U.S. v. Barone

• Citation: 71 F.3d 1442
• Decision Date: 18 December 1995
• Docket Number: No. 93-10415,93-10415
• Parties: 95 Daily Journal D.A.R. 16,749 UNITED STATES of America, Plaintiff-Appellee, v. Anthony BARONE, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1442

71 F.3d 1442

95 Daily Journal D.A.R. 16,749

UNITED STATES of America, Plaintiff-Appellee, v. Anthony BARONE, Defendant-Appellant.

No. 93-10415.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 12, 1994.

Decided Nov. 3, 1994.

As Amended Dec. 18, 1995.

Karen C. Winckler, Las Vegas, Nevada, for defendant-appellant.

Michael E. Barr, Assistant United States Attorney, Las Vegas, Nevada, for plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada.

Before: GOODWIN, POOLE, and REINHARDT, Circuit Judges.

REINHARDT, Circuit Judge:

Anthony Barone appeals his convictions on one count of conspiracy and nine counts of uttering forged securities. See 18 U.S.C. Secs. 371, 2, 513(a). He claims, inter alia, that the government failed to prove the necessary interstate jurisdictional element of the offenses, and that his conduct therefore did not constitute a federal crime. We agree and reverse his convictions.

I.

The facts of this case revolve around a not particularly exciting or imaginative check-bouncing scheme which occurred in the Las Vegas area in December of 1990 and January of 1991, and could easily have been prosecuted in state court. The scheme targeted several businesses, usually casinos, for a few days at a time. The participants in the scheme cashed a number of checks at each targeted business. Although these checks purported to be payroll checks drawn on the accounts of various legitimate businesses, ¹ they were in fact drawn on closed accounts or accounts with insufficient funds. Many of the checks were falsely signed, and some were falsely endorsed. During the scheme, the participants fraudulently cashed over 130 checks, with values ranging from $200 to $916.84.

On June 30, 1992, a grand jury returned a twelve-count indictment which charged Anthony Barone and 16 others in this scheme. Count 1 charged all of the defendants with conspiracy to make, utter, and possess forged securities in violation of 18 U.S.C. Sec. 513(a). Each of the other counts charged one or more of the defendants with substantive violations of 18 U.S.C. Secs. 2 and 513(a). The substantive counts were organized by victim: Count 3 alleged that the defendants uttered 15 forged checks at the Golden Gate Hotel, Count 4 alleged that the defendants uttered 39 forged checks at the Horseshoe Hotel, and so forth. The indictment charged Barone in every count except Counts 9 and 10.

All of Barone's co-defendants entered into plea agreements. Barone, however, went to trial. At trial, the government sought to prove the existence of the check-bouncing scheme, and Barone's central role in it, by several means. Bank representatives testified regarding the dates on which the various checking accounts were opened and closed. Representatives of the several victim businesses provided the cancelled checks which they had cashed and which later bounced. Several of these individuals stated that their companies operated in interstate commerce. Eight of Barone's co-defendants testified. They stated that Barone organized and supervised the scheme, and that he distributed the forged checks to the other participants through a man named Kimble Edmounds (who was actually co-defendant Robb Benns). Darren Miller, an acquaintance of Barone's but not a co-defendant, testified that he had seen Barone practicing various signatures on a computer. (Barone's then-wife, also a co-defendant, provided similar, although less detailed, testimony on that point). The government also introduced the testimony of a handwriting expert, who stated that it was probable that Barone signed 37 of 56 checks with handwritten signatures. (Many of the checks in the scheme had been signed by computer).

In his defense, Barone claimed that the checks used in the scheme were leftover checks from the accounts of his legitimate businesses, and that these checks had been stolen from his garage shortly before the numerous check-bouncing incidents. Barone also sought to challenge the credibility of his co-defendants who had entered into plea agreements. He focused particular attention on Edmounds, who had provided the law enforcement authorities with information about the check-bouncing scheme. Barone claimed that Edmounds had set him up and was carrying out a vendetta against him because Edmounds blamed him for a prior drug conviction. (In his testimony before the grand jury, Edmounds stated that he became an informant "[b]ecause Tony sent me to prison for two and a half years." At trial, Edmounds denied feeling any resentment towards Barone.).

