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United States v. Quinn

December 5, 2005

UNITED STATES OF AMERICA
v.
ROBERT E. QUINN, MICHAEL H. HOLLAND, MOHAMMED A. SHARBAF DEFENDANTS.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

On October 25, 2005, a federal grand jury in the District of Columbia handed up a six-count superseding indictment charging Robert E. Quinn and Michael H. Holland ("defendants"), employees of Kentucky-based Clark Material Handling Company ("CMHC") -- as well as a third individual, Mohammed A. Sharbaf of Iran -- with violating laws restricting the export of goods from the United States to Iran. According to the indictment, defendants and Sharbaf collaborated to export forklift truck parts from the United States to Iran, via the United Arab Emirates ("UAE"). See Indict. at 5-7.

The indictment alleges that Sharbaf and an unindicted co-conspirator in Iran would send requests to Quinn and Holland for price quotations on CMHC parts, sometimes using an intermediary in the UAE named Khalid Mahmood. Id. Quinn and Holland, the indictment alleges, would provide the quotes and, if Sharbaf and his employer (Sepahan Lifter Company) approved of the prices, Quinn and Holland would arrange to ship the parts to Mahmood, knowing that Mahmood was simply a middleman and that the parts were destined for Iran. Id. at 8. All of this, the indictment asserts, was done without obtaining approval of the transactions from the Treasury Department's Office of Foreign Assets Control ("OFAC"). Id. at 5.

Count One of the indictment alleges the crime of "Conspiracy to Commit an Offense Against the United States," in violation of 18 U.S.C. § 371, and is based on a series of thirty-eight alleged overt acts in furtherance of that conspiracy, including a number of e-mail communications among the alleged conspirators. Id. at 5-15. Counts Two through Six are based on five separate indirect shipments of goods from CMHC in the United States to Iran, and each count alleges a "Violation of the United States Iranian Embargo," based on the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. § 1705(b), and the Iranian Transaction Regulations ("ITR") promulgated thereunder, principally 31 C.F.R. § 560.204 (prohibiting the indirect exportation "from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran" if those transactions are "undertaken with knowledge or reason to know that" the goods are "intended specifically" for subsequent delivery to Iran). Id. at 15-18. Counts Two through Six also charge the crime of "aiding and abetting" an offense against the United States or "causing" such an offense to be done. Id. at 15-18.

The trial of defendants commenced on November 21, 2005, with the selection of a jury, and the presentation of evidence began on November 28. At the close of the government's case-in-chief on December 2, each defendant moved for a judgment of acquittal, pursuant to Rule 29 of the Federal Rules of Criminal Procedure. See Tr. of Jury Trial at 1049, 1061. As permitted by that rule, the Court reserved decision on the motions and allowed the trial to go forward, whereupon the defendants proceeded to put on their case. See Fed. R. Crim. P. 29(b); Tr. of Jury Trial at 1075. Today marks the close of all the evidence, and the Court will now resolve the motions. For the reasons provided herein, and based only on the evidence at the close of the government's case, the Court concludes that judgments of acquittal are not warranted.

ANALYSIS

In considering a Rule 29 motion, the Court must view the evidence in the light most favorable to the government and must determine whether the evidence presented at trial is sufficient to sustain a conviction as a matter of law; in other words, the Court must decide whether a reasonable jury could conclude that the government met its burden of proving each element of the offense beyond a reasonable doubt. See United States v. Treadwell, 760 F.2d 327, 333 (D.C. Cir. 1985). For purposes of the present motion, defendants effectively have conceded that the government has met its burden on all but one of the elements of the charged crimes: the "willful" state of mind that the law requires the government to prove the defendants had at the time they engaged in the alleged prohibited acts and, for the conspiracy count, at the time they joined in a plan to engage in the unlawful acts. See 50 U.S.C. § 1705(b) (prescribing criminal sanctions for persons who "willfully violate[], or willfully attempt[] to violate, any license, order, or regulation issued under [IEEPA]"); United States v. Feola, 420 U.S. 671, 686 (1975) ("[I]n order to sustain a judgment of conviction on a charge of conspiracy to violate a federal statute, the Government must prove at least the degree of criminal intent necessary for the substantive offense itself."). All of defendants' arguments in support of their motions focus on that single disputed element.

I. Defining the Element of Willfulness

This Court previously has said that IEEPA's criminal provision "demands proof that a defendant acted with knowledge of the illegality of his actions," see Order of Nov. 23, 2005, at 2, and has further defined willfulness in this context as the "voluntary, intentional violation of a known legal duty," id. at 3 (citing United States v. Lizarraga-Lizarraga, 541 F.2d 826, 828 (9th Cir. 1976)). Notwithstanding the Court's prior statement that "nothing in this ... formulation of willfulness demands that the government prove the defendants had specific knowledge of [the] licensing regime, as set out in the ITR," id. at 4, defendants now ask the Court to conclude that the "legal duty" of which the defendants must have had knowledge includes the particular duty to obtain a license from OFAC. See Tr. of Jury Trial at 1053-54 (counsel for defendant Holland asserting that, to sustain a conviction, the government must demonstrate that defendants "knew that [a license] was required, knew that there was no such license held by the company, and intentionally failed to obtain the license"). Defendants interpret this Court's prior articulation of willfulness to mean that, although "the government need not prove that the defendants were aware that the licensing requirement was included in the Iranian Transaction Regulations," it still must "show that the defendants knew that there was a licensing requirement," even if they were not aware of the specific code provisions that create the requirement. See Defs.' Supp. Submission on Willfulness at 2 (emphasis in original).

