actually the first one relates to her motion to dismiss count one and her subsequent conviction on that count as well as her sentencing and the second relates to the addition the amendment of her judgment to add in money judgment i'm going to address  the count one issue the motion isthmus and the judgment of acquittal on count one and the money judgment issue mr wicker is going to address the sentencing issue as it overlaps with for both mr maddicks and ms carmen the arguments and so he's going to address that so you're the one of the three boys who is going to address the question whether as a matter of wall this constitute a frog wire fraud yes ok correct so just as a start i think most and i think that that's probably the most important issue it is with respect for question a common with respect to just count one she was if you don't want to just jenkins domitian it is from two thousand and eight to two thousand and ten june two thousand and ten when the jenkins act was still in effect  it relates to a company called your tobacco your kentucky tobacco resource or why katie are so ling cigarettes untaxed cigarettes into other states and we live in an age where there are all kinds of online sellers now that was a mail order company but to draw an analogy where companies are based in one state and sell in to other states this case is only different because with regard to the sale of cigarettes there's one additional requirement under the jenkins act which requires the filing of a report indicating to the state that you're selling into who you are and where you're from and what you're selling and then to file a monthly report indicating to whom you sold the cigarettes to and in this case the problem was only that the the reports weren't filed with respect to count one that's the omission that they say was counted misrepresentation or whatever you want to call right so to have a mail or wire fraud file a she have to misrepresentation or an omission and i don't think there's any question in this case that there were no specific misrepresentations so this is an omission case but to have an omission case you have to have a duty to speak and in this case common individually did not have a duty to speak the jenkins act requires the seller to found the reports monthly and if you look at the definition in the statute itself said it says a person but when you look at the definition of a  and individual controlling that entity entirely i could see that argument but in this case ms common did not have any decision making authority as to how the company handled this legal requirements ok i thought the six months or something and in this case that that same omission is now the basis for a wire fraud claim that is a serious felony why don't you your argument about why you think that omission cannot be the basis for war or fraud claim well i guess the government's logic seems straightforward the state would have relied on this you know they were seller the entity was this knowledge and i think in the cases cited by the government the brewer case for example there was a determination that the individual ms brewer was the seller i'm so i think that that's a distinction here i think in other cases the other cases cited by the government  diffuse case there are other other actions other activities that are going on that would lean more towards male or wire fraud other deceptive acts there were no other deceptive acts here the home while individual responsibility is the order it's not individual responsibility in this he did every single thing he might be good it's individual responsibility in terms of joining with a particular object i mean it's a little like conspiracy would you disagree with that knowing it was charged as a conspiracy the tax regulators knew what they were doing in this case there was no cigarettes had been sold in their state though they did because they were sending letters but they didn't know the names and addresses of the purchasers no not specifically after the investigation started but it also has to be material and i think that there's a question as to whether that if they had that information if they would have done anything with it anyway i think in certain cases that may not be the test of materiality whether or not regulators pursue every possible life is not necessarily good for whether it's material or not know the testament you're correct i gree with that i think the test for materiality is whether it's it weighs or it has an influence on the person who receives the information and i think in this case the tax regulators knew what they were doing they were sending letters letting them know arses presumably in their individual states regulatory actions that they could have taken to enforce the requirement to to file the necessary rip why don't you think there was an intention to deceive the states that might be your argument why your client wasn't trying to deceive the states i think my client was trying to sound more cigarettes yeah but isn't isn't part of their business model deceiving states to think to  unaware that people who should be paying taxes are i think it's important perhaps important to the scheme but not material to the person applying the materiality goes to the person who was purportedly deceived ok states in this case the states and why aren't the states being deceived by the failure to file the jenkins act and form because i don't think they were right they weren't acting in secret they were out there sending out flyers they had a registry of proximately eight million register of smokers they were sending out flyers to eight million people they weren't acting in any kind of secret which is different from what some of these other cases where it's not whether their actions were secret it's whether the purchasers names and addresses were known to the states and you know you're kind of suggesting they had to go on this would be like just chasing a thousand answer around the back runners or the opponent michael smith i'd like to reserve two minutes for bottle we've obviously