U.S. vs. Doli Pulungan

Federal law prohibits the export of “defense articles” without a license. 22 U.S.C.
§2778. A “defense article” is any item on the United
States Munitions List, which §2778(a) authorizes the
President to promulgate. The President has delegated that
power to the State Department’s Directorate of Defense
Trade Controls. The Munitions List includes “[r]iflescopes
manufactured to military specifications.” 22 C.F.R. §121.1
Category 1(f). Designations are not subject to judicial
review. 22 U.S.C. §2778(h).

Doli Pulungan tried in 2007 to export 100 Leupold Mark
4 CQ/T riflescopes ® ® (made in Oregon by Leupold &
Stevens, Inc.). He planned to transship through Saudi
Arabia to Indonesia in order to conceal the destination,
because his clients told him that the United States had
an embargo on military exports to Indonesia. There had
been such an embargo between 1999 and 2005, but there
was none when Pulungan tried to acquire and export
the ‘scopes. He was charged with violation of §2778(c),
however, on the theory that the Leupold Mark 4 CQ/T
riflescope is “manufactured to military specifications.” A
jury found him guilty of attempting to export defense
articles without a license, and the judge sentenced him
to 48 months’ imprisonment.

Section 2778(c) makes it a crime to violate (or attempt
to violate) any part of §2778 “willfully”. The parties agree
that “willfully” means with knowledge that a license is
required. Pulungan concedes that he attempted to
acquire and export Leupold Mark 4 CQ/T riflescopes to
Indonesia without a license. But he contends that the
prosecution did not prove that these ‘scopes are “manufactured
to military specifications”—and that, even if
they are so manufactured, he did not know it and therefore
lacked the required mental state.

Pulungan contends that the prosecution must prove,
beyond a reasonable doubt, that the Leupold Mark 4 CQ/T
riflescope was “manufactured to military specifications”
—just as the prosecution must prove in a prosecution
for distributing cocaine that the substance is cocaine
rather than sugar. The prosecutor addressed this topic
through the testimony of Anthony Dearth, who testified
that the Directorate of Defense Trade Controls has concluded
that the Leupold Mark 4 CQ/T is “manufactured
to military specifications”—but he would not say what
those specifications are or why the Directorate believes
that the Mark 4 CQ/T is “manufactured to” them. The
decision itself was not produced.

After Dearth testified, the prosecutor asked the judge
to instruct the jury that, as a matter of law, the Leupold
Mark 4 CQ/T riflescope is “manufactured to military
specifications.” The judge gave the requested instruction,
taking the issue out of the jury’s hands. The judge
agreed with the prosecutor that §2778(h) prevents any
inquiry, by either judge or jury, into the propriety of an
item’s classification. The judge confirmed this ruling
after trial when denying Pulungan’s motion for acquittal.
561 F. Supp. 2d 1019 (W.D. Wis. 2008). Pulungan disputes
this understanding of §2778(h) and adds that, if the
prosecutor is right, then the defendant’s sixth amendment
right to trial by jury supersedes the statute. See
United States v. Gaudin, 515 U.S. 506 (1995) (in a prosecution
for fraud, the judge must allow the jury to decide
whether the false statements were material; the judge
may not treat materiality as a matter of law).

Section 2778(h) provides: “The designation by the
President (or by an official to whom the President’s
functions . . . have been duly delegated), in regulations
issued under this section, of items as defense articles or
defense services for purposes of this section shall not be
subject to judicial review.” (Emphasis added.) So if 22
C.F.R. §121.1 Category 1(f) read “any Leupold Mark 4
CQ/T riflescope”, that designation would be incontestable
(even though made by the Directorate rather than the
President), and the question for the jury would be whether
the item that Pulungan tried to export was indeed a
Leupold Mark 4 CQ/T riflescope. If Pulungan had conceded
that the Leupold Mark 4 CQ/T riflescope is “manufactured
to defense specifications”, he could not
avoid liability by arguing that the Munitions List should
not require licenses for these items. See United States v.
Martinez, 904 F.2d 601 (11th Cir. 1990). But he does not
concede that the Leupold Mark 4 CQ/T riflescope is
within the domain of 22 C.F.R. §121.1 Category 1(f).

The only regulation is that “[r]iflescopes manufactured
to military specifications” require export licenses. It is
easy to see why the regulation’s language deals with
attributes rather than names; an effort to enumerate
each item would be futile, not only because some are
bound to be overlooked (imagine a regulation that tried
to list all bicycles by manufacturer and model number)
but also because manufacturers change their designations.
The Mark 4 may be succeeded by a Mark 5, or the CQ/T
model may become the CQ/X. But while a narrative
description may be the most sensible way to proceed, it
also limits the effect of §2778(h). Only material “in regulations”
is covered by that statute. The Directorate’s
conclusion that the Leupold Mark 4 CQ/T riflescope is
“manufactured to military specifications” is not in a
regulation and so is unaffected by §2778(h).

