Opinions of the United 1994 Decisions States Court of Appeals for the Third Circuit
6-20-1994
United States of America v. Jemal Precedential or Non-Precedential:
Docket 93-5172
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Recommended Citation "United States of America v. Jemal" (1994). 1994 Decisions. Paper 52. http://digitalcommons.law.villanova.edu/thirdcircuit_1994/52
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________________
NO. 93-5172 ________________
UNITED STATES OF AMERICA,
Appellee
v.
DAVID JEMAL,
Appellant
______________________________________
On Appeal From the United States District Court For the District of New Jersey (D.C. Crim. No. 91-00535-02) ______________________________________
Argued: May 12, 1994
Before: BECKER, and LEWIS, Circuit Judges, and POLLAK, District Judge.1
(Filed: June 21, 1994)
RICHARD E. MISCHEL, Esquire (ARGUED) 233 Broadway New York, NY 10279
Attorney for Appellant
MICHAEL CHERTOFF, United States Attorney EDNA B. AXELROD (ARGUED) JOHN J. FARMER, JR.
1 Honorable Louis H. Pollak, United States District Judge for the Eastern District of Pennsylvania, sitting by designation.
1 Assistant U.S. Attorneys Office of the U.S. Attorney 970 Broad Street Room 502 Newark, NJ 07102
Attorneys for Appellee
_____________________________
OPINION OF THE COURT _____________________________
BECKER, Circuit Judge. This appeal from a judgment in a criminal case presents
an important question under Federal Rule of Evidence 404(b):
whether a defendant may, by offering a comprehensive and
unreserved stipulation that he possessed the knowledge, intent,
motive, opportunity, or other fact sought to be established by
Rule 404(b) evidence, prevent the government from putting on
evidence of the defendant's prior bad acts. This question arises
in a mail fraud case stemming from a "bust-out" scheme allegedly
masterminded by defendant David Jemal. Along with co-conspirator
Norman Levy, Jemal allegedly started a business (Capital
Merchandise), increased its credit rating by fraudulent means,
bought goods for resale on credit with no intention of paying the
sellers, sold the goods, kept the money, and declared the
corporation bankrupt. For this, a jury convicted him of one
count of conspiracy to commit mail fraud, 18 U.S.C. § 371, and
for six substantive counts of mail fraud, 18 U.S.C. § 1341.
Over Jemal's objections, the district court allowed the
government to introduce evidence of Jemal's involvement in prior
2 insurance frauds and bust-outs in order to prove he knew and
intended Capital Merchandise to be a bust-out. Jemal argues that
because he indicated his willingness to stipulate to knowledge
and intent, the prior bad acts evidence should have been
excluded. Although we agree with Jemal that a district court
should generally refuse to admit evidence of a defendant's prior
bad acts to show knowledge and intent when the defendant has
profferred a comprehensive and unreserved stipulation that he
possessed the requisite knowledge and intent (or other fact
sought to be established by the prior bad acts evidence), Jemal's
offer was not sufficiently comprehensive to remove those issues
from this case. Inasmuch as the Rule 404(b) evidence was
otherwise admissible and not subject to exclusion under Federal
Rule of Evidence 403, we hold that the district court did not
abuse its discretion in admitting the evidence. The judgment of
the district court will therefore be affirmed.2
I. FACTS AND PROCEDURAL HISTORY
In September 1985, Jemal approached his attorney,
Joseph Indick, about incorporating a business for him and a
relative. In November 1985, Jemal began discussing this plan
with Levy, his cousin. In January 1986 he specifically proposed
to Levy that they start a "wholesale jobbing business" in the
2 The only other contention advanced by Jemal on appeal -- that it was plain error for the district court to fail to give the jury a cautionary instruction that the guilty plea of Jemal's alleged co-conspirator did not constitute evidence of Jemal's guilt -- is, in light of other instructions the court gave, clearly without merit and does not warrant discussion.
