........................................................................................... 4 OTHER AUTHORITIES Barker & Alexander, Evidence in New York State and Federal Courts (2d ed.) §4:18 .............................................................................................................. 24 Feldman, Principled Compromise: The New York State Organized Crime Control Act, 6 Criminal Justice Ethics (1987) ..................................... 5 Gerber, "A RICO You Can't Refuse": New York's Organized Crime Control Act, 53 Brook. L. Rev. (1988) ........................................................... 5 Governor's Mem., 2 McKinney's Sess. L. N.Y. 1986 .............................................. 6 Greenberg, et al., New York Criminal Law § 1 : 16 .................................................. 3 0 Greenberg, et al., New York Criminal Law §36.1 .................................................. 11 ... 111 Miller letter, July 16, 1986, Bill Jacket, L. 1986, ch. 516 ......................................... 6 Preiser, Practice Commentary to §200.40 ............................................................... 26 IV INTRODUCTION In its opinion below, the First Department majority wrote that "in [their] brief ... the People offered a series of wholly unsupported arguments and significant misrepresentations of the record." (A. 616). 1 The People have continued that same course here. They have filed a 1 77 -page brief which does more to obfuscate the issues than to illuminate them. The two appellants are lumped together, and the facts are seriously misstated. On a cursory reading of the brief, without checking its citations, one might think that Mr. Kancharla perpetuated a series of massive frauds that threatened the safety ofNew York City. The length of the brief and its tone are designed to convey that impression. 2 As discussed below, however, Mr. Kancharla's only wrongdoing was continuing Testwell's long-standing practice of producing mix design reports using a computer program (and an employee with knowledge of concrete mixes), a "A" refers to the appendix to Mr. Kancharla's brief; "R" to the supplemental appendix to the People's (Respondent's) brief; and "SSA" refers to the supplemental appendix at the back of this brief. 2 Although the People seek to portray Mr. Kancharla as a criminal mastermind, that is not how his colleagues in the construction industry view him. The following structural engineers submitted letters prior to sentencing seeking leniency for him: Irwin Cantor, a co-chair of the Mayor's Structural Code Revision Committee; Silvian Marcus, the principal engineer on the Freedom Tower project; Thomas Farrell, the head of Design and Construction for Tishman Speyer; Daniel Kolakowski, the Senior Vice President of Skanska USA, . the construction manager for the Second Avenue Subway; Harry Olsen, who hired Testwell to work on the new Yankee Stadium project; and Michael Kolk, an architect who was DASNY's Director of CUNY programs. 1 practice that was widespread in the industry. Even as to that, there was a substantial question as to whether he acted with intent to defraud. We recognize that the issues here are fact-bound, but facts matter. They spell the difference between innocence and guilt. A careful review of the facts, we submit, puts the lie to the People's contentions. BACKGROUND Before turning to our reply arguments, some basics bear repetition: The Building Code requires a laboratory to test a mix for strength before it is sent to a concrete contractor, who will use it as a recipe to manufacture concrete for a project. This is the so-called preliminary tests method. The Code also requires a laboratory (but not necessarily the same one) to test the concrete for strength after it has been manufactured and as it is being poured on the job site. In both cases, the Code calls for compressive strength testing in which cylinders are allowed to harden, typically for 28 days, and then are crushed and their strength measured. Generally, Testwell did not test its mixes before sending them to the concrete contractor. Rather, a technician determined what he believed was an appropriate recipe to satisfy the project's specifications, and prepared a report showing illustrative results, which was generated with the aid of a computer algorithm. The lack of actual testing to support the computer-generated numbers was the essence of the "Mix Design Scheme." 2 Testwell did test the concrete that was poured on the job site, but the results were sometimes altered. That is the essence of the "Compressive Strength Alterations Scheme." Poured concrete is also tested for qualities other than strength, such as consistency. On the Yankee Stadium job, two technicians did not perform the required field tests, but "results" were nonetheless reported. That is the essence of the "Field Tests Scheme." The other two alleged schemes -- the "Steel Inspections Scheme" and the "Certified Inspectors Scheme" -- are discussed below. ARGUMENT POINT A3 THE EVIDENCE WAS LEGALLY INSUFFICIENT TO SUPPORT MR. KANCHARLA'S CONVICTION FOR ENTERPRISE CORRUPTION As noted in our opening brief, the First Department majority dismissed Mr. Kancharla's Enterprise Corruption conviction in a strongly worded opinion. The court wrote that "the entire theory of the People's case is made of conjecture, surmise and innuendo" and that the People "failed to introduce any evidence of leadership structure, overall planning ... or any communications between Kancharla, Barone, and any of the Testwell employees in furtherance of [a] criminal enterprise." (A-610, A-615-16). The People have appealed that 3 We have designated this Point A, since it is our response to the People's cross-appeal. 3 dismissal ruling to this Court. For the reasons discussed below, the ruling is sound and should be affirmed. 4 A. Our Position Before turning to the People's arguments, we believe that it is helpful to set forth our position in much the form it was presented to the First Department. New York's Enterprise Corruption statute makes it a class B felony for a person associated with a "criminal enterprise" to conduct its affairs by participating in a pattern of criminal activity. Penal Law §460.20(1)(a). The statute defines the term "criminal enterprise" as "a group of persons sharing a common purpose of engaging in criminal conduct, associated in an ascertainable structure distinct from a pattern of criminal activity, and with a continuity of existence, structure and criminal purpose beyond the scope of individual criminal incidents." Penal Law §460.10(3). As the Legislative fmdings accompanying the statute make plain, the definition was "carefully drawn." Indeed, "[b ]ecause of [the] more rigorous definition[], th[e] act [does] not apply to some situations 4 We continue to believe that this Court does not have jurisdiction to decide this issue because the First Department found, not only that the evidence on Enterprise Corruption count was legally insufficient, but, alternatively, that it was against the weight of the evidence. See A-619 (First Department majority: "the defendants' convictions for enterprise corruption were not supported by legally sufficient evidence and were against the weight of evidence")( emphasis added). The jurisdictional point is fully developed in the brief of co-appellant Vincent Barone, and we join it. 4 encompassed within comparable statutes in other jurisdictions." Penal Law §460.00 Legislative findings.5 The inclusion of a restrictive definition of "criminal enterprise" was "a late addition to the statute." Gerber, "A RICO You Can't Refuse": New York's Organized Crime Control Act, 53 Brook. L. Rev. 979,995 (1988). In a letter to the counsel to the Governor, Assemblyman Melvin H. Miller described its significance: The most fundamental difference between the measure approved by the Assembly and all prior versions is the requirement of each defendant's association with a criminal enterprise. Other proposals would have permitted ... prosecution of individuals who engage in a 5 The "comparable statute[]" that the Legislature spent the most time examining was the federal RICO statute. 18 U.S.C. §1961 et seq. (1970). At the time, the federal Circuits were divided as to whether a RICO enterprise required proof of a criminal group with an ascertainable structure distinct from the pattern of criminal activity. The Eighth Circuit, for example, took the view that a RICO enterprise must have "an ascertainable structure which exists for the purpose of maintaining operations directed toward an economic goal that has an existence that can be defined apart from the commission of the predicate acts constituting the 'pattern of racketeering activity."' United States v. Anderson, 626 F.2d 1358, 1372 (8th Cir. 1980). Other Circuits required only proof of a group of persons associated together for a common purpose of engaging in a course of criminal conduct. See,~' United States v. Altese, 542 F.2d 104 (2d Cir. 1976). The New York Legislature opted to employ the Eighth Circuit's definition in the Enterprise Corruption statute. See Feldman, Principled Compromise: The New York State Organized Crime Control Act, 6 Criminal Justice Ethics 50, 55 n.54 (1987)("[t]he final version of [the Act] reflects ... the Eighth Circuit's view of the criminal enterprise in its definition"). The split among the federal Circuits was not resolved until 2009, when the Supreme Court held that a RICO enterprise need not have a hierarchical structure or chain of command. See Boyle v. United States, 556 U.S. 938 (2009). 