Opinion ID: 626865
Heading Depth: 3
Heading Rank: 1

Heading: Conspiracy to Violate the CCTA

Text: Defendants argue that because there were no state or local taxes applicable to the cigarettes they were selling, they could not have conspired to violate the CCTA. To analyze this claim, we divide the eight years during which the Wilburs sold unstamped cigarettes into three periods. During the first period, from July 1999 to October 2003, Washington had not entered into a CTC with the Swinomish Tribe. During the second period, from October 2003 to March 2005, the Swinomish CTC was in effect, and the Trading Post was licensed to sell tobacco by the Tribe. During the final period, from April 2005 to the time of the raid in May 2007, the Swinomish CTC was in effect, and the Trading Post was not licensed to sell tobacco by the Tribe. For the reasons that follow, we conclude that Defendants' actions violated the CCTA during the first and third period, but not the second. We then discuss the implications of our conclusion for the indictment and guilty plea.
The first period extends from 1999, the beginning of the alleged conspiracy, to 2003, when the Swinomish CTC was signed. During this period, none of Washington's retrocession provisions applied. During this period there clearly was an applicable State . . . cigarette tax[ ], 18 U.S.C. § 2341(2), and the unstamped cigarettes received, possessed, and sold by the Wilburs were therefore contraband under the CCTA. There is a five-year statute of limitations on CCTA prosecutions. 18 U.S.C. § 3282(a). The United States did not file the indictment against Defendants until June 10, 2009, more than five years after the Swinomish CTC went into effect. Criminal prosecution for any substantive violations of the CCTA that took place during the period before the Swinomish CTC fall outside the statute of limitations. The government, however, has alleged a continuing eight-year conspiracy beginning in 1999 and extending through 2007. In order for the conspiracy to have occurred during the statute of limitations period, only one overt act in furtherance of the conspiracy must have occurred during that period. See United States v. Fuchs, 218 F.3d 957, 961 (9th Cir.2000). We discuss below the implications of the statute of limitations for Defendants' indictment for activity during this period.
The second period extends from the signing of the Swinomish CTC in 2003 to the revocation of the Trading Post's tribal tobacco license in 2005. During this period the Swinomish CTC was in effect, and the Trading Post was licensed by the Tribe to sell tobacco. During this period the Trading Post qualified both as an Indian retailer under RCW § 43.06.455(14)(b)(ii) and as a Tribal retailer under the Swinomish CTC. The unambiguous language of both the applicable Washington statutes and the Swinomish CTC compels the conclusion that there were no state cigarette taxes applicable to the Wilburs during this period. First, Washington's cigarette tax statutes provide for retrocession on all transactions covered by the Swinomish CTC while the Trading Post was licensed by the Tribe. Under Washington law, the retail sales tax on cigarettes does not apply to sales of cigarettes by an Indian retailer during the effective period of a cigarette tax contract. Id. § 82.08.0316. The use tax on cigarettes shall not apply in respect to the use of cigarettes sold by an Indian retailer during the effective period of a cigarette tax contract. Id. § 82.12.0316. Finally, the state's cigarette taxes do not apply to the sale, use, consumption, handling, possession, or distribution of cigarettes by an Indian retailer during the effective period of a cigarette tax contract. Id. § 82.24.295. These statutes unambiguously provide that so long as the Swinomish CTC was in effect, the Trading Post was covered by the Swinomish CTC, and the Trading Post was an Indian retailer, the state taxes on cigarettes did not apply to the Trading Post's transactions. There is no dispute that, starting in October 2003, the Swinomish CTC was in effect. Further, at least while licensed by the Tribe, the Trading Post was an Indian retailer. For purposes of the relevant Washington statutes, an Indian retailer is defined under state law as: (i) a retailer wholly owned and operated by an Indian tribe, (ii) a business wholly owned and operated by a tribal member and licensed by the tribe, or (iii) a business owned and operated by