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 Posted: Thu Nov 11, 2004 1:03 pm Post subject: Pasquantino, FEAR and the long reach of U.S. wire fraud |
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PART I: Pasquantino and the common law revenue rule:
Why is the U.S. Justice Department so interested in Canada's liquor tax?
We were more than a little surprised at the lack of commentary in the media regarding the appeal all the way to the U.S. Supreme Court of the wire fraud conviction of three U.S. citizens, David and Carl Pasquantino and Arthur Hilts, for their alleged failure to pay a disputed amount in Canadian liquor sin taxes U.S. prosecutors estimate at more than $3 million.
The facts of the case are set out briefly in this excerpt from PR Web The Free Wire Service press release July 1/04:
| Quote: | The case involves brothers David and Carl Pasquantino and Arthur Hilts, who were accused of scheming to transport liquor into Canada without paying Canadian sales and excise taxes. Rather than extraditing the group to stand trial under Canadian law, U.S prosecutors charged them with violating the federal wire fraud statute, citing their use of domestic telephone lines to order the liquor. In the brief filed today, Irell argues that this prosecution runs counter to a long-established rule that the courts of one country do not enforce the tax laws of another, and asked the Supreme Court to rule that the wire fraud statute does not apply to such conduct.
Although this issue arises here in the context of an alleged smuggling operation, Brill says its importance goes well beyond the circumstances of this case. If the convictions in this case are upheld, the government would also be free to prosecute multi-national corporations involved in complex international transactions when the government believes that such a company has taken too aggressive a position regarding its foreign tax obligations. |
Find legal briefs:
Go to the American Bar Association's Preview of U.S. Supreme Court Cases link under Nov. 9/04 for three of four Pasquantino v. U.S. briefs and here for the amicus brief by the National Association of Criminal Defense Lawyers and the National Association of Manufacturers on behalf of petitioners. See also the 4th Circuit Court of Appeals decision reversing and the that court's decision en banc affirming the conviction.
Articles, bulletins available online:
See also OYEZ U.S. Supreme Court Multimedia, Northwestern University's On the Docket June 23/04 by Scott Wentworth, the excellent clickable April 1-5 issue of Tech Law Journal under Supreme Court Grants Certiorari in Wire Fraud Case, the Internal Revenue Service Criminal Tax Bulletin Canadian Tax Laws Unenforceable Under the Wire Fraud Statute Oct./02 at p. 3 and Violations Involving Foreign Jurisdictions on the first page of the Aug./03 bulletin.
There are a number of unanswered questions in this case, but the issue ultimately before the Supreme Court is this one, according to petitioners' brief:
| Quote: | | Whether the federal wire fraud statute authorizes criminal prosecution of an alleged fraudulent scheme to avoid payment of taxes potentially owed to a foreign sovereign, (emphasis ours, not petitioners') given the lack of any clear statement by Congress to override the common law revenue rule, the interests of both the Legislative and Executive Branches in guiding foreign affairs, and this Court's prior rulings concerning the limited scope of the term property as used in the wire fraud statute. |
What can you tell me about the common law revenue rule?
| Quote: | | Even if the Canadian government has a right to payment under Canadian law, the well-established common law revenue rule nevertheless bars it from enforcing that right in the courts of the United States. Courts -- even those that have upheld convictions like petitioners' -- have uniformly acknowledged that a foreign sovereign may not enforce its tax judgments in the courts of this country. (emphasis ours). (citation omitted). Indeed, there is general agreement that the revenue rule has firm roots in the common law and that any court can invoke it to prevent a foreign sovereign from enforcing its revenue laws within its jurisdiction. (From p. 9 of amicus brief). |
The government, however, contends at p. 9 of its brief under The Text of the Wire Fraud Statute Covers Schemes to Defraud a Foreign Government of Tax Revenue:
| Quote: | | The wire fraud statute prohibits "any scheme or artifice to defraud" where interstate wires are used "for the purpose of executing such scheme or artifice." 18 U.S.C. 1343 (emphasis added). The term "any" is all-inclusive. (citation omitted) It means that the wire fraud statute applies to all schemes to defraud that are executed through interstate wires, regardless of the identity of the victim or the nature of the money or property that is the object of the fraud. (emphasis ours). The text of the wire fraud statute does not excempt schemes to defraud foreign or governmental entities, and it contains no exception for schemes to deprive such entities of tax revenue. Indeed, the statute expressly prohibits schemes to defraud through the use of wires in "foreign commerce," 18 U.S.C. 1343, and thus contemplates that foreign entities may be victims of wire fraud. As long as the defendant has devised a "scheme to defraud" and has used interstate wires to execute that scheme, a violation of the wire fraud statute has occurred. (emphasis ours) |
In addition to the proper application of the revenue rule, petitioners in this appeal are challenging the substance of the conviction, attacking evidence given at trial by a Canadian Customs officer, a 17-year veteran according to the judgments, but whose tax calculation nevertheless may lack authority.
| Quote: | | ...The government did not present any evidence showing that Peititoners ever made any misrepresentation to any representative of the Canadian government...The only evidence regarding the alleged failure to pay Canadian taxes came a Canadian Customs Officer, Officer Jonah, who testified that alcohol "is taxed very high" in Canada, and that, according to her calculation, the various Canadian excise and sales taxes associated with the alcohol purchased by Petitioners would have totalled approximately $100 (U.S.) per case imported into Canada. She did not explain how she arrived this number (emphasis ours)...She provided no evidence showing that Canada's and Ontario's interests in collecting any applicable taxes were transferable or proprietary, rather than sovereign and inherently governmental, or that any Canadian court or agency had may any determination regarding the amount of taxes that Petitioners allegedly owed or planned to evade. (From petitioners' brief at p. 3). |
Would a U.S. conviction end the matter for the accused?
Good question, especially in view of the first judgment of the appeal court, which states at footnote 4:
| Quote: | | They [petitioners] were also indicted in Canada for failure to file excise taxes and possession of unlawfully imported spirits, though the status and disposition of the Canadian charges is not evident in the record provided to us. |
Canadian experts were not called to give evidence in the case, according to the petitioners' brief, which puzzles us, particularly when p. 26 of that brief points out:
| Quote: | | That issues of foreign law were not "merely incidental" to this prosecution, as the Fourth Circuit supposed, is apparent from Petitioners' sentences, which were based in dominant part on the revenue loss Petitioners allegedly intended to inflict on Canada and Ontario . (emphasis ours) Notwithstanding this sentencing element, the government sought to avoid a determination that it was enforcing Canadian revenue law by waiving any request for restitution in this case, on the ground that it was not appropriate in light of the revenue. Given that [the wire fraud act] mandates payment of restitution to the victim of a wire fraud scheme, however, the prosecutor had no authority to pick and choose which elements of Canadian law to incorporate into Petitioners' sentences. (emphasis ours) Had the prosecutor proceeded as required by law, it would have been clear to all concerned that a prosecution under the federal wire fraud statute for failure to pay taxes to a foreign sovereign is also an effort to vindicate, enforce and assist in collecting on that foreign sovereign's claim to revenue...(and at p. 41) Ultimately, neither the district court nor the Fourth Circuit engaged in the analysis of Canadian law required by Cleveland, relying instead on an unsupported assumption that the Canadian interests at issue constitute "property." This assumption, however, was not only unsupported, but erroneous. Unadjudicated tax claims of a foreign soverign do not fall within the "traditional concept of property." (footnotes omitted) |
Even more disturbing, perhaps, is the potential described in the amicus brief for multiple prosecutions and civil actions, which could have a chill effect on U.S. business -- an especially damaging prospect at a time when U.S. consumption exceeds production and America is at war with far-away Iraq:
| Quote: | ...The fact that the unintentional violation of an obscure foreign tax
law could result in criminal penalties under the wire fraud statute could have chilling implications for all U.S. businesses that are involved in international transactions. (at p. 22)
...even if the Executive Branch were able to limit offense to foreign governments by controlling federal wire fraud prosecutions based on foreign tax evasion, it could do little to exercise the same kind of control over prosecutions brought by state and local prosecuting authorities under state analogues to RICO. Some twenty-nine of these statutes use federal mail and wire fraud as a predicate offense. Accordingly, if this Court determines that schemes to evade foreign taxes are actionable federal mail and wire fraud, it will effectively give rise to twenty-nine different crimes under state law...(at p. twenty-seven)
Finally, the recognition of foreign tax evasion as a basis for federal mail and wire fraud also raises the possibility that private plaintiffs may bring civil [i][b]RICO claims based upon alleged acts of foreign tax evasion[/b][/i]. Like criminal prosecutions under state RICO analogues, these private civil claims would stand beyond the control of the federal government, and would require federal courts to interpret and pass upon the validity of foreign tax laws. For this reason, civil RICO claims using this type of mail and wire fraud as a predicate act presents the same separation-of-powers problem and the same risks of substantial damage to foreign relations. (From amicus brief at p. twenty-eight) (footnotes omitted) (emphasis ours) |
Our biggest question, however, concerns the money:
If the U.S. conviction is upheld, will Canadian revenue authorities be automatically entitled to the estimated $3 million at issue, or would a conviction trigger the U.S. civil forfeiture remedy available in that country in the case of a breach of the wire fraud statute?
