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United States of America v. Chi Tong Kuok

January 17, 2012

UNITED STATES OF AMERICA, PLAINTIFF-APPELLEE,
v.
CHI TONG KUOK, AKA YOKO CHONG, AKA EDDY, AKA YOKO KAWASAKI, AKA EDISON KUOK, AKA JAMES KUOK, DEFENDANT-APPELLANT.



Appeal from the United States District Court for the Southern District of California Roger T. Benitez, District Judge, Presiding D.C. No. 3:09-cr-02581-BEN-1

The opinion of the court was delivered by: Bybee, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted October 13, 2011-Pasadena, California

Before: Harry Pregerson and Jay S. Bybee, Circuit Judges, and Glen H. Davidson, Senior District Judge.*fn1

Opinion by Judge Bybee

OPINION

Chi Tong Kuok was convicted after a jury trial on four counts of conspiracy and attempt to export defense articles without a license, money laundering, and conspiracy and attempt to smuggle goods from the United States. Kuok raises a variety of challenges to his conviction and sentence. We first conclude that venue was proper in the Southern District of California. We disagree with Kuok that the Arms Export Control Act violates the non-delegation principle. We next conclude that Kuok's conviction on count three must be vacated as a matter of law, because attempting to cause an export of a defense article is not a federal crime. Likewise, Kuok's conviction on count four must be vacated for lack of jurisdiction. Finally, because the district court should have allowed Kuok to present evidence of duress to the jury, we reverse and remand for a new trial on counts one and two. Given this disposition, we do not reach Kuok's arguments regarding his sentence.

I

Kuok is a citizen of Macau, a special administrative region of the People's Republic of China and, until recently, a colony of Portugal. For roughly a decade, Kuok engaged in efforts to import protected defense articles from the United States into China, without the licenses required by law. In the summer of 2009, his activities caught up with him, and Kuok was arrested by U.S. Immigration and Customs Enforcement ("ICE") agents at the Atlanta airport. The indictment, filed in July 2009, charged, in count one, conspiracy to export items on the U.S. Munitions List without the required license and conspiracy to buy items knowing they were intended for export in violation of law. 18 U.S.C. §§ 371, 554(a); 22 U.S.C. § 2778(b)(2). Count two charged Kuok with buying a KG-175 Taclane encryptor knowing that it was "intended for exportation contrary to . . . law." 18 U.S.C. § 554(a). Count three charged Kuok with attempting to export the encryptor from the United States without the required license. 22 U.S.C. § 2778(b)(2); 22 C.F.R. § 127.1(a)(1). Count four charged Kuok with transmitting $1700 in funds with the intent to promote the carrying on of "specified unlawful activity": the smuggling and the export offenses charged in counts two and three. 18 U.S.C. § 1956(a)(2)(A).

At trial, the government presented evidence that, over the course of a two-and-a-half year period between 2006 and 2009, Kuok tried to purchase from vendors in the United States various types of communication equipment commonly used by the U.S. military. The government's investigation began in December 2006 when Kuok approached a British company to obtain materials for a device used to transfer data to and from aircraft. Kuok's contact at the company referred the case to ICE, who proceeded to investigate Kuok via undercover agents. As part of the investigation, ICE subpoenaed Kuok's eBay records and discovered that Kuok had purchased two-way radios from a Los Angeles seller. After raiding the seller's home, undercover ICE agents took over and continued to discuss transactions for similar equipment with Kuok. Kuok eventually grew suspicious of the under-cover agents, and broke off negotiations. ICE continued in this vein, opening several other investigations into Kuok's eBay activity and tracking him via undercover agents until Kuok broke off communications.

The crux of the government's case lies in the encryptor described in the indictment-a device called the KG-175 Taclane Encryptor offered for sale on eBay by an Arizona company. Kuok's attempts to purchase the device prompted another investigation by undercover ICE agents, who pretended to be willing to sell this device to Kuok. Kuok arranged for a money order transfer to pay for the encryptor. The encryptor never showed up, and the undercover agent claimed it had been confiscated in customs in Alaska. Despite Kuok's repeated suspicions that he was dealing with law enforcement, he arranged to meet the agent in Panama to obtain the encryptor. Kuok promptly informed his contact that he would be traveling through Atlanta to get to Panama, which-unsurprisingly-resulted in his arrest in the Atlanta airport.

At trial, Kuok did not dispute the facts described above, nor the government's evidence that the items Kuok purchased or attempted to purchase required a license to export them from the United States-a license which Kuok did not possess. Kuok also did not dispute that he knew his actions violated U.S. law. Rather, Kuok's entire defense strategy rested on a theory of duress.

Defense counsel raised the issue of duress in his opening statement. He described the facts supporting the duress defense to the jury, explaining that Kuok had lived in Macau all his life. Kuok started his own business in 2000, installing and maintaining building management systems. A few years before he opened this business, Kuok developed contacts with a businessman who identified himself as a Chinese cultural official, Kung Pen Zheng. Zheng began asking Kuok to buy items from abroad that could not be obtained in China, and Kuok cooperated in order to develop this business contact. The items were available on eBay, and Kuok generally had no problems acquiring them, but troublingly, it would often take a long time for Zheng to pay Kuok back.

