Pasquantino v. United States
544 U.S. 349, 2005 U.S. LEXIS 3701, 161 L. Ed. 2d 619 (2005)
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Rule of Law:
A scheme to defraud a foreign government of tax revenue using U.S. interstate wires is a prosecutable offense under the federal wire fraud statute (18 U.S.C. § 1343). Such a prosecution is not barred by the common-law revenue rule, which traditionally prevents direct enforcement of a foreign sovereign's tax claims.
Facts:
- Between 1996 and 2000, Carl J. Pasquantino and David B. Pasquantino, while in New York, used telephones to order large quantities of liquor from discount stores in Maryland.
- The Pasquantinos employed Arthur Hilts and other drivers to transport the liquor from the United States across the border into Canada.
- The drivers concealed the liquor within their vehicles and deliberately failed to declare the goods to Canadian customs officials.
- This scheme was designed to evade Canadian excise taxes on imported alcohol, which were substantial, approximately doubling the liquor's purchase price.
Procedural Posture:
- Petitioners Carl J. Pasquantino, David B. Pasquantino, and Arthur Hilts were indicted for federal wire fraud in a U.S. District Court.
- Petitioners filed a motion to dismiss the indictment on the grounds that it failed to state a wire fraud offense, which the District Court denied.
- Following a trial, a jury convicted the petitioners of wire fraud.
- Petitioners appealed to the U.S. Court of Appeals for the Fourth Circuit, where a three-judge panel reversed the convictions.
- The Court of Appeals granted a rehearing en banc, which vacated the panel's decision and affirmed the petitioners' convictions.
- The U.S. Supreme Court granted certiorari to resolve a circuit split on the issue.
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Issue:
Does a plot to defraud a foreign government of tax revenue, which uses U.S. interstate wires, violate the federal wire fraud statute, 18 U.S.C. § 1343?
Opinions:
Majority - Justice Thomas
Yes. A plot to defraud a foreign government of tax revenue by using U.S. wires violates the federal wire fraud statute. The scheme falls within the statute's plain terms because a foreign government's right to uncollected tax revenue is 'money or property' under § 1343. This prosecution does not derogate from the common-law revenue rule because that rule, as it existed in 1952 when the wire fraud statute was enacted, did not have a well-established principle barring a domestic sovereign from prosecuting a fraudulent scheme that incidentally involved the evasion of foreign taxes. The revenue rule historically barred direct actions by foreign sovereigns to collect tax debts, not domestic criminal prosecutions for fraud, which enforce the domestic sovereign's own penal laws. The traditional rationales for the revenue rule, such as avoiding judicial evaluation of foreign policy, are not implicated because the prosecution is brought by the Executive Branch, which is responsible for foreign relations.
Dissenting - Justice Ginsburg
No. The wire fraud statute should not be read to cover schemes to evade foreign tax laws. This interpretation ascribes an exorbitant extraterritorial scope to the statute, contrary to the strong presumption that Congress legislates with domestic concerns in mind. Congress has specifically addressed international smuggling in other statutes (e.g., 18 U.S.C. § 546) which require reciprocity that Canada lacks, and tax collection is governed by treaties with specific procedures, indicating Congress did not intend for a general statute like wire fraud to cover this conduct. The prosecution is not merely an 'attenuated' enforcement of foreign law; it is a direct enforcement that squarely implicates the common-law revenue rule which Congress did not clearly intend to displace. The rule of lenity should apply to this ambiguous application of a criminal statute.
Analysis:
This decision significantly broadens the prosecutorial reach of the federal wire fraud statute to include schemes defrauding foreign governments of tax revenue. It narrows the practical application of the common-law revenue rule, establishing that the rule does not provide a defense in a U.S. criminal prosecution where the core offense is a domestic crime like fraud, even if the ultimate victim is a foreign sovereign. The ruling empowers federal prosecutors to target international schemes that use U.S. infrastructure, thereby creating a new front in the enforcement against international tax evasion without relying on international treaties or reciprocity agreements.
