Lankler & Carragher, LLP, New York (Andrew M. Lankler of counsel), for Vincent Barone, appellant.
Stillman, Friedman & Shechtman, P.C., New York (Paul Shechtman of counsel), for V. Reddy Kancharla, appellant.
Cyrus R. Vance, Jr., District Attorney, New York (Amyjane Rettew of counsel), for respondent.
Catterson, J.P., Richter, Abdus-Salaam, Manzanet-Daniels, Román, JJ.
Judgment, Supreme Court, New York County (Edward J. McLaughlin, J.), rendered April 7, 2010, convicting defendant Vincent Barone, after a jury trial, of enterprise corruption, attempted grand larceny in the third degree, two counts of scheme to defraud in the first degree and nine counts of offering a false instrument for filing in the first degree, and sentencing him to an aggregate term of 5 ⅓ to 16 years, modified, on the law and the facts, to the extent of vacating the conviction for enterprise corruption and, as a matter of discretion in the interest of justice, to the extent of modifying the remaining sentences to run concurrently, thereby reducing the aggregate term to 16 months to 4 years, and otherwise affirmed. Judgment, same court and Justice, rendered May 26, 2010, convicting defendant V. Reddy Kancharla, after a jury trial, of enterprise corruption, two counts of scheme to defraud in the first degree, nine counts of offering a false instrument for filing in the first degree and three counts of falsifying business records in the first degree, and sentencing him to an aggregate term of 7 to 21 years, modified, on the law and the facts, to the extent of vacating the convictions for enterprise corruption and offering a false instrument for filing under counts 12 and 13 as originally numbered in the indictment, and, as a matter of discretion in the interest of justice, to the extent of modifying the remaining sentences to run concurrently, thereby reducing the aggregate term to 16 months to 4 years, and otherwise affirmed. The matter is remitted to Supreme Court, New York County, for further proceedings pursuant to CPL 460.50(5).
We exercise our discretion in the interest of justice to modify defendants' sentences so that the sentences for the remaining counts run concurrently. Pursuant to CPL 470.15(6)(b), this Court has "broad, plenary power to modify a sentence that is unduly harsh or severe under the circumstances, " even with respect to an otherwise legal sentence (see People v Delgado, 80 N.Y.2d 780, 783 ). This power may be exercised in the interest of justice and without deference to the sentencing court (id.) Where the court deems an otherwise legal sentence to be excessive, it may "substitute [its] own discretion even where a trial court has not abused its discretion" (People v Edwards, 37 A.D.3d 289, 290 [1st Dept 2007], lv denied 9 N.Y.3d 843, 840 , citing People v Rosenthal, 305 A.D.2d 327, 329 [1st Dept 2003]).
In this case, the trial court sentenced Barone to an aggregate term of 5 ⅓ to 16 years, indicating that the sentences on four counts — including offering a false instrument for filing, attempted grand larceny, and scheme to defraud — should run consecutively, but concurrently with the sentences on the remaining counts, including the sentence of 5 ⅓ to 16 years for enterprise corruption. Similarly, the trial court sentenced Kancharla to an aggregate term of 7 to 21 years, indicating that the sentences on six counts — including offering a false instrument for filing, falsifying a business record, and scheme to defraud — should run consecutively to each other. Kancharla's 7-to-21-year sentence for enterprise corruption along with the sentences for the remaining counts, were to run concurrently.
Thus, the trial court meted out the sentences in a manner such that even if the enterprise corruption convictions were vacated, the defendants would still serve equivalent aggregate terms. As defendants point out, the trial court apparently felt that such sentences were warranted in order to "send a message" to " the construction industry in New York City [which] over the decades has been rife with corruption.'"
