Tuesday, April 26, 2005

Pasquantino - For the Government - 5-4

In a 5-4  decision, the United States Supreme Court issued an extremely narrow decision favorable to the government in the case of Pasquantino v. United States.   Justice Thomas, delivering the opinion of the Court, held that there was no violation of the common law revenue rule when the government prosecutes a wire fraud (18 U.S.C. s1343) and the scheme to defraud involves the deprivation of tax revenue to another country.  In this case petitioners were "convicted for federal wire fraud for carrying out a scheme to smuggle large quantities of liquor into Canada from the United States." The circuits were split on whether wire fraud could be used when the loss involved foreign tax revenue.  The Court permits this prosecution and additionally finds that the tax revenue is "property"  for purposes of the wire fraud statute.

What is more interesting about this case, is what is not decided:

1.  In footnote one of the decision, the Court specifically states  that it is expressing "no view on the related question whether a foreign government, based on wire and mail fraud predicates, may bring a civil action under" the RICO statute for defrauding of taxes. 

2. The Court does not rule on the issue of extraterritoriality as it does not see this case as allowing the wire fraud statute  to have "extraterritorial effect."  (the Court in a footnote says this issue was not raised until the Reply brief).

The dissent, authored by Ginsburg, and joined by  Breyer, Scalia, and Souter, focused on the extraterritorial application.  The dissent states:

"Construing s1343 to encompass violations of foreign revenue laws, the Court ignores the absence of anything signaling Congress' intent to give the statute such an extraordinary extraterritorial effect."

The dissent also supports its position through use of the Rule of Lenity.

The bottom line is that this case does not resolve the extraterritorial application of white collar laws, although it does permit wire fraud to be premised on a tax loss othat occurs outside the United States.  The question of extraterritoriality is made more interesting by the Court's accompanying decision in Small v. United States, where it held that "convicted in any court" as used in section 922(g)(1) is limited to domestic as opposed to foreign convictions. 


Addendum - Scotus Blog notes that:

"Justice Thomas said that this prosecution "creates little risk of causing international friction through judicial evaluation of the policies of foreign sovereigns" -- the problem on which the revenue rule was based. The Executive Branch brought this case, according to the opinion, and it thus could be assumed that "the Executive has assessed this prosecution's impact on this nation's relationship with Canada, and concluded that it poses little danger of causing international friction."

WCC Blog notes - If this sounds familiar, see the reasoning the Court used in Alvarez-Macahin. (esp)


Fraud, International, Judicial Opinions | Permalink

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