the Indian person or persons in whose name the land is held in trust[.] Id. § 43.06.455(14)(b). The Trading Post qualified as an Indian retailer under (ii) because it was owned and operated by Marvin Wilbur, a member of the Swinomish Tribe, and because it was licensed by the Tribe. Second, the Swinomish CTC supports the conclusion that the state retroceded from its cigarette taxes for the Trading Post's transactions while the Swinomish CTC was in effect, and while the Trading Post possessed a tribal tobacco license. The Swinomish CTC applies to the retail sale of cigarettes by Tribal retailers. Like Indian retailers under the Washington statutes, Tribal retailers is defined in the Swinomish CTC to include a member-owned smokeshop located in Indian country and licensed by the Tribe. The Swinomish CTC further provides that the State retrocedes from its tax during the time this Contract is in effect. The Swinomish CTC thus provides that the state retroceded from its cigarette taxes, at least so long as the Trading Post qualified as a Tribal retailer under the CTC. Because the state retroceded its taxes, there were no applicable State or local cigarette taxes that the Wilburs failed to pay, and the cigarettes they sold during this period were not contraband under the CCTA. Because the cigarettes were not contraband under the CCTA, the Wilburs could not have conspired to violate the CCTA during this period. The government makes two arguments why, despite the seemingly unambiguous language quoted above, the cigarettes the Wilburs sold during this period were contraband under the CCTA. We find neither argument convincing. First, the government argues that, as the district court concluded below, the State's retrocession under the Tax Contract applies only to sales that conform to its core requirements. In other words, the government argues that if a tribal cigarette retailer sells cigarettes without a tribal stamp, the state's cigarette tax retrocession does not apply. The government and the district court rely almost entirely on the Swinomish CTC's provision that, [a]s to all transactions that conform with the requirements of this Contract, such transactions do not violate state law, and the State agrees that it will not assert that any such transactions violate state law for the purpose of [the CCTA]. The district court concluded, and the government argues to us, that [i]mplicit in this statement is that the tax retrocession applies only to sales that conform to the Contract. It also implies that sales which do not conform to the Tax Contract are subject to state law and the CCTA. This argument ignores the clear retrocession language in the statute. Even had the governor wanted to agree to make Washington's tax retrocession for the Swinomish Tribe conditional on the actions of individual cigarette retailers, the governor cannot by contract repeal statutes that explicitly make the state's cigarette taxes inapplicable to Indian retailers during the effective period of a cigarette tax contract. RCW §§ 82.08.0316, 82.12.0316, 82.24.295. Regardless of the Wilburs' failure to collect the tribal tax from their customers, Washington law is clear in stating that the state's cigarette taxes do not apply to the Trading Post during the time the Swinomish CTC was in effect and the Trading Post had a tribal tobacco license. The argument also misunderstands the nature of CTCs. CTCs are agreements between the state of Washington and the Indian tribes. In a CTC, each government agrees to make certain changes to its laws in exchange for the other government's agreement to make changes to its laws. In the Swinomish CTC, Washington agreed to retrocede its cigarette taxes during the time the Swinomish CTC was in effect. In return, the Swinomish Tribe agreed to impose cigarette taxes equal in amount to the state cigarette taxes. The Swinomish Tribe further agreed to require that all cigarettes sold by Tribal retailers bear a tribal tax stamp. The Contract places no obligations on anyone other than the state of Washington and the Tribe. It provides that [n]o third party shall have any rights or obligations under this Contract. Any obligation on individual retailers comes not from the Contract, but from the tribal laws enacted pursuant to the Contract. The state's contractual retrocession is not conditional on the actions of non-parties. To the extent the Contract's provision that transactions that conform with the