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.
No comments:
Post a Comment