Opinion ID: 556608
Heading Depth: 3
Heading Rank: 3

Heading: Admission of Evidence Regarding Bilzerian's 1986 Personal

Text: Tax Return 36 Defendant next alleges that the district court abused its discretion in admitting evidence of a $4 million error made on his 1986 personal income tax return. The evidence was part of the testimony given by Brian Murphy, a former senior tax manager with the accounting firm of Peat Marwick Main & Co. who had done accounting work for some partnerships in which defendant participated. On direct examination the government elicited testimony that during Murphy's preparation of tax returns for Bilzerian's Hammermill-related partnerships, Bilzerian stated that the source of his contribution to the partnership was personal funds. The trial evidence indicated to the contrary that the money was borrowed. 37 On cross-examination, the defense sought to establish that the source of funds was irrelevant for tax purposes and that the tax returns filed on behalf of the partnerships, including the Bilzerian contribution, were correct. On redirect the government elicited the fact that defendant had underreported income from the Hammermill transaction on his personal tax return for 1986 by approximately $4 million. 38 The trial court stated since a partnership pays no income taxes, the testimony given on cross-examination regarding the accuracy of partnership returns created the impression that defendant had accurately reported his income from the Hammermill transaction. As such, the door had been opened to correct the false impression, including inquiry into defendant's personal tax returns. 39 Bilzerian asserts the evidence was inadmissable pursuant to Rules 403 and 404(b) of the Federal Rules of Evidence. Rule 404(b) prohibits the introduction of other crimes, wrongs, or acts for the purpose of demonstrating defendant's propensity to commit the charged crime. Fed.R.Evid. 404(b). The district court noted the evidence was not admitted for that improper purpose, but in order to rebut a false impression that had been created. Redirect may of course be used to rebut false impressions arising from cross-examination, and the scope of such redirect is within the trial court's broad discretion. United States v. Mang Sun Wong, 884 F.2d 1537, 1544 (2d Cir.1989), cert. denied, --- U.S. ----, 110 S.Ct. 1140, 107 L.Ed.2d 1045 (1990). 40 Rule 403 permits the court to exclude evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury. The weighing of relevance under Rule 403 may be altered when a false impression is created by earlier testimony. That is, evidence whose probative value might not ordinarily outweigh its prejudicial effect if offered on direct examination is admissable to rebut testimony elicited on cross examination that created a false impression. United States v. Martinez, 775 F.2d 31, 37 (2d Cir.1985). Balancing relevance against prejudice under Rule 403 is in the hands of the trial court and will not be overturned unless its ruling is arbitrary or irrational. See United States v. Esdaille, 769 F.2d 104, 108 (2d Cir.), cert. denied, 474 U.S. 923, 106 S.Ct. 258, 88 L.Ed.2d 264 (1985). 41 The deficiency in Bilzerian's personal tax return was not relevant to the charge of conspiracy to defraud the IRS or to any other charge in the indictment. In addition, the testimony on cross examination related only to defendant's partnership tax return. His personal return at most had a tenuous connection to the issues at trial. Yet, the fact of his tax error was introduced without objection when he was cross-examined. In such context the evidence was admissable under Fed.R.Evid. 611(b) as probative of his veracity. The trial court was in the best position to judge whether a false impression was created by Murphy's cross-examination, and the decision to admit this evidence was within the trial court's discretion. Here, in addition, Judge Ward gave a limiting instruction stating that the contested evidence was to be considered only in evaluating Murphy's testimony regarding his preparation of the partnership returns. Thus, the rulings on the admissability of the tax error were proper.