Opinion ID: 625938
Heading Depth: 3
Heading Rank: 1

Heading: Challenges to Admitted Evidence

Text: The testimony of cooperating defendant Sparks formed much of the government’s 5 Count 7 charged the defendants with harassing Sparks in an effort to dissuade him from testifying, but was dismissed before trial. -5- case against Miller and Irvin. Over the course of four days, Sparks described the various forgeries, misrepresentations, and other fraudulent activities he allegedly engaged in with Vanatta to obtain financing for unqualified buyers. In all, Sparks related the particulars of twenty-two separate transactions involving Miller-built homes. During this testimony, continual reference was made to government Exhibit 1-2, a chart displayed before the jury that purported to summarize the relevant details of these transactions. This chart was entitled “Summary of Fraud for JEFF MILLER et al., Fraud That Can Be Identified By James Sparks.” It included information identifying the date, location, and buyer for each transaction, as well as a column labeled “False Statements to Lenders,” which listed the various specific fraudulent representations and actions described by Sparks. Exhibit 1-2 was initially offered by the government under Fed. R. Evid. 1006 as a summary of several boxes of “loan files” pertaining to the allegedly fraudulent home sales. The defendants vigorously resisted the admission of the summary chart, filing a motion in limine and repeatedly objecting during trial. The district court ultimately agreed with the government and admitted Exhibit 1-2 under Rule 1006. Arguing the requirements of Rule 1006 were not satisfied and the loan files upon which Exhibit 1-2 was based constituted inadmissible hearsay, Miller and Irvin contend the district court’s decision is reversible error. We review a district court’s decision to admit summary charts under Rule 1006 for abuse of discretion. United States v. Thompson, 518 F.3d 832, 858 (10th Cir. 2008). Rule 1006 provides, in relevant part: “The contents of voluminous writings, -6- recordings, or photographs which cannot conveniently be examined in court may be presented in the form of a chart, summary, or calculation. The originals, or duplicates, shall be made available for examination or copying, or both, by other parties at reasonable time and place.” Fed. R. Evid. 1006. Although the materials upon which a Rule 1006 summary is based need not themselves be admitted into evidence, they must at least be admissible. United States v. Samaniego, 187 F.3d 1222, 1223 (10th Cir. 1999). Miller and Irvin argue the loan files purportedly summarized in Exhibit 1-2 constituted hearsay that was not shown to qualify for any exception to the prohibition on hearsay evidence. When this same challenge was raised before the district court, the government attempted to show the loan files were admissible under the business records exception established by Fed. R. Evid. 803(6). Pursuant to Rule 803(6), business records are admissible despite their hearsay nature if the records’ custodian, or another qualified witness, testifies the records (1) were prepared in the normal course of business; (2) were made at or near the time of the events recorded; (3) were based on the personal knowledge of the entrant or of a person who had a business duty to transmit the information to the entrant; and (4) are not otherwise untrustworthy. United States v. Ary, 518 F.3d 775, 786 (10th Cir. 2008). The government offered Sparks as the witness qualified to make these foundational showings. Sparks, however, testified the loan files were largely maintained by various title companies for whom he had not worked and under circumstances of which he had no personal knowledge. Furthermore, Sparks could not state whether the loan files were made or kept by the title companies in the regular -7- course of their businesses. He also indicated that various documents within the loan files had been removed, destroyed, or otherwise modified. His testimony, therefore, was insufficient to establish the admissibility of the loan files as business records. Before ruling on the admissibility of Exhibit 1-2, the district court acknowledged the documents summarized by a Rule 1006 chart must themselves be admissible. Nevertheless, it reasoned that, while Sparks’s testimony had not established admissibility of the loan files under Rule 803(6), neither had the defendants demonstrated the loan files would not satisfy the business records exception if the government presented testimony from the appropriate records