Posted On: September 17, 2012

Third Circuit Rules Unlicensed Distribution of Prescription Drugs Not an “Aggravated Felony”

In Borrome v. Attorney General, 2012 U.S. App. LEXIS 14676, Petitioner Borrome was an immigrant from the Dominican Republic, who, since August 1996 had been a lawful permanent resident of the United States. Following his conviction under a federal indictment alleging the distribution of prescription drugs including Oxycontin, an immigration judge (IJ) ordered Borrome removed. On the Government's motion, the Board of Immigration Appeals (BIA) summarily affirmed the IJ's decision without opinion pursuant to 8 C.F.R. § 1003.1(e)(4). Borrome petitioned for review.

The Circuit court applied the categorical approach used to assess the nature of prior convictions to hold that a federal conviction for the unlicensed wholesale distribution of prescription drugs was not an "aggravated felony." The "case hinges," the Court explained, "on the relationship between prescription ‘drugs’ and ‘controlled substances.’" Id. The statutory provisions criminalizing the unlicensed wholesale distribution of prescription drugs — 21 U.S.C. §§ 331(g) and 353(e)(2)(A) — do not define a form of "illicit trafficking in a controlled substance" because "while some prescription drugs contain chemicals that are also regulated as ‘controlled substances’ under the [Controlled Substances Act,. 21 U.S.C. § 801 et seq.], many do not." Id. at 18. By the same token, the prior conviction was not for a "drug trafficking crime" under § 924(c)(2) because § 924(c)(2) defines "drug trafficking crime" to mean any felony punishable under the federal controlled substance laws.

In the course of its analysis, the Court stated that it "is well established that the aggravated felony enumerating statute at issue here, [8 U.S.C. § 1101(a)(43)(B)], does not permit departure from the categorical approach nor does it invite inquiry into the underlying facts of conviction." Accordingly, the defendant’s guilty plea under an indictment alleging the wholesale distribution of Oxycontin — a prescription drug containing the controlled substance oxycodone — did not turn the conviction into an "aggravated felony."

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Posted On: September 12, 2012

If Police Prevent Your Car From Legally Moving, They Have Seized You

In United States v. Jones, 678 F.3d 293; 2012 U.S. App. LEXIS 9513, Defendant Frederick Jones was convicted of one count of possession of a firearm by an unlawful user of controlled substances, in violation of 18 U.S.C.S. § 922(g)(3), and the U.S. District Court for the Eastern District of Virginia sentenced him to 41 months' imprisonment and a 3-year term of supervised release. Defendant appealed the denial of his suppression motion.

In Jones, two police officers in a marked patrol cruiser closely followed a car from a public road onto private property, and then blocked the car's exit. The officers observed no traffic violation. The only assertedly suspicious activity they saw was the car's presence in a high-crime neighborhood with out-of-state tags. These facts alone led the officers to suspect that the car's occupants, four African American men, were involved in drug trafficking. Immediately after the driver, Frederick Jones, exited his car, the officers approached him and asked that he lift his shirt, which he did. The officers then asked him to consent to a pat down search, which he did. After neither the shirt lift nor the search revealed anything, the officers discovered that Jones had committed a traffic violation, and so detained him. Subsequently, they found he possessed a firearm and a small quantity of marijuana.

Defendant moved to suppress the evidence, alleging that the officers illegally seized him when an officer asked him to lift his shirt and then submit to a pat down search – an encounter that the Government contended was consensual. The appellate court agreed with Defendant, holding that although the officers did not draw their holstered weapons or use a threatening tone, the existing circumstances – including the fact that Defendant’s car was blocked from leaving – would suggest to a reasonable person that the officers were not treating the encounter as routine in nature, but rather that the officers were targeting him because he was engaged in illegal activity. The court noted, “Any one of these facts on its own might very well be insufficient to transform a consensual encounter into a detention or seizure, but all of these facts viewed together crystallize into a Fourth Amendment violation”. Id. at 305.

The judgment of the district court was reversed and the case was remanded for further proceedings.

