Source: https://law.justia.com/cases/federal/appellate-courts/F2/987/1087/240716/
Timestamp: 2019-07-19 17:01:03
Document Index: 131128474

Matched Legal Cases: ['§ 371', '§ 371', '§ 1705', '§ 371', '§ 371', '§ 371', '§ 371', '§ 371', '§ 201', '§ 1', '§ 1601', '§ 1701', '§ 1703', '§ 1702', '§ 1702', '§ 1001', '§ 1001', '§ 575', '§ 1001', '§ 1001']

United States of America, Plaintiff-appellee, v. Arch Trading Company, Defendant-appellant, 987 F.2d 1087 (4th Cir. 1993) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fourth Circuit › 1993 › United States of America, Plaintiff-appellee, v. Arch Trading Company, Defendant-appellant
United States of America, Plaintiff-appellee, v. Arch Trading Company, Defendant-appellant, 987 F.2d 1087 (4th Cir. 1993)
US Court of Appeals for the Fourth Circuit - 987 F.2d 1087 (4th Cir. 1993)
Argued Oct. 29, 1992. Decided Feb. 26, 1993
Arch Trading then sought to recover the $200,000 which had been deposited with the Kuwaiti bank to secure the letter of credit guaranteeing contractual performance, submitting backdated documents which falsely represented that contractual performance was completed on July 24, 1990, before the embargo of August 2 was imposed. Arch Trading also asked Biomedical Technologies to backdate its confirmation of performance. The Kuwaiti bank nevertheless denied the request for return of the funds "until [Arch Trading] obtain [ed] a license from the Office of Foreign Assets Control of the Department of the Treasury (OFAC)." To obtain the license, Arch Trading wrote a letter, dated April 3, 1991, to the Treasury Department's OFAC explaining the company's position. The letter stated: "We have performed our contract prior to August 2d, 1991 [1990], and stopped any contact with Iraq in conformity with the presidential executive [order]." Noting that the Kuwaiti bank said it required a license before the $200,000 deposit could be released, the letter concluded, "At this time we would like your office to inform us if such license is necessary for the release of our funds. If so, kindly issue us this license at the earliest possible time." (Emphasis added). The OFAC replied by letter, erroneously advising Arch Trading that no license was required.
Arch Trading first contends that it was improperly charged under 18 U.S.C. § 371. That section criminalizes conspiracies of two sorts: conspiracies to commit an offense against the United States and conspiracies to defraud the United States.1 Arch Trading was charged with, and convicted of, conspiring to commit an "offense" against the United States government. It asserts, however, it could only have been charged, if at all, with having conspired to "defraud" the United States, because violations of executive orders and regulations do not constitute an "offense." Arch Trading argues that the conspiracy count must therefore be dismissed, relying on United States v. Minarik, 875 F.2d 1186, 1193-94 (6th Cir. 1989).
We reject this argument because we do not agree that violation of an executive order cannot constitute an offense as that term is used in 18 U.S.C. § 371. While it may be that executive orders cannot alone establish crimes, when such orders are duly authorized by an act of Congress and Congress specifies a criminal sanction for their violation, the consequence is different. In this case the IEEPA authorized the President to issue executive orders proscribing conduct, and 50 U.S.C. § 1705(b) makes criminal the disobedience of an order issued under the Act.2 There is no question that violation of a federal criminal statute may properly be charged under the "offense" clause. See United States v. Feola, 420 U.S. 671, 687, 95 S. Ct. 1255, 1265, 43 L. Ed. 2d 541 (1975). We therefore hold that when Congress provides criminal sanctions for violations of executive orders that it empowers the President to issue, such violation constitutes an "offense" for the purposes of 18 U.S.C. § 371.
Because of this overlap, given conduct may be proscribed by both of the section's clauses. In such a situation, the fact that a particular course of conduct is chargeable under one clause does not render it immune from prosecution under the other. When both prongs of § 371 apply to the conduct with which a particular defendant is charged, the government enjoys considerable latitude in deciding how to proceed. See United States v. Jones, 976 F.2d 176, 183 (4th Cir. 1992) (" [F]aced with two equally applicable penal statutes, there is nothing wrong with the government's decision [absent an improper purpose] to prosecute under one and not the other"). Convictions under the "defraud" clause for conspiracies to commit particular offenses are commonly upheld. See, e.g., Dennis v. United States, 384 U.S. 855, 862-64, 86 S. Ct. 1840, 1845-46, 16 L. Ed. 2d 973 (1966); United States v. Mohney, 949 F.2d 899, 902-03 (6th Cir. 1991); United States v. Sans, 731 F.2d 1521, 1533-34 (11th Cir. 1984), cert. denied, 469 U.S. 1111, 105 S. Ct. 791, 83 L. Ed. 2d 785 (1985). Conversely, convictions under the "offense" clause for conspiracy to engage in conduct which would defraud the United States are also proper. See Minarik, 875 F.2d at 1193-96. Many courts have even found it permissible to list both prongs of § 371 in a single indictment count rather than specifying whether the alleged conspiracy was one to defraud or one to commit an offense. See, e.g., United States v. Bilzerian, 926 F.2d 1285, 1301-02 (2d Cir.), cert. denied, --- U.S. ----, 112 S. Ct. 63, 116 L. Ed. 2d 39 (1991); United States v. Smith, 891 F.2d 703, 711-13 (9th Cir. 1989), amended 906 F.2d 385 (1990), cert. denied, 498 U.S. 811, 111 S. Ct. 47, 112 L. Ed. 2d 23 (1990); May v. United States, 175 F.2d 994 (D.C. Cir.), cert. denied, 338 U.S. 830, 70 S. Ct. 58, 94 L. Ed. 505 (1949); United States v. Berlin, 707 F. Supp. 832 (E.D. Va. 1989). But see United States v. Haga, 821 F.2d 1036 (5th Cir. 1987) (holding indictment count may charge violation of either prong of § 371 but not both).
