Opinion
Crim. File No. 04-169 (PAM/RLE).
August 8, 2004
MEMORANDUM AND ORDER
This matter is before the Court on various Motions in Limine.
The Court grants Defendants Jorgensen and Wirtz leave to adopt and join in the various motions in limine filed by each Defendant.
A. Evidence of Prior Acts
The Government seeks to introduce evidence of the following prior acts:
1. Defendants Baubie's and Wirtz's alleged involvement in a conspiracy to defraud Minolta Business Systems and Xerox Corporation by acts of commercial bribery. A trial based on these allegations is set for September 27, 2004.
2. Defendant Jorgensen's alleged involvement in a scheme to defraud the State of California by avoiding automobile use taxes and vehicle registration fees by registering his automobiles in other states. A trial based on these allegations is set for November 8, 2004.
3. Defendant Jorgensen's alleged scheme to defraud Katun Corporation ("Katun") by receiving consulting payments that he was not entitled to receive. A trial based on these allegations is set for November 8, 2004.
4. Defendants Baubie's and Wirtz's alleged involvement in a scheme to defraud the State of Minnesota by avoiding higher Minnesota sales tax and vehicle registration fees by registering the vehicles in another state.
5. Defendant Baubie's alleged involvement in a scheme to defraud Katun customers and various state governments by taking unused customer credits.
The Government does not seek to introduce evidence regarding Defendant Baubie's alleged unlawful involvement with unused customer credits in its case-in-chief. However, it requests that the evidence be presented by way of cross-examination during the defense.
Defendants argue that this evidence should be excluded because the evidence merely shows that Defendants had a proclivity to engage in fraud. The Government asserts that it will use the evidence to prove Defendants' criminal intent.
Rule 404(b) of the Federal Rules of Evidence prohibits the admission of evidence of the accused's bad acts if the evidence is offered to show the accused acted in conformity with the prior bad acts. However, the Rule allows admission of prior acts evidence if it is offered for a non-propensity purpose, "such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or accident." Fed.R.Evid. 404(b); United States v. Adams, 898 F.2d 1310, 1313 (8th Cir. 1989). When intent is an element of the crime charged, "evidence of other acts tending to establish that element is generally admissible." Adams, 898 F.2d at 1312 (quoting United States v. Miller, 725 F.2d 462, 466 (8th Cir. 1984)); see also United States v. Southwest Bus Sales, Inc., 20 F.3d 1449, 1456-57 (8th Cir. 1994) (intent is at issue when it is an element of the crime charged and is necessary to the government proving its case beyond a reasonable doubt). Moreover, Rule 404(b) is a rule of inclusion. United States v. Crenshaw, 359 F.3d 977, 998 (8th Cir. 2004). However, it "does not give the government the unhindered ability to introduce evidence of prior acts." Id. Instead, the prior acts evidence must be: (1) relevant to a material issue; (2) similar in kind and close in time to the charged crime; (3) established by a preponderance of evidence; and (4) such that its probative value is not outweighed by any prejudicial impact. Crenshaw, 359 F.3d at 998 (citing United State v. Williams, 308 F.3d 833, 837 (8th Cir. 2002)).
Considering these four factors, the Court finds that the prior acts evidence must be excluded. First, the prior acts evidence is only marginally relevant to whether Defendants intended to defraud commercial airlines through various ticketing schemes. Indeed, the prior acts evidence is relevant only to show that Defendants engaged in other fraudulent schemes, thereby showing that Defendants have a propensity to conspire to defraud others. This is precisely what Rule 404(b) prohibits.
Second, the prior acts evidence involves schemes that are markedly different from the alleged conspiracy in this case. Defendants' alleged schemes to defraud others by registering automobiles in different states and bribing employees differ substantially from their alleged schemes to defraud commercial airlines through ticketing and reservation manipulation. The victims are different, the beneficiaries are different, the methods of fraud are different, and the schemes are completely unrelated.
Finally, the potential prejudice of the prior acts evidence substantially outweighs its probative value. Evidence of uncharged misconduct "deflects the jury's attention from the immediate charges and causes it to prejudge a person . . . thereby denying that person a fair opportunity to defend against the offense that is charged." United States v. Roark, 924 F.2d 1426, 1434 (8th Cir. 1991). From the prior acts evidence, a juror may infer that Defendants have a propensity to defraud others and use that inference to conclude that Defendants are guilty of conspiring to defraud in this case. Furthermore, the admission of prior acts evidence is likely to transform this case into a trial of Defendants' other alleged fraud schemes — many of which may be tried in the near future.
The instant case is analogous to United States v. Forcelle, 86 F.3d 838 (8th Cir. 1996), where the Eighth Circuit held that the district court abused its discretion in admitting prior acts evidence. In Forcelle, the defendant was tried for stealing funds from the company he founded. At trial, the government introduced evidence that the defendant had also stolen platinum scrap metal from the company. The government contended that the theft was part of a series of criminal acts serving to defraud the company, including the acts of stealing company funds. Id. at 842. The Eighth Circuit disagreed and reversed the conviction. It found that the evidence relating to the theft of platinum scrap was entirely distinct from the mail fraud charges in the indictment. Thus, the prior acts evidence was not relevant to the issue of intent. Id. at 842-43.
