Admission of Defendant’s Racist Rant Violates Rules 403, 404

Does after-hours racism reflect poor business judgement? That question is the crux of the Sixth Circuit’s recent decision in United States v. Hazelwood. The government charged multiple employees at a large gas company with conspiracy to commit wire fraud. The fraud centered around rebates which the employees promised, but then failed to deliver. Many employees pleaded guilty, but Mark Hazelwood—the company’s president—took the case to trial.

Hazelwood’s main defense was that he did not know about the fraud that his subordinates committed. However, defense counsel also elicited some testimony about Hazelwood’s business acumen. One witness testified that Hazelwood was an excellent president who had great relationships with customers. Counsel cross-examined another witness about whether it would have been logical for Hazelwood to participate in the fraud. Counsel established that because the fraud was such a small part of the company’s sales, it was “incredibly stupid and dumb from a business standpoint” to risk bringing down the company by committing fraud. 

The government then sought to introduce a recording of Hazelwood making extremely racist comments and using slurs. A cooperating witness had worn a wire to the company’s retreat. The witness had recorded an earlier session where executives discussed the fraud scheme. However, Hazelwood had not been present at that session. After the business meetings had ended, the employees watched a football game while drinking and “spewing profanities about African Americans and women.” Hazelwood arrived and participated prominently in this racism.

The government argued that this recording was appropriate rebuttal to Hazelwood’s character evidence for good business judgement. Hazelwood objected, arguing that he had not introduced character evidence, that the recording was not related to good business judgement, and that the danger of unfair prejudice outweighed any probative value.

The district court agreed with the government. It ruled that the defense had elicited testimony that Hazelwood was too good a businessman to risk the fraud. And the racist recording supported the argument that Hazelwood was not too good a businessman to engage in conduct that would put the company at serious risk if it were discovered. 

On appeal, a divided panel reversed the decision. The majority held that Hazelwood’s racism was not relevant to the elements of the crime or to Hazelwood’s argument that he was a good businessman. The Court cited Henry Ford, “a rabid anti-Semite” who nevertheless had great business acumen. Hazelwood’s despicable comments—made at a private after hours gathering—did not reflect on his business judgement.

Additionally, the district court violated Rule 405 in two ways. The court had allowed the government to present extrinsic evidence of alleged character evidence, and the evidence was of specific instances of conduct rather than testimony about reputation.

The racist recording was also improper propensity evidence. The government was “using another act (racist and misogynist language), to prove that Hazelwood had a character trait (recklessness), such that on a particular occasion he acted in accordance with that character trait (by committing fraud).”

Finally, the danger of unfair prejudice substantially outweighed any probative value. The recording was so offensive that it posed an extreme risk of unfair prejudice; “Hazelwood and his companions ma[d]e absurdly offensive remarks about African Americans and women and laugh[ed] along to a wrenchingly racist and misogynistic tune.” Accordingly, the Sixth Circuit reversed and remanded.

The dissent would have affirmed the district court. The dissent argued that the recording was relevant. If Hazelwood was willing to use such offensive language with his subordinates, even after hours, it made it less probable that he was a good businessman. And whether Hazelwood was a good businessman was relevant as to whether he would have risked participating in the fraud.

Full opinion available here.


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