FRE 801(d)(2)(E) Co-Conspirator Statement Not Limited To An Unlawful Combination

In conspiracy to commit securities fraud trial, testimony of a co-conspirator under FRE 801(d)(2)(E) was admissible without proof that the charged conspiracy was unlawful, in United States v. Gewin, 471 F.3d 197 (D.C. Cir. Dec. 22, 2006) (No. 05-3086)

Often a point of confusion in application of the co-conspirator hearsay exception embodied in FRE 801(d)(2)(E) is whether the conspiracy that must be shown for application of the rule requires proof as well that it was unlawful. The Advisory Committee Notes suggest not. See ACN 801 (1974 Senate Advisory Committee note to 801(d)(2)(E)) ("The House approved the long-accepted rule that 'a statement by a co-conspirator of a party during the course and in furtherance of the conspiracy' is not hearsay as it was submitted by the Supreme Court. While the rule refers to a co-conspirator, it is this committee's understanding that the rule is meant to carry forward the universally accepted doctrine that a joint venturer is considered as a co-conspirator for the purposes of this rule even though no conspiracy has been charged.") Most circuits have adopted a similar interpretation. See, e.g., citing United States v. Weisz, 718 F.2d 413, 432-35 (D.C. Cir. 1983) (noting FRE 801(d)(2)(E) “embodies the long-standing doctrine that when two or more individuals are acting in concert toward a common goal, the out-of-court statements of one are . . . admissible against the others, if made in furtherance of the common goal”).

Several years ago, the D.C. circuit revisited this application of the co-conspirator exception and reiterated its essence in a case in which the defendant was charged with conspiracy to commit securities fraud, among other crimes. In the case, defendant Gerwin was prosecuted with others for engaging in a “pump and dump” scheme. Allegedly, the defendants manipulated stock in a “2DoTrade” company based on a “reverse merger” with a shell company that had no employees and only $26 in assets. The conspirators secured hidden control of 2DOTrade’s publicly traded stock, pumped up its share price through timed, fraudulent press releases, and sold its holdings into an artificially inflated market. Some of the co-defendants pled guilty and testified at trial against the defendant and their statements were admitted as a co-conspirator statement under FRE 801(d)(2)(E).

In the defendant's appeal after his conviction, he argued that the trial judge erred in applying the hearsay exception because whatever conspiracy was shown was not proved to be an unlawful conspiracy rather than simply people acting in concert for completely legitimate purposes. Despite this, the circuit affirmed the admission of the testimony under FRE 801(d)(2)(E) and rejected the defense argument that proof of an unlawful conspiracy was required under the rule. The circuit noted that FRE 801(d)(2)(E) was “based on principles of agency and partnership law," so that the use of the terminology in the rule requiring a "‘conspiracy’ does not limit the doctrine to unlawful combinations, and that the doctrine applies equally in civil and criminal cases.” Gerwin, 471 F.3d at 202.

That FRE 801(d)(2)(E) applies to any common enterprise, regardless of whether the objective of the enterprise is lawful or not reflects the consensus of the circuits. See, e.g., United States v. Russo, 302 F.3d 37, 45 (2d Cir. 2002) (“[W]hen two people enter into a joint venture of conspiratorial nature, the actions and utterances of either done in furtherance of that conspiracy are deemed authorized by the other. Where one is a defendant, the declarations of his co-conspirator done in furtherance of the conspiracy formed between them are deemed to be authorized by the defendant and are admissible against him.… [and] the objective of the joint venture need not be the crime charged in the indictment (or the objective of the conspiracy charged in the indictment.") (emphasis added), cert. denied, 537 U.S. 1112 (2003).

Federal Rules of Evidence