3 back office of Big Bargain Stores -- one of Jemal's retail
stores. He suggested that they buy merchandise and resell it to
"mom and pop" retail stores. At the end of January, Jemal
informed Levy that he could raise the capital if Levy was willing
to "operate the business." They agreed to incorporate the
business under the name Capital Merchandise.
Jemal then formed a corporation and asked Levy to be
the corporation's president. In March 1986 he brought Levy with
him to Indick's office. At the meeting, Levy, but not Jemal,
signed corporate by-laws and board resolutions listing Levy as
the president, vice-president, treasurer, secretary, and
subscriber to the stock of Capital Merchandise. These documents
had been backdated to September 23, 1985, which Indick testified
was not inappropriate as a means of reflecting the "reality" that
Levy had been operating the "corporation" on the dates indicated.
Levy also signed a lease, which he said Jemal had prepared, for
part of Jemal's premises at 143 Newark Avenue -- a lease
backdated to October 22, 1984 and purporting to run from November
1, 1984 to October 31, 1986, although Levy did not move into the
office until March, 1986. The lease was purportedly assigned to
Capital Merchandise in November 1, 1985.
On March 10, 1986, Levy opened a bank account for
Capital Merchandise for which he signed a signature card allowing
him to withdraw funds. The next day, according to Levy, Jemal
signed an additional signature card with the name "Mike Levy"
saying that he "just want[ed] to use that name." Levy told the
4 bank that "Mike" was his brother and would sign for funds in case
of emergency.
Levy and Jemal then began to purchase merchandise from
wholesalers, substantiating their credit worthiness by stating
that they had been in business for a couple of years as evidenced
by the backdated lease. But Capital Merchandise needed to
establish a more significant credit history in order to begin
buying large quantities of merchandise. Thus, Jemal approached
Sam Kassin, an acquaintance who had familiarity with bust out
schemes and asked for advice on how to inflate the credit history
of the corporation. Kassin provided this advice in June 1986,
and agreed to write purchase orders for Capital Merchandise.
Jemal also approached his acquaintance Richard Beda, told him
(according to Beda) that he was "going to make a bust-out" of
Capital Merchandise, and asked if he could used Beda's company as
a credit reference. Beda agreed and sent out 20 to 40 references
indicating that Capital Merchandise's credit was very good.
During this period, Jemal advised Levy to remove his
name from the corporate documents "after discussions we had that
we were planning to scam the company;" Kassin provided similar
advice. In August, although made to look as if it was in July,
Levy resigned as director and president of the corporation and
inveigled his invalid father Morris Levy to sign the name "Jack
Levy" on documents naming Jack Levy the sole shareholder,
director, and president of Capital Merchandise. Also in August
1986, Capital Merchandise submitted a credit statement, signed by
"Jack Levy", to Dun and Bradsteet. Jemal apparently fabricated
5 the statement to show equities, sales, and profits far above
their actual values.
Soon thereafter, according to Levy, Jemal and Levy
discussed their strategy of running the corporation into
bankruptcy and then satisfying creditors by having a marshal
liquidate remaining assets. They began ordering merchandise in
large quantities with no intention of paying for it. Levy
testified that most orders and sales were made by Jemal. However,
Jemal and Levy began feuding, and, after November, Levy's
involvement in Capital Merchandise was very limited. In January
1987 Levy received his remaining "payoff" of $5,000, bringing his
total compensation to $14,000. Jemal took 80-85% of the income,
some of it allegedly for rent. By March 1987 Capital Merchandise
was essentially defunct, with the corporate bank account closed
for insufficient funds.
Jemal was indicted for engaging in a conspiracy to
commit mail fraud, 18 U.S.C. § 371, and for six substantive
counts of mail fraud, 18 U.S.C. § 1341. Norman Levy, who was
named as a co-conspirator and a co-defendant, pleaded guilty to
conspiracy to commit mail fraud. After a jury trial, Jemal was
convicted on all counts.
