Articles Posted in Federal Crimes

The policies of the U.S. Department of Justice (DOJ) regarding federal drug sentencing have gone through several major changes recently. Former Attorney General (AG) Eric Holder undertook a major overhaul several years ago, seeking to focus attention away from low-level drug offenses and onto major ones. In May 2017, however, AG Jeff Sessions rescinded Holder’s policy and issued a new memorandum directing federal prosecutors to “charge and pursue the most serious, readily provable offense.” The memorandum does not specifically mention drugs and drug-related offenses, but that is where it is likely to have the most far-reaching effects.

Federal sentencing guidelines derive, in part, from a list of factors established by Congress in 1984 that courts must consider when imposing a sentence. These include “the nature…of the offense and the…characteristics of the defendant,” the effect of the sentence on society at large, the need to maintain consistent sentencing practices for similar offenses, and “the need to provide restitution to any victims of the offense.” 18 U.S.C. § 3553(a).

A “mandatory minimum” sentence gives courts no discretion to adjust the sentence downward. Such sentences became particularly widespread with the Anti-Drug Abuse Act of 1986, Pub. L. 99-570 (Oct. 27, 1986). That law established lengthy minimum sentences for various drug offenses, such as 10 years for manufacturing, distributing, or possessing with intent to manufacture or distribute one kilogram of heroin or five kilograms of cocaine. 21 U.S.C. §§ 841(b)(1)(A)(i), (ii). According to the United States Sentencing Commission (USSC), 47.9 percent of all federal drug convictions in fiscal year 2015 involved an offense with a mandatory minimum penalty.

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More than half of the states in the U.S. now allow the use of medical marijuana to some extent. At the same time, federal law still treats marijuana as having “no currently accepted medical use in treatment in the United States.” 21 U.S.C. §§ 812(b)(1)(B), (c)(I)(c)(10). This has, obviously, created conflicts between federal and state law enforcement. Congress relieved this tension somewhat in 2014, when it passed legislation known as the Rohrbacher-Farr amendment as part of a spending bill. This amendment prohibits the U.S. Department of Justice (DOJ) from spending funds on law enforcement activities that interfere with lawful state medical marijuana systems, which range from the extensive in California to the restrictive in Texas. Texas marijuana lawyers are aware, however, that officials in the new White House administration have sought to use federal resources against state medical marijuana. So far, the Rohrbacher-Farr amendment remains in force.

California was the first state to allow the use of medical marijuana with a doctor’s prescription. Voters approved Proposition 215 in November 1996, also known as the “Compassionate Use Act.” Cal. Health and Safety Code § 11362.5. Twenty years later, in November 2016, voters in that state approved Proposition 64, which authorized the sale, purchase, and possession of limited amounts of marijuana for recreational use. Id. at § 11362.1. Most states have not gone this far, but states that allow medical marijuana in some form outnumber those that do not. Texas is among the states that allow medical marijuana use, although it is strictly limited to “low-THC cannabis” to treat “intractable epilepsy.” Tex. Health & Safety Code Ch. 487, Tex. Occ. Code Ch. 169.

The U.S. Supreme Court has rejected at least two challenges to the applicability of federal marijuana laws over state medical marijuana laws. The court rejected a common-law medical necessity defense in U.S. v. Oakland Cannabis Buyers’ Cooperative, 532 U.S. 483 (2001). Justice Thomas, writing for the court, noted that federal criminal law generally does not recognize common-law defenses unless Congress specifically includes them in a statute. He concluded that “a medical necessity exception for marijuana is at odds with the terms of the Controlled Substances Act.” Id. at 491. The court held that the Commerce Clause of the U.S. Constitution allows a federal prohibition of marijuana production, distribution, and possession, regardless of state medical marijuana laws, in Gonzales v. Raich, 545 U.S. 1 (2005).

The gradual decriminalization of marijuana in several states around the country has created unusual legal pitfalls. The U.S. Securities and Exchange Commission (SEC) has taken an interest in efforts to attract investors to the legal marijuana trade. This is practically unexplored legal territory, since such investments would have been unambiguously illegal just a few years ago. The SEC recently filed a civil complaint for securities fraud against a California company involved in legal marijuana sales, as well as its founder and two corporate officers. The founder and the corporation settled with the SEC, which is the civil equivalent of pleading no contest. SEC v. Notis Global, Inc., et al., No. 2:17-cv-01905, final judgment (C.D. Cal., Mar. 21, 2017).

