Opposition Brief — Robinson v. United States

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QUESTION PRESENTED

Whether 18 U.S.C. 545, which punishes one who

“knowingly and willfully, with intent to defraud the

United States, * * * makes out or passes, or attempts

to pass, through the customhouse any false, forged, or

fraudulent invoice, or other document or paper,”

requires the government to prove that the defendant

intended to deprive the United States of money or

property.

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In the Supreme Court of the Gnited States

UOCTORER TRRM. Lh

ITED STATES OF AMET

PETITION FOR A WRIT OF CKERTIOI

Hk | ITED STATES COURT O} PP}

POR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

5

ihe opinion of the court of appeals (Pet App La-Ya

eported at 147 F.8d 851, A related opinion of th

urt of appeals rejecting other contentions raised bi

titioner (Pet, App, 10a-18a) is unpublished, but th

ecision is noted at 162 F.8d 981 (Table)

JURISDICTION

rhe judgment of the court of ippeals Waa entered on

huine 4, LYS \ petition for rehearing Was denied on

\uguat ol, ly lel \pp In he petvilion Tor a writ

| Certliorart was filed on Novembe} ls, vy Pri

irisdiction of this Court is invoked under 28 |

A]

STATEMENT

Following a jury trial in the United States District

Court for the Southern District of California, petitioner

was convicted on one count of conspiracy to smuggle

merchandise into the United States through the use of

false invoices, to receive the same merchandise, and to

engage in money laundering, in violation of 18 U.S.C.

371 (Count 1); three counts of making out and passing

through the customhouse false and fraudulent invoices,

in violation of 18 U.S.C. 545 (Counts 2-4); three counts

of receiving merchandise that had been brought into

the United States contrary to law. in violation of

18 U.S.C. 545 (Counts 5-7); nine counts of money

laundering, in violation of 18 U.S.C. 1956(a)(2)(B)(i)

(Counts 8-16); 24 counts of engaging in monetary

transactions in property derived from unlawful activity,

in violation of 18 U.S.C. 1957 (Counts 17-40); and three

counts of mail fraud, in violation of 18 U.S.C. 1341

(Counts 42, 44, and 46). Petitioner was sentenced to 121

months’ imprisonment, to be followed by three years of

supervised release, and was fined $75,000. He was also

ordered to forfeit $1.9 million.

1. In 1990, petitioner and Bradley Hirou were co-

owners of Fusion International Trading, Inc. (Fusion).

As the president and majority owner of Fusion,

petitioner had final decision-making authority over all

financial matters. Pet. App. 3a-4a; Gov’t C.A. Br. 7.

In the spring of 1990, Hirou contacted Stephen Pec-

queraux, the majority owner of High Tech Trading

(HTT), a company located in France. HTT bought and

sold used IBM AS-400 processor cards and feature

cards.’ After Hirou determined that Fusion could sell

' IBM computers contain at least one processor card and sev-

eral feature cards. The processor card determines the processing

Sg ee

3

cards to customers, petitioner and Pecqueraux agreed

that Fusion would purchase three processor cards from

HTT. In June 1990, petitioner took delivery of the

three processor cards in Paris, put them in his suitcase,

and brought them to San Diego, California, without

declaring them to United States Customs. Pet. App.

4a; Gov’t C.A. Br. 8-9.

Later that month, Fusion purchased 14 additional

IBM cards from HTT for $500,000. Petitioner again

traveled to France, where he and Pecqueéraux hid the

IBM cards in the back of a computer. Petitioner agreed

to pay Pecqueraux through a Swiss bank account in

order te avoid paying United States taxes and customs

duties and to allow Pecqueraux to avoid paying French

taxes. Petitioner and Pecqueraux traveled to Switzer-

land, where each set up a foreign corporation to be used

to create false invoices. Pet. App. 4a; Gov’t C.A. Br. 9-

11.

In July 1990, Pecqueraux arranged to export IBM

cards from France to Fusion in the United States

through CSC Computer Sales and Leasing, Inc. (CSC),

a New York business that had an import license for the

IBM cards. CSC subsequently acted as the importer of

record for computer parts sold by HTT to Fusion. To

avoid the assessment of customs duties on Fusion’s

purchases, HTT sent false invoices to CSC that under-

stated the value of the computer parts sold to Fusion.

Pet. App. 4a-5a; Gov’t C.A. Br. 11-12.

In August 1990, Fusion received the computer in

which petitioner and Pecqueraux had hidden the 14

capability of the computer, and the feature cards perform routine

computer functions. At the time, a processor card for AS-400 com-

puters sold for $19,000 to $229,000, depending upon the processing

capability of the card. Pet. App. 4a n.1; Gov’t C.A. Br. 7-8.

