United States v. Kaplan ( 1998 )

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_______________
No. 95-4908
_______________
D. C. Docket No. 94-422-CR-SH
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
BARRY KAPLAN,
Defendant-Appellant.
______________________________
Appeal from the United States District Court
for the Southern District of Florida
______________________________
(January 22, 1998)
Before ANDERSON and BIRCH, Circuit Judges, and WOODS,* Senior
Circuit Judge.
*
Honorable Henry Woods, Senior U.S. District Judge for the
Eastern District of Arkansas, sitting by designation.
BIRCH, Circuit Judge:
This case requires us to determine whether a potential transfer
of funds from a point outside the United States to a point inside a
State, for the purpose of paying an extortion demand, establishes
an effect on commerce sufficient to support federal jurisdiction
under the Hobbs Act. See 18 U.S.C. § 1951. The district court
held, and the government contends on appeal, that the simple
payment of an extortion demand in interstate commerce, without any
further effect on commerce, is sufficient to support a conviction
under the Hobbs Act. We REVERSE.
BACKGROUND
In 1984 and 1985, defendant-appellant, Barry Kaplan, a
resident of Miami, Florida, placed several hundred thousand dollars
into two Panamanian bank accounts with the assistance of Pablo
Arosemena, a Panamanian lawyer. Kaplan also gave Arosemena
power of attorney over the two bank accounts for the ostensible
purpose of disguising his ownership of the money and thus evading
2
taxation in the United States. Thereafter, Kaplan sought access to
those funds, but Arosemena refused to return the money. In
January 1989, Kaplan met with Arosemena in his Panamanian
office, where Kaplan claims Arosemena admitted that he had stolen
the money. Kaplan also contends that Arosemena brandished a
firearm during their conversation as he asked Kaplan what he was
going to do about the theft.
Kaplan consulted another Panamanian lawyer, Mario Fonseca,
to attempt to recover his money. Fonseca conducted an
investigation into the matter and confirmed that Arosemena had
stolen the money from the Panamanian accounts. When Fonseca
met with Arosemena, Arosemena refused to deny the theft and
warned Fonseca that he would report Kaplan's off-shore funds to the
United States Internal Revenue Service if Kaplan pursued the
matter. Fonseca immediately communicated this threat to Kaplan
by letter, calling Arosemena's tactics “blackmail.”
3
Fonseca testified that Kaplan could have brought a civil suit
against Arosemena or sought criminal charges against him in
Panama.1 Fonseca explained, however, that a civil suit would have
served no purpose because Arosemena claimed to have no assets.
Moreover, as a criminal prosecution certainly would have caused
Arosemena to lose his license to practice law, thereby eliminating
his primary means of earning money, any such course of action also
would have defeated Kaplan's objective of repayment.
Next, Kaplan discussed his predicament with Roy Gelber, then
a Dade County Circuit Judge. Gelber had served as Kaplan's lawyer
on another matter while he was still in private practice. Gelber
volunteered to contact Raymond Takiff, a Florida lawyer who had
represented General Manuel Noriega, then the de facto leader of
Panama. Kaplan, Gelber, and Takiff began to discuss this matter in
June 1989 and continued until the early part of 1990. Neither
1
Fonseca hired another Panamanian lawyer, Dr. Rafael
Rodriguez, to prepare a civil suit against Arosemena but Kaplan
decided not to pursue it.
4
Kaplan nor Gelber, however, were aware that Takiff had begun to
cooperate with the federal government in an attempt to resolve his
own criminal problems. Takiff became an informant for the
government on or about August 4, 1989, and he began to record his
conversations with Kaplan and Gelber.2 During these conversations,
Takiff offered to contact high ranking individuals in the Panamanian
Defense Forces (“PDF”) who could retrieve the money from
Arosemena in Panama. Although Takiff stated that his contacts
would not kill Arosemena, the record shows that he expected those
contacts to resort to violence or the threat of violence to obtain the
money. On September 7, 1989, Takiff explained to Gelber and
Kaplan that PDF soldiers would force Arosemena to sign cards to
withdraw approximately $300,000 from a Panamanian bank account.