joined in a number of the arguments that raised by co counsel and the the other defendants in this case and the irony is not lost on me that would like to take my time speaking with you about this morning is why we ought not have been with those folks in the first place the jointer that was permitted in this case was permitted pursu to would appears to be the district court's applying the standard that was not a political under the instances before it as i cited in the briefing the district eight a standard we are proceeding under the eight b standard they are related they are certainly nuanced in their application and it is not lost on me iran ors that our burden under both stan is very high before the principal court and certainly before this body but we think this is the case in which the government may have cast the net too broadly your honor judge careful and you asked the question about intent and the piece of evidence or the element of which the government lacked its most evidence against mr smith was on that point of intent indeed they brought to bear only three somewhat discrete pieces of evidence that they argued to the jury justified that he had the intent sufficient to joining these three discrete conspiracies as articulated in their indictment  the predicate the predicate offenses themselves the jenkins act offenses my client was not charged with any conspiracy to violate the pact act in fact the government  indicates in its briefing that it did so because it simply lacked any evidence to be able to demonstrate that so the jenkins act violations themselves being somewhat subject to scrutiny as to whether there's enough sufficient for that violation which in another form would be a misdemeanor can provide the trappings to support these conspiracies is even further exaggerated when it's brought to bear upon my client who was not charged with a principal violation of those statutes and all his statutes i'm sorry which statute i'm sure i apologize to jenkins as he was not charged with a principle violation of the jenkins act but he was part of a scheme well we would of the other defendants and they were all part of a general scheme to sell and tax cigarettes and who were involved were pulling money together to battle cigarettes from overseas wires that correct that is what the government alleged and the government is someone is there is there some specific factor about this case other than that he's not charged with  violation that might he think that the jointer was problematic well we've got three factors first of all procedurally the record before this body shows the district court applied the wrong standard that reasons al g second it so there isn't anything in the record upon which this court could rely to demonstrate that the district court exercised its discretion so what have what is it back really about this case that makes you think your client should have been separate the government couldn't have approved intent without his presence in this broader trial is our position the the scope and breadth of the many charged conspiracies how they spell over nder the law something wars generally require i think there's a differentiation factor here in that we all were tempting to balance at least in my perception is the economy the need to not put the government through unnecessary paces to try a whole bunch of different cases where it could try them all together and against the prejudice that might be visited upon individual defendants here why there is and that is because i think the burden upon the circumstance indeed but i think it would be a one element trial look most of this and not whether it's here or not well i don't mean to suggest whether the test is whether it's easier now but one of the relevant factors is what is the burden upon the government occasioned by minute by an absence of joinder or severance under rule fourteen analysis and the government's burden here would not have been terribly high whatsoever most if not all of the joined it and proving what his role was to thank you want to respectfully the entire scheme was out in the open this was this was that's why i try to differentiate it from contraband this isn't this isn't the selling of of narcotics or the selling of banned substances this isn't even the black market selling of lawful products this is the selling of lawful products in a lawful manner what makes it what the government contends made it criminal was the failure to do so in conjunction with some scheme to violate the jenkins act so for purposes of of of demonstrating that a trial that there really wasn't any dispute my client was selling cigarettes my client was sending money to the individuals alleged in the indictment my client was receiving the cigarettes in exchange for that this isn't a situation you have to prove the presence of the drugs or the movement of the drugs or or that's all out there the only issue for the fact finder to determine is whether my the requisite criminal intent to do so as a part of a scheme or has outlined it that like there's plenty of evidence to support the idea that he knew that they were not doing the  we bear frequently as appellants the burden of trying to second guess what a jury would have done in circumstances that didn't play out that would work for you if indeed it did indeed but the analysis is limited to what is on the four corners of the end of the charging document and that in both you and the district court knew that at the time i see my time is about to expire i appreciate the the computation of loss here should have begun with an examination of what exactly it is that has been lost by the actions here in this case and what was lost was not tax revenue because john maddux did not tax revenue what he deprived the states of was information which they could have used perhaps to why doesn't i mean if you're in the court the supreme court address this very kind of intent issue in the humi case which was a civil case but involve the same kind of make fill your to make filings under the jenkins act and and the court ultimately