The Directorate’s claim of authority to classify any
item as a “defense article,” without revealing the basis
of the decision and without allowing any inquiry by the
jury, would create serious constitutional problems. It
would allow the sort of secret law that Panama Refining
Co. v. Ryan, 293 U.S. 388 (1935), condemned. (That case
dealt with an unpublished regulation that remained “in
the hip pocket of the administrator,” a serious problem
apart from the nondelegation holding usually associated
with Panama Refining.) A regulation is published for all
to see. People can adjust their conduct to avoid liability.
A designation by an unnamed official, using unspecified
criteria, that is put in a desk drawer, taken out only for
use at a criminal trial, and immune from any evaluation
by the judiciary, is the sort of tactic usually associated
with totalitarian régimes. Government must operate
through public laws and regulations. See United States v.
Farinella, 558 F.3d 695 (7th Cir. 2009). Thus the United
States must prove, and not just assert, that the Leupold
Mark 4 CQ/T riflescope is “manufactured to military
specifications.”

It does not necessarily follow that proof must come
in open court. Congress has made some special provisions
for classified information—and both the manufacturing
details of the Leupold Mark 4 CQ/T riflescope and the
precise specifications for military ‘scopes may be
classified as state secrets; some details also may be trade
secrets. Until Congress enacted the Classified Information
Procedures Act, 18 U.S.C. App. 3 §§ 1–16, defendants
frequently engaged in “greymail”—they threatened to
expose secrets as the price of successful prosecution, which
induced the government to dismiss the indictments or
prosecute for less serious crime. The Classified Information
Procedures Act is designed to allow disputes involving
material legitimately kept secret to be resolved without
unnecessary public disclosures.

Pulungan’s lawyer said at oral argument that he
had not asked for a hearing under this statute. Nor did
the prosecutor offer one. Both took an all-or-nothing
approach: Pulungan demanded a public jury trial, and
the prosecutor total secrecy. We need not decide whether
either litigant has waived or forfeited its position by
disdaining the statutory middle ground—or whether any
error is harmless (Pulungan has never argued that the
Mark 4 CQ/T ‘scope is not actually a mil-spec product
and didn’t ask for an expert to explore that subject)—
because Pulungan is entitled to prevail even if the
criminal-justice system must proceed on the assumption
that the Mark 4 CQ/T riflescope is a “defense article.”

It is not enough for the Leupold Mark 4 CQ/T riflescope
to be a “defense article.” Pulungan cannot be convicted
unless he knew that it is one, and that licenses are necessary
to export them. The United States concedes that the
word “willfully” in §2778(c) requires it to prove that the
defendant knew not only the material facts but also the
legal rules. (We need not decide whether the concession
is correct. “Willfully” is a notoriously plastic word. See
Bryan v. United States, 524 U.S. 184 (1998).)

That the Directorate’s determination about the status of
the Leupold Mark 4 CQ/T riflescope was unknown to
the general public until Pulungan’s trial makes it hard to
show his knowledge. Some people in the business
knew the Directorate’s view. Leupold & Stevens itself
asked after bringing the ‘scope to market in 2002, and the
Directorate replied in 2003 that the Mark 4 CQ/T is covered
as a “defense article.” But Pulungan was not an industry
insider, nor were his potential customers (he says that
his clients were civilian police departments). The United
States does not contend that Pulungan knew what the
Directorate told Leupold & Stevens in 2003, or indeed
knew that the firm had even made an inquiry.

The United States offered three kinds of proof on the
subjects of knowledge and intent. It observed, first, that
Pulungan had in his possession printouts of web pages
at the site Telescopes.com that limit the countries available
for shipment. It showed, second, that Pulungan lied
to his business associates about how many riflescopes
he wanted and where they would be sent. The prosecutor
contends that these lies, coupled with a willingness to
pay above-market prices ($1,000 per Leupold ‘scope, when
retailers charge only $700), show that he knew that his
proposed transaction of 100 riflescopes to Indonesia was
unlawful. Third, Pulungan sent email messages and
made notes evincing a belief that munitions exports to
Indonesia were unlawful; the prosecutor submits that
Pulungan has effectively conceded intending to violate
the law.

Let us start with the first of these. Telescopes.com
advised its customers that “[w]e are allowed to ship
riflescopes, laser sights and riflescope accessories only to
certain countries.” And one of the web pages devoted to
the Leupold Mark 4 CQ/T riflescope contained this text,
in bold red type: “We cannot export this item outside
the U.S.” The prosecutor says that a jury could infer
from Pulungan’s possession of these statements that he
knew that a license was required to export the Leupold
Mark 4 CQ/T riflescope. The problem with this inference
is obvious: Telescopes.com did not say why the available
destinations are limited. Its web pages seemed to say
that the Leupold Mark 4 CQ/T riflescope cannot be exported
(at least not by Telescopes.com) even if the
buyer has a license.

