Federal Evidence Review

In Hurricane Katrina fraud prosecution, evidence of second website involving another charitable organization was not intrinsic evidence of the defendants’ charged conspiracy to commit wire fraud and identity theft; however, there was no plain error in admitting the evidence of the second site, in United States v. Stephens, 571 F.3d 401 (5th Cir. June 10, 2009) (No. 07-20899)

One challenge in applying FRE 404(b) is determining when uncharged crimes or other acts are admissible as intrinsic evidence of the charged crime. Occasionally, a court’s explanations for a conclusion that the proffered evidence is intrinsic or extrinsic can seem vague and conclusory. If the evidence is intrinsic to the charges, then FRE 404(b) does not apply. If the evidence is extrinsic, then admission of the evidence is governed by the FRE 404(b) elements. The Fifth Circuit recently grappled with this issue. In doing so, the circuit analyzed the issue under a multi-step process, providing some guideposts to determine whether the evidence is intrinsic or extrinsic to the charged offense.

In the case, defendant Steven Stevens and his brother Bartholomew registered a website using the Salvation Army name (www.salvationarmyonline.org.) as an attempt to profit personally from the charitable contributions intended for victims of Hurricane Katrina. As the opinion described, the website was patterned to look like “the official Salvation Army website and claimed to be the website of the organization’s international headquarters. A donation link was created on the website for contributions into PayPal accounts created in the names and identification numbers of individuals other than Steven or Bartholomew but linked to the brothers’ bank accounts. Donations were made, and the brothers profited.” Stephens, 571 F.3d at 403.

After an investigation, the defendants were charged with conspiracy to commit wire fraud and aggravated identity theft. During their joint trial, the government introduced e-mails between the defendants demonstrating the nature of their scheme as well as the money deposited into defendant’s bank accounts from PayPal accounts. The brothers established these accounts to receive the “donations” made at the fraudulent website.

Before trial, both defendants moved in limine to exclude the Red Cross website evidence. The trial court denied the motion. Stephens, 571 F.3d at 409 n.11. At trial, the government introduced under FRE 404(b) evidence of a second website one of the defendants created which used the name Red Cross. The government did not introduce any evidence “that the Red Cross website was indeed fraudulent or that any donations were ever collected from the website.” Stephens, 571 F.3d at 410 n.13. The defendants did not renew an objection to the evidence at trial. Stephens, 571 F.3d at 409 n.11. The defendants were convicted. On appeal, the defendants challenged the admission of the Red Cross website evidence. Because the defendants failed to renew an objection at the time the evidence was offered, the circuit reviewed the issue for plain error, and found none.

The circuit’s analysis in reviewing the admission of the uncharged website evidence presents a useful approach to assessing this type of evidence. The circuit noted that the justification for admission of the evidence was that “it was intrinsic to the charged crimes” so that FRE 404(b) was not implicated. If the evidence of the earlier Red Cross fraudulent website “was intrinsic to the acts for which the brothers were charged, i.e. the fraudulent Salvation Army website,” then the uncharged evidence was admissible. The circuit engaged in a multi-step inquiry:

First, is the other act evidence “intrinsic to the acts for which the brothers were charged?” In addressing this question, the analysis considers whether:

1. The other act and the charged act are “inextricably intertwined”;
2. The other act is “part of a ‘single criminal episode’”;
3. The other acts are “necessary preliminaries’ to the charged crime.

If the answer to any part of this question is “yes,” the evidence is admissible. Otherwise the decision maker assess the next set of questions. In examining this, the circuit noted that the prior Red Cross website was not intrinsic (or inextricably intertwined) to the charged Salvation Army website scheme, because it was not clear that it was fraudulent or that it ever collected any contributions. Stephens, 571 F.3d at 410.

Second, if the uncharged evidence is not intrinsic (that is it is extrinsic), a two-step” test is applied in the Fifth Circuit under FRE 404(b):

1. Is “the extrinsic offense evidence is relevant to an issue other than the defendant’s character?”
2. Does the evidence have a “probative value that is not substantially outweighed by its undue prejudice?” (or other requirements of FRE 403)

These final two elements derive from the Fifth Circuit standard to admit uncharged other act evidence under FRE 404(b). See United States v. Beechum, 582 F.2d 898, 911 (5th Cir. 1978) (en banc) (“First, it must be determined that the extrinsic offense evidence is relevant to an issue other than the defendant’s character. Second, the evidence must possess probative value that is not substantially outweighed by its undue prejudice and must meet the other requirements of [R]ule 403.”). Stephens, 571 F.3d at 410.

In applying this test, the circuit found that the uncharged evidence was not intrinsic to the charges. As the circuit explained:

“The action of creating the Red Cross website was not “inextricably intertwined” with the evidence of the Salvation Army website. Neither was it a part of a single criminal episode or a necessary preliminary step in the Salvation Army website scheme. Certainly the actions are similar, but they were still distinct events.”

Stephens, 571 F.3d at 410. Under the second level of analysis, the circuit concluded the uncharged evidence was admissible under FRE 404(b). The operation of the prior website “helped establish the brothers’ intent, planning, preparation, and knowledge” because it showed how they operated their scheme and utilized Paypal to transfer funds to their accounts from funds posted to their website.

The defendants also failed to show how the probative value of the other website evidence “was substantially outweighed by the danger of undue prejudice to such a degree that for the district court to have admitted the evidence was plain error,” under FRE 403. Even assuming the evidence was excludable under FRE 403, there was no plain error as the defendants failed to show that their substantial rights were affected by the admission of the evidence. Stephens, 571 F.3d at 411.

The circuit admitted that this approach to the other act evidence was not without critics. In particular the panel cited the D.C. Circuit as “highly” critical. Stephens, 571 F.3d at 410 n.12 (citing United States v. Bowie, 232 F.3d 923, 927 (D.C. Cir. 2000) (“As a practical matter, it is hard to see what function this interpretation of Rule 404(b) performs. If the so-called ‘intrinsic’ act is indeed part of the crime charged, evidence of it will, by definition, always satisfy Rule 404(b).... So far as we can tell, the only consequences of labeling evidence ‘intrinsic’ are to relieve the prosecution of Rule 404(b)’s notice requirement and the court of its obligation to give an appropriate limiting instruction upon defense counsel’s request.”). Other than this passing observation in a footnote, the Fifth Circuit was not deterred from using its structured approach to assess and admit the other act evidence.

The Stephens case provides some useful guideposts for sorting through the issue of whether uncharged conduct qualify as intrinsic or extrinsic evidence.