United States v. Cole ( 2011 )

Filed: January 24, 2011
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-4487
(1:08-cr-00144-RDB-1)
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
HENRY COLE,
Defendant - Appellant.
O R D E R
The Court amends its opinion filed January 21, 2011,
as follows:
On page 16, line 2 -- the word “denotations” is
corrected to read “donations.”
For the Court – By Direction
/s/ Patricia S. Connor
Clerk
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee,
v.  No. 09-4487
HENRY COLE,
Defendant-Appellant.

Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Richard D. Bennett, District Judge.
(1:08-cr-00144-RDB-1)
Argued: October 29, 2010
Decided: January 21, 2011
Before NIEMEYER, DAVIS, and WYNN, Circuit Judges.
Affirmed by published opinion. Judge Davis wrote the opin-
ion, in which Judge Niemeyer and Judge Wynn joined.
COUNSEL
ARGUED: Steven M. Klepper, KRAMON & GRAHAM,
PA, Baltimore, Maryland, for Appellant. Joyce Kallam
McDonald, OFFICE OF THE UNITED STATES ATTOR-
NEY, Baltimore, Maryland, for Appellee. ON BRIEF:
Andrew Jay Graham, Max H. Lauten, KRAMON & GRA-
2 UNITED STATES v. COLE
HAM, PA, Baltimore, Maryland, for Appellant. Rod J. Rosen-
stein, United States Attorney, A. David Copperthite, Assistant
United States Attorney, Baltimore, Maryland, for Appellee.
OPINION
DAVIS, Circuit Judge:
Henry Cole appeals his convictions for filing false tax
returns in violation of 26 U.S.C. § 7206(1) and evading taxes
in violation of 26 U.S.C. § 7201. Cole, a real estate agent and
investor, agreed with several others to purchase commercial
properties in the Baltimore metropolitan area. Without his co-
venturers’ knowledge, Cole secretly negotiated with the sell-
ers of each property to increase the purchase price. He then
arranged to have the difference ($2 million in the aggregate)
paid to an entity only he controlled. He paid no income tax
on this bounty. A jury accepted the Government’s theory of
the prosecution and rejected Cole’s innocent version of his
acts and omissions, which he vigorously supported with docu-
mentary evidence and witness testimony (including his own
and that of his expert accountant, among others). On appeal,
Cole asks us to overturn his convictions, principally on the
ground that the proper tax treatment of the $2 million was
ambiguous as a matter of law, rendering proof of his willful-
ness a legal impossibility. He also assigns error to the district
court’s admission of certain evidence and its denial of a con-
tinuance. We affirm.
I.
This prosecution for tax offenses arose from Cole’s promo-
tion of real estate investment partnerships in connection with
which he clandestinely extracted commissions that he
reported on his tax returns as capital gains offset by capital
losses. We summarize the facts in the light most favorably to
UNITED STATES v. COLE 3
the Government’s theory of the case and consistent with the
jury’s verdict.
A.
Cole was a real estate agent at the O’Conor, Piper & Flynn
real estate brokerage (later consolidated into Coldwell
Banker) ("OPF"). He also invested in real estate. As relevant
to this case, Cole partnered with three doctors to purchase five
office buildings during the period 2001 to 2003. Prior to the
first disputed purchase, there existed a two-person partnership
between Cole and Dr. David Miller. Dr. Miller testified as a
witness for the defense that he had long had an understanding
with Cole that Cole, who was to serve as the property man-
ager for any of their purchased investments, would take "a
10% profit up front . . . on any building that he bought or
sold." J.A. 635-36. Dr. Stanley Friedler, a friend of Dr. Mil-
ler’s, paid a premium to buy into the venture in 2001. Shortly
thereafter, Dr. Friedler solicited the participation of his friend,
Dr. Selvin Passen, who invested in subsequent deals.
