Opinion ID: 149112
Heading Depth: 3
Heading Rank: 4

Heading: Evidence of HII and HC's Wealth

Text: Raymond Harbert is Bill Harbert's nephew and CEO of Harbert Management Company, a company formed in 1993 (after most of the underlying events in this case) that manages assets for third parties, including HC. When Raymond Harbert testified, Miller's counsel asked him about the assets of HII, HC, and Harbert Management Company. From the exchange, counsel elicited that HII currently owns or is associated with seven or eight power plants in California, owns various cash assets, and makes approximately $40 to $50 million in annual revenues. Raymond Harbert also confirmed that between approximately 1990 and 1993, HII sold somewhere between $250 million and $500 million in assets, including selling its 50% ownership in BIE. Raymond Harbert also testified that HC was a holding company with assets in the form of stock in subsidiary companies, and that Harbert Management Company currently manages over $100 million in assets for HC. He also testified that Harbert Management Company manages assets for other Harbert entities, including individuals of the Harbert family, for a total of around $9 billion in assets. In its closing, the Government recalled this testimony and juxtaposed the wealth of all the Harbert companies with the relative poverty of those in countries benefitting from projects funded by the USAID, saying that the excess money the Government paid to the conspirators could have [been] used for less fortunate people in other countries. Counsel for HII and HC objected to this testimony on the grounds that information about the companies' wealth was both irrelevant and prejudicial, and reiterate this argument on appeal. We agree. To be admitted, evidence must be relevant. Fed.R.Evid. 402. That is, the evidence must have a 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. 401. None of Raymond Harbert's testimony described above satisfies this definition. No fact concerning the present size and scope of Harbert Management Company was of consequence to the determination of the action. The present size and scope of Harbert Management Company, a company that was not a defendant and manages assets for many non-defendants, including Raymond Harbert, his mother, and other members of the Harbert family, had nothing to do with the liability of any of the defendants or the measure of damages. Indeed, the district court recognized this irrelevance in its opinion denying a new trial, though it deemed the irrelevant evidence not prejudicial. 563 F.Supp.2d at 111 n. 73. However, arguments to the jury about a defendant's wealth are grounds for new trial. Koufakis v. Carvel, 425 F.2d 892, 902 (2d Cir.1970) (Remarks ... which can be taken as suggesting that the defendant should respond in damages because he is rich and the plaintiff is poor, are grounds for a new trial.) (citing Washington Annapolis Hotel Co. v. Riddle, 171 F.2d 732, 740 (D.C.Cir.1948) (A mistrial should have been declared on account of these remarks [suggesting that the defendant should respond in damages because it was rich and the plaintiff poor].)). Nor was evidence of the wealth of HII and of HC relevant. The district court said the testimony concerning HII and HC was properly admitted because it could help the jury decide whether one company was the alter ego of the other, a theory presented by the Government as a way to implicate HC in the conspiracy. 563 F.Supp.2d at 111. Under the alter ego theory, the court may ignore the existence of the corporate form whenever an individual so dominates an organization `as in reality to negate its separate personality.' Founding Church of Scientology of Wash., D. C., Inc. v. Webster, 802 F.2d 1448, 1452 (D.C.Cir.1986) (quoting Quinn v. Butz, 510 F.2d 743, 758 (D.C.Cir.1975)). Applied to this case, HII would be the alter ego of HC: if the jury had decided HII was part of the conspiracy, and that it was the alter ego of HC, the jury could have found HC liable for the conspiracy even if there was no direct evidence that HC had itself joined the conspiracy. But the evidence described above does not help establish whether HII was the alter ego of HC. Instead, Raymond Harbert testified only as to how much money HII made from selling assets in the 1990s, how much money HII makes now, and how many assets HC now has. Under Rule 401's terms, the evidence made it no more probable or less probable that one corporation was the alter ego of the other. The only way the information could have affected the jury was to prejudice it. The Government and Miller argue before us that all the testimony at issue was nonetheless admissible because the counsel for HII and HC brought up the subject of its wealth first, and in any case the amount of wealth evidence elicited and referred to at trial was not large and was not significant enough to warrant a new trial. We disagree on both points. First, the plaintiffs cite only two references to support their But they started it! argument: counsel's opening and closing statements. [5] Neither reference is convincing. The first time HII and HC's counsel referenced the corporations' money was to point out Miller's monetary interest in the case. This is a perfectly acceptable point for counsel to make. Cf. United States v. Smith, 232 F.3d 236, 242 (D.C.Cir.2000) (Routinely, defense counsel cross-examines government witness about an informant's bias whether it be a plea agreement, a financial arrangement, or both.); 3 Federal Jury Practice and Instructions § 101.43 (5th ed.) (jury instruction stating that, in assessing the credibility of a witness, jury may consider whether the witness has any bias or prejudice). It is unrelated to the testimony later elicited by the plaintiffs about the various Harbert companies' wealth. Even less convincing is the plaintiffs' reliance on counsel's closing statements, which of course came after the plaintiffs had already elicited Raymond Harbert's testimony. As for the argument that there was not enough prejudice to warrant a new trial, again we disagree. Evidence need not be reinforced and reiterated again and again for it to be prejudicial enough to warrant a new trial. Here, it is enough that there were several inappropriate references to multiple different companies' wealth, especially given that the Government's counsel emphasized the wealth of the Harbert companies in his closing statement and insinuated that the money would be in better hands if it were taken from the defendants. We therefore vacate the judgments with respect to HII and HC and remand for a new trial for those two defendants.