United States v. Matthew Yip

MINER, A from an broker collects Before CARDAMONE and business. charges in- POLLACK, pay he uses Judges importer and District to Circuit importation goods into curred Judge.* States, freight, bro- including ocean United CARDAMONE, Judge: Circuit fees, incidental kerage customs importer in The broker aids the Yip appeals judgment costs. Matthew from 5,1989 through following two- May paying in the duties entered on in the goods When the arrive step process. District of District Court for Eastern him, stopped are at the bor- (Costantino, J.), convicting York New Service, trial, the broker fraud the Customs jury counts of mail der after listing the a form 3641 generally files of 18 U.S.C. 1341 violation § being imported. 19 C.F.R. depriving See counts (1990). suspi- 142-3(a)(l) is no If there duty payments in violation of lawful irregularity appeal he con- of fraud or On cion U.S.C. posted tends, alia, importer has paperwork insufficient inter there was of the customs fraud to cover cost support 1341 mail bond evidence released goods, they are convictions, owed on importation and that duties 142.4 invoices, 19 C.F.R. fol- to the broker. See goods using non-fraudulent days (1990). The then has 10 broker the failure lowed * Pollack, York, sitting by designation. New Milton Senior Honorable Judge District District Court the Southern

complete step filing Alternatively, importer second a form ment. may give an detailing the owed checks its already broker made out to shipment enclosing Customs, in the contained the order of thereby U.S. avoid- amount check to cover the owed. See 19 ing any potential problems such as embez- 142.11 C.F.R. zlement. case, Airway slightly followed a this regulations Customs in force at the rele- is, procedure, this

modified version of in required vant times this case to brokers pursuant the form 3461 was filed to a placе a notice on their invoices of the im- special permit delivery” for “immediate porter’s right pay to U.S. Customs Service provided “setting under 142.21 19 C.F.R. directly, 111.29(b)(1986). § 19 C.F.R. adequate description forth an of the mer- parties agree Airway fully complied quantities, together chandise and the with regulations. with the above The difficult approximate the values values [of question Yip before us is whether commit- (1990). goods].” 19 C.F.R. 142.22 This against ted a criminal act helps speed goods method release of the by when he prom- obtained a client’s funds Airway from customs. then had the stan- ising pay Customs, to its duties to days dard 10 to file the form 7501 with a kept instead for his own use. check pay goods. attached to duties on the 19 C.F.R. 142.23 FACTS Although importing companies routinely background With that relationship of the rely on customs brokers to act as their between a broker and its сlient and the agents, passage through secure safe governing regulations, we describe the cir- regulations, pay maze of customs cumstances appeal. that led to this Sam- duties two-step America, owed on their in the sung Electronics Inc. and Sam- process described, just International, only sung Inc., the brokers are two affiliated cor- agents importers; importer an porations (collectively Samsung), import remains liable to the United States for electronic for sale in the United regardless payment of what Samsung ar- States. engaged Airway rangements may have made with a bro- imports to act as its customs broker for ker/agent. 111.29(b) 19 C.F.R. Beginning August See into New York. in (1990). Thus, if the Airway broker does not submit it retained charge to take of im- payment the form days, ports 7501 and within 10 Angeles Airway into Los as well. importer, then principal, subjeсt as to hired a local brokerage California customs penalty by house, assessed International, Customs. These RS in assistance penalties can include a demand for handling Samsung’s Angeles immedi- opera- Los payment ate on the bond Samsung furnished tions. agreed pay Airway to importer, 142.15, 142.27, which, turn, 19 C.F.R. a re- undertook to forward mon- §§ fusal customs to allow future ey release of to compa- RS International. The latter importer’s goods payment without ny agreed pay at to customs duties on Sam- release, 142.13, the time of sung’s C.F.R. Unfortunately, behalf. matters did delivery privi- go withdrawal of immediate planned. not leges, 142.25(a)(1) if any exist. 19 C.F.R. § May 1986 RS International received Airway’s duty payments Upon late. in- regulations quiry,