II. PRIOR BAD ACT TESTIMONY
A. The Evidence and Defendant's Offer to Stipulate
Jemal's defense was essentially that he was an innocent
landlord who had no involvement in the bust-out scheme
perpetrated by Levy and others. He sought to impeach Levy and
6 the government's other witnesses by demonstrating that they were
testifying because of deals they had made with the government, by
showing their past tendency to lie, their past crimes, and, with
regard to Levy, by his history of drug abuse.
Over continuous objections, the government introduced
evidence of prior crimes Jemal had allegedly committed,
ostensibly to show Jemal's knowledge of the nature of a bust-out
scheme and his intent to perpetrate one. Kassin testified that
Jemal had been one of his partners in a bust-out of a store
called SBL Trading in 1976 or 1977; Jemal had served as SBL
Trading's landlord and had received 25% of the profits. Kassin
also testified that he had operated a bust-out in 1979 of which
Jemal was aware and from which Jemal had wanted to purchase
discounted merchandise. Finally, Kassin testified that he had
operated a bust-out in 1982 or 1983 which moved into a building
housing one of Jemal's businesses -- a business which then ceased
operations (apparently implying that Jemal decided to use the
space for the bust-out scheme).
Richard Beda testified that in 1986 Jemal had purchased
damaged clocks from him so that he could "stage" a flood and file
an insurance claim (allegedly a regular practice of Jemal). Beda
also testified that during a bust out operation he had operated
in 1985, Jemal had advised him to make a lease agreement similar
to that later entered into by Capital Merchandise.
Just before trial, Jemal voiced his opposition to the
introduction of this prior bad acts evidence. His counsel
stated:
7 This case should be distinguished from one in which we acknowledge that the defendant was either an employee or an officer of the corporation, that he was committing some acts which were otherwise innocent. Then the issue of the defendant's knowledge becomes important. The issue of his intent becomes important. In this case, our contention, quite simply, is that the defendant was not involved. The government alleges that my client was a signatory on the checking account and that he used the name "Mike Levy" as an alias. We deny that the defendant ever signed a check or had any power to sign any checks. We deny that my client used the name "Mike Levy."
Defense counsel continued that in order to preclude the
introduction of the prior bad acts evidence: I'm prepared to stipulate that if the government can establish that my client was the signatory on the checking account, and that if he participated in the other acts as described by Norman Levy, that they can find that the defendant had the requisite knowledge and intent as far as the mail fraud is concerned.
Nonetheless, the district court ruled that the prior
bad acts testimony was admissible as showing modus operandi,
intent, and lack of mistake. The court indicated that its
probative value outweighed any undue prejudice and that it was
too difficult to obtain a useful stipulation on intent in this
case. Id. Defense counsel then offered a new stipulation saying: [w]ith regard to the Count 1 of the indictment charging conspiracy, I would stipulate to all of the elements of the -- of that count of the indictment, save the defendant's membership in the conspiracy. With regards to Counts 2 through 7 alleging mail fraud, I would submit that the only
8 issue remaining is the issue of acting in concert. And even with regard to the issue of acting in concert, I will stipulate that if the government -- if the jury finds that the testimony of Norman Levy is truthful, then the jury may find that the defendant had the requisite intent and may consider the remaining elements of acting in concert.
After considering this stipulation, the court concluded that
"[e]ven with the proposal . . ., I think it's highly relevant
under the issue of knowledge of what bust-outs are, how they
operate. I think it works also as evidential on the issue of
lack of mistake, so that even though intent may not be in play,
those others certainly are."
