                               In the
    United States Court of Appeals
                   For the Seventh Circuit
                           ____________

No. 02-1443
UNITED STATES OF AMERICA,
                                                  Plaintiff-Appellee,
                                  v.

MICHAEL TURNER,
                                             Defendant-Appellant.
                           ____________
             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
               No. 00 CR 694—David H. Coar, Judge.
                           ____________
       ARGUED JUNE 7, 2002—DECIDED AUGUST 20, 2002
                       ____________


    Before BAUER, POSNER and RIPPLE, Circuit Judges.
  BAUER, Circuit Judge. Michael Turner embezzled a
significant amount of money from his employer, Allstate
Insurance Company.1 Turner was a field claims adjuster
for Allstate, and he worked out of his home in suburban
Northeast Illinois. As part of his duties as an adjuster,
Turner was authorized to write settlement checks on be-



1
  Allstate Insurance Company is an Illinois corporation and is
a subsidiary of Allstate Corporation, a Delaware corporation and
holding company with subsidiaries involved nationally in insur-
ance as well as financial services. Allstate Insurance Company
has its principal place of business in Northbrook, Illinois.
2                                                  No. 02-1443

half of Allstate. Turner wrote eighteen company checks
payable to his own order and deposited the checks in his
personal bank account.2 The government indicted Turner
on five counts of embezzlement, and the other thirteen
uncharged checks were considered during sentencing.
  In this appeal Michael Turner argues that 18 U.S.C.
§ 1033 is unconstitutional as Congress has exceeded its
authority to legislate under the Commerce Clause. First,
Turner asserts that the district court erred in classify-
ing the statute as regulating instrumentalities or things
in interstate commerce. Second, Turner avers that nei-
ther he nor Allstate Insurance Company are instrumen-
talities or things in interstate commerce and that his
actions were wholly intrastate. Finally, Turner argues
that, in the alternative, his activity is only tangentially
related to and did not have a substantial affect on inter-
state commerce. Hence, Turner asserts that Congress can-
not regulate embezzlement in a small locality any more
than it can regulate shoplifting in Northbrook, Illinois.
He asserts that there must be limits on Congress’ power
because nearly every individual’s day-to-day mundane
commercial activities, such as shopping at the local grocery
store, may, in some way, affect a company which is in-
volved in interstate commerce. For the reasons that fol-
low, we find that 18 U.S.C. § 1033 does not exceed Con-
gress’ power under the Constitution to regulate commerce
“among the several States”. U.S. CONST. Art. I, § 8, cl. 3.




2
  Turner admitted that he was not authorized to deposit the
checks into his account and that by doing so he committed a
crime. Turner could have been charged under any number
of Illinois statutes relating to theft or deception. See 720 ILCS
5/16-1, 5/17-1.
No. 02-1443                                              3

                    BACKGROUND
  Initially, Turner moved to dismiss the indictment,
arguing Congress had exceeded its authority under the
Commerce Clause by enacting 18 U.S.C. § 1033(b)(1)(A).
The district court denied the motion, and Turner decided
to plead guilty, reserving the right to appeal the Com-
merce Clause issue. The district court sentenced Turner
to five months confinement (recommending the sen-
tence be served in a half-way house), and three years
supervised release (with the first five months to be
served in home confinement). Turner remains out on
bond, pending the resolution of this appeal.


                       ANALYSIS
  We review the determination of a federal statute’s
constitutionality de novo. United States v. Black, 125 F.3d
454, 458 (7th Cir. 1997). Tuner asserts that 18 U.S.C.
§ 1033 (which makes it illegal for employees to embez-
zle—among other things—from insurance companies)
exceeds Congress’ power under the Commerce Clause,
criminalizing a wholly intrastate activity. Turner’s spe-
cific argument is that: (1) criminal acts are not encom-
passed within the Commerce Clause power, and (2)
even though insurance affects interstate commerce, his
conduct, which merely affected the insurance company,
did not directly affect interstate commerce and cannot be
regulated.