5 pattern of criminal activity without further proof that the criminal activity was accomplished for the purpose of participating in or advancing the affairs of a criminal enterprise with a separate, distinct and ascertainable structure and a continuity of existence and purpose beyond the scope of the pattern itself. The members of the Codes Committees felt that the extraordinary sanctions allowed under the Act should be reserved for those who not only commit crimes but do so as part of an organized criminal enterprise. Present law is adequate to punish ordinary white-collar crime. Miller letter, July 16, 1986, Bill Jacket, L. 1986, ch. 516. Accord Governor's Mem., 2 McKinney's Sess. L. N.Y. 1986 at 3177 ("if ... the group demonstrates a structure -- such as the hierarchy of a 'Cosa Nostra family,' or the specialization of a narcotics, loansharking or gambling operation the criminal enterprise requirement is satisfied"). As this Court has recently written, under the statute "a common purpose 1s required and the structure of [the] criminal enterprise must be ascertainable." People v. Western Express Intern. Inc., 19 N.Y.3d 652, 659 (2012). Lower courts have used similar language to express the requirement. See, ~' People v. Wakefield Fin. Corp., 155 Misc.2d 775, 785 (Sup. Ct. N.Y. Co. 1992)("a system of authority beyond what is minimally necessary to effectuate individual substantive criminal offenses . . . [or] more than a mere ad hoc association"); People v. Latta, 2008 N.Y. Misc. LEXIS 4967 (Sup. Ct. N.Y. Co. Aug. 1, 2008)(there must be a "system of authority or hierarchy binding the defendants 6 together"); People v. Yarmy, 171 Misc.2d 13, 17 (Sup. Ct. N.Y. Co. 1996)(there must be a "semblance of a hierarchical organization beyond what is minimally necessary to effectuate the individual [crimes]"). 6 Judged by this standard, the notion that the "Testwell Group" was a criminal enterprise and Mr. Kancharla its leader is fanciful. As noted above, Mr. Kancharla was convicted principally for his role in the "Mix Design Scheme," in which he and a few others continued Testwell's longstanding practice of preparing computer-generated reports. He was not charged in the "Field Tests Scheme" or the "Compressive Strength Alterations Scheme," and he was acquitted of the one "Certified Inspectors Scheme" charge and of 21 of the 22 charges relating to the "Steel Inspections Scheme." If Mr. Kancharla was a leader of the "Testwell Group," then never has a leader of a criminal enterprise been kept so much in the dark. See Limestone Development Corp. v. Village of Limestone Development, 6 In Besser, this Court put it this way: [The Enterprise Corruption statute] "focused upon criminal enterprises because their sophistication and organization make them more effective at their criminal purposes and because their structure and insulation protect their leadership from detection and prosecution" (Penal Law §460.00). Thus, the purpose of creating the separate crime was to address the particular and cumulative harm posed by persons who band together in complex criminal organizations. People v. Besser, 96 N.Y.2d 136, 142 (2001)(emphasis added). 7 Ill., 520 F.3d 797, 804 (7th Cir. 2008)(Posner, J.)("[t]he Chicago Vice Lords would be embarrassed to have so little structure"). (A-614-15). On this point, the First Department majority put it well: Here, as in Western Express, there is "no proof of concerted activity from which a petit jury might reasonably have gathered that the appellants were knowing participants in the affairs of a 'criminal enterprise."' Western Express, 19 N.Y.3d at 660. 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 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 with Thumma concerning the mix design reports. Absent this proof, [an] enterprise corruption count cannot stand. Comparison of this case to others further demonstrates the point. In People v. Forson, N.Y.L.J. 5/12/94 at 29 col. 3 (Sup. Ct. N.Y. Co. 1994), the defendants formed a business that "stole vast sums" "through a variety of fraudulent [securities schemes]." Forson "directed the entire criminal enterprise," and the other defendants formed an "inner circle" to "relay [his directives] to those below." Id. In People v. D.H. Blair & Co., Inc., 2002 WL 766119 (Sup. Ct. N.Y. 8 Co. 2002), the defendants operated a securities "boiler room" with "the top of the structure planning the objectives . . . and the middle and bottom levels ... carry[ing] out the scheme." In People v. Pustilnik, 14 Misc.3d 1237(A)(Sup. Ct. N.Y. Co. 2007), the defendants were part of an enterprise that defrauded no- fault insurance carriers, with Pustilnik and his wife "at the top of the structure ... establish[ing], plann[ing] and direct[ing] the accomplishments of its illegal goals" and others "carrying out [their] criminal plan." In People v. Wakefield Fin. Corp., supra, the defendants formed an enterprise that sought to control the price of certain securities, with four defendants "at the top ... planning the objectives of the enterprise, and directing [the others] how the trading would occur to achieve the objectives." And in People v. Marquez, N.Y.L.J. 7/22/96 at 25 col. 6 (Sup. Ct. N.Y. Co. 1996), the defendants ran a "sophisticated gambling syndicate" with Marquez "[a]t the top of the hierarchy ... set[ting] the goals, policies and strategies of the organization." The recent case of People v. Joseph Stevens & Co. Inc., 31 Misc.3d 1223(A)(Sup. Ct. N.Y. Co. 2011) is also instructive. There, the indictment alleged that the defendants, all members of a securities broker dealer firm, engaged in fraudulent trading in small cap securities: The principals recruited employees to join the firm because of their willingness to participate in the scheme transactions. Meetings were held at which the principals announced the schemes, and the traders and brokers 9 communicated and carefully coordinated their own actions . . . . Sorbara and Markowitz were the managers of the criminal enterprise, supervising the trades ... and settling disputes . . . . Shapiro, Moraitis and Martinucci were the traders who informed brokers which scheme stocks would be manipulated . . . . [Eleven other defendants] were brokers, whose role was to coordinate with the traders in selling and buying scheme stocks .... Thus, the evidence clearly identified ... the members of the criminal enterprise [and] their roles. Id. at *32-33. Here by contrast, there was no structure. No one "set the illegal goals" or "directed the entire enterprise" and there was no "inner circle." Indeed, as the First Department majority found, there was no evidence of a single occasion (other than his brief conversation with Dr. Thumma about mix design reports) in which Mr. Kancharla met with his "underlings" to discuss criminal activity. Stitching together disparate crimes committed by different people without a common nucleus or leadership structure does not satisfy the rigorous requirements of New York law, even if those people are employed by the same company. If "the purpose of creating the [Enterprise Corruption statute] was to address the particular and cumulative harm posed by persons who band together in complex criminal organizations," Besser, 96 N.Y.2d at 142, then the statute does not apply here, where there was no proof of banding. Moreover, although the indictment alleged that the goal of the "Testwell Group" was "to make money for its members by engaging in criminal 10 schemes relating to the testing of building materials," the proof that Mr. Kancharla led a money-making criminal operation was woefully lacking. Testwell's annual revenue for mix design reports was approximately $90,000 a year (300 reports x $300 per report). Ironically, had the preliminary tests method been followed, Testwell would have charged its clients far more for a mix design report ($4,000) than it actually did ($300). (R-788-89). And the revenue from the steel inspections "double billing scheme" was $50,000 at most. Thus, this case is a far cry from Forson, D.H. Blair, Pustilnik, Wakefield and Joseph Stevens, where the defendant entities, whose animating purpose was to engage in fraud, stole literally millions from their victims. 7 When the Legislature enacted the Enterprise Corruption statute, it sought to provide prosecutors with a "powerful weapon to combat organized criminal activity, while limiting the statute's potential for abuse." Greenberg, et al., New York Criminal Law §36.1 at 1650. The requirement of a structured criminal enterprise was a key limit. On this record, Mr. Kancharla's Enterprise Corruption conviction was properly reversed, since that requirement was not met. 7 In addition to testing concrete and steel, Testwell provided soil testing, metallurgy, radiography, fire code inspections, asbestos testing, forensic studies, pile driving inspections, vibration monitoring, air quality studies, lead testing, and numerous other services. There was no hint that any of those services was tainted by fraud. 