Court Opinion

ID: 2771504
Source: CourtListenerOpinion
Date Created: 2015-01-20 22:00:49.31529+00
Date Added: 2024-06-11T12:23:16.530306
License: Public Domain

In the

      United States Court of Appeals
                     For the Seventh Circuit
                          ____________________  

No.  14-­‐‑1233  
UNITED  STATES  OF  AMERICA,  
                                                              Plaintiff-­‐‑Appellee,  
                                         v.  

JAMAL  E.  LAWSON,  SR.,  
                                                         Defendant-­‐‑Appellant.  
                          ____________________  

            Appeal  from  the  United  States  District  Court  for  the  
              Northern  District  of  Illinois,  Eastern  Division.  
                 No.  12  CR  03  —  James  B.  Zagel,  Judge.  
                          ____________________  

    ARGUED  JANUARY  7,  2015  —  DECIDED  JANUARY  20,  2015  
                 ____________________  

   Before  WOOD,  Chief  Judge,  and  POSNER  and  EASTERBROOK,  
Circuit  Judges.  
    EASTERBROOK,   Circuit   Judge.   Evangel   Capital   held   itself  
out   as   a   lender   with   $250   million   in   assets   available   to  
churches   and   other   religious   institutions.   It   issued   firm-­‐‑
commitment   financing   letters   for   multi-­‐‑million-­‐‑dollar   pro-­‐‑
jects   but   never   closed   a   single   loan   and,   indeed,   never   had  
more   than   $10,000   in   its   bank   accounts.   What   money   it   did  
have   came   from   fees   charged   to   potential   borrowers.   Jamal  
2                                                                      No.  14-­‐‑1233  

Lawson,   Sr.,   its   owner   and   principal   manager,   told   clients  
that   the   fees   would   be   used   to   pay   for   appraisals   and   re-­‐‑
quired  documents;  instead  the  fees  were  swiftly  withdrawn  
and   used   for   personal   expenses.   Lawson   collected   some  
$270,000   in   fees   and,   despite   his   promises,   did   not   return   a  
penny   to   clients   when   their   loans   went   unfunded.   A   jury  
convicted  Lawson  of  wire  fraud,  18  U.S.C.  §1343,  and  he  has  
been  sentenced  to  52  months’  imprisonment.  
     Lawson  does  not  contest  the  sufficiency  of  the  evidence.  
He   told   clients   that   he   had   a   track   record   of   financing   reli-­‐‑
gious   projects;   actually   he   never   financed   a   single   one.   Es-­‐‑
sentially  everything  he  said  to  the  clients  was  false,  and  in  a  
statement   to   federal   investigators   Lawson   admitted   divert-­‐‑
ing   fees   to   his   own   use.   Unfortunately,   the   prosecutor   tried  
to  “strengthen”  an  airtight  case  by  asking  the  district  court’s  
approval  of  a  plan  to  show  that  Lawson  had  not  reported  the  
fees  as  income.  (Lawson  had  not  filed  tax  returns  at  all.)  The  
judge   told   the   prosecutor   that   he   could   show   that   Lawson  
failed   to   report   his   income,   but   not   that   he   failed   to   file   tax  
returns.   The   prosecutor   followed   these   instructions   at   trial.  
The   judge   told   the   jury   that   the   evidence   was   admitted   for  
the   purpose   of   showing   whether   Lawson   acted   with  
knowledge  or  fraudulent  intent—but  not  how  it  illuminated  
those  issues,  creating  a  needless  risk  that  the  jury  used  it  for  
the   forbidden   purpose   of   treating   Lawson   as   having   a   pro-­‐‑
pensity  to  commit  crimes.  
   The   only   issue   raised   in   Lawson’s   appellate   brief   is  
whether  the  district  court  should  have  excluded  the  tax  evi-­‐‑
dence.  The  United  States  contends  that  the  evidence  was  rel-­‐‑
evant  and  admissible,  despite  Fed.  R.  Evid.  404(b),  because  it  
was   not   used   to   show   Lawson’s   propensity   to   commit  
No.  14-­‐‑1233                                                                                  3  

