TABLE OF CONTENTS

 

Table of Contents           i

 

Table of Authorities        iv

 

Statute Involved  xi

 

Preliminary Statement of Subject Matter

And Appellate Jurisdiction           xii

 

Statement of the Issues  xiii

 

Statement of the Case    1

 

            I.          The Theories of the Prosecution and Defense       1

 

            II.          Pretrial Proceedings       2

 

                        A.         Motions to Dismiss        2

 

                        B.         Motions In Limine           3

 

            III.         The Trial            3

 

                        A.         The Court's Initial Instructions      3

 

                        B.         The Government's Case  4

 

                        C.         The Rule 29 Motion        7

 

                        D.         The Defense's Case       8

 

                        E.         The Charge Conference  8

 

                        F.         The Verdict and Sentence           9

 

Summary of Argument    10

 

Argument          12



Point I

 

Because the Undisputed Trial Evidence Demonstrates That, Before Beginning His Offshore Gambling Operation, Defendant Became Convinced That Such Activity Would Not Be Unlawful If Conducted Solely in Antigua, There Was a Complete Absence of Criminal Intent on Defendant’s Part to Violate 18 U.S.C. 1084(a); Accordingly, Not Only Did the Court Commit Clear Error When it Repeatedly Instructed the Jury That Defendant's Good Faith Was Irrelevant as to the Conspiracy Charge, but the Evidence of Guilt as to That Count Was Legally Insufficient    12

 

            A.         Background       13

 

                        1.         The Evidence of Jay Cohen's Good Faith  13

 

                        2.         The District Court's Rulings

                                    and Instructions 18

 

            B.         The Law of Conspiracy and the

                        Need For a “Corrupt Motive”        21

 

                        1.         The Powell Doctrine       21

 

                        2.         Second Circuit Law        24

 

                        3.         The Feola Ruling            31

 

            C.         Discussion        36

 

Point II 

 

The District Court Erroneously Concluded That the Exception Set Forth in 18 U.S.C. § 1084(b) Does Not Apply to this Case and Improperly Instructed the Jury as to the Essential Elements of the Substantive Offense.          39

 

            A.         The Statute       39

 

B.         The District Court Erroneously Concluded that

                        It is Not “Legal” to Place a Bet in New York.         41

 

C.         The District Court Erroneously Determined as a Matter of Law, and Thus Improperly Instructed the Jury, that a Request from New York to Have a Bet Placed from a Wagering Account Located in Antigua Constituted Transmission of a Bet or Wager Per Se.         45


D.         The Undisputed Evidence Failed to Establish that Jay Cohen Had the Requisite Mens Rea to Commit the Substantive Offenses Alleged in Counts Two Through Eight, and the Court Improperly Instructed the Jury as to the Mens Rea Element of § 1084.            56

 

Point III

 

The Rule of Lenity Requires Reversal of Defendant’s Convictions  on  All  Counts  and  Dismissal  of  All Charges.            62

 

            A.         The Rule of Lenity          62

 

            B.         Application to § 1084      63

 

Point IV

 

The District Court Committed Clear Error in Declining to Give an Aiding and Abetting Charge to the Jury; Moreover, the Evidence as to the Substantive Counts Was Legally Insufficient            67

 

            A.         Applicable Principles      67

 

            B.         The District Court's Instructions   68

 

            C.         Discussion        71

 

                        1.         The Instructions 71

 

                        2.         Insufficiency of the Evidence       71

 

Point V

 

The District Court Abused its Discretion by Denying Defendant's Motion to Take the Deposition of Gyneth McAllister, Whose Proffered Testimony Was Relevant to Jay Cohen's Belief That His Conduct Was Lawful and to His Belief That Only Information Assisting in the Placing of Bets Was Transmitted from New York to Antigua            73

 

Conclusion        77

 

Certificate of Compliance Pursuant to

FRAP 32(a)(7)(C)           78

 


            TABLE OF AUTHORITIES

 

 

FEDERAL CASES

 

Browne v. United States, 145 F.1 (2d Cir. 1905),

            cert. denied, 200 U.S. 618 (1906)            24

 

Burton v. United States, 204 U.S. 344 (1906)        50, 51

 

Chadwick v. United States, 141 Fed.225

            (6th Cir. 1905)    23, 25, 26, 28, 30

 

Cruz v. United States, 106 F.2d 828

            (10th Cir. 1939)  23, 24, 36, 38

 

Fall v. United States, 209 Fed. 547

            (8th Cir. 1913)    23

 

Hamburg-American Steam Packet Company v. United States,

            250 F. 747 (2d Cir.),cert. denied,

            246 U.S. 662 (1918)       24, 25, 26, 28, 30

 

Landen v. United States, 299 F. 75

            (6th Cir. 1924)    23, 25, 26, 37

 

Lantis v. United States, 186 F.2d 91

            (9th Cir. 1950)    24, 30

 

Liparota v. United States, 471 U.S. 419 (1985)      35, 58

 

Martin v. United States, 389 F.2d 895

            (5th Cir.), cert. denied,

            391 U.S. 919 (1968)       42

 

McBoyle v. United States, 283 U.S. 25 (1931)      62

 

Morissette v. United States, 342 U.S. 246 (1952)  35

 

Nye & Nissen v. United States, 336 U.S. 613 (1949)         68

 

Pinkerton v. United States, 328 U.S. 640 (1946)   71

 

Sagansky v. United States, 358 F.2d 195 (1st Cir.)

            cert denied, 385 U.S. 816 (1966) 46

 

Staples v. United States, 511 U.S. 600 (1994)      35

 

State of Missouri v. Coeur D’Alene Tribe, et. al,

            1997 WL 603834 (W.D. Mo. 1997)           47

 

Sterling Suffolk Racecourse Ltd. Partnership v.

            Burrillville Racing Ass’n, Inc., 989 F.2d 1266

            (1st Cir.), cert. denied, 510 U.S. 1024 (1993)        41, 42

 

United States v. Bailey, 444 U.S. 394 (1980)        35

 

United States v. Barker, 514 F.2d 208

            (D.C. Cir. 1975) (en banc)           24

 

United States v. Barone, 467 F.2d 247

             (2d Cir. 1972)    57

 

United States v. Bass, 404 U.S. 336 (1971)          62, 63

 

United States v. Blair, 54 F.3d 639

            (10th Cir. 1995)  36

 

United States v. Borgese, 235 F. Supp. 286

            (S.D.N.Y. 1964) 43

 

United States v. Bronston, 321 F. Supp. 1269

            (S.D.N.Y. 1971) 76

 

United States v. Bronx Reptiles, Inc., 217 F.3d 82

            (2d Cir. 2000)     58

 

United States v. Coy, 127 U.S. 731         34

 

United States v. Crimmins, 123 F.2d 271

            (2d Cir. 1941)     26, 27, 32, 33, 34, 37

 

United States v. Dauray, 215 F.3d 257

            (2d Cir. 2000)     63, 65

 

United States v. Dickerson, 508 F.2d 1216

            (2d Cir. 1975)     67

 

United States v. Doyle, 130 F.3d 523

            (2d Cir. 1997)     36

 

United States v. Feola,

            420 U.S. 671 (1975)                   22, 23, 24, 31, 32, 33, 34, 36, 37

 

United States v. Ferrarini, 219 F.3d 145

            (2d Cir. 2000)     36

 

United States v. Freed, 401 U.S. 601 (1971)         22, 33, 34

 

United States v. Jordan, 927 F.2d 53

            (2d Cir.), cert. denied, 501 U.S. 1210 (1991)         71

 

United States v. Harriss, 347 U.S. 612 (1954)       62

 

United States v. Keegan, 141 F.2d 248

            (2d Cir. 1944), rev'd, 325 U.S. 478 (1945) 27, 28, 30, 33

 

United States v. Keegan,

            325 U.S. 478 (1945)       22, 27, 28, 29, 31,34, 38

 

United States v. Labat, 905 F.2d 18 (2d Cir. 1990)            67

 

United States v. Lanier, 117 S.Ct. 1219 (1997)      62

 

United States v. Lanza, 790 F. 2d 1015

            (2d Cir. 1986)     36

 

United States v. Mack, 112 F.2d 290

            (2d Cir. 1940)     26, 27, 28, 30, 31

 

United States v. McDonough, 835 F.2d 1103

            (5th Cir. 1988),   42, 44

 

United States v. New Buffalo Amusement Corp.,

            600 F.2d 368, 382-383 (2d Cir. 1979)       32

 

United States v. Pezzino, 535 F.2d 483 (9th Cir.)

            cert. denied, 429 U.S. 839 (1976)            46

 

United States v. Pinckney, 85 F.3d 4

            (2d Cir. 1996)     32

 

United States v. Pipola, 83 F.3d 556 (2d Cir.),

            cert. denied, 519 U.S. 869 (1996)            68

 

United States v. Previte, 648 F.2d 73

            (1st Cir. 1981)    23, 31, 36, 38

 

United States v. Reeder, 614 F.2d 1179

            (8th Cir. 1980)    46

 

United States v. Reminga, 493 F. Supp. 1351

            (W.D. Mich. 1980)          23

 

United States v. Rosa, 17 F.3d 1531

            (2d Cir. 1994)     32

 

United States v. Schwartz, 464 F.2d 499

            (2d Cir. 1972)     31

 

United States v. Sellers, 483 F.2d 37 (5th Cir. 1973)

            cert. denied, 417 U.S. 908 (1974)            46

 

United States v. Singleton, 460 F.2d 1148

            (2d Cir. 1972), cert. denied,

            410 U.S. 984 (1973)       74

 

United States v. Smith, 198 F.3d 377

            (2d Cir. 1999)     67, 72

 

United States v. Southard, 700 F.2d 1

            (1st Cir. 1983)    44, 57

 

United States v. Stonehouse, 452 F.2d 455

            (7th Cir. 1971)    46

 

United States v. Tomeo, 459 F.2d 445 (10th Cir.)

            cert. denied, 409 U.S. 232 (1972)            46

 

United States v. Truesdale, 152 F.3d 443

            (5th Cir. 1998)    49, 51

 

United States v. Truesdale, No. 96-CR-261-D

            (N.D. Tex. filed Aug. 20, 1997)    49

 

United States v. Walker, 191 F.3d 326

            (2d Cir. 1999), cert. denied,

            120 S.Ct. 1702 (2000)    41

 

United States v. Whiting, 308 F.2d 537

            (2d Cir. 1962), cert. denied,

            372 U.S. 919 (1963)       74

 

United States v. X-Citement Video, Inc.,

            513 U.S. 64 (1994)         32, 34, 35, 57

 

United States v. Yermain, 468 U.S. 63 (1984)       32

 

United States v. Zambrano, 776 F.2d 1091

            (2d Cir. 1985)     68

 


 

STATE CASES

 

Lescallett v. Commonwealth, 17 S.E. 546 (Va. 1893)        50

 

McQuesten v. Steinmetz, 58 A. 876 (N.H. 1904)   50

 

People v. Augustine, 235 A.D.2d 915,

            654 N.Y.S.2d 179 (3rd Dept. 1997)          22

 

People v. Flack, 125 N.Y. 324, 26 N.E. 267 (1891)            22, 25, 35

 

People v. Giordano, 87 N.Y.2d 441,

            640 N.Y.S.2d 432, 446 (1995)     43

 

People v. Harris, 294 N.Y. 424, 63 N.E. 17 (1945) 22

 

People v. Powell, 63 N.Y. 88,

            2 Cow. Cr. Rep. 283 (1875)         passim

 

Saratoga Harness Racing, Inc. v.

            City of Saratoga Springs, 55 A.D.2d 295,

            390 N.Y.S.2d 240 (3rd Dept. 1976),

            aff'd, 44 N.Y.2d 980,

            408 N.Y.S.2d 331 (1978).          

48, 51

 

Watts v. Malatesta, 262 N.Y. 80 (1933)    43

 

 

FEDERAL STATUTES AND RULES

 

15 U.S.C. §§ 3001-3007 52-53

 

15 U.S.C. § 3002           52, 53

 

15 U.S.C. § 3004           53

 

18 U.S.C. § 2    67, 70-71

 

18 U.S.C. § 111 32, 33

 

18 U.S.C. § 371 xii, xiii, 1

 

18 U.S.C. § 1084           passim

 

18 U.S.C. § 1084(a)       passim

 

18 U.S.C. § 1084(b)       passim

 

18 U.S.C. § 1955           49

 

18 U.S.C. § 3503           73

28 U.S.C. § 1291           xiii

 

Fed. R. App. P. 4(b)       xiii

 

Fed. R. App. P. 28(f)      xi

 

Fed. R. App. P. 30(b)(1) 3

 

Fed. R. App. P. 32(a)(7)(C)         78

 

Fed. R. App. P. 32(a)(7)(B)(i)      78

 

Fed. R. Crim. P. 15(a)    11, 73

 

Fed. R. Crim. P. 29        7

 

 

STATE STATUTES

 

N.Y. Const. Art. I, § 9     42, 43

 

N.Y. Rac. Pari-Mut. Wag. & Breed. Law § 1012    51

 

N.Y. Penal Law §§ 225.05 - 225.30          42

 

Or. Rev. Stat. § 462.142(2)         51, 52

 

Or. Rev. Stat. § 462.725 52

 

4 Pa. Cons. Stat. § 325.218; 58 Pa. Code § 169.3            51

 

Tex. Penal Code § 47.01            51

 

 

 

STATE REGULATIONS

 

Or. Admin. R. 462-20-0010         52

 

Or. Admin. R. § 462-220-0020(2) 51, 53

 

Or. Admin. R. § 462-220-0060     53

 

 

 

 

 


MISCELLANEOUS

 

143 Cong. Rec. E1633   64

 

143 Cong. Rec. S2560   64

 

Developments in the Law – Criminal Conspiracy,

            72 Harv. L. Rev. 920, 936-937 (1959)        33

 

 

H.R. Rep. No. 87-967, 87th Cong.,

            1st Sess. (1961), reprinted in

            1961 U.S.C.C.A.N. 2631 44

 

Internet Gambling Prohibition Act of 1997

            (S. 474,"Kyl Bill")           64

 

Legislative Counsel of California,

            Opinion No. 15374 (June 21, 1999)          54

 

S. Rep. No. 554, 95th Cong.,

      1st Sess. 1977, reprinted in

      1978 U.S.C.C.A.N. 4132  53

 

S. Rep. No. 1117, 95th Cong.,

      2d Sess. 1978, reprinted in

      1978 U.S.C.C.A.N. 4144  53

 

United States Court of Appeals for the Second Circuit

            Local Rule 27(g) 78


Statute Involved (Fed. R. App. P. 28[f])

 

18 U.S.C. § 1084(a), (b)

 

 

      (a)  Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

 

      (b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.


UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

                                  

 

Docket No. 00-1574

 

                       

                                                                

 

UNITED STATES OF AMERICA,

 

                                                                                    Appellee,

 

- against -

 

JAY COHEN,

 

                                                                                    Defendant-Appellant.

