United States v. Haitham Mohamed

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13-2368
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
HAITHAM MOHAMED,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:12-CR-00097-SEB-MJD — Sarah Evans Barker, Judge.
____________________
ARGUED APRIL 15, 2014 — DECIDED JULY 22, 2014
____________________
Before RIPPLE and WILLIAMS, Circuit Judges, and ST. EVE,
District Judge. *
ST. EVE, District Judge. On March 26, 2013, a jury convict-
ed Haitham Mohamed of one count of knowingly transport-
ing and possessing contraband cigarettes in violation of
18 U.S.C. § 2342(a). Mr. Mohamed appeals his conviction,
* The Honorable Amy J. St. Eve, District Judge for the United States Dis-
trict Court, Northern District of Illinois, sitting by designation.
2 No. 13-2368
claiming that the district court erred in denying his motions
for judgment of acquittal pursuant to Federal Rule of Crimi-
nal Procedure 29. For the reasons set forth in the following
opinion, we agree and reverse the district court’s decision.
BACKGROUND
On the evening of June 6, 2012, Officer Christopher
Helmer, a patrolman with the Speedway Police Department,
pulled over Mr. Mohamed for running a red light in Speed-
way, Indiana near Indianapolis. Upon searching Mr. Mo-
hamed’s van, 1 Officer Helmer found 1,170 packs of New-
port-brand cigarettes (totaling 23,400 cigarettes) not bearing
Indiana tax stamps. A federal grand jury indicted Mr. Mo-
hamed with one count of knowingly transporting and pos-
sessing contraband cigarettes in violation of section 2342(a)
of the Contraband Cigarette Trafficking Act (“CCTA”),
which makes it unlawful for “any person knowingly to ship,
transport, receive, possess, sell, distribute, or purchase con-
traband cigarettes.” See 18 U.S.C. § 2342(a). The CCTA de-
fines “contraband cigarettes” with reference to state law:
“[C]ontraband cigarettes” means a quantity in excess
of 10,000 cigarettes, which bear no evidence of the
payment of applicable State or local cigarette taxes in
the State or locality where such cigarettes are found, if
the State or local government requires a stamp, im-
pression, or other indication to be placed on packages
or other containers of cigarettes to evidence payment
of cigarette taxes, and which are in the possession of
any person other than [certain exceptions].
1 Mr. Mohamed does not challenge the constitutionality of the search.
No. 13-2368 3
18 U.S.C. § 2341(2). Mr. Mohamed pleaded not guilty to the
offense, and the case proceeded to trial.
The government called two witnesses at trial, Special
Agent Daniel Neie of the Bureau of Alcohol, Tobacco, Fire-
arms, and Explosives (“ATF”) and Officer Helmer of the
Speedway Police Department. Special Agent Neie explained
to the jury how cigarette traffickers typically operate. 2 Dis-
parities in state cigarette tax rates, which range from $0.17
per pack in Missouri to $4.35 per pack in New York, allow
cigarette traffickers to profit by buying cigarettes in low-tax
states and reselling them in high-tax states without paying
the latter state’s taxes. As a result of the tax disparity, the
cigarette trafficker can sell the cigarettes below the market
price while still earning a profit; the greater the tax disparity,
the greater the trafficker’s potential profits. The state in
which the cigarette trafficker sells the cigarettes, meanwhile,
loses out on the tax revenue it would have received from a
legal sale. Special Agent Neie testified that because retailers
often limit the amount of cigarettes a customer can buy at
one time to ensure that they will have sufficient inventory
for other customers, traffickers often must travel from retail-
er to retailer until they accumulate the total number of ciga-
rettes they want. Special Agent Neie further testified based
on his training and experience that Marlboros and Newports
are the most frequently trafficked brands of cigarettes.
2 See generally U.S. DEP’T OF JUSTICE, OFFICE OF THE INSPECTOR GENERAL, I-
2009-005, THE BUREAU OF ALCOHOL, TOBACCO, FIREARMS AND EXPLOSIVES’
EFFORTS TO PREVENT THE DIVERSION OF TOBACCO i-ii (2009), available at
http://www.justice.gov/oig/reports/ATF/e0905.pdf (last visited July 22,
2014).
4 No. 13-2368
With respect to Mr. Mohamed in particular, Special
Agent Neie testified that the cigarette tax rate in Kentucky,
where Mr. Mohamed had bought the cigarettes at issue, is
$0.60 per pack, whereas the cigarette tax rate in Indiana,
where the cigarettes were found, is $0.995 per pack. Thus, if
Mr. Mohamed sold all 1,170 packs in his possession in Indi-
ana, he stood to make a profit of up to $462.15. Special Agent
Neie acknowledged that many states—including New York
($4.35 per pack) and Washington ($3.25 per pack)—had
higher cigarette taxes than Indiana, and Mr. Mohamed
would have increased his potential profit by selling the ciga-
rettes at issue in those states rather than Indiana. Finally,
Special Agent Neie confirmed that none of the cartons of
cigarettes found in Mr. Mohamed’s van was missing ciga-
rettes; all 23,400 cigarettes were accounted for and remained
in their original packs.
