Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 1 of 16
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`UNITED STATES OF AMERICA,
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` -against-
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`JOSEPH PERCOCO,
`a/k/a “Herb,”
`ALAIN KALOYEROS,
`a/k/a “Dr. K,”
`PETER GALBRAITH KELLY, JR.,
`a/k/a “Braith,”
`STEVEN AIELLO,
`JOSEPH GERARDI,
`LOUIS CIMINELLI,
`MICHAEL LAIPPLE, and
`KEVIN SCHULER,
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` Defendants.
`------------------------------------------------------------
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`VALERIE CAPRONI, United States District Judge:
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`USDC SDNY
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`DOCUMENT
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`ELECTRONICALLY FILED
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`DOC #:
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`2/13/2018
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`DATE FILED:
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`16-CR-776 (VEC)
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`MEMORANDUM
`OPINION AND ORDER
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`On December 27, 2017, the Government moved in limine to preclude the expert
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`testimony of Dubravka Tosic. See Ltr. (Dec. 27, 2017), Dkt. 418 (“Gov. Mot.”). On January 19,
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`2018, the Court held a Daubert hearing and orally GRANTED the Government’s motion. This
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`order explains the reasons for the Court’s ruling.
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`BACKGROUND
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`Defendants Percoco, Kelly, Aiello, and Gerardi (the “January Defendants”) are currently
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`being tried on bribery and corruption charges. The Court assumes familiarity with the
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`allegations in this case. See generally Order and Opinion (Dec. 11, 2017), Dkt. 390, 2017 WL
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`6314146; Second Superseding Indictment (Sept. 19, 2017), Dkt. 321 (“S2 Indictment”);
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`Complaint (Sept. 20, 2016), Dkt. 1 (“Compl.”).
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`1
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 2 of 16
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`On December 27, 2017, the Government moved in limine to preclude the testimony of
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`three expert witnesses: Dubravka Tosic, whom Kelly offered to testify about the reasonableness
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`of the compensation paid to Percoco’s wife by Competitive Power Ventures (“CPV”); Nicholas
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`Allard, whom Kelly offered to testify about lobbying practices; and Michael Kunkel, whom
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`Percoco offered to testify about “blank” emails on the exhibit lists of some of the January
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`Defendants. See Gov. Mot. On December 28, 2017, Kelly moved in limine to preclude some
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`testimony from two of the Government’s fact witnesses, teachers who worked in the same
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`education program as Percoco’s wife. See Ltr. (Dec. 28, 2017), Dkt. 420.
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`On January 19, 2018, the Court held a Daubert hearing on Tosic’s proposed testimony.
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`See Transcript (Jan. 19, 2018), Dkt. 481 (“Tr.”). The Court also held argument on the
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`Government’s other motions and on Kelly’s motion. At the conference, the Court orally granted
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`the Government’s motion to preclude Tosic and stated that a written opinion would follow. The
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`Court reserved decision on the Government’s motion to preclude Allard until the close of the
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`Government’s case-in-chief. The Court also reserved decision on the Government’s motion to
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`preclude Kunkel, pending an admissibility determination of the “blank” emails and a possible
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`stipulation to Kunkel’s testimony. Finally, the Court granted Kelly’s motion in part and denied it
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`in part.
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`Trial for the January Defendants began on January 22, 2018. The Government’s case-in-
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`chief is ongoing.
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`2
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 3 of 16
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`I.
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`Legal Standards
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`DISCUSSION
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`Federal Rule of Evidence 702 governs the admissibility of expert testimony.1 “When
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`parties seek to introduce expert testimony in accordance with Rule 702, a district court must
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`serve as a gatekeeper.” United States v. Cruz, 363 F.3d 187, 192 (2d Cir. 2004) (citing
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`Amorgianos v. Nat’l R.R. Passenger Corp., 303 F.3d 256, 265 (2d Cir. 2002)). “The Federal
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`Rules of Evidence ‘assign to the trial judge the task of ensuring that an expert’s testimony both
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`rests on a reliable foundation and is relevant to the task at hand.’” Id. (quoting Daubert v.
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`Merrell Dow Pharm., 509 U.S. 579, 597 (1993)).
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`The threshold question for a district court is whether the “proffered expert testimony is
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`relevant.” Amorgianos, 303 F.3d at 265. “Next, the district court must determine ‘whether the
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`proffered testimony has a sufficiently reliable foundation to permit it to be considered.’” Id.