found that there was no proximate cause between the failure to make filings and the failure of the states to collect the taxes because the intent was not they were rare fairly indifferent about whether customers pa the taxes and so that's a causation issue not in a tent issue there's so much paper in this case i can't find any this or that i mean i thought there was another link in the causation chain between withholding the jenkins information it wasn't the victim not the one that was entitle it was the city that's right the only difference that it should have been disclosed to the state and but the unlike this case the victim there was the city and the court said it really need to stick to the first step in that causation line right what well the victims in this case are city governments and locality governments is as well and a sec that could have collected taxes were more local governments and that amount is included in the forty eight million dollars that was assessed against my client as well and what the court s the himi case was that we usually only look to the to the direct chain of causation right in where it's interrupted by the independent decision of some some third party like a customer who decides to mate to pay taxes or not then that breaks the chain of causation or are you saying under hemi then that local government interests lost revenue i'm not sure exactly what that would have been but those  should've those should not have been counted certainly should not have been counted but i believe the state government's lost tax revenue should not have been counted because of that i mean that's different than what the court was saying and how well they're to it are two reasons one is the causation reason because the causation the chain of causation is interrupted by the decision of a taxpayer to pay or not the taxpayer has the obligation he can decide to pay it not rely on intended loss he relied on actual loss and that's the other problem in the case is the math problem the judge assume a forty eight million dollars loss and to get to that number he has to assume that because of the actions of not making jenkins sacked filings we have gone from a in a state of affairs where every single dollar would have been collected by the state to state of affairs where not a single dollar will will be collected by the states as you as you said before your honor states even if they have all this information they have to decide whether it's in their best economic interest to chase the a all around the back yard and there was no evidence that the states even if they had the information would have taken any effective means to collect that from from the customers i guess i mean you your client failed to file before mx's that would allow the state to to pursue the revenue or you know send letters and everyone i mean why wasn't your burden to show that they would not have done that why is it the state's outpatient show that they would have but what we argued your honor was that the states only had a temporary deprivation of information they had all the names and addresses by two thousand and twelve but they learned in the course of the investigation so if you're talking about you know it all came out after the feds busted the scheme i don't think that really helps you to know that's not what i'm talking about you're on what i'm talking about is that the government has the obligation to prove the amount of loss and they just proved it by an assumption an assumption that well if they would have had the information everybody would have paid their taxes we don't think that's realistic didn't some state witnesses testify that they would've pursued the buyers had they gotten the information some of the states said that they were going to pursue the buyers now that they had the information that they had waited until the  investigation was over but now that they have the information they're going to pursue the buyers what would any extent do we a governmental entity not cool let  but let me let me address that and tell you why that this was not appropriate as in the two last case either in the district court or on appeal as you know the the guidelines definition of ended at ten did last the government has to prove that the defendants quote purposely sought to inflict a loss on the victims and we talked about in this record that there was no evidence of a purposeful intent to impose a particular loss in the particular victims there was ample evidence of indifference about whether the defendants about whether the defendants customers well and our argument at sentencing is well in the sentencing hearing where we argued this motion to the court didn't make a factual finding on that issue he went to the to the actual loss approach is silence in a mission and courts are also uniformly clear that any mission a deceptive a mission is an omission that is a failure to speak in the face of a statutory duty to provide information and to disclose that's why every court that has addressed this issue these precise factual circumstances have held that the failure to provide the information required by the jenkins act can be an actionable mission and what's let's just say that authority is an overwhelming and it's persuasive force i mean actionable under the fraud statutes and this court has made clear that it could be a an affirmative false statement or it could be silence and all courts have been clear can be silence then the question is well when is silence action silence deceptive for purposes of the mail or wire fraud statutes and we've said the cases we don't we're not aware of any case the contrary saying that the failure to disclose information in the face of a statutory duty to cases in the woods i think it relies on over the cracks basically i mean just i believe woods was a an individual who is was soliciting was doing telemarketing and soliciting i think  customers over the phone and did not provide information that was quite required under f t c rules about i think you have to tell people that they don't have to purchase