US v. Gulla, 92 Cr. 1236 (VLB).

• Decision Date: 13 September 1993
• Docket Number: No. 92 Cr. 1236 (VLB).,92 Cr. 1236 (VLB).
• Court: U.S. District Court — Southern District of New York
• Parties: UNITED STATES of America, v. Guido GULLA, Vito Gulla, and GUIDO IMPORTER AND WHOLESALER, INC., Defendants.

833 F. Supp. 274

UNITED STATES of America, v. Guido GULLA, Vito Gulla, and GUIDO IMPORTER AND WHOLESALER, INC., Defendants.

No. 92 Cr. 1236 (VLB).

United States District Court, S.D. New York.

September 13, 1993.

Alan J. Brudner, Asst. U.S. Atty., New York City, for U.S.

Alan Levine, Kronish, Lieb, Weiner & Hellman, New York City, for defendants.

MEMORANDUM ORDER

VINCENT L. BRODERICK, District Judge.

I

Nations in the European Economic Community ("EEC") have imposed restrictions on the importation of hormone-containing meat products produced in the United States. A Presidential finding, citing no sources, has been made to the effect that the hormones in those meat products are not harmful to human health. To induce the EEC nations to remove the import restrictions on those American meat products, the United States by Executive action has increased the importation duty on selected vegetable products: an increase from 13.6% to 100% has been applied to tomatoes, but not to tomato sauce.

This case involves criminal charges that false documents were used to avoid application of the increase in duty to tomato products imported by the defendants. In essence the Government charges that defendants imported tomatoes but declared that they were importing tomato sauce. Violations of 18 USC §§ 371, 542 and 1001 are alleged.

Defendants have moved to dismiss the indictment in this case on the ground that the distinction between "tomatoes" dutiable at 100% and "tomato sauce" dutiable at 13.6% is unconstitutionally vague on its face, and also as applied to defendants: they note that Customs previously and subsequently cleared identical imports by defendants. Defendants have also moved to dismiss certain counts and paragraphs of the indictment, for a bill of particulars, and to suppress statements made during a search of the corporate defendant's premises pursuant to warrant.

I find difficulty in sustaining the rationality or comprehensibility of the tomato/tomato sauce distinction. I also have difficulty in squaring the Executive action taken — that of raising duties five-fold on products not involved in the dispute with the EEC nations — with the Origination Clause of the Constitution, which requires that measures to raise revenue originate in the House of Representatives. Const., Art. I § 7, Cl. 1.

In ruling upon defendants' motions addressed to the indictment, however, I must consider what is charged in the indictment, and as a practical matter I must assume that the Government can prove the elements of the crimes charged. The indictment charges substantively and as a conspiracy, the making of deliberately false statements to the Customs Service.

Making deliberately false statements is not an acceptable way to mount a constitutional challenge. Possible invalidity of the tomato/tomato sauce distinction, as a determinant of duty or as a distinction importers were required to honor under the conceded circumstances here, would not mean that deliberately entering a product defendants themselves regarded as "tomatoes" under the rubric of "sauce" can be excused. In fact, such a covert constitutional challenge would give persons or entities in the position of defendants a competitive advantage over business rivals who chose either to pay the 100% duty on tomatoes or to incur the expense and potential delay of litigating the validity of the distinction. Use of deliberate false statements, if condoned by the courts, would deprive the consuming public (which must ultimately pay the retaliatory duty), the Customs Service and the courts of the ability to make decisions about the issues at stake on an all-facts-known basis. Statements affecting asserted customs duties, whether those duties are valid or invalid, are material to Customs administration and within the jurisdiction of the Customs Service, and thus cognizable under 18 USC § 1001.

I deny defendants' motions except that:

(a) I direct certain additional discovery as set forth below;

(b) The United States Attorney must elect as to certain counts and paragraphs of the indictment, or must explain after further consideration why they are necessary, as set forth below;

(c) I shall set forth in a separate memorandum order my disposition of defendants' motion under Fed.R.Cr.P. 12(b)(3) and 41(f) to suppress evidence obtained through conversations with the defendants during a search of the corporate defendant's premises.

The parties are directed to submit memoranda of law accompanying their proposed instructions to the jury concerning the defendants' assertion that a civil Customs inquiry with respect to the tomato product at issue in the indictment led to its "liquidation" favorably to defendants.¹

II

The indictment charges violations of:

(a) 18 USC § 542, which prohibits entry of goods through United States Customs by means of false statements;

(b) the more general provisions of 18 USC § 1001, which prohibits false statements within the jurisdiction of government agencies; and

(c) 18 USC § 371, which prohibits conspiracies to violate other federal criminal laws, including 18 USC §§ 542 and 1001.

