Opinion ID: 20108
Heading Depth: 3
Heading Rank: 1

Heading: Braugh’s Challenges to McMillan’s Testimony

Text: Braugh argues that the admission of McMillan’s testimony violated Rule 404(b) of the Federal Rules of Evidence because the transactions McMillan described were remote in time from, and dissimilar to, the transactions charged in the indictment. Braugh also argues that, even if the evidence was relevant, its marginal probative value was substantially outweighed by the highly prejudicial impact. In response, the government argues that the McMillan transactions had substantial similarities to the transactions charged in the indictment, making the evidence highly probative of Braugh’s intent. Braugh put his intent squarely in issue, making McMillan’s testimony important rebuttal evidence. The district court instructed the jury that they were to consider the testimony only on the issue of intent. The district court’s decision to admit Rule 404(b) evidence is reviewed for abuse of discretion. See United States v. Chavez, 119 F.3d 342, 346 (5th Cir. 1997). This review is “necessarily heightened” in criminal cases. United States v. Gonzalez, 76 F.3d 1339, 1347 (5th Cir. 1996)(quoting United States v. Anderson, 933 33 F.2d 1261, 1268 (5th Cir. 1991)). The probative value of the evidence, the need for the evidence by the government on the issue of intent, and the court’s limiting instructions are all considered in determining if the court properly admitted the testimony under Rule 404(b).8 A trial court must apply the test set out in United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978)(en banc), in determining whether to admit extrinsic evidence under Rule 404(b). Careful application of the Beechum test protects defendants from unfair prejudice in the admission of extrinsic act evidence. See Anderson, 933 F.2d at 1268. The first step of the Beechum test is to determine that the extrinsic offense evidence is relevant to an issue other than the defendant’s character. The second step is to determine whether the evidence satisfies Rule 403. See Beechum, 582 F.2d at 911. The relevance of extrinsic act evidence “is a function of its similarity to the offense charged.” Id. When the evidence is admitted to show the defendant’s intent to commit the offense charged, “the relevancy of the extrinsic offense derives from the defendant’s indulging himself in the same state of mind in the perpetration of both the extrinsic and charged offenses.” Id. 8 Rule 404(b) of the Federal Rules of Evidence provides: 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. 34 “The reasoning is that because the defendant had unlawful intent in the extrinsic offense, it is less likely that he had lawful intent in the present offense.” Id. An extrinsic offense is relevant to the issue of intent only if “an offense was in fact committed and the defendant in fact committed it.” Id. at 912. The proponent of the evidence need not establish these facts by a preponderance of the evidence; rather, “the evidence in the case must be sufficient to permit a jury, acting reasonably, to find the preliminary facts by a preponderance of the evidence.” Anderson, 933 F.2d at 1269. “Once it is determined that the extrinsic offense requires the same intent as the charged offense and that the jury could find that the defendant committed the extrinsic offense, the evidence satisfies the first step under rule 404(b).” Beechum, 582 F.2d at 913. As to Braugh, McMillan’s testimony satisfies the first part of the Beechum test. McMillan’s testimony, if believed, would permit a reasonable jury to find by a preponderance of the evidence that Braugh committed fraud in both of the McMillan transactions, involving the same intent as the offenses charged in the indictment. In performing the second part of the Beechum test,“the task for the court . . . calls for a commonsense assessment of all the circumstances surrounding the extrinsic offense.” Id. Several factors affect the probative value of the evidence, including “the extent to which the defendant’s unlawful intent is established by other evidence, the overall similarity of the extrinsic and charged offenses, and the amount of time that separates the extrinsic and charged offenses.” Chavez, 119 F.3d at 346-47. 