11 B. The People's Arguments 1. The People begin their discussion on this point by arguing that "[t]he crimes committed to perpetuate Testwell's schemes spanned many years and targeted hundreds of different projects." (P. Br. 71). That may have been true of the "Mix Design Scheme" and of the "Compressive Strength Alterations Scheme" (in which Mr. Kancharla was not charged). It was not true, however, for the others. "The Field Test Scheme" involved the work of two technicians at Yankee Stadium; the "Certified Inspectors Scheme" involved one school construction project and two employees;8 and the "Steel Inspections Scheme" involved inspections conducted by two inspectors at one site between April 2007 to September 2007. In short, the crimes here were discrete, and the notion of a "continuous" criminal enterprise is make believe. 2. The People argue that the "common purpose behind all of Testwell's crimes was to increase and protect the company's profit through the 8 In an effort to make the "Certified Inspectors Scheme" seem more than it was, the People write that an employee named Hoyos "had once been certified, but then failed the recertification test in 2004 and again in 2007" and that Kennedy "was never [properly] certified at all." (P. Br. 75 n.49). But as the People's own witness acknowledged, there are many jobs a technician can perform that do not require certification. (SSA-4-5); see also R-1441 ("[w]e do have [workers] on the job that don't have [certification], we have them work with other [certified employees] which the client approves of'). Kennedy was eventually fired because he did not obtain ACI certification. (R-1440); see also A-619 (First Department majority: "the People's use of 'often unqualified field inspectors' is a hyperbolic argument [and] empty rhetoric"). 12 commission of fraud." (P. Br. 76). But the People never come to grips with how little money was involved here. As noted above, the "Mix Design Scheme" grossed approximately $90,000 a year and probably netted nothing;9 the "Steel Inspections Scheme" involved at most $50,000; and the "Certified Inspectors Scheme" involved $630.08. For a $20 million-a-year company, those are not material sums. (A-371-72); see also A-619 (First Department majority: "[e]ven were we to accept everything the prosecution contends as true, the revenue from criminal conduct in 2008 did not exceed .5% [ofTestwell's total revenue]"). 3. To support the conviction, the People resort to attacking straw men. Thus, they argue that the Enterprise Corruption statute is not "limited to traditional criminal syndicates or crime families" (P. Br. 79); that the enterprise need not "use the names or colors or code of a street gang or the titles and initiation ceremonies of a Mafia family" (P. Br. 79-80); and that the top members of the enterprise need not "plan[] out each crime and scheme together." (P. Br. 9~). We have never advanced those positions. What we have argued, and continue to argue, is that a criminal enterprise must "demonstrate a structure such as the 9 The People incorrectly assert that the "Mix Design Scheme" generated "pure profit." (P. Br. 77)("the mix-design scheme alone brought in about $100,000 a year of pure -- if unlawful --profit"). Testwell's mix design business brought in about $90,000 in annual revenue and required the efforts of one full-time employee, Edward Porter. Thus, it was essentially a break-even business. Indeed, at trial the prosecutor referred to the mix design reports as a "loss leader." (A-386)("a loss leader is ... what those mix designs were"). 13 hierarchy of a 'Cosa Nostra family,' or the specialization of a narcotics, loansharking or gambling operation," Governor's Mem., supra, and that such a structure did not exist here. 4. The People write that the majority decision below rests on the mistaken "view that the enterprise corruption statute requires direct evidence" of knowing participation in a criminal enterprise. (P. Br. 88)( emphasis in original). But the First Department majority did not express such a view, and no judge in this state would. Rather, the First Department held that there was not "any evidence of a leadership structure, overall planning ... or any communications between ... any of the Testwell employees in furtherance of [a] criminal enterprise." (A-615-16). Thus, the First Department was not enunciating a novel direct evidence standard; it was conducting a familiar sufficiency review, and finding no proof. 5. At trial, the People attempted to portray the "Testwell Group" as a structured enterprise in which Mr. Kancharla "delegated ... to his top lieutenants, Vincent Barone and Alfredo Caruso, who in tum enlisted others to help them." (A-394); see also R-1532 ("each defendant had their role in the structure at Testwell [with] Reddy Kancharla at the top"); SSA-11 ("there is no doubt that Mr. Kancharla is at the top"). As noted above, however, Mr. Kancharla did little leading. Except for the one conversation in which he solicited Dr. 14 Thumma to stamp mix design reports, there was no evidence that he asked anyone to do anything that could be considered wrong. It is therefore not surprising that the People have now demoted Mr. Kancharla from his supposed perch. Now he is one of Testwell's "top tier." (P. Br. 83-84). But an amorphous "top tier" of individuals who do not communicate among themselves is not what the Legislature had in mind when it required a structured enterprise. 6. To fill the void, the People argue that Testwell was such a long- running criminal enterprise, that its "planning phase had long since passed, the fraud was institutionalized, and did not require meetings and communications for purposes of coordinating the criminal activity." (P. Br. 89). That excuse for the absence of proof is unavailing. After all, the People's key witness was Kaspal Thumma, who from 1998 to 2008 was Testwell's laboratory director. (R-759). Yet despite his long tenure, Dr. Thumma gave no testimony on which an Enterprise Corruption conviction could be based. Quite the opposite is true. Dr. Thumma testified that Mr. Kancharla supported his every effort to hire good employees, to improve training, to purchase state-of-the-art equipment, and to participate in proficiency testing programs. 15 (A-230-44, A-252-53). He believed that he was running a state-of-the-art lab.10 Moreover, despite his central role in the company, Dr. Thumma knew nothing about bogus field tests (SSA-1) or falsified compressive strength tests. (SSA-2). Indeed, he agreed to sign the computer-generated mix design reports because he, like Mr. Kancharla, believed that any problem would be detected when the compressive strength tests were conducted. (A-213)("if it doesn't work ... first batch, second batch, when we test them, we would know [if] there were some problems"). 10 On cross-examination, Dr. Thumma gave this testimony: (A-252-53). Q. I believe you told the jury that you tried to run the laboratory to the very best of your ability? A. Yes. Q. And to follow all accepted procedures? A. Yes. Q. And wherever possible to use state of the art • ? eqmpment .... A. Yes. Q. And that Mr. Kancharla supported you with the resources you needed to run the top quality lab and to train the employees who worked with you? A. Yes. 16 Finally, Dr. Thumma testified that although there were regular managers' meetings at Testwell, there was never a discussion of criminal conduct: Q. Now, you testified about manager's meetings and you said there were manager's meetings at Testwell itself? A. Yes. Q. And that's when all the managers were together? . . . . Plus other people. And during those there was no discussion of criminal conduct? .... A. No. (A-276). In short, the fact that Dr. Thumma-- a quintessential insider-- gave no testimony indicating that Testwell was a criminal enterprise is powerful proof that it was not. 11 7. In an effort to prove that Mr. Kancharla instilled "fear" into his employees, the People write that Dr. Thumma had no "choice [but] to 'follow' in Kancharla's footsteps [and stamp mix design reports] or find another job." 11 The People write that "when Thumma became suspicious about Porter's role [in creating computerized mix design reports], Kancharla recruited Thumma into joining the scheme as well." (P. Br. 91, citing Tr. 2352-57, 2522); see also P. Br. 89 ("Kancharla also suborned previously uninvolved Testwell employees when they came asking questions about the fraudulent mix-design practice")( emphasis in original). But Dr. Thumma did not become "suspicious" about Porter's role. Rather, what the cited pages show is that he knew from a "long time back" that Testwell was using a computer to generate its mix design reports. The notion that he grew "suspicious" or "came asking questions about the fraudulent practice" is made up. 17 (P. Br. 85, citing Tr. 2362). If one looks to page 2362, one finds the following testimony of Dr. Thumma: I thought that [stamping the mix design reports] is okay . . . . [I'm] not going to investigate, going into the code and investigate .... [I]fi knew it is a serious matter for me to look into, I would have done that, but I was only going by what has been done earlier for several years by more than one person, people who have more experience than me and with the understanding other industry people are [doing] the same thing. (A-221). In short, Dr. Thumma never testified that Mr. Kancharla threatened him that if he did not stamp the reports he would lose his job. 8. The People write that Anuradha Murthy, their other cooperating witness, "described ... the way the lower-level members carried out the directions of top-level members like Kancharla, Barone, and Caruso." (P. Br. 88 n.59). In 38 pages of testimony, however, Murthy did not mention Mr. Kancharla once. See A-621 (First Department majority: "Murthy never spoke with Kancharla about the data alterations"). 