According to Kuok's counsel, what started out as a friendly relationship turned serious at one business dinner, when Zheng-after encouraging Kuok to drink to excess- pressured Kuok into signing a note promising to locate and purchase certain items that could not be obtained in China. The next day, Kuok realized that he might be in a bad situation and attempted to back out by telling Zheng that his wife was ill and work needed his attention. Zheng reminded Kuok that he had signed the contract promising to find these items. Zheng then contacted Kuok's wife, who was surprised to hear that she was supposed to be ill. Kuok-who had never given Zheng his home telephone number-was unhappy when he heard about Zheng's phone call to his wife, and spoke to Zheng again later that day. Zheng asked Kuok why he had lied, and Kuok asked Zheng not to call his wife again. Zheng replied: "Why? Are you afraid we're going to hurt her?" Kuok interpreted this as a clear threat to harm his family, but by that point he knew that the threat was coming from the Chinese government itself and that he could not go to the local police, who were under the Chinese government's control.

According to counsel, Kuok's situation only escalated from there: he was presented with reports detailing his wife's comings-and-goings, and her employer's name and address. Kuok was shown reports of this type for the next several years, as well as photos of himself with his wife and child out in public, with the clear implication that his family was being tracked. Zheng even sent Kuok a gift after the birth of his son, although Kuok had never told Zheng that his wife was pregnant.

Around 2002, Zheng stopped being subtle. He explained to Kuok that others were doing the same things Kuok was being made to do, and if they refused, a family member would be arrested and held in a "black jail"-where the Chinese government sends people to "take [them] off the grid." In 2005, Kuok first learned that his actions could violate U.S. export laws. He went to Zheng again and asked to stop. Zheng refused to let him out of the deal, instead telling Kuok that he had no choice. In 2007, Kuok was diagnosed with a tumor and hospitalized for a week, again begging to be let out of Zheng's schemes, but still Zheng refused.

After opening statements concluded, Kuok made a Brady request for any materials in the government's possession that would support his duress defense. The government objected to the Brady request, and the district court denied it as untimely.*fn2

The government also objected to the duress defense on the grounds that Kuok should have given notice of his defense before trial.*fn3 The district court ordered the parties to brief the duress issue. The government argued that there was insufficient evidence to support the duress defense, and the district court agreed. Kuok filed a motion to reconsider, which contained a more detailed proffer of the defense case. For instance, he claimed that Zheng told Kuok that if his wife were taken to a black jail, she would be harmed and might not ever return. Kuok also asserted that he had attempted to tell the ICE agents at the airport that he had been forced to act. Finally, Kuok added details explaining how he knew that Zheng and the other officials worked for the Ministry of State Security, China's equivalent of the CIA.

The district court denied the motion for reconsideration. The case proceeded to trial, and the jury found Kuok guilty on all counts. Prior to sentencing, Kuok served another Brady request on the government, asking for evidence to support an imperfect duress defense. The district court denied the request. At sentencing, the district court calculated the applicable Guidelines range to be 63 to 78 months. The district court varied upward and sentenced Kuok to 96 months on counts two through four, and 60 months on count one, to run concurrently. This appeal followed.

II

We first address Kuok's claims common to all counts: that venue in the Southern District of California was improper, and the statutory export control regime violates the non-delegation doctrine.*fn4 Our review of both claims is de novo, United States v. Bozarov, 974 F.2d 1037, 1040 (9th Cir. 1992) (non-delegation doctrine); United States v. Ruelas-Arreguin, 219 F.3d 1056, 1059 (9th Cir. 2000) (venue), and we reject Kuok's arguments.

A

[1] Kuok challenges venue on counts two through four, which are based on Kuok's purchase of the Taclane encryptor.*fn5

The Constitution requires that venue lie in the state and district where a crime was committed. U.S. Const. art. III, § 2, cl. 3; U.S. Const. amend. VI; see also Fed. R. Crim. P. 18. "The burden of establishing proper venue by a preponderance of the evidence rests with the government." Ruelas-Arreguin, 219 F.3d at 1060. The government argues that venue was plainly proper in the Southern District of California, because the undercover ICE agent withdrew funds in a San Diego bank from Kuok's money transfer.

