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U.S. v. Menon

filed as corrected june 24 1994.: May 18, 1994.

UNITED STATES OF AMERICA
v.
THEKKEDAJH PEETHAMB MENON, APPELLANT



On Appeal From the United States District Court for the District of New Jersey. (D.C. Crim. No. 92-00354-01).

Before: Becker, Hutchinson and Cowen, Circuit Judges.

Author: Becker

Opinion OF THE COURT

BECKER, Circuit Judge.

Thekkedajh Menon appeals from a judgment in a criminal case in which he was convicted by a jury of violating 18 U.S.C. §§ 2*fn1 and 545*fn2 by knowingly and willfully, with intent to defraud the United States, making out and passing through the customhouse false and fraudulent invoices and other documents in order to conceal the identity of the exporters of certain products, and of violating those same sections by reimporting shrimp that had previously been rejected as contaminated by the Food and Drug Administration ("FDA").

Menon's first contention on appeal, a contention he failed to raise in the district court and hence one that we review for plain error, is that to obtain a conviction for passing false invoices under § 545, the government must prove that he intended to deprive the United States of revenue, not just that he intended to evade federal regulations. Menon's second argument is that the evidence was insufficient to show that he reimported previously rejected shrimp, a point which ultimately turns on whether a search of Menon's office which exceeded the scope of a search warrant was nonetheless valid under the "plain view" doctrine even though the agent who happened upon the documents at issue did not appreciate their significance until she brought them to a more knowledgable agent.

Agreeing with Menon's construction of the the first paragraph of § 545 and holding that the district court's construction constituted plain error, we reverse his convictions for passing false invoices through the customhouse. The meaning of "defraud" varies from statute to statute, see McNally v. United States, 483 U.S. 350, 359, 107 S. Ct. 2875, 2881, 97 L. Ed. 2d 292 (1987), and here the evidence supports Menon's interpretation of "defraud." When Congress codified the criminal code, it changed the language of § 545 (then § 1593 of title 19 (U.S.C. 1940 ed.)) from "defraud the revenues of the United States" to "defraud the United States" but it did not mean to change the substance of the statute; it meant to continue the previous requirement of an intent to defraud the revenues of the United States. Thus, we continue to give the statute its former meaning, and, finding plain error on the basis that the district court's misinterpretation went to the existence vel non of criminal responsibility, we reverse Menon's convictions for passing false invoices. However, we affirm Menon's conviction for reimporting previously rejected shrimp, disagreeing with his contention regarding the illegality of the search, and his less significant assignments of error.

Because we have overturned Menon's convictions on most counts, we must remand for resentencing. On remand, the district court should not apply the enhancement for importation of seafood worth more than $2,000. Although Menon's conviction on Count 140 easily puts him over the $2,000 minimum for the enhancement, application of the enhancement is impermissible because it would violate the Ex Post Facto Clause of the Constitution. Although the enhancement was in effect at the time of Menon's sentencing, it was not in effect at the time of his conduct.

I. FACTS AND PROCEDURAL HISTORY

The FDA is responsible for ensuring the safety of seafood entering the United States. In performing this function, the agency analyzes data to see if it establishes a pattern demonstrating that seafood which importers have bought from particular exporters is likely to be unsafe. Foreign exporters which have a history of shipping contaminated goods are placed on a block list; shipments from these exporters are automatically detained, and the importer must obtain a private laboratory report demonstrating that the seafood is free of contamination before the FDA will release it. Other exporters are placed in an intermediate category, which means the FDA is more likely to sample their products before admitting them into the country than it is to sample those of other exporters.

Menon was President and two thirds owner of Flag Imports, Inc. ("Flag"), a business that purchased seafood both overseas and domestically for resale to distributors. On numerous occasions, Menon directed his employees to list falsely on invoices a different exporter of seafood than the one from which Flag had actually purchased the seafood. By listing exporters with no history of contamination rather than the actual exporters, who were either on the block list or subject to an increased risk of surveillance sampling by the FDA, Menon intended to deceive the FDA so that Flag's imports entered the United States more readily.

Nonetheless, the FDA discovered that one of Flag's shipments, a March 22, 1991 shipment of 1200 cases of shrimp, contained salmonella. It thereupon issued a Notice of Refusal of Admission for this shipment, and ordered that the cases be either exported or destroyed within 90 days. On May 25, 1991, Flag shipped the shrimp to Jabeco Transport ("Jabeco") in Rotterdam, Holland. The ultimate fate of that shrimp is a question of much moment in this case; the government contends that Menon illegally reimported it into the United States whereas Menon claims that there is insufficient evidence to prove reimportation beyond a reasonable doubt.