9. Toward the end of its discussion of the Enterprise Corruption charge, the People write that Mr. Kancharla "relied on his confederates" to falsify compressive strength tests as "a necessary step to cover up the mix-design crimes." (P. Br. 96). To repeat, there was no proof that Mr. Kancharla knew that compressive strength tests were being altered. Moreover, the notion that the "Mix Design Scheme" and the "Compressive Strength Alterations Scheme" flowed from 18 each other is false. First, no witness suggested that the purpose of altering compressive strength test results was to cover up the mix design reports. Second, there was no proof that Barone (or anyone else who allegedly altered compressive strength tests) knew that Testwell's mix design reports did not comply with the Building Code's requirements. Third, if the purpose of altering compressive strength test results was to disguise the "Mix Design Scheme," then surely someone would have let Mr. Kancharla and Dr. Thumma in on the secret.12 Fourth, Testwell issued computer-generated reports on projects where the compressive strength testing was performed by other companies. If compressive strength test alterations were "necessary" to "cover up the mix-design crimes," Testwell would have insisted on doing the tests itself. 13 Finally, it is hard to 12 As noted above, when Mr. Kancharla enlisted Dr. Thumma to stamp mix design reports, he said it was "okay" because any problem would be detected when the "first batch" of poured concrete was tested. Thus, for Mr. Kancharla and Dr. Thumma, compressive strength testing was a way to uncover any problems with Testwell's mix designs, not to cover them up. 13 Notably, Dr. Thumma testified that the fact that other laboratories would be testing Testwell's mix design reports gave him comfort: Q. Can you just please, Mr. ·Thumma, can you please explain what did you understand what Mr. Kancharla -- what he meant? ... A. What I was told ... is if there are any problems with these mixes it will be known to us early in the project . . . . [b ]ecause they are made, cylinders come to the lab and tested. If not our lab, some other lab. 19 imagine that anyone would alter compressive strength test results to protect mix design reports that earned Testwell no money. See, supra at 13 n.9. 10. In their brief, the People argue that "while no one would suggest that Kancharla personally programmed [Testwell's] computer to allow for tariJ.pering ... it was plainly reasonable to infer that he knew about the ease with which the data could be falsified, for he himself was one of the 'privileged users' with access to tamper with the lab data." (P. Br. 96-97)(emphasis in original). But the majority opinion below put this issue to rest: The People repeatedly pointed to Testwell's computer system, stating that Kancharla "personally installed a 'state of the art' computer system" that "was programmed to support and help hide the data-tampering fraud." The People failed to provide any record citation either in their brief on appeal or when pressed at oral argument for what defendant correctly characterizes as an outlandish claim. While there was testimony that Testwell's computer system did not allow one to determine who had altered data, there was no evidence of any kind that the computer system was purposefully programmed to "hide" data tampering or that Kancharla had any role in the programming. (A-616-17). 14 (A-213-14)(emphasis added). 14 The only testimony about Mr. Kancharla's role was in response to this question to Dr. Thumma: Q. And were there other system upgrades to the computers while Mr. Kancharla owned the company? 20 * * * All of this is disheartening. If we are correct that Mr. Kancharla had no role in the Steel Inspections Scheme (~ Point Two, infra), then his only wrongdoing was continuing Testwell's practice of preparing computer-generated mix design reports, which were commonplace in the industry. He was not a kingpin, and Testwell was not a criminal enterprise. There was no overarching structure binding the crimes and participants together. Accordingly, the First Department's decision vacating the Enterprise Corruption decision was correct and should be afflrmed. 15 (R-791). A. I mean the computer system itself has grown from a simple recording of dispatch data and test data to making things more automatic in terms of generating reports, generating reports, sending them and sorting them and also ability to email them. Q. So all these developments happened under Mr. Kancharla's ownership? A. Yes. 15 In a slight to Justice Catterson, the People write that "as the author of the opinion striking down the OCCA count ... he -- alone among the Justices -- discounted the evidence of the crimes each defendant had committed individually and then ignored the pattern into which those crimes fell." (P. Br. 90). The People may wish to portray the decision of the First Department as a frolic of Justice Catterson's own, but it is not. Three other justices joined him in castigating the prosecution for misrepresenting the record and all four others joined in reducing Mr. Kancharla's sentence from 7 to 21 years' imprisonment to 1 1/3 to 4. 21 POINT ONE THE SPILLOVER PREJUDICE FROM THE ENTERPRISE CORRUPTION CHARGE DENIED MR. KANCHARLA A FAIR TRIAL ON THE REMAINING COUNTS At the heart of Mr. Kancharla's appeal to this Court is the issue of whether he was denied a fair trial because of the spillover prejudice from the Enterprise Corruption count that the First Department dismissed.16 In their response on this point, the People argue that there was no spillover prejudice -- that "given the strength of the evidence, and the patent weakness of [Mr. Kancharla's] defense, it is impossible to imagine any jury reaching any other verdict but guilty." (P. Br. 109). As discussed below, however, just the opposite is true. The presence of the Enterprise Corruption count allowed the People to "supplement deficiencies in the proof on [the] key elements of the [remaining counts]," People v. Castillo, 47 N.Y.2d 270, 275 (1979), and impaired Mr. Kancharla's fair trial rights. 1. As we observed in our opening brief, without the Enterprise Corruption charge, Mr. Kancharla's trial would have been far different. Mr. Kancharla was not charged in the "Compressive Strength Alternations Scheme" 16 In our opening brief, we noted that our spillover argument was addressed below "in one conclusory sentence." (K. Br. 10). Our purpose, of course, was to suggest that the issue was not given extended consideration. Oddly, the People devote a lengthy footnote to showing that the First Department majority did not give any consideration to the spillover claim; that the sentence to which we referred related only to the verdicts on the steel inspection counts. (P. Br. 98 n.66). We stand corrected: the First Department majority did not address this issue. 22 and in the "Field Tests Scheme," and the "Certified Inspectors Scheme" was not venued in New York County. Thus, without the Enterprise Corruption charge, the jury would have heard only a portion of the evidence that it did. Indeed, if Kancharla and Barone had not been charged with Enterprise Corruption, they could not have been tried together. See CPL §200.40( 1 ). And if Kancharla were charged alone, there is a serious question as to whether the mix design counts and the steel inspection counts could have been joined. See People v. Pierce, 14 N.Y.3d 564, 574 (2010)Goinder under CPL §200.20(2)(c) is improper where "the essential nature of the criminal conduct is quite distinct"). 2. In response to this fundamental point, the People resort to the same canard that they advance in their effort to revive the Enterprise Corruption count. See supra at 18-19. They claim that even without the Enterprise Corruption count, the jury would have heard about the alteration of compressive strength test results, since it "had to understand that [Mr. Kancharla] had a back stop of lab-data tamperers in place to cover up the crimes he was committing at the beginning of the process." (P. Br. 103). But as we have shown in Point A, there was no proof that Mr. Kancharla knew that compressive strength test results were being altered. Rather, both he and Dr. Thumma believed that Testwell could safely issue computer-generated mix design reports because any problem would be detected 23 when the compressive testing was conducted after the concrete was poured. See, supra at 19 n.12 & 13. The point is so critical that it bears further explication. Assume that there was no Enterprise Corruption count and that Mr. Kancharla had been charged only with mix design counts. The question then would be this: on what Molineux theory would the jury learn that others at Testwell were falsifying compressive strength test results? Although the People do not address the issue in these terms, their only conceivable answer could be that the compressive strength test evidence would be admissible to "complete the narrative of the episode." People v. Till, 87 N.Y.2d 835, 837 (1995). But how so? If Mr. Kancharla did not know that the compressive strength tests were being altered, then the alterations could not have been his "back stop." Put simply, Molineux evidence need not be proven beyond a reasonable doubt, but a defendant's involvement in those acts must be shown. See Barker & Alexander, Evidence in New York State and Federal Courts (2d ed.) §4:18 (the People must prove an uncharged crime at least to a preponderance of the evidence). 