A. The Power to Regulate Interstate Commerce
  The Court has enunciated three broad categories of
activities that Congress may regulate using the power
delegated to it in the Commerce Clause. E.g., United
States v. Lopez, 514 U.S. 549, 558-59 (1995). First, Con-
gress may regulate the channels of interstate commerce.
4                                               No. 02-1443

Id. Channels refer to the transportation of a commodity
or travel in interstate commerce. See, e.g., Heart of At-
lanta Motel, Inc. v. United States, 379 U.S. 241, 256
(1964) (interstate travel and places of public accommoda-
tion); United States v. Darby, 312 U.S. 100, 114 (1941)
(shipment of manufactured goods); Caminetti v. United
States, 242 U.S. 470, 489-91 (1917) (women and girls
transported for “immoral” purposes); Lottery Case (Cham-
pion v. Ames), 188 U.S. 321 (1903) (lottery tickets). Sec-
ond, Congress may regulate and protect the instrumen-
talities, persons, or things in interstate commerce “even
though the threat may come only from intrastate activities”.
Lopez, 514 U.S. at 558-59. Instrumentalities, persons, or
things in interstate commerce include railroads, aircraft,
and trucks. See, e.g., Mitchell v. H. B. Zachry Co., 362 U.S.
310, 323 (1960) (describing railroads, truck companies
and airlines as instrumentalities of interstate commerce);
Shreveport Rate Cases, 234 U.S. 342 (1914) (railroad
shipping rates). Third, Congress may regulate activities
having a substantial relation to or substantial affect on
interstate commerce. Lopez, 514 U.S. at 558-59. An ac-
tivity “substantially affects interstate commerce” either
directly or when considered with other similar activities
in the aggregate. See, e.g., Hodel v. Virginia Surface
Mining & Reclamation Assn., Inc., 452 U.S. 264, 276-80
(1981) (coal mining); Perez v. United States, 402 U.S. 146,
156 (1971) (loan sharking); Wickard v. Filburn, 317 U.S.
111, 125-29 (1942) (growing of wheat on a local farm solely
for personal consumption).
  As the district court found that Congress did not ex-
ceed its authority because it was regulating an instrumen-
tality or thing in interstate commerce, we must first
determine whether this conclusion is correct. The statute
at issue, 18 U.S.C. § 1033, provides, in relevant part:
“Whoever—acting as, or being an officer, director, agent,
or employee of, any person engaged in the business of
No. 02-1443                                                  5

insurance whose activities affect interstate commerce . . .
willfully embezzles, abstracts, purloins, or misappropriates
any of the moneys, funds, premiums, credits, or other
property of such person so engaged shall be punished as
provided in paragraph (2).” 18 U.S.C. § 1033(b)(1) (empha-
sis added).3 The statute repeatedly refers to “the business
of insurance whose activities affect interstate commerce.”
18 U.S.C. §§ 1033(a)(1), (b)(1)(A), (c)(1), (d), (e)(1)(B); see
also 18 U.S.C. § 1033(f)(3) (defining “interstate commerce”
as used in the statute). Furthermore, the report from
the House Judiciary Committee, to whom the bill was
referred, also indicates that Congress enacted the law
relying upon the third category of authority. The stated
purpose of the law was to deal with “interstate insur-
ance fraud schemes” that Congress felt were too com-
plex and that current laws, state and federal, were inade-
quate to deal with the problem. H.R. Rep. No. 103-468
(1994) (emphasis added).
  Turner inferentially bases his argument on the Mc-
Carran-Ferguson Act, 15 U.S.C. §§ 1011-1015, where
Congress explicitly allowed the States to continue regulat-
ing insurance despite the interstate effects of such regula-
tion. 15 U.S.C. § 1012(b); Prudential Ins. Co. v. Benjamin,
328 U.S. 408, 417-19 (1946). Turner’s argument is that
insurance and criminal acts such as embezzlement are
the province of the States to regulate. Despite the con-
current jurisdictional grant in McCarran-Ferguson and,
thereby, the recognition that insurance has intrastate
and interstate effects, the business of insurance can and
does affect interstate commerce. See United States v. South-


3
   18 U.S.C. § 1033 was enacted as the Insurance Fraud Preven-
tion Act as part of an amendment to the Violent Crime Control
and Law Enforcement Act of 1994. Pub. L. No. 103-322, 108 Stat.
2115 (1994). To our knowledge, embezzlement from insurance
companies is not a violent crime.
6                                               No. 02-1443