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`(quoting Campbell v. Metro. Prop. & Cas. Ins. Co., 239 F.3d 179, 184 (2d Cir. 2001)). Among
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`other things, a district court should consider whether (1) the testimony is grounded on sufficient
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`facts or data; (2) the testimony is the product of reliable principles and methods; and (3) the
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`witness has applied the principles and methods reliably to the facts of the case. See id. “[I]t is
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`critical that an expert’s analysis be reliable at every step.” Id. at 267.
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`“[E]xpert testimony should be excluded if it is speculative or conjectural, or if it is based
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`on assumptions that are so unrealistic and contradictory as to suggest bad faith or to be in
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`essence an apples and oranges comparison . . . .” Tiffany (NJ) Inc. v. eBay, Inc., 576 F. Supp. 2d
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`1
`Rule 702 provides that “[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.” Fed. R. Evid. 702.
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`3
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 4 of 16
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`457, 459 (S.D.N.Y. 2007) (internal quotation marks omitted) (quoting Boucher v. United States
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`Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996)). “[O]ther contentions that the assumptions
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`are unfounded go to the weight, not the admissibility, of the testimony.” Id. “A minor flaw in an
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`expert’s reasoning or a slight modification of an otherwise reliable method will not render an
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`expert’s opinion per se inadmissible. ‘The judge should only exclude the evidence if the flaw is
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`large enough that the expert lacks good grounds for his or her conclusions.’” Amorgianos, 303
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`F.3d at 267 (quoting In re Paoli R.R. Yard PCB Litig., 35 F.3d 717, 746 (3d Cir. 1994)); see also
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`United States v. Morgan, 675 F. App’x 53, 55 (2d Cir.), cert. denied, 138 S. Ct. 176 (2017).
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`II.
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`The Government’s Motion to Preclude Dubravka Tosic’s Testimony Is Granted
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`A.
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` Tosic’s Proposed Testimony
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`The Government charges Kelly with paying bribes or gratuities to Percoco by providing
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`his wife an allegedly “low-show” job. See Gov Mot. at 2; S2 Indictment ¶ 30; Compl. ¶¶ 32, 39–
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`43. Ms. Percoco had been a public school teacher in New York City. Compl. ¶ 39. Kelly
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`allegedly caused his employer, CPV, to hire Ms. Percoco as part of a newly-created education
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`program, called CPV Educates. Id. ¶ 44(a). The program brought Ms. Percoco and others into
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`elementary school classrooms in Woodbridge, New Jersey, allegedly in order to build support for
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`a nearby development project. See id.; Gov. Mot. at 2. CPV paid Ms. Percoco $7,500 per
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`month, or $90,000 per year, for her work. Compl. ¶¶ 44(b).
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`Kelly offered Tosic to testify that Ms. Percoco’s compensation was “within reasonable
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`parameters.” Ltr. (Nov. 28, 2017), Dkt. 418, Ex. A, at 3; see also Tr. 54:11–55:18. To reach this
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`conclusion, Tosic compared Ms. Percoco’s salary to the compensation of other jobs that
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`allegedly had “similar responsibilities and experience,” in a similar geographic area, during the
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`“relevant time period.” Ltr. (Nov. 28, 2017), Dkt. 418, Ex. A, at 2–3.
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`4
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 5 of 16
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`Tosic relied primarily on two labor databases, the Occupational Employment Statistics
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`(“OES”) dataset, provided by the U.S. Bureau of Labor Statistics (“BLS”), and the Salary
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`Assessor dataset, provided by the Economic Research Institute (“ERI”). See Ltr. (Dec. 18,
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`2017), Dkt. 418, Ex. B, at 2. These databases collect compensation information for various jobs
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`across different geographic areas. See Tr. 60:17–61:9. From each database, Tosic found five to
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`seven jobs with responsibilities that she deemed to be “similar” to Ms. Percoco’s position and
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`collected data on their annual mean and median salaries. Exs. BKX-524, BKX-525. Tosic
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`added 30 percent to each of these salaries to account for the value of fringe benefits that
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`Ms. Percoco, as an independent contractor, did not receive.2 Exs. BKX-524, BKX-525;
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`Tr. 63:16–64:8. Tosic then calculated the arithmetic average of those salaries (with the
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`30 percent premium). Exs. BKX-524, BKX-525. That figure—an average of salaries for
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`numerous purportedly “similar” jobs, enlarged by the value of fringe benefits—served as a
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`reference point from which Tosic assessed the “reasonableness” of Ms. Percoco’s compensation.