2
Takiff's cooperation with the federal government was not
limited to Kaplan's case. Takiff played a part in “Operation
Courtbroom,” an investigation into judicial corruption in Dade
County. Takiff engaged in a series of secret transactions with
Gelber in the course of this operation and Gelber eventually pled
guilty to charges based on his acts of judicial corruption.
Pursuant to his plea agreement, Gelber testified against Kaplan at
trial.
5
Kaplan agreed to the details of the plan and was aware that violence
would play a part in the transaction.
Kaplan also decided that he would receive the money by
accepting a check, in Florida, payable to a Bahamian attorney and
referenced to another off-shore bank account. Although the
transaction never took place, it is clear that Kaplan sought access to
these funds because he had exhausted his personal assets and the
record supports the inference that he would have made some
attempt to use the money in Florida. Moreover, the record
establishes that Gelber and Takiff were to receive a portion of the
extortion demand as payment for their efforts.
Kaplan, appeals his conviction for attempted extortion and
conspiracy to commit extortion under the Hobbs Act and argues
that the evidence the government presented at trial was
insufficient to show any effect on commerce as contemplated by
the statute. Kaplan presented this issue to the district court in a
motion for a judgment of acquittal and new trial pursuant to Fed.
6
R. Crim. P. 29(a) & 33, but the district court denied relief.
Although Kaplan challenges his conviction on a number of
additional grounds, since we hold that the district court erred by
finding an effect on commerce on the facts of this case, we limit
our discussion to that issue.
DISCUSSION
The Hobbs Act provides for the federal prosecution of a
defendant who attempts or conspires to extort property in a manner
that obstructs or affects commerce. See 18 U.S.C. § 1951(a).3 The
language of the statute, as well its historical context, demonstrate
that Congress did not intend to transform every extortionate
3
The Hobbs Act provides in pertinent part:
(a) Whoever in any way or degree obstructs, delays,
or affects commerce or the movement of any article
or commodity in commerce, by robbery or extortion
or attempts or conspires so to do . . . shall be
fined under this title or imprisoned not more than
twenty years, or both.
(b) As used in this section–
. . . .
(3) The term “commerce” means . . . all
commerce between any point in a State . . .
and any point outside thereof . . . and all
other commerce over which the United States
has jurisdiction.
18 U.S.C. § 1951.
7
transaction into a federal crime. Instead, the Hobbs Act applies only
to those extortionate acts that affect interstate commerce. See
generally United States v. Staszcuk, 517 F.2d 53 (7th Cir. 1975) (en
banc) (providing an excellent history of the Hobbs Act). As a result,
the government must prove both extortion and an effect on
commerce as the two essential elements of a Hobbs Act crime. See
Stirone v. United States, 361 U.S. 212, 218, 80 S. Ct. 270, 274,
4 L. Ed. 2d 252 (1960) (“The charge that interstate commerce is
affected is critical since the Federal Government’s jurisdiction of
this crime rests only on that interference.”). Although the Hobbs
Act’s definition of commerce is intended to be broad, and we have
held that the required effect on commerce need only be minimal,
some effect on commerce nevertheless must exist to support federal
jurisdiction. See United States v. Castleberry, 116 F.3d 1384,
1386 (11th Cir.) (reaffirming that the government need only show
that “the extortionate activity has a minimal effect on interstate
commerce . . . .”), cert. denied, __U.S. __, 118 S. Ct. 341 (1997).