                                                          

 

On Appeal From a Judgment of the United States

District Court for the Southern District of New York

 

                                                                

 

 

 BRIEF FOR APPELLANT

 

                                                                               

 

            Preliminary Statement of Subject Matter

And Appellate Jurisdiction

 

 

                        This is an appeal from a judgment of the United States  District Court for the Southern District of New York (Hon. Thomas P. Griesa) rendered on August 10, 2000, convicting Jay Cohen ("Defendant"), pursuant to a jury verdict, upon Indictment No. S2 98 CR 434 (TPG), of violations of 18 U.S.C. § 371 (Count One) and 18 U.S.C. § 1084(a) (Counts Two through Eight). Timely notice of appeal was filed on August 15, 2000 and the instant appeal invokes the jurisdiction of the Court of Appeals pursuant to 28 U.S.C. § 1291 and Fed. R. App. P. 4(b).

 

Statement of the Issues

                        1.         Whether the district court erred in instructing the jury that the law of conspiracy does not require a corrupt motive before there may be a conviction of a violation of 18 U.S.C. § 371, and whether, in the absence of such proof, Defendant's conspiracy conviction was based on legally insufficient evidence.

                        2.         Whether the district court erroneously concluded that the exception set forth in 18 U.S.C. § 1084(b) does not apply to this case, and improperly instructed the jury as to the essential elements of the substantive offense.

                        3.         Whether the rule of lenity requires reversal of Defendant’s convictions on all counts and dismissal of all charges.                        4.         Whether the district court committed clear error in declining to give an aiding and abetting charge to the jury, and whether the evidence as to the substantive counts was legally insufficient.

                        5.         Whether the district court abused its discretion by denying Defendant’s motion to take the deposition of Gyneth McAllister, whose proffered testimony was relevant to Jay Cohen’s belief that his conduct was lawful and to his belief that only information assisting in the placing of bets was transmitted from New York to Antigua.



Statement of the Case

I.          The Theories of the Prosecution and Defense

                        Under Indictment 98 CR 434 (TPG), originally filed on May 11, 1998, and superseded on October 16, 1998, Defendant was charged with Eight Counts. Count One alleged a conspiracy to violate the Federal Wire Act, under 18 U.S.C. § 1084, in violation of 18 U.S.C. § 371, and Counts Two through Eight alleged substantive violations of 18 U.S.C. § 1084.

                        The prosecution theorized that Defendant, although having established, with his "co-conspirators," an Internet and telephone wagering operation, the World Sports Exchange ("WSE"), in the sovereign offshore jurisdiction of Antigua, violated federal law by accepting wagers from the Southern District of New York and elsewhere through the use of the wires. The alleged wire use in this case entailed undercover federal investigators, posing as bettors in New York, contacting WSE, whose telephones and computer servers were located in Antigua, via telephone and the Internet.

                        During pretrial proceedings and at trial, the defense sought to demonstrate that Defendant consistently acted in a good faith belief that he was engaging in innocent conduct. Thus, it would be part of the defense that before launching his entity in Antigua, Defendant had sought advice, information and guidance from professionals. In fact, Defendant and his associates had prepared a Private Placement Memorandum which was approved by lawyers at Orrick, Herrington and Sutcliffe in San Francisco, with some input on tax matters from KPMG Peat Marwick, an internationally respected accounting and consulting firm.

                        It would be further claimed by the defense that before establishing WSE, Defendant had carefully researched the offshore wagering industry. Defendant thereby determined that there were other known wagering sites already functioning through the use of the Internet, absent any interference from the Government.

                        The jury would also be told that Defendant carefully modeled his business after the New York Off-Track Betting Corporation (“Capital OTB”). Defendant would explain that, given Capital OTB's mode of operation, he always believed that by physically placing his own Internet site in Antigua, where he completely relocated, and where wagering, as a licensed activity, was wholly lawful, he would not run afoul of United States law. Defendant also believed that he was an employee of a foreign corporation operating outside of the jurisdiction of the United States.

II.         Pretrial Proceedings

            A.         Motions to Dismiss

                        Prior to trial, Defendant moved to dismiss the charges on the ground that his conduct was exempt from prosecution pursuant to the provisions of 18 U.S.C. § 1084(b).  In this regard, Defendant contended, inter alia, that his business operated entirely in Antigua and that the placing of bets took place solely in that jurisdiction.  In addition, Defendant contended that § 1084 did not provide fair notice of the conduct sought to be proscribed.  Defendant’s motions to dismiss were denied.  See A109-65.


            B.         Motions In Limine

                        On January 4, 2000, during a pretrial conference, the Government sought to preclude, on relevance grounds, evidence that gambling was legal in Antigua. A171.[1] Upon hearing both parties, A175-92, the Court opined "that if the Defendant knew that he was using a wire communication facility . . . then he had the criminal mens rea, the criminal state of mind and would be guilty." A192. It then added that "if his defense is, well, I knew I was using a wire communication facility, but I did not know it was illegal, then that is not a defense in my view." A192-93.

                        On February 9, 2000, the defense requested, with an elaborate proffer, see Point V, infra, a one-week continuance in order to take the deposition of Gyneth McAllister, an Antiguan Government official who had become unavailable for trial. A206-08, A212-13, A220, A229-31. In accordance with its view as to the governing mens rea, the court ruled that the proffered testimony was irrelevant. A265. The court also denied a subsequent application for reconsideration.  A267, A282.

III.        The Trial

            A.         The Court's Initial Instructions

                        Immediately following defense counsel's opening statement, wherein he outlined Defendant's good faith defense, the court, sua sponte, offered certain additional instructions to the jury. Among these was the instruction that federal law is violated when there is a use of the wire communications facility in interstate or foreign commerce in order to conduct gambling activity. The court added that "[w]e are talking about a federal statute, not an Antigua law, or a Nevada law, or right at the moment a New York law." A291.

                        Ultimately, when allowed to protest on the record, counsel objected that the court had only discussed part of the relevant federal statute with the jury, thereby only "giving them half of the law to focus on during the entire trial, waiting two weeks before they hear a balance [sic] charge." A293. Counsel therefore asked the court to instruct the jury that there is an exception to the Wire Act, § 1084(b), which may apply "if what you are conveying is information from a state where placing a bet is legal to a place where gambling is legal." Id. The Court declined to "add anything." A294.      

            B.         The Government's Case

                        The Government first demonstrated Defendant’s efforts  to determine and verify the lawfulness of his business. Moranville: Tr. 379, 383-87, 420-21, 425-26, 435, 458; Hair: Tr. 472, 496, 501-02, 519. A Government agent thereafter verified that sports betting was legal in Antigua. Ference: Tr. 683.

                        The Government also introduced evidence concerning the nature of the Internet, accessing the Internet via computer, and the process of betting over that medium. Bondi: Tr. 57-66. A Government witness conceded that the WSE's Internet server in this case was located wholly in Antigua. Bondi: Tr. 104.

                        Thereafter, the Government's evidence in support of the conspiracy charged in Count One, as well as the substantive violations alleged in Counts Two through Eight, was predicated on testimony provided by undercover investigators. They testified to having made myriad phone calls and Internet visits to the WSE website, not all of which, though listed as overt acts, were charged as substantive crimes. Additionally, there was evidence that thousands of calls had been made to WSE, as well as money wired to WSE in Antigua, from all over the United States. Ference: Tr. 650-659.

                        Identifying tape recorded telephone conversations with WSE, and videotaped visits to the WSE website, which were introduced as exhibits, agents recalled that, from the Southern District of New York, they had either provided information or placed wagers with WSE, over the telephone and the Internet. It was established that WSE had set up "800" numbers, Stipulation: Tr. 685-687, and that, prior to wagering, a potential bettor had to wire money to the WSE account at Swiss American Bank in Antigua. Grant: Tr. 569-81; Ference: Tr. 656-700.

                        Only one agent, involving one occasion, had a personal conversation with Defendant. The agent, posing as a graduate student doing research on entrepreneurs and the Internet, telephoned WSE. Walsh: Tr. 169, 190, 192, Exhibit 46T. During the conversation, Defendant openly discussed his involvement with WSE, and noted that his company was "totally foreign." Walsh: Tr. 195-197, 199.

                        Agents could not ascertain whether Defendant either was present at the WSE headquarters or knew when the remaining telephone or Internet communications were made. Bondi: Tr. 108. In fact, Defendant voluntarily surrendered himself in New York on March 10, 1998, after learning that a warrant had been issued for his arrest. Ference: Tr. 620-621, 673. Accordingly, by the time agents initiated the communications underlying Counts Seven (March 17, 1998) and Eight (March 18, 1998), Defendant already had been taken into custody.

                        As to the substantive counts involving the mere transmission of information, the Government proved that two telephone calls were made from the Southern District of New York to Antigua on October 7, 1997 (Count Two) and March 17, 1998 (Count Seven). In the October 7th communication, Special Agent Steven Bondi called WSE, at a number obtained from its website, and spoke to an unidentified male. Bondi: Tr. 44, 46, 51, Exhibit 1. Using  an assumed name, Bondi received instructions for setting up a wagering account and wiring money to fund the account.  He thereafter established an account and sent $500 to Antigua. Bondi: Tr. 53, 53-54. Bondi was told at the time that "'when you bring up our website, you are basically taking a trip to Antigua.'" Bondi: Tr. 77.

                        On October 24, 1997 (Count Three) and October 31, 1997 (Count Four), Special Agent Linda Walsh accessed the WSE website from FBI headquarters in New York. Walsh: Tr. 146. On each of those occasions, she authorized the placement of bets from the $500 that had been wired to Antigua. Walsh: Tr. 153-54, 161-63, 164-66, Exhibits 5V and 8V. On November 7, 1997 (Count Five), Agent Bondi visited the WSE website and requested to place a bet from the FBI’s undercover wagering account. Bondi: Tr. 56, 68-73, Exhibit 11V. On November 14, 1997, Agent Walsh, using the name Susan O’Sullivan, requested placement of another bet by telephone from 26 Federal Plaza (Count Six). Walsh: Tr. 168-69, 190, 13T.

                        The remaining charged telephone calls were made on March 17, 1998 (Count Seven) and March 18, 1998 (Count Eight), after Defendant already had voluntarily returned to the United States. Ference: Tr. 620-21, 673. In the first conversation, initiated on March 17th from FBI headquarters in New York by Special Agent Carl Benoit, Benoit: Tr. 311-12, 325, Exhibit 128, he discussed sending money to WSE by wire. Benoit: Tr. 314. On March 18th, $300 was wired to Antigua. Benoit: Tr. 315.

                        Also on March 18th (Count Eight), Benoit made his next undercover call. Benoit: Tr. 315, 344, Exhibit 138. Someone named "Spencer," who informed Benoit that betting in the "licensed jurisdiction" of Antigua over the Internet was not illegal under United States laws, received Benoit’s wagering instructions. Benoit: Tr. 321-322, 339-340.

            C.         The Rule 29 Motion

                        In his motion for a judgment of acquittal, counsel first noted that Defendant had been arrested prior to the alleged conduct underlying Counts Seven and Eight, occurring on March 17 and 18, 1998. A423. He therefore claimed that "you can't aid and abet retroactively." A425.

                        As to the other substantive counts, counsel urged that "no crime is committed because the betting . . . occurs in Antigua, on the server in Antigua" and hence § 1084(b) provided an exception, since only information was provided from New York, where betting is not illegal. A426-29. Finally, as to the conspiracy count, counsel urged that "there is no evidence that Mr. Cohen engaged into [sic] an unlawful agreement with anyone." A430.

            D.         The Defense's Case

                        Following the denial of motions, and during the defense's case, as detailed below, various witnesses testified that Defendant had done extensive research and relied upon expert opinions as to the lawfulness of the venture prior to establishing WSE in Antigua. See Points I & II, infra.

                        Defendant personally testified to efforts he made to comply with, and thereby avoid violating, United States law. He explained, without dispute, that at all times he believed that by completely locating both his residence and  business to Antigua, he would be acting in a lawful manner in the conduct of his wagering business.

            E.         The Charge Conference

                        During the charge conference, Counsel emphasized that subdivision (b) of § 1084 must be read in conjunction with the term "knowingly" in subdivision (a). A741. Counsel argued that if Defendant believed his conduct was legal because all betting occurring wholly within Antigua, then the exception in subdivision (b) applied, since the placing of a bet was legal in New York. While recognizing that the Court of Appeals might "expand that discussion of wilfulness," A745, the district court declined to so charge. A745-46; see also A976-77.

            F.         The Verdict and Sentence      

                        Following the district court's initial and supplemental instructions, see Points I, II & IV, infra, the jury convicted Defendant of all counts. On August 10, 2000, the court sentenced him to concurrent terms of imprisonment of twenty-one months, concurrent terms of supervised release amounting to two years, A988-99, a special assessment of $800, and a fine of $5,000. A1000.

                        Timely notice of appeal having been filed, A1003, the instant appeal follows.


            Summary of Argument

                        1.         In view of the "corrupt motive" doctrine, which this Court should embrace, the district court erred in instructing the jury that, with respect to the conspiracy charge, it was irrelevant whether Defendant either did not know of the statute or misconstrued its reach. Moreover, because there was no proof that Defendant intended to violate the law, and instead, the proof showed that he believed he was acting lawfully at all times, Defendant's conspiracy conviction was based on legally insufficient evidence.

                        2.         The district court erroneously interpreted the provisions of 18 U.S.C. § 1084 so as to render the defense completely irrelevant. The court also incorrectly ruled that the exemption set forth in § 1084(b) did not apply to this case. Because, in fact, a correct interpretation of the charged statute precludes a conviction under these facts, the evidence of Defendant's guilt was legally insufficient as to all counts. In any event, a new trial should be ordered with the jury correctly instructed on the law.

                        3.         Even if this Court were to uphold the district court's interpretation of § 1084, the rule of lenity mandates dismissal of all charges because the resulting ambiguity in the statute would have deprived Defendant of fair notice as to the precise conduct therein proscribed.

                        4.         The district court committed clear error in declining to give an aiding and abetting charge to the jury. Moreover, the evidence as to the substantive counts on such theory was legally insufficient.

                        5.         The district court abused its discretion in denying Defendant the opportunity to take a deposition of an unavailable, but crucial witness, pursuant to  Fed. R. Cr. P. 15(a).


            ARGUMENT

            POINT I

 

BECAUSE THE UNDISPUTED TRIAL EVIDENCE DEMONSTRATES THAT, BEFORE BEGINNING HIS OFFSHORE GAMBLING OPERATION, DEFENDANT BECAME CONVINCED THAT SUCH ACTIVITY WOULD NOT BE UNLAWFUL IF CONDUCTED SOLELY IN ANTIGUA, THERE WAS A COMPLETE ABSENCE OF CRIMINAL INTENT ON DEFENDANT’S PART TO VIOLATE 18 U.S.C. § 1084; ACCORDINGLY, NOT ONLY DID THE COURT COMMIT CLEAR ERROR WHEN IT REPEATEDLY INSTRUCTED THE JURY THAT DEFENDANT'S GOOD FAITH WAS IRRELEVANT AS TO THE CONSPIRACY CHARGE, BUT THE EVIDENCE OF GUILT AS TO THAT COUNT WAS LEGALLY INSUFFICIENT

 

                        This record establishes beyond question that Jay Cohen would not have undertaken his venture in Antigua had he not been convinced that, by situating it in this offshore jurisdiction, he would be conducting his business lawfully, regardless of the location from which any calls or Internet visits originated. The only issue of significance, therefore, is whether, contrary to the district court's instructions to the jury, such good faith undermines a finding of criminal culpability for purposes of a conspiracy charge. Defendant submits that it does.

