U.S. v. Cohen, Docket No. 00-1574

• Decision Date: 21 May 2001
• Docket Number: Docket No. 00-1574
• Citation: 260 F.3d 68
• Parties: (2nd Cir. 2001) UNITED STATES OF AMERICA, Appellee, v. JAY COHEN, Defendant-Appellant. Argued:
• Court: U.S. Court of Appeals — Second Circuit

Page 68

260 F.3d 68 (2nd Cir. 2001)

UNITED STATES OF AMERICA, Appellee, v. JAY COHEN, Defendant-Appellant.

Docket No. 00-1574

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: May 21, 2001

Decided: July 31, 2001

[Copyrighted Material Omitted]

JOSEPH V. DEMARCO, Assistant United States Attorney for Mary Jo White, United States Attorney for the Southern District of New York (Assistant United States Attorney George S. Canellos, New York, NY, on the brief), for Appellee.

MARK M. BAKER, New York, NY (Brafman & Ross, P.C., Benjamin Brafman, Jennifer Liang, and Melinda Sarafa on the brief) for Defendant- Appellant.

Before: LEVAL and PARKER, Circuit Judges, and KEENAN,^* District Judge.

Appeal from a judgment of the United States District Court for the Southern District of New York (Griesa, J.) after a trial jury convicted the defendant Jay Cohen of conspiracy and substantive violations under the Wire Wager Act, 18 U.S.C. § 1084.

Affirmed.

KEENAN, District Judge:

BACKGROUND

In 1996, the Defendant, Jay Cohen ("Cohen") was young, bright, and enjoyed a lucrative position at Group One, a San Francisco firm that traded in options and derivatives. That was not all to last, for by 1996 the Internet revolution was in the speed lane. Inspired by the new technology and its potential, Cohen decided to pursue the dream of owning his own e-business. By year's end he had left his job at Group One, moved to the Caribbean island of Antigua, and had become a bookmaker.

Cohen, as President, and his partners, all American citizens, dubbed their new venture the World Sports Exchange ("WSE"). WSE's sole business involved bookmaking on American sports events, and was purportedly patterned after New York's Off-Track Betting Corporation.² WSE targeted customers in the United States, advertising its business throughout America by radio, newspaper, and television. Its advertisements invited customers to bet with WSE either by toll-free telephone or by internet.

WSE operated an "account-wagering" system. It required that its new customers first open an account with WSE and wire at least $300 into that account in Antigua. A customer seeking to bet would then contact WSE either by telephone or internet to request a particular bet. WSE would issue an immediate, automatic acceptance and confirmation of that bet, and would maintain the bet from that customer's account.

In one fifteen-month period, WSE collected approximately $5.3 million in funds wired from customers in the United States. In addition, WSE would typically retain a "vig" or commission of 10% on each bet. Cohen boasted that in its first year of operation, WSE had already attracted nearly 1,600 customers. By November 1998, WSE had received 60,000 phone calls from customers in the United States, including over 6,100 from New York.

In the course of an FBI investigation of offshore bookmakers, FBI agents in New York contacted WSE by telephone and internet numerous times between October 1997 and March 1998 to open accounts and place bets. Cohen was arrested in March 1998 under an eight-count indictment charging him with conspiracy and substantive offenses in violation of 18 U.S.C. § 1084 ("§ 1084"). That statute reads as follows:

(a) Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

(b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.

See § 1084(a)-(b). In the conspiracy count (Count One) and in five of the seven substantive counts (Counts Three through Six, and Eight), Cohen was charged with violating all three prohibitive clauses of § 1084(a) ((1) transmission in interstate or foreign commerce of bets or wagers, (2) transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, (3) information assisting in the placement of bets or wagers). In two counts, Counts Two and Seven, he was charged only with transmitting "information assisting in the placing of bets or wagers."

Cohen was convicted on all eight counts on February 28, 2000 after a ten-day jury trial before Judge Thomas P. Griesa. The jury found in special interrogatories that Cohen had violated all three prohibitive clauses of § 1084(a) with respect to the five counts in which those violations were charged. Judge Griesa sentenced Cohen on August 10, 2000 to a term of twenty-one months' imprisonment. He has remained on bail pending the outcome of this appeal.