requirements of this Contract . . . do not violate state law implies that the tax retrocession is conditional, it is conditional on the Tribe passing the laws required by the Contract. Second, the government argues that even if the cigarettes sold by the Trading Post during this period were not contraband based on their lack of a tribal stamp, they were contraband because neither Defendants, nor anyone else, provided pre-notification of their transport to the liquor control board. Washington law regulates the transportation of unstamped cigarettes. For example, it provides: No person other than: (a) A licensed wholesaler in the wholesaler's own vehicle; or (b) a person who has given notice to the [liquor control] board in advance of the commencement of transportation shall transport or cause to be transported in this state cigarettes not having the stamps affixed to the packages or containers. RCW § 82.24.250(1). Washington law also regulates the possession of unstamped cigarettes in the state. Id. § 82.24.250(3), (7). Other than licensed wholesalers and the United States government, organizations must give notice to the Washington liquor control board before receiving unstamped cigarettes in the state. Id. § 82.24.250(7). Cigarettes possessed or transported by a non-wholesaler without prenotification are contraband under Washington law. Id. § 82.24.250(4). The government argues that because Washington never waived these pre-notification provisions, and because the cigarettes sold and possessed by the Trading Post were transported and possessed without following these pre-notification provisions, the cigarettes were contraband under the CCTA. It is clear that the Wilburs violated these pre-notification requirements, that the state never waived these pre-notification requirements, and that the cigarettes were therefore contraband under Washington law. See id. § 82.24.250(4). The CCTA, however, does not make cigarettes contraband under federal law simply because they are contraband under state law. Cigarettes are only contraband under the CCTA if they bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found. 18 U.S.C. § 2341(2). If there are no applicable State or local cigarette taxes, cigarettes are not contraband, regardless of whether they were transported in violation of state law. The government correctly notes that we have held in cases not involving CTCs that a violation of Washington's pre-notification requirement is sufficient to make cigarettes contraband. See, e.g., United States v. Fiander, 547 F.3d 1036, 1039 (9th Cir. 2008); United States v. Gord, 77 F.3d 1192, 1194 (9th Cir.1996). In Gord, we held that even if no state taxes were due on certain unstamped cigarettes because they were intended for sale only to tribal members, the cigarettes were still contraband under the CCTA if the cigarettes were possessed or transported without state pre-approval. The government notes that in Gord, because the cigarettes were tax-exempt, there were technically no applicable State or local cigarette taxes and yet we still found the cigarettes contraband. Our holding in Gord does not support the government's argument. There was no CTC involved in that case. Because there was no CTC, the defendants were required to affix a Washington state tax stamp, even if that tax stamp simply represented that the cigarettes were tax-exempt. Further, and more important, state cigarette taxes were applicable in Gord. Under the part of the Washington Administrative Code that governs the tax-exempt sale of cigarettes to tribal members absent a CTC, if Washington's pre-notification provisions are not followed for cigarettes intended for sale to tribal members, then the person making or attempting. . . delivery will be held liable for payment of the cigarette tax and penalties. WAC § 458-20-192(9)(a)(iii). The applicability of the state cigarette tax was the basis for our decision in Gord. Gord, 77 F.3d at 1194. Unlike in Gord, in this case there was a CTC in effect, the stamps at issue were tribal rather than state stamps, and there were no state taxes owed. We conclude that in this case, unlike in Gord, Defendants' violation of Washington's pre-notification requirement did not make the cigarettes contraband under the CCTA. We therefore hold that during the period in which the Swinomish CTC was in effect, and the Trading Post was licensed to sell tobacco by the Tribe, Defendants' actions did not violate the CCTA.