                        Specifically, apart from issues concerning the substantive interpretation of the Wire Act under 18 U.S.C. § 1084, see Point II, infra, where, as here, Defendant lacks a corrupt intent to commit an object offense that is not inherently unlawful – i.e., an object offense that is malum prohibitum rather than malum in se – any conspiracy to commit such offense cannot stand, as a matter of law. This proposition implicates the "corrupt" or "evil" motive doctrine, which this Court has not visited, even implicitly, since at least 1972.

                        Several other Circuits have embraced the corrupt motive doctrine, while the United States Supreme Court has expressly declined to rule on its applicability to federal conspiracy law. This Circuit has treated the doctrine with some inconsistency, but it has neither authoritatively abandoned the doctrine nor passed upon its application to the unique circumstances presented in this case. Accordingly, Defendant submits that the weight of authority establishes that his undisputed lack of criminal intent to transgress existing criminal prohibitions renders his conviction for conspiracy invalid and requires that the conspiracy count be dismissed, or at a minimum, that his conspiracy conviction be reversed.

A.         Background

            1.         The Evidence of Jay Cohen's Good Faith

                        The evidence produced, even during the Government's case in chief, including both testimony and tape transcripts, demonstrated that Jay Cohen physically relocated to Antigua and thereupon set up WSE in that sovereign nation. Based on the Private Placement Memorandum for WSE’s holding company, NetBet, Inc., which the Government introduced into evidence (Tr. 382-87; Ex. 301), the undisputed reason for establishing the entire WSE operation offshore was to ensure that the business was conducted wholly within a jurisdiction where such activity was completely lawful. Moranville: Tr. 379, 420-421, 425-426, 435, 458; Hair: Tr. 472, 496, 501, 502, 519.

                        Thereafter, defense witnesses testified that Defendant and the investment firm with which he had been associated, Group One, initially conducted a great deal of research and due diligence on the subject of Internet and offshore gambling. The evidence established that such research led to the preparation by Defendant and Group One of the aforementioned Private Placement Memorandum. Sparks: Tr. 737-39,741; Grebe: Tr. 791. At least two witnesses noted that Group One had focused on the fact that a publicly traded company, “S-Bet” or “Sports International,” was already conducting a similar Internet and telephone wagering business. Sparks: Tr. 741-42; Grebe: Tr. 791-92.

                        The evidence also established that one of the world’s largest accounting and consulting firms, KPMG Peat Marwick, had helped to establish and license WSE in Antigua. Sparks: Tr. 742-43; Grebe: Tr. 792-94. In fact, the founders of WSE chose to locate the business in Antigua, despite the fact that Antigua charged the highest licensing fees, because Antigua had the strictest licensing requirements, rules and regulations. Sparks: Tr. 744, 758-59; Grebe: Tr. 796.

                        Defendant personally testified that while trading at Group One, he discussed with Steve Schillinger the idea of betting on sports futures over the Internet. A495-98. After the people at Group One expressed interest in exploring the idea, Cohen started doing research. A498. He found several companies already engaged in Internet gambling, including Sports International, which Cohen learned was publicly traded and had among its board of directors a former majority Whip in Congress. A498-99. Such findings gave Defendant "a comfort level." A499, A604-05.

                        Defendant further testified that when he and his associates approached KPMG Peat Marwick about providing accounting and consulting services to the new venture, they were informed that the firm’s in-house counsel would first have to approve its involvement in such a venture. A500, A602, A625, A644. About a week later, KPMG Peat Marwick received authorization to enlist Defendant and his associates as clients.

                        KPMG Peat Marwick, which maintained an office in Antigua, helped incorporate the holding company and the operating company for WSE, as well as process a gaming license application in Antigua on WSE’s behalf by acting as an intermediary between WSE and the Antiguan Government. A500-01. Defendant testified that after he personally contacted the governments of countries hosting Internet gambling operations, Antigua was selected because it had the most stringent regulations, set by Parliament and approved by the Prime Minister, and the highest licensing fees. A501. These considerations were vital to Defendant because he "wanted to be running a legal business.”  A502. Defendant “wanted a credible and legal business, and . . . didn't want to break the law." A502, A557-58. Defendant eventually became familiar with Antigua's standards for licensing. A503. Soon, Defendant and his associates received a license for the business, and WSE obtained a certificate of good standing. A505.

                        KPMG Peat Marwick instructed Defendant that, although WSE was located in Antigua, Defendant still had to report all his income to the United States. A507. Defendant did so, indicating on his tax return that he was in the business of "wagering." A510, A652.

                        Defendant explained that he operated a totally foreign company, with no employees, bank accounts or offices in the United States. A511. The reason was that "[w]e wanted to do this legally, and to do it legally, we modeled it after Capital Off-Track Betting in New York," A511-12, which "does the same thing and takes bets from around the country." A521, A603. In Antigua, "it was legal to bet down there, and the bet takes place down there because that's where the money is." A512. Thus, Defendant always believed that conducting an account-based wagering business wholly in Antigua was lawful. A549, A660. Contributing to this belief was Defendant’s awareness that the spokesman for the Department of Justice had been publicly quoted numerous times as stating, in substance, that there is nothing the Government can do about international offshore wagering. A545, A646-47.

                        WSE required that a potential bettor wire money to a wagering account in Antigua before he could bet. A522. In this "account wagering" format, A650, the betting itself takes place entirely in Antigua. A522. Based on his research, Defendant understood that account wagering was a concept developed by off-track betting organizations. A522. In particular, Defendant testified that he modeled his company on Capital Off-Track Betting in New York, which requires potential bettors from around the world to establish betting accounts in New York. A542; see also A666. As a result, all actual betting takes place in New York, and  all that is ever transmitted via telephone or Internet is information assisting in the placement of bets. A542. Accordingly, Capital OTB “fall[s] squarely under the exception [sic] 1084(b)." A542; see also A607. Defendant testified that his company operated the same way, with betting taking place wholly in the place in which the betting accounts were located – namely, Antigua. A551, A610. WSE did not permit betting on credit, or for an amount not actually on deposit in the customer’s account. A523.

                        Because Defendant believed that the operation in Antigua was legal, he felt that he could advertise around the world, including in the United States. A513-14. Defendant became the spokesperson not only for WSE, but for the Internet gambling industry in general. He was featured in this capacity in many well-known publications and television programs. A514-15.

                        In May, 1997, Defendant learned that the New York law firm of Debevoise & Plimpton (“Debevoise”), which represented several major league sports organizations, was threatening to sue WSE for trademark or copyright infringement arising out of WSE’s use of proprietary team names and links to major league sports websites. A515-16. WSE settled the matter by agreeing to take down the links and stop using the team names. A516. Although Debevoise opined in its letter threatening to sue WSE that Defendant’s business violated the law, Defendant understood this to be no more than a hostile opinion with which he did not agree. A517, A645.

                        When Defendant later learned that the United States Government had obtained a warrant for his arrest, he voluntarily returned, despite his understanding that Antigua would not extradite him. A518. Defendant always believed that he was acting legally and wanted to clear his name. Rather than live as a fugitive, he voluntarily returned for his day in court.

            2.         The District Court's Rulings and Instructions

                        From the onset of the proceedings, the district court repeatedly advised the jury that despite the legality of gambling in Antigua, as long as bets originated in the United States, Defendant’s beliefs that he was acting lawfully were totally irrelevant.[2] An undercover agent testified that the WSE rules and regulations, which are posted on WSE’s website and which all customers agree to abide by, advise that "all wagers and money transactions are done in U.S. dollars and take place at our server in Antigua." A300.  In response to this testimony, the Court interrupted the cross-examination and, after denying defense counsel the right to be heard, instructed the jury, sua sponte:

 

And I might as well instruct you now – and I have discussed this with counsel, and they know what the legal instruction will be – that if in fact a bet was placed through a wire communication facility from New York to Antigua, then that would be an interstate or foreign usage of a wire communication facility for the placing of a bet within the meaning of the statute, and that is true as a matter of law regardless of what language the World Sports Exchange used in the way you have seen or any other arrangements to attempt to for his purpose to have the transaction within Antigua. If in fact telephone calls or other wire communications were made from the United States to Antigua, placing bets, those would be within the meaning of the United States law regardless of what the Antigua law might be.

 

A302.

                        During a subsequent request for a mistrial, A315, counsel characterized that instruction as a "directed verdict of conviction under the facts of this case and an incorrect statement of the law." A313. The following colloquy thereupon ensued:

MR. BRAFMAN:            . . . And why the prejudice was so great is that Mr. Cohen as a defense to the charges, has a perfect right, within your Honor's ruling, to produce evidence or testify to the effect that he did not violate Section 1084; not that he didn't believe he was violating it, but that he did not violate it, because as far as he understood the way the rules were set up , all betting took place in Antigua, and since all betting took place in Antigua, there was no foreign communication of a bet. There was information only. The bet occurred in Antigua.

 

That's the question of fact for the jury to decide, not a question for your Honor. And what you have told them, in effect, is that those regulations are not relevant, that Mr. Cohen's state of mind or his conduct, is irrelevant, that regardless of what it says on there, you can ignore it, in effect, ladies and gentlemen, because I, as the judge, am telling you that if you call up a place –

 

            . . .

 

            . . .

 

THE COURT:     That may be for an appellate court, but for me, we've discussed it extensively. I told you what I would advise the jury. I told you explicitly. I told you what I would instruct the jury, as to the law, as to the attempt to make it appear that all these bets were placed in Antigua. The record will show all of our pre-trial discussions, and I was simply following up. And it goes not only to the application of the statute, as a matter of fact, it goes to the issue of state of mind, and I will stand on that.

A313-14.

                        Thereafter, in response to the court's inquiry as to whether Defendant was entitled to defend by claiming that he believed that the bets were transmitted entirely within Antigua and not in foreign commerce, the Government stated that Defendant could defend only by claiming that he did not believe he was using a wire communication facility. A319. Defense counsel argued that "if Mr. Cohen's rules and if his state of mind was no betting is being transmitted, because the betting only takes place in Antigua, that's a defense to the charges. That's exactly how he set up the entire business." A320. Similar colloquies ensued. A321-22, A326-32. The Court noted that the whole "unique situation" amounted to an issue of law, as opposed to a question of fact. A344-45; see also A357.

                        Ultimately, the Court accepted the Government's position that the only issue as to the conspiracy count, as with the substantive counts, A432, A698, was whether Defendant "knowingly" used a wire facility. A317. It thus rejected, as a matter of law, the defense proposition that Defendant had a good faith defense because he modeled his company after Capital OTB to ensure that the bets took place only in Antigua. A706-07, 711, 719-27, 729, 737, 746. See Point II, infra.

                        Accordingly, the district court ultimately instructed the jury as to the conspiracy, over strong objection from defense counsel that such would be "tantamount to a directed verdict," A964, as follows:

The Government need not prove that the defendant knew that the deeds violated the statute. The Government need not prove that the defendant literally knew the deeds were illegal. . . .

 

Even if the defendant misconstrued or misinterpreted the statute, that is no defense. . . .

 

When we come to the conspiracy count, the same standard applies. You again look at the kinds of conduct, the kinds of deeds prohibited by the statute. If the Government has proved that a person has engaged in a plan with one or more other persons to do these deeds, and if he knew that the plan involved the perpetration of these deeds, then he was a conspirator within the meaning of the law to violate the statute. This is true even if he  was ignorant that the deeds violated that statute, even if he didn't know of the statute or misconstrued the statute.

A974-75(emphasis added).

B.         The Law of Conspiracy and the Need For a “Corrupt Motive”

 

            1.         The Powell Doctrine

                        In 1875, the New York Court of Appeals, in the seminal case of People v. Powell, 63 N.Y. 88, 2 Cow. Cr. Rep. 283 (1875), reviewed a conviction of conspiracy to award public contracts without first advertising, as required under an 1871 state statute. There, the trial judge charged that an "ignorance of the law, or an absence of intent to violate it, would not avail the defendants." The court rejected a request to instruct that the jury "must find a corrupt intent in order to convict the defendants, and that if they acted in the honest belief that the law did not require them to advertise for proposals the jury could not convict them." Instead, the court charged that a mere finding that the defendants had committed the act complained of would warrant a finding of guilt.

                        The court distinguished between the substantive objects of a conspiracy and the conspiracy itself. Thus, with respect to the substantive offense, the court stated that "where a man is indicted for doing a prohibited act, he will not be allowed to say that he did not know of the existence of the law he had violated. The offence [sic] in cases of acts mala prohibita, is complete when the act is intentionally done, irrespective of any actual intention to violate the law." 63 N.Y. at 92.

                        On the other hand, as to the conspiracy, the court held that "[t]he agreement must have been entered into with an evil purpose, as distinguished from a purpose simply to do the act prohibited in ignorance of the prohibition. This is implied in the meaning of the word conspiracy." Id.

                        Sixteen years later, the New York Court of Appeals reiterated the Powell doctrine in People v. Flack, 125 N.Y. 324, 26 N.E. 267 (1891). This doctrine constitutes existing law in New York. See, e.g., People v. Harris, 294 N.Y. 424, 63 N.E. 17 (1945);  People v. Augustine, 235 A.D.2d 915, 920, 654 N.Y.S.2d 179, 184-185 (3rd Dept. 1997).

                        Although the United States Supreme Court has, at least twice, expressly declined to pass upon the doctrine, see United States v. Feola, 420 U.S. 671, 691 (1975); United States v. Freed, 401 U.S. 601, 609, n.14 (1971); but see United States v. Keegan, 325 U.S. 478 (1945) (seemingly embracing the rule, as discussed below), it has been accepted, in one form or another, not only in several states, but in at least the First, Sixth, Eighth, Tenth and D.C. Circuits. See, e.g., United States v. Previte, 648 F.2d 73, 81-82 (1st Cir. 1981) ("the Powell doctrine is limited to cases in which an alleged objective may be completely innocent and unobjectionable . . ." [distinguishing] United States v. Feola"); Landen v. United States, 299 F. 75, 78 (6th Cir. 1924) ("When, however, the prosecution is for conspiracy, the text-books and elementary discussions seem to agree that there must be a 'corrupt intent,' which is interpreted to be the mens rea, the conscious and intentional purpose to break the law");[3] Fall v. United States, 209 F. 547, 553 (8th Cir. 1913) ("where the government relies upon circumstances to prove a conspiracy or the devising of a scheme and artifice to defraud, the case comes within that class where an intent different from the ordinary criminal intent must be shown."); Cruz v. United States, 106 F.2d 828, 830 (10th Cir. 1939) ("In order to establish a criminal conspiracy, a corrupt motive or intent must be shown. There must be an evil design, a wrongful purpose.");[4] and United States v. Barker, 514 F.2d 208, 233 (D.C. Cir. 1975) (en banc) (Bazelon, C.J., concurring) (enunciating the rule, and collecting cases). But see Lantis v. United States, 186 F.2d 91 (9th Cir. 1950), discussed in note 6, infra.

