Opinion ID: 468586
Heading Depth: 1
Heading Rank: 1

Heading: Admissibility of evidence of outstanding tax judgment and insufficient funds checks

Text: 23 Tager assigns as error the admission at trial of evidence of a 1973 unpaid tax judgment against him in an amount exceeding $500,000. Defendant objects to admissibility of this evidence on the grounds that it was irrelevant under Fed.R.Evid. 401, that it was unfairly prejudicial under Fed.R.Evid. 403, and that it was also an impermissible attempt to show that defendant had bad character under Fed.R.Evid. 404(b). 24 It is not error to admit evidence of the tax judgment if it is relevant in this case to establish motive as well as intent, an element of the crimes charged. See, e.g., United States v. Zipkin, 729 F.2d 384, 390 (6th Cir.1984); United States v. Reed, 639 F.2d 896, 907 (2d Cir.1981). The government argues that the unpaid judgment dating from 1973 was relevant not only to prove fraudulent intent by showing the falsity of the defendant's representations to Mericka & Co. concerning his financial condition, but also that it was relevant to show the defendant's motive for the free riding scheme and for using a corporate name instead of his own to insulate any profits from forfeiture or seizure for the tax debt. We find the admission of the outstanding tax judgment to be relevant and therefore admissible under Rule 401. 25 While admission of this evidence had potential for prejudice, the trial judge is to be accorded broad discretion in evaluating the impact of evidence under Rule 403, and we find that admission of the evidence in question was not an abuse of discretion. See United States v. Robinson, 560 F.2d 507, 514-15 (2d Cir.1977) (en banc), cert. denied, 435 U.S. 905, 98 S.Ct. 1451, 55 L.Ed.2d 496 (1978). We conclude also that the district court did not commit error in admitting the evidence for valid purposes under Fed.R.Evid. 404. The evidence was not admitted to show a prior criminal act or to show Tager's bad character as proscribed under Fed.R.Evid. 404(b), but was allowed as competent proof of plan, motive, and intent to defraud. 26 Defendant also assigns as error admission into evidence of two checks issued by him, which were later dishonored, for his contemporaneous purchase of the Nord stock from Mericka & Co. The trial judge, however, did not abuse her discretion in allowing this proof under Fed.R.Evid. 401, 403, and 404(b). Again, the court determined that these acts or conduct of the defendant were admissible for a proper purpose such as to prove motive, intent, and knowledge, as distinguished from the improper purpose of showing character or a propensity to commit an offense. United States v. Beechum, 582 F.2d 898 (5th Cir.1978) (en banc), cert. denied, 440 U.S. 920, 99 S.Ct. 1244, 59 L.Ed.2d 472 (1979). In our view, the trial court properly found that the checks were relevant evidence of defendant's current financial condition to show defendant's knowledge that, if he made concurrent statements to Mericka & Co. concerning his financial ability to pay for stocks, he knew the representations of financial worth were false and he acted with fraudulent intent. See United States v. Reed, 639 F.2d 896 (2d Cir.1981). In Reed, defendant's insufficient funds checks given in connection with a contemporaneous stock offering were admitted under Rule 404(b) as evidence of the defendant's intent to defraud in a similar free riding scheme, as well as showing a common scheme or plan. 27 Under Rule 10b-5, the defendant's intent to defraud can be inferred from the totality of the circumstances and the actions of the parties. Henderson v. United States, 202 F.2d 400 (6th Cir.1953). In securities fraud cases such as this, similar act evidence has been regarded as especially relevant and probative where the defense is a lack of fraudulent intent or where the making of misrepresentations is disputed. As stated in United States v. Birrell, 447 F.2d 1168, 1172 (2d Cir.1971), cert. denied, 404 U.S. 1025, 92 S.Ct. 675, 30 L.Ed.2d 675 (1972): 28 Evidence of similar acts in fraud cases may be introduced where knowledge or intent is at issue, to give rise to an inference of knowledge or intent, or where the actual making of the misrepresentations is at issue, to establish the existence of a larger continuing plan or design. United States v. Freedman, 445 F.2d 1220 (2d Cir.1971). C. McCormick, Law of Evidence, Sec. 164 (1964).