Next, Officer Helmer testified about his June 6, 2012 traf-
fic stop involving Mr. Mohamed. Officer Helmer testified
that he pulled over Mr. Mohamed for running a red light at
approximately 6:57 p.m. Mr. Mohamed, who lives in Indian-
apolis, informed Officer Helmer that he was returning home
after visiting friends in Kentucky. When Officer Helmer
searched Mr. Mohamed’s van, he found 117 cartons (with
ten packs per carton) of Newport cigarettes bearing Ken-
tucky tax stamps. None of the cigarette packs had Indiana
tax stamps evidencing the payment of Indiana’s cigarette
tax. Officer Helmer also found in Mr. Mohamed’s van re-
ceipts showing purchases of Newport cigarettes from several
Kentucky gas stations earlier that day and a black trash bag
containing over $15,000 in cash. When Officer Helmer asked
Mr. Mohamed how much he makes selling cigarettes, Mr.
Mohamed answered “not much.”
No. 13-2368 5
The parties stipulated at trial that Mr. Mohamed did not
fall within one of the exceptions contained in the CCTA’s
definition of “contraband cigarettes.” See 18 U.S.C.
§ 2341(2)(A)-(D). Specifically, the parties stipulated that the
State of Indiana and the United States did not have any rec-
ords indicating that, as of June 6, 2012, Mr. Mohamed held a
permit as a manufacturer of tobacco products, an export
warehouse proprietor, or a person operating a customs
bonded warehouse; nor did they have records indicating
that Mr. Mohamed ever served as an officer, employee, or
other agent of the State of Indiana or the United States. The
parties also stipulated that the State of Indiana had no rec-
ords indicating that Mr. Mohamed was engaged in business
as a common carrier or was licensed or otherwise authorized
to account for and pay Indiana cigarette taxes as of June 6,
2012.
At the close of the government’s evidence, Mr. Mo-
hamed’s counsel moved for a judgment of acquittal under
Federal Rule of Criminal Procedure 29. The district court de-
nied the Rule 29 motion, finding that the government had
presented sufficient evidence to allow a reasonable jury to
conclude that Mr. Mohamed was guilty as charged. Mr. Mo-
hamed elected not to call any witnesses or present any evi-
dence in his defense, as is his right.
During closing arguments, defense counsel admitted that
Mr. Mohamed had more than 10,000 cigarettes not bearing
Indiana tax stamps in his possession but argued that the
government failed to prove that Indiana law required the
cigarettes to bear Indiana tax stamps in order to make the
cigarettes “contraband” under the CCTA. (R. 25 at 9-14.) De-
fense counsel asserted that the government presented no ev-
6 No. 13-2368
idence that the cigarettes had been “sold, used, consumed,
handled, or distributed” within Indiana, and, therefore, the
government failed to prove that Indiana’s cigarette tax ap-
plied to the cigarettes at the time of seizure. (Id. at 10–13.)
Moreover, defense counsel asserted, it made no economic
sense for Mr. Mohamed to sell the cigarettes in Indiana,
where he stood to gain only $462.15, minus the cost of gas,
travel, and food. (Id. at 13.) On rebuttal, the government con-
tended that it had proven everything necessary to convict
Mr. Mohamed of the offense:
When Mr. Mohamed was arrested in Indiana, he stat-
ed in Indiana that he didn’t make much money buy-
ing these cigarettes. When he was arrested in Indiana,
he had a bag full of cash in his car, in Indiana. And he
had twice the legal limit of cigarettes from out of
state. You can look at these facts and you can infer
that everything that needs to be proven for this of-
fense to be complete has, in fact, been proven, and
that when Officer Helmer pulled Haitham Mohamed
over, Haitham Mohamed was already committing the
crime of knowingly transporting or possessing those
cigarettes, and I ask you to find him guilty.
(Id. at 16.)
Following closing arguments, the district court instructed
the jury on what constitutes “contraband cigarettes” under
the CCTA and on the application of Indiana’s cigarette tax
laws. The jury instruction on the definition of “contraband
cigarettes” mirrored the CCTA’s definition of the term. See
18 U.S.C. § 2341(2). The instruction regarding the applicabil-
ity of Indiana’s cigarette tax stated as follows:
No. 13-2368 7
Indiana law requires a stamp to be placed on packag-
es or other containers of cigarettes to prove that ap-
plicable taxes have been paid. Indiana’s cigarette tax-
es are levied on all cigarettes sold, used, consumed,
handled, or distributed within the State of Indiana.
With respect to this law, the following definitions ap-
ply:
• to “sell” means the transfer of property for a
price;
• to “use” means to bring or put into service or
action;
• to “consume” means to possess for use or to
use a cigarette or cigarettes for the purpose of
smoking;
• to “handle” means to engage in selling, buying,
or distributing; and
• to “distribute” means to divide among several
or many.
(Jury Instruction No. 10.) 3
The jury appears to have struggled in applying these in-
structions. During deliberations, the jury submitted three
questions to the district court. First, the jury asked whether
“more than 10,000 cigarettes being transported into Indiana
from another state without paying [Indiana’s cigarette] tax
[is] enough to be called contraband?” Second, the jury asked,
“Is the question at hand just that [Mr. Mohamed] had
10,000+ [cigarettes] and crossed state lines, or do we need to
3 Neither party objected to these instructions at trial or argues on appeal
that the instructions were erroneous.