3. Equally specious is the People's claim that the evidence against Mr. Kancharla on the steel inspections counts and the mix design counts was strong. As we demonstrate in Point Two, infra, the evidence against Mr. Kancharla on the one steel inspection count of which he was convicted (one of 22) 24 was all but non-existent. There was no proof that he knew that inspection reports were inaccurate or that DASNY had been "over-billed" until those issues were elevated to him after the inspection reports were submitted and the bills issued. Moreover, the evidence on the mix design counts was hardly clear- cut. The defense was lack of intent, and there was much to support it. First, on many of the mix design reports, the results were labeled "expected" to indicate that actual tests had not been performed. Second, Testwell charged only $300 for a mix design report, a price which reflected the fact that actual testing (which cost as much as $4,000) had not been done. Third, Testwell often issued mix design reports within a day or two of a customer's request, thereby not hiding the fact that actual testing (which required a 28-day test) had not been used. 17 And fourth, Dr. Thumma, the People's key witness, testified in essence that he did not intend to defraud anyone -- that issuing the computer-generated reports did not seem a "serious matter." (A-221). In short, Mr. Kancharla had a viable defense to the mix design charges if an unprejudiced jury could have heard it.18 17 As discussed in Point Three, Mr. Kancharla's ability to prove that reports were issued with quick turnaround time was impermissibly limited. 18 Contrary to the People's claim, Edward Porter (and others in the industry like him) did not simply concoct numbers to make it seem that testing had proved the mix was a proper recipe. Rather, they used their considerable practical experience to create mixes that would produce the strength and other characteristics required. (A-263). Testwell's computer program then used an algorithm, which was based on the number of pounds of concrete in the mix, to calculate the expected results if the mix were employed. See R-846 (Thumma: 25 4. The People argue that the "crimes by the other Testwell defendants were of the same quality and nature as those Kancharla [was] charged with committing." (P. Br. 105). But that, too, is not so. When it came to the "Compressive Strength Alterations Scheme," the People argued this: "the 3,290 [alterations] meant that the data was changed on 119 building projects in New York City and in the metropolitan area [and] it created a crisis of confidence in the concrete structure and structural safety." (R-1523)(emphasis added); see also R-1524 ("[t]here were 119 projects that were affected ... includ[ing] schools, hospitals ... and every type of building we know in our neighborhood"). It was proof of that scheme (of which Mr. Kancharla was not charged and of which he knew nothing) that most poisoned the jury.19 5. In their effort to downplay the significance of the Enterprise Corruption count, the People note that they "used the term ['Testwell Group'] only once in their opening statement, twice in questioning, and once in summation." "these results are not the actual test results; we projected this using [the] method that we had"). 19 Notably, the Legislature has recognized that the broadened joinder permitted when an Enterprise Corruption count is charged "creates an increased risk of spill- over prejudice." Preiser, Practice Commentary to §200.40. As a result, when a defendant seeks a pre-trial severance, the standard is "not undue prejudice, as would apply when considering the other bases for joinder [but] 'likelihood of prejudice."' Id., discussing §200.40(1)(d). When an Enterprise Corruption charge has been brought and found to be deficient for lack of proof, the same "likelihood of prejudice" standard should apply. 26 (P. Br. 109). But that is disingenuous. As a reading of the prosecutor's summation shows, Mr. Kancharla was tarred with the theme that Testwell was a corrupt enterprise and he was its boss. There was this: "[t]raud [was] so thoroughly entrenched at Testwell that ... the pattern repeated [itself] over and over." (A-373-74). And this: "for Testwell ... fraud became the master plan." (A-374). And this: "fraud [was] a deliberate business strategy." (A-375). And this: "Testwell's [a] net of deceit." (A-378). And this: Mr. Kancharla "built [Testwell] on a culture of fraud." (Id.). And this: what occurred was "simultaneous institutionalized fraud." (R-1527). And this: Testwell had a "book of fraud ... the Techniques of the Criminal Enterprise." (R-1531 ). And this: "to Testwell it's all about money not integrity; [they were] uncompromising in their fraud." (SSA-10). And this: "[t]hese crimes ... are not ad hoc or occasional [rather] they all conform to a pattern of criminal activity." (A-410). Despite the People's efforts to claim otherwise, none of this could have been argued had this not been an Enterprise Corruption case. 6. In a similar vein, the People argue that Mr. Kancharla's "leadership role in carrying out and advancing systematic, long-term organized criminal activity would have been before the jury one way or the other" because of his involvement in the mix design scheme. (P. Br. 106). But it is one thing to hear that Mr. Kancharla continued Testwell's longstanding practice of issuing 27 computer-generated mix design reports -- i.e., that he hired Porter to determine the mix recipes and asked Thumma to stamp the reports. It is quite another thing to hear that Mr. Kancharla built "a culture of fraud" at Testwell; that his greed "fueled" all of Testwell's schemes (A-389) that he "delegated" the details of the "Compressive Strength Alterations Scheme" to his underlings (A-393-94); and that he was "at the top" of a criminal enterprise (R-1532). The jury would not have heard any of that except for the Criminal Enterprise charge. 7. Not surprisingly, the People argue that "the claim of spillover prejudice is belied by the carefully mixed verdicts the jury returned before moving on to consider the enterprise-corruption count." (P. Br. 101).20 But surely the order in which a jury deliberates is not an antidote to spillover prejudice if its deliberations are tainted from the start. Nor is the existence of mixed verdicts dispositive of a spillover prejudice claim. See People v. Morales, 20 N.Y.3d 240 (2012)(reversing defendant's conviction for spillover prejudice even though jury had acquitted him of murder in the second degree, the top count)?1 The proof 20 At one point, the People write that Mr. Kancharla "was acquitted of over 40 other charges related to the steel scheme and of the scheme to dupe the SCA about the qualifications ofTestwell's field inspectors." (P. Br. 102). We count only 22: 21 of the 22 steel inspections counts and the single certified inspectors pattern act. 21 In her brief to this Court, Morales' counsel put it well: The People appear to assume that prejudice is an "all or nothing" phenomenon. That the jury did not find beyond a reasonable doubt that Mr. Morales committed murder 28 against Mr. Kancharla was so weak on the 21 steel inspection counts of which he was acquitted and on the SCA pattern act that a jury would not have convicted him of those charges under any circumstances. 22 In sum, if the Enterprise Corruption conviction is not reinstated, Mr. Kancharla should be given the opportunity to present his defenses to an untainted JUry. POINT TWO THERE WAS INSUFFICIENT EVIDENCE THAT MR. KANCHARLA PARTICIPATED IN A SCHEME TO DEFRAUD RELATIVE TO STEEL INSPECTIONS The People argue that Mr. Kancharla "played an active and culpable role" in the scheme to defraud Tishman, DASNY and Silverstein (Count 27) by double billing for steel inspections. (P. Br. 155). That, of course, was the only one in no way leads to the conclusion that [it] was not prejudiced ... by the endless stream [of otherwise inadmissible] evidence when deciding the [other] counts. Morales' Reply Brief at 7. 22 The People make much of the fact that Wilfred Sanchez, who was charged in the steel inspection counts and with Enterprise Corruption, was acquitted of all counts. (P. Br. 101-02). One has only to read his counsel's summation, however, to realize that Sanchez should never have been charged in the first place. See SSA-6 ("[w]hat does this have to do with Wilfred Sanchez?"). Without contradiction, his counsel said this: "There is no evidence he had any role in invoicing or billing. There is no evidence he had any role in the filing of any documents with DASNY and there's been no evidence that [he] stamped, sealed or otherwise certified any document." (SSA-8-9); see also SSA-7 ("Mr. Thumma ... didn't even notice that Mr. Sanchez had left Testwell for almost a one year period of time"). 29 of the 22 steel inspections counts on which he was convicted. Most likely, the verdict reflected the jury's belief that, as Testwell's leader, Mr. Kancharla bore some responsibility for what occurred. But corporate leadership, by itself, is not a basis for criminal liability. Greenberg, et al., New York Criminal Law §1:16. As discussed below, the People can point to no evidence that Mr. Kancharla participated in the double-billing scheme or covered it up, and therefore his conviction on Count 27 cannot stand. 