Securities Fraud: Challenging the Admissibility of Co-Conspirator Statements

When prosecutors bring securities fraud charges, they often rely heavily on co-conspirator statements to prove their case. These out-of-court statements made by alleged co-conspirators are exempt from the hearsay rule under Federal Rule of Evidence 801(d)(2)(E) and can be devastatingly effective evidence against defendants. However, experienced defense attorneys know that there are ways to challenge the admissibility of these co-conspirator statements and weaken the prosecution’s case. This article will examine some of the most common and effective strategies for keeping co-conspirator statements out of evidence.

What Are Co-Conspirator Statements?

Co-conspirator statements refer to any out-of-court statements made by alleged members of a conspiracy that prosecutors want to use as evidence against the defendants. This could include emails, text messages, recorded phone calls, or even statements made to informants or undercover agents. The main reason co-conspirator statements are so useful for prosecutors is that they are exempt from the hearsay rule, whereas most out-of-court statements would be inadmissible hearsay.

Under the Federal Rules of Evidence 801(d)(2)(E), a statement is not considered hearsay if it is offered against an opposing party and “was made by the party’s co-conspirator during and in furtherance of the conspiracy.” This co-conspirator hearsay exemption allows prosecutors to introduce statements that would otherwise be inadmissible hearsay, providing they can prove:

1. A conspiracy existed
2. The defendant and declarant were members of the conspiracy
3. The statement was made during the course of the conspiracy
4. The statement was made in furtherance of the conspiracy

Challenging Co-Conspirator Statements Before Trial

The first opportunity to prevent co-conspirator statements from being used against your client is before trial through a motion in limine. This allows you to challenge the admissibility of the statements before the jury ever hears them. There are several grounds on which you can challenge co-conspirator statements in a motion in limine:

• Argue no conspiracy existed. If the prosecution cannot prove by a preponderance of evidence that a conspiracy existed, then co-conspirator statements cannot be admitted under Rule 801(d)(2)(E), since the first requirement is not met. Force the prosecution to prove – without relying on the statements themselves – that a conspiracy existed.
• Argue the defendant was not part of the conspiracy. Similarly, make the prosecution demonstrate with independent evidence that the defendant knowingly participated in the alleged conspiracy. If they cannot, then the co-conspirator statements would be inadmissible against the defendant.
• Challenge whether the statements were made “during the course” of the conspiracy. This requires the statements to be made within the time frame of the conspiracy’s existence. If they clearly fall outside the timeframe, they do not meet the co-conspirator hearsay exemption.
• Challenge whether the statements were made “in furtherance” of the conspiracy. Simply being relevant to the conspiracy is not enough. The statements must directly advance the conspiracy in some way. Incidental comments that merely touch on the conspiracy likely do not meet this standard.
• Argue the statements would be unfairly prejudicial. Under Rule 403, even relevant evidence can be excluded if its probative value is substantially outweighed by unfair prejudice. Co-conspirator statements often contain sensational, inflammatory or scandalous information that could unfairly bias the jury against your client.
• Challenge the reliability of the statements. Point out any circumstances that call into question the truth or accuracy of the co-conspirator statements, such as ambiguities in meaning, lack of personal knowledge, or motives to lie or exaggerate. Reliability is key to admissibility.

As you can see, there are numerous angles from which to challenge the admissibility of co-conspirator statements before they ever reach the jury. An effective motion in limine requires marshaling all available arguments and evidence to undermine the statements and prevent the prosecution from using them at trial.

Objecting to Co-Conspirator Statements at Trial

If your motion in limine is denied and the judge rules the co-conspirator statements admissible, your objections are not over. You will still have opportunities at trial to keep the statements away from the jury.

When the prosecution moves to admit co-conspirator statements during trial, promptly object on hearsay grounds. This will require the judge to hold a hearing outside the presence of the jury to determine by a preponderance of evidence that a conspiracy existed, the defendant and declarant were involved, and the statements were made during and in furtherance of the conspiracy. Force the prosecution to lay this foundation before the jury hears the statements.

During the hearing, reassert all the arguments from your motion in limine for why the statements do not satisfy the co-conspirator hearsay exemption. Point out any flaws or evidentiary gaps in the prosecution’s foundation. Hold them to their burden of proof.

If the judge still rules the statements admissible, continue to object whenever they are introduced at trial. Frequently renew your objections to their admissibility. Seek a standing objection to preserve the issue for appeal. This constant objection will at least signal to the jury that the defense disputes the validity of the co-conspirator statements.

Attacking Co-Conspirator Statements on Cross-Examination

If all else fails and the co-conspirator statements are admitted into evidence, cross-examination provides one last opportunity to undermine their credibility and persuasiveness in the eyes of the jury. Some strategies for cross-examination include:

• Question the accuracy and meaning of the statements. Many out-of-context statements are open to interpretation. Force the witness to acknowledge alternative meanings.
• Challenge the declarant’s basis of knowledge. Establish what they could and could not have personally known about the events in question.
• Highlight biases, motives to lie or exaggerate. Explore what incentives the declarant may have had to make self-serving or distorted statements.
• Emphasize lack of first-hand knowledge. The witness on the stand often lacks personal knowledge of the declarant’s statement or the events discussed. This undermines reliability.
• Paint the declarant as unreliable. Raise issues calling the declarant’s credibility into question, such as mental illness, substance abuse, or history of dishonesty.

Skillful cross-examination of the government’s witnesses can reduce the impact of co-conspirator statements admitted into evidence, but preventing admission in the first place through the strategies discussed above is always the strongest defense.

The Bottom Line

Co-conspirator statements can bolster even a weak prosecution case, so keeping them away from the jury should be a top priority. Use every strategy available – motions in limine, objections at trial, vigorous cross-examination – to exclude or discredit these dangerous hearsay statements. An experienced securities fraud defense attorney will know how to effectively challenge co-conspirator statements at every stage and give your client the best chance for acquittal.