TABLE OF CONTENTS
Preliminary Statement 1
Reasons for Granting the Petition For Rehearing 4
I. The Panel's Decision Overlooks Those Undisturbed Holdings in Which Other United States Courts of Appeals and, Implicitly, this Court and the United States Supreme Court, Embraced the Powell Doctrine. 4
A. The Panel Overlooked Specific Aspects of United States v. Feola, As Well as the Earlier Holding in United States v. Keegan Which Seemingly Embraces the Powell Doctrine 5
B. The Panel Overlooked Holdings of Other Circuits Adopting the Powell Doctrine. 7
C. The Panel Overlooked this Court's Ruling in United States v. Crimmins, decided after United States v. Mack, Which Effectively Adhered to the Powell Doctrine 9
II. The Panel's Holding that Betting is Not "Legal" in New York Despite the Fact that it is Not a Crime Directly Conflicts with the First Circuit's Holding in Sterling Suffolk Racecourse v. Burrillville Racing and the Demonstrated Intention of the Drafters of § 1084. 10
III. The Panel's Groundbreaking Holding that, as a Matter of Law, Wagering Instructions Constitute "Bets" Per Se, Criminalizes the Longstanding, State-Sanctioned Practices of Off-Tracking Betting Enterprises in Numerous States, Including New York, in Direct Contravention of the First Circuit's Holding in Sterling and the Legislative History of § 1084. 13
IV. The Panel's Holding that Defendant Need Not Know He Was Transmitting a "Bet" Conflicts with Settled Law of the United States Supreme Court that the Scienter Requirement Applies to Every Element of the Offense. 15
TABLE OF AUTHORITIES
Cruz v. United States,
106 F.2d 828
(10th Cir. 1939) 8
Fall v. United States,
209 F. 547
(8th Cir. 1913) 8
Packet Co. v. United States,
250 F. 747 (2d Cir. 1918) 4
Landen v. United States,
299 F. 75
(6th Cir. 1924) 4, 7
Lee v. Commissioner of
155 F.3d 584 (2d Cir. 1998) 5, 10
Racecourse Ltd. Partnership v.
Burrillville Racing Ass'n, Inc., 989 F.2d 1266
(1st Cir.), cert. denied, 510 U.S. 1024 (1993) i, 10, 11, 13
United States v. Barker,
514 F.2d 208
(D.C. Cir. 1975) (en banc) 7
United States v. Blair,
54 F.3d 639
(10th Cir. 1995) 4, 8
United States v.
Crimmins, 123 F.2d 271
(2d Cir. 1941) i, 2, 5, 9, 10
United States v.
Eisenberg, 596 F.2d 522
(2d Cir. 1979) 4, 9
United States v. Feola, 420 U.S. 671 (1975) i, 4-6, 9
United States v. Freed, 401 U.S. 601 (1971) 6
United States v. Keegan, 325 U.S. 478 (1945) i, 2, 5-7
United States v. Kelley,
254 F.Supp. 9
(S.D.N.Y. 1966) 12
United States v. Mack,
112 F.2d 290
(2d Cir. 1940) i, 4, 9
United States v. Mauro,
501 F.2d 45 (2d. Cir),
cert. denied, 419 U.S. 969 (1974) 10
United States v. Murray,
928 F.2d 1242
(1st Cir. 1991) 4, 8
United States v. Previte,
648 F.2d 73
(1st Cir. 1981) 7
United States v. Thomas,
887 F.2d 1341
(9th Cir. 1989) 4
United States v.
X-Citement Video, Inc.,
513 U.S. 64 (1994) 15
People v. Powell, 63 N.Y.