8 No. 13-2368
consider intent of what he planned to do with them once he
crossed the state line? Sell, distribute, etc.?” Third, the jury
asked, “In the definition of ‘handled,’ is ‘buying’ applicable
even if [the cigarettes] are bought in Kentucky? Can we see
the entire copy of title 18 U.S. Code Section 2342(a)[?]” The
district court judge responded to the jury’s questions in writ-
ing, informing the jurors that she could not provide the in-
formation they had requested. The judge instructed the ju-
rors to review the jury instructions and the evidence at trial
and discuss the issues they had raised with the court in their
continued deliberations.
The jury ultimately found Mr. Mohamed guilty of know-
ingly transporting or possessing contraband cigarettes in vi-
olation of the CCTA. After the jury rendered its verdict, de-
fense counsel renewed Mr. Mohamed’s Rule 29 motion for
judgment of acquittal, which the district court again denied.
STANDARD OF REVIEW
We review de novo the district court’s denial of Mr. Mo-
hamed’s Rule 29 motion for acquittal. See United States v. Fo-
ley, 740 F.3d 1079, 1082 (7th Cir. 2014); United States v. Seid-
ling, 737 F.3d 1155, 1159 (7th Cir. 2013). Under Rule 29,
“[a]fter the government closes its evidence or after the close
of all the evidence, the court on the defendant’s motion must
enter a judgment of acquittal of any offense for which the
evidence is insufficient to sustain a conviction.” Fed. R.
Crim. P. 29(a). “In considering challenges to the sufficiency
of the evidence, we view the evidence in the light most fa-
vorable to the prosecution, and then ask whether any ration-
al trier of fact could have found the essential elements of a
crime beyond a reasonable doubt.” Foley, 740 F.3d at 1082–83
(internal quotation marks omitted) (quoting United States v.
No. 13-2368 9
Boender, 649 F.3d 650, 654 (7th Cir. 2011)). “[W]e ‘defer to the
credibility determination of the jury[] and overturn a verdict
only when the record contains no evidence, regardless of
how it is weighed, from which the jury could find guilt be-
yond a reasonable doubt.’” United States v. Torres-Chavez, 744
F.3d 988, 993 (7th Cir. 2014) (second alteration in original)
(quoting United States v. Blassingame, 197 F.3d 271, 284 (7th
Cir. 1999)).
ANALYSIS
I. The Contraband Cigarette Trafficking Act
Congress enacted the CCTA to enable federal enforce-
ment agencies to assist states in curtailing interstate cigarette
trafficking, which drains billions of dollars in tax revenues
from state and local governments each year and often serves
as a source of illicit financing for organized crime and terror-
ist organizations. See S. REP. 95-962 at 3–9 (1978), reprinted in
1978 U.S.C.C.A.N. 5518; H.R. CONF. REP. 95-1778 at 7–9
(1978), reprinted in U.S.C.C.A.N. 5535. Under the CCTA, it is
unlawful for any person knowingly to ship, transport, re-
ceive, possess, sell, distribute, or purchase “contraband ciga-
rettes.” See 18 U.S.C. § 2342(a). The CCTA defines “contra-
band cigarettes” as
a quantity in excess of 10,000 cigarettes, which bear
no evidence of the payment of applicable State or lo-
cal cigarette taxes in the State or locality where such
cigarettes are found, if the State or local government
requires a stamp, impression, or other indication to be
placed on packages or other containers of cigarettes to
evidence payment of cigarette taxes, and which are in
10 No. 13-2368
the possession of any person other than [certain ex-
ceptions].
18 U.S.C. § 2341(2). Accordingly, to convict Mr. Mohamed of
cigarette trafficking, the government needed to prove be-
yond a reasonable doubt that (1) Mr. Mohamed knowingly
shipped, transported, received, possessed, sold, distributed,
or purchased (2) more than 10,000 cigarettes (3) not bearing
Indiana cigarette tax stamps (4) under circumstances in
which Indiana law required the cigarettes to bear such
stamps, and (5) Mr. Mohamed is not an excepted person un-
der 18 U.S.C. § 2341(2)(A)-(D). See 18 U.S.C. §§ 2341-42; see
also City of New York v. Chavez, 944 F. Supp. 2d 260, 264
(S.D.N.Y. 2013).
Mr. Mohamed does not challenge the sufficiency of the
evidence with respect to the first, second, third, and fifth el-
ements of the offense. The only issue before us is whether
the government presented sufficient evidence to allow a ra-
tional trier of fact to find beyond a reasonable doubt that In-
diana law required the cigarettes discovered in Mr. Mo-
hamed’s van to bear Indiana cigarette tax stamps. To resolve
this issue, we turn to Indiana state law.
II. Indiana’s Cigarette Tax Act
In construing Indiana’s Cigarette Tax Act, we must inter-
pret the statute as we think the Indiana Supreme Court
would interpret it. See Laborers Local 236, AFL-CIO v. Walker,
749 F.3d 628, 634 (7th Cir. 2014) (citing Brownsburg Area Pa-
trons Affecting Change v. Baldwin, 137 F.3d 503, 507 (7th Cir.