IBM cards. The 14 cards were not listed on any invoice

presented by CSC to the United States Customs Ser-

vice. Fusion sold the cards to Sun Data, a company in

Atlanta, Georgia, for $623,000. After receiving payment

from Sun Data, Fusion wired its payment to HTT to

Pecqueraux’s Swiss bank account. Pet. App. 5a; Gov’t

C.A. Br. 12-13.

Shortly thereafter, Fusion agreed to purchase 43

IBM cards from Pecqueraux for $1.36 million. HTT

sent a false invoice to CSC that listed the purchase

price of the IBM cards as $9,000, and CSC sent a false

invoice to Fusion that listed the purchase price as

$10,000. Fusion sold the 43 IBM cards to Sun Data for

$1.6 million. After receiving payment from Sun Data,

Fusion wired its payment for the cards to Pecqueraux’s

Swiss bank account. Pet. App. 5a; Gov’t C.A. Br. 13-14.

Several months later, Fusion agreed to purchase 554

computer IBM cards from Pecqueraux for $1.8 million.

HTT sent a false invoice to CSC that listed the pur-

chase price as $27,000, and CSC created a false invoice

showing that it sold the cards to the foreign corporation

set up by petitioner for $30,500. Petitioner and Hirou

arranged to sell the computer cards to Americomp, but

the transaction was not consummated. Petitioner and

Hirou then sold 423 IBM computer cards to Sun Data

for $2.1 million. They subsequently transferred $2.3

million to their Swiss bank account. Pet. App. 5a-6a;

Gov't C.A. Br. 14-17.

During this time, petitioner and Hirou paid $72,356

for a Porsche automobile for Pecqueraux and $1.3

million for a home in Rancho Santa Fe, California, for

Pecqueraux. Soon thereafter, the market for IBM AS-

400 computer cards declined substantially. Pet. App.

6a; Gov't C.A. Br. 16-17.

2. Counts 2, 3, and 4 of the indictment charged that

petitioner, with intent to defraud the United States,

made out and passed through the customhouse false

and fraudulent invoices, in violation of 18 U.S.C. 5452

Petitioner contended that, by using the phrase “intent

to defraud the United States,” Section 545 punishes

only one who intends to deprive the United States of

customs revenue. He therefore requested that the

district court instruct the jury that, to convict him on

Counts 2, 3, and 4 charging violations of Section 545, the

jury was required to find that petitioner intended to

deprive the United States of revenue. He also re-

quested a jury instruction that the jury was required to

find him not guilty on those counts if it found that he

honestly believed that no customs duty was owed on

the computer cards.’ The district court refused to give

petitioner’s requested instructions. Instead, the court

instructed the jury that the element of “intent to

defraud” required an “intent to deceive or to cheat.”

Pet. 7; Pet. App. 7a.

3. The court of appeals affirmed. Pet. App. la-9a.

Following circuit precedent, United States v. Boggus,

411 F.2d 11u (9th Cir.), cert. denied, 396 U.S. 919 (1969),

In pertinent part, Section 545 provides:

Whoever knowingly and willfully, with intent to defraud

the United States, * * * makes out or passes, or attempts to

pass, through the customhouse any false, forged, or fraudulent

invoice, or other document or paper * * * [s]hall be fined

under this title or imprisoned not more than five years, or

both.

° At trial, petitioner testified in his own defense that he knew

that the false invoices allowed Pecqueraux to avoid French taxes,

but he claimed that he did not intend to avoid the payment of U.S.

customs duties because he believed that the computer cards were

duty-free and legally admissible into the United States. Pet. 6.

6

the court rejected petitioner’s claim that the district

court erred in refusing to instruct the jury that the

government was required to prove an intent to deprive

the government of revenue to obtain a conviction under

Section 545. Pet. App. 6a-9a.

The court acknowledged that the Third Circuit had

held in United States v. Menon, 24 F.3d 550 (1994), that

“intent to defraud” under Section 545 required an

intent to deprive the government of revenue. As the

court explained, the Menon decision had relied on the

fact that the predecessor statute to Section 545 had

been construed to required an intent to deprive the

government of revenues, and had also held that Con-

gress did not intend any substantive change when it

deleted the references to revenue from the statutory

text. Pet. App. 7a-8a. The court below also observed,

however, that the phrase “defraud the United States”

has generally been construed (by this Court among

others) to extend beyond defrauding the government of

revenue. /d. at 8a (citing McNally v. United States, 483

U.S. 350, 359 n.8 (1987)). It therefore concluded that

“the intent to defraud element of [the] statute should be

construed as meaning intent to avoid and defeat the

United States Customs laws, as construed in Boggus,

rather than the narrower construction ‘intent to

deprive the United States of revenue.’” Jbid. The

court further observed that its decision is in accord

with the Second Circuit’s decision in United States v.

