U.S. v. Cleveland

• Decision Date: 14 January 1997
• Docket Number: Criminal Action No. 96-207.
• Citation: 951 F.Supp. 1249
• Court: U.S. District Court — Eastern District of Louisiana
• Parties: UNITED STATES of America v. Carl W. CLEVELAND, Fred H. Goodson, Maria F. Goodson, Joe H. Morgan, Benjamin Bura Rayburn, Sr. aka "B.B. Sixty Rayburn" and Larry S. Bankston.

951 F.Supp. 1249

UNITED STATES of America v. Carl W. CLEVELAND, Fred H. Goodson, Maria F. Goodson, Joe H. Morgan, Benjamin Bura Rayburn, Sr. aka "B.B. Sixty Rayburn" and Larry S. Bankston.

Criminal Action No. 96-207.

United States District Court, E.D. Louisiana.

January 14, 1997.

Anthony J. Marabella, Jr., Marabella & Moore, Baton Rouge, LA, for Carl W. Cleveland.

Marilyn Michele Fournet, Baton Rouge, LA, for Fred H. Goodson.

Katherine Wheeler, Steffes & MacMurdo, Baton Rouge, LA, James Michael Small, Law Offices of J. Michael Small, Alexandria, LA, for Maria F. Goodson.

Arthur A. Lemann, III, Arthur A. Lemann & Associates, New Orleans, LA, William R. Campbell, Jr., New Orleans, LA, Michael Seth Fawer, Smith, Jones & Fawer, New Orleans, LA, for Benjamin Bura Rayburn, Sr.

Christopher Mar Guidroz, Simon, Peragine, Smith & Redfearn, LLP, New Orleans, LA, George Shaddock, Pascagoula, MS, for Joe H. Morgan.

Karl J. Koch, Lewis O. Unglesby, Unglesby & Koch, Baton Rouge, LA, for Larry S. Bankston.

Ian Hipwell, U.S. Attorney's Office, Baton Rouge, LA, Robert J. Boitmann, U.S. Attorney's Office, New Orleans, LA, for U.S.

ORDER AND REASONS

VANCE, District Judge.

I. Introduction

This criminal case involves allegedly illegal activity in the video poker industry in Louisiana. The defendants are former Louisiana State Senators Benjamin ("B.B. Sixty") Rayburn and Larry S. Bankston; an attorney, Carl Cleveland; an accountant, Joe H. Morgan; and two alleged video poker entrepreneurs, Fred H. Goodson and his daughter, Maria F. Goodson.

The government charges each of the defendants with racketeering and racketeering conspiracy and charges various defendants with mail fraud, conducting an illegal gambling business, interstate communications in aid of racketeering, conspiracy to defraud the United States, filing of a false income tax return, false declaration under penalty of perjury, aiding and abetting false declaration under penalty of perjury, and money laundering. Defendant Fred Goodson ("Goodson") challenges certain counts of the indictment as predicated on constitutionally infirm criminal statutes and claims that other charges should be dismissed because a video poker license does not constitute the "money or property" needed to support a federal mail fraud conviction. For the reasons stated below, both of Goodson's motions are DENIED.

II. Defendant Fred Goodson's Motion to Dismiss All Illegal Gambling Counts, All Money Laundering Counts, and All Racketeering Acts Predicated on Either Illegal Gambling or Money Laundering Counts

A. Background: Commerce Clause Jurisprudence and Lopez

Defendant Fred Goodson moves to dismiss racketeering acts 1e, 2a, 2b, 2c, 2d, 2e, Count 7, and Counts 8 through 12 of the superseding indictment on the grounds that the criminal statutes on which these allegations are based, 18 U.S.C. § 1955 (conducting an illegal gambling enterprise), and 18 U.S.C. § 1956 (money laundering), are facially unconstitutional or, alternatively, that the application of these statutes to this case is unconstitutional in that it constitutes a violation of the Commerce Clause and the Tenth Amendment of the United States Constitution.

It is a fundamental principle of constitutional law that the federal courts are courts of limited jurisdiction and that federal criminal jurisdiction is limited to cases arising under the United States Constitution or federal law. See U.S. Const. Art. III, § 2. The Constitution specifically enumerates only five criminal activities.¹ All other federal crimes are the product of Congressional statutes. Congress, however, is not free to pass any criminal statute it deems appropriate. Rather, to pass constitutional muster, all federal criminal statutes must be passed pursuant to one of the specifically enumerated powers in the Constitution. Defendant attacks the constitutional validity of 18 U.S.C. § 1955 (conducting an illegal gambling enterprise) and 18 U.S.C. § 1956 (money laundering) by arguing that neither statute was passed pursuant to a specifically enumerated Congressional power. Defendant maintains that both statutes regulate activity that falls outside the scope of Congress' power to regulate interstate commerce under the Commerce Clause, U.S. Const. art. I, § 8, cl. 3.² The Fifth Circuit has already upheld both statutes in question under the Commerce Clause. See United States v. Gallo, 927 F.2d 815, 822 (5th Cir.1991) (recognizing the validity of 18 U.S.C. § 1956); United States v. Harris, 460 F.2d 1041, 1044 (5th Cir.1972) (upholding 18 U.S.C. § 1955). Defendant nevertheless argues that this Court should reconsider those decisions in light of the United States Supreme Court's recent decision in United States v. Lopez, 514 U.S. 549, 115 S.Ct. 1624, 131 L.Ed.2d 626 (1995).

