Opinion ID: 529953
Heading Depth: 2
Heading Rank: 1

Heading: The FCCB/FFCM Statements

Text: 65 In considering the hearsay problem presented on this appeal it is necessary to review the relevant business entities and their relation to the records admitted into evidence. Furst was employed by NC Bank--one business entity--and in that capacity directed the investment of certain funds held by NC Bank to FCCB which subsequently transferred the investment to FFCM/FFCA. For purposes of this appeal FCCB, FFCM, and FFCA may be viewed as a single enterprise--the second business entity. Computer Information Service (CIS), which was acquired in 1983 by Automated Data Processing (ADP)--is the third business entity. FCCB/FFCM electronically transmitted data daily to CIS/ADP. CIS/ADP processed raw data and generated daily and monthly statements and reports for FCCB/FFCM based exclusively on the input from FCCB/FFCM. 66 At trial the government introduced statements and reports of FCCB/FFCM for the truth of their contents, some obtained from the files of NC Bank and others secured from other sources. 67 To provide a foundation for the statements and reports of FCCB/FFCM the government called two witnesses. James Burns, an employee of CIS/ADP, testified that the reports were generated by CIS/ADP's data processing software, but disclaimed any knowledge of the accuracy of the data supplied by FCCB/FFCM. On direct examination Burns testified that CIS/ADP had no direct contact with FCCB/FFCM's clients, see Trial Transcript of Jan. 10, 1989, at 22, and that CIS/ADP did not have copies of the records which the government sought to introduce. See id. at 23-24. 68 On cross examination Burns specifically limited himself to vouch[ing] for the accuracy of the processing. Id. at 26. Burns answered affirmatively the question: [Y]ou don't vouch for what you produce because it's only as good as the information that [FCCB/FFCM] gave you? Id. at 27. Moreover, Burns acknowledged that the data sent back to FCCB/FFCM could be altered before being printed out in the reports sent to FCCB/FFCM's clients. See id. at 31-32. Burns conceded that he had no personal knowledge of FCCB/FFCM's personnel, see id. at 28, no personal knowledge of whether FCCB/FFCM was conducting [its] business in an ethical or legal manner, id., and, most significantly, no personal knowledge that the commodity trades reported by FCCB/FFCM had actually occurred. See id. at 34-35. 69 The second witness was Margarethe Aderhold, an employee of NC Bank. Aderhold testified that some of the records covering the period prior to December, 1980, see Trial Transcript of Jan. 11, 1989, at 89-90, 92-93, were in the possession of NC Bank. See Trial Transcript of Jan. 10, 1989, at 82-85. She also testified that the FCCB/FFCM records matched records of the NC Bank as to the date and sums of transfers between NC Bank and FCCB/FFCM. See, e.g., id. at 132-34. 70 On cross examination Aderhold conceded that, based on NC Bank records, she had independent knowledge as to the accuracy of the FCCB/FFCM records only to the extent they reflect the arrival of money from NC Bank, Trial Transcript of Jan. 11, 1989, at 96, and to the extent they indicate money being sent back to NC Bank, id.; see also id. at 163-65. 71 Furst objected to the admission of these records in a pre-trial motion filed December 22, 1988, and again at trial, see, e.g., id. at 85-94, 101, 109, 113, 124, 129-30, 167, on the basis that they were hearsay. 16 The government asserts that the records were properly admitted under either the business record exception to the hearsay rule, Fed.R.Evid. 803(6), or under the residual exception to the hearsay rule, Fed.R.Evid. 803(24). The exceptions require independent analysis. 72 To the extent that the district court's admission of these documents was based on an interpretation of the Federal Rules of Evidence, we exercise plenary review, see In re Japanese Electronic Products Litigation, 723 F.2d 238, 265 (1983), rev'd on other grounds sub nom. Matsushita Electronic Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), but to the extent that the district court was making a discretionary ruling premised on a permissible view of the law we may review the ruling only for an abuse of discretion. See id. at 265-66.
73 The business record exception to the hearsay rule requires that the witness who lays the foundation for the admission of the evidence testify that: (1) the declarant in the records had knowledge to make accurate statements; (2) that the declarant recorded the statements contemporaneously with the actions which were the subject of the reports; (3) that the declarant made the record in the regular course of the business activity; and (4) that such records were regularly kept by the business. 17 74 It is clear that neither witness called by the government had any knowledge as to the accuracy of the information on which the FCCB/FFCM documents was based or as to the knowledge of the persons who prepared the records. Neither Burns nor Aderhold knew that the commodities trades reported in the FCCB/FFCM statements were made, nor did they know whether the individual sending reports of the trades to CIS/ADP had such knowledge. Consequently, neither Burns nor Aderhold was a qualified witness with respect to the manner in which FCCB/FFCM maintained or compiled its records and, thus, neither provided the necessary foundation for the admission of these documents. 75 We recognize that documents may be admitted under the business record exception to the hearsay rule when circumstantial evidence provides the necessary foundation. See In re Japanese Electronic Products Litigation, 723 F.2d at 288. And, although the government maintains that the NC Bank records that verify the dates and amounts of deposits and receipts with FCCB/FFCM serve to provide circumstantial evidence for such a foundation, the NC Bank records do not verify significant portions of these documents--that is, the remaining value of the commodities investment is not independently verified by the NC Bank records. Thus, we conclude that the government failed to lay the proper foundation for the admission of the FCCB/FFCM statements not contained in the NC Bank files. 18 76 The government contends that the early FCCB records found in the NC Bank files were admissible as NC Bank records. See brief of appellee at 26-27. To the very limited extent that these documents confirm data transmitted between NC Bank and FCCB, we agree. In other words, these documents may be considered NC Bank records to the extent that they confirm the transfer of funds between NC Bank and FCCB. With respect to the contemporaneous value of the FCCB investment, however, the records are inadmissible inasmuch as the government has failed to establish a proper foundation for their admission. 19 Clearly, NC Bank had no independent knowledge of the value of these investments on the dates shown in the record nor did it know how the person who prepared the records obtained his knowledge of them. 77 We also note that Furst raised an additional objection to the admission of these documents under the business record exception. See Trial Transcript of Jan. 10, 1989, at 91-92. He contended that inasmuch as FCCB/FFCM has been subject to federal investigation for its practices, that the surrounding circumstances suggest that its documents lack the requisite trustworthiness. Under our analysis, this contention is moot except to the extent that it would bar the admission of those records contained in NC Bank's files for the limited purpose of confirming the transfers between NC Bank and FCCB. It is clear, however, that the FCCB records are sufficiently trustworthy when so limited in time and use since they merely confirm NC Bank's other records. 78 Thus, we conclude that the district court erred in admitting, under Fed.R.Evid. 803(6), the FCCB/FFCM statements not contained in NC Bank's files and in admitting even those statements found in NC Bank's files to the extent the statements contained any data other than confirmations of transactions with NC Bank.