Customs allow wide latitude by Airway Samsung it was told arrangements brokers paying Airway make had been slow and that importer with their regarding pay- clients delay. Airway’s this accounted for the late example, payments continued, terms. For brokers are to RS International required segregate to client funds inquiries and ear- and further met were more mark importers may them for By July untruthful excuses. when simply Samsung forward funds to the broker to cov- problem, heard of the it told RS er the understanding Airway owed with the International to look to because that the broker in turn govern- Samsung duty payments will had made all its allegedly take Samsung was not then aware would over the accounts held promptly. by Airway ‍​​‌‌‌​‌​​‌​​‌​​​‌​​‌‌​‌‌​‌‌​‌​​​​​‌‌​​‌​‌‌​‌‌‌‌​‍million of its customs duties being the customers $1 that over —without im- paid Yip its California was had not been aware still involved their According witness, ports. business. $50,000 him give loan if he offered August International for- RS On cooperate, but Hartill declined handling mally of Sam- terminated Airway’s employ offer and left at thе end Air- Airway. When sung’s account cross-examination, of October. On Har- by its way went out of business—forced credibility till’s was attacked and he re- involuntary bankruptcy into creditors fused, grounds, Fifth Amendment affiliated early November 1986—the two questions alleged six regarding answer an companies Samsung obligation had an he in- kick-back/extortion scheme million in duties $2.6 he Airway employ- volved in while was an paid Airway had never to Customs. ee. Airway bankrupt time it had At the went 15, just prior On November to the necessary for re- filed all the 3461 forms 1986— bankruptcy assuming trustee’s control of merchandise, Samsung’s imported lease Airway’s Yip an account- ordered not filed all the 7501 forms with but had assets— company’s ant to alter the books. The The million required checks. $2.6 reclassified alterations several loans Air- paid Samsung. unpaid duties was way Yip “compensation,” made to had as Samsung settling its account with the two greatly reduced shown as the amounts entities, government agreed to waive Airway by accounts receivable owed to late duties. penalties payment for cases, Yip’s corporations. other some THE TRIAL falsely that these the alterations showed corporations Airway. were creditors The selected 59 invoices—ac- counting for million out of $1.8 $2.6 Yip prosecution’s against was The case for in duties—that formed the basis million mail fraud 1341 and cus- based on under § charged against Yip under 18 the 59 counts toms duties violations under 542. At trial the evidence showed U.S.C. him on under both jury convicted all counts 1986, Yip May while that from to October ap- analysis We undertake an statutes. Samsung supposedly accepted funds from pellant’s conviction 1341 under both § duties, he was payment of its customs pay- using mortgage the funds to make Long and to on his Island home ments DISCUSSION $25,000 purchase a Benz automo- Mercedes Fraud 18 1341—The Mail I U.S.C. § Yip frequently transferred mon- bile. also Counts Samsung support his ey received from 1986, businesses, Sufficiency A. the Evidence September, and in money purchase Yip some of used asserting adduced the evidence deposit in his own name. certificate con legally support insufficient to his was fraud, heavy partner Airway, Yip for mail bears viction Yip’s business Gaviria, 805 v. Hartill, cus- burden. See United States who was a licensed Charles (2d Cir.1986), 1108, himself, 1116 cert. Yip took F.2d testified that toms broker 1031, 1960, 107 95 L.Ed.2d by the S.Ct. advantage provided the “float” 481 U.S. funds, upheld if A conviction must be Samsung’s defer- 531 influx of constant light using viewing the in the “after evidence ring payment of customs to the ra prosecution, Hartill most favorable money purposes. for his оwn of fact could have found trier 1986—as tional testified that mid-October also beyond a of the crime financially— essential elements self-destructing Airway was Virginia, doubt.” company reasonable Jackson a new Yip him to start asked 319, 2781, 2789, 61 be a S.Ct. Yip 443 U.S. new name which under a (1979) original). (emphasis in scheme, Hartill L.Ed.2d partner. Under silent himself, pay sonal loans to a conviction under off his mort- To sustain prove gage, must “that the defen deposit and take out a certificate of (1) de participated a scheme to dant support govern- in his own name also fraud; (2) knowingly used the mails to theory A ment’s of the case. rational trier the scheme.” United States v. further that, of fact was entitled to believe after a (2d Cir.), Gelb, de 700 F.2d point, certain these activities would bank- nied, 853, 104 rupt Airway knew this— —and scope 1341’s L.Ed.2d Section making acceptance his continued of Sam- “any broad. It reaches scheme to sung’s funds fraudulent. money property by or means of another A rational trier of fact was also entitled pretenses, representa false or fraudulent Yip’s suspicious to consider actions after he tions, promises,” Carpenter or v. United accepted money corroborating had States, 484 U.S. 108 S.Ct. proof Airway of fraudulent intent. When (1987),including “the act of 98 L.Ed.2d 275 struggling financially in October embezzlement, ap is ‘the fraudulent instance, Yip attempted get Hartill propriation to one’s own use of the brokerage to start a new customs business to one’s anoth entrusted care partner in which he would abe silent ” —an Shine, (quoting er.’ Id. Grin v. U.S. suggests Yip offer which was aware he 23 S.Ct. 47 L.Ed. 130 tending had committed acts to make him (1902)). appear untrustworthy to clients was Applying principles, these the evidence Further, acting up to cover those acts. at Yip was sufficient to show violated § hour, Airway the eleventh as control of A rational trier of fact could have conclud- pass was about to into the hands of a Yip Airway, sought ed that controlled trustee, bankruptcy Yip had an accountant Samsung money to the take affiliates’ “reclassify” loans made to himself from keeping 1986 with the intention of it for his Airway’s “compensation,” bank account as personal pay expenses own use or to the disguise and alter the to the books earlier corporations pay his other rather than to transactions which funnelled out of customs duties. A rational trier of fact Airway Yip’s corporations. to These Yip Samsung could also find tricked into proof showing facts corroborated the direct giving Airwаy money the for duties instead Yip Samsung during intended to defraud having Samsung pay United States Cus- accepted the time he its funds. Conse- directly. testimony toms There was that quently, sup- the evidence was sufficient to Airway’s representative sales lied to Sam- port Yip’s under conviction sung arrangement by stating to secure this speed goods. this would release of the B. Trial on Court’s Instructions A rational trier of fact could conclude this Specific Ruling Intent and Yip's request. falsehood was made at Amendment Sixth Claim Moreover, it Yip could be found never Yip further contends the district pay by Samsung intended to duties owed jury adequately court failed to instruct the accepted money paid when he himto “specific on the issue of intent to defraud.” purpose. for that Charles Hartill testified only The record is otherwise. Not did Yip expressly sought gain access to charge court refer several times in its these funds to use the “float” for his own requirement Yip must be shown to purposes personal. Yip ar- —business defraud, specific intent to but it also gues proof, along that this with the other trial, stated that “an essential element of the only evidence adduced at shows crime is payments late, ... intent to defraud” which it he intended to make explained, knowingly and pay. that he never intended to “means to act Were this deceive, specific supporting govern- evidence with the intent to for the theory, might agree; purpose causing ment’s we some financial loss to but it was another,” Yip’s using not. actions in that “even false funds instructed corporations, per- representations bankroll his other or omissions make or statements explicitly requiring do to fraud out facts not amount that the act or omis- material intent.” with fraudulent done with done sion be intent to defraud the unless properly accurately and government argues instructions These United States. jury on issue. Yip properly instructed was convicted under there was sufficient because evidence to addition, Yip language since the willfully show he omitted court not have in argues the should now by Samsung. duties owed proposed was included in his own cluded instructions, any objection to this instruc Appellant responds that even tion was waived. See requires proof second offense under Moon, (2d Myung F.2d Sun specific of both fraud and to defraud intent Cir.1983), Although the United States. we do not (1984). Appel L.Ed.2d agree appellant’s interpretation challenge to the instruc lant’s trial court’s we think that the is correct on intent to defraud is meritless. tion requires act or omission section that the Moreover, appel there no merit to willfully show defendant allegation that Amendment lant’s his Sixth act or undertook an omission that he knew him against right to confront witnesses have known should would result de re abridged when district court was priving of customs duties. This testimony. to strike fused Hartill’s coming set forth our reasons for to this We an refused on cross-examination to witness conclusion discussion follows. Fifth Amend questions claiming his swer — cashing privilege regarding a check — A. Meaning" The “Plain allegedly in scheme he and kickback the Statute at The scheme Airway. in while volved must, course, first turn to the examination, subject was not direct statutory language, see Perrin v. United it therefore a collateral matter and was States, 444 U.S. 100 S.Ct. solely credibility. bearing on' Hartill’s See pro- 62 L.Ed.2d 199 Section 542 Cardillo, 316 F.2d States United part: in relevant vides (2d Cir.), introduces, enters оr or at- Whoever 11 L.Ed.2d Defense introduce, enter or into the tempts to cross-ex permitted counsel was extensive any im- commerce subject. Hartill amination of on this by any merchandise of ported means ‍​​‌‌‌​‌​​‌​​‌​​​‌​​‌‌​‌‌​‌‌​‌​​​​​‌‌​​‌​‌‌​‌‌‌‌​‍Hence, find no the district we abuse of declaration, invoice, or false fraudulent in its to strike the court’s discretion refusal letter, affidavit, paper, by of or means testimony. witness’ statement, verbal, any written or or false II 18 Violations U.S.C. 542—Customs any of or fraudulent by means false