What is the effect, if any, of treaties between Canada and the U.S. concerning criminal or public law matters? Who should decide? Why was there no representation from Canada in this case?
We will pursue this investigation below in the next week or so. Please check back for updates and send us your views. We'd love to hear from you.
Link to this entry
http://www.pokerpulse.com/legal/viewtopic.php?p=84#84
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legal
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| Posted: Thu Nov 11, 2004 1:06 pm Post subject: |
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Who are the attorneys?
There are quite a few, not surprisingly, and all with impressive credentials. Counsel of record are listed as follows:
Representing the U.S.:
Theodore B. Olson
Solicitor General (counsel of record),
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217
Representing Amicus Curiae:
National Association of Criminal Defense Lawyers, et al.:
Joshua Lewis Dratel
14 Wall Street, 28th Floor
(212) 732-0707
New York, NY 10005
Representing Petitioners David B. Pasquantino, et al.:
Laura W.Brill
Irell & Manella, LLP
(310) 277-1010
1800 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Our e-mail to defense counsel:
| Quote: | From: legal@pokerpulse.com
To: lbrill@irell.com
Cc: legal@pokerpulse.com
Sent: Sunday, October 24, 2004 12:19 PM
Subject: Pasquantino briefs
Hello Laura Brill,
We are most interested in the Pasquantino wire fraud case, and we have had a look at the U.S. Justice Dept.'s brief before the U.S. Supreme Court, which is provided online by the Justice Dept. Unfortunately, we have been unable to locate any materials on behalf of the defense.
Our visitors, particularly our Canadian visitors, are very concerned with the conflict of laws issues in this case. Are there any readings you could recommend that might explain Canada-US relations in this case? Many of us are wondering, for instance, whether the defendants might be subject to further prosecution for the same offenses in Canada and whether and how a wire fraud conviction in the U.S. might be used by Canadian tax authorities to collect tax on the liquor.
Anything you could send us would be greatly appreciated. We have just begun a new legal magazine-style forum at our site, which features some materials on the big California Cisneros action against the search engines. Thanks for your kind attention. Again, we would be grateful for anything you might send us.
Pokerpulse.com/legal
Tracking Internet poker worldwide |
The snappy two responses:
| Quote: | From: Brill, Laura
To: legal@pokerpulse.com
Sent: Sunday, October 24, 2004 12:24 PM
Subject: Pasquantino
Here are the briefs that we and our amici filed on the merits. (See above).
Best wishes,
Laura Brill |
| Quote: | From: Brill, Laura
To: legal@pokerpulse.com
Sent: Sunday, October 24, 2004 1:28 PM
Subject: RE: Pasquantino briefs
As far as further reading, I would refer your readers to the table of authorities in our briefs.
Thank you for your interest,
Laura Brill |
Link to this entry
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legal
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| Posted: Thu Nov 11, 2004 1:08 pm Post subject: |
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Conflict of laws texts and articles:
View the two-page article of June, 2004 by Sydney Weintraub, U.S. Trading Partners: The Large Role of North America, in Issues in International Political Economy, a publication of the Centre for Strategic and International Studies (CSIS).
Consider at p. 2:
| Quote: | | Both Canada and Mexico ship upwards of 80 per cent of their exports to the U.S. (emphasis ours) These cross-border exports constitute about 35 per cent of Canada's gross domestic product, and more than 30 per cent of Mexico's GDP. Each country would like to diversify its exports to third markets, and each (especially Mexico) has signed free trade agreements (FTAs) to accomplish this. However, the draw of the large U.S. market, the low cost of transportation, and the extent of the related party production and trade with U.S. companies have thus far frustrated this diversification. |
See also Notes for an Address by Canada's Foreign Affairs Minister Bill Graham on Canada-US relations to the Chicago Council on Foreign Relations Nov. 20/03 at http://webapps.dfait-maeci.gc.ca/minpub/Publication.asp?publication_id=380535&Mode=print.
Jones & Doobay on Extradition and Mutual Assistance
Hardcover
| Quote: | About the authors:
Alun Jones QC, Barrister, Gray’s Inn, is a leading expert on extradition law who has advised on many international cases and was instructed by the Government of Spain in the Pinochet extradition. He advises extensively in the UK, Europe, The Caribbean, USA and Far East on extradition and mutual assistance matters. He also practices in commercial crime, criminal law and public law.
Anand Doobay, Solicitor, works for the leading commercial and international fraud firm Peters & Peters, specialising in extradition and commercial crime. He has acted for governments, companies and individuals in extradition and mutual assistance matters. He is a member of the Law Society’s International Human Rights Committee and assisted the Law Society with its response to the recent reforms to extradition law and procedure. (From the Publisher's Note). |
Why the increase in U.S. requests for extradition?
Here's what we found under Extradition and Mutual Assistance at the website of law firm Peters and Peters:
| Quote: | | There have also been an increasing number of extradition requests for white collar offences made by the US in respect of activities which have taken place mainly in the UK. Extradition arrangements with the US have been changed recently to remove the requirement for the US to provide evidence. Understandably, this has led to those companies and individuals who conduct business in or with the US to become more concerned about the possibility of extradition requests being made for allegedly criminal conduct taking place mainly in the UK. Our team is recognized as being experts on the US / UK extradition arrangements and is often asked to speak on this area and to provide comments for the media |
See also the Press release of April 13/05 at the Thomson Sweet & Maxwell website. Here are a few excerpts:
| Quote: | Directors of UK companies with just one shareholder in the US could be extradited to the US in cases of alleged fraud, warns Alun Jones QC , the UK's leading extradition expert, at a conference (today) hosted by Sweet & Maxwell, the legal information provider, and JUSTICE, the UK's leading human rights organisation. In a joint speech with Anand Doobay of law firm Peters & Peters, Jones, a leading extradition lawyer, went on to say that with the appetite of the US for law enforcement outside its own borders increasing yearly, the chances of this happening is now a distinct reality.
"A director of a publicly-listed UK company could be extradited to the US to be tried for fraud if his company's allegedly inaccurate reports are published in a US newspaper to a solitary US shareholder," said Jones. "Many UK companies still believe that they need a US listing or a large US shareholder base before they are subject to US laws such as Sarbanes-Oxley but this is not the case." Any allegedly fraudulent scheme operated in the UK or within Europe in which only one e-mail or other electronic communication passes through an Internet Service Provider in the US is now indictable in the US, he said. "A UK national may now be extradited to the US where he is accused of conduct which took place mostly in the UK - even where the UK authorities have declined to prosecute him. There are currently two such cases before the courts," he said...
