Court reverses gambling license fraud convictions

Anne Gearan

Tuesday, Nov. 7, 2000 | 10:59 a.m.

WASHINGTON -- The Supreme Court overturned a Louisiana lawyer and gambling entrepreneur's fraud conviction for lying when he applied for a state license, saying the state did not prove it was harmed in the process.

In the unanimous decision today, the justices agreed with New Orleans lawyer Carl W. Cleveland that the federal mail-fraud law does not apply to state licenses that have not yet been issued.

The license application and the application fee that went along with it did not give Louisiana property rights that the state could then claim had been violated, Justice Ruth Bader Ginsburg wrote for the court.

The state only has a real monetary interest in the license once it is granted and a business begins to generate money, she said.

Following the state's reasoning would mean "states would have property rights in drivers' licenses, medical licenses and other license that the government concedes are purely regulatory," she said.

Cleveland and his client, businessman Fred H. Goodson of Slidell, La., were charged in 1996 with mail fraud, racketeering and other offenses.

Federal prosecutors said the two lent money to Goodson's adult children to operate a video poker business, but that applications for state licenses concealed the fact that Cleveland and Goodson were the business' true owners.

Prosecutors said the men concealed their ownership because they feared their tax and financial problems could have disqualified them from getting the license.

Cleveland and Goodson each were convicted of two counts of mail fraud as well as money laundering, racketeering and other charges. Both were sentenced to 10 years and one month in prison.

The mail-fraud charges were based on the state's mailings of the video poker license and subsequent renewals.

The 5th U.S. Circuit Court of Appeals upheld the convictions last July. The court noted it previously had ruled that state licenses are considered "property" under the mail fraud law, which bars people from using the mail to fraudulently obtain property.