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130 F.3d 547; 1997 U.S. App. LEXIS
34155 UNITED STATES OF AMERICA, Appellant,
v. ROBERT TRAPILO, also known as Sealed Deft. 1, LYLE DAVID PIERCE, III, also
known as Joe Boy; REGINA PIERCE, also known as Sealed Deft. 3, and WAYNE
STEHLIN, also known as Sealed Deft. # 7, Defendants-Appellees, CARL TARBELL,
also known as Sealed Deft. # 4, also known as Jake; PATRICIA TARBELL, also
known as Sealed Deft. # 5, also known as Patty, and ARTHUR TARBELL, also known
as Sealed Deft. # 6, Defendants. Docket No. 97-1011 UNITED STATES COURT OF APPEALS FOR THE
SECOND CIRCUIT August 28, 1997, Argued December 5, 1997, Decided SUBSEQUENT
HISTORY: [*1] As Amended December 31, 1997. Certiorari
Denied October 5, 1998, Reported at: 1998 U.S. LEXIS 4788; 1998 U.S. LEXIS
4787. PRIOR
HISTORY: Appeal from the December 20, 1996 order of the United States
District Court for the Northern District of New York, Pooler, J., dismissing a
one count indictment that alleged money laundering conspiracy in violation of
18 U.S.C. § 1956. The conspiracy charge was brought in
connection with an alleged series of domestic and foreign financial
transactions that involved the proceeds of, and were intended to promote, a
scheme to defraud the Canadian government of tax revenue, in violation of the
wire fraud statute, 18 U.S.C. § 1343. The district court
dismissed the indictment, holding that a scheme to defraud a foreign government
of tax revenue does not fall within the purview of the wire fraud statute. DISPOSITION: Reversed and remanded. COUNSEL: GREGORY A. WEST, Assistant
United States Attorney, Northern District of New York, Syracuse, NY (Thomas J.
Maroney, United States Attorney for the Northern District of New York,
Syracuse, NY, of counsel), for Appellant. K.
MICHAEL SAWICKI, Buffalo, NY (Zdarsky, Sawicki & Agostinelli, Buffalo, NY,
of counsel), for Appellee Lyle David Pierce, III. MARSHA
A. HUNT, Syracuse, NY, for Appellee Regina Pierce. Kevin
E. McCormack, Hancock & Estabrook, [*2] on the brief, for Appellee
Robert Trapilo. JUDGES: Before: MESKILL and JACOBS,
Circuit Judges, and KORMAN, District Judge.* * Honorable Edward R. Korman, United
States District Judge for the Eastern District of New York, sitting by
designation. OPINIONBY: MESKILL OPINION: MESKILL,
Circuit Judge: This
appeal presents the question whether a scheme to defraud the Canadian
government of tax revenue is cognizable under the federal wire fraud statute,
18 U.S.C. § 1343. In addressing that issue, the district
court adopted the reasoning of the First Circuit in United States v. Boots, 80 F.3d 580 (1st Cir.),
cert. denied, 136 L. Ed. 2d 188, 117 S. Ct. 263 (1996), and concluded that the
common law “revenue rule” and other prudential considerations
precluded application of the federal wire fraud statute in alleged schemes to
defraud foreign governments of tax revenue. Because we disagree with the
reasoning in Boots, we reverse the order of the district court. BACKGROUND
In
recent years, Canada has dramatically raised taxes and duties on the sale of
liquor and tobacco products. These tax increases have created a lucrative
“black market” for smugglers, who buy [*3] liquor and tobacco
products in the United States and secretly deliver them into Canada for resale
in various Canadian cities. On
February 29, 1996, the government filed a one count indictment in the United
States District Court for the Northern District of New York, charging Robert
Trapilo, Lyle David Pierce, III, Regina Pierce and Wayne Stehlin with a money
laundering conspiracy in violation of 18 U.S.C.