            2.         Second Circuit Law

                        In the Second Circuit, the corrupt motive doctrine is laden with ambiguities, overrulings, inconsistencies and non-binding dicta.  Even the Supreme Court has noted that it is "curious enough," Feola, 420 U.S. at 691.

            First to cite Powell was Browne v. United States, 145 F. 1 (2d Cir. 1905), cert. denied, 200 U.S. 618 (1906). There, considering whether the indictment was deficient in not alleging all elements of conspiracy, the Court, while upholding the charge, stated that "[w]hoever framed this indictment would have saved court and counsel a great deal of unnecessary trouble, if he had been careful to insert an allegation that the agreement between the alleged conspirators as to what one or other of them should do to defraud the government of its lawful revenues was entered into with a corrupt and fraudulent intent."  Id. at 6.

            Thereafter, in Hamburg-American Steam Company v. United States, 250 F. 747 (2d Cir.), cert. denied, 246 U.S. 662 (1918), the defendants, steam ship operators, were charged with a conspiracy to defraud the United States by submitting false manifests to customs officials at various ports of the United States, thereby concealing the actual points of destination. This Court, when confronted by the defendants with the Powell rule, stated,

Whatever may be the law of the state of New York as to criminal conspiracy, we are satisfied that as to the statutory crime of conspiracy, as defined in the Criminal Code of the United States, it is not necessary to show that the defendants who are alleged to have conspired to do an act which is only malum prohibitum had knowledge of the unlawfulness of the act. We think that the law was correctly stated in Chadwick v. United States, 141 Fed. 225, 72 C.C.A. 343 (1905), a case in the Circuit Court of Appeals in the Sixth Circuit...

            In reality, however, since the Court in Hamburg-American did not need to address this issue, this conclusion is only dictum. And the same is the case with Chadwick, upon which it relied. That is because, unlike in Powell and Flack, the Hamburg-American Court found that "[i]n this case the act complained of was not innocent, but dishonest and fraudulent...The clearances were obtained by means of false oaths, and those responsible were guilty of corrupt conduct." 250 F. at 759 (emphasis added). In short, in Hamburg-American, there existed actual proof of corrupt motive.

            In fact, the Sixth Circuit, in its later Landen decision –  which specifically embraced the Powell corrupt motive doctrine – made this very point regarding both Hamburg-American and Chadwick. As Landen explained:

The principle of these two decisions does not reach a case where the contemplated act is not inherently wrongful, where the prohibitory statute is ambiguous, where there is good reason for both lawyers and laymen to think that the act planned is not prohibited, and where the respondent plans and does the act in the actual belief, supported by good-faith advice of counsel, that it is a lawful act. In such a situation the conclusion that the respondent has a 'corrupt intent' to violate the law is, in our judgment, one repugnant to the fundamental principles of justice, and not to be adopted unless under the compulsion of authoritative decisions. We find nothing requiring such adoption.

 

299 F. at 79; see note 3, supra.

            Twenty-two years after Hamburg-American, the Second Circuit decided United States v. Mack, 112 F.2d 290 (2d Cir. 1940). There, the Court, per Judge Learned Hand, affirmed a conviction of conspiracy to harbor and conceal aliens without registering them. Importantly, as in Hamburg-American, the proof showed that "there was in this case 'corrupt motive' in abundance, and the only possible doubt is whether there was a conspiracy not to register."  112 F.2d at 292.

            Nonetheless, Judge Hand, in obvious dictum, criticized the Powell rule as an "anomalous doctrine," explaining that "it is hard to see any reason for this, or why more proof should be necessary than that the parties had in contemplation all the elements of the crime they are charged with conspiracy to commit. Chadwick v. United States, 6 Cir., 141 F. 225, 243." Id. Notably, Judge Hand's reference to Chadwick ignored the Sixth Circuit's own delimiting of that case, 15 years earlier, in Landen, as discussed above.

            More in line with Landen, and just 17 months after Mack was decided, Judge Hand authored the rather paradoxical opinion in United States v. Crimmins, 123 F.2d 271 (2d Cir. 1941). There, this Court reversed a conviction of conspiracy to transport stolen goods in interstate commerce, holding the Government to a far greater evidentiary burden on the question of mens rea with respect to the conspiracy than to the object offense.[5]

            Judge Hand offered the analogy that "[w]hile one may, for instance, be guilty of running past a traffic light of whose existence one is ignorant, one cannot be guilty of conspiring to run past such a light, for one cannot agree to run past a light unless one supposes that there is a light to run past." 123 F.2d at 273.

            Three years later, this Court upheld a conspiracy conviction in United States v. Keegan, 141 F.2d 248 (2d Cir. 1944), rev'd, 325 U.S. 478 (1945). In Keegan, the defendants, members of the German-American Bund, had been convicted of conspiracy to violate the Selective Training and Service Act by counselling draft evasion during the Second World War, in light of the Bund's view that conscription was unconstitutional. The defendants challenged, inter alia, the district court's instruction to the jury that "a 'bona fide honest intent to make a test case was no defense,' saying that 'if there was a conspiracy amongst these defendants or any of them having as its object the violation of the Selective Service Law, knowingly, the reason for such violation is immaterial to you in your consideration of the question of their guilt or innocence.'" 141 F.2d at 254. The defendants had "argued that the question of so-called 'corrupt intent' could not properly be withdrawn from the jury."  Id. The Court stated:

      We hold that to establish violation of the statute nothing more has to be proved than that the parties 'had in contemplation all the elements of the crime they are charged with conspiracy to commit.' United States v. Mack, 2 Cir., 112 F.2d 290, 292; Hamburg-American Steam Packet Co. v. United States, 2 Cir., 250 F. 747, 759; Chadwick v. United States, 6 Cir., 141 F. 225, 243.

 

141 F.2d at 254.

 

            Significantly, the Second Circuit's holding in Keegan, with its seeming rejection of the corrupt motive doctrine, was short-lived. A year later it was overturned by a divided Supreme Court in United States v. Keegan, 325 U.S. 478 (1945).

            In its ruling, which essentially reversed the conspiracy convictions on evidentiary insufficiency grounds, the Supreme Court reviewed the district court's protested instructions. In so doing, it explained that the jury was essentially left incapable of appreciating that:

One with innocent motives, who honestly believes a law is unconstitutional and, therefore, not obligatory, may well counsel that the law shall not be obeyed; that its command shall be resisted until a court shall have held it valid, but this is not knowingly counselling, stealthily and by guile, to evade its command.

 

325 U.S. at 493-94.

            Then, the Court determined that the district court had essentially instructed that:

If defendants had innocent motives they are nonetheless guilty; if they had guilty motives they, of course, are guilty. It is somewhat difficult to see how the jury could reach any other than a verdict of guilty.

 

325 U.S. at 494. The Supreme Court ruled, therefore, that "the defendants were entitled to the direction of acquittal, for which they moved." Id. at 495.

            Since the majority decision, being fact-driven, was virtually bereft of case law, more significant for our present purposes is what was implicitly embraced by the Court, as articulated by the dissent. Thus, in voting to uphold the conspiracy conviction, the dissenting Justices observed that "[p]lainly one who would assail the validity of a statute in a test case can do so only by violating its provisions, here by knowingly counselling another to evade registration or service in the armed forces." Id. at 505 (Stone, C.J., dissenting). In Chief Justice Stone's view, therefore, there can be no "innocent" act in knowingly violating a statute, even in furtherance of testing its validity. For, in such instance, the actor "nevertheless does the act which the statute prohibits and nonetheless intended to do it even though his purpose was to establish that the statutory prohibition is unconstitutional." Id.

            In short, according to the dissent, the majority had ostensibly accepted the Powell doctrine which the defendants had been propounding. This, the dissent argued, was an unprecedented step. As explained:

The doctrine of People v. Powell, 63 N.Y. 88, on which petitioners rely, that a criminal conspiracy to do an act 'innocent in itself' not known by the conspirators to be prohibited must be actuated by some corrupt motive other than the intention to do the act which is prohibited and which is the object of the conspiracy, has never been accepted by this Court. To establish violation of § 11 nothing more need be proved than that respondents had in contemplation all the elements of the offense which they conspired to commit. United States v. Mack, 2 Cir., 112 F.2d 290, 292; cf. Hamburg-American Steam Packet Co. v. United States, 2 Cir., 250 F. 747, 759; Chadwick v. United States, 6 Cir., 141 F. 225, 243. There is no contention that petitioners did not know that the Selective Service Act required those subject to it to do military service. And People v. Powell, supra, was careful to point out that where the conspiracy is to do an act which is not 'innocent in itself' the offense is 'complete when the act is intentionally done', irrespective of any actual intention to violate the law. Here the act prohibited was hardly 'innocent in itself.'  The facts found by the jury under instructions of the court constitute plain violation of s 11, and the jury's verdict is supported by the evidence.

Id. at 506 (Stone, C.J., dissenting) (emphasis added).[6]

            What emerges from this discussion, aside from at least the majority's implicit embracing of the Powell doctrine, is that even had the Second Circuit's Keegan holding, with its explicit rejection of the corrupt motive rule, not been reversed, it would still have amounted to dictum. That is because the Keegan defendants clearly knew and understood, at all times, that they were violating the statute. They claimed that their conduct was justified, however, because, in their view, the statute was unconstitutional. As Chief Justice Stone stated, however, that is simply not conduct which is wholly devoid of unlawful motivations.

            That leaves only Mack, which, as noted, also involved knowing and, therefore, not innocent conduct. In fact, to our knowledge, the last time Mack was cited on this issue was in United States v. Schwartz, 464 F.2d 499, 510 (2d Cir. 1972), where the Court upheld a conviction of conspiracy to violate security laws, absent need to find a greater intent. But in Schwartz, as in all the above cases, the facts demonstrated that the charged act amounted to "a violation of a regulation known to exist, and a reprehensible act within its own dimensions independent of the regulation." 464 F.2d at 509 (internal quotes omitted).

            All things considered, because, as it has been understood, "the Powell doctrine is limited to cases in which an alleged objective may be completely innocent and unobjectionable[]," Previte, 648 F.2d at 81-82, to our awareness there really has been no pure set of facts before either this Court or, as will be seen, the Supreme Court, beyond Keegan, where the issue, as in this case, has been squarely and unambiguously presented. Accordingly, Supreme Court and Second Circuit law in this regard remains decidedly unsettled.

      3.    The Feola Ruling

            Thirty years after its decision in Keegan, the Supreme Court, in United States v. Feola, 420 U.S. 671 (1975), ruled that one need not have knowledge of the official status of the victim in order to be guilty of a substantive assault on a federal officer, in violation of 18 U.S.C. § 111. In effect, as the relevant statute has been construed, the Court found the official status of the victim to be a jurisdictional requirement, which was not dependant upon proof of the underlying mens rea. Id. at 676-77, n.9; see also United States v. X-Citement Video, Inc., 513 U.S. 64, 72, n.3 (1994); United States v. Yermain, 468 U.S. 63, 68 (1984); United States v. Pinckney, 85 F.3d 4, 8 (2d Cir. 1996); United States v. Rosa, 17 F.3d 1531, 1544-45 (2d Cir. 1994); United States v. New Buffalo Amusement Corp., 600 F.2d 368, 382-83 (2d Cir. 1979) (Oakes, J., concurring).

            More importantly, for our purposes, the Court further held in Feola that one need not have a greater mental culpability in order to be guilty of a conspiracy to commit such offense, for "[t]he general conspiracy statute, 18 U.S.C. § 371, offers no textual support for the proposition that to be guilty of conspiracy a defendant in effect must have known that his conduct violated federal law." 420 U.S. at 687(footnote omitted).

            At first blush, Feola appears not only to undermine the Supreme Court's earlier – and inexplicably unmentioned – holding in Keegan, but also to militate against the ongoing viability of the Powell corrupt motive doctrine. Yet, while upholding that particular conspiracy conviction, the Court discussed Judge Hand's famous "traffic light" analogy, articulated in Crimmins. It stated that "[t]he traffic light analogy poses the question whether it is fair to punish parties to an agreement to engage intentionally in apparently innocent conduct where the unintended result of engaging in that conduct is the violation of a criminal statute." 420 U.S. at 691. However, the Court specifically deferred any consideration of that issue:

But this case does not call upon us to answer this question, and we decline to do so, just as we have once before. United States v. Freed, 401 U.S., at 609 n. 14, 91 S. Ct. at 1118. We note in passing, however, that the analogy comes close to stating what has been known as the 'Powell doctrine,' originating in People v. Powell, 63 N.Y. 88 (1875), to the effect that a conspiracy, to be criminal, must be animated by a corrupt motive or a motive to do wrong. Under this principle, such a motive could be easily demonstrated if the underlying offense involved an act clearly wrongful in itself; but it had to be independently demonstrated if the acts agreed to were wrongful solely because of statutory proscription. See Note, Developments in the Law – Criminal Conspiracy, 72 Harv. L. Rev. 920, 936-37 (1959). Interestingly, Judge Hand himself was one of the more severe critics of the Powell doctrine.

 

Id. (footnote omitted).

            So, despite ignoring Keegan, why did the Supreme Court decline to reach this doctrine in Feola? The answer, based on the facts in that case, as well as in Crimmins, was quickly provided:

In Crimmins, the substantive offense, namely, the receipt of stolen securities that had been in interstate commerce, proscribed clearly wrongful conduct. Such conduct could not be engaged in without an intent to accomplish the forbidden result. So, too, it is with assault, the conduct forbidden by the substantive statute, § 111, presently before us. One may run a traffic light 'of whose existence one is ignorant,' but assaulting another 'of whose existence one is ignorant,' probably would require unearthly intervention. Thus, the traffic light analogy, even if it were a correct statement of the law, is inapt, for the conduct proscribed by the substantive offense, here assault, is not of the type outlawed without regard to the intent of the actor to accomplish the result that is made criminal. If the analogy has any vitality at all, it is to conduct of the latter variety; that, however, is a question we save for another day. We hold here only that where a substantive offense embodies only a requirement of mens rea as to each of its elements, the general federal conspiracy statute requires no more.

Id. at 691-92 (emphasis added).

            Given the Supreme Court's refusal to deal with the Powell doctrine, therefore, the ultimate holding of Feola, insofar as conspiracy is concerned, is limited. Simply stated, in those instances where a substantive offense is inherently wrongful, such as fixing elections (United States v. Coy, 127 U.S. 731 [1888]); possessing hand grenades (Freed)[7]; trafficking in stolen securities (Crimmins); or committing an assault (Feola), there is no need for proof of an additional wrongful intent for purposes of a conspiracy prosecution.

            On the other hand, where the underlying motives are purely innocent, Keegan should still control. For, as the Court later explained, "[c]riminal intent serves to separate those who understand the wrongful nature of their act from those who do not, but does not require knowledge of the precise consequences that may flow from that act once aware that the act is wrongful." X-Citement Video, 513 U.S. at 72, n.3 (emphasis added).

