     11-3756 (L)
     United States v. Cuti

 1                           UNITED STATES COURT OF APPEALS

 2                               FOR THE SECOND CIRCUIT

 3                                  August Term 2012

 4               (Argued: October 25, 2012     Decided: June 26, 2013)

 5                       Docket Nos. 11-3756, 11-3831
 6   ----------------------------------------x

 7   UNITED STATES OF AMERICA,

 8            Appellee,

 9                                -- v. --

10   ANTHONY CUTI, WILLIAM TENNANT,

11            Defendants-Appellants.

12   -----------------------------------------x

13   B e f o r e :   JACOBS, Chief Judge, WALKER, Circuit Judge, and
14   O’CONNOR, Associate Justice (retired).*
15
16            Defendants-Appellants Anthony Cuti and William Tennant, former

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.).        Cuti and Tennant

20   arranged fraudulent transactions to inflate Duane Reade’s reported

21   earnings in SEC filings.       Among the issues raised on appeal by Cuti

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.       Tennant asserts primarily that the jury lacked sufficient

25   evidence to convict him and that the district court had no basis to



     *
          The Honorable Sandra Day O’Connor, Associate Justice (retired)
     of the United States Supreme Court, sitting by designation.
 1   give a conscious avoidance instruction.    We conclude that the

 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                                    BRIAN C. BROOK, Clinton Brook & Peed
 6                                    (Matthew J. Peed, Clinton Brook &
 7                                    Peed, and Brian D. Waller, Simon &
 8                                    Partners, LLP, on the brief), New
 9                                    York, NY, for Defendant-Appellant
10                                    Anthony Cuti.
11
12                                    JOHN J. KENNEY (Laura B. Hoguet,
13                                    Tai-Heng Cheng, Caitlin N. Bush,
14                                    Damian R. Cavaleri, on the brief),
15                                    Hoguet Newman Regal & Kenney, LLP,
16                                    New York, NY, for Defendant-
17                                    Appellant William Tennant.
18
19                                    SARAH E. MCCALLUM (Rebecca Monck
20                                    Ricigliano, Katherine Polk Failla,
21                                    on the brief), Assistant United
22                                    States Attorneys, for Preet Bharara,
23                                    United States Attorney for the
24                                    Southern District of New York, New
25                                    York, NY, for Appellee.
26
27   JOHN M. WALKER, JR., Circuit Judge:

28        Defendants-Appellants Anthony Cuti and William Tennant appeal

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    This opinion addresses Cuti’s claim that the district


     1
          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.      We conclude

 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.

10                                  BACKGROUND

11         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.      Tennant was Duane Reade’s former

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        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.   When Duane Reade vacated a storefront with an

 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.   Cuti and Tennant,

 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        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”).   At trial, Cory Zelnik, a

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.   The defendants repaid the

21   WRG entities for these outlays using a sham consulting agreement

22   and padded brokerage fees.   The revenue immediately recognized from

23   these transactions helped Duane Reade bridge a gap between its true

24   earnings and analysts’ expectations for the fourth quarter of 2000.

                                       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.   In order for revenue generated from

 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.    If any

10   of the foregoing criteria were not satisfied, immediate revenue

11   recognition would have been inappropriate.   Both the company’s

12   internal accountants and outside auditors adhered to these rules in

13   booking revenue from real estate concession transactions.     At

14   trial, the defendants did not dispute that these rules were

15   appropriately and consistently applied.

16        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.   In each instance, Hallinan and Henry replied that if

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.   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.

 3          In his defense, Tennant asserted that, like Hallinan and

 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.   He also objected to the district court’s inclusion of

 8   a conscious avoidance instruction in the jury charge, which he

 9   claimed was unwarranted and prejudicial.

10          These arguments are again raised on appeal and we consider

11   them in turn.

12                                 DISCUSSION

13     I.    Cuti’s claim as to the non-expert testimony

14          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).

3          The Federal Rules of Evidence allow the admission of fact

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      The initial

7   question is therefore whether the contested testimony should be

8   characterized as fact or opinion.       “[T]he distinction between

9   statements of fact and opinion is, at best, one of degree.” Beech


    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).   We need not

 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.   United States v. Giovannetti, 919

 8   F.2d 1223, 1226 (7th Cir. 1990).

 9        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.     These

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        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.   The hypothetical questions utilized

21   facts that had been independently established in the record.     If

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


                                        9
 1   affected that accounting under the same, undisputed accounting

 2   rules.   And, since the applicable accounting rules were explained

 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        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.”     Id.   Similarly,

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.     As this case illustrates, “what-

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.   Although we have not addressed the issue squarely, other

24   circuits have permitted the use of hypothetical questions to


                                      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.   Indeed, Cuti pointed out at trial that at

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.   Cuti also

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        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.      Their testimony was plainly

18   helpful to the jury within the meaning of Rule 701(b).