1. The People begin their argument by writing that Mr. Kancharla's "attack on [his] steel-related convictions rests on disguised, and often unpreserved, claims of repugnancy." (P. Br. 155). They then devote five pages to proving that any repugnancy claim would fail. But Mr. Kancharla has not raised a repugnancy claim, either in this Court or below. His argument is, and always has been, that there was insufficient evidence to convict him of the scheme to defraud count. On that issue, the 21 acquittals are relevant. See People v. Abraham, 20 13 WL 6164490 at 3 ("a reviewing court may consider a jury's acquittal on one count ... to determine if a factually inconsistent conviction on another count is supported by legally sufficient evidence"). 2. In an effort to sustain the conviction, the People advance a fraud theory that was not alleged in the Indictment or pressed at trial -- that Testwell "assign[ed] two men to do the work of at least four." (P. Br. 152); see 30 also id. at 159 (the "core [of the scheme to defraud] was the decision to cut costs by pretending to staff the jobs, while actually making it impossible for much of the inspection work to be done").23 No doubt that theory was not charged because there was no evidence to support it. To the contrary, it was acknowledged that an inspector would often have "considerable down time," particularly in the beginning and at the end of a project.24 23 Prior to trial, the People provided a lengthy bill of particulars that discussed the "Steel Inspection and Double Billing Crimes" in considerable detail but never mentioned a shortage of inspectors. See ADA Florence letter 7/28/09 ("[i]n general, Testwell billed each inspector's time for the same shift on the same day twice, once to DASNY, and once to either Tishman or Silverstein"). And in her summation, the prosecutor made clear to the jury that the scheme to defraud charge was about double-billing: This is the Scheme to Defraud. Steel inspection .... Here we have a Scheme to Defraud of over a $1,000. How do we show it's over a $1,000? We have invoices and this is going to be a little bit of an overlap because we're going to be talking about larcenies in a moment. But you'll see that Testwell was paid for steel in inspections by Tishman for $16,500.00 and by Silverstein, approximately $35,000. So certainly well over $1,000 from more than one person. (SSA-12)( emphasis added). Never was the jury told that the "core of the scheme" was about understaffing the jobs. 24 There was this testimony from a DASNY witness: (SSA-3). Q. . .. I mean you agree with me that particularly in the beginning of a project and at the end of a project there can be considerable down time? A. Yes, I agree with that. 31 Notably, the work in question for Tishman (which overlapped with the DASNY job from April 9 to June 21, 2007) occurred when the Tishman job, which began in 2005, was "wrapp[ing] up." (A-317). And the Silverstein job (which overlapped with the DASNY job in July and August 2007) was not large. It involved the fabrication of only "11 pieces" of steel for a project that was a "99 percent" concrete structure, and called for "mostly visual inspection of welds." (R-1128, A-328, R-1114)?5 Thus, the notion that the "more pernicious fraud" here involved not hiring enough inspectors is not only newly minted, but not true. 3. On the real issue here -- what Mr. Kancharla did that might support a scheme to defraud conviction -- the People say only this: (i) "it was Kancharla who negotiated the contract with Silverstein and who told [Silverstein] that he 'was going to sub the work out' to [two local inspectors]," even though he knew "these two local men were already assigned to a full-time job for DASNY'' 25 In their brief, the People write that the Silverstein job was "yet another full- time steel inspection project: River Place II, a huge high-rise apartment building by Silverstein Development." (P. Br. 150)(emphasis in original). This sentence is followed by three citations: Tr. 3464-67, 3476-77, 3506. From the first, one learns only that the project was a large residential rental building on 42nd Street between 11th and 12th Avenue. (R-1104-06). From the second, one learns only that the Silverstein witness did not have an expectation of"how long [the job] was going to take" but that "the production on the beams was going to take close to three months and [the] inspections [would be] done over that three month period." (R-1114-15). From the third, one learns only that the witness thought that fabrication would start in May but did not "know when they actually started putting the pieces together." (R-1129). Plainly, none of that supports the proposition that the Silverstein job was "full-time." 32 (P. Br. 159-60)(emphasis in original); and (ii) that it was Mr. Kancharla who "confided [to DASNY] that Testwell 'd[id] not have any special internal procedures' to address billing for multiple clients and lamented that DASNY had never given [Testwell] any 'guidelines' about the matter," a response that supposedly was "patently fraudulent coming from the CEO of a multi-million dollar corporation." (P. Br. 161). But that will not do. The evidence with respect to Mr. Kancharla's "negotiation" with Silverstein was 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. (R-1113-14). The fact that Mr. Kancharla said that the work would be "sub[bed] out to a local testing company" hardly proves that he knew Silverstein would be misbilled for it. Nor can it fairly be said that Mr. Kancharla covered-up the "Steel Inspections Scheme" after he learned that DASNY was contesting Testwell's bills. The record shows only this: (i) that Mr. Kancharla first learned that DASNY was complaining about double billing on November 16, 2007, when a DASNY 33 representative "elevate[ d]" the issue to him; (ii) that Testwell promptly sent DASNY timesheets and billing records, which showed that the two inspectors had worked simultaneously on the John Jay and Tishman projects (from April to June 2007) and on the John Jay and Silverstein projects (in July and August 2007); (iii) that by December 27, Testwell was offering DASNY a 20 percent discount because the inspectors had "performed [work] concurrently for another client," (A-450); and (iv) that when DASNY did not respond to the offer, Mr. Kancharla sought "direction or guidelines" and promised to submit revised invoices once an agreement was reached?6 If asking for guidance on how to resolve a perceived billing dispute were sufficient to support a scheme to defraud charge, then no CEO should do business in this State. 4. Toward the end of their response, the People write that "none of the three victims could be sure any particular piece of steel had actually been inspected." (P. Br. 162)(emphasis in original). But while DASNY took the position that Testwell had not fully inspected its work, neither Tishman nor Silverstein raised a similar concern. The Tishman representative testified that if he had known that the two inspectors were also working on the DASNY job, he would have expected a "prorated" rate. (A-324). And the Silverstein 26 The People mock Mr. Kancharla's request for guidelines. But Testwell had offered DASNY a 20 percent discount and had not yet received a response. It was not "fraudulent" for Mr. Kancharla to ask DASNY what discount it wanted. 34 representative testified that he "would have had a conversation with Mr. Kancharla" about it. (A-332). Neither contract had an exclusivity provision, and neither witness expressed alarm at what occurred. 27 * * * In typical fashion, the People seek to diminish Mr. Kancharla's sufficiency argument writing that it "comes down to a claim that, unless he personally put together the false bills for at least one client, he could not have participated in a scheme to defraud at all." (P. Br. 159). That, of course, is not true. Mr. Kancharla's argument comes down to the fact that he had no knowledge that anyone had been "double billed" until well after the bills had been issued, and he did nothing thereafter to advance the alleged scheme. The sufficiency issue here is not a close call. On this record, Mr. Kancharla's conviction on Count 27 was not "rough justice" (P. Br. 162), it was not justice at all. POINT THREE THE COURT ERRED IN EXCLUDING EVIDENCE SUPPORTING MR. KANCHARLA'S DEFENSE ON THE MIX DESIGN COUNTS In our opening brief, we argued that two evidentiary rulings impaired Mr. Kancharla's ability to present his defense on the mix design counts. First, the court excluded evidence that eight other testing laboratories in the New York area 27 As noted in our original brief, Testwell billed Silverstein a total of $34,600, and Tishrnan a total of$16,500. 35 employed the same mix design practice as Testwell -- i.e., they reported estimated results. 