Wednesday, April 20, 2005

On Mail Fraud, Property and Cheap Gas

Oscar Porcelli v. United States, Docket No. 04-2000-pr (2d Cir. April 12, 2005): Those driving automobiles in the New York area in the early 1980's will remember Oscar Porcelli fondly as the owner of the Gaseteria chain of discount gas stations, an operation that was able to charge prices for gas significantly lower than all other outlets. The reason for that ability, it turned out, was that Porcelli simply failed to collect state sales taxes on the gas he sold while filing false sales tax returns. Although this conduct was at worst a misdemeanor under New York law, it led to Porcelli's conviction in Federal court of one count of Rackeetering (RICO) and numerous counts of mail fraud. It also led (alas!) to the demise of the Gaseteria chain and to a whole lot of post-conviction litigation.

On direct appeal in 1989, the Circuit recognized that it "pushed the law" to its outer limits to subject Porcelli to a RICO conviction for conduct that was at most a misdemeanor under state law, but affirmed the conviction nonetheless. Judge Newman dissented on the ground that there was no "deprivation" of property (or attempted deprivation) under McNally v. United States, 483 U.S. 350, since Porcelli never even tried to collect the sales taxes from his customers and never obtained or attempted to obtain property belonging to the state.

The Circuit upheld the conviction twice against subsequent post-conviction attacks based on developments in New York law, the first, a holding that the state had no property interest in checks for taxes due where it had not previously obtained possession of those checks, and the second a holding that taxes due the state were not property of the state prior to being remitted.

In this, his third post conviction proceeding, seeking a writ of coram nobis, Porcelli claimed that the U.S. Supreme Court decision in Scheidler v. NOW, 537 U.S. 393, holding that interference with the use of property was not the "obtaining" of property punishable by the Hobbs Act, had undercut his conviction. The Circuit rejected this contention rather quickly, simply holding that the mail fraud statute, unlike the Hobbs Act, punished "any scheme or artifice to defraud, or for obtaining money or property ...." Whether this is an adequate answer to Porcelli's complaint is hardly clear, however, since the crux of Porcelli's arguments has always been that not only did he not obtain, but that he never tried to obtain, the money due in sales taxes.

Indeed, the Court appeared to recognize the problem by going on to address Porcelli's complaint that his conviction was simply wrong because what the Circuit had previously found sufficient to uphold it -- that by deception he concealed the state's cause of action for unpaid taxes from it -- was not an obtaining or an attempt to obtain property from the state. (An analogous deprivation was, of course, not sufficient to be "obtaining" in Scheidler.) The Court, recognizing that this was an "attractive" argument, essentially rejected it as having come too late.

Following this last (or perhaps only most recent) Porcelli installment, it is a little difficult to tell what exactly the Court holds the gist of the property deprivation in the case to be. The Court appears to abandon its former reliance on Porcelli's concealment of a cause of action as the crux of the crime and to return to the notion that "taxes owed to governments .. [are] "property" within the meaning of the mail and wire fraud statutes." But, as Judge Newman explained originally, in Porcelli's case that does not seem to be applicable, since he did not obtain or try to obtain the state's tax revenues; he just passed on the savings to his customers. So, the Court's only real answer may be that it is "too late in history" to think clearly about Porcelli's case at last; it certainly fails to give any other clear justification of its jurisprudence as applied to Porcelli's case.


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