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Posted On: September 10, 2012

Fourth Circuit Holds that Money Laundering Applies to the Profits of Crime, Not the Expenses

In United States v. Cloud, 680 F.3d 396; 2012 U.S. App. LEXIS 10946, The United States Court of Appeals for the Fourth Circuit reversed Defendant William Roosevelt Cloud’s money laundering convictions, applying State v. Santos, 553 U.S. 507 (2008). Cloud’s convictions all stemmed from a complex mortgage-fraud scheme in which Cloud would dupe buyers with good credit into purchasing property as an ostensible joint-real estate investment with Cloud; unbeknownst to the buyers, however, the properties had already been “flipped” by Cloud who was making a profit on each deal and who had in his pocket a group of lawyers, loan officers, and mortgage brokers – all of whom were perpetuating the conspiracy.

Cloud was indicted for mortgage fraud and money laundering. The mortgage fraud charges stemmed from Cloud encouraging his buyers to make false statements on their mortgage applications. The money laundering charges arose from Cloud paying a number of people to help him to find home buyers and facilitate their real estate closings. Cloud was convicted by a jury and sentenced to 324 months' imprisonment.

On appeal, Cloud argued that the government failed to prove the money laundering charges because it did not show that the transactions involved the profits of unlawful activity as required by Santos.

The appellate court agreed, stating:

“Cloud's money laundering convictions are based on payments to recruiters, buyers, and other coconspirators for the role each person played in the mortgage fraud scheme. Cloud's mortgage fraud depended on the help of others, and their help, in turn, depended on payments from Cloud. Such payments are no different than ‘the felon who uses the stolen money to pay for the rented getaway car’ or ‘the initial recipient of the wealth’ in ‘any wealth-acquiring crime with multiple participants . . . [who] gives his confederates their shares.’ Santos, 553 U.S. at 516 (plurality opinion). Because Cloud's money laundering convictions on Counts 28-33 were based on paying the ‘essential expenses’ of his underlying fraud, we find a merger problem.”

Applying the precedent of Santos, the Court reversed defendant's money laundering convictions.

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Posted On: September 6, 2012

Fourth Circuit Finds No FBAR Penalty Exceptions for Voluntary Disclosure and Plea Bargains

In U.S. v. Williams, 2012 U.S. App. LEXIS 15017; 2012-2 U.S. Tax Cas. (CCH) P50, 475, the United States Court of Appeals for the Fourth Circuit held that a taxpayer could be liable for significant civil penalties for failing to report interest in foreign bank accounts. The United States brought an enforcement action to collect the civil penalties assessed against defendant taxpayer Williams, pursuant to 31 U.S.C.S. § 5321(a)(5), for his failure to report his interest in two foreign bank accounts by failing to file a completed form TD F 90-22.1 (FBAR) for tax year 2000. The U.S. District Court for the Eastern District of Virginia, at Alexandria, entered judgment in favor of the taxpayer. The United States appealed.

By way of background, the FBAR is required to be filed by U.S. persons, which include U.S. citizens, resident aliens, trusts, estates, and domestic entities that have an interest in foreign financial accounts and meet the reporting threshold. The total threshold is also much lower than with Form 8938, being $10,000 at any time during the calendar year. The penalties associated with failure to file the FBAR are also more severe. If the failure to file is determined to be non-willful the penalty is $10,000, but if the failure to file is “willful,” then the penalty for violating the law is up to the greater of $100,000 or 50 percent of account balances.

In the instant case, the district court held that the United States failed to establish that Williams willfully violated 31 U.S.C.S. § 5314. But on appeal, the Court found that Williams’ signature on his 2000 federal tax return was prima facie evidence that he knew the contents of the return. Williams made a conscious effort to avoid learning about reporting requirements, and his false answers on both the tax organizer and his federal tax return evidenced conduct that was meant to conceal or mislead sources of income or other financial information. This conduct constituted willful blindness to the FBAR requirement. Williams’ guilty plea allocution further confirmed that his violation of § 5314 was willful because the taxpayer acknowledged that he willfully failed to report the existence of two foreign bank accounts to the Internal Revenue Service or the Department of the Treasury as part of his larger scheme of tax evasion, and this failure was an admission of violating § 5314. At a minimum, Williams’ undisputed actions established reckless conduct, which satisfied the proof requirement under § 5314. The district court clearly erred in finding that the taxpayer did not willfully violate § 5314.

The judgment of the district court was reversed and the case was remanded for further proceedings.

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