Finally, after the prosecution had presented fifteen
witnesses, defense counsel again raised the Rule 404(b) issue,
offering to stipulate that: Levy testified that David Jemal committed the following acts: 1. Knowingly and intentionally entering into a fictitious lease arrangement. 2. Participating in the preparation and back-dating of corporate documents. 3. Supplying false financial information to Dun & Bradstreet, and to creditors. 4. Ordering merchandise on behalf of Capital Merchandise, Inc. 5. Selling merchandise by Capital Merchandise, Inc. By his plea of not guilty David Jemal denies having committed any of these acts. If you find that the government has proven beyond a reasonable doubt any one or more of the acts alleged above, then I instruct you that you must find that the defendant possessed the requisite knowledge and intent.
Relying on its prior rationale, the district court again rejected
the offer to stipulate, but it did give limiting instrutions to
the jury with respect to the use of the bad acts evidence.
9 B. The Proper Rule
1) Background
Fed.R.Evid. 404(b) begins by stating that: [e]vidence of other crimes, wrongs or acts is not admissible to prove the character of a person in order to show that he acted in conformity therewith.
We have stated that:
[c]haracter evidence is not rejected because it is irrelevant. On the contrary, `it is said to weigh too much with the jury and to so overpersuade them as to prejudice one with a bad general record and deny him a fair opportunity to defend against a particular charge.' Michelson v. United States, 335 U.S. 469, 475-76, 69 S. Ct. 213, 218, 93 L.Ed. 168 (1948).
United States v. Sampson, 980 F.2d 883, 886 (3d Cir. 1992) Nonetheless, while prior bad acts evidence is
inadmissible to prove that the defendant "acted in conformity
therewith," "[character] evidence may . . . be admissible for
other purposes, such as proof of motive, opportunity, intent, preparation, plan, knowledge, identity, or absence of mistake or
accident." Fed.R.Evid. 404(b). We have recognized that Rule
404(b) is a rule of inclusion rather than of exclusion. See
United States v. Scarfo, 850 F.2d 1015, 1019 (3d Cir.), cert.
denied, 488 U.S. 910, 109 S. Ct. 263 (1988). Evidence can be
admitted even if it does not fit one of the specific exceptions
listed in the rule, so long as it is used for a purpose other
than proving a defendant's likelihood to have committed this
10 particular crime based on an inference drawn from evidence
pertaining to his character. Id. at 1019.
Despite our characterization of Rule 404(b) as a rule
of admissibility, we have expressed our concern that, "[a]lthough
the government will hardly admit it, the reasons proffered to
admit prior bad act evidence may often be potemkin village,
because the motive, we suspect, is often mixed between an urge to
show some other consequential fact as well as to impugn the
defendant's character." See Sampson, 980 F.2d at 886.
As a result, we held in Sampson that, "[i]f the government offers
prior offense evidence, it must clearly articulate how that
evidence fits into a chain of logical inferences, no link of
which can be the inference that because the defendant commited .
. . offenses before, he therefore is more likely to have commited
this one." Id. at 887. Moreover, once the government
articulates how the evidence fits into such a chain, the district
court must weigh the probative value of the evidence against its
potential to cause undue prejudice and articulate a rational
explanation on the record for its decision to admit or exclude
the evidence. Id. at 889.3
3 These steps follow the test for admissibility set out by the Supreme Court in Huddleston v. United States, 485 U.S. 681, 691, 108 S. Ct. 1496, 1502 (1988). The Supreme Court stated that for prior bad acts evidence to be admitted: 1) it must have a proper purpose under Rule 404(b); 2) it must be relevant under Rule 402; 3) its probative value must outweigh its prejudicial effect under the standard of Rule 403; and 4) the court must charge the jury to consider the evidence only for the purpose for which it was admitted. See id.
11 We review the Rule 404(b)/Rule 403 weighing process
only for abuse of discretion; hence the district court has
significant leeway in reaching its decision. Id. at 886. "If
judicial self-restraint is ever desirable, it is when a Rule 403
analysis of a trial court is reviewed by an appellate tribunal."
