Cleveland v U.S.
| Decision Date | 07 November 2000 |
| Docket Number | 99804 |
| Citation | 121 S.Ct. 365,148 L.Ed.2d 221,531 U.S. 12 |
| Parties | CARL W. CLEVELAND, PETITIONER v. UNITED STATESSUPREME COURT OF THE UNITED STATES |
| Court | U.S. Supreme Court |
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
Louisiana law authorizes the State to award nontransferable, annually renewable licenses to operate video poker machines. License applicants must meet suitability requirements designed to ensure that they have good character and fiscal integrity. The State itself does not run any video poker machinery. In 1992, Fred Goodson and his family formed a limited partnership, Truck Stop Gaming, Ltd. (TSG), to participate in the video poker business in Louisiana. Petitioner Carl W. Cleveland, a lawyer, assisted Goodson in preparing TSG's initial and subsequent video poker license applications, each of which identified Goodson's children as the sole beneficial owners of the partnership. The State approved the initial application, and TSG successfully renewed its license in 1993, 1994, and 1995. In 1996, Cleveland and Goodson were charged with money laundering under 18 U.S.C. § 1957 and racketeering and conspiracy under §1962 in connection with a scheme to bribe state legislators to vote in a manner favorable to the video poker industry. Among the predicate acts supporting these charges were four counts of violating the mail fraud statute, §1341, which proscribes use of the mails in furtherance of "any scheme or artifice to defraud, or for obtaining property by means of fraudulent representations." The indictment alleged that, because Cleveland and Goodson had tax and financial problems that could have undermined their suitability to receive a video poker license, they fraudulently concealed that they were the true owners of TSG in the license applications they had mailed to the State. Before trial, Cleveland moved to dismiss the mail fraud counts on the ground that the alleged fraud did not deprive the State of "property" under §1341. The District Court denied the motion, concluding that licenses constitute property even before they are issued. A jury found Cleveland guilty on two mail fraud counts and on other counts predicated on the mail fraud. The Fifth Circuit affirmed the conviction, considering itself bound by an earlier decision holding that Louisiana video poker licenses constitute "property" in the State's hands.
Held: State and municipal licenses in general, and Louisiana's video poker licenses in particular, do not rank as "property," for purposes of §1341, in the hands of the official licensor. Pp. 5 14.
(a) Section 1341 is largely limited to the protection of money and property. McNally v. United States, 483 U.S. 350, 360; Carpenter v. United States, 484 U. S 19, 25. The only nonproperty right protected by §1341 is "the intangible right of honest services," §1346, a right not implicated by this case. Pp. 5 7.
(b) Section 1341 does not reach fraud in obtaining a state or municipal license of the kind here involved, for such a license is not "property" in the government regulator's hands. Whatever interests Louisiana might be said to have in its video poker licenses, the statute itself shows that the State's core concern is regulatory: It licenses, subject to certain conditions, engagement in pursuits that private actors may not undertake without official authorization. The Government offers two reasons why the State also has a property interest in its video poker licenses. The Court rejects both because they stray from traditional concepts of property. First, the Government stresses that the State receives a substantial sum of money in exchange for each license and continues to receive payments from the licensee as long as the license remains in effect. However, Louisiana receives the lion's share of its expected revenue not while the licenses remain in its own hands, but only after they have been issued to licensees. Licenses pre-issuance merely entitle the State to collect a processing fee from applicants. Were such an entitlement sufficient to establish a state property right, then States would have property rights in drivers' licenses, medical licenses, and other licenses requiring an upfront fee licenses that the Government concedes are purely regulatory. Tellingly, the Government does not allege that Cleveland defrauded Louisiana of any money to which it was entitled by law. If Cleveland defrauded the State of "property," the nature of that property cannot be economic. The Government's second assertion that the State has significant control over the issuance, renewal, suspension, and revocation of licenses is also unavailing. Far from composing an interest that "has long been recognized as property," Carpenter, 484 U.S., at 26, these intangible rights of allocation, exclusion, and control amount to no more and no less than paradigmatic exercises of the State's traditional police powers. Pp. 7 10.
(c) Comparison of the State's interest in video poker licenses to a patent holder's interest in an unlicensed patent does not aid the Government. Although both involve the right to exclude others, a patent also protects the holder's right to use, make, or sell the invention herself. Louisiana does not conduct gaming operations itself, does not hold video poker licenses to reserve that prerogative, does not "sell" licenses in the ordinary commercial sense, and may not sell its licensing authority. Comparison of the State's licensing power to a franchisor's right to select its franchisees fares no better. While the latter right typically derives from a franchisor's ownership of some product that it may trade or sell in the open market, Louisiana's authority to select video poker licensees rests on no similar asset. It rests upon the State's sovereign right to exclude applicants deemed unsuitable to run video poker operations. Pp. 10 11.
(d) The Government's reading of §1341 invites the Court to approve a sweeping expansion of federal criminal jurisdiction in the absence of a clear statement by Congress. Equating issuance of licenses or permits with deprivation of property would subject to federal mail fraud prosecution a wide range of conduct traditionally regulated by state and local authorities. Unless Congress conveys its purpose clearly, the Court will not read a statute to have significantly changed the federal-state balance in the prosecution of crimes. E.g., Jones v. United States, 529 U.S. 848, 858. Pp. 11 12.
