Discounting Witness Testimony By Analogy To The Bullcoming Confrontation Clause Case

In fraud case involving bidding by defendant contractor for a city contract, reversing and remanding fraud conviction because the court admitted testimony by a investigator for the city about what the city “would have done had it known what” the defendant “was doing behind the scenes” to influence bid results; likening the investigator's testimony as similar to “offering hearsay evidence when the out-of-court declarant, though available, is not called as a witness because the party that would call him lacks confidence about what he would testify to or wants to shield him from cross-examination” as in Bullcoming v. New Mexico, 131 S.Ct. 2705, 2714–15 (2011), in United States v. Fenzl, __ F.3d __ (7th Cir. Feb. 23, 2012) (No. 11–2459)

Sometimes an appellate court spends a great deal of time trying to figure out why a party proceeded in the case in the manner the party did. Recently, the Seventh Circuit provided an example of this bench -seat-driving in its review of a defendant's conviction for fraud involving the bidding of a City of Chicago trash container refurbishing contract.

In the case, defendant Fenzl was a principal in a “waste-management company called Urban Services” which had been charged with mail and wire fraud in bidding “to refurbish garbage carts for the City of Chicago.” The defendant's bid was submitted at a time when the city was investigating the defendant's bidding practices, which brought the defendant both “bad press and the City's refusal to award the contract” to the defendant's bid. The city investigation closed without finding the defendant engaged in misconduct. To improve its chances for successful bidding, the defendant approached three competitors trying to “interest” them in the bidding even though they “would not have done so had it not been for Urban's encouragement.... The hope was that if one of those companies won the contract it would subcontract the fulfillment of it to Urban, either directly or by leasing Urban's facilities for refurbishing garbage carts.” Fenzl, __ F.3d at __.

The circuit noted that this situation did not involve elements for an antitrust action because the defendant “had been the low bidder and its aim in 'colluding' with other potential bidders had not been to prevent them from underbidding it but merely to buy insurance against [defendant's] bid's being rejected because of false accusations” against the defendant regarding its earlier bids. In this bidding strategy, contended the circuit, the defendant was “able to obtain some refurbishing work as a subcontractor of the winning bidder” as the “bidders invited by Urban were almost certain to submit higher bids because Urban would be doing the actual work and charging for it and the bidders would be repricing Urban's work in their bids.” “It's difficult to see what's wrongful about such a 'scheme.'” as “[m]isconduct in bidding involves trying to reduce rather than increase the competition among bidders.” Fenzl, __ F.3d at __. Instead of filing in antitrust, the government proceeded against the defendant on a theory of fraud. The circuit noted “puzzlement” about the soundness of the fraud charges as “the theory behind the charge of fraud for misleading the City by inflating the number of bids was never made clear at trial.” In fact the circuit found that “[n]o evidence was presented that the more bidders there were, the more likely [defendant's] bid was to be accepted and that this would result in a higher price to the City for getting its garbage carts spruced up.”

In order to prove fraud, the circuit opined that what would have been “critical” was testimony by city employees of the procurement department about “who could be awarded the contract and whether Urban's machinations, if disclosed, would have precluded the award of the contract to Urban even if it was the lowest bidder. If they would not have precluded its obtaining the contract, then any fraud involved in its lining up additional bidders was immaterial, and therefore not criminal. Fenzl, __ F.3d at __ (citing Neder v. United States, 527 U.S. 1, 25 (1999); United States v. Rosby, 454 F.3d 670, 673 (7th Cir. 2006); United States v. Fernandez, 282 F.3d 500, 508 (7th Cir. 2002).

But the government's main witness an investigator (Brown) that the city had hired to assess the defendant's bidding conduct. Rather than calling an employee of the Procurement Department to testify, the prosecutors built their case on the testimony of investigator Brown. He testified “that had the Department known about Urban's behind-the-scenes activity to insure itself against the consequences of not being awarded the contract it would have disqualified the company from bidding.” This was a “crucial” issue in the case. Fenzl, __ F.3d at __

The circuit noted problems with the admission of his testimony:

Brown's testimony about what the Department would have done had it known what Urban was doing behind the scenes should not have been admitted—certainly not as lay testimony; and no effort was made to qualify Brown as an expert witness, which would have permitted him to give opinion evidence based on hearsay if it was the kind of hearsay on which an expert in his field bases professional opinions unrelated to litigation. Fed.R.Evid. 703. His testimony was hearsay of a peculiarly unreliable sort. He was part of the prosecution team, testifying to impressions gleaned from discussions and observations. Apparently he was not even repeating what someone had told him, but rather was drawing inferences from stray comments and from things he'd learned in previous investigations. The government argues that he was testifying from his personal knowledge because he knows the practices of the Department of Procurement first hand. But he was unable to point to any rule or policy governing the award of the contract for which Urban and its friendly companies were bidding, and he admitted on cross-examination that he had not been “involved in any discussions whatsoever with anybody in procurement at the time these bids were being considered.” Yet his testimony was crucial to the prosecution.
Fenzl, __ F.3d at __ .

The circuit rejected that Brown had any basis for testifying about that the city would have done:

[I]is a matter of conjecture whether the relevant employees in the Department would have awarded the contract—at a loss to the City—to a higher bidder, in order to punish Urban (for what exactly?). But instead of asking them what they would have done had they known what Urban was up to, the prosecutors asked an investigator what he thought they would have done. What the government dignifies by the term “personal knowledge”—for a lay witness is permitted to base his testimony on his personal knowledge (and on nothing else)—is the investigator's conjectures based on seven years of “training and experience,” an impermissible basis for lay opinion testimony. When a DEA agent's “testimony was not limited to what he observed in the search or to other facts derived exclusively from this particular investigation [but] instead, he brought the wealth of his experience as a narcotics officer to bear on those observations and made connections for the jury based on that specialized knowledge,” he was giving expert rather than lay testimony. The witness's “reasoning process was not that of an average person in everyday life; rather, it was that of a law enforcement officer with considerable specialized training and experience … and therefore was not admissible as lay testimony.
Fenzl, __ F.3d at __ (citing United States v. Oriedo, 498 F.3d 593, 603–04 (7th Cir. 2007); United States v. Santos, 201 F.3d 953, 963 (7th Cir. 2000) (“Inferences [to be admissible as lay testimony] must be tethered to perception, to what the witness saw or heard.”). United States v. Garcia, 413 F.3d 201, 217 (2d Cir. 2005). See also United States v. Figueroa–Lopez, 125 F.3d 1241, 1245–46 (9th Cir.1997)).

Not only was the testimony by investigator Brown not admissible, but the circuit also found that the error was not harmless with regard to certain charges against the defendant. The circuit opined on the reason the government depended on investigator Brown's testimony:

The most plausible inference from the prosecutors' decision to call Brown, and Brown alone, to testify to the materiality of the alleged fraud is that they had no confidence that the testimony of the officials actually responsible for awarding contracts would have supported the government's case. Putting Brown on the stand was like offering hearsay evidence when the out-of-court declarant, though available, is not called as a witness because the party that would call him lacks confidence about what he would testify to or wants to shield him from cross-examination. Bullcoming v. New Mexico, 131 S.Ct. 2705, 2714–15 (2011).
Fenzl, __ F.3d at __ .


Photo Description: U.S. District Court, Eastern District of Tennessee in Chattanooga, TN.


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