28 Second, the court excluded evidence that the concrete contractors who purchased the Testwell mix designs were well aware that Testwell was not following the preliminary tests method. Our arguments on these issues are fully developed in our opening brief, and we add only three points here. 1. It is instructive to quote the description of the "Mix Design Scheme" that the People advance in their brief. (P. Br. 118). For more than a decade, Kancharla and his Testwell confederates sold cut-rate mix-design reports, filled with false but plausible-looking "results," when in fact the required testing had never been done. Testwell offered concrete suppliers these phony reports for about one- tenth the cost of testing. Hundreds of times a year, a group of Testwell's professional engineers -- including Kancharla -- rubber-stamped a report designed to convey the false impression that the mix the supplier wanted to use had passed muster in the lab. Suppliers simply contacted Testwell's "Assistant Laboratory Manager," Edward Porter, dictated the ingredients they proposed to use, and got a Testwell engineer's seal of approval on the "test results" they wanted. This paints a dark picture of insidious criminals producing worthless reports with an intent to deceive all those who received them. But that portrait is 28 The People write that "[w]ith startling hyperbole," we asserted in our opening brief that "virtually every materials testing laboratory in the New York area" issued computer-generated reports. (P. Br. 124). But eight laboratories is a big number and represents the vast majority ofTestwell's competitors. 36 false. Had the jury heard all the evidence, it would have known that computer- generated mix design reports were commonplace in the industry -- that a custom had developed in New York of producing inexpensive mix design reports on short notice, especially when the required concrete was of a conventional type. Because that evidence was excluded, the jury was led to believe that Testwell's mix designs were aberrant -- and criminal -- when, in fact, they were no different from most anyone else's. See Newton v. Merrill Lynch, 135 F.3d 266, 273 (3d Cir. 1998)(en bane)( evidence of industry practice "could, of course, be regarded by a trier of fact as probative of the defendants' state of mind"). 2. The People work the hardest to defend the trial court's ruling excluding 31 e-mail and facsimile exchanges which showed that Testwell dealt openly with its principal customers -- the concrete contractors -- who regularly requested that Testwell create mix designs in a few days' time. Those customers obviously knew that Testwell was not following the preliminary tests method, which requires 28 days. The People argue that "these contractors were at least two steps removed on the paper trail from the victims, so their knowledge of the fraudulent nature of Testwell's reports did not reflect whether the victims [the structural engineers] had been duped." (P. Br. 134)(emphasis in original). But that 37 misses the point, which is this: ifTestwell was engaged in fraud, would it have let 14 concrete contractors in on it?29 3. The People also write that "most of [those] who were in on Testwell' s scheme were careful not to pass on the [mix design] reports too early [to the structural engineers] except in a 'handful' of instances." (P. Br. 135). But there was no evidence that Mr. Kancharla (or anyone else) chose to keep the structural engineers in the dark by delaying the delivery of reports to them. On this point, Dr. Thumma's testimony bears quoting: Q. Anybody at a meeting say to you don't let people know that we are producing these mix designs two days after they're requested? A. No. Q. Anybody ever say we can't let the structural engineers know? A. No. (A-275). If Mr. Kancharla wanted to keep the truth from the structural engineers, he would have instructed his "underlings" to watch their words. * * * 29 The People write that Mr. "Kancharla could easily have felt comfortable tipping his hand with contractors he knew." (P. Br. 134). But there was no evidence of "tipping." Appellate advocacy should not be an exercise in writing fiction. 38 In sum, Mr. Kancharla hoped to persuade the jury that Testwell was following standard industry practice when it produced inexpensive mix design reports with a quick turnaround time. The court excluded that evidence, leaving the jury with the misimpression that anyone who would produce such reports was a fraudster. Had the jury known the truth, its verdict on the mix design counts may well have been different. See People v. Buie, 86 N.Y.2d 501, 509 (1995)(evidence rules are intended "to further, not frustrate, the truth-finding function of the courts"). CONCLUSION At the risk of being presumptuous, we urge the Court to press the People at oral argument to answer some basic questions: what was the structure of the "Testwell Group"? How is that Dr. Thumma, who was Testwell's laboratory director for ten years and attended regular meetings of its executives, knew of no wrongdoing other than the computer-generated mix design reports? What evidence is there that Mr. Kancharla knew that compressive strength test results were being altered and were supposedly a "back stop" for the computer-generated mix design reports? What evidence was there that Mr. Kancharla participated in a scheme to defraud DASNY, Silverstein and Tishman? The People have filed a 1 77 -page brief that does not answer these questions. Honest answers, we submit, would result in Mr. Kancharla's receiving the relief that he seeks from this Court. 39 Accordingly, the People's cross appeal should be denied (on jurisdictional grounds or the merits), and the remaining convictions should be vacated, and a new trial ordered on the mix design counts. Dated: New York, New York January 6, 2014 Respectfully submitted, ZUCKERMAN SPAEDER, LLP By: {-1 I h:::- Paul Shechtman 1185 Avenue ofthe Americas NewYork,NY 10036 Tel (212) 704-9600 Fax (212) 704-4256 Attorneys for Defendant-Appellant V. Reddy Kancharla Of Counsel: William A. Wetzel 445 Hamilton Avenue, Suite 1206 White Plains, NY 10601 Tel (914) 298-3004 Fax (914) 683-1210 40 Second Supplemental Appendix for Defendant-Appellant-Respondent i Table of Contents Page Excerpts from Trial Transcript ................................................ SSA-1 Certification Pursuant to CPLR 2105 ...................................... SSA-13 SSA-1 EXCERPTS FROM TRIAL TRANSCRIPT [SSA-1 - SSA-12] 1 2 3 4 5 6 7 8 9 10 11 12 MS. FLORENCE: Objection, your Honor. THE COURT: If by skipping you mean not doing it, overruled. Q. Not doing it? A. I don't have that responsibility. THE COURT: Whether you do or not, he wants to know did anybody come to tell you my partner Joe is not doing such and such? THE WITNESS: To me it's an irrelevant thing to say somebody -- to say my guy isn't doing the test correctly. Q. Nobody told you they were skipping the 13 test when they came for the training? 14 15 16 stop. A. Q. That's not a relevant thing. Let's do it one last time and then we'll 17 Is it your testimony it would have been 18 irrelevant to you if the people said they weren't 19 doing the field testing? 20 21 22 23 24 25 A. Q. A. No, no, I don't expect them to. But no one did? No one did. MR. SHECHTMAN: Judge, might be a good place to break. I'm happy to go on a few minutes. THE COURT: No, let me make a ruling 2411 SSA-2 1 2 investigation is done to Q. Testwell was called on to do very high 3 profile forensic investigations? 4 5 A. Q. That's right. Mr. Kancharla never asked you to do 6 anything improper with respect to those? 7 8 A. Q. Never. He never asked you, pressured you to make 9 a false report? 10 11 12 13 14 15 MS. FLORENCE: Objection. MR. SHECHTMAN: Let me put a mix design to the side. THE COURT: Forget that question and move on. Fine. Q. In the area of concrete, in the 16 compressive testing that you did in your lab day in 17 and day out, did he ever ask you to falsify any of 18 those numbers? 19 20 21 22 A. Q. A. Q. No. Change those numbers improperly? No. When you needed additional resources, he 23 was supportive? 24 25 A. Q. Yes. Equipment, supportive? 2563 SSA-3 1 Q. The full month of April we can do that. 2 mean you agree with me that particularly in the 3 beginning of a project and at the end of a project 4 there can be considerable down time? 5 6 A. Q. Yes, I agree with that. You're not offended by the fact he may 7 simply be sitting in the trailer at that time? I 8 9 10 11 MS. FLORENCE: Objection to offended. THE COURT: Overruled. 12 Q. A. Because there's nothing for him to do? There's always work for them to do. There's always review that can be done. There's 13 always background work that can be done. There's 14 always a certain amount of research and reporting 15 and documentation they can review. I don't know if 16 I'd agree with that. 17 Q. Let's take the second day of the project, 18 January lOth and they've cut 19 20 21 22 23 24 25 MS. FLORENCE: Objection. January lOth? MR. SHECHTMAN: I'm sorry, Judge, I really -- it was a terrible mistake on my part. Q. April lOth. MS. FLORENCE: Not a terrible mistake. THE COURT: Okay. 3219 SSA-4 1 2 3 Q THE COURT: Once, twice, or do you know? THE WITNESS: Once. And, sir, before we leave this topic, with 4 regard to Mr. Hoyos, do you have the dates, do you 5 recall the dates that he attempted and failed 6 certification? 7 8 A Q I do not without looking at the sheet again. All right, if that document would assist you 9 in refreshing your recollection, could you take a look 10 at that exhibit 83 for identification and please set 11 it aside. 12 He attempted in 2004 and 2007. 13 14 15 16 MS. KEITH: No further questions at this time, Judge. THE COURT: Okay, someone. MR. SHECHTMAN: Yes, I'll be very brief. 17 CROSS-EXAMINATION 18 BY MR. SHECHTMAN: 19 Q So I take it, sir Paul Shechtman, I 20 represent Reddy Kancharla who is the CEO of 21 Testwell -- Mr. Hoyos and Mr. Kennedy were not ACI 22 certified for field inspections of concrete on January 23 16, 2007? 