Law3_compressed-68-100 (1)_OCR.pdf

Law Civil Actions Conversely, if the arbitration is nonbinding, the arbitrator’s determination is not binding upon the parties. Today, many contracts contain arbitration clauses providing that if a dispute occurs...

Law Civil Actions Conversely, if the arbitration is nonbinding, the arbitrator’s determination is not binding upon the parties. Today, many contracts contain arbitration clauses providing that if a dispute occurs between the parties to the contract, both parties agree to submit their claims to binding arbitration rather than filing suit. Additionally, parties might agree to have the laws of a particular jurisdiction apply during the arbitration, and these provisions are often enforceable. Fraud Examiners Manual |iccnsed to [email protected] 2913 Law Basic Principles of Evidence BASIC PRINCIPLES OF EVIDENCE In general, evidence consists of anything that can be used to prove something. In a legal sense, evidence refers to the testimony, documents, exhibits, and other tangible objects offered to prove or disprove the existence of an alleged fact during court proceedings. In legal systems, the use of evidence is often regulated by an intricate set of principles that have been developed and refined over hundreds of years, designed to ensure that only relevant and probative evidence is admitted and that irrelevant, unreliable, and prejudicial evidence is excluded so that cases can be fairly and expeditiously decided. Every aspect of a legal case—from filing the complaint to the presentation of witnesses and exhibits—is affected by rules of evidence. This body of law covers not just what counts as evidence, but how that evidence is gathered, handled, and presented. In every jurisdiction, the law of evidence governs the admissibility of evidence in legal proceedings. The law of evidence, however, varies between countries and legal systems. Common law legal systems have separate rules of evidence that regulate the admission and evaluation of evidence by courts. For example, evidence in U.S. federal courts is governed by the Federal Rules of Evidence (FRE). These rules establish what can and cannot be introduced during a dispute. In the late 1960s, a U.S. Supreme Court panel began codifying centuries of common law into the FRE. What had previously been a far-flung set of precedents, buried in local jurisdictions and lengthy appellate court decisions, was gathered into a singular body of information. The FRE became law in 1975. Likewise, in Canada, the Canada Evidence Act regulates the rules of evidence in court proceedings under federal law. Civil law legal systems, however, do not have a separate code of evidence law. The rules of evidence can be complex, and counsel should be contacted if an important question of evidence arises during a fraud examination. Additionally, rules of evidence vary by jurisdiction, even within the same country. For example, in the United States, state courts have rules for the admissibility of evidence that might differ from federal rules. The following are some general principles regarding evidence; however, fraud examiners should always review the rules applicable in their jurisdiction. Fraud Examiners Manual | jcensed to shrutip awar987 1 @gmail.com.acfe 21001 Basic Principles of Evidence Law Three Basic Forms of Evidence Evidence can be anything perceptible by the five senses, which is invoked in the process of arguing a case. Documents, spoken recollections, data of various sorts, and physical objects are all potentially evidence. Put differently, evidence is simply anything that relates to proving or disproving a fact that is of consequence in a case. With the known universe available for court inspection, legal authorities have narrowed the field by setting up categories to evaluate evidentiary significance. There are three basic forms of evidence: testimonial, real, and demonstrative. Testimonial evidence refers to the oral or written statements made by witnesses under oath. In general, there are two types of testimonial witnesses: lay witnesses and expert witnesses. A /ay witness (or fact witness) is a nonexpert witness who must testify from personal knowledge about a matter at issue. An exper? witness is a person who, by reason of education, training, skill, or experience, is qualified to render an opinion or otherwise testify in areas relevant to resolution of a legal dispute. Real evidence refers to physical objects that played a part in the issues being litigated. The term includes both documentary evidence—such as canceled checks, invoices, ledgers, and letters—and other types of physical evidence. Therefore, a printer in a case involving questioned documents is clearly real evidence, as is a tape recording since members of the court can experience the sounds firsthand. Demonstrative evidence is a tangible item that illustrates some material proposition (e.g., a2 map, a chart, or a summary). It differs from real evidence in that demonstrative evidence was not part of the underlying event; it was created specifically for the trial. Its purpose is to provide a visual aid for the fact finder. Nonetheless, demonstrative evidence is evidence and can be considered by the fact finder in reaching a verdict. Direct Versus Circumstantial Evidence There are two basic categories of admissible evidence: direct evidence and circumstantial evidence. Direct evidence is evidence that tends to prove or disprove a fact in issue directly, such as rewitness testimony or a confession. Circumstantial evidence is evidence that tends to prove or disprove facts in issue indirectly, by inference. Many fraud cases are proved entirely by circumstantial evidence, or by a combination of circumstantial and direct evidence, but seldom by direct evidence alone. The most difficult element to prove in many fraud cases— 2.1002 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence fraudulent intent—is usually proved circumstantially, and necessarily so, because direct proof of the defendant’s state of mind, absent a confession or the testimony of a co- conspirator, is impossible. The distinction between direct and circumstantial evidence, however, is more significant in common law systems than in civil law systems; in trials held in civil law systems, the court weighs all relevant evidence, regardless of type, to reach its decision. Admissibility of Evidence Not all evidence is admissible. To be admissible, evidence must normally satisfy certain requirements. However, common law systems tend to have far more stringent restrictions on the admission of evidence than civil law systems. This is, in part, due to the extensive use of juries in common law systems. In common law systems, limitations on the admission of evidence are intended to protect jurors from irrelevant evidence and to ensure that the defendant receives a fair trial. In common law systems using adversarial processes—those in which the litigating parties drive the discovery process—questions involving the admissibility of evidence occur when one party objects to another party’s offer of evidence. If a judge sustains an objection, the evidence is not admitted. If, however, the judge overrules the objection, the evidence is admitted and can be considered by the fact finder. For country-specific information regarding the exclusion of illegally obtained evidence, see the content on “Illegally Obtained Evidence” in the “Supplemental Regional Information” section of this chapter on fraudexaminersmanual.com. Relevant The admissibility of evidence largely depends on the discretion of the presiding judge, but a basic requirement of admissibility in both common and civil law systems is that evidence must be relevant. To be admissible in common law systems, evidence must be relevant to material issues in dispute. In civil law systems, evidence is admitted if the presiding judge determines it is relevant. Simply stated, evidence is relevant if it tends to make some fact that is in dispute more or less likely than it would be without the evidence. The facts in issue, of course, vary according to Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1003 Basic Principles of Evidence Law the case, but they generally can be said to be those facts that tend to prove the essential elements of the offense or claim, as well as related matters, such as motive, opportunity, identity of the parties, and credibility. Whether a particular piece of evidence is relevant or not depends on what the evidence is offered to prove. An item of evidence might be relevant and admissible if offered to prove one thing, but it might be irrelevant and inadmissible if offered to prove something else. For example, under U.S. law, evidence of other crimes, wrongs, or acts committed by the defendant would not be admissible if offered to prove that the defendant is generally a bad person and therefore likely to be guilty of the crime charged. However, such evidence could be admissible if offered to prove motive, intent, identity, absence of mistake, or modus operandi, if such factors are at issue. If evidence of other wrongs or acts is admitted, the judge will instruct the jury that they may consider the evidence only as it relates to the narrow issue for which it was admitted and may not consider it for any other purpose. Also, in common law systems using adversarial processes, the fact that an item of evidence is relevant does not automatically mean that it will be admitted. Relevant evidence might be excluded if it is unduly prejudicial, threatens to confuse or mislead the jury, threatens to cause unnecessary delay or a waste of time, or is merely cumulative. Thus, evidence of drug addiction technically might be relevant to prove motive for embezzlement or fraud, but it will be excluded if the judge determines that its probative value is outweighed by the danger of prejudice to the defendant. Relevant evidence might also be excluded if it is subject to certain privileges as noted below. Evidence of other crimes and acts, as discussed above, that is otherwise relevant might also be excluded for the same reason. Relevant evidence can be either inculpatory or exculpatory. lnculpatory evidence tends to show that an individual is guilty or at fault. Exculpatory evidence tends to clear an individual from fault or guilt. Evidence that is neither exculpatory nor inculpatory is likely irrelevant. Authentic Authentic evidence is evidence that accurately represents the fact or situation it is offered to prove or disprove. The authenticity of evidence is an important concept in civil law and common law systems. 