Counts appliance, any false practice or or makes any rea- declaration without statement appellant’s troublesome is conten- More such cause to believe the truth of sonable requires specific proof tion that of statement, procures making of or government. defraud the A fair intent to any mat- false as to any such statement it reading of the text of the statute reveals thereto reasonable ter material without The first punishes two distinct offenses. state- to believe truth of such cause proscribes the of im- offense introduction ment, or not whether any through merchandise means of ported deprived any lawful may be of shall or practice” regardless “false or fraudulent duties; or deprived United States is whether act or guilty any is willful clearly requires proof That offense duties. Whoever whereby shall specific fraudulent conduct. The second omission ac- deprived of lawful duties charged may or offense—under —is or cruing upon merchandise embraced the loss of and makes directed at declaration, invoice, crime, to in such “any act or with- referred willful omission” letter, statement, invoice, affidavit, knowing paper, or or covered the false or being upon by such act or omission— that the invoice relied affected Cus- failing toms contains falsehoods but each offense not fined for Shall be falsehoods, agency alert the to those there- $5,000 imprisoned or not more more than depriving government, attempt- or years, or both.... than two it, ing deprive of duties. The last exam- government’s agree with the ple apply only if than would someone other the first offense under construction of the defendant made the false statement importation by use of false state § 542— first, simply defendant failed to practices. Anyone seeking to im ments or correct it. who, in the course of that im port goods contrary This view of the statute (written portation, makes a false statement does— government’s to the assertion—mаke oral), guilty criminal act. of a paragraph pro- sense. The second of 542 paragraph of 542 is more The second separate conduct distinct and from scribes parse. prongs It has two difficult to paragraph. that covered the first Fur- separate kinds of acts and criminalize two ther, prohibits conduct prong The first refers back to omissions. discourage prevent aim to in order to il- provision the false statement of the first legal importation protect and to portion of the statute when it offense the collection of customs revenues. In ef- guilty willful states: “Whoever is fect, paragraph the second could reason- whereby ... United States ... ably “mop up” be read to the false state- accruing lawful duties provision by making sure that those upon referred merchandise embraced оr ” government by who seek to defraud the invoice, The use declaration.... willfully taking advantage of the false clearly “such” refers of the word back penalized just statements of others are “invoice,” para- etc. listed in the first are those place. who made them the first graph. paper specified invoice or paragraph 542 are the first false paragraph The second has a second Hence, part this first of the second ones. prong that does not refer to the earlier paragraph makes criminal those acts and provision. false statement This “act or omissions that the United States of prong particular part omission” is the specifically duties on the merchandise relat- Yip transgressed. claims De- ed to the false statements. argues prong may fendant that this not be proscribe completely read to an offense part para This first the of second separate from the rest of the He statute. graph obviously is not intended to criminal that in- reasons because the term “such and omissions that ize acts are themselves paragraph voice” in the second refers by false statements since these are covered the false invoices mentioned the first paragraph. the text of 542’s first paragraph, so too the term “such act or think this a sound conclusion because omission” must relate back to the first ascribing separate construction to two stat paragraph, government, so that the he con- utory meaning provisions the same and cludes, prove must the act or omission was scope is disfavored. Russello v. Unit Cf. deceptive way in the same that it must Statеs, 296, ed S.Ct. prove the invoices were false. We do not (1983)(court refrain 78 L.Ed.2d will agree. concluding language in differing from meaning has the same due two subsections On the face of the “such invoice” draftsmanship). to some mistake Rath must refer to the false invoices mentioned er, language paragraph paragraph. in the second in the first But “such act or proscribe nothing of 542 must conduct not cover omission” can refer to other than by Examples beginning paragraph, ed the first offense. of this of the second helping pack place phrase sort of would be is to conduct that is age ship beginning phrase the merchandise referred to be found. The “Whoever invoice, any carting away guilty the false is of willful act or omission” is case, mention of “act or omission” this there is no claim the first begins para- goods intо separate smuggled country, It and the statute. “or,” following government an it forms graph, actually deprived was not prohibition standing logical complete Samsung, its lawful duties because primarily reference to the first paid on its own without liable for the Therefore, paragraph. We conclude that the second Yip’s them. conviction must that, is en- paragraph’s theory act or omission offense rest on because of his omissions, from first tirely