United States v. Cuti, No. 11-3756 (2d Cir. 2013)

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Justia Opinion Summary

Defendants, former executives of the retail drugstore chain Duane Reede, appealed their convictions for securities fraud. Defendants had executed a number of schemes to inflate the company's earnings in quarterly and annual financial statements filed with the SEC. The court concluded that the district court did not abuse its discretion in admitting the testimony of non-expert witnesses. The court also concluded that Defendant Tennant's claims that his conviction should be overturned for insufficient evidence to prove his knowledge of the fraud and that it was error for the district court to give a conscious avoidance jury instruction were without merit. Accordingly, the court affirmed the judgment.

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11-3756 (L) United States v. Cuti 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term 2012 (Argued: October 25, 2012 4 Decided: June 26, 2013) 5 6 Docket Nos. 11-3756, 11-3831 ----------------------------------------x 7 UNITED STATES OF AMERICA, Appellee, 8 -- v. -- 9 10 ANTHONY CUTI, WILLIAM TENNANT, Defendants-Appellants. 11 12 -----------------------------------------x 13 14 15 16 B e f o r e : JACOBS, Chief Judge, WALKER, Circuit Judge, and O CONNOR, Associate Justice (retired).* 17 executives of the retail drugstore chain Duane Reade, appeal their 18 convictions for securities fraud in the District Court for the 19 Southern District of New York (Batts, J.). 20 arranged fraudulent transactions to inflate Duane Reade s reported 21 earnings in SEC filings. 22 is the admission of non-expert witness testimony as to what the 23 accounting treatment of the transactions would have been absent the 24 fraud. 25 evidence to convict him and that the district court had no basis to Defendants-Appellants Anthony Cuti and William Tennant, former * Cuti and Tennant Among the issues raised on appeal by Cuti Tennant asserts primarily that the jury lacked sufficient The Honorable Sandra Day O Connor, Associate Justice (retired) of the United States Supreme Court, sitting by designation. 1 give a conscious avoidance instruction. 2 district court did not abuse its discretion in admitting the lay 3 witness testimony and that Tennant s claims are without merit. 4 Affirmed. 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 We conclude that the BRIAN C. BROOK, Clinton Brook & Peed (Matthew J. Peed, Clinton Brook & Peed, and Brian D. Waller, Simon & Partners, LLP, on the brief), New York, NY, for Defendant-Appellant Anthony Cuti. JOHN J. KENNEY (Laura B. Hoguet, Tai-Heng Cheng, Caitlin N. Bush, Damian R. Cavaleri, on the brief), Hoguet Newman Regal & Kenney, LLP, New York, NY, for DefendantAppellant William Tennant. SARAH E. MCCALLUM (Rebecca Monck Ricigliano, Katherine Polk Failla, on the brief), Assistant United States Attorneys, for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Appellee. JOHN M. WALKER, JR., Circuit Judge: Defendants-Appellants Anthony Cuti and William Tennant appeal 28 29 from judgments of conviction following a jury trial in the District 30 Court for the Southern District of New York (Deborah A. Batts, 31 Judge).1 1 This opinion addresses Cuti s claim that the district Cuti was convicted of conspiracy under 18 U.S.C. § 371 (Count One) and substantive offenses of securities fraud in violation of 15 U.S.C. §§ 78j(b) & 78ff, 17 C.F.R. § 240.10b-5 and 18 U.S.C. § 2 (Count 2), making false statements in two SEC filings in violation of 15 U.S.C. §§ 78m(a) & 78ff, 17 C.F.R. § 240.13a-1 and 18 U.S.C. § 2 (Counts 3 and 4), and making false statements in another SEC filing in violation of 15 U.S.C. §§ 78o(d) & 78ff, 17 C.F.R. 2 1 court erred in admitting testimony from two lay witnesses as to 2 what the accounting treatment of certain fraudulent transactions 3 would have been absent the fraud, and Tennant s claims that his 4 conviction should be overturned for insufficient evidence to prove 5 his knowledge of the fraud and that it was error for the district 6 court to give a conscious avoidance jury instruction. 7 that the district court did not abuse its discretion in admitting 8 the testimony of the non-expert witnesses and that Tennant s claims 9 are without merit.2 AFFIRMED. BACKGROUND 10 11 We conclude Cuti was the former president, chief executive officer, and 12 board chairman of Duane Reade, a retail drugstore chain in the New 13 York City metropolitan area. 14 chief financial officer or CFO and senior vice-president, who 15 continued to consult for the company on real estate matters after 16 his formal retirement. 