Fraud, Theft, Paper Cases
January-February 2023

Is your case paper thin?

By Robert Buss
Assistant District Attorney in Harris County

With assistance from Michael Chiu
Intern and 2L student at South Texas College of Law

Would you try a case where an officer seized a baggie of a substance believed to be cocaine without lab results to confirm it? Would you prosecute a serious bodily injury case involving internal injuries without testimony from a doctor or medical records? Of course not: You would make sure you have the necessary evidence for trial first.

            Fraud and theft cases that do not involve the physical taking of cash or objects (aka, “paper cases”) have their own evidentiary concerns that are just as necessary to the prosecution as a lab report or medical records, but prosecutors often overlook them. Some common issues are securing admissible business records, obtaining verifiable identifying information in identity theft cases, and getting other supporting documentation that would be helpful (or necessary) at trial. This article addresses each of these issues and offers some solutions.

First things first

Perhaps most importantly, do not forget evidentiary law when preparing for trial in paper cases. More than once I have invested large amounts of time going through documents and obtaining more paper evidence by subpoena before realizing that a bad traffic stop, an inadmissible custodial interview, or an illegal search wrecked my case. Sometimes as prosecutors we are given imperfect situations and must cut our losses. None of us has time to waste building cases that cannot be prosecuted.  

Business records

TRE 902(10) makes business records accompanied by an affidavit self-authenticating evidence so long as the records meet the requirements of TRE 803(6) (Records of Regularly Conducted Activity). These records are admissible without a sponsoring witness if served on opposing counsel at least 14 days before trial with an accompanying affidavit substantially complying with Rule 902(10). A live witness can also introduce the records as a custodian of records. Personally, I prefer to use business records affidavits when possible because the custodian of records for a financial institution will not have knowledge of the case, and I have had trouble when that custodian (including employees of the complainant) answers predicate questions on the stand—often the legalese nature of the questions confuses them.[1] 

            Paper cases often start with a complainant printing out some records she accessed online and turning those over to police. All too often those records are the only ones on file when the case is set for trial. Prosecutors and investigators tend to overlook that financial records of a bank or other institution are not necessarily the business records of the complainant. I have encountered numerous criminally charged embezzlement theft cases where the only evidence of theft are a few cherry-picked portions of bank statements the complainant printed off the internet. Sometimes the complainant even scribbled notes on the statements. Unless the complainant is the bank, the bank records she printed out are arguably inadmissible hearsay because the complainant is merely using the records and did not create them.[2] There are instances where a document created by a third party could be admissible as business records of a complainant if they are kept in the course of the testifying witnesses’ business, the business typically relies on the accuracy of the document’s contents, and the circumstances otherwise indicate the document’s trustworthiness,[3] but the sure way to introduce business records of a financial institution at trial is to get the records from the institution itself. 

            If the complainant has written investigation notes on the records, then the writings were prepared for legal proceedings and are not admissible under the business records exception.[4] I have had to introduce a business’s internal records where the business owner wrote on the original copies of paper ledgers to document theft. There was no other source where I could get “clean” copies of the records, so I asked for an evidentiary hearing and introduced a copy for court appellate records (but not for the jury) that included the writings. Afterward, I was able to introduce a copy of the ledger where the extra writings were redacted for the jury.

            Business records affidavits can occasionally be defective. TRE 902(10)(B) includes a template for an affidavit for records of regularly conducted activity. My office sends fill-in-the-blank business records affidavits so responding parties can stick to the prescribed form, but banks often incorrectly fill in the blanks with erroneous responses or ignore the template and send us a document they prepared themselves. The good news is the affidavit is still acceptable so long as it substantially conforms to the model affidavit,[5] but if it goes too far off the rails it will no longer be acceptable.[6] Always review business records affidavits when you receive them to see if they are notarized or sworn to under penalty of perjury and to ensure the affidavits meet the essential requirements of the statute.[7] If an affidavit is defective, you can request a new one. 

Identity theft cases

Fraudulent Use or Possession of Identifying Information (Penal Code §32.51) is used to prosecute identity theft; it is an offense for a defendant, with an intent to defraud, to possess or use the identifying information of another person without that other person’s consent.[8]

            Identifying information is information that identifies a person. When prosecuting these cases, the State must prove the items of identifying information actually identify the complainants.[9] If the case involves a limited number of complainants, the complainants can each testify that the item(s) the defendant possessed accurately identify the complainants and were possessed or used without the complainants’ consent.[10] With a large number of complainants, prosecutors may wish to change strategy, perhaps by using circumstantial evidence. Circumstantial evidence surrounding how the items are possessed or used can lead a jury to reasonably deduce the defendant possessed identifying information without the complainants’ consent. If you are using circumstantial evidence to prove the items are held without consent and you are not calling the complainants as witnesses, you will need to use other means to prove the identifying information, such as a credit or debit card number or some other financial account number, actually identifies the complainants.[11] Subpoena the financial institution for business records for the account number that identifies the account holder. And ensure the subpoena duces tecum makes it clear that account and credit card numbers cannot be redacted—credit card companies often redact portions of credit card numbers and other material that prosecutors need to show that the number the defendant possessed matches the complainant, unless the subpoena tells them otherwise.