separate the statute’s acts or willful paragraph The second reads: paragraph. might deprived have been of duties had Samsung not been it un solvent. But guilty any act or Whoever is willful reading language clear from a of the whereby the United States shall omission statute how close the causal connection deprived any or lawful duties must be between willful act or omission accruing upon affected merchandise ... resulting probability increased act or omission— will of lawful not be fined each offense Shall face, duties. On its statute does $5,000 imprisoned not more more than any limiting principle prevents contain years, or than two both.... making any from criminal and all acts— paragraph This make criminal might matter how far no removed—that to file omission forms of lawful duties. brought into the United interpretations Because stat of criminal bringing acts undertaken in such unde- utes which would “criminalize broad goods into the United States. These clared range apparently conduct” are innocent acts and omissions are not false statements disfavored, States, Liparota v. United para- and so are not covered the first 419, 426-27, 2088-89, U.S. graph are omis- they nor acts and 85 L.Ed.2d it is our task through which an seeks to sions individuаl Congress whether intended the ascertain benefit from the false statements of anoth- all-encompassing. statute to be so See Bi er, distinguishing these omissions acts and States, v. United U.S. fulco part from those covered the first (1980) 100 S.Ct. 65 L.Ed.2d 205 paragraph of the Never- second statute. (where scope of criminal statute is un theless, it makes sense that certain, language, court will examine struc just false would want to make criminal not ture, motivating legislative history, and importation statements made to secure policies congression of the act to ascertain thereon, goods and intentional reliance but intent). al attempts making also to avoid state- willful paying altogether ments and —an Legislative History B. § 542 i.e., equally deception, invidious form of deprives smuggling, question, we turn to To answer of lawful revenues. legislative history, Bradlеy v. statute's see Cir.1988), 1288, (6th Austin, 841 F.2d 1293 is another broader of acts or There set light the act see if it sheds on whether to paragraph arguably pro- omissions this any incorporates section such or omission any Those are willful acts or omis- scribes. roots can limiting principle. The statute’s attempts smuggle are not sions which 2, 1799, ch. to the Act of be traced March customs, specific through merchandise but 627, part 22, 1 677 which stated Stat. may deprive the which nevertheless act to merchandise, duties; goods, any of lawful in other if or United States That wares words, entry at shall made willful acts or omissions taken of which have been collector, any during process of a shall not importation time the office according cost negatively ability to the actual affect invoiced thereof, place exportation, with lawful at the collect its thereupon, or proscription design to evade duties. The relevance thereof, part goods, all wares plain. any such merchandise, thereof, (1922), provision or the value 981-82 but the willful or person making unchanged, entry, of the remained as it did in the be recovered enactment, 17, 1930, Act of forfeited.... see June ch. shall be 591, 497, (1930), 46 Stat. 750 when Id. at changes were made to the false statement present It can be seen that the criminal 1935, portion. single phrase was in- was, origins, years in its and for 75 statute serted at end of the False Statement thereafter, penalty forfeiture a civil semicolon, provision ending in a see Act of twice, violations. It was modified 5, 1935, 438, 304(a), August ch. 49 Stat. 1830, 28, 1830, May Act of Stat. 409 (1935),separating for the first time the 1832, 14, 1832, (1830), July and in Act of provisions concerning false statements and quite Stat. 583 before version sim- willful acts. including ilаr to the current for the § 542— The statute was amended 1948 to its penalty adopted first time a criminal —was present 25, 1948, format. See Act of June provided in 1874. The 1874 Act 645, 542, (1948). ch. 62 Stat. owner, any importer, consignee, That this current version deleted the shall, agent, person who or phrase any twice used portion “or thereof” revenue, intent to defraud the make or provision, from the willful act or omission make, attempt any entry imported explaining why without these words—first merchandise, by any means of fraudulent added in the 1874 version—were eliminat- invoice, affidavit, letter, pa- or false or S.Rep. ed. No. Cong., See 80th 2d statement, per, by any or false means (1948); H.R.Rep. Sess. No. 80th verbal, guilty written or or who shall be Sess., Cong., Appendix, 2d at A45 any willful act or omission means tarry long We need not point on this be- whereof the shall be de- cause the words surplus- taken out were prived por- any lawful or age, they qualified included with the items thereof, accruing upon tion the merchan- in earlier versions of the lawful dise, thereof, any portion or embraced or duties and merchandise. think a sim- invoice, affidavit, referred to in such let- ple streamlining intended, was all that was ter, statement, paper, or or affected contrary and no indication is found in the omission, shall, such act or for each of- legislative legislative materials. This histo- fense, exceeding be fined in sum not ry, sparse, while does demonstrate that the fifty five thousand dollars nor less than originated forfeiture, statute as a civil rath- dollars, imprisoned or be time not criminal, Thus, er than a statute. its broad both; exceeding years, two and in language, basically which has remained un- fine, addition to such such merchandise changed years, over the cannot be said to forfeited; shall which forfeiture shall Congressional have stemmed from a aim to only apply to the whole of the merchan- all-encompassing category make an of acts package dise in containing the case or Rather, Congress criminal. pro- desired to particular article or articles of mer- government’s tect the economic interest chandise to alleged fraud or ensuring the appropriate collection of cus- fraud relates.... toms duties. 