United States v. Netschi , 511 F. App'x 58 ( 2013 )

11-1828-cr
United States v. Netschi
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or
after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and
this Court’s Local Rule 32.1.1. When citing a summary order in a document filed with this Court, a
party must cite either the Federal Appendix or an electronic database (with the notation “summary
order”). A party citing a summary order must serve a copy of it on any party not represented by
counsel.
At a stated term of the United States Court of Appeals for the Second Circuit, held at the
Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York, on the 7th
day of February, two thousand thirteen.
PRESENT:
JOHN M. WALKER, JR.,
JOSÉ A. CABRANES,
RICHARD C. WESLEY,
Circuit Judges.
_____________________________________
UNITED STATES OF AMERICA,
Appellee,
v. No. 11-1828-cr
WALTER NETSCHI,
Defendant-Appellant,
VANCE MOORE, II,
Defendant.1
_____________________________________
FOR DEFENDANT-APPELLANT: BETH M. FARBER, Law Offices of Beth
Farber, New York, NY.
1 The Clerk of Court is directed to amend the caption of this case to conform to the listing of the parties shown above.
FOR APPELLEE: CARRIE H. COHEN (Antonia M. Apps and
Katherine P. Failla, on the brief), for Preet
Bharara, United States Attorney, United States
Attorney’s Office for the Southern District of
New York.
Appeal from a judgment of the United States District Court for the Southern District of
New York (Thomas P. Griesa, Judge).
UPON DUE CONSIDERATION WHEREOF, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of conviction entered on May 4, 2011 is
AFFIRMED.
Walter Netschi and his co-defendant Vance Moore, II were each charged with one count of
conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349, and nine counts of wire fraud, in
violation of 18 U.S.C. §§ 1343 and 2. One week before the trial was set to begin, Moore pleaded
guilty, and the trial proceeded against Netschi only. On November 12, 2010, the jury convicted
Netschi on all ten counts in the Indictment. Netschi was sentenced to 100 months’ imprisonment
on April 22, 2011; the District Court also entered a forfeiture order in the amount of $80 million and
entered orders of restitution against Netschi and Moore for more than $58 million. We assume the
parties’ familiarity with the background of the case, which we reference only as necessary to explain
our decision to affirm.
BACKGROUND
The underlying scheme giving rise to the conspiracy and wire fraud charges involved the
purported selling of Automated Teller Machines (“ATMs”) to investors. The scheme operated like a
Ponzi scheme, in that: (1) Netschi purported to locate profitable ATMs and package them to sell to
investors; (2) Moore purported to conduct due diligence on the ATMs before a sale and service
them after a sale; (3) investors would “purchase” the ATMs from Netschi, who in turn would
provide them with a Bill of Sale and a corresponding Asset Purchase Agreement; but (4) for the vast
majority of these purported transactions, the ATMs either didn’t exist or were owned by third
parties not affiliated with Netschi and Moore.
At trial, Netschi argued that he was unaware of this scheme and had relied on Moore to do
the due diligence on each of the ATMs. In support of his argument, he attempted to introduce (1)
testimony of witnesses regarding statements and reactions he made when and after the scheme was
unraveling, and (2) two emails with attachments relating to due diligence on the so-called “Atlas”
transaction that was never completed.
2
Before the District Court, Netschi argued that the witness testimony should have been
allowed under the “state of mind” exception to the hearsay rule and that the two emails were
relevant and should be admitted. The District Court excluded both sets of evidence, finding that the
“state of mind” exception did not apply to the proffered testimony and that the two emails lacked
the necessary foundation and could cause the jury great confusion. Netschi’s appeal focuses only on
these two evidentiary challenges.
DISCUSSION
As district courts maintain “broad discretion over the admission of evidence,” United States v.
McDermott, 245 F.3d 133, 140 (2d Cir. 2001), we review their evidentiary rulings for abuse of
discretion only, SR Int’l Bus. Ins. Co. v. World Trade Ctr. Props., LLC, 467 F.3d 107, 119 (2d Cir. 2006).
Therefore, “[u]nless a district court’s determination of relevance is arbitrary or irrational, it will not
be overturned.” United States v. Schultz, 333 F.3d 393, 415 (2d Cir. 2003) (internal quotation marks
omitted); see also In re Sims, 534 F.3d 117, 132 (2d Cir. 2008) (noting that a district court abuses its
discretion if it “base[s] its ruling on an erroneous view of the law or on a clearly erroneous
assessment of the evidence, or render[s] a decision that cannot be located within the range of
permissible decisions” (internal citation and quotation marks omitted)).
A. Testimony Regarding Netschi’s Statements and Reactions
On appeal, Netschi challenges the District Court’s exclusion of testimony by three
witnesses─Raymond Kurzon, James Nobles, and Gail Cotton─regarding certain statements Netschi
made and reactions he had concerning the unraveling of the scheme.2 During Kurzon’s testimony,
the District Court sustained the government’s objection to the question, “what did [Netschi] say to
you and what was his reaction” when he learned that certain ATM investment funds had been lost.