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`Tr. 74:8–23.
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`Tosic performed a few alternative calculations to generate additional reference points. In
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`one iteration, she reduced the annual mean/median salary for each comparator job by 50 percent,
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`before adding the value of fringe benefits. Exs. BKX-524, BKX-525; Tr. 70:23–71:6. She then
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`performed the same calculation with a 75 percent reduction of the annual mean/median salary.
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`Exs. BKX-524, BKX-525; Tr. 70:23–71:6. Tosic also performed calculations in which she
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`weighed some comparator jobs more heavily than others in her analysis, purportedly to account
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`for variations in Ms. Percoco’s role. Exs. BKX-524 (labeled as “weighted average”), BKX-525
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`2
`Tosic testified that the value of an employee’s fringe benefits is typically around 30 percent of the
`employee’s base salary. Tr. 63:16–64:8, 81:4–20. She drew this data from the Employer Cost for Employee
`Compensation survey, which is provided by the U.S. Bureau of Labor Statistics. Id. 63:16–64:8.
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`5
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`(same). Finally, Tosic drew data from lower percentiles, to account for Ms. Percoco’s lack of
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`experience in some areas, and performed the same calculations on those lower salaries.
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`Exs. BKX-524 (data drawn from 25th percentiles), BKX-525 (data divided by years of
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`experience). Tosic used these calculations as alternative benchmarks for the “reasonableness” of
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`Ms. Percoco’s salary. Tr. 70:23–71:6, 187:4–9.
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`B.
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`Tosic’s Testimony Is Not Reliable3
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`Tosic’s opinion about Ms. Percoco’s salary is inherently comparative. Her testimony,
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`then, is reliable only if her comparisons are reasonable and grounded in a sound methodology,
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`reliably applied. The Court will focus on three steps in Tosic’s analysis: (a) identifying jobs with
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`responsibilities “similar” to those of Ms. Percoco, (b) determining the relevant geographic area,
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`and (c) accounting for other variables in compensation data, such as fringe benefits.
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`1.
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`Job Categories
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`To assess the reasonableness of Ms. Percoco’s salary, Tosic first needed to identify
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`similar jobs to serve as comparison points. In Tosic’s view, Ms. Percoco’s position was an
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`“amalgam” of several different jobs. Ltr. (Jan. 6, 2018), Dkt. 434 (“Kelly Resp.”), at 7; see also
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`Tr. 174:16–175:5. The position involved teaching and curriculum development. Kelly Resp.
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`at 3. But, as part of a private company’s efforts to build community support, it also involved
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`public relations and corporate branding. Id. at 3, 7; Tr. 57:2–19. Thus, Tosic considered
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`compensation data for public relations, community development, and teaching positions. Kelly
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`Resp. at 7; Tr. 57:2–19, 59:20–60:5. In the BLS dataset, for example, Tosic collected salary
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`information for “Public Relations and Fundraising Managers” and “Social and Community
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`Service Managers,” along with “Elementary School Teachers” and four other positions.
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`3
`The Court assumes for purposes of this motion that Tosic’s testimony is relevant. The parties also do not
`dispute that Tosic’s specialized knowledge in the field of labor economics qualifies her as an expert witness.
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`6
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 7 of 16
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`Ex. BKX-524. Tosic collected the mean and median annual compensation data for each of those
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`positions and averaged them together, before adjusting for fringe benefits and performing the
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`alternative calculations that the Court has described. Id.
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`Tosic had no clear methodology for choosing these positions. After learning about Ms.
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`Percoco’s responsibilities, Tosic simply scrolled through the hundreds of jobs in the BLS and
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`ERI databases and chose the ones that she “felt” were most appropriate comparators. Tr. 90:9–
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`21. Tosic offered no explanation as to how she reviewed and decided among possible
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`comparator jobs.
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`Kelly argues that Tosic chose comparator jobs whose duties “contain[] aspects that
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`overlap with Ms. Percoco’s responsibilities.” Kelly Resp. at 7; see also Tr. 75:16–76:6, 158:17–
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`159:19. But other jobs in the BLS and ERI databases also overlapped with Ms. Percoco’s
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`responsibilities. Tosic offered no method for choosing one comparator job over the other. For
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`example, why did she include “Public Relations and Fundraising Managers” but not “Marketing
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`Managers” or “Advertising and Promotions Managers”? See Ex. GXD-22 at 2; May 2013
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`Occupation Profiles, Bureau of Labor Statistics (Apr. 1, 2014),
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`https://www.bls.gov/oes/2013/may/oes_stru.htm. Absent some reliable or replicable system for
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`choosing among comparator jobs, and a basis for that system in studies or data, Tosic’s analysis
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`is predicated on arbitrarily chosen data.