the product in order to be a part of a market yeah right prior district court itself is coming out it's been failures to disclose material information for example or whatever it is well when the following statements are not affirmative representations their failure to provide information is deceptive because it it it's it's it doesn't allow that i was trying to do is kind of forth the pickle case but you're not  i'm really i have to tell you i'm just very uneasy about this case because i mean here we have this you know federal criminal law which is itself just already extremely pervasive justice kagan among others has noted that so you guys have a ton to work with in the federal criminal law and and we have and my concern is specific to the  based i guess count one maybe is that count five as well just count one it's only count one because the others are also based on international the failure to write right and i mean there you know the jenkins that specifically is you know says that this very a mission is just a misdemeanor and now that same omission is the basis for a much bigger more jet you know more general felony under wire fraud you know it's it's often the case and very common that the conduct perpetrated by an individual defendant violates more than one criminal statute and in its common for example of to have a a lesser included offense and but yet additional conduct by that same defendant takes it out into a greater criminal offense and that's what happened here the jenkins act only requires that you know that you provide reports and it doesn't have a when to prior to the pact act it didn't even have it within it a a mental state requirement it didn't so you know jenkins act violation if you were prosecuting the misdemeanor you'd have to show that they sold cigarettes out of state and they did not file before is that correct yes and your wire fraud that the conduct or omissions giving rise to this wire fraud offense as i understand it is sold cigarettes out of was as it was previously and and and but what's not and but what's different and what what distinguishes a mere failure to file these because of laziness or forgetfulness is an intent to deceive and to deprive another of their money or property through deception and that is the government's prove beyond a reasonable doubt we had approved a plan to deprive another of money or property through deception and that these individuals possessed that mental state to two thousand and ten holders but if you look at the you know you know what is the status of the statute just said any person who sells or transfers for profit cigarettes in interstate commerce has to file these reports and then it says for the penalties it says whatever violates any provision of this chapter shall be guilty of a misdemeanor now after the past act was passed it's section are we talking about what used to be three seventy seven with the penalties and it said whoever violates any provision of this chapter shall be guilty of a misdemeanor and the provision in the prior provision which is three seventy six said any person who sells cigarettes into a state must make these filings there's no there's no mention of any kind of mental state requirement which is contrasts with the the that that those same provisions after the passage of the pact act and now it says  that it says knowingly or honor it says three seventy seven a criminal penalties number one except as provided in paragraph two whether knowingly violates this chapter shall be in prison for not more than three years know it up to the penalty before it was six months no mental state requirement specifically in the statute after two thousand and ten it's three years plus in knowing the requirement well ok and why why isn't the post packed at conduct tha fraud a different animal to be clear the only fraud charges that are challenge here are only pre two thousand and ten but in our view the same reasoning applies that this is still just a mere knowing requirement it's a lower mens rea it's a lesser offense as opposed to an intent different which is a specific intent offense requires that the government to prove beyond a reasonable doubt that they harbored the purpose and intent to deprive of another of money or property through deceit and that's and that's the burden the government has to carrying it's a bird that's hard to carry and that we did can in this case by overwhelming evidence in less of your honor i said yeah i guess it just bothers me but you know i see the logic of your response is turning to a loss i just want to briefly discuss that in our view hammy does not apply in this case it doesn't provide any instruction about how to calculate loss of the guidelines the guidelines refer  to the final loss as the reasonably foreseeable peculiarly harm hemmy involved a the causation standard in the rico statute which requires that circumstance it has a different you know different definitions that apply in perhaps different statutes perhaps of course the common law courts might adopt different standards was it fair the rico and just first up or something in rico  they the supreme court made clear that it and what the plurality said is so among the formulations that courts have applied are a direct relationship or reasonable foreseeability in the court make clear those are different and the court adopted a direct relationship and the dissent said no we think it should be reasonable foreseeability i don't think that there was any and now the plurality didn't address whether the it would have reached a different conclusion unreasonable for see ability but i don't think that there's any it didn't seem that the court would reach any different conclusion or did i think that the justices seemed to be in agreement that under reasonable forsee ability standard there was causation in that case where you say there's no carve out for state and clear the the the sentencing commission in fact made clear when it adopted the los standard that it was a reasonable force the ability and not direct relationship in amendment six one