24 25 A Q That's correct. And now Mr. Atunbi, if he was a plant 3260 SSA-5 1 inspector, if he worked at the plant, he wouldn't need 2 to be ACI field certified? 3 A I'm not sure how that particular employment 4 position relates to code or anything. 5 Q 6 correct? 7 8 9 10 A Q A Q So he doesn't have the certification, No, he does not. But you don't know what he was doing? Correct. And if he was working as a plant inspector 11 you don't know what that requires? 12 13 14 15 16 17 18 19 20 21 22 23 24 25 I don't, no. MR. SHECHTMAN: Thank you, sir. THE COURT: Someone else? MR. DE CASTRO: No questions. MR. FARBER: No questions. THE COURT: Mr. Lankler? MR. LANKLER: No, Judge. THE COURT: Redirect? MS. KEITH: No. THE COURT: Enjoy your flight back. (Witness excused.) THE COURT: Is there someone else today? MS. FLORENCE: There is not, your Honor. THE COURT: Here is the schedule for 3261 SSA-6 1 2 (The jury entered the courtroom and the following occurred:) 3 COURT CLERK: Case on trial continued. 4 All parties are present. All jurors are present. 5 THE COURT: All right, Mr. Farber, would 6 you like to give a summation? 7 8 MR. FARBER: I would, Judge, thank you. Your Honor, counsel, learned counsel, 9 ladies and gentlemen of the jury, good afternoon. 10 What does this have to do with Wilfred 11 Sanchez? During my opening statement, I indicated 12 to you, you will find yourselves asking that 13 question over and over again. 14 Through the month of December into the 15 early part of January it seems as if Wilfred 16 Sanchez's name would never be mentioned. This is 17 because Wilfred Sanchez has nothing to do with 18 design mixes, concrete breaks, slump tests, random 19 number generators, nothing. It got to the point 20 where my friends began to teasingly say to me and 21 I quote, "I should cement my summation by saying 22 there is no concrete evidence that my client is 23 involved in this mix." 24 All joking aside, we didn't hear about 25 Mr. Sanchez for a very good reason because he has 5457 SSA-7 5458 1 nothing to do with the concrete end of Testwell. 2 We learned Wilfred Sanchez is a steel inspector. 3 We ultimately did hear his name mentioned but yet 4 of the 31 prosecution witnesses who testified, 5 only four could say they knew who Wilfred Sanchez 6 was. 7 None, including Kaspal Thumma, a 8 co-worker of Mr. Sanchez at Testwell had much to 9 say about him. 10 Mr. Thumma you may recall didn't even 11 notice that Mr. Sanchez had left Testwell for 12 almost a one year period of time. 13 Wilfred Sanchez's day-to-day activity 14 was to inspect steel. He inspected at 15 construction sites, he inspected at some 16 fabrication mills and we heard that he had a 17 special certification issued by the New York State 18 Department of Transportation, a certification 19 issued to only 37 people in the entire country 20 which enables him to inspect bridges. We heard he 21 inspected the Throgs Neck Bridge, the Whitestone 22 Bridge, and other bridges in New York state. 23 Without a doubt it's conceded he had a 24 title at Testwell when he came back and that title 25 was steel department manager. SSA-8 1 2 Sanchez did this. No one could say Mr. Sanchez did that. There is no evidence that he had any 3 role in the revision of the Finklea or Dowd 4 reports. 5 The evidence indicates that Mr. Sanchez 6 possibly reviewed those reports after he came back 7 8 from his trip, but that's it. these reports were reviewed There's no evidence revised by anyone 9 except Finklea and Dowd. 10 What about the database the prosecution 11 is going to say? The database in the computer. 12 What is that database? It's a listing of the 13 original reports, what's missing of the columns 14 that should be there, the revisions of the people 15 16 17 up here in New York. There's no column that says we should change X to Y. any suggestive revision. There's nothing to show More importantly, we 18 heard the database was recovered again from the 19 computers, again we didn't hear whose computer, 20 we're just going to lump it on Sanchez when it's 21 not even coming out of his computer. Where is 22 there anything to show Wilfred Sanchez had 23 anything to do with the revision of these steel 24 inspection reports? 25 There is no evidence he had any role in 5479 SSA-9 5480 1 invoicing or billing. 2 There is no evidence he had any role in 3 the filing of any documents with DASNY and there's 4 been no evidence that Wilfred Sanchez stamped, 5 sealed or otherwise certified any document. 6 If ever there's a classic example of 7 misjudging a book by its cover, here it is. By 8 negotiating the title of Steel Department Manager, 9 Wilfred Sanchez unwhittingly put into place this 10 prosecution years later. We have seen because of 11 this title that Mr. Sanchez has been assumed to 12 have a supervisory role over Clyde Finklea and 13 Tommy Dowd. It's because of this title that Mr. 14 Sanchez stands accused of filing false documents 15 and invoices. However, if anyone has simply read 16 more than the book jacket, they would have 17 discovered the following of this perception. The 18 facts pointing to innocence are there to see, that 19 is if there is anyone willing to take off the 20 blinders and look, assumptions are not proof. If 21 the error becomes such, then our system of justice 22 is doomed. 23 Thank you. 24 THE COURT: We're finished for the day. 25 Tomorrow, at least, we'll hear the prosecution, I SSA-10 5630 1 happening, if he really self reported, why didn't 2 he do it right away? I think you really need to 3 consider that, ladies and gentlemen, because 4 Mr. Barone could have said it right up front. He 5 could have put the certification and deleted those 6 two gentlemen, could have done that. But he 7 didn't. Why? Greed. 8 And, number 10. If the client continues 9 to balk, have Kancharla and Barone go over his 10 head and we just discussed that with the SCA and 11 DASNY. When all else fails, offer a discount 12 because to Testwell it's all about money not 13 integrity. It's not uncompromising at all unless 14 you mean uncompromising in their fraud. 15 Now let's talk about the counts I'm 16 going to be asking you to consider and we're going 17 to talk about who is charged with each so I 18 started to tell you about enterprise corruption, 19 I'm just going to pause for a second, I'm getting 20 a little dry, I apologize. 21 Enterprise corruption, the Judge is 22 going to instruct you that I must prove each 23 defendant is guilty of knowingly being a part of a 24 criminal enterprise when he intentionally 25 participating in the enterprise by participating SSA-11 1 first chart and what we saw here was Wilfred 2 Sanchez under Stephen Latus and in the second 3 chart we have Wilfred Sanchez under Vincent Barone 4 and again, ladies and gentlemen, that's not the 5 People being whimsical or making up ascertainable 6 structure as we go along, it was based on the 7 evidence. 8 Ladies and gentlemen, I submit to you 9 the first chart refers to the hierarchy based on 10 the John Jay inspection scheme. The second chart 11 with respect to Wilfred Sanchez being under 12 Mr. Barone is responsive to what Mr. Thumma 13 believed that he saw and again it doesn't matter 14 which one you credit. 15 In fact, the Judge told you that the 16 lines are for you to decide. The point is, ladies 17 and gentlemen, there is no doubt that 18 Mr. Kancharla is at the top and that Mr. Barone is 19 next to him and Wilfred Sanchez, if you want to 20 put him below Mr. Barone or you want to put him 21 below Mr. Latus, it doesn't matter. 22 23 Again, listen to the charge, listen to what the Judge says. It doesn't matter if he was 24 under here (indicating) or over here (indicating) 25 or over here (indicating) or over here 5632 SSA-12 1 2008 and April 22nd, 2008, again representative 2 counts, there are many more. 3 Move on to the next one. Okay still 4 looking for that 3:40, okay. 5 This is the Scheme To Defraud. Steel 6 inspection. April 1st, 2007 to March 24th, 2008. 7 Where are those dates coming from? Those dates 8 are coming from approximately when the steel 9 inspection started for Tishman or at least when 10 they overlapped with John Jay, two -- that last 11 letter that Mr. Barone sent to Mr. Visconti in 12 March 2008 and let's talk about the steel 13 inspection scheme. 14 Here I talked to you at length before 15 the lunch break. Here we have a Scheme to Defraud 16 of over a $1,000. How do we show it's over a 17 $1,000? We have invoices and this is going to be 18 a little bit of an overlap because we're going to 19 be talking about larcenies in a moment. But 20 you'll see that Testwell was paid for steel in 21 inspections by Tishman for $16,500.00 and by 22 23 Silverstein, approximately $35,000. So certainly well over $1,000 from more than one person. If 24 you just --these are discounts by half. That's 25 where we're taking those numbers from, ladies and 5664 lssA-13 1 CERTIFICATION PURSUANT TO CPLR 2105 I, Paul Shechtman, an attorney of the firm of Zuckerman Spaeder, LLP attorneys for the Defendant-Appellant- Respondent, do hereby certify, pursuant to CPLR 2105, that the foregoing papers constituting the Second Supplemental Appendix herein have been personally compared by me with the originals filed herein and found to be true and complete copies of those originals and the whole thereof, which are now on tile in the office of the Clerk of the County ofNew York and which have been subpoenaed for transmittal to this Court. Dated: January 6, 2014 f-t!~ Paul Shechtman Attorney for Defendant-Appellant-Respondent