United States v. Joseph Loftis , 843 F.3d 1173 ( 2016 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 15-30262
Plaintiff-Appellant,
D.C. No.
v. 2:15-cr-00011-DLC-1
JOSEPH BRENT LOFTIS,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the District of Montana
Dana L. Christensen, Chief Judge, Presiding
Argued and Submitted October 7, 2016
Seattle, Washington
Filed December 9, 2016
Before: William A. Fletcher, Raymond C. Fisher
and N. Randy Smith, Circuit Judges.
Opinion by Judge Fisher
2 UNITED STATES V. LOFTIS
SUMMARY*
Criminal Law
The panel affirmed the district court’s order granting in
part the defendant’s motion in limine in a case in which the
government has charged the defendant with five counts of
wire fraud for victimizing investors through false
representations about his oil business.
The five charged uses of the wires involve a total of three
investors, and all involve the scheme as perpetrated in
Montana. The government sought to introduce evidence of
investor victims not specifically named in the indictment,
additional uses of the wires and aspects of the scheme carried
out in states other than Montana (“uncharged transactions”).
The panel held that the uncharged transactions are part of
the charged offense – the fraudulent scheme as a whole – not
“other” crimes or “other” acts evidence; and that Fed. R.
Evid. 404(b) thus does not preclude the government from
introducing evidence of uncharged transactions to prove the
first element of wire fraud – the existence of a scheme to
defraud. The panel wrote that even if the uncharged
transactions were not part of the crime charged, they would
not be subject to exclusion under Rule 404(b) because they
are “part of the same transaction” as the charged transactions,
and that the inextricably-intertwined doctrine therefore
affords a second basis for concluding the evidence should not
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V. LOFTIS 3
be treated as “other” crimes or “other” acts evidence under
Rule 404(b).
The panel wrote that, notwithstanding some ambiguity in
the district court’s ruling, it does not construe the district
court’s ruling as contrary to the panel’s holding.
COUNSEL
Chad Spraker (argued), Assistant United States Attorney;
Michael W. Cotter, United States Attorney; United States
Attorney’s Office, Helena, Montana; for Plaintiff-Appellant.
John Rhodes (argued), Assistant Federal Defender; Anthony
R. Gallagher, Federal Defender; Office of the Federal Public
Defender, Missoula, Montana; for Defendant-Appellee.
OPINION
FISHER, Circuit Judge:
The defendant, Joseph Brent Loftis, has been charged
with five counts of wire fraud. The government alleges
Loftis victimized investors through false representations
about his oil business. The indictment charges a broad
scheme to defraud, spanning six years, several states and
numerous alleged victims. Each of the five counts in the
indictment pertains to a particular wire transfer in which a
defrauded investor wired money to Loftis. These five uses of
the wires (“charged transactions”) involve a total of three
investors, and all involve the scheme as perpetrated in a
single state, Montana.
4 UNITED STATES V. LOFTIS
As the trial approached, it became clear the government
intended to offer evidence of investor victims not specifically
named in the indictment, additional uses of the wires and
aspects of the scheme carried out in states other than Montana
(“uncharged transactions”). Loftis moved in limine to
exclude this evidence, arguing the district court should “limit
the government’s case to evidence regarding the [three]
named investors and alleged criminal activity involving
Montana.” He sought to bar the government from calling
“witnesses other than [the three investors] from wh[om] the
wired funds were received in the criminal cou[n]ts.”
The district court granted the motion in part, suggesting
the evidence the government sought to introduce pertained to
“other wire frauds” that would be subject to exclusion under
Federal Rule of Evidence 404(b) unless the government could
show the evidence was either “inextricably intertwined with
the scheme Loftis employed in Montana” or admissible for
one of the purposes authorized by Rule 404(b) itself. The
government has appealed the court’s order, and the district
court has stayed proceedings pending disposition of this
interlocutory appeal.
We have jurisdiction under 18 U.S.C. § 3731, see United
States v. DeCinces, 808 F.3d 785, 789-90 (9th Cir. 2015), and
we affirm the district court’s order. We hold the evidence of
uncharged transactions is not evidence of “other” crimes or
acts under Rule 404(b), because it is evidence of part of the
crime charged in the indictment – the overall scheme to
defraud.1
1
“We review admission of ‘other crimes’ evidence for abuse of
discretion; however, whether the evidence is indeed other crimes evidence
UNITED STATES V. LOFTIS 5
I
Under Rule 404(b), “[e]vidence of a crime, wrong, or
other act is not admissible to prove a person’s character in
order to show that on a particular occasion the person acted
in accordance with the character.” Fed. R. Evid. 404(b)(1).
But the evidence “may be admissible for another purpose,
such as proving motive, opportunity, intent, preparation, plan,
knowledge, identity, absence of mistake, or lack of accident.”
Fed. R. Evid. 404(b)(2).
