Revenue Rule and Enforcing an Extraterritorial Penal Code

Pasquantino v. United States

In this case two people are charged with wire fraud for using interstate wires to effect a "scheme or artifice" to defraud. The real question here is whether enforcing the U.S. code would violate the common law rule against recognizing the revenue laws of Canada.

The Court held that whereas the revenue rule was derived from the concept that the laws of another state cannot be enforced by another, this prosecution does not cross that line for a few reasons. First, it must be presumed that Congress legislates with a recognition of the law of the land, and in 1952 (when the wire fraud law was written) there was no case that indicated that the law cannot recognize extraterritorial taxes in its own domestic functions. Furthermore, there was nothing in the spirit of the common law to indicate that it should be read so expansively.

What is interesting is that the Court found that this prosecution only required the law to recognize the extraterritorial taxes to show that there was intent to defraud, and that the defendants' "offense was complete the moment they executed the scheme inside the United States." what's more, it seems that, by the wording of the statue, the fact that Canada was in fact deprived of taxes due it, is relatively inconsequential as to this prosecution. What really matters is that the defendants intended to cause the loss. Thus this case is only applying domestic law, and one that is meant to prohibit sufficiently deplorable activity.

The dissent focuses on the fact that this judgment requires a finding of fact that relies on Canadian entitlement to the taxes as a prerequisite for the application of the statute, in that these taxes had to meet the requirement of being "money or property" by the statute, and money or property "in the victim's hands" as interpreted by the Court (meaning it was due Canada). There is also some discussion of the fact that the sentence is based largely on the amount defrauded, which further blurs the line, but insofar as this decision is just about finding guilt or not, this seems somewhat misplaced.