seven and this appendix c of volume two in explaining the reason for adopting this reasonable foreseeability standard the commission said the commission decided not to use the term consequential damages or any similar civil law distinction between direct and indirect harms rather the commission to terminate the reasonable foreseeability standard provides sufficient guidance to courts as to what type of forms are included in loss so the commission really basically decided not to go with the type of direct relationship proximate cause ation standard that the supreme court hemi adopted in the rico context and instead it that reasonable for see ability well i'd like to ask you about the jury instruction on materiality i mean it's i understand your arguments are you know construed as a whore or common sense and so on but still the the meaning of these words in the english language do have a place in the jury instruction analysis and it seems to me that the sentence that was added from the government's proposed instruction as i understand it namely immaterial missions such as a failure to file required reports may constitute a misrepresentation or concealment under the mail and wire fraud statutes the contingency the may there concerns whether the omission to file the report is a misrepresentation that contingency as i read this does not go to whether the omission is material and it does seem to me that this wording would strongly indicate to the jury that a failure to file require report is a material mission and the thing they need to figure out it's what is whether it's also a misrepresentation what what am i getting wrong well certainly the the that sentence could have been worded better in our view sometimes it's you know to the point where it's wrong but i think that we in our view you have to look at that one sentence in the light of all of the in the context of the instructions as a whole i am and what do we learn from that context that we disabuse one of what seems to be the straightforward implication here well the quote was the jury was instructed that it it had to find a misrepresentation of concealment and that the misrepresentation or concealment had to be material and you define materiality and then it went into that state which in our view was intended to just say that concealment or misrepresentation can take the form of a failure to put it to comply with the statutory the you have the witnesses you know entered in need or itself which is establishes the materiality element of wire and mail fraud the court held that the total failure to you assume that the court took material materiality away from the jury which we don't think was the case here but even if you assume that no reasonable jury would have reached any different conclusion the the the several witnesses from the states all testified that these reports mattered to them that they used these reports and they would have used these reports tried to collect taxes the evidence established that the inability of the states to collect the taxes these states not being able to collect the taxes in that matter and in fact i mean keep asking questions of others have a question on the forfeiture issue who's raising that issue again can you remind us carmen mean cigarettes are lawful goods they're not methamphetamine and they don't put a stamp on it and that's that's the and that would seem to be classic just unlawful manner of a lawful good well it doesn't turn into merely on the fact that something is  is lawful for example food stamps or lawful but it courts the second circuit held that the frontal it's frauds regarding food stamps falls under the illegal goods whatever or maybe you know you're not supposed to sell food stamps i don't know if we stamp seems like a weird example where you're not if you had a case where they're selling you know jack daniels bourbon and they didn't pay some tax and that was deemed to be inherently on lawful activity selling the bourbon then that would be persuasive i think application these two provisions turns in the individual facts of the case and here you have a highly regulated area cigarettes which the evidence establishes need to be stamped and sold with taxes various states the various states require that they be taxed before they go in it's a highly regulated area and the manner in which they sold them was illegal and we've we've looked through the cases that have applied these two provisions the only cases we've found that apply to the second the b provision are securities fraud cases where someone sells securities and the courts feel happen clip the securities are lawful or i believe that in legislative history it suggests that what it was intended for would be for example a bribe the bribery situation where if i were to pay a bribe to someone to get a contract to provide goods to that to that business and i actually provided the very goods that they wanted you want but that would be reduced it seems like a two way that says illegal goods and then a to be a legal manner and so it seems like we've we first look at the goods themselves and say are those inherently illegal are those illegal goods just the goods before there's any transaction methamphetamine credit mean yes cigarettes probably know about cardinal mob arose that's that that's not just inherently illegal and then we say ok what was the manner of the sale illegal well then put a stamp on it you're supposed to do that you can't sell it without the stamp so yes seems like a straightforward way to be well it also it's illegal goods the illegal service possess i don't believe ten thousand or more government demonstrate here that they possessed presuming that at one time or something now it's courts of applied accumulatively your honor that's my understanding it's the name of that act again contraband c c t it's  in the look it up i don't want to tax everybody's pay should you look at the fourth circuit case the sign case that we say your honor and that's that pertains to that i mean it's just i must say i mean it seems like it's this is just you know  