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Alain Leibman writes:

As discussed here previously, prosecutors always look to introduce evidence of pleadings or orders entered in related civil litigation to achieve a variety of purposes in the present criminal case. Ostensibly, the civil matters are offered to establish an element of the offense, usually going to intent or knowledge, but quite often the evidence is sought simply to show that the defendant has a propensity for behaving badly and that he/she did so on other occasions. As a result, the offer of such evidence usually precipitates a vigorous argument under Federal Rule of Evidence 403, but only after the government first successfully hurdles the admissibility question.

A case in point is the recent decision in United States v. Dupree, 2013 WL 309983 (2nd Cir., January 28, 2013), a bank fraud prosecution against the CEO of the borrower. Based on evidence that the borrower entity had inflated its assets in order to obtain a term loan and line of credit worth $21,000,000, the Amalgamated Bank obtained a state court restraining order enjoining the entity and its CEO from removing any assets maintained at the bank; this order was obtained on the same date that the CEO, Dupree, and others were arrested in connection with an alleged scheme to defraud the bank through the same means. According to subsequent indictment, Dupree then also took various steps following the entry of the state court order to gain access to frozen funds, and so was additionally charged specifically for his post-freeze activity.

The government moved in limine in the trial court to allow it to admit the restraining order as evidence that Dupree had knowledge of his and his company's obligations under the agreements with the bank and that his post-freeze order actions were intended to evade those obligations. The District Court declined to admit the evidence, and the government thought it important enough to seek, and obtain, interlocutory appeal. The Second Circuit reversed the trial court decision. The appeals court rejected the holding below that the state court order was inadmissible hearsay, holding instead that its offer fell under Federal Rule of Evidence 801(c), which defines hearsay as including only those statements offered to prove the truth of the matter asserted. The relevance of the court order, the appeals court held, was not in the legal effect of its directives to the affected parties, but in Dupree's knowledge of the order and the notice which it gave him of the pertinent loan agreement terms which were referenced in the order and which he allegedly evaded improperly in accessing funds.

As for the Rule 403 considerations, the Second Circuit acknowledged the concerns expressed by the trial court that the jury might place undue emphasis on the freeze order and thus on its violation by the defendant. However, the appeals court noted, as they often do under such circumstances, that the danger of unfair prejudice could be cured by appropriate limiting instructions.

(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office.  A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts) 
 

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Alain Leibman writes:

In an important decision for the right to a fair trial, the Second Circuit recently held that a detective -- testifying against the only charged defendant in a case involving the seizure of weapons from a minivan occupied by several persons besides that defendant -- could be impeached with prosecutors' initial decision to charge other occupants of the vehicle with possession of those firearms.

In United States v. White, 2012 WL 3734425 (2nd Cir., August 30, 2012), the central issue in the felon-in-possession trial was possession: which of several passengers actually had possessed the firearms in question? The Court of Appeals vacated the conviction because of erroneous evidentiary rulings made by the district judge, with significant consequences for other cases. In the first ruling, the trial judge precluded defense counsel from cross-examining the lead detective involved in the arrest of White and the weapons seizure from the minivan on the basis that state prosecutors had initially charged other occupants of the vehicle with possessing those weapons. The court had reasoned that charging decisions rest on a number of considerations which do not necessarily speak to the issues of guilt or innocence of the person on trial. Here, however, defense counsel argued, the initial charging decision was simply inconsistent with the decision to charge White alone when his defense was that the guns were not his. The Court of Appeals agreed, rejecting the authorities relied upon by the court below, including United States v. Re, 401 F.3d 828 (7th Cir. 2005), and held that charging decisions may be proper subjects for cross-examination and so may not be reflexively excluded. In White's case, the inconsistent earlier charging decision was "plainly relevant" to the question of possession, and under Federal Rule of Evidence 403, its probative value was not substantially outweighed by the risk of jury confusion.