2 Cow. Cr. Rep. 283 (1875) passim
Watts v. Malatesta, 262 N.Y. 80 (1933) 12
FEDERAL STATUTES AND RULES
18 U.S.C. § 371 2
18 U.S.C. §1084 passim
18 U.S.C. § 1084(a) 2
18 U.S.C. § 1084(b) 10, 11
Fed. R. App. P. 35(a) 2
Fed. R. App. P. 35(b)(1)(A) 2
Fed. R. App. P. 35(b)(1)(B) 2, 3
Fed. R. App. P. 40 2
Second Circuit Local Rule 35 2
Second Circuit Local Rule 40 2
N.Y. Gen. Obl. Law § 5-419 12
H.R. Rep. No. 87-967,
87th Cong., 1st Sess. (1961)
reprinted in 1961 U.S.C.C.A.N. 2631 12 UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Docket No. 00-1574
UNITED STATES OF AMERICA,
On Appeal From a Judgment
of the United States
District Court for the Southern District of New York
PETITION FOR REHEARING FOR JAY COHEN
WITH A SUGGESTION FOR A REHEARING EN BANC
United States v. Jay
Cohen is no ordinary case. Today an entire offshore gaming industry, as well as
numerous state-sanctioned off-track betting enterprises, flourish with hundreds
of companies and Internet websites operating unencumbered by United States
Government interference. Yet Defendant-Appellant Jay Cohen alone faces time in
federal prison for such conduct. Mr. Cohen's former company, World Sports
Exchange, was wholly located, licensed and regulated in the sovereign nation of
Antigua. It was the most reputable business in the offshore gaming industry,
yet was singled out by the United States Attorney's Office for the Southern
District of New York at the behest of an influential private law firm
representing the major sports leagues. The Government concedes that there was
never any allegation of fraud or wrongdoing in the operation of World Sports
Exchange. For the reasons set forth herein and in Appellant's briefs, this
conviction is wrong and should be reheard and reversed.
Pursuant to Federal Rules of Appellate Procedure 40 and Local Rule 40, Jay Cohen ("Defendant") respectfully petitions for a rehearing of the appeal from a final judgment of the United States District Court for the Southern District of New York (Hon. Thomas P. Griesa), rendered on August 10, 2000, convicting him upon Indictment No. S2 98 CR 434 (TPG), pursuant to a jury verdict, of violations of 18 U.S.C. § 371 (Count One) and 18 U.S.C. § 1084(a) (Counts Two through Eight). In a judgment entered on July 31, 2001, a Panel of this Court affirmed the judgment of the District Court (Addendum).
Pursuant to Federal Rules of Appellate Procedure 35(a) and (b)(1)(A) & (B), as well as Local Rule 35, Defendant also suggests that the court rehear this case en banc. Defendant respectfully submits that the Panel decision affirming the judgment herein conflicts with a prior decision of the United States Supreme Court, United States v. Keegan, 325 U.S. 478 (1945), and a prior decision of this Court, United States v. Crimmins,123 F.2d 271 (2d Cir. 1941). "[C]onsideration by the full court is therefore necessary to secure and maintain uniformity in the court's decisions."
Additionally, the instant petition raises one or more questions of exceptional importance. First, the Panel's decision rejecting the corrupt motive doctrine established in People v. Powell,63 N.Y. 88, 2 Cow. Cr. Rep. 283 (1875), "conflicts with authoritative decisions of other United States Courts of Appeals that have addressed the issue." Fed. R. App. P. 35(b)(1)(B).
Second, the Panel's conclusion that, for purposes of § 1084, betting is not "legal" in New York despite the fact that it is not a crime conflicts with a decision of the First Circuit, with the intention of the statute's drafters, and with established legal principles in the State of New York.
Third, the Panel's unprecedented holding that wagering instructions constitute "bets" per se effectively criminalizes the operation of state-sanctioned off-track betting entities in several states. Such criminalization contravenes not only the laws and policies of such states, but also a decision of the First Circuit and the legislative purpose of § 1084.
Finally, the Panel's holding that defendant need not know that the information transmitted in foreign commerce was in fact a bet or wager conflicts with fundamental principles of statutory construction as articulated by the United States Supreme Court. Reasons for Granting the Petition For Rehearing
I. The Panel's Decision Overlooks Those Undisturbed Holdings in Which Other United States Courts of Appeals and, Implicitly, this Court and the United States Supreme Court, Embraced the Powell Doctrine.
In holding that "whatever remains of Powell does not apply to this case" Opn. at 6, the Panel explained:
The Powell doctrine was echoed in federal cases from the first half of the last century, but many circuits have since, in effect, moved away from the doctrine. Compare e.g., Landen v. United States, 299 F. 75 (6th Cir. 1924) (applying Powell to drug wholesaler's conspiracy to sell intoxicating liquor for nonbeverage purposes without the necessary permit), with United States v. Blair, 54 F.3d 639 (10th Cir. 1995) (involving, as does this case, offshore bookmaking in violation of §1084); United States v. Murray, 928 F.2d 1242 (1st Cir. 1991) (involving an illegal gambling business in violation of 18 U.S.C. §1955); United States v. Thomas, 887 F.2d 1341 (9th Cir. 1989) (involving trafficking in wildlife that the defendant should have known was taken in violation of state law).
