*1 If the Lerman, something akin to a “smell test.” at 48 (quoting at 127 bad, 52). question the intent to However, smells it is the definition scheme & n. sticking not the result as we do avoid taxes defines “economic substance” inqui Here, “put one over.” How- taxpayer the “economic substance point. want differ ever, clearly the “material ry governed is not whether ACM must be the issue Cottage Savings, Commissioner, not requirement” or used put ence one over on taxpayers. intent of the avoidance “pull the tax' the wool over his notes to LIBOR eyes.” The issue is whether what ACM majority mis- regard, I believe the In this under qualifies for the tax treatment it seeks argument. The appellant’s characterizes “put § 1001. The fact that ACM acknowledges that majority “ACM states: crafting transactions over” in these taxpayer’s activi of the where the ‘form even in- inquiry. influence our Our ought not to re the literal indisputably satisfied] ties cerebral, To the extent quiry is not visceral. language, the statutory quirements’ of the by these that the Commissioner is offended the substance examine ‘whether courts must Congress he should address transactions consistent with transactions was of those rulemaking process, and not and/or Maj. (quoting Appel Op. at 246 form’ ”. courts.2 21). However, referring ACM is lant’s Br. at posed by Gregory v. Helver issue as
to the I Accordingly I must dissent from what case, referring facts of that ing. to the by my very finely opinion crafted admit is a argues: ACM Judge Greenberg. colleague, taxpayer’s activities indis- The form requirements the literal putably satisfied provisions, reorganization
of the Code’s sub- whether question
but consistent of those transactions was
stance here, form. As he does
with their argued Crregory
Commissioner should be dis-
taxpayer’s ulterior regarded. ... America, UNITED STATES words, the focus should be In other done, and not of what was the substance why Supreme Court it was done. IDOWU, Appellant. Ismoila statutory lan- analyzed the
then No. 98-5076. concerning reorganizations and con- guage lay out- taxpayer’s actions cluded Court of plain intent of statute. side the Third Circuit. Appellant’s Br. at July Argued earlier, sales of the Citi- ACM’s As recited re- and LIBOR Notes corp Notes for cash 14, 1998. Decided Oct. materially different exchange sulted pro- inquiry should I our property. believe further, holding and reverse
ceed no eliminating capital gains
the Tax Court application to ACM’s
and losses attributable provisions sale contingent installment recovery to its rule the ratable basis Citicorp Notes.
disposition of majority’s suspect that the help
I can’t essence, is, contrary in its
conclusion notes, tax driven trans- apparent to curb such appar- effort majority the Commissioner 2. As the Op. Maj. 246- See reg- the ones here. “loophole" actions as 247, possible ently realized 1.701-2(a)in Reg. § n. 29. Treas. and enacted ulations *2 Orange, (Argued), West B. Axelrod
Edna NJ, Appellant. Hochberg, United States Attor- S.
Faith
(Argued), Assistant
ney, George
Leone
S.
NJ,
Newark,
Attorney,
Chief
Appellee.
BECKER,
Judge,
Chief
Before:
WEIS,
Judges.
Circuit
STAPLETON
THE COURT
OF
OPINION
BECKER,
Judge.
Chief
the trial of Ismoila Idowu
evidence at
possess with
charge
conspiracy to
kilogram
than one
to distribute more
intent
crystal
heroin,
§
made it
U.S.C.
knew that
Idowu was—and
clear
of some
in an illicit transaction
was—involved
question
is no
There also
sort.
gov-
subject of
was the
transaction
investigation
sur-
ernment’s undercover
veillance,
Mo-
Idowu’s co-defendant
in which
buyer, involved more than
nadu
question
The sole
kilogram of heroin.