1998)). “In Indiana, the lodestar of statutory interpretation is
legislative intent, and the plain language of the statute is the
‘best evidence of … [that] intent.’” Estate of Moreland v. Diet-
No. 13-2368 11
er, 576 F.3d 691, 695 (7th Cir. 2009) (alterations in original)
(quoting Cubel v. Cubel, 876 N.E.2d 1117, 1120 (Ind. 2007));
see also Indiana Dep’t of Revenue v. United Parcel Serv., Inc., 969
N.E.2d 596, 600 (Ind. 2012); Indiana Dep’t of State Revenue, In-
heritance Tax Div. v. Estate of Parker, 924 N.E.2d 230, 233 (Ind.
Tax Ct. 2010). Unless a statute indicates otherwise, we must
give the words in the statute their plain and ordinary mean-
ing, and we must examine the statute as a whole, “avoiding
both excessive reliance on strict literal meaning and selective
reading of individual words.” Estate of Moreland, 576 F.3d at
695 (quoting Cubel, 876 N.E.2d at 1120); see also Scherr v. Mar-
riott Int’l, Inc., 703 F.3d 1069, 1077 (7th Cir. 2013). When the
language of a statute is clear, we must enforce the statute as
written, and we “ha[ve] no power to construe the statute for
the purpose of limiting or extending its operation.” See Estate
of Parker, 924 N.E.2d at 233 (quoting In re Estate of Wilson, 822
N.E.2d 292, 295 (Ind. Tax Ct. 2005)); see also Scherr, 703 F.3d
at 1077 (“When the language of a statute is plain, we enforce
it according to its terms.”).
Indiana’s Cigarette Tax Act levies a tax on “all cigarettes
sold, used, consumed, handled, or distributed” within the
state. See Ind. Code § 6-7-1-1. For purposes of the Cigarette
Tax Act, “consume” means to possess for use or use ciga-
rettes for the purpose of smoking, see Ind. Code § 6-7-1-8;
“handle” means “to trade in: engage in the buying, selling,
or distributing of (a commodity),” Indiana Eby-Brown Co. v.
Indiana Dep’t of State Revenue, 648 N.E.2d 401, 404 (Ind. Tax
Ct. 1995) (quoting Webster’s Third New Int’l Dictionary 1027
(1981)); and “distribute” means “to divide among several or
many.” Id. (quoting Webster’s Third New Int’l Dictionary at
660). All packages of cigarettes subject to Indiana’s cigarette
12 No. 13-2368
tax must bear Indiana tax stamps evidencing payment of the
tax. See Ind. Code § 6-7-1-14.
Mr. Mohamed argues that under the plain language of
the Cigarette Tax Act, the cigarettes at issue were not subject
to Indiana’s cigarette tax because, at the time of his arrest,
the cigarettes had not yet been sold, used, consumed, han-
dled, or distributed within Indiana. His argument raises two
questions regarding Indiana’s cigarette taxation scheme: (1)
when Indiana’s cigarette tax becomes due; and (2) whether
Indiana’s cigarette tax applies to cigarettes possessed in In-
diana but bought and intended for sale outside the state.
A. The Timing of Indiana’s Cigarette Tax
Mr. Mohamed argues that Indiana’s cigarette tax does
not apply until disposal of the cigarettes. We disagree. Indi-
ana technically imposes its cigarette tax on the retail pur-
chaser or ultimate consumer “upon the sale, exchange, bar-
tering, furnishing, giving away, or otherwise disposing of
cigarettes within the state of Indiana.” See Ind. Code
§ 6-7-1-12. The State, however, pre-collects the tax for con-
venience and facility from “the person who first sells, uses,
consumes, handles, or distributes the cigarettes.” See id.§ 6-7-1-1. The Cigarette Tax Act requires cigarette distribu-
tors and retailers, 4 which act as agents of the State in collect-
4 Under the Cigarette Tax Act, “distributor” includes
every person who sells, barters, exchanges, or distributes ciga-
rettes in the state of Indiana to retail dealers for the purpose of
resale, or who purchases cigarettes directly from a manufacturer
of cigarettes, or who purchases for resale cigarettes directly from
a manufacturer of cigarettes, or from a wholesaler, jobber, or dis-
tributor outside of the state of Indiana who is not a distributor
No. 13-2368 13
ing the cigarette tax, see id. § 6-7-1-17(a), to prepay the tax
and affix the required amount of tax stamps “upon receipt”
of any unstamped cigarettes subject to the tax. See id.
§ 6-7-1-18. Distributors and retailers can then pass along the
tax to retail purchasers or ultimate consumers by adding the
tax to the price of the cigarettes. 5 See id. § 6-7-1-1. According-
ly, under the plain language of the Cigarette Tax Act, read
fairly and as a whole, if Indiana’s cigarette tax applies at all,
it applies upon receipt of the cigarettes, even though the
State technically does not levy the tax until disposal. See id.
§ 6-7-1-18.
