United States v. Jemal

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit

6-20-1994

United States of America v. Jemal
Precedential or Non-Precedential:

Docket 93-5172

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 UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

________________

NO. 93-5172
________________

UNITED STATES OF AMERICA,

Appellee

v.

DAVID JEMAL,

Appellant

______________________________________

On Appeal From the United States District Court
For the District of New Jersey
(D.C. Crim. No. 91-00535-02)
______________________________________

Argued: May 12, 1994

Before: BECKER, and LEWIS, Circuit Judges, and
POLLAK, District Judge.1

(Filed: June 21, 1994)

RICHARD E. MISCHEL, Esquire (ARGUED)
233 Broadway
New York, NY 10279

Attorney for Appellant

MICHAEL CHERTOFF,
United States Attorney
EDNA B. AXELROD (ARGUED)
JOHN J. FARMER, JR.

1
Honorable Louis H. Pollak, United States District Judge for the
Eastern District of Pennsylvania, sitting by designation.

1
 Assistant U.S. Attorneys
Office of the U.S. Attorney
970 Broad Street
Room 502
Newark, NJ 07102

Attorneys for Appellee

_____________________________

OPINION OF THE COURT
_____________________________

BECKER, Circuit Judge.
This appeal from a judgment in a criminal case presents

an important question under Federal Rule of Evidence 404(b):

whether a defendant may, by offering a comprehensive and

unreserved stipulation that he possessed the knowledge, intent,

motive, opportunity, or other fact sought to be established by

Rule 404(b) evidence, prevent the government from putting on

evidence of the defendant's prior bad acts. This question arises

in a mail fraud case stemming from a "bust-out" scheme allegedly

masterminded by defendant David Jemal. Along with co-conspirator

Norman Levy, Jemal allegedly started a business (Capital

Merchandise), increased its credit rating by fraudulent means,

bought goods for resale on credit with no intention of paying the

sellers, sold the goods, kept the money, and declared the

corporation bankrupt. For this, a jury convicted him of one

count of conspiracy to commit mail fraud, 18 U.S.C. § 371, and

for six substantive counts of mail fraud, 18 U.S.C. § 1341.

Over Jemal's objections, the district court allowed the

government to introduce evidence of Jemal's involvement in prior

2
insurance frauds and bust-outs in order to prove he knew and

intended Capital Merchandise to be a bust-out. Jemal argues that

because he indicated his willingness to stipulate to knowledge

and intent, the prior bad acts evidence should have been

excluded. Although we agree with Jemal that a district court

should generally refuse to admit evidence of a defendant's prior

bad acts to show knowledge and intent when the defendant has

profferred a comprehensive and unreserved stipulation that he

possessed the requisite knowledge and intent (or other fact

sought to be established by the prior bad acts evidence), Jemal's

offer was not sufficiently comprehensive to remove those issues

from this case. Inasmuch as the Rule 404(b) evidence was

otherwise admissible and not subject to exclusion under Federal

Rule of Evidence 403, we hold that the district court did not

abuse its discretion in admitting the evidence. The judgment of

the district court will therefore be affirmed.2

I. FACTS AND PROCEDURAL HISTORY

In September 1985, Jemal approached his attorney,

Joseph Indick, about incorporating a business for him and a

relative. In November 1985, Jemal began discussing this plan

with Levy, his cousin. In January 1986 he specifically proposed

to Levy that they start a "wholesale jobbing business" in the

2
The only other contention advanced by Jemal on appeal -- that it
was plain error for the district court to fail to give the jury a
cautionary instruction that the guilty plea of Jemal's alleged
co-conspirator did not constitute evidence of Jemal's guilt --
is, in light of other instructions the court gave, clearly
without merit and does not warrant discussion.

3
back office of Big Bargain Stores -- one of Jemal's retail

stores. He suggested that they buy merchandise and resell it to

"mom and pop" retail stores. At the end of January, Jemal

informed Levy that he could raise the capital if Levy was willing

to "operate the business." They agreed to incorporate the

business under the name Capital Merchandise.