Rule 404(b) applies solely to evidence of “other” acts, not
to evidence of the very acts charged as crimes in the
indictment. As a leading treatise explains, “[o]ne of the key
words in determining the scope of Rule 404(b) is ‘other’; only
crimes, wrongs, or acts ‘other’ than those at issue under the
pleadings are made inadmissible under the general rule.” 22B
Kenneth W. Graham, Jr., Federal Practice and Procedure
§ 5239 (1st ed. 2016). For example:
In cases where the incident offered is a
part of the conspiracy alleged in the
indictment, the evidence is admissible under
Rule 404(b) because it is not an “other” crime.
The evidence is offered as direct evidence of
the fact in issue, not as circumstantial
evidence requiring an inference as to the
character of the accused. Such proof can be
quite time-consuming and it may be
extremely prejudicial to the defendant but the
court would have no discretion to exclude it
we review de novo.” United States v. Parks, 285 F.3d 1133, 1141 (9th
Cir. 2002).
6 UNITED STATES V. LOFTIS
[under Rule 404(b)] because it is proof of the
ultimate issue in the case. To the extent that
these consequences may seem unfair, this is
attributable to the nature of the conspiracy
charge, not to any defect in the other crimes
rule.
Id. (footnotes omitted); see, e.g., United States v. Ripinsky,
109 F.3d 1436, 1442 (9th Cir. 1997) (holding evidence in
question “was not evidence of ‘other crimes’ under Rule
404(b)” where it was “direct evidence of the ongoing
conspiracy charged in the indictment”), overruled on other
grounds by United States v. Sablan, 114 F.3d 913, 916 (9th
Cir. 1997) (en banc).
This principle applies not only to charges of conspiracy
but also to any prosecution in which the “other” crime in
question is in fact “an element of the crime charged.”
Graham, Federal Practice and Procedure, supra, § 5239. In
United States v. Smith, 685 F.2d 1293, 1294 (11th Cir. 1982),
for example, the defendant was charged with four counts of
mail fraud, each arising from an alleged scheme of the
defendant to defraud his insurance company by presenting
fraudulent claims.2 At trial, the government introduced
evidence of three previous fraudulent insurance claims, none
of which was alleged in the indictment. See id. Although the
previous claims were uncharged transactions in the sense that
they were not charged as specific executions of the scheme,
the Eleventh Circuit held evidence of those transactions was
2
“It is well settled that cases construing the mail fraud and wire fraud
statutes are applicable to either.” United States v. Green, 592 F.3d 1057,
1063 n.3 (9th Cir. 2010) (quoting United States v. Shipsey, 363 F.3d 962,
971 n.10 (9th Cir. 2004)).
UNITED STATES V. LOFTIS 7
admissible, without going through Rule 404(b), “to
demonstrate the existence of the fraudulent scheme; an
essential element of the crime.” Id. at 1295. It was “not
necessary to consider whether the evidence was admissible as
other crimes evidence under Rule 404(b).” Id. at 1296.
Similarly, in United States v. Swinton, 75 F.3d 374, 376
(8th Cir. 1996), the defendant was charged with seven counts
of bank fraud. Each count involved a residential loan
transaction on a particular property. See id. at 376–77. At
trial, the government introduced evidence concerning
additional property transactions in which the defendant was
involved but for which he was not specifically charged. See
id. at 377. The government argued “the evidence concerning
the other uncharged transactions went directly to an element
of the crime – the existence of a scheme or artifice” – and
thus was not subject to Rule 404(b). Id. at 378. The Eighth
Circuit agreed, holding “[s]uch evidence did not concern
‘other acts’ but rather acts belonging to the charged scheme.”
Id. at 379. The evidence did not “implicate Rule 404(b)[,]
because [it] related to the existence of a scheme, an element
of the charged crime.” Id. at 379.
II
These principles apply here. “The elements of wire fraud
are: (1) the existence of a scheme to defraud; (2) the use of
wire, radio, or television to further the scheme; and (3) a
specific intent to defraud.” United States v. Jinian, 725 F.3d
954, 960 (9th Cir. 2013). The crime charged in a wire fraud
prosecution therefore includes not only the specific
executions of the scheme alleged as the second element of the
offense but also the overall scheme alleged as the first
element of the offense. As we recently explained, “the
8 UNITED STATES V. LOFTIS
commission of . . . a mail fraud or wire fraud offense
necessarily includes a fraudulent scheme as a whole . . . ,
including additional executions of the scheme that were not
specifically charged.” United States v. Lo, 839 F.3d 777, 793
(9th Cir. 2016). The uncharged transactions, therefore, are
part of the charged offense – the fraudulent scheme as a
whole – not “other” crimes or “other” acts evidence. Rule
404(b) thus does not preclude the government from
introducing evidence of uncharged transactions to prove the
first element of wire fraud – the existence of a scheme to
defraud.