by a
following his conviction
appeal,
jury,
there was sufficient evidence
is whether
matter
that Idowu knew
substance,
controlled
contraband,
form of
than some other
rather
or
jewels
computer chips
or
such as stolen
sup-
necessary to
currency,
proof being
such
port Idowu’s conviction.1
consistently held in cases of this
haveWe
that,
where
de-
genre
even
situations
in illicit
engaged
knew that he was
fendant
contra-
“some form of
activity, and knew that
testimony, there was
of this
insuffi-
challenged
testi-
admission
the admission
1. Idowu also
Idowu, we do not reach
evidence to convict
cient
mony regarding
that was seized
argument.
with the
even
Since we conclude
him.
helping
gather
him to
man was
in which
other
in the scheme
band”
pay
he was
participating,
doubt
a reasonable
obliged to
agents
up
DEA
set
surveil-
March
On
knowledge of the
the defendant
They
Inn.
wired
lance at the
contemplated
objective
illegal
particular
tape
and transmit-
a concealed
recorder
*3
See,
v.
e.g.,
States
conspiracy.
United
monitor the transaction
ter so that
(3d
403,
Cir.1997);
Thomas,
405
afternoon, Ajao
nearby car. That
from a
(3d
Wexler,
88,
90
Quality Inn in a black Lincoln
arrived at the
Cir.1988).
consistently held
also have
We
Ajao
by
and
Town Car driven
Idowu.
Idowu
proof,
that,
of such
in the absence
lobby,
the hotel
left the car and entered
conspiracy charge cannot be
on a
verdict
bag. The
carrying
a brown leather
406;
114 F.3d at
sustained. See
lobby,
men then exited the
re-entered
two
think that the
F.2d at 91. We
sedan,
moved it to another location
and
that heroin or
that Idowu knew
parking
Khaliq
in
arrived in a Ford
lot.
controlled substance was
some other
trank;
suitcase in his
Explorer with
reverse
lacking
Accordingly, we will
here.
previously
DEA
outfitted the suit-
judgment.
drags
lining.2
in
case to hold
its
Ajao
intro-
got out of the Town Car and
I.
Khaliq.
in
himself to
Idowu remained
duced
Ajao
Khaliq
and
discussed the
the vehicle.
March
leading up to Idowu’s
The events
$30,000.
payment,
was to have been
which
1997,
Jersey,
Jersey City,
arrest in
New
brought
Ajao
Khaliq
only
that he
told
Lahore,
in
Paki-
began two months earlier
$20,000.
was unable to hear their
time,
Drug
stan. At that
Ajao
Khaliq
and
then re-
conversation.
(the “DEA”)
Agency
in Paki-
Enforcement
Ajao encouraged
Town
turned to the
Car.
kilograms of heroin
stan seized over two
car,
get
Khaliq
de-
Khaliq to
into the
operation. The
of an undercover
the course
Ajao, sitting in the front
offer.
clined
part of a
agency
the seized heroin as
used
Car,
to talk to
seat of the Town
continued
targeted prospective
sting operation that
standing
Khaliq,
remained
outside.
who
purchasers in the United States. Pakistani
vehicle,
Ajao
exited the
and Idowu then
dealers, believing
eo-eonspira-
drag
Khaliq
for the first
point
met Idowu
heroin,
led to
possessed the
tors still
was,
Khaliq asked who Idowu
time. When
actually
Khaliq,
Abdul
who
contact
Ajao replied that “he is driver.”
During
telephone
call
DEA informant.
by
operative,
DEA
a man
organized
another
trunk
gathered
All three
near the
“Raja”
Khaliq
himself as
told
trank,
who identified
opened Town Car. Idowu
arrange
him to
that someone would call
bag; he then
the brown leather
contained
purchase the heroin.
money
bag, displaying the
inside
opened the
money,
Khaliq counted the
As
later,
Ajao,
Monadu
who
Several weeks
Khaliq
would have to take
stated that he
friend,
Raja’s
and who
identified himself as
documents
bag with him.