17 Tennant was Duane Reade s former The trial evidence, which we take as credited by the jury, 18 showed that from 2000 to 2004, Cuti and Tennant (collectively, 19 defendants ) executed a number of schemes to inflate the company s §§ 240.15d-1 & d-13 (Count 5). Tennant was acquitted on Count 1 and convicted on Count 2. The district court sentenced Cuti and Tennant principally to imprisonment for three years and time served, respectively, and imposed fines of $5 million on Cuti and $10,000 on Tennant. 2 The appellants other arguments on appeal are addressed in a summary order issued simultaneously with this opinion. 3 1 earnings in quarterly and annual financial statements filed with 2 the Securities and Exchange Commission ( SEC ). 3 The principal scheme consisted of the fraudulent sale of real 4 estate concessions and other rights that Duane Reade held in its 5 storefront leases. 6 unexpired lease, the right to the remainder of the lease term could 7 have residual value and be sold back to the landlord or to a 8 broker, especially when rental rates had risen. 9 however, inflated earnings by fraudulently selling real estate 10 concessions that were virtually worthless and surreptitiously 11 repaying the purchasers through payments disguised as expenses. 12 When Duane Reade vacated a storefront with an Cuti and Tennant, Cuti and Tennant s primary counterparty to the transactions in 13 this scheme was the Winick Realty Group ( Winick Realty ), a 14 commercial real estate brokerage firm and its subsidiaries 15 (collectively, the WRG entities ). 16 partner at Winick Realty, testified that in 2000, the WRG entities 17 paid $806,000 for concessions in eight leases that Duane Reade had 18 already sold, assigned away or planned to abandon and another 19 $890,000 for options to buy out Duane Reade from three leases that 20 were of minimal value to Winick Realty. 21 WRG entities for these outlays using a sham consulting agreement 22 and padded brokerage fees. 23 these transactions helped Duane Reade bridge a gap between its true 24 earnings and analysts expectations for the fourth quarter of 2000. At trial, Cory Zelnik, a The defendants repaid the The revenue immediately recognized from 4 1 In subsequent quarters, the defendants continued to arrange other 2 sham transactions to inflate company earnings and to repay the 3 counterparties. 4 Because Duane Reade recognized such significant income from 5 these activities, its external auditor, PricewaterhouseCoopers 6 ( PwC ), required the company to include in its financial 7 statements filed with the SEC, a note stating that the company had 8 no side agreements with or other obligations to the transaction 9 counterparties. At trial, the government produced evidence of side 10 agreements and demonstrated, through witness testimony and 11 voluminous documentation, how the defendants executed and concealed 12 their fraudulent conduct from the company s internal accountants, 13 PwC, the SEC, and the investing public. 14 As part of its case, the government called Kevin Hallinan, the 15 PwC partner who was Duane Reade s lead outside auditor, and John 16 Henry, Tennant s successor as CFO and the company s chief in-house 17 accountant, to testify as to how they had accounted for the 18 proceeds from the fraudulent transactions; how they would have 19 accounted for the transactions had they been aware of the full 20 facts; and how the material information that was withheld from them 21 led to misstatements in the company s financial statements. 22 The rules governing the accounting of real estate concession 23 transactions, as Hallinan and Henry explained, are set forth under 24 generally accepted accounting principles ( GAAP ) including 5 1 Financial Accounting Standards Board Statement No. 13 and SEC Staff 2 Accounting Bulletin No. 104. 3 such a transaction to be recognized immediately, (1) Duane Reade 4 had to have negotiated with the counterparty at arms length, (2) 5 the transaction must have had value, (3) to the extent the 6 transaction relieved Duane Reade of its obligations under a lease 7 agreement, the company could not be committed to enter into another 8 lease with the same landlord, and (4) the transaction could not 9 create any further obligations for Duane Reade to perform. In order for revenue generated from If any 10 of the foregoing criteria were not satisfied, immediate revenue 11 recognition would have been inappropriate. 