custodians. Because it had “heard nothing that contradicts the idea that [the loan files] are business records and would meet the business records exception,” the district court overruled the hearsay objection and received Exhibit 1-2. It reaffirmed this ruling several times throughout the trial. The district court abused its discretion by admitting Exhibit 1-2. The materials summarized by Rule 1006 evidence must themselves be admissible because a contrary rule “would inappropriately provide litigants with a means of avoiding rules governing the admission of evidence such as hearsay.” Samaniego, 187 F.3d at 1224. Accordingly, just as the proponent of hearsay evidence bears the burden of establishing the applicability of a hearsay exception, Ary, 518 F.3d at 786, so too must the proponent of a Rule 1006 summary based on hearsay evidence establish that the materials summarized are admissible. Samaniego, 187 F.3d at 1224. Contrary to the district court’s ruling, Miller and Irvin were under no obligation to affirmatively disprove the -8- applicability of the business records exception. The burden was on the government alone. By not requiring the government to lay the foundation necessary under Rule 803(6), the district court erred as a matter of law. Id. The government seeks to avoid this conclusion by explaining that, contrary to its representations before the district court, Exhibit 1-2 summarized not only the aforementioned loan files, but also the trial testimony of Sparks and other government witnesses.6 Therefore, the government reasons, Exhibit 1-2 constituted a “hybrid” summary chart, admissible under Fed. R. Evid. 611(a). The government’s logic eludes the court, for the loan files remain inadmissible hearsay. Rule 611(a) provides that “[t]he court shall exercise reasonable control over the mode and order of interrogating witnesses and presenting evidence so as to (1) make the interrogation and presentation effective for the ascertainment of the truth, (2) avoid needless consumption of time, and (3) protect witnesses from harassment or undue embarrassment.” Fed. R. Evid. 611(a). This directive has in some circuits been read as authorizing the use of summary exhibits for pedagogical purposes, wholly apart from Rule 1006. See, e.g., United States v. Milkiewicz, 470 F.3d 390, 397 (1st Cir. 2006); United States v. Bray, 139 F.3d 1104, 1111-12 (6th Cir. 1998); United States v. Johnson, 6 Rule 1006 permits the use of exhibits summarizing only “[t]he contents of voluminous writings, recordings, or photographs which cannot conveniently be examined in court.” Fed. R. Evid. 1006. To the extent the government’s revisionist assertions indicate Exhibit 1-2 summarized witness testimony, therefore, they further emphasize that the chart’s admission under Rule 1006 was in error. -9- 54 F.3d 1150, 1157-59 (4th Cir. 1995). Nothing in Rule 611(a) or the cases interpreting it, however, indicates that such pedagogical exhibits can be used to summarize otherwise inadmissible hearsay evidence, such as the loan files. Indeed, the cases discussing Rule 611(a) summaries typically require the summarized evidence to be affirmatively admitted into evidence. See Milkiewicz, 470 F.3d at 397 (“A summary chart used as a pedagogical device must be linked to evidence previously admitted . . . .”); Bray, 139 F.3d at 1111 (same). Such a requirement is consistent with the spirit of Rule 611(a), which, in discussing the presentation of evidence, presupposes the suitability of such evidence for presentation, as well as our existing Rule 611(a) jurisprudence. See United States v. Stiger, 413 F.3d 1185, 1198 (10th Cir. 2005) (“[A] party may only admit summary testimony under Fed. R. Evid. 611(a) if the District Court previously admitted at trial the evidence that forms the basis of the summary.”). In short, resort to Rule 611(a) in no way resolves the hearsay problem that renders Exhibit 1-2 inadmissible. This analysis, however, does not conclude the inquiry, because “this court applies a harmless error standard when reviewing trial courts’ rulings on hearsay objections resting solely on the Federal Rules of Evidence.” United States v. Collins, 575 F.3d 1069, 1073 (10th Cir. 2009) (quotation and alteration omitted). “A harmless error is one that does not have a substantial influence on the outcome of the trial; nor does it leave one in grave doubt as to whether it had such effect.” Id. (quotation omitted). In evaluating whether the district court’s erroneous admission of Exhibit 1-2 was harmless, “we review the record de novo to determine