And there may be a very good reason. Perhaps
Telescopes.com had a restricted territory. It is common
for a manufacturer to authorize a dealer to sell in one
country but not another. Leupold & Stevens may ship
directly to dealers in foreign nations (getting licenses if
necessary) and forbid any of its dealers to ship across
international borders. Such limits can be enforced
through trademark and patent laws, whether or not a
given nation’s contract or antitrust laws recognize
vertical restrictions on dealers’ sales territories. To see
the absence of a link between no-export notices and
military technology, look at almost any web page at
Amazon.com devoted to electronic equipment. The web
page for every USB flash-memory stick—a commodity
item that is manufactured outside this nation, and thus
unaffected by export-control laws—contains the statement:
“Currently, item can be shipped only within the
U.S.” That’s pretty much what Telescopes.com told
Pulungan about the Leupold Mark 4 CQ/T riflescope. The
same legend can be found on Amazon’s pages for
some movie DVDs and other copyrighted material. And
Amazon’s page for LaraBar Jocalat orange milk chocolate
says: “Currently, item can be shipped only within the
U.S.” The military may run on coffee and chocolate, but
that does not make either a “defense article.”

At the Telescopes.com web site, quite a few pages for
binoculars say: “Only ships in contiguous USA”.
Telescopes.com no longer sells riflescopes, but
OpticsPlanet.com, which does, does not display a USAonly
shipping restriction on its page for the Leupold
Mark 4 CQ/T riflescope. We conclude that no reasonable
jury could infer from the presence, or absence, of a USAonly
shipping legend on a commercial web site that a
would-be buyer knows that the item is, or is not, a
“defense article.”

The prosecutor’s second and third reasons may be
taken together. They show convincingly that Pulungan
believed that what he was doing was illegal. The problem
is that they evince a belief in a nonexistent rule (the
embargo that had been lifted two years earlier) rather
than a belief that an export license was necessary.

As the prosecutor sees things, an intent to violate one
law is as good as the intent to violate any other. The
United States’ appellate brief essentially invokes the
doctrine of transferred intent (though it does not use
that name or cite authority). If you set out to kill A by
poisoning his whiskey, and B drinks from the glass first
and dies, you are guilty of B’s premeditated murder: The
intent to kill A is “transferred” to B’s death. See Bradshaw
v. Richey, 546 U.S. 74 (2005); see also Wayne R. LaFave, 1
Substantive Criminal Law §5.2(c) (2d ed. 2003); Anthony M.
Dillof, Transferred Intent: An Inquiry into the Nature of
Criminal Culpability, 1 Buff. Crim. L. Rev. 501 (1998); Model
Penal Code §2.03 (1962). So far as we can tell, however,
transferring intent from one genus of offense to another
has never been permitted. Suppose Pulungan had
believed (wrongly) that the United States imposes an
excise tax on exports of optical gear and had tried to
avoid payment; an intent to evade a nonexistent tax
would not transfer to an intent to export riflescopes
without a license; the crimes are too different for one
intent to suffice for the other.

The crime that Pulungan set out to commit was
unrelated to unlicensed exports. An embargo on sales to
Indonesia would not have prevented a shipment to
Saudi Arabia; it is only the intent to transship in
Saudi Arabia that would have created a legal problem
(had there been an embargo). It would be a stretch to
treat “intent to transship lawfully exported riflescopes” as
equivalent to “intent to export riflescopes without a
required license.” Both crimes are malum prohibitum
rather than malum in se—that is, they are regulatory
offenses rather than acts evil in themselves under widely
held moral codes—and the “willfullness” element in a
regulatory offense such as §2778(c) is designed to
require knowledge of this rule, rather than of some other
actual or potential regulation. See Staples v. United States,
511 U.S. 600 (1994); Cheek v. United States, 498 U.S. 192
(1991).

No matter. Suppose that intent can be transferred from
a nonexistent embargo to a licensing requirement. Still, the
United States has conceded that §2778(c) requires proof
of knowledge of the law’s coverage, as well as intent to
violate the law. Pulungan acted willfully only if he
knew that Leupold Mark 4 CQ/T riflescopes are “manufactured
to military specifications.” It may be a fool’s errand
to try to list every riflescope that is made to military
specifications, but the Directorate could avoid problems
such as this by putting into the text of the regulation all
riflescopes that it has tested and found to be covered. An
“including but not limited to . . .” listing would take
advantage of §2778(h), give notice to affected persons,
yet not restrict the listing’s domain.

As things stand, though, the only basis for inferring
Pulungan’s knowledge is the legend on the web page. We
explained above why that is insufficient. If Indonesia
had not so recently been subject to an arms embargo, then
hugger-mugger alone might permit a jury to infer knowledge
that a license was required. Pulungan’s efforts to
work through intermediaries, and to acquire 100 ‘scopes
without placing one large order that might have set off
warning systems, do not point in that direction, however.
The prosecutor does not contend that Pulungan’s emails
and notes about the embargo were part of a ruse to
create a defense for someone who knew that the embargo
had been rescinded but that other laws might block
exports. So the evidence is insufficient to show, beyond
a reasonable doubt, that Pulungan knew that these
‘scopes were “defense articles” that required export
licenses, and the conviction is
REVERSED.


Chicago Criminal Lawyer - Robert J Callahan