Opinion ID: 3000051
Heading Depth: 2
Heading Rank: 1

Heading: Admission of Attorney James Fox’s Statements

Text: A decision regarding the admission of evidence is within the broad discretion of the trial judge and will be overturned only upon a clear abuse of that considerable discretion. United States v. Brandon, 50 F.3d 464, 468 (7th Cir. 1995). Jung contends that the district court abused its discretion by admitting statements attributed to Fox under Rule 801(d)(2)(D), which provides that “[a] statement is not hearsay if . . . the statement is offered against a party and is a statement by the party’s agent or servant concerning a matter within the scope of the agency or employment, made during the existence of the relationship[.]” Fed. R. Evid. 801(d)(2)(D). “An attorney may be the agent of his client for purposes of Rule 801(d)(2)(D).” United States v. Harris, 914 F.2d 927, 931 (7th Cir. 1990). But “[t]he unique nature of the attorney-client relationship . . . demands that a trial court exercise caution in admitting statements that are the product of this relationship.” Id. This Court has “caution[ed] the government that it should only offer this sort of evidence in rare cases and when absolutely necessary, in order to avoid impairing the attorney/client relationship, chilling full disclosure by a defendant to his lawyer, and deterring defense counsel from vigorous and legitimate advocacy.” United States v. Sanders, 979 F.2d 87, 92 (7th Cir. 1992). Jung argues that the attorney statements admitted in this case, unlike the statements admitted in Harris and Sanders, infringed upon the policy concerns inherent in the attorney-client relationship. In Harris, Harris’ attorney visited with an eyewitness prior to trial and showed him pictures of Harris’ brother in an attempt to develop a defense to the charge of armed robbery. Harris, 914 F.2d at 930. Harris’ theory was that his brother had committed the crime and that he was a victim of mistaken 6 No. 05-3718 identity. Id. However, after reviewing the pictures, the witness was confident that it was Harris that he saw fleeing from the scene. Id. At trial, the witness testified about his conversation with Harris’ attorney, and the district court admitted a statement attributed to Harris’ attorney acting in his investigative capacity. Id. In admitting the evidence, the court explained that when Harris’ lawyer met with the witness, he was “testing a theory on behalf of his client” and not “relating confidential information about his client.” Id. at 931. In Sanders, the defendant’s former attorney visited two co-conspirators, who were in pretrial detention, and asked the co-conspirators whether they had given statements to the police. Sanders, 979 F.2d at 90. Because the visit with the co-conspirators occurred several months before Sanders was indicted, the government elicited the statements made by Sanders’ attorney during his visit with the co-conspirators to establish that Sanders must have been involved in the conspiracy. Id. at 91. In deciding to admit the statements attributed to Sanders’ former attorney, the court noted the parallel facts in Sanders and Harris: In both cases, the lawyer spoke to the witness in order to develop a defense strategy. Both lawyers took a calculated risk in approaching an individual who might well testify against his client. The fact that the strategy backfired does not mean that advocacy will be chilled . . . . Moreover, the testimony did not impair the defendant’s privilege against self-incrimination in either case; it simply ‘force[d the] defendant to present a competing explanation to the jury.’ Sanders, 979 F.3d at 91 (quoting Harris, 914 F.2d at 931). The court also emphasized that Sanders’ explanation “fit in neatly with the defense theory that the other man who knew [the incarcerated co-conspirators] also knew [the No. 05-3718 7 lawyer who visited the co-conspirators in jail] and was the true co-conspirator.” Id. We agree with Jung that the district court failed to apply the “more exacting standard [that] must be demanded for admission of statements by attorneys under Rule 801(d)(2)(D)[.]” Harris, 914 F.2d at 931. Unlike the attorneys in Harris and Sanders, Fox did not meet with Lamon and Isaf in an investigative capacity. The statements attributed to Fox were uttered more than five years before Jung’s criminal trial.2 This is not a case where an attorney’s pre-trial tactical decisions backfired; Fox was not attempting to develop a defense strategy by meeting with Lamon and Isaf. As the government acknowledges in its brief, “Fox’s statements served one purpose—that being to notify victims about the situation on behalf of the defendant as part of a strategy to be cooperative.” The government achieved the equivalent of having Jung’s former attorney stand with the prosecutors and vouch for his indictment when the trial court admitted testimony that Fox had told Lamon