Jemal then formed a corporation and asked Levy to be

the corporation's president. In March 1986 he brought Levy with

him to Indick's office. At the meeting, Levy, but not Jemal,

signed corporate by-laws and board resolutions listing Levy as

the president, vice-president, treasurer, secretary, and

subscriber to the stock of Capital Merchandise. These documents

had been backdated to September 23, 1985, which Indick testified

was not inappropriate as a means of reflecting the "reality" that

Levy had been operating the "corporation" on the dates indicated.

Levy also signed a lease, which he said Jemal had prepared, for

part of Jemal's premises at 143 Newark Avenue -- a lease

backdated to October 22, 1984 and purporting to run from November

1, 1984 to October 31, 1986, although Levy did not move into the

office until March, 1986. The lease was purportedly assigned to

Capital Merchandise in November 1, 1985.

On March 10, 1986, Levy opened a bank account for

Capital Merchandise for which he signed a signature card allowing

him to withdraw funds. The next day, according to Levy, Jemal

signed an additional signature card with the name "Mike Levy"

saying that he "just want[ed] to use that name." Levy told the

4
bank that "Mike" was his brother and would sign for funds in case

of emergency.

Levy and Jemal then began to purchase merchandise from

wholesalers, substantiating their credit worthiness by stating

that they had been in business for a couple of years as evidenced

by the backdated lease. But Capital Merchandise needed to

establish a more significant credit history in order to begin

buying large quantities of merchandise. Thus, Jemal approached

Sam Kassin, an acquaintance who had familiarity with bust out

schemes and asked for advice on how to inflate the credit history

of the corporation. Kassin provided this advice in June 1986,

and agreed to write purchase orders for Capital Merchandise.

Jemal also approached his acquaintance Richard Beda, told him

(according to Beda) that he was "going to make a bust-out" of

Capital Merchandise, and asked if he could used Beda's company as

a credit reference. Beda agreed and sent out 20 to 40 references

indicating that Capital Merchandise's credit was very good.

During this period, Jemal advised Levy to remove his

name from the corporate documents "after discussions we had that

we were planning to scam the company;" Kassin provided similar

advice. In August, although made to look as if it was in July,

Levy resigned as director and president of the corporation and

inveigled his invalid father Morris Levy to sign the name "Jack

Levy" on documents naming Jack Levy the sole shareholder,

director, and president of Capital Merchandise. Also in August

1986, Capital Merchandise submitted a credit statement, signed by

"Jack Levy", to Dun and Bradsteet. Jemal apparently fabricated

5
the statement to show equities, sales, and profits far above

their actual values.

Soon thereafter, according to Levy, Jemal and Levy

discussed their strategy of running the corporation into

bankruptcy and then satisfying creditors by having a marshal

liquidate remaining assets. They began ordering merchandise in

large quantities with no intention of paying for it. Levy

testified that most orders and sales were made by Jemal. However,

Jemal and Levy began feuding, and, after November, Levy's

involvement in Capital Merchandise was very limited. In January

1987 Levy received his remaining "payoff" of $5,000, bringing his

total compensation to $14,000. Jemal took 80-85% of the income,

some of it allegedly for rent. By March 1987 Capital Merchandise

was essentially defunct, with the corporate bank account closed

for insufficient funds.

Jemal was indicted for engaging in a conspiracy to

commit mail fraud, 18 U.S.C. § 371, and for six substantive

counts of mail fraud, 18 U.S.C. § 1341. Norman Levy, who was

named as a co-conspirator and a co-defendant, pleaded guilty to

conspiracy to commit mail fraud. After a jury trial, Jemal was

convicted on all counts.

