Bank Printouts And Cardholder Statements Inadmissible As Business Records Were Admissible Under Residual Hearsay Exception

Fifth Circuit

In bank and credit card fraud case, while hearsay and double hearsay issues were presented by the introduction of bank computerized printouts reflecting reports of cardholder telephone calls and the statements of cardholders concerning lost, stolen or not received cards, the statements and printouts were admissible under residual hearsay exception based on “equivalent circumstantial guarantees of trustworthiness”, in United States v. Ismoila, 100 F.3d 380, 392 (5th Cir. 1997)

The residual hearsay exception, under FRE 807, may often be considered the exception of last resort. When other hearsay exceptions may not be available, the residual hearsay exception may apply so long as the statement has “equivalent circumstantial guarantees of trustworthiness” to the hearsay exceptions under FRE 803 or FRE 804. A Fifth Circuit case involving bank computerized printouts and credit cardholder statements demonstrates application of the residual hearsay exception rule.

In the case, the defendants were prosecuted in a scheme to defraud banks and credit card companies. At trial, during the testimony of a bank fraud investigator, the government “admitted records from 44 banks regarding 270 credit card customers” which included letters and affidavits from cardholders stating “that their credit cards were stolen.” Ismoila, 100 F.3d at 390. The government also introduced bank computerized printouts reflecting communications from the cardholders to the bank that their credit cards had been lost, stolen or never received. The defendants claimed the statements were inadmissible hearsay or double hearsay. The trial court admitted the records as business records, under FRE 803(6), or under the residual hearsay exception, under FRE 807 (which was previously numbered as FRE 803(24) and FRE 804(b)(5)). After the defendants were convicted, on appeal they challenged the admission of the statements and records.

The Fifth Circuit affirmed and found no abuse of discretion. First, the circuit concluded that the “the bank records themselves and the computer recordation by bank personnel of the oral statements of the cardholders,” were business records under FRE 803(6). However, the circuit agreed with the defendants that “neither the cardholders’ oral statements nor their written affidavits and letters fall within the business records exception” since “it is not the regular course of business for credit cardholders to fill out affidavits or otherwise give information to their banks regarding stolen credit cards.” Ismoila, 100 F.3d at 392. The cardholder statements were double hearsay, under FRE 805. As the circuit explained the double hearsay problem:

“Double hearsay exists when a business record is prepared by one employee from information supplied by another employee If both the source and the recorder of the information, as well as every other participant in the chain producing the record, are acting in the regular course of business, the multiple hearsay is excused by Rule 803(6). However, if the source of the information is an outsider, Rule 803(6) does not, by itself, permit the admission of the business record. The outsider’s statement must fall within another hearsay exception to be admissible because it does not have the presumption of accuracy that statements made during the regular course of business have. In the present case, the cardholders—outsiders to the companies that generated the documents—were the sources of the information contained in the records. So although Fed. R. Evid. 803(6) provides an exception for one level of hearsay—that of the documents themselves created by the employee who recorded the cardholder statements—the sources of the information contained in the records were the cardholders, and their statements must fall within another hearsay exception to be admissible.”

Ismoila, 100 F.3d at 392 (citations, quotation marks, and footnote omitted).

Nonetheless, the Fifth Circuit concluded that the residual hearsay exception, under FRE 807, cured the hearsay and double hearsay issues. The records and statements possessed guarantees of trustworthiness, required under FRE 807; an experienced fraud investigator testified that few unreliable cardholder statements had been provided based on prior experience and the banks had “an incentive to ensure the veracity of the cardholders’ claims of fraud because loss due to fraud is borne by the issuing banks.” Ismoila, 100 F.3d at 393. The surrounding circumstances lent further trustworthiness to the records and statements.

The circuit also concluded that the records and statements of the cardholders did not violate the Confrontation Clause. Ismoila, 100 F.3d at 393-94. The circuit applied the Confrontation Clause analysis before the decision in Crawford v. Washington, 541 U.S. 36 (2004). However, since the statements were not testimonial (), they would likely not pose any Confrontation Clause issues after Crawford. See, e.g., Crawford, 541 U.S. at 68 (“Where testimonial evidence is at issue . . . the Sixth Amendment demands what the common law required: unavailability and a prior opportunity for cross-examination.”); see also United States v. Stone, 432 F.3d 651, 654 (“We agree with the First Circuit. Because Crawford was concerned only with testimonial evidence introduced at trial, Crawford does not change our long-settled rule that the confrontation clause does not apply in sentencing proceedings.”) (citing United States v. Luciano, 414 F.3d 174, 179 ).

The Ismoila case provides a useful example of the analysis to consider multiple hearsay as well as the residual hearsay exception. Most of the time, the key to admissibility is demonstrating “equivalent circumstantial guarantees of trustworthiness.”

Federal Rules of Evidence