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United States of America v. Patrick J. Shelow

December 8, 2011


The opinion of the court was delivered by: Baylson, J.


I. Introduction

Presently before the Court is the Government's Motion in Limine to Admit Evidence Under Federal Rule of Evidence 404(b), filed on December 8, 2010 (ECF No. 26), and Defendant Patrick Shelow's response thereto (ECF No. 30). On January 21, 2010, a grand jury indicted Defendant on five counts of wire fraud relating to his scheme to defraud married victims T.A. and L.A. ("the victims"), based on conduct between 2005 and the date of the indictment. In advance of the trial, the Government has moved to introduce evidence concerning the Defendant's relationship with the victims beginning in the 1990s, prior to the activities charged in the indictment. The Government also seeks to introduce evidence of Defendant's distressed financial condition during the period of time in which the acts in the indictment allegedly occurred.

The Government offers two alternative theories for admission. First, the Government argues that the evidence is "intrinsic" to the charged crime, and excluded from the scope of Rule 404(b). Second, the Government contends that the evidence is probative of the exceptions under Rule 404(b). The Court rejects the Government's theory that the evidence is intrinsic to the offense of wire fraud. However, the Court will grant the Government's Motion in Limine because the evidence is not to be admitted to show propensity, but rather is permissible under Rule 404(b) to show the Defendant's intent, motive, opportunity, and knowledge.

II. Background*fn1

A. The Charged Conduct

The indictment charges that Defendant conducted a fraudulent scheme to obtain approximately $1.2 million from the victims between December 2005 and December 2007 to finance an oil-drilling project in Ecuador. In the first phase of the scheme, Defendant allegedly solicited approximately $845,000 from the victims by selling them stock in a company that was allegedly carrying out the drilling, and by charging them for their share of costs associated with the project. In the second phase of the scheme, Defendant allegedly solicited $350,000 from the victims based on fraudulent representations that he needed the money to buy out another investor in the project and that the loan was critical to the success of the project. In both instances, the victims sent funds by interstate wire transfer into a bank account registered to St. Joe Trading Company, which Defendant owns and solely controls. Defendant did not invest the victims' funds into the Ecuadorian oil-drilling project, which was a fabrication. Rather, Defendant used the victims' funds to finance his personal expenses.

B. The Contested 404(b) Evidence

The Government seeks to admit two categories of evidence in this Motion in Limine.

One category concerns the relationship between Defendant and the victims, which began in the mid-1990s. At their initial meeting, Defendant told the victims he was president of a petroleum trading company. Soon after, the victims began investing money in various projects promoted by Defendant as investment opportunities through which the victims believed they would earn profits. The victims invested more than one million dollars in seven projects promoted by Defendant, not including the Ecuadorian oil-drilling project charged in the indictment, and never received any money back on their investments.

The other category of evidence that the Government moves to admit pertains to Defendant's financial distress during the period of the alleged fraud. Defendant represented to the victims that he was a successful oil trader and businessman to the victims, when his only income in 2005 and 2006 was "pass-through" income from his business, St. Joe's Trading, into which the victims transferred their investments. Defendant owed a substantial amount of money in back taxes to the Internal Revenue Service ("IRS"). The IRS placed a lien on Defendant's house in Florida, which was facing foreclosure because of the significant sum Defendant owed on the mortgage, and Defendant was also building a million dollar home in North Carolina. After Defendant received the $350,000 loan from the victims, he paid the IRS the $100,000 he owed in back taxes.

III. The Parties' Contentions

The Government moves to admit the above evidence either as intrinsic evidence or permissible evidence under Rule 404(b). First, the Government argues that evidence of the Defendant's pre-2005 relationship with the victims is intrinsic to the wire fraud because it will show how the Defendant solicited investments from the victims for numerous projects over the course of a decade, which facilitated the commission of the charged fraud. Evidence of Defendant's financial condition is intrinsic, to prove that Defendant had the intent to defraud the victims, which is an element of wire fraud.

Alternatively, if the evidence is not intrinsic, the Government contends that it is admissible for a proper purpose under Rule 404(b). The long period over which Defendant established a relationship with the victims shows background for the charged crime, and Defendant's financial troubles are probative of his motive to commit the fraud. The ...

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