II. PRIOR BAD ACT TESTIMONY

A. The Evidence and Defendant's Offer to Stipulate

Jemal's defense was essentially that he was an innocent

landlord who had no involvement in the bust-out scheme

perpetrated by Levy and others. He sought to impeach Levy and

6
the government's other witnesses by demonstrating that they were

testifying because of deals they had made with the government, by

showing their past tendency to lie, their past crimes, and, with

regard to Levy, by his history of drug abuse.

Over continuous objections, the government introduced

evidence of prior crimes Jemal had allegedly committed,

ostensibly to show Jemal's knowledge of the nature of a bust-out

scheme and his intent to perpetrate one. Kassin testified that

Jemal had been one of his partners in a bust-out of a store

called SBL Trading in 1976 or 1977; Jemal had served as SBL

Trading's landlord and had received 25% of the profits. Kassin

also testified that he had operated a bust-out in 1979 of which

Jemal was aware and from which Jemal had wanted to purchase

discounted merchandise. Finally, Kassin testified that he had

operated a bust-out in 1982 or 1983 which moved into a building

housing one of Jemal's businesses -- a business which then ceased

operations (apparently implying that Jemal decided to use the

space for the bust-out scheme).

Richard Beda testified that in 1986 Jemal had purchased

damaged clocks from him so that he could "stage" a flood and file

an insurance claim (allegedly a regular practice of Jemal). Beda

also testified that during a bust out operation he had operated

in 1985, Jemal had advised him to make a lease agreement similar

to that later entered into by Capital Merchandise.

Just before trial, Jemal voiced his opposition to the

introduction of this prior bad acts evidence. His counsel

stated:

7
 This case should be distinguished from one in
which we acknowledge that the defendant was
either an employee or an officer of the
corporation, that he was committing some acts
which were otherwise innocent. Then the
issue of the defendant's knowledge becomes
important. The issue of his intent becomes
important. In this case, our contention,
quite simply, is that the defendant was not
involved. The government alleges that my
client was a signatory on the checking
account and that he used the name "Mike Levy"
as an alias. We deny that the defendant ever
signed a check or had any power to sign any
checks. We deny that my client used the name
"Mike Levy."

Defense counsel continued that in order to preclude the

introduction of the prior bad acts evidence:
I'm prepared to stipulate that if the
government can establish that my client was
the signatory on the checking account, and
that if he participated in the other acts as
described by Norman Levy, that they can find
that the defendant had the requisite
knowledge and intent as far as the mail fraud
is concerned.

Nonetheless, the district court ruled that the prior

bad acts testimony was admissible as showing modus operandi,

intent, and lack of mistake. The court indicated that its

probative value outweighed any undue prejudice and that it was

too difficult to obtain a useful stipulation on intent in this

case. Id.
Defense counsel then offered a new stipulation saying:
[w]ith regard to the Count 1 of the
indictment charging conspiracy, I would
stipulate to all of the elements of the -- of
that count of the indictment, save the
defendant's membership in the conspiracy.
With regards to Counts 2 through 7 alleging
mail fraud, I would submit that the only

8
 issue remaining is the issue of acting in
concert. And even with regard to the issue
of acting in concert, I will stipulate that
if the government -- if the jury finds that
the testimony of Norman Levy is truthful,
then the jury may find that the defendant had
the requisite intent and may consider the
remaining elements of acting in concert.

After considering this stipulation, the court concluded that

"[e]ven with the proposal . . ., I think it's highly relevant

under the issue of knowledge of what bust-outs are, how they

operate. I think it works also as evidential on the issue of

lack of mistake, so that even though intent may not be in play,

those others certainly are."

Finally, after the prosecution had presented fifteen

witnesses, defense counsel again raised the Rule 404(b) issue,

offering to stipulate that:
Levy testified that David Jemal committed the
following acts: 1. Knowingly and
intentionally entering into a fictitious
lease arrangement. 2. Participating in the
preparation and back-dating of corporate
documents. 3. Supplying false financial
information to Dun & Bradstreet, and to
creditors. 4. Ordering merchandise on
behalf of Capital Merchandise, Inc. 5.
Selling merchandise by Capital Merchandise,
Inc. By his plea of not guilty David Jemal
denies having committed any of these acts. If
you find that the government has proven
beyond a reasonable doubt any one or more of
the acts alleged above, then I instruct you
that you must find that the defendant
possessed the requisite knowledge and intent.

