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U.S. v. Jemal

filed: June 21, 1994; As Corrected June 24, 1994.


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

Before: Becker, and Lewis, Circuit Judges, and Pollak, District Judge.*fn*

Author: Becker


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 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.*fn1


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 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 wanted to use that name." Levy told the 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 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.


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 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 ...

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