12 internal accountants and outside auditors adhered to these rules in 13 booking revenue from real estate concession transactions. 14 trial, the defendants did not dispute that these rules were 15 appropriately and consistently applied. 16 Both the company s At To demonstrate the impact of the defendants deception on the 17 preparation and review of the company s financial statements, the 18 government presented Hallinan and Henry with information that Cuti 19 and Tennant had withheld, such as side letters to the transactions, 20 and asked how the withheld information would have affected their 21 accounting. 22 they had been aware of the withheld information, they would not 23 have recognized the full amount of the transaction proceeds as 24 immediate revenue. In each instance, Hallinan and Henry replied that if Defense counsel objected to the use of what- 6 1 if-you-had-known questions as eliciting inadmissible expert 2 opinion testimony from fact witnesses. In his defense, Tennant asserted that, like Hallinan and 3 4 Henry, he too was deceived by Cuti s fraudulent scheme and signed 5 transaction documents without knowing that fraud was afoot so there 6 was insufficient evidence of his criminal intent to support a 7 conviction. 8 a conscious avoidance instruction in the jury charge, which he 9 claimed was unwarranted and prejudicial. These arguments are again raised on appeal and we consider 10 11 them in turn. DISCUSSION 12 13 14 He also objected to the district court s inclusion of I. Cuti s claim as to the non-expert testimony Cuti argues on appeal, as he did below, that the what-if-you- 15 had-known questions posed to Hallinan and Henry improperly 16 elicited expert opinion testimony from non-expert witnesses. 17 Because both Hallinan and Henry, while professional accountants, 18 were not qualified as experts, Cuti insists that their testimony as 19 lay witnesses was inadmissible. 20 We accord a district court s evidentiary rulings deference, 21 and reverse only for abuse of discretion. United States v. 22 Robinson, 702 F.3d 22, 36 (2d Cir. 2012). A district court has 23 abused its discretion if its ruling is based on an erroneous view 24 of the law or on a clearly erroneous assessment of the evidence, or 7 1 if its decision cannot be located within the range of permissible 2 decisions. In re Sims, 534 F.3d 117, 132 (2d Cir. 2008). The Federal Rules of Evidence allow the admission of fact 3 4 testimony so long as the witness has personal knowledge, see Fed. R. 5 Evid. 602,3 while opinion testimony can be presented by either a lay 6 or expert witness, see Fed. R. Evid. 7014 & 702.5 7 question is therefore whether the contested testimony should be 8 characterized as fact or opinion. 9 statements of fact and opinion is, at best, one of degree. Beech The initial [T]he distinction between 3 Rule 602 provides in relevant part: A witness may testify to a matter only if evidence is introduced sufficient to support a finding that the witness has personal knowledge of the matter. Evidence to prove personal knowledge may consist of the witness s own testimony. 4 Rule 701 states: If a witness is not testifying as an expert, testimony in the form of an opinion is limited to one that is: (a) rationally based on the witness s perception;(b) helpful to clearly understanding the witness s testimony or to determining a fact in issue; and (c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702. 5 Rule 702 states: A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if: (a) the expert s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. 8 1 Aircraft Corp. v. Rainey, 488 U.S. 153, 168 (1988). 2 adopt verbatim Judge Posner s observation that [a]ll knowledge is 3 inferential, and the combined effect of [Federal] Rules [of 4 Evidence] 602 and 701 is to recognize this epistemological verity 5 but at the same time to prevent the piling of inference upon 6 inference to the point where testimony ceases to be reliable to 7 acknowledge its essential truth. 8 F.2d 1223, 1226 (7th Cir. 1990). 9 We need not United States v. Giovannetti, 919 In this case, the inference that Hallinan and Henry were asked 10 to make in answering the hypothetical questions was limited by the 11 factual foundation laid in earlier admitted testimony and exhibits, 12 the factual nature of the hypotheticals, and the witnesses 13 reasoning, which was based on undisputed accounting rules. 