In light of our decision to vacate the enterprise corruption convictions, we find that the imposition of consecutive sentences is unduly harsh. "[F]airness of the criminal justice system requires some measure of equality in the sentences meted out to defendants who commit the same or similar crimes" see People v Schonfeld, 68 A.D.3d 449, 450 [1st Dept 2009] [internal quotation marks omitted]; People v Andrews, 176 A.D.2d 530 [1st Dept 1991] , lv denied 79 N.Y.2d 918  [although defendant was could be properly sentenced to greater term than those imposed upon codefendants who pled guilty, the concept of proportionality of punishment warranted a reduction of his sentence]; People v Slobodan, 67 A.D.2d 630, 630, 412 N.Y.S.2d 21, 22 (1st Dept. 1979)(sentence reduced where the difference between defendant's sentence and those of his codefendants who did not go to trial was "so great as to raise serious questions as to whether [defendant was] not being penalized for going to trial").
Here, in return for his cooperation with the prosecution, codefendant Thumma, who affixed his engineer's stamp to hundreds of mix design reports, received a misdemeanor conviction and a probationary sentence and will likely retain his engineering license. Similarly, codefendant Porter pleaded guilty to a single felony count and was sentenced to probation. The defendants' consecutive sentences for the same or similar crimes, all non-violent class E felonies, are strikingly disproportionate and should be reduced in the interest of justice.
All concur except Catterson, J.P. and Richter, Abdus-Salaam and Román, JJ. who concur in Part I of a separate memorandum by Catterson, J.P.; Richter, Abdus-Salaam, Manzanet-Daniels and Román, JJ. who concur in Part I of a separate memorandum by Manzanet-Daniels, J.; Catterson, J.P. who dissents in part in Part II of his separate memorandum and Manzanet-Daniels, J. who dissents in part in Part II of her separate memorandum as follows:
CATTERSON, J.P. (concurring in part and dissenting in part) Part I
In this case involving alleged falsified test and inspection reports for landmark projects in the New York City metropolitan area, we find that defendants' convictions for enterprise corruption were not supported by legally sufficient evidence and were against the weight of the evidence. Relying on pure conjecture bolstered by empty rhetoric, the People failed to produce any evidence that either defendant knew that test results and inspection reports were fabricated, much less that the defendants spearheaded a criminal enterprise.
The record reflects that in 1995, defendant V. Reddy Kancharla joined Testwell Craig, a construction material testing company, as its laboratory director. Kancharla acquired the company three years later, renaming it Testwell Laboratories, Inc. (hereinafter referred to as "Testwell"). Testwell was considered the preeminent material testing laboratory in the New York area. Both public and private builders relied on its test reports and certifications about the strength of concrete and the quality of steel in structures built in the city.
In October 2008, a New York County grand jury returned an indictment against Testwell, its owner and chief executive officer Kancharla, its vice-president of engineering, defendant Vincent Barone, and several other employees, charging various crimes including enterprise corruption, scheme to defraud and offering a false instrument for filing. The crimes were based on five separate criminal schemes. At issue in this appeal are three schemes involving concrete and steel testing of major, high-profile projects including Yankee Stadium, the Freedom Tower, and Jet Blue facilities at JFK Airport.
Kancharla was charged in connection with the "mix design scheme, " the "steel inspections scheme" and the "certified inspectors" scheme, but not in the "field tests scheme" or the "compressive/flexural strength alternations scheme." Barone was charged only in the "steel inspections scheme" and "compressive/flexural strength alternations scheme."
In the "mix design scheme" the People alleged that Testwell, rather than utilizing the "preliminary tests method, " one of three methods authorized by the Building Code to calculate the strength of concrete needed for a project, created a formula believed to meet project specifications, and then used a computer program to generate expected compressive strength tests. Thus, the mix design reports were the product of a computer algorithm, not actual testing. The People contended that Kancharla stamped and signed the improperly-prepared "mix design" reports and urged Testwell's laboratory director, Dr. Kaspal Thumma, to do the same.
