Argued April 15, 2014
Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 1:12-CR-00097-SEB-MJD -- Sarah Evans Barker, Judge.
For United States of America, Plaintiff - Appellee: Zachary Augustus Myers, Attorney, Office of The United States Attorney, Indianapolis, IN.
For Haitham Mohamed, Defendant - Appellant: Sara J. Varner, Attorney, Indiana Federal Community Defenders, Inc., Indianapolis, IN.
Before RIPPLE and WILLIAMS, Circuit Judges, and ST. EVE, District Judge.[*]
St. Eve, District Judge.
On March 26, 2013, a jury convicted Haitham Mohamed of one count of knowingly transporting and possessing contraband cigarettes in violation of 18 U.S.C. § 2342(a). Mr. Mohamed appeals his conviction, claiming that the district court erred in denying his motions for judgment of acquittal pursuant to Federal Rule of Criminal Procedure 29. For the reasons set forth in the following opinion, we agree and reverse the district court's decision.
On the evening of June 6, 2012, Officer Christopher Helmer, a patrolman with the Speedway Police Department, pulled over Mr. Mohamed for running a red light in Speed-way, Indiana near Indianapolis. Upon searching Mr. Mohamed's van, Officer Helmer found 1,170 packs of Newport-brand cigarettes (totaling 23,400 cigarettes) not bearing Indiana tax stamps. A federal grand jury indicted Mr. Mohamed with one count of knowingly transporting and possessing contraband cigarettes in violation of section 2342(a) of the Contraband Cigarette Trafficking Act (" CCTA" ), which makes it unlawful for " any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes." See 18 U.S.C. § 2342(a). The CCTA defines " contraband cigarettes" with reference to state law:
" [C]ontraband cigarettes" means a quantity in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes, and which are in the possession of any person other than [certain exceptions].
18 U.S.C. § 2341(2). Mr. Mohamed pleaded not guilty to the offense, and the case proceeded to trial.
The government called two witnesses at trial, Special Agent Daniel Neie of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (" ATF" ) and Officer Helmer of the Speedway Police Department. Special Agent Neie explained to the jury how cigarette traffickers typically operate. Disparities in state cigarette tax rates, which range from $0.17 per pack in Missouri to $4.35 per pack in New York, allow cigarette traffickers to profit by buying cigarettes
in low-tax states and reselling them in high-tax states without paying the latter state's taxes. As a result of the tax disparity, the cigarette trafficker can sell the cigarettes below the market price while still earning a profit; the greater the tax disparity, the greater the trafficker's potential profits. The state in which the cigarette trafficker sells the cigarettes, meanwhile, loses out on the tax revenue it would have received from a legal sale. Special Agent Neie testified that because retailers often limit the amount of cigarettes a customer can buy at one time to ensure that they will have sufficient inventory for other customers, traffickers often must travel from retailer to retailer until they accumulate the total number of cigarettes they want. Special Agent Neie further testified based on his training and experience that Marlboros and Newports are the most frequently trafficked brands of cigarettes.
With respect to Mr. Mohamed in particular, Special Agent Neie testified that the cigarette tax rate in Kentucky, where Mr. Mohamed had bought the cigarettes at issue, is $0.60 per pack, whereas the cigarette tax rate in Indiana, where the cigarettes were found, is $0.995 per pack. Thus, if Mr. Mohamed sold all 1,170 packs in his possession in Indiana, he stood to make a profit of up to $462.15. Special Agent Neie acknowledged that many states--including New York ($4.35 per pack) and Washington ($3.25 per pack)--had higher cigarette taxes than Indiana, and Mr. Mohamed would have increased his potential profit by selling the cigarettes at issue in those states rather than Indiana. Finally, Special Agent Neie confirmed that none of the cartons of cigarettes found in Mr. Mohamed's van was missing cigarettes; all 23,400 cigarettes were accounted for and remained in their original packs.