This construction is consistent with the Cigarette Tax
Act’s “intent and purpose” to pre-collect the cigarette tax
from the person who first sells, uses, consumes, handles, or
distributes the cigarettes. See id. § 6-7-1-1. It is also consistent
with the Indiana Tax Court’s interpretation of the Cigarette
Tax Act and, as the Tax Court recognized, the State’s interest
holding a registration certificate issued under [the Cigarette Tax
Act].
Id. § 6-7-1-6. “Retailer” means “every person, other than a distributor,
who purchases, sells, offers for sale, or distributes cigarettes, to consum-
ers or to any person for any purpose other than resale, irrespective of
quantity or amount, or the number of sales.” Id. § 6-7-1-7. If Mr. Mo-
hamed intended to sell the cigarettes in his possession in Indiana, he
would qualify as either a distributer or retailer under the Cigarette Tax
Act.
5 Although the Cigarette Tax Act does not specify when persons other
than distributors and retailers must pay the cigarette tax, this is not sur-
prising given that Indiana requires all cigarettes sold within the state to
be sold through cigarette distributors or retailers. See id. § 24-3-6-11(a)-
(f).
14 No. 13-2368
in protecting itself from revenue losses due to cigarette traf-
ficking:
To hold that the [cigarette] tax is due only when ciga-
rettes are “sold, bartered, exchanged, etc.” defeats the
purpose for the distributor to pay the tax and affix
stamps upon receipt—the purpose being that because
cigarettes are a major source of revenue for Indiana,
the state has an interest in protecting the cigarettes
from “bootleggers” who seek to bypass the conven-
tional methods of cigarette distribution and, conse-
quently, payment of the tax.
The most effective way for the state to protect its ciga-
rette revenue is to impose upon distributors the duty
to pay the tax on all cigarettes at the earliest possible
point, which the statute defines as receipt. This meth-
od nearly guarantees that the tax is always collected
… . Had the legislature intended that the tax be paid
only on those cigarettes that are sold, the legislature
would not have mandated that distributors affix the
stamps upon receipt as evidence the tax has been paid.
Indiana Eby-Brown Co., 648 N.E.2d at 405 (footnote omitted;
emphasis in original). We therefore reject Mr. Mohamed’s
argument that Indiana’s cigarette tax does not apply until
the cigarettes are sold, used, consumed, handled, or distrib-
uted as contrary to Indiana law. We instead find that Indi-
ana’s cigarette tax applies upon receipt of cigarettes subject to
the tax.
B. The Scope of Indiana’s Cigarette Tax
Next, we consider the scope of Indiana’s cigarette tax. On
its face, the Cigarette Tax Act applies only to cigarettes sold,
No. 13-2368 15
used, consumed, handled, or distributed within Indiana. See
Ind. Code § 6-7-1-1 (“It is the intent and purpose of this
chapter to levy a tax on all cigarettes sold, used, consumed,
handled or distributed within this state … .” (emphasis add-
ed)); id. § 6-7-1-12(a) (imposing Indiana’s cigarette tax only
“upon the sale, exchange, bartering, furnishing, giving away,
or otherwise disposing of cigarettes within the state of Indi-
ana” (emphasis added)). The Cigarette Tax Act does not tax
cigarettes possessed in Indiana merely for the purpose of in-
terstate commerce; nor does it require cigarettes passing
through the state in interstate commerce to bear Indiana tax
stamps. See id. § 6-7-1-18 (“Any distributor engaged in inter-
state business[] shall be permitted to set aside such part of
his stock as may be necessary for the conduct of such inter-
state business without affixing the stamps required by this
chapter.”); see also 45 Ind. Admin. Code § 8.1-1-28 (“Distribu-
tors need not affix tax stamps to the individual packages of
cigarettes that are sold and shipped outside the State.”); Indi-
ana Eby-Brown Co., 648 N.E.2d at 404 n.3 (“Eby-Brown need
not … stamp cigarettes that are to be shipped in interstate
commerce.”).
Because Indiana does not tax all cigarettes possessed
within the state, the government needed to prove more than
Mr. Mohamed’s possession of unstamped cigarettes in Indi-
ana to convict him of violating the CCTA. Rather, the gov-
ernment needed to prove that Mr. Mohamed possessed the
cigarettes for the purpose of selling, using, consuming, han-
dling, or distributing them within Indiana in order to estab-
lish that they were subject to Indiana’s cigarette tax. See Ind.
Code §§ 6-7-1-1, 6-7-1-12(a); 18 U.S.C. § 2341(2).
16 No. 13-2368
The government argues that “[t]he larger context of Indi-
ana’s cigarette taxation statutes” establishes that the ciga-
rettes found in Mr. Mohamed’s van were subject to Indiana’s
cigarette tax at the time of his arrest. (See Appellee Br. at 9-
11.) The government cites two provisions of the Cigarette
Tax Act in support of this argument. First, under Indiana
Code section 6-7-1-19.5, all persons transporting unstamped
cigarettes over Indiana highways, except licensed distribu-
tors, common carriers, and state or federal employees per-
forming their official duties, must carry invoices or delivery
tickets stating the quantity and brand of the cigarettes and
the names and addresses of the seller, purchaser, and the
person ultimately liable for the state’s cigarette tax. See Ind.