In this second erroneous ruling, the trial court had precluded the defense from cross-examining the same detective under FRE 608(b) on the basis of his testimony in an unrelated case. The trial judge in the unrelated case had in a number of respects found the detective's testimony to be non-credible, but the White trial judge would not allow those findings of untruthfulness to be used in the present cross-examination. The Second Circuit held that this, too, was error, reaffirming its earlier decision in United States v. Cedeno, 644 F.3d 79 (2nd Cir.), cert. denied, 132 S. Ct. 315 (2011). The Cedeno case had set forth a list of factors for courts to consider in determining the admissibility of a prior incident in which the witness's testimony was found non-credible (Cedeno had not yet been decided when the same evidentiary issue arose at the trial in White). In this instance, the district judge in the earlier case had repeatedly found the detective’s testimony "not credible." The government made the specious argument in White that a judge's finding that testimony was "not credible" was not equivalent to a finding that the witness had lied. The Second Circuit easily rejected this argument, saying "A finding that a witness is not credible is not fundamentally different from a finding that the witness lied. It often just reflects a fact finder's desire to use more gentle language." While trial judges retain authority to impose reasonable limits on cross-examination, the court below erred in excluding the prior judge's findings of lack of credibility.

Of course, in the Second Circuit and perhaps elsewhere now, the White and Cedeno decisions open up new avenues of discovery prior to trial. Arguably, defense counsel are entitled to receive not simply Jencks material relating to the testimony at issue in the present trial, and conventional Giglio impeachment material, but any prior testimony of the law enforcement officers involved in the present trial, to be exhaustively mined for any adverse findings or comments by the trial judge regarding the officers' earlier truthfulness or lack of truthfulness.

It is also worth noting that, in vacating White’s conviction and remanding based on the above two significant errors, the Court of Appeals explicitly declined to decide another interesting issue raised by defense counsel. Counsel had also sought to cross-examine the detective based on statements made in the government's brief in opposition to a suppression motion in the same case, statements which described a sequence of events regarding the finding of the weapons which was inconsistent with the testimony of the detective; counsel had argued at the inconsistent statements in the brief were admissible as an admission by a party-opponent under FRE 801(d)(2). The only argument the government could muster in opposition, it appears, was that the admission of the contrary statements from the brief would require the lead prosecutor to take the witness stand to explain why he wrote what he did (and, presumably, why either he or the detective got the facts wrong). Why this step, even if necessary, would be an impediment to the defendant’s exercise of his right to full cross-examination and his entitlement to a fair trial is entirely unclear. However, as noted, the Court of Appeals did not reach this issue.
 

(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office. A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts)

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We have previously questioned the sensibility of courts of appeals decisions permitting cooperating witnesses to testify to their sense or intuition of the guilty knowledge of a defendant. Such testimony violates a host of evidence rules, since the cooperator cannot possibly have personal knowledge of another’s thoughts (FRE 602), and cannot offer an admissible opinion as to the nature of those thoughts (FRE 701), and since the slender probative value of such testimony will nearly always be substantially outweighed by its prejudice (FRE 403), especially in intent cases. Another basis for objection, of course, is that asking a cooperating witness to state his/her view of the defendant’s state of knowledge invades the province of the jury, whose function it is to determine whether or not the defendant’s words and actions prove the necessary criminal intent.

However, there are some boundaries in the metaphysical world of witnesses’ divination of the intent of others. The Eleventh Circuit, joining a unanimous group of appeals courts which have directly decided the question, recently held that it is improper to ask a defendant on cross-examination whether government witnesses, whose testimonies conflicted with his, should be considered liars or untruthful.

In United States v. Schmitz, 2011 WL 754148 (11th Cir., Mar. 4, 2011), an Alabama state legislator was convicted of mail fraud for receiving compensation for, a no-show, no-work job with a community college program. Schmitz testified in her own defense and provided a markedly different explanation for key events than had several government witnesses. In cross-examination, the prosecutor asked Schmitz to characterize those witnesses as untruthful or liars; she fenced with the examiner before yielding and making the requested accusation. In summation, the prosecutor then successfully denigrated Schmitz’s credibility by arraying all of the “liar” witnesses against her, the sheer force of their numbers making her accusation of them all improbable and thereby proving her testimony to be lacking in credibility.