United States v. Long, 574 F.2d 761, 767 (3d Cir.), cert. denied,
439 U.S. 985, 99 S. Ct. 577 (1978).
2) Stipulations
The Second Circuit has held that, as a matter of law,
it is an abuse of discretion for district courts to admit prior
bad acts evidence to prove an issue such as knowledge or intent
if the defendant takes sufficient steps to remove that issue from
the case. See, e.g., United States v. Manafzadeh, 592 F.2d 81,
87 (2d Cir. 1979); United States v. Mohel, 604 F.2d 748, 753 (2d
Cir. 1979), United States v. Figueroa, 618 F.2d 934, 941-42 (2d
Cir. 1980). The initial question we are faced with in this case
is whether we should follow the Second Circuit's rule.
Under the Second Circuit's rule, if the government
offers Rule 404(b) evidence to prove knowledge or intent, the
defendant can avoid introduction of the evidence if his defense
is that "he did not do the charged act at all." United States v. Ortiz, 857 F.2d 900, 903 (2d Cir. 1988), cert. denied, 489 U.S.
1070 (1989). Thus, where a defendant has claimed that he did not
distribute drugs at all rather than claiming that he distributed
a substance that turned out to be drugs without knowledge that
the substance was drugs, the Second Circuit has precluded the
admission of prior crime evidence. See, e.g., Mohel, 604 F.2d at
12 755; Figueroa, 618 F.2d at 944; United States v. Colon, 880 F.2d
650, 662 (2d Cir. 1989). Many other courts of appeals
essentially agree with the Second Circuit. See United States v.
Jenkins, 7 F.3d 803, 807 (8th Cir. 1993) (observing that this
interpretation comports with the clear language of the rule which
makes bad acts evidence inadmissible to prove character); cf.
United States v. Silva, 580 F.2d 144, 148 (5th Cir. 1978)
(reasoning that where defendant's sole defense is denial of
participation in the act, there is no issue of intent), United
States v. Palmer, 990 F.2d 490, 495 (9th Cir. 1993), cert.
denied, 114 S. Ct. 1120 (1994) (holding that where defendant's
theory was that he had moved onto the property and had no part in
growing the marijuana that was there, his statement that he had
sold marijuana before was inadmissible).
In contrast, the Seventh Circuit has held that, "`[i]n
cases involving specific intent crimes, intent is automatically
an issue, regardless of whether the defendant has made intent an
issue in the case.'" United States v. Mazzanti, 888 F.2d 1165,
1171 (7th Cir. 1989), (quoting United States v. Monzon, 869 F.2d
338, 344 (7th Cir.), cert. denied, 490 U.S. 1075, 109 S. Ct. 2087 (1989)). At a minimum, this means that in conducting the Rule
403 balancing test, district courts in the Seventh Circuit have
been directed to consider prior bad acts evidence to be
significantly probative regardless of the defense employed by the
defendant. Mazzanti itself upheld a district court decision
allowing the introduction of evidence of prior drug dealing where
13 the defendant conceded his presence at or near the scene but
denied any wrongdoing. See id.4
We have not yet taken a definitive position on the use
of stipulations to remove Rule 404(b) evidence from a case,
although we have expressed ourselves in the context of Rule 403
balancing generally. In United States v. Provenzano, 620 F.2d
985 (3d Cir.), cert. denied, 449 U.S. 899, 101 S. Ct. 267 (1980),
we considered the government's attempt to prove that a
corporation was a sham corporation by introducing evidence that
the defendant was in jail during the time period that he was
supposedly running the corporation. In considering the
defendant's offer to stipulate that he was unavailable, we held
that: [a]n offer to stipulate does not automatically mean that the fact may not be proved instead, as long as the probative value of the proof still exceeds the prejudicial effect, taking into account the offer to stipulate. United States v. Grassi, 602 F.2d 1192, 1197 (5th Cir. 1979) ("A cold stipulation can deprive a party `of the legitimate moral force of his evidence,' 9 Wigmore on Evidence § 2591 at 589 (3d ed. 1940), and can never fully substitute for tangible, physical evidence or the testimony of witnesses.")