2.1004 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence Authenticity in Common Law Systems In common law systems using adversarial processes, evidence will not be admissible unless it is established as authentic. If a piece of real evidence cannot be authenticated, it will not be admitted, even if it is relevant. Authenticity in Civil Law Systems Civil law systems, in contrast to common law systems, do not impose a requirement of authenticity for the admission of evidence. However, authentication is relevant in civil law systems because it affects the evidential value or weight the fact finder should give to evidence. That is, in civil law systems, authenticity is a factor to be considered by the fact finder in deciding, given all the evidence presented at trial, just how much weight to give the evidence. If, for example, a relevant item of evidence is not authentic, it will not be reliable, and, therefore, it will not be helpful to the fact finder in ascertaining the truth. Consequently, the fact finder will give it less weight than authenticated evidence. Conversely, an item of evidence deemed relevant and authentic will be reliable, and, therefore, it can be used by the fact finder to ascertain the truth. Admissibility of Testimonial Evidence Rules regarding the admissibility of testimonial evidence in civil law jurisdictions are typically more lenient than in common law jurisdictions. Generally, in civil law jurisdictions, testimonial evidence is admitted if the presiding judge decides it is relevant. In contrast, to be admissible in common law countries, testimony generally must be relevant and based on: o Fact, not speculation or opinion (unless the witness is testifying as an expert) ¢ Direct knowledge, not hearsay Very generally, witnesses have direct knowledge if they: o Performed the act or participated in it o Saw the act being performed o Heard about the act from the defendant (or in some circumstances, from a co-conspirator) Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1005 Basic Principles of Evidence Law Special Rules Concerning the Admission of Evidence in Adversarial Proceedings Common law systems that use adversarial processes have several rules that restrict the admission of evidence. These rules are not present in civil law systems that use inquisitorial proceedings. In common law systems, special rules exclude certain forms of evidence that lack reliability. The most common of these rules are: o The rule of authentication o The rule against character evidence ¢ The rule against opinion testimony e The best-evidence rule o The rule against hearsay The Rule of Authentication In common law systems using adversarial processes, exhibits are inadmissible unless they are relevant and established as authentic. Exhibits are the tangible objects presented as evidence. Therefore, both real evidence and demonstrative evidence are entered into the record as exhibits. Exhibits include documents such as contracts, letters, and receipts, as well as photographs, X-rays, baseball bats, knives, fountain pens, and computer files. In short, almost anything that is not testimony is an exhibit. Testimony is what people say. Exhibits are the “props.” Questions concerning the admissibility of exhibits are determined by the trial judge in common law systems using adversarial processes. But again, to be admissible at trial, evidence, other than testimonial evidence, must be properly authenticated; that is, the party offering the item must produce some evidence (e.g., testimony from a person who has firsthand knowledge) to show it is, in fact, what the party says it is and that it is in the same condition as when it was seized. If an exhibit cannot be authenticated, it will not be admitted even if it is plainly relevant. The authentication requirement serves to ensure that evidence is what the party claims it is and that it is genuine, not a forgery. Although testimonial evidence does not have to be authenticated to be admissible, the courts in common law systems have a sort of credibility test for witnesses. Witnesses must 2.1006 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence demonstrate that the knowledge they communicate is believable and was gained through personal experience. There are a number of techniques that can be used to authenticate evidence, but they vary depending on the type of evidence. Often, evidence is authenticated by the testimony of a witness who knows about the item’s chain of custody, by the testimony of a witness with knowledge that the item is what it is claimed to be, by reference to the item’s distinctive characteristics, and so on. Additionally, certain documents are self-authenticating and may be received into evidence without independent proof of authenticity. For example, in the United States, business records are self-authenticating if they were generated or maintained in the usual course of business. Authenticating Typical Exhibits Below are some of the issues that might be encountered in proving that particular types of exhibits are authentic. DEMONSTRATIVE EVIDENCE Demonstrative evidence refers to a tangible item that illustrates some material proposition. It differs from real evidence in that demonstrative evidence is not part of the underlying event; it is created specifically for the trial. Its purpose is to provide a visual aid for the jury. An exhibit used for purely “illustrative purposes” is a type of demonstrative evidence. Demonstrative evidence includes charts, graphs, and summaries that help to simplify complicated evidence for the jury. In complex fraud cases, such evidence is extremely useful, but it must be simple and easy to understand. Demonstrative evidence is admissible if the court decides that it presents a fair and balanced summary or picture of the evidence and is not unduly prejudicial. If offered for its truth value (and not just to illustrate a point), demonstrative evidence must be authenticated to show that the evidence is in fact what it is claimed to be. Also, demonstrative evidence must be made available to the other party, and the court may order that the information used to create the exhibit be produced in court. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1007 Basic Principles of Evidence Law DIAGRAMS A diagram is a schematic or technical drawing that is used to help make something easier to understand. A diagram (on paper or some other tangible display) can be admitted as evidence with no more foundation than the assent of a witness (e.g., “Is this a fair representation of the suite where you work?”). It does not have to be true to scale or particularly detailed. A diagram can be prepared before trial, during trial, or prepped outside the court and finished during questioning. If a party objects to the admission of a diagram, the offering party may need to establish that it is reliable. Diagrams can be used in tandem with photos or other representational evidence, or as assistance in demonstrations to the jury. WRITINGS In general, authentication of a writing consists of establishing who authored the document. Depending on the document and situation, this is done in one of several ways: (1) the author testifies and claims authorship; (2) a witness testifies to secing the author write the document; (3) with handwritten letters, a witness verifies the author’s penmanship; (4) with typed or machine-written documents, the witness verifies the author’s signature; or (5) a witness testifies that the contents of the document point decisively to the author. These and many other document issues may require the participation of a document expert. BUSINESS RECORDS AND OTHER DOCUMENTS Business records can encompass a broad range of documents, from all sorts of organizations, including corporations, small businesses, nonprofit operations, and community groups. Like other evidence, a party offering business records must provide testimony that the exhibit is the business record in question. For proper authentication, the party offering the evidence should be able to establish the following two things: s The content of the document is complete and unaltered. e The document originated from the named place of origination. Certain documents, such as business records, are self-authenticating and may be received into evidence without independent proof of authenticity. For example, in the United States, business records are self-authenticating if a custodian or other qualified person certifies that the records meet the following requirements: e The records were prepared reasonably near the time of the event they describe. e The records were made by, or based on information transmitted from, a person with knowledge. 