The third and final period extends from April 2005, when the Trading Post's tribal license to sell tobacco expired, to the end of the alleged conspiracy in 2007. During this period, the Swinomish CTC no longer applied to the Wilburs' transactions. The Swinomish CTC states: [T]his Contract shall apply to the retail sale of cigarettes by Tribal retailers. As we discussed above, a Tribal retailer is defined in the CTC as a cigarette retailer wholly owned by the Swinomish Tribe and located in Indian country or a member-owned smokeshop located in Indian country and licensed by the Tribe. The Trading Post was not owned by the Tribe, and thus the only way it was a Tribal retailer under the Contract is if it was licensed by the Tribe. Once the Trading Post lost its license in April 2005, it was no longer a Tribal retailer and the Contract no longer applied to its sales. Although one might think that this would resolve the legal issue for this third period, the Washington statutes complicate matters. Washington's statutory retrocession provisions all provide for retrocession for Indian retailers. RCW § 82.08.0316 (retail sales tax does not apply to sales of cigarettes by an Indian retailer during the effective period of a cigarette tax contract); id. § 82.12.0316 (use tax shall not apply in respect to the use of cigarettes sold by an Indian retailer during the effective period of a cigarette tax contract); id. § 82.24.295 (cigarette taxes do not apply to the sale, use, consumption, handling, possession, or distribution of cigarettes by an Indian retailer during the effective period of a cigarette tax contract). The definition of Indian retailer under the Washington statutes sweeps more broadly than the definition of Tribal retailer under the Swinomish CTC. For the purpose of all relevant statutory provisions, Washington law defines Indian retailer as: (i) a retailer wholly owned and operated by an Indian tribe, (ii) a business wholly owned and operated by a tribal member and licensed by the tribe, or (iii) a business owned and operated by the Indian person or persons in whose name the land is held in trust[.] Id. § 43.06.455(14)(b). Although the first two definitions match the Swinomish CTC, the third definition is not in the Swinomish CTC. Defendants argue that they qualify as an Indian retailer under this third definition, and that the state has retroceded from its cigarette tax as applied to them regardless of whether they are a Tribal retailer under the Swinomish CTC. The government contends, on the other hand, that we should read the statutory definition of Indian retailer as authorizing the Governor to enter into CTCs defining Indian or Tribal retailer as including all three, or fewer than all three, of these definitions, and limiting the state's retrocession to only retailers as defined in the relevant CTC. We agree with the government. The definition of Indian retailer is phrased in the disjunctive. Indian retailer is defined as a retailer owned and operated by an Indian tribe, a retailer owned and operated by a tribal member and licensed by the tribe, or a business owned and operated by the Indian person or persons in whose name the land is held in trust. Id. In negotiating a CTC, the Governor and the tribe have the option of deciding which of these definitions to incorporate. In the Swinomish CTC, they chose to incorporate only the first two. This interpretation comports with Washington's purpose in enacting the CTC scheme, which was both to further the government-to-government relationship between the state of Washington and Indians, and to enhance enforcement of the state's cigarette tax law. Id. § 43.06.450. Under this interpretation, so long as the Indian retailer had a tobacco license from the tribe, the state would retrocede its cigarette taxes, leaving enforcement to the tribe. This would give the tribe independence over its law enforcement, part of the government-to-government relationship envisioned by the CTC scheme. If, however, a tribe found that a certain business, like the Trading Post, was so intransigent that the tribe could not enforce its laws, it could revoke or refuse to renew the tribal license. Revocation or expiration of the license would remove the business from the protection of the CTC and subject it to state, and potentially federal, enforcement. The ability to revoke or refuse to renew a license, and thereby trigger state or federal enforcement, ensures that the enforcement of state and tribal cigarette tax law is not undermined by a lack of tribal enforcement capacity. Though not enacted until after termination of the Wilburs' charged conduct, RCW § 82.24.020(5) provides additional support for our interpretation. RCW § 82.24.020(5) makes explicit the intent of the Washington legislature that where the state enters into a cigarette tax contract or agreement with a federally recognized Indian tribe . . ., the terms of the contract or agreement take precedence over any conflicting provisions of this chapter while the contract or agreement is in effect. If the cigarette tax contract includes a definition of tribal retailer that is narrower than the statutory definition of Indian retailer, the narrower definition controls. State v. Comenout, 173 Wash.2d 235, 267 P.3d 355, 358 (2011) (en banc). We therefore conclude that the state did not retrocede its taxes during the third period. During this period, the Defendants' actions violated the CCTA.
The only charge in the indictment to which Defendants pled guilty was one continuous conspiracy to violate the CCTA stretching from 1999 through 2007. Based on our interpretation of the CCTA and the relevant Washington laws, there is a gap in the middle of that period during which Defendants' actions did not violate the CCTA. Two issues arise concerning the implications of this gap. First, we must determine whether, based on the gap, Defendants actually committed two separate conspiracies rather than one continuous conspiracy and, if so, whether prosecution for the first conspiracy is barred by the statute of limitations. Second, we must determine whether the gap creates a variance or constructive amendment of the indictment such that the conspiracy charge should be dismissed in its entirety.
