United States Court of Appeals

For the First Circuit

No. 99-1695

UNITED STATES OF AMERICA,

Appellee,

v.

GEORGE VAROUDAKIS,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Selya, Circuit Judge,

Lipez, Circuit Judge,

and Casellas,* District Judge.

Diana K. Lloyd, Assistant U.S. Attorney, with whom Donald

K. Stern, U.S. Attorney was on brief for appellee.

Kimberly Homan, with whom Sheketoff & Homan was on brief for

defendant, appellant.

December 5, 2000

* Of the District of Puerto Rico, sitting by designation.
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LIPEZ, Circuit Judge. This case requires us to decide

a familiar but difficult issue about the admissibility of prior

bad act evidence under Federal Rules of Evidence 404(b) and 403.

The government alleged that defendant George Varoudakis, charged

with arson and conspiracy to commit arson in violation of 18

U.S.C. § 844(i) and 18 U.S.C. § 371, hired an acquaintance to

burn down his failing restaurant, Destinations, in order to

collect insurance proceeds. Following his conviction,

Varoudakis argues on appeal that the district court abused its

discretion by admitting evidence of a prior bad act, namely,

testimony by Varoudakis's long-time girlfriend and coconspirator in the Destinations arson, Cheryl Britt, that she

saw Varoudakis set fire to his leased car sixteen months before

the Destinations fire. We agree with Varoudakis that the

evidence should have been excluded under Rule 403, and that the

error was not harmless. Accordingly, we vacate the judgment.

I.

We recite the following undisputed facts or describe

the testimony of certain witnesses. 

In 1991, George Varoudakis opened a restaurant and

night club called Destinations at One Congress Street in Boston.

The establishment's general manager was Cheryl Britt,

Varoudakis's girlfriend since the mid-1980s. Initially,
1 Cheryl Britt was listed as the president, treasurer,

clerk, and director of Destinations, but testified that she had

no financial stake in the company and that Varoudakis controlled

it. The defendant did not dispute these facts.

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Destinations succeeded financially, but business declined about

a year after it opened. Varoudakis paid his suppliers cash on

delivery and owed his workers back wages. His landlord claimed

$600,000 in back rent and damages, and began eviction

proceedings in December 1994. 

In late 1994, after several years of carrying insurance

that was inadequate under the terms of his lease, Varoudakis

increased the contents insurance coverage for Destinations to

$500,000 and bought business interruption insurance for

$100,000. Cheryl Britt testified that Varoudakis told her he

increased the insurance so he could burn the restaurant and

collect the insurance proceeds.

In January 1995, Varoudakis filed for bankruptcy for

One Congress Street, a corporation he controlled that owned

Destinations.1 In February, he filed for Destinations, a

separate company. Varoudakis initiated these filings under

Chapter 11, allowing reorganization by the debtor-in-possession.

In March, he filed for personal bankruptcy. Also in March, the

One Congress Street petition was voluntarily converted to

Chapter 7, which requires the debtor to transfer control to a
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bankruptcy trustee. On April 6, 1995, two days after the fire

at Destinations, the Destinations petition was voluntarily

converted to Chapter 7. 

Britt testified that several weeks before the April

1995 fire, Varoudakis told her to stop paying Destinations's

bills. As a result, Britt did not pay the February 1995

insurance bill. On March 27, 1995, the insurance policy was

cancelled. At trial, Varoudakis relied on the cancellation to

contest the government's theory that he burned Destinations to

collect insurance. Britt, however, testified that Varoudakis

did not know the insurance was cancelled. 

Also sometime in March, Varoudakis began moving sound

and lighting equipment from Destinations to a property he owned

in Everett. Several employees worked long hours loading the

equipment into trucks on the days and nights leading up to the

fire. According to Britt and others, the removal included a

drop-safe, tables, kitchen equipment, liquor, and paperwork.

More than $100,000 worth of equipment was removed. 

Britt and her sister, Diane Casey, testified that at

the end of March 1995, Varoudakis hired Casey's boyfriend, Nick

Adams, to torch Destinations. Britt said that Varoudakis told

her to pay Adams $2,000 when the job was completed.
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On the night of April 3, Varoudakis went to the

Foxwoods Casino with two friends. Britt and Casey testified

that he instructed Casey to switch shifts with Destinations's

scheduled night manager, Mansour Alrisheq, on the night of April

3 because Alrisheq did not know of the planned arson. Casey

also said Varoudakis told her to give Adams the keys to

Destinations.

Destinations burned on April 4, 1995. Investigators

determined that arson caused the fire. Varoudakis did not

dispute this finding at trial.

In the early morning of April 4, apparently believing

he had insurance, Varoudakis called his insurance agent from

Foxwoods to report the fire. Britt testified that when

Varoudakis learned that the fire damage to Destinations was not

extensive, he was furious with Adams for having botched the job.

When interviewed about the fire in September 1995,

Varoudakis, who was not then a suspect, told investigators that

the fire might have been connected with the robbery of the

Destinations drop-safe, which held between $5,000 and $7,000,

and that a rival Greek club might be responsible. He also

mentioned Casey and Adams as suspects. 