According to Jones, this state of affairs has arisen as a result of the US blurring the distinction between 'international' and 'trans-national' crimes. Many allegations of serious fraud are 'trans-national' crimes, in that they are concerned with conduct which took place in more than one jurisdiction. "These allegations of serious fraud are not, however, international crimes like hijacking or hostage taking. They have not been the subject of agreements which permit enlarged jurisdiction or call for common definition of crimes," he says. (emphasis added)
Recent changes to legislation relating to UK-US extradition mean that when demands for extradition come before the UK courts, the accused no longer has adequate opportunity to defend himself, said Jones. This is because in March, 2003, the UK and the US signed a new extradition treaty, which removed the requirement for the US to provide evidence when making an extradition request. "The allegation of fraud itself, however unfounded, is now sufficient for an extradition to be granted," he said. "Evidence of wrongdoing simply isn't required. This allows extradition claims by the US far in advance of anything we have seen so far."
Nor is it necessary to interfere with a person's right to privacy, home and family under Article 8 of the European Convention on Human Rights if he could be prosecuted in this country, said Jones. "This is an important issue on which the courts have yet to decide, "but they will decide and may rule that extradition to the US is unwarranted in some cases." |
Link to this entry
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legal
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| Posted: Fri Dec 03, 2004 3:00 pm Post subject: |
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Pasquantino PART II:
Money laundering, proceeds of crime, civil forfeiture and 9/11:
When can Uncle Sam come knocking?
This is by far the toughest investigation we've pursued to date by virtue of the near impenetrable, Kafka-esque bureaucracies both Canda and the U.S. have constructed in the wake of 9/11/01 ostensibly intended to combat terrorism. Our objective initially was to examine the interplay of treaties and criminal law in both countries to determine which country would be entitled to the money if the Pasquantino conviction is upheld.
The American viewpoint:
We began with a look at the U.S. Internal Revenue Service (IRS) materials on civil seizure and forfeiture, which must be read with Part 9.4.2. Sources of Inforamtion in a Criminal Investigation. These sources include a clickable section called Treaties, Mutual Assistance Laws, Simultaneous Investigation Programs and Agreements (see below). But when we clicked on Exhibit 9.4.2-1 (08-10-2004) UNITED STATES- CANADA SIMULTANEOUS CRIMINAL INVESTIGATION PROGRAM, we got the following message:
| Quote: | | There is currently no description available for this image. For help with this image, please call the IRS.gov Helpdesk at 1-800-876-1715. |
We then found Chapter 13 International Investigations, which provides for search and seizure thus:
| Quote: | 9.13.2.3 (06-24-2003)
Mutual Legal Assistance Treaties and Laws
The United States currently has Mutual Legal Assistance Treaties (MLAT) with a number of countries. The MLATs can be used to obtain information from a foreign country for only those United States criminal violations listed in the MLAT. An updated list of the countries with which the United States has a MLAT can be found on the CI Web, International Section.
These treaties provide a vehicle to obtain testimony and tangible evidence from each country. The treaties offer a wide range of assistance from the judicial and executive authorities of each country involved. Each treaty designates the Attorney General as the Competent Authority for the United States who must handle requests under the treaty and whose approval is necessary for all requests. The Attorney General has delegated these powers and duties to the Assistant Attorney General of the Criminal Division. The MLATs can be used for both grand jury and administrative investigations. In some agreements, criminal tax charges are not listed in the MLAT, requiring the use of another bilateral agreement discussed in this section, to request the information.
Pursuant to a request under an MLAT, the requested authorities may:
supply official records
locate persons
provide service of process
execute search and seizures of property
arrange for the appearance of witnesses or experts before the relevant judicial authority
secure extraditions
transfer accused persons needed in the United States
exchange relevant information relating to the laws, regulations, and international practices in criminal matters of the contracting state. (emphasis ours) |
See also Information from Canada in Chapter 13, Section 12 Arrests, this long, long list of examples of IRS investigations, the guidelines beginning at p. 42 of What every member of the Trade Community Should Know About: Customs Administrative Enforcement Process: Fines, Penalties, Forfeitures and Liquidated Damages, a 253-page Informed Compliance Publication of February, 2004, published by the Department of Homeland Security and Implementing an Asset Forfeiture Program by Victor E. Hartman in the January, 2001 issue of the FBI Law Enforcement Bulletin.
In view of the above, we're unclear on the effect of this October, 1997 entry, Forfeiture of Assets Located in Foreign countries, s. 280 of the Criminal Resource Manual, which states with regard to foreign jurisdictions:
| Quote: | Despite the potential benefits involved, certain issues of foreign sovereignty and domestic resource allocation and coordination are raised by the jurisdictional law relating to forfeitable property abroad. For instance, there are some countries which may perceive the mere filing of a forfeiture action here against property within their borders as an affront to or infringement on their sovereign prerogatives. The invocation or attempted enforcement of extraterritorial forfeiture jurisdiction in such circumstances could well prove prejudicial to legitimate foreign policy interests or to other law enforcement initiatives or activities involving the country in question. Moreover, when it is known or can be ascertained in advance that a particular foreign government either cannot or will not recognize, enforce, or otherwise make beneficial use of a forfeiture order obtained in this country, it would clearly be a waste of U.S. prosecutorial and judicial resources to pursue the forfeiture action.
The broad grant of authority in 28 U.S.C. § 1355(b)(2) also raises potential problems with conflicts between or duplicative efforts by different districts asserting jurisdiction over the same assets in other countries. It is not uncommon for major criminals to have charges pending against them and their organizations in a number of districts in the United States, each of which could have an arguable claim to the foreign assets of the defendant or his illicit enterprise. Even in the absence of pending charges, various districts might be able to argue that certain "acts or omissions giving rise to forfeiture" occurred within their territory. The filing of multiple extraterritorial forfeiture actions for the same property would clearly not be a wise use of U.S. time and effort, and the presentation of multiple forfeiture orders to the foreign government in question would likely be both confusing and counterproductive. (emphasis ours) |
We also found this disturbing reference to the requirement for due process in a 1996 document, which describes it as something of a nuisance. Click on Appendix V The Department of State Concerns Regarding Financial Crimes and Money Laundering, in 1995 excerpted here:
| Quote: | | An increasing number of countries outlaw money laundering and allow the forfeiture of assets but many remain obliged to inform account holders that the government is investigating them and may take action against their accounts - giving criminals time to move assets and leave town. Countries that cooperate on money-laundering investigations and prosecutions need to share forfeited proceeds so as to equitably reflect their respective contributions. (p. 42 of 69) (emphasis ours) |
U.S. opinion about forfeiture in a word: FEAR
For the inside line on how the U.S. feels about its forfeiture provisions, we visited a national website based in California's Mill Valley edited by Washington, D.C. attorney Brenda Grantland. The site, which began in 1992, is aptly called FEAR, which stands for the proposition that Forfeiture Endangers American Rights.
There is a rich mine of authoritative articles, news bulletins and position papers explaining how U.S. forfeiture operates both at home and abroad. Click on the International Forfeiture link here. The material is no longer current but it does affirm the organization's earlier concern about expanding and importing this controversial U.S. remedy. Here's an excerpt from Why FEAR exists written by Leon Felkins 03/27/02:
| Quote: | | Asset forfeiture was virtually unheard until recently. In 1984, Congress overhauled the federal forfeiture laws to give the government incredible advantages over property owners, and began expanding the list of offenses which could trigger forfeiture. Now there are over three hundred federal offenses which trigger forfeiture. But the most terrifying aspect of the legislative scheme in the 1984 crime bill was that it allowed the seizing police agency to keep what they seize and forfeit. This inherent conflict of interest has lead to greater and greater abuses, as forfeiture income -- and dependence on forfeiture income -- has risen. Asset forfeiture brings in close to a billion dollars a year for the federal government alone(emphasis ours). |
Now compare that amount to the following figures released in the October, 2004 issue of Atlantic in the article, Bush's Lost Year, by James Fallows, a senior U.S. man of letters:
| Quote: | The Atlantic Monthly
Magazine Subscription
Bush's Lost Year
October, 2004
| Quote: | | By this summer, fifteen months after fighting began in Iraq, appropriations for war and occupation there totaled about $150 billion. With more than 100,000 U.S. soldiers still based in Iraq, the outlays will continue indefintely at a rate of about $5 billion a month -- much of it for fuel, ammunition, spare parts and other operational needs (emphasis ours). All this is at striking variance with the pre-war insistence by Donald Rumsfeld and Paul Wolfowitz that Iraq's oil money, plus contributions from allies, would minimize the financial burden on Americans." (p. 70) |
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We very much admire FEAR's summaries, including full report cards, of forfeiture law reform intiatives undertaken to date both by government and by this non-profit itself, but we were most pleased to find FEAR Asset Forfeiture Defense Manual, a 500-page paperback revised in September, 2004 and a bargain at $119 U.S. plus shipping. We've ordered one and we'll let you know how we like it when it arrives. If you can't wait, order via PayPal from Publications.
