United States v. Lyons
2014 U.S. App. LEXIS 950
| D.C. Cir. | 2014Background
- SOS (Sports Off Shore), Antigua-based bookmaker, took bets from U.S. customers by phone and internet; agents in the U.S. (including Lyons in Massachusetts and Daniel Eremian in Florida) collected losses, paid winners, and remitted net balances to Antigua.
- Federal and state investigations (including wiretaps and searches) led to a superseding indictment charging Lyons and Daniel Eremian with Wire Act violations, RICO (§§1962(c), (d)), operating an illegal gambling business (§1955), and related offenses; Lyons faced additional counts (money laundering, Travel Act, UIGEA, etc.).
- At trial a jury convicted both defendants on the principal counts; both appealed raising multiple challenges to instructions, statutory scope, mens rea, extraterritoriality, evidentiary rulings, suppression of wiretap/search evidence, sufficiency of proof on profits/proceeds, and sentencing/forfeiture.
- The district court admitted an SOS "agent directory" as coconspirator statements under Fed. R. Evid. 801(d)(2)(E); Lyons’s house searches (2006, 2009) recovered large cash sums and records; wiretaps began with another case and were expanded to include Lyons.
- The First Circuit affirmed convictions and sentences, rejecting challenges to: (1) failure to give a Wire Act safe-harbor instruction (as to Eremian) or finding alternative aiding-and-abetting liability (as to Lyons); (2) applying the Wire Act to internet communications; (3) mens rea sufficiency; (4) extraterritorial application; (5) proof of sports bets; (6) admission of the directory; and Lyons’s individual suppression and statutory-interpretation claims.
Issues
| Issue | Plaintiff's Argument (Lyons/Eremian) | Defendant's Argument (Government) | Held |
|---|---|---|---|
| Safe-harbor under Wire Act (§1084(b)) | Safe-harbor applies (communications between jurisdictions where betting is legal) so convictions should be acquitted or jury instructed | Evidence showed activities outside safe-harbor; aiding-and-abetting of receipt of bets removes safe-harbor protection | Affirmed: Eremian had no evidence of legality in Florida; Lyons still guilty because aiding-and-abetting receipt of bets placed him outside safe harbor or other non-harbor acts were overwhelming |
| Wire Act applies to internet | Wire Act (pre-Internet) cannot reach internet transmissions | "Wire communication facility" statutory definition covers transmissions by wire/cable and thus internet use | Affirmed: statute covers internet; no ex post facto problem |
| Mens rea for Wire Act | Government failed to prove defendants knew their conduct was unlawful | "Knowingly" requires knowledge of facts, not knowledge of illegality; ignorance of law not a defense | Affirmed: proof was sufficient; knowledge-of-facts standard met |
| Extraterritoriality of Wire Act | Application to communications involving Antigua improperly extraterritorial | Wire Act expressly covers interstate and foreign commerce; transmissions with a U.S. participant fall within statute | Affirmed: statute shows congressional intent to reach foreign communications |
| Proof bets were on sporting events (Wire Act scope) | SOS took non-sports bets (casino), so evidence insufficient for Wire Act convictions | Sufficient evidence that SOS engaged in sports betting; instruction limited Wire Act to sports bets | Affirmed: ample evidence of sports betting |
| Admission of agent directory (801(d)(2)(E)) | Directory was hearsay or testimonial; Sixth Amendment confrontation problem | Directory was business/conspiracy record admissible as coconspirator statement and non-testimonial | Affirmed: admission proper under Rule 801(d)(2)(E) and not testimonial |
| Wiretap authorization & probable cause (Lyons) | Wiretaps invalid: insufficient DA authorization / facial defects / lack of probable cause | DA personally reviewed/authorized renewals (affidavit); application met procedural requirements; Lyons waived some suppression objections | Affirmed: district court findings not clearly erroneous; authorization adequate; some waiver of untimely claims |
| Unsigned search warrant (Lyons) | Warrant unsigned at execution -> invalid search | Judge reviewed and approved warrant; signature omission was inadvertent and later corrected; signing not constitutionally required | Affirmed: lack of signature not a Fourth Amendment defect where issuance proved |
| Money laundering/Travel Act (profits/proceeds) | §1957/Travel Act require "profits"; government failed to prove profits rather than gross receipts | Santos governs: "proceeds" pre-2009 = profits; government proved discrete profitable transactions (specific transfers) | Affirmed: sufficient evidence that charged transfers represented profits for money laundering and Travel Act counts |
| UIGEA liability pre-regulations (Lyons) | UIGEA unenforceable until implementing regs issued | UIGEA criminalizes certain private acceptance/transfer activity; Wire Act already made such transmissions unlawful; regulations clarify financial-institution obligations only | Affirmed: convictions under UIGEA valid; statute not unconstitutionally vague here |
| Prosecutor comment on silence (Lyons) | Prosecutor impermissibly commented on Lyons’s failure to testify | Prosecutor commented on lack of evidence for defense theory, not silence | Affirmed: not Fifth Amendment violation |
| Venue (Eremian) | Venue improper in Massachusetts | Defense failed to preserve the issue | Waived; no appellate review |
| RICO collection of unlawful debt (Eremian) | Insufficient proof debt unlawful (state law) | Evidence showed bets incurred in Florida and violated federal/Florida law; debts were unlawful | Affirmed: sufficient evidence for racketeering conviction |
| Constructive amendment by instructing Florida law (Eremian) | Jury instruction on Florida law expanded indictment | Indictment gave fair notice of charges and facts placing activity in Florida | Affirmed: no constructive amendment |
| Sentencing and forfeiture (both) | Sentences and large forfeiture disproportionate / Eighth Amendment violation | Sentences within Guidelines; roles and lack of cooperation justify sentences and forfeitures; forfeiture based on reasonably foreseeable proceeds | Affirmed: sentences and forfeiture judgments reasonable and supported |
Key Cases Cited
- Lanier v. United States, 520 U.S. 259 (statutory notice / ex post facto principles)
- Bryan v. United States, 524 U.S. 184 (mens rea: "knowingly" requires knowledge of facts, not knowledge of illegality)
- Pasquantino v. United States, 544 U.S. 349 (extraterritorial application where statute covers foreign commerce)
- Melendez-Diaz v. Massachusetts, 557 U.S. 305 (business records generally non-testimonial for Confrontation Clause)
- Michigan v. Bryant, 562 U.S. 344 (defining testimonial evidence / primary purpose test)
- United States v. Santos, 553 U.S. 507 ("proceeds" construed as "profits" pre-amendment)
- United States v. Spinney, 65 F.3d 231 (1st Cir.) (aiding-and-abetting mens rea standard)
- Sagansky v. United States, 358 F.2d 195 (1st Cir.) (receipt of bets is a "use" of a wire facility)
- United States v. Cohen, 260 F.3d 68 (2d Cir.) (Wire Act applied to internet transmissions)
- United States v. McDonough, 835 F.2d 1103 (5th Cir.) (safe-harbor does not protect transmission of bets themselves)