Next, Officer Helmer testified about his June 6, 2012 traffic stop involving Mr. Mohamed. Officer Helmer testified that he pulled over Mr. Mohamed for running a red light at approximately 6:57 p.m. Mr. Mohamed, who lives in Indianapolis, informed Officer Helmer that he was returning home after visiting friends in Kentucky. When Officer Helmer searched Mr. Mohamed's van, he found 117 cartons (with ten packs per carton) of Newport cigarettes bearing Kentucky tax stamps. None of the cigarette packs had Indiana tax stamps evidencing the payment of Indiana's cigarette tax. Officer Helmer also found in Mr. Mohamed's van receipts showing purchases of Newport cigarettes from several Kentucky gas stations earlier that day and a black trash bag containing over $15,000 in cash. When Officer Helmer asked Mr. Mohamed how much he makes selling cigarettes, Mr. Mohamed answered " not much."
The parties stipulated at trial that Mr. Mohamed did not fall within one of the exceptions contained in the CCTA's definition of " contraband cigarettes." See 18 U.S.C. § 2341(2)(A)-(D). Specifically, the parties stipulated that the State of Indiana and the United States did not have any records indicating that, as of June 6, 2012, Mr. Mohamed held a permit as a manufacturer of tobacco products, an export warehouse proprietor, or a person operating a customs bonded warehouse; nor did they have records indicating that Mr. Mohamed ever served as an officer, employee, or other agent of the State of Indiana or the United States. The parties also stipulated that the State of Indiana had no records indicating that Mr. Mohamed was engaged in business as a common carrier or was licensed or otherwise authorized to account for and pay Indiana cigarette taxes as of June 6, 2012.
At the close of the government's evidence, Mr. Mohamed's counsel moved for a judgment of acquittal under Federal Rule of Criminal Procedure 29. The district court denied the Rule 29 motion, finding that the government had presented sufficient evidence to allow a reasonable jury to conclude that Mr. Mohamed was guilty as charged. Mr. Mohamed elected not to call any witnesses or present any evidence in his defense, as is his right.
During closing arguments, defense counsel admitted that Mr. Mohamed had more than 10,000 cigarettes not bearing Indiana tax stamps in his possession but argued that the government failed to prove that Indiana law required the cigarettes to bear Indiana tax stamps in order to make the cigarettes " contraband" under the CCTA. (R. 25 at 9-14.) Defense counsel asserted that the government presented no evidence that the cigarettes had been " sold, used, consumed, handled, or distributed" within Indiana, and, therefore, the government failed to prove that Indiana's cigarette tax applied to the cigarettes at the time of seizure. ( Id. at 10-13.) Moreover, defense counsel asserted, it made no economic sense for Mr. Mohamed to sell the cigarettes in Indiana, where he stood to gain only $462.15, minus the cost of gas, travel, and food. ( Id. at 13.) On rebuttal, the government contended that it had proven everything necessary to convict Mr. Mohamed of the offense:
When Mr. Mohamed was arrested in Indiana, he stated in Indiana that he didn't make much money buying these cigarettes. When he was arrested in Indiana, he had a bag full of cash in his car, in Indiana. And he had twice the legal limit of cigarettes from out of state. You can look at these facts and you can infer that everything that needs to be proven for this offense to be complete has, in fact, been proven, and that when Officer Helmer pulled Haitham Mohamed over, Haitham Mohamed was already committing the crime of knowingly transporting or possessing those cigarettes, and I ask you to find him guilty.
(Id. at 16.)
Following closing arguments, the district court instructed the jury on what constitutes " contraband cigarettes" under the CCTA and on the application of Indiana's cigarette tax laws. The jury instruction on the definition of " contraband cigarettes" mirrored the CCTA's definition of the term. See 18 U.S.C. § 2341(2). The instruction regarding the applicability of Indiana's cigarette tax stated as follows:
Indiana law requires a stamp to be placed on packages or other containers of cigarettes to prove that applicable taxes have been paid. Indiana's cigarette taxes are levied on all cigarettes sold, used, ...