“Securities fraud” encompasses a wide range of activities. The Securities Act of 1933, 15 U.S.C. § 77a et seq., regulates the issuance of new securities, including corporate stocks. The Securities Exchange Act of 1934, 15 U.S.C. § 78a et seq., deals with the trading of securities after they have been issued, such as in the various stock exchanges. Both statutes prohibit fraudulent statements and other deceptive acts in connection with the sale or purchase of securities. Violations may result in civil liability and, in some situations, criminal penalties. 15 U.S.C. §§ 77x, 78ff; see also 18 U.S.C. §§ 1348, 3301.

Lawmakers and law enforcement must often figure out how to reconcile new marijuana laws with old systems. One state might have removed criminal penalties for the production, distribution, sale, and possession of marijuana, but financial institutions subject to federal regulations might still shy away from doing business with them. In 2014, the SEC issued a memorandum about potential microcap investment scams, also known as penny stock fraud, in the marijuana business. The memo sought to warn investors about “pump-and-dump” scams, which involve making false or misleading statements about a company in order to artificially inflate its stock price.

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Unauthorized access to computer systems, commonly known as “hacking,” undoubtedly causes significant damage to individuals and businesses around the country. As often happens, however, the law has had difficulty keeping up with new technology. Federal law prohibits a wide range of computer fraud-related activities, but most offenses require proof that a defendant acted with intent, which is the most difficult mental state for prosecutors to prove. Perhaps as a result, some prosecutors have developed creative strategies to pursue alleged hackers. In one recently filed case, federal prosecutors have charged an individual under the federal hacking statute with no allegations that he personally engaged in any hacking activities. Instead, they essentially allege that he developed software with the intent that it would be used by hackers. United States v. Huddleston, No. 1:17-cr-00034, indictment (E.D. Va., Feb. 16, 2017).

Congress first enacted a criminal statute related to computer fraud, found at 18 U.S.C. § 1030, in 1984. It has amended this section numerous times over the years, perhaps most notably in 1986 with the Computer Fraud and Abuse Act (CFAA). That bill significantly expanded the legal definition of “computer fraud.” The original 1984 law made it a federal crime to access computer systems of the federal government or a financial institution without authorization. The CFAA added provisions about unauthorized access, or access that exceeds granted authority, to any “protected computer,” which it defined to include nearly any computer whose use affects interstate commerce. 18 U.S.C. §§ 1030(a)(4) – (6), (e)(2)(B).

Federal prosecutors are not accusing the defendant in Huddleston of hacking anybody. Instead, the alleged conduct leading to the indictment consisted solely of developing a software tool reportedly used by hackers. According to the indictment, the defendant created a “remote administration tool,” or “remote access trojan” (RAT), a type of software that allows a user to take control of someone else’s computer without their knowledge or consent. This RAT has allegedly been used in multiple cyberattacks around the world. Prosecutors allege that the defendant created this software for the specific purpose of making it available to hackers.

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The federal system of drug laws in the U.S. is very simple and straightforward with regard to some substances and extremely ambiguous for others. Drugs categorized in Schedule I of the Controlled Substances Act (CSA) are effectively banned for any and all purposes. Organizations may apply to the Drug Enforcement Administration (DEA) for a religious exception, which would allow the use of certain scheduled substances for specific religious purposes. Ayahuasca, also known as yagé, is a tea made using plants from South America that contain a psychedelic compound. It is gaining popularity in the U.S. In late 2015, an organization claimed to have obtained the legal right to use ayahuasca in religious ceremonies, but the DEA appears to have had other ideas. The organization halted its activities, and the legal status of ayahuasca remains unclear.

The CSA categorizes controlled substances in five schedules, with Schedule I being the most restricted. This includes a psychedelic compound called N,N-dimethyltryptamine, or “DMT.” 21 U.S.C. § 812(c)(I)(c)(6), 21 C.F.R. § 1308.11(d)(19). Ayahuasca is a tea made using leaves from two plants:  a vine commonly known as ayahuasca and a shrub known as chacruna. Ayahuasca leaves contain compounds that interact with naturally occurring DMT in chacruna, resulting in a tea that people can drink in order to feel the effects of the DMT. The ayahuasca plant itself is therefore not illegal under the CSA, but the chacruna plant, and any product that includes chacruna leaves, would be considered a Schedule I controlled substance.

The DEA can grant exceptions to its regulations after receipt of a written petition. 21 C.F.R. § 1307.3. The agency’s director has broad discretion to grant or deny such a request. The Religious Freedom Restoration Act (RFRA) prohibits the government from “substantially burden[ing] a person’s exercise of religion” without demonstrating the measure is the “least restrictive means” of pursuing a “compelling governmental interest.” 42 U.S.C. § 2000bb-1. The U.S. Supreme Court ruled in favor of a church in a RFRA case involving ayahuasca, holding that the federal government’s seizure of the tea did not serve a compelling government interest. Gonzales v. O Centro Espirita Beneficente União do Vegetal, 546 U.S. 418 (2006).