§ 1956(a)(1)-(2) and (h). n1 The indictment alleges that the
appellees conspired to engage in a series of financial transactions that
involved the proceeds of, and were intended to promote, a scheme to defraud the
Canadian government of tax revenue, in violation of the wire fraud statute, 18
U.S.C. § 1343. This “scheme to defraud”
constitutes the specified unlawful activity for purposes of the money laundering
statute. n2 n1 Section 1956, Laundering of monetary
instruments, provides, in pertinent part: (a)(1) Whoever, knowing that the
property involved in a financial transaction represents the proceeds of some
form of unlawful activity, conducts or attempts to conduct such a financial
transaction which in fact involves the proceeds of specified unlawful activity
—(A)(i) with the intent to promote the carrying on of specified
unlawful activity; . . . . . . . shall be sentenced to a fine of not more
than $ 500,000 or twice the value of the property involved in the transaction,
whichever is greater, or imprisonment for not more than twenty years, or
both.(2) Whoever transports, transmits, or transfers, or attempts to transport,
transmit, or transfer a monetary instrument or funds from a place in the United
States to or through a place outside the United States or to a place in the
United States from or through a place outside the United States—(A)
with the intent to promote the carrying on of specified unlawful activity; . .
. . . . . (h) Any person who conspires to commit
any offense defined in this section . . . shall be subject to the same
penalties as those prescribed for the offense the commission of which was the
object of the conspiracy. 18 U.S.C. § 1956.
[*4] n2 Section 1956(c)(7)(A) defines
“specified unlawful activity” as including “any act
or activity constituting an offense listed in section 1961(1) of this title
(with exceptions not pertinent here).” 18 U.S.C.
§ 1956(c)(7)(A). Wire fraud is among the offenses listed in
§ 1961(1). The
conspiracy charge arises out of the appellees' alleged participation in a
smuggling organization that operated within the St. Regis Mohawk Indian
Reservation in upstate New York. The reservation, consisting of a five mile
strip of land straddling the international border between the state of New York
and the Canadian provinces of Quebec and Ontario, allegedly served as the
conspiracy’s hub for the
delivery of tax free liquor into Canada.
The
indictment alleges that Canadian currency generated by the black market liquor
sales was thereafter transported back into the United States where it was
exchanged and/or deposited to purchase bank drafts or wire transfers. These
funds were then used to pay for additional goods, thereby promoting the scheme
to defraud the Canadian government of tax revenue. On
July 3, 1996, the appellees moved to dismiss the indictment, arguing that in
accordance with Boots the government did not have the authority to prosecute
wire fraud aimed at defrauding a foreign government of tax or customs revenue.
n3 In Boots, three defendants were convicted of conspiracy to violate the
federal wire fraud statute, among other things, in connection with a scheme to
transport tobacco into Canada without paying Canadian taxes and excise duties.
See Boots, 80 F.3d at 583-85. On appeal, the First Circuit reversed the
convictions, holding that a scheme to defraud the Canadian government of tax
revenue is [*6] beyond the reach of the wire fraud statute. Specifically,
the court concluded that for purposes of the wire fraud statute, it could not
determine whether the defendants had the requisite intent to defraud without
first assessing the validity of foreign revenue law. Id. at 587-88. As the court
reasoned, its authority to assess the validity of foreign revenue law was
precluded by the common law revenue rule, which holds that our courts will
normally not enforce foreign tax judgments, n4 the rationale for which is that
issues of foreign relations are assigned to, and better handled by, the
legislative and executive branches of the government. Because it was foreclosed
from passing on the validity of foreign revenue law, the court could not
determine whether the defendants had violated the wire fraud statute. Id. n3 The appellees also argued that the
simple act of smuggling, without an allegation of misrepresentation or deceit,
does not satisfy the requirements for a scheme to defraud under the wire fraud
statute. Because the district court did not address this argument, the
appellees assert it here as an additional ground for affirmance. We conclude
that this argument has no merit. The term “scheme to defraud”
is measured by a “‘nontechnical standard. It is a reflection
of moral uprightness, of fundamental honesty, fair play and right dealing in
the general [and] business life of members of society.’” United
States v. Von Barta, 635 F.2d 999, 1005 n.12 (2d Cir. 1980) (quoting Gregory v.
United States,
253 F.2d 104, 109 (5th Cir. 1958)), cert. denied, 450 U.S. 998, 68 L. Ed. 2d
199, 101 S. Ct. 1703 (1981); accord United States v. Ragosta, 970 F.2d 1085, 1090 (2d
Cir.), cert. denied, 506 U.S. 1002, 121 L. Ed. 2d 543, 113 S. Ct. 608 (1992).
“The scheme exists although no misrepresentation of fact is
made.” Gregory, 253 F.2d at 109 (citation and internal quotation marks omitted);
accord United States v. Richman, 944 F.2d 323, 331-32 (7th Cir. 1991); McEvoy Travel
Bureau v. Heritage Travel, 904 F.2d 786, 791 (1st Cir.), cert. denied, 498 U.S. 992, 112 L.