Relying on its prior rationale, the district court again rejected

the offer to stipulate, but it did give limiting instrutions to

the jury with respect to the use of the bad acts evidence.

9
 B. The Proper Rule

1) Background

Fed.R.Evid. 404(b) begins by stating that:
[e]vidence of other crimes, wrongs or acts is
not admissible to prove the character of a
person in order to show that he acted in
conformity therewith.

We have stated that:

[c]haracter evidence is not rejected because
it is irrelevant. On the contrary, `it is
said to weigh too much with the jury and to
so overpersuade them as to prejudice one with
a bad general record and deny him a fair
opportunity to defend against a particular
charge.' Michelson v. United States, 335
U.S. 469, 475-76, 69 S. Ct. 213, 218, 93
L.Ed. 168 (1948).

United States v. Sampson, 980 F.2d 883, 886 (3d Cir. 1992)
Nonetheless, while prior bad acts evidence is

inadmissible to prove that the defendant "acted in conformity

therewith," "[character] evidence may . . . be admissible for

other purposes, such as proof of motive, opportunity, intent,
preparation, plan, knowledge, identity, or absence of mistake or

accident." Fed.R.Evid. 404(b). We have recognized that Rule

404(b) is a rule of inclusion rather than of exclusion. See

United States v. Scarfo, 850 F.2d 1015, 1019 (3d Cir.), cert.

denied, 488 U.S. 910, 109 S. Ct. 263 (1988). Evidence can be

admitted even if it does not fit one of the specific exceptions

listed in the rule, so long as it is used for a purpose other

than proving a defendant's likelihood to have committed this

10
particular crime based on an inference drawn from evidence

pertaining to his character. Id. at 1019.

Despite our characterization of Rule 404(b) as a rule

of admissibility, we have expressed our concern that, "[a]lthough

the government will hardly admit it, the reasons proffered to

admit prior bad act evidence may often be potemkin village,

because the motive, we suspect, is often mixed between an urge to

show some other consequential fact as well as to impugn the

defendant's character." See Sampson, 980 F.2d at 886.

As a result, we held in Sampson that, "[i]f the government offers

prior offense evidence, it must clearly articulate how that

evidence fits into a chain of logical inferences, no link of

which can be the inference that because the defendant commited .

. . offenses before, he therefore is more likely to have commited

this one." Id. at 887. Moreover, once the government

articulates how the evidence fits into such a chain, the district

court must weigh the probative value of the evidence against its

potential to cause undue prejudice and articulate a rational

explanation on the record for its decision to admit or exclude

the evidence. Id. at 889.3

3
These steps follow the test for admissibility set out by the
Supreme Court in Huddleston v. United States, 485 U.S. 681, 691,
108 S. Ct. 1496, 1502 (1988). The Supreme Court stated that for
prior bad acts evidence to be admitted: 1) it must have a proper
purpose under Rule 404(b); 2) it must be relevant under Rule 402;
3) its probative value must outweigh its prejudicial effect under
the standard of Rule 403; and 4) the court must charge the jury
to consider the evidence only for the purpose for which it was
admitted. See id.

11
 We review the Rule 404(b)/Rule 403 weighing process

only for abuse of discretion; hence the district court has

significant leeway in reaching its decision. Id. at 886. "If

judicial self-restraint is ever desirable, it is when a Rule 403

analysis of a trial court is reviewed by an appellate tribunal."