2.1008 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence o The document was prepared as a usual part of doing business (i.c., it was not prepared specifically for litigation). Business records and other documents are also vulnerable to hearsay objections. That is, offering the contents of business records to establish the truth of their contents can constitute hearsay. Thus, such materials can be barred as unreliable out-of-court statements unless a trustworthy foundation is established. If, however, there is certification that complies with the self-authenticating rules listed previously, the records will not only be self- authenticating, but the records’ contents will be admissible to prove the truth of the contents as an exception to the rule against hearsay. GOVERNMENT DOCUMENTS The requirements for government documents are the same as for other business records. The distinction between government and business records arose because of narrow interpretations of the law that separated nonprofit from for-profit enterprises. Today, most records, regardless of origin, are called business records. PHONE RECORDS To be admitted into evidence, phone records typically must meet the same authentication standards as business records. DIGITAL RECORDS Courts typically accept digital files and documents as evidence. In fact, courts themselves are using more digital resources because many aspects of litigation can now be conducted electronically. Generally, to be admissible, digital records must meet the same authentication standards as hard copy records (i.e., to show that the item is what the proponent claims). Thus, to prove that a particular electronic record is authentic, those offering the evidence must demonstrate that the original document was not modified after its creation. But courts have recognized that the authentication of digital records may require greater scrutiny because such records can easily be altered after creation. In fact, courts are still figuring out how to deal with digital evidence, and there is still disagreement regarding how to authenticate digital records. If digital evidence needs to be seized, it is vital that fraud examiners engage the services of a trained computer forensic Fraud Examiners Manual | | censed to [email protected] 2.1009 Basic Principles of Evidence Law technician. A properly trained technician should know the proper procedures to follow to ensure that the files can be authenticated. Nevertheless, the most likely methods of authenticating digital records are: e Testimony from a witness who has personal knowledge (e.g., an authenticating witness attests to the process by which the digital records are created, acquired, maintained, and preserved) o Circumstantial evidence of distinctive characteristics (e.g., a person’s business habit is consistent with the document) o Certified copies of business records (e.g., digital records are accompanied by a custodian’s written certification) Digital evidence comes in several forms, including email, texts, instant messages, website data, and digital photographs. And different forms of electronic evidence may require different authentication approaches. Therefore, it is helpful to examine a few common forms. EMAIL Unlike traditional business letters written on formal letterhead, emails are more prone to authenticity issues and may be more difficult to authenticate. Email authenticity issues usually arise because email systems are unreliable and inherently unsecure, making emails susceptible to alteration. Moreover, emails can lack reliability because the identities of senders can be corrupted through unauthorized access and use. Even so, there are numerous ways email can be authenticated, including: o Witness with personal knowledge (e.g., 2 witness testifies that they recognize a copy of an email that they received or drafted) « Comparison with authenticated examples (e.g., if one email has been properly authenticated, a second email could be authenticated by comparing it with the first) o Circumstantial evidence of distinctive characteristics (e.g., the presence of a party’s name and email address or the presence of metadata) e Trade inscriptions purporting to have been affixed during business and indicating ownership, control, or origin (e.g., an automatic business signature at the end of the email) e Certified copies of business records (e.g., email is accompanied by a written certification by its custodian) 2.1010 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence As the use of text and instant messages continues to grow, parties are offering these types of records as evidence in an increasing number of cases. The most likely methods to authenticate text and instant messages are: ¢ Witness with personal knowledge (e.g., a witness testifies that they recognize a copy of messages that they received or drafted) o Circumstantial evidence of distinctive characteristics (e.g., the use of the defendant’s name in the text messages and the subject matter of the messages) WEBSITE DATA As with all evidence, the proponent of website evidence must be prepared to establish that the evidence is authentic. In some courts, authenticity can be established by the testimony of a witness. Like any other demonstrative exhibit, parties can authenticate a website with the testimony of a witness who verifies that the exhibit at issue accurately reflects what they observed after logging on to the site and reviewing what was there. Alternately, the proponent may be able to authenticate a website by providing testimony from the webmaster or someone with personal knowledge to show that the data were posted by the person to whom the information is attributed. For example, if website data are attributed to the website owner, then the webmaster can testify whether that particular content was entered on a site at a specific time. This is similar to authenticating writings by showing that the item was written by the person to whom it is attributed. A growing number of people are using social networking sites like LinkedIn, Facebook, and Twitter. As a result, the legal use of information obtained from social media sites has increased. Many users do not give much thought to what they post online. And because most of the information that gets posted online becomes a permanent record somewhere, investigators, attorneys, and employers are increasingly mining these sites for information, photos, and videos that can become evidence in civil and criminal litigation. The standard for authenticating evidence from social media sites is no different than for any other types of evidence—there must be sufficient evidence to support a finding that the evidence is what the proponent claims. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1011 Basic Principles of Evidence Law Because evidence posted on social media sites typically comes from third parties, who sometimes use pseudonyms, attributing this type of evidence to a certain person can be challenging. Finally, some website data may be self-authenticated. To review, self-authenticating evidence may be received into evidence without independent proof of authenticity. The types of website evidence that may fall under this category include government material that appears on official government websites or business-related material that appears on an organization’s website. PHOTOGRAPHS Concerning the admissibility of photographs, it is necessary to establish their fidelity to the object they claim to represent. This means that the offering party must prove that the picture is unaltered and shows what the proponent claims it shows. Generally, it is enough to have a witness familiar with the object or space in a photo to corroborate it (e.g., “Yes, that is the hallway running between our two buildings.”). The matter gets more complicated when a photo is controversial. This can require technical specifications for proper foundation. In some unusual situations, a photo may reveal information that no witness can corroborate. There has been at least one instance where the background of a photo showed a stabbing that took place in a crowd. No one, not even the photographer, saw the stabbing at the time. In unusual situations where a photo communicates evidence not substantiated elsewhere, the foundation of the photograph will need more strength—including technical details on the camera, the film, who took the shot, why and where, and so on. The exceptions make photos seem more legally fraught than they are. In fact, photos usually are admitted with little objection. Moreover, photos do not even have to be contemporary with the crime or grievance to which they pertain. If a photograph is established as accurate in its portrayal, it can be shot after the original act. General Points About Exhibits In adversarial processes, either side can enter exhibits into the record, given the proper foundation. Once admitted, the evidence is available for use by cither side. It does not matter who entered the item into evidence; either side can use it during questioning. It also does not matter when exhibits are admitted; they may be introduced into evidence during direct 2.1012 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence examination when opposing counsel is allowed to inspect the exhibits and have the witness confirm them. Additionally, exhibits are marked for identification before they are offered into evidence. Marking an exhibit identifies it for the record so that it will be recognizable to anyone who subsequently reads the transcript of the proceedings. Exhibits generally are marked sequentially and identified according to the party who offered them (e.g., Plaintiff’s Exhibit 1). Furthermore, when everyone agrees that an exhibit is authentic and admissible, it can be directly entered into the record, without foundational review, by stjpulation—an agreement between the parties that relates to a matter in the trial proceedings. Both sides to a lawsuit can stipulate to certain basic facts and narrow the line of dispute to a few issues or allegations. Stipulations generally are used only for objective facts that are easily proved or disproved. For instance, in an embezzlement case, both sides might stipulate the fact that the employee worked at the company, as well as the employee’s dates of employment and title. Objections to Exhibits The fact that an item of evidence is relevant and authentic does not, however, automatically mean that it will be admitted. If the evidence violates some other rule of evidence—such as the rules against hearsay, prejudice, or relevance—it will likely be barred. If, during trial, a party wishes to dispute the admissibility of an exhibit, the party will raise an objection and the judge will rule on it. If the judge overrules the objection, the evidence will be admitted, but if the judge sustains the objection, the evidence will be excluded. Also, in deciding on the admissibility of exhibits, judges can decide to admit the material just as it is, admit it with alterations (e.g., expurgating parts of a text or obscuring certain images), or deny the admission altogether. In some instances, the judge’s ruling on an objection requires a separate hearing to consider the issue. Fraud trials can be bogged down with lengthy challenges duc to the large volumes of documents that are sometimes offered as evidence. Fraud Examiners Manual | | nsed to shrutipawar987 1 @gmail.com.acfe 21013 Basic Principles of Evidence Law The Rule Against Character Evidence In civil and criminal trials in common law systems, there is strong policy against character evidence. Character evidence (sometimes called propensity evidence) is testimony or exhibits that purport to establish a “trait of character” or propensity to behave in a particular way, such as carefulness, honesty, violence, or cowardice. There are several reasons why common law rules exclude character evidence. If used inappropriately, character evidence has the potential to be unreliable and unfair. Also, if character evidence is admitted, the jury might draw conclusions about the general propensity of the individual who is the subject of the evidence. Similarly, juries might afford character evidence too much weight, or they might choose to punish a defendant for perceived bad character, rather than actual guilt. Additionally, character evidence is subject to interpretation—one person’s idea of antisocial is another person’s idea of introspective or pensive. Moreover, the introduction of character evidence might involve time-consuming ventures into matters that are collateral to the matters at issue. Additionally, character is not an absolute indicator of behavior. That is, it is common to remark how out of character somebody’s actions were in a given situation. So there is always a chance someone was acting out of character, making the behavioral propensity (if there was one) useless in the legal exchange. Finally, testimony about character has the potential to be mistakenly founded, misled, or concocted. It is always possible to misjudge someone, especially if we only know the person in limited circumstances like work or a social club. Moreover, it is exceedingly easy to fabricate incidents about character and, for shrewd talkers, to manipulate perceptions of personality. To prove a fraud case, the party bringing the action must show that the defendant committed the act in question. There is too great a danger of prejudicing the jury if testimony about the defendant’s allegedly poor character is allowed. A defendant’s character flaws should have no bearing in determining whether the defendant committed the act in question. In general, character evidence is not admissible in criminal cases, and it is only rarely admissible in civil ones. The general rule in criminal cases provides that evidence of a defendant’s bad character is not admissible at trial. For example, under this rule, the government cannot offer evidence of a defendant’s prior crimes or other bad acts to prove the defendant’s bad character. 2.1014 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence There are, however, some instances where character evidence may be admitted in criminal trials. Some of the exceptions for use of character evidence in criminal cases include: o The accused may offer evidence of good character, in which case the prosecution may introduce evidence of the accused’s bad character. o Character evidence may be admissible to reflect on the credibility of a witness. Again, evidence of other crimes, wrongs, or acts is usually not admissible to prove the character of a person. For example, Rule 404(b) of the U.S. Federal Rules of Evidence (FRE) states that evidence of a person’s earlier crimes, wrongs, or acts is not admissible to prove the person’s character in order to show that the person acted in conformity with that character. That is, under such rules, such evidence is not admissible to prove that a defendant is generally a bad person and therefore is likely to have committed the crime charged. For example, if a defendant is charged with stealing money from their employer’s safe, the prosecution would not normally be permitted to offer evidence that the defendant had previously stolen an item from their neighbor to show the defendant has a propensity to steal. However, there are some uses of character evidence that may be admissible because they are offered for a purpose other than showing character. In criminal cases, character evidence generally may be used to: * Show the accused’s knowledge, intent, or motive for the crime. e Prove the existence of a larger plan of which the charged crime is a part. o Show the accused’s preparation to commit the charged crime. o Show the accused’s ability and means of committing the crime (possession of a weapon, tool, or skill used in the commission of the act). o Show the accused’s opportunity to commit the crime. ¢ Show threats or expressions of ill will by the accused. * Link the accused to physical evidence at the scene. e Show the accused’s conduct and comments during arrest. * Show the accused’s attempt to conceal their identity. o Show the accused’s attempt to destroy evidence. o Present valid confessions. Conversely, because civil law systems do not rely on juries as common law systems do, the laws of evidence in most civil law systems do not have rules designed to prevent improperly influencing an inexperienced fact finder. Therefore, most civil law systems do not prohibit the use of character evidence. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1015 Basic Principles of Evidence Law The Rule Against Opinion Testimony During trial in adversarial proceedings, most evidence is introduced through the testimony of witnesses. Evidence on which the jury can make factual determinations must be introduced in the form of admissible testimony or documentary evidence by lay or fact (i.c., nonexpert) witnesses. The rules of evidence, however, limit the testimony of /ay witnesses—nonexpert witnesses who testify from personal knowledge about a matter at issue. Generally, lay witnesses are only allowed to testify about what they have actually experienced firsthand and their factual observations. Thus, lay witnesses provide a report on what they know and must keep their opinions and conclusions to themselves. Despite the general rule, there are exceptions that allow some nonexpert witnesses’ opinions into the record. Lay witnesses may give opinions if the statement is “rationally based” on their own perceptions, and if the opinion is helpful to a clear understanding of their testimony or the determination of a fact. EXAMPLE An employee at a securities firm blows the whistle on ber superiors for a high-level stock fraud, and in response, the government initiates a secret investigation into the matter and ultimately brings criminal charges against the employee’s superiors. At trial, defense suggests the investigation was an invasion of privacy. Prosecutors are justifying their secret eight-month investigation on the basis of the whistleblower’s tip. The prosecution will offer into evidence the whistleblower’s “opinion”’ that her superiors were engaged in frand to show that the government was justified in conducting its investigation. Under these facts, the opinion is admissible. But the apinion testimony is not allowed to show that management is guilty of frand, instead, it is adissible to show what prompted the investigation. In general, lay witnesses in common law countries may give opinions if their statements pass a three-part test: e The witness must have direct personal knowledge of the facts to which the opinion pertains. e The opinion must be of the common, everyday sort (i.c., does not involve specialized knowledge or tests). * The opinion is not part of a legal judgment, reserved for the jury or judge to decide. 