8
Kaplan argues that the government failed to provide evidence
of how the extortion scheme in which he was involved could have
produced an effect on commerce sufficient to support his conviction
under the Hobbs Act. In reviewing the sufficiency of the evidence,
we “consider the evidence in the light most favorable to the
Government and draw all inferences and credibility choices in favor
of the jury's verdict.” Id. at 1387-88. We, therefore, must affirm
Kaplan's conviction if any reasonable construction of the evidence
would have permitted the jury to find guilt beyond a reasonable
doubt. See id. at 1388. As the courts have recognized, however,
proving an effect on commerce when an individual rather than a
business entity is the target of the extortion is no simple matter. See
United States v. Collins, 40 F.3d 95, 99-100 (5th Cir. 1994).4
4
The Collins court held that:
Criminal acts directed towards individuals may
violate section 1951(a) only if: (1) the acts
deplete the assets of an individual who is directly
and customarily engaged in interstate commerce; (2)
if the acts cause or create the likelihood that the
individual will deplete the assets of an entity
engaged in interstate commerce; or (3) if the
number of individuals victimized or the sum at
stake is so large that there will be some
9
The government advances two theories to support the
conclusion that Kaplan’s plan, if completed, would have affected
interstate commerce. First, the government argues that it has
satisfied the Hobbs Act’s jurisdictional prerequisite because if
Kaplan’s extortion demand had been successful the ensuing transfer
of money from Panama to Florida would have constituted a
transaction in interstate commerce.5 In direct support of the
government's argument, the Hobbs Act specifically defines
commerce to include “all commerce between any point in a State .
. . and any point outside thereof . . . .” 18 U.S.C. § 1951(b)(3).
Nevertheless, the government has cited no case in which the
victim’s payment of an extortion demand, standing alone, provided
“cumulative effect on interstate commerce.”
Collins, 40 F.3d at 100 (footnotes and citations omitted). The
government has made no argument with regard to the first two
possibilities.
5
Although the parties vigorously contest whether the
government presented evidence that the money would have ever
entered the United States, for the purposes of this appeal we
assume, as we must, that the jury inferred that Kaplan, Gelber, or
Takiff would have received money in Florida. See Castleberry, 116
F.2d at 1387-88.
10
the effect on commerce necessary to support a conviction under the
Hobbs Act. The typical Hobbs Act case involves some element of
commerce independent and apart from the transaction of paying an
extortionist’s demand. Indeed, the courts have gone to great lengths
to identify how a defendant’s actions affected that independent,
preexisting commerce, rather than looking to the form of the
extortion payment. See, e.g., United States v. Hollis, 725 F.2d 377,
380 (6th Cir. 1984) (basing jurisdiction on a preexisting interstate
contract between the parties rather than on the movement of the
extorted funds across state lines). This approach is consistent with
the language of the Hobbs Act, which criminalizes extortion that
“obstructs, delays, or affects” commerce rather than extortion that
itself constitutes commerce. 18 U.S.C. § 1951(a). Congress
enacted the Hobbs Act (and its statutory predecessor) to “eliminate
the ‘levy of blackmail upon industry’” and therefore intended the
statute to “remove artificial restraints on the free flow of goods.”
Staszcuk, 517 F.2d at 57, 58. This legislative emphasis on
11
protecting industry and business explains the judicial focus on the
victim’s connection to interstate commerce rather than the form or
structure of the extortion payment.
The government’s argument, however, would require that we
extend the Hobbs Act to every act of extortion that constitutes an
interstate commercial transaction. Although we do not doubt that
Congress has the power to make the receipt of an extortion
payment across a State border a federal crime, cf. Castleberry,
116 F.3d at 1387 (discussing the impact of United States v Lopez,
514 U.S. 549, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), on the
Hobbs Act’s jurisdictional requirements), the language and history
of the Hobbs Act does not indicate that Congress intended this
statute to perform any such function.6
6
Our own research has uncovered only two cases that even
suggest that the Hobbs Act applies to a case in which the victim’s
payment of an extortion demand would constitute the only nexus to
interstate commerce. In United States v. Blair, a district court
toyed with the idea that: “An individual may be extorted in a
manner which affects interstate commerce if the actual extortionate
payment forces the individual to perform a direct interstate
transaction.” 762 F. Supp. 1384, 1389-90 n.7 (N.D. Cal. 1991)
(citing United States v. Hoelker, 765 F.2d 1422 (9th Cir. 1985)
(per curiam)). For the reasons discussed above, we find that the
Blair court’s reasoning on this point and its reading of Hoelker,
12
The government’s contention that United States v. Davis, 707
F.2d 880 (6th Cir. 1983), supports its theory of jurisdiction is
unpersuasive. In that case, the defendant, an elected sheriff in
Ohio, required his deputies to make monthly contributions to his
political war-chest and perform construction work at his home to
ensure their continued employment. Some of these deputies were
receiving funds under federal programs, and the evidence showed
that some of this money was diverted to make contributions to the
sheriff. The Sixth Circuit held that this diversion of funds in interstate
commerce supported jurisdiction under the Hobbs Act. Id. at 884.