United States v. Long, 574 F.2d 761, 767 (3d Cir.), cert. denied,

439 U.S. 985, 99 S. Ct. 577 (1978).

2) Stipulations

The Second Circuit has held that, as a matter of law,

it is an abuse of discretion for district courts to admit prior

bad acts evidence to prove an issue such as knowledge or intent

if the defendant takes sufficient steps to remove that issue from

the case. See, e.g., United States v. Manafzadeh, 592 F.2d 81,

87 (2d Cir. 1979); United States v. Mohel, 604 F.2d 748, 753 (2d

Cir. 1979), United States v. Figueroa, 618 F.2d 934, 941-42 (2d

Cir. 1980). The initial question we are faced with in this case

is whether we should follow the Second Circuit's rule.

Under the Second Circuit's rule, if the government

offers Rule 404(b) evidence to prove knowledge or intent, the

defendant can avoid introduction of the evidence if his defense

is that "he did not do the charged act at all." United States v.
Ortiz, 857 F.2d 900, 903 (2d Cir. 1988), cert. denied, 489 U.S.

1070 (1989). Thus, where a defendant has claimed that he did not

distribute drugs at all rather than claiming that he distributed

a substance that turned out to be drugs without knowledge that

the substance was drugs, the Second Circuit has precluded the

admission of prior crime evidence. See, e.g., Mohel, 604 F.2d at

12
755; Figueroa, 618 F.2d at 944; United States v. Colon, 880 F.2d

650, 662 (2d Cir. 1989). Many other courts of appeals

essentially agree with the Second Circuit. See United States v.

Jenkins, 7 F.3d 803, 807 (8th Cir. 1993) (observing that this

interpretation comports with the clear language of the rule which

makes bad acts evidence inadmissible to prove character); cf.

United States v. Silva, 580 F.2d 144, 148 (5th Cir. 1978)

(reasoning that where defendant's sole defense is denial of

participation in the act, there is no issue of intent), United

States v. Palmer, 990 F.2d 490, 495 (9th Cir. 1993), cert.

denied, 114 S. Ct. 1120 (1994) (holding that where defendant's

theory was that he had moved onto the property and had no part in

growing the marijuana that was there, his statement that he had

sold marijuana before was inadmissible).

In contrast, the Seventh Circuit has held that, "`[i]n

cases involving specific intent crimes, intent is automatically

an issue, regardless of whether the defendant has made intent an

issue in the case.'" United States v. Mazzanti, 888 F.2d 1165,

1171 (7th Cir. 1989), (quoting United States v. Monzon, 869 F.2d

338, 344 (7th Cir.), cert. denied, 490 U.S. 1075, 109 S. Ct. 2087
(1989)). At a minimum, this means that in conducting the Rule

403 balancing test, district courts in the Seventh Circuit have

been directed to consider prior bad acts evidence to be

significantly probative regardless of the defense employed by the

defendant. Mazzanti itself upheld a district court decision

allowing the introduction of evidence of prior drug dealing where

13
the defendant conceded his presence at or near the scene but

denied any wrongdoing. See id.4

We have not yet taken a definitive position on the use

of stipulations to remove Rule 404(b) evidence from a case,

although we have expressed ourselves in the context of Rule 403

balancing generally. In United States v. Provenzano, 620 F.2d

985 (3d Cir.), cert. denied, 449 U.S. 899, 101 S. Ct. 267 (1980),

we considered the government's attempt to prove that a

corporation was a sham corporation by introducing evidence that

the defendant was in jail during the time period that he was

supposedly running the corporation. In considering the

defendant's offer to stipulate that he was unavailable, we held

that:
[a]n offer to stipulate does not
automatically mean that the fact may not be
proved instead, as long as the probative
value of the proof still exceeds the
prejudicial effect, taking into account the
offer to stipulate. United States v. Grassi,
602 F.2d 1192, 1197 (5th Cir. 1979) ("A cold
stipulation can deprive a party `of the
legitimate moral force of his evidence,' 9
Wigmore on Evidence § 2591 at 589 (3d ed.
1940), and can never fully substitute for
tangible, physical evidence or the testimony
of witnesses.")