79 Although the district court did not rely on Fed.R.Evid. 803(24) in admitting the FCCB/FFCM documents, the government argues that their admission was appropriate inasmuch as the residual exception provides an independent basis for the ruling. 20 80 We note at the outset that Fed.R.Evid. 803(24) is not limited in availability as to types of evidence not addressed in the other exceptions; Fed.R.Evid. 803(24) is also available when the proponent fails to meet the standards set forth in the other exceptions. Cf. In re Japanese Electronic Products, 723 F.2d at 301 (implicitly holding that Fed.R.Evid. 803(24) may be invoked when a proponent fails to establish admissibility under one of the other hearsay exceptions). 81 On appeal Furst maintains that the government failed to comply with the notice requirements 21 of Fed.R.Evid. 803(24), the final sentence of which provides that 82 a statement may not be admitted under this exception unless the proponent of it makes known to the adverse party sufficiently in advance of the trial or hearing to provide the adverse party with a fair opportunity to prepare to meet it, the proponent's intention to offer the statement and the particulars of it, including the name and address of the declarant. 83 The government argues that Furst waived this ground by not asserting it at trial. See brief of appellee at 29 n. 14. We find no merit to the government's position. 84 The district court observed in the sidebar discussion with reference to the admission of the FCCB/FFCM statements that the government had indicated at the pre-trial conference that it would not seek to admit the FCCB/FFCM statements. See Trial Transcript of Jan. 10, 1989, at 92-93; appellant's app. at 640-41. In addition, the government did not rely primarily on Rule 803(24) and the court did not rule on that basis. Inasmuch as only passing reference was made to the residual exception, and the district court implicitly indicated that no response was necessary we cannot conclude that Furst waived any objection to that ground by not objecting at that time. 85 In the absence of a waiver, we consider the merits of Furst's argument that the government did not comply with the notice requirements of Fed.R.Evid. 803(24). Although Furst had filed a motion to exclude the FCCB/FFCM records on December 22, 1988, the record indicates that the government did not respond until it served a memorandum on Furst's attorney on January 9, 1989, at the start of the trial. 22 Furst's memorandum addressed only the possibility that the government would rely on the business record exception when offering the FCCB/FFCM records. The government's response raised both the business record exception and the residual exception. Thus, the first reference to the residual exception was on the first day of trial, one day prior to the government's effort to introduce the records. On these facts we cannot conclude that the FCCB/FFCM records were admissible under Fed.R.Evid. 803(24).
86 Although we conclude that the district court erred in admitting the FCCB/FFCM statements not found in NC Bank's files and in not limiting the admissibility of the FCCB/FFCM statements found in NC Bank's, under Fed.R.Crim.P. 52(a) we may nevertheless affirm the convictions if it is highly probable that the evidence did not contribute to the jury's judgment of conviction. United States v. Asher, 854 F.2d 1483, 1500 (3d Cir.1988) (quoting Government of the Virgin Islands v. Toto, 529 F.2d 278, 284 (3d Cir.1976)), cert. denied, --- U.S. ----, 109 S.Ct. 836, 102 L.Ed.2d 969 (1989). 87 Furst concedes that the investment in FCCB/FFCM had declined in value by as much as $700,000.00 of the $909,100.00 investment and that he knew of that loss. The relevance that the FCCB/FFCM statements have to the charges that Furst made false statements in bank records is to establish his motive for engaging in the internal stock trades and for cloaking the source of the funds generated in those trades. In the circumstances, since the existence of the loss was not in doubt, the FCCB/FFCM statements were not significant with respect to counts V, VI, and VII. Furthermore, it was perfectly clear from the NC Bank records regarding the Rocking Horse transaction that the NC Bank statements falsely attributed distributions from the Rocking Horse transactions to the FCCB/FFCM investment. Thus, it is highly probable that the FCCB/FFCM statements did not contribute to the conviction on those counts. 88 With respect to the charges of making false statements in ERISA records in counts X and XI, we likewise conclude that based on the record as a whole the admission of the FCCB/FFCM records was harmless. NC Bank's own records indicate that the WOA annual reports for 1984 and 1985 contained false statements. As discussed above, Aderhold's testimony and the documentary evidence clearly supported the government's case on these counts. While the presence of the FCCB/FFCM statements may have explained Furst's motive for the falsification, the evidence on the counts, even in the absence of the FCCB/FFCM statements, was such that it is highly probable that the admission of the statements did not contribute to the convictions on counts X and XI. 89 We conclude, therefore, that the admission of the FCCB/FFCM statements does not require a new trial on counts V, VI, VII, X, and XI.