Drs. Friedler and Passen contradicted Dr. Miller’s appar-
ently favorable view of Cole’s business methods. Each testi-
fied for the prosecution, attesting to his understanding that the
co-venturers had agreed to make equal capital contributions
toward the purchase of commercial properties in return for
equal returns, and that Cole specifically promised not to take
a commission (over and above the customary broker commis-
sions paid to OPF, which OPF shared with Cole) for finding
and negotiating deals.
In each of the five transactions presented at trial, after Cole
had negotiated a purchase price with the seller on behalf of
the specific co-venture, he asked the seller to increase the
price by several hundred thousand dollars (ranging from
$250,000 to $600,000). He then arranged, with one exception,
4 UNITED STATES v. COLE
to have funds representing the agreed increase paid at closing
to an entity he controlled, B&N Realty.1
The evidence of the contemporaneous treatment of the
increased payments as commissions was substantial. First, the
agreed increases in the sales prices of the investments, which
totaled $2 million, were designated as commissions in the
sales contracts, though several of the sellers testified that they
were quite high for commissions. Second, Cole told Carol
Wildesen, Esq., OPF’s in-house settlement attorney who over-
saw the disbursement of funds generated by the transactions,
and John Evans, the OPF partner who oversaw sales asso-
ciates, that they were commissions. Third, the checks
Wildesen issued to Cole were labeled as commissions (as
were the descriptions appearing in certain internal OPF docu-
ments). Fourth, in the course of civil litigation in 2006
between Friedler and Passen, on the one hand, and Cole on
the other hand, Cole stated under oath that the disputed pay-
ments were commissions. J.A. 1128 ("[T]he commission and
fees received by Cole were not material to Passen’s and
Friedler’s decisions to invest in the properties [as] the com-
missions and fees were paid by the sellers, not the investors."
(emphasis added)).2
1
Payment was made to B&N Realty in all but the fifth, final transaction.
Counsel to the seller in the fifth transaction objected to Cole’s request, cit-
ing concerns that B&N was in no way connected to the transaction.
Instead, the seller paid the increased amount directly into the purchasers’
partnership account and Cole subsequently directed the partnership’s
bookkeeper to issue a check to him, which Cole then deposited into his
personal account. Cole complains on appeal that the Government improp-
erly referred to this withdrawal of funds from the partnership account as
an "embezzlement." We discern no reversible error in this regard.
2
To be sure, during the tax years at issue, Cole earned significant com-
mission income (apparently close to or exceeding a quarter of a million
dollars in each year) as a real estate agent and he appropriately reported
such earnings on his belatedly-filed tax returns. The gist of the prosecu-
tion’s theory of this case was that Cole tried to disguise additional com-
mission income, i.e., ordinary income, generated by his negotiation of
increased sales prices for the co-venturers’ real estate investments, as "as-
signment fees," i.e., capital gains.
UNITED STATES v. COLE 5
Cole had attorney Wildesen prepare separate settlement
reports for the buyers and sellers in the subject transactions,
a practice Wildesen testified was unusual. The payments to
B&N Realty (Cole’s alter ego) were listed only on the sellers’
settlement reports. Friedler and Passen testified that they were
wholly unaware of the secret payments to Cole. Indeed,
Friedler testified that Cole urged him not to attend the settle-
ment for the first property in which he invested.
Each of the sales contracts negotiated by Cole identified the
buyer as "Henry Cole and/or assigns." Nevertheless, each of
the sellers testified that Cole told them he was purchasing the
buildings not just for himself, but also as an agent for his
physician/co-venturers. The down payments were all paid
with partnership funds or with checks written directly by the
doctors or their spouses, and one of the buildings was
financed in part by a $1 million note personally guaranteed by
Cole, Miller, and Friedler.3
In addition to the transactions summarized above, Cole
arranged during the 2003 tax year for Dr. Passen’s children to
buy at a discount the $1 million note financing the third prop-
erty. Passen testified that Cole was not to receive a commis-
sion on the purchase and sale of the note. Nonetheless, the
evidence at trial showed that the seller sold the note for
$98,200 less than Cole received from Passen’s children, and
Cole pocketed the difference.
