In United States v. Hazelwood, No. 18-6023 (6th Cir. Oct. 14, 2020), a Sixth Circuit panel divides over whether it was error for the trial judge to admit “audio recordings in which one of the defendants … is heard using deeply offensive racist and misogynistic language.” The panel majority holds that it was inadmissible and, in any event, unduly prejudicial, thus leading the court to vacate the convictions of three defendants.
Four defendants were tried for a “conspiracy to defraud Pilot [Flying J]’s trucking-company customers by falsely promising discounted fuel prices, and then secretly shorting those customers on the promised discounts through deceptive invoicing and rebate techniques.” One defendant was Hazelwood, “who was Pilot’s president and head of the direct-sales division.” During the government’s case, through cross-examination, defense counsel raised Hazelwood’s “reputation as a manager and president within the company,” that he “was too good a businessman to engage in something as high-risk and low-reward as the … rebate scheme” charged by the government (emphasis added).
Contending that defense counsel opened the door to character evidence, the government offered – under Fed. R. Evid. 404(a)(2)(A) and 405 – audio recordings of a company retreat obtained during the fraud investigation by a cooperating witness inside Pilot. Hazelwood was caught repeatedly using the “n-word,” mentioning (among other things) that one of their “coworkers had been ‘married to a n****r’ because, in his view, ‘[y]ou can’t trust those little n****r b**ches.’” The district court rejected the Rule 404 and 405 rationale, but found that the evidence was admissible as relevant to rebut the “good businessman” defense argument under Fed. R. Evid. 401.
“Turning to Rule 403, the district court concluded that the risk of unfair prejudice to Hazelwood did not substantially outweigh the recordings’ probative value. Although it acknowledged the danger of unfair prejudice likely to be caused by the ‘deeply offensive’ language on the recordings, the district court reasoned that the recordings rebutted Hazelwood’s argument that he was a ‘too good a businessman’ and would not have ‘engaged in conduct that, if it became known, would bring the entire company down.’” The district court gave a limiting jury instruction that the audio-recording “should be used by you only for your consideration of whether Mr. Hazelwood was a good businessman and an excellent company president for Pilot Travel Centers.”
The jury convicted three of the four defendants of conspiracy, mail fraud and wire fraud, although the jury acquitted each of them on some counts. One defendant was acquitted on all counts.
The panel majority reverses. “[W]e begin with two commonsense questions: Does the fact that Mark Hazelwood used utterly repulsive language in private make it more likely that he and his cohorts committed wire fraud? No. Does it make it more likely that a jury would convict? Yes. With this broad view of the recordings’ probable real-life effect, we turn to the legal justifications offered for their admission.”
First, the panel majority holds that the audio-recordings did not clear the Rule 401 relevance bar. “Hazelwood’s personal views are despicable, but they do not correlate with his business judgment. Which raises another point: Hazelwood did not make these comments in public; he made them after hours, during a private corporate retreat, with trusted corporate compadres. And, they certainly do not advance the evidentiary route to the ultimate fact, the commission of wire and mail fraud. Being a racist and a chauvinist did not make it more probable that Hazelwood would commit wire fraud. And eliciting testimony that it would be dumb to risk a company’s reputation by committing fraud did not put bigotry or sexism in ‘issue.’”
The panel majority also finds the audio-recordings are inadmissible under Rules 404 and 405, which within tight limits allow admission of so-called character evidence. “Even if Hazelwood ‘opened the door’ to a ‘pertinent’ trait, that trait was his business acumen, not his seriously misguided personal beliefs. If ‘pertinent’ to anything, the recordings illuminated Hazelwood’s mindset, his attitudes towards African Americans and women. As discussed above, the recordings did not cast light on Hazelwood’s business skills. Thus, they fail to rebut (in any meaningful way) the evidence actually offered by Hazelwood.” Moreover, “Rule 405 allows inquiry into prior acts only through testimony about a defendant’s ‘reputation’ or ‘opinion’ to prove a person’s character.” The audiotapes were impermissible extrinsic evidence “offered to prove specific instances of Hazelwood’s conduct allegedly bearing on character.”
Finally, the evidence ought to have been excluded in any event as unduly prejudicial under Rule 403. “The prejudicial effect of these recordings to all three defendants is obvious. As to Hazelwood, the fear is that the jury would judge him for being a bigot rather than defrauding customers of fuel discounts. The potential ‘spillover effect’ on [the other defendants] is also clear—that’s why the district court gave a limiting instruction.”
The panel majority concludes that the error was not harmless. The government presented a “convincing” case, but it was “not iron clad.” The jury could have credited testimony that the suspicious rebate scheme was actually “a legitimate sales tool, and that Pilot could legally change discounts under certain circumstances, such as when a customer failed to purchase a minimum agreed-upon fuel amount.” Indeed, the jury acquitted each of the defendants on some counts and onw co-defendant entirely. In the end, “[t]he profoundly racist and sexist content of these recordings is so antithetical to the sensibilities of decent people, that we are ‘left in grave doubt’ that anyone could scrub all traces clean from one’s mind regardless of the quantum of evidence presented.”
Judge Donald dissents, finding that the audio-recordings went directly to the “good businessman” theory proffered by the defense. “In the very least, if Hazelwood is willing to use racist, misogynistic, and otherwise inappropriate language when communicating with his subordinates at a company retreat held for the purpose of conducting business, as well as invite and condone the same statements and behavior by his subordinates, it makes the factual assertion elicited by Hazelwood that he was such a good businessman less probable. And if Hazelwood being a good businessman that would not put the company at great risk for little reward is relevant in that it tends to serve as one evidentiary step in concluding that he could not have committed the fraud, evidence that Hazelwood does not have the good business judgment purported, but bad business judgment, is relevant to rebutting that conclusion.”