United States v. Yufeng Wu

• Decision Date: 19 March 2013
• Docket Number: Nos. 11–1115,11–1141.,s. 11–1115
• Citation: 711 F.3d 1
• Parties: UNITED STATES of America, Appellee, v. ZHEN ZHOU WU, a/k/a Alex Wu, Defendant, Appellant. United States of America, Appellee, v. Yufeng Wei, a/k/a Annie Wei, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

711 F.3d 1

UNITED STATES of America, Appellee,

v.ZHEN ZHOU WU, a/k/a Alex Wu, Defendant, Appellant.

United States of America, Appellee,

v.Yufeng Wei, a/k/a Annie Wei, Defendant, Appellant.

Nos. 11–1115, 11–1141.

United States Court of Appeals,First Circuit.

March 19, 2013.

Michael R. Schneider and Alan M. Dershowitz with whom Jeffrey G. Harris and Salsberg & Schneider were on brief for appellant Zhen Zhou Wu, a/k/a Alex Wu.

Nathan Z. Dershowitz with whom Amy Adelson and Dershowitz Eiger & Adelson, P.C. were on brief for appellant Yufeng Wei, a/k/a Annie Wei.

Stephan E. Oestreicher, Jr., Appellate Section, Criminal Division, Department of Justice, with whom Lanny A. Breuer, Assistant Attorney General, Criminal Division, John D. Buretta, Acting Deputy Assistant Attorney General, Criminal Division, Carmen M. Ortiz, United States Attorney, B. Stephanie Siegmann and John A. Capin, Assistant United States Attorneys, were on brief for appellee.

Before LYNCH, Chief Judge, SOUTER,^* Associate Justice, and SELYA, Circuit Judge.

LYNCH, Chief Judge.

This case involves criminal laws meant to protect the security of the United States and rights guaranteed to criminal defendants by the Constitution.

In 1976, Congress passed the Arms Export Control Act (“AECA”), giving the President broad authority to regulate the shipment of defense articles to foreign destinations “[i]n furtherance of world peace and the security and foreign policy of the United States.” 22 U.S.C. § 2778 (2006). Three years later, Congress further authorized the President to restrict the export of “dual-use” technologies that serve both military and nonmilitary purposes. 50 U.S.C. app. §§ 2401(5), 2402(2)(A). Individuals who violate either set of export restrictions may be fined up to $1 million and imprisoned for up to 20 years. 22 U.S.C. § 2778(c); 50 U.S.C. § 1705(c). The resulting regulatory scheme is intricate, in order to combat the sophisticated weapons dealers whose activities undermine U.S. interests.

The case at hand involves two defendants prosecuted and convicted on charges of violating restrictions on the overseas shipment of weapons-grade technologies. From 1996 until 2008, Zhen Zhou Wu and Yufeng Wei shipped tens of millions of dollars worth of sophisticated electronic components from the United States to China, with little regard for whether the parts that they sold were export-controlled. On appeal, Wu and Wei launch a broad-based attack on the federal government's arms export control system—a regulatory scheme that, they say, violates the Fifth Amendment's Due Process Clause. We reject this attack. However, on two counts of conviction, charging Wu and Wei with exporting items restricted under the U.S. Munitions List, we find that the district court erred in its instructions by not submitting to the jury an element of the offense—an error that violated the defendants' Sixth Amendment right to a trial by jury and has not been shown to be harmless. Accordingly, we affirm Wu's conviction on 15 of the 17 counts, affirm Wei's conviction on 11 of the 13 counts, and vacate the convictions of each defendant on two counts. We remand for resentencing.

I.

A. Background

Zhen Zhou Wu and Yufeng Wei, both Chinese nationals, married in China in 1988. Afterward, they each pursued graduate degrees in the United States. In 1996, Wu returned to China to found the Chitron Electronics Company Limited in Shenzhen (“Chitron–Shenzhen”). Chitron–Shenzhen served as an electronic-parts broker, purchasing components from international suppliers and then selling them to customers in China. It specialized in military and industrial parts.

The same year that Wu founded Chitron–Shenzhen, he also opened a branch purchasing office for the company in Massachusetts called “Perfect Science and Technology” and employed Wei to run the office. Wei ran Perfect Science as a sole proprietorship under her own name. In early 1998, Wu incorporated the office as “Chitron Electronics, Inc.” (“Chitron–US”), with Wu as the corporation's president and Wei as its business and finance manager. Throughout this period, Wei oversaw the purchase of parts from vendors in the United States and the shipment of those parts to Chitron's customers in China. Wu and Wei divorced in 1999, although their working relationship continued throughout the period covered in the indictment.