crimes.   It   was   used,   rather,   to   negate   his   contention   that   he  
intended  to  extend  loans  and  failed  to  do  so  only  because  the  
state   of   the   economy   made   it   impossible   to   get   financial  
commitments.   Tax   evidence   could   in   principle   undermine  
such  a  contention:  if  Lawson  did  not  report  the  advances  as  
business   income   and   take   deductions   for   the   expenses   of  
running   the   business,   that   implies   that   there   was   no   legiti-­‐‑
mate   business   (and   no   legitimate   business   expenses).   The  
prosecutor  also  maintains  that  a  jury  could  understand  non-­‐‑
reporting   of   the   income   as   Lawson’s   implicit   acknowledg-­‐‑
ment  that  it  was  the  fruit  of  a  fraud  rather  than  a  legitimate  
venture.  Yet  the  prosecutor  did  not  ask  the  jury  to  draw  the-­‐‑
se   inferences   (or   any   other)   when   the   evidence   was   admit-­‐‑
ted,  and  all  the  instructions  said  about  the  subject  was:  
    you   must   decide   whether   it   is   more   likely   than   not   that   the   de-­‐‑
    fendant   did   the   acts   that   are   not   charged   in   the   indictment.   If  
    you   decide   that   he   did,   then   you   may   consider   this   evidence   to  
    help   you   decide   whether   the   defendant   acted   knowingly   and  
    with  fraudulent  intent  when  he  committed  the  acts  alleged  in  the  
    indictment.  You  may  not  consider  it  for  any  other  purpose.  

This  does  not  tell  the  jury  how  it  could  make  proper  use  of  
the  evidence.  Legalese  such  as  “knowingly  and  with  fraudu-­‐‑
lent   intent”   is   useless   to   lay   jurors   without   concrete   advice  
about  what  sort  of  inferences  are  proper  or  improper.  
     That’s  not  the  only  problem  with  this  evidence.  Although  
Rule  404(b)  says  that  other-­‐‑act  evidence  may  be  admitted  to  
show   knowledge   or   intent,   Rule   403   provides   for   exclusion  
of  evidence  when  its  potential  for  unwarranted  prejudice  ex-­‐‑
ceeds  its  potential  for  appropriate  use.  United  States  v.  Gomez,  
763  F.3d  845  (7th  Cir.  2014)  (en  banc),  stresses  that  a  district  
judge   must   apply   both   Rule   403   and   Rule   404(b)   with   care  
and   exclude   evidence   that   either   lacks   a   proper   use   (Rule  
4                                                                  No.  14-­‐‑1233  

404(b))   or   poses   excessive   risk   that   the   jury   will   draw   the  
forbidden  propensity  inference  rather  than  an  allowable  one.  
Rule  403  calls  for  a  careful  exercise  of  discretion  by  the  dis-­‐‑
trict  judge.  See,  e.g.,  Gomez,  763  F.3d  at  856–60;  United  States  
v.   Beasley,   809   F.2d   1273   (7th   Cir.   1987).   But   we   can’t   tell  
whether  the  district  judge  did  that,  because  he  conducted  the  
critical   conference   off   the   record.   Back   in   open   court,   the  
judge  put  on  the  record  what  he  had  ruled  (he  would  allow  
evidence   that   Lawson   failed   to   report   income   but   not   evi-­‐‑
dence  that  Lawson  failed  to  file  tax  returns),  but  not  why  he  
reached   these   conclusions   or   how   he   thought   a   jury   could  
make  proper  use  of  the  tax  evidence.  
     If  Lawson  had  protested  at  the  time,  he  might  have  a  sol-­‐‑
id   position   on   appeal.   District   judges   must   think   carefully  
and  have  good  reasons  for  their  dispositions  under  Rule  403.  
Silence  does  not  suffice.  But  the  district  judge  stated  (on  the  
record)  that  the  earlier  proceedings  had  been  conducted  off  
the  record  by  mutual  consent;  Lawson  does  not  contend  oth-­‐‑
erwise.   And   when   the   judge   put   his   rulings   on   the   record,  
Lawson   did   not   ask   him   to   relate   his   reasons.   There   can  
therefore  be  no  contention  that  the  judge  violated  the  Court  
Reporters  Act,  28  U.S.C.  §753(b),  or  the  holdings  of  decisions  
such   as   United   States   v.   Nolan,   910   F.2d   1553,   1559   (7th   Cir.  
1990),  that,  when  judges  hold  conferences  or  discussions  off  
the  record,  they  must  eventually  record  both  what  they  con-­‐‑
cluded  and  why.  
     Nolan   concerns   sidebar   conferences,   but   its   approach   is  
equally   applicable   to   other   off-­‐‑the-­‐‑record   decisions.   Our  
conclusion   in   United   States   v.   Murphy,   768   F.2d   1518,   1535  
(7th   Cir.   1986),   that   conferences   held   in   chambers   need   not  
be  transcribed  does  not  suggest  that  it  is  sound  practice  for  a  
No.  14-­‐‑1233                                                                  5  