3
The down payments for the first three properties came from partnership
accounts, to which the doctors had contributed hundreds of thousands of
dollars, and the third building was financed, in part, by a $1 million note
guaranteed by Cole, Miller, and Friedler. The down payment on the fourth
property was funded entirely by Passen and Friedler. The down payment
on the fifth and final purchase was raised through a $75,000 check from
Friedler directly to OPF and monies taken from the management entity
related to the fourth property. It appears to be undisputed that Cole con-
tributed little, if any, capital to any of the ventures.
6 UNITED STATES v. COLE
B.
In April 2005, having learned a few months earlier of the
Government’s criminal investigation, Cole filed tax returns
for the years 2001, 2002, and 2003, reporting no taxable
income for each year. He had his accountant characterize the
$2 million in payments he received in the transactions sum-
marized above as "assignment fees" earned from the sale of
his contractual right to make the purchases individually, and
thus capital gains rather than ordinary income. In this fashion,
he was able to offset completely the short-term capital gains
income in each year with carry-forward losses. He entirely
failed to report the $98,200 he received for arranging the sale
of the $1 million note to Passen’s children; he testified at trial
that he "missed it" due to a bookkeeping error. J.A. 851. He
did report approximately $15,000 of self-employment tax
each year, though by the time of trial he had never paid the
taxes.
C.
A grand jury issued a superseding indictment in September
2008 charging Cole in six counts: three counts for willfully
filing false tax returns for tax years 2001, 2002, and 2003, in
violation of 26 U.S.C. § 7206(1), and three counts for evading
income taxes in the same years in violation of 26 U.S.C.
§ 7201. The indictment charged that, inter alia, Cole falsely
claimed $2 million of ordinary income as capital gains.
D.
As mentioned above, to justify characterizing the $2 mil-
lion as capital gains, Cole argued at trial that the amounts
were proceeds from the assignment of the sales contracts to
his co-venturers. Cole’s expert accountant, James Wilhelm,
testified that he believed the "underlying economics" of the
transactions justified their treatment as assignments, J.A. 689,
though he admitted that the sale of a contract would require
UNITED STATES v. COLE 7
(at minimum) that the buyer knew he was purchasing the con-
tract rights. The Government, eliciting the above testimony
from Friedler and Passen that they were unaware of the funds
paid to Cole, citing the "commission" labels used in the rele-
vant documents, and adverting to the totality of the direct and
circumstantial evidence of Cole’s suspicious methods, argued
that the payments were disguised commissions, i.e., ordinary
income and not capital gains.
Over Cole’s objection, the trial court admitted into evi-
dence three forms Cole had submitted to the federal Bureau
of Alcohol, Tobacco, and Firearms ("ATF") in 1996 and 1998
in order to purchase firearms. The forms asked if the applicant
was "an unlawful user of, or addicted to . . . any . . . narcotic
drug, or any other controlled substance," and Cole answered
"No" on each. J.A. 1359-60, 1362. But, as Cole stipulated at
trial, he was "addicted to narcotic pain medication at the time
he purchased the[se] firearms," and "prior to the purchase of
the firearms, [he] had self-admitted to a hospital for drug
addiction and was subsequently re-admitted for drug addic-
tion treatment between 1996 and 1998." J.A. 308. The Gov-
ernment also proffered evidence that Cole plead guilty in
2001 to possessing those firearms while "an unlawful user of
or addicted to any controlled substance" in violation of 21
U.S.C. § 922(g)(3), but the trial court sustained Cole’s objec-
tion to admission of the conviction.
