Source: http://www.techlawjournal.com/alert/2009/02/02.asp
Timestamp: 2019-04-19 05:02:07+00:00

Document:
TLJ Daily E-Mail Alert No. 1,889, February 2, 2009.
February 2, 2009, Alert No. 1,889.
1/27. The U.S. Court of Appeals (DCCir) issued its opinion [19 pages in PDF] in US v. Soulbury Limited, an in rem case regarding seizure by the US government of money of an internet gambling enterprise located outside of the US.
This case pertains to efforts by the US government to terminate internet gambling operations that are located outside of the US, which are legal where located, but illegal in the US, under the Wire Act.
These gambling operations, and their owners and operators, are beyond the jurisdiction of US courts. However, by seizing funds of these businesses located abroad, by alleging violation of the US money laundering statute, and then denying access to the courts to contest the seizure, by asserting the US fugitive disentitlement statute, the US may be able to terminate these foreign based operations.
Fugitive disentitlement is a common law principle that allows dismissal of appeals in criminal cases where the defendant has escaped custody after filing an appeal and is evading the jurisdiction of the court. In 2000 the Congress codified the principle, and expanded it to civil proceedings, in the Civil Asset Forfeiture Reform Act of 2000 (CAFRA). It is codified at 28 U.S.C. § 2466.
In this case, the government seeks to use the CAFRA to enforce US gambling law against non US citizens living abroad for their internet based activity. The government's tactic in this case could be applied in other situations where the US seeks to regulate foreign based conduct, internet based or otherwise, that violates US law. Similarly, foreign governments, utilizing their own related statutes, might enforce their laws against US based persons or companies.
The Court of Appeals wrote that the US alleges that William Scott "operated a network of offshore Internet gambling sites from the Caribbean that catered primarily to U.S. residents". The US attempted to criminally prosecute Scott, without success, because he is not a U.S. citizen, and lives outside of the US.
The US then brought an in rem action in the U.S. District Court (DC) to seize nearly $7 Million in bank funds of Soulbury Limited, a British Virgin Islands corporation, held by a foreign financial institution located in a dependency of the United Kingdom by alleging illegal money laundering. Soulbury, of which Scott is a major shareholder, sought return of the money.
The District Court granted summary judgment to the US. The District Court held that the federal fugitive disentitlement statute precludes Soulbury from contesting the seizure of the funds. Soulbury was afforded no opportunity to contest whether there was in fact any money laundering or violation of the Wire Act, or to raise any procedural deficiencies with the seizure.
Court of Appeals. This appeal followed. The Court of Appeals reversed and remanded in a narrow opinion.
Section 2466 provides in part that the court "may disallow a person from using the resources of the courts of the United States in furtherance of a claim in any related civil forfeiture action or a claim in third party proceedings in any related criminal forfeiture action upon a finding that such person ... declines to enter or reenter the United States to submit to its jurisdiction ... or ... otherwise evades the jurisdiction of the court in which a criminal case is pending against the person".
The Court of Appeals adopted the test articulated in 2004 by the Second Circuit in Collazos v. US, 368 F.3d 190. The DC Circuit wrote that the statute requires that "(1) a warrant or similar process has issued in a criminal case for the claimant’s apprehension; (2) the claimant had notice or knowledge of the warrant or process; (3) the criminal case is related to the forfeiture action; (4) the claimant is not confined or otherwise held in custody in another jurisdiction; and (5) the claimant has deliberately avoided criminal prosecution by leaving the United States, declining to enter or reenter the country, or otherwise evading the criminal court's jurisdiction."
The Court of Appeals held that the District Court erred in resolving the issue of "notice or knowledge" on summary judgment. That is, the US had not shown that Scott had notice of the warrant for his arrest.
However, the Court of Appeals also held that the District Court was correct including that "the criminal case is related to the forfeiture action". In the criminal case the US alleged violation of the Wire Act by Scott. In the civil forfeiture case the US alleged money laundering. The Court of Appeals concluded that they are related.
