The opinion of the court was delivered by: Surrick, J.
Presently before the Court is the Government's Motion in Limine to Admit Evidence Regarding Defendant Barrett Byron Staton's Bank Records and Income Tax Returns. (ECF No. 96.) For the following reasons, the Motion will be granted.
On July 21, 2011, a federal grand jury returned a First Superseding Indictment ("Indictment") against Defendants Barrett Byron Staton, Matthew Staton and William Haken, Jr. (Gov't's Mot. 2, ECF No. 96; see also ECF No. 38 (First Superseding Indictment, hereinafter, "Indictment")). Barrett Byron Staton (hereinafter, "Defendant") was charged with: conspiracy to commit wire fraud, in violation of 18 U.S.C. § 1349 (Count One); wire fraud, in violation of 18 U.S.C. § 1343 (Counts Two through Five); mail fraud, in violation of 18 U.S.C. § 1341 (Counts Six through Nine); and making a false statement in a loan application, in violation of 18 U.S.C. § 1014 (Count Ten). (Gov't's Mot. 2; Def.'s Resp. 1-2, ECF No. 104.)
The Indictment asserts that since January 2002, Defendant has been engaged in a fraudulent scheme involving businesses that he either owned or controlled. (Gov't's Mot. 2.) Through these businesses, Defendant brokered leases for new office copy machines. The scheme involved having prospective customers complete a lease and an application for financing. Defendant would present the lease and the customer's credit information to a financing company. (Id.) If the customer's credit was acceptable, the financing company would provide to Defendant's company a lump sum payment for up to 125 percent of the value of the new office copy machines. (Id. at 3.)
Defendant would "entic[e]" the customers to sign new leases by offering to pay off their old copy machine leases and to provide free maintenance services to them. (Id.) However, Defendant would pay off the leases and provide free maintenance services for the first few months only. In addition, Defendant would alter the leases, which his customers had already signed, to include additional copy machines or other features that the customer did not order and ultimately never received. This practice increased the lump sum payment that Defendant would receive from the financing companies. Defendant also would induce customers to complete new lease applications under the guise of "refinancing" their leases on existing copy machines, then submit the new lease applications to an entirely different lease company. This practice would obligate a customer to make two separate lease payments on one copy machine and enabled Defendant to collect two lump sum payments for each machine. Defendant would execute this scheme until he was flooded with customer complaints about unpaid leases, upon which he would shut down his business, only to reopen another business under a different company name shortly thereafter. (Id.) This fraudulent scheme occurred in three distinct phases: (1) Access Business Solutions, Inc. ("ABS"), which Defendant operated from January 2002 to March 2004; (2) First Choice Imaging, LLC ("FCI"), which Defendant operated from May 2005 to March 2007; and (3) NBS Document Solutions, also known as New Business Systems, LLC ("NBS") and World Trade Systems ("WTS"), which Defendant operated from November 2007 to September 2008. (Id.)
The Government seeks to admit the following evidence: (1) ABS bank account records from June 2002 to January 2004; (2) credit card statements related to the ABS bank account; (3) FCI bank account records from July 2005 to December 2006; (4) credit card statements related to the FCI bank account from August 2005 to January 2007; (5) Defendant's personal income tax return for the tax year 2002; (6) a certification for lack of records for Defendant's personal income tax returns for the tax years 2003 through 2008; and (7) certifications of lack of records for corporate income tax returns for ABS, FCI, NBS and WTS for the tax years 2002 to 2008. (Id. at 2 n.1.)
1. Defendant's Bank Account and Related Credit Card Records Over the course of the Government's investigation, bank records from June 2002 to January 2004 were obtained for the primary bank account under Defendant's name ("ABS Bank Account"). The Government states that the Federal Bureau of Investigation ("FBI") analyzed records from this account to determine the nature of the deposits and withdrawals made and subsequently produced a summary of its findings. The Government asserts that this summary shows, inter alia, that over $2 million in deposits were made into the ABS Bank Account during this time frame; and that "significant sums of money" were withdrawn from this account to pay for Defendant's "personal life style." (Id. at 4.) Defendant used the ABS Bank Account to make the following purchases or withdrawals: (1) $60,947.63 in checks written to Defendant; (2) $112,473.80 in unknown cash withdrawals; (3) $13,977.48 in entertainment expenses; (4) $51,372.19 in retail store purchases; (5) $5,620.98 in vacation expenses; and (6) $70,920.35 in credit card payments, which included payments for two credit cards that were in the name of Defendant's wife, who was not an ABS employee. (Id.)
In addition, records from July 2005 to December 2006 were obtained for another bank account under Defendant's name ("FCI Bank Account"). Credit card statements that were paid from this account from August 2005 to January 2007 were obtained as well. (Id. at 4-5.) The FBI analyzed these records. The Government claims that the FBI's analysis revealed that over $2.5 million in deposits were made into this account. (Id. at 5.) The Government also claims that the records show that Defendant "made substantial personal purchases" and withdrawals using the account, including: (1) $258,073.24 in unknown cash withdrawals; (2) $105,048.40 in expenses related to cars; (3) $6,999.82 in jewelry expenses; (4) $1,255.65 in vacation expenses; and (5) $270,915.96 in credit card expenses, which included two credit cards in the names of Defendant and his wife, respectively. (Id.) The records for the credit card under Defendant's name reflected $12,527.59 in vacation-related purchases, and the records for the credit card listed under his wife's name reflected $4,277.55 in retail store purchases. (Id.)
2. Defendant's Tax Returns
Defendant's personal income tax returns, and the corporate income tax returns for the various businesses that he operated or controlled, were obtained as well.
The time frame of Defendant's fraudulent scheme covers the tax years ("TYs") 2002 through 2010. (Id. at 6.) The Government asserts that Defendant's personal income tax return for TY 2002 reveals that it was filed in 2004 and that Defendant claimed a total income of $11,180. However, Defendant claimed that he did not generate any income from ABS, the business operating at the time. (Id.) In addition, the ABS Bank Account records purportedly show "substantial activity starting in June 2002 (the same time [Defendant] incorporated ABS and opened this bank account)." (Id.) Moreover, Defendant did not file any personal income tax returns for TYs 2003 through 2008, the years during which the fraudulent scheme took place. Furthermore, despite owning and operating ABS, FCI, NBS and WTS, Defendant did not file any corporate income tax returns for these companies from TYs 2003 through 2008. (Id.)
Under Federal Rule of Evidence 404(b), parties may not introduce "evidence of extrinsic acts that might adversely reflect on the actor's character, unless that evidence bears upon a relevant issue in the case such as motive, opportunity, or knowledge." Huddleston v. United States, 485 U.S. 681, 686 (1988). Such evidence ...