Kuok argues that venue is not proper because the government manufactured venue in the Southern District of California by its own activities. This argument fails. Kuok cites two cases in support of his argument, neither of which even mention the word "venue." See United States v. Coates, 949 F.2d 104, 106 (4th Cir. 1991) ("'[M]anufactured jurisdiction' cannot form the basis for a federal prosecution."); United States v. Archer, 486 F.2d 670, 681 (2d Cir. 1973) ("Whatever Congress may have meant by [18 U.S.C.] § 1952(a)(3), it certainly did not intend to include a telephone call manufactured by the Government for the precise purpose of transforming a local bribery offense into a federal crime."). Both cases deal with manufacturing jurisdiction for a crime, which is a distinct question from the manufacturing of venue. In fact, the Fourth Circuit has distinguished Coates on this very ground: "There is no such thing as 'manufactured venue' or 'venue entrapment.' " United States v. Al-Talib, 55 F.3d 923, 929 (4th Cir. 1995); see also United States v. Rodriguez-Rodriguez, 453 F.3d 458, 462 (7th Cir. 2006) (holding that the entrapment doctrine does not apply to venue, and that the proper remedy for prosecutorial forum shopping is Federal Rule of Criminal Procedure 21(b)).

[2] Although we have not yet adopted a similar holding rejecting manufactured venue in this circuit, we need not decide the issue today. We have noted that Archer "cannot offer . . . generally applicable principles" and that it has been limited to cases involving "extreme" law enforcement tactics. United States v. Bagnariol, 665 F.2d 877, 898 n.15 (9th Cir. 1981). We find nothing "extreme" about an ICE undercover operation, based in San Diego, deciding to cash Kuok's money order in a bank in San Diego. Therefore, because part of the conduct that formed the offense occurred in the Southern District of California, even if that conduct was performed by an undercover government agent, venue there was proper.

B

Kuok argues that the Arms Export Control Act ("AECA"), 22 U.S.C. § 2778, invalidity delegates legislative authority. Section 2778(a)(1) of Title 22 provides:

In furtherance of world peace and the security and foreign policy of the United States, the President is authorized to control the import and the export of defense articles and defense services and to provide foreign policy guidance to persons of the United States involved in the export and import of such articles and services. The President is authorized to designate those items which shall be considered as defense articles and defense services for the purposes of this section and to promulgate regulations for the import and export of such articles and services. The items so designated shall constitute the United States Munitions List.

22 U.S.C. § 2778(a)(1); see 22 C.F.R. § 121.1 (setting forth the U.S. Munitions List). Section 2778(b)(2) provides that "no defense articles or defense services designated by the President [on the U.S. Munitions List] may be exported or imported without a license." 22 U.S.C. § 2778(b)(2). Any person who violates § 2778(b)(2), or "any rule or regulation issued under th[at] section," may be fined not more than $1,000,000 or imprisoned for not more than 20 years, or both. Id. § 2778(c). Kuok argues that Congress, in enacting the AECA, failed to "clearly delineate[ ] the general policy, the public agency which is to apply it, and the boundaries of this delegated authority." Mistretta v. United States, 488 U.S. 361, 372-73 (1989) (internal quotation marks omitted).

The argument is easily answered. The Constitution provides that "[a]ll legislative Powers herein granted shall be vested in a Congress of the United States." U.S. Const. art. I, § 1. From this language and first principles of separation of powers, the Supreme Court has announced a non-delegation principle: "Congress may not constitutionally delegate its legislative power to another branch of Government." Touby v. United States, 500 U.S. 160, 165 (1991). Accordingly, when "Congress confers decisionmaking authority upon agencies Congress must 'lay down by legislative act an intelligible principle to which the person or body authorized to act is directed to conform.' " Whitman v. Am. Trucking Ass'ns, Inc., 531 U.S. 457, 472 (2001) (quoting J.W. Hampton, Jr., & Co. v. United States, 276 U.S. 394, 409 (1928)).

[3] The AECA authorizes the President to maintain the United States Munitions List, which consists of "those items which shall be considered as defense articles and defense services." 22 U.S.C. § 2778(a)(1). Although the defining principle for "articles" and "services" has not been set forth with particularity, it is intelligible: the President is to designate those articles or services "which shall be considered as defense articles and defense services." Id. Articles or services that are not regarded as belonging to defense may not be so designated. Furthermore, Congress prefaced the delegation to the President by referring to its shared interest in the "furtherance of world peace and the security and foreign policy of the United States." Id. The "[d]elegation of foreign affairs authority is given even broader deference than in the domestic arena." Freedom to Travel Campaign v. Newcomb, 82 F.3d 1431, 1438 (9th Cir. 1996).

[4] The Supreme Court rejected a similar non-delegation challenge in United States v. Curtiss-Wright Exp. Corp., 299 U.S. 304 (1936). Congress had authorized the President to prohibit the sale of "arms and munitions of war in the United States to those countries now engaged in armed conflict in the Chaco." Id. at 312 (internal quotation marks omitted). Congress made it a criminal act to violate the President's prohibition. The Supreme Court recognized that it was "dealing not alone with an authority vested in the President by an exertion of legislative power, but with such an authority plus the very delicate, plenary and exclusive power of the President as the sole organ of the federal government in the field of international relations." Id. at 319-20. The Court commented on the "unwisdom of requiring Congress in this field of governmental power to lay down narrowly definite standards" and declined to "condemn[ ] legislation like that under review as constituting an unlawful delegation of legislative power." Id. at 321-22; see id. at 329 ("[T]here is sufficient warrant for the broad discretion vested in the ...


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