In Davis, however, the court focused, not on the actual payment of
the extortion demand to the sheriff (which by all indications would
have been an intrastate transaction), but on the preexisting,
which decides only that the McCarran-Ferguson Act does not take an
insurance contract out of interstate commerce, to be seriously
flawed. Similarly, in Hollis, 725 F.2d at 380 n.5, the court mused
in dicta that the payment of an extortion demand might be
sufficient to “affect commerce” when the defendant immediately took
the money across state lines. Subsequent courts, however, have
rejected such an approach. See, e.g., Collins, 40 F.3d at 99
(finding that the movement of robbery proceeds across state lines
was insufficient to affect commerce within the meaning of the Hobbs
Act).
13
independent commerce that the extortion affected: the payments to
the deputies.7 In this case, however, there was no diversion of funds
already in independent interstate commerce because the victim had
secured them for his personal use in a Panamanian bank account.8
Since we have found no support for the contention that the federal
government can establish jurisdiction under the Hobbs Act by relying
solely on the flow of the extortion payment itself through interstate
commerce, we refuse to expand the scope of the Hobbs Act to affirm
the conviction in this case.
Second, the government asserts that federal jurisdiction is
appropriate because, once the funds arrived in Florida, Kaplan and
his co-conspirators reasonably could have been expected to use
7
The government attempts to bolster this argument by citing
United States v. Huynh, 60 F.3d 1386, 1388-89 (9th Cir. 1995), in
which the defendant threatened to interrupt her victims'
supplemental security income (“SSI”) payments, which traveled from
Alabama to Washington state, if the victims refused to pay her and
buy her gifts. By now it should be clear that, on the facts of the
Huynh case, the defendant's conduct affected independent,
preexisting interstate commerce (the government's payment of SSI
benefits), an element that is missing from this case.
8
The victim's withdrawal of the funds from a bank account
also fails to provide the required connection to interstate
commerce. See Blair, 762 F. Supp. at 1393-94 (collecting cases).
14
that money in interstate commerce. Although the government’s
argument does identify a reasonably probable effect on commerce
as a result of the extortion scheme,9 it proves too much. Given the
state of the modern national and international economy, in which
almost anyone can purchase goods from distant corners of the
globe, the government’s theory would make the Hobbs Act
ubiquitous by supporting a federal prosecution in any case in which
a defendant extorted any amount of money. Moreover, the
government's argument receives virtually no support in the cases.
Although a few courts have suggested that the sheer size or scope
of an extortion plot might provide the required effect on
9
The government’s theory might be considered the converse of
the “depletion of assets” theory, which has supported the federal
prosecution of defendants whose extortion produced only an indirect
effect on commerce. The theory permits a Hobbs Act conviction when
a defendant extorts money from a business, thereby reducing its
ability to purchase goods or participate in interstate commerce.
See e.g., United States v. Alexander, 850 F.2d 1500, 1503-04 (11th
Cir.) (upholding a Hobbs Act conviction against a defendant whose
extortion depleted the assets of a school board that customarily
engaged in interstate commerce), vacated, 492 U.S. 915, 109 S. Ct.
3236, 106 L. Ed. 2d 584, amended and reinstated, 888 F.2d 777 (11th
Cir. 1989).