            Thus, "public welfare offenses" aside, in cases where the subject conduct is bottomed upon otherwise innocent motivations, a more specific mens rea has been required before criminal liability may attach, even as to the substantive offense. See, e.g., X-Citement Video, (reading "knowing" element into statute with respect to otherwise constitutionally protected activity);  Staples v. United States, 511 U.S. 600 (1994) (specific knowledge required that a weapon contain physical properties which would allow it to be transformed into a machinegun); Liparota v. United States, 471 U.S. 419 (1985) (requiring proof of knowledge that otherwise innocent possession of food stamps was unauthorized); Morissette v. United States, 342 U.S. 246 (1952) (requiring specific knowledge that property being converted belonged to the United States).[8]  That is certainly the case, then, with respect to conspiracy prosecutions. See United States v. Bailey, 444 U.S. 394, 405 (1980) ("Another such example is the law of inchoate offenses such as attempt and conspiracy, where a heightened mental state separates criminality itself from otherwise innocuous behavior.").

            Thus, when presented, as here, with a case in which an actor's motives are not inherently wrongful – and hence, where the actor honestly believes his conduct is within the bounds of the law – this Court is well positioned to finally embrace the corrupt motive doctrine.[9] For in such instance, as has long been the rule in several other Circuits, where the "objective may be completely innocent and unobjectionable," Previte, 648 F.2d at 81-82, a conspiracy prosecution should be precluded. Such result is in complete harmony with this Court's jurisprudence that an aspect of a conspiracy is that there be "some knowledge of the unlawful aims and objectives of the scheme," United States v. Ferrarini, 219 F.3d 145, 155 (2d Cir. 2000), quoting United States v. Lanza, 790 F. 2d 1015, 1022 (2d Cir. 1986) (emphasis added).

C.    Discussion

            This case presents the still viable Powell corrupt motive doctrine in its purest form.  Because this is a question of law, this Court reviews the issue de novo. United States v. Doyle, 130 F.3d 523, 535 (2d Cir. 1997).  Application of this doctrine requires not only a new trial on the conspiracy count, but dismissal of this count based on insufficient evidence.

            Here, the unrefuted evidence attests that Defendant believed that he would not be violating 18 U.S.C. § 1084, because,  given the manner in which the business was being conducted, all bets would take place wholly in Antigua and would not be transmitted in interstate commerce. According to evidence presented by the Government and the defense, Defendant and his associates planned, consistent with the manner in which Capital OTB conducted its interstate betting, that the entire operation would be in Antigua, with the bettors' money physically transferred to Antigua prior to any bets being taken. Accordingly, it was believed, in view of Defendant's research and expert opinions which had been solicited and obtained by Group One, which then prepared the Private Placement Memorandum, the business would not run afoul of United States law. This testimony demonstrates not only the absence, but the complete opposite, of precisely what the Powell doctrine requires – a "'corrupt intent,' . . . [involving] the conscious and intentional purpose to break the law." Landen, 299 F. at 78.

            Moreover, contrary to the situations in Crimmins and then in Feola, the testimony in this case demonstrates that "such conduct could [indeed] . . . be engaged in without an intent to accomplish the forbidden result."  Feola, 420 U.S. at 691. The record is clear: Defendant studied the statute, he and his associates consulted with persons whom they believed to be experts, he modeled his business after other entities, including Capital OTB and private companies already operating in a similar manner without interference, and he even studied public comments of federal officials. But the jury was told to ignore all that. As in Keegan, therefore, the jury was effectively charged that "[i]f defendant[] had innocent motives [he is] nonetheless guilty; if []he[] had guilty motives []he[], of course, [is] guilty. It is somewhat difficult to see how the jury could reach any other than a verdict of guilty." 325 U.S. at 494.

            The district court’s instructions that "[t]he Government need not prove that the defendant knew that the deeds violated the statute[]," and that "this is true even if he was ignorant that the deeds violated that statute, even if he didn't know of the statute or misconstrued the statute," was clear error. Unquestionably, the jury in this case was simply precluded from determining whether Defendant's objective, if found to be "completely innocent and unobjectionable," Previte, 648 F.2d at 81-82, would warrant his acquittal on the conspiracy charge. See also Cruz, 106 F.2d at 830. Accordingly, even if this Court declines to dismiss on grounds of evidentiary insufficiency, and finds that the proof, at the least, presented a jury question as to that Count, Defendant should be granted a new trial.


POINT II

      THE DISTRICT COURT ERRONEOUSLY CONCLUDED THAT THE EXCEPTION SET FORTH IN 18 U.S.C. § 1084(b) DOES NOT APPLY TO THIS CASE AND IMPROPERLY INSTRUCTED THE JURY AS TO THE ESSENTIAL ELEMENTS OF THE SUBSTANTIVE OFFENSE

 

            Jay Cohen established World Sports Exchange in a sovereign nation that licenses and regulates sports betting operations. Further, he designed WSE’s operating procedures specifically to comply with the exception to prohibited wire transmissions set forth in 18 U.S.C. § 1084(b). Indeed, Defendant testified, over  objection, to his knowledge of § 1084(b) and his understanding that his conduct fell within that exception.

            The jury, however, despite a specific request for a copy of § 1084 in its entirety, A930, and a read back of Defendant’s  testimony concerning his knowledge of § 1084, A930, never learned what § 1084(b) provides. It therefore never had an opportunity to consider the exception in determining whether Defendant’s conduct violated § 1084 and whether he had the requisite mens rea to do so. In fact, the district court specifically instructed the jury that § 1084(b) was not relevant to the case and, in effect, to disregard Defendant’s testimony concerning his understanding of the statute. A970-71. This was reversible error.

A.    The Statute

            Section 1084 provides, in relevant part:

      (a)  Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both.

 

      (b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal.

18 U.S.C. § 1084.

            As the plain language of the statute makes clear, § 1084(b) provides an exception to the conduct prohibited in § 1084(a). Defense counsel repeatedly urged below that defendant’s conduct falls squarely within this exception to the statute, for several reasons. First, it is legal, within the meaning of § 1084, to bet on sporting events in New York. Moreover, such betting is indisputably legal in Antigua. Second, Defendant established WSE in the sovereign nation of Antigua and designed its account-based operating procedures to ensure that all bets or wagers are placed in Antigua, rather than transmitted in interstate or foreign commerce. Accordingly, only information assisting in the placing of bets or wagers was transmitted from New York to Antigua. Third, because the undisputed evidence established that Defendant believed that his conduct involved only the transmission of information assisting in the placing of bets or wagers and not the transmission of bets or wagers per se, he did not, as a matter of law, have the requisite mens rea to commit a substantive violation of § 1084.

            Because the district court’s legal conclusions, its jury instructions, and its evidentiary rulings concerning each of these issues were in error, and because the evidence was insufficient to establish the element of mens rea, Defendant’s convictions on all counts should be vacated and the charges dismissed.

            As questions of law, these issues are subject to de novo review. United States v. Walker, 191 F.3d 326, 338 (2d Cir. 1999), cert. denied, 120 S. Ct. 1702 (2000).

B.    The District Court Erroneously Concluded that it is Not “Legal” to Place a Bet in New York.

 

            While Defendant submits that all conduct charged in this case meets the criteria set forth in § 1084(b), the issue of whether it is legal to place a bet in New York is, standing alone, determinative of whether the conduct charged in Counts Two and Seven violates the statute. Each of these counts involves no more than a telephone conversation between an undercover agent in New York and a WSE employee, in which no requests to bet were made. See A10, A429. Accordingly, if this Court agrees that, for purposes of § 1084(b), it is “legal” in New York to place a bet, then Counts Two and Seven must be dismissed as a matter of law.

            Although § 1084 does not define the term “legal” as it is used in subsection (b), courts repeatedly have interpreted the term to refer to whether the act of placing a bet is prohibited by state criminal law. In Sterling Suffolk Racecourse Ltd. Partnership v. Burrillville Racing Ass’n, Inc., 989 F.2d 1266 (1st Cir.), cert. denied, 510 U.S. 1024 (1993), the First Circuit stated, “[W]e think it clear that Congress, in adopting section 1084, did not intend to criminalize acts that neither the affected states nor Congress itself deemed criminal in nature.”  Id. at 1273 (emphasis added). Likewise, in United States v. McDonough, 835 F.2d 1103 (5th Cir. 1988), the Fifth Circuit affirmed a conviction for receiving bets per se on sporting events via telephone from Texas to Massachusetts “despite the lack of evidence or any charge that placing such bets in Massachusetts was a state criminal offense.”  Id. at 1104 (emphasis added); see also Martin v. United States, 389 F.2d 895 (5th Cir.), cert. denied, 391 U.S. 919 (1968) (noting that relevant state law pursuant to § 1084 was Texas penal code section prohibiting agreements to wager).

            In New York, the jurisdiction from which all of the undercover transmissions in this case occurred, gambling offenses are defined in Article 225 of the New York State Penal Law, which prohibits neither the act of placing a bet nor the act of requesting information regarding the placement of bets. Although the New York State Constitution provides, in pertinent part, that “no lottery or the sale of lottery tickets, pool-selling, bookmaking, or any other kind of gambling . . . shall hereafter be authorized or allowed within this state,” N.Y. Const. art. I, § 9, the legislature chose to make criminal only the acts of promoting gambling by advancing or profiting from unlawful gambling activity, possessing gambling records, and possessing gambling devices. N.Y. Penal Law §§ 225.05 - 225.30. In short, the act of placing a bet is not a crime in New York.

            The New York State Court of Appeals has recognized that “[t]he evil which the law chiefly condemns (N.Y. Const. art. I, § 9) and makes criminal (Penal Law, art. 88) is betting and gambling organized and carried on as a systematic business.”  Watts v. Malatesta, 262 N.Y. 80, 82 (1933). The Court further recognized that “casual betting or gaming by individuals as distinguished from betting or gambling as a business or profession, is not a crime.” Id. The Court of Appeals reaffirmed this principle in People v. Giordano, 87 N.Y.2d 441, 640 N.Y.S.2d 432, 446 (1995).  See also United States v. Borgese, 235 F. Supp. 286, 296 (S.D.N.Y. 1964).            Indeed, efforts by the New York State Legislature to protect New York consumers who wager with offshore Internet gambling companies make clear that the act of placing a bet is not illegal in New York. Senate Bill No. 2044, entitled Internet Gambling Authorization, would amend the New York Business Corporation Law to require any foreign corporation providing gambling or wagering services in New York via the Internet to register with the state. The bill was introduced on February 2, 1999, passed the Senate later that year, and remains pending. The existence of such proposed legislation to protect New York bettors against fraudulent or deceptive practices demonstrates that even the lawmakers of New York recognize that the act of placing a bet in New York is not unlawful.

            The legislative history of § 1084 clearly establishes that Congress intended the term to mean not contrary to the penal law of a State or foreign country.

            According to the House Report concerning § 1084, the purpose of the law is as follows:

      The purpose of the bill is to assist the various States and the District of Columbia in the enforcement of their laws pertaining to gambling, bookmaking, and like offenses and to aid in the suppression of organized gambling activities by prohibiting the use of wire communication facilities which are or will be used for the transmission of bets or wagers and gambling information in interstate and foreign commerce.

 

H.R. Rep. No. 87-967, 87th Cong., 1st Sess. (1961), reprinted in 1961 U.S.C.C.A.N. 2631, 2631. The primary purpose of the statute clearly was to assist the states in the enforcement of their own laws which make gambling and bookmaking punishable “offenses” against the state. See also United States v. Southard, 700 F.2d 1, 20 (1st Cir. 1983); McDonough, 835 F.2d at 1104-05.

            Therefore, the statute was not meant to create criminal liability where the states had none. Congress’s specific concern with the penal laws of the states is made express in the legislative history concerning the preemption subsection of the statute:

      Subsection (c) would make certain that the Federal Government is not preempting the area encompassed by the bill. Thus, the right of a State to prosecute for a violation of its penal laws is preserved by this subsection which is a disclaimer of any possible preemption by the Federal Government.

 

H.R. Rep. No. 87-967, 87th Cong., 1st Sess. (1961), reprinted in 1961 U.S.C.C.A.N. 2631, 2633 (emphasis added).

            Thus, both the plain language and the legislative history of § 1084(b) establish that Congress intended to exempt from the statute’s reach certain transmissions of gambling information from a jurisdiction which has not made the act of placing a bet a criminal offense. New York is indisputably such a jurisdiction.

            For purposes of § 1084, then, sports betting is legal in New York and the exception set forth in § 1084(b) indeed applies to this case. Because Counts Two and Seven allege only that information assisting in the placing of bets or wagers was transmitted, and not any actual bets, and because it is undisputed that betting is legal in Antigua, these two counts should be dismissed as a matter of law. For the same reason, the conduct underlying these counts cannot be the basis for a conspiracy conviction. Moreover, because in this case the bet itself only occurred in Antigua, § 1084(b) precludes prosecution under the remaining substantive counts as well.

B.    The District Court Erroneously Determined as a Matter of Law, and Thus Improperly Instructed the Jury, that a Request from New York to Have a Bet Placed from a Wagering Account Located in Antigua Constituted Transmission of a Bet or Wager Per Se.

            Section 1084 distinguishes between two relevant types of possible transmissions in interstate or foreign commerce: (1) “bets or wagers” per se; and (2) “information assisting in the placing of bets or wagers.”  18 U.S.C. § 1084.[10]      The court’s instructions on this clause, moreover, were completely erroneous, as they permitted the jury to convict based on no more than a finding that a wire communication resulted somehow in a bet being placed.  See A877. Defendant submits that, as a matter of law, the undisputed facts in this case establish that only the latter type of transmission took place between New York and Antigua. Accordingly, as argued in the district court, Defendant’s conduct falls squarely within § 1084(b) and is not unlawful. See A114, A426-29.[11]

            As demonstrated in Point I, Defendant testified that he physically established WSE – including its computer servers, telephones, and bank accounts – in Antigua, and designed its operating procedure to ensure that no bet or wager per se is transmitted in foreign commerce. In this regard, WSE required that before an individual in any location could place a bet with WSE, that individual first establish an account with WSE and send money to Antigua to fund that account. The money, plus or minus wins or losses, would remain on deposit in Antigua until the individual requested a refund. The WSE database, located in Antigua, tracked the balance in the account. Once an individual established and funded an account, the individual could contact either a WSE operator by telephone or the WSE website[12] via the Internet to request that WSE place a bet in Antigua on the individual’s behalf using the funds already on deposit in Antigua. The request would be transmitted to the WSE database server, which would verify that sufficient funds were in the customer’s account and then authorize the bet. Until the WSE database server verified funds and authorized the bet, a process that took place entirely in Antigua, no bet existed. These procedures ensured that the bet itself took place entirely in Antigua. See A357-59.