14 limitations left little room for the witnesses to engage in 15 speculation and ensured that their testimony fell near the fact end 16 of the fact-opinion spectrum. 17 These Moreover, the witnesses, although not qualified as experts, 18 were fact witnesses of a unique sort. Each was a certified and 19 experienced accountant personally familiar with the accounting of 20 the transactions at issue. 21 facts that had been independently established in the record. 22 the facts as the witnesses had understood them were A and the true 23 facts were B, it was not inappropriate to ascertain, from the very 24 witnesses responsible for their accounting, whether B would have The hypothetical questions utilized 9 If 1 affected that accounting under the same, undisputed accounting 2 rules. 3 in detail, the reasoning process that the witnesses employed in 4 answering the hypotheticals was straightforward and transparent to 5 the jurors, who could readily discern whether the responses given 6 were reliable. 7 And, since the applicable accounting rules were explained Cuti also contests whether the witnesses had sufficient 8 personal knowledge, as required by Rule 602, to provide factual 9 testimony. See Fed. R. Evid. 602. This rule makes personal 10 knowledge a foundational requirement for fact witness testimony and 11 is premised on the common law belief that a witness who testifies 12 to a fact which can be perceived by the senses must have had an 13 opportunity to observe, and must have actually observed the fact. 14 Fed. R. Evid. 602 advisory committee s note. 15 However, personal knowledge of a fact is not an absolute to 16 Rule 602 s foundational requirement, which may consist of what the 17 witness thinks he knows from personal perception. 18 a witness may testify to the fact of what he did not know and how, 19 if he had known that independently established fact, it would have 20 affected his conduct or behavior. 21 if-you-had-known questions that present withheld facts to a 22 witness are especially useful to elicit testimony about the impact 23 of fraud. 24 circuits have permitted the use of hypothetical questions to Id. Similarly, As this case illustrates, what- Although we have not addressed the issue squarely, other 10 1 inquire into the effect of a fraud. See, e.g., United States v. 2 Orr, 692 F.3d 1079, 1096-97 (10th Cir. 2012); United States v. 3 Laurienti, 611 F.3d 530, 549 (9th Cir. 2010); United States v. 4 Jennings, 487 F.3d 564, 582 (8th Cir. 2007); United States v. 5 Ranney, 719 F.2d 1183, 1187-88 (1st Cir. 1983); United States v. 6 Bush, 522 F.2d 641, 649-50 (7th Cir. 1975). 7 It also bears noting that there was nothing in the 8 prosecution s questions or in the answers they elicited that 9 prevented the defense from challenging the factual accuracy of the 10 disputed testimony. 11 least one document Hallinan claimed not to have seen was actually 12 recorded in a log of documents covered by PwC s audit, and thus 13 Cuti was able to argue that the auditor could not have been 14 deceived about the accounting for that transaction. 15 questioned the materiality of the accounting distortions to the 16 company s overall financial statement by extracting an admission 17 from Hallinan that the fair comparison for the proceeds generated 18 from the real estate concession transactions was to the company s 19 pre-tax income and not to the considerably smaller after-tax net 20 income figure. 21 Indeed, Cuti pointed out at trial that at Cuti also While we hold that the challenged testimony was properly 22 admitted as factual testimony, we alternatively hold that it is 23 admissible as lay opinion under Federal Rule of Evidence 701, which 24 permits a lay witness to give an opinion if it is limited to one 11 1 that is: (a) rationally based on the witness s perception; (b) 2 helpful to clearly understanding the witness s testimony or to 3 determining a fact in issue; and (c) not based on scientific, 4 technical, or other specialized knowledge within the scope of Rule 5 702. 6 Cuti argues that the hypothetical questions posed to the 7 witnesses violated each subsection of Rule 701 because Hallinan and 8 Henry were asked to comment on facts that they had not personally 9 perceived; because their interpretation of evidence already 10 admitted was not helpful to the jury; and because the witnesses 11 used specialized expertise and were not properly qualified as 12 experts in accordance with Rule 702. 