The Court of Appeals also held that "Under the correct interpretation of the fugitive disentitlement statute, there is a genuine issue of material fact whether Scott is a person to whom the statute applies and therefore whether Soulbury's claim can be dismissed under the statute."
Commentary. This case relates to US efforts to regulate foreign based conduct that is legal where practiced, but illegal in the US. The US criminalizes some internet based gambling operations. The operations prohibited in the US are legal and legitimate in many other countries.
The US procedures employed in this case may illustrate a tactic for enforcing US criminal laws extraterritorially.
Perhaps it should be noted that the same sort of procedures might be employed by other governments, including against US based activities that are lawful in the US.
For example, some internet based activities that are legal, and protected by the First Amendment, in the US, are criminal in other countries. A foreign government might issue a criminal complaint against a US defendant, then assert its money laundering statute to seize from a financial institution funds of a US defendant, and when the US defendant or financial institution seeks to contest the seizure, dismiss the challenge under its fugitive disentitlement statute.
A foreign government might thereby effectively regulate internet based First Amendment activities in the US.
This case is US v. Soulbury Limited, U.S. Court of Appeals for the District of Columbia, App. Ct. No. 07-5383, an appeal from the U.S. District Court for the District of Columbia, D.C. No. 03cv02540.
1/26. The World Trade Organization (WTO) released a panel report [PDF] in its proceeding, initiated by the U.S. against the People's Republic of China (PRC), regarding the PRC's failure to protect intellectual property rights in movies, music, books and other content, and the PRC's access barriers for US content distributors.
1/30. The U.S. Patent and Trademark Office (USPTO) and the Intellectual Property Office of Singapore (IPOS) announced in a release that they "intend to launch a new trial cooperation initiative called the Patent Prosecution Highway (PPH) on February 2, 2009. The Patent Prosecution Highway will leverage fast-track patent examination procedures already available in both offices to allow applicants to obtain corresponding patents faster and more efficiently. It also will permit each office to exploit the work previously done by the other office and reduce duplication. In turn, the initiative will reduce examination workload and improve patent quality."
1/30. Federal Communications Commission (FCC) acting Chairman Michael Copps gave a speech at a meeting of the FCC's Consumer Advisory Commission. He said that "we didn't have a well thought-out and coherent and coordinated plan to ease the transition" to digital television. He added that "I wish we had more time and additional resources to prepare". He also stated that he has instructed FCC staff "to convene the technical working group" to "address digital closed captioning and video description issues".
1/30. The Government Accountability Office (GAO) released a report [38 pages in PDF] titled "Information Security: Further Actions Needed to Address Risks to Bank Secrecy Act Data". The report addresses information security weaknesses at the Department of the Treasury's (DOT) Financial Crimes Enforcement Network (FinCEN), Treasury Communications System (TCS), and Internal Revenue Service (IRS).
1/30. Randy May of the Free State Foundation (FSF), released a short paper regarding the broadband provisions of HR 1 [LOC | WW], a huge spending bill titled the "American Recovery and Reinvestment Act of 2009". It contains numerous technology related provisions. See, story titled "House to Consider Spending Bill" in TLJ Daily E-Mail Alert No. 1,887, January 27, 2009. May wrote that "Funds should only be allocated for build-outs in unserved areas, rather than for underserved areas as well. We know that about 90-92% of homes already are passed by a broadband provider. The focus should be on the remaining 8-10% that do not have access to any service (except satellite broadband). Under the bill, the FCC is tasked with defining an ``unserved´´ area within 45 days. This is likely to be a very messy and contentious process." (Parentheses in original.) He added that "The bill requires that NTIA ensure that grant recipients operate on an ``open access´´ basis. The term ``open access´´ is to be defined by the FCC not later than 45 days after enactment of the bill. Without belaboring the point, the stimulus bill is no place to effect what may be a far-reaching change in broadband policy." The House passed its version of the bill on January 28, 2009. The Senate is considering it.
