- Court: 9th Circuit Court of Appeals Archives
- Area(s) of Law: Evidence
- Date Filed: 08-27-2012
- Case #: 11-50132
- Judge(s)/Court Below: Circuit Judge Fletcher for the Court, Circuit Judge Kleinfield; Dissent by Circuit Judge M. Smith
- Full Text Opinion
Defendant issued stock to a Mr. Owens without disclosing the information to the SEC according to Rule S-8. The SEC brought a civil enforcement action against defendant, which he settled, and then he was indicted for securities fraud, of which he was found guilty. Defendant appeals the decision of the district court to allow evidence of the SEC’s civil suit at trial because the prosecution used it to prove his mental state, in violation of Federal Rule of Evidence 404. The Ninth Circuit reversed the trial court’s ruling because the prosecution failed to prove that the jury could reasonably conclude from the SEC's complaint that defendant was guilty of prior misconduct. The Court cited two reasons for its ruling: first, the settlement was not evidence of guilt because defendant could have settled for any number of reasons other than culpability. Second, the complaint was improper evidence because it did not prove that defendant had violated Rule S-8, it merely alleged it. The Court found that the error was not harmless because in light of the prosecution’s weak case and frequent reference to the civil complaint, the jury could easily have been swayed to find the defendant guilty based on that evidence. REVERSED and REMANDED.