A defendant’s plea agreement can be admitted in a separate proceeding to prove his fraudulent intent under the residual hearsay exception notes the Ninth Circuit in In re Slatkin, 525 F.3d 805 (9th Cir. 2008) (No. 06-56334)
After defendant/debtor Slatkin pled guilty to one of the largest Ponzi schemes ever committed (about 800 investors lost more than $240 million over 15 years), Slatkin filed for bankruptcy protection under Chapter 11. A year later, the trustee for Slatkin’s estate initiated adversary proceedings against the Johnsons and their management company, investors in the Ponzi scheme. The trustee sought to recover fraudulent transfers Slatkin made to them. The bankruptcy court granted summary judgment against the Johnsons, finding that Slatkin had made transfers to the Johnsons in order to "hinder, delay or defraud" creditors. The court’s findings regarding Slatkin’s intent was based "solely on Slatkin’s guilty plea and plea agreement" from the Ponzi scheme prosecution.
Normally, the admission of a plea agreement is considered as a party admission under FRE 801(d)(2)(A). However, when the defendant who entered the plea agreement is not a party to the proceedings, another hearsay exception is required to admit the contents of the plea agreement for the truth of the matter asserted. In the Slatkin case, it was under FRE 807, the residual hearsay exception. See, e.g., United States v. Harwood, 998 F.2d 91, 97 (2d Cir. 1993) (in drug prosecution, defendant could not use co-defendant’s statement to journalist that the defendant had been "in the wrong place at the wrong time," as it was not admissible under the party admission’s exception to hearsay rule because the statement was that of the defendant’s co-defendant who was not a party opponent; rather the prosecution was the party opponent).
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Comments
Party Admissions & Representative Capacity Problems
How consistent is the court’s application of the party admission exception when you have the problem that the party who made the admission was also acting in a representative capacity – say in the case of an executor of a decedent’s estate rather than as trustee of a bankruptcy estate? Estate of Shafer v. Commissioner of Internal Revenue, 749 F.2d 1216, 1219 (6th Cir. 1984) suggests no difference. There the circuit affirmed a tax court’s admission of statements by the decedent in a proceeding in which his estate sought re-determination of a tax deficiency. The circuit there reasoned that trial court was correct that the decedent’s statement was a party admission under FRE 801(d)(2)(A) – "Since [decedent] Arthur, through his estate, is a party to this action, his statements are a 'classic example of an admission.'" Similarly, statements by the executor could also be party admissions because "[a]n executor of an estate was considered a “party” to the action under the … rule of representative admissions."
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