2.1016 Licensed to shrutipawar9871(@gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence Opinions from lay witnesses must be based on personal experience and have some bearing on the facts (as opposed to the judgment) of the case. This distinction is further refined in situations involving hearsay and personal judgment (discussed below). In contrast to lay witnesses, expert witnesses may give opinion testimony because experts are hired to render a professional opinion. Experts are enlisted to testify because they possess education, training, skill, or experience in drawing conclusions from certain types of data or information that lay witnesses do not possess. Expett testimony, however, may be excluded if it draws a legal conclusion. Therefore, expert opinions addressing guilt or innocence will likely be excluded in criminal cases. The Best-Evidence Rule Sometimes testimony may be excluded in common law systems because of the best-evidence rule, which prohibits a party from orally testifying about the contents of a document without producing the document itself or proving to the judge that there is a valid reason for being unable to do so. This rule, however, only applies when an original or copy is being used to prove the contents of a writing, and it does not demand that a party produce the very best evidence to prove a fact in dispute. Also known as the original-writing rule, the best-evidence rule provides that when a witness testifies about the contents of a document, at least a fair copy of the original must be available for inspection. If there is no original, a copy of the proven authentic document will do, but the court must be assured that the copies are reliable and accurate. If the document is lost— no original, no copies—the judge will have to be convinced that there is good reason to forgo the exhibit and admit the testimony. The original purpose of the rule was to prevent altered evidence from being admitted as evidence, but most modern commentators state that the primary purpose of the rule is to censure that the most accurate written version of evidence is admitted at trial. Fraud examiners can use copies in preparing their case reports, but at trial, the original must be produced if it is available. Thus, when public records are involved in a fraud examination, examiners should always obtain certified copies. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 21017 Basic Principles of Evidence Law The best-evidence rule applies in the United States, but to accommodate electronic evidence, some common law countries, including England and Australia, abolished the best- evidence rule. The Rule Against Hearsay Many countries with common law systems restrict the admission of hearsay statements at trial. Simply put, hearsay refers to a statement that repeats what some other person said while outside of court. More specifically, Jearsay is “a statement, other than one made... at the trial or hearing, offered in evidence to prove the truth of the matter asserted.” Basically, hearsay involves the following elements: o A statement (anything intended to be an assertion; statements can be oral, written, or nonverbal conduct, such as nodding a head) o That is made outside the court’s supervision (statements made at trial or during deposition are not hearsay because they are made during court proceedings, but a statement made at work or at a crime scene is outside the court’s supervision and could be hearsay if the other elements are also present) o That is offered to prove the truth of the matter asserted (a party is offering a statement to prove the truth of the matter asserted if the party is trying to prove that the assertion made by the declarant [the person who made the out-of-court statement] is true) Under the general rule, hearsay is not admissible in court, but this rule is subject to numerous exceptions. Excluding hearsay on one level means witnesses cannot say, “He said... she said.” Each person testifies to that individual’s own experience. The general rule against hearsay is designed to ensure the credibility of testimony and to preserve each side’s right to cross-examine witnesses. Each witness in the trial will be questioned about personal, firsthand encounters. Unless their statements satisfy one of the exceptions discussed below, witnesses will speak only about things they have experienced themselves. If possible, evidence should be presented in the courtroom so that the jury can determine the weight to give each piece of evidence. The hearsay rule often creates admissibility issues for digital evidence because such evidence is often made out of court and offered to prove the truth of the matter asserted. 2.1018 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence Exceptions to the Hearsay Rule The general rule against hearsay is full of exceptions—ways to get information into the record—that account for the rule’s infamy in courtroom dramas and in real courtrooms. Some categories of statements may be exempt because they are not considered hearsay, and there are many circumstances in which evidence, although hearsay, is admissible. Note that these are general types of exceptions, and each country that excludes hearsay has its own list. Fraud examiners should check the applicable laws for hearsay exceptions. THE TRUTH OF THE STATEMENT IS NOT AT ISSUE Although the general rule against hearsay provides that out-of-court statements offered to prove the truth of an assertion are not admissible, it does not apply to out-of-court statements that are offered for some other purpose. That is, the general rule against hearsay only applies if the statement is being offered to prove the truth of the matter contained in the statement. Therefore, if the statement is offered for some other purpose, it technically is not hearsay. An out-of-court statement can be admitted if it (1) is relevant to some aspect of the proceedings azd (2) is not offered for the truth of its contents. Such statements are most often used to show a person’s knowledge or state of mind at a particular time. EXAMPLE Patrick filed a civil suit against Dwyer alleging that Dwyer broke his jaw during an altercation. The suit goes to trial, and during the trial, it is established that the fight occurred at 8:30 p.m. and that it lasted about five minntes. In bis defense, Dwyer calls Walter to the stand, and Walter testifies that at 9:30 that night, Patrick called him and made the following clearly ennnciated statement: “W alter, 1 hereby forgive the money you owe me.” Walter's testimony relates to an out-of-court statement, but it is not hearsay becanse it is not offered to prove the truth of the matter asserted (i.e., that Patrick forgave the loan he made to Walter). Instead, the statement is being offered to prove that Patrick was speaking clearly at 9:30 p.mm., which would mean that Patrick’s jaw was unbroken after his altercation with Dwyer. Walter's testimony relates to his own firsthand perception of how Patrick’s voice sounded. Therefore, this statement is not hearsay, and it is admissible to show that Patrick was speaking clearly at 9:30 p.m. Fraud Examiners Manual || nsed to [email protected] 21019 Basic Principles of Evidence Law ADMISSIONS BY AN ADVERSE PARTY Generally, the statement of an adverse party is not hearsay. Such statements, called adwissions, can be very powerful evidence. More specifically, an admission is an out-of-court statement or conduct by a party to the lawsuit that tends to support the other side’s position or diminish the declarant’s own position. Thus, anything spoken or written by a party to a lawsuit can be entered into the record, provided that the statement can be corroborated and is relevant. Each side can use its adversary’s out-of-court statements as evidence. For example, during your investigation of the case prior to trial, you interviewed the defendant. During the interview, they tell you that they falsified invoices. Later they deny making the statement. If you take the stand and tell the jury that the defendant told you they falsified invoices, technically that statement is hearsay. But because the statement is an admission, it will be admitted under this exception to the rule. An admission is not necessarily an outright confession. A witness may testify that a bank officer told them, “I have ways of getting loans approved that no one else knows about.” The statement alone does not prove loan fraud against the officer, but it does establish, by their own admission, their stated intent to subvert the security controls of the institution. In cases involving corporations, large groups, or government agencies, any statement made by a member of the organization is potentially an admission. But to qualify as an admission, the person who made the statement has to be directly authorized to speak for the organization or perform a job related to the issue under discussion. For example, an agent employed by Jefferson Realtors who says, “You have been defrauded here” to an aggrieved client has made an admission on behalf of the company. A janitor at Jefferson Realtors, however, cannot make the same admission because janitorial duties are not related to the formation of contracts, and it is not likely that the janitor is authorized to make corporate declarations. Additionally, because an agent makes contracts on the company’s behalf, a statement made by an agent of Jefferson Realtors is an admission even if the agent is not the official spokesperson for Jefferson’s legal affairs. FORMER TESTIMONY UNDER OATH Testimony given by the declarant at another hearing is admissible if the party against whom the testimony is now offered had an opportunity and motive to examine the witness in circumstances similar to those of the present trial. 