Cheryl Britt initially denied to investigators that

Varoudakis had hired Adams to set the fire. After she learned
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that Varoudakis had accused Casey and Adams, and after

investigators told her she could be indicted, she implicated

Varoudakis. In the course of these discussions with

investigators in October 1995, Britt was promised immunity.

However, she lied about her involvement in the fire and her

relationship with Varoudakis to investigators and in two grand

jury appearances. The government did not revoke her immunity.

At Varoudakis's trial, Britt was one of the government's main

witnesses.

On February 10, 1999, after a thirteen-day trial, a

jury convicted Varoudakis of both arson and conspiracy to commit

arson. At the end of the second half-day of deliberations, the

jury wrote the court a note saying: "At this current time, we

are at an impasse. Could you tell us how to proceed." The court

told the jury to stop for the day and continue on the following

day. After another day and a half of deliberations, the jury

found Varoudakis guilty.

II.

At trial, the court allowed Cheryl Britt to testify

that in December 1993 she saw Varoudakis set fire to a Cadillac

he had leased. Britt said that Varoudakis parked the car on a

piece of property he owned in Everett and that he left in

another car to buy gasoline, with her as a passenger. When he
2 The lease showed that Varoudakis had leased the car for 36

months, and that at the time of the fire he had used 13 months

of that period. The lease allowed him to drive 45,000 miles

without further charge. There was no evidence of what the

mileage was at the time of the fire. The defense argued that it

was unlikely that Varoudakis would have driven 45,000 miles in

13 months.

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returned, he threw newspapers into the back of the Cadillac,

poured gasoline over them, and ignited the newspapers. Britt

said Varoudakis told her that he torched the car because the

lease had expired and he owed excess mileage charges, and that

he expected insurance to cover the loss. On cross-examination

of Britt, Varoudakis offered the car lease agreement to impeach

Britt's testimony that the lease had expired. The agreement

showed that the lease had 23 months remaining.2 Following

Britt's testimony, Officer Richard Gamby of the Everett Police

Department testified that he investigated the burning of a

Cadillac in December 1993 that matched Britt's description. 

Varoudakis argues that the car fire evidence should not

have been admitted under Rule 404(b) because its sole purpose

was to demonstrate criminal propensity, or that the evidence

should not have been admitted under Rule 403 because its

probative value was substantially outweighed by its unfairly

prejudicial effect. The government responds that the car fire

evidence was properly admitted, or, if not, that its admission

was harmless error.
3 Rule 404(b) provides in relevant part:

Evidence of other crimes, wrongs, or acts is

not admissible to prove the character of a

person in order to show action in conformity

therewith. It may, however, be admissible

for other purposes, such as proof of motive,

opportunity, intent, preparation, plan,

knowledge, identity, or absence of mistake

or accident. . . . 

Fed. R. Evid. 440(b).

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We review the district court's determination that the

prior bad act evidence was admissible under 404(b) and 403 for

an abuse of discretion. See United States v. Balsam, 203 F.3d

72, 84 (1st Cir. 2000). 

A. Standard for Admission under Federal Rule of Evidence 404(b)

 Rule 404(b) provides that evidence of a defendant's

prior bad acts may not be admitted to prove his criminal

character or propensity to commit crimes of the sort for which

he is on trial.3 To admit evidence of prior bad acts, a trial

court must find that the evidence passes two tests. First, the

evidence must have "special relevance" to an issue in the case

such as intent or knowledge, and must not include "bad character

or propensity as a necessary link in the inferential chain."

United States v. Frankhauser, 80 F.3d 641, 648 (1st Cir. 1996).

Second, under Rule 403, evidence that is specially relevant may

still be excluded if its probative value is substantially

outweighed by the danger of unfair prejudice.
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As the text of Rule 404(b) indicates, prior bad act

evidence may be specially relevant if, for example, it goes to

the defendant's intent, knowledge, plan, absence of mistake, or

identity. Additionally, prior bad acts may be admitted in

conspiracy cases under 404(b) if they "explain the background,

formation, and development of the illegal relationship." United

States v. Escobar-De Jesus, 187 F.3d 148, 169 (1st Cir. 1999).

See also United States v. Prevatte, 16 F.3d 767, 775-76 (7th

Cir. 1994); United States v. Jones, 982 F.2d 380, 382-83 (9th

Cir. 1993); United States v. Passarella, 788 F.2d 377, 383-84

(6th Cir. 1986); United States v. Magnano, 543 F.2d 431, 435 (2d

Cir. 1976). We have focused on two factors to determine the

probative value of prior bad act evidence: "the remoteness in

time of the other act and the degree of resemblance to the crime

charged." Frankhauser, 80 F.3d at 648, quoting United States v.

Fields, 871 F.2d 188, 197 (1st Cir. 1989). 