4 The Fourth Circuit has taken an intermediate approach. It has held that the use of prior bad acts evidence must be examined meticulously in each case and has strongly implied that the probative value of prior bad acts evidence is significantly less when the defense is that the defendant did not perform the charged act at all. See United States v. Hernandez, 975 F.2d 1035, 1040 (4th Cir. 1992). This is similar to the approach we will take in this case. See infra at 17-19.
14 Id. at 1004. We concluded in Provenzano that because the
proposed stipulation would leave some doubt as to whether the
defendant was completely unavailable and because of "the
conceptual difficulty of structuring a stipulation that would
convey the same fact of unavailability due to incarceration
without adverting to that concept," id., admission of the
evidence was not an abuse of discretion.
In United States v. Sheeran, 699 F.2d 112 (3d Cir.
1983), we summarized Provenzano as follows: Although "[a]n offer to stipulate does not automatically mean that the fact may not be proved instead, as long as the probative value of the proof still exceeds the prejudicial effect taking into account the offer to stipulate," United States v. Provenzano, 620 F.2d 985, 1003-04 (3d Cir. 1980 (emphasis added), we have held that evidence admissible in the absence of such a concession sometimes should not be admitted where the defendant has offered "a suitable stipulation . . . that would convey the same fact," id. at 1004.
Sheeran, 699 F.2d at 118 n.12. In Sheeran, in the absence of an offer to stipulate, we upheld the admission of evidence of prior
bad acts by alleged co-conspirators to prove their control over
companies involved in the charged conspiracy.
While we did not decide Provenzano and Sheeran under
the specific rubric of Rule 404(b), we think that Provenzano,
which involved the question of whether to admit evidence that the
defendant was in jail, was in essence a Rule 404(b) case
involving prior bad acts evidence. Thus, at least in the absence
of in banc reconsideration, Provenzano and Sheeran would seem to
15 prevent us from adopting the per se rule of the Second Circuit.
That may be just as well inasmuch as there may be some cases,
presently unforeseeable, which the district court might identify
as properly calling for the admission of Rule 404(b) evidence
notwithstanding a defendant's willingness to stipulate.
However, although we leave the door open, we believe
that district courts should generally deem prior bad acts
evidence inadmissible to prove an issue that the defendant makes
clear he is not contesting. The relevance of the prior bad acts
evidence will be minimal in most such cases, since the evidence
will not bear on the issues being contested. And the undue
prejudice will be quite high, since prior bad acts evidence tends
to be quite persuasive. This is consistent with Provenzano's
rule that stipulations should be taken into account in conducting
a Rule 403 balancing analysis. See United States v. Hernandez,
975 F.2d 1035, 1040 (4th Cir. 1992) (employing a Rule 403
balancing analysis to reverse a district court's decision to
admit evidence of defendants' prior sale of crack where the
defense was that the defendant did not sell the crack involved at
all and where there was no indication that the district court had
carefully balanced the evidence).
We emphasize, however, that to succeed, the defendant's
proffer must be comprehensive and unreserved, completely
eliminating the government's need to prove the point it would
otherwise try to establish using 404(b) evidence. As the Second
Circuit explained, whether a defendant has removed an issue from
the case:
16 depends not on the form of words used by counsel but on the consequences that the trial court may properly attach to those words. When the Government offers prior act evidence to prove an issue, counsel must express a decision not to dispute that issue with sufficient clarity that the trial court will be justified (a) in sustaining objection to any subsequent cross-examination or jury argument that seeks to raise the issue and (b) in charging the jury that if they find all the other elements established beyond a reasonable doubt, they can resolve the issue against the defendant because it is not disputed.
Figueroa, 618 F.2d at 942.