Defendants argue that, based on the gap in the conspiracy, they actually committed two separate conspiracies rather than one continuous conspiracy. Defendants therefore argue that prosecution for the first conspiracy is barred by the statute of limitations. We agree. Actions that cannot be prosecuted because of the statute of limitations can be considered as part of an ongoing conspiracy so long as one overt act in furtherance of the conspiracy occurred during the limitations period. See United States v. Fuchs, 218 F.3d 957, 961 (9th Cir.2000). The question here is whether the Wilburs' conspiracy ran continuously from 1999 through 2007, or whether the Wilburs engaged in two separate conspiracies, one before the Swinomish CTC went into effect from 1999 through 2003, and the other after their Swinomish tobacco license expired in 2005. The general rule is that a conspiracy continues until there is affirmative evidence of abandonment, withdrawal, disavowal or defeat of the object of the conspiracy. United States v. Recio, 371 F.3d 1093, 1096 (9th Cir.2004) (internal quotation marks omitted). There are relatively few cases in which defendants have argued that gaps in their activity demonstrated abandonment or withdrawal from the conspiracy such that the government was required to charge two separate conspiracies. See, e.g., United States v. Krasn, 614 F.2d 1229 (9th Cir.1980); United States v. Payne, 635 F.2d 643 (7th Cir.1980); Continental Baking Co. v. United States, 281 F.2d 137 (6th Cir.1960). The most similar case to the one before us is Continental Baking, decided by the Sixth Circuit. The government indicted the Continental Baking Company for a continuous conspiracy based on the fixing and stabilization of uniform and non-competitive prices of bakery products in the Memphis, Tennessee area. 281 F.2d at 141. For a period of slightly over two years in the middle of the alleged conspiracy, however, the Director of the Office of Price Stabilization set a price ceiling on bakery products. Id. at 154. Defendants argued that this terminated any conspiracy entered into prior thereto, and therefore any continuing conspiracy necessarily began as of the termination of the governmental control. Id. The Sixth Circuit rejected this argument, concluding that [e]ven if the price freeze were to be considered as interrupting an existing conspiracy, if the conspiracy were resumed upon the termination of the price freeze, the intervening period is more properly characterized as a period of suspension of activities rather than a termination resulting in two separate conspiracies. Id. We adopted the Sixth Circuit's reasoning in a case with very similar facts. Krasn, 614 F.2d at 1236. We conclude that Continental Baking and Krasn are distinguishable. In this case, there was affirmative evidence that there was a termination rather than a suspension of the conspiracy during the 2003-2005 period. In Continental Baking, the legal change that interrupted the conspiracy did not affect the legality of what the defendants were conspiring to do. Rather, by establishing a fixed price ceiling, the legal change made it impossible for them to achieve their object. In this case, however, the signing of the Swinomish CTC and subsequent state retrocession of its cigarette taxes did not prevent the Wilburs from achieving their object. Rather, it made the pursuit of that object legal under federal law. During the two years in which the Swinomish CTC was in effect and the Trading Post had its Swinomish tobacco license, the Wilburs could not have conspired to violate the CCTA because the purpose of their alleged conspiracy, to sell tax-free cigarettes, did not violate the CCTA. The Wilburs may have been engaged in a conspiracy to violate tribal law, but a violation of tribal cigarette tax law is not criminalized by the CCTA. We therefore conclude that the fact that the Wilburs could achieve their desired end without violating the CCTA during the second period is affirmative evidence that the Wilburs terminated their conspiracy during the period in which the Swinomish CTC was in effect and they possessed a Swinomish tobacco license. No overt act in furtherance of the conspiracy ending in 2003 occurred within the five-year statute of limitations for CCTA offenses. The government argues that the Wilburs waived a statute of limitations defense by not raising it in the district court. The statute of limitations is an affirmative defense and, generally, is waived if not raised in the trial court. See United States v. LeMaux, 994 F.2d 684, 689 (9th Cir.1993). However, a defendant's failure to raise a statute of limitations defense in the trial court does not result in waiver if raising the defense would have been futile. United States v. Manning, 56 F.3d 1188, 1195 (9th Cir. 1995). Defendants were charged in the indictment with a single continuing conspiracy, the last overt act of which occurred in 2007, well within the five-year statute of limitations period. Because there was no available statute of limitations defense to the conspiracy charged, to which they conditionally pled guilty, the Wilburs have not waived the defense. Prosecution for the first conspiracy, between 1999 and 2003, is barred by the statute of limitations. The conviction in the second conspiracy, between 2005 and 2007, the period after the Trading Post's tobacco license was revoked, is valid.
