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<