The Schmitz court held that it was improper to have cross-examined in this fashion, citing the lack of probative value of such accusatory testimony; the irrelevance of another witness’s opinion on the subject; the violation of FRE 608(b) in allowing specific-instance accusations of untruthfulness, as opposed to the opinion/reputation testimony allowed by the rule; the invasion of the jury’s province; and the argumentative nature of the questions. The opinion cited cases from the First, Second, Third, Fifth, Seventh, and D.C. Circuits which have held similarly. However, since Schmitz’s attorney made no contemporaneous objection, the plain error standard applied, and the conviction was affirmed.

The effect of a failure to object contemporaneously was underscored in United States v. Harris, 471 F.3d 507 (3d Cir. 2006), one of the cases cited in Schmitz. The Third Circuit there, also finding fault with the liar series of cross-examination questions directed to a defendant, but also affirming the resulting conviction, explained that while courts of appeal have condemned the practice, they have generally not reversed convictions on that basis because of an absence of contemporaneous objections. Id at 511.

It is important, therefore, that defense counsel create a record of objections at trial court to secure the more lenient review standard. These cases may also be used in limine to try to avoid damaging testimony from government witnesses about what the defendant thought or intended. After all, a witness has no greater insight nor any higher competence to declare another’s intent to commit fraud than he/she has to swear that the other intended to lie.

(Alain Leibman, Esq., the author of this entry and a co-author of this blog, is a partner with Fox Rothschild LLP, based in our Princeton, NJ office. A former decorated federal prosecutor, he practices both criminal defense and commercial litigation in federal and state courts)
 

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In a recent post here we commented on the perplexing affirmance in a recent case in which the Third Circuit agreed that a government cooperating witness could speculate in his testimony regarding what a defendant knew or thought in a given conversation about the accuracy of tax returns signed by that defendant. Even if such lay opinion testimony can, like the proverbial round peg, be pounded into the square hole of Fed. R. Evid. 701, it seems obvious that the slight probative value of such mind-reading testimony is substantially outweighed by its enormous prejudice, precluding its admission under Fed. R. Evid. 403. Fundamentally, permitting such testimony by self-interested witnesses invites the jury to ground their decision on unreliable, biased, and nearly unimpeachable testimony.

The Third Circuit has just issued another head-scratching opinion of like nature. The case of United States v. Christie, 2010 WL 4026817 (3d Cir., Sept. 15, 2010) was a child pornography case in which the defendant was one of a large number of persons charged through their connection to the same pornography-distribution website. At trial defense counsel cross-examined the FBI case agent about the government’s arrangement with the cooperating website administrator. Counsel sought to show that the FBI failed to follow its confidential informant guidelines and was misled by an unreliable witness.

On redirect examination of the agent, the prosecutor was permitted to validate the reliability of the overall investigation by asking the FBI agent to “relay [sic] the circumstances of the investigation that would address concerns” raised by defense counsel about the implication of innocent persons. Overruling an objection that the agent lacked personal knowledge (but facing no Rule 403 objection), the court permitted the agent to testify that the FBI had executed 30 search warrants all across the country and had in the process obtained confessions from 24 individuals as to child pornography charges.

The court of appeals easily batted away the personal-knowledge objection made at trial, since the same agent had oversight for all thirty investigations. Other objections to the agent’s testimony were raised for the first time on appeal, and thus were subject to the more onerous plain error standard. The Third Circuit found none had merit: the testimony was not hearsay, since it was not the truth of others’ confessions which was relevant, only the fact that others had confessed, which bolstered the credibility of the web administrator and “illustrated the reliability of the investigation”; and it was not improper vouching, since information about the government’s track record had not come from the argument of a prosecutor but the testimony of a witness. There was no explicit discussion in the opinion of the probative versus prejudicial balance of Rule 403.