Eastern Underwriters Ass’n, 322 U.S. 533, 552-53 (1944);
United States v. Robertson, 158 F.3d 1370, 1371 (9th Cir.
1998). As the business of insurance does affect inter-
state commerce, Congress may choose to regulate it, in
whole or part, and those activities that affect the business.
  Although Congress chose the “affects interstate com-
merce” rationale to support this legislation (and we
agree that insurance does affect interstate commerce)
that does not mean insurance may not also be a channel
from which interstate commerce flows. Banks are general-
ly considered vehicles through which interstate com-
merce emanates, as banks conduct innumerable transac-
tions with persons, companies, and banks in other states
and countries. E.g., United States v. Watts, 256 F.3d 630,
634 (7th Cir. 2001); Weir v. United States, 92 F.2d 634,
636 (7th Cir. 1937). Similarly, when a person purchases
insurance from a company, the company holds the money
in a pool with the money of other insured persons, and
later the company pays claimants. Hence, insurance
companies provide a vehicle through which premiums
from the insured and payments to claimants flow in
interstate commerce. Cf. Black, 125 F.3d at 460-62 (find-
ing that child support payments regularly travel in inter-
state commerce); Nat’l Cas. Co. v. Fed. Trade Comm’n, 245
F.2d 883, 886 (6th Cir. 1957) (noting the McCarran Act
gave the FTC the authority to regulate insurance on the
grounds that insurance was part of the channels of com-
merce).
  Whether we characterize the business of insurance
as affecting interstate commerce or being a channel of
commerce, we conclude Congress may regulate the insur-
ance industry pursuant to Article I, § 8, clause 3. The
question remaining is whether the prohibited activity,
embezzlement from insurance companies, is included with-
in this grant. Turner asserts that his actions do not
touch upon interstate commerce and are outside the
scope of Congress’ authority.
No. 02-1443                                              7

B. The Scope of the Interstate Commerce Power
  During the early years of the infant Republic, Congress
enacted little commercial legislation, and the Supreme
Court reviewed few such enactments. Gibbons v. Ogden,
22 U.S. (9 Wheat.) 1 (1824), marked the first major con-
sideration of the scope of the Commerce Clause. In the
majority opinion, Chief Justice John Marshall noted that
Congress’ commerce power, “like all others [powers] vested
in Congress, is complete in itself, may be exercised to its
utmost extent, and acknowledges no limitations other
than are prescribed by the Constitution.” Id. at 196. This
theory underscored the Court’s Commerce Clause jurispru-
dence up until the late 1800s.
  In 1887 and 1890, Congress enacted two important
statutes both broad in scope, regulating economic activity.
The Interstate Commerce Act and the Sherman Anti-
trust Act heralded a new intent by Congress to more
thoroughly regulate interstate commerce. The Supreme
Court responded by striking down several other acts,
finding they reached activities beyond the clause’s scope.
See, e.g., United States v. E.C. Knight Co., 156 U.S. 1, 12
(1895) (finding manufacturing precedes commerce). How-
ever, the Court also upheld statutes that regulated inter-
state and intrastate commerce when regulating the latter
as incidental and required when regulating the former.
See, e.g., Shreveport Rate Cases, 234 U.S. 342 (1914).
  As part of the New Deal, Congress enacted a series
of sweeping economic regulations which sought to fix
hours, control rates and wages, and govern various
aspect of the economy in order to engineer a recovery.
See, e.g., The National Industrial Recovery Act of 1933,
48 Stat. 195 (1933). The Court reacted by striking down
the regulations because they exceeded Congress’ power
under the Commerce Clause. See, e.g., R.R. Ret. Bd. v.
Alton R.R. Co., 295 U.S. 330 (1935); A.L.A. Schechter
8                                            No. 02-1443