In Lopez, the Supreme Court struck down the Gun Free School Zone Act ("the GFSZA"), a federal statute making it a crime to knowingly possess a firearm in a school zone, on the grounds that it exceeded the authority of Congress under the Commerce Clause. Lopez marked the first time since 1936 that the Supreme Court invalidated a federal statute under the Commerce Clause and clearly indicated a shift towards a more restrictive view of Congress' powers under the Commerce Clause than had been espoused in the past.³

The Lopez Court enumerated three categories of activity that Congress may regulate under its commerce power:

First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e., those activities that substantially affect interstate commerce.

Lopez, 514 U.S. at ___ - ___, 115 S.Ct. at 1629-30 (internal citations omitted).

The Court found that the GFSZA did not meet either of the first two categories and thus could be upheld only if the statute regulated an activity that "substantially affected interstate commerce." Id. In this case, all parties agree that the activities regulated under the statutes in question — illegal gambling and money laundering — clearly do not fall under the first two Lopez categories. As in Lopez, the Court's Commerce Clause analysis is therefore confined to the third Lopez category and the application of the "substantial effects" test. Defendant argues that neither illegal gambling nor money laundering has the requisite "substantial effect" on interstate commerce to permit federal regulation under the Commerce Clause after Lopez.

B. Standard of Review

Under Lopez, this Court must determine whether a rational basis exists for concluding that the activity to be regulated substantially affected interstate commerce. Chief Justice Rehnquist, in the majority opinion, stated:

In [National Labor Relations Board v.] Jones & Laughlin Steel, [301 U.S. 1, 57 S.Ct. 615, 81 L.Ed. 893] [(1937)], the Court warned that the scope of the interstate commerce power `must be considered in the light of our dual system of government and may not be extended so as to embrace effects upon interstate commerce so indirect and remote that to embrace them, in view of our complex society, would effectually obliterate the distinction between what is national and what is local and create a completely centralized government.' (citations omitted). Since that time, the Court has heeded that warning and undertaken to decide whether a rational basis existed for concluding that a regulated activity sufficiently affected interstate commerce.

Lopez, 514 U.S. at ___, 115 S.Ct. at 1629 (citing Hodel v. Virginia Surface Mining & Reclamation Association, Inc., 452 U.S. 264, 276-80, 101 S.Ct. 2352, 2360-62, 69 L.Ed.2d 1 (1981)).

Further, although the rational basis test was not new to the Court's Commerce Clause analysis, the Supreme Court applied the test with more rigor in Lopez than it had in the past. The Lopez Court did not, however, establish precise guidelines for determining whether an activity can be rationally found to have a substantial effect on interstate commerce. Rather, finding that the GFSZA did not regulate activity that substantially affected interstate commerce, the Lopez Court found three deficiencies in the statute. First, the GFSZA by its terms "ha[d] nothing to do with commerce or any sort of economic enterprise, however broadly one might define those terms" Lopez, 514 U.S. at ___ - ___, 115 S.Ct. at 1630-31. Second, the GFSZA "contain[ed] no jurisdictional element which would ensure, through case-by-case inquiry, that the firearm possession in question affect[ed] interstate commerce." Id. at ___, 115 S.Ct. at 1631. Third, there were no express Congressional findings regarding the effects upon interstate commerce, and the arguments advanced in their absence would permit limitless assertions of federal power. Id. at ___, 115 S.Ct. at 1632.

While the Court found that the statute failed to satisfy all of these considerations, it did not assign the relative weights to be accorded each of these factors. It has been suggested that the Court left unclear, for example, whether a statute must satisfy all three of the Lopez considerations to be constitutional or whether it simply needs to satisfy one of them. See United States v. Wall, 92 F.3d 1444, 1460 (6th Cir.1996) (Boggs, J., concurring in part and dissenting in part) ("Because the GFSZA satisfied none of the three subparts, the Court did not have to face the[] question [of the relationship between the subparts]. But [this question] cannot be ignored."). The Fifth Circuit's post-Lopez decisions do not directly address this issue either.

C. The Fifth Circuit's Post-Lopez Jurisprudence

Since Lopez, the Fifth Circuit has had two occasions to examine the validity of various...