B. Applying Rule 404(b)

1. The Court's Ruling

Immediately before the opening statements of counsel,

in response to a motion in limine filed by the defendant to

exclude the car fire evidence, the court ruled that Britt's

testimony about the car fire would be admissible to show

Varoudakis's "plan, knowledge, and intent" in relation to
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whether he "knowingly participated in a common scheme to

defraud." In support of this rationale, the court cited the

government's allegations that Varoudakis committed both the car

fire and the Destinations arson "for a financial motive" and

with "one of the same conspirators [Britt]."

The court cited United States v. Gonzalez-Sanchez, 825

F.2d 572 (1st Cir.), cert. denied, 484 U.S. 989 (1987), as

authority for its ruling. In Gonzalez-Sanchez, the defendants,

who were gang members, were convicted of an October 1981 arson.

The trial court admitted prior bad act evidence primarily

concerning two other recent fires. Like the arson charged, both

fires had also destroyed businesses owned by the defendants and

insured by the same insurance company. These fires occurred

just two months and six months before the October 1981 fire. In

upholding the court's decision to admit the evidence, we said:

"The issue at trial was not just whether [defendant] Latorre

committed arson. The broader issue was whether Latorre knowingly

participated in a common scheme to defraud." Id. at 581.

There are important differences between the facts

supporting a common scheme rationale in Gonzalez-Sanchez and

this case. Unlike the recurring fires in Gonzalez-Sanchez--

three arsons of business properties in six months--Britt's

testimony does not suggest a plan connecting the car fire to the
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Destinations fire. In United States v. Lynn, 856 F.2d 430 (1st

Cir. 1988), we held that evidence of a prior conviction for

marijuana was not admissible to show a common plan or scheme

connected to the defendant's instant prosecution for marijuana

distribution because there was no evidence that the previous

offense "leads in a progression" to the second. Id. at 435.

Similarly here, no evidence suggests that "a continuing or

connected scheme" linked the car fire and the Destinations fire.

Id.

The district court also saw the car fire evidence as

specially relevant to the Destinations fire on the ground that

Britt acted as Varoudakis's co-conspirator in both instances.

The court was correct that prior bad act evidence is admissible

to prove conspiracy in cases "where the earlier crime involved

the same participants as the charged crime." United States v.

Hadfield, 918 F.2d 987, 994 (1st Cir. 1990), citing United

States v. Flores-Perez, 849 F.2d 1, 7 (1st Cir. 1988). See also

Gonzalez-Sanchez, 825 F.2d at 581 ("the evidence of Latorre's

involvement with the same people in past arson and fraud schemes

is especially probative of the issue whether he was an innocent

'tool' of others or a knowing participant in the conspiracy").

Britt, however, did not "participate" in the car fire

as a co-conspirator. According to her testimony, and there was
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no contrary evidence, she was a witness who went along for the

ride. By contrast, she testified that she helped Varoudakis with

the Destinations fire, removing restaurant equipment and paying

Adams for his work. Her lack of participation in the car fire

distinguishes this aspect of the case from Gonzalez-Sanchez, in

which the defendant and his fellow gang members played the same

roles in committing the prior arsons as they did in the arson

for which the defendant was charged.

Finally, the court said that the car fire was specially

relevant to Varoudakis's motive to commit the Destinations fire

because, in both instances, he allegedly committed arson to

alleviate a financial burden by collecting insurance proceeds.

Unlike knowledge and intent, motive is not an element of the

crime that the government must prove. For that reason, proof of

motive must be offered to show some other element, for example,

that the crime was committed, the identity of the accused, or

the accused's requisite mental state. See 22 Charles A. Wright

and & Kenneth A. Graham, Jr., Federal Practice and Procedure, §

5240 (1978). 

When prior bad act evidence is offered to prove a

motive for the crime, "courts must be on guard to prevent the

motive label from being used to smuggle forbidden evidence of

propensity to the jury." Id. That is the problem here. As
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proof of motive, the car fire testimony is offered as

circumstantial evidence that Varoudakis committed the

Destinations fire. It involves an inference of propensity as "a

necessary link in the inferential chain." Frankhauser, 80 F.3d

at 648. Put most simply, the government argues that

Varoudakis’s commission of the car fire arson in response to

financial stress makes it more likely that he committed the

restaurant arson in response to financial stress. Contrast this

forbidden inference with the permissible inference to be drawn

in a case in which the prior bad act--say, a botched robbery by

the defendant that was frustrated by the ineptitude of his

cohort--provided the motive for the defendant’s subsequent

assault on his cohort. There the prior bad act would provide

circumstantial evidence of the commission of the assault without

the involvement of any propensity inference.

In a case that also involved arson of a restaurant

owned by the defendant, the Eleventh Circuit excluded evidence

that the defendant, in a separate incident, threatened to "burn

out" a tenant after she did not pay a full month's rent. See

United States v. Utter, 97 F.3d 509, 514 (11th Cir. 1996) As in

this case, the government argued that the tenant's testimony
4 The court also noted that the prior bad act evidence

related "only to [Utter's] threat to use fire" not arson for the

purpose of collecting insurance, for which Utter was charged.