nine and it's true that the district court discussed a joint several liability but in our view the court actually the manner in which the court determined forfeiture the court did not apply joint several we made clear in our in our  interest which has similar language and we do agree that heinie could does apply to the forfeiture statute at issue here even though that wasn't directly at issue in honeycutt the statutes are similar enough that the honeycutt standard does apply so the district court had to could only order forfeiture in the amount that carmen obtained and carmen obtained all the money that came through why katie or the business that she ran with her husband mr think the first issue that the court needs it herman is because miss carmen does raise one of her near apply is whether she obtained the money under honeycutt and then from what she obtained do you under the statutory issue that we just discussed do you do gross or net in our view the ship taint all of the proceeds which i believe were twenty three million during the time of the conspiracy the domestic conspiracy because she was an integral member of this of this organization she helped run why katie are she in ma yes yes you if i'm mad like to just address a couple of the issues that were raised first with respect to the bootstrapping of the jenkins act to mailer wire fraud i share your concerns your honor and i think that there is no act offense where as for wire fraud you know there is a very serious intent intend to you know trick somebody out of money basically and they weren't tricking anybody out of any money well but if we're just talking about the two offenses and why one should not be overly alarmed about the felon is ation of this conduct the answer is well you had to have this pretty bad intent where as for the jenkins act but there is no line fan because that could be true for omitted to file for deceptive purpose as opposed to you know it got lost under a sponge stuff in your desk that's that's true but i think in this case as i had previously argued i don't think that there was a specific intent to deprive anybody of any property only be responsible or for what she actually received and the government went through great detail to determine that the distributions that she received as a fifty percent owner she never had control there was no evidence to suggest that she had entire control over the entire proceeds of that total to her but it wasn't it the what was applied to her at the district court level wasn't a share it was everybody understands no it was the whole the thirty five million was for the entire proceeds fair enough but i think ultimately he intended prior to getting to the eighth amendment argument he was holding her responsible for the entire proceeds of the in that are where you did that that's that's thank you very much thank you your honor just to pick up on what appears to be one of the more pressing issues this notice this this notion of intent and this this prophylactic application of the jenkins act again i think that that has particular emphasis upon my client in this case he was charged with conspiracy to participate in a fraud in which the predicate crime is this prophylactic statutory that indeed and i think i would take it the other way i don't think that that adding the wire fraud washes through and imputes some notion that they met a higher standard indeed what i think happens is you had a jury faced with the discrete question in some of the counts was the jenkins act violated you then have the jury presented with a more esoteric question in the counsel pertaining to my client did your client knowingly enter into a conspiracy with individuals who possessed the specific intent to violate a predicate statute even though my client they did not have evidence to demonstrate that he possessed any of that requisite intent this is why it drives to our point about whether and to what extent there was substantial harm to him being tried with these other individuals without that the the logical connection that your honor is reaching in order to breach the breach the gap between the problem that you perceive in terms of how do we get to felony criminal culpability via statute that is then i prophylactic application in violation of that prophylactic application yields only a misdemeanor violation is breached in this case as it relates to my client only because he's in a trial with these other individuals being being may please the court i'd like to address just a couple remaining issues about about loss as it applies to mr maddicks first on the burden of proof the burden of proof is not on the defendant to prove the amount of loss the burden is always on the on the government to prove the amount of loss and what happened here in this case was not that that there was some shifting of burden of proof like in an employment case under mcdonnell douglas but the good the judge accepted the government's premise hole that because of the actions of the defendant we went from a state where every bit of the taxes would have been collected to a point where none of the taxes would have been collected that specific argument made to the district court that a even if you believe the state officials that they would have tried to get the money it's not realistic to think they would have gotten every penny of it yes exactly your honor that was reached in argued to the court  days would it be your bird to come forward with some evidence that the government would not have collected the full of mail but it's not it's not really mitigation in the way that we think of it in a civil case you know in a civil case there is a burden of proof to show mitigation but the guidelines are clear and the sentencing rules are clear that proving you know between one and two hours and three hours is all that always the government burger maggs the government awesome there are various scenarios under the gas lines where it becomes a defendant's burden to come forward with evidence i'm just suggesting this is probably want to understand the point you