Our e-mail to FEAR:
In the meantime, here is the e-mail we sent FEAR for assistance with Pasquantino and the foreign liquor tax:
| Quote: | From: legal@pokerpulse.com
To: webmaster@fear.org
Cc: legal@pokerpulse.com
Sent: Monday, November 15, 2004 7:13 PM
Subject: FEAR and Pasquantino - Who gets the money?
Hello Brenda Grantland,
We were out surfing the other day when we found your excellent article on forfeiture and then the website, FEAR. FEAR indeed.
Our legal forum has been following the Pasquantino case, which went before the U.S. Supreme Court on Nov. 9. The case concerns Canadian liquor tax, an amount that has not yet been fully determined but which DOJ estimates to be about $3 million. We were trying to figure out why the U.S. was so interested in Canadian sin tax when we clapped onto proceeds of crime and forfeiture materials. We noted that a wire fraud (not a smuggling) conviction may result in civil forfeiture, so we were wondering, if that is so, and if the Pasquantino conviction is upheld, might DOJ have legal entitlement to the tax?
It's interesting to us that your site discusses DOJ intiatives to destroy a number of its documents. Co-incidentally, we have been unable to re-locate material we found there recently which suggested that civil forfeiture was to be encouraged as a way for the government to pay for its prosecutions. Does that sound familiar?
We've been wrestling with our own Canadian gov't bureaucracy concerning proceeds of crime, tax treaties and so on as well in an effort to shed some light on conflict of laws issues. We now resemble a herd of cats in quarters where the rules concerning access to balls of yarn are far too lenient. In other words, we are in a jumble. Visit our jumble still under construction if you dare. We would certainly love to hear from you.
Legal@pokerpulse.com
http://www.pokerpulse.com
Tracking Internet poker worldwide. |
Note: We'll publish any replies we receive here. Please check back for updates.
In the meantime, we include this excerpt from a story in the November, 1998 issue of The Champion, White-collar Crime, by Kathryn Keneally, who specializes in white-collar crime, tax controversy and commercial litigation. In practice in New York City, she is a member of the U.S. Sentencing Commission Practitioners' Advisory Group. She is chairperson of the ABA Subcommittee of the Tax Section's Civil and Criminal Penalties Committee on Department of Justice Procedures. She is a member of The Champion Advisory Board, and her article, The U.S. Prosecutes Foreign Tax Evasion as a Domestic Crime -- With Far-Reaching Consequences, 88 J. Tax'n 224 (1998) is listed in the Table of Authorities in Pasquantino.
| Quote: | It Is Nearly Impossible To Make Sense of U.S. Cross-Border Law Enforcement
We face many difficulties in explaining the criminal law and justice system to those of our clients who live and work in the United States, and who were educated here. For those who refuse to believe that anyone ever goes to jail for the crimes of which they are accused, I keep close at hand not only the Federal Sentencing Guidelines, but a folder of newspaper clippings, which report on lengthy sentences in white-collar cases. For some, who rail against the system, I may even inquire as to whether they are registered to vote, and whether they considered issues of civil rights and liberties when they last cast their ballots. The system may not be right and fair, and it may defy explanation, but at least to a fellow citizen, I can make it understandable that it works the way it does.
Recently, however, I had the privilege of representing a South American businessman and his sons. These men were decent, hard-working people. All of their business activities were in their country, a country that is known for its respect for legal systems. Unlike neighboring countries, their country was one largely untouched by narcotics trafficking.
Among the father's many businesses was a passive investment in a money exchange, or cambio, operated by his brother. To his great misfortune, a man presenting himself as a Mexican doctor exchanged currency at the cambio. Unfortunately, this Mexican doctor was fronting for a high-level narcotics trafficker, and together they were seeking to establish a base of investment in my client's country. Also to my client's misfortune, the doctor and his accomplice sought to purchase a home from my client's wife.
Many others in my client's country were also fooled by the front presented by these narcotics traffickers. To my client's unique detriment, however, he and his sons maintained bank accounts in a U.S. bank.
With no more information than that funds had transferred between one of these U.S. accounts and an apparent drug dealer, and that currency had been exchanged with a drug dealer in a foreign country, the government seized and commenced forfeiture proceedings against all of the accounts of all of the family members. (emphasis ours)
Thus I found myself explaining that under the U.S. forfeiture laws, the government could -- and indeed did -- wreak such havoc based on nothing more than probable cause. I explained that the burden of proof was now on my clients to prove that they did not know or have reason to know that the persons with whom they conducted arms-length business dealings were drug dealers. I explained that the U.S. government exercised its authority over my clients -- who were neither citizens nor residents of this country, and who did not conduct business here -- based on activities that had taken place outside the United States, solely because the transactions were conducted in American dollars through domestic banks.
To the credit of the prosecutors involved in this matter, we proceeded systematically through proffer sessions and negotiations to resolve this matter expeditiously. Most of the funds for most of the family members were released quickly. In the settlement my clients agreed not to dispute forfeiture of the amount of money that corresponded to the transactions with the two men who were drug dealers, in exchange for the release of the balance of the funds. My clients thought this resolution was one of pure pragmatism, not justice. They had merely engaged in arms-length business transactions that were routine in their country. As a result, they saw considerable assets tied up and put at risk under U.S. law, and they were placed in the position of bearing the burden of proving a negative -- that they did not know or have reason to know that the Mexican doctor and the businessman with whom they did business were in fact narcotics traffickers.
The point in time that best summarized the situation from my perspective came when I was interviewing a witness in the South American country. The witness, a law professor and a member of a prominent family in his country, had been retained by the Mexican doctor and the businessman to negotiate the purchase of the house from my client's wife, and to assist in other business transactions. He was one of many who saw no reason to suspect the Mexican doctor and the businessman. When I explained the forfeiture proceedings that had been commenced in the United States, and the burden placed on my clients, he said succinctly, "Tell your government that your country has dumb laws." (Footnotes omitted, emphasis ours). |
Further Reading:
Reports:
DOJ Strategic Plan for Fiscal Years 2003-2008: Click here for the list of anti-terrorist groups and sub-groups in just this department. Scroll to to bottom of the document under Inspector General's List of the Most Serious Management Challenges and Responses to see one goal whose progress Legal@pokerpulse.com will be following at regular intervals the next few years:
| Quote: | A somewhat different but related challenge for the Department in responding to the heightened terrorism threat is to use its law enforcement and intelligence-gathering authorities without inappropriately affecting the civil rights and civil liberties of individuals. Section 1001 of the USA PATRIOT Act (Patriot Act) directs the Department’s Inspector General to “receive and review” allegations of civil rights and civil liberties abuses by Department employees and report to Congress every six months about these responsibilities under Section 1001 (emphasis ours).