The Government argues that the instant case is akin toUnited States v. Gellene, 182 F.3d 578 (7th Cir. 1999). In that case, the Seventh Circuit held that evidence of past misrepresentations to the judiciary was admissible when the defendant put his intent to file fraudulent declarations in a bankruptcy proceeding at issue. The defendant had admitted to filing the false declarations but denied having the requisite fraudulent intent. Although the prior acts evidence and the charged conduct involved different instances of deceit, both suggested the defendant possessed a "cavalier disregard for the truth in his dealings with tribunals." Id. at 595. Consequently, the Seventh Circuit held that the prior acts evidence was admissible. Id. at 594-96.
While the Court recognizes some similarities between Gellen and the instant case, it also notes several key distinctions. For example, the defendant in Gellene admitted to making the past misrepresentations. In contrast, Defendants have denied the prior acts that the Government seeks to introduce. Thus, it is likely that admission of the prior acts evidence will transform this trial into a trial of all prior acts. Moreover, the prior acts inGellene were very similar to the charged acts. In this case, however, the alleged conspiracies are markedly different in victim, method, and purpose.
So too in this case: Proof that Defendants conspired to defraud commercial airlines does not incidentally involve proof that Defendants conspired to defraud others through entirely different means. Because the prior acts evidence fails the four-factor test, the Court grants Defendants' Motions in Limine to exclude the prior acts evidence.
B. Evidence of Settlement Agreements Between Katun Corporation and Northwest Airlines
Defendants seek to exclude evidence relating to the settlement agreements between Katun and Northwest Airlines, contending that the Government will offer the evidence to show that the alleged ticketing and reservation practices were unlawful. The Government maintains that it will use the settlement agreements to show that Defendants were put on notice that Northwest Airlines informed Defendants — as Katun executives — that Northwest Airlines disapproved of Katun's ticketing practices. The Court notes that the settlement agreements specifically deny that Katun officers and employees committed any unlawful act or wrongdoing.
Under Rule 408, settlement negotiations and agreements are "not admissible to prove liability for or invalidity of the claim or its amount." Fed.R.Evid. 408. However, such evidence is admissible when offered "for another purpose, such as proving bias or prejudice of a witness, negativing a contention of undue delay, or proving effort to obstruct a criminal investigation or prosecution." Id.
The Government's use of the settlement agreements to show Defendants' knowledge that Northwest Airlines disapproved of Katun's ticketing practices is permissible. See United States v. Austin, 54 F.3d 394, 400 (7th Cir. 1995) (evidence relating to civil settlement admissible to show that defendant was aware that his actions were illegal and that he acted with criminal intent);United States v. Hauert, 40 F.3d 197, 200-01 (7th Cir. 1994) (settlement documents admissible to show defendant's knowledge and intent regarding his obligation to pay taxes); Bradbury v. Phillips Petroleum Co., 815 F.2d 1356, 1363-64 (10th Cir. 1987) (evidence relating to previous settlement admissible to show defendant's intent and absence of mistake). The Court therefore denies Defendants' Motion in Limine to exclude evidence of the settlement agreements. It further concludes, however, that a limiting instruction is needed to militate any potential prejudice to Defendants. The Court therefore approves the limiting instruction proposed by the Government, which informs the jury that Katun denied all liability under the settlement agreements and that the settlement agreements may be considered only to evaluate a Defendant's notice or intent.
C. Testimony of Terry Trippler
Defendants move to exclude testimony of Terry Trippler, whom the Government identified as an expert witness to opine on Defendants' alleged scheme to manipulate ticketing and reservations systems. The Government has agreed not to call Mr. Trippler in its case-in-chief, but reserves the right to call him to rebut testimony by Defendants' experts. If the Government eventually seeks to introduce Mr. Trippler's testimony, the Court will rule on Defendants' Daubert motions at that time.
D. Evidence of Katun Corporation's Plea and Plea Agreement
Defendants seek to exclude evidence of the plea agreement and plea entered by Katun relating to charges of computer, mail, and wire fraud. The Government does not oppose the Motion. The Court therefore grants the Motion, finding specifically that the danger of prejudice substantially outweighs the probative value of the plea agreement and plea. See United States v. Brown, 913 F. Supp. 1324, 1330 (D. Minn. 1996) (Doty, J.) (granting a new trial to corporate executive because the corporate guilty plea was highly prejudicial and likely to have affected the jury verdict);see also United States v. Andreas, 23 F. Supp. 2d 835, 848-49 (N.D. Ill. 1998), aff'd 216 F.3d 645 (7th Cir. 2000) (evidence of corporate plea agreement raised concerns of unfair prejudice that the jury would be unable to separate the corporation from the individual executives on trial).