35 McMillan’s testimony was highly probative as to Braugh’s intent. “The mere entry of a not guilty plea in a conspiracy case raises the issue of intent sufficiently to justify the admissibility of extrinsic offense evidence.” United States v. Broussard, 80 F.3d 1025, 1039 (5th Cir. 1996). In this case, the core of Braugh’s defense was that he lacked the intent to defraud. Braugh testified, and his attorney argued, that Braugh believed the “roll program” was a legitimate investment. The government had no direct evidence of Braugh’s fraudulent intent. Braugh’s arguments as to the dissimilarity between the McMillan transactions and those described in the indictment are without merit. Braugh twice induced McMillan to give him money by describing investments that would result in a European bank paying $10 million to Braugh, yielding McMillan a substantial return in a very short time with no risk of losing his money. The first of the two transactions involved a letter of credit. The “roll program” transactions involved promises that the investors’ payments would enable Braugh and the other defendants to obtain a $10 million letter of credit from a foreign bank, which would return the investors’ money, plus interest and large profits, in a very short time. Braugh told McMillan that Latrasse was in charge of the investments proposed in the second transaction, just as he would later tell the “roll program” victims that Latrasse was the expert in that investment plan. The three to five years between the McMillan transactions and the later charged offenses does not so diminish the probative value of the evidence as to make it inadmissible. Cf. United States v. Hernandez-Guevara, 162 F.3d 36 863, 872–73 (5th Cir. 1998)(affirming district court’s admission of an 18-year-old conviction under Rule 404(b) to show intent), cert. denied, ___ U.S. ___, 119 S. Ct. 1375 (1999); Chavez, 119 F.3d at 346-47(affirming district court’s admission of a 15-year-old prior conviction under Rule 404(b) to show intent). The district court instructed the jury on the limited purpose for which McMillan’s testimony could be considered: You are going to hear evidence that you may conclude is similar to the acts of Defendants Braugh and Latrasse that are charged in the indictment but that occurred on different occasions than those alleged in the indictment. You must not consider any of the evidence that you are about to hear in deciding if Mr. Braugh or Mr. Latrasse committed the acts charged in the indictment. However, you may consider the evidence for other very limited purposes. If you find beyond a reasonable doubt from the evidence you have heard up to now that Mr. Braugh or Mr. Latrasse committed the acts charged against them in the indictment, then you may consider the evidence that you are about to hear to determine whether Mr. Braugh or Mr. Latrasse had the state of mind or intent necessary to commit the crimes charged against them in the indictment. That is the only purpose for which you may consider the evidence that you are about to hear. The district court repeated this admonition in his final instructions to the jury. “[T]he danger of unfair prejudice was minimized by the district court’s careful instructions to the jury.” Gonzalez, 76 F.3d at 1348. The high degree of probative value of McMillan’s testimony, balanced against the danger of unfair prejudice the testimony raised, in light of the limiting instructions, leads to the conclusion that the district court acted well within its discretion in admitting the testimony over Braugh’s Rule 404(b) objection. 37 Braugh’s argument that McMillan’s testimony was improper “guilt-by-association” evidence is similarly without merit.9 “It is well established . . . that the government may not attempt to prove a defendant’s guilt by showing that [the defendant] associates with ‘unsavory characters.’” United States v. Polasek, 162 F.3d 878, 884 (5th Cir. 1998). McMillan’s testimony did not suffer from this defect. McMillan testified about Braugh’s acts and statements in inducing McMillan to make the two “investments.” The testimony focused on Braugh’s own conduct. It did not merely show that Braugh associated with Latrasse. See id. at 885(distinguishing between evidence showing extrinsic wrongdoing on defendant’s part, which might be admissible to show knowledge or intent under Rule 404(b), and evidence showing the defendant associated with people who were later convicted of an offense similar to the charged offense, which would be inadmissible guiltby-association evidence). The district court did not err on this basis in admitting McMillan’s testimony. 2. Latrasse’s Challenges to McMillan’s Testimony Latrasse challenges McMillan’s testimony as inadmissible, both because it failed the Rule 404(b) criteria and because parts of McMillan’s testimony were hearsay as to Latrasse. 