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Players:
To monitor recent changes in DOJ administration, click here on the letter of resignation dated Nov. 2/04 by former Attorney General John Ashcroft excerpted here:
| Quote: | Lastly, I am grateful to God for each day the sun rises on a safe and free America. For the past three years, my every working day has begun with a report – a catalog of the murderous acts being plotted against Americans. That we have passed these three years in safety and security is a credit to the men and women with whom I serve. But it would be the height of arrogance to assume we achieved this alone. The Psalms remind us: “Unless the Lord watches over the city, the watchman stands guard in vain.”
My fellow Americans, for four years we have stood watch together. We have endured many things and we have accomplished many more. It has been the honor of my lifetime to stand beside you. And as I take my leave of this privileged post, I know that our efforts have not been in vain. The Builder of our city and the Author of our freedom has stood beside us. He stands beside us still. |
Mr. Ashcroft is replaced by Alberto Gonzalez, whose nomination was challenged by the Center for Constitutional Rights (CCR) on the following basis:
| Quote: | | On November 10, 2004 in New York, NY the Center for Constitutional Rights (CCR) voiced strong opposition to the nomination of White House Counsel Alberto Gonzales to replace Attorney General John Ashcroft. Citing the infamous leaked January 25, 2002, Gonzales’ memo justifying the suspension of the Geneva Conventions in the war on terror, CCR Legal Director Jeffrey Fogel said, "To call the Geneva Conventions, which were put in place after the atrocities of World War II to govern the future conduct of war and prevent such horrors from ever occurring, ‘quaint’ and ‘obsolete’ is to go back down a path we thought we would never travel again." |
Stats:
Those who like counts may search the term, forfeiture, at DOJ's Strategic Plan 2003-2005. Those who don't may prefer the legal summary of forfeiture and disgorgement set out in DOJ's Final Proposed Conclusions of Law (Volume Two) Regarding Defendants' Affirmative Defences in U.S. v. Philip Morris Inc. et al at p. 16 in preparation for the appearance scheduled July 15/04.
We'll continue to examine U.S. laws of seizure and forfeiture as they pertain to foreign assets and the response to these efforts by the international community. Please check back for updates and send us your questions or comments. We'd love to hear from you.
Link to this entry
http://www.pokerpulse.com/legal/viewtopic.php?p=99#99.
Last edited by legal on Tue Feb 03, 2009 9:24 am; edited 8 times in total |
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legal
Site Admin
Joined: 18 Aug 2004
Posts: 510
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| Posted: Fri Dec 03, 2004 3:12 pm Post subject: |
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PART II:
A word from the European Union on MLATs:
| Quote: | Really, it's enough to make celebrated English barrister Horace Rumpole of the Bailey, the creation of our favorite penpal, Sir John Mortimer, stand up on his hind legs and recite his oft repeated speech on the golden thread, the quaint notion that in a democratic society one is innocent until proven guilty.
Rumpole and the Golden Thread
Audio Cassettes
By John Mortimer
Narrated by the great Leo McKern
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And more recently:
| Quote: | This England
Magazine Subscription
Don't Let Europe Rule Britannia
A non-political campaign sponsored by
This England, Cheltenham, Glos.,
GL50 1HT
Autumn, 2007
| Quote: | The Golden Thread of British Freedom
It’s the golden thread of freedom, that makes Great Britain great,
It’s the sure hand of friendship, when you first come to our gate,
It’s the voice that bids you welcome, when you travel here in need,
It’s the help that gets you settled, that you might sow your seed,
The ease in which you go to work, put food upon your plate,
It’s the golden thread of fairness, makes this Great Britain great!
Every child that’s born within, to first see light of day,
Recipient of that golden strand, come whatever may,
Be he black or brown or yellow, pink or slightly red,
He’s equal to the other one, he’s got his golden thread.
His future opens up for him, he can reach and touch the sky,
Not everybody makes it, but all are urged to try.
Not everything is perfect, to be fair, it must be said,
It’s being about what’s British, again that golden thread.
Yet you resolve to kill us, with your bombs on train and bus,
What misdeeds have we done to you, that you repay us thus?
You claim you’re disadvantaged, by, the colour of your skin
Bit it’s you that’s chosen conflict, the enemy within.
You’ve had all we can give you, and some a great deal more,
But for those who come behind you, you have slammed the British door.
You force us now to tighten up, to take a tougher stance,
When you bite the hand that feeds you, there is no second chance,
And yet the golden thread weaves on, try to cut it as you might,
It’s what makes this Britain great, and we’ll not give up the fight.
Charles Kielty (-- p. 67) |
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Not surprisingly, perhaps, we found no shortage online of well researched criticism concerning MLATs typified by this Oct. 12/04 article, Investigating Imperialism, Big Brother is Acting by William Bowles, on the international co-operative effort that led to a shutdown this fall of 140 outspoken alternative Indymedia websites in 17 countries, an initiative led by DOJ but which some say was prompted by Swiss and Italian authorities. The legal basis for the action remains unclear but MLATs are under fire.
| Quote: | Note: When we visited Indymedia UK June 28/05, we found the following disturbing headline and story:
Indymedia Bristol Server Seized by Police
28-06-2005 09:56
On Monday, June 27th, Indymedia Bristol's server was seized by the police. An Indymedia volunteer was also arrested during the raid on suspicion of incitement to criminal damage. Last week, police demanded access to the server to gain the IP details of a posting. The alternative media outlet is receiving advice from civil liberties organisations and the NUJ. Before being legally forced to hand over the server, Indymedia Bristol stated: "We do not intend to voluntarily hand over information to the police as they have requested". Bristol Indymedia see the seizure of their server and the arrest of one of their volunteers as an attack on the freedom of speech. A further statement from Bristol Indymedia volunteers is expected soon.
This is the second time that law enforcement authorities have attacked Indymedia servers in the UK in the run up to a major event. Last October, just prior to the European Social Forum, Indymedia servers in London were seized in an international law enforcement operation - prompting a wave of protests and solidarity statements from a wide range of organisations [report]. This time, events are unfolding one week before the G8 Summit begins in Scotland. |
Our e-mail to William Bowles:
| Quote: | From: legal@pokerpulse.com
To: williambowles@williambowles.info
Cc: legal@pokerpulse.com
Sent: Tuesday, November 16, 2004 2:48 PM
Subject: MLATs, Rumpole and the Golden Threat
Hello William Bowles,
We're doing a piece at our new legal forum on America's use of civil forfeiture against foreign assets under an MLAT. The case we're looking into at the moment is Pasquantino, which concerns, inter alia, Canadian liquor tax, the amount of which is still in dispute. As Frostbacks, we were trying to figure out why the U.S. was so interested in a tax case and why DOJ elected to prosecute under wire fraud rather than smuggling provisions. Wire fraud, we discovered, allows for civil forfeiture.
Our inquiry began with the question, if the convictions are upheld in this case and the amount of tax proved, which country - Canada or the U.S. - will be entitled to the tax? You can see the implications for all those countries with similar MLATs. Anyhoo, what we were wondering is if it would be OK to post a link to your materials at our forum. We will also shortly, we hope, have a link to Brenda Grantland's work at a site called presciently FEAR (Forfeiture Endangers American Rights). You've done some impressive work on MLATs and our UK visitors in particular would be most interested to find it. You can watch our jumble unroll here.
Thanks for all we've learned so far from you.
Legal@pokerpulse.com
http://www.pokerpulse.com
Tracking Internet poker (of all things) worldwide. |
Here is the immediate reply:
| Quote: | From: William Bowles
To: legal@pokerpulse.com
Sent: Wednesday, November 17, 2004 3:07 AM
Subject: Re: MLATs, Rumpole and the Golden Threat
Hi (it would be nice to know who I'm writing to),
Yes, by all means add a link to the piece. Yes, the MLAT law is an indiscriminate piece of legislation (there was no debate on it in Parliament) and in my view it's just another nail in the coffin of due process, transparency and government accountability. Bad times.