2.1020 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence BUSINESS AND GOVERNMENT RECORDS We commonly think of invoices, receipts, and official documents as the final legal word, but like statements made outside of court, business and government records are hearsay; they are prepared outside the courtroom. A special exception for these materials, however, makes them admissible if they are provided with a legal foundation. The admissibility of such records rests on two questions: e Have they been prepared during “regularly conducted business activity”? o Are they verifiably trustworthy? If both questions can be answered in the affirmative, then the records are admissible. Thus, the business-records exception to the rule against hearsay provides that, although business records are hearsay (prepared outside the courtroom), such records are admissible under a hearsay exception if they are prepared during regularly conducted business activity and are verifiably trustworthy. Materials prepared specifically for trial are not admissible as business records. Anything that casts doubt on the veracity of these documents can bar them. In situations where the charge involves altered documents, the materials are admitted to prove the charge of alteration—not for their truth-value—so the hearsay rule does not apply. Computerized records have had no trouble being accepted as evidence. Generally, the hearsay exception for business records applies to such records (i.e., they are admissible if the records have been compiled as a regular facet of doing business). STATEMENT AGAINST INTEREST A statement against interest is a hearsay exception that is grounded on the theory that people do not ordinarily make harmful or damaging statements about themselves. A statement against interestis a statement that was, at the time of its making, contrary to the declarant’s interests and would not have been made unless the declarant believed it was true. So, a statement against interest exception allows someone to testify to a statement by another person that reveals something damaging to the person who made the statement. Fraud Examiners Manual | | nsed to shrutipawar987 1 @gmail.com.acfe 2.1021 Basic Principles of Evidence Law Generally, to be admissible under this exception, the statement must meet three requirements: ® The declarant must be unavailable to testify. o The statement must have been against important interests of the declarant when made. ¢ Corroborating circumstances must clearly establish the trustworthiness of the statement. In prosecuting a tax evasion charge, for example, prosecutors may present a financial statement used by the defendant to obtain a loan; this is a statement against interest because the document declares a higher net worth than the defendant now claims to have. ABSENCE OF AN ENTRY IN BUSINESS RECORDS Evidence that a matter is not included in the memoranda or reports kept in the regular course of business may be admissible to prove that a certain event did not occur if the matter was one about which a memorandum or report regularly was made and preserved. However, this does not hold true if the source of information or the circumstances indicate a lack of trustworthiness. RECORDED RECOLLECTIONS A memorandum or record may be admissible if it concerns a matter that the witness once had knowledge of but now has forgotten; was made or adopted by the witness when the matter was fresh in memory; and is shown to be accurate. Such memoranda or records also may be shown to a witness who has temporarily forgotten the events to refresh the witness’s recollection and allow the testimony to be more complete or accurate. PRESENT SENSE IMPRESSIONS Courts assume statements that are made during or immediately after significant events or conditions and that describe or explain the events or conditions are reliable, so present sense impressions are admissible. For example, a witness can report that they first suspected fraud at Securities Plus by noting that their superior said, “This can’t be happening!” when they were informed that there would be an audit. In a similar example, Mr. Whistler notices Jenny Moore, a coworker, in John Smith’s office and overhears her say, “Oh, here are some bid sheets in the trash can.” If the government prosecutes Smith for bid rigging, which is demonstrated by the bid sheets, Mr. Whistler can testify about Moore’s statement as a present sense impression because the words described the scene before her. 2.1022 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence EXCITED UTTERANCES There is also a hearsay exception for extited utterances (i.c., statements relating to a startling event or condition made while the declarant was under the stress of its excitement). Unlike statements of present sense impressions, excited utterances require an occurrence that is startling enough to produce excitement. In the Mr. Whistler scenario, for example, Moore’s statements might qualify as an excited utterance if she discovered the bid sheets after months of searching for incriminating evidence and told Whistler, while jumping up and down in excitement, “This is the evidence I have been waiting for!” Here, the successful conclusion of the search was sufficiently exciting. THEN-EXISTING MENTAL, EMOTIONAL, OR PHYSICAL CONDITION Statements of the declarant’s then-existing state of mind, emotion, or physical condition are also admissible as exceptions to the hearsay rule. Generally, evidence rules list state of mind, emotion, sensation, or physical condition, pain, and bodily health as acceptable subject matters, along with extremely personalized thought processes such as intent, plan, motive, design, and mental feeling. Defense attorneys at a fraud trial sometimes use arguments about what their client /nzended, or the confusion and stress the person was suffering. For instance, the defendant was seen shredding documents, and they were overheard to have said, “They will never prove anything now.” The statement may be admitted to show the defendant’s state of mind at the time they were shredding the documents. It also shows that the defendant acted with the intent to destroy the documents. Hearsay statements that help establish this intention are admissible as exceptions. STATEMENTS FOR PURPOSES OF MEDICAL DIAGNOSIS OR TREATMENT Anything first communicated during a medical examination is admissible as a hearsay exception. This includes medical history, symptoms, pain, and the general character of the medical condition. These statements do not even need to have been made by the patient. They can involve someone (parent or spouse) accompanying the patient. PRINTED MATTER, LEARNED TREATISES, AND REFRESHER WRITINGS Written materials that add to the court’s knowledge of an issue are excluded from the general rule against hearsay. This exception frequently applies to the testimony of expert witnesses who often use published material in their work. Fraud Examiners Manual | | censed to [email protected] 2.1023 Basic Principles of Evidence Law Printed materials that support technical or professional assertions, such as commodity market reports, stock market quotes, mortality tables, cost of living indexes, etc., are admissible if they are “generally used and relied upon by the public or by persons in particular occupations.” Often, rules of evidence create a hearsay exception for larmed treatises, providing that an authoritative work is admissible to either support or attack the opinion of an expert witness if the work is established as a reliable authority. However, some courts limit the rule. In these jurisdictions, specialized “treatises, periodicals, or pamphlets” can be referenced only during cross-examination. In a world of proliferating and sometimes contradictory sources of information, just what counts as a learned treatise and what is a fringe group’s manifesto is not immediately clear. Also, courts may permit testifying witnesses to refresh or revive their memory by referring to a writing or anything else if the witnesses will thereafter be able to testify without depending on the terms of the writing. For example, Whistler, who is serving as a witness at a fraud trial, wants to see some notes he wrote two years ago to ensure that he got the numbers right in his testimony. He is allowed to consult the notes and continue with his testimony. The text of the notes used to refresh the witness’s memory is also admissible, but only if the gpposing attorney requests the admission. OTHER EXCEPTIONS There are other miscellaneous exceptions to the general rule against hearsay, and these include exceptions for things like dying declarations and ancient documents. For those instances not specified in any rule, there remains the judge’s discretion: Anything the judge deems trustworthy for the purposes of its presentation is admissible. This is the cornerstone of the rule. Hearsay is excluded in the first place because it supposedly lacks trustworthiness. However, other kinds of hearsay that do not fall within any specific hearsay exceptions may be admissible if they meet the same