Ed. 2d 546, 111 S. Ct. 536 (1990). Because the act of smuggling violates
fundamental notions of honesty, fair play and right dealing, it is an act
within the meaning of a “scheme to defraud.” [*7] n4 “The rationale of the revenue rule has been said
to be that revenue laws are positive rather than moral law; they directly affect
the public order of another country and hence should not be subject to judicial
scrutiny by American courts: for our courts effectively to pass on such laws
raises issues of foreign relations which are assigned to and better handled by
the legislative and executive branches of government.” Boots, 80 F.3d at 587; see also Her Majesty the Queen v.
Gilbertson, 433 F. Supp. 410, 411 (D. Or.
1977), aff'd, 597 F.2d 1161 (9th Cir. 1979). But cf. Restatement (Third) of the
Foreign Relations Law of the United States § 483, Reporters
Note 2 at 613 (1987) (“In an age when virtually all states impose and
collect taxes and when instantaneous transfer of assets can be easily arranged,
the rationale for not recognizing or enforcing tax judgments is largely
obsolete.”). The
Boots Court also noted that aside from revenue rule considerations, a decision
upholding the convictions under the wire fraud statute could license the
prosecution of persons [*8] who use the wires of the United States to engage in
smuggling schemes, even though the federal statute that specifically
criminalizes the smuggling of goods into a foreign country punishes such
conduct only if that foreign country has a reciprocal law. 80 F.3d at 588
(citing 18 U.S.C. § 546.) n5 n5 Section 546, smuggling goods into
foreign countries, provides, in pertinent part:Any person owning in whole or in
part any vessel of the United States who employs . . . such vessel for the
purpose of smuggling . . . any merchandise into the territory of any foreign
government in violation of the laws there in force, [and] if under the laws of
such foreign government any penalty or forfeiture is provided for violation of
the laws of the United States respecting the customs revenue . . . [then that
person] shall be fined under this title or imprisoned not more than two years,
or both. 18 U.S.C. § 546. On
December 20, 1996, the district court issued its Memorandum-Decision and Order,
granting [*9] the appellees' motion to dismiss. The district court,
relying on Boots, concluded that the defendants could not be convicted of money
laundering conspiracy because it could not determine whether the defendants had
the requisite fraudulent intent to sustain the underlying unlawful activity of
wire fraud. Specifically, the district court concluded that it could not
determine whether the defendants had the requisite intent to defraud without
first passing on the validity of foreign revenue law, and stated “if
the law [the defendants] intended to violate was not valid, the defendants
could not have had [the requisite] criminal intent [to defraud].”
Because the court reasoned that, in accordance with Boots, the common law
revenue rule precluded inquiry into the validity of foreign revenue laws, the
indictment could not be sustained. On
appeal, the government contends that the district court erred in dismissing the
indictment. Specifically, the government asserts that contrary to the
conclusion of the Boots Court and the court below, the wire fraud statute
condemns any scheme to defraud where interstate or foreign telecommunications
systems are used, and does not require [*10] the court to determine the
validity of Canadian tax law prior to finding a violation of the statute. In
this regard, the government avers that because the essence of any scheme to
defraud is a defendant’s
fraudulent intent, the appellees are not exempt from the strictures of
the wire fraud statute simply because the object of the scheme involved
defrauding a foreign government of tax revenue. We agree. “The
intention of the legislature is to be collected from the words they employ.
Where there is no ambiguity in the words, there is no room for construction.
The case must be a strong one indeed, which would justify a Court in departing
from the plain meaning of words . . . in search of an intention which the words
themselves did not suggest.” United States v. Wiltberger, 18 U.S. 76, 95-96, 5 L. Ed.
37 (5 Wheat.) (1820) (Marshall, C.J.). The
wire fraud statute provides, in pertinent part: Whoever, having devised or intending to
devise any scheme or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or promises, transmits
or causes to be transmitted by means of wire . . . communication in [*11] interstate or foreign commerce,
any writings, signs, signals, pictures, or sounds for the purpose of executing
such scheme or artifice, shall be fined under this title or imprisoned not more
than five years, or both. 18
U.S.C. § 1343. The language of the statute unambiguously
prohibits the use of interstate or foreign communication systems by anyone who
“intends to devise any scheme or artifice to defraud.” Id. (emphasis added); United
States v. DeFiore, 720 F.2d 757, 761 (2d Cir. 1983), cert. denied, 466 U.S. 906, 80
L. Ed. 2d 158, 104 S. Ct. 1684 (1984). The statute is limited in scope to the
protection of money or property rights. McNally v. United States, 483 U.S. 350, 359-60, 97
L. Ed. 2d 292, 107 S. Ct. 2875 (1987). n6 The statute neither expressly, nor
impliedly, precludes the prosecution of a scheme to defraud a foreign
government of tax revenue, and the common law revenue rule, inapplicable to the
instant case, provides no justification for departing from the plain meaning of
the statute. n6 Congress overruled the holding in McNally when it enacted 18 U.S.C.