Bill |
Further Reading:
See the Aug. 12/03 story, Treaties Challenge U.S. Sovereignty, by Paul Rush in Insight news magazine.
| Quote: | The Economist
Magazine Subscription
The insidious wiles of foreign influence
June 11/05
| Quote: | In virtually every other country in the world, an international treaty or convention, once ratified, overrides domestic law. Not so in the United States; it simply becomes part of the ordinary body of American law. As such, it can be ignored by the president or Senate if national security, or even ideology, seems more important.
After the World Court found against the United States in 1986 for mining Nicaragua's harbors, President Ronald Reagan is said to have told his advisors to tear up the relevant treaty giving the court jurisdiction. When informed that this required two years' notice, he reportedly told them to tear up that provision too. (p. 25)
...Under a treaty that came into force last year, extradition rules have been eased between Britain and the United States. America no longer has to present supporting evidence against someone it wants to extradite from Britain. It simply has to claim that an "extraditable" offence - one carrying a prison sentence of at least a year - has been committed. But because the Senate has so far declined to ratify the treaty, the new rules do not apply the other way round. If Britain wants to extradite a suspect from America, it still has to make out a prima facie case against him.
America's crackdown on white-collar crime goes further. Under its wire-fraud laws, anyone using an internet server to contact colleagues or clients could face extradition, even though the alleged offence did not take place in America or involve American victims. (emphasis ours)
Foreign companies are getting worried, too, about the use of America's Alien Tort Claims Act, passed in 1789, which grants jurisdiction to American federal courts over "any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States". This is increasingly being invoked by foreigners in America to sue international companies for alleged wrongs suffered outside the United States. One can imagine the rumpus if such a law were invoked, abroad, against an American company. (emphasis added) (-- p. 26) |
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Link to this entry
http://www.pokerpulse.com/legal/viewtopic.php?p=100#100
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legal
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| Posted: Fri Dec 03, 2004 3:14 pm Post subject: |
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PART III - The Canadian perspective:
What would Ottawa do, if anything, to protect Canadian assets from U.S. seizure/forfeiture?
To predict the extent of Canada's co-operation with U.S. crime and forfeiture initiatives under MLAT and other agreements with the U.S., we begin with the two-page article, Strains in the Canada-U.S. Relationship, by Sydney Weintraub, published in April, 2003 by the Center for Strategic and International Studies (CSIS), a Washington, D.C. non-partisan public policy group that advises world leaders. The article describes the extent of the two countries' deeply interdependent trade relationship as follows:
| Quote: | | Trade issues are central to the relationship. About 85% of Canada's exports go to the U.S., and they constitute more than 35% of Canada's GDP. About 70% of the trade is either intra-firm or between related parties in the two countries so that any restrictions would immediately affect U.S. as well as Canadian companies. The amount of merchandise that now moves between the two countries is more than $1.2 billion a day. It is hard to exaggerate the implications of imposing trade restrictions for the two countries, and it is not an overstatement to assert that even an implied threat by the United States to take such steps is madness. I assume therefore that it will not happen, except for marginal actions by small producers and traders. (emphasis added). |
Wrong! (Search the terms, 'USA-CDA-2002-1904-03' for the NAFTA panel decisions). U.S. President George W. Bush was in Canada recently to discuss the softwood lumber conflict, which was rapidly escalating into an all-out trade war, according to a report in The Vancouver Sun on the front page of the Business section Nov. 13/04. B.C. Forest Minister Mike de Jong told reporters Renata D'Aliesio and Derrick Penner that passage and implementation by the U.S. of the Byrd Amendment:
| Quote: | would be a "de facto unilateral cancellation of the NAFTA treaty," that would require retaliation and create a crisis in bilateral relations between Canada and the United States.
"You can't steal $3 billion US from a country and not expect retaliation," he added.
Under the proposed bill, called the Softwood Lumber Duties Liquidation Act of 2004, the collected duties would remain in escrow accounts, but American lumber companies would get the equivalent money from other funds...(Montana Democrat Senator Max) Baucus's proposed legislation would bring into play a piece of U.S. legislation called the Byrd Amendment, which has been declared illegal under international trade rules...The U.S. Customs and Border Protection bureau (under the auspices of Homeland Security) is holding an estimated $3.6 billion in countervailing and anti-dumping duties collected since May, 2002, when American producers claimed Canadian softwood lumber sold into the U.S. market was being subsidized.
The WTO ruled in January, 2003 that the so-called Byrd Amendment to the Tariff Act, which distributed punitive tariffs to companies deemed to have been injured by subsidized imports, violated international trade rules. Last September, the trade body gave Canada and other countries the right to impose retaliatory sanctions against American products after the U.S. government refused to repeal the Byrd Amendment...Canada won a key victory in September when a binational panel of the North American Free Trade Agreement ruled Canadian softwood imports presented no threat of injury to American producers.
U.S. trade officials served notice they would file an extraordinary challenge against the ruling, a process that would drag the dispute into next spring. The Commerce Department also has refused to refund duties collected from West Fraser Timber Ltd., despite the fact its own review showed the B.S. exporter should not have had to pay. (p. G1 and G2) |
See also Ottawa threatens trade war with U.S., Battle plan includes punitive duties that would double the price of some U.S. goods, by Paul Vieira Nov. 24, again in The Vancouver Sun on the front of the Business section and the 83-page report of November, 2004 by trade expert Jeffrey J. Schott entitled, NAFTA Dispute Settlement Systems.
| Quote: | | Note: We received a NAFTA alert Aug. 10/05 regarding Certain Softwood Lumber Products from Canada (ECC), (Secretariat File No. ECC-2004-1904-01USA), in which the Extraordinary Challenge Committee unanimously affirmed the decision of the Binational Panel, requiring the U.S. to repay unfairly collected countervailing monies. Nevertheless, Canada's 'closest' trading partner has indicated that it will continue the fight, this time by way of a constitutional challenge. Please check back soon for updates. |
Prime Minister Paul Martin and Canada's new 'open' society:
To be fair, Canada's multi-tiered hierarchy of government agencies that might in some way be responsible for decisions involving U.S. forfeiture of foreign assets are probably not that much more complex than their U.S. counterparts. Here is the plan Prime Minister Paul Martin signed in April, 2004: Securing an Open Society: Canada's National Security Policy, published by the Privy Council Office. Here is an excerpt from Chapter 7, part of which concerns Smart Borders Discussions with the United States:
| Quote: | Canada took the lead in proposing to the United States a comprehensive smart borders strategy that would enhance North American security and prosperity. The Smart Borders Declaration, signed with the United States on December 12, 2001, supports a detailed 32-point Action Plan to enhance the security of the flow of goods and people and the transportation system, and to strengthen intelligence and law enforcement co-operation. The Smart Borders initiatives make both countries partners in systems and programs that expedite the flow of low-risk goods and people while increasing the information that is needed to screen higher-risk flows.
Examples of progress in the Smart Borders discussions include:
The joint NEXUS program expedites the flow of pre-approved, low-risk travellers in both directions across the land border. NEXUS currently operates at 11 high-volume border crossings, with more sites planned.
The Free and Secure Trade (FAST) program takes the same approach to low-risk, pre-approved commercial goods and truck drivers. It currently operates at the 12 highest-volume border crossings and will be available at all major commercial crossings by the end of 2004.
The Canada-U.S. Safe Third Country Agreement has been signed which, once implemented, will permit both countries to better manage the flow of refugee claimants across our common land border.
Canada and the United States have expanded integrated border enforcement teams to cover the 14 geographic regions along the land border. These multidisciplinary teams deal with potential terrorist and criminal activity between ports of entry (emphasis added). (See, for example, MAGLOCLEN).
