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United States v. Banki

May 10, 2010


The opinion of the court was delivered by: John F. Keenan, United States District Judge


Before the Court is a motion by the Government to preclude certain testimony of Defendant's proposed expert witnesses at trial scheduled to begin on May 10, 2010. For the reasons that follow, the motion is granted in part and denied in part.

I. Background

In a Superseding Indictment filed March 17, 2010, Mahmoud Reza Banki ("Banki" or "Defendant") is charged with: (1) conspiracy to violate and the violation of various Executive Orders and regulations issued under the International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701-1706, including the Iranian Transactions Regulations ("ITR"), 31 C.F.R Part 560, which prohibit "the importation into the United States of any goods or services of Iranian origin or owned or controlled by the Government of Iran" and "the exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any goods, technology, or services to Iran or the Government of Iran"; (2) operating an unlicensed money transmitting business in violation of 18 U.S.C. § 1960, 2; and (3) making materially false statements in response to inquiries by the Office of Foreign Assets Control ("OFAC") in violation of 18 U.S.C. § 1001(a).

As the conduct underlying the IEEPA/ITR charges, the Government alleges that Banki and unnamed co-conspirators "operated an informal value transfer system known as a 'hawala' [in which] funds are transferred by customers to a hawala operator, or 'hawaladar,' in one country (here, the United States), and then corresponding funds, less any fees, are disbursed to recipients in another country (here, Iran) by foreign hawaladars associated with the U.S.-based hawaladar." (Indictment ¶ 10). Banki claims that the transfers which are the subject of the Superseding Indictment were family remittances that, according to him, were lawful under the relevant regulations.

As the conduct underlying the false statement charges, the Government alleges that in response to two requests from OFAC that Banki provide detailed information about various money transfers, Banki claimed that the money was a gift from his cousin, who is an Iranian citizen, when in fact that money came from his father, who is a U.S. citizen. The Government further alleges that Banki falsely stated that he had not facilitated any transfer of funds from the United States to Iran.

In a letter dated April 19, 2010, Banki identified R. Richard Newcomb and Daniel Gill as expert witnesses he expects to testify at trial about the operation of the ITR and the hawala system described in the Superseding Indictment, respectively. The Government contests the relevance of Mr. Newcomb's proffered testimony and also seeks to limit that of Mr. Gill.

I. Testimony of R. Richard Newcomb

R. Richard Newcomb served as the Director of OFAC from 1987 through 2004, where he was involved with the development and implementation of the ITR. Mr. Newcomb is currently a practicing attorney and is the Chair of the International Trade Practice Group at the law firm DLA Piper. Mr. Newcomb's testimony is offered on two general subjects: (1) whether Defendant willfully violated the IEEPA/ITR; and (2) whether Defendant made materially false statements to OFAC.

A. Willfulness

In order to make out the willfulness element of the IEEPA/ITR charge, the Government must prove that Defendant "acted with knowledge that his conduct was unlawful." United States v. Homa Int'l Trading Corp., 387 F.3d 144, 147 (2d Cir. 2004) (quoting Bryan v. United States, 524 U.S. 184, 192 (1998)). To defend against the allegations that Defendant knowingly violated the ITR, the defense proposes that Mr. Newcomb testify that: (1) "during the relevant time period OFAC's policy was not to regulate non-commercial family transfers"; (2) "[w]hen the ITR were promulgated, there was nothing in this policy that specifically required that the money move through United States depository institutions"; (3) "remittances are a significant part of the relationships between expatriate communities and family members in their home countries." (Def. April 19, 2010 Expert Disclosure Letter at 1-2). This testimony forms the basis of his ultimate opinions, namely that due to OFAC's under-enforcement of the ITR and the customary nature of family transfers to and from Iran, "a member of the Iranian-American community could have seen family remittances taking place on a regular basis," "could reasonably have concluded that there was nothing unlawful in engaging in such remittances," and "could reasonably conclude that the policies and practices in place with respect to family remittances also applied to any transactions ordinarily incident and necessary to effectuate any family remittance transaction." (Id. at 2-3).

Under Rule 702 of the Federal Rules of Evidence, "[i]f scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." There is no contention that Mr. Newcomb is unqualified to testify about OFAC's policies and procedures during his tenure as Director. Instead, the Government objects on grounds of relevance. Indeed, the Second Circuit has specified that "evidence regarding the knowledge of individuals other than the defendant should be admitted only if there is some other evidence in the record -- concerning, for example, the nature of the [crime] or the relationship of the parties -- from which to conclude that the defendant would have the same knowledge." United States v. Kaplan, 490 F.3d 110, 120 (2d Cir. 2007). Mr. Newcomb's testimony that OFAC ignored aspects of the very law it was tasked with enforcing, standing alone, sheds no light on Defendant's subjective knowledge of the legality of his alleged money transfers; absent Defendant's own testimony or other direct evidence that he believed his conduct to be lawful, there is no basis on which the jury could properly infer anything about Defendant's state of mind from the opinion of this third party expert witness who likely has never communicated with the Defendant. Cf. United States v. Ingredient Tech. Corp., 698 F.2d 88, 97 (2d Cir. 1983) ("[P]rior cases on willfulness consistently require factual evidence of the defendant['s] state of mind to negate willfulness under any theory."). Thus, if, but only if, there is prior evidence in the record to establish a factual link between Defendant's state of mind and OFAC's under-enforcement policy, then Mr. Newcomb may testify that, based on his specialized knowledge of the inner workings of the agency and the relevant expertise he gained in shaping and implementing the ITR, at the time of his service, OFAC chose not to regulate non-commercial family transfers involving Iran. That testimony would be relevant in that it may aid the jury in weighing the credibility of Defendant's alleged lack of knowledge regarding the legality of his conduct. To be clear, Mr. Newcomb may not testify about the legal requirements of the ITR or any other OFAC regulations, and I will give the jury a limiting instruction to that effect if necessary. Furthermore, in support of the testimony that OFAC did not closely police family remittances, Mr. Newcomb may explain to the jury his opinion that remittances are significant to expatriates and their families who reside in home countries singled out for regulation by OFAC.

The Government points out that Mr. Newcomb did not work at OFAC during the time period charged in the Superseding Indictment, and the prosecutors may certainly bring this point out on cross-examination. If indeed OFAC's policies have changed, as may be evidenced by the very existence of this case, the Government may offer such rebuttal testimony.

However, the defense may not draw out from Mr. Newcomb's factual testimony any opinion about what a member of the Iranian-American community, or Defendant in particular, "could have seen" or "could have reasonably concluded." To begin with, that testimony is purely speculative. There is no suggestion by the defense that Mr. Newcomb is himself a member of the Iranian-American community or that he has specific knowledge about that community's beliefs regarding the legality of money transfers to and from Iran. Moreover, theorizing about what any given member of the Iranian-American ...

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