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District Court Holds that Some White-Collar Felons May Lawfully Possess Firearms Due to a Little Known Exemption For Crimes ‘Relating to the Regulation of Business Practices’

In Reyes, District Judge John Bates of the D.D.C. appears to have become the first Federal jurist to hold that some white-collar felons can lawfully possess firearms, notwithstanding the fact that they have been convicted of a crime “punishable by imprisonment for a term exceeding one year.” While Federal law normally bars such persons from owning a firearm, Judge Bates concluded a little known exemption set forth in 18 U.S.C. § 921(a)(20)(A) excludes from the reach of those felon-in-possession statutes crimes “relating to the regulation of business practices that are designed to address economic harm to competition or consumers” as happened in this case where the defendant was convicted of “securities and accounting offenses.”

In one sense, this decision appears to be just another in the long list of cases since the Supreme Court’s landmark decision in District of Columbia v. Heller, 554 U.S. 579 (2008), that chips away at the plethora of Federal gun laws restricting the rights of citizens to possess or use guns in America. But, in fact, this case has nothing to do with Heller. Rather, Judge Bates’s decision is highly significant because it would seem to affirm that some white-collar felons can possess firearms, despite the language of 18 U.S.C. §§ 922(d)(1) and (g)(1), which, on their face, prohibit the transfer of firearms to, and the possession of firearms by, individuals who have been convicted of a “crime punishable by imprisonment for a term exceeding one year.” And why do some white-collar criminals get that special treatment? Because, as Judge Bates explained, the category of crimes covered by 18 U.S.C. §§ 922(d)(1) and (g)(1) is “statutorily defined [in 18 U.S.C. 921(a) (20)(A) ] to exclude offenses pertaining to antitrust violations, unfair trade practices, restraints of trade, or other similar offenses relating to the regulation of business practices’.” Thus, we have another example of the inherent racial prejudice behind many of America’s gun laws in the form of a little known law that grants statutory relief to limited class of white-collar criminals who have the financial means to afford an expensive appeals process. (See: “Ruling Clarifies That Some White-Collar Felons Can Possess A Firearm,” by Walter Pavlo, published in Forbes Magazine on October 5, 2018.) In 2010, Gregory Reyes, then the Chief Executive Officer of Brocade Communications Systems, Inc. (“Brocade”), a publicly traded company, was convicted of three crimes: (1) securities fraud and making false filings with the Securities and Exchange Commission; (2) falsifying corporate books and records; and (3) making false statements to auditors all in violation of various Federal statutes and rules. Each of those crimes carries a maximum prison sentence of twenty years. Reyes ultimately was sentenced to eighteen months in prison, two years of supervised release, and was fined $15 million. Long after his release from prison, Reyes wanted to acquire and possess firearms “for defense of himself and his family and for hunting.” Although his right to possess a firearm had been restored under the laws of his home state of Montana, he alleged, in the instant proceedings, that the Government’s interpretation and application of §§ 922(d)(1) and 922(g)(1) (collectively the “felon-in-possession statute”) effectively prevented him from purchasing a firearm. He contended that, because the Government instructs firearms dealers not to sell to anyone who has “been convicted in any court of a felony, or any other crime for which the judge could have imprisoned [him] for more than one year,” sellers are unable to provide him with a firearm. In fact, Reyes alleged that two merchants specifically informed him that they would be unwilling to make such a sale to him due to his felony convictions. Moreover, even if Reyes could obtain a firearm from a licensed federal firearms dealer or a private party, he asserted that he has refrained from attempting to do so because he believes the Government would subject him to criminal penalties under the felon-in-possession statute. Thus, Reyes claimed that he was effectively barred from acquiring a firearm. In August 2017, Reyes filed the instant action, bringing as-applied statutory and constitutional challenges to 18 U.S.C. § 922(d)(1) and (g)(1). He first claimed that he is statutorily exempted from § 922(d)(1) and (g)(1) because his convictions constitute business practices offenses excluded under § 922(a)(2)(A)

In the alternative, he asserted two claims under the Equal Protection Clause of the Fifth Amendment, alleging that the statute creates two impermissible distinctions: first, between federal offenders convicted, like him, of securities and accounting offenses who are barred from possessing firearms and federal offenders convicted of “business practices” offenses who are excepted from the felon-in-possession statute and second, between citizens convicted of nonviolent crimes who do not “pose[] any greater risk to public safety[] than a typical law-abiding citizen” but are disqualified from firearm possession and other citizens not subject to § 922(d)(1) and (g)(1). For all counts, Reyes sought declaratory and injunctive relief barring the government from enforcing §§ 922(d)(1) and (g)(1) against him based on his 2010 convictions. The Government moved to dismiss Reyes claims on a number of grounds, including claims that Reyes predicate convictions do not fall within the statutory exception to the firearms disability and that Reyes is not within the scope of the Second Amendment’s protections because he was convicted of serious crimes. In response to those competing positions, Judge Bates rejected the Government’s motion to dismiss after concluding that Reyes’ prior conviction did indeed fall within the exception set forth in 18 U.S.C. § 921(a) (20(A). He ruled that not all crimes under the felon-in-possession statute would result in a felon losing his or her gun rights, even though the sentence was for a term exceeding one year. Judge Bates explained: “This category of crimes, however, is statutorily defined to exclude ‘offenses pertaining to antitrust violations, unfair trade practices, restraints of trade, or other similar offenses relating to the regulation of business practices.’ The question then was whether Reyes’ conviction fell into an exclusion. Judge Bates first concluded that it was left to the courts to identify which offenses fell within this “business practices” exception. Judge Bates then continued: “The Court concludes that each of Reyes’s predicate offenses satisfies the primary purpose prong of the business practices exception test and therefore is excluded from the definition of ‘crime[s] punishable by imprisonment for a term exceeding one year.’” The business practices exception in § 921(a)(20)(A) excludes from the felon-in-possession statute only predicate offenses relating to the regulation of business practices that are designed to address economic harm to competition or consumers. An offense relating to the regulation of business practices qualifies under the exception if either its primary purpose or the elements of the violation demonstrate that it was primarily intended to address such harm. While none of Reyes’s predicate convictions required the government to prove as an element of the offense direct harm to competition or consumers, the text and history of the Exchange Act generally, and an examination of each of Reyes’s predicate offenses specifically, evince that those offenses regulate business practices primarily to protect securities purchasers from economic harm. Hence, each of Reyes’s predicate offenses ‘pertain[s] to antitrust violations, unfair trade practices, or other similar offenses relating to the regulation of business practices’ under § 921(a)(20)(A) and thus does not trigger the application of the felon-in-possession statute. In sum, Judge Bates appears to have become the first jurist to find that people convicted of securities fraud and bookkeeping violations are exempt from the felon-in-possession statute; and we soon expect a flood of new cases testing the limits of § 921(a)(20(A) to see if crimes like mail and wire fraud, or lying to Government officials, also qualify under this “business practices” exemption. See: Reyes v. Sessions, 2018 U.S. Dist. LEXIS 167431 (D.D.C. 2018). 

This article originally appeared in the September 2018 issue of Punch & Jurists and is reprinted with permission, with minor edits. Copyright, Punch & Jurists

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