In the "compressive/flexural strength alterations scheme" the People alleged that compressive strength test results were altered by Testwell employees before the results were sent out for review, and that Barone authorized changes to certain test results related to one project through faxes sent from his assistant. The People's theory was that the altered test results were designed to eliminate anomalous outcomes so that the projects' engineers would not question the results. At trial, the prosecution relied on testimony from Ana Murthy, an employee in the concrete department, and on documents seized from Testwell's offices to identify who altered test results.
The "steel inspections scheme" charges arose from steel inspections performed by two Testwell inspectors in 2007 for the Dormitory Authority of New York at a South Carolina steel fabrication plant. The People alleged that Testwell double-billed for the inspectors' work.
Kancharla was convicted of all the mix design counts and one of the 22 "steel inspections scheme" charges, and was acquitted of the "certified inspectors scheme" charge. He was also convicted of being the leader of the "Testwell Group, " which was allegedly a criminal enterprise. Barone was convicted of five counts in the "compressive/flexural strength alterations scheme" and seven counts in connection with the "steel inspections scheme." He was also convicted of enterprise corruption.
In our view, the evidence necessary to establish the elements of enterprise corruption was wholly missing from the People's proof. Indeed, the entire theory of the People's case is made of conjecture, surmise and innuendo rather than proof beyond a reasonable doubt. A person is guilty of enterprise corruption when that individual is employed by or associated with a criminal enterprise and intentionally participates in the affairs of that enterprise by engaging in a pattern of criminal activity involving at least three criminal acts. Penal Law § 460.20(1), (2); see People v. Besser, 96 N.Y.2d 136, 726 N.Y.S.2d 48, 749 N.E.2d 727 (2001); People v. Western Express Intl., Inc., 85 A.D.3d 1, 923 N.Y.S.2d 34 (1st Dept. 2011), rev'd 19 N.Y.2d 652, ___ N.Y.S.2d ___, ___ N.E.2d ___ (2012).
In Besser, the Court of Appeals held that:
"Penal Law § 460.20 was plainly intended to reach conduct that was not already subject to criminal prosecution (see, Bill Jacket, L 1985, ch 516). The emphasis of the legislation was not on the quantity or nature of the myriad, isolated criminal activities underlying the new offense — conduct adequately addressed elsewhere in the Penal Law. Instead, it focuse[d] 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." 96 N.Y.2d at 142, 749 N.E.2d at 729, 726 N.Y.S.2d at 50 (emphasis added).
A "criminal enterprise" has also been defined 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); see Western Express, 85 A.D.3d at 6-7, 923 N.Y.S.2d at 37-38; People v. Yarmy, 171 Misc.2d 13, 16-17, 651 N.Y.S.2d 840, 843 (Sup. Ct., NY County 1996). Thus, a criminal enterprise consists of three elements: (i) a common purpose; (ii) an ascertainable structure distinct from a pattern of criminal activity; and (iii) a continuity of existence, structure and criminal purpose. See Western Express, 85 A.D.3d at 7, 923 N.Y.S.2d at 38.
In Western Express, a majority of this Court upheld the enterprise corruption counts on the ground that the defendants "transform[ed] what had been [a] legitimate business into a hub for criminal activity geared toward maximizing... profits from the theft and use of stolen credit card information." 85 A.D.3d at 13, 923 N.Y.S.2d at 42. The Court of Appeals recently reversed, finding that "[t]here [was] no hint that... [the participants] were somehow connected to the workings of a structured, purposeful criminal organization." Western Express, 19 N.Y.3d at 659.
The Western Express decision is particularly instructive in that it reiterates that the People must prove that there is a "common purpose" and an "ascertainable" hierarchical structure. The Court of Appeals, quoting the dissent at this Court, specifically noted that although there was a pattern of illegal activity, there was no " evidence of any collective decision-making or coordination with respect to the purported enterprise's activities or of any overarching structure of authority or hierarchy in which defendants participated.'" Western Express, 19 N.Y.3d at 657, quoting 85 A.D.3d at 19, 923 N.Y.S.2d at 46 (Andrias, J., dissenting). The Court concluded that the enterprise corruption indictments should have been dismissed because there could be no reasonable inference of an "enduring structurally distinct symbiotically related criminal entity with which [defendants] were purposefully associated." 19 N.Y.3d at 660.