E. Summary Chart
The Government intends to introduce a chart that summarizes an audit of Katun's travel documents. Defendants move to compel the Government to allow Defendants to inspect all information underlying the summary chart. Alternatively, Defendants seek exclusion of the chart under Rule 1006 of the Federal Rules of Evidence. The Government has since provided Defendants access to the underlying information, and has represented willingness to work with Defendants to address any remaining concerns relating to the summary chart. The Court therefore denies Defendants' Motion as moot.
F. Co-Conspirator Statements
The Government seeks admission of co-conspirator statements under Rule 801(d)(2)(E) of the Federal Rules of Evidence, which sets forth the co-conspirator exception to the hearsay rule. The Court may conditionally admit a co-conspirator statement if the Government demonstrates by a preponderance of the evidence that (1) a conspiracy existed; (2) the defendant and the declarant were members of the conspiracy; and (3) the declaration was made during the course and furtherance of the conspiracy. United States v. Bell, 573 F.2d 1040, 1043-44 (8th Cir. 1978). At the conclusion of all evidence, the Court will determine whether the Government satisfied its burden and will then determine whether the co-conspirator statement is admissible. Id. at 1044.
This procedure does not contemplate an overarching ruling on the admissibility of all co-conspirator statements. Rather, the Government must first propound a question that obviously requires a witness to recount an out-of-court declaration of an alleged co-conspirator. Id. Only then, upon a timely and appropriate objection by Defendants, may the Court conditionally admit the statement. Id.
The Government has not identified any co-conspirator statement it seeks to admit under Rule 801(d)(2)(E). Moreover, it has yet to present any evidence to satisfy any of the elements required under Bell. Accordingly, the Court denies the Government's request for a pretrial ruling allowing the Government to introduce evidence of co-conspirator statements.
G. Evidence of Guilty Pleas and Plea Agreements of Testifying Witnesses
The Government plans to examine several former Katun executives who have previously pled guilty to crimes involving Katun. In particular, the Government seeks to question the witnesses on direct examination about the specifics of their plea agreements. The Government also seeks the opportunity to examine the witnesses in a limited manner about the plea agreements, including the requirement to cooperate and testify truthfully in the prosecution of Defendants in this case. Defendants do not oppose the Motion. Such evidence goes to the witness's credibility and will provide the jury with a complete presentation of the facts. See United States v. Hutchings, 751 F.2d 230, 237 (8th Cir. 1984) ("confederate's guilty plea is admissible, even on the Government's direct examination of the witness, as evidence of the witness' credibility, or of his acknowledgment of participation in the offense"); United States v. Wiesle, 542 F.2d 61, 62 (8th Cir. 1976) (evidence that a witness entered a plea of guilty to the same offense is not error unless it is elicited as substantive proof of the defendant's guilt). Accordingly, the Court grants the Government's request to introduce evidence of pleas and plea agreements on direct examination.
I. Evidence of Defendants' Compensation from Katun
The Government intends to introduce evidence regarding the Katun compensation of each Defendant during the latter part of the alleged conspiracy. Defendants contend that the evidence is prejudicial and "serves no purpose other than to appeal to the current bias against corporate executives."
The Court finds this evidence relevant as background information to explain the Defendants' motives and intent to engage in the alleged conspiracy. Moreover, the Court notes that the Government is willing to stipulate to the presentation of compensation evidence without the need for testimony and elaboration. The Court therefore refrains from ruling on the motion until such evidence is presented at trial.
Accordingly, IT IS HEREBY ORDERED that:
1. Defendant Jorgensen's Motion in Limine to Adopt Motions in Limine of Co-Defendants (Clerk Doc. No. 90) is GRANTED;
2. Defendant Wirtz's Motion in Limine to Adopt Co-Defendants' Motions in Limine (Clerk Doc. No. 108) is GRANTED;
3. Defendant Baubie's Motion in Limine to Exclude Evidence of Katun Corporation's Plea Agreement and Guilty Plea (Clerk Doc. No. 89) is GRANTED;
4. Defendant Baubie's Motion in Limine to Exclude Evidence of Other Crimes, Wrongs, or Acts (Clerk Doc. No. 95) is GRANTED;
5. Defendant Jorgensen's Motion in Limine to Exclude Evidence of Other Bad Acts (Clerk Doc. No. 100) is GRANTED;
6. Defendant Wirtz's Motion in Limine to Exclude Evidence of Other Crimes, Wrongs, or Acts (Clerk Doc. No. 109) is GRANTED;
7. Defendant Jorgensen's Motion in Limine Regarding Government's Summary Chart (Clerk Doc. No. 98) is DENIED as MOOT; and
8. Defendants' Motion in Limine to Exclude Evidence of Settlement Agreements (Clerk Doc. No. 99) is DENIED.