Criminal Law and Procedure Decisions: Cleveland v. United States</titl <body>  <script language="javascript1.1" src="http://images.findlaw.com/tracking/wss-lp.js"></script> <script language="javascript1.1" src="http://images.findlaw.com/tracking/hbx-0250.js"></script> <noscript> <img src="http://ehg-findlaw.hitbox.com/HG?hc=we76&cd=1&hv=6&ce=u&hb=DM531216MLSZ&n=LP&vcon=NO+JAVASCRIPT&vpc=HBX0250u" border="0" width="1" height="1"> </noscript>  <div id="main"> <div id="doc3" class="pro"> <div id="bd"> <div class="yui-g" id="header"> <div id="header_sub_center"> <h1 id="logo"><a href="http://lp.findlaw.com"><b>FindLaw | Find a Lawyer. Find Answers.</b></a></h1> <div id="question"> <h3><a href="http://www.findlaw.com/" class="c_4">Non-Professional? 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United States</h5><P align="center"><b>Mail Fraud – Are Licenses Property?</b></p><p><b>Case: <a href="http://laws.findlaw.com/us/000/99-804.html">Cleveland v. United States</a></b></p><p><b>Issue</b>: Whether the federal mail fraud statute, <a href="http://caselaw.lp.findlaw.com/scripts/ts_search.pl?title=18&sec=1341">18 U.S.C. §1341</a>, which proscribes use of the mails in furtherance of “any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises,” reaches false statements made in an application for a state video poker license.</p><p><b>Facts</b>: Carl Cleveland was convicted of federal money laundering, RICO and mail fraud violations in connection with a video poker business he and his law partner Fred Goodson controlled. Among the predicate offenses to the RICO conviction were four mail fraud charges based on Cleveland’s submission of false applications to the State of Louisiana in an effort to obtain a video poker license. The original license application and several annual renewals were false in that they failed to list Cleveland and Goodson as the true owners of the video poker business, Truck Stop Gaming, Ltd. (“TSG”). The Federal District Court denied Cleveland’s pre-trial motion to dismiss the mail fraud counts for failing to allege a property deprivation under § 1341. After conviction, Cleveland renewed his argument before the United States Court of Appeals for the Firth Circuit, which rejected it in accord with its own precedent. The Supreme Court granted certiorari to resolve a Circuit split.</p><p><b>Holding</b>: For purposes of the federal mail fraud statute, the “thing obtained” through fraud must be property in the hands of the <U>victim</U> rather than the recipient. “State and municipal licenses in general and Louisiana’s video poker license in particular do not rank as ‘property,’ for purposes of § 1341, in the hands of the official licenser.”</p><p><b>Reasoning</b>: Justice Ginsburg wrote for a unanimous Court. “In <a href="http://laws.findlaw.com/us/483/350.html">McNally v. United States</a>, 483 U.S. 350, 360 (1987), this Court held that the federal mail fraud statute is ‘limited in scope to the protection of property rights.’” Prior to <U>McNally</U>, federal prosecutors had used § 1341 “to attack various forms of corruption that deprived victims of ‘intangible rights’ unrelated to money or property.” After <U>McNally</U>, Congress enacted 18 U.S.C. § 1346, providing that “a scheme or artifice to defraud” included “a scheme or artifice to deprive another of the intangible right of honest services.” The Court thought it significant that “the intangible right of honest services” enacted into law by Congress was only one of the “intangible rights” that lower courts had upheld under § 1341 in the pre-<U>McNally</U> era. In fact, after <U>McNally</U> but prior to Congress’ enactment of § 1346, courts relying on <U>McNally</U> “had dismissed, for want of monetary loss to any victim, prosecutions under § 1341 for diverse forms of public corruption, including licensing fraud.”</p><p>The United States did not assert that Louisiana video’s poker licensing scheme implicated the intangible right of honest services. “The question presented is whether, for purposes of the federal mail fraud statute, a government regulator parts with ‘property’ when it issues a license.” The Court found that the video poker licenses were not property in the hands of State officials under traditional notions of property rights. The State’s core concern in enacting the video poker licensing scheme was regulatory. The “statute establishes a typical regulatory program” and resembles “other licensing schemes long characterized by this Court as exercises of state police powers.”</p><p>That Louisiana receives a revenue stream from its video poker licensing scheme no more makes a video poker license property, in the State’s hands, than a revenue stream would render drivers’ licenses, medical licenses, or fishing licenses property. The United States never alleged that Cleveland defrauded Louisiana of any money to which that State was entitled and it was undisputed that TSG properly paid Louisiana $1.2 million in revenues during the relevant time period. Nor does the State’s right of control over the issuance, renewal, suspension, and revocation of licenses give it a property interest in them. “Such regulations are paradigmatic exercises of the State’s traditional police powers.” Though the United States compared Louisiana’s interest in video poker licenses to that of a patent holder’s interest in a patent that he has not licensed, “the better analogy is to the Federal Government’s interest in an unissued patent.” Nor is the State like a franchiser who has “ventured into the video broker business.” Rather than venturing into the poker business by putting its own labor or capital at risk, Louisiana “decided typically to permit, regulate, and tax private operators of the games.” The United States’ reading of § 1341 was also untenable because it would comprehend “a sweeping expansion of federal criminal jurisdiction in the absence of a clear statement by Congress.” In addition, to the extent that the word “property” is ambiguous within § 1341, ambiguities concerning the ambit of federal criminal statutes are “resolved in favor of lenity.” The Court also rejected the Untied States’ argument that § 1341 defines two separate crimes: 1) a scheme or artifice to defraud; and 2) a scheme or artifice for obtaining money or property by means of false or fraudulent pretenses, representations, or promises. The United States contended that Cleveland “obtained property” and committed the “second offense” since the video poker license “is property in the hands of the licensee.” Though agreeing that Cleveland may have had a property interest in the licenses, the Court rejected the United States’ view of § 1341. In <U>McNally</U> the Court had concluded “that the second phrase simply modified the first by ‘making it unmistakable that the statute reached false promises and misrepresentations as to the future as well as other frauds involving money or property.’” Indeed the <U>McNally</U> Court had stressed § 1341’s origin in the desire to protect individual property rights. Were the United States correct that § 1341’s second phrase defined a second offense “the statute would appear to arm federal prosecutor’s with power to police false statements in an enormous range of submissions to state and local authorities.” The Court would simply not read the statute that broadly absent a clear Congressional statement. The judgment of the Fifth Circuit was reversed and remanded.</p><p><b>Other Opinions</b>: None </p><p><b>Comment</b>: This opinion is consistent with the Court’s recent general trend of narrowly construing federal criminal statutes. It resolved a long-simmering conflict in the Circuits concerning the relationship of licensing schemes to the mail fraud statute.</p></div> </div>       <div id="fl_container3"> <script language="javascript">fl_legal_645x52();</script> <script language="javascript">fl_legal_645x52();</script> <script language="javascript">fl_legal_645x52();</script> <div id="fl_label">Ads by FindLaw</div> </div> <script> hide_box('fl_container3'); </script>   <div id="fl_container_goog"> <script language="JavaScript1.1" src="http://images.findlaw.com/lp/google.js"></script> <script language="JavaScript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"></script> </div>  </div> </div> <div class="nav_right rn_inner">  <div class="sections yui-g"> <h2 class="right" style="color:#666666;">Welcome Legal Professionals</h2> <p>FindLaw provides the resources to help you practice law. 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