4
The Fourth Circuit has taken an intermediate approach. It has
held that the use of prior bad acts evidence must be examined
meticulously in each case and has strongly implied that the
probative value of prior bad acts evidence is significantly less
when the defense is that the defendant did not perform the
charged act at all. See United States v. Hernandez, 975 F.2d
1035, 1040 (4th Cir. 1992). This is similar to the approach we
will take in this case. See infra at 17-19.

14
Id. at 1004. We concluded in Provenzano that because the

proposed stipulation would leave some doubt as to whether the

defendant was completely unavailable and because of "the

conceptual difficulty of structuring a stipulation that would

convey the same fact of unavailability due to incarceration

without adverting to that concept," id., admission of the

evidence was not an abuse of discretion.

In United States v. Sheeran, 699 F.2d 112 (3d Cir.

1983), we summarized Provenzano as follows:
Although "[a]n offer to stipulate does not
automatically mean that the fact may not be
proved instead, as long as the probative
value of the proof still exceeds the
prejudicial effect taking into account the
offer to stipulate," United States v.
Provenzano, 620 F.2d 985, 1003-04 (3d Cir.
1980 (emphasis added), we have held that
evidence admissible in the absence of such a
concession sometimes should not be admitted
where the defendant has offered "a suitable
stipulation . . . that would convey the same
fact," id. at 1004.

Sheeran, 699 F.2d at 118 n.12. In Sheeran, in the absence of an
offer to stipulate, we upheld the admission of evidence of prior

bad acts by alleged co-conspirators to prove their control over

companies involved in the charged conspiracy.

While we did not decide Provenzano and Sheeran under

the specific rubric of Rule 404(b), we think that Provenzano,

which involved the question of whether to admit evidence that the

defendant was in jail, was in essence a Rule 404(b) case

involving prior bad acts evidence. Thus, at least in the absence

of in banc reconsideration, Provenzano and Sheeran would seem to

15
prevent us from adopting the per se rule of the Second Circuit.

That may be just as well inasmuch as there may be some cases,

presently unforeseeable, which the district court might identify

as properly calling for the admission of Rule 404(b) evidence

notwithstanding a defendant's willingness to stipulate.

However, although we leave the door open, we believe

that district courts should generally deem prior bad acts

evidence inadmissible to prove an issue that the defendant makes

clear he is not contesting. The relevance of the prior bad acts

evidence will be minimal in most such cases, since the evidence

will not bear on the issues being contested. And the undue

prejudice will be quite high, since prior bad acts evidence tends

to be quite persuasive. This is consistent with Provenzano's

rule that stipulations should be taken into account in conducting

a Rule 403 balancing analysis. See United States v. Hernandez,

975 F.2d 1035, 1040 (4th Cir. 1992) (employing a Rule 403

balancing analysis to reverse a district court's decision to

admit evidence of defendants' prior sale of crack where the

defense was that the defendant did not sell the crack involved at

all and where there was no indication that the district court had

carefully balanced the evidence).

We emphasize, however, that to succeed, the defendant's

proffer must be comprehensive and unreserved, completely

eliminating the government's need to prove the point it would

otherwise try to establish using 404(b) evidence. As the Second

Circuit explained, whether a defendant has removed an issue from

the case:

16
 depends not on the form of words used by
counsel but on the consequences that the
trial court may properly attach to those
words. When the Government offers prior act
evidence to prove an issue, counsel must
express a decision not to dispute that issue
with sufficient clarity that the trial court
will be justified (a) in sustaining objection
to any subsequent cross-examination or jury
argument that seeks to raise the issue and
(b) in charging the jury that if they find
all the other elements established beyond a
reasonable doubt, they can resolve the issue
against the defendant because it is not
disputed.

Figueroa, 618 F.2d at 942.