Idowu had some
co-defendant,
telephoned
became
Idowu,
bag,
Khaliq
who want-
and
told
telephone
Khaliq. During the course of six
back,
Idowu could
get
bag
ed to
conversations,
by Khaliq,
taped
which were
“pull
out” and that would
[the documents]
Khaliq
Ajao negotiated
buy
the heroin.
day.
next
Ido-
bag
to Idowu the
return
ultimately agreed
meet at a
Khaliq that he had checked
wu told
Jersey City,
New
parking
Inn
lot
himself,
and that all
Throughout Jersey on March
there.
negotiations, .Ajaonever mentioned
telephone
the Ford
bag
Idowu,
took
specifically
nor
mention heroin.
did
Idowu, who
opened the rear hatch.
acting on
indicate that he was
behalf
pulled
Town Car into
others,
previously had
point implied that an-
and at one
operation there.
in its undercover
DEA seized
in Pakistan
was the same suitcase that the
This
possession of
Ford,
was to obtain
then removed
spot next to
substance.
black suitcase from Khal-
controlled
specially-outfitted
still-open trunk
it into the
iq’s
placed
caí' and
points to a series of acts
unzipped the black
Car. Idowu
of the Town
opinion,
in its
inside,
and,
nothing
seeing
told
suitcase
drug
part
of a
deal.
pack
thing.” Ajao
Ajao, “They didn’t
First,
bag
leather
Idowu carried the brown
press the suitcase with
told
Second,
money.
appar-
containing the
Ajao and
Khaliq tried to reassure
hands.
by the
ently
bag,
as evidenced
fact
owned
something
con-
explaining that
kept personal documents in the
frame of the suitcase. Mo-
cealed
Third, Ajao
willing
Idowu alone
leave
later,
DEA
arrested
ments
Fourth,
money.
Ajao believed that
with the
*4
Khaliq
presence
to talk to
was safe
$3,000
agents
in cash
The DEA
recovered
Fifth,
Idowu was the
who
right
pocket,
front
$495
from Idowu’s
Khaliq money
Khal-
and who told
showed
$18,000in
and
cash from
pocket,
his back
iq
it to
that it
that he had checked
ensure
brown leather
Sixth,
opened the black
was all there.
Idowu
being
check the contents without
suitcase to
II.
Seventh,
Ajao.
two defen-
prompted
(a
dialect)
spoke
Nigerian
dants
Yoruban
government
Idowu and the
As both
together. Eighth, Ajao urged Idowu to feel
out,
correctly point
“must determine
Ninth,
in the suitcase.
Idowu
around
had
whether, viewing
favorably
most
pocket
in his
at the time he was
government, there is substantial evi
to the
arrested,
presumably
skimmed
which he
jury’s
support
verdict.”
dence
from the stash.
(citing
F.2d at 90
v.
838
Glasser
States,
80,
457,
60,
62
315 U.S.
S.Ct.
facts,
government at-
these
From
(1942)). “The
a
elements of
269
presented
has
evi-
purchasing
hold that
knew what
jury
dence sufficient for
find
money.
proved
be-
argu
strongest
government’s
yond a reasonable doubt.
get
invitation to
ment is that
supports
law
the conclusion that
Our case
car,
sitting,
in which Idowu
into the
it was unreasonable for the
to infer that
total confidence
reflects such
Idowu knew of the transaction’s ultimate
be drawn that Idowu knew
an inference can
purpose.
In United States v.
“Infer
of the transaction.
the full nature
(3d Cir.1997), drug
courier named
accepted
established facts are
ences from
Lynch,
being
agreed
coop-
after
proof when no direct evidence is
methods of
by following through
the DEA
erate with
logical
long as there exists a
available so
plan
drop
in a motel room.
off
suitcase
convincing
the facts es
connection between
Thomas, acting
Defendant
communica-
conclusion inferred.”
tablished and
“Cliff,” picked up
tion from someone named
Clemmons,
United States v.
key
room
the room
and entered the
(3d Cir.1989). However,
govern
suitcase, in
contained the
accordance with
argument actually
on two inter
ment’s
relies
Lynch
arrangements
had made with her
inferences,
dependent
at least one of which
co-conspirator,
left
Petersen. Thomas then
convincing connection
lacks a
between
*5
the room without the suitcase and without
facts and the conclusion.