1/21. The Federal Trade Commission (FTC) filed a civil complaint [9 pages in PDF] in the U.S. District Court (DNev) on December 30, 2008, against Gregory Navonne, alleging violation of federal laws in connection with privacy related practices, including disposal of sensitive consumer information, such as credits reports and tax returns. The complaint states that Navonne is sole owner, sole director, and President of First Interstate Mortgage Corporation, which provided services to mortgage brokerage companies. The complaint states that "On December 20, 2006, approximately forty boxes of intact documents that Defendant had stored in his garage were found in a publicly-accessible dumpster". The complaint alleges violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Fair Credit Reporting Act, and the FTC's rule regarding disposal of consumer report information and records. The FTC added in a January 21, 2009, release that he "failed to implement reasonable data security measures in key areas at the companies, including the physical and electronic security of sensitive consumer information". This case is FTC v. Gregory Navonne, U.S. District Court for the District of Nevada, D.C. No. 2:08-cv-01842.
1/16. The Federal Communications Commission (FCC) filed its brief [85 pages in PDF] with the U.S. Court of Appeals (3rdCir) in AT&T v. FCC. This is a petition for review of a Federal Communications Commission (FCC) order regarding privacy interests under the federal Freedom of Information Act (FOIA), 5 U.S.C. § 552. This case is AT&T, Inc. v. FCC and USA, U.S. Court of Appeals for the 3rd Circuit, App. Ct. No. 08-4024, a petition for review of a final order of the FCC.
1/16. The Federal Communications Commission (FCC) filed its reply brief [85 pages in PDF] with the Supreme Court in FCC v. CBS, Sup. Ct. No. 08-653, a case regarding regulation of broadcast indecency. This is a petition for writ of certiorari to the U.S. Court of Appeals (3rdCir), App. Ct. No. 06-3575. This case pertains to the FCC's fine of CBS for broadcasting a fleeting and unscripted view of a breast during a halftime show for a football game. On July 21, 2008, the 3rd Circuit issued its opinion [102 pages in PDF] overturning the FCC's fine. See, story titled "3rd Circuit Overturns FCC's Breast Broadcast Fine" in TLJ Daily E-Mail Alert No. 1,797, July 22, 2008. The FCC filed its petition for writ of certiorari on November 18, 2008. CBS filed its opposition brief on January 8, 2009. The FCC argues in its reply brief that "the petition for a writ of certiorari should be held pending this Court's decision in FCC v. Fox Television Stations, Inc., No. 07-582, and then disposed of accordingly." The Supreme Court heard oral argument in FCC v. Fox on November 4, 2008, but has not yet issued its opinion. For more on the Fox case, see stories titled "FCC Releases Indecency Orders" in TLJ Daily E-Mail Alert No. 1,332, March 20, 2006, and "FCC Releases Order on Remand Regarding Broadcast Indecency" in TLJ Daily E-Mail Alert No. 1,484, November 7, 2006. The U.S. Court of Appeals (2ndCir) issued its divided opinion [53 pages in PDF] on June 4, 2007. See, story titled "2nd Circuit Vacates and Remands FCC Profanity Order" in TLJ Daily E-Mail Alert No. 1,590, June 4, 2007. The Supreme Court granted certiorari on March 17, 2008. See, story titled "Supreme Court Grants Certiorari in FCC Fleeting Expletives Case" in TLJ Daily E-Mail Alert No. 1,732, March 18, 2008.
The House will meet at 2:00 PM in pro forma session only. See, Rep. Hoyer's schedule for week of February 2.
The Senate will meet at 2:00 PM. It will begin consideration of HR 1 [LOC | WW], a huge spending bill, which is titled the "American Recovery and Reinvestment Act of 2009". It contains numerous technology related provisions. See, story titled "House to Consider Spending Bill" in TLJ Daily E-Mail Alert No. 1,887, January 27, 2009.
12:00 NOON. Federal Communications Commission (FCC) Commissioner Robert McDowell will give a speech titled "The FCC in Transition". The price to attend is $70. See, registration page. Location: Capital Hilton Hotel, 1001 16th St., NW.