            When the identifying information is Texas driver licenses or identification cards, request certified copies of those IDs from the Texas Department of Public Safety at its Austin office. The fax number for law enforcement driver records is 512/424-5190, and the email for requests is [email protected]

            Penal Code §32.315 (Fraudulent Use or Possession of Credit Card or Debit Card Information) is a relatively new statute that criminalizes possession of counterfeit credit and debit cards. The penalty depends on the number of counterfeit cards (“items”) possessed. Counterfeit cards look to be issued by a financial institution, but that institution either did not actually issue them or the cards were altered in a number of ways—generally, the magnetic stripe on the back has been re-encoded with stolen card information so the number on the front of the card doesn’t match the number on the magnetic stripe. Identity thieves will often use stolen card numbers by re-encoding them onto the back of gift cards. This statute makes it easier to prosecute such crimes because the State does not have to figure out to whom the fraudulent card numbers written on the magnetic stripe belong, just that the number on the back does not match the front of the card.[12]

            Federal caselaw says that there is no extra expectation of privacy on the magnetic stripe of a card, so if an officer legally holds the cards, then he can use a card reader to figure out the number on the back of the cards without a warrant.[13] At trial, the officer must testify about using the card reader to show that the numbers on the magnetic stripes does not match the numbers on the cards’ fronts; you may want the officer to bring a card reader into court to demonstrate for the jury how it works. 

            Social Security numbers are often misused by identity thieves. One would think that it would be easy enough to get records from the Social Security Administration to show that a Social Security number matches a person. In practice, this is not the case.  I have never been able to get records from the federal government to verify Social Security numbers. An officer can look up the numbers in a law enforcement database for charging purposes, but it would likely be hearsay for an officer to talk about verifying these numbers this way. Instead, prosecutors will have to call the complainants to verify their own Social Security numbers.

Other helpful documentation

If the charging instrument alleges a complainant is a nonprofit organization, then prosecutors must prove that the organization was a nonprofit at the time of the offense. Do not assume the complainant organization is a nonprofit just because the complainant’s representative thinks it is one. Oftentimes the defendant was the employee who was supposed to be taking care of nonprofit registration but never followed through. Obtain material from the Texas Secretary of State to show the complainant’s corporate filings and proof the organization was a nonprofit.    

            Employment records can be useful in embezzlement cases. Records showing work responsibilities regarding money and salary information establish how much money the defendant was supposed to be receiving from the complainant. The complaining witness should explain the records and testify about them. It is always useful to compare the defendant’s legitimate salary to what the defendant was taking from his workplace. The complainant will (let’s hope) have internal paperwork showing what the defendant was supposed to be paid and the limits of his job’s responsibility.[14] Ideally, the State’s case will include the defendant’s financial records with business records affidavits from banks, credit cards, loans, and other ways to follow the money and see how the defendant took the complainant’s property for personal use.[15]

            Contracts and other legal agreements are important pieces of evidence in many fraud cases. Misapplication of Fiduciary Property (PC §32.45) requires proving a fiduciary misapplied property; “misapply” means to deal contrary to an agreement or law. Technically, the agreement does not have to be in writing,[16] but for practical purposes there should be a written agreement that prosecutors introduce as evidence. In contractor theft cases, the State must show the defendant had no intention of fulfilling an obligation under an agreement and that the promise to perform work was a ruse to accomplish theft by deception.[17] If there was a contract, the State needs to introduce it. If there was not a traditional contract, prosecutors will want to supplement the complainant’s testimony with anything that shows what the agreement was supposed to be, such as emails, text messages, endorsements on checks, or notes on transactions made through a payment app.

            Tax paperwork is also helpful evidence in fraud and theft cases. If the defendant failed to report ill-gotten income, it goes toward showing that the money was received illegally. The Internal Revenue Service will not give prosecutors a defendant’s tax returns, but you may be able to acquire tax information through other means: for example, through the defendant’s accountant or a tax-preparing service.[18] Likewise, a defendant will often have to turn over tax statements when obtaining loans, and prosecutors can subpoena the loan records. If a defendant filed for bankruptcy, the prosecutor may be able to get tax paperwork through bankruptcy court records. (Bankruptcy filings and hearing records can be a goldmine of evidence in theft and fraud cases.)  