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`Further illustrating the arbitrariness of Tosic’s selection of data, the jobs she selected
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`contain numerous aspects that clearly do not overlap with Ms. Percoco’s role and, in fact, go
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`well beyond the scope of her responsibilities. According to a BLS handbook, for example,
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`“Public Relations and Fundraising Managers” write press releases and “prepare information for
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`the media.” Ex. GXD-1. Tosic stated that she had no reason to believe that Ms. Percoco
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`7
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 8 of 16
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`performed those functions. See Tr. 128:16–129:15. Similarly, Tosic included “Public Relations
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`Specialists” as a comparator position in her analysis. Ex. BKX-524. The BLS handbook
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`describes that position as involving “draft[ing] speeches and arrang[ing] interviews for an
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`organization’s top executives.” Ex. GXD-2. Tosic admitted that she had seen no evidence that
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`Ms. Percoco performed these duties. See Tr. 130:3–131:10.4
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`Tosic failed—entirely—to account for these discrepancies. Her baseline calculations
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`simply averaged the annual mean/median salary of each comparator job that she selected—that
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`is, she assigned each comparator job an equal weight. See Exs. BKX-524, BKX-525; Tr. 74:13–
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`15, 89:23–90:1 (“So the average is a very simple average, where every single occupation is
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`weighed the same way.”). Tosic offered no explanation why it was appropriate to weigh each
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`job equally, when some jobs clearly had more overlap with Ms. Percoco’s responsibilities than
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`others.
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`Tosic also calculated “weighted averages,” in which she weighed the public-relations-
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`type comparator jobs at 75 percent and the teaching-type comparator jobs at 25 percent. See Exs.
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`BKX-524, BKX-525; Tr. 89:18–91:12. Tosic explained that when Ms. Percoco’s salary was
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`initially set, her duties “were more in line with” public relations than with teaching. Tr. 90:3–8.
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`Even if this were true, Tosic’s “weighted averages” failed to account for the areas of public
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`relations that Ms. Percoco undisputedly did not perform, such as drafting press releases and
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`4
`Regardless of the BLS handbook, Tosic’s choices of comparator jobs were plainly inappropriate when read
`with some basic common sense. Ms. Percoco, who developed curriculum and taught lessons to fourth graders, was
`clearly not a “Public Relations and Fundraising Manager.” Kelly alleges that Ms. Percoco had some involvement in
`creating promotional materials and participated in some calls with public relations professionals. See Kelly Resp.
`at 3. Those limited tasks do not make her a public relations manager, in the sense that any reasonable person would
`use the term—and certainly not in the sense that BLS used the term. Kelly also argues that the goal of CPV
`Educates was to generate goodwill and positive public relations. See id. at 4. That argument conflates the ultimate
`goal of the program with the day-to-day duties of a person working within that program. Neither Kelly nor Tosic
`explained why that leap was appropriate.
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`8
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 9 of 16
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`executive speeches. Tosic’s “weighted averages,” then, fail to address the Court’s concerns on
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`this point.5
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`In sum, nothing in Tosic’s analysis accounts for the stark differences between her
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`comparator jobs and Ms. Percoco’s responsibilities. Nor did Tosic offer any objective
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`methodology to support her selection or weighting of those jobs. What we are left with, then, is
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`a series of arbitrary, inappropriate, and unreasonable comparisons.6
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`2.
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`Geographic Areas
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`Tosic’s next step was to define the geographic area relevant to her analysis.
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`Compensation varies geographically, so Tosic needed to define a reasonable area from which to
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`select comparative compensation data.
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`i.