(e) Finally, the Government argues that §1341 defines two independent offenses: (1) "any scheme or artifice to defraud" and (2) "any scheme or artifice for obtaining property by means of false . . . representations." Proceeding from that argument, the Government asserts that a video poker license is property in the hands of the licensee, hence Cleveland "obtain[ed] property" and thereby committed the second offense even if the license is not property in the State's hands. But McNally refused to construe the two phrases identifying the proscribed schemes independently. 483 U.S., at 358. Indeed, McNally explained that §1341 had its origin in the desire to protect individual property rights and that any benefit the Government derives from the statute must be limited to the Government's interests as property holder. Id., at 359, n. 8. Pp. 12 14.182 F.3d 296, reversed and remanded.
This case presents the question whether the federal mail fraud statute, 18 U.S.C. § 1341 reaches false statements made in an application for a state license. Section 1341 proscribes use of the mails in furtherance of "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." Petitioner Carl W. Cleveland and others were prosecuted under this federal measure for making false statements in applying to the Louisiana State Police for permission to operate video poker machines. We conclude that permits or licenses of this order do not qualify as "property" within §1341's compass. It does not suffice, we clarify, that the object of the fraud may become property in the recipient's hands; for purposes of the mail fraud statute, the thing obtained must be property in the hands of the victim. State and municipal licenses in general, and Louisiana's video poker licenses in particular, we hold, do not rank as "property," for purposes of §1341, in the hands of the official licensor.
Louisiana law allows certain businesses to operate video poker machines. La. Rev. Stat. Ann. §§27:301 to 27:324 (West Supp. 2000). The State itself, however, does not run such machinery. The law requires prospective owners of video poker machines to apply for a license from the State. §27:306. The licenses are not transferable, §27:311(G), and must be renewed annually, La. Admin. Code, tit. 42, §2405(B)(3) (2000). To qualify for a license, an applicant must meet suitability requirements designed to ensure that licensees have good character and fiscal integrity. La. Rev. Stat. Ann. §27:310 (West Supp. 2000).
In 1992, Fred Goodson and his family formed a limited partnership, Truck Stop Gaming, Ltd. (TSG), in order to participate in the video poker business at their truck stop in Slidell, Louisiana. Cleveland, a New Orleans lawyer, assisted Goodson in preparing TSG's application for a video poker license. The application required TSG to identify its partners and to submit personal...
To continue reading
Request your trial
-
United States v. Ernst
...Court considered intangible rights further and clarified the reach of the federal fraud statutes in Cleveland v. United States. 531 U.S. 12, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000). At issue in Cleveland were false statements that the defendants had made in applications for video poker licens......
-
United States v. Caldwell
... ... ambit of criminal statutes should be resolved in favor of ... lenity.” Cleveland v. United States , 531 U.S ... 12, 25 (2000). That rule, however, “applies only when, ... after consulting traditional canons of ... ...
-
U.S v. Alsugair
...but is "limited in scope to the protection of property rights." McNally, 483 U.S. at 358-60; see also Cleveland v. United States, 531 U.S. 12, 19, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000) (1909 amendment to Section 1341 signaled no intent by Congress to depart from the common understanding tha......
-
United States v. Caldwell
...that "ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity." Cleveland v. United States , 531 U.S. 12, 25, 121 S.Ct. 365, 148 L.Ed.2d 221 (2000). That rule, however, "applies only when, after consulting traditional canons of statutory construction, [a co......
-
Will Ciminelli’s Impact on Wire Fraud Cases Ripple Out to Bank Fraud?
...v. United States, 590 U.S. ___, ___ (2020)), but “[i]nstead . . . ‘protec[t] property rights only’” (quoting Cleveland v. United States, 531 U.S. 12, 19 (2000)). After reviewing the evolution of the right-to-control theory, Justice Thomas declares that it “cannot be squared with the text of......
-
Blaszczak II: 2nd Circuit Reverses Course And Overturns Insider Trading Convictions
...of value' to CMS that is susceptible to being 'converted.'" Id. at 244. Judge Kearse relied on both Kelly and Cleveland v. United States, 531 U.S. 12, 23 (2000), in which the Supreme Court held that unissued poker-machine licenses in the hands of the state did not constitute property, such ......
-
Federal criminal conspiracy.
...of co-conspirator's statement can be held open while all evidence is presented), abrogated on other grounds, Cleveland v. United States, 531 U.S. 12 (127.) See, e.g., Murphy, 193 F.3d at 7 (stating co-conspirator statements must have been admissible because no instruction to disregard was g......
-
The need for a clear statement after 'bridgegate': combatting scotus's narrowing view of corruption with an 'abuse of functions' offense
...v. United States and Kelly v. United States , commonly known as the “Bridgegate” case. 94. See, e.g. , Cleveland v. United States, 531 U.S. 12, 24–25 (2000) (stating that “unless Congress conveys its purpose clearly, it will not be deemed to have significantly changed the federal-state bal......
-
Surgery with a meat axe: using honest services fraud to prosecute federal corruption.
...other intangible rights theories of mail and wire fraud that had been adopted by courts prior to McNally. See Cleveland v. United States, 531 U.S. 12, 19-20 (130) The text of [section] 1346 was part of the Anti-Drug Abuse Act of 1988. See Pub. L. No. 100-690, [section] 7603(a), 102 Stat. 45......
-
Mail and wired fraud.
...long been recognized as property.") (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1001-04 (1984)). (106.) Cleveland v. United States, 531 U.S. 12, 23 (2000) (distinguishing the interest in an unissued state license from the property interest in confidential business information by char......