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State and federal law enforcement officials filed securities fraud charges against the Texas attorney general (AG) in 2015. The state criminal charges, along with a federal civil claim, relate to alleged acts that pre-dated the defendant’s election to the office of AG in 2014. The case has been controversial in both a political and a legal sense. All politics aside, the case is notable as an example of the multiple ways law enforcement can pursue certain alleged white-collar criminal offenses. State law allows criminal prosecution, and federal law allows both civil and criminal proceedings.

In a very general sense, our judicial system is divided between civil and criminal matters. In criminal cases, prosecutors employed by the government bring charges against defendants. They have the burden of proving the defendant’s guilt beyond a reasonable doubt, the highest burden of proof in our justice system. Civil cases involve lawsuits between one or more plaintiffs and one or more defendants. The plaintiff must prove the elements of their cause of action by a preponderance of evidence. This is a lighter burden of proof than the one prosecutors must meet.

Some counties in Texas maintain separate courts for civil and criminal cases, while other trial courts handle both types. Rather than a single state supreme court, Texas also maintains two high courts. The Texas Supreme Court hears appeals of civil cases, while the Texas Court of Criminal Appeals handles criminal appeals. Federal courts handle both civil and criminal cases, from district courts up to the U.S. Supreme Court. The cases involving the Texas AG are currently pending in a state district court in Collin County that handles both civil and criminal matters, as well as a federal district court in Sherman.

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The federal Criminal Code imposes a variety of restrictions on people with felony convictions. The Armed Career Criminal Act (ACCA) of 1984 prohibits convicted felons from owning or possessing firearms. 18 U.S.C. § 922(g). This statute also imposes sentencing enhancements on people with three or more “violent felony” convictions. 18 U.S.C. § 924(e)(1). Since the precise definition of a “felony” varies from one jurisdiction to another, federal statutes attempt to provide general definitions. In 2015, the U.S. Supreme Court struck down part of the ACCA’s definition of “violent felony,” finding it to be unconstitutionally vague. Johnson v. United States, 576 U.S. ___ (2015). This year, the court held that the Johnson ruling applies retroactively to other individuals. Welch v. United States, 578 U.S. ___ (2016).

In Welch, the court was asked to decide whether its ruling in Johnson was “substantive” or “procedural.” These two terms are not particularly well-defined, but a “substantive” ruling generally affects fundamental rights or obligations, and therefore it has an impact beyond the parties to a particular dispute. A “procedural” ruling, on the other hand, addresses the manner in which a court handled a particular case, and therefore it does not have such a far-reaching impact. This distinction appears in many important civil rights cases that invoke “substantive due process.”

The ACCA, like many federal statutes, broadly defines a “felony” as a criminal offense that carries a potential punishment of more than one year’s imprisonment. 18 U.S.C. § 922(g)(1). This definition, it is important to note, does not require an actual sentence of more than one year. A person who is convicted of such an offense but who receives a lesser sentence is still a “convicted felon” for the purposes of the ACCA.

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The legal status of marijuana has become increasingly uncertain, ever since California became the first state to allow marijuana for medical purposes in the 1990s. More than half of all U.S. states have reduced criminal prohibitions on marijuana or decriminalized it altogether. It remains completely illegal under federal law, which creates an obvious and ongoing conflict between state and federal law enforcement. The Drug Enforcement Administration (DEA) recently affirmed marijuana’s status as a Schedule I controlled substance, and the Food and Drug Administration has declined to recognize any medical value. At the same time, Congress has effectively prohibited the Department of Justice (DOJ), which includes the DEA, from interfering with the implementation of state medical marijuana laws. A federal appellate court decision has held that federal prosecutors may not pursue drug charges for conduct permitted by state law.

Federal law describes Schedule I controlled substances as those with a “high potential for abuse,” “no currently accepted medical use,” and a “lack of accepted safety” for medical use. 21 U.S.C. § 812(b)(1). “Marihuana” is currently included under Schedule I in both the U.S. Code and DEA regulations. Id. at § 812(c)(I)(c)(10), 21 C.F.R. § 1308.11(d)(23). A new rule issued by the DEA affirms marijuana’s Schedule I designation, rejecting calls to have the drug rescheduled. 81 Fed. Reg. 53846 (Aug. 12, 2016). The agency did, however, slightly loosen the restrictions on the cultivation of marijuana for medical research. Any slight progress in the DEA’s position on marijuana seems to be increasingly at odds with the 28 U.S. states, along with the District of Columbia, Guam, and Puerto Rico, that now allow marijuana use for medical purposes.