Borello, 766 F.2d 46 (1985), and the Seventh Circuit’s

decision in United States v. Kurfess, 426 F.2d 1017,

1019, cert. denied, 400 U.S. 830 (1970). Pet. App. 8a-9a.

ARGUMENT

Petitioner contends (Pet. 7-24) that the term “intent

to defraud” in the first paragraph of 18 U.S.C. 545

requires an intent to deprive the government of money

cr property, as opposed to an intent to deceive the

government (for example, by fraudulently depriving it

of useful information in the-administration of the

customs laws). The court of appeals, consistent with

two of the three other circuits that have addressed the

issue, correctly rejected that contention. Further, al-

though the Third Circuit has reached a contrary result,

it may reconsider its decision i» light of this Court’s

intervening decision in United States v. Wells, 519 U.S.

482 (1997). The Third Circuit relied heavily on asser-

tions by the 1948 Revisers to the United States Code

that they intended no substantive change to Section 545

when they removed a reference to defrauding “the

revenue of” the United States in that statute. Wells

makes clear, however, that such assertions by the

Revisers cannot prevail over the plain language of

Section 545. Further review is therefore not war-

ranted.

1. The court of appeals correctly held that the

element of “intent to defraud the United States” in

Section 545 does not require proof of intent to deprive

the government of revenue. This Court has consis-

tently interpreted statutes prohibiting an act done with

intent “to defraud the United States” not to require an

intent to injure the government financially. Thus, the

Court has long held in cases arising under 18 U.S.C.

371, which prohibits conspiracies “to defraud the

United States,” that a showing of intent to cause

pecuniary harm to the United States is not required. In

Hammerschmidt v. United States, 265 U.S. 182, 188

8

(1924), this Court explained that “[t]o conspire to

defraud the United States means primarily to cheat the

Government out of property or money, but it also

means to interfere with or obstruct one of its lawful

functions by deceit, craft or trickery, or at least by

means that are dishonest.” See also Dennis v. United

States, 384 U.S. 855, 861 (1966); Haas v. Henkel, 216

U.S. 462, 480 (1910). The most natural reading of Sec-

tion 545, therefore, is that the prohibited “intent to

defraud the United States” may include in intent to

obstruct the government’s enforcement of the customs

laws (by, for example, depriving the government of

information needed to enforce those laws), and is not

limited to an intent to deprive the government of

customs revenue.

McNally v. United States, 483 U.S. 350 (1987), does

not suggest a different conclusion. In that case, the

Court held that mail fraud convictions under 18 U.S.C.

1341 could not be based on the theory that a public

official’s conduct had deprived citizens of their intangi-

ble right to honest and impartial services by their gov-

ernment officials. The Court held (483 U.S. at 356-360)

that the right to honest services did not fall within the

meaning of “property” as defined in Section 1341.‘

Although the Court held in McNally that the mail fraud

statute was “limited in scope to the protection of prop-

erty rights,” id. at 360, the Court expressly distin-

guished Hammerschmidt and similar cases by noting

* After this Court’s decision in McNally, Congress enacted 18

U.S.C. 1346, which now provides that, for purposes of the mail

fraud and wire fraud statutes, “the term ‘scheme or artifice to

defraud’ includes a scheme or artifice to deprive another of the

intangible right of honest services.” Anti-Drug Abuse Act of 1988,

Pub. L. No. 100-690, § 7603(a), 102 Stat. 4508.

9

that, whereas Section 371 “is a statute aimed at protect-

ing the Federal Government alone[,] * * * the mail

fraud statute * * * had its origin in the desire to

protect individual property rights.” Jd. at 359 n.8. Like

Section 371, Section 545 is “a statute aimed at protect-

ing the Federal Government alone[.]” /bid. Conse-

quently, McNally has no bearing on the issue presented

in this case.