The District Court similarly sustained the government’s objection when defense counsel asked
Nobles to testify about his “perceptions of how [Netschi] appeared” when Netschi received reports
that investors had not been paid for two months. The day after these evidentiary rulings, Netschi
asked the District Court to reconsider and made an offer of oral proof about Cotton’s anticipated
testimony, which related to a conversation she had with Netschi after Moore had filed for
bankruptcy.
Netschi argues that these statements fall within Federal Rule of Evidence 803(3)’s “state of
mind” hearsay exception. We disagree.3
2 Defense counsel made an offer of proof regarding anticipated testimony by Stephen Parks, but Netschi does not
challenge the District Court’s exclusion of Parks’s testimony on appeal.
3 To the extent that Netschi argues that these statements should have been admitted as lay opinions, it was not an abuse
of discretion for the District Court to prohibit Kurzon and Nobles from offering such testimony.
3
Federal Rule of Evidence 803(3) provides that “[a] statement of the declarant’s then-existing
state of mind . . . but not including a statement of memory or belief to prove the fact remembered or believed ” is not
excluded by the rule against hearsay. Fed. R. Evid. 803(3) (emphasis added). Thus, to fall within
Rule 803(3)’s “state of mind” hearsay exception, the statements sought to be introduced must relate
to the declarant’s state of mind during the various fraudulent transactions. But the excluded
statements in this case concerned what Netschi said or did after the fraudulent transactions had taken
place and as the scheme itself was being discovered.4 Such statements do not fit within Rule
803(3)’s “state of mind” exception. See United States v. Cardascia, 951 F.2d 474, 488 (2d Cir. 1991)
(“To admit statements of one’s state of mind with regard to conduct that occurred . . . earlier as in
this case would significantly erode the intended breadth of this hearsay exception.”); United States v.
Lawal, 736 F.2d 5, 8 (2d Cir. 1984) (“Of course, to the extent that the declarations excluded by the
trial court’s rulings were not statements exhibiting Lawal’s then existing state of mind, but were
instead statements of what he or someone else had done in the past, they would be properly
excludable as inadmissible hearsay not within the terms of Rule 803(3).”).
In any event, even assuming that the District Court erred by not admitting this testimony,
the error was harmless. Indeed, Netschi was allowed to present evidence (through Cotton) that he
appeared shocked when he supposedly learned that Moore never owned some of the ATMs, and
defense counsel argued that Netschi “was shocked and distraught when he found out the machines
were fake.” The jury could weigh this testimony against the government’s evidence (1) that Netschi
knowingly sold ATMs that he knew neither he nor Moore had purchased, and (2) that Netschi had
fabricated and backdated documents to create the impression that he had purchased those ATMs
from Moore so that it would appear that he also was a victim of the fraud. See United States v. Farhane,
634 F.3d 127, 164 (2d Cir. 2011); United States v. Song, 436 F.3d 137, 140 (2d Cir. 2006) (deeming
harmless the erroneous exclusion of state of mind evidence where defendant “was permitted to
testify in sufficient detail as to his theory of the case” and the government presented overwhelming
evidence of guilt).
B. Emails Related to the “Atlas” Transaction
At trial, Netschi sought to introduce two emails sent by or on behalf of Moore that
supposedly related to due diligence on the so-called “Atlas” transaction that was never completed.
The first email purportedly was sent by Moore’s son to “atmcapital@aol.com,” an email that was
related to Netschi’s company. The second email purportedly was sent by Philip Lackey, one of
Moore’s employees, to “atmcapital@aol.com.” Netschi argued that these emails showed that Moore
altered profitability information about certain ATMs, and thus, defrauded Netschi of $13 million
that Netschi had transferred to Moore for the purchase of those ATMs. Netschi attempted to
4 Some of the statements were made after the scheme itself was discovered and after Moore had filed for bankruptcy.
4
introduce these emails through an investigator that saw them in the inbox of “atmcapital@aol.com,”
rather than through one of the individuals that supposedly sent or received them.
The District Court was well within its discretion to exclude these emails. No foundation
existed to establish that these emails were what Netschi asserted, and Netschi’s proposed method of
introducing them through an investigator with no personal connection―beyond seeing them in an
inbox―was insufficient. Cf. Kassim v. City of Schenectady, 415 F.3d 246, 251 (2d Cir. 2005) (excluding a
translated exhibit where “[t]here was no foundation to establish that the exhibit was a competent
translation”). Accordingly, these emails properly were excluded by the District Court.5
CONCLUSION
We have considered all of Netschi’s arguments on appeal and find them to be without merit.
For the reasons stated above, we AFFIRM the District Court’s May 4, 2011 judgment.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
5 The trial transcript also suggests that the District Court excluded these emails under Federal Rule of Evidence 403.
The District Court acted within its discretion in barring these emails on this alternate basis. See United States v. Bermudez,
529 F.3d 158, 161-62 (2d Cir. 2008) (“District courts have broad discretion to balance probative value against possible
prejudice, and we will not disturb that balancing unless there is a clear showing of abuse of discretion or that the
decision is arbitrary or irrational.” (internal citations and quotation marks omitted)).
5