U.S.A. v. White

• Decision Date: 01 August 2000
• Docket Number: Docket No. 00-1039
• Citation: 237 F.3d 170
• Parties: (2nd Cir. 2001) UNITED STATES OF AMERICA, Appellee, v. CHARLES WHITE, a/k/a "Mr. Buck", and FABIAN HART, Defendants-Appellants. (L), 00-1040
• Court: U.S. Court of Appeals — Second Circuit

Page 170

237 F.3d 170 (2nd Cir. 2001)

UNITED STATES OF AMERICA, Appellee, v. CHARLES WHITE, a/k/a "Mr. Buck", and FABIAN HART, Defendants-Appellants.

Docket No. 00-1039(L), 00-1040

August Term, 2000

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Submitted: November 15, 2000

Decided: January 10, 2001

Defendants conditionally pled guilty to one count of failing to file reports of cash payments in excess of $10,000, in violation of 26 U.S.C. § 6050I (1994), preserving for appeal the issue whether Section 6050I applies to transactions that occur exclusively within American Indian reservations. We hold that Section 6050I does apply to such transactions and affirm defendants' respective convictions and sentences.

BARBARA D. COTTRELL, Assistant United States Attorney, Albany, New York (Daniel J. French, United States Attorney for the Northern District of New York, Gregory A. West, Assistant United States Attorney, Syracuse, New York, on the brief), for Appellee.

STANLEY L. COHEN, New York, New York, for Defendants-Appellants.

Before: KEARSE, LEVAL, and SOTOMAYOR, Circuit Judges.

SOTOMAYOR, Circuit Judge:

On October 29, 1998, defendants Charles White and Fabian Hart ("defendants") entered conditional pleas of guilty to separate one-count Informations charging them with violating 31 U.S.C. § 5313(a) (1994) by willfully failing to prepare and file IRS Form 8300 reports of currency transactions in which they received more than $10,000 in cash, as required by 26 U.S.C. § 6050I.¹ The conditional pleas reserved for review by this Court the issue whether defendants, as Mohawks conducting business within the St. Regis Mohawk Indian Reservation, a/k/a "Akwesasne" ("the Reservation"), were "as a matter of law, required to prepare and file the . . . Form 8300 [reports] for cash transactions exceeding $10,000." We hold that defendants were required to prepare and file such reports and affirm defendants' respective judgments of conviction and sentences.

BACKGROUND

On June 20, 1997, Hart and White (along with 19 others) were indicted in the United States District Court for the Northern District of New York on charges of conspiracy, money laundering, and racketeering, based on their roles in a scheme to smuggle significant amounts of alcohol and tobacco from the United States into Canada through the Reservation, which straddles the border between the two nations. A superceding indictment containing essentially the same charges was filed on July 10, 1997. Several defendants, including Hart and White, moved the district court to dismiss the superceding indictment on April 20, 1998. The district court denied the motion on October 7, 1998.

On October 29, 1998, Hart and White waived their right to an indictment and separate one-count Informations against them were filed with the district court. The Informations charged Hart and White with willfully violating Section 6050I by failing to prepare and file Form 8300 reports of currency transactions in which they received cash payments in excess of $10,000. During the plea proceedings, Hart and White each moved the district court to dismiss their Informations, claiming that they were not required to file Form 8300 reports for transactions conducted exclusively within the Reservation. The district court denied these motions.

Hart and White then entered conditional pleas of guilty, pursuant to Rule 11(a)(2) of the Federal Rules of Criminal Procedure, to their Informations. In their respective plea agreements, Hart and White acknowledged that between January 1, 1991 and June 20, 1997, they each operated separate wholesale warehouses - located within the portion of the Reservation that is within the borders of the United States - where they sold large quantities of cigarettes and liquor. Furthermore, Hart and White admitted that they knew that United States law provides that cash transactions involving more than $10,000 must be reported to the IRS, yet on numerous occasions during the aforementioned period of warehouse operation, they accepted such cash payments and willfully failed to prepare and file Form 8300 reports of these transactions. The pleas were conditional in that they reserved for review by this Court the issue whether, as Mohawks residing and conducting business within the Reservation, defendants were required to prepare and file Form 8300 reports.

On December 28, 1999, Hart was sentenced to fifteen (15) months imprisonment, ordered to forfeit certain assets, and fined $10,000. White was sentenced to five (5) months imprisonment, ordered to forfeit certain assets, and fined $6,000. Both Hart and White were released from custody pending the outcome of this appeal.

