United States v. Haitham Mohamed
759 F.3d 798
7th Cir.2014Background
- On June 6, 2012 Officer Helmer stopped Haitham Mohamed in Indiana and found 1,170 packs (23,400 cigarettes) of Newport cigarettes bearing Kentucky tax stamps, receipts for Kentucky purchases, and over $15,000 cash. Mohamed was indicted under the Contraband Cigarette Trafficking Act (CCTA), 18 U.S.C. § 2342(a).
- The CCTA defines “contraband cigarettes” as >10,000 cigarettes that bear no evidence of payment of applicable state/local cigarette taxes in the state where found, subject to exceptions. Parties stipulated Mohamed was not within those exceptions.
- Government presented ATF testimony on typical interstate cigarette trafficking (buy low-tax/ sell high-tax states), tax differentials (Kentucky $0.60; Indiana $0.995; New York far higher), Mohamed’s purchases in Kentucky, his cash, and his statement he sells cigarettes and makes “not much.”
- Defense argued government failed to prove Indiana law required Indiana tax stamps because there was no evidence Mohamed had sold, used, consumed, handled, or distributed the cigarettes in Indiana or intended to do so.
- The jury convicted Mohamed; district court denied Rule 29 motions. On appeal, the Seventh Circuit reviewed sufficiency of the evidence de novo and considered whether Indiana law made the cigarettes contraband under the CCTA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Indiana tax is due upon receipt or only upon disposal/sale | Govt: Indiana tax statutes require stamps upon receipt (pre-collection) so tax is due earlier | Mohamed: Tax not due until cigarettes are sold/used/consumed/handled/distributed in Indiana | Court: Tax is effectively imposed upon receipt; distributors must prepay and stamp on receipt, consistent with Indiana law and case law |
| Whether cigarettes possessed in Indiana but intended for sale outside Indiana are subject to Indiana tax (thus contraband under CCTA) | Govt: statutory provisions (documentation requirement; prima facie possession-for-sale presumption) and trafficking circumstances support inference cigarettes were subject to Indiana tax | Mohamed: Evidence shows intent to sell outside Indiana (government later argued New York at sentencing), and state misdemeanor/transport rules do not automatically make items federal contraband | Court: Conviction reversed — government failed to prove beyond a reasonable doubt that Mohamed intended to sell/use/handle/distribute the cigarettes in Indiana; mere violation of transport/documentation rules insufficient for CCTA conviction absent proof state tax applied |
Key Cases Cited
- United States v. Boggs, 775 F.2d 582 (4th Cir. 1985) (upholding CCTA conviction where defendant transported unstamped cigarettes through state without required documentation and presumption of intent to evade state tax applied)
- United States v. Skozcen, 405 F.3d 537 (7th Cir. 2005) (contraband under CCTA where cigarettes had become subject to state tax at purchase, so later intent to sell outside state irrelevant)
- United States v. Wilbur, 674 F.3d 1160 (9th Cir. 2012) (CCTA does not make cigarettes contraband solely because they violate state law; applicable state tax must exist for CCTA to apply)