            The testimony of the Government’s own agent, David Marziliano, supported this view. On cross-examination, Agent Marziliano testified that he understood that before the bet could be finalized, WSE would have to accept the bet. Marziliano: Tr. 609. Thereafter, on redirect, Agent Marziliano testified as follows:

Q. Is it fair to say, Agent Marziliano, that the bet was placed when you commanded that instruction to World Sports Exchange from New York?

 

A. I gave authorization for the individual to place a bet for me.

 

Q. You placed that bet from New York; is that correct?

 

A. Yes.

 

Marziliano: Tr. 614. On recross, Agent Marziliano testified:

Q. You gave authorization for the individual in Antigua to place the bet, correct?

 

A. That is true, I gave authorization for the person on the other end of the phone in Antigua to place my bet.

Id.

            This testimony was consistent with evidence that the rules and regulations of WSE, which all customers agree to as a condition of  establishing a wagering account, provide that “[a]ll wagers . . . take place at our server in Antigua.”  A300; see also A348.

            The principle that a bet occurs where it is accepted is well-grounded in common law. In New York, the Appellate Division has expressly recognized that betting is conducted where the bet is received. Saratoga Harness Racing, Inc. v. City of Saratoga Springs, 55 A.D.2d 295, 390 N.Y.S.2d 240 (3d Dept. 1976), aff’d, 44 N.Y.2d 980, 408 N.Y.S.2d 331 (1978), was a tax case which turned on whether betting was “conducted” in the locations where telephone calls to the defendant off-track betting corporation (“OTB”) originated or at the site where such calls were received. The court agreed with defendant OTB that betting is conducted only at the site at which OTB has established operating facilities to receive, record and pay out bets. The court stated:

The location of the bettor at the time he places his bet is immaterial in the same sense that no reasonable person would consider that the famous betting parlors of London . . . are conducting betting in any other country from which someone might place a bet by telephone or cable.

55 A.D.2d at 297-98.

            The Fifth Circuit’s decision in United States v. Truesdale, 152 F.3d 443 (5th Cir. 1998), is consistent with this principle. In Truesdale, the defendants were charged, among other counts, with conspiracy to violate 18 U.S.C. § 1955 and with substantive violations of § 1955, in connection with their operation of a sports wagering service licensed in the Dominican Republic and Jamaica which accepted instructions to place wagers in these countries from bettors in the United States via international phone calls.[13] Section 1955 prohibits conducting a gambling business in violation of state law. The court reversed all convictions, after concluding that the business did not violate Texas bookmaking laws because no bets were received in Texas. The operation maintained information lines that were answered in Texas, but the lines for accepting wagers were answered only in Jamaica and the Dominican Republic. The court declared that “it is plain that the bookmaking activities occurred outside the United States,” in countries where wagering on such sports events was legal. Id. at 447.

            As early as 1893, the Supreme Court of Virginia held that an individual could not be convicted of keeping a house for the purpose of “betting therein” where the individual leased a house in Virginia in which he merely accepted an offer to bet upon a horse race in New Jersey, took the bettor’s money plus a small commission, and sent it by telegraph to the track in New Jersey. Lescallett v. Commonwealth, 17 S.E. 546, 548 (Va. 1893). The court concluded that “the betting was done, not here, but in New Jersey.”  Id. The court explained:

A bet is a wager between two or more persons. It involves a concurrence of wills; that is, there must be an offer to bet made on one side, and accepted on the other. When the offer is accepted, and not before, the betting becomes complete. . . . If, therefore, an offer to bet is telegraphed by a person in this city to another in New York, and the latter accepts by telegraph, the betting is done, not in Richmond, but in New York, because the offer, being accepted there, takes effect there.

Id. at 547-48.

            Likewise, the Supreme Court of New Hampshire recognized in 1904:

Had it appeared that parties in New York telegraphed proposals offering to bet upon horse races with persons in Nashua, who accepted the same by telegraph, the contracts would be completed at Nashua when the messages of acceptance, directed to the parties in New York, were delivered at the telegraph office.

McQuesten v. Steinmetz, 58 A. 876 (N.H. 1904); see also Burton v. United States, 204 U.S. 344 (1906) (reaffirming basic principle of contract law that a contract is formed at the time and place of acceptance); Tex. Penal Code § 47.01 (defining “bet” as “an agreement to win or lose something of value solely or partially by chance”).

            The principle that an offer to bet, or wagering instructions, constitute mere information assisting in the placing of a bet or wager is not only well-grounded in the common law, but also has been recognized and implemented in several states. WSE, like the business in Truesdale and OTB in Saratoga Harness Racing, required the bettor to establish and fund an account at the site where the business accepts the bet. WSE did not accept bets on credit. This is identical to the longstanding, and ongoing, practice of account wagering in connection with off-track betting on horse racing.

            As Defendant explained to the jury, A521-24, account wagering is the practice by which an individual establishes an account with an account wagering facility and causes wagers to be made from that account by sending instructions to the facility operator. A number of states, including New York,[14] Pennsylvania,[15] and Oregon,[16] permit the establishment and operation of wagering accounts for individuals located outside the state in which an off-track betting facility is located. These out-of-state account holders may lawfully instruct the facility via telephone or other electronic means to place a bet from their account. This practice is wholly unlike a bookmaking operation in which individuals telephone a bookie and wager a certain sum of money that will be produced by the losing party following the subject sports event.

            The Oregon statute authorizing account wagering on horse racing is instructive. This statute defines “account wagering” as

a form of mutuel wagering in which an individual may deposit money in an account with a race meet licensee and then use the account balance to pay for mutuel wagering conducted by the licensee. An account wager may be made in person, by direct telephone call or by communication through other electronic media by the holder of the account to the race course.

Or. Rev. Stat. § 462.142(2). The Oregon Racing Commission, which is authorized to regulate businesses that conduct pari-mutuel wagering on races, or “hubs,” see Or. Rev. Stat. § 462.725; Or. Admin. R. 462-20-0010, has promulgated the rule that wagering accounts “can be established and operated for people whose principal residence is outside of the State of Oregon including residents of foreign jurisdictions” as long as such wagering is lawful in the person’s place of residence and the hub complies with the provisions of the Interstate Horseracing Act of 1978 (“IHA”), 15 U.S.C. §§ 3001-3007.[17] Or. Admin. R. § 462-220-0020(2). The applicable rules further provide that:

(1) Any wager that is made from an account maintained by the hub operator is considered to have been made in the State of Oregon.

 

(2) Account holders may communicate instructions concerning account wagers to the hub in person, by mail, telephone, or electronic means.

Or. Admin. R. § 462-220-0060 (emphasis added).

            The coexistence of such lawful account wagering facilities with § 1084 reflects the prevailing view that offers to bet or wagering instructions from out-of-state account holders to account wagering facilities constitute merely “information assisting in the placing of bets or wagers,” and not “bets or wagers” per se, under § 1084. Accordingly, under circumstances such as those in this case, § 1084(b) precludes criminal liability.

            Indeed, the Legislative Counsel of California recognized the validity of this view when asked to determine whether a duly licensed interactive wagering entity located in Oregon, operating in accordance with the IHA and Oregon law, may lawfully receive telephoned wagering instructions from California residents who have previously established accounts in Oregon with that hub. As explained in the opinion, this question turns on whether the wagering instructions constitute “information assisting in the placing of bets or wagers” or “bets or wagers” per se under § 1084.  The Legislative Counsel opined that:

To the extent that a telephoned wagering instruction is construed as ‘information assisting in the placing of bets or wagers’ as used in Section 1084 of Title 18 of the United States Code Annotated, a multi-jurisdictional simulcasting and interactive wagering totalizator hub located in Oregon that is duly licensed by the Oregon Racing Commission and is operating in accordance with both the federal Interstate Horseracing Act of 1978 and Oregon law may lawfully receive telephoned wagering instructions from California residents of legal age who have previously established accounts in Oregon with that hub.

Legislative Counsel of California, Opinion No. 15374 (June 21, 1999), at 1. Importantly, as noted in the Legislative Counsel opinion, the IHA does not address the legality of one state accepting a wager from a bettor who is not present in that state at the time the wager is placed.

            Accordingly, the lawful operation of betting operations in New York, Oregon, and elsewhere, wherein an out-of-state account holder communicates wagering instructions by telephone or other electronic means to the account wagering facility located in the state where the bet is accepted, is premised upon the interpretation that such wagering instructions constitute merely “information assisting in the placing of bets or wagers” under § 1084.

            Contrary to all this authority, the district court in this case repeatedly instructed the jury as a matter of law that the act of placing a call, or making an Internet connection, from New York to Antigua and requesting that WSE place a bet on the caller’s behalf from his Antiguan wagering account constituted transmission of a bet per se. A872-73.  The court emphasized that “[i]t is very important for you to understand this.” A873.

            The court further instructed the jury that “the evidence as to where the bet was deemed to take place, or where it was created, in no way disposes of the issue presented under Section 1084.”  A873. The court then repeated its earlier instruction as to what constitutes transmission of a bet as a matter of law. A874.The court further stated, twice, that “Congress clearly did not intend to have this statute be made inapplicable because the party in a foreign gambling business deemed or construed the transmission as only starting with an employee or an [I]nternet mechanism located on the premises in the foreign country.”  A874-85. The court emphasized to the jury that “this kind of thing would be a fiction and would avoid the facts that are relevant under the statute.”  A875.[18] As counsel urged, A898-25, these instructions not only misstated the law, but amounted to a directed verdict of guilt.

            Even though we have demonstrated that, as a matter of law, that the evidence in this case warrants a dismissal of all charges, at a minimum, the question of whether WSE customers transmitted actual bets or wagers when they contacted the company in Antigua or merely transmitted information to assist WSE in placing bets in Antigua from their Antiguan-based wagering accounts, was a question of fact that should have been presented to the jury. See A329, A332, A341. Accordingly, at the least, a new trial must be ordered.

D.    The Undisputed Evidence Failed to Establish that Jay Cohen Had the Requisite Mens Rea to Commit the Substantive Offenses Alleged in Counts Two Through Eight, and the Court Improperly Instructed the Jury as the Mens Rea Element of § 1084.

            Even if this Court concludes that, as a matter of law, a request to have a bet placed from one’s wagering account constitutes a “bet or wager” per se, Defendant did not have a culpable mental state because the undisputed evidence established that he believed that only information assisting in the placing of bets was transmitted from one lawful jurisdiction to another – a type of transmission that does not violate § 1084. Accordingly, Defendant could not have knowingly used a wire communication facility to transmit bets or wagers per se in foreign commerce.

            As noted, § 1084(a) makes it a crime to “knowingly use[] a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” 18 U.S.C. § 1084(a).[19] Defendant submits that, as a threshold matter, the term “knowingly” modifies not only the phrase “uses a wire communication facility,” but each of the following phrases. In addition, contrary to the district court’s view, this knowledge requirement pertains to the exception in § 1084(b).

            It is well established in this Circuit that a conviction under  § 1084 “requires a showing that the defendant knew or could reasonably foresee that interstate communication would be used in furtherance of the plan of action.” United States v. Barone, 467 F.2d 247, 249 (2d Cir. 1972); see also United States v. Southard, 700 F.2d 1 (1st Cir.), cert. denied, 464 U.S. 823 (1983). Clearly the term “knowingly” modifies more than just the phrase “uses a wire communication facility.”

            Common sense and fundamental principles of statutory construction demand that the term “knowingly” also be read to modify each of the subsequent clauses identifying the type of prohibited transmission. In United States v. X-Citement Video, Inc., 513 U.S. 64 (1994), the Supreme Court rearticulated the general principle that criminal statutes are to be interpreted “to include broadly applicable scienter requirements.”  Id. at 70. The Court further recognized that “the presumption in favor of a scienter requirement should apply to each of the statutory elements that criminalize otherwise innocent conduct.”  Id. at 72.; see also Liparota v. United States, 471 U.S. 419, 426 (1985) (construing a statute to include an element of mens rea “is particularly appropriate where  . . . to interpret a statute otherwise would be to criminalize a broad range of apparently innocent conduct”); United States v. Bronx Reptiles, Inc., 217 F.3d 82 (2d Cir. 2000) (same). Indeed, if “knowingly” did not modify the clause “bets or wagers,” then an individual could be convicted for transmitting a wire communication in interstate or foreign commerce that later turned out to be a bet, even if he did not know that the communication was in fact a bet. Such a construction would undermine the very purpose of the statute.

            Accordingly, to violate § 1084, an individual must know that the information being transmitted is in fact a bet or wager, or information assisting in the placing of a bet or wager. At trial, the Government conceded that “we have to prove that [Defendant] knew those communications were the taking of a bet, that he knew that his business took bets over the wires in interstate foreign commerce.” Tr. 351. It follows, then, given the provisions of § 1084(b), that if a defendant knows only that information assisting in the placing of bets or wagers, and not bets themselves, is transmitted in foreign commerce from one jurisdiction in which betting is legal to another such jurisdiction, then the defendant, as a matter of law, does not have the requisite mens rea to commit a substantive violation of § 1084.[20]

            In this case, however, the district court instructed the jurors that they need only find that Defendant “knew that the deeds described in the statute as being prohibited were being done. I emphasize the word ‘deeds.’” A879. In conjunction with its instruction on what constitutes transmission of a bet as a matter of law, see A872-75, the court thus instructed the jury that it could find that Defendant had the requisite mens rea as long as he knew that individuals in New York were calling WSE in Antigua to request that WSE place bets from their wagering accounts, even if they found that Defendant believed that such transmissions involved no more than information assisting in the placing of bets or wagers. The court’s instructions effectively eliminated the mens rea requirement of the statute.

            The court compounded this error by further instructing that:

ignorance of the law is no excuse. Now, the same doctrine applies even where a person knows of the particular statute and believes in some interpretation or construction of it which is contrary to the actual lawful meaning of the statute – if the person misconstrues the statute. That isn’t the issue here. Did the person do the deeds and know that he was doing the deeds?  That is what is sufficient for this element here that I am talking about. . . . If he knew of the statute and misconstrued it, that is no excuse.

 

A880. Not satisfied, the court went so far as to instruct the jurors:

[W]e recognize that in our society there are ways to find out the proper and lawful interpretation and application of a statute. I repeat, in our society it is recognized that there are ways to find out the proper and lawful interpretation and application of statute. There is a legal profession, which can be consulted regarding specific questions under specific statutes. Consequently, if a statute applies to a particular kind of conduct, and under this statute the person knows he is engaged in that kind of conduct, then under our law he is guilty of doing the conduct and having the requisite criminal state of mind even though he does not know literally that he is violating the statute, or he may have some personal misinterpretation of the statute. Ignorance or misinterpretation is not a defense.

 

A881.

            The court thus precluded the jury from determining the factual question of whether Defendant knew that bets or wagers per se, as opposed to mere information assisting in the placing of bet, were transmitted. In effect, the court told the jury that Defendant had concocted in his mind a “legal fiction,” thereby imputing to him a mens rea as a matter of law.

            Further, the court imposed upon the defendant the burden of consulting a lawyer for a legal opinion when no relevant authority requires any such thing.

            Finally, the district court erroneously refused to instruct the jurors that if they found that Defendant knew only that information assisting in the placing of bets or wagers was being transmitted, that they must return a verdict of not guilty. See A741, A976-77. As shown, this completely undermined the thrust of the statute.