Constructive amendment and variance are based on the rule that after an indictment has been returned its charges may not be broadened through amendment except by the grand jury itself. Stirone v. United States, 361 U.S. 212, 215-16, 80 S.Ct. 270, 4 L.Ed.2d 252 (1960). A constructive amendment of an indictment occurs when the charging terms of the indictment are altered, either literally or in effect, by the prosecutor or a court after the grand jury has last passed upon them. United States v. Hartz, 458 F.3d 1011, 1020 (9th Cir.2006) (internal quotation marks omitted). A variance occurs when the charging terms of the indictment are left unaltered, but the evidence offered at trial proves facts materially different from those alleged in the indictment. Id. (internal quotation marks omitted). The distinction is important because a constructive amendment always requires reversal, whereas a variance only requires reversal if it prejudices the defendant's substantial rights. Id. We conclude that neither of these doctrines applies. Courts find a constructive amendment where there is a complex of facts distinctly different from those set forth in the charging instrument. United States v. Von Stoll, 726 F.2d 584, 586 (9th Cir.1984) (internal quotation marks omitted). Constructive amendment does not apply in this case because no facts are in dispute, and the government has not offered proof of facts different from those set forth in the indictment. The only issue is the legal consequence of the undisputed facts. Further, constructive amendment only applies to the broadening, rather than the narrowing, of indictments. In United States v. Miller, the Supreme Court rejected a claim of constructive amendment where the complaint was not that the indictment failed to charge the offense for which he was convicted, but that the indictment charged more than was necessary. 471 U.S. 130, 140, 105 S.Ct. 1811, 85 L.Ed.2d 99 (1985). In that case, Miller was indicted for various fraudulent acts in connection with a burglary at his place of business. Id. at 131, 105 S.Ct. 1811. Proof at trial concerned only one of the many alleged fraudulent acts. Id. at 132, 105 S.Ct. 1811. The Court specifically rejected the argument that it constitutes an unconstitutional amendment to drop from an indictment those allegations that are unnecessary to an offense that is clearly contained within it. Id. at 144, 105 S.Ct. 1811. In Miller, the Court relied on its earlier decision in Ford v. United States, 273 U.S. 593, 47 S.Ct. 531, 71 L.Ed. 793 (1927). In that case, the defendant was charged with conspiring to import liquor to the United States in violation of both federal law and a treaty. 273 U.S. at 601, 47 S.Ct. 531. The treaty, however, created no offense against the United States, and thus the conspiracy charge based on the treaty could not be sustained. Id. at 602, 47 S.Ct. 531. The Court held that ignoring the treaty charge did not constitute an improper amendment of the indictment. It held that the constructive striking out of the part of the indictment involving the treaty is merely a judicial holding that a useless averment is innocuous and may be ignored. Id. These cases indicate that our conclusion that there was no conspiracy during the period of 2003 to 2005 does not require us to hold that there was an impermissible constructive amendment of the indictment, because the conviction is narrower, rather than broader, than the indictment. Variance contemplates a difference between the evidence offered at trial and the facts alleged in the indictment. Hartz, 458 F.3d at 1020. Like constructive amendment, variance does not apply in this case because the facts are not disputed. There is a possible argument that variance applies because the legal consequence of the facts alleged is different from the legal consequence alleged in the indictment. Based on the facts alleged, the indictment charged a single continuous conspiracy. As discussed above, we conclude that the facts show two separate conspiracies with a gap between them. If variance did apply, Defendants' substantial rights arguably would be prejudiced if we were to find that Defendants waived a statute of limitations defense as to the first conspiracy spanning the years 1999 to 2003. However, because we find the defense has not been waived, we need not reach that question.