When a defendant indicates a desire to preclude the

admissibility of Rule 404(b) evidence by stipulating away a

particular issue but the government offers a reasonable

explanation as to why the proposed stipulation is inadequate, the

district judge should explore the possibility of fashioning an

agreement on a more comprehensive stipulation -- preferably in

limine, as the recent Rule 404(b) amendment contemplates. See

Fed. R. Evid 404(b) (amended in 1991). Finally, we note that

even if the defendant is unwilling to make sufficient concessions

to completely remove an issue from the case, the district court

should weigh prejudice against probative value only after taking

into account the defendant's "partial" stipulation, a weighing

that we will review for abuse of discretion. Cf. Hernandez, 975
F.2d at 1040 (holding that the probative value of the use of

prior bad acts evidence can be reduced by the defendant's

willingness to concede certain issues).

17
 C. Application in this Case

We think that the district court acted properly in

admitting prior bad acts evidence here to show that Jemal

intended his actions to be part of a bust-out scheme and knew

that his acts were part of such a scheme. Jemal did not offer a

stipulation that completely removed the issues of intent and

knowledge from the case despite an apparently sincere effort to

do so, nor can we think of a stipulation that would have done the

job. Cf. Garcia, 983 F.2d at 1174 ("[N]otwithstanding the

sincerity of the defendant's offer, the concession must cover the

necessary substantive ground to remove the issue from the

case."). Although defense counsel asserted that "our contention,

quite simply, is that the defendant was not involved," he had to

concede that Jemal had participated in some of the acts alleged

by the government to have been part of the bust-out scheme. With

respect to those acts, defense counsel had to claim that while

Jemal performed the acts, he did not do so with an intent to

perpetrate a "bust out."

This becomes apparent from Jemal's final, and most

complete, offer to stipulate to knowledge and intent -- an offer

made after the district court stated its view that it was

impossible to obtain a useful stipulation in this case. Jemal

offered to stipulate that if the jury found that he had performed

any of five acts described by Norman Levy, then it should find

that he "possessed the requisite knowledge and intent." See
supra at 10-11. But Jemal's position falters at the first act

specified in the stipulation -- the backdating of the lease. The

18
government's position is that Jemal knowingly entered the

backdated lease with the intention of having Capital Merchandise

use the lease to boost its credit rating. This act was among the

overt acts specified in the indictment as taken by the defendant

in furtherance of the alleged conspiracy. Yet Jemal's proposed

stipulation to knowledge and intent with respect to the lease

would have required the government to prove knowledge and intent:

Jemal proposed to stipulate that if the jury found that he

"knowingly and intentionally entered into a fictitious lease

arrangement," it should find that he possessed the requisite

knowledge and intent.

Indeed, defense counsel admitted that his client had

signed the lease but stated that he had not intended to use the

lease as part of a bust-out. This brings the elements of

knowledge and intent to the fore.5 Cf. Provenzano, 620 F.2d at

5
The government also claims that Jemal's proposed stipulation was
inadequate because it did not list all of the acts which
constituted Jemal's alleged crimes (assuming that he committed
the acts with the requisite intent). For example, the government
argues that Jemal sought to use Richard Beda's company as a phony
credit reference, but Jemal's proposed stipulation did not cover
this alleged act. The government, however, did not identify this
supposed deficiency in the stipulation at trial; nor did the
district court point to the absence of these acts in the
stipulation as a basis for rejecting it. Given Jemal's sincere
attempt to eliminate intent and knowledge from the case and his
proposal of several alternative stipulations, we think that if
the government or the district court felt that additional acts
needed to be part of the stipulation to make it adequate, they
should have pointed to these acts and allowed Jemal an
opportunity to add them to the stipulation.
Moreover, the additional acts specified by the
government would not have helped the government's case, for they
were not sufficient to allow the jury to find Jemal guilty even
if they were performed with the requisite intent. None of these
acts was specified in the indictment as an overt act taken in

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1004 (observing that a stipulation that the defendant was

unavailable did not completely remove the issue as to whether the

defendant might have been able to return in an emergency to help

run the company in question); Garcia, 983 F.2d at 1174-75

(explaining that a concession that the defendant knew something

about cocaine trafficking did not remove the issue of knowledge

from the case where his defense was that he did not know of the

presence of cocaine in his closet and did not apprehend the

nature of drug paraphernalia that was visible in his apartment);

Colon, 880 F.2d at 658 (observing that a stipulation to intent if

the government proved that the defendant intended to direct an

undercover officer to a particular person to buy drugs did not

remove the issue of intent from the case).