The district court also admitted evidence of Cole’s "lavish
spending" during the 2001-03 tax years and in subsequent
years of non-reporting. Cole objected that the evidence was
irrelevant because he would have had enough money to cover
his lifestyle expenses even had he paid the taxes the Govern-
ment alleged were due but unpaid. The trial court admitted the
evidence, finding it relevant to Cole’s motive to commit the
tax offenses.
In a special verdict form the jury largely adopted the Gov-
ernment’s theory of the case, although it declined to find that
8 UNITED STATES v. COLE
Cole had fraudulently claimed charitable deductions and busi-
ness expenses. Ultimately, the jury found Cole guilty on all
six counts for willfully mischaracterizing the $2 million as
capital gains each year and failing to report the $98,200 in
income from the sale of the $1 million note.
The material facts concerning Cole’s health at the time he
was denied a continuance are set out in Part IV.
II.
Cole was convicted under 26 U.S.C. § 7201, which makes
it a crime to "willfully attempt[ ] in any manner to evade or
defeat any tax imposed by [Title 26] or the payment thereof,"
and 26 U.S.C. § 7206(1), which reaches one who "[w]illfully
makes and subscribes any return, statement, or other docu-
ment, which contains or is verified by a written declaration
that it is made under the penalties of perjury, and which he
does not believe to be true and correct as to every material
matter."
Cole contends that the district court erred in denying his
motion for judgment of acquittal. In this regard, he principally
asserts that the proper characterization of the $2 million was
uncertain as a matter of tax law and thus, under controlling
precedent, he was incapable of achieving the mental state
required under the statute, "willfulness," as a matter of law.
Questions of both the legal sufficiency of evidence to sustain
a conviction and of tax law uncertainty are questions of law
subject to de novo review. See United States v. Gallimore,
247 F.3d 134, 136 (4th Cir. 2001); United States v. Mallas,
762 F.2d 361, 364 n.4 (4th Cir. 1985).
Having closely examined Cole’s contentions, we conclude
that because the two cases Cole relies on, United States v.
Critzer, 498 F.2d 1160 (4th Cir. 1974), and Mallas, speak
only to legal, not to factual, uncertainty in the treatment of
UNITED STATES v. COLE 9
income under federal tax law, they are wholly inapposite to
this case and Cole’s argument is wholly without merit.
Critzer concerned the failure to report income from
improvements on land within the Eastern Cherokee Reserva-
tion, which generated a tax law question "so uncertain that
even co-ordinate branches of the United States Government
plausibly reach directly opposing conclusions," 498 F.2d at
1162. That is, despite the defendant’s prosecution by the
Department of Justice, the Department of the Interior contin-
ued to maintain that the income was not taxable. Id. at 1161-
62. Likewise, Mallas concerned "novel questions of tax liabil-
ity to which governing law offer[ed] no clear guidance," 762
F.2d at 361, arising from a complex tax shelter that the Gov-
ernment claimed was illegal, id. at 362-63. We reversed the
convictions, finding that "present authority in support of the
[Government’s] theory is far too tenuous and competing inter-
pretations of the applicable law far too reasonable to justify
these convictions." Id. at 363. We particularly emphasized
that, as the Government conceded, the relevant Treasury regu-
lation simply "does not address the issue." Id. at 364.
The instant case presented no "novel questions of tax liabil-
ity to which governing law offers no clear guidance." Mallas,
762 F.2d at 361. Rather, the jury here confronted a straight-
forward question of fact: did Cole sell the sales contracts to
his partners for an aggregate of $2 million, or was that amount
simply the sum of purloined (the Government says, as to the
fifth sale at least, "embezzled") funds Cole secretly extracted
from the respective investment ventures?