9 Braugh concedes that he did not object to McMillan’s testimony specifically on the ground that it was “guilt-byassociation” evidence. However, he argues that, based on the record, his Rule 404(b) objection suffices to preserve this argument on appeal. Of course, if Braugh did not timely object to McMillan’s testimony on this ground, the plain error standard would apply. See Polasek, 162 F.3d at 883-84. We conclude that McMillan’s testimony was not inadmissible “guilt-by-association” evidence even under the abuse of discretion standard. 38 Latrasse challenges the sufficiency of the evidence showing that “an offense was in fact committed and the defendant in fact committed it.” Beechum, 582 F.2d at 913. Specifically, Latrasse argues that McMillan’s testimony was insufficient to show that Latrasse was involved with Braugh in the second McMillan transaction. To determine whether there was sufficient evidence to satisfy the first part of the Beechum test, Latrasse’s hearsay objection must first be addressed. The statements Latrasse objects to would, if admissible, form part of the evidence showing Latrasse’s involvement. Latrasse objected under Rule 802 to McMillan’s testimony that Braugh described Latrasse as the person in charge of the investment, who was giving Braugh direction. The district court admitted McMillan’s testimony against Latrasse under Rule 801(d)(2)(D), which defines statements of an agent or employee of the defendant as non-hearsay. Latrasse challenges the district court’s ruling.10 An out-of-court statement of a declarant is not hearsay if “[t]he statement is offered against a party and is . . . a statement by the party’s agent or employee, made during the existence of the relationship.” FED. R. EVID. 801(d)(2)(D). The proponent of the evidence must prove the preliminary facts that bring the statement within Rule 801(d)(2)(D), by a preponderance of 10 Braugh’s out-of-court statements about Latrasse were only arguably offered for the truth of the matters asserted in them. However, because the government did not make this argument at trial or on appeal, we do not rest our resolution of the issue on this ground. 39 the evidence. See United States v. Bourjaily, 483 U.S. 171, 174 (1987). The statement itself may be considered in making this determination. See id. However, “[t]he contents of the statement . . . are not alone sufficient to establish . . . the agency or employment relationship and scope thereof under subdivision (D) . . . .” FED. R. EVID. 801(d)(2). McMillan testified that Braugh told him “over and over and over that Kurt Latrasse was the man in charge” of the Gold Cloud Development and San Francisco Productions investments. McMillan also testified that Braugh said “he was basically acting as an agent for Kurt Latrasse.” These statements provided the only evidence of Latrasse’s role as principal and Braugh’s as agent in the second transaction Braugh proposed to McMillan. Neither the loan document bearing Latrasse’s signature nor the circumstances under which Latrasse signed it provide proof that Braugh was acting as Latrasse’s agent. In light of the lack of evidence to corroborate Braugh’s out-of-court statements that he was acting as an agent for Latrasse, Rule 801(d)(2)(D) cannot serve as the basis for the admission of these statements against Latrasse. However, even if McMillan’s testimony should not have been admitted against Latrasse under Rule 801(d)(2)(D), other grounds for admission remove any harmful error. See United States v. Lopez, 979 F.2d 1024, 1033 (5th Cir. 1992). The government urges that the testimony was admissible under Rule 801(d)(2)(E), which takes an out-of-court statement outside the hearsay rule if the statement “is offered against a party and is . . . a statement by a coconspirator of a party during the course and in furtherance of 40 the conspiracy.” FED. R. EVID. 801(d)(2)(E). Although the indictment did not allege an earlier conspiracy in connection with the McMillan transactions, “the conspiracy that forms the basis for admitting coconspirators’ statements need not be the same conspiracy for which the defendant is indicted.” United States v. Arce, 997 F.2d 1123, 1128 (5th Cir. 1993). Before admitting evidence under Rule 801(d)(2)(E), the proponent must “establish by a preponderance of the evidence that the declarant and the defendant were involved in a conspiracy and that the statements were made during and in furtherance of the conspiracy.” United States v. Broussard, 80 F.3d 1025, 1038 (5th Cir. 1996); see also Bourjaily, 483 U.S. at 175-76. Under Rule 104(a) of the Federal Rules of Evidence, a court “is not bound by the rules of evidence except those with respect to privileges” in determining the existence of preliminary facts to support the admission of evidence. See also Bourjaily, 483 