13 Cuti s Rule 701(a) objection is unpersuasive because, as 14 discussed earlier, the witnesses were not testifying to the 15 existence of facts, but simply acknowledging that knowledge of such 16 facts, already admitted into evidence, would have caused them to 17 alter their accounting treatment. 18 helpful to the jury within the meaning of Rule 701(b). 19 Their testimony was plainly Cuti s Rule 701(c) contention also fails but requires a bit 20 more elaboration. The Advisory Committee s Note on Rule 701 21 instructs that a witness testimony must be scrutinized under the 22 rules regulating expert opinion to the extent that the witness is 23 providing testimony based on scientific, technical, or other 24 specialized knowledge within the scope of Rule 702. 12 Fed. R. Evid. 1 701 advisory committee s note, 2000 amend. 2 701 must be limited to opinions that result[] from a process of 3 reasoning familiar in everyday life. 4 Lay opinion under Rule Id. Cuti insists that if Hallinan and Henry s answers to the 5 hypotheticals are characterized as opinion, they are necessarily 6 expert opinion and must satisfy the qualification requirements of 7 Rule 702 because the testimony involved the technical and 8 specialized knowledge of the accounting profession. 9 the accounting rules involved in the recognition of revenue from At first blush, 10 real estate concession transactions appear technical and unfamiliar 11 to everyday life, but those rules or their interpretation were not 12 in question in this case. 13 facts would have altered the rules application. The only issue was whether the withheld 14 We held in Bank of China, N.Y. Branch v. NBM LLC that a 15 witness s specialized knowledge, or the fact that he was chosen to 16 carry out an investigation because of this knowledge, does not 17 render his testimony expert as long as the testimony was based on 18 his investigation and reflected his investigatory findings and 19 conclusions, and was not rooted exclusively in his expertise. 20 F.3d 171, 181 (2d Cir. 2004). 21 product of his investigation, but rather reflected [his] 22 specialized knowledge [of the banking industry], then it was 23 impermissible expert testimony. 24 359 However, if the testimony was not a Id. at 182. A similar question arose in United States v. Rigas, 490 F.3d 13 1 208 (2d Cir. 2007). 2 of a company s books testified to the accounting impact of debt 3 reclassifications, which the government had already established as 4 fraudulent. 5 opinion because it did not address what the appropriate accounting 6 technique should have been, but was instead simply offered to show 7 what the amount of the debt would have been had the fraud not 8 occurred. 9 There, an accountant with personal knowledge We held that the accountant s testimony was lay Id. at 225. The testimony in this case was not rooted exclusively [in the 10 witness s] expertise and did not address the soundness of the 11 accounting rules. 12 determination is reduced to impact -- whether a witness would have 13 acted differently if he had been aware of additional information -- 14 the witness so testifying is engaged in a process of reasoning 15 familiar in everyday life. 16 committee s note, 2000 amend. 17 in response to the hypothetical questions was therefore also 18 admissible as lay opinion. 19 When the issue for the fact-finder s See Fed. R. Evid. 701 advisory The testimony of Hallinan and Henry United States v. Garcia, 413 F.3d 201, 216 (2d Cir. 2005), is 20 not to the contrary. In that case, we held that an undercover law 21 enforcement agent could not testify as lay opinion that, based on 22 his knowledge gleaned from other drug interdiction cases, the 23 defendant was a partner in the narcotics distribution conspiracy. 24 Such testimony was inadmissible because the opinion was based on 14 1 specialized experience that the agent had accumulated from other 2 cases and involved a specialized reasoning process not readily 3 understandable to the average juror. 4 here. 5 with matters pertinent to this case, and their reasoning was 6 evident to the jury. Nothing similar occurred These witnesses testified based only on their experiences 7 Cuti also challenges the admission of the contested testimony 8 as undermining the presumption of innocence by assuming his guilt. 