§ 1346, which provides “the term ’s cheme
or artifice to defraud' includes a scheme or artifice to deprive another of the
intangible right of honest services.” [*12] Under both the mail fraud
and wire fraud statutes, n7 “the thing which is condemned is (1) the
forming of the scheme to defraud, however and in whatever form it may take, and
(2) a use of [mail and wire communications] in its furtherance. If that is
satisfied, more is not required.” Gregory v. United States, 253 F.2d 104, 109 (5th
Cir. 1958) (emphasis omitted); accord United States v. Eskow, 422 F.2d 1060, 1064 (2d
Cir.), cert. denied, 398 U.S. 959, 26 L. Ed. 2d 544, 90 S. Ct. 2174 (1970); United
States v. Fromen, 265 F.2d 702, 705 (2d Cir.), cert. denied, 360 U.S. 909, 3 L.
Ed. 2d 1260, 79 S. Ct. 1295 (1959). In the past, we have concluded that the
wire fraud statute was applicable to a scheme to defraud the State of New York
of cigarette taxes, stating that its focus “is upon the misuse of the
wires, not the regulation of state affairs.” DeFiore, 720 F.2d at 761. We have
also upheld a conviction under the mail fraud statute where the evidence
demonstrated that the defendant intended to defraud the State of New York of
tax revenue, but failed to prove that any taxes were actually due. United
States v. Helmsley, 941 F.2d 71, 94 (2d Cir. 1991) [*13] (“Section 1341
punishes the scheme, not its success.”), cert. denied, 502 U.S. 1091,
117 L. Ed. 2d 409, 112 S. Ct. 1162 (1992); see also Durland v. United States, 161 U.S. 306, 313, 40 L.
Ed. 709, 16 S. Ct. 508 (1896) (for purposes of the statute, the
“significant fact is the intent and purpose”). These cases
teach, as the statute plainly states, what is proscribed is use of the
telecommunication systems of the United States in furtherance of a scheme
whereby one intends to defraud another of property. Nothing more is required.
The identity and location of the victim, and the success of the scheme, are
irrelevant. n8 n7 The wire fraud statute, 18 U.S.C. § 1343, is the
“lineal descendant” of the mail fraud statute, 18 U.S.C.
§ 1341. McNally v. United States, 483 U.S. 350, 374, 97 L.
Ed. 2d 292, 107 S. Ct. 2875 (1987) (citation and internal quotation marks
omitted). “Because these statutes use the same relevant language, they
are analyzed in the same way.” United States v. Slevin, 106 F.3d 1086, 1088 (2d
Cir. 1996); see also Von Barta, 635 F.2d at 1005 n.11 (“scheme or
artifice to defraud” language in both mail and wire fraud statutes is
construed uniformly). [*14] n8 The appellees also argue that the Rule
of Lenity provides an additional reason for affirmance. We conclude that the
Rule of Lenity is not applicable to this case. That rule provides that where
there is a “grievous ambiguity or uncertainty in the language and
structure [of a statute],” Chapman v. United States, 500 U.S. 453, 463, 114 L.
Ed. 2d 524, 111 S. Ct. 1919 (1991) (citation and internal quotation marks
omitted), such that “there are two rational readings of a criminal
statute, one harsher than the other, we are to choose the harsher only when
Congress has spoken in clear and definite language,” McNally v.
