Gonzaga Journal of International Law Volume 9, Issue 1
Sorting Out the Mess: International Smuggling Schemes, Foreign Policy, and a Little Thing Called Ju
Written by Shannon L. Snider
Gonzaga University721 N. Cincinnati StSpokane, WA 99202Phone 800 986 9585
Cite as: Shannon L. Snider, Sorting Out the Mess: International Smuggling Schemes, Foreign Policy, and a Little Thing Called Justice, 9 Gonz. J. Int'l L. 1 (2005), available at http://www.gonzagajil.org.
SORTING OUT THE MESS:
International Smuggling Schemes, Foreign Policy, and a Little Thing Called Justice
Shannon L. Snider *
I. Introduction
From the early days of prohibition [1] up through modern day, as long as there has been a demand, there has been a supply. From the back-house speakeasy of the 1920s, to the large organized crime rings of the 1980s, to today's epidemic of medium-sized operations utilizing the proximity of Indian reservations to the Canadian border, [2] smuggling operations have long been a problem plaguing the United States and foreign nations. [3] The legislative and executive branches have struggled to construct a solution to this re-occurring problem. Yet, in the process of legislative activism and statutory interpretation, a muddled mess found its way to the Supreme Court for review in the case of Pasquantino v. United States. [4]
To combat smuggling operations that affect both the United States and foreign entities, Congress enacted the Anti-Smuggling Statute. [5] In doing so, Congress expressly included a reciprocity clause, stating that prosecution of individuals who smuggle goods into another country will not occur unless that country has a reciprocal law prosecuting the same crimes committed in the United States. [6] At the time of this article, no nation has enacted such a reciprocal law. [7] Therefore, federal prosecutors have found a "work-around" in the Mail and Wire Fraud Statutes. [8] In such cases, as long as there is some use of U.S. mail or wire systems across interstate borders in furtherance of the smuggling scheme, federal prosecutions are sought under these statutes. [9]
Charging export smugglers under the Mail and Wire Fraud Statutes may be in conflict with the common law revenue rule. [10] As its name indicates, the common law revenue rule is a historical common law rule that states one country will not enforce or recognize the revenue laws of another country. [11] Because the "property" defrauded by export smugglers is a foreign country's customs and tax revenue, defendants argue that they cannot be prosecuted because to do so would amount to recognition and enforcement of the revenue laws of another country. [12] The Supreme Court granted certiorari to the case of Pasquantino II to determine if this revenue rule prohibits export smuggling convictions under the Mail and Wire Fraud Statutes. [13]
The issues that export smuggling schemes present are three-fold:By utilizing the Mail and Wire Fraud Statutes to prosecute export smuggling crimes, federal prosecutors are acting against clear congressional intent and thus undermining the foreign policy Congress set when enacting the Anti-Smuggling Statute.
The second issue pertains to the intended purpose of the Mail and Wire Fraud Statutes; regardless of the revenue rule implication, does the term "fraud" in the Mail and Wire Fraud Statutes include the act of smuggling?
Finally, the paramount issue that brought this case before the Court was determining whether unassessed tax revenue owed to a foreign sovereign constitutes "property" for purposes of the Mail and Wire Fraud convictions. It is here that the revenue rule is implicated, potentially barring any U.S. court from engaging in the analysis of this question.
This article will investigate the history, background, and purpose of the implicated laws, as well as discuss the various states of the law in circuits that have addressed this issue. Additionally, this article will methodically address each issue as it logically arises rather than prematurely address the issue of the revenue rule. [14] The article will then analyze the Supreme Court's recent decision in Pasquantino v. United States. Finally, the article will summarize the information and arguments presented herein.
