## Facts

- Bogdan Gajo owned Cragin Sausage, a specialty ethnic food store in Chicago.
- On January 16, 1996, the building housing the store caught fire; investigators concluded the fire was intentionally set after debris testing showed traces of gasoline despite no gasoline being stored there.
- Multiple investigators and scientists testified the fire was deliberate, and physical evidence suggested a staged break-in: the only open door showed signs the locks had been pried from the inside, and the store’s alarm did not activate.
- About a week after the fire, Gajo submitted an insurance claim seeking payment for the damage; the insurer later denied the claim.
- During the investigation, agents identified Jay Smith through phone records. Smith told agents that, before the fire, Edward Baumgart introduced him to Gajo and that Baumgart and Gajo offered Smith $4,000 to burn Gajo’s building; Smith refused.
- Nearly ten months after the fire, federal agents had Smith place two recorded telephone calls to Baumgart. In those calls, Baumgart told Smith not to speak with law enforcement about the fire and referenced a prior meeting involving Smith, Baumgart, and Gajo, as well as the fact that the investigation was still open.
- A federal jury convicted Gajo of conspiracy to commit arson (18 U.S.C. § 371), solicitation to commit arson (18 U.S.C. § 373), arson (18 U.S.C. § 844(i)), and mail fraud (18 U.S.C. § 1341).
- On appeal, Gajo focused on evidentiary rulings, including (1) admission of the recorded Baumgart-Smith calls as co-conspirator statements and (2) admission of a government agent’s account of Smith’s prior grand jury testimony after Smith’s trial testimony differed from his earlier statements.

## Issues

1. Whether the district court erred by admitting Baumgart’s recorded statements to Smith as non-hearsay co-conspirator statements under Federal Rule of Evidence 801(d)(2)(E), given that the calls occurred after the fire.
2. Whether the district court erred by allowing a government agent to recount Smith’s prior grand jury testimony to impeach Smith, and whether that evidence was improperly treated as substantive proof in violation of the rules of evidence or the Confrontation Clause.

## Decision

- The Seventh Circuit affirmed Gajo’s convictions.
- The court held the district court did not abuse its discretion in admitting Baumgart’s recorded statements under Rule 801(d)(2)(E) because there was sufficient proof of a conspiracy involving Gajo and Baumgart, and the statements were made during and in furtherance of that conspiracy.
- The court held the district court did not reversibly err in permitting impeachment of Smith using his prior grand jury testimony through a government agent; Smith testified at trial and was subject to cross-examination, and any arguable overreach was harmless in light of the record as a whole.

## Legal Principles

- Under Fed. R. Evid. 801(d)(2)(E), a statement is not hearsay if the government proves by a preponderance of the evidence that (1) a conspiracy existed, (2) the declarant and the defendant were members, and (3) the statement was made during the course of and in furtherance of the conspiracy.
- Statements aimed at concealment—such as warning a participant not to talk to law enforcement—may qualify as “in furtherance” when the agreement and its objectives have not yet ended (including efforts to avoid detection and protect anticipated benefits).
- A district court’s evidentiary rulings are reviewed for abuse of discretion, and reversal is warranted only when no reasonable basis in the record supports the ruling.
- Under Fed. R. Evid. 801(d)(1)(A), a witness’s prior inconsistent statement given under oath (including grand jury testimony) is admissible as non-hearsay if the witness testifies at trial and is subject to cross-examination about the statement.
- When an evidentiary error is alleged, the conviction will stand if any error was harmless—i.e., it did not affect the verdict given the remaining evidence.

## Conclusion

United States v. Gajo, 290 F.3d 922 (7th Cir. 2002), affirmed convictions arising from a deliberately set fire and related fraud, holding that recorded post-fire calls urging silence could be admitted as co-conspirator statements when the concealment served the ongoing unlawful agreement, and that impeachment using prior sworn grand jury testimony did not warrant reversal where the witness testified and was available for cross-examination and any error was harmless.


United States v. Gajo, 290 F.3d 922 (2002)