Wu oversaw the business from Shenzhen. Once a year, he traveled to the United States to visit the Chitron–US office,and he remained in daily contact with Wei throughout the year, coordinating the activities of Chitron–US through electronic tasking lists and an online database system. Meanwhile, Wei worked as office manager of the Chitron–US branch, a role she served in until 2007, when Stephen Gigliotti took over that position. By that time, Chitron had five offices—three in China, one in Hong Kong, and one in the United States—and over 200 employees. Each year, the company purchased tens of thousands of parts, worth tens of millions of dollars, from dozens of U.S. suppliers.

Nearly all of Chitron's customers were located in mainland China. Before 2005, Chitron–US would ship orders to freight forwarders ¹ in Hong Kong, who then repackaged the items and sent them along to Chitron–Shenzhen, where they were inspected and then finally sent to their ultimate recipients in China. In 2005, Chitron established its own one-room branch office in Hong Kong, staffed by a single part-time employee who traveled to Hong Kong a few days a week while working full-time in Shenzhen. Thereafter, Chitron–US exported parts directly to Chitron's Hong Kong office, which then forwarded the orders to Chitron–Shenzhen. Wu and Wei claimed that they shipped parts through Hong Kong because it was cheaper than sending them directly to China.

Before exporting parts from the United States, a Chitron–US employee—usually Wei—would prepare a “Shipper's Export Declaration” (“SED”), as required by the Commerce Department's Foreign Trade Regulations. See15 C.F.R. § 30.2(a)(1); see also13 U.S.C. § 301. Wei always entered the code “NLR” (“no license required”) on the forms to indicate that no export licenses were required for the goods that Chitron–US was shipping. Wei also listed “Hong Kong” as the “country of ultimate destination” for the parts, and entered the names of the freight forwarders—and later Chitron's Hong Kong office—as the parts' “ultimate consignee.”

How much Wu and Wei actually knew about the United States' export control regime was hotly contested at trial. Wu occasionally presented himself to customers as an export compliance expert with a specialty in military products. According to Chitron staff, for most of its history the company had no export compliance policy, nor did it give any compliance training to its employees.

Nevertheless, as early as 1996, someone at Chitron–US had printed out pages from the Commerce Department's Export Administration Regulations (“EAR”), 15 C.F.R. pts. 730–774, and placed them into a folder labeled “export” inside a box marked “Wu files.” Communications between Wu and Wei around this time also evidence that the two were aware of legal restrictions on the export of certain electronics to China. In April 1997, Wei told Wu in an e-mail that she had learned from United Parcel Service that she was required by law to obtain an export license in order to ship a certain part. That same month, Wei also told Wu that a vendor had refused to sell to her after she mentioned that her customer was in China, and that the “big lesson” from this “mistake” was to avoid providing “extra” information to vendors. Wu agreed, suggesting that Wei not tell suppliers that she sold parts to China, and later instructing that she should simplyavoid telling suppliers that she exported parts at all.

Beginning in 2000, Chitron's lack of export licenses for its products became a bigger and bigger concern for the company. In 2001 and 2002, Maylyn Atkinson Murphy, a Chitron–US employee, repeatedly told Wu that vendors had begun to ask for “end user information,” such as where Chitron would be shipping the parts and whether those parts would be used with products that had military applications. In response, Wu explained to Murphy that his priority was to “get business done” while avoiding “trouble if the parts are really sensitive and defense related.” He told her that “[t]he key is to avoid submitting end user information and get the [p]arts ordered,” and suggested that if vendors asked her, she should tell them that she did “not know where the parts ship.”

In August 2002, Wei raised similar concerns with Wu: she said that she was worried about shipping a part that was “not for exporting [to] China” and that she feared there might be “some strict rule from [C]ustom[s] if they see the part number.” Wei suggested to Wu that she could instead enter a different part number on the shipping documents.

In June 2003, a vendor at an electronics trade show told Wei that she would be interested in doing business with Chitron “provided you guys can, you know, supply the export license[s]. You are supplying the export licenses, are[n't] you?” According to Murphy, Wei said “yes,” even though Chitron had never obtained, nor ever even applied for, an export license for any part. Wei later e-mailed Wu about the exchange, telling him that the vendor had “realized that we export most [of] their products to China,” that “all their items (or most) should have [a] license for exporting,” and that “they became susp[i]cious how we file the application or forms for exporting.” She warned Wu that it would be difficult to obtain parts from that vendor in the future, due to “exporting getting more strict, especially to China.”

As more and more vendors discovered that Chitron planned to ship parts to China, and as the vendors refused to sell to Chitron unless it obtained export licenses, Chitron–US staff—including Wei—began to note these so-called “problem orders”...