Resolution of this question hinged not at all on the legal
definition of "commission," "ordinary income," "capital
gains," or on permissible methods of assignment, but rather
on whether, in fact, the elements of a sale of capital assets
were present. Most importantly, the jury was tasked with
determining whether the doctors, the alleged buyers of these
contracts, knew they were purchasing them from Cole. In sum,
10 UNITED STATES v. COLE
because the "ambiguity" urged by Cole is a quintessential
question of fact, it was properly left to the jury to decide,
based on the evidence presented, whether the funds Cole gen-
erated for himself were properly treated as ordinary income or
capital gains. Plainly, the jury did not entertain a reasonable
doubt as to the Government’s proof of the negative: that Cole
was not engaged in a sale of capital assets to his co-venturers
who already owned an interest in the assets by virtue of their
payment of the down payments needed to acquire the assets
in the first place.
As a distinct strand of his contention, Cole argues that the
favorable testimony of his expert accountant, Wilhelm, should
foreclose conviction under either statute as a matter of law. At
trial, Wilhelm insisted that the payments were correctly char-
acterized as "assignment fees," and he persisted in this view
even after he learned that Cole had not contributed to the
down payments and had a zero basis in many of the contracts.
Cole makes the odd contention that the Government’s failure
to object to this testimony under Federal Rule of Evidence
702 operated as a concession that the testimony met the rule’s
strictures, and thus that Wilhelm’s opinion was "based upon
sufficient facts," was "the product of reliable principles and
methods," and that Wilhelm "applied the principles and meth-
ods reliably to the facts of the case." See Fed. R. Evid. 702(1)-
(3). Accordingly, Cole argues, the opinion of a single accoun-
tant, hired by a defendant, should suffice to establish the sort
of legal uncertainty we found adequate to defeat a finding of
willfulness in Critzer and Mallas. Indeed, Cole boldly invites
us to "take this opportunity to announce a general rule that
admissible Rule 702 evidence of actual correctness [of a tax
characterization] precludes a finding of willfulness in tax
prosecutions." Br. of Appellant, at 45. We decline this invita-
tion.
Of course, even when an expert’s methodology qualifies as
"reliable" (and his testimony is thus admissible) for the pur-
poses of Rule 702, the expert’s resulting conclusions are by
UNITED STATES v. COLE 11
no means unassailable.4 Here Wilhelm’s conclusion was pred-
icated upon the fact of a sale of contract rights between Cole
and his partners; Wilhelm himself conceded that a sale would
at least require that the partners have been aware that they
were purchasing Cole’s rights. The jury was clearly entitled
to find, as it did, that the Government’s evidence conclusively
negatived that possibility.
Finally, asking us to blink at the evidence of the repeated
contemporaneous descriptions of the disputed payments as
commissions, Cole contends that if we look to "the objective
economic realities of [the] transaction rather than . . . the par-
ticular form the parties employed," Boulware v. United States,
552 U.S. 421, 429 (2008) (quoting Frank Lyon Co. v. United
States, 435 U.S. 561, 573 (1978)), we must find that the $2
million in payments were assignment fees, not commissions.
We disagree. To excuse a party’s attempted tax evasion by
giving him the benefit of a different transactional structure he
concocts post factum would be to turn Frank Lyon on its head.
Here, where the jury could easily have found that Cole could
not have structured these transactions as assignments because
his partners did not know and would not have approved of
Cole’s inflating sales prices to capture solely for himself $2
million in income, this argument entirely lacks merit.
4
As the district court correctly instructed the jury (without objection)
when Wilhelm took the stand to testify:
This witness will be qualified as an expert with respect to tax
preparation and tax matters as a CPA. Just as I previously indi-
cated, I think as to [the Government’s expert], this is a time when
a person has been qualified as an expert that they are permitted
to give, he is permitted to give his opinion on a matter unlike
other witnesses. Again it’s up to the jury to accept or reject any
opinions that are presented. But expert witnesses are permitted
to give their opinions. Other witnesses are not. This gentleman
has been qualified as an expert. So Mr. Wilhelm is allowed to
give his opinion on certain federal tax matters.
J.A. 662 (brackets and emphasis added).
