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United States v. Walters

United States District Court, E.D. Kentucky, Central Division, Frankfort

December 27, 2016

UNITED STATES OF AMERICA, Plaintiff,
v.
BRIAN C. WALTERS, et al., Defendants.

          MEMORANDUM OPINION & ORDER

          Gregory F. Van Tatenhove United States District Judge

         Federal Rule of Evidence 404(b) allows evidence of a criminal defendant's prior bad acts to be introduced for purposes other than proving a person's character and his propensity to act in accordance with that character. In this case, the Government and Defendants dispute whether certain evidence is admissible under that rule. While the Government claims the noticed evidence is relevant to proving Defendants' intent, plan, and knowledge, Defendants maintain admitting the evidence would violate the protections of the rule. For the reasons that follow, the Court GRANTS IN PART but DENIES IN PART Defendant Brian Walters's motion to exclude admission of the evidence in question.

         I

         The five Defendants in this matter are charged with one count of conspiracy to defraud the United States in violation of 18 U.S.C. § 1349 and ninety-nine counts of aiding and abetting one another to commit healthcare fraud in violation of 18 U.S.C. §§ 2 and 1347. [R. 1.] On August 9, 2016, the Government filed a notice of its intent to seek the admission of two categories of evidence falling within the scope of Federal Rule of Evidence 404(b). [R. 112.]

         Specifically, the Government desires to introduce proof of a series of allegedly inappropriate procedures that Defendants' laboratory, PremierTox, used for its urine drug testing, as well as evidence related to allegedly inappropriate payments Defendant Robert Bertram made to promote business referrals to PremierTox. [Id.] Defendant Brian C. Walters filed a response in opposition to the notice, as well as a motion to preclude admission of the evidence and a conditional motion for severance, pending the Court's decision on admissibility. [R. 116; R. 117.] Defendants James W. Bottom and Robin G. Peavler have joined in Defendant Walters's request introduction of the noticed evidence.[1] [R. 120; R. 154.]

         Defendants Walters, Wood, and Peavler maintain the noticed evidence is inadmissible under Federal Rule of Evidence 404(b). Pursuant to that rule, “evidence 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).

         Nevertheless, the rule goes on to note in relevant part that such 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). The Sixth Circuit has adopted a three-part test that courts use to decide whether to admit or exclude evidence under Rule 404(b):

First, the district court must decide whether there is sufficient evidence that the other act in question actually occurred. Second, if so, the district court must decide whether the evidence of the other act is probative of a material issue other than character. Third, if the evidence is probative of a material issue other than character, the district court must decide whether the probative value of the evidence is substantially outweighed by its potentially prejudicial effect.

United States v. Jenkins, 345 F.3d 928, 937 (6th Cir. 2003) (emphasis in original); see also United States v. Yu Qin, 688 F.3d 257, 262 (6th Cir. 2012).

         Notably, Rule 404(b) “does not extend to evidence of acts which are ‘intrinsic' to the charged offense.” Fed.R.Evid. 404 advisory committee's note. Put another way, “Rule 404(b) is not implicated when the other crimes or wrongs evidence is part of a continuing pattern of illegal activity.” United States v. Weinstock, 153 F.3d 272, 276 (6th Cir. 1998) (quoting United States v. Barnes, 49 F.3d 1144, 1149 (6th Cir. 1995)). Ultimately, this Court has broad discretion to determine whether bad acts evidence is admissible. See, e.g., United States v. Stout, 509 F.3d 796, 799 (6th Cir. 2007).

         II

         A

         The United States seeks to introduce evidence of payments made by Defendant Robert Bertram to Willow Rouben and Night Hawks Investment Company in exchange for business referrals to PremierTox and Nexus, a laboratory not referenced in the indictment but allegedly owned, at least in part, by Dr. Bertram. [R. 112 at 3.] These payments, which might violate the Anti-Kickback Statute, 42 U.S.C. § 1320a-7(b)(b), provide a classic example of a “crime, wrong, or other act” under Rule 404(b). Because the test for admitting the evidence is not satisfied, any evidence of these payments shall be inadmissible at trial.

         The relevant three-prong test first asks the Court to consider whether there is sufficient evidence to prove the inappropriate payments actually occurred. The Government claims that evidence of the payments has already been produced through discovery [R. 112 at 4], and several exhibits attached to the Government's notice do seem to corroborate that contention. [See, e.g., R. 153-18.] But whether sufficient evidence ...


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