193, 12, Act of June ch. 18 Stat. C. Case Law under § 542 Act of June ch. Next, we examine the case law to see 6, 9, 134, (1890), 26 Stat. 135 and in light §§ question posed. what it sheds on the 1909, August Act of ch. single Research has not unearthed a case (1909), again Stat. 95-97 the statute was person violating where a accused of any significant change amended without paragraph willful act or omission of provision. the willful act The civil and predecessors successfully or its has been penalty provisions separated criminal prosecuted were upon govern- and convicted 21, Sept. the first time under the Act ‍​​‌‌‌​‌​​‌​​‌​​​‌​​‌‌​‌‌​‌‌​‌​​​​​‌‌​​‌​‌‌​‌‌‌‌​‍of proposed, interpretation ment’s unlimited 1922, 356, 592, ch. paragraph. 591 and Stat. of Almost all cases §§ 542, nating those that men a brought under even false invoice and a weight false section, the act or omission directly, tion or discuss rather than indirectly, cause government government an intent to deceive the deprived involve to be of duties. proper as to the amount of duties owed on In Seventy United States v. Five Bales See, e.g., specific merchandise. United Tobacco, (2d Cir.1906), 147 F. 127 we of (2d Borello, Cir.1985); 766 F.2d 46 v. government’s turned down the effort (C.C.S. Cutajar, 60 F. 744 States v. confiscate innocently, though tobacco im- D.N.Y.1894). properly, labeled under the 1890 version of cases for inter- support There is these statute, stating: “Proof which is suffi- requiring in manner preting the statute a uphold cient to a forfeiture import- an proof of at least a close nexus between property ers’ is also justify sufficient to deprivation act or omission and of conviction, imprisonment. fine and Such a duties, for several earlier government of statute strictly must be construed. Mani- employ proximate causation lan- cases festly it apply was not intended to to mis- guage. Boyd, 24 F. judgment takes or errors in but to acts of (C.C.S.D.N.Y.1885)(Brown, J.), rev’d omission, commission and plainly in- 616, 6 grounds, on other 116 U.S. S.Ct. culpable dicate a willful and intent to de- (1886), L.Ed. 746 defendants’ con- fraud the of its lawful reve- upheld upon proof showing victions were nues.” at 130. Id. they passage goods had secured free of Rosenthal, In United States v. 126 F. obtaining, through first (C.C.S.D.N.Y.1903), nom, sub affd through representations, fraudulent a let- States, (2d Browne v. United 145 F. 1 Treasury Department stating ter from the Cir.1905), in the were to be used construc- 50 L.Ed. 623 an indict of a Post tion Office. against importer an of under obtaining court held that the letter “cannot the 1890 version of statute was sus be considered as a remote or indirect cause distinguished tained. The court the second only, procuring direct of but as the cause proscribed of the two offenses the stat entry.” ap- While it the free Id. at 696. ute from the first as follows: pears holding that the court its more based provi- Then adds the further on the fact that the invoices were false that, any person guilty sion if shall be theory letter from the than on omission, he willful act or shall be omission,” Treasury constituted an “act or punished, prоvided such act or omission proximate language the use of the cause deprivation results in the of the United noteworthy. States of lawful duties. A willful act or Cutajar, 60 F. the course of might omission itself be fraudu- discussing provi- whether the false invoice lent, itself, might as a and it save required proof sion of the statute also discipline, en- matter of infraction of the scheme did or could de- harmless, tirely might it occur in duties, prived the court ways great variety such a that Con- asserting that the a false noted scheme punish- gress unwilling to attach the invoice, weight on the combined with a it, proximate ment to unless it was the government agent false return filed losing cause of the revenue. doing weighing facilitates “doubtless case, importer Id. at 776-77. entry goods upon payment of less invoices, had filed false so the court did not legal than the amоunt so question proximate the explore the of how whereby may be a means needed to be to the defendant’s actions of the lawful on the shall to be government’s loss of revenue order Although merchandise.” Id. at 745. closely criminal under the will- considered ultimately invoice court concluded false paragraph quoted provision, ful act under alone was sufficient for conviction Nevertheless, given paucity is dicta. paragraph the first noted that statute, the fact considering this the connection between the act of coordi- case law 152 sum, opinions repeat ‍​​‌‌‌​‌​​‌​​‌​​​‌​​‌‌​‌‌​‌‌​‌​​​​​‌‌​​‌​‌‌​‌‌‌‌​‍the above a re paragraph the as incor- the court read requirement “proximate cause” the theme in

