Evidence of a Prior Fire is Available to Prove Fraud

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Arson for Profit Conviction Affirmed

Evidence that is “inextricably intertwined” with the charged arson conspiracies is admissible in an arson for profit trial especially when the earlier fire was used as a “playbook” for the fire that is the subject of the appeal.

In United States Of America v. James Edward Lester, a/k/a Punkin, No. 19-4333, United States Court Of Appeals For The Fourth Circuit (June 9, 2020) a jury convicted James Lester of arson conspiracy, in violation of 18 U.S.C. § 844(m) (2018), money laundering conspiracy, in violation of 18 U.S.C. § 1956(h) (2018), mail and wire fraud conspiracy, in violation of 18 U.S.C. §§ 1349, 1341, 1343 (2018), arson to commit wire fraud, in violation of 18 U.S.C. § 844(h)(1) (2018), aiding and abetting an unlawful monetary transaction, in violation of 18 U.S.C §§ 2, 1957 (2018), and structuring transactions, in violation of 31 U.S.C. §§ 5324(a)(3), (d) (2018). He received a 204-month sentence.

Lester contended that the district court abused its discretion in admitting the evidence of a prior arson fire (the “Wharncliffe fire”) evidence. The district court admitted the evidence as intrinsic to the charged crimes. Alternatively, the district court determined that the evidence was admissible, pursuant to Fed. R. Evid. 404(b), as probative of Lester’s motive, knowledge, and intent.

Lester challenged the district court’s admission of the Wharncliffe fire evidence as intrinsic to the fraud charges, and he argued that the story of the crime was complete in itself and that there was no need to introduce evidence of the Wharncliffe fire. Lester also argues that the prejudicial effect of the Wharncliffe fire evidence substantially outweighed any probative value it may have had to prove the criminal nature of the fires that occurred at properties owned by the coconspirators in Matoaka and Ikes Fork, West Virginia. The Government contended that the district court properly admitted the Wharncliffe fire evidence as direct evidence of the Matoaka and Ikes Fork schemes because the evidence was intrinsic to the charged conspiracies.

Rule 404(b) applies only to evidence of other acts that are extrinsic to the one charged. Acts intrinsic to the alleged crime do not fall under Rule 404(b)’s limitations on admissible evidence.

Evidence is intrinsic if it is necessary to complete the story of the crime on trial. Other criminal acts are intrinsic when they are inextricably intertwined or both acts are part of a single criminal episode or the other acts were necessary preliminaries to the crime charged. Such evidence is inextricably intertwined with the evidence regarding the charged offense if it forms an integral and natural part of the witness’s accounts of the circumstances surrounding the offenses for which the defendant was indicted.

The Fourth Circuit, therefore, concluded that the district court did not abuse its discretion in admitting the Wharncliffe fire evidence as intrinsic to the charged conspiracies. This evidence laid the foundation for the arson and insurance fraud schemes, and it was necessary to complete the story of Lester’s relationships with his coconspirators. Moreover, the Wharncliffe fire evidence was “inextricably intertwined” with the charged arson conspiracies because the Wharncliffe fire was used as a “playbook” for the Matoaka and Ikes Fork fires.

In fact, the Wharncliffe fire insurance claim contents list was overwhelmingly similar to those of the Matoaka and Ikes Fork fire claims.

The district court’s judgment was affirmed.

ZALMA OPINION

Arson for profit is the most dangerous and vicious form of insurance fraud. Often firefighters or innocent neighbors are injured or killed by an arson fire. In this case the defendant had tried fraud with a fire before working with co-conspirators to set two more fires making claim for the destruction of the same property involved in the earlier fire. That fact made the evidence of the earlier fire – the Wharncliffe fire – inextricably intertwined with the fires for which he was tried and convicted.


© 2020 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 52 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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