As the government has defined the crimes with which defendants are charged in the substantive offenses (Counts Two through Six) -- both in the indictment and in its proposed jury instructions -- included as an element of each offense is a specific omission: the failure to obtain a license from OFAC. See Indict. at 15-18; Gov't Prop. Supp. Instruct. No. 3. Defendants have seized on that point in their motions for judgment of acquittal, arguing that IEEPA's willfulness requirement should apply to every element of the offense and that, because it should so apply, the government must produce sufficient evidence to support a reasonable jury's conclusion that defendants knew of the need to obtain a license.

The Court cannot accept defendants' view of the scienter requirement for the charged offenses. To do so would produce an absurd result: A defendant could readily admit that he knew his exact conduct was illegal,*fn1 but he could nonetheless avoid criminal liability by convincing a jury that he did not know precisely why the conduct was illegal because he was unfamiliar with the specific licensing requirement. Surely neither Congress in passing IEEPA nor the Executive Branch in promulgating the ITR intended to foreclose prosecution of persons who knew the gist, but not the exact details, of the law they are accused of violating. A defendant's assertion, no matter how credible, that he "had not brushed up on the law" has never been deemed a sufficient defense to a crime requiring knowledge of illegality. See Hamling v. United States, 418 U.S. 87, 123 (1974). In fact, that is precisely the result that the Supreme Court sought to avoid when it upheld a conviction for willfully engaging in the sale of firearms without a federal license even though the government had not been required to prove that the defendant was aware of the particular requirement of a license. See Bryan v. United States, 524 U.S. 184, 196 (1998). As the Third Circuit said in a case involving a prosecution under the Arms Control Export Act ("ACEA"), "[i]f the defendant knew that the export was in violation of the law, we are hard pressed to say that it matters what the basis of that knowledge was." United States v. Tsai, 954 F.2d 155, 162 (3d Cir. 1992).

Defense counsel, in support of their view of the government's burden in this prosecution, refer the Court to two Second Circuit cases that address the scienter element of a similar federal crime: willful violation of the ACEA or the regulations issued thereunder (specifically, the International Traffic in Arms Regulations, or "ITAR"). See 22 U.S.C. § 2778(c); 22 C.F.R. § 127.1. Those cases approved jury instructions for an ACEA/ITAR offense that required proof that a defendant had knowledge of the statute's licensing requirement. In United States v. Durrani, 835 F.2d 410 (2d Cir. 1987), the court affirmed an ACEA conviction where the trial judge instructed the jury that a guilty verdict required proof that the defendant "knew he was required to obtain an export license before causing defense articles to be exported," that he "intentionally failed to do so," and that he nonetheless went ahead with the exports. See id. at 423. Three years later, in United States v. Smith, 918 F.2d 1032 (2d Cir. 1990), the same court affirmed another ACEA conviction where the trial judge told jurors that an essential element of the crime was that the defendant "knew about the licensing requirement" for exporters of certain helicopters. See id. at 1038.

This Court does not question the correctness of those instructions.*fn2 But even in ACEA cases such as Durrani and Smith, where the trial court demanded that the government prove knowledge of the licensing requirement to establish willfulness, there is no suggestion that the government was required to prove specific knowledge of each and every aspect of the law that was treated as an essential element of the crime -- for example, the fact that the goods in question appeared on the United States Munitions List. See also United States v. Murphy, 852 F.2d 1, 7 (1st Cir. 1988) ("[I]t is sufficient that the government prove that [defendant] knew he had a legal duty not to export the weapons ...."); id. at n.6 ("[The law does not require] proof that the defendant kn[e]w that the arms [we]re on the United States Munitions List. Rather, ... all that the Government needs to prove is that the item exported appears on the Munitions List ... and, of course, that the defendant knowingly and willfully exported it, with the necessary intent and knowledge, and without the appropriate license.") (citing United States v. Gregg, 829 F.2d 1430, 137 (8th Cir. 1987)).

The Court also observes that the ACEA/ITAR regulatory scheme is quite different than the IEEPA/ITR regime. The ACEA itself contains a licensing requirement, and it requires all arms exporters (with a few narrowly drawn exceptions) to obtain a license from the State Department before shipping to any foreign country. It is, in short, a licensing statute that contemplates the general granting of licenses, subject to restrictions. Indeed, the regulation that defines an ACEA violation expressly makes the crime dependent upon whether the accused acted "without first obtaining the required license or written approval from the Office of Defense Trade Controls." See 22 C.F.R. ยง 127.1. IEEPA, by contrast, contemplates the possible creation of a licensing regime, but by no means requires it. And where the ITR do provide for licensing, the requirement applies only to a narrow group of exporters who would seek to do business with a specific country (Iran). Furthermore, the regulation that defines the ITR violation charged in this case broadly prohibits all transactions with Iran, "[e]xcept ...


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