porating a frain similar to Diamonds, (8th persuasive. Ninety-Nine is 139 F. 961 v. Cir.1905), Loose 218½ Carats L.Ed. where the (S.D.N.Y.1907), Emeralds, aff'd, F. 643 “highly pe court held that the statute is (2d Cir.1907), Manuel Suarez F. strictly nal” and must be construed. Id. at York, and to a cus in New stated arrived 967, quoting States v. Boxes any pre not have toms official that he did 7 Pet. 8 L.Ed. person. Sugar, A jewelry on his cious stones or up bag of em and none of the cases involve as remote a subsequent search turned Thus, and he was pockets, in one of his connection as the one before us. the eralds Stating Act. charged supports under the 1890 case law of Circuit narrow appli parts separate had the statute’s two reading of the statute.

cations, applied and that the first papers, importer the filed upon which Requirement D. The Scienter falsehoods, judge said which contained Logic also us that this statute convinces could not be said to have violated Suarez does not have as broad reach as part he did not file false the first because government urges believes. It goods he he regarding statements admitted criminalizes all willful acts or omissions part The will importing. second —the may deprive that shall or apply, the portion ful act or omission —did proof of lawful without of scienter said, judge concealed the because Suarez that such acts or omissions de- would so he was presence of the emeralds when prive government’s interpre- it. Under if explicitly by inspector the customs asked tation, may upheld any a conviction time any precious he had stones. Id. at 646. a broker commits a fraud on a client— government Loose Emer- The believes taking money given him with the under- supports a construction of the alds broad standing paid government it will be to the paragraph second under 542. We arе temporarily for customs duties and even First, agree unable to for two reasons. converting it to his own use—because could have we read Suarez action constitutes a “willful act or omis- convicted under the first or false been purposes sion” for 542. Under this paragraph of the statute since statement every inclusive fraud on a construction response to a explicitly he stated—in direct regardless perpetrated when is client— or whether it question subject he did not —that directly jeopardizes pay- any precious person stones on his ment of customs duties —constitutes Second, in fact he did. the court’s when crime, 542, providing a violation of interpretation accords with a narrow read- prosecution can establish even a tenuous is, ing provision. of the willful act That connecting deprivation link the fraud to the applies in a statute case where true, This of duties. seeking accused to avoid customs makes no insists, any even when there was never regarding goods importing, statement he is security pro- risk—because of the financial deprives where such willful act or omission importer vided in bond or other may deprive of reve- form—that the United States would actual- nues, directly is so con- where act ly duties. deprivation nected to the of the duties that conclusion, logical its Taken to fol- the defendant knew what result would government’s interpretation is all encom- essence, low from his actions. the ac- passing. After a customs broker submits smug- engaged smuggling. cused is proper papers to have the re- gling scenario is a distant stretch from the Customs, any “willful act or government’s proposition leased from willful рart its which does or act or omission a defendant which in omission” on any way deprives of lawful duties the United States of arguably constitute a criminal duties is a crime under CONCLUSION For paragraph of 542. under the second § funds instance, remove Yip’s decisions to counts of mail The convictions con- account could be Airway’s bank from charged under 18 U.S.C. 1341 are fraud § transactions since these charging appel- criminal sidered affirmed. The 59 counts depriving more difficult. lant with payment of duties made duty payments under 18 U.S.C. lawful bankruptcy assuming Sam- Airway’s — reversed and the matter is re- 542 are then have inability sung’s —could as to those counts to the district manded of revenue. deprived proceedings further court for whatever narrowly Reading penal statute this —as deems advisable. plain that the we must—makes we believe Affirmed, reversed, part, pаrt, in in crucial to its language used is “willfulness” proceedings. for further remanded question in must interpretation. The act is, with it must be done “willful”—that MINER, Judge, dissenting Circuit that are of con- knowledge the results part: Were we to read government. to the cern appellant’s Because I would affirm voluntarily any act done “willful” to denote him charging on the counts convictions as the competent person, by a of lawful depriving the United States with us, such construc- apparently would under 18 U.S.C. payments only accidents. This exclude tion would charging him with as on the counts well open possibility would leave view of 18 U.S.C. mail fraud violation ordinary citi- performed by an indirect acts respectfully part. I dissent sudden- going his business could zen about brethren, Maj. op. recognized by my As felon. ly make him a offenses are defined at two distinct entry 542: the provisions of 18 U.S.C. § origin of the statute the civil Given imported merchandise means emphasis on the repeated law’s the case statement, or not the Unit- false “whether penal statute narrow- need to construe this shall or ed States planned Congress must have ly, we believe duties”; act or omis- lawful willful that, criminal con- in order to constitute “whereby the United States shall sion duct, person’s acts willfulness deprived of lawful duties.” may be to their voluntariness only extend must offense, for second here with the deal competency, also to person’s but and the upon uncon- appellant was convicted act’s ability to foresee the the defendant's he converted to his evidence that troverted government’s loss of customs on the effect sums personal use substantial interpretation is accord duties. This customs broker to him as a furnished languagе proximate use of the with our payment of custom Samsung for the cause, it is those acts that are into this equipment imported electronic deprivation of law- proximate cause of My “hold that country. brethren expect- could be ful duties that a defendant link be- prove that the government must would result ed to have known deprivation was so and the the act tween deprivation. should have defendant knew or direct that deprive the would