III
Because the evidence from other investors is charged
conduct, the government is not required to rely on the
inextricably intertwined doctrine to avoid Rule 404(b).
However, we have also “held that evidence should not be
considered ‘other crimes’ or ‘other act’ evidence within the
meaning of Rule 404(b) if ‘the evidence concerning the
“other” act and the evidence concerning the crime charged
are inextricably intertwined.’” United States v. Dorsey,
677 F.3d 944, 951 (9th Cir. 2012) (quoting United States v.
Soliman, 813 F.2d 277, 279 (9th Cir. 1987)). This doctrine
applies when the acts in question are so interwoven with the
charged offense that they should not be treated as other
crimes or acts for purposes of Rule 404(b).
“There are generally two categories of cases in which we
have concluded that ‘other act’ evidence is inextricably
intertwined with the crime with which the defendant is
charged and therefore need not meet the requirements of Rule
404(b).” United States v. Vizcarra-Martinez, 66 F.3d 1006,
1012 (9th Cir. 1995). “First, we have sometimes allowed
UNITED STATES V. LOFTIS 9
evidence to be admitted because it constitutes a part of the
transaction that serves as the basis for the criminal charge.”
Id. “Second, we have allowed ‘other act’ evidence to be
admitted when it was necessary to do so in order to permit the
prosecutor to offer a coherent and comprehensible story
regarding the commission of the crime; it is obviously
necessary in certain cases for the government to explain
either the circumstances under which particular evidence was
obtained or the events surrounding the commission of the
crime.” Id. at 1012–13.
In the context of mail and wire fraud, we have held that
uncharged transactions that are part of an overall scheme are
“part of the same transaction” as the charged transactions,
such that evidence of the uncharged transactions falls under
the first inextricably intertwined exception. In United States
v. Mundi, 892 F.2d 817, 818 (9th Cir. 1989), for example, the
defendant was charged with wire fraud arising from a broad
scheme to defraud travel agencies. The indictment “named
only one [travel] agency specifically,” although it also spoke
of the defendant’s scheme “in terms that indicated a far wider
scope of operations.” Id. at 820. At trial, the district court
“allowed testimony which named several travel agencies not
specifically mentioned in the indictment, and which discussed
[the defendant’s] scheme with respect to them.” Id. We held
the evidence was admissible notwithstanding Rule 404(b).
Because the uncharged transactions were part of the overall
scheme, the evidence “was ‘inextricably intertwined’ with,
and ‘part of the same transaction’ as, the conduct alleged in
the indictment.” Id. (quoting Soliman, 813 F.2d at 279).
Similarly, in United States v. Sayakhom, 186 F.3d 928, 933
(9th Cir. 1999), the defendant was charged with multiple
counts of mail fraud arising from her fraudulent sale of life
insurance products through a single business entity (AAC).
10 UNITED STATES V. LOFTIS
After the government effectively shut down AAC’s operation,
the defendant began operating through a second entity
(MAPS), “in order to continue the unlawful sale of life
insurance products.” Id. at 937–38. At trial, the district court
allowed the government to introduce evidence regarding the
defendant’s operation of MAPS. See id. at 937. Explaining
that “AAC and MAPS were part of an ongoing scheme to
defraud,” we held “[t]he MAPS evidence is not subject to
exclusion under Rule 404(b) because it is inextricably
intertwined with the indicted crimes.” Id. at 937–38 (citing
Vizcarra-Martinez, 66 F.3d at 1006).
Under these authorities, even if the uncharged
transactions at issue were not part of the crime charged, they
would not be subject to exclusion under Rule 404(b) because
they are “part of the same transaction” as the charged
transactions. The inextricably intertwined doctrine, therefore,
affords a second basis for concluding the evidence should not
be treated as “other” crimes or “other” acts evidence under
Rule 404(b).
IV
We emphasize these holdings address solely the
application of Rule 404(b) to the evidence the government
has said it seeks to introduce. We do not address whether the
evidence may be excluded for any other reason, such as under
Rule 403. We also make clear these holdings apply only
when the charged and uncharged transactions can fairly be
characterized as parts of a single fraudulent scheme. See
Swinton, 75 F.3d at 378.
UNITED STATES V. LOFTIS 11
V
The extent to which the district court properly applied
these principles is not clear. On the one hand, the court
appears to have applied the law correctly when it recognized
“[e]vidence of other wires may be admissible to support the
first, but not the second, element of wire fraud,” and when it
said the evidence in dispute “may be admissible if offered as
proof of the scheme underlying” the charged transactions. On
the other hand, the court may have erred when it said the
evidence involving other investors pertained to “other wire
frauds” and suggested the evidence would be excluded under
Rule 404(b) unless “the government can prove that the
evidence is in fact inextricably intertwined with the scheme
Loftis employed in Montana.” Notwithstanding some
ambiguity in the district court’s ruling, we do not construe it
as ruling contrary to our holding here.
ORDER AFFIRMED.