judge  to  keep  his  reasoning  entirely  off  the  record  or  that  an  
unexplained   application   of   Rule   403   can   be   sustained.   But  
Lawson’s  failure  to  ask  that  an  adequate  record  be  made  in  
the   district   court   disables   him   from   arguing   on   appeal   that  
the   judge   failed   to   conduct   a   proper   Rule   403   analysis.   For  
all   we   can   tell,   the   judge   did   everything   necessary—except  
put  his  thinking  in  the  record.  
     Nor  can  Lawson  protest  the  judge’s  failure  to  give  a  lim-­‐‑
iting   instruction   crafted   to   help   the   jury   understand   what  
sorts   of   inferences   were   appropriate   and   what   inferences  
were   forbidden.   Although   Gomez   discusses   the   importance  
of   situation-­‐‑specific,   non-­‐‑boilerplate   instructions—see   763  
F.3d   at   860–61;   see   also   id.   at   865   (opinion   dissenting   in  
part)—it   also   concludes   that   the   choice   whether   to   give   a  
limiting   instruction   rests   with   the   defense,   which   may   de-­‐‑
cide   that   the   less   said   about   the   evidence   the   better.   See  
Gomez,  763  F.3d  at  860;  see  also  Fed.  R.  Evid.  105  (providing  
that  the  court  must  explain  the  use  and  limits  of  the  evidence  
“on  timely  request”).  Lawson  did  not  ask  the  district  court  to  
give   a   better   limiting   instruction   and   therefore   has   not   pre-­‐‑
served  this  subject  for  appeal.  
      Still,   the   performance   of   the   district   judge   is   disappoint-­‐‑
ing.  We  would  have  expected  him  to  ensure  that  the  record  
reflects  his  thinking  and  to  suggest  a  useful  instruction  even  
if  the  parties  failed  to  prompt  him.  The  prosecutor’s  perfor-­‐‑
mance   also   is   disappointing.   Introducing   evidence   that  
stretches   or   exceeds   the   limits   of   admissibility   in   a   bullet-­‐‑
proof  prosecution  has  nothing  to  recommend  it,  whether  or  
not  the  harmless  error  doctrine  will  save  the  conviction;  dis-­‐‑
trict  judges  can  and  should  protect  defendants  and  the  pub-­‐‑
lic  interest  from  excessive  zeal  by  excluding  such  evidence.  
6                                                                No.  14-­‐‑1233  

     The   prosecutor’s   oral   argument   in   this   court   was   disap-­‐‑
pointing  for  a  different  reason:  counsel  for  the  United  States  
insisted   that   Gomez   is   irrelevant   because   it   concerns   only  
Rule   404(b),   while   this   appeal   concerns   Rule   403.   That   isn’t  
remotely   correct.   Gomez   covers   the   entire   process   of   using  
other-­‐‑act   evidence,   and   that   process   has   four   components:  
whether  the  evidence  is  relevant  (Rules  401  and  402);  wheth-­‐‑
er  it  is  categorically  inadmissible  under  Rule  404(b);  whether  
if  not  foreclosed  by  Rule  404(b)  it  should  be  excluded  under  
Rule  403;  and  finally,  if  the  evidence  is  admissible,  how  the  
judge   informs   the   jury   about   permissible   and   forbidden   in-­‐‑
ferences.   These   are   linked   subjects.   Prosecutors   who   do   not  
understand   and   apply   the   full   scope   of   the   Gomez   decision  
will  find  their  convictions  hard  to  sustain  on  appeal.  
     As  for  this  appeal,  however:  We’ve  already  stressed  that  
Lawson’s  best  potential  arguments  are  not  presented  for  de-­‐‑
cision,  and  now  we  add  that  any  error  was  harmless.  The  tax  
evidence   could   not   have   affected   a   rational   jury’s   verdict,  
given   the   undisputed   proof   that   Lawson   converted   the   fees  
to   his   personal   use   and   did   not   spend   the   money   for   the  
purposes   he   told   clients   it   was   needed.   His   lawyer’s   argu-­‐‑
ment   that   hard   times   upset   well-­‐‑intentioned   plans   was   em-­‐‑
barrassed   by   the   fact   that   Lawson   lied   when   telling   clients  
that  he  already  had  funding  in  hand.  That  he  also  lied  about  
the  firm’s  past  success  in  securing  financing,  and  reneged  on  
his   promises   to   return   fees   if   loans   did   not   close,   cemented  
the  prosecution’s  case.  
                                                                    AFFIRMED