19          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.”      Fed. R. Evid.


                                       12
 1   701 advisory committee’s note, 2000 amend.       Lay opinion under Rule

 2   701 must be limited to opinions that “result[] from a process of

 3   reasoning familiar in everyday life.”    Id.

 4        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.       At first blush,

 9   the accounting rules involved in the recognition of revenue from

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.   The only issue was whether the withheld

13   facts would have altered the rules’ application.

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.”       359

20   F.3d 171, 181 (2d Cir. 2004).     However, if the testimony was “not a

21   product of his investigation, but rather reflected [his]

22   specialized knowledge [of the banking industry],” then it was

23   impermissible expert testimony.    Id. at 182.

24        A similar question arose in United States v. Rigas, 490 F.3d


                                        13
 1   208 (2d Cir. 2007).    There, an accountant with personal knowledge

 2   of a company’s books testified to the accounting impact of debt

 3   reclassifications, which the government had already established as

 4   fraudulent.   We held that the accountant’s testimony was lay

 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.   Id. at 225.

 9        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.     When the issue for the fact-finder’s

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.”      See Fed. R. Evid. 701 advisory

16   committee’s note, 2000 amend.      The testimony of Hallinan and Henry

17   in response to the hypothetical questions was therefore also

18   admissible as lay opinion.

19        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.    Nothing similar occurred

 4   here.    These witnesses testified based only on their experiences

 5   with matters pertinent to this case, and their reasoning was

 6   evident to the jury.

 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.    See, e.g., United States v. Russo, 110 F.3d

12   948, 952 (2d Cir. 1997); United States v. Oshatz, 912 F.2d 534, 539

13   (2d Cir. 1990).

14           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.    The district

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.    And, as noted, Cuti had ample opportunity to challenge

23   the factual accuracy of the disputed testimony.

24           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.   The

 4   district court reasonably required the government to reformulate

 5   its questions in some instances, but it did not always do so.    We

 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.    When a court, upon review of the entire

 9   record, “is sure that the [evidentiary] error did not influence the

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.    See Fed. R. Evid. 401, 403 & 602.

16   Alternatively, it was admissible as lay opinion testimony. See Fed.

17   R. Evid. 701.   The district court did not abuse its discretion in

18   admitting the challenged testimony.

19     II.   Tennant’s claims

20           A.   Sufficiency of evidence

21        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).   A defendant challenging a conviction on sufficiency

11   grounds undertakes a “heavy burden.”    United States v. Kozeny, 667

12   F.3d 122, 139 (2d Cir. 2011).    A judgment of acquittal can be

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.”   United States v. Temple, 447 F.3d 130, 137 (2d

20   Cir. 2006)(quotation marks and alteration omitted).

21        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.    Id. at 136-37.   To “avoid usurping

24   the role of the jury,” United States v. Guadagna, 183 F.3d 122, 129


                                       17
 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.    The Court

 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.”   United States v.

 7   McDermott, 245 F.3d 133, 137 (2d Cir. 2001).

 8        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.    On that

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)).     This

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).   This is so because the sufficiency test “must be

21   applied to the totality of the government’s case and not to each

22   element, as each fact may gain color from others.”   Guadagna, 183

23   F.3d at 130.




                                      18
 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.   The very next day,

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.   Against this and similar evidence, his plea that

20   other company personnel failed to tell him of the fraud could

21   reasonably be rejected by the jury.

22        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.    The

 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          B.   Conscious avoidance charge

 7        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).     The

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        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.   United States v. Ebbers, 458 F.3d 110, 124 (2d Cir. 2006).

 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

10   (2d Cir. 2011).   For example, in a securities fraud case, if a

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.   Ebbers, 458 F.3d at 124-25.

15        The Government “need not choose between an ‘actual knowledge’

16   and a ‘conscious avoidance’ theory.”   Ferguson, 676 F.3d at 278.

17   To the contrary, in many cases, the evidence supporting each theory

18   will be the same:

19        [T]he same evidence that will raise an inference that the
20        defendant had actual knowledge of the illegal conduct
21        ordinarily will also raise the inference that the
22        defendant was subjectively aware of a high probability of
23        the existence of illegal conduct. Moreover, [conscious
24        avoidance] may be established where a defendant’s
25        involvement in the criminal offense may have been so
26        overwhelmingly suspicious that the defendant’s failure to
27        question the suspicious circumstances established the
28        defendant’s purposeful contrivance to avoid guilty
29        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).   Similarly, if the

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.   See, e.g., United

15   States v. Adeniji, 31 F.3d 58, 63 (2d Cir. 1994).

16        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
 1          In response, Tennant argued both that the evidence was lacking

 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.   The same evidentiary facts

 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

10   served as the factual predicate for the conscious avoidance charge,

11   Kozeny, 667 F.3d at 133-34.   Finally, the government did not have

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.   Of course, it is

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.

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
1                               CONCLUSION

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