Poultry Corp. v. United States, 295 U.S. 495, 550 (1935);
Carter v. Carter Coal Co., 298 U.S. 238, 304 (1936); see
also United States v. Butler, 295 U.S. 495, 548 (1935)
(striking down legislation enacted under the taxing and
spending power as violating the Tenth Amendment).
  In 1936, President Franklin Delano Roosevelt won
reelection by a large margin, and in 1937, he introduced
his “Court Packing” plan. The measure—which would
have led to the appointment of an additional justice for
any justice who had served ten years and was over
seventy—was met with stiff resistance in Congress
and failed. The controversy subsided as the makeup of
the Court changed by death and resignation, and the
Court began upholding New Deal legislation. See, e.g.,
NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937);
United States v. Darby, 312 U.S. 100 (1941); United
States v. Wrightwood Dairy Co., 315 U.S. 110 (1942);
Wickard v. Filburn, 317 U.S. 111 (1942). These deci-
sions “ushered in an era of Commerce Clause jurispru-
dence that greatly expanded the previously defined au-
thority of Congress under that Clause.” Lopez, 514 U.S.
at 556. Not until 1995 did the Court again, in earnest,
take up the issue of the limits of Congress’ authority un-
der the Commerce Clause.
  In Lopez, the Supreme Court struck down the Gun-Free
School Zones Act because it exceeded Congress’ authority
under the Commerce Clause. Id. at 549, 561-67. Since
then, criminals and other litigants have sought to chal-
lenge statutes that went unquestioned as constitu-
tional prior to Lopez. See United States v. Watts, 256
F.3d 630, 631 (7th Cir. 2001) (noting the defendant
pled guilty but “reserved the right to pursue on appeal a
line of argument popular with criminal defendants these
days: whether Congress exceeded its Commerce Clause
power”) (emphasis added). And the subsequent cases of
United States v. Morrison, 529 U.S. 598 (2000) and Jones
No. 02-1443                                                   9

v. United States, 529 U.S. 848 (2000), have added to the
challenges.
  Turner challenges the statute at issue citing the Sup-
reme Court’s decision in Lopez as primary support (al-
though he also cites Morrison and Schechter Poultry).4
Turner’s argument ignores both the narrow applicability
of Lopez’s facts to other cases and the careful legal analy-
sis engaged in by the Court. Together, Lopez, Morrison,
and Jones have defined the outermost reach of the com-
merce power, yet, those cases did not signal a turnabout,
herald new restrictions on the power and did not over-
rule prior definitions of its scope. See Black, 125 F.3d at
460-62 (“Although the majority in Lopez intended to
draw an outer limit to congressional authority, this does
not mean that Lopez represents a retrenchment of al-
ready well-established Commerce Clause precedent.”);
United States v. Spinello, 265 F.3d 150, 153-54 (3d Cir.
2001); United States v. Kenney, 91 F.3d 884, 887 (7th Cir.
1996) (“But Lopez must also be noted for what it did
not do.”); see also United States v. Wall, 92 F.3d 1444, 1447-
48 (6th Cir. 1996) (citing a number of cases upholding
federal criminal statutes after Lopez and noting that
“[m]ost courts have resisted urgings [by criminal defen-
dants] to extend Lopez”).
  In Lopez, the Court analyzed the regulation at issue
under the third category, “substantially affects inter-
state commerce”. The Court found that the Gun-Free
School Zones Act did not regulate economic activity or



4
   Morrison provides little support for Turner’s arguments as
it dealt not with a criminal but a civil remedy. Moreover, the
Court distinguished a similar criminal provision created under
the same act, quoting a court of appeals case upholding the sec-
tion as a valid exercise of the Commerce power. Morrison, 529
U.S. at 613 n.5 (quoting 18 U.S.C. § 2261(a)(1)).
10                                             No. 02-1443

