A modern-day bootlegging case involving three Niagara County men reached a skeptical Supreme Court this week, with several justices questioning whether the government overreached when it brought wire fraud charges to prosecute a liquor-smuggling scheme that cost Canada millions in lost taxes.
Brothers David and Carl Pasquantino of Niagara Falls and another man, Arthur "Butch" Hilts of Sanborn, are appealing their 2001 conviction from U.S. District Court in Baltimore.
The men ran a lucrative smuggling ring in the late 1990s, buying hundreds of cases of low-end liquor from distributors in Maryland and then driving the black-market booze across the Canadian border.
Government lawyers said the scheme allowed the men to dodge roughly $3 million in Canadian import taxes. But the Pasquantinos contend that a centuries-old common law, known as the "revenue rule," prohibits the United States from enforcing in its courts the tax laws of another county -- and should have blocked their prosecution.
The Supreme Court, hearing arguments in the case Tuesday, appeared divided. "Can you look at the interest of the government as one of not allowing U.S. territory to be used to carry out a smuggling scheme?" Justice Sandra Day O'Connor asked at one point, signaling agreement with the government's position.
But several other justices questioned whether it made sense to bring wire fraud charges in connection with what could be construed strictly as a crime against Canada.
"Are there any (criminal) proceedings going on in Canada? Was there any effort to extradite these people?" Justice Ruth Bader Ginsburg asked at one point.
Justice Antonin Scalia noted the possibility for double jeopardy: "We could punish someone for violating Canada's laws, and then Canada could punish them for violating the same laws."
Deputy Solicitor General Michael R. Dreeben argued that the government had brought a straightforward criminal prosecution under federal wire fraud laws to protect its "perfectly valid interest" in breaking up schemes carried out in the United States.
Los Angeles attorney Laura W. Brill, representing the Pasquantinos, countered that the only fraud in the case came at the Canadian border, when the smugglers failed to declare the cases of low-end booze hidden in their car trunks.
Both sides won a round on earlier appeals. The 4th U.S. Circuit Court of Appeals threw out the convictions in a 2002 ruling that asked, "Where do we draw the line as to which countries' laws we will help enforce? Imagine (the defendants) had engaged in a similar scheme to travel overseas and defraud Afghanistan or Iraq of tax revenues."
Government lawyers appealed to the full appeals court, which reinstated the convictions in a ruling last July.