Opn. at 7.
Upon then noting that "[a]lthough this Court has long expressed its discontent with the Powell doctrine, we have done so only in dicta in cases involving conspiracies to commit acts that were not ‘innocent in themselves'", Opn. at 7, the Panel mentioned only United States v. Mack 112 F.2d 290, 292 (2d Cir. 1940); United States v. Eisenberg, 596 F.2d 522, 526 (2d Cir. 1979); and Hamburg-American Steam Packet Co. v. United States, 250 F. 747, 759 (2d Cir. 1918). Additionally, the Panel referred to United States v. Feola, 420 U.S. 671 (1975), for the proposition that "the Supreme Court, in another context, rejected the notion that a federal conspiracy conviction required proof of scienter." Opn. at 9. Based on these citations alone, as well as an additional reference to the American Law Institute, Opn. at 8, the Panel concluded that "the Powell doctrine does not apply to a conspiracy to violate 18 U.S.C. § 1084." Opn. at 9.
Most respectfully, given the body of case law from several other Circuit Courts that has never been overruled, including two Circuits even relied upon by the Panel, and considering the precise, albeit wholly overlooked, positions taken by the Supreme Court in Feola and United States v. Keegan, 325 U.S. 478 (1945), the Panel's analysis is strikingly insufficient and places this Court squarely in conflict with other United States Courts of Appeals and with at least one prior unmentioned decision of this Circuit, United States v. Crimmins, 123 F.2d 271 (2d Cir. 1941). In view of the maxim that "one panel of this circuit will not overrule another; Panels are to be overruled only by the court en banc", Lee v. Commissioner of Internal Revenue, 155 F.3d 584, 587 (2d Cir. 1998), the full Court should convene and rehear Defendant's appeal.A. The Panel Overlooked Specific Aspects of United States v. Feola, As Well as the Earlier Holding in United States v. Keegan Which Seemingly Embraces the Powell Doctrine.
Wholly unmentioned by the Panel in discussing United States v. Feola is the Supreme Court's express refusal therein to pass on the Powell doctrine and reservation of the matter for another day. Specifically, the Feola Court noted: "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." 420 U.S. at 691-692. Therefore, the Court held "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 692. Overlooked by the Panel is that, in so delimiting its ruling, the Supreme Court stated with regard to the Powell doctrine:
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 .
420 U.S. at 691.
Feola, therefore, is not definitive on the question of whether in a prosecution under 18 U.S.C. §1084, involving no particularized mens rea, the Powell doctrine is applicable. On the other hand, prior to Feola, in Keegan, supra, the Supreme Court effectively embraced the Powell doctrine, although it did not specifically articulate the doctrine as the controlling rule. The Panel, however, wholly overlooked Keegan.
As discussed in Defendant's briefs, a majority of the Supreme Court in Keegan found that a conspiracy to violate a statute which was "innocent[ly]" and "honestly" believed to be unconstitutional was not sufficiently established. The Court stated, in language applicable to Defendant, who believed he was acting lawfully:
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 counseling, stealthily and by guile, to evade its command.
325 U.S. at 493-94
The Court then added, finding for the defendant:
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.
We respectfully submit, as we did in our briefs, that the Keegan majority, implicitly disagreeing with the dissent (which alone cited the Powell doctrine, only to reject it), based its decision on what it viewed to be decidedly innocent conduct. Here, since it is incontrovertible that Defendant had acted under the good faith belief that his malum prohibitum conduct was lawful, the Panel's conclusion is utterly incompatible with Keegan.
B. The Panel Overlooked Holdings of Other Circuits Adopting the Powell Doctrine.
The Panel wholly overlooked those cases decided in other Circuits which specifically gave vitality to the Powell doctrine. Thus, unmentioned by the Panel was that, in addition to the cited Sixth Circuit decision in 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"), the First, Eighth, Tenth, and D.C. Circuits have, at various times, either embraced the Powell doctrine or cited its underlying proposition with favor. See United States v. Previte, 648 F.2d 73, 81-82 (1st Cir. 1981) (stating that "the Powell doctrine is limited to cases in which an alleged objective may be completely innocent and unobjectionable" and thereby distinguishing Feola); 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); 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."); 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.").
Moreover, by referring only to the decisions of the First Circuit in United States v. Murray, supra, and the Tenth Circuit in United States v. Blair, supra, the Panel overlooked the fact that those cases came from circuits which, as noted above, specifically had embraced Powell in earlier rulings. Therefore, Murray and Blair – in which Powell was neither mentioned nor litigated – do not at all undermine the doctrine, as the Panel suggests.