The case upon which Arch Trading primarily relies, United States v. Minarik, is in no way inconsistent with our conclusions. In Minarik, the Sixth Circuit found that the prosecution had "used the defraud clause in a way that created great confusion about the conduct claimed to be illegal." Minarik, 875 F.2d at 1196. In light of the prejudice to the defendant that resulted from the confusion in that case, the Sixth Circuit reversed the defendant's conviction. Id. at 1186, 1193-96. As that court has since stressed, however, Minarik did not hold that the two clauses of § 371 are mutually exclusive, but only that in the case then before the court confusion prejudicial to the defendant had arisen from the government's choice of proceeding under the "defraud" clause. See Mohney, 949 F.2d at 902-03; cf. Bridges v. United States, 346 U.S. 209, 223-34, 73 S. Ct. 1055, 1063, 97 L. Ed. 1557 (1953) (government may not invoke "defraud" clause in order to evade time bar applicable under "offense" clause). In cases such as the present one, however, where the defense will not be unfairly burdened by invocation of either clause, the prosecution may frame the indictment at its discretion.
While it is recognized that an unconstrained delegation by Congress of authority to define criminal conduct would run afoul of the constitutionally-based nondelegation doctrine, see Mistretta v. United States, 488 U.S. 361, 371-74, 109 S. Ct. 647, 654-55, 102 L. Ed. 2d 714 (1989), a challenge to a specific Congressional grant of authority to define only the details of criminal conduct presents a more complex question. In the context of the IEEPA, the Supreme Court has upheld Congress' delegation to the President of civil authority to nullify certain attachments and transfers of assets. See Dames & Moore v. Regan, 453 U.S. 654, 675, 101 S. Ct. 2972, 2984, 69 L. Ed. 2d 918 (1981). Arch Trading contends, however, that the IEEPA's delegation of the power to define criminal conduct is inherently different from, and more suspect than, the Act's civil provisions.
The Supreme Court most recently articulated the limits of a lawful delegation of the power to define criminal conduct in Touby v. United States, --- U.S. ----, 111 S. Ct. 1752, 114 L. Ed. 2d 219 (1991). Upholding the delegation of authority to the Attorney General to specify the particular substances, possession of which violate the criminal law, the Court stated:
So long as Congress "lay [s] down by legislative act an intelligible principle to which the person or body authorized to [act] is directed to conform, such legislative action is not a forbidden delegation of legislative power." ... Petitioners suggest, however, that something more than an "intelligible principle" is required when Congress authorizes another Branch to promulgate regulations that contemplate criminal sanctions. They contend that regulations of this sort pose a heightened risk to individual liberty and that Congress must therefore provide more specific guidance. Our cases are not entirely clear as to whether or not more specific guidance is in fact required. We need not resolve that issue today. We conclude that § 201(h) passes muster even if greater congressional specificity is required in the criminal context.
Id. at ----, 111 S. Ct. at 1756. In Touby, the factor which marked the statute as unquestionably constitutional was that it "meaningfully constrain [ed] the Attorney General's discretion to define criminal conduct." Id. It did so by (1) specifying that scheduling the substance in question must be determined to be "necessary to avoid an imminent hazard to the public safety" before the Attorney General could take action; (2) specifying the factors that go into such a determination; (3) requiring published 30-day notice of the proposed scheduling and consideration of any comments from the Secretary of Health and Human Services; and (4) requiring that certain findings be made as to the effects of the substance in question (e.g., for adding a substance to schedule I, that the substance had no medical value and had a high potential for being abused). Id. at ----, 111 S. Ct. at 1756-57.
Similar constraining factors are present here. The IEEPA, which was drawn from and constitutes an extension to the Trading with the Enemy Act of 1917, 50 U.S.C.App. § 1, et seq., defines the specific circumstances in which the President may act and to what extent. The President's authority is limited to meeting a foreign threat "to the national security, foreign policy or economy of the United States," that is "unusual and extraordinary," and only then if he is able to declare the threat a "national emergency" under the National Emergencies Act, 50 U.S.C. § 1601, et seq. See 50 U.S.C. § 1701. He is required to consult with Congress before, if possible, exercising the powers conferred, to explain his acts in specified respects, and to report regularly thereafter during the period of the emergency. See 50 U.S.C. § 1703. The powers granted to the President are explicitly defined and circumscribed. See 50 U.S.C. § 1702. Moreover, the Act protects the conduct of any person whose violation of the President's order can be shown to be "in good faith." 50 U.S.C. § 1702(a) (3).