drugs. Upon being
Thomas ex-
that, by inviting
The first
inference is
plained
to
that he had been offered $500
talk, Ajao
willing
Khaliq into the ear to
was
luggage.
cheek on the
See id. at 404-05.
freely in
we
speak
to
front of Idowu. While
Idowu,
they might
Much like
Thomas conceded that
only speculate what
have
can
ear,
tending
there
“evidence
to show that he
in the
we think there are
was
talked about
agreement,”
explanations
entered into some kind of
but he
more viable
number of
presented
might
“that the evidence
at
to
It
have
contended
invitation
prove beyond a
merely
friendly, confidence-inspiring
trial
insufficient to
[was]
been
Moreover,
doubt ...
that he knew that the
suggests
record
reasonable
gesture.
specific
agreement
of the
was the
apprehensive that he
under
was
indictment,
surveillance,
purpose charged in the
have invited
unlawful
so
i.e.,
possession
of
controlled substance
the car
he wanted to drive
into
because
intent to distribute.”
F.3d at
complete
to
the deal. But with
somewhere else
Thomas, noting
agreed with
jury We
accept
even if we
that a reasonable
substance of
speak-
government failed to
felt comfortable
could infer
Idowu,
from
to Thomas
phone
calls made
“Cliff’
ing of
the second inference—
front
evidence that
speak
and that
it failed
offer
willing
about
that because
Lynch
Idowu,
spoke to
or Petersen
presence
Thomas ever
the transaction in the
of
Finally,
pointed
govern-
all.
we
out
already have been aware of the
Idowu must
Thom-
entirely
evidence failed to controvert
subject matter —is
without ment’s
deal’s
actions,
record,
proffered explanation for his
regardless of how as’s
support
in the
phone
received a
call
which was that he had
favorably
government
the evidence is
go
asking
simply
him
into
government
pre-
from Cliff
has
viewed.3 Because
and to leave the door unlocked
justify the
hotel room
sented no evidence that would
no
way
concluded that “there is
out. We
jury’s
leap
inferential
between the second
permissibly
conclusion,
evidence from which a
and because we
inference and the
object
alone,
that Thomas knew that the
assumption
with-
infer
not think the first
do
cocaine,”
possess
necessary
conspiracy was to
second as-
support
out the
of
support
cannot
that “the evidence
strong enough foundation on therefore
sumption, is a
conviction,
Id. at 406.
conspiracy conviction.”
cannot Thomas’
ground
plan
operation so that
and from the overall
of
passing that it is not uncommon for
3. We note in
against
supply
others in-
illegal operations
cannot
evidence
managers
of clandestine
employees
volved.
keep
from one another
insulated
conspiracy,
Thomas,
a defendant
gov- which to convict
prosecution
Like
Id.
was overturned.
prove that
the conviction
failed to
has
here
ernment
reference
heard
ever
defendant
distinguish
government
tries to
The
the transaction
subject matter
present
the facts
from
facts in Wexler
government
involved.
Wexler, who
argues that unlike
It
case.
on the
distinguish Thomas
us
would
edge
be on the outside
appeared to
presented a credi-
Thomas
ground that
member”
a “trusted
conspiracy, Idowu was
acts,
for his
where
explanation
alternative
ble
argu-
support
In
of this
conspiracy.
explana-
an alternative
not offer
the fact that
ment,
government points to
However, in refus-
participation.
tion for
large amount of
was entrusted with
conviction, we relied
ing
uphold Thomas’s
cash,
keys to his own
possessed the
convincing alterna-
presence of
not on the
(where
kept), that he
the cash was
car trunk
on the
explanation
the defendant
tive
mon-
amount of
was the correct
knew
Thom-
showing
absence of
total
all
Khaiiq that
ey,
he assured
involved.