9 In support of this argument, Cuti highlights Second Circuit case 10 law that forbids such questions in the cross-examination of defense 11 character witnesses. 12 948, 952 (2d Cir. 1997); United States v. Oshatz, 912 F.2d 534, 539 13 (2d Cir. 1990). 14 See, e.g., United States v. Russo, 110 F.3d This argument fails because the challenged questions here were 15 not directed at character witnesses and made no assumption of guilt. 16 Hallinan and Henry were asked, for the most part, narrow questions 17 on direct examination designed to assess the impact of the 18 fraudulent omissions on their accounting treatment. 19 court took pains to limit the hypotheticals to the impact of the 20 withheld information and barred the witnesses from speaking to the 21 wrongfulness of the defendants actions, leaving that analysis to 22 the jury. 23 the factual accuracy of the disputed testimony. 24 The district And, as noted, Cuti had ample opportunity to challenge Finally, Cuti argues that the manner in which the government 15 1 presented the withheld information to the witnesses was flawed 2 because some questions were open-ended, some were phrased in terms 3 of opinion, and some were based on material not in the record. 4 district court reasonably required the government to reformulate 5 its questions in some instances, but it did not always do so. 6 have examined the record and find any missteps in this regard to be 7 minor relative to the witnesses entire testimony and harmless to 8 the outcome of the trial. 9 record, is sure that the [evidentiary] error did not influence the The We When a court, upon review of the entire 10 jury, or had but very slight effect, the verdict and the judgment 11 should stand. Kotteakos v. United States, 328 U.S. 750, 764 (1946). 12 In sum, we hold that under these circumstances the contested 13 testimony was admissible fact testimony that was relevant, 14 probative, and for the most part carefully controlled so as not to 15 be unfairly prejudicial. 16 Alternatively, it was admissible as lay opinion testimony. See Fed. 17 R. Evid. 701. 18 admitting the challenged testimony. 19 20 21 II. See Fed. R. Evid. 401, 403 & 602. The district court did not abuse its discretion in Tennant s claims A. Sufficiency of evidence Tennant argues that, even though he signed the various 22 documents used to effectuate the fraudulent real estate concession 23 transactions and return-trip payments disguised as commissions and 24 consulting fees and engaged in other related activities, there was 16 1 insufficient evidence that he knew or should have known that fraud 2 was afoot to allow the case to go to the jury. 3 We review a claim of insufficient evidence de novo, United 4 States v. Geibel, 369 F.3d 682, 689 (2d Cir. 2004), but must uphold 5 the jury verdict if drawing all inferences in favor of the 6 prosecution and viewing the evidence in the light most favorable to 7 the prosecution, any rational trier of fact could have found the 8 essential elements of the crime beyond a reasonable doubt. United 9 States v. Santos, 449 F.3d 93, 102 (2d Cir. 2005) (quotation marks 10 omitted). 11 grounds undertakes a heavy burden. 12 F.3d 122, 139 (2d Cir. 2011). 13 entered only if the evidence that the defendant committed the 14 crime alleged is nonexistent or so meager that no reasonable jury 15 could find guilt beyond a reasonable doubt. United States v. 16 Espaillet, 380 F.3d 713, 718 (2d Cir. 2004). In a close case, 17 where either of the two results, a reasonable doubt or no 18 reasonable doubt, is fairly possible, the court must let the jury 19 decide the matter. 20 Cir. 2006)(quotation marks and alteration omitted). 21 A defendant challenging a conviction on sufficiency United States v. Kozeny, 667 A judgment of acquittal can be United States v. Temple, 447 F.3d 130, 137 (2d In considering the sufficiency of the evidence supporting a 22 guilty verdict, the evidence must be viewed in the light most 23 favorable to the Government. 24 the role of the jury, United States v. Guadagna, 183 F.3d 122, 129 Id. at 136-37. 17 To avoid usurping 1 (2d. Cir. 1999), the Court must resolve all issues of credibility 2 in favor of the jury s verdict, Kozeny, 667 F.3d at 139. 3 must also credit[] every inference that the jury might have drawn 4 in favor of the government, Temple, 447 F.3d at 136-37, because 5 the task of choosing among competing, permissible inferences is 6 for the [jury], not for the reviewing court. 