Moreover, as the second part of the proposed

stipulation, Jemal agreed that if the government proved that he

had participated in the backdating of corporate documents, the

jury could then infer knowledge and intent. Unlike the first act

specified in the stipulation, proof of this act does not on the

surface require proof of knowledge and intent. But Jemal's

actual argument with respect to this backdating was that, while

furtherance of the conspiracy (in fact, none was an act taken
with Jemal's alleged co-conspirator) and none was an act which
involved mail fraud. Thus, in order to obtain a conviction on
either the conspiracy or the substantive counts, the government
had to prove that Jemal performed at least one of the acts listed
in his proposed stipulation -- and Jemal conceded that if the
government proved that he performed any of these acts, then the
jury should find the requisite knowledge and intent. We
therefore do not rely on Jemal's failure to list additional acts
in his proposed stipulation as a basis for upholding the district
court's Rule 404(b) determination.

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he did backdate the documents, he did so without the intent to

use the documents for a bust-out. Defense counsel argued, "you

see, if [the intent to defraud] occurred during a meeting at Sam

Kassin's office[,] . . . if that's when Mr. Jemal allegedly made

his mind up to bust this corporation out, then the backdating of

the documents . . . doesn't have a sinister intent."6 Thus,

Jemal had no real way of completely excising the issues of

knowledge and intent from this case.

Hypothetically, Jemal could have removed these issues

by contending that he did not participate in any of the acts

alleged by the government -- including formation of the

fictitious lease and backdating of the corporate documents -- and

then he could have conceded that, if the government proved that

he engaged in any of these acts, the jury should find knowledge

and intent. But Jemal did not offer to make such a concession

and could not have done so as part of a reasonable defense

strategy, because the evidence that Jemal engaged in these acts

was too strong for him realistically to contest it.

Jemal's proposed stipulation did reduce the role that

knowledge and intent played in the case, since, with respect to

the acts other than signing the fictitious lease and backdating
6
Defense counsel made this statement after the district court had
refused to accept the proposed stipulation. It may be that if
the district court had accepted his proposed stipulation, counsel
would simply have argued that defendant did not participate in
the backdating of the corporate documents and he would not have
argued intent. However, the evidence of defendant's
participation in the backdating of the documents was
overwhelming, thus, the fact that the district court's refusal to
accept the stipulation foreclosed the possibility of relying on
this strategy can be deemed harmless error.

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the documents, Jemal was willing to concede knowledge and intent

if the government proved he engaged in the acts. The question

becomes whether, given this concession, the district court abused

its discretion in finding that the probative value of the

evidence outweighed its undue prejudice. Jemal makes no real

effort to argue that it did -- he expends almost all of his

capital in the contention we have now rejected, namely, that he

had completely removed the issues of knowledge and intent from

the case.

We hold that the district court did not abuse its

discretion. The testimony that Jemal had participated in prior

bust-outs (in at least one case by acting as a landlord), and

that he had advised Beda that in order to successfully engage in

a bust-out he should formulate a lease agreement similar to that

later used by Capital Merchandise, was highly relevant to the

issue of whether Jemal knowingly and intentionally entered a

fictitious lease agreement for the purpose of engaging in a bust-

out. The district court was well within its discretion in

holding that the probative value of this evidence was not

substantially outweighed by any unfairly prejudicial effect.

The judgment of the district court will be affirmed.

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