The Canada Border Services Agency created the National Risk Assessment Centre to improve information sharing about high-risk individuals and cargo with the United States. This is increasing the capacity of the two countries to detect and stop high-risk travellers and cargo destined for either country. The National Risk Assessment Centre will be linked to the Integrated Threat Assessment Centre described earlier. |
See also When Customs Seizes Your Goods; the Justice Dept.'s chart, The Process under Mutual Legal Assistance in Criminal Matters Act; the RCMP's Proceeds of Crime Fact Sheet; the Solicitor General's 2003-2004 Estimates, Report on Plans and Priorities; CA Magazine article, The tax powers that be by Barbara Novek of Sweibel Novek from March, 2004; the Competition Bureau's Comparative Analysis of Exchange of Information and Mutual Assistance between Canada and U.S. Enforcement Authorities; some light reading at Public Safety and Emergency Preparedness Canada and the prescient 196-page report of March 31/00, Alternative Approaches to Combating Transnational Crime by Stephen Schneider, Margaret Beare and Jeremy Hill. Search the term, 'seizure.' See particularly p. 5 of the Excecutive Summary, which states:
| Quote: | Civil sanctions - A select few governments have enacted legislation that provides the state and citizens with tools to undertake civil action (including injunctions, treble damage penalties, and the "forfeiture" of assets) against inviduals or entities involved in organized criminal activity. The Racketeer Influenced Corrupted Organization (RICO) Act represents one of the most far-reaching organized crime enforcement tools in the United States. In contrast to criminal prosecutions, where the burden of proof is beyond a reasonable doubt, only the lesser standard of proof (balance of probabilities) is required under civil provisions of RICO. Many have argued that the law has overstepped its original purpose and has been abused by justice officials and private citizens.
Within Canada, it has long been argued that the use of civil sanctions to target criminal activities or assets would never survive a Charter challenge. However, amendments to the RICO statute and a new South African law that provides for civil forfeiture of criminal proceeds have both incorporated provisions to guard against infringements on civil rights and due process. These legislative initiatives may have implications for the adoption of similar laws in Canada. |
Indeed. Compare the above with the notice requirements and appeal procedures in the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (search the terms, 'forfeiture, agreements with foreign states'). We'll take a closer look at how the courts have interpreted this statute in the next week or so. Please check back for updates.
We will also be following up on the watchdog commitments set out in Financial Transactions and Reports Analysis Centre of Canada Report on Plans and Priorities 2004-2005 in this excerpt:
| Quote: |
4.9 Changes in Legislation
FINTRAC will need to be aware of and responsive to developments in the broader policy environment. The revised anti-money laundering standards of the Financial Action Task Force (FATF), together with legislative initiatives already in progress, will significantly affect its operations. FINTRAC contributes to discussions, in support of government legislative and regulatory initiatives. As it gains more expertise, the Centre will be in a position to contribute information about how financial and other instruments may be used in money laundering and terrorist activity financing in Canada. This information will be important in shaping the government's anti-money laundering and anti-terrorist financing policy.
Proposed legislation, the Public Safety Act, would allow an exchange of information with regulators to facilitate compliance efforts, and provide FINTRAC with access to national security databases to improve the base of information available for analysis.
4.10 Audits, Reviews, Evaluations
FINTRAC and its partners are entering a period of audits and reviews, ranging from government evaluations of the results of the money laundering and terrorist activity financing strategies, to the upcoming parliamentary reviews of the PCMLTFA and Anti-terrorism Act. The Office of the Auditor General will be conducting a value for money audit of the government's money laundering and terrorist financing strategy and the report will likely be tabled in Parliament during the 2004-2005 fiscal year. (emphasis ours)
Reviews are important opportunities for FINTRAC and its partners to assess progress to date, and to further strengthen individual and collective efforts. FINTRAC will be devoting considerable energy to further developing its performance management indicators and positioning itself to respond effectively to these reviews. |
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legal
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| Posted: Wed Dec 08, 2004 1:08 pm Post subject: |
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PART IV- Endgame: So who gets the lolly?
Absolutely no idea. Nevertheless, our investigation has not been fruitless. We have amassed a few contacts and we'll put the question to them in the next week or so. We begin with U.S. white-collar crime/tax attorney Kathryn Keneally (see above).
Our e-mail to Kathryn Keneally:
| Quote: | From: legal@pokerpulse.com
To: kkeneally@fulbright.com
Cc: legal@pokerpulse.com
Sent: Wednesday, December 08, 2004 11:59 AM
Subject: Pasquantino, forfeiture and the common-law revenue rule
Hello Kathryn Keneally,
Well, we have tied ourselves in more than a few knots trying to determine how various treaties and agreements operate in Canada and the U.S. with regard to criminal prosecutions, particularly when there may be an issue with civil forfeiture. We are particularly interested in the Pasquantino case, which went before the U.S. Supreme Court Nov. 9. What we want to know is, if the Canadian liquor tax is proved in this case and a conviction ensues, which country, in your view, would be entitled to the tax and how on earth is this determined? Our international visitors have expressed some interest in U.S. policy in this regard and we thought, in view of your excellent, readable work in this area, some of which we link to, you would be able at least to point us toward the light.
We would be most grateful for any comments you care to make and will happily post them at our forum unedited, of course. Many thanks in advance for your kind attention.
Legal@pokerpulse.com
PokerPulse.com
Tracking Internet poker worldwide. |
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legal
Site Admin
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Posts: 510
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| Posted: Wed Dec 29, 2004 6:46 pm Post subject: |
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Our e-mail to Canadian tax authorities:
| Quote: | From: legal@pokerpulse.com
To: comments@smtp1.ccra-adrc.gc.ca
Cc: legal@pokerpulse.com
Sent: Wednesday, December 29, 2004 5:38 PM
Subject: Pasquantino, FEAR and U.S. civil forfeiture
Hello CCRA,
We sympathize indeed with your efforts to collate complex tax information so that mere mortals might have some chance at understanding the Canadian tax system. We have spent some hours here at your website, looking at bulletins and links, trying different search terms to narrow results and so on. Here's our problem: A U.S. Supreme Court case called Pasquantino, which involves a wire fraud charge based on the U.S. Justice Dept.'s contention that the accused evaded Canuck liquor tax totalling approx. $3 million. Neither side called expert Canadian witnesses. What we'd like to know is:
1. If the U.S. court overturns several hundred years of common law and the common law revenue rule and the conviction is upheld, which country would be entitled to the unpaid tax and why?
2. If Canada is entitled to the unpaid tax, what is the procedure to be followed in claiming it?
Legal@pokerpulse.com
http://www.pokerpulse.com
Tracking Internet poker worldwide. |
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legal
Site Admin
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| Posted: Tue Apr 26, 2005 3:20 pm Post subject: |
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U.S. scraps common-law revenue rule:
Plot to defraud a foreign government of tax violates U.S. wire fraud act
Of the reasons handed down by the U.S. Supreme Court Apr. 26/05 in Pasquantino v. United States, the only ones we understand are in the dissent by Ginsberg, J., joined by Breyer, J. and in part by Scalia, J. and Souter, J. Here is a summary beginning at p. 3 of the dissent:
| Quote: | | Today's novel decision is all the more troubling for its failure to take account of Canada's primary interest in the matter at stake. United States citizens who have committed criminal violations of Canadian tax law can be extradited to stand trial in Canada. Canadian courts are best positioned to decide "whether, and to what extent, the defendants have defrauded the governments of Canada and Ontario out of tax revenues owed pursuant to their own, sovereign, excise laws." (emphasis added) (footnotes omitted) |
Further, at p. 8:
| Quote: | | The presumption against extraterritoriality, which guides courts in the absence of congressional direction, provides ample cause to conclude that ss1343 does not extend to the instant scheme. (emphasis added) Moreover, as to foreign customs and tax laws, there is scant room for doubt about Congress' general perspective: Congress has actively indicated, through both domestic legislation and treaties, that it intends "strictly [to] limit the parameters of any assistance given" to foreing nations. (emphasis added) ("National [foreign] policy judgments...could be undermined if federal courts were to give general effect to wire fraud prosecutions for ...violating the revenue laws of any country.") (footnotes omitted) |
And at p. 10:
| Quote: | | ...Significantly, the Protocol does not call upon either nation to interpret or calculate liability under the other's tax statutes; it applies only to tax claims that have been fully and finally adjudicated under the law of the requesting nation. Further, the Protocol bars assistance in collecting any claim against a citizen or corporation of "the requested State." Art. 15, para. 8. These provisions would preclude Canada from obtaining United States assistance in enforcing its claims against the Pasquantinos and Hilts. (emphasis added) I would not assume that Congress understood ss1343 to provide the assistance that the United States, in the considered foreign policy judgment of both political branches, has specifically declined to promise. |
Wouldn't a charge of smuggling have been more appropriate in this case?