12 UNITED STATES v. COLE
We readily conclude, therefore, that no complexity of tax
law rendered Cole’s prosecution untenable and that the jury’s
verdict finding beyond a reasonable doubt that Cole had will-
fully falsified the character of his income on his tax returns
was amply supported by the evidence presented at trial. There
was no error in the district court’s denial of Cole’s motion for
judgment of acquittal.
III.
Cole next argues that the trial court violated Federal Rule
of Evidence 404(b) when it admitted evidence that he: (1)
provided false answers on three forms filed with ATF in 1996
and 1998; and (2) engaged in lavish spending before and after
filing the tax returns in question.
We review a trial court’s rulings on the admissibility of evi-
dence for abuse of discretion, and we will only overturn an
evidentiary ruling that is "arbitrary and irrational." United
States v. Blake 571 F.3d 331, 346 (4th Cir. 2009). To that end,
we "look at the evidence in a light most favorable to its pro-
ponent, maximizing its probative value and minimizing its
prejudicial effect." United States v. Udeozor, 515 F.3d 260,
265 (4th Cir. 2008) (quoting United States v. Simpson, 910
F.2d 154, 157 (4th Cir. 1990)).
Federal Rule of Evidence 404(b) provides:
Evidence of other crimes, wrongs, or acts is not
admissible to prove the character of a person in order
to show action in conformity therewith. It may, how-
ever, be admissible for other purposes, such as proof
of motive, opportunity, intent, preparation, plan,
knowledge, identity, or absence of mistake or acci-
dent . . . .
As we recognized in United States v. Queen, 132 F.3d 991,
995 (4th Cir. 1997), this court has been less than consistent
UNITED STATES v. COLE 13
in its application of Rule 404(b). But on the whole, "we have
construed the exceptions to the inadmissibility of prior bad
acts evidence broadly, and characterize Rule 404(b) as an
inclusive rule, admitting all evidence of other crimes or acts
except that which tends to prove only criminal disposition."
United States v. Powers, 59 F.3d 1460, 1464 (4th Cir. 1995)
(internal quotation marks omitted). And we have set out a
four-part test for prior-act evidence:
(1) The evidence must be relevant to an issue, such
as an element of an offense, and must not be offered
to establish the general character of the defendant. In
this regard, the more similar the prior act is (in terms
of physical similarity or mental state) to the act
being proved, the more relevant it becomes. (2) The
act must be necessary in the sense that it is probative
of an essential claim or an element of the offense. (3)
The evidence must be reliable. And (4) the evi-
dence’s probative value must not be substantially
outweighed by confusion or unfair prejudice in the
sense that it tends to subordinate reason to emotion
in the factfinding process.
United States v. Johnson, 617 F.3d 286, 296-97 (4th Cir.
2010) (quoting Queen, 132 F.3d at 997). Parts (1)-(3) of the
Queen test are requirements that must be satisfied for admis-
sion, but they also double as factors to be considered as pro-
bative value is weighed against unfair prejudice in the
bundled Rule 403 analysis of part (4).
A.
Cole argues that the district court erred in admitting evi-
dence that he falsely denied being an unlawful user of and
addicted to controlled substances on 1996 and 1998 ATF
forms he filed in order to purchase firearms. Cole argued that
the ATF forms (and related testimonial evidence) should have
been excluded as improper character evidence under Rule
14 UNITED STATES v. COLE
404(b), but the district court held that, as the forms contained
false statements made to an agency of the federal government,
they were admissible because probative of "intent" and "ab-
sence of mistake" in this prosecution for tax offenses. The
Government called Special Agent James Tanda, who intro-
duced the three ATF forms, and Cole stipulated that at the
time he completed the forms he was addicted to narcotic pain
medication and had twice been treated as an in-patient for
drug addiction. Immediately after the stipulation was read to
the jury, the court gave a cautionary instruction.