II. The Applicable Laws
Several laws are implicated in the prosecution of international export smuggling under the Mail and Wire Fraud Statutes. The proper application of these laws is at the heart of this debated issue. These laws include: the Anti-Smuggling Statute, [15] the Mail and Wire Fraud Statutes, [16] and apparently most importantly, the common law revenue rule. [17] The crime of export smuggling is specifically addressed by the Anti-Smuggling Statute, yet federal prosecutors charge defendants under the Mail and Wire Fraud Statutes, because they are unable to obtain convictions under the Anti-Smuggling Statute. [18] Facing such charges, defendants argue that they cannot be prosecuted under these statutes because of the common law revenue rule. [19]
A. Congressional Intent - The Anti-Smuggling Statute
In 1998, Congress attempted to tackle the problem of international smuggling by enacting the Anti-Smuggling Statute, which made the smuggling of goods from the United States into foreign territories illegal. [20] The statute states that any person who smuggles "merchandise into the territory of any foreign government in violation of" [21] that foreign government's laws "shall be fined under this title or imprisoned not more than two years, or both." [22] When it enacted this law, Congress clearly imposed a reciprocity clause; the statute would only be enforced "if under the laws of the foreign government any penalty or forfeiture is provided for violation of the laws of the United States respecting the customs revenue[.]" [23] By nature of the reciprocity clause, Congress intended to prosecute acts of export smuggling only when the targeted country was committed to prosecuting smuggling into the United States. [24] As of today, no foreign government has enacted such a reciprocal statute. [25] Since no foreign government maintains a law that makes smuggling into the United States illegal, it follows that the Anti-Smuggling Statute cannot be utilized. [26]
One may wonder what the intent of Congress was when enacting a statute that, at least at the time of enactment, was moot for lack of reciprocal laws in foreign nations. In 1935, Congress passed the Anti-Smuggling Act making it a crime to smuggle goods into the United States. [27] Congress intended to fight a two-front battle against smuggling. Therefore, Congress enacted the 1948 Anti-Smuggling Statute, making it a crime to smuggle legally obtained goods out of the United States into a foreign territory. [28] This was intended to be an incentive for foreign governments to also make smuggling goods into the United States a crime. [29] As stated above though, no foreign government has yet to take a bite of this apple by enacting a reciprocal law. [30]
B. Federal Prosecutors Find a Work-Around:
The Mail and Wire Fraud Statutes
In 1872, in order to make it a federal crime to use the United States mail system as a vessel to perpetrate or intend to perpetrate a fraudulent scheme, Congress enacted the Mail Fraud Statute. [31] Under this statute, defendants found guilty of mail fraud may be fined or imprisoned up to twenty years unless the scheme affects a financial institution, in which case they may be fined up to one million dollars or imprisoned up to thirty years. [32]
To keep up with the evolution of technology, in 1952 Congress enacted a nearly identical statute pertaining to the use of wire, radio and/or television communications, commonly known as the Wire Fraud Statute. [33] Similarly, the statute makes it a federal crime to use interstate wires, radio and/or television signals in connection with a scheme to defraud. [34] It is worth noting though, that neither the Mail nor the Wire Fraud Statute enumerates against whom exactly the illegal fraud must be perpetrated. [35] Although the penalty clause of each statute states that schemes directed at financial institutions will carry a greater penalty, [36] the statute is ambiguous regarding any other potential targets for such schemes. [37] It is for this reason that federal prosecutors are able to liberally use the Mail and Wire Fraud Statutes to prosecute defendants who commit or intend to commit almost any fraudulent scheme, as long as they at some point use the mail or pick up the telephone. [38]
In export smuggling cases, there is often an issue of whether the crime qualifies as "fraud" for purposes of mail and wire fraud convictions. "It is a well-established rule of construction that '[w]here Congress uses terms that have accumulated settled meaning under...the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms.'" [39] At the time of the enactment of both the Mail and Wire Fraud Statutes, the well-established common law meaning of fraud required a misrepresentation or concealment of a material fact. [40] In application to the crime of smuggling, "the essence of the crime is concealment and fraud." [41] According to the Restatement (Second) of Torts, Section 527, where a representation is made that has two meanings, one of which the maker knows...