Code § 6-7-1-19.5. Transporting unstamped cigarettes in In-
diana without proper documentation constitutes a misde-
meanor under Indiana law. See id. § 6-7-1-23. Second, under
Indiana Code section 6-7-1-24, the possession of more than
1,500 cigarettes in packages not bearing Indiana tax stamps
by any person other than a distributor, common carrier, or
state or federal employee constitutes “prima facie evidence
that the cigarettes are possessed for the purpose of sale.” Id.
§ 6-7-1-24(d).
Mr. Mohamed acknowledges on appeal that he was
transporting the cigarettes at issue over Indiana highways
without proper documentation in violation of Indiana Code
section 6-7-1-19.5, and, as a result, the State could have
charged him with a misdemeanor. (See Appellee Reply Br. at
3.) He argues, however, that this misdemeanor violation
does not amount to a violation of the CCTA. Additionally,
Mr. Mohamed argues that even if his possession of more
than 1,500 cigarettes without Indiana tax stamps creates a
presumption that he possessed the cigarettes for the purpose
No. 13-2368 17
of sale, the presumption “stands only until it is destroyed by
the facts.” (Id. at 4.) According to Mr. Mohamed, the evi-
dence at trial and the government’s position during sentenc-
ing—i.e., that the district court should calculate the amount
of loss using New York’s cigarette tax rate, rather than Indi-
ana’s tax rate—demonstrate that Mr. Mohamed intended to
sell the cigarettes outside Indiana, thus destroying any pre-
sumption that he intended to sell them within the state. (Id.)
The strongest support for the government’s position is
United States v. Boggs, 775 F.2d 582 (4th Cir. 1985). In Boggs,
federal agents arrested the defendant in West Virginia carry-
ing over 60,000 cigarettes not bearing West Virginia tax
stamps. The parties stipulated that the defendant had pur-
chased the cigarettes in North Carolina and was transporting
them through West Virginia to resell them in Michigan. Af-
ter a bench trial based on stipulated facts, the district court
found the defendant guilty of trafficking and conspiring to
traffic contraband cigarettes in violation of the CCTA. See id.
at 583.
On appeal, the defendant argued that because he had
purchased the cigarettes outside the state and intended to
sell them outside the state, West Virginia’s cigarette tax did
not apply, and, thus, the cigarettes did not qualify as contra-
band under the CCTA even though they lacked West Virgin-
ia tax stamps. The Fourth Circuit disagreed. A majority of
the panel determined that West Virginia’s tax statutes gave
the State authority to apply its cigarette tax to “people such
as [the defendant] unless the cigarettes they possess are being
legitimately transported in commerce, in which event excep-
tion is made.” See id. at 584.
18 No. 13-2368
The majority relied on two provisions of West Virginia’s
tax statutes in drawing this conclusion. First, the court found
that the defendant’s possession of more than twenty packag-
es of cigarettes not bearing West Virginia tax stamps created
a presumption under West Virginia law that the defendant
possessed the cigarettes “for the purpose of evading the
payment of taxes imposed or due thereon.” See id. (quoting
W. Va. Code § 11-17-19(b)(6)). Second, the court determined
that the defendant’s intent to sell the cigarettes in Michigan
rather than West Virginia did not rebut the presumption that
he possessed the cigarettes for the purpose of evading West
Virginia’s cigarette tax because the defendant had not com-
plied with the State’s requirements regarding the transporta-
tion of unstamped cigarettes. See id. at 585 (quoting W. Va.
Code § 11-17-20). Like Indiana, West Virginia requires per-
sons transporting unstamped cigarettes across the state to
have in their possession invoices or delivery tickets bearing
certain information about the buyer and seller of the ciga-
rettes. See W. Va. Code § 11-17-20. The defendant stipulated
at trial that he did not have the required invoices or delivery
tickets for the cigarettes in his possession. See Boggs, 775 F.2d
at 585. As a result, the majority held that West Virginia
“would have been perfectly justified in imposing upon [the
defendant] its excise tax on account of his failure to comply
with this rather simple and unburdensome requirement of
West Virginia law or to subject [the defendant] to criminal
penalties for his failure to comply therewith.” Id.In United States v. Skozcen, 405 F.3d 537 (7th Cir. 2005), we
faced a situation analogous to the one addressed in Boggs.
The defendant in Skozcen was arrested in Illinois with
325,000 packs of unstamped cigarettes in his possession. Id.
at 541. The defendant argued that because the cigarettes
No. 13-2368 19
“were to be sold out of the state and never within Illinois,”
they were not subject to Illinois’s cigarette tax, and, there-
fore, the cigarettes were not required to bear Illinois tax
stamps. See id. at 547. We ultimately did not need to decide
whether the defendant’s intention to sell the cigarettes out-
side Illinois foreclosed his conviction under the CCTA, how-
ever, because we found that the cigarettes at issue had be-
come subject to Illinois’s cigarette tax even before they came
into the defendant’s possession. See id.Illinois subjects all cigarettes sold or otherwise disposed
of within the state to its cigarette tax and requires those ciga-
rettes to bear stamps evidencing payment of the tax. See 35
ILCS 130/2-3. Because the defendant in Skozcen had pur-
chased the cigarettes at issue in Illinois, the cigarettes had
become subject to Illinois’s cigarette tax at the time of that
purchase (at the latest). See Skozcen, 405 F.3d at 547. Accord-
ingly, the unstamped cigarettes were “contraband” under
the CCTA regardless of what the defendant did with the cig-
arettes after purchasing them. See id. Under these circum-
stances, we held that the defendant’s intention to sell the
cigarettes outside Illinois was irrelevant to his conviction
under the CCTA. Id. We did not address, however, whether
a defendant’s intention to sell cigarettes outside the state in
which the cigarettes were found would be relevant where, as
here, the cigarettes were not already subject to the state’s
cigarette tax. Because the CCTA incorporates state law in de-
fining contraband cigarettes, the resolution of this issue nec-
essarily rests on the applicable state’s laws.