In light of the four-part test announced in Queen, 132 F.3d
at 997, we think that the propriety of the district court’s
admission of the ATF evidence is a very close question. It is
doubtful that Cole’s prior false statements are probative of
any "absence of mistake" in causing his accountant to treat as
capital gains ordinary income. After all, Cole’s defense of
"good faith" or "inherent ambiguity" turned mainly on
whether he provided all of the relevant information to his pro-
fessional tax preparer so that a reasoned assessment of the
proper treatment could be arrived at. On the other hand, there
clearly was a defense of "mistake" asserted here as to the fail-
ure to report the income earned from the 2003 sale of the
promissory note.
In any event, the ATF forms injected Cole’s drug addiction
into a trial that was far removed from such a subject. Such
evidence of major improprieties in Cole’s personal life would
in many cases likely have occasioned significant unfair preju-
dice. Nevertheless, even if there was an abuse of discretion in
the admission of the ATF evidence, a conclusion we do not
reach, we find that any such error was harmless.
Manifestly, a conviction will not be overturned on account
of an erroneous evidentiary ruling when that error is deemed
harmless within the meaning of Federal Rule of Criminal Pro-
cedure 52(a). "[I]n order to find a district court’s error harm-
less, we need only be able to say ‘with fair assurance, after
UNITED STATES v. COLE 15
pondering all that happened without stripping the erroneous
action from the whole, that the judgment was not substantially
swayed by the error.’" Johnson, 617 F.3d at 292 (quoting
United States v. Brooks, 111 F.3d 365, 371 (4th Cir. 1997)).
In this case, there was overwhelming evidence indicating
that the $2 million obtained by Cole did not constitute pro-
ceeds from the sale of contracts. As already discussed, for
example: (1) two of the three purported buyers testified that
they were unaware Cole ever received these payments, and
Cole arranged for the issuance of separate sellers’ settlement
reports in a transparent effort to hide the payments from his
co-venturers; (2) the purported buyers were themselves the
ones who provided the down payments on the contracts,
which means that they already owned an interest in the con-
tracts; (3) the sellers testified that Cole represented he was
acting on behalf of the partnership, not alone; (4) the surrepti-
tious payments to Cole were identified as commissions on the
checks and related documents, and in discussions within OPF;
and (5) Cole himself swore in his answers to interrogatories
in related civil litigation that these amounts were "commis-
sions and fees" that came from the sellers, not from his part-
ners.
Though the false statements on the ATF forms were at best
only tenuously related to proof of the willful mischaracteriza-
tion of income charged here and posed a genuine risk of prej-
udice, we are confident that "the judgment was not
substantially swayed by the error" of admitting them. Id. The
potential for substantial undue prejudice arising from the
injection of a defendant’s drug addiction into a trial involving
dishonesty is real, but the jury properly had before it strong
evidence of Cole’s conversion of partnership funds when the
fifth fee was made out to the partnership rather than to B&N,
far more salient evidence of Cole’s dishonest dealings with
his partners. We further note that the district court followed
admission of the ATF evidence immediately with a cautionary
instruction and that the jury was not so prejudiced as to keep
16 UNITED STATES v. COLE
it from rejecting the allegations regarding fraudulent deductions
for charitable donations and business expenses under Counts
one, three, and five.
In sum, there was a veritable mountain of evidence against
Cole bearing on the over-arching issue at trial: the existence
vel non of his willful intent to evade taxes arising from his
secretly-obtained remuneration in the real estate deals.
Accordingly, we cannot plausibly say that an erroneous ruling
on an ancillary evidentiary point "substantially swayed" the
jury here.5
B.
Cole further contends that evidence of his "lavish spend-
ing" was admitted contrary to Rule 404. As the Government
argues, however, such evidence does not appear to be charac-
ter evidence governed by Rule 404. Regardless, the evidence
was clearly probative of Cole’s motive (e.g., wealth accumu-
lation and maintenance) as the trial court held, and was sim-
ply not introduced "for the purpose of proving action in
conformity [ ]with" the character of a lavish spender. Fed. R.
