U.S. v. Pierce, Docket Nos. 99-1437
| Decision Date | 01 August 1999 |
| Docket Number | Docket Nos. 99-1437,99-1496 |
| Citation | 224 F.3d 158 |
| Parties | (2nd Cir. 2000) UNITED STATES OF AMERICA, Appellee, v. LYLE DAVID PIERCE, III, a/k/a SEALED DEFENDANT # 2, a/k/a JOE MARTIN, a/k/a JOE BOY, and REGINA PIERCE, Defendants-Appellants |
| Court | U.S. Court of Appeals — Second Circuit |
BRUCE R. BRYAN, Syracuse, NY, for Appellant Lyle David Pierce, III (Lyle David Pierce, III, pro se, filed an additional brief).
JAMES E. LONG, Albany, NY, for Appellant Regina Pierce.
BARBARA D. COTTRELL, Assistant United States Attorney, Albany, NY (Daniel J. French, United States Attorney for the Northern District of New York and Gregory A. West, Assistant United States Attorney, of counsel), for Appellee United States of America.
Before: JACOBS, LEVAL, and SACK, Circuit Judges.
In 1996 Lyle David Pierce, III, and his sister Regina Pierce, residents of the St. Regis Mohawk Indian Reservation, also known as Akwesasne, (the "Reservation") and five others were named as defendants in a single-count indictment accusing them of conspiracy to launder money in violation of 18U.S.C. §1956(a)(1)-(2) and (h). In 1999, following a bench trial, the Pierces were convicted in the United States District Court for the Northern District of New York (Thomas J. McAvoy, Chief Judge).
Subsections 1956(a)(1)-(2) and (h) criminalize the conspiracy to use monies derived from or used to promote "specified unlawful activit[ies]" defined in subsection 1956(c)(7) of the statute. The "specified unlawful activity" in which the Pierces were accused of having engaged was a wire-fraud scheme in violation of 18 U.S.C. §1343 to defraud the Canadian government of tax and duty revenue. The prosecution alleged that the Pierces transported or caused to be transported alcoholic beverages, mostly or entirely liquor, from the United States to Canada through the Reservation, and sold or caused the beverages to be sold in Canada. According to the indictment, the Pierces defrauded the Canadian government by evading the payment of Canadian taxes or duty on the transactions.
The government did not elicit proof at trial that the Canadian government imposes duty or taxes on such importation or sale of liquor. The existence of such duties or taxes payable to the Canadian government was essential to proving the scheme to defraud alleged in the indictment, which in turn was the "specified unlawful activity" required by §1956. Because the government thus failed to establish a fact necessary to prove wire fraud, the Pierces' convictions cannot stand. We therefore reverse the judgments of conviction and direct that verdicts of acquittal be entered.
The Reservation, roughly thirty square miles in area, straddles the St. Lawrence River. It lies within the State of New York and the Province of Quebec on the south side of the river, and the Province of Ontario on the north side of the river. In 1994 and 1995, the Pierces participated in a business venture in which frequent tractor-trailer truckloads of liquor, each worth in the neighborhood of $100,000, were transported from various legitimate sources in the United States to the New York portion of the Reservation. The liquor was originally brought to warehouses owned and run by persons other than the Pierces, but eventually deliveries began to be made to a warehouse operated by Lyle Pierce. Regina Pierce worked at the warehouse, performing primarily clerical duties.1
From the Pierce warehouse, cases of the liquor were transported into Canada, typically by being ferried across a narrow stretch of the St.Lawrence River in the dead of night on flat-bottomed, lightless boats. Those responsible for the shipments assiduously avoided official border crossings, which are garrisoned by Canadian customs officers.
The liquor thus transported across the border was usually sold to Canadian customers for Canadian dollars. The alleged conspirators exchanged that currency for American dollars, which were used to purchase more liquor to be trucked to the warehouse on the Reservation. It is undisputed that "interstate and international telephone calls, facsimile, and wire transmission" were employed in the operation, as alleged in the indictment, and that neither Canadian taxes nor Canadian duty was collected by Canadian authorities on the sale or importation of the liquor.
The operation in which the Pierces were involved occasionally encountered legal difficulties and was frequently disrupted by squabbles amongst various persons having an interest in the operation or who had defected from or were competing with it. But federal and New York taxes were paid on the liquor,2 the operation was otherwise in compliance with U.S. regulatory standards, and U.S. law enforcement authorities, although in contact with the conspirators, for a time did not seek to put a halt to their operations. The United States Bureau of Alcohol, Tobacco and Firearms ("ATF") appears to have known about the operation throughout 1994, but did not make a serious attempt to stop it until early 1995, when the ATF issued an industry circular asserting that the type of cross-border enterprise in which the Pierces were involved as unlawful. In response to this letter, the operation's American suppliers stopped their alcohol shipments to the Reservation and the flow of liquor through the Reservation and across the St. Lawrence River came to a halt.
On February 29, 1996, seven participants in the operation, including the Pierces, were indicted on one count of conspiracy to commit money laundering in violation of the federal money laundering statute, 18 U.S.C. §1956(a)(1)-(2) and (h). They were not charged with smuggling, wire fraud, or transporting currency across the border illegally.
18 U.S.C. §1956, provides, in relevant part:
(a) (1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--
(A) (i) with the intent to promote the carrying on of specified unlawful activity...
....
shall be sentenced to a fine... or imprisonment... or both. (2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States --
(A) with the intent to promote the carrying on of specified unlawful activity...
....
shall be sentenced to a fine... or imprisonment... or both.
Subsection (c)(7) of the statute defines the term "specified unlawful activity" to include a wide array of criminal acts either described in the subsection or identified by reference to other statutes. See 18 U.S.C. § 1956(c)(7).
The Pierces were indicted for conspiracy to violate §1956(a)(1) and (a)(2) in violation of subsection (h) of the statute which provides:
Any person who conspires to commit any offense defined in this section... shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy.
18 U.S.C. §1956(h).
The indictment alleged that the "specified unlawful activity" on the basis of which the Pierces violated the money-laundering law was "a wire fraud scheme to defraud the Canadian government of revenue" in violation of the wire fraud statute, 18U.S.C. §1343. Section 1343 provides for the fine or imprisonment of any person who,
... having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice ....
The theory of the prosecution of the Pierces under 18U.S.C. §1956(a)(1) and (h), then, was that they (i) had conspired (ii) knowingly to conduct a financial transaction (the changing of Canadian money into U.S. currency) (iii) that "in fact involve[d]" the proceeds of wire fraud (the "specified unlawful activity") (iv) with knowledge that the money represented the proceeds of wire fraud and (v) with the intent to promote the carrying on of further wire fraud. The wire fraud consisted of (vi) using communications in interstate and foreign commerce for the purpose of executing a scheme that the Pierces had devised "to defraud the Canadian government of revenue" by fraudulently avoiding the duty and taxes owed on the liquor they had caused to be imported into and sold in Canada.
The theory of the prosecution under 18 U.S.C. §1956(a)(2) and (h) was that the Pierces (i) had conspired (ii) to transport, transmit, or transfer funds between Canada and the United States (iii) with the intent to promote the carrying on of wire fraud (the "specified unlawful activity"). Again, the wire fraud consisted of (iv) using communications in interstate and foreign commerce for the purpose of executing a scheme that the Pierces had devised "to defraud the Canadian government of revenue" by fraudulently avoiding duty and taxes owed on liquor they had caused...
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