The false statements charged consisted in characterizing "tomatoes" as "tomato sauce."

The Second Circuit held in United States v. Avelino, 967 F.2d 815 (2d Cir.1992) that false statements must be material to be prosecutable under 18 USC § 1001. This precaution is necessary to avoid criminalizing entirely irrelevant assertions. I find that the nature of a product entered through Customs is necessarily material not merely to administration of the Customs laws, but to any determination as to whether or not the duty imposed or the characterizations at issue are valid. Similar observations apply to 18 USC § 542.²

III

On December 30, 1987, acting under § 301 of the Trade Act of 1974 as amended, 19 USC §§ 2411 and 2483, President Reagan increased from 13.6% to 100% U.S. Customs duties on various food products imported from the European Community including tomatoes in retaliation for decisions of the European Economic Community barring U.S. meat exports containing hormone residues. 52 Fed.Reg. No. 250, p. 49131.³

The tomato duty was increased by Part 2, Subpart B of the appendix to the Tariff Schedules of the United States, 19 USC § 1202, item 946.42 and 9903.23.15, modified so as not to include tomato sauces by 54 Fed.Reg. No. 235, p. 50673 (Dec. 8, 1989).

The underlying trade dispute, generating the retaliatory duty on which this indictment is based, had nothing whatever to do with tomatoes or other vegetable products. President Reagan's Determination⁴ stated that the European Economic Community had insisted "against the weight of scientific evidence, that consumption of meat from animals treated with growth hormones is dangerous to human health." No data supporting President Reagan's Determination were cited, nor was any indication provided as to whether the view described was substantially controverted by other experts.⁵

Questions raised by this sequence of events do not justify dismissal of the indictment at this stage, because if the facts alleged in the indictment are proven, defendants chose not to contest the 100% duty head on, but to bypass these issues through deliberate use of false documents. Issues presented by the imposition of the 100% duty under the circumstances here do, however, justify a heightened level of scrutiny with regard to the adequacy of notice furnished to defendants, leading me (a) to order additional discovery relevant to that subject, and (b) to direct that memoranda of law be submitted as to appropriate instructions to the jury concerning the effect of subsequent Customs "liquidation" of defendants' tomato product in a manner favorable to defendants.

IV

Clear warning that conduct is criminal is a prerequisite to prosecution.

Fundamental principles of due process ... mandate that no individual be forced to speculate, at peril of indictment, whether ... conduct is prohibited ... Thus, to ensure that a legislature speaks with special clarity when marking the boundaries of criminal conduct, courts must decline to impose punishment for actions that are not `plainly and unmistakably' proscribed.

Dunn v. United States, 442 U.S. 100, 112, 99 S.Ct. 2190, 2197, 60 L.Ed.2d 743 (1979); see also United States v. Harriss, 347 U.S. 612, 617, 74 S.Ct. 808, 812, 98 L.Ed. 989 (1954); Lambert v. California, 355 U.S. 225, 228, 78 S.Ct. 240, 243, 2 L.Ed.2d 228 (1957); and see United States v. MacKenzie, 777 F.2d 811, 817 (2d Cir.1985), cert. denied 476 U.S. 1169, 106 S.Ct. 2889, 90 L.Ed.2d 977 (1986).

The underlying criminal statutes prohibit, in matters involving Customs under the circumstances alleged here, intentional false statements (18 USC §§ 542 and 1001), agreements to engage in such conduct (18 USC § 371), and aiding and abetting such conduct (18 USC § 2).

Defendants claim that the definitions of "tomatoes" and "tomato sauce" shade into each other to such an extent as to make incorrect selection between these definitions not punishable by criminal prosecution. To the extent that this issue was presented on the face of published documents, defendants were required to pursue it by challenging the distinction by the means available as discussed below, rather than by deliberately ignoring the distinction and resorting to deliberate false statements (if the allegations in the indictment are true). To the extent that defendants' argument depends on the nature of the tomato processing industry and the precise nature of defendants' wares, it presents a fact-intensive issue not capable of resolution on the face of published documents together with the indictment, and accordingly must be determined at trial.

Defendants assert, further, that Customs procedures designed to give adequate notice of problems arising in administration of Customs requirements, as well as of the provisions at issue here, were ignored with prejudicial consequences to the...