Historical Financial Data Used To Establish Loss Under FRE 803(17)

Bloomberg Financial Service’s historical financial data based on its computer records was used to calculate loss and was admissible under Rule 803(17) as a market report relied upon by those involved in the financial markets, in United States v. Masferrer, 514 F.3d 1158, 1162 (11th Cir. Jan. 22, 2008) (No. 06-14223)

FRE 803(17) allows market reports and commercial publications to be admitted as an exception to the rule excluding hearsay. The rule provides: “Market quotations, tabulations, lists, directories, or other published compilations, generally used and relied upon by the public or by persons in particular occupations.” As the rule drafters noted, “The basis of trustworthiness is general reliance by the public or by a particular segment of it, and the motivation of the compiler to foster reliance by being accurate.” ACN. A fraud case demonstrated the use and admission of historical financial data under FRE 803(17) to establish the losses at trial.

In the bank and securities fraud prosecution, after substantial losses resulted from a bank investment in Russian debt instruments, the defendant and others “devised a scheme that would enable Hamilton Bank to liquidate its Russian assets at full face value through ‘ratio swaps.’ Ratio swaps are exchanges of assets in which the prices of the swapped items are deemed to be at face value, with the difference between the face and fair market value of the seller’s asset offset by a similar disparity in the asset received in return.” Masferrer, 514 F.3d at 1160. One trial issue involved determining the bank’s losses, which were determined to be about $22 million. The loss was based on computerized records of Bloomberg Financial Service. After his conviction, the defendant challenged the admission of Bloomberg price quotes as inadmissible hearsay.

The Eleventh Circuit affirmed the admission of the Bloomberg market quotes under FRE 803(17). As the circuit explained:

“The government presented evidence at trial establishing that Bloomberg financial information is universally relied upon by individuals and institutions involved in financial markets. The fact that the Bloomberg information was used to price an illiquid asset does not bring it outside the scope of 803(17). Therefore, the district court did not err by allowing the government to introduce the Bloomberg data. Additionally, the Bloomberg executive’s testimony does not implicate Daubert or Rule 702, because it is not expert opinion testimony. Instead, it only provided the necessary context for the admissible market quotations.”

Masferrer, 514 F.3d at 1162.

There are not many cases relying on the hearsay exception for market reports and commercial publications. The Masferrer case provides one example.

Federal Rules of Evidence