15
commerce,10 no court has converted the state crime of extortion into
a federal matter simply by virtue of its size. If such a theory could
provide a sufficient nexus to interstate commerce there would be no
need to engage in the extensive analyses of how particular acts of
extortion affected a victim’s position in interstate commerce that are
so prevalent in Hobbs Act cases. In United States v. DiCarlantonio,
870 F.2d 1058 (6th Cir. 1989), for example, the court reversed a
Hobbs Act conviction even though the defendant received $30,000
from the FBI. The defendant’s receipt of the money was insufficient
to sustain the conviction because the court held that the money had
no connection to interstate commerce.11 Id. at 1060-61; United
10
This court, for example, has suggested, in dicta and
without the benefit of supporting authority, that a Hobbs Act
prosecution may be appropriate if the sheer size of an extortion
demand implies that the defendants’ use of the funds could be
expected to affect interstate commerce. See United States v.
Farrell, 877 F.2d 870, 875-76 (11th Cir. 1989) (defendants had
demanded in excess of $1.5 million); see also Collins, 40 F.3d at
100 & n.21 (citing Jund v. Town of Hempstead, 941 F.2d 1271, 1285
(2d Cir. 1991)(affirming the Hobbs Act conviction of defendants who
required a large number of victims to make political contributions
in order to win and to retain public employment)). We find such a
result untenable, both on the facts of this case and as a matter of
law.
11
The DiCarlantonio court, however, sustained the convictions
for conspiracy to violate the Hobbs Act because the defendants in
that case expected the extorted funds to come from a business
16
States v. Kaye, 593 F. Supp. 193, 196-99 (N.D. Ill. 1984) (“In plain
English . . . [the indictment] charges an effect on interstate
commerce by the payment of money, a contention on which there
has been a failure of proof in . . . [jurisdictional] terms.”); see also
Collins, 40 F.3d at 99 (holding that the movement of a car, the
proceeds of a robbery, in interstate travel was insufficient to support
jurisdiction under the Hobbs Act).
The government’s position also runs afoul of our requirement
that the effect on commerce be adverse. See United States v. De
Parias, 805 F.2d 1447, 1450 (11th Cir. 1986); see also United States
v. Waters, 850 F. Supp. 1550, 1562 (N.D. Ala. 1994) (applying the
rule). Although a few of our sister circuits have criticized our choice
of words in De Parias,12 the requirement of an adverse effect on
engaged in interstate commerce. Id. at 1061-62.
12
Perhaps most notably, the U.S. Court of Appeals for the
Fourth Circuit has held that: “Although the word 'adverse' has been
loosely used in expressing the effect on interstate commerce, such
adverse effect is not an essential element of the crime that must
be proved by the prosecution in a Hobbs Act case.” United States
v. Bailey, 990 F.2d 119, 126 ( 4th Cir. 1993). Compare United
States v. Mattson, 671 F.2d 1020, 1024 (7th Cir. 1982) (“Even a
beneficial effect on interstate commerce . . . is within the
prohibition of the statute.”) and United States v. Tormos-Vega, 959
17
commerce is consistent with the language of the statute and
describes the typical Hobbs Act prosecution in which a defendant
targets a business entity and thus hampers that victim’s ability to
engage in commerce. Instead, the government’s argument focuses
on an increase in interstate commerce arising out of the defendant’s
ability to spend the proceeds of the extortion scheme. Moreover,
even if we were inclined to agree with the government’s criticism of
De Parias, “[t]he law in this circuit is emphatic that 938 F.2d 1255, 1258 (11th Cir. 1991) (per curiam) (quoting United
States v. Machado, 804 F.2d 1537, 1543 (11th Cir. 1986)).
CONCLUSION
F.2d 1103, 1113 (1st Cir. 1992) (same) with McLaughlin v. Anderson,
962 F.2d 187, 194 (2d Cir. 1992)(requiring an adverse effect) and
United States v. Snyder, 930 F.2d 1090, 1093 (5th Cir. 1991)(same).
18
We conclude that the government failed to establish the effect
on commerce required to support a prosecution for extortion under
the Hobbs Act. Our decision, however, hardly vindicates Kaplan,
and we note that the State of Florida remains free to prosecute
Kaplan on the facts of this case. See Fla. Stat. Ann. § 836.05
(defining the crime of extortion under Florida State law).
Nevertheless, the evidence in this case does not support a federal
prosecution under the Hobbs Act. Accordingly, we REVERSE his
conviction.
19