standards of trustworthiness as required for the listed exceptions. Hearsayin Civil Law Systems Civil law systems generally do not have rules analogous to the common law rules against hearsay because judges play a more active role in determining the facts in inquisitorial systems. For example, in German courts, hearsay is admissible, and it is up to the court to determine whether the hearsay evidence is convincing. The common law rules against hearsay 2.1024 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence are founded on the concern that juries might give inappropriate weight to unreliable hearsay evidence, but because judges play a more active role in determining the facts in inquisitorial systems, the concerns that gave rise to the rules against hearsay in common law systems are not present in civil law systems. Accordingly, hearsay evidence is more freely admitted in civil law systems than in common law systems. Chain of Custody If evidence is subject to change over time or susceptible to alteration, the offering party might need to establish that the evidence has not been altered or changed from the time it was collected through its production in court. This is done by establishing a chain of custody. Thus, the chain of custody can be an important factor in establishing authenticity. ‘The chain of custody is both a process and a document that memorializes (1) who has had possession of an object and (2) what they have done with it; it is simply a means of establishing that there has not been a material change or alteration to a piece of evidence. Thus, establishing the chain of custody for an item of evidence demonstrates its authenticity, and it shows that the item has not been altered or changed from the time it was collected through production in court. In general, establishing the chain of custody consists of documenting each person who had control or custody of the evidence; how and when it was received; how it was maintained or stored while in each person’s possession; what changes, if any, it underwent in that person’s custody; and how it left that person’s custody. The result is a chain of testimony that accounts for the movement and location of physical evidence from the time it is obtained to the time it is proffered at trial. The goal is to show that access to the evidence was limited to those who testified in the chain of custody and thereby demonstrate that the evidence has not been materially altered. Gaps in the chain of custody (e.g., when it is not clear what occurred with a set of records) or outright mishandling (e, a group of questioned documents was not properly sealed) can dishevel a case but not wreck it outright. Courts have found in some cases that even though there have been mistakes in the chain of custody, the mistake affects the weight, though not the admissibility, of evidence. That is to say, the evidence will still be allowed into the record, but it is accompanied by a forthright description of any improprieties that have occurred in Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1025 Basic Principles of Evidence Law the chain of custody. The jury and judge are supposed to consider the improprieties when they deliberate, weighing the case for guilt or innocence. In fraud cases, the array of physical evidence, all the paper documents, audio and video recordings, and information-processing equipment, such as computers, demands close monitoring in the chain of custody. The following are some general guidelines that will help examiners demonstrate the chain of custody. They will also help examiners in authenticating obtained evidence: o If records are received via mail or courier-receipted delivery, keep copies of the postmarked envelope or the delivery receipts. o Ifa cover letter is included, make sure to keep it. o If the cover letter or transmittal letter includes a list of the documents, check the package immediately to ensure all documents are there. If something is missing, make a note in the file and notify the sender immediately. * If you receive documents in person, create a memorandum stating the date and time the documents were received, who gave you the documents, where that individual obtained the documents, and a complete list of the documents received. e Ifyou obtained the documents yourself from the original source (e.g., from a desk or file cabinet), create a memorandum describing the date, time, exact location of where the documents were found, and a complete list of the documents obtained. o Keep the originals of these memoranda or delivery receipts in the case file and keep copies with the documents (it will be much easier to identify where the documents came from if you have the information with the documents). Additionally, because digital evidence can be easily altered or destroyed, a chain of custody must be maintained for all electronic evidence gathered and analyzed in an investigation. At a minimum, the following chain of custody procedures should be followed: o Identify each item that contains relevant information. e Document each item, who it was received from, who authorized its removal, the location of the item, and the date and time the item was received. e Maintain a continuous record of the item’s custody as it changes hands. 2.1026 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence Impeachment In common law systems using adversarial processes, evidence is usually introduced during direct examination of a witness. In adversarial processes, there is another side to testimony cross-examination. (Inquisitorial processes do not allow cross-examinations). Under the evidence rules in adversarial systems, the adverse party is usually entitled to offer evidence to impeach the testimony or credibility of a witness. Impeachment is the practice of questioning a s knowledge or credibility. It is important to note, however, that because cross- xamination is absent from inquisitorial processes, impeachment is not an issue for civil law systems using inquisitorial processes. There are numerous ways an attorney might impeach a witness, but the most common ways include efforts to show that the witness: e Isinfluenced by bias or self-interest e Has an impaired ability to observe * Made prior inconsistent statements e Has been convicted of a felony or equivalent crime * Has a reputation for untruthfulness Impeachment by bias shows that the witness has reason, or at least opportunity, to skew the evidence against one of the parties in the litigation. To impeach a witness for bias, opposing counsel will, during cross-examination, ask questions to bring up any pecuniary interest the witness has in the case, any connection the witness might have to any matter or litigant, and any other information that will make the witness appear to have some interest in favoring one party over another. Another way to impeach witnesses is to show that their ability fo observe was impaired. Matters of observance include the ability to see, hear, smell, or feel some item in question. Nothing overturns a witness’s statements like inconsistency. Opposing lawyers will always confront any witness on cross-examination with any apparent inconsistencies between the trial testimony and statements, testimony, or information given by the witness on other occasions. In some common law systems, a witness’s credibility may be challenged, though not automatically impeached, by showing that the person has been convicted of a felony crime. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1027 Basic Principles of Evidence Law For example, under Rule 609 of the U.S. Federal Rules of Evidence (FRE), evidence that a witness has been convicted of a crime may be offered to attack the witness’s character for truthfulness if the crime was punishable by death or imprisonment in excess of one year or if the crime, regardless of the punishment, involved dishonesty or a false statement. In short, Rule 609 offers a few basic rules for introducing evidence of prior crimes to impeach a witness. First, convictions for acts involving dishonesty, such as perjury, false statement, or criminal fraud, are admissible to impeach a witness’s testimony. So, if a witness has been convicted of a misdemeanor not involving dishonesty or a false statement, the prior conviction cannot be used for impeachment. Second, evidence of felony convictions can be used to impeach a witness, but evidence of any prior conviction is presumably inadmissible if the conviction is more than ten years old. Finally, any witness may be impeached by proof of reputation for untruthfielness. Generally, impeachment is complete when a witness admits the impeaching matter; if the witness does not admit it, then opposing counsel is usually required to prove the impeachment. If, however, the subject of the matter of the impeachment is collateral—those non-material matters that affect the credibility of a witness and do not tend to prove or disprove a substantive issue in the case—the impeaching counsel must accept the witness’s answer even if it is false. So, when a witness is asked about a collateral matter for the purposes of proving impeachment, the witness’s answer ends the inquiry, and opposing counsel cannot offer extrinsic evidence to prove collateral impeaching matters. CFEs should keep in mind that the above methods of impeachment may be used not only on the defendant and defense witnesses, but also on witnesses for the prosecution. Inquiries should be made before trial to determine if a prosecution or defense witness is subject to impeachment, and, if so, appropriate steps should be taken. Privileges and Protections Introduction There are evidentiary privileges and protections that prevent certain types of evidence from being discovered or produced during trial. Generally, if a privilege applics to information, the court and the parties secking the information are denied access to it, and judges and juries must disregard any evidence they do actually hear if it is deemed privileged afterward. 