Evid. 404(b).
For these reasons we reject Cole’s claims of prejudicial
error under Rule 404(b).
5The Government argues that any Rule 404(b) error is harmless for the
simple reason that Cole went on to testify, thus opening the door to evi-
dence attacking his credibility, like the false statements on the ATF forms.
But as we explained in Johnson, where an erroneous admission is made
during the Government’s case-in-chief that damages defendant’s charac-
ter, it is often "impossible to make a post-hoc assessment as to whether
[the defendant] would have testified without" the erroneous admission.
617 F.3d at 299 n.7.
UNITED STATES v. COLE 17
IV.
Finally, Cole alleges error in the trial court’s refusal to
grant him a continuance. In considering a motion for continu-
ance on the basis of health issues, a trial judge must "assess
the degree to which a defendant’s health might impair his par-
ticipation in his defense, especially his right to be present at
trial, to testify on his own behalf, and to confront adverse wit-
nesses," as well as whether "the proceeding is likely to
worsen the defendant’s condition." United States v. Brown,
821 F.2d 986, 988 (4th Cir. 1987). The judge "may properly
consider . . . the medical evidence [and] the defendant’s activ-
ities in the courtroom and outside of it," among other things.
Id.Denial of a motion for a continuance is reviewed for abuse
of discretion, and the reviewing court is "not [to] review the
medical information before the district court de novo; instead,
[it is to] look to see whether the district court had sufficient
evidence before it to support its decision." Brown, 821 F.2d
at 988. In addition, the appellant must also establish that prej-
udice resulted from the erroneous denial. United States v.
Bakker, 925 F.2d 728, 735 (4th Cir. 1991). We have held that
"[f]or a denial of a continuance to constitute an abuse of dis-
cretion, the medical repercussions must be serious and out of
the ordinary; the impending trial must pose a substantial dan-
ger to a defendant’s life or health." Brown, 821 F.2d at 988.
The issue of a continuance in this case arose very late in the
proceedings. As Cole was to be cross-examined during the
fourth week of trial, he moved for a mistrial and a continu-
ance, and the court conducted a thorough hearing on the mat-
ter. The trial judge repeatedly emphasized that he had seen no
documented medical evidence demonstrating that Cole was
disoriented or incapable of focusing, and he asked defense
counsel to point him to any such evidence. The judge also
noted that he had not seen any indication of the alleged disori-
entation during trial, which included testimony from Cole.
18 UNITED STATES v. COLE
Defense counsel merely reported that Cole told them he was
in pain, that he seemed to his counsel to have lost focus dur-
ing his direct examination, and that an attending physician at
the hospital had told one of them that Cole seemed confused.
On this last point, the trial judge emphasized that Cole’s con-
fusion was nowhere noted on the hospital’s report about
Cole’s earlier visit to the emergency room, and he explained
that he could not simply accept counsel’s oral representations
as evidence.
The trial judge, who showed commendable sympathy and
flexibility throughout the hearing, made every effort to allow
the defense opportunities to gather adequate evidence. As it
was, the court had twice granted Cole mid-trial continuances,
once after breaking his clavicle and again after a diagnosis of
double pneumonia. There was no medical evidence —or evi-
dence of any kind, aside from defendant’s and defense coun-
sel’s unsupported claims —to support a finding that Cole was
unable to continue trial after he had concluded his direct
examination. This unsupported motion came as Cole was to
be faced with cross-examination, at the end of a four-week
trial comprising the testimony of 34 witnesses. The trial court
acted well within its broad discretion in denying Cole another
continuance.
V.
We have considered the remaining issues raised on appeal
by Cole (e.g., the alleged cumulative effects of the district
court’s rulings) and find them to lack merit. Accordingly, for
the foregoing reasons, the judgment is
AFFIRMED.