We are not persuaded that Mr. Mohamed’s violation of
Indiana’s requirements for transporting unstamped ciga-
rettes over Indiana highways alone is sufficient to support
20 No. 13-2368
his conviction for violation of the CCTA. As an initial matter,
unlike in Boggs, the government cannot rely on the eviden-
tiary presumption created by state law here. Under Indiana
Code section 6-7-1-24(d),
[t]he possession of more than [1,500] cigarettes in
packages not bearing Indiana tax stamps by any per-
son other than a distributor, a common carrier, or an
employee of the state or federal government perform-
ing his official duties in the enforcement of this chap-
ter constitutes prima facie evidence that the cigarettes
are possessed for the purpose of sale.
Ind. Code § 6-7-1-24(d). Read fairly, this provision creates a
presumption that a person (apart from the three listed excep-
tions) possessing more than 1,500 cigarettes not bearing In-
diana tax stamps has the cigarettes available and intended
for sale within the state. 6 The jury instructions, however,
made no mention of the presumption, and the government
never argued at trial that it applied. Had the government ac-
tually relied on the presumption at trial, Mr. Mohamed may
have elected to present evidence rebutting the presumption,
rather than rest his defense without presenting affirmative
evidence. Thus, unlike in Boggs, the government cannot use
the presumption to its advantage on appeal.
Without the benefit of the presumption, the government
has not presented sufficient evidence to allow a reasonable
trier of fact to determine that Mr. Mohamed intended to sell,
distribute, or otherwise dispose of the cigarettes within Indi-
ana. Although Mr. Mohamed acknowledges on appeal that
6 Mr. Mohamed does not challenge whether this state-law presumption
applies in federal court, so we will assume that it does.
No. 13-2368 21
he violated Indiana’s requirements for transporting un-
stamped cigarettes across the state, the CCTA does not make
every violation of a state’s cigarette taxation laws a federal
crime. See 18 U.S.C. § 2341(2); see also United States v. Wilbur,
674 F.3d 1160, 1173–74 (9th Cir. 2012) (“The CCTA, however,
does not make cigarettes ‘contraband’ under federal law
simply because they are contraband under state law.”). Only
cigarettes that “bear no evidence of the payment of applica-
ble State or local cigarette taxes in the State or locality where
such cigarettes are found” qualify as contraband cigarettes
under the CCTA. See 18 U.S.C. § 2341(2); Wilbur, 674 F.3d at
1174. If Congress had intended to make all cigarettes trans-
ported in violation of state law “contraband,” it could have
done so. Congress, however, chose to limit the definition of
“contraband cigarettes” to cigarettes that fail to bear evi-
dence of applicable state or local cigarette taxes, and we
must enforce the statute according to its plain terms. See
Sebelius v. Cloer, --- U.S. ---, 133 S. Ct. 1886, 1896, 185 L. Ed.
2d 1003 (2013) (“[W]hen [a] statute’s language is plain, the
sole function of the courts—at least where the disposition
required by the text is not absurd—is to enforce it according
to its terms.” (internal quotation marks and citation omit-
ted)). Accordingly, under the CCTA’s plain language, “[i]f
there are no ‘applicable State or local cigarette taxes,’ ciga-
rettes are not contraband, regardless of whether they were
transported in violation of state law.” Wilbur, 674 F.3d at1173–74.
The legislative history of the CCTA provides further
support for this interpretation of its terms. As the legislative
history establishes, Congress intended the CCTA to supple-
ment, but not supplant, states’ enforcement of their own cig-
arette tax statutes. See S. REP. 95-962 at 3-9. In enacting the
22 No. 13-2368
CCTA, Congress sought to help states avoid large-scale rev-
enue losses and prosecute major cigarette traffickers while
ensuring that the primary efforts to stop cigarette smuggling
remained with the states. See id. at 9. With these goals in
mind, it makes sense that Congress would focus federal ef-
forts under the CCTA on prosecuting offenders who skirt
applicable state and local cigarette taxes while leaving en-
forcement of other aspects of states’ cigarette taxation
schemes to the states themselves.
We, therefore, find that Mr. Mohamed’s violation of In-
diana’s requirements regarding the transportation of un-
stamped cigarettes alone cannot serve as the basis for his
conviction. This, however, does not end our inquiry. We
must first determine whether the government presented suf-
ficient evidence at trial to prove that Mr. Mohamed pos-
sessed the cigarettes at issue for the purpose of selling, us-
ing, consuming, handling, or distributing them within Indi-
ana—not just that he failed to comply with Indiana’s re-
quirements for transporting unstamped cigarettes across the
state.