Even a cursory examination of the two executive orders, however, makes clear that the standard relevant to judgment of Arch Trading's acts did not in fact change. The first executive order specified that United States persons were prohibited from traveling to Iraq, exporting any goods to Iraq, and performing a contract in support of an industrial, commercial, or governmental project in Iraq. The second order prohibited the same conduct. While it did provide greater detail, that detail is not material to Arch Trading's conduct.3 Further, what was prohibited was laid out at such a level of detail in the original Executive Order, of which Arch Trading had actual (not just constructive) notice, that Arch Trading was undoubtedly aware of the illegality of its actions. This awareness is confirmed by its considered efforts to circumvent the order's prohibitions and to conceal its actions: Arch Trading attempted to send representatives to Iraq via Cyprus after receiving notice of the prohibition; it backdated financial documentation and requested a Jordanian subcontractor to do the same; and it falsely represented to the Department of the Treasury that it had performed its contract before August 2, 1990, and had as of that date "stopped any contact with Iraq." The executive orders that Arch Trading violated were written in a manner that did not encourage arbitrary and discriminatory enforcement, and they defined the prohibited conduct with sufficient definiteness that an ordinary person could--and in this case did--understand what conduct was prohibited. They were, therefore, not void for vagueness. See Kolender v. Lawson, 461 U.S. 352, 357, 103 S. Ct. 1855, 1858, 75 L. Ed. 2d 903 (1983).
To establish a violation of § 1001, it must be proved that (1) the defendant made a false statement to a governmental agency or concealed a fact from it or used a false document knowing it to be false, (2) the defendant acted "knowingly and willfully," and (3) the false statement or concealed fact was material to a matter within the jurisdiction of the agency. See United States v. Seay, 718 F.2d 1279, 1284 (4th Cir. 1983), cert. denied, 467 U.S. 1226, 104 S. Ct. 2677, 81 L. Ed. 2d 873 (1984). A material fact about a matter within the jurisdiction of the agency is one that has a "natural tendency to influence agency action or is capable of influencing agency action." United States v. Norris, 749 F.2d 1116, 1122 (4th Cir. 1984), cert. denied, 471 U.S. 1065, 105 S. Ct. 2139, 85 L. Ed. 2d 496 (1985).
While it may be a fact that Arch Trading's misrepresentations did not prompt any official action, the prompting of such action is not an element of a § 1001 offense. As we have stated previously, " [T]here is no requirement that the false statement [actually] influence or effect the decision making process of a department of the United States government." Norris, 749 F.2d at 1121. Moreover, the OFAC's determination that a license was not necessary turned out to be erroneous. Because the Iraqi government had a contingent interest in the Kuwaiti bank's letter of credit, which the $200,000 deposit secured, it was necessary for Arch Trading to obtain a license to have that deposit released. This licensing requirement continued through April 1991, when the misrepresentation was made. See 31 C.F.R. § 575.201.
Arch Trading also claims, relying on its other § 1001 arguments, that the determination that Arch Trading's misrepresentation was material was tainted by inadequate instructions to the jury on the question of materiality. In the context of § 1001, however, we have consistently held that "materiality is a question of law to be determined by the trial judge." See Norris, 749 F.2d at 1121; accord Nilson Van & Storage Co. v. Marsh, 755 F.2d 362, 367 (4th Cir. 1985); United States v. Ivey, 322 F.2d 523, 529 (4th Cir.), cert. denied, 375 U.S. 953, 84 S. Ct. 444, 11 L. Ed. 2d 313 (1963). There was, therefore, no reversible error in failing to clarify that issue for the jury.
With these facts in hand, we believe that the magistrate judge had a substantial basis for concluding that it was fairly probable that a search of Arch Trading's corporate offices would reveal evidence that it was engaged in the performance of a commercial contract with the government of Iraq in violation of the IEEPA. The warrant was, thus, properly issued and the search constitutional. See Illinois v. Gates, 462 U.S. 213, 238-39, 103 S. Ct. 2317, 2332, 76 L. Ed. 2d 527 (1983).
[t]he exportation to Iraq, or to any entity operated from Iraq, or owned or controlled by the Government of Iraq, directly or indirectly, of any goods, technology (including technical data or other information), or services ... from the United States ... or any act that promotes or is intended to promote such exportation ... [;] Any transaction by a United States Person relating to travel by any United States citizen or permanent resident alien to Iraq, or to activities by any such person within Iraq, after the date of this order ... [;] [t]he performance by any United States person of any contract ... in support of an industrial, commercial, public utility, or governmental project in Iraq; ... [and] [a]ny transaction that evades or avoids, or has the purpose of evading or avoiding, any of the prohibitions set forth in this order.