Circuit Consensus: Admitting Foreign Bank Records Under The Residual Hearsay Exception

In conspiracy to defraud the IRS, Third Circuit joins other circuits in admitting foreign bank records under FRE 807, the residual hearsay exception; the seized bank records were also authenticated under FRE 901(b)(4) which permits admission of a document or statement based on "the circumstances surrounding the documents’ discovery," in United States v. Turner, _ F.3d _ (3d Cir. May 1, 2012) (No. 12-1420)

The Third Circuit recently considered the admissibility of foreign bank records seized during an investigation. The circuit's analysis provides an instructive approach to addressing whether to admit this type of evidence.

In the case, defendant Turner was the author of "Tax Free! How the Super Rich Do It!." The book recommended how to “escape federal and state income taxation” through common law trust organizations. The defendant was charged with conspiracy to defraud the IRS by impairing the collection of taxes. Turner marketed and sold the book with co-conspirator Leveto. After an undercover investigation, the Internal Revenue Service seized records from Leveto’s office and residence, including foreign and domestic bank records. At trial, defendant Turner challenged the admission of the foreign bank records as unauthenticated and inadmissible hearsay. After his conviction, defendant Turner contested the introduction of the foreign bank records.

Authentication

In addressing the defendant's challenge to admission of the records, the Third Circuit first considered whether the seized foreign bank records had been authenticated. The circuit noted that the "standard for authenticating evidence is ‘slight’ based on 'a prima facie showing of some competent evidence to support authentication'." Turner, _ F.3d at _ (citing and quoting McQueeney v. Wilmington Trust Co., 779 F.2d 916, 928 (3d Cir. 1985). FRE 901(b)(4) permits authentication based on the "appearance, contents, substance, internal patterns, or other distinctive characteristics of the item, taken together with all the circumstances." The circuit concluded the records were authenticated under this rule based on "the circumstances surrounding the documents’ discovery." The circumstances included the "official appearance" of the records, "the contents of the documents" addressed to the co-conspirator, the location (residence and office) where the records were seized which was consistent with a place bank records would be stored, and there was no basis to "doubt the authenticity of the document." Turner, _ F.3d at _.

Residual Hearsay Exception

On the hearsay challenge, the circuit assessed whether the foreign bank records were admissible under FRE 807, the residual hearsay exception. Under the rule, a statement may be admitted upon a showing that:

(1) the statement has equivalent circumstantial guarantees of trustworthiness; (2) it is offered as evidence of a material fact; (3) it is more probative on the point for which it is offered than any other evidence that the proponent can obtain through reasonable efforts; and (4) admitting it will best serve the purposes of these rules and the interests of justice.
FRE 807.

The defendant contended that the first element was not met; the defendant failed to dispute the court's findings on the last three elements of the rule. The circuit had previously noted the general trustworthiness of bank records under the rule:

Bank documents like other business records provide circumstantial guarantees of trustworthiness because the banks and their customers rely on their accuracy in the course of their business.
Turner, _ F.3d at _ (quoting United States v. Pelullo, 964 F.2d 193, 202 (3d Cir. 1992) (but concluding the residual hearsay exception was inapplicable based on the lack of pretrial notice or trial court findings on trustworthiness)).

The Third Circuit noted the following circuits had admitted bank records under the residual hearsay exception:

  • First Circuit: United States v. Nivica, 887 F.2d 1110, 1127 (1st Cir. 1989) (admitting offshore bank records), cert. denied, 494 U.S. 1005 (1990)
  • Fifth Circuit: United States v. Wilson, 249 F.3d 366, 376 (5th Cir. 2001) (admitting foreign bank records under the residual hearsay exception), abrogated on other grounds by Whitfield v. United States, 543 U.S. 209 (2005)
  • Ninth Circuit: Karme v. Comm’r, 673 F.2d 1062, 1064-65 (9th Cir. 1982) (bank records, which were inadmissible under FRE 803(6), were admissible under residual hearsay exception)

Another case that might have been added to this list would include:

  • Eleventh Circuit: United States v. Munoz, 16 F.3d 1116, 1122 (11th Cir. 1994) (admitting three bank deposit slips and a check application form).
On the facts of the case, the first element was supported by the seizure of the records from a co-conspirator’s office and residence and corroborating circumstances. As the circuit noted, the defendant:

does not identify any break in the chain of custody of the documents. And he does not suggest any reasons why [co-conspirator] Leveto would have been storing false bank documents that implicated him in tax fraud.... [And in considering the records, the trial court] relied on: (1) the appearance of the records, including their internal consistency; (2) the contents of the records; and (3) the circumstances surrounding the discovery of the records.
Turner, _ F.3d at _.

Finally, the circuit dismissed the defendants argument that the proponent of the evidence had an obligation "to identify the declarant of the foreign bank documents in order for the documents to be admissible under Rule 807." Turner, _ F.3d at _.

The Turner case demonstrates how a court may consider the authentication and admissiblity of foreign bank records seized during an investigation. While there may be other means of proof, including through a custodian of the bank records, the residual hearsay exception can be be used where "equivalent circumstantial guarantees of trustworthiness" can be clearly established.

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Federal Rules of Evidence
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