and Isaf that (1) Jung’s actions were improper and illegal, (2) Jung had concealed his trading activity from SIF’s investors, (3) Jung had taken the investors’ assets unbeknownst to them, and (4) Jung had written a confession. Unlike the admitted statements in Sanders, Fox’s statements did not fit in neatly with the defense’s theory of the case. Instead, the statements directly contradicted the argument that Jung reasonably believed that the investors knew about the cross-collateralization risks. From a policy 2 The record does not indicate whether Fox’s initial conversations with Lamon and Isaf were authorized by Jung. However, Fox became Jung’s attorney a week before these conversations were initiated by Fox. 8 No. 05-3718 perspective, defendants will be chilled from sharing information with their attorneys, defense attorneys will be deterred from vigorous advocacy, and the attorneyclient relationship will be impaired if statements like Fox’s regarding Jung’s criminal liability are admissible. Therefore, we agree with Jung that the district court abused its discretion in admitting the out-of-court statements attributed to Fox. Under Rule 52(a) of the Federal Rules of Criminal Procedure, any error “that does not affect substantial rights must be disregarded” and deemed “harmless.” In deciding whether the district court’s error was harmless, this Court’s task is to gauge “what effect the error had or reasonably may be taken to have had upon the jury’s decision.” United States v. Shepherd, 576 F.2d 719, 723 (7th Cir. 1978) (quoting Kotteakos v. United States, 328 U.S. 750, 764 (1946)). Only if we are convinced that the error did not influence the jury or only had very slight effect should we hold the error harmless. Id. at 723-24. Jung argues that after hearing the statements attributed to Fox, the jurors had a compelling reason to make all credibility judgments in favor of the government’s witnesses and to draw every inference against him. Jung claims that Fox’s statements erased any chance for the jury to view Jung as a trader incurring losses struggling to get back into the black. Jung contends that Fox’s statements had a significant effect on the jury and tainted the verdict. We disagree. Jung’s admissions in both an affidavit and a bankruptcy stipulation severely damaged his defense. First, the affidavit, executed by Jung, included the following admission: From in or about July 1994 through September 1998, contrary to the best interest of SIF and its members, and my duties as Manager, I wrongfully permitted LIT No. 05-3718 9 to deposit the Pledged Securities and other Collateral in an ETJ sub-account. This action exposed, through cross-collateralization, the SIF members’ securities and cash on deposit, to liquidation by LIT to satisfy my personal trading loses and expenses posted to other ETJ sub-accounts at LIT. I did not notify SIF members or the Member Liaison L & S, of this action. Additionally, Jung agreed not to have the approximately $21 million debt (the amount lost by SIF’s investors) discharged in bankruptcy.3 These statements defeat Jung’s arguments that he did not intend to deceive the SIF’s investors and that he reasonably believed the investors were on notice of cross-collateralization. The evidence presented against Jung was overwhelming. In addition to Jung’s admissions, the government introduced the testimony of a senior accountant from the United States Securities and Exchange Commission, who testified that Jung’s combined trading from 1994 to 1998 was never profitable; documents and testimony showing that Jung used the SIF’s investors’ collateral and continued to pursue additional collateral to keep his brokerage firm in operation; the testimony of two former SIF employees, who testified that Jung reallocated trades after the fact to consolidate SIF and FFA profits; the testimony of SIF’s and FFA’s investors, who testified that they had received quarterly reports and trade compilations from Jung showing that their investments were profitable; trade performance compilations, which inaccurately reflected that the SIF fund had made profits of 16.4% in 1994, 4.7% in 1995, 4.6% in 1996, and 4.8% in 1997; and the testimony of SIF’s and FFA’s investors, who testified that Jung had 3 The bankruptcy code includes a provision that makes money or property obtained by fraud non-dischargeable. 10 No. 05-3718 never told them about his trading losses or that their collateral was in jeopardy. Because of Jung’s admissions and the overwhelming body of evidence presented by the government establishing that Jung did not disclose to SIF’s investors that he was losing millions of dollars or that the investors’ collateral was being used to cross-collateralize his personal trading, we are convinced that the jury’s decision was not substantially swayed by the admission of Fox’s statements. Therefore, we conclude that the district court’s error was harmless.