When a defendant indicates a desire to preclude the
admissibility of Rule 404(b) evidence by stipulating away a
particular issue but the government offers a reasonable
explanation as to why the proposed stipulation is inadequate, the
district judge should explore the possibility of fashioning an
agreement on a more comprehensive stipulation -- preferably in
limine, as the recent Rule 404(b) amendment contemplates. See
Fed. R. Evid 404(b) (amended in 1991). Finally, we note that
even if the defendant is unwilling to make sufficient concessions
to completely remove an issue from the case, the district court
should weigh prejudice against probative value only after taking
into account the defendant's "partial" stipulation, a weighing
that we will review for abuse of discretion. Cf. Hernandez, 975 F.2d at 1040 (holding that the probative value of the use of
prior bad acts evidence can be reduced by the defendant's
willingness to concede certain issues).
17 C. Application in this Case
We think that the district court acted properly in
admitting prior bad acts evidence here to show that Jemal
intended his actions to be part of a bust-out scheme and knew
that his acts were part of such a scheme. Jemal did not offer a
stipulation that completely removed the issues of intent and
knowledge from the case despite an apparently sincere effort to
do so, nor can we think of a stipulation that would have done the
job. Cf. Garcia, 983 F.2d at 1174 ("[N]otwithstanding the
sincerity of the defendant's offer, the concession must cover the
necessary substantive ground to remove the issue from the
case."). Although defense counsel asserted that "our contention,
quite simply, is that the defendant was not involved," he had to
concede that Jemal had participated in some of the acts alleged
by the government to have been part of the bust-out scheme. With
respect to those acts, defense counsel had to claim that while
Jemal performed the acts, he did not do so with an intent to
perpetrate a "bust out."
This becomes apparent from Jemal's final, and most
complete, offer to stipulate to knowledge and intent -- an offer
made after the district court stated its view that it was
impossible to obtain a useful stipulation in this case. Jemal
offered to stipulate that if the jury found that he had performed
any of five acts described by Norman Levy, then it should find
that he "possessed the requisite knowledge and intent." See supra at 10-11. But Jemal's position falters at the first act
specified in the stipulation -- the backdating of the lease. The
18 government's position is that Jemal knowingly entered the
backdated lease with the intention of having Capital Merchandise
use the lease to boost its credit rating. This act was among the
overt acts specified in the indictment as taken by the defendant
in furtherance of the alleged conspiracy. Yet Jemal's proposed
stipulation to knowledge and intent with respect to the lease
would have required the government to prove knowledge and intent:
Jemal proposed to stipulate that if the jury found that he
"knowingly and intentionally entered into a fictitious lease
arrangement," it should find that he possessed the requisite
knowledge and intent.
Indeed, defense counsel admitted that his client had
signed the lease but stated that he had not intended to use the
lease as part of a bust-out. This brings the elements of
knowledge and intent to the fore.5 Cf. Provenzano, 620 F.2d at
5 The government also claims that Jemal's proposed stipulation was inadequate because it did not list all of the acts which constituted Jemal's alleged crimes (assuming that he committed the acts with the requisite intent). For example, the government argues that Jemal sought to use Richard Beda's company as a phony credit reference, but Jemal's proposed stipulation did not cover this alleged act. The government, however, did not identify this supposed deficiency in the stipulation at trial; nor did the district court point to the absence of these acts in the stipulation as a basis for rejecting it. Given Jemal's sincere attempt to eliminate intent and knowledge from the case and his proposal of several alternative stipulations, we think that if the government or the district court felt that additional acts needed to be part of the stipulation to make it adequate, they should have pointed to these acts and allowed Jemal an opportunity to add them to the stipulation. Moreover, the additional acts specified by the government would not have helped the government's case, for they were not sufficient to allow the jury to find Jemal guilty even if they were performed with the requisite intent. None of these acts was specified in the indictment as an overt act taken in
19 1004 (observing that a stipulation that the defendant was
unavailable did not completely remove the issue as to whether the
defendant might have been able to return in an emergency to help
run the company in question); Garcia, 983 F.2d at 1174-75
(explaining that a concession that the defendant knew something
about cocaine trafficking did not remove the issue of knowledge
from the case where his defense was that he did not know of the
presence of cocaine in his closet and did not apprehend the
nature of drug paraphernalia that was visible in his apartment);
Colon, 880 F.2d at 658 (observing that a stipulation to intent if
the government proved that the defendant intended to direct an
undercover officer to a particular person to buy drugs did not
remove the issue of intent from the case).