See Utter, 97 F.3d at 513. As we have noted, Britt testified

that Varoudakis set the car fire to collect insurance, and the

government offers the testimony to show motive on that basis.

However, this distinction between the cases does not affect the

relevance to our case of the Utter court’s conclusion that the

"threat" evidence should have been excluded. In both cases, the

prior bad act evidence is specially relevant to the defendant's

commission of the crime alleged only if criminal propensity is

inferred.

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would show "how the defendant reacts to financial stress." Id.4

The court rejected this rationale, stating: "This is the type of

character and propensity evidence prohibited by Rule 404(b)."

Id. See also Lynn, 856 F.2d at 436. For the same reason, we

find error in the district court's financial motive rationale.

2. The Britt-Varoudakis Relationship 

There is, however, a proper rationale for admitting the

car fire evidence under 404(b) that differs subtly, but

importantly, from the district court's rationale that Britt was

a co-conspirator in both fires. The government urges on appeal

that the car fire evidence was properly admitted because it

demonstrates the background and formation of the conspiratorial

relationship between Varoudakis and Britt during the planning

for and commission of the Destinations fire.

In United States v. Escobar-De Jesus, 187 F.3d 148, 169

(1st Cir. 1999), we said that prior bad act evidence is
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admissible "to help the jury understand the basis for the coconspirators' relationship of mutual trust." Id. See also

United States v. Love, 134 F.3d 595, 603 (4th Cir. 1998); United

States v. Pipola, 83 F.3d 556, 565-66 (2d Cir. 1996); United

States v. Rosa, 11 F.3d 315, 334 (2d Cir. 1993); United States

v. Diaz, 994 F.2d 393, 395 (7th Cir. 1993). The district court

in Escobar-De Jesus admitted evidence about an uncharged heroin

deal between the defendant, who was charged with other drugrelated crimes, and one of his co-conspirators. We reasoned

that the heroin purchase "was relevant and admissible because it

helped to explain the history between [co-conspirators]

Rodriguez and Escobar," whose relationship "was directly in

issue and material to the case." Escobar-De Jesus, 187 F.3d at

169. 

Cheryl Britt's relationship with George Varoudakis was

similarly material to the conspiracy case against him. Britt

testified to the key facts that Varoudakis hired Nick Adams to

torch Destinations and that he believed he still had insurance

when the arson took place. Britt's testimony also refuted

Varoudakis's alibi, and his claim that he removed the sound

system and other equipment for a legitimate purpose. 

Britt knew these things because Varoudakis trusted her.

Her testimony that he allowed her to watch him torch his
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Cadillac demonstrated that trust. It also demonstrated

Varoudakis's willingness to involve her in some way in his

illegal acts. Like the prior bad act evidence admitted in

Escobar-De Jesus, Britt's car fire testimony helped explain the

nature of their relationship.

The defense argues that the prior bad act evidence

should not be admissible to show the background and formation of

Britt's relationship with Varoudakis because Varoudakis did not

dispute that he and Britt were long-time intimates. At first

blush, this argument seems plausible. However, we have held

that evidence of prior bad acts may be probative even when it is

relevant to an issue that the defendant does not contest. For

example, such evidence may be admitted to show knowledge or

intent when the defense is a general denial of the charges, see

United States v. Oppon, 863 F.2d 141, 146 (1st Cir. 1988), or a

claim of mistaken identity, see United States v. Ferrer-Cruz,

899 F.2d 135, 138 (1st Cir. 1990). After all, the fact that the

defendant does not contest the issue for which the prior bad act

evidence is offered does not, "by itself, remove those issues

from the case." Id.

We conclude, therefore, that the car fire evidence is

specially relevant under Rule 404(b) to Varoudakis's

relationship with Britt because it shows that he trusted her so
5 Since the car fire took place only sixteen months before

the Destinations arson, the two events are also sufficiently

proximate in time to warrant admission under 404(b). See

Hadfield, 918 F.2d at 994 (convictions that occurred five years

before the charged crime were sufficiently proximate in time);

Frankhauser, 80 F.3d 641, 649 (seven year span between prior bad

act and charged crime did not render evidence inadmissible).

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much that he was willing to commit a crime in her presence.5 We

further conclude, however, that the contention that the

government did not need the car fire evidence to prove the close

relationship between Britt and Varoudakis remains a pertinent

question in the Rule 403 analysis, which requires weighing the

evidence's probative value against its unfairly prejudicial

effect. See United States v. Gilbert, 229 F.3d 15,24 (1st Cir.

2000).

C. Rule 403

Prior bad act evidence that surmounts the bar of Rule

404(b) may still be inadmissible under Rule 403. This rule

requires the trial court to exclude the evidence if its

probative value is substantially outweighed by "the danger of

unfair prejudice." Fed. R. Evid. 403. Otherwise relevant

evidence may also be excluded if its probative value is

substantially outweighed by "confusion of the issues, or

misleading [of] the jury, or by considerations of undue delay,

waste of time, or needless presentation of cumulative evidence."