Deadline to submit comments to the National Aeronautics and Space Administration (NASA) regarding its proposed rules changes regarding information technology security. See, notice in the Federal Register, December 2, 2008, Vol. 73, No. 232, at Pages 73201-73202.
Deadline to submit to the Federal Communications Commission (FCC) replies to oppositions to the petition for reconsideration [PDF] filed on December 1, 2008 by Cohen Dippell & Everist regarding the FCC's Second Report and Order and Second Further Notice of Proposed Rulemaking [PDF] in its proceeding titled "In the Matter of An Inquiry Into the Commission's Policies and Rules Regarding AM Radio Service Directional Antenna Performance Verification". The FCC adopted this item on September 24, 2008, and released the text on September 26, 2008. It is FCC 08-228 in MM Docket No. 93-177. See, notice in the Federal Register, January 8, 2009, Vol. 74, No. 5, at Page 810.
The House will meet at 12:30 PM for morning hour and at 2:00 PM for legislative business. Votes will be postponed until 6:30 PM. The House will consider under suspension of the rules HR 559, the "Fair, Accurate, Secure, and Timely Redress Act of 2009", a bill to provide procedural redress to those who believe they have been denied access to commercial aircraft as a result of listing on a terrorist watch list or database used by the Transportation Security Administration (TSA). See, Rep. Hoyer's schedule for week of February 2.
4:00 PM. George Mason Univeristy's (GMU) Information Economy Project will host an lecture by David Clark (MIT) titled "The Internet Today and Tomorrow: Social Implications of Evolving Technology". This event is free. Location: George Mason University School of Law, Room 121, 3301 Fairfax Drive, Arlington, VA.
5:00 PM. The House Rules Committee will meet to adopt a rule for consideration of S 328 [LOC | WW], the "DTV Delay Act". Location: Room H-313, Capitol Building.
The House will meet at 10:00 AM for legislative business. The House will consider S 328 [LOC | WW], the "DTV Delay Act", subject to a rule. See, Rep. Hoyer's schedule for week of February 2.
12:00 NOON - 1:45 PM. The Federal Communications Bar Association (FCBA) will host a brown bag lunch on the issue of establishment of new generic top level domains by the Internet Corporation for Assigned Names and Numbers (ICANN). Register by February 3 with Kevin Rupy at 202-326-7276 or krupy at ustelecom dot org. Location: USTelecom, Suite 400, 607 14th St., NW.
12:15 PM. The Federal Communications Bar Association's (FCBA) Homeland Security / Emergency Communications Committee will host a brown bag lunch titled "Public Safety Issues to Watch in 2009". The speakers will be Brian Fontes (National Emergency Number Association), Bob Gurss (Association of Public-Safety Communications Officials International). RSVP to Marianne Trana at 202-419-2476 or marianne dot trana at hklaw dot com. Location: Holland & Knight, 2099 Pennsylvania Ave., NW.
1/30. The Federal Trade Commission (FTC) announced that Mary Beth Richards, Deputy Director of the FTC's Bureau of Consumer Protection (BCP), will return to the Federal Communications Commission (FCC). The FTC also announced that Mary Engle, Associate Director in the FTC/BCP's Division of Advertising Practices (DAP), will be acting Deputy Director. The FTC also announced that Heather Hippsley, an Assistant Director in the FTC/BCP/DAP, will be acting Associate Director of the DAP. See, FTC release.
1/22. Neil MacBride was named Associate Deputy Attorney General at the Department of Justice (DOJ). He was previously VP for Anti-Piracy and General Counsel at the Business Software Alliance (BSA). See, BSA release.
1/16. Sidney Rosenzweig joined the Progress & Freedom Foundation (PFF) as a Visiting Fellow. See, PFF release. He was previously a professor at the Hofstra University School of Law, where he taught courses in intellectual property, internet law, and civil procedure. Before that, he worked for the law firm of Arnold & Porter.

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