We respectfully submit that since several Circuits have undisturbed case law on the books specifically adhering to Powell, the Second Circuit, by virtue of the Panel's decision in this case rejecting the doctrine's application to a decidedly "innocent in itself" situation, is now in stark conflict. C. The Panel Overlooked this Court's Ruling in United States v. Crimmins, decided after United States v. Mack, Which Effectively Adhered to the Powell Doctrine.
Finally, the Panel
completely failed to address this Court's decision in United States v.
Crimmins, supra. The viability of Crimmins, which effectively adhered to the
Powell doctrine, places the Panel decision at odds with a prior ruling of this
In Crimmins, decided 17 months after Mack and even noted by the Supreme Court to be seemingly irreconcilable with Mack because it effectively embraced the Powell doctrine, see Feola, 420 U.S. at 691, Judge Hand stated:
[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. This is
precisely the proposition advanced by Defendant, who, the evidence
demonstrates, did not "suppose" that receiving wagering instructions
in Antigua via wire from New York was criminally proscribed.
On the other hand, the earlier Mack decision involved a conspiracy to conceal an unregistered alien. Likewise, the other Second Circuit cases which the Panel selected for citation all involved inherently unlawful conduct that would not have been appropriate for application of the Powell doctrine. See Eisenberg (knowingly transporting counterfeit checks in interstate commerce); Hamburg-American (submitting falsified customs documents).
Therefore, given the irrefutable reality that Jay Cohen, like the accused in Crimmins, harbored no criminal intent, and the fact that such Powell-based holding has never been overruled, either by the Supreme Court or the en banc Second Circuit, the Powell doctrine remains viable in this Circuit and directly applicable to this case. Consequently, going much further than any later Second Circuit ruling which cited Crimmins, see, e.g., United States v. Mauro, 501 F.2d 45, 50, n.2 (2d. Cir) (collecting cases), cert. denied, 419 U.S. 969 (1974), the Panel's decision in this case effectively overrules the earlier holding – something a Panel may not do. Lee v. Commissioner of Internal Revenue, supra. For this reason as well, the en banc court should rehear this appeal.
II. The Panel's Holding that Betting is Not "Legal" in New York Despite the Fact that it is Not a Crime Directly Conflicts with the First Circuit's Holding in Sterling Suffolk Racecourse v. Burrillville Racing and the Demonstrated Intention of the Drafters of § 1084.
It is undisputed that in New York it is not a crime to bet on the outcome of sporting events. The Panel, however, concluded that because sports betting is not specifically authorized by law in New York, such betting is not "legal" within the meaning of 18 U.S.C. § 1084(b), which provides a safe harbor for the transmission of wagering information from a jurisdiction in which the underlying wagering is "legal" to another such a jurisdiction. In effect, the Panel held that one is subject to criminal prosecution under § 1084 for transmitting wagering information even where the affected states have not deemed the underlying wagering criminal in nature.
This holding conflicts directly with the decision of the First Circuit 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), which, we respectfully submit, the Panel misapprehended. In Sterling, the First Circuit rejected a RICO challenge predicated on an alleged violation of § 1084, reasoning that § 1084(b) exempted the defendant's conduct because the type of wagering at issue had not been criminalized in the affected state. The court 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. [Defendant's] acts fall into this chiaroscuro category – perhaps not right, but certainly not felonious. It follows that these acts, not indictable under section 1084, cannot constitute a pattern of racketeering activity within RICO's definitional parameters.
989 F.2d at 1273.
The Panel distinguished Sterling on the ground that Sterling was a civil action and not a criminal prosecution under § 1084. This distinction, however, is without significance. The RICO action necessarily was based on the theory that the defendant's conduct constituted "a pattern of indictable activity under federal gambling laws." 989 F.2d at 1272. Accordingly, the Sterling court, like the court here, was required to determine whether the defendant's conduct constituted a crime under § 1084. The Panel decision cannot be reconciled with Sterling.
