Jack Fineberg v. United States
393 F.2d 417, 1968 U.S. App. LEXIS 7430 (1968)
Rule of Law:
Evidence of substantially similar prior fraudulent schemes is admissible to prove criminal intent, and an individual cannot claim the Fifth Amendment privilege against self-incrimination for corporate books and records they are compelled to produce. The admissibility of expert testimony is subject to the trial court's sound discretion, particularly when the subject matter is within the common understanding of a jury.
Facts:
- Between April and August of 1962, appellant operated a scheme in Albuquerque, New Mexico, where he and his partner decamped, leaving no money or assets to pay creditors.
- Around June 1963, approximately nine months after the Albuquerque operation ended, appellant formed a corporation named Nelson Bureau of Employment, doing business as Merco Sales, in Los Angeles.
- Appellant, through Merco Sales, placed orders with various wholesale record distributing companies.
- Appellant made misrepresentations and partial payments to lull the companies into a false sense of security.
- Appellant issued post-dated checks that were not honored or on which payment was stopped.
- Appellant sold the phonograph records obtained from the companies below his cost price.
- Appellant's scheme involved the use of United States mails, a fictitious name, and interstate telephone to defraud these companies.
Procedural Posture:
- Appellant was charged with mail fraud, using a fictitious name to defraud, and wire fraud in the U.S. District Court (trial court).
- A jury in the U.S. District Court convicted the appellant on these charges.
- Appellant appealed the conviction to the United States Court of Appeals for the Ninth Circuit.
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Issue:
Did the trial court err by admitting evidence of a defendant's prior similar fraudulent scheme to prove intent, compelling the production of corporate records from the sole owner of a corporation, or excluding expert testimony regarding the feasibility of the defendant's business plan?
Opinions:
Majority - PLUMMER, District Judge
No, the trial court did not err in any of the appellant's claims. First, regarding the admission of prior bad acts, the court affirmed that while evidence of distinct offenses is generally inadmissible, a well-recognized exception permits such evidence when it bears on criminal intent. The Albuquerque scheme was 'substantially similar' to the Los Angeles scheme, with only 'trivial or immaterial differences,' and was 'reasonably related in point of time.' The court noted that actual defrauding or loss is not required to prove intent in these types of prosecutions. The evidence was 'unquestionably relevant on the issue of intent,' and its probative value 'outweighs by far any possible prejudice' to the defendant, especially since the jury was given proper limiting instructions and is presumed to have followed them. Second, concerning the compelled production of corporate records, the court held that Nelson Employment Bureau, as a corporation, could not claim a Fifth Amendment privilege against self-incrimination for its books and records, citing Hale v. Henkel. Furthermore, the appellant, as the sole owner or an officer of the corporation, could not claim this personal privilege in connection with the corporation’s books and records, either for himself or the corporation. Therefore, the production of these corporate records under threat of contempt did not violate his constitutional rights. Third, on the exclusion of expert testimony, the court found no abuse of discretion. It reiterated that expert testimony is warranted only when the subject matter is beyond the knowledge of an average layman and the witness's opinion would aid the trier of fact. The feasibility or possibility of success for the appellant’s business scheme, including the practice of 'kiting money,' did not require special study or skill and was within the jury's common observation and experience. The proposed expert, a certified public accountant, lacked specific knowledge of the business relationships in question, and the general principles he proposed to testify on were not beyond the jury's comprehension. The admissibility of expert testimony is 'peculiarly within the sound discretion of the trial judge,' and that discretion was 'exercised soundly and judiciously' in this case.
Analysis:
This case reinforces several foundational evidentiary and constitutional principles. It underscores the broad applicability of the 'prior bad acts' exception for proving intent in fraud cases, allowing prosecutors significant latitude so long as the prior acts are sufficiently similar and relevant. The decision also solidifies the corporate records doctrine, clearly separating an individual's Fifth Amendment rights from a corporation's lack thereof, making it difficult for corporate officers, even sole owners, to shield company documents. Furthermore, it highlights the substantial deference appellate courts give to trial judges' discretionary rulings on expert testimony, particularly when the subject matter touches on common business sense rather than specialized knowledge.