That's precisely what Ginsberg, J. observed in Part I the dissent at pgs. 9-10:
| Quote: | First, Congress has a specific statute criminalizing offenses of the genre committed by the defendants here: 18 U.S.C. §546 prohibits transporting goods "into the territory of any foreign government in violation of the laws there in force." Section 546's application, however, is expressly conditioned on the foreign government's enactment of reciprocal legislation prohibiting smuggling into the United States...Significantly, Canada has no statute criminalizing smuggling into the United States, rendering §546 inapplicable to schemes resembling the one at issue here.
Second, the United States and Canada have negotiated, and the Senate has ratified, a comprehensive tax treaty, in which both nations have committed to providing collection assistance with respect ...only to tax claims that have been fully and finally adjudicated under the law of the requesting nation (emphasis added)...These provisions would preclude Canada from obtaining United States assistance in enforcing its claims against the Pasquantinos and Hilts.
(footnotes omitted) |
What about the doctrine of lenity?
What indeed.
| Quote: | Finally, the rule of lenity counsels against adopting the Court's interpretation of §1343...We have long held that, when confronted with "two rational readings of a criminal state, one harsher than the other, we are to choose the harsher only when Congress has spoken in clear and definite language."
This interpretive guide is particularly appropriate here. Wire fraud is a predicate offense under the Racketeer Influenced and Corrupt Organizations Act (RICO), and the money laundering statute. A finding that particular conduct constitutes wire fraud therefore exposes certain defendants to the severe criminal penalties and forfeitures provided in both RICO and the money laundering statute. (footnotes omitted) (From Part III of the dissent at p. 12) |
For an inside look at the proceedings last fall, don't miss Bootleg, Eh? The ineffable, unknowable mystery of the Canadian tax code, by Dahlia Lithwick at the excellent Slate e-zine of Nov. 9/04. Here's an excerpt:
| Quote: | Laura Brill represents the Pasquantino brothers and Arthur Hilts, the driver. She opens by listing five reasons this prosecution is outside the scope of what American courts should be doing. Justice Sandra Day O'Connor stops her, incredulous: "How can you not allow the United States to use its wire-fraud statute to apprehend someone carrying out the scheme of smuggling?"
Brill starts to respond, but Justice Antonin Scalia interrupts to remind her that there is an antismuggling statute that might have applied in this case, but it only works "for countries with reciprocity" and that if "Canada won't do this for the United States … that suggests we don't want to do this for Canada."
Brill notes that the allegations against the Pasquantinos weren't even adjudicated in Canadian courts: The American court, by calculating the tax burden and setting the penalties, "became an apparatus of the government of Canada." Sounds almost communist when she puts it that way.
Brill explains that foreign tax laws, unlike foreign contracts, are based on policy—often policy, such as customs law, aimed at disadvantaging foreign countries. Why would the United States be enforcing those policies on Canada's behalf? She goes on to argue that, even though the federal wire-fraud* statute is worded with extraordinary breadth (criminalizing "any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent purposes …"), the unpaid taxes in this case cannot be viewed as either "money" or "property." Again O'Connor launches an acid bomb: "Tax revenues are not property in your view?"
Ginsburg wonders why the Canadian government hasn't been bothered to prosecute this case. Brill replies that an indictment was filed, but no effort to extradite the defendants was ever made. Lazy Mounties. Anthony Kennedy, like O'Connor, can't believe the United States can't prosecute bad guys anywhere around the globe: "The government has an interest in saying, 'Look—if you want to smuggle, have your system in Canada. But don't use our wire system.' "
Ginsburg asks whether the defendants' sentences were increased based on the magnitude of the fraud, and Brill replies that yes, the court ratcheted up their six-month sentences to 57 months "based on our courts making an assessment of Canadian law." |
See also the news story, CITYCIDE: SUPREME COURT TO CONSIDER CASE OF NIAGARA FALLS BROTHERS ON NOV. 9 by David Staba of the Niagara Falls Reporter online, which includes a mention of the daughter of Carl Pasquantino, Lisa, who is credited with securing amicus briefs by both the National Association of Manufacturers and the National Association of Criminal Defense Attorneys. She also wrote to us in the spring, expressing considerable shock at the outcome. We'll try to get in touch with her to see if there are any plans to challenge the conviction or the wire fraud statute. Please check back soon for updates.
The long arm of wire fraud is now even longer:
We're still combing the 'net for articles that discuss the full implications of this disturbing decision. Please check back soon for updates. In the meantime, consider the following comments in United States: Comfortable With Your International Tax Planning? - The Playing Field may Have Just Changed by Thomas F. Carlucci and Mark T. Schieble of Foley & Lardner dated June 2/05:
| Quote: | | In Pasquantino v. United States, decided April 26 of this year, a bare majority of the Supreme Court held that persons smuggling liquor into Canada in violation of Canadian excise tax laws (but not U.S. law) violated the federal wire fraud statute. Pasquantino spells bad news not only for smugglers. Under the rationale of that decision, any lawyer, accountant, corporate tax officer or other person developing or implementing strategies to reduce someone's foreign taxes might similarly be criminally prosecuted. The only elements needed for conviction are that the planning or implementation activity occurred on U.S. soil and relied on the use of a telephone, e-mail or mail, and that the tax savings strategy evades the laws of a foreign country, all as determined by a U.S. court. (emphasis added) |
Note also this April 6/05 post, What's holding up Pasquantino?, at White Collar Crime Professors Blog :
| Quote: | It is an issue that can go in so many directions. 1) It could be a case where the Court will focus on the wire fraud statute and its breadth and cut back on what is "property" as was done in the Cleveland case, where the Court held that licenses were not property. 2) Or it could be a case that the Court will define how far the revenue rule can extend, a relatively narrow decision in comparison to the other choices. 3) Or, finally, it could be a case where the Court focuses on extraterritoriality and whether wire fraud should apply outside the United States. This last option could make this a landmark decision. This decision coupled with what the Court might do in Small could make this the year that the Court tackles tough questions of transnational law. And what better place to start than with a white collar case.
My guess is that the Court is focusing on the international issue. It seems odd that both Small and Pasquantino have been bypassed in the Court's ruling on cases heard well after these two, and both of these cases have an international issue. Could this be the year that the Court will finally look at whether criminal law should apply to extraterritorial cases? The last time this was really examined is in the Bowman decision, and a lot has happened since 1922 when this decision was issued.
Pasquantino could be a simple resolution of the jurisdictional split coming from in the cases of Boots, Trapilo, and Fountain. But as the jury stays out longer, I am beginning to think that this case may be more monumental than some may have expected it to be. (emphasis ours) |
You and me both, brother.
The bottom line:
The risk of prosecution by the U.S. for what it considers to be wire fraud is now greatly increased, in our view. Stated very succinctly in the following two paragraphs:
| Quote: | | The decision in Pasquantino may have far-reaching consequences for individuals and companies with any connection to the US. Bearing in mind the extensive breadth of the federal wire statute, it would appear that any use of the telephone or e-mail passing through the US wires to carry out a fraud would place anyone at risk of a US prosecution,regardless of the nationality of the victim. While the three defendants in Pasquantino were US citizens, there is nothing in the Supreme Court’s decision to indicate that non-US citizens or foreign companies would be exempt from prosecution under the wire fraud statute. (From Extradition and white-collar crime by David Corker and Ellen Zeisler at www.complinet.com June 14/05). |
Last edited by legal on Fri Sep 02, 2005 4:58 pm; edited 5 times in total |
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legal
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