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`The BLS Data
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`Tosic testified that the “relevant labor market” for her analysis was the area where
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`Ms. Percoco performed her work for CPV Educates. Tr. 76:6–15; see also id. 78:13–21, 152:21–
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`153:1. Tosic explained that Ms. Percoco performed most of her work from her home in
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`Westchester County, New York. Id. 76:7–22, 152:19–153:1. Particularly during the first few
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`years of her tenure, Ms. Percoco worked from home developing curriculum and promotional
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`materials. Id. 152:19–153:1. Ms. Percoco also performed some work in the township of
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`5
`Tosic also admitted that her choices of 75 percent and 25 percent were “just a judgment call,” that is, they
`were chosen arbitrarily. Tr. 91:3–12. The arbitrariness of Tosic’s “weighted averages” makes it impossible to draw
`any reliable conclusions at all, let alone to address the concerns that the Court has expressed.
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`At the Daubert hearing, Tosic testified that her conclusion about the “reasonableness” of Ms. Percoco’s
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`compensation would not change even if she removed the higher-paying public relations positions from her analysis.
`Tr. 101:23–102:8. Accordingly, Kelly argues that these positions did not “[drive] her analysis” and should not cause
`the Court to preclude Tosic’s testimony. Id. 186:24–187:24. Kelly misses the point. The problem is not the
`particular positions that Tosic included but, rather, the methods that she employed. Even without the public
`relations jobs, Tosic still cherry-picked other jobs from the BLS and ERI databases without any reliable
`methodology. And she still failed to account for the differences between those jobs and Ms. Percoco’s actual
`responsibilities. Her opinions remain unreliable and inadmissible.
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`9
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 10 of 16
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`Woodbridge, which is in Middlesex County, New Jersey. Id. 77:5–13. Once the CPV Educates
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`program was up and running, Ms. Percoco taught the curriculum to students there. Id. 77:5–13,
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`137:18–20. Thus, Tosic said, it was important to include both Westchester and Middlesex
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`compensation data in her analysis. Id. 76:7–77:13.
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`Tosic selected two regions from the BLS database: the “New York-White Plains-Wayne,
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`NY-NJ Metropolitan Division” and the “New York-Jersey City-White Plains, NY-NJ
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`Metropolitan Division.” Ex. BKX-524. Because these regions included both Westchester and
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`Middlesex, Tosic said, they fully captured the labor markets in which Ms. Percoco worked.
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`Tr. 77:5–13.
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`Tosic was wrong in her description of these regions. Middlesex County was not part of
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`BLS’s “New York-White Plains-Wayne, NY-NJ Metropolitan Division” in 2013 or 2014.
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`See Exs. GXD-17 at 112, GXD-18 at 101; Tr. 138:8–15. Thus, at least two years of Tosic’s
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`analysis did not fully capture the markets in which Ms. Percoco worked. Tosic apparently did
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`not realize this when she developed her analysis. See Tr. 77:5–13 (Tosic stating on direct
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`examination that her BLS regions included Middlesex County). When confronted on cross
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`examination with this information, Tosic admitted that her BLS chart was “incorrect.”
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`Id. 138:8–139:2. By Tosic’s own assumptions, then, her analysis was based on faulty data.7
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`7
`To rehabilitate his expert, Kelly argued that salaries in Westchester are no higher than salaries in
`Woodbridge, essentially rendering harmless Tosic’s failure to include Woodbridge in the BLS regions.
`See Tr. 88:23–89:16, 178:21–179:2. The Court disagrees. The mean salary in 2013 for a “Public Relations
`Representative” was $67,128 in Woodbridge but $73,277 in South Salem (the town in Westchester in which
`Ms. Percoco lived). Ex. BKX-525. That is an almost 10 percent difference. Tosic herself admitted that teachers’
`salaries are lower in Woodbridge than in Westchester. See Tr. 140:19–141:16 (“The Court: So the salaries in
`Woodbridge are lower. The Witness: Yes, they are. The Court: So you were incorrect before when you said they
`were all about the same. The Witness: Well, I was thinking about the totality of the occupations that I looked at, not
`just the elementary school teachers or the teachers.”). In any event, Kelly’s argument misses the larger point.
`Regardless of whether the salaries are the same between the two areas, Tosic had no reliable method for choosing
`one area over the other.
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`10
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 11 of 16
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`More importantly, Tosic’s assumptions lack any foundation. Tosic assumed that the
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`relevant market for a comparative compensation analysis was the physical location where a
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`person worked, even if that person was an independent contractor who worked from home.
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`Tosic repeatedly stated that she based her analysis on this assumption, but she provided no
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`studies, facts, or data to support that assumption. Id. 76:6–25, 154:15–158:13. When asked how
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`often employers set salaries based on an independent contractor’s residence (if that contractor
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`works from home), Tosic could reply only that “[s]ometimes they do” and “[i]t’s hard to say.”
