Opinion ID: 767698
Heading Depth: 2
Heading Rank: 1

Heading: The Perpetual Inventory

Text: 13 Federal Rule of Evidence 404(b) provides that 14 Evidence of other crimes, wrongs, or acts is not admissible to prove the character of a person in order to show action in conformity therewith. It may, however, be admissible for other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident, . . . . 15 We follow an inclusionary rule, allowing the admission of such evidence for any purpose other than to show a defendant's criminal propensity, as long as the evidence is relevant and satisfies the probative-prejudice balancing test of Rule 403 of the Federal Rules of Evidence. United States v. Inserra, 34 F.3d 83, 89 (2d Cir. 1994). The district court has wide discretion in making this determination, and we will reverse only for abuse of discretion. See id. Moreover, evidence of uncharged criminal activity is not considered other crimes evidence under Fed. R. Evid. 404(b) if it arose out of the same transaction or series of transactions as the charged offense, if it is inextricably intertwined with the evidence regarding the charged offense, or if it is necessary to complete the story of the crime on trial. United States v. Gonzalez, 110 F.3d 936, 942 (2d Cir. 1997) (internal quotation marks and indicators of alterations from the original omitted). 16 The district court did not err or abuse its discretion by admitting evidence that Carboni added fictional items to the perpetual inventory. First, the evidence supports the district court's view that the changes in the perpetual inventory were inextricably intertwined with the charged conduct and thus not subject to Rule 404(b). The additions to the perpetual inventory - which Carboni acknowledged making but claimed were necessary to address a computer glitch that undercounted the perpetual inventory - occurred at about the same time Cableco entered into the loan agreement. Moreover, Rutigliano testified that he met with Carboni during the September audit and Carboni did not mention or explain the discrepancy between the general ledger and the perpetual inventory. The jury reasonably could have concluded that Carboni altered the perpetual inventory as part of his continued effort to create an overly optimistic picture of Cableco's financial system and thus keep the money flowing from Fleet to the troubled company. Even if the perpetual inventory evidence had been subject to Rule 404, the court correctly admitted the evidence because it tended to rebut Carboni's contention that he acted in good faith when he caused false base borrowing certificates to be submitted to Fleet. See Inserra, 34 F.3d at 89 (finding that district court did not abuse its discretion in admitting evidence of prior conviction for similar act when defendant asserted good faith defense). Although Cableco's accountant advised Carboni to delete the fictional parts from both the perpetual inventory and the general ledger, Carboni rejected his advice. Carboni's failure to comply when his accountant advised him to delete the fictional inventory makes it less likely that he believed pre-billing and addition of NACC inventory to Cableco's books reflected sound accounting practices. Because Carboni vigorously pursued a good faith defense, the relevance of this testimony outweighed any attendant prejudice.