Id.
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The district court's determination on this issue merits

great deference on appeal. See Hadfield, 918 F.2d at 995.

Nonetheless, we find that in this case the district court erred

in finding that the car fire evidence was admissible under Rule

403.

Under Rule 403's weighing test, "it is only unfair

prejudice which must be avoided." United States v. RodriguezEstrada, 877 F.2d 153, 156 (1st Cir. 1989). We stress "unfair"

because "[b]y design, all evidence is meant to be prejudicial."

Id. Usually, courts use the term "unfair prejudice" for

evidence that invites the jury to render a verdict on an

improper emotional basis. For example, we have upheld the

exclusion of prior bad act evidence in part because it was

"undeniably explosive," Gilbert, 229 F.3d at 26. We are also

cautious when the prior act is a "shocking or heinous crime

likely to inflame the jury." United States v. Mocchia, 681 F.2d

61, 64 (1st Cir. 1982). 

As the district court noted, the car fire evidence is

not particularly shocking. There is little danger that it

swayed the jury toward a conviction on an emotional basis. But

Rule 403 also protects defendants from unfair prejudice
6 The drafters of Rule 403 expected "unfair prejudice" to

have multiple meanings. "'Unfair prejudice' within its context

means an undue tendency to suggest decision on an improper

basis, commonly, though not necessarily, an emotional one."

Advisory Committee's Notes on Fed. Rule. Evid. 403, 28

U.S.C.App., at 860 (emphasis added).

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resulting from criminal propensity evidence.6 As the Supreme

Court has stated, improper grounds under Rule 403 "certainly

include . . . generalizing a defendant's earlier bad act into

bad character and taking that as raising the odds that he did

the later bad act now charged." Old Chief v. United States, 519

U.S. 172, 180 (1997).

To be sure, all prior bad act evidence involves some

potential for an improper propensity inference. That is why,

under Rule 404(b), the possibility that a jury may infer

something negative about a defendant's character or propensity

to commit crime does not make the evidence inadmissible unless

no permissible inference may also be drawn. See Ferrer-Cruz,

899 F.2d at 138. Under Rule 403, however, that risk of an

improper criminal propensity inference should be considered in

light of the totality of the circumstances, including the

government's need for the evidence given other available

testimony, to prove the issue identified pursuant to the 404(b)

special relevance analysis. See Old Chief, 519 U.S. at 184

("what counts as the Rule 403 'probative value' of an item of
7 Rule 401 defines relevant evidence as evidence having "any

tendency to make the existence of any fact that is of

consequence to the determination of the action more probable or

less probable than it would be without the evidence." Fed. R.

Evid. Rule 401.

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evidence, as distinct from its Rule 401 'relevance,' may be

calculated by comparing evidentiary alternatives").7

Here is the crux of our analysis. "The prejudice to

an opponent can be said to be 'unfair' when the proponent of the

evidence could prove the fact by other, non-prejudicial

evidence." Wright & Graham, supra, § 5214. Doubts about the

probative value of prior bad acts evidence are thus "compounded"

when prosecutors have other evidence available, "rendering

negligible their need to show intent by the prior bad acts."

Lynn, 856 F.2d at 436; see also Wright & Graham, supra, § 5250

("The probative value of any particular bit of evidence is

obviously affected by the scarcity or abundance of other

evidence on the same point.").

Our recent holding in Gilbert incorporated the

understanding of Rule 403 unfair prejudice that we articulate

here. In that case, we affirmed on interlocutory appeal a

district court's decision to exclude a variety of prior bad act

evidence. We cited as factors the risk that the jury would

infer criminal propensity, and the government's lack of need for

the evidence. See Gilbert, 229 F.3d at 26 ("we simply do not
-21-

see how the jury could regard the [prior bad act] evidence as

specially relevant without drawing a forbidden inference of

criminal propensity . . . . [W]e do not find particularly

compelling the government's argument that it has a strong need

for this evidence").

There is clearly a tension between Rules 404(b) and

403. The more similar the prior bad act evidence is to the

charged crime, the more likely it is to be deemed relevant under

404(b). Yet the more the prior bad act resembles the crime, the

more likely it is that the jury will infer that a defendant who

committed the prior bad act would be likely to commit the crime

charged. See United States v. Beechum, 582 F.2d 898, 915 n.20

(5th Cir. 1978) ("the more closely the extrinsic offense

resembles the charged offense, the greater the prejudice to the

defendant"). This is precisely the kind of inference that Rule

403 guards against. See Lynn, 856 F.2d at 436 ("The ordinary

inference here would seem very close to the inference the Rule

was designed to avoid."). 

