Case o' The Week: Never Made it to the Grand, But Throw Before Petit - Loftis, Uncharged Conduct, and FRE 404(b)
He’s making a list,
He’s checking it twice,
Now naughty’s admissible,
When fraudsters entice.
United States v. Loftis, 2016 WL 7176657(9th Cir. Dec. 9, 2016), decision available here.
Players: Decision by Judge Fisher, joined by Judges W. Fletcher and N.R. Smith. Hard fought appeal by Montana AFPD John Rhodes.
Facts: Loftis is charged with wire fraud, for allegedly victimizing investors through falserepresentations. Id. at *1. Though the government posits a broad scheme, spanning six years and several states, charged transactions involved just three investors and all took place in Montana. Id.
Before trial it became clear that the government intended to introduce evidence of crimes beyond the charged offenses. Loftis thus moved in limine for exclusion of uncharged conduct. Id.
The district court granted the motion in part, finding some evidence excludable under FRE 404(b). While “[t]he extent to which the district court properly applied [the evidentiary] principles is not clear,” id. at *4, the court held that some evidence would be excluded under FRE 404(b) unless the government showed the uncharged conduct evidence was “inextricably intertwined” with the Montana scheme. Id. at *1.
The government filed an interlocutory appeal; trial was stayed. Id.
Issue(s): Did the district court properly exclude evidence of uncharged offenses, absent a showing from the government that the crimes were inextricably intertwined with the scheme employed in Montana?
Held: 1. FRE 404(b) and “other” acts: “We hold the evidence of uncharged transactions is not evidence of ‘other’ crimes or acts under Rule 404(b), because it is evidence of part of the crime charged in the indictment—the overall scheme to defraud.” Id. at *2 (emphasis in original, footnote omitted). ‘Because the evidence from other investors is charged conduct, the government is not required to rely on the inextricably intertwined doctrine to avoid Rule 404(b).” Id. at *4.
2. “Inextricably intertwined:” “[However,] . . . even if the uncharged transactions at issue were not part of the crime charged, they would not be subject to exclusion under Rule 404(b) because they are ‘part of the same transaction’ as the charged transactions. The inextricably intertwined doctrine, therefore, affords a second basis for concluding the evidence should not be treated as ‘other’ crimes or ‘other’ acts evidence under Rule 404(b).” Id.
Of Note: While this is a disappointing outcome, Judge Fisher does take pains to emphasize why the evidence is admissible. Wire fraud’s first element requires the government to prove “the existence of a scheme to defraud.” Id. at *3. Hence, evidence from uncharged crimes is admissible as proof of that first element – it is not, by definition, “other crimes” and is not precluded under FRE 404(b). Id.
This doesn’t mean that in a fraud case the government can throw everything at the barn to see what sticks – “these holdings apply only when the charged and uncharged transactions can fairly be characterized as parts of a single fraudulent scheme.” Id. at *4 (emphasis added).
Put differently, when our creative clients have other, different scams running, those crimes fall outside of Loftis – they don’t bear on the first element of the charged wire (or mail) fraud.
How to Use: Fish gotta swim, birds gotta fly, AUSAs gotta overprove their case: it’s the nature of things.
What are you supposed to do when a gung-ho prosecutor invokes Loftis and smuggles in a mountain of inflammatory junk to “prove” a fraudulent scheme (a scheme that is often painfully clear from the charged offenses?) Counter-invoke Judge Fisher’s explicit caveat: Loftis doesn’t address exclusion of this evidence on other bases, such as FRE 403. Id. at *4. (And remind the DJ that excluding cumulative evidence will shave weeks off an interminable fraud trial . . . .)
For Further Reading: What about snitches running their own “uncharged conduct” schemes? Under Loftis, aren’t their shenanigans evidence of fraud crimes (and hence their motive for falsely incriminating your poor client to earn that 5K break?) For an interesting rift on this theme, see Jessica Broderick, Reverse 404(b) Evidence: Exploring Standards When Defendants Want to Introduce Other Bad Acts of Third Parties, at 79 U. Colo. L. Rev. 587 (2008), available here.
Image of the Honorable Judges Fisher, W. Fletcher, and NR Smith (the Loftis panel) from http://www.ca9.uscourts.gov/media/view_video.php?pk_vid=0000010315
Steven Kalar, Federal Public Defender N.D. Cal. Website at www.ndcalfpd.org