844 F.2d 36 (2nd Cir. 1988), 673, United States v. Evans

Docket Nº:673, Docket 87-1400.
Citation:844 F.2d 36
Party Name:UNITED STATES of America, Appellant, v. Samuel EVANS, Guriel Eisenberg, Rafael Israel Eisenberg, William Northrop, Abraham Bar'Am, Nico Minardos, Alfred Flearmoy, Herman Moll, Ralph Kopka, and Hans Bihn, Defendants-Appellees.
Case Date:April 07, 1988
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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844 F.2d 36 (2nd Cir. 1988)

UNITED STATES of America, Appellant,


Samuel EVANS, Guriel Eisenberg, Rafael Israel Eisenberg,

William Northrop, Abraham Bar'Am, Nico Minardos,

Alfred Flearmoy, Herman Moll, Ralph

Kopka, and Hans Bihn,


No. 673, Docket 87-1400.

United States Court of Appeals, Second Circuit

April 7, 1988

Argued Jan. 25, 1988.

Lorna G. Schofield, New York City, Asst. U.S. Atty. for S.D. New York (Rudolph W. Giuliani, U.S. Atty. for S.D. New York, Aaron R. Marcu, Asst. U.S. Atty., of counsel), for appellant.

Lawrence S. Bader, New York City (Grand & Ostrow, J. Kelly Strader, of counsel), for defendant-appellee Evans.

Before FEINBERG, Chief Judge, MESKILL and MAHONEY, Circuit Judges.

FEINBERG, Chief Judge:

This case arises out of defendants' alleged efforts to arrange sales of arms from various foreign countries to Iran, and, in furtherance of that scheme, to deceive the United States about the true destination of the arms. The government brings an interlocutory

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appeal, pursuant to 18 U.S.C. Sec. 3731, from an order of the United States District Court for the Southern District of New York, Leonard B. Sand, J., dismissing 46 counts of a 55-count indictment charging defendants with mail and wire fraud in violation of 18 U.S.C. Secs. 1341 and 1343. The government raises two issues: (1) whether, to make out a violation of the mail and wire fraud statutes, the government must show that the goal of the fraudulent scheme was to deprive the party deceived (rather than someone else) of money or property, and (2) whether the right of the United States to veto sales of U.S.-made or licensed weapons by one foreign government to another is a property right for wire and mail fraud purposes. For the reasons stated below, we agree with the district court that the government must prove that the scheme aimed at depriving it of money or property, and that the right to control future arms sales is not a property right for this purpose. We therefore affirm the decision of the district court dismissing the wire and mail fraud counts of the indictment.

I. Background

The government alleges that Samuel Evans, general counsel to Adnan Khashoggi (a leading figure in the now well-publicized Iran-Contra affair), and the other defendants planned to sell to Iran arms that were manufactured in, or by license from, the United States and that are now owned by various foreign countries by deceiving the United States about the true identity of the country purchasing the arms in order to obtain the necessary government approval for the transaction. Specifically, defendants are charged with conspiring to provide and providing false end user certificates and other documents to the United States, hoping to deceive the government into thinking the arms were being sold to an acceptable country. In fact, the arms were destined for Cyrus Hashemi, a government agent pretending to be an Iranian buyer. Hashemi's negotiations with defendants were tape-recorded, and the undercover operation was terminated before any arms changed hands. See United States v. Evans, 667 F.Supp. 974 (S.D.N.Y.1987) (ruling on various motions). The arms involved, which the government values at over $2 billion, are a frightening array and include missiles, fighter aircraft, helicopters, battle tanks, guns, ammunition, cameras, radar, radios, engines and spare parts.

The original indictment in this case was returned in May 1986 and was followed by five superseding indictments, the latest of which ("the indictment") was filed in July 1987. Counts one to four of the indictment allege conspiracies to violate the Arms Export Control Act, 22 U.S.C. Sec. 2751, et seq., and to make false statements in connection with proposed arms sales in violation of 22 U.S.C. Sec. 2778(c) and 18 U.S.C. Sec. 1001. All defendants are charged in at least one of these counts. Counts 5 to 48 charge various defendants with wire fraud, 18 U.S.C. Sec. 1343, and counts 49 and 50 charge mail fraud, 18 U.S.C. Sec. 1341. (We hereafter refer to the wire and mail fraud counts collectively as the "federal fraud" counts, and, because the statutes share the same relevant language, we apply the same analysis to both sets of offenses. See Carpenter v. United States, --- U.S. ----, 108 S.Ct. 316, 320 n. 6, 98 L.Ed.2d 275 (1987); United States v. Covino, 837 F.2d 65, 71 (2d Cir.1988)). Finally, counts 51 to 55 charge various defendants with violating the Arms Export Control Act, 22 U.S.C. Sec. 2778(c), by making false statements on applications and licenses.

The only counts at issue in this appeal are the federal fraud counts, which are stated in the following pattern: One paragraph charges defendants with having "devised and intended to devise a scheme and artifice to defraud and to obtain money and property by means of false and fraudulent pretenses and representations"; a later paragraph charges that "it was in part the object of this scheme ... that the defendants ... would obtain by fraud ... (a) property, to wit, the U.S. Defense Articles listed in this paragraph, among others, for Iran, and (b) money, to wit, commissions for themselves from the sale of said U.S. Defense Articles." Another paragraph charges that the fraud was that defendants

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"would make and cause to be made to the United States Department of State or Defense false statements regarding the ultimate destination of the above described U.S. Defense Articles." Succeeding paragraphs list acts of wire and mail use.

Evans, joined by the other defendants, challenged the federal fraud counts. Evans argued that McNally v. United States, --- U.S. ----, 107 S.Ct. 2875, 97 L.Ed.2d 292 (1987), requires that the party deceived--here the United States--be deprived of money or property, and that the indictment fails to so allege. Specifically, defendants pointed out that the "property" involved--the weapons--is not alleged to belong to the...

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