About a year before the DEA issued its latest rule, the FDA reportedly advised the DEA to maintain marijuana’s Schedule I status. Many of the documents related to the FDA’s position on this issue were not publicly available until VICE News published over 100 pages it obtained from the agency. While the FDA has called for the rescheduling of certain “constituents” of marijuana used to treat conditions like epilepsy, it has opposed rescheduling marijuana itself. Its report to the DEA includes findings that marijuana can be addictive for monkeys, which apparently contributed to the recommendation that marijuana remain subject to stricter controls than cocaine and heroin.

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More than half of the states in the U.S. have enacted laws allowing marijuana use for medicinal purposes with a doctor’s prescription. A few states have gone even further by decriminalizing the recreational use of the drug. Under federal law, however, marijuana is still a Schedule I controlled substance, and the federal government shows no signs of relaxing its stance. Even in states that have, to varying degrees, decriminalized the cultivation, distribution, purchase, and possession of marijuana, federal authorities may still pursue charges. A ruling issued by a federal appellate court in August 2016 could significantly alter the power dynamic between the federal and state governments on this issue. The court ruled that a clause in an appropriations bill passed by Congress in 2015 effectively prohibits federal prosecutors from pursuing marijuana-related charges against people whose alleged conduct was permissible under applicable state laws.

Currently, 28 U.S. states, along with the District of Columbia, Guam, and Puerto Rico, have passed laws decriminalizing marijuana for at least some uses. Seventeen states, including Texas, now allow the use of certain low-THC cannabis products for specified medical purposes. Texas, for example, allows the use of low-THC cannabis with a doctor’s prescription for the treatment of intractable epilepsy. See Tex. Health & Safety Code § 487.001 et seq., Tex. Occ. Code § 169.001(3).

Despite this multitude of state laws, the federal government often continues to enforce federal marijuana laws in those states. Enforcement against individual users by federal law enforcement is relatively rare, but businesses engaged in cultivating and dispensing medical marijuana have found themselves the targets of federal investigations and prosecutions.

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The federal Controlled Substances Act (CSA), 18 U.S.C. § 801 et seq., establishes five schedules of chemicals and materials, setting restrictions on their manufacturing, distribution, sale, and possession. Schedule I contains the most highly restricted drugs. The Drug Enforcement Administration (DEA), part of the U.S. Department of Justice (DOJ), has the authority to add drugs to the schedules, remove them, or reschedule them. In August 2016, the DEA published a notice of intent to add two chemicals, the active components of a plant known as kratom, to Schedule I. 81 Fed. Reg. 59929 (Aug. 31, 2016). The DEA claimed that banning kratom “is necessary to avoid an imminent hazard to the public safety.” Id. The notice prompted a massive public response about the purported benefits of kratom. The DEA withdrew its notice of intent about six weeks later and requested additional feedback. 81 Fed. Reg. 70652 (Oct. 13, 2016).

Schedule I controlled substances, according to the CSA, have a “high potential for abuse,” lack a “currently accepted medical use,” and have no “accepted safety” standards for use “under medical supervision.” 21 U.S.C. § 812(b)(1). The CSA includes various opioids and opiate derivatives, including heroin, under Schedule I, as well as MDMA, marijuana, LSD, peyote, and psilocybin. Id. at § 812(c)(I). The DOJ, through the Attorney General, has the authority to add drugs to any of the schedules upon a finding that they have “a potential for abuse” and fit the CSA’s scheduling criteria. Id. at § 811(a). The DOJ has delegated this procedure to the DEA. 21 C.F.R. § 1308.01 et seq.

Kratom is native to Southeast Asia. It is reportedly used in pain management and to treat opiate withdrawal, although the Food and Drug Administration (FDA) has not approved it for any medical use. Since it has similar effects to opioids, it is also used recreationally. According to the Centers for Disease Control and Prevention (CDC), kratom use has been associated with various negative effects. Kratom proponents claim that it is a beneficial alternative to opioid drugs. Six states—Alabama, Arkansas, Indiana, Tennessee, Vermont, and Wisconsin—have banned kratom, along with one county in Florida. The FDA has issued an import alert regarding the plant, and the federal government has seized multiple shipments of dietary supplements containing kratom at U.S. ports.

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