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`Id. 76:21–25; see also id. 154:15–158:13. Tosic’s reasoning fell dramatically short of testimony
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`that is “grounded on sufficient facts or data.” Amorgianos, 303 F.3d at 268.
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`Once again, a small amount of common sense shows how absurd Tosic’s assumptions
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`are. In Tosic’s view, if an independent contractor worked from home, the employer would set
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`the contractor’s salary based on the location of the contractor’s residence, however remote that
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`might be. Ms. Percoco could have lived in Boston, upstate New York, or Alaska—Tosic still
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`would have taken those labor markets into account when identifying appropriate comparative
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`compensation data.8
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`ii.
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`The ERI Data
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`Tosic selected ERI compensation data from a “50 mile radius around Woodbridge, NJ.”
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`Ex. BKX-525. Tosic explained that she “wanted to get a similar geographic region to the region
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`that was used” in the BLS data chart. Tr. 85:8–14. Tosic’s description of her geographic area
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`was again wrong. The ERI “geographic region” was not “similar” to the BLS regions; the ERI
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`See Tr. 79:16–79:21 (“The Witness: Well, if [Ms. Percoco] performed the work from Boston, then I would
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`have considered Boston as well. The Court: You absolutely would? The Witness: Yes.”), 156:9–20 (“The Witness:
`Well, what matters is where the work is done. The Court: Why? As you have said, it doesn’t matter where the work
`is done. The person could be sitting in an igloo in Alaska. They’re communicating via email. . . . The Witness:
`Well, that’s one of the elements. The Court: What’s one of the elements? The Witness: Where the work is
`performed.”).
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`11
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 12 of 16
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`area centered around Woodbridge, and the BLS areas did not include Woodbridge in 2013 and
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`2014. See Exs. GXD-17 at 112, GXD-18 at 101; Tr. 138:8–15. Furthermore, as the Court has
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`explained, the choice of BLS areas had no basis in common sense, facts, or data. If the ERI
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`region was based on the BLS regions, then the ERI region was equally unfounded. Finally,
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`Tosic offered no basis for her choice of a 50-mile radius (as opposed to a 40-mile or a 10-mile
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`radius), further undercutting the appropriateness of the data on which she relied.
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`Put simply, Tosic’s choice of geographic regions was arbitrary and unfounded. She
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`based these regions on assumptions that had no support in data or common sense. And she
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`contradicted herself and admitted errors in her analysis. See, e.g., Tr. 138:8–139:2. In short, her
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`opinion is unreliable in every sense of the word.9
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`3.
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`Accounting for Fringe Benefits
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`After identifying compensation data associated with purportedly “comparable” jobs,
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`Tosic increased all comparator salaries by 30 percent. See Exs. BKX-524, BKX-525; Tr. 63:16–
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`64:8, 74:21–24. In the BLS data, for example, Tosic took the median and mean annual salaries
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`for “Public Relations and Fundraising Managers” and increased those amounts by 30 percent.
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`Ex. BKX-524. She then did the same for all other comparator jobs, before averaging those
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`inflated numbers together to arrive at a reference point for Ms. Percoco’s compensation. See Tr.
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`74:21–24.
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`9
`As a last-ditch maneuver, Kelly’s attorney argued that Ms. Percoco “lived practically smack in the middle
`of three different developments by CPV,” making her residence in Westchester the relevant geographic area for
`Tosic’s analysis. Tr. 176:14–177:7; see also id. 168:21–169:6. Kelly failed to lay an adequate foundation for this
`assertion. Tosic mentioned only briefly that Ms. Percoco’s proximity to CPV developments might have been “an
`important factor” in CPV’s compensation decision. Id. 168:21–169:6. She failed to cite any evidence on which she
`could have based that inference. Tosic also did not demonstrate that the geographic regions she considered matched
`the area “in the middle of” CPV’s three developments. Id. 176:14–177:7. That area includes parts of Connecticut,
`for example, which Tosic did not include in her analysis. It seems much more likely that Tosic selected geographic
`regions based on the location from which Ms. Percoco performed her duties (as Tosic testified repeatedly), rather
`than on Ms. Percoco’s proximity to CPV developments.