As explained above, the government did not rely on the
presumption under Indiana Code section 6-7-1-24(d) at trial.
We must therefore decide whether, absent the presumption,
the jury could have reasonably inferred from the evidence at
trial that Mr. Mohamed possessed the cigarettes at issue for
sale, use, consumption, handling, or distribution in Indiana.
See United States v. Jones, 713 F.3d 336, 340 (7th Cir. 2013) (“A
Rule 29 motion calls on the court to distinguish between rea-
sonable inferences and speculation.”). The government’s ev-
idence at trial was sufficient to give rise to an inference that
Mr. Mohamed was trafficking cigarettes when Officer
No. 13-2368 23
Helmer pulled him over. Mr. Mohamed had in his posses-
sion over 23,000 Newport cigarettes purchased from various
gas stations in Kentucky, a low-tax state, along with a trash
bag containing over $15,000 in cash. Special Agent Neie testi-
fied that cigarette traffickers typically travel from retailer to
retailer purchasing cigarettes—like Mr. Mohamed had—
because of restrictions retailers place on the amount of ciga-
rettes a customer can purchase at one time. Special Agent
Neie also testified that Newports are one of the two most
frequently trafficked brands of cigarettes. Furthermore,
when Officer Helmer asked Mr. Mohamed how much mon-
ey he makes selling cigarettes, Mr. Mohamed answered “not
much,” effectively admitting that he does in fact sell ciga-
rettes for profit. This evidence is more than sufficient to
show that Mr. Mohamed was engaged in cigarette traffick-
ing and that he intended to sell the cigarettes at issue in a
state with higher cigarette taxes than Kentucky.
The government’s evidence at trial, however, was not
sufficient to show that Mr. Mohamed intended to sell the
cigarettes in Indiana. Thirty-eight states had higher cigarette
taxes than Kentucky in 2012, and, as Special Agent Neie tes-
tified, Mr. Mohamed could have made a profit selling the
cigarettes in any one of those states. The government pre-
sented no evidence that Mr. Mohamed had taken any steps
to sell, distribute, or otherwise dispose of the cigarettes in
Indiana, and although Mr. Mohamed admitted to Officer
Helmer that he sells cigarettes, he gave no indication of
where he sells them. The government’s evidence and argu-
ments at trial simply did not focus on whether Mr. Mo-
hamed intended to sell the cigarettes in Indiana, and the ju-
ry’s questions to the district court understandably reflected
their confusion over this issue. Significantly, during sentenc-
24 No. 13-2368
ing, the government took the position that Mr. Mohamed
intended to sell the cigarettes in New York, where he stood
to make substantially more profit than selling them in Indi-
ana due to New York’s $4.35 per pack tax rate.
We do not believe that Mr. Mohamed’s possession of cig-
arettes in Indiana under these circumstances is sufficient to
support a finding, beyond a reasonable doubt, that Mr. Mo-
hamed intended to sell, distribute, or otherwise dispose of
the cigarettes in Indiana. See United States. v. Katz, 582 F.3d
749, 752 (7th Cir. 2009) (“A jury cannot speculate its way out
of reasonable doubt.”); see also United States v. Griffin, 684
F.3d 691, 698 (7th Cir. 2012) (evidence that the defendant had
easy access to firearms and could have possessed them in a
matter of seconds was not sufficient to prove that he intend-
ed to exercise control over them); Piaskowski v. Bett, 256 F.3d
687, 692–93 (7th Cir. 2001) (evidence that the defendant was
present at the site of a murder and later referred to “shit go-
ing down” was insufficient to prove that he participated in
the murder directly or as a conspirator); United States v. Har-
ris, 942 F.2d 1125, 1129–30 (7th Cir. 1991) (reversing the de-
fendant’s conviction where the evidence was “as consistent
with an inference of innocence as one of guilt”). Without ev-
idence that Mr. Mohamed intended to sell or otherwise dis-
pose of the cigarettes in Indiana, the government failed to
prove beyond a reasonable doubt that Indiana law required
the cigarettes to bear Indiana tax stamps. Mr. Mohamed’s
conviction, therefore, cannot stand. 7
7 This does not mean that Mr. Mohamed’s conduct necessarily must go
unpunished. As Mr. Mohamed has acknowledged, the State could have
charged him with a misdemeanor for violating Indiana’s requirements
for transporting unstamped cigarettes. See Ind. Code § 6-7-1-19.5. The
No. 13-2368 25
CONCLUSION
For the foregoing reasons, we REVERSE the decision of
the district court and REMAND with instructions to enter a
judgment of acquittal.
CCTA, moreover, contains recordkeeping and reporting requirements
that apply to the shipment, sale, or distribution of more than 10,000 ciga-
rettes in a single transaction, see 18 U.S.C. § 2343, and violations of those
requirements also may result in criminal liability. See 18 U.S.C. § 2344(b).
We make no comment on whether the government’s evidence at trial
would have been sufficient to convict Mr. Mohamed under Indiana state
law or under other provisions of the CCTA. We hold only that the evi-
dence at trial was not sufficient to support a conviction for violation of 18
U.S.C. § 2342(a).