In conclusion

One of the most rewarding aspects of presenting a paper case to a jury is the level of certainty prosecutors should have in the case. We believe the defendant is guilty, and the jury can sense our confidence. If the case is worked up correctly, the defense is left with unpersuasive arguments that have to explain why the defendant changed internal records and received four times his income in one year, or why he possessed the identities of 50-plus people when living in a hotel room rented with a stolen credit card. With paper cases, the evidence we need is printed in black and white—we just have to go out and get it.

Endnotes


[1]  West v. State, 124 S.W.3d 732, 736 (Tex. App.—Houston [1st Dist.] 2003, pet. ref’d). Failure to elicit the proper predicate language for business records from a live witness will result in inadmissibility of those records.

[2]  Sw. Indus. Inv. Co. v. Scalf, 604 S.W.2d 233, 237 (Tex. Civ. App.—Dallas 1980, no writ). The statute does not authorize admission of records of information received from other sources. 

[3]  Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240–41 (Tex. App.—Houston [1st Dist.] 2010, no pet.); Harris v. State, 846 S.W.2d 960, 964 (Tex. App.—Houston [1st Dist.] 1993, pet. ref’d). It was proper to admit certificate of origin from an automobile manufacturer where it could be considered part of the business records of an automobile dealership due to a high degree of trustworthiness. 

[4]  Cole v. State, 839 S.W.2d 798 (Tex. Crim. App. 1990), decision clarified on reh’g (Oct. 21, 1992). Reports that are not ministerial and are created solely for the purpose of litigation do not meet TRC 803(6) as business records. See also, Hardy v. State, 71 S.W.3d 535, 537 (Tex. App.—Amarillo 2002, no pet.); R.R. Comm’n of Tex. v. Rio Grande Valley Gas Co., 683 S.W.2d 783, 789 (Tex. App.—Austin 1984, no writ).

[5]  Dominguez v. State, 441 S.W.3d 652, 657 (Tex. App.—Houston [1st Dist.] 2014, no pet.); Reyes v. State, 48 S.W.3d 917, 921 (Tex. App.—Fort Worth 2001, no pet.).

[6]  Venable v. State, 113 S.W.3d 797, 800-01 (Tex. App.—Beaumont 2003, pet. ref’d).

[7]  See Rosenblatt v. City of Houston, 31 S.W.3d 399, 404 (Tex.App.—Corpus Christi 2000, pet. denied). “Substantial compliance” has been defined to mean performance of the essential requirements of a statute. A deviation from the requirements of a statute which does not seriously hinder the legislature’s purpose in imposing the requirement is in substantial compliance.

[8]  I wrote an article for the July–August 2017 issue of The Texas Prosecutor journal, “Don’t Give Credit to Identity Thieves” (https://www.tdcaa.com/journal/dont-give-credit-to-identity-thieves) that gives more information about prosecuting offenses under Penal Code §32.51. In that article I proposed being able to aggregate the number of uses of the same item of identification information by a defendant to increase the level of offense. To my knowledge there is not any caselaw regarding aggregating uses of identifying information, but after a few more years of experience I do not recommend indicting §32.51 cases in that manner. If there are multiple fraudulent uses of the same identifying information, the more conservative approach is to treat them as separate offenses.

[9]  See, Ford v. State, 282 S.W.3d 256, 265 (Tex. App.—Austin 2009, no pet.). Fictitious cards and accounts are not items of identifying information unless they identify a real human being.  

[10]  Grimm v. State, 496 S.W.3d 817, 825 (Tex. App.—Houston [14th Dist.] 2016, no pet.).

[11]  Cortez v. State, 469 S.W.3d 593 (Tex. Crim. App. 2015).

[12]  You still have to prove intent to defraud so you may want to figure out who at least some of the human victims are or have other evidence the defendant knows these cards are illegally altered.

[13]  United States v. Turner, 839 F.3d 429, 435-6 (5th Cir. 2016).

[14]  The complainant could testify without records, but the records make a complainant more believable. Juries expect employers to have written agreements with their employees or official documentation of salary. 

[15]  See Tex. Penal Code §31.08(d); Riley v. State, 312 S.W.3d 673, 679 (Tex. App.—Houston [1st Dist.] 2009, pet. ref’d). If the defendant introduces evidence that appropriated money was used for the benefit of the complainant, then the defendant can reduce the value of the charged theft. Be ready for arguments that the defendant took money to get reimbursed for expenses or extra work. 

[16]  Bynum v. State, 767 S.W.2d 769, 777 (Tex. Crim. App. 1989).

[17]  Jacobs v. State, 230 S.W.3d 225 (Tex.App.—Houston [14th Dist.] 2006, no pet.).

[18]  Financial records can show payments to tax preparation services or an accountant. Send a new subpoena to that entity for its records.