whether the evidence . . . had a substantial influence on -10- the jury’s verdict in the context of the entire case against [the defendants].” United States v. Wilson, 107 F.3d 774, 785-86 (10th Cir. 1997) (quotation omitted). The government bears the burden of proving the error was harmless. United States v. Velarde, 214 F.3d 1204, 1211 (10th Cir. 2000). It has not adequately carried this burden. Exhibit 1-2 was displayed before the jury throughout Sparks’s direct testimony, listing the government’s allegations using suggestive terminology (e.g., referring to commission payments as “kickbacks”) and organizing them into a simple and comprehensible chart beneath condemnatory section headings (e.g., “Summary of Fraud for JEFF MILLER et al.” and “False Statements to Lenders”). The district court itself later acknowledged the prejudicial influence of the exhibit’s rhetorical aspects and ordered several redactions to the chart’s accusatory terminology before sending it into jury deliberations. Although these revisions were appropriate, they came too late. More importantly, they did not address the core prejudicial impact of this inadmissible exhibit, i.e., the compelling simplicity with which Exhibit 1-2 reduced weeks of complex testimony and inadmissible hearsay into an easily digested summary. The government itself confirmed this was the primary benefit of the summary chart. In advocating the propriety of Exhibit 1-2 before the district court, the government highlighted its significance: “The more that this document is challenged the more it emphasizes the importance, and particularly in a fraud case where we have a cooperating individual, of having a document that in one comprehensive format identifies the various kinds of frauds and the patterns.” Focusing on the usefulness of Exhibit 1-2 in jury -11- deliberations, the government further explained: “[I]t’s more significant than ever that the jury have this back in the jury room . . . as something that will be a roadmap . . . .” The government’s advocacy for Exhibit 1-2 in the district court belies its assertions of harmlessness on appeal. See United States v. DeLoach, 504 F.2d 185, 192 (D.C. Cir. 1974) (noting that a prosecutor’s “own estimation of his case, and of its reception by the jury at the time, is, if not the only, at least a highly relevant measure now of the likelihood of prejudice”). In contrast to the litany of direct evidence indicating Vanatta’s and Sparks’s illegal activities in furtherance of the conspiracy charged in Count 1, Miller’s and Irvin’s connections with the conspiracy were primarily supported by circumstantial evidence, such as Miller’s admitted desire to sell his houses at the highest possible price and Irvin’s preparation of invoices for “construction management fees” that secretly represented Vanatta’s real estate marketing commissions. Although the evidence is sufficient to sustain the jury’s verdict on Count 1 as a purely legal matter,7 we are left in grave doubt that the verdict would have been the same had the objection to Exhibit 1-2 been sustained. Miller’s and Irvin’s convictions on Count 1 are therefore reversed. Nevertheless, the admission of Exhibit 1-2 was harmless error in relation to Counts 2, 4, 5, 9 and 10, which are discussed in greater detail below. Those counts—each of which alleged a discrete instance of criminal activity—did not present the factual 7 Neither Miller nor Irvin now contest the sufficiency of the evidence supporting their convictions on Count 1. -12- complexity characteristic of the conspiracy in Count 1, and were therefore less susceptible to the summarization of the evidence in Exhibit 1-2. The bank fraud and money laundering charged in Counts 2 and 4, moreover, were not reflected on Exhibit 1-2 at all, and the government’s case on those counts was supported by a wholly separate body of evidence. Counts 5, 9, and 10, by contrast, centered on criminal conduct committed in connection with the so-called Jordan Transaction, which was summarized on Exhibit 1-2. Each allegation concerning the Jordan Transaction contained in Exhibit 1-2, however, was independently supported by sufficient properly admitted evidence and witness testimony. Furthermore, while the majority of the transactions summarized on Exhibit 1-2 received only passing mention during the trial, the Jordan Transaction upon which Count 5 was premised was discussed repeatedly and at great length during trial. Any influence that Exhibit 1-2 might have had upon the jury’s verdict on Counts 5, 9, and 10 was, therefore, minimal.