            Additional errors permeated the jury instructions with respect to the mens rea element.  First, the district court erroneously instructed the jury that Defendant’s testimony about his understanding of where the bet took place and that his conduct was lawful was irrelevant, A873-74, when this evidence was relevant to show that Defendant understood that only information assisting in the placing of bets or wagers was transmitted.  Second, the court instructed the jury that testimony concerning  Capital OTB was irrelevant, A857, when such evidence was directly probative of whether Defendant believed that only information assisting in the placing of bets or wagers was transmitted.

            For all the foregoing reasons, Defendant’s convictions should be reversed and all counts ordered dismissed. At a minimum, he should be afforded a new trial.


POINT III

 

THE RULE OF LENITY REQUIRES REVERSAL OF DEFENDANT’S CONVICTIONS ON ALL COUNTS AND DISMISSAL OF ALL CHARGES

 

            Even if this Court concludes that § 1084 should be interpreted  in accordance with the district court’s instructions, Defendant cannot be held to such an interpretation because, based on an analysis of the statute and its legislative history, the statute as drafted does not provide fair notice that Defendant’s conduct was unlawful.

A.    The Rule of Lenity

            The Supreme Court has long maintained that a criminal conviction cannot be based on a statute that does not fairly warn of the conduct it proscribes. United States v. Harriss, 347 U.S. 612, 617 (1954). This principle underlies the equally well-established rule of lenity, “a sort of junior version of the vagueness doctrine,” United States v. Lanier, 117 S. Ct. 1219, 1225 (1997) (internal quotations omitted), which “ensures fair warning by so resolving ambiguity in a criminal statute as to apply it only to conduct clearly covered.” Id. The Supreme Court made clear in 1931 that “a fair warning should be given to the world in language that the common world will understand, of what the law intends to do if a certain line is passed. To make the warning fair, so far as possible the line should be clear.”  McBoyle v. United States, 283 U.S. 25, 27 (1931). In United States v. Bass, 404 U.S. 336 (1971), the Court articulated the longstanding rule that “when choice has to be made between two readings of what conduct Congress has made a crime, it is appropriate, before we chose the harsher alternative, to require that Congress should have spoken in language that is clear and definite.” Id. at 347 (internal quotations omitted).

            This Circuit recently reaffirmed the principle that where a critical word or phrase of a statute lends itself to more than one meaning, only one of which can sustain the conviction, and neither the tools of statutory construction nor the legislative history resolve the matter, then the court must resolve the ambiguity in the defendant’s favor. United States v. Dauray, 215 F.3d 257, 260-65 (2d Cir. 2000).

B.    Application to § 1084

            Notwithstanding all of the arguments set forth in Points I and II, Defendant now stands convicted of conspiracy to violate § 1084 and substantive violations of § 1084.  That being so, § 1084, either by its own terms, as construed, or as discussed in the legislative history, did not provide Defendant with fair warning that his conduct was unlawful.

            Notably, a committee of the National Association of Attorneys General issued a report in 1996 that not only described “actual online gambling” as an activity “which may be a violation of various state and federal laws,” A57 (emphasis added), but also concluded with respect to § 1084 that “[t]here are . . . a number of ambiguous provisions in the statute, which was originally enacted more than thirty years ago.” A70.[21] Such ambiguities included the absence of any definitions of “bets or wagers” or “transmissions.”  See A105.

            First, the statute simply does not define “bets or wagers.”  Accordingly, while Defendant maintains that WSE’s procedures ensured that no bets or wagers per se were transmitted in foreign commerce, the phrase “bets or wagers” arguably can be construed in different ways. Indeed, the Internet Gambling Prohibition Act of 1997 (“Kyl Bill”), formally known as S.474, A29-33, would have added a definition of “bets and wagers,” A30, because, as the bill’s sponsor recognized, the definition currently is not clear. A34.

            As the statute is drafted, it is impossible for an individual to determine whether “bets or wagers” per se are transmitted in an account wagering system. Despite all the authority indicating that they are not, see Point II, the legislative history does not address this point. Further complicating the matter is the operation of off-track betting operations which use account wagering to accept requests to bet via interstate and foreign communications, despite the absence of any exemption from § 1084 for horseracing. This practice was in effect at the time of the charged conduct and remains so. Defendant thus cannot be convicted for conduct which he had an absolute right to believe was not  proscribed.

            The same holds with respect to the lack of notice as to whether the term “transmission” includes mere sending of information or both sending and receiving of information. Once again, § 1084 does not define the term “transmission.”  See note 11, supra. Defendant submits that the plain meaning of the term establishes that it is limited to the sending of information. However, the Second Circuit has not resolved the issue, and the other circuits are split. See note 11, supra. To the extent that this term lends itself to more than one meaning, and neither the tools of statutory construction nor the legislative history eliminates the ambiguity, this Court must resolve it in Defendant’s favor. Dauray, 215 F.3d at 265.

            Likewise, the statute does not define the term “legal” as it is used in § 1084(b). While Defendant maintains that the statute  and its legislative history clearly indicate that Congress intended this term to refer to whether a state has declined to make the act of betting a criminal offense, to the extent that it can be construed differently, as did the district court, the Defendant cannot fairly be held to a stricter construction.

            Defendant’s convictions cannot constitutionally rest on a statute that does not fairly warn of what it proscribes. Accordingly, they must be reversed and the charges dismissed.


POINT IV

 

THE DISTRICT COURT COMMITTED CLEAR ERROR IN DECLINING TO GIVE AN AIDING AND ABETTING CHARGE TO THE JURY; MOREOVER, THE EVIDENCE AS TO THE SUBSTANTIVE COUNTS WAS LEGALLY INSUFFICIENT

            In instructing the jury, the Court, failing to give an aiding and abetting charge, essentially explained that the jury could convict upon principles of civil liability. A865-66. Counsel’s vociferous protests were overruled. A904-79. This clear error unduly prejudiced Defendant as to the substantive counts. It also glaringly demonstrates that the evidence in support of those counts was legally insufficient.

A.    Applicable Principles

            Pursuant to 18 U.S.C. § 2, it is provided that "[w]hoever commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal." To convict a defendant of aiding and abetting the commission of a substantive crime, the government must prove that "the underlying crime was committed by someone other than the defendant and that defendant himself either acted or failed to act with the specific intent of advancing the commission of the underlying crime." United States v. Smith, 198 F.3d 377, 383 (2d Cir. 1999); see also United States v. Labat, 905 F.2d 18, 23 (2d Cir. 1990). This means that to be convicted of aiding and abetting, “it must be proved that the defendant consciously assisted the commission of the specific crime in some active way.” United States v. Dickerson, 508 F.2d 1216, 1218 (2d Cir. 1975).

            To show specific intent the prosecution must prove the defendant knew of the proposed crime and had an interest in furthering it.  United States v. Pipola, 83 F.3d 556, 561 (2d Cir.), cert. denied, 519 U.S. 869 (1996). Therefore, suspicion that such crime might occur is not enough. To prove the act and intent elements for aiding and abetting the commission of a crime, the evidence must demonstrate that the defendant joined in the underlying criminal endeavor and that his efforts contributed to its success. United States v. Zambrano, 776 F.2d 1091, 1097 (2d Cir. 1985); See also Nye & Nissen v. United States, 336 U.S. 613 (1949).

B.    The District Court's Instructions

            Both defense counsel and the Government submitted proposed aiding and abetting instructions which contained the following language: "Obviously, no one can be convicted of aiding or abetting the criminal acts of another if no crime was committed. But if you do find that a crime was committed, then you must consider whether the defendant aided or abetted the commission of the crime." A778, 820-21. Instead of the foregoing, the court instructed the jury as follows:

 

The evidence is that the person on the other end of the line, the employee of World Sports Exchange, was not the defendant Jay Cohen personally. . . If a person is acting through employees, he can be guilty of a violation of Section 1084. This is true really under the statute itself, and it is also true under what is called the aiding and abetting statute. What I am talking about here embraces an instruction that would apply the aiding and abetting statute.

 

      . . .

 

      If a person acts through employees or subordinates, then that person is, from a common sense standpoint, committing the illegal act – if the act is illegal – just acting through somebody else. And our law makes the person, the employer, the supervisor, the person who does the directing, criminally liable.

 

However, for the employer to be guilty, all of the acts defined in the elements that I have described to you must be committed by the employee or employees, and the employer must know that all such acts are being done and intend that they are done. He must cause them to be done by his direction and his superior position.

 

However it is not necessary that the employer direct or know of the specific call in question. As long as he knows and directs that calls of this precise nature are done at a time which covers the time alleged.

 

. . . [W]here a person acts through someone else, not only does the employee have to commit the acts, but the employee has to do it at the behest and under the direction or pursuant to the direction of the superior in his position of the employer, and the employer must know of all those acts and intend that they be done even though maybe not the specific incident, but he must direct that the general conduct go on and he must know of the conduct, and he must know that all of the elements constituting the crime are being carried out . . .

 

A865-67 (emphasis added).  The court continued:

 

I will refer again to the fact that it is not necessary for the defendant personally to engage in a telephone call or internet transmission. It is sufficient if he acts through employees. But, of course, the employee must do the acts which violate the statute for there to be any basis for convicting the defendant. . .

 

It is necessary for the government to prove beyond a reasonable doubt that the defendant knew that the employee was committing the acts that constituted what is illegal under the statute, not necessarily as I say the knowledge that the specific phone call or the specific internet transmission was made, but knowledge that the exact nature of the telephone calls or internet transmissions were being made.

 

Now what the defendant must be proved to have known is that he knew that the deeds described in the statute as being prohibited were being done. You must find that he knew that the deeds described in the statute as being prohibited were being done. I emphasize the word "deeds.". . .

 

A878-79 (emphasis added).  Finally, the court instructed:

 

So, the question is whether the government has proven that the defendant knew that these deeds – if you find they were done were done at his direction by subordinates and whether he knew the deeds were done.

 

A882-83 (emphasis added).

            Thereafter, counsel objected to the court’s instruction, arguing that the charge, as given, was erroneous as a matter of law. A904-13. Counsel noted that the court failed to give an aiding and abetting charge. A904.  Thus, it failed to advise the jury that it must find that each person in Antigua answering each call had to have committed a violation of § 1084(a) before it could find Defendant guilty of each count pursuant to 18 U.S.C. § 2. A909-10.

            Conceding that it had failed to submit an aiding and abetting instruction to the jury, the Court stated:

. . . Mr. Brafman is absolutely right, I did not instruct the jury that they had to find that the employees were themselves guilty of criminal acts. And Mr. Brafman is absolutely right, but my belief of the law is that that is not necessary if the jury makes the finding that I speak of, because this is really beyond and above the mere concept of aiding and abetting in Section 2. . . I am just saying that there are many situations in the law where the person does not have to physically do the act. They were working with somebody, if somebody is doing something at their direction, they are responsible for the act. That’s the concept I gave the jury.

 

A911-12.

            Thereafter, the Court overruled defense counsel’s objection. A912-13.

C.    Discussion

      1.    The Instructions

            Upon this de novo review, it is respectfully submitted that the Court’s charge was clear error since it allowed the jury to conclude that Defendant could be found guilty without the jury’s finding that a crime had been committed by Defendant's employees, as required by 18 U.S.C. § 2. The jury simply had no understanding that it first was required to weigh the employees' conduct for knowing criminality.


            This glaring – and admitted – deficiency on the Court’s part is significant since there was absolutely no evidence that the individuals answering the phones in Antigua knowingly violated § 1084. Hence, as counsel argued, the jury was essentially charged to evaluate Defendant’s guilt under principles of agency. Standing alone, this requires a reversal of the substantive charges.

      2.    Insufficiency of the Evidence

            For the same reasons, even viewing the evidence at trial in the light most favorable to the government, it was legally insufficient to support Counts Two through Six of the indictment. Because any "Pinkerton" theory, see United States v. Jordan, 927 F.2d 53 (2d Cir.) (discussing  Pinkerton v. United States 328 U.S. 640 [1946]), cert. denied, 501 U.S. 1210 [1991]), was specifically disavowed in this case, A758, there must be proof that "the underlying crime was committed by someone other than the defendant and that defendant himself either acted or failed to act with the specific intent of advancing the commission of the underlying crime." Smith, 198 F.3d at 383. But, as shown, evidence of such knowing criminality by defendant’s employees was lacking.

            Finally, with respect to Counts Seven and Eight, there is absolutely no evidence that Defendant personally did anything to further the commission of those charged crimes. Foremost, there is absolutely no evidence that Defendant was present at the WSE headquarters when the telephone communications underlying Counts Seven and Eight on March 17, 1998 and March 18, 1999 were made. Rather, the evidence demonstrated that Defendant voluntarily surrendered himself to the Government in New York on March 10, 1998, prior to the conduct identified in Counts Seven and Eight.

            Accordingly, given the proof that Defendant was not present in Antigua at the time of the conduct underlying Counts Seven and Eight, and, absent any proof to the contrary, it is not reasonable to infer that he would have aided and abetted continued criminality of the sort for which he had just voluntarily surrendered. As counsel urged in his motion for judgment of acquittal, A690, the Government’s proof was simply blind to this fact. Thus, the record lacked any evidence that Defendant was even aware of the telephone calls underlying Counts Seven and Eight, Bondi: Tr. 108, let alone aided or abetted any criminality therein committed. The evidence, therefore, is legally insufficient to support Counts Seven and Eight.


      POINT V

THE DISTRICT COURT ABUSED ITS DISCRETION BY DENYING DEFENDANT’S MOTION TO TAKE THE DEPOSITION OF GYNETH MCALLISTER, WHOSE PROFFERED TESTIMONY WAS RELEVANT TO JAY COHEN’S BELIEF THAT HIS CONDUCT WAS LAWFUL AND TO HIS BELIEF THAT ONLY INFORMATION ASSISTING IN THE PLACING OF BETS WAS TRANSMITTED FROM NEW YORK TO ANTIGUA

 

            Defendant sought to introduce the testimony of Gyneth McAllister, an Antiguan Government official who was instrumental in assisting Defendant establish and license WSE in Antigua. Immediately upon learning that Ms. McAllister had become unavailable to testify, the defense requested a one-week adjournment of the trial to take her deposition in Antigua. A206. Because her proffered testimony was relevant to material issues in the case and Defendant was denied a fair trial without her testimony, the district court’s denial of this request was an abuse of discretion. Although Defendant maintains that his convictions on all counts should be reversed and all charges dismissed as a matter of law, should this Court decline to do so, the deprivation of Ms. McAllister’s testimony mandates that he be granted a new trial on all counts.

            Rule 15(a) of the Federal Rules of Criminal Procedure provides, in relevant part:

      Whenever due to exceptional circumstances of the case it is in the interest of justice that the testimony of a prospective witness of a party be taken and preserved for use at trial, the court may upon motion of such party and notice to the parties order that testimony of such witness be taken by deposition and that any designated book, paper, document, record, recording, or other material not privileged, be produced at the same time and place.