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 13 of 16
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`Tosic explained that 30 percent represents the average value of employees’ fringe
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`benefits (such as health insurance). Id. 63:16–64:8. Ms. Percoco did not receive fringe benefits
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`as an independent contractor. Id. 58:7–22. In Tosic’s view, an assessment of the reasonableness
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`of Ms. Percoco’s compensation needed to take into account the fact that employees doing similar
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`work to Ms. Percoco received fringe benefits, while Ms. Percoco did not. See id.; Kelly Resp.
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`at 4.
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`Tosic failed to provide any foundation for this approach. At the Daubert hearing, she and
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`Kelly argued that an assessment of the “reasonableness” of a salary should take place from the
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`contractor’s point of view (i.e., whether an independent contractor might “reasonably” have
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`demanded the salary that Ms. Percoco received). See Tr. 122:4–13, 169:12–170:4, 188:6–24,
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`196:22–197:16. According to Kelly, an independent contractor in Ms. Percoco’s situation would
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`demand a higher salary to compensate for the lack of fringe benefits. See id. 169:12–170:4,
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`188:6–24, 196:22–197:16. But Kelly and Tosic failed to support this assertion with any studies
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`or data. Their assumption about what an independent contractor “might” do in this situation is
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`pure conjecture.10 Id. 169:12–19. The next step in their argument—that employers actually
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`agree to such demands and increase contractors’ compensation to account for the absence of
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`fringe benefits—is even more conjectural.
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`Tosic also failed to apply this principle reliably to her data. She testified that the BLS
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`dataset included salaries for both full-time and part-time workers. Id. 63:5–11, 144:23–145:4.
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`Tosic acknowledged that part-time workers do not usually receive fringe benefits. Id. 69:21–24.
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`Yet Tosic indiscriminately increased all BLS salaries by 30 percent, without taking into account
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`It seems equally plausible that an independent contractor might not demand a higher salary, knowing that
`10
`the employer wishes to save money by hiring an independent contractor for whom fringe benefits will not be
`provided. Without studies, data, or other foundation, the Court has no way of knowing one way or the other.
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`Case 1:16-cr-00776-VEC Document 487 Filed 02/13/18 Page 14 of 16
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`that the data included part-time workers.11 Id. 69:21–70:1. Tosic had no explanation for this
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`gap in her logic. When asked whether she had any reason to believe that the part-time workers
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`in the BLS data received fringe benefits, Tosic could reply only that “[t]hey may in some cases”
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`and that she “would have to look at data” to answer the question. Id. 119:13–121:4. In Tosic’s
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`own words, she simply “assumed”—without foundation—“that everybody that is included in the
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`averages and the occupations that [she] looked at” received “a value [in] benefits that equals 30
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`percent.” Id. 120:14–18.12
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`In short, Tosic had no reasonable basis for adding the value of fringe benefits to her
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`analysis.
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`C.
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`Tosic’s Opinions Warrant Preclusion
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`Kelly urges this Court to allow him to present Tosic’s opinions to the jury, arguing that
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`any flaws in Tosic’s reasoning go to weight, not admissibility. See Kelly Resp. at 8; Tr. 190:13–
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`191:14. The Court disagrees. Tosic injected numerous assumptions into her analysis that lack
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`support in data or common sense. At the Daubert hearing, Tosic was unable to answer basic
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`questions about those assumptions, let alone explain why they are reasonable. She contradicted
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`herself and admitted errors in her analysis. See, e.g., Tr. 138:8–139:2. When an expert’s
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`11
`If Tosic’s theory on compensation practices were correct, the salaries of these part-time workers would
`already be inflated. In Tosic’s view, the employers of part-time workers (who are presumably independent
`contractors without fringe benefits) would already have increased their salaries to account for their lack of fringe
`benefits.
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`Tosic later stated that the effect of including part-time workers in the data was to bring the salary levels
`12
`down, meaning that her error did not inflate her comparisons. Tr. 150:1–12. The Court’s concern is not merely the
`inclusion of part-time salaries but, rather, the enlargement of those salaries by adding the value of fringe benefits.
`The effect of that calculation is, of course, to skew the numbers upward.
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`Tosic also ran alternative calculations in which she reduced the average salary data by 50 percent or 75
`percent before adding the value of fringe benefits. See Exs. BKX-524, BKX-525. These numbers are meaningless.
`Tosic admitted that she could have chosen any value other than 50 or 75 percent; she “just wanted to see what the
`numbers would look like.” Id. 71:9–16. In other words, Tosic’s choice of percentages here was random and
`arbitrary.
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`Case 1:16-cr-00776-VEC Document