A vexing problem in trying white collar cases involving alleged group activity is the willingness of judges to allow cooperating witnesses to offer their opinions as to the guilty knowledge of the defendant-participants. Prosecutors elicit cooperator opinion testimony regarding defendants to the effect that “they all knew” of certain fraud or “everyone in the office was aware” that certain documents were falsified. It is no remedy to wait until cross-examination to unring that particular bell by attempting to show that the witness was not competent to have offered that wide-ranging opinion.
A couple of years ago I was brought into a mortgage fraud case after trial in order to handle sentencing and any appeal for a convicted client who had been employed as a loan representative at a mortgage company. The multi-defendant trial in federal court, resulting in convictions across the board, had been conducted by skilled, experienced counsel, who had nonetheless been unable to persuade the judge to exclude cooperator statements that “everyone” in the office knew that loan applications were false and that supporting income and bank statements were fabricated; the weeks of trial transcripts were rife with these vague but very damning statements. More recently, news reports reflect that Solomon Dwek, the FBI’s star witness in two New Jersey corruption trials thus far -- and who recorded sessions in which he, in assumed identity, made payments to numerous local politicians -- has been permitted to opine that the recipients “knew” the illicit purpose and nature of his payments.
The evidence rules seemingly prohibit such testimony. Under FRE 602, the witness’s lack of personal knowledge as to the beliefs or knowledge of another would seem to effect a bar. FRE 701’s requirements that lay opinions be rationally based on the witness’s perceptions and helpful to the trier of fact would also seem to block these intuitions about the thoughts of another. Finally, FRE 403’s balancing test should yield the conclusion that the probative value of such testimony is substantially outweighed by the risk of unfair prejudice and jury confusion. Yet, courts consistently allow such testimony, as evidenced in the recent Third Circuit opinion in United States v. Stadtmauer, 2010 WL 3504321 (3d Cir., Sept. 9, 2010).
In Stadtmauer, an officer of certain prominent real estate companies was convicted after a two-month trial of committing tax fraud relating to the reporting of entity expenses. An outside accountant was permitted to testify that Stadtmauer “knew” that certain tax returns which he signed in the presence of the witness were problematic. On appeal, Stadtmauer argued that the testimony ran afoul of Rule 701. The Third Circuit noted that Rule 701 excludes lay opinion testimony which simply tells the jury what result to reach, and that testimony as to what a defendant did or did not know “comes dangerously close to doing just this.” However, the accountant’s testimony was held to be rationally based on his perceptions of Stadtmauer’s involvement in the entities and on Stadtmauer’s knowledge of the characterization of the expenditures in the entities’ books and records (citing among other cases United States v. Anderskow, 88 F.3d 245 (3d Cir. 1996), where the “he must have known” testimony met the rationally-based test because of the witness’s knowledge of the defendant’s involvement in fraudulent loan documents).
However, the Stadtmauer Court noted that the “helpfulness” component of Rule 701 was not as easily met, because the jury had before it the same evidence of Stadtmauer's state of knowledge. (In Anderskow, the “he must have known” testimony was ultimately held inadmissible because the jury had before it the evidence on which the witness’s opinion was based and so was as well-positioned as the witness to form a view as to the defendant’s knowledge.) But any error in Stadtmauer’s trial was deemed harmless based on the weight of the other evidence against him.