7 McDermott, 245 F.3d 133, 137 (2d Cir. 2001). 8 The Court United States v. Tennant argues that evidence of his knowledge of the fraud is 9 insufficient because Zelnik could not definitively place him at a 10 particular meeting where Cuti discussed this conspiracy with the 11 principals of the WRG entities, who were in on the scheme. 12 basis alone, Tennant reasons that his conviction was based on 13 evidence that was at least as consistent with innocence as with 14 guilt, and must be reversed. (Tennant Brief at 45 (quoting United 15 States v. Mulheren, 938 F.2d 364, 372 (2d Cir. 1991)). 16 approach is flawed because not only must the evidence be viewed in 17 the light most favorable to the government, Santos, 449 F.3d at 102, 18 it must also be analyzed in conjunction [with all of the evidence 19 and] not in isolation, United States v. Persico, 645 F.3d 85, 104 20 (2d Cir. 2011). 21 applied to the totality of the government s case and not to each 22 element, as each fact may gain color from others. 23 F.3d at 130. On that This This is so because the sufficiency test must be 18 Guadagna, 183 1 We have little difficulty rejecting Tennant s argument that 2 the evidence was insufficient to support the jury s finding that he 3 was aware of the fraudulent character of the transactions at issue. 4 He either knew or had to know that the so-called real estate 5 concession rights that Duane Reade was selling to the WRG entities 6 in 2000 were valueless because he had personally signed or approved 7 transactions that had rendered those very rights worthless in the 8 first place or was otherwise privy to information that revealed 9 their sham character. One conspicuous example of this is the lease 10 remainder in the storefront at 19 Park Place, which Duane Reade 11 sold, pursuant to a document that Tennant personally signed, for 12 $12,500 back to the landlord of that property. 13 Tennant personally signed the $806,000 deal with the WRG entities 14 into which the same concessionary right was bundled for $75,000. 15 The jury was entitled to infer guilty knowledge on the part of 16 Tennant, the company s former CFO and senior vice-president who was 17 experienced in real estate matters, from his signing two contracts 18 on back-to-back days to sell the same leasehold interest to two 19 different buyers. 20 other company personnel failed to tell him of the fraud could 21 reasonably be rejected by the jury. 22 The very next day, Against this and similar evidence, his plea that Moreover, Zelnik testified at trial that not only was Tennant 23 aware that the concessions being sold were worthless, Tennant and 24 Cuti also determined the arbitrary values that the WRG entities 19 1 would pay for them, and that it was Tennant who devised the 2 vehicles used to make return payments to the WRG entities. 3 totality of the government s evidence was more than sufficient for 4 the jury to conclude that Tennant was aware of the fraud that he 5 was helping to perpetrate. 6 7 B. The Conscious avoidance charge Tennant faults the district court for including a conscious 8 avoidance charge in its instructions to the jury, which he says 9 caused him prejudice and warrants reversal of his conviction. The 10 district court instructed the jury that Tennant knowingly 11 committed fraud if he was actually aware he was making or causing 12 a false statement to be made, or if he (a) was aware of a high 13 probability that, because of the [real estate concession] 14 transactions at issue, Duane Reade s reported financial results 15 were false or misleading but (b) that he deliberately and 16 consciously avoided confirming these facts. (Tr. 5004-05). 17 Court cautioned, however, that the knowingly element would not be 18 satisfied if Tennant actually believed that the transactions were 19 legitimate and not improper. (Tr. 5005). 20 The Tennant takes no issue with the form of the conscious 21 avoidance instruction, but rather argues that the charge should not 22 have been given at all because there was an insufficient factual 23 predicate to support it. This argument is without merit. 20 1 We review a claim of error in jury instructions de novo, 2 reversing only where there was prejudicial error in the charge as a 3 whole. 