A former pharmaceutical executive convicted of fraudulently selling imported drugs without FDA approval won a reversal and remand for a new trial from the U.S. Court of Appeals for the Second Circuit on Wednesday in United States v. Scully, No. 16-3073-cr.

William Scully was convicted of mail and wire fraud and conspiracy to commit the same in what prosecutors said was the defrauding of doctors and other medical providers who believed they were buying drugs backed by the U.S. Food and Drug Administration. In fact, Scully and his business partner were importing and reselling drugs from Canada, Turkey and elsewhere that had not received the U.S. government's stamp of approval.

During trial, Scully's primary defense was that he relied on the advice of counsel that his actions weren't criminal. Yet an attempt to establish that defense was thwarted by U.S. District Judge Arthur Spatt of the Eastern District of New York, who ruled that an attempt to introduce Scully's testimony about the advice from his counsel, private attorney Peter Tomao, was overly prejudicial to the government.

“This testimony is extremely important to the defense, and as the prosecutor said, totally prejudicial to the government,” Spatt is quoted as saying from transcripts. “Why should I permit this totally prejudicial evidence for a state of mind where it is outweighed by the danger of unfair prejudice?”

The panel of Second Circuit Judges Rosemary Pooler and Gerard Lynch and District Judge Brian Cogan of the Eastern District of New York, sitting by designation, found that the district court's “continued concern with the hearsay character of Scully's secondhand relaying of Tomao's words was misplaced.”

“It is difficult to identify what unfair prejudice that testimony would have imposed on the government,” the panel found.

At trial, Spatt questioned why Tomao himself wasn't being called as a witness, but the panel found it wasn't an appropriate requirement to ensure the reliability of the defendant's testimony. The district court erred in considering “as an element of prejudice to the government the increased possibility that Scully's testimony about Tomao's oral advice would be false if uncorroborated by testimony from Tomao himself,” the panel said.

This error was not harmless, according to the panel. Since Scully's sole defense was that he relied on advice of counsel in how he operated his business, articulating his version of the advice Tomao gave him was necessary to that defense. Being denied that opportunity for the jury to hear what his state of mind was—and to have the government rebut that position—meant a new trial had to be ordered.

The panel went on to provide parameters for how to instruct the jury regarding advice of counsel strategy, something Scully argued the district court had erred in doing at trial. In particular, the panel took issue with Spatt's “potentially confusing” instructions at trial that the defendant had a burden of proof, or was required to show evidence, to support an advice of counsel defense. Better, the panel said, that the district court use language from the Seventh Circuit and others that laid out the threshold test for the defense strategy without the potentially misleading language.

Scully's counsel, Katten Muchin Rosenman partner Scott Resnik, handled both the trial and the appeal. He told the New York Law Journal that the result was a vindication for his client's right to bring an advice of counsel defense.

“This is correcting an important evidentiary ruling that happened at the trial court, that really impaired our ability to put our whole defense up,” Resnick said. “My client truly believes he will be able to succeed at the retrial, now that he'll be able to present his whole defense and all the evidence that support the decisions he made on how to handle his business.”

The U.S. Attorney's Office for the Eastern District of New York represented the government, with Assistant U.S. Attorney Kenneth Abell arguing on appeal. A spokesman for the office declined to comment.