DISCUSSION

On appeal, Cohen asks this Court to consider the following six issues: (1) whether the Government was required to prove a "corrupt motive" in connection with the conspiracy in this case; (2) whether the district court properly instructed the jury to disregard the safe-harbor provision contained in § 1084(b); (3) whether Cohen "knowingly" violated § 1084; (4) whether the rule of lenity requires a reversal of Cohen's convictions; (5) whether the district court constructively amended Cohen's indictment in giving its jury instructions; and (6) whether the district court abused its discretion by denying Cohen's request to depose a foreign witness. We will address those issues in that order.

I Corrupt Motive

Cohen appeals his conspiracy conviction on the grounds that the district court instructed the jury to disregard his alleged good-faith belief about the legality of his conduct. He argues that People v. Powell, 63 N.Y. 88 (1875), requires proof of a corrupt motive for any conspiracy to commit an offense that is malum prohibitum, rather than malum inse. We disagree, and we hold that whatever remains of Powell does not apply to this case.

In 1875, the New York Court of Appeals ruled in Powell that a conspiracy to commit an offense that was "innocent in itself" required evidence of a "corrupt" or "evil purpose." Id. at 92. The Powell defendants were commissioners of charities for Kings County and had been convicted of conspiring to violate state law by purchasing supplies without first advertising for proposals and awarding a contract to the lowest bidder. Id. at 89-90.

The Powell Court upheld an appellate court's reversal of the trial court, which had ruled that ignorance of the law was no defense to conspiracy. Id. at 89. In doing so, the Court concluded that a conspiracy offense, by nature, required some form of corrupt motive, even if its underlying substantive offense required only an intent to commit the prohibited act. Id. at 92. The Court stated that "[p]ersons who agree to do an act innocent in itself, in good faith and without the use of criminal means, are not converted into conspirators [] because it turns out that the contemplated act was prohibited by statute." Id.

The Powell doctrine was echoed in federal cases from the first half of the last century, but many circuits have since, in effect, moved away from the doctrine. Compare, e.g., Landen v. United States, 299 F. 75 (6th Cir. 1924) (applying Powell to drug wholesalers' conspiracy to sell intoxicating liquor for nonbeverage purposes without the necessary permit), with United States v. Blair, 54 F.3d 639 (10th Cir. 1995) (involving, as does this case, offshore bookmaking in violation of § 1084); United States v. Murray, 928 F.2d 1242 (1st Cir. 1991) (involving an illegal gambling business in violation of 18 U.S.C. § 1955); United States v. Thomas, 887 F.2d 1341 (9th Cir. 1989) (involving trafficking in wildlife that the defendant should have known was taken in violation of state law).

Although this Court has long expressed its discontent with the Powell doctrine, we have done so in dicta in cases involving conspiracies to commit acts that were not "innocent in themselves." See, e.g., United States v. Mack, 112 F.2d 290, 292 (2d Cir. 1940). In Mack, Judge Learned Hand criticized the Powell doctrine as "anomalous" and questioned "why more proof should be necessary than that the parties had in contemplation all the elements of the crime they are charged with conspiracy to commit." Id. He nevertheless found "'corrupt motive' in abundance" in connection with the defendant's conspiracy to employ unregistered alien prostitutes. Id.; see also United States v. Eisenberg, 596 F.2d 522, 526 (2d Cir. 1979) ("It being clearly established that requisite knowledge was proved for conviction of the substantive offense, it now follows that the same knowledge is enough as well to establish the conspiracy to commit the substantive offense."); Hamburg-American Steam Packet Co. v. United States, 250 F. 747, 759 (2d Cir. 1918) ("[W]e are satisfied that as to the crime of conspiracy,... it is not necessary to show that the defendants who are alleged to have conspired to do an act which is only malum prohibitum had knowledge of the unlawfulness of the act.")

The American Law Institute has expressly rejected Powell in its commentary to the Model Penal Code. See Model Penal Code § 5.03 note on subsec. 1 & cmt. 2(c)(iii) (1985). The Institute noted that the "melodramatic and sinister view of conspiracy" upon which Powell was premised is no longer valid. Id. at cmt. 2(c)(iii). It further observed that Powell now has "little resolving power in particular ca...