The jurors deliberated less than six hours before returning a verdict. They found Barone guilty on all ten counts, and the court sentenced him to 71 months on each of them. The sentences were to run concurrently with each other, and consecutively to a sentence Barone is currently serving in state prison. The district court entered a formal judgment on June 30, 1993, and Barone filed a notice of appeal on the same day.

II.

Under 18 U.S.C. Sec. 513(a), it is a federal offense to make, utter, or possess, with the intent to deceive, a forged security of an organization. For purposes of this statute, an "organization" is "a legal entity, other than a government, ... which operates in or the activities of which affect interstate or foreign commerce." 18 U.S.C. Sec. 513(c)(4). ² Barone argues that the government failed to satisfy this jurisdictional requirement. He contends that the forged checks were securities only of nonexistent shell companies, and that these companies' non-operations necessarily did not "affect interstate ... commerce." ³ We agree. Although the government might conceivably have been able to prove the requisite jurisdictional element in other ways, it utterly failed to do so. Accordingly, we must reverse and remand with instructions to dismiss for lack of federal jurisdiction. ⁴

To prove the necessary jurisdictional element of the securities forgery offenses, the government relied on two theories at trial: First, it claimed that the shell companies on whose accounts the checks were drawn were themselves "organizations" affecting commerce, and that the checks were securities of these organizations. ⁵ The government asserted that the shell companies affected interstate commerce for purposes of the securities forgery statute simply because some victims of the scheme operated in interstate commerce. Second, the government contended that the defendants had travelled interstate and purchased goods that had crossed state lines as part of their scheme.

We find the government's jurisdictional theories inadequate as a matter of law. Under a straightforward interpretation of Sec. 513, a non-existent shell company does not constitute an "organization" when its only effect on interstate commerce results from the passage of its forged securities to a victim which operates in interstate commerce. As Barone persuasively argues, a contrary construction would render meaningless Congress's decision to restrict Sec. 513 to cases in which the entity whose securities are forged itself operates in or affects interstate commerce. Although Congress could easily have done so, it did not draft Sec. 513 to make a federal crime out of every case in which the uttering of forged securities had an interstate effect. Rather, it sought to reach only those cases which involved forged securities "of an organization"--that is, securities of "a legal entity ... which operates in or the activities of which affect interstate or foreign commerce." 18 U.S.C. Sec. 513(c)(4).

Congress's intent to limit the application of Sec. 513 to cases in which the general activities of the organization affect interstate commerce is made clear by an examination of other federal criminal statutes with interstate jurisdictional elements. See United States v. Nukida, 8 F.3d 665, 671 (9th Cir.1993) (holding that a court should "examine other federal criminal statutes which contain similar provisions" to determine the scope of an interstate jurisdictional element). The phrasing of the jurisdictional element of Sec. 513 stands in clear contrast to the language Congress used in defining a number of other federal crimes, which base federal jurisdiction on the interstate effects of the offense conduct. See, e.g., 18 U.S.C. Sec. 844(i) (criminalizing the use of fire or explosives to maliciously damage or destroy any property "used in interstate or foreign commerce or in any activity affecting interstate or foreign commerce"); 18 U.S.C. Sec. 875 (criminalizing the transmission in interstate or foreign commerce of threats or extortion); 18 U.S.C. Sec. 922 (criminalizing, inter alia, various interstate transactions involving firearms); 18 U.S.C. Sec. 1028(c)(3) (criminalizing, under certain circumstances, the production, transfer, or possession of identification documents "in or affect[ing] interstate or foreign commerce"). Indeed, Congress has even adopted, pursuant to its commerce power, criminal statutes in which an interstate effect is not an element of the crime, jurisdictional or otherwise. See, e.g., 18 U.S.C. Secs. 891-896 (criminalizing extortionate extensions of credit); Perez v. United States, 402 U.S. 146, 91 S.Ct. 1357, 28 L.Ed.2d 686 (1971) (upholding this statute, even as applied to purely intrastate loansharking activity). Here, by contrast, Congress has made an effect on interstate commerce a jurisdictional element of the crime, and it has based federal jurisdiction not on the interstate effect of the offense conduct, but rather on the interstate effect of the organization's operations. By drafting the statute in this manner instead of using the broader language included in other statutes, Congress evidenced a clear intent that the organization whose securities are forged--and not just the forgery--be in or affecting commerce. Where forged instruments are not securities of an organization affecting interstate commerce,...