Applied to the fullest degree, Christie stands for the remarkable proposition that any time counsel representing one defendant who is part of a sweep challenges in opening statement or cross-examination the bona fides of the government’s investigation or the reliability of its informants, the government is free to respond with a litany of its successes in other similar matters. Nothing in Christie, for example, prevents the government from redirecting an agent-witness, who has been cross-examined on the lack of credibility of her informant, to tell the jury about how many convictions have been obtained in cases where the same informant’s information has been the basis for a search warrant or a lead to a defendant. The trial jury is no longer moored to the evidence presented in the courtroom in which it sits, but is encouraged to consider the government’s batting average in related cases.

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A vexing problem in trying white collar cases involving alleged group activity is the willingness of judges to allow cooperating witnesses to offer their opinions as to the guilty knowledge of the defendant-participants. Prosecutors elicit cooperator opinion testimony regarding defendants to the effect that “they all knew” of certain fraud or “everyone in the office was aware” that certain documents were falsified. It is no remedy to wait until cross-examination to unring that particular bell by attempting to show that the witness was not competent to have offered that wide-ranging opinion.

A couple of years ago I was brought into a mortgage fraud case after trial in order to handle sentencing and any appeal for a convicted client who had been employed as a loan representative at a mortgage company. The multi-defendant trial in federal court, resulting in convictions across the board, had been conducted by skilled, experienced counsel, who had nonetheless been unable to persuade the judge to exclude cooperator statements that “everyone” in the office knew that loan applications were false and that supporting income and bank statements were fabricated; the weeks of trial transcripts were rife with these vague but very damning statements. More recently, news reports reflect that Solomon Dwek, the FBI’s star witness in two New Jersey corruption trials thus far -- and who recorded sessions in which he, in assumed identity, made payments to numerous local politicians -- has been permitted to opine that the recipients “knew” the illicit purpose and nature of his payments.

The evidence rules seemingly prohibit such testimony. Under FRE 602, the witness’s lack of personal knowledge as to the beliefs or knowledge of another would seem to effect a bar. FRE 701’s requirements that lay opinions be rationally based on the witness’s perceptions and helpful to the trier of fact would also seem to block these intuitions about the thoughts of another. Finally, FRE 403’s balancing test should yield the conclusion that the probative value of such testimony is substantially outweighed by the risk of unfair prejudice and jury confusion. Yet, courts consistently allow such testimony, as evidenced in the recent Third Circuit opinion in United States v. Stadtmauer, 2010 WL 3504321 (3d Cir., Sept. 9, 2010).

In Stadtmauer, an officer of certain prominent real estate companies was convicted after a two-month trial of committing tax fraud relating to the reporting of entity expenses. An outside accountant was permitted to testify that Stadtmauer “knew” that certain tax returns which he signed in the presence of the witness were problematic. On appeal, Stadtmauer argued that the testimony ran afoul of Rule 701. The Third Circuit noted that Rule 701 excludes lay opinion testimony which simply tells the jury what result to reach, and that testimony as to what a defendant did or did not know “comes dangerously close to doing just this.” However, the accountant’s testimony was held to be rationally based on his perceptions of Stadtmauer’s involvement in the entities and on Stadtmauer’s knowledge of the characterization of the expenditures in the entities’ books and records (citing among other cases United States v. Anderskow, 88 F.3d 245 (3d Cir. 1996), where the “he must have known” testimony met the rationally-based test because of the witness’s knowledge of the defendant’s involvement in fraudulent loan documents).

However, the Stadtmauer Court noted that the “helpfulness” component of Rule 701 was not as easily met, because the jury had before it the same evidence of Stadtmauer's state of knowledge.  (In Anderskow, the “he must have known” testimony was ultimately held inadmissible because the jury had before it the evidence on which the witness’s opinion was based and so was as well-positioned as the witness to form a view as to the defendant’s knowledge.) But any error in Stadtmauer’s trial was deemed harmless based on the weight of the other evidence against him.
 

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