United States v. Spangler

An exclusion of an expert witness may be found to be harmless error if the expert’s testimony is deemed irrelevant to the charges, and the proponent had the opportunity to present evidence of the same substance.

Mark Spangler organized Spangler Ventures in 1999, which offered clients high risk investment opportunities in startups. Spangler’s investing clients expected that their money would be put into publicly-traded companies. Spangler was personally invested in two of these startups: TeraHop and Tamarac. In 2003, Spangler started to move money from the publicly-traded funds into TeraHop and Tamarac without his clients’ consent, concealing his activity by using misleading quarterly statements. Spangler was charged with wire fraud, money laundering, and investment-adviser fraud. Spangler appealed the district court’s exclusion of his expert witness, John Keller, a forensic accountant and former IRS criminal investigator. Keller was to testify that he saw no false representations to clients in the reports, or any evidence of inappropriately diverted funds. The Ninth Circuit held that Spangler’s ability to challenge the expert was governed by Federal Rule of Evidence 702. The panel held that the district court correctly excluded Keller’s testimony on the diversion of assets, false representations, and prudence of investment decisions, as irrelevant. The financial statements were technically accurate; the problem was that they failed to disclose the reality behind Spangler’s investment decisions, making an expert opinion on their accuracy irrelevant. The panel further held that the case did not depend on whether these were prudent decisions, but instead on whether Spangler diverted his clients’ funds without knowledge or consent. The panel further denied Spangler’s contention that the expert witness denial constituted a denial of his Sixth Amendment right to present a defense, finding that Spangler was still able to present the substance of his defense, and had ample opportunity to introduce evidence that his investment strategies were sound. The panel affirmed Spangler’s conviction of twenty-four counts of wire fraud, seven counts of money laundering, and one count of investment-adviser fraud. AFFIRMED.