cocaine was
knew that
nothing in the
there,
finding
upon
Therefore,
credibility of
thafhe However, matter of the transaction operation. Id. during the al times kilogram her- of any purchase of more than one concluded, missing evi- “What is is hold that no reasonable oin. therefore knew that a controlled We that Wexler govern- that the have concluded doors of couched behind the substance was proof, of ment had met its burden “[t]hat Id. Ryder Because truck.” doubt. requires proof a reasonable an essential knowledge is element judgment the district Accordingly, the of “keeping charged,” and because conspiracy be reversed. grounds on court company” is not sufficient will bad decision, playing being co-conspirator an we note that far from basis for our 4. While not the exchange, integral was a dis- quite possible role that makes it that there is evidence gov- agenda. If the his quite honest driver with own from the someone different that Idowu was correct, theory was about is would ernment's "trusted confederate" $165,000 worth of partial appears owner It become out be. make him have felt The fact that in his heroin. some of the found skimmed at least $3,000 suggests petty the risk to skim the brown worth pocket from stash of in in the heart of bag was not involved supposed held leather The $18,000. therefore $20,000, only and that the If Ido- transaction held but instead bag, suggests incorrect. from the wu did skim jury properly could con- dissenting: conclude STAPLETON, I Judge, Circuit charged be- as that Idowu clude provides a majority opinion court’s The doubt. yond a reasonable my Unlike the evidence. account of fair district judgment of the I affirm the would sup- that this colleagues, I conclude court. against Mr. verdict ports the supports the indisputably
The purchase intended
proposition Khaliq in the heroin
large quantity The Inn.
parking lot of proposition supports the indisputably
also to facilitate himself committed that Idowu McVEY, Plaintiff-Appellee, L. Dixie He parking lot transaction. anticipated cash, he the site with drove STACY, of the Vir L. Chairman Kenneth suitcase, he own the cash his transported Commission, Highlands Airport ginia he had counted the seller that represented to capacity Individually, in his official to cover and it was himself sufficient the cash Kiser, Chairman; H. Member Richard attempted to con- and he purchase price, Highlands Airport Virginia Commis purchased being merchandise firm sion, Individually, and in his official ca Finally, as Khaliq’s black suitcase. Vicars, member; D. pacity James as indis- acknowledges, the evidence the court Highlands Airport Virginia Member of proposition supports putably Individually, Commission, and in his of transaction he have known must member; capacity Thomas Phil as ficial illicit one. an to facilitate was committed Highlands Virginia lips, Air Member of the court only doubt to which reasonable Individually, Commission, and in port that Idowu com- possibility point is can member; capacity as David his official $20,000 illicit himself to facilitate mitted Johnson, Virginia High Member C. knowing the un- either without Commission, Individually, Airport lands having or objective to be achieved lawful member; capacity as official his objective. misled about been Haviland, Virginia Member of David Commission, Highlands Airport Individ risk, extremely it is the inherent Given capacity ually, official him- person commits when rare occurrence *7 Conrad, member; Member F. Ellison large facilitating a illicit self Commission, Highlands Airport Virginia objective to be ascertaining the without capacity Individually, and his official Moreover, with re- the evidence achieved. Hutzler, member; Member Beatrice establishes spect Idowu’s circumstances Airport Highlands Virginia Commis Ajao. Ajao he was a trusted confidant sion, Individually, and in her official the transaction negotiating was comfortable member, Defendants-Appel capacity as presence as well as with in Idowu’s lants, cash in custody of having sole unlikely it even more This makes absence. why to discuss failed Commission, Airport Virginia Highlands parking Quality Inn they going to the were Defendant. believing into misled Idowu lot or that No. 97-1691. explosives, dia- paying Finally, the evi- computer chips.
monds or Court at least that Idowu was Circuit. establishes Fourth Khaliq’s checking tacitly assigned the task of 8,May Argued getting bag to confirm that Sept. Decided for, assignment Ido- being paid what was if he were un- received not have wu would looking for. Based on aware what evidence, approach to the sense
this common