High court upholds Maryland convictions

3 men were prosecuted for smuggling liquor

April 27, 2005|By Gail Gibson | Gail Gibson,SUN NATIONAL STAFF

The Supreme Court upheld the convictions of three men in a modern-day bootlegging case from Maryland yesterday, ruling 5-4 that the government could use U.S. wire fraud laws to prosecute a liquor smuggling operation that cost Canada millions of dollars in lost taxes.

Brothers David and Carl Pasquantino and co-defendant Arthur "Butch" Hilts challenged their 2001 conviction, arguing that a centuries-old common law prohibiting the United States from enforcing the tax laws of another country should have blocked their prosecution.

But the court said the so-called "revenue rule" would not bar U.S. prosecution of a scheme to defraud a foreign government of tax revenue.

The 5-4 decision marked the only case argued in November in which Chief Justice William H. Rehnquist, who was absent from the bench while undergoing treatment for thyroid cancer, apparently cast a tie-breaking vote.

Writing for the court, Justice Clarence Thomas said that the wire fraud prosecution "creates little risk of causing international friction" - as anticipated by the revenue rule - and said the U.S. government had a legitimate interest in the case.

"This is a criminal prosecution brought by the United States in its sovereign capacity to punish domestic criminal conduct," Thomas wrote. He was joined in the majority by Rehnquist and Justices Sandra Day O'Connor, John Paul Stevens and Anthony M. Kennedy.

Prosecutors said the three defendants, all from upstate New York, ran a lucrative smuggling ring in the late 1990s that involved buying hundreds of cases of low-end vodka, whiskey and rum from Maryland distributors, trucking it to New York and then smuggling the liquor across the Canadian border without paying import fees.

The men were convicted on wire fraud charges after a February 2001 trial before U.S. District Judge J. Frederick Motz in Baltimore.

They won one round on appeals, when a three-judge panel of the 4th U.S. Circuit Court of Appeals threw out the convictions in 2002.

But the full appeals court reinstated the convictions last summer.

In a dissenting opinion yesterday, Justice Ruth Bader Ginsburg said U.S. prosecutors had overreached in trying to enforce the tax laws of another country.

"Today's novel decision is all the more troubling for its failure to take account of Canada's primary interest in the matter at stake," Ginsburg wrote. "United States citizens who have committed criminal violations of Canadian tax law can be extradited to stand trial in Canada."

Justices Stephen G. Breyer, Antonin Scalia and David H. Souter joined the dissent.

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