Other decisions on continuing criminal enterprise similarly rely on evidence of a defendant's purposeful participation in a distinct hierarchy. In People v. Forson, N.Y.L.J., May 12, 1994 at 29, col. 3 (Sup. Ct. N.Y. Co. 1994), the defendants formed a business, Oxford Capital Securities, that "stole vast sums" of money "through a variety of fraudulent [securities schemes]." The testimony showed that "Forson was at the top of the hierarchy and directed the entire criminal enterprise" — that he set the goals, policies, and strategies" for Oxford — and that other defendants formed an "inner circle" to "execute his directives and to relay them to those below in the enterprise." Id. In People v. D.H. Blair & Co., Inc., 2002 N.Y. Slip Op. 50152[U], *9 (Sup. Ct. N.Y. County 2002), the defendants operated a securities "boiler room" through a "hierarchical structure" with "the top of the structure planning the objectives of the enterprise and directing how the objectives would be achieved, and the middle and bottom levels engaging in activities to carry out the scheme." In People v. Pustilnik, 14 Misc.3d 1237 (A), 2007 N.Y. Slip Op. 50407[U] (Sup. Ct. N.Y. County 2007), the indictment alleged a criminal enterprise bent on defrauding no-fault insurance carriers, with Pustilnik and his mother "at the top of the structure... establish[ing], plan[ning] and direct[ing] the accomplishments of its illegal goals" and others "carrying out [their] criminal plan." Id. at *6. Finally, in People v. Marquez, N.Y.L.J., July 22, 1996 at 25, col. 6 (Sup. Ct. N.Y. County 1976), Raymond Marquez "controlled and managed a sophisticated gambling syndicate, " supervising approximately 100 employees. Marquez was "[a]t the top of the hierarchy;" his associates called him "Boss"; "[o]n a continuing basis he set the goals, policies and strategies of the organization"; and the operation of each gambling spot was "centralized under his direction."
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, the enterprise corruption counts cannot stand.
It appears that the People relied on two witnesses to make out the charge of enterprise corruption: Thumma and Karen Connelly. Connelly testified about Testwell's website and newsletters. This testimony was seemingly introduced to show Testwell's corporate hierarchy. Thumma effectively negated Connelly's testimony when he testified that the website was "totally out of date." Moreover, Thumma's testimony is far more important for what it did not say. While Thumma stated that there were regular meetings of Testwell's management, Thumma did not testify that at any meeting at Testwell there was any discussion related to any of the schemes described above.
The People offered no proof that Kancharla, Barone, or Testwell encouraged or expanded any criminal transactions. They adduced no proof that anyone encouraged "more and larger criminal transactions." Simply put, the People failed to introduce any evidence of a leadership structure, overall planning of the criminal enterprise, or any communications between Kancharla, Barone, and any of the Testwell employees in furtherance of the criminal enterprise as required by the precedent cited above. Astoundingly, there was no testimony that any employee of Testwell ever spoke with Kancharla or Barone about the different crimes other than the one tangential conversation that Kancharla had with Thumma.
In the People's brief on appeal and at oral argument, the People offered a series of wholly unsupported arguments and significant misrepresentations of the record to sidestep the absence of proof on the criminal enterprise issue. The People contended that Testwell's "computer programming, the vagueness about [its] corporate titles and responsibilities, [and its] careful crafting of correspondence... are signs of an enterprise that has banded together to ensure that [its] crimes [would be] undetected."
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.
We agree with Kancharla that it is one thing to draw inferences from the facts and another thing for the People to simply invent facts in an attempt to satisfy the Western Express standard. The only testimony on Kancharla's ...