U.S. at 178. The out-of-court statement itself may be considered in determining the existence of the conspiracy and other preliminary facts. See id. at 177–81; FED. R. EVID. 801(d)(2). However, the out-of-court statement alone is not sufficient to support its own admission. See FED. R. EVID. 801(d)(2). Braugh made the statements as part of his efforts to induce McMillan to give him money a second time. There is sufficient evidence to show that Braugh and Latrasse conspired in this effort to defraud McMillan. The trial record included the following evidence that Braugh and Latrasse were parties to such a conspiracy: 41 • McMillan testified that Braugh told him “over and over again that Latrasse was in charge” of the Gold Cloud Development transaction and the San Francisco Production movie deal. • McMillan testified that Braugh said that “he was basically acting as an agent for Kurt Latrasse.” C After McMillan refused to give Braugh any money unless Latrasse signed a loan document and personal guarantee drafted by McMillan’s staff, those documents were faxed to Latrasse. • Braugh and McMillan telephoned the hotel where Latrasse was staying. They were connected to a man who identified himself as Kurt Latrasse. That man stated that he had received the documents that McMillan’s staff drafted and was signing them. C Braugh faxed McMillan the loan document bearing a signature purporting to be that of Kurt Latrasse. • The signature of Kurt Latrasse was very similar to Latrasse’s signature on other documents previously admitted as evidence in the trial. This evidence shows the predicate facts making Braugh’s statements about Latrasse admissible under Rule 801(d)(2)(e). The record discloses sufficient evidence to show by a preponderance of the evidence that Latrasse and Braugh conspired to defraud McMillan. Braugh’s out-of-court statements in furtherance of the conspiracy were admissible under Rule 801(d)(2)(E) of the Federal Rules of Evidence. In light of this determination, we return to the first part of the Beechum test to consider whether McMillan’s testimony was admissible against Latrasse under Rule 404(b). Under the circumstances presented in this case, there was sufficient evidence to permit a rational jury to find that Latrasse committed an offense involving fraud for the purpose of the Beechum analysis. 42 McMillan’s testimony also satisfies Rule 403, the second part of the Beechum test. Latrasse placed his intent at issue by testifying that he believed the “roll program” was legitimate. The evidence of the second McMillan transaction was probative rebuttal evidence, particularly given the similarity between Latrasse’s role in the extrinsic offense and his role in the charged offenses. Braugh described Latrasse to McMillan as the person in charge of the proposed investments; later, Latrasse was presented to the roll program investors as the expert in such transactions. In both schemes, when an investor expressed concern or doubt, Latrasse was called in to provide reassurance. McMillan’s testimony was probative on the issue of Latrasse’s intent. The district court gave a careful limiting instruction to the jury, minimizing the prejudicial impact of McMillan’s testimony. See Gonzalez, 76 F. 3d at 1348. Balancing the probative value against the danger of unfair prejudice in light of the limiting instruction, the district court did not abuse its discretion in admitting McMillan’s testimony against Latrasse over his Rule 404(b) objection. Moreover, even if McMillan’s testimony was inadmissible, the error was, on this record, harmless. See United States v. Cornett, 195 F.3d 776, 784 (5th Cir. 1999). The erroneous admission of McMillan’s testimony would require reversal of Latrasse’s conviction only if the evidence had a “substantial impact” on the verdict. See United States v. Dickey, 102 F. 3d 157, 163 (5th Cir. 1996); United States v. El-Zoubi, 993 F.2d 442, 446 (5th Cir. 1993). The trial record discloses ample evidence of Latrasse’s guilt. The evidence shows that Latrasse repeatedly provided Hayes, 43 Schwinger, and Blackwelder assurances as to the legitimacy and profitability of the roll program long after he knew that the money had not been invested as promised and was not producing the promised returns. The record shows that Latrasse gave the investors detailed and varying explanations, promises, and excuses long after the investors’ money had already been disbursed to the defendants, including Latrasse. In the context of the ample evidence of Latrasse’s criminal intent in the record, McMillan’s testimony did not have a “substantial impact” on the jury verdict so as to require reversal.