Moreover, as the second part of the proposed
stipulation, Jemal agreed that if the government proved that he
had participated in the backdating of corporate documents, the
jury could then infer knowledge and intent. Unlike the first act
specified in the stipulation, proof of this act does not on the
surface require proof of knowledge and intent. But Jemal's
actual argument with respect to this backdating was that, while
furtherance of the conspiracy (in fact, none was an act taken with Jemal's alleged co-conspirator) and none was an act which involved mail fraud. Thus, in order to obtain a conviction on either the conspiracy or the substantive counts, the government had to prove that Jemal performed at least one of the acts listed in his proposed stipulation -- and Jemal conceded that if the government proved that he performed any of these acts, then the jury should find the requisite knowledge and intent. We therefore do not rely on Jemal's failure to list additional acts in his proposed stipulation as a basis for upholding the district court's Rule 404(b) determination.
20 he did backdate the documents, he did so without the intent to
use the documents for a bust-out. Defense counsel argued, "you
see, if [the intent to defraud] occurred during a meeting at Sam
Kassin's office[,] . . . if that's when Mr. Jemal allegedly made
his mind up to bust this corporation out, then the backdating of
the documents . . . doesn't have a sinister intent."6 Thus,
Jemal had no real way of completely excising the issues of
knowledge and intent from this case.
Hypothetically, Jemal could have removed these issues
by contending that he did not participate in any of the acts
alleged by the government -- including formation of the
fictitious lease and backdating of the corporate documents -- and
then he could have conceded that, if the government proved that
he engaged in any of these acts, the jury should find knowledge
and intent. But Jemal did not offer to make such a concession
and could not have done so as part of a reasonable defense
strategy, because the evidence that Jemal engaged in these acts
was too strong for him realistically to contest it.
Jemal's proposed stipulation did reduce the role that
knowledge and intent played in the case, since, with respect to
the acts other than signing the fictitious lease and backdating 6 Defense counsel made this statement after the district court had refused to accept the proposed stipulation. It may be that if the district court had accepted his proposed stipulation, counsel would simply have argued that defendant did not participate in the backdating of the corporate documents and he would not have argued intent. However, the evidence of defendant's participation in the backdating of the documents was overwhelming, thus, the fact that the district court's refusal to accept the stipulation foreclosed the possibility of relying on this strategy can be deemed harmless error.
21 the documents, Jemal was willing to concede knowledge and intent
if the government proved he engaged in the acts. The question
becomes whether, given this concession, the district court abused
its discretion in finding that the probative value of the
evidence outweighed its undue prejudice. Jemal makes no real
effort to argue that it did -- he expends almost all of his
capital in the contention we have now rejected, namely, that he
had completely removed the issues of knowledge and intent from
the case.
We hold that the district court did not abuse its
discretion. The testimony that Jemal had participated in prior
bust-outs (in at least one case by acting as a landlord), and
that he had advised Beda that in order to successfully engage in
a bust-out he should formulate a lease agreement similar to that
later used by Capital Merchandise, was highly relevant to the
issue of whether Jemal knowingly and intentionally entered a
fictitious lease agreement for the purpose of engaging in a bust-
out. The district court was well within its discretion in
holding that the probative value of this evidence was not
substantially outweighed by any unfairly prejudicial effect.
The judgment of the district court will be affirmed.