United States,
483 U.S. 350, 359-60, 97 L. Ed. 2d 292, 107 S. Ct. 2875 (1987). A statute does
not become ambiguous merely because “[it] has been applied in
situations not expressly anticipated by Congress.” National
Organization For Women v. Scheidler, 510 U.S. 249, 262, 127 L. Ed. 2d 99,
114 S. Ct. 798 (1994) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 499, 87 L.
Ed. 2d 346, 105 S. Ct. 3275 (1985) (internal quotation marks omitted)). Here,
there is no “grievous ambiguity or uncertainty” in the wire
fraud statute whereby one could rationally read its language to exclude schemes
to defraud foreign governments of tax revenue. The statute explicitly covers
“any scheme to defraud,” and expressly covers frauds
involving foreign transactions. [*15] The statute reaches any
scheme to defraud involving money or property, whether the scheme seeks to
undermine a sovereign’s
right to impose taxes, or involves foreign victims and governments. See United
States v. Porcelli, 865 F.2d 1352, 1358 (2d Cir.) (scheme involved defrauding New
York state of state sales taxes), cert. denied, 493 U.S. 810, 107 L. Ed. 2d 22,
110 S. Ct. 53 (1989); Helmsley, 941 F.2d at 94 (scheme involved intent to
defraud New York state of income taxes); see also United States v. Gilboe, 684 F.2d 235, 237-38 (2d
Cir. 1982) (scheme involved defrauding Chinese government, where the
telecommunication systems of the United States were used in transferring
certain Chinese payments from a New York bank to a Bahamas bank), cert. denied,
459 U.S. 1201, 75 L. Ed. 2d 432, 103 S. Ct. 1185 (1983); United States v.
Goldberg, 830 F.2d 459, 464 (3d Cir. 1987) (indictment for wire fraud
authorized where scheme involved wire communications between Pennsylvania and
Canada). At
the heart of this indictment is the misuse of the wires in furtherance of a
scheme to defraud the Canadian government of tax revenue, not the validity of a
foreign sovereign’s
[*16] revenue laws. See, e.g., DeFiore, 720 F.2d at 761-62. The
statute condemns the intent to defraud, that is, “the forming of the
scheme to defraud, however and in whatever form it may take.” Gregory, 253 F.2d at 109. The
intent to defraud does not hinge on whether or not the appellees were
successful in violating Canadian revenue law, as “section 1341
punishes the scheme, not its success.” Helmsley, 941 F.2d at 94. n9
Consequently, there is no obligation to pass on the validity of Canadian
revenue law, and the common law revenue rule is not properly implicated. n9 Our holding today is not only fully
consistent with the plain meaning of the wire fraud statute and decades of
jurisprudence developed thereunder, but it is also consistent with the law of
conspiracy. Where, as here, an indictment alleges conspiracy, legal impossibility
affords a conspirator no defense. United States v. Feola, 420 U.S. 671, 693, 43 L.
Ed. 2d 541, 95 S. Ct. 1255 (1975). “The crime of conspiracy is
complete upon the agreement to violate the law, as implemented by one or more
overt acts . . ., and is not at all dependent upon the ultimate success or
failure of the planned scheme.” United States v. Everett, 692 F.2d 596, 600 (9th
Cir. 1982) (citation and internal quotation marks omitted), cert. denied, 460
U.S. 1051, 75 L. Ed. 2d 930, 103 S. Ct. 1498 (1983). “The
impossibility that the defendants' conduct would result in consummation of the
contemplated substantive crime is not persuasive or controlling.” United
States v. Meyers, 529 F.2d 1033, 1037 (7th Cir.), cert. denied, 429 U.S. 894, 50
L. Ed. 2d 176, 97 S. Ct. 253 (1976). The
simple fact that the scheme to defraud involves a foreign
sovereign’s revenue laws
does not draw our inquiry into forbidden waters reserved exclusively to the
legislative and the executive branches of our government. We concern ourselves
only with what has been expressly forbidden by statute — the use of
the wires in the scheme to defraud. Whether our decision today indirectly
assists our Canadian neighbors in keeping smugglers at bay or assists them in
the collection of taxes, is not our Court’s concern. Therefore, the presence or absence of reciprocal
smuggling laws is irrelevant. Our goal is simply to vindicate the intended
purpose of the statute, that is, “to prevent the use of [our
telecommunication systems] in furtherance of fraudulent enterprises.” United
States v. Von Barta, 635 F.2d 999, 1005 (2d Cir. 1980), cert. denied, 450
U.S. 998, 68 L. Ed. 2d 199, 101 S. Ct. 1703 (1981) (citations omitted). CONCLUSION
We
therefore hold that a scheme to defraud the Canadian government of tax revenue
is cognizable under the federal wire fraud statute, 18 U.S.C.
§ 1343, and reverse the order of the district court that
dismissed the indictment alleging a money-laundering [*18] conspiracy in violation of
18 U.S.C. § 1956 and remand to the district court for further
proceedings. |