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United States v. Hughes


November 9, 2007


The opinion of the court was delivered by: Milton I. Shadur Senior United States District Judge


In its prosecution of Brian Hughes ("Hughes") for crimes related to two alleged*fn1 fraudulent bankruptcy petition schemes, the government wishes to introduce evidence of certain uncharged conduct of Hughes*fn2 that took place both before and concurrently with the presently charged conduct. That uncharged conduct comprises two mortgage fraud schemes.*fn3

Hughes actively opposes the admission of evidence of the second scheme, dubbed the "mortgage loan application scheme." Hughes and two others are said to have used stolen identities to defraud mortgage lenders out of the funds disbursed for home loans. Hughes' cohorts in the mortgage loan application scheme played no role in the conduct as to which Hughes is charged.

Fed. R. Evid. ("Rule") 404(b) precludes the admission of evidence of uncharged conduct to show that the defendant acted in conformity with some certain character trait--most often a propensity to commit crime. Even though Rule 404(b) is a rule of exclusion, not of inclusion, it opens the door of admissibility by stating that evidence of uncharged conduct may come in if it is offered for some relevant purpose other than to prove character (for instance, to prove motive or intent). To be admitted, however, such evidence must still comply with the rest of the rules regarding admissibility.

To that end a four-pronged test has been fashioned in the seminal opinion in Huddleston v. United States, 485 U.S. 681 (1988) to determine the admissibility of uncharged conduct evidence. And Huddleston remains alive and well after nearly two decades: Thus, earlier this year United States v. Mallett, 496 F.3d 798, 801 (7th Cir. 2007) reiterated the standards in these terms: (1) the evidence must be directed toward establishing a matter in issue other than the defendant's propensity to commit the charged offense; (2) the evidence must show that the uncharged conduct is similar enough and close enough in time to be relevant to the matter in issue; (3) the evidence must be sufficient to support a jury finding that the defendant committed the similar act; and (4) the danger of unfair prejudice must not outweigh the evidence's probative value.

That first element embodies Rule 404(b). In this prosecution the government claims the evidence of Hughes' mortgage loan application scheme illuminates his knowledge, fraudulent intent and absence of mistake in the charged bankruptcy frauds. In the indictment's four counts, the government accuses Hughes of violating 18 U.S.C. §§157(1) and 152(3). Each section sets out a specific intent crime, and "when a defendant is charged with a specific intent crime, the government may present other acts evidence to prove intent" (United States v. Whiting, 471 F.3d 792, 801 (7th Cir. 2006)). Even so, the government still cannot offer such evidence to create an impermissible propensity inference. Here Hughes' past fraudulent dealing can be viewed as probative of whether he mustered the requisite level of intent to commit the charged bankruptcy fraud offenses--but at the same time it cannot be gainsaid that it carries with it an implication of propensity as well.

Relevancy forms the crux of the second inquiry--whether the uncharged conduct is sufficiently comparable to the charged conduct to be of proper use to a finder of fact. Similarity between the charged and uncharged conduct need not be rigidly scrutinized where the uncharged conduct is offered to prove intent: It is unnecessary for the uncharged acts to be identical to the charged conduct--instead they need only be similar enough to support an inference of intent (United States v. Long, 86 F.3d 81, 84 (7th Cir. 1996)). Similarity, a concept that evades precise definition, calls for a case-by-case analysis--to be sufficiently alike the acts must share more than just "some common characteristics" but rather "the common characteristics must relate to the purpose for which the evidence is offered" (id.). Seventh Circuit precedent has both "loosely interpreted and loosely applied" the term "similarity" in its analysis (United States v. Montani, 204 F.3d 761, 768 (7th Cir. 2000)). There is of course an element of irony here: the greater the similarity (pointing to admissibility), the greater the potential for the forbidden inference of propensity (pointing to inadmissibility).

In this instance mortgage fraud and bankruptcy fraud are sufficiently alike for the evidence of the uncharged mortgage fraud to be viewed as relevant to the determination of Hughes' intent to commit bankruptcy fraud. In the alleged mortgage application scheme the mortgage was secured with false identities and never repaid. In the charged bankruptcy fraud the mortgage was properly secured, but then bankruptcy petitions were fraudulently filed (in one case by using a false identity) to stop the mortgage lender from receiving payment or foreclosing on the mortgage. While not identical in operation, the schemes had a like effect. And temporally speaking, the uncharged conduct preceded the charged conduct by 1-1/2 years, a proximity sufficiently close to support admissibility (United States v. Lloyd, 71 F.3d 1256, 1264 (7th Cir. 1995)).

As for the third requirement--that the evidence must be such that a jury could reasonably conclude that the uncharged acts occurred and that defendant was the actor--it is intended to ensure that the proffered evidence of uncharged conduct stands on more than mere unfounded speculation and conjecture. In light of the already-described risks implicit in the admission of such evidence, it is surprising that the courts have not developed a gatekeeping function akin to that prescribed for opinion testimony under Rule 702--yet the caselaw teaches that the trial court need not predetermine that defendant committed the uncharged acts, even by a preponderance of the evidence, before permitting presentation to the jury (see, e.g., United States v. Manso-Portes, 867 F.2d 422, 425 (7th Cir. 1989)). As stated earlier, Hughes has been charged with the mortgage application fraud scheme in state court. Although Hughes is of course entitled to the presumption of innocence there (just as he is here), the information submitted by the government is enough to overcome the low hurdle posed by the third element of the Huddleston formulation.

That brings the analysis to the fourth element, which calls for the balancing process prescribed by Rule 403: a determination that the danger of unfair prejudice caused by the uncharged conduct evidence will not outweigh the probative value of the evidence. Unlike relevancy, the required element of probativeness is evaluated on a sliding scale under which the greater the probativeness, the more courts are inclined to indulge some risk of undue prejudice (see, e.g., United States v. Torres, 977 F.2d 321, 328 (7th Cir. 1992)).

This Court is of course well aware of the conventional wisdom that properly crafted jury instructions can guard against jurors being tempted to reach for the forbidden fruit of propensity when considering the evidence of uncharged conduct (see, e.g., United States v. James, 487 F.3d 518, 524 (7th Cir. 2007)). That approach is essential because we do not bug jury rooms to learn how jurors really reach their decisions, and to keep the jury system from breaking down we judges must necessarily indulge the sometimes fictitious propositions embodied in that conventional wisdom or in the similarly convenient (though sometimes problematic) holdings that acknowledged errors are harmless, even though we have no assurance that such is the case.

But here this Court sees no difficulty in deciding on which side of the Rule 403 balance the disputed evidence falls.

Consider the prospect that a juror, having been confronted with the evidence (for example) of Hughes' eight successive bankruptcy filings charged in Paragraphs 6 through 13 of Count One of the indictment, still harbors a doubt as to the existence of the required criminal intent on Hughes' part--but that juror then has that doubt dispelled by the admitted evidence as to the uncharged conduct at issue here. Can there be any serious question that there is a major risk (if not a near certainty) that the uncharged conduct, although marginally probative as to intent, has really tipped the scales because of propensity considerations?

In short, the nature of the charged conduct in this case, as well as the nature of the disputed and uncharged conduct, calls for a Rule 403 determination--which parallels the fourth element in the Huddleston canon--that the danger of unfair prejudice substantially outweighs the incremental probative value of the uncharged conduct. Hughes' motion to exclude such disputed evidence is granted.

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