Pasquantino v. United States

Background

Two brothers and a hired driver ran a scheme in the late 1990s to buy discounted liquor in the United States and secretly drive it into Canada without paying heavy Canadian import taxes. The purchases were arranged by telephone across state lines. U.S. prosecutors charged them under the federal wire fraud law for using interstate wires to carry out a plan to deprive Canada of tax revenue.

Reasoning

The main question was whether a U.S. scheme to cheat a foreign government out of tax money fits the plain words of the federal wire fraud law, and whether an old common‑law rule (the “revenue rule”) that generally bars enforcing foreign tax laws in domestic courts prevents the prosecution. The Court said yes: the wire fraud statute covers schemes that use U.S. wires to obtain money or property, and Canada’s right to collect unpaid taxes is “property.” The Court also concluded that applying the wire fraud law here does not clearly conflict with the revenue rule because that rule traditionally bars collection actions, not domestic criminal prosecutions for fraud.

Real world impact

The decision affirms that U.S. prosecutors may bring wire fraud charges when people use U.S. communications to help evade foreign taxes, and that unpaid foreign taxes can count as the “money or property” the scheme targets. The ruling may affect charging choices, plea negotiations, and sentencing calculations when cross‑border smuggling and tax evasion are involved.

Dissents or concurrances

Justice Ginsburg dissented, warning the ruling gives the statute extraterritorial reach, may conflict with treaties and a separate smuggling law, and raises treaty, extradition, and sentencing concerns.