United States v. Arch Trading Company
1993 U.S. App. LEXIS 3265, 987 F.2d 1087, 1993 WL 49067 (1993)
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Rule of Law:
Congress may constitutionally delegate authority to the President under the International Emergency Economic Powers Act (IEEPA) to define prohibited conduct through executive orders, and a violation of such an order constitutes an "offense" for the purposes of the federal conspiracy statute, 18 U.S.C. § 371.
Facts:
- In November 1988, Arch Trading Company, Inc. entered into a contract with an Iraqi state-owned company to ship and install laboratory equipment in Iraq.
- To guarantee its performance, Arch Trading was required to deposit $200,000 with the Commercial Bank of Kuwait.
- By early August 1990, five of six planned shipments had arrived in Iraq, but the equipment had not yet been installed.
- On August 2, 1990, following Iraq's invasion of Kuwait, President Bush issued Executive Order No. 12722 under the IEEPA, prohibiting U.S. persons from performing contracts in or traveling to Iraq.
- The Treasury Department’s Office of Foreign Assets Control (OFAC) faxed a copy of the Executive Order to Arch Trading's offices on the same day it was issued.
- Despite the order, Arch Trading hired a Jordanian firm, Biomedical Technologies, Inc., to complete the installation of the equipment in Iraq, which was accomplished between October 24 and November 2, 1990.
- To recover its $200,000 deposit, Arch Trading submitted backdated documents falsely representing that its contractual performance was completed on July 24, 1990, before the embargo.
- On April 3, 1991, Arch Trading sent a letter to OFAC falsely stating that it had "stopped any contact with Iraq" prior to the embargo, in an effort to obtain a license to release its funds.
Procedural Posture:
- The United States government indicted Arch Trading Company, Inc. in federal district court.
- A jury convicted Arch Trading on counts of conspiracy, violating the International Emergency Economic Powers Act (IEEPA), and making false statements to a government agency.
- The district court sentenced Arch Trading to a fine of $50,000.
- Arch Trading Company, Inc. (as appellant) appealed its convictions to the United States Court of Appeals for the Fourth Circuit.
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Issue:
Does the International Emergency Economic Powers Act (IEEPA) unconstitutionally delegate legislative authority to the President to define criminal conduct through executive orders?
Opinions:
Majority - Niemeyer, Circuit Judge
No, the International Emergency Economic Powers Act (IEEPA) does not unconstitutionally delegate legislative authority to the President because the statute provides an intelligible principle to constrain the President's discretion. The court reasoned that the nondelegation doctrine is satisfied so long as Congress lays down an intelligible principle to which the authorized body must conform. The IEEPA provides such a principle by limiting the President's authority to situations involving an "unusual and extraordinary" foreign threat to national security, requiring the declaration of a national emergency, mandating consultation with Congress, and explicitly defining the scope of presidential powers. These constraints, combined with the President's inherent authority in foreign policy, meet the constitutional standard. The court also held that a willful violation of an executive order issued under the IEEPA constitutes an "offense" for the purposes of the federal conspiracy statute (§ 371), and that the government had discretion to charge Arch Trading under the "offense" clause rather than the "defraud" clause. Finally, the court rejected Arch Trading's vagueness, Ex Post Facto, and false statement materiality challenges, noting the executive orders were clear and that a statement's materiality under § 1001 depends on its capability to influence, not its actual influence.
Analysis:
This decision solidifies the broad discretion afforded to the Executive Branch in matters of foreign policy and national security under the IEEPA. By affirming that the statute's constraints constitute a sufficient "intelligible principle," the court reinforces a flexible application of the nondelegation doctrine in the context of foreign affairs. The ruling clarifies that violating presidentially-defined sanctions is a predicate "offense" for conspiracy charges, giving prosecutors flexibility. Furthermore, the case reinforces a broad interpretation of materiality for false statement prosecutions, focusing on the statement's potential to influence a government agency, which lowers the burden of proof for the government in such cases.
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