4 A conscious-avoidance charge is appropriate when (a) the element 5 of knowledge is in dispute, and (b) the evidence would permit a 6 rational juror to conclude beyond a reasonable doubt that the 7 defendant was aware of a high probability of the fact in dispute 8 and consciously avoided confirming that fact. Id. (quotation marks 9 omitted); see also United States v. Ferguson, 676 F.3d 260, 277-78 United States v. Ebbers, 458 F.3d 110, 124 (2d Cir. 2006). 10 (2d Cir. 2011). 11 defendant attended meetings that were part of the charged scheme, 12 yet argues that he lacked the requisite scienter because, for 13 example, he didn t bother to read in full the documents he signed, 14 the charge is appropriate. 15 For example, in a securities fraud case, if a Ebbers, 458 F.3d at 124-25. The Government need not choose between an actual knowledge 16 and a conscious avoidance theory. 17 To the contrary, in many cases, the evidence supporting each theory 18 will be the same: 19 20 21 22 23 24 25 26 27 28 29 Ferguson, 676 F.3d at 278. [T]he same evidence that will raise an inference that the defendant had actual knowledge of the illegal conduct ordinarily will also raise the inference that the defendant was subjectively aware of a high probability of the existence of illegal conduct. Moreover, [conscious avoidance] may be established where a defendant s involvement in the criminal offense may have been so overwhelmingly suspicious that the defendant s failure to question the suspicious circumstances established the defendant s purposeful contrivance to avoid guilty knowledge. 21 1 Kozeny, 667 F.3d at 133-34 (quotation marks omitted) (first 2 alteration added). 3 District courts should pay heed, however, to circumstances in 4 which a conscious avoidance charge may be inappropriate. This is 5 so when the only evidence that alerts the defendant to the high 6 probability of the criminal activity is direct evidence of the 7 illegality such that the question for the jury is whether the 8 defendant had either actual knowledge or no knowledge at all of the 9 facts in question. United States v. Nektalov, 461 F.3d 309, 316 10 (2d Cir. 2006)(quotation marks omitted). 11 defendant denies ever having access to the facts that the 12 government claims should have alerted him to the fraud, the issue 13 is not whether the facts he knew should have alerted him but 14 whether he could even have known those facts. 15 States v. Adeniji, 31 F.3d 58, 63 (2d Cir. 1994). 16 Similarly, if the See, e.g., United In this case, the district court did not err in giving the 17 conscious avoidance charge. The government s theory was that, 18 because Tennant was immersed in sham concession agreements that he 19 personally signed or approved, determined phony values for the 20 contracts, figured out how to get money back to the WRG entities 21 through overpayments and sham consulting services, and met with the 22 principals of the WRG entities to these ends, Tennant had actual 23 knowledge of the fraud. 22 In response, Tennant argued both that the evidence was lacking 1 2 that he knew of the fraud and that the facts of which he was aware 3 were insufficient to alert him to a high probability of fraud.6 4 This purported lack of knowledge defense, despite Tennant s deep 5 involvement in the transactions that effectuated the fraud, all but 6 invited the conscious avoidance charge. 7 that supported the government s theory of actual knowledge also 8 raised the inference that he was subjectively aware of a high 9 probability of the existence of illegal conduct and thus properly The same evidentiary facts 10 served as the factual predicate for the conscious avoidance charge, 11 Kozeny, 667 F.3d at 133-34. 12 to choose between an actual knowledge theory or a conscious 13 avoidance theory, Ferguson, 676 F.3d at 278, and the district 14 court did not err in giving both to the jury. 15 plausible that the semi-retired Tennant, attending part-time to 16 complex transactions, might have been sufficiently disengaged or 17 trusting that in fact he lacked knowledge on any culpable level; 18 but the jury was empowered to find otherwise, and did. Finally, the government did not have Of course, it is 19 6 For example, Tennant s able counsel argued in summation, There is no evidence that [Tennant] knew anything about improper sales of leases or lease rights [to the WRG entities]. Then and now he believed them to be entirely proper, arm s-length transactions. (Tr. 4850). 23 CONCLUSION 1 2 For the above reasons, and for those set forth in the 3 accompanying summary order, the judgments of conviction and 4 sentence are AFFIRMED. 24