2.1028 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence The privileges and protections available and the requirements for each vary substantially by jurisdiction. Generally, countries with common law systems offer broader evidentiary protections than countries with civil law systems. Civil law jurisdictions have doctrines that serve the same function as privileges and protections in common law jurisdictions—doctrines that exclude relevant evidence from being discovered or produced during trial—even if such doctrines are not classified as privileges. For example, many civil law systems have general professional privileges that prohibit the admission of communications made through the exercise of certain Some of the more common privileges and protections are discussed below. Legal Professional Privileges Legal professional privileges are rules of evidence that preclude disclosure of confidential communications between professional legal advisors (e.g., solicitor, barrister, or attorney) and their clients. These privileges are designed to encourage open and honest communications, and they go by many names. In the United States, the legal professional privilege is known as the attorney-client privilege; in the United Kingdom, it is known as the lega/ advice privilege; in Canada, it is known as the solicitor-client privilege; and in the European community, it is known as the /egal professional privilege. The requirements for the application of these privileges vary among jurisdictions, but generally, the following elements must be present for communications to be protected: e A communication between a legal professional and a client ¢ The communication was made to seek or give legal advice e The parties intended the communications to be confidential (i.e., the communications must not be disclosed to third parties, such as vendors, customers, auditors, or governmental officials) To be protected under a legal professional privilege, it is not necessary that the communication take place after a lawsuit has been filed. Legal professional privileges, however, are not absolute; they are subject to waiver. Because these privileges only protect confidential communications, the protection they provide will be waived for communications disclosed to third parties who have little or nothing to do Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1029 Basic Principles of Evidence Law with the client’s pursuit of legal representation because such disclosures demonstrate a lack of confidentiality. Generally, waiver occurs when the client, who holds the privilege, voluntarily discloses (or consents to or encourages someone else into disclosing) any significant part of the privileged communications. Although the client holds the privilege, the privilege can be waived by the client’s attorney or a third party—someone who is neither the attorney nor the client. The legal professional privilege can be waived in various ways, including: e The client testifies about confidential communications. e The attorney testifies about confidential communications at the client’s command or request. e The client puts confidential communications in question. o The client, the attorney, or a third party carelessly or inadvertently discloses confidential communications to an outside party (which sometimes results in waiver). Although legal professional privileges only apply to confidential communications between a legal representative and the legal representative’s client, in most jurisdictions, the protection afforded by these privileges extends to communications with third-party consultants hired to help provide legal advice to the client (e.g., fraud examiners, accountants, bankers, or other experts). Thus, waiver does not occur when an attorney shares privileged information with an outside consultant hired in a role that concerns the client’s pursuit of legal representation and when the communication is made for the purpose of effectuating legal representation for the client. The U.S. Attorney-Client Privilege The attorney-client privilege precludes disclosure of communications between an attorney and client, but only if all of the following conditions are met: * The client retained the attorney to provide legal advice (i.c., there must be an attorney- client relationship). o Thereafter, the client communicated with the attorney on a confidential basis. e The privilege has not been waived. 2.1030 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual Law Basic Principles of Evidence The attorney-client privilege applies to individuals as well as corporations or other business entities. In the context of an investigation of a company, communications generally will be protected under the attorney-client privilege if the following elements are present: ¢ The communications were made by corporate employees to counsel. ¢ The communications were made at the direction of corporate superiors in order for the company to obtain legal advice from counsel. e The employees were aware that the communications were being made in order for the company to obtain legal advice. e The information needed was not available from upper management. ¢ The communications concerned matters within the scope of the employees” corporate duties. o The communications were confidential when made and were kept confidential by the company. To be protected under the attorney-client privileges, a communication must be made to obtain legal advice. Thus, a general counsel’s participation in an investigation conducted by management does not automatically create an attorney-client privilege. The key element is that the attorney (whether in-house counsel or outside counsel) is conducting the investigation for the purpose of providing legal advice to the company. The privilege generally extends to information gathered by investigators acting at the direction of the attorney. Also, to qualify for the privilege, there must be intent to keep the communications confidential (i.e., the communications must not be disclosed to third parties, such as vendors, customers, auditors, or governmental officials). The attorney-client privilege prevents disclosure of the communications—the letters, memoranda, or contents of telephone calls—between the attorney and client, not of the underlying facts or documentary evidence in the case. A client may not refuse to produce documents or other relevant evidence merely because such evidence was previously given to the attorney. Similarly, the attorney-client privilege does not prevent disclosure of communications that relate to business rather than legal advice. Corporate counsel is often consulted to give advice on matters related to business conduct rather than legal issues. Such communications would be discoverable. Fraud Examiners Manual || nsed to shrutipawar987 1 @gmail.com.acfe 2.1031 Basic Principles of Evidence Law Finally, the attorney-client privilege may not be asserted if the communication involved the attempted or actual commission of a present crime or fraud. The attorney does not have to be a participant in the fraud for the waiver to apply. For additional information regarding waiver of the U.S. attorney-client privilege, see the content on “Privileges and Protections” in the “Supplemental Regional Information” section of this chapter on fraudexaminersmanual.com. The Legal Advice Privilege in the United Kingdom Because the United Kingdom is also a common law jurisdiction, its legal advice privilege shares many aspects of the attorney-client privilege in the United States. The legal advice privilege prevents the disclosure of confidential communications between a lawyer and the lawyer’s client that are in connection with giving legal advice. The legal advice privilege applies to every communication between a lawyer and their client regardless of whether the communication was made in contemplation of litigation. The Solicitor-Client Privilege in Canada The solicitor-client privilege protects information a client provides to the client’s solicitor that is necessary to obtain legal advice. For the solicitor-client privilege to apply, all of the following three requirements must be met: e There is a communication between a legal professional and a client. ¢ The communication was made to seek or give legal advice. e The parties intended the communications to be confidential. Litigation Privileges Many common law jurisdictions have a /izigation privilege that protects materials prepared in anticipation of litigation. The U.S. Attorney Work-Product Doctrine In the United States, the litigation privilege is called the a#torney work-product doctrine. The U.S. attorney work-product doctrine protects materials from discovery that are prepared in anticipation of litigation. The attorney work-product doctrine is embodied in Rule 26(b)(3) of the Federal Rules of Civil Procedure (FRCP) and under comparable state rules. It protects documents and tangible 2.1032 Licensed to shrutipawar987 1 @gmail.com.acfe Fraud Examiners Manual