Opinion ID: 3160112
Heading Depth: 5
Heading Rank: 1

Heading: The Victims’ Testimony

Text: Baker and Nelson argue that the district court should not have allowed victims to testify about their financial situations and the impact of losing the money they invested. Baker and Nelson argue that the district court erred in admitting the victims’ testimony because the risk of unfair prejudice UNITED STATES V. LLOYD 39 substantially outweighed the probative value. See Fed. R. Evid. 403. We disagree. Because Nelson objected to Eliassen’s testimony, we review its admission as to both Nelson and Baker for an abuse of discretion. See United States v. Orm Hieng, 679 F.3d 1131, 1141 (9th Cir. 2012).5 We review testimony elicited without objection for plain error. See United States v. Lopez, 762 F.3d 852, 859 (9th Cir. 2014). “A district court’s Rule 403 determination is subject to great deference, because ‘the considerations arising under Rule 403 are susceptible only to case-by-case determinations, requiring examination of the surrounding facts, circumstances, and issues.’” Hinkson, 585 F.3d at 1267 (quoting R.B. Matthews, Inc. v. Transamerica Transp. Serv., Inc., 945 F.2d 269, 272 (9th Cir. 1991)). Eliassen’s testimony that he told Nelson that he had no cash to invest and would have to use his retirement money was relevant to rebut the defendants’ argument that they believed their investor-victims to be accredited investors. Eliassen also testified that losing his investment was a “very big” hardship. Any error in admitting this limited and brief victim-impact testimony was harmless. The thrust of Eliassen’s testimony 5 Although only Nelson objected to Eliassen’s testimony, the government concedes that “[a]buse-of-discretion review applies to [Baker’s] claim regarding Eliassen.” See United States v. Orm Hieng, 679 F.3d 1131, 1141 (9th Cir. 2012) (reviewing the defendant’s claim of evidentiary error for abuse of discretion even though he did not object because his codefendant did and “the matter was sufficiently brought to the attention of the district court”). 40 UNITED STATES V. LLOYD was relevant to show not only what Nelson said, but also what he knew and intended.6 For similar reasons, the district court did not plainly err by allowing Bitikofer, Beacham, and Clark to testify about how they described their financial situations to Nelson or Baker. Both Nelson and Baker argued at trial that they believed each person they successfully persuaded to invest in partnership units was a wealthy and experienced investor who could afford to lose the money. The testimony was relevant to rebut this defense, and there was no error, much less plain error, in allowing it. Although these victims also briefly described the impact of losing the money, that limited testimony did not affect the defendants’ substantial rights. There was no plain error. Baker and Nelson contend that Rao’s testimony that Greenhouse refused to return the money he and his girlfriend invested, even after Greenhouse was told that it was needed for her cancer treatment, was plain error. Rao’s testimony discussed only Greenhouse and Agler and did not mention either Baker or Nelson. At oral argument, Nelson’s counsel agreed that this testimony prejudiced only Greenhouse. Baker, however, contends that Rao’s testimony “was unfairly prejudicial to all the trial defendants because they were charged in Count One with a conspiracy” and the district 6 The parties do not cite Ninth Circuit case law on using similar victimimpact testimony to show intent to defraud. Other circuits have allowed it under limited circumstances. See, e.g., United States v. Cloud, 680 F.3d 396, 402 (4th Cir. 2012) (district court did not abuse its discretion in admitting victim-impact testimony because it “met the low bar of relevancy, given [the defendant’s] defense that the [victims] were guilty of bank fraud.”). The case law also recognizes limits on such testimony. See, e.g., United States v. Copple, 24 F.3d 535, 544–46 (3d Cir. 1994). UNITED STATES V. LLOYD 41 court did not specifically instruct the jury to consider the testimony only against Greenhouse. The record shows that any error in failing to give the limiting instruction was not plain and did not affect Baker’s or Nelson’s substantial rights. Baker separately argues that because he had no duty to tell potential investors about the commissions he was paid, the district court erred in allowing the victims he solicited to testify that they would not have invested had they known about the commissions. Baker relies on cases stating that “[a]bsent an independent duty, such as a fiduciary duty or an explicit statutory duty, failure to disclose cannot be the basis of a fraudulent scheme,” United States v. Ali, 620 F.3d 1062, 1070 n.7 (9th Cir. 2010) (internal quotation marks omitted), and that “otherwise truthful statements made by [a broker] about the merits of a particular investment are not transformed into misleading ‘half-truths’ simply by the broker’s failure to reveal that he is receiving added compensation for promoting a particular investment,” United States v. Skelly, 442 F.3d 94, 97 (2d Cir. 2006). Baker’s argument fails to take into account the evidence that he affirmatively told victims that he, other sales personnel, and promoters would not receive any commissions or other payments until after the investors had received a 110 percent return. Baker’s argument also fails to take into account that the Red Water private placement memorandum, which Baker sent to Gary Tranter and to the undercover FBI agent posing as an investor, included the false statement that no commissions would be paid until the investors had received a profitable return on their investments. The jury heard recorded conversations of Baker telling the undercover FBI agent posing as an investor that he received no commissions. Baker admitted that he lied to the agent about commissions. “[A] broker cannot affirmatively tell a misleading half-truth 42 UNITED STATES V. LLOYD about a material fact to a potential investor . . . [because] the duty to disclose in these circumstances arises from the telling of a half-truth, independent of any responsibilities arising from a truth relationship.” United States v. Laurienti, 611 F.3d 530, 541 (9th Cir. 2010). Baker’s affirmative misrepresentations that he would receive no commissions until the investors received a profitable return supported his fraud conviction without the need to prove a fiduciary relationship. See United States v. Benny, 786 F.2d 1410, 1418 (9th Cir. 1986) (“Proof of an affirmative, material misrepresentation supports a conviction of mail fraud without any additional proof of a fiduciary duty.”). The district court did not err in allowing the victims to testify about Baker’s representations and omissions about commissions.