United States v. Werner Bruchhausen

977 F.2d 464, 92 Daily Journal DAR 13601, 92 Cal. Daily Op. Serv. 8273, 1992 U.S. App. LEXIS 24725, 1992 WL 247631
CourtCourt of Appeals for the Ninth Circuit
DecidedOctober 5, 1992
Docket87-5143
StatusPublished
Cited by29 cases

This text of 977 F.2d 464 (United States v. Werner Bruchhausen) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Werner Bruchhausen, 977 F.2d 464, 92 Daily Journal DAR 13601, 92 Cal. Daily Op. Serv. 8273, 1992 U.S. App. LEXIS 24725, 1992 WL 247631 (9th Cir. 1992).

Opinions

CANBY, Circuit Judge:

Werner J. Bruchhausen appeals his conviction for wire fraud in violation of 18 U.S.C. § 1343 and 18 U.S.C. § 2(b). We reverse.

BACKGROUND

This case arises out of a scheme to smuggle American technology to Soviet Bloc countries. Bruchhausen, a German citizen, engineered the effort by deceiving the United States government and manufacturers. The deception spanned more than ten years and led to the diversion of millions of dollars in equipment.

Bruchhausen often relied on his American agents to deal directly with the manufacturers. With Bruchhausen’s blessing, these agents assured company representatives that all equipment would be used in the United States. No manufacturer was told that the equipment actually was going to West Germany and then on to the Soviet Bloc. Representatives from these companies testified that they would never have sold to Bruchhausen had they known the truth.

The deception also took other forms. Bruchhausen’s agents prepared two sets of invoices: one stating the shipment’s true value, and a second reflecting only ten percent of this amount. The first invoice was sent to Bruchhausen in Germany. Meanwhile, the second invoice would accompany the delivery to freight forwarders and to United States Customs. Bruchhau-sen believed that this method would reduce the likelihood that officials would search the crates.

In addition, agents mischaracterized the shipments when preparing Shipper’s Export Declarations. For example, they would label shipments of computers and military communications equipment as “electrical” or “meters.” Further, Bruch-hausen instructed them not to apply for export licenses in order to limit Customs’ control over the shipments. Throughout the deception, Bruchhausen relied on telex machines to communicate with these agents.

On August 19, 1981, a federal grand jury indicted Bruchhausen and his confederates for offenses ranging from tax evasion to export violations. During the next four years, Bruchhausen eluded authorities. On May 8, 1985, however, British authorities apprehended him. He was extradited to the United States.

On June 6, 1985, a second grand jury indicted Bruchhausen on sixteen counts of wire fraud, in violation of 18 U.S.C. § 13431 and 18 U.S.C. § 2(b).2 After a [467]*467bench trial, he was convicted of fifteen of these counts. On May 1, 1987, the district court sentenced Bruchhausen to fifteen years in custody and fined him $15,000. Bruchhausen appeals.

DISCUSSION

Bruchhausen contends that the wire fraud indictment was insufficient as a matter of law. We review this issue de novo. See United States v. Buckley, 689 F.2d 893, 897-98 (9th Cir.1982), cert. denied, 460 U.S. 1086, 103 S.Ct. 1778, 76 L.Ed.2d 349 (1983).

The indictment defined Bruchhausen’s objectives as follows:

a. [to] defraud American manufacturers of high-technology commodities of their property and their right to make business decisions based on truthful information and representations;
b. [to] defraud the United States and its executive agencies, namely the Department of Commerce, the Department of State and the Customs Service of their right to conduct their affairs free from stealth, chicanery, fraud, false statements and deceit.

According to Bruchhausen, the indictment improperly relies on intangible property rights. This contention is without merit. The wire fraud statute is not limited to possessory interests, and can extend to rights in intangible property. See Carpenter v. United States, 484 U.S. 19, 25, 108 S.Ct. 316, 320, 98 L.Ed.2d 275 (1987) (information’s “intangible nature does not make it any less ‘property’ protected by the mail and wire fraud statutes”); 18 U.S.C. § 1346 (Supp.1992) (amending fraud statutes to include schemes to deprive another of “the intangible right of honest services”).

The real question is whether the government’s and manufacturers’ interests can be considered property rights within the meaning- of the statute. The government contends that two other statutes recognize its interest in the future alienation of American high technology products — the Arms Export Control Act, 22 U.S.C. § 2751 et seq., and the Export Administration Act of 1979, 50 U.S.C. App. § 2401 et seq. To enforce these statutes, Congress enacted forfeiture provisions that permit the government to seize the products. 50 U.S.C. App. § 2410(g); 22 U.S.C. § 401(a). From these provisions, the government would have us derive a property right.

We reject this construct. The government’s potential forfeiture interest is too ethereal to fall within the protections of a statute that “had its origin in the desire to protect individual property rights.” Cf. McNally v. United States, 483 U.S. 350, 358-59 n. 8, 107 S.Ct. 2875, 2881 n. 8, 97 L.Ed.2d 292 (1987).3 We accordingly hold that this interest cannot support Bruchhau-sen’s indictment.

A closer question is whether the manufacturers were defrauded of “property” within the meaning of the statute. The manufacturers received the full sale price for their products; they clearly suffered no monetary loss. While they may have been deceived into entering sales that they had the right to refuse, their actual loss was in control over the destination of their products after sale. It is difficult to discern why they had a property right to such post-sale control.

The government argues, however, that the manufacturers lost part of their bargain because they would not have sold the products if they had been told that the products were destined for the Soviet Bloc. [468]*468Thus, the assurance that the products would be used domestically was, in the government’s view, part of the consideration for the sale, and the manufacturers were defrauded of that portion of their bargain. The government relies on Carpenter v. United States, 484 U.S. at 25-28, 108 S.Ct. at 320-22, in which the Supreme Court held that the Wall Street Journal was defrauded of “property” when its employees leaked to conspiring brokers the prepublication contents of columns discussing stocks. The Court stated that the Journal “had a right to decide how to use [the confidential information] prior to disclosing it to the public,” and that a scheme to defraud did not “require[] a monetary loss.” Id. at 26, 108 S.Ct. at 321.

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977 F.2d 464, 92 Daily Journal DAR 13601, 92 Cal. Daily Op. Serv. 8273, 1992 U.S. App. LEXIS 24725, 1992 WL 247631, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-werner-bruchhausen-ca9-1992.