On January 19, 1993, a federal grand jury returned a 142-count indictment against Menon. Counts 1 through 110 charged that, in violation of 18 U.S.C. §§ 2 and 545, see supra nn. 1 & 2, Menon did knowingly and willfully, with intent to defraud the United States, make out and pass through the customhouse, false and fraudulent invoices and other documents in order to conceal that the exporter of these products had been block-listed by the FDA. Counts 111 through 139 charged Menon with similar conduct with respect to seafood obtained from exporters in the intermediate category. Count 140 charged Menon with reimportation of shrimp that had previously been rejected as contaminated by the FDA, also in violation of 18 U.S.C. §§ 2 and 545. Finally, Counts 141 and 142 charged that, in violation of 16 U.S.C. § 3372(d) and 18 U.S.C. § 2, Menon knowingly made and used false invoices and decoy packaging to conceal that shipments identified as shrimp from Bangladesh were largely composed of frog legs subject to automatic detention and special permit requirements.

During the course of the jury trial, the government voluntarily dismissed counts 16 and 33 of the indictment. At the close of the evidence, the district court granted a judgment of acquittal on Counts 141 and 142 (the frog legs counts). On March 10, 1993, the jury found Menon guilty of all of the remaining counts. Menon filed a motion for a judgment of acquittal on Count 140 alleging that the government had presented insufficient evidence of his guilt. Menon also moved for a new trial, asserting that 1) the district court had improperly barred him from presenting evidence that no one had ever reported being sick as a result of Flag seafood;*fn3 2) Count 140, alleging reimportation of contaminated shrimp "contrary to law," was deficient for failing to specify the law to which the reimportation was contrary; and 3) evidence seized during a search of Flag's property should have been suppressed. The district court denied these motions.

The district court held a sentencing hearing after which it imposed concurrent sentences of 20 months on each of Counts 1 through 15, 17 through 32, and 34 through 140. The court also imposed concurrent terms of two years supervised release on each count of conviction, a total special assessment of $6,900, and a fine of $50,000. The adjusted offense level of 22, when combined with a Criminal History Category of I, resulted in a guideline range of 41-51 months. The district court then departed downward from this range based on the severe mental problems of Menon's wife.

Menon appeals the denial of his motions for judgment of acquittal and for a new trial as described on p.6 supra. On appeal, Menon presses two additional arguments. First, he asserts that his convictions for making out false invoices should be reversed because he did not intend to defeat the customs laws nor to defraud the United States government of money. Second, he submits that the district court's fourteen level increase to his sentence violates the Ex Post Facto Clause of the Constitution. After considering the many difficult issues, we hold that paragraph 1 of § 545 does require an intent to deprive the United States of revenue and that Menon's convictions on counts 1-15, 17-32, and 34-139 should therefore be reversed. While we will uphold Menon's conviction on count 140 for reimportation of previously rejected shrimp, we agree with Menon that application of the sentencing enhancement for importation of valuable seafood violates the Ex Post Facto Clause and thus should not be repeated in his resentencing.

II. THE MEANING OF 18 U.S.C. § 545

The jury convicted Menon of 137 counts of violating the first paragraph of 18 U.S.C. § 545. As we have noted supra at 2 n.2, this paragraph makes it illegal to "knowingly and willfully, with intent to defraud the United States, . . . make[] out or pass[], or attempt to pass through the customhouse any false, forged, or fraudulent invoice." The jury concluded that Menon, in his position as President of Flag, violated this provision by writing invoices that misrepresented the name of the seafood exporter from which Flag had bought the seafood it was importing. Menon contends that the district court misread § 545, because "an intent to defraud the United States" by passing false invoices "through the customhouse" requires 1) an intent to defeat the customs laws and 2) an intent to deprive the United States of revenue.

Menon's argument that § 545 requires an intent to deprive the United States of revenue would place a new gloss on a 45-year-old statutory provision that has been interpreted to the contrary by two courts of appeals, see United States v. Borello, 766 F.2d 46, 51 (2d Cir. 1985); United States v. McKee, 220 F.2d 266, 269 (2d Cir. 1955); United States v. Kurfess, 426 F.2d 1017, 1019 (7th Cir. 1970), cert. denied, 400 U.S. 830, 27 L. Ed. 2d 60, 91 S. Ct. 60 (1970). Moreover, because Menon failed to argue in the district court that § 545 requires an intent to deprive the government of revenue, we review Menon's contention on appeal for plain error. See Fed.R.Crim.P. 52(b).

Rule 52(b) provides that "plain errors or defects affecting substantial rights may be noticed although they were not brought to the attention of the court." We find plain error "sparingly, solely in those circumstances in which a miscarriage of Justice would otherwise result." United States v. Frady, 456 U.S. 152, 163 n.14, 102 S. Ct. 1584, 1592 n.14, 71 L. Ed. 2d 816 (1982). See also Government of Virgin Islands v. Smith, 949 F.2d 677, 681 (3d Cir. 1991). We

look on a case-by-case basis to such factors as the obviousness of the error, the significance of the interest protected by the rule that was violated, the seriousness of the error in the particular case, and the reputation of judicial proceedings if the error stands uncorrected -- all with an eye toward avoiding manifest inJustice.