Exhibit 2009 is a review appraisal prepared by Pinnacle Appraisal Group LLC at the request of Meara King, the accounting firm monitoring Miller. The appraisal concerned the property sold by Miller in connection with the Jordan Transaction. It concluded the property was worth approximately $185,000, and that an earlier appraisal of $220,000 reflected an inflated valuation. Stephen Browne, a partner at Meara King, was called upon to provide the necessary foundational showing and testified that he and his firm regularly ordered, received, and relied upon such appraisals as a protocol in -13- monitoring businesses, including Miller’s. He further testified that Meara King routinely worked with Pinnacle in obtaining appraisals and that Exhibit 2009 was prepared by Pinnacle shortly after a request was made. Browne also explained that Meara King created a database where all information relating to the monitoring of Miller’s businesses was stored, including any appraisals and accounting documents accumulated through the process. Miller and Irvin objected to the admission of Exhibit 2009 on hearsay grounds, but the district court ruled the document was admissible as a business record pursuant to Fed. R. Evid. 803(6). Miller and Irvin contend this ruling was error. Rule 803(6) provides8: The following are not excluded by the rule against hearsay, regardless of whether the declarant is available as a witness: .... (6) Records of a Regularly Conducted Activity. A record of an act, event, condition, opinion, or diagnosis if: (A) the record was made at or near the time by—or from information transmitted by—someone with knowledge; (B) the record was kept in the course of a regularly conducted activity of a business, organization, occupation, or calling, whether or not for profit; (C) making the record was a regular practice of that activity; (D) all these conditions are shown by the testimony of the custodian 8 Beginning December 1, 2011, the wording of Rule 803 was changed to improve its clarity. The changes were “intended to be stylistic only” and do not displace any of this court’s prior holdings on evidence admissibility. Fed. R. Evid. 803, advisory committee’s note (2010 amendments). -14- or another qualified witness . . . ; and (E) neither the source of information nor the method or circumstances of preparation indicate a lack of trustworthiness. Relying on United States v. Carranco, 551 F.2d 1197, 1200 (10th Cir. 1977), the government contends Exhibit 2009 was admissible through the testimony of Browne as an “adoptive” business record. The government reads Carranco as holding a record prepared by one company and “incorporated and adopted into the records of the witness’s company” satisfies the requirements of the business records exception to the hearsay rule. Carranco does not so hold. To the contrary, Carranco expressly recognized such an argument could have been made on the facts of that case, but declined to separately consider it because the necessary objections had not been made before the trial court. Id. at 1199. Carranco did concern the admissibility of a freight bill prepared by one party, Admiral Merchants, and used by another party, ICX. Id. The objection at issue, however, was limited to whether notations made by ICX on the freight bill precluded its admissibility because they were not made in the regular course of business. Id. At best, Carranco can be read as assuming, without deciding, that one company can “adopt” the business records of another company for purposes of Rule 803(6). This court has therefore never decided whether “adoptive business records” are admissible under Rule 803(6).9 The court need not do so today, however, because even 9 Contra United States v. Adefehinti, 510 F.3d 319, 326 (D.C. Cir. 2007) (incorrectly listing Tenth Circuit as having adopted the adoptive business records (continued...) -15- if Exhibit 2009 was erroneously admitted, the court concludes such admission was harmless as to both Irvin and Miller. See Collins, 575 F.3d at 1073. As to Irvin, the record shows the government did not rely in any way on Exhibit 2009 to prove she participated in the Jordan Transaction and therefore its admission is harmless as to her convictions for Counts 5, 9, and 10. As to Miller, Exhibit 2009 was but one of many pieces of evidence indicating the valuation of the Jordan home was inflated. It was uncontested the home originally appraised at $200,000. Further, two witnesses testified Miller influenced the appraisal process because he was unhappy with this amount. Angela Parenza, Miller’s office manager, testified Miller directed her to fax HUD settlement statements for Miller-built homes or homes built on lots Miller owned to be used as comparables in the Jordan appraisal. She also testified Miller did not list his homes on the Multiple Listing Service because he frequently changed their sales prices to reflect their highest appraised value, and that keeping his homes off the MLS made it more difficult for appraisers to discover that all of the comparables were Miller-built homes. James Sparks’s testimony also linked Miller to the inflated appraisal on the Jordan property. He testified Miller was unsatisfied with the original amount he stood to receive from the bank based on the appraisal which placed the value of the Jordan home at $200,000. Sparks explained Miller had initially hoped Ms. Jordan would receive a bank loan of more than eighty percent of the original appraised value of the property, but 9 (...continued) doctrine.) -16- when it became apparent that would be impossible, he sought out a new appraisal in order to net what Miller wanted out of the sale. Moreover, Sparks testified that when the first appraiser he worked with would not return the desired $220,000 figure, Vanatta, who Sparks described as the “contact person” between himself and Miller, gave him the name of an appraiser who would return the desired value. Because, under the circumstances of this case, Exhibit 2009 is cumulative of other witness testimony, the court is not left in grave doubt as to whether it had a substantial influence on the outcome of the trial. See United States v. Clifton, 406 F.3d 1173, 1179 (10th Cir. 2005) (“Where the wrongly admitted evidence was cumulative of other properly admitted evidence, it is less likely to have injuriously influenced the jury’s verdict.” (quotation and alteration omitted).) Accordingly, the court concludes its admission was harmless. -17-