known his actions sum, govern we hold that duties.” Id. government of lawful at and a new trial is reversed the link between the The conviction prove must never at- “the because ordered was so direct that deprivation scienter, and the Yip’s tempted prove his should have known knew or defendant jury on this did not instruct trial court government of deprive the ‍​​‌‌‌​‌​​‌​​‌​​​‌​​‌‌​‌‌​‌‌​‌​​​​​‌‌​​‌​‌‌​‌‌‌‌​‍actions agree I am unable issuе.” Id. And, govern since here the duties. lawful consequences. holding or its Yip’s attempted prove scien ment never jury us- ter, not instruct the the trial court did court instructed The district defining language issue, statutory precise conviction cannot ing jury on out in offense set the second on the 542 counts. stand govern- majority opinion provide that “the ed in the no direct instructed court further knowledge beyond support requirement a reasonable for a prove ment must deprivation. simply the defendant acted know- actual There is no ba- doubt ... willfully.” very say, plain language The next in- ingly and sis to view of the the standard definitions “Congress included must have struction “knowingly” “willfully.” I think planned per- ... willfulness of appel- are all that that these instructions son’s acts must not extend to their to on the issue of scienter lant was entitled person’s competency, voluntаriness fully justified the evidence his and that ability but also to defendant’s to fore- I do not know what deficien- conviction. government’s see the act’s effect on the they refer to when de- my cies brethren loss of customs duties.” Id. at 153. If a “link” between act the absence of scribe Congress wanted to include the element of as to demonstrate deprivation so direct forseeability certainly in section knew or should have known that defendant knew how to do so. depriving government that he would be Finally, agree govern- I do not that the could more of customs duties. What be interpretation of the statute is ment’s so direct than the theft of monies known to be encompassing” sweep “all as to within it payable to the United States? due and ordinary the “indirect acts” of “an citizen course, appellant it could be said that Of going Only аbout his business.” those who government could not know that the would willfully way act or fail to act in as if of its duties he believed that lose, government to cause the or to eventually Samsung pay. But that duties, jeopardy losing, stand in type knowledge is not what the statute every perpetrated are covered. Not fraud requires. required knowing What is is a upon a customs broker customer will may” deprive “shall or act which give prosecution, my rise to a successful government jury of monies due it. The Only brethren fear. those frauds that certainly appellant’s was free to find that jeopardize the collection of customs knowing stealing act of as well as ultimately whether the duties are lost or deprivation, willful. As far as the the act not, Congress were the concern of in enact- stealing itself demonstrated that ing majori- this statute. The failure of the might customs duties stolen never find ty recognize the fact that has government’s way their into the coffers. power exercised its to criminalize this sort appellant It seems ludicrous for to be exon- compels my of conduct dissent. merely liability erated from because some- good one else would make on his obli- Samsung eventually

gation. did make

good, despite having given appellant the previously pur-

same amount for the same pose. did fact lose CEMETERY, The WOODLAWN here, however, agreed because it Plaintiff-Appellee, penalties pay- waive and interest for late ment. LOCAL CEMETERY WORKERS event, I think that it reads too AND GREENS ATTENDANTS impose specific much into the statute to UNION, Defendant-Appellant. requirement regard scienter No. Docket 90-7987. money, majori- government’s loss of as the requires only The statute ty holds. Appeals, United States Court of deprived. shall or Second Circuit. is or is not ulti- Whether Argued Feb. really of no mately deprived moment. April Decided background The historical discussed majority opinion relates to statutes worded differently from the one with

much Likewise,

we are concerned. the cases cit-

Case Details

Case Name: United States v. Matthew Yip

Court Name: Court of Appeals for the Second Circuit

Date Published: Apr 4, 1991

Citation: 930 F.2d 142

Docket Number: 489, Docket 89-1223

Court Abbreviation: 2d Cir.