There is likewise no merit in petitioner’s argument

(Pet. 13-15) that the court of appeals’ decision conflicts

with United States v. Cohn, 270 U.S. 339 (1926). That

case involved a statute that punished one who “for the

purpose and with the intent of cheating and swindling

or defrauding the Government of the United States, or

any department thereof, * * * shall knowingly and

willfully * * * make * * * any false or fraudulent

statements or representations.” In holding that the

statute did not reach false statements made to a

customs collector when the purpose of the statements

was not to deprive the government of money or pro-

perty, the Court concluded that because the word

“defrauding” was “used in connection with the words

‘cheating or swindling,’ * * * it is to be construed in

the manner in which those words are ordinarily used, as

relating to the fraudulent causing of pecuniary or

property loss.” Jd. at 346-347. The Court distin-

guished its interpretation of Section 371 (which does

not refer to “cheating or swindling”) in Hammer-

schmidt on the ground that “the language of the two

® Congress subsequently amended the statute construed in

Cohn to remove “the restriction to cases involving pecuniary or

property loss to the government.” United States v. Gilliland, 312

U.S. 86, 93 (1941); see also Brogan v. United States, 118 S. Ct. 805,

813-814 (1998); United States v. Yermian, 468 U.S. 68, 70-71 (1984).

10

statutes [was] * * * so essentially different as to

destroy the weight of the supposed analogy [to Section

371]}.” Id. at 346. Because the language of the false

statement statute involved in Cohn is likewise “essen-

tially different” from the language of Section 545, Cohn

is not controlling in this case.

2. Petitioner argues (Pet. 15-24) that the legislative

history of Section 545 and the overall statutory scheme

establish that Section 545 requires proof of an intent to

deprive the government of revenue. As petitioner

notes (Pet. 16-17), before the 1948 revision of the

United States Code, the predecessor to what is now

Section 545 required proof of an “intent to defraud the

revenue of the United States.” See 19 U.S.C. 1593

(1940). Moreover, the Second Circuit construed that

predecessor statute to require proof of an intent to

cause “an actual loss of government income.” United

States v. Kushner, 135 F.2d 668, 671, cert. denied, 320

U.S. 212 (1943). When Congress revised the Code in

1948, see Act of June 25, 1948, ch. 645, 62 Stat. 683, it

deleted the words “the revenue of” from the intent

element of Section 545. Petitioner argues, however

(Pet. 17-19), that the Reviser’s Note to Section 545 and

the legislative history concerning the 1948 codification

indicate that no substantive change to Section 545 was

intended by that revision.

Petitioner’s argument is without merit. First, re-

gardless of what the revisers might have said about

their intent in proposing changes to the language of

Section 545, their comments cannot prevail over the

plain language of Section 545, which contains no refer-

ence to a requirement of an intent to deprive the

government of revenues, but rather uses language—

“intent to defraud the United States”—that has long

been construed not to be limited to an intent to cause

1]

the government financial harm. See pp. 7-8, supra.

“Legislative history can be a legitimate guide to a

statutory purpose obscured by ambiguity, but in the

absence of a clearly expressed legislative intention to

the contrary, the language of the statute itself must

ordinarily be regarded as conclusive.” Burlington N.

R.R. v. Oklahoma Tax Comm’n, 481 U.S. 454, 461

(1987) (internal quotations and citations omitted); see

also Salinas v. United States, 522 U.S. 52, 57-58 (1997).

Here, the statutory language unambiguously reaches

further than an intent to deprive the United States of

revenue. The fact that the 1948 Reviser’s Note did not

expressly indicate that substantive changes were

intended in Section 545 does not make the statutory

language used by Congress ambiguous. In a similar

case involving the effect of a Reviser’s Note accom-

panying the 1948 revisions of the United States Code,

this Court recently explained that the mere fact that

the 1948 Revisers may have overlooked or chosen to

say nothing about a substantive change in their pro-

posed revisions does not, by itself, mean that no such

substantive change was effected when the revisions

were enacted into law by Congress. See Wells, 519 U.S.

at 496-497.

Moreover, in this case, like Wells, Congress could not

reasonably have understood the 1948 revision as

making no substantive change. Cf. Wells, 519 U.S. at

497. When the Second Circuit construed the predeces-

sor to Section 545 in Kushner, it placed significant

weight on the fact that the statute before it did not

flatly punish actions taken with the “intent to defraud”

the government, but rather required “an intent to

defraud the revenue of the United States.” 135 F.2d at

671 (emphasis added). Although the Kushner court

found the reach of the statute “not free from doubt,”

ibid., it concluded that the additional reference to “the

revenue of” the United States distinguished the case

before it from cases like Haas v. Henkel, supra, which

construed statutory language referring to a purpose “to

defraud the United States” to reach broadly to an

intent to prevent the government from exercising its

lawful functions (rather than merely an intent to cause

it financial harm, see Kushner, 135 F.2d at 671). Indeed,

the Kushner court affirmed one of the defendant’s

convictions, which rested on another part of the statute

that prohibited “fraudulently or knowingly” importing

matter into the United States contrary to law, and did

not require a purpose to defraud “the revenue of the

United States,” id. at 672. Moreover, the Kushner

court endorsed (id. at 671- 672) Judge Augustus Hand’:

decision in United States v. Twenty-Five Pictures, 260

IF’. $51 (S.D.N.Y. 1919), which had also relied on Haas y,

Henkel to conclude (id. at 854) that “[tlo deprive the

United States of the information it was entitled to

was to defraud the United States.”

