On January 20, 2015, the US Court of Appeals for the Seventh Circuit held, in US v. Lawson, that the defendant could not challenge an off-record ruling because he had not insisted that the district court judge explain his reasoning on the record (No. 14-1233, (7th Cir. Jan. 20, 2015)). The court also held that the defense had not preserved its right to challenge the judge's failure to give a limiting instruction to help the jury understand the purpose for which evidence it had admitted could be used.

The defendant was the principal manager and owner of a lender called Evangel Capital, which never had more than $10,000 in its bank accounts, despite its representations that it had $250 million in assets available for loans to religious institutions. The money that it did have came from fees charged to potential borrowers. The defendant withdrew the fee money, used it for personal expenses and failed to return it to customers when their loans went unfunded. A jury convicted the defendant of wire fraud.

During the trial, the prosecutor sought to introduce evidence that the defendant had not reported the fees as income. The prosecutor argued that this tax evidence demonstrated that the defendant acted with knowledge or fraudulent intent. The district judge conducted the conference relating to the evidence off the record. When the proceedings went back on the record, the judge stated that he would admit the evidence, but did not explain how he had reached his conclusion. The defendant did not insist that the judge make a complete ruling, including an explanation of his reasoning, on the record. In addition, the only instruction to the jury regarding how the evidence could be used was broad and failed to provide concrete advice about what sort of inferences would be proper.

The defendant filed an appeal challenging the district court's admission of the tax evidence. He argued that it should have been excluded under FRE 403 and 404(b). The Seventh Circuit held that the defendant could not contend on appeal that the judge failed to conduct a proper FRE 403 analysis. The appellate court explained that without a record of the judge's reasoning, it could not conclude that the judge's analysis was insufficient. The court further held that the defendant also waived his right to challenge the instruction to the jury because he did not insist at trial that a better limiting instruction be given. Although the Seventh Circuit held that it could not disturb the trial court's rulings in this case, the court noted its disappointment in the district court judge, who should have ensured that the record fully reflected his thinking and provided a more useful limiting instruction.

Trial counsel should develop a complete record of rulings that they may want to challenge on appeal. Defense counsel in a criminal matter should also be sure that any instruction limiting the use of evidence gives clear direction to the jurors on how such evidence might be used.