Fed. R. Crim. P. 15(a); see also 18 U.S.C. § 3503. The decision whether to grant such a motion is within the discretion of the trial court. United States v. Whiting, 308 F.2d 537, 541 (2d Cir. 1962), cert. denied, 372 U.S. 919 (1963). Accordingly, this Court reviews the lower court’s ruling for abuse of discretion.

            The “exceptional circumstances” standard is satisfied if: (1) it appears that a prospective witness may be unable to attend or prevented from attending a trial or hearing; (2) the testimony of such witness is material; and (3) it is necessary to take the witness’s deposition in order to prevent a failure of justice. United States v. Singleton, 460 F.2d 1148, 1154 (2d Cir. 1972), cert. denied, 410 U.S. 984 (1973). All three conditions were met in this case.

            First, Ms. McAllister, was unavailable to testify pursuant to her physician’s order that she not travel for at least several weeks due to a severe ear problem. A206, A231, A234. Second, her testimony was material because it was probative of two key issues in this case: (1) whether Defendant had a corrupt motive to violate the law; and (2) whether Defendant knowingly transmitted bets or wagers in foreign commerce.

            Defense counsel proffered that Ms. McAllister would testify that in 1997 she met with Scott Charney, then head of the Computer Fraud Division of the United States Justice Department and the White House Advisor on Computer Fraud, and with Jonathan Winer of the United States State Department, at a time when she was interested in obtaining assistance from the United States in strengthening Antigua’s existing regulation of the offshore gaming industry. A267. She would have further testified that the focus of discussion in each meeting was the regulation of gaming operations based in Antigua which had many customers in the United States, and that neither United States Government representative expressed any concern that such operations would contravene United States law. To the contrary, she would have testified that she understood that the United States Government supporting the burgeoning gaming industry in Antigua and was interested in improving existing regulations in order to protect United States consumers. A268.

            Most importantly with respect to the these meetings, Ms. McAllister would have testified that upon her return to Antigua from these meetings, she discussed them with Defendant, and communicated the tacit acceptance of the United States officials of offshore gaming. A268. This testimony was directly probative of Defendant’s belief that his conduct did not violate United States law.

            Defense counsel also proffered that Ms. McAllister would testify that she and other officials of the Antiguan Government maintained to Defendant that they believed that all actual bets would be placed in Antigua. She also had numerous discussions with Defendant before, during, and after WSE became a licensed gaming company in Antigua in which Defendant clearly expressed his belief that WSE operated in such a way that no bets or wagers were transmitted from the United States to Antigua. A268. This testimony would have been strongly probative of Defendant’s belief that only information assisting in the placing of bets and wagers was transmitted in foreign commerce.

            Finally, counsel proffered that Ms. McAllister would testify to the status of gaming in Antigua, licensing procedures in Antigua, and the steps taken by WSE to establish a legal gaming operation in Antigua. A207. All of this was essential background information for the jury to understand in order to determine Defendant’s state of mind for each of the charged offenses.  See  United States v. Bronston, 321 F. Supp. 1269, 1272 (S.D.N.Y. 1971) (granting defendant’s motion to take depositions of foreign individuals, where court found that testimony would help establish the background against which defendant formed relevant beliefs).

            Furthermore, defense counsel had secured the full cooperation of the Antiguan Government with respect to taking Ms. McAllister’s deposition. A230. The requested adjournment would have postponed the trial for only one week, A231, and the defense was prepared to make all arrangements on behalf of the United States Attorney’s Office. A232. Accordingly, the potential disruption to the trial was minimal.

            The district court’s refusal to grant a brief adjournment of the trial in order to permit the deposition of Ms. McAllister resulted in a considerable miscarriage of justice and mandates that Defendant be granted a new trial.


      CONCLUSION

      FOR THE REASONS STATED IN POINTS I, II, III, AND IV, THE JUDGMENT OF CONVICTION SHOULD BE REVERSED AND ALL  COUNTS SHOULD BE DISMISSED; ALTERNATIVELY, FOR SUCH REASONS, AND FOR THOSE FURTHER STATED IN POINT V, A NEW TRIAL SHOULD BE ORDERED.

 

Dated:      New York, New York

            November 1, 2000

 

 

 

                                    Respectfully submitted,

 

                                    BRAFMAN & ROSS, P.C.     

                                    Attorneys for Defendant-                                                Appellant Jay Cohen

                                    767 Third Avenue, 26th Floor

                                    New York, New York 10017

                                    212 750-7800

 

                       

                              By:                      

                                    MARK M. BAKER

 

 

 

 

BENJAMIN BRAFMAN

MARK M. BAKER

JENNIFER LIANG

MELINDA SARAFA

 

            Of counsel 

 


Certificate of Compliance

 

(FRAP 32[a][7][C])

 

 

            I, Mark M. Baker, an attorney at law duly admitted to practice in the United States Court of Appeals for the Second Circuit, hereby certifies that the within Brief on behalf of Petitioner complies with the word limitation contained in Fed. R. App. P. 32 (a)(7)(B)(i), in that, according to the word count in the word-processing system used to prepare such brief, there are 19,964 words, exclusive of the Preliminary Statement of Subject Matter and Appellate Jurisdiction, and the Statement of the Issues.  To the extent that the word count herein exceeds the limitation contained in Fed. R. App. P. 32(a)(7)(B)(i), Appellant has moved, in conjunction with the filing of this brief, pursuant to Local Rule 27(g), for permission to file an oversize brief.

Dated:      New York, New York

            November 1, 2000

 

 

 

                                                                    

                                          MARK M. BAKER



[1] Numerical references preceded by the letter "A" are to Appellant's Appendix. Those preceded by a "Tr." are to the transcript of trial. The parties have consulted, pursuant to Fed. R. App. P. 30(b)(1), and Appellee elects to prepare and file its own appendix.

[2]  For the same reason, the court refused to permit Gary Sparks to testify regarding his consultations with the law firm of Orrick, Herrington & Sutcliffe concerning Group One’s investment in WSE, Sparks: Tr. 739, 765-83, and refused to adjourn the trial to permit the deposition of Gyneth McAllister. A265. These preclusions, in and of themselves, deprived Defendant of a fair trial.  See Point V, infra.

[3] The Landen court added that "The [Powell] case has stood for 50 years as the leading one on the subject, and if it be confined, as it is ([63 N.Y. at] page 92), to a plan to do an act 'innocent in itself,' it has never, so far as we find, been questioned."299 F. at 79. (omitted footnote discussed infra). Notably, in reaching its conclusion, the Landen Court limited a precedent in that Circuit, Chadwick v. United States, 141 Fed. 225 (6th Cir. 1905), which seemingly had rejected the Powell doctrine. Landen is still valid law in the Sixth Circuit. See United States v. Reminga, 493 F. Supp. 1351, 1360 (W.D. Mich. 1980), upon constraint of Landen district court overturned a conspiracy conviction, while sustaining the conviction of the object offense ("Though, guilty of unlawfully dealing in firearms, in the absence of showing an intentional violation of the Gun Control Act, there appears to be no reason to hold the Defendant liable for the separate offense of conspiracy.").


[4] Although the Cruz court added that "it is not necessary to establish knowledge on the part of the defendants of the existence of the law defining the offense, even if it is merely mala prohibita[]," it qualified that "[w]here a corrupt motive is established such knowledge is imputed." 106 F.2d at 830.

 


[5] As alluded to above, this conclusion, implicitly accepting the Powell doctrine, was later found by the Supreme Court to be inconsistent with the ostensible eschewal of that doctrine, as earlier enunciated in Mack. Thus, "[t]hat Judge Hand should reject the Powell doctrine and then create the Crimmins doctrine seems curious enough. Fatal to the latter, however, is the fact that it was announced in a case to which it could not have meant to apply. In Crimmins, the substantive offense, namely, the receipt of stolen securities that had been in interstate commerce, proscribed clearly wrongful conduct. Such conduct could not be engaged in without an intent to accomplish the forbidden result." Feola, 420 U.S. at 691-692 (emphasis added).

 

[6] Minimizing the Keegan majority’s holding, the Tenth Circuit, in Lantis v. United States, 186 F.2d 91, 93 (9th Cir. 1950), noted "in passing" that "the rule of the Powell case appears to have gained little if any headway in the federal jurisdiction." But, aside from the fact that that court quoted this very passage from Chief Justice Stone's dissent  in support of that observation, it was emphasized that in the Lantis "record there is plenty of evidence that the motives and intent of Abreu as well as of appellant were not innocent."  Id.

[7] In Freed, because such "possession of hand grenades is not an innocent act," 401 U.S. at 609, n.14, the Court likewise declined to pass upon the "corrupt motive" rule.

[8] Notably, the Supreme Court in Morissette quoted from the New York Court of Appeals' reversal of a conspiracy conviction in Flack, where, immediately after noting the Powell rule regarding the need for an "evil purpose," the Flack court had stated, in part, that "'to constitute guilt there must not only be a wrongful act, but a criminal intention. Under our system (unless in exceptional cases) both must be found by the jury to justify a conviction of a crime. . . .'" 342 U.S. at 274, quoting 125 N.Y. at 334, 26 N.E. at 270.

[9] It is for this reason that the Tenth Circuit's ruling in United States v. Blair, 54 F.3d 639 (10th Cir. 1995), relied upon by the Government below in seeking to interpret Feola, Tr. 901, is wrongly decided. According to the Blair court, that defendant, charged inter alia, with conspiracy to violate 18 U.S.C. 1084(a) "made no effort to distinguish Feola from the present case, and indeed, nowhere mentions it in his brief." 54 F.3d at 643. It was therefore held that "Feola is controlling and the prosecution need not prove a defendant intentionally violates a known legal duty in order to sustain a conviction under § 371 in cases where the underlying substantive offense does not impose such a requirement." Id. As shown, not only does Blair ignore the fact that  Feola involved inherently wrongful conduct, and not only does it ignore that, for that reason, Feola specifically declined to address the Powell corrupt motive doctrine, but the Blair court also ignored its own contrary precedent, which had embraced the Powell doctrine. See Cruz, 106 F.2d at 830. Informed by Cruz, therefore, Blair has no impact at all where there is an absence of wrongful motivations.


[10]  The Government produced no evidence that a third type of transmission identified in the statute and charged in the indictment – namely, “a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers,” 18 U.S.C. § 1084(a) – was ever transmitted.  Clearly this clause refers to a category distinct from bets or wagers per se and from information assisting in the placing of bets or wagers.  Rather, this plainly refers to a communication that takes place after the subject sports event has taken place and notifies a party that he is actually entitled to receive money as result of a formerly placed bet.

 

 

[11]  Even if this Court were to conclude as a matter of law that bets or wagers per se were transmitted, there was no evidence that Defendant or any WSE employee “transmitted” bets or wagers, only that WSE customers did.  Although § 1084 does not define the term “transmission,” the plain meaning of the term is to send, and subsection (d) of § 1084 refers to both “transmitting” and “receiving” information, thereby indicating that, as used in § 1084(a), “transmission” refers only to sending.  The Second Circuit has not decided this issue, and the other circuits are split.  See United States v. Stonehouse, 452 F.2d 455 (7th Cir. 1971) (reversed § 1084 conviction of defendant who received gambling information over ticker tape because “transmission” does not encompass mere reception).  But see United States v. Reeder, 614 F.2d 1179, 1184 (8th Cir. 1980) (“transmission” under § 1084 includes both sending and receiving information); United States v. Pezzino, 535 F.2d 483, 484 (9th Cir.) (same), cert. denied, 429 U.S. 839 (1976); United States v. Sellers, 483 F.2d 37, 44-45 (5th Cir. 1973) (same), cert. denied, 417 U.S. 908 (1974); United States v. Tomeo, 459 F.2d 445 (10th Cir.) (same), cert. denied, 409 U.S. 232 (1972); Sagansky v. United States, 358 F.2d 195 (1st Cir.) (same), cert. denied, 385 U.S. 816 (1966).

[12]  The website, although available for viewing via the Internet from virtually anywhere in the world, is located in Antigua. See State of Missouri v. Coeur D’Alene Tribe, et. al, 1997 WL 603834 (W.D. Mo. 1997) (an Internet lottery website operated by an Indian tribe is located on tribal lands where the website is maintained and operated).

[13]  Count One of the indictment in Truesdale actually set forth a violation of § 1084(a) as the first object of the conspiracy.  See United States v. Truesdale, No. 96-CR-261-D (N.D. Tex. filed Aug. 20, 1997). The Truesdale opinion, however, does not discuss the § 1084(a) object of the conspiracy because the Government in that case apparently determined that the defendants’ conduct did not violate federal law unless it violated the Texas penal laws prohibiting bookmaking. See Truesdale, 152 F.3d at 450 n.6.

[14]  See N.Y. Rac. Pari-Mut. Wag. & Breed. Law § 1012; www.nyra.com/saratoga/phone.html.

[15]  See 4 Pa. Cons. Stat. § 325.218; 58 Pa. Code § 169.3; www.philadelphiapartk.com/phonebet.

[16]  See Or. Rev. Stat. § 462.142; Or. Admin. R. § 462-220-0020(2).

[17]  The IHA was enacted to regulate the off-track betting industry, which posed a potential threat to the racetracks where subject races are run.  S. Rep. No. 554, 95th Cong., 1st Sess. 1977, reprinted in 1978 U.S.C.C.A.N. 4132; S. Rep. No. 1117, 95th Cong., 2d Sess. 1978, reprinted in 1978 U.S.C.C.A.N. 4144.  The IHA thus prohibits the acceptance of an “interstate off-track wager,” defined as “a legal wager placed or accepted in one State with respect to the outcome of a horserace taking place in another State” unless consent is obtained from the host racing association, the host racing commission, and the off-track racing commission.  15 U.S.C. §§ 3002, 3004.  The Act in no way exempts betting on horseracing from the reach of § 1084.

[18]  The court also erroneously instructed the jury that Defendant’s testimony concerning off-track betting was irrelevant.  A857.

[19]  Section 1084 also makes it a crime to “knowingly use[] a wire communication facility . . . for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers.”  18 U.S.C. § 1084.  Although the Government recites this language in the indictment, no evidence of such conduct was produced at trial.  See note 10, supra, Accordingly, this section does not address this clause.

[20]  See Defendant’s Request to Charge No. 7, A777.

[21]  In this regard, Representative Bob Goodlatte, the House sponsor of the Internet Gambling Prohibition Act of 1997, S. 474, stated when he introduced the bill to the House of Representatives, “the Internet had not been created when the original law was passed and thus is not covered by it.”  143 Cong. Rec. E1633 (September 3, 1997) (statement of Rep. Bob Goodlatte) (emphasis added); A37.  Likewise, the bill’s sponsor, Senator Kyl, stated in his remarks to the Senate stated that “my bill clarifies that Internet access providers are covered by the law,”  A34, and that it “makes explicit the intent of Congress to create extraterritorial jurisdiction regarding Internet gambling activities.” A35.  143 Cong. Rec. S2560 (March 19, 1997) (statement of Sen. Kyl). It is  clear that even the question of whether § 1084 applies to the Internet is subject to reasonable debate, and the rule of lenity should apply with regard to this issue as well.