The law before the 1948 revisions to the United

States Code therefore made clear that the predecessor

statute to Section 545 required an intent to deprive the

government of revenues only because the statute

contained an express reference to such revenues, and

did not refer generally to an intent “to defraud the

United States.” When Congress in 1948 deleted the

words that the Second Circuit had found crucial, it

could not reasonably have believed that that deletion

would have no substantive effect. Rather, the deletion

did have the substantive effect of removing any

requirement that the government prove that the

defendant had a purpose to deprive the government of

revenue.

For similar reasons, petitioner’s reliance on the rule

of lenity (Pet. 20) is misplaced. “The mere possibility of

articulating a narrower construction [of a statute] does

not by itself make the rule of lenity applicable.” Smith

v. United States, 508 U.S. 223, 239 (1993). Further, the

rule of lenity is “not applicable unless there is a griev-

ous ambiguity or uncertainty in the language and

structure of |a statute], * * * such that even after a

court has seized every thing from which aid can be

derived, it is still left with an ambiguous statute.”

Chapman v, United States, 500 U.S, 458, 468 (1991)

(internal quotation marks and citations omitted); see

rp 0 Muscarello vy, United States, 118 S, Ct. 1911, 1919

ee) igre 19 U.S, at 499; United States v. Shabani,

518 . 10, 17 (1994), Because the language of Section

+t is oe ambiguous, the rule of lenity is inapplicable in

this case.

3. As petitioner points out (Pet. 7-13), two of the

other three circuits that have addressed the question

have agreed with the Ninth Circuit that Section 545

requires proof only of an intent to avoid and defeat the

customs laws, and not proof of an intent to deprive the

government of revenue. See United States v. Borello,

766 F.2d 46, 51-52 (2d Cir. 1985); United States vy.

McKee, 220 F.2d 266, 269 (2d Cir, 1955); United States

Vv, Kurfess, 426 F.2d 1017, 1019 (7th Cir,), cert, denied,

400 U.S, 880 (1970); see also United States \

Mehrmaneah, 689 F.2d 822, 8388 (Oth Cir, 1982): United

States v, Bogqua, 411 F.2d 110, 118 (9th Cir), cert

denied, 896 U.S, 919 (1969), On the other hand, the

Third Cireuit held in United Statea v, Menon, 24 F.3d

550, 557 (1904), that Section 545 “requires an intent to

cause a deprivation of property or money.” The Third

Circuit relied on the Reviser’s Note accompanying the

1948 revision to Section 545, which indicated that no

substantive change had been intended by the deletion

of the words “the revenue of” from the statute. That

legislative history, the court concluded, made “the

meaning of ‘defraud the United States’ in § 545

ambiguous given that * * * the meaning of defraud

varies from statute to statute.” /bid.

lor the reasons discussed above, the Third Circuit’s

view that Section 545 requires proof of an intent to

deprive the government of revenue is ineorrect. The

Reviser’s Note to Section 545 simply will not bear the

weight that the Third Circuit placed on it. Moreover,

after the Third Cireuit’s Menon decision, this Court

made clear in United States vy. Wells, supra, that a

Reviser’s Note to the 1948 Code, indicating that no

substantive change was intended by an alteration in

statutory language, cannot prevail over the plain

language of a statute enacted by Congress in 1948 as

part of that revision. When presented with the

opportunity the Third Circuit may well reconsider its

ruling in Menon in light of this Court’s decision in

Wel/s. In addition, the conflict among the circuits does

not at present appear to involve an issue of great

importance in the administration of federal criminal

law, for only a handful of cases have addressed the issue

in the 51 years since the codification of the criminal

code in 1948, Accordingly, further review by this Court

is not warranted,

15

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

SETH P. WAXMAN

Solicitor General

JAMES K. ROBINSON

Assistant Attorney General

JOSEPH C, WYDERKO

\fformey

rEBRUARY 1009