D. Applying Rule 403

 The government primarily used the car fire evidence

to cast Varoudakis as an arsonist. In its opening statement,

the government said the following: "Now, the Defendant knew very

well how to plan an arson because this wasn't the first arson he
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had planned." Although Rule 404(b) permits the admission of

prior bad acts evidence as proof of plan, we have already

concluded that no common plan or scheme linked the car fire and

the Destinations fire. See supra. In reality, this opening

statement underscored Varoudakis's criminal propensity to burn

Destinations because of the car fire. In questioning Britt

about the car fire, the government did not stress the

development of her relationship with Varoudakis, a proper

rationale for admission under 404(b). Instead, Britt's

testimony focused on the facts of the car fire and Varoudakis's

statement to her that he burned the car to collect insurance

coverage.

Moreover, as in Gilbert, the probative value of the car

fire evidence was minimal. The government did not need the car

fire to demonstrate the close nature of Varoudakis's

relationship with Britt. Britt testified that she and

Varoudakis began a romantic relationship in about 1985, and that

they lived together for six years, beginning in about 1989, in

an apartment that Varoudakis helped Britt purchase. Britt said

Varoudakis bought her jewelry and furniture and took her on

expensive vacations.

Britt also testified that she allowed him to list her

as the president, treasurer, clerk, and director of
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Destinations, a corporation in which she had no financial

interest. She said she knew about Varoudakis's long-running

dispute over rental payments with the Destinations landlord.

Because her name was on the Destinations incorporation papers,

she wrote the rent checks. As she said at trial: "Me and George

[Varoudakis] [sic] communicated a lot if something came up."

Britt also testified that she heard Varoudakis's discussions

with a potential buyer for Destinations. She signed the

Destinations bankruptcy petition.

The government also did not need the car fire evidence

to prove Varoudakis's knowledge or intent relating to the

Destinations arson. Varoudakis denied setting the fire at all,

rather than arguing that he burned Destinations unknowingly or

unintentionally. There was no evidence suggesting that

Varoudakis was an innocent "tool" of others in the arson

conspiracy like the defendant in Gonzalez-Sanchez, 825 F.2d at

581. The absence of a dispute on these issues weighs against

admitting the evidence under 403. See Gilbert, 229 F.3d at 24

(citing as a factor weighing in favor of exclusion that "four of

the five issues adduced by the government in support of

admitting the [prior bad act] evidence do not appear to be much

in dispute in this case."); Lynn, 856 F.2d at 437 n. 15 ("While

we do not undermine the government's substantial burden of
8 Other details about Britt's personal relationship with

Varoudakis came out during the cross-examination that followed

Britt's direct testimony.

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proof, we do note that in this instance, 'intent, while

technically at issue, [was] not really in dispute,' greatly

reducing any need for the jury to know of the previous

conviction.") (footnote omitted).

We recognize that our 403 analysis must "evaluate the

trial court's decision from its perspective when it had to rule

and not indulge in review by hindsight." Old Chief, 519 U.S. at

183 n.6. At the start of the trial, the district court denied

Varoudakis's motion in limine to exclude the car fire evidence.

When the government began to ask Britt about the car fire on

direct examination, Varoudakis objected. The court overruled

him, relying on its ruling on the motion in limine. The court's

decision to allow the evidence at this point followed Britt's

other testimony about her close relationship with Varoudakis.

Britt had already said that she and Varoudakis had lived

together for six years; that she was listed on the Destinations

incorporation papers; that she knew about Varoudakis's fight

with his landlord; that she wrote the rent checks for

Destinations; and that she and Varoudakis "communicated a lot if

something came up."8 This testimony revealed that the government

did not need the car fire evidence to establish Britt’s close
9 To better position the court to evaluate the government's

need for the prior bad act evidence it seeks to offer, the

Second Circuit has ruled that the determination about whether to

admit the evidence to show knowledge or intent "should await the

conclusion of the defendant's case and should be aimed at a

specifically identified issue." United States v. Figueroa, 618

F.2d 934, 939 (2d Cir. 1980). We mention this practice because

such an ordering of the proof, though not required in this

circuit, occasionally may prove to be a useful tool for trial

judges.

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relationship with Varoudakis, the only legitimate purpose of the

evidence under 404(b). The absence of any other special

relevance under 404(b), including those cited by the court and

the government, was also discernible at this juncture. The

propensity danger of the evidence was unmistakable. Thus the

probative value of the car fire evidence was substantially

outweighed by the danger of unfair prejudice at the time the

district court admitted it.9 That ruling was erroneous.

We add two further observations. First, given the

nature of appellate review, with its restrictions to the cold

record, we rarely reverse a district court's judgment about the

admissibility of prior bad act evidence pursuant to the weighing

analysis of Rule 403. Indeed, as we have said repeatedly,

"[o]nly in exceptional circumstances will we reverse the

exercise of a district court's informed discretion vis a vis the

relative weighing of probative value and unfairly prejudicial

effect." United States v. Griffin, 818 F.2d 97, 101-02 (1st
10 Rule 404(b) requires the prosecution to provide

reasonable notice of prior bad act evidence at the defendant's

request. See Fed. R. Evid. 404(b). Varoudakis responded to the

government's notice by filing a motion in limine to exclude the

car fire evidence. He renewed his objection when the government

began to question Britt about the car fire at trial, as

required. See Gill v. Thomas, 83 F.3d 547, 540-41 (1st Cir.