Nor can the Panel decision be reconciled with the legislative history of § 1084. Limiting its consideration of the legislative history to one footnote, the Panel ignores the significance of the undisputed fact that § 1084 was enacted "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." H.R. Rep. No. 87-967, 87th Cong., 1st Sess. (1961), reprinted in 1961 U.S.C.C.A.N. 2631, 2631 (emphasis added). Clearly Congress, in enacting § 1084, was concerned with aiding the states in protecting the public against criminal activity. See also United States v. Kelley, 254 F.Supp. 9, 15 (S.D.N.Y. 1966) (the "substantive evil" that § 1084 sought to curtail was "the use of a federally controlled means of communication to violate state penal statutes") (emphasis added).
In this regard, the Panel, having apparently overlooked extensive authority establishing beyond dispute that New York's gambling laws chiefly target the operation of a gambling business as opposed to mere betting, reached a conclusion at odds with the very state whose laws § 1084 is intended to help enforce. See Appellant's Br. at 42-43; Appellant's Reply Br. at 5-11. The New York Court of Appeals has recognized that the anti-gambling provision of the New York Constitution, upon which the Panel primarily relied to conclude that it is not "legal" to place a bet in New York, "chiefly condemns . . . betting and gambling organized and carried on as a systematic business." Watts v. Malatesta, 262 N.Y. 80, 82 (1933). In addition, the General Obligations Law, also relied upon by the Panel, actually permits recovery of wagered property by a mere bettor, but not by one engaged in the business of gambling. N.Y. Gen. Obl. Law § 5-419. In addition, the Panel failed to apprehend the significance of legislation now pending in New York State that would require any foreign corporation providing gambling or wagering services in New York via the Internet to register with the state. See Appellant's Reply Br. at 13-14.
In short, the Panel decision creates not only a circuit split, but a rift with the statute's legislative history and New York law.
III. The Panel's Groundbreaking Holding that, as a Matter of Law, Wagering Instructions Constitute "Bets" Per Se, Criminalizes the Longstanding, State-Sanctioned Practices of Off-Tracking Betting Enterprises in Numerous States, Including New York, in Direct Contravention of the First Circuit's Holding in Sterling and the Legislative History of § 1084.
In affirming the district court's jury instructions, the Panel held, as a matter of law, that when one person communicates to a second person located in another state or foreign country a desire to place a bet, and the second individual communicates via wire that the desired bet has been placed, a "bet" has been transmitted for purposes of § 1084. This holding, being the first of its kind, exposes every state-sanctioned off-tracking betting entity that accepts interstate wagers to criminal prosecution, since their conduct is materially indistinguishable from that of Defendant.
The Panel decision does precisely what the First Circuit refused to do in Sterling – criminalize conduct that the affected states have not deemed criminal. In fact, the Panel goes even one step further: the Panel has criminalized practices that many states not only have never subjected to prosecution, but, to the contrary, have actively sponsored and protected. This cannot be what Congress intended when it enacted § 1084 to assist the states in enforcing their laws against gambling offenses.
In fact, the testimony of one of the Government's own undercover agents supports the view that defendant's company and off-track betting enterprises that operate in precisely the same way transmitted nothing other than information assisting in the placement of bets or wagers, not bets or wagers per se. In this regard, although quoting other testimony which it thought to be supportive of its conclusion, the Panel ignored the following passage from the redirect examination of Agent Marziliano, which defeats it categorically:
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?
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
The full court should
rehear this appeal in order to ensure that the prerogative of the states to
regulate gambling remains unfettered, as Congress intended when it enacted § 1084.
IV. The Panel's Holding that Defendant Need Not Know He Was Transmitting a "Bet" Conflicts with Settled Law of the United States Supreme Court that the Scienter Requirement Applies to Every Element of the Offense.
In affirming the district court's jury instruction concerning mens rea, the Panel stated that "Cohen's own interpretation regarding what constituted a bet was irrelevant to the issue of his mens rea under § 1084." Opn. at 17. In effect, the Panel held that the Government did not need to prove that Defendant knew that what was being transmitted in interstate or foreign commerce was in fact a bet, and not merely wagering instructions. This result is inconsistent with the longstanding principle that "the presumption in favor of a scienter requirement should apply to each of the statutory elements that criminalize otherwise innocent conduct." United States v. X-Citement Video, Inc., 513 U.S. 64, 72 (1994).
THE PETITION FOR A REHEARING SHOULD BE GRANTED, AND THE COURT SHOULD REHEAR THE MATTER EN BANC
Dated: New York, New York
August 14, 2001
BRAFMAN & ROSS, P.C.
Attorneys for Defendant-Appellant,
767 Third Avenue, 26th Floor
New York, New York 10017
MARK M. BAKER
MARK M. BAKER