DISCUSSION

I. Subject Matter Jurisdiction

We review questions of subject matter jurisdiction de novo. See Dew v. United States, 192 F.3d 366, 371 (2d Cir. 1999).

With certain exceptions to be discussed below, federal laws of general applicability are presumed to apply to American Indians, regardless of whether they reside on or off a reservation. See Reich v. Mashantucket Sand & Gravel, 95 F.3d 174, 177 (2d Cir. 1996). Thus, for example, it is well settled that American Indians are subject to the federal income tax. See Squire v. Capoeman, 351 U.S. 1, 6 (1956) ("Indians are citizens and . . . in ordinary affairs of life, not governed by treaties or remedial legislation, they are subject to the payment of income taxes as are other citizens.").

Defendants maintain that they were not required to file Form 8300 reports because their cash transactions fell under one of the four exceptions to the reporting requirement that are specified in subsection (d) of 26 C.F.R. § 1.6050I-1, specifically, subsection (d)(4), which is entitled, "Receipt is made with respect to a foreign cash transaction." Subsection (d)(4)(ii) defines this as the "'foreign transaction exception.'" The exception provides as follows:

Generally, there is no requirement to report with respect to a cash transaction if the entire transaction occurs outside the United States (the fifty states and the District of Columbia). An entire transaction consists of both the transaction . . . and the receipt of cash by the recipient. If, however, any part of an entire transaction occurs in the Commonwealth of Puerto Rico or a possession or territory of the United States and the recipient of cash in that transaction is subject to the general jurisdiction of the Internal Revenue Service under title 26 of the United States Code, the recipient is required to report the transaction under this section.

26 C.F.R. § 1.6050I-1(d)(4)(i).² Defendants contend that because (1) the transactions for which they were prosecuted "remained exclusively within the boundary of the St. Regis Mohawk Indian Reservation," and (2) the Reservation "is [neither] a state . . . [nor] Washington D.C., nor . . . a territory or possession of the United States," the transactions in question qualified for the "foreign transaction exception."

This argument rests on a fundamental misreading of Section 1.6050I-1(d)(4). Section 1.6050I-1(d)(4) exempts from the reporting requirement transactions that take place completely "outside the United States" in foreign places. The fifty states and the District of Columbia are obviously part of the United States. So too are Puerto Rico and the possessions and territories of the United States. Hence, the question is not whether an American Indian reservation is one of the fifty states, the District of Columbia, Puerto Rico, or a possession or territory of the United States, but whether an American Indian reservation is located "outside the United States." It is well settled that American Indian reservations have been "incorporat[ed] within the territory of the United States," United States v. Wheeler, 435 U.S. 313, 323 (1978), and thus are not foreign territory, see Washington v. Confederated Tribes of the Colville Indian Reservation, 447 U.S. 134, 165 (1980) (Brennan, J., concurring in part, dissenting in part) ("While they are sovereign for some purposes, it is now clear that Indian reservations do not partake of the full territorial sovereignty of States or foreign countries."); United States v. Wadena, 152 F.3d 831, 847 (8th Cir. 1998), cert. denied, 526 U.S. 1050 (1999); ("[T]ribal governments are dependent sovereigns - not independent foreign ones."); White v. Califano, 437 F. Supp. 543, 547 (D.S.D. 1977) ("The Indian tribes have vestiges of sovereignty which must be guarded carefully, but reservations are not analogous to foreign states."), aff'd, 581 F.2d 697 (8th Cir. 1978). Because American Indian reservations are not outside the United States, we hold that such reservations - more specifically, the portions of such reservations located within the territorial boundaries of the United States - are not exempted from Section 6050I's reporting requirement by the "foreign transaction exception" of Section 1.6050I-1(d)(4). Cf. Cross v. Commissioner of Internal Revenue, 98 T.C. 613, 615 (1992) (rejecting American Indian taxpayer's reliance on 26 U.S.C. § 6213(a), which grants "person[s] outside the United States" additional time to appeal a notice of deficiency, on ground that his "reservation is unquestionably physically located wholly inside the boundaries of Washington State and thus the United States").

This holding is reinforced by application to Section 6050I of this Court's test for determining whether a federal statute of general applicability applies to American Indians.³ In Reich v. Mashantucket Sand & Gravel, this Court adopted the Ninth Circuit's test for determining whether "a general statute in terms applying to all persons includes Indians and their property interests." 95 F.3d 174, 177 (2d Cir. 1996) (internal quotation marks omitted). Under this approach,

[a] federal statute of general applicability that is silent on the issue of applicability to Indian tribes will . . . apply to them . . . [unless]: (1) the law...