1996) (party whose in limine motion to exclude evidence is

denied must, to preserve issue for appeal, renew objection when

evidence is offered at trial). 

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Cir. 1987). We reiterate our commitment to that principle.

Here, however, we have the exceptional case that requires us to

intervene.

Second, although we do not reach the conclusion that

we must intervene on the basis of hindsight, we do reach it with

advantages unavailable to the district court. In ruling on a

defendant's motion in limine before trial, courts do not have

the benefit of context--how the prior bad act evidence relates

to the evidence actually presented by the prosecution during its

case in chief. When defendants renew their objection to prior

bad act evidence offered by the prosecution during trial, as

they usually must to preserve their objection to its

admissibility,10 courts do not have the time we have on appeal to

assess critically the 404(b) boilerplate formula for admission

of the evidence often invoked by the prosecution. 

 By contrast, the prosecution does have these

advantages of context and time. Before trial, the prosecution
11 Because of its many exceptions to the general statement

that prior bad act evidence should not be admitted, Rule 404(b)

is sometimes understood as one of inclusion, and sometimes as

one of exclusion. See Wright & Graham, supra, § 5239. We

ourselves have used both formulations. Compare United States v.

Rodriguez-Cardona, 924 F.2d 1148, 1153 (1st Cir. 1991) ("Rule

404(b) is a rule of exclusion.") with United States v. Carty,

993 F.2d 1005, 1011 (1st Cir. 1993) ("Rule 404(b) is a rule of

inclusion".). Whatever the proper formulation, the exceptions

must not swallow the rule.

-27-

generally knows the totality of its case and how the prior bad

act evidence fits into it. The prosecution also has the time to

analyze rigorously whether the exceptions to Rule 404(b),11 and

the limitations of Rule 403, apply to the facts. The failure to

engage in that analysis

leads to the needless complications we find in this case and

others. See United States v. Rodriguez-Cardona, 924 F.2d 1148,

1153 (1st Cir. 1991) ("[T]he government here attempted to render

the rule [of excluding prior bad act evidence] a minor

exception. This practice is inconsistent with the fair

administration of justice. We notice that this is a recurrent

problem.") (footnote omitted); United States v. Simon, 842 F.2d

552, 556 (1st Cir. 1988) (Torruella, J., concurring) ("Almost

any excuse or far-fetched theory is made to fit within [Rule

404(b)'s] truly exceptional language."). 

In oft-quoted language, Justice Jackson explained why

our rules of evidence are so wary of propensity evidence: 
12 Varoudakis did not ask the district court to give a

limiting instruction about the car fire evidence at the time the

evidence was offered or before the jury charge, and no

instruction was given. When the defendant does not ask for a

limiting instruction, but later objects to its absence, we

review the district court's failure to issue one sua sponte for

plain error. See United States v. Carty, 993 F.2d 1005, 1011

n.9 (1st Cir. 1993). That praxis, however, does not mean that

we apply the plain error standard to the court's decision to

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The State may not show defendant's prior

trouble with the law, specific criminal

acts, or ill name among his neighbors, even

though such facts might logically be

persuasive that he is by propensity a

probable perpetrator of the crime. The

inquiry is not rejected because character is

irrelevant; on the contrary, it is said to

weigh too much with the jury and to so

overpersuade them as to prejudge one with a

bad general record and deny him a fair

opportunity to defend against a particular

charge. 

Michelson v. United States, 334 U.S. 469, 475-76 (1948)

(footnotes omitted) (quoted approvingly in Old Chief, 519 U.S.

at 181). Despite the fairness implications of the prosecution's

use of prior bad act evidence, the prosecution too often pushes

the limits of admissibility of this evidence, knowing its

propensity power and gambling that the time constraints on the

trial court, the court's broad discretion, the elasticity of

Rule 404(b), and the harmless error rule of the appellate court,

will save it from the consequences of overreaching. That is not

always a good gamble.

E. Harmless Error12
admit prior bad act evidence over the objection of the

defendant, even though that evidence would have justified a

limiting instruction if the defendant had sought it. Varoudakis

did not have to ask for a limiting instruction if he determined

that the lack of one operated in his favor. See Malik, 928 F.2d

at 23 ("Counsel might well have concluded that, in the context

of the trial, such an instruction would not prove very helpful.

In any event, whether a party wishes such an instruction, or

wishes to forego the instruction (thereby calling less attention

to the statement) is primarily a matter for counsel to decide at

trial."). Varoudakis did not forfeit his right to challenge

admission of the car fire evidence under a harmless error

standard by not asking for a limiting instruction. Similarly,

contrary to the government's argument, Varoudakis did not

forfeit a harmless error argument by not objecting repeatedly to

every question or statement of the prosecution about the car

fire. Varoudakis renewed his motion in limine objection to the

car fire evidence when Britt began to testify about the car fire

at the trial. No more was necessary. 

