As the recent mistrial in the Roger Clemens case demonstrates, prosecutors must obey the rules of evidence. When prosecutors violate a judge’s order or the rules of evidence, a defendant is often unfairly harmed as a result.

However, not every violation of evidence rules results in a mistrial. On some occasions, juries can be unfairly influenced by impermissible evidence, and defendants can be convicted based on this evidence. Nevertheless, there are other remedies aside from a mistrial in a situation like this, including an appeal to a higher court. Recently, a U.S. Court of Appeals threw out the convictions of five executives who were convicted of fraud.

Prosecutors had accused the executives at American International Group Inc. (AIG) and General Reinsurance Corp. of engaging in fraudulent transactions that were designed to inflate AIG’s loss reserves by $500 million in 2000 and 2001. The alleged offenses occurred prior to the financial crisis that resulted in AIG receiving a bailout of $182.3 billion from the U.S. government.

In reversing the defendants’ convictions, the federal appeals court noted that the trial judge let the prosecutors show the jury several charts, which showed AIG’s stock price before and after the alleged fraud. According to the appeals court, the charts unfairly suggested that the defendants’ actions caused AIG’s stock price to fall by 12 percent, even though the prosecutors had not established any evidentiary support for this conclusion.

Because AIG was so deeply involved in the financial crisis and economic downturn that has since affected nearly every family in the country, the Court of Appeals found that this evidence impermissibly suggested that the defendants caused the economic downturn.

Because of the Court of Appeals’ decision, the defendants’ convictions have been overturned and the case has been sent back to the trial court for a new trial.

Source: Bloomberg, “Ex-AIG, General Re Officers Win Retrial After Convictions Tossed,” David Voreacos, Aug. 2, 2011