United States v. Thame, 846 F.2d 200, 205 (3d Cir. 1988). Here, because "the challenge to the construction of the statute goes to the existence vel non of criminal responsibility, we think that the error, if such it was, would affect [Menon's] due process rights and would constitute plain error." United States v. Cusumano, 943 F.2d 305, 309 (3d Cir. 1991).

In a very similar case, in which the plaintiff argued that the district court had improperly instructed the jury that the mail fraud statute did not require an intent to deprive another of money or property, we indicated that if the district court had given such an improper instruction, it would have constituted plain error. See United States v. Piccolo, 835 F.2d 517, 519 (3d Cir. 1987), cert. denied, 486 U.S. 1032, 108 S. Ct. 2014, 100 L. Ed. 2d 602 (1988). As in that case, we think that, assuming Menon's interpretation of the statute is correct, the district court's failure to instruct the jury that § 545 requires an intent to deprive the government of money or property constituted manifest inJustice and thus constituted plain error. And, despite the contrary decisions of two courts of appeals, we hold that Menon's interpretation of § 545 is correct.*fn4

While the meaning of "defraud the United States" generally extends beyond defrauding the government of revenue, the history of § 545 demonstrates that Congress did not intend such a broad reading here. We first note that until recently, the Supreme Court generally interpreted "defraud" to extend to actions preventing the government from carrying out its lawful functions even when the government did not lose any revenue. This interpretation took root in Hammerschmidt v. United States which analyzed the statutory predecessor of 18 U.S.C. § 37, a statute making it illegal to "conspire to . . . defraud the United States in any manner or for any purpose." See 265 U.S. 182, 185, 44 S. Ct. 511, 511, 68 L. Ed. 968 (1924) (interpreting Comp. St. § 10201). In Hammerschmidt, the Supreme Court concluded that

to conspire to defraud the United States means primarily to cheat the Government out of property or money, but it also means to interfere with or obstruct one of its lawful governmental functions by deceit, craft or trickery, or at least by means that are dishonest. It is not necessary that the Government shall be subjected to property or pecuniary loss by the fraud, but only that its legitimate official action and purpose shall be defeated by misrepresentation, chicane, or the overreaching of those charged with carrying out the governmental intention.

Id. at 188, 44 S. Ct. at 512.*fn5

Recently, however, the Supreme Court has significantly narrowed the category of statutes in which the meaning of "defraud" extends beyond a deprivation of property rights. In McNally v. United States, 483 U.S. 350, 359, 107 S. Ct. 2875, 2881, 97 L. Ed. 2d 292 (1987), the Court interpreted the mail fraud statute, which made it illegal "to defraud" or to "obtain[] money by means of false or fraudulent pretenses," to require a finding that the defendant intended to deprive others of property or money. 18 U.S.C. § 1341.*fn6 In so doing, the Court rejected "a long line of court of appeals decisions that had interpreted the statute as proscribing schemes by government officials to defraud citizens of their intangible rights to honest and impartial government." United States v. Asher, 854 F.2d 1483, 1488 (3d Cir. 1988) (emphasis in original). In justifying its decision, the Court quoted Hammerschmidt, 265 U.S. at 188, 44 S. Ct. at 512, for the proposition that, "the words to defraud 'commonly refer to wronging one in his property rights by dishonest methods or schemes.'" McNally, 483 U.S. at 359, 107 S. Ct. at 2881. The Court concluded that this common understanding combined with the rule of lenity meant that the mail fraud statute required an intent to deprive someone of money or property. See id.

The Court distinguished the actual ruling of Hammerschmidt on the basis that the mail fraud statute aimed to prevent fraud against any member of the public, while the statute discussed in Hammerschmidt aimed to protect the United States against fraud. A statute that has for its "'object the protection and welfare of the government alone'" aims to prevent fraud in a broader sense than deprivation of property rights, but a statute aiming to prevent fraud against members of the public is likely using fraud in its usual, narrower sense. Id. at 358, 107 S. Ct. at 2881 n. 8 (quoting Curley v. United States, 130 F. 1, 7 (1st Cir. 1904)).*fn7

Another case distinguishing Hammerschmidt is United States v. Cohn, 270 U.S. 339, 343, 46 S. Ct. 251, 252, 70 L. Ed. 616 (1926). There the Supreme Court was faced with interpreting the meaning of Section 35 of the Penal Code, 40 Stat. 1015 (1918), which provided that actions "'for the purpose of obtaining or aiding to obtain the payment or approval of' any 'claim upon or against the United States . . . for the purpose and with the intent of cheating and swindling or defrauding the Government of the United States' . . . shall be punishable." The Court construed section 35 as requiring the defendant to cheat the government out of property or money. The Court distinguished Hammerschmidt on the grounds that the term defraud within section 35 "is used in connection with the words 'cheating or ...


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