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Admission of prior bad act evidence is harmless "only

if it is 'highly probable' that the error did not contribute to

the verdict." United States v. Aguilar-Aranceta, 58 F.3d 796,

802 (1st Cir. 1995). To make this determination, we must

conclude "with fair assurance, after pondering all that happened

without stripping the erroneous action from the whole, that the

[jurors'] judgment was not substantially swayed by the error."

United States v. Williams, 985 F.2d 634, 638 (1st Cir. 1993),

quoting United States v. Burke, 948 F.2d 23, 27 (1st Cir. 1991).

We cannot so conclude in this case.

The car fire evidence led to testimony by Officer Gamby

that bolstered the credibility of Britt, the key government
13 Britt alone testified that Varoudakis believed he still

had insurance when the arson took place, and that he had no

intention of opening a restaurant at the Everett property, and

thus had no legitimate reason for removing equipment from

Destinations before the fire. Britt also refuted Varoudakis's

alibi by testifying that it was preplanned. Britt and Casey

testified that Varoudakis hired Adams to burn Destinations.

-30-

witness.13 Officer Gamby confirmed Britt’s car fire account by

testifying that he investigated the burning of a car that

matched Britt’s description in terms of date, location, and make

of vehicle. In its closing statement, the government said of

Britt and her sister Diane Casey: "And when you consider their

testimony, consider corroborating evidence . . . evidence that

confirms, confirms what they say." The government then

highlighted Gamby’s testimony as an example of such

corroboration for Britt. Without the car fire evidence, the

government would not have had this opportunity to show an

independent, neutral source verifying Britt's truthfulness and

accuracy, and thereby enhancing her credibility generally. 

In addition, when we "assess the record as a whole,"

as harmless error analysis requires, United States v. Santana,

175 F.3d 57, 66 (1st Cir. 1999), quoting Morgan v. Hall, 569

F.2d 1161, 1166 (1st Cir. 1978), we cannot say that the

government’s case was "so overwhelming as to overshadow the

prejudicial effect" of the prior bad act evidence. Santana, 175

F.3d at 67. As the trial court observed, the government’s case
14 The government had shown that Varoudakis suddenly

increased his insurance, after years of inadequate coverage,

five months before the fire. His phone call to his insurance

agent immediately after learning that the fire had occurred

apparently demonstrated that he did not know that his failure to

pay his bills had interrupted his coverage. Witnesses also

testified that Varoudakis directed the removal of hundreds of

thousands of dollars worth of equipment from Destinations in the

weeks before the fire. The defense, on the other hand, showed

that Varoudakis was bankrupt at the time of the arson. It

produced witnesses who said the restaurant looked functional

when they entered it after the fire. There was also testimony

that while the Everett property into which Varoudakis said he

moved the Destinations equipment was far from ready to open for

business, substantial renovations had begun. Varoudakis himself

did not testify at trial.

-31-

against Varoudakis would have been largely circumstantial had

Britt been discredited.14

Finally, the three-day length of the jury

deliberations, and the jury’s note to the trial court that it

was "at an impasse" at the end of the second half-day, weigh

against a finding of harmless error. Lengthy deliberations

suggest a difficult case. See Santana, 175 F.3d at 67; United

States v. Ottersburg, 76 F.3d 137, 140 (7th Cir. 1996) ("The

length of the jury’s deliberations makes clear that this case

was not an easy one."); Gibson v. Clanon, 633 F.2d 851, 855 (9th

Cir. 1980) ("The state’s case against [the defendants] is a

strong one. Nevertheless, if the jury had readily accepted [the]

eyewitness testimony it seems unlikely that they would have

deliberated for so long to reach a verdict."). 
15 In light of this disposition, we do not reach the two

other issues raised by Varoudakis relating to a limit on the

cross-examination of Cheryl Britt and to sentencing. 

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In some cases, the jury may deliberate for an extended

period not because of indecision, but in "a diligent and

conscientious attempt to evaluate the evidence, and to verify

the testimony of different witnesses and to come to a careful

and reasoned decision." Clark v. Moran, 942 F.2d 24, 32-33 (1st

Cir. 1991). In this case, however, the jury’s "impasse" note

reveals uncertainty about Varoudakis’s guilt. See Medina v.

Barnes, 71 F.3d 363, 369 (10th Cir. 1995) (jurors’ indication

that they might be unable to reach a unanimous verdict weighed

in favor of finding prejudice). The interplay between

uncertainty and propensity evidence is particularly troublesome.

As then-Judge Breyer put it:

"Although ... 'propensity evidence' is relevant, the risk that

a

jury will convict for crimes other than those charged--or that,

uncertain of guilt, it will convict anyway because a bad person

deserves punishment--creates a prejudicial effect that outweighs

ordinary relevance." Moccia, 681 F.2d at 63. That risk

occurred here with the admission of the car fire evidence. We

cannot deem that admission harmless.15

Judgment vacated. Remanded for further proceedings.
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