commerce no matter how “broadly one might define those
terms”. Lopez, 514 U.S. at 561, 567 (“The possession of
a gun in a local school zone is in no sense an economic
activity that might, through repetition elsewhere, substan-
tially affect any sort of interstate commerce.”). At the
same time, the Court went to great lengths to distin-
guish Wickard—a case the majority said was “perhaps the
most far reaching example of Commerce Clause authority
over intrastate activity”—from the possession of a gun
in a school zone. Id. at 560. Also, the Court indicated
that a similar regulation, properly enacted and circum-
scribed to reach interstate activity, might pass muster,
but the Gun-Free School Zones Act failed because there
was no indication and no requirement that either the
person or the firearm “have any concrete tie” or have
moved in interstate commerce. Id. at 567. What Lopez
did not do was invalidate a federal criminal statute reg-
ulating criminal activity that was tied to and affected
interstate commerce. See Morrison, 529 U.S. at 610-12
(“But a fair reading of Lopez shows that the noneco-
nomic, criminal nature of the conduct at issue was central
to our decision in that case.”).
  More importantly, the subsequent case of Jones v.
United States, examining a criminal statute, provides
ample support for the proposition that Congress’ com-
merce power has not suddenly contracted. 529 U.S. at
851. In Jones, the Court examined a federal arson statute
that made it a federal crime to “damage or destroy, ‘by
means of fire or an explosive, any . . . property used in
interstate or foreign commerce or in any activity affect-
ing interstate or foreign commerce.’ ” Id. at 850 (quoting
18 U.S.C. § 844(i)) (emphasis added). The question was
whether a private residence fell within the definition of
“used in” or “affecting” interstate commerce. Id. at 850-51.
The Court focused on those terms, concluding that Con-
gress intended only to reach those buildings which were
No. 02-1443                                              11

“used in” or “affected” interstate commerce. Id. at 854-55.
A building used as rental property was “used in” or “af-
fected” interstate commerce; however, not a private,
personal dwelling which had neither commercial purposes
nor was used in any commercial undertaking such as
a home office. Russell v. United States, 471 U.S. 858, 859-
62 (1985); Jones, 529 U.S. at 855-57.
  The salient, overriding inquiry in both Jones and Lopez
was the search for a commercial activity that Congress
could properly regulate. Jones, 529 U.S. at 858-59; Lopez,
514 U.S. at 561-67. If there is an interstate commercial
activity which meets any of the three Lopez categories
Congress may regulate that activity and the actions or
activities which secondarily affect the primary commercial
activity. Hence, Congress may regulate the arson or
bombing of any commercial building because the destruc-
tion of the building indirectly affects interstate commerce
by virtue of the fact that the building was used in inter-
state commerce. Russell, 471 U.S. at 862.
  The business of insurance does affect interstate com-
merce. Turner asserts that his activities did not direct-
ly affect interstate commerce, therefore, Congress’ pro-
hibition of insurance embezzlement is ultra vires. Turner
asks us to divide his actions from those engaged in by
Allstate. However, we do not look solely at Turner’s crime,
as he would have us do; rather, we look to the “class of
activities” and determine their “total incidence” on inter-
state commerce. Perez, 402 U.S. at 153-54; Maryland
v. Wirtz, 392 U.S. 183, 193 (1968); see also 18 U.S.C.
§§ 1033(a)(1), (b)(1) (“the business of insurance whose
activities affect interstate commerce.”). If embezzlement
affects the business of insurance, positively or negatively,
then Congress may also regulate that activity as incident
to regulating the business of insurance. E.g., Perez, 402
U.S. at 150-55; Wickard, 317 U.S. at 125. Turner’s crime
may be local and have only an indirect effect on commerce;
12                                               No. 02-1443

nevertheless, the activity may be reached by Congress
by virtue of the fact that it affects Allstate’s business—
which, in turn, affects interstate commerce—or in the ag-
gregate, embezzlement may negatively effect and de-
stabilize the entire insurance industry. Perez, 402 U.S.
at 150-56; Wickard, 317 U.S. at 125; Black, 125 F.3d at 460-
61 (holding that “Congress can criminalize [the failure to
pay child support] just as it has other impediments to
interstate commerce.”). In fact, Congress enacted 18 U.S.C.
§ 1033 for the purpose of preventing the destructive ag-
gregate effects of embezzlement by multiple employees,
agents, and officers throughout the insurance industry,
in order to preclude another crisis akin to the massive
savings and loan failures of the 1980s. H.R. REP. NO. 103-
468.
   If Allstate is a channel of interstate commerce, it is
proper to assume that the money Turner embezzled from
the company moved in interstate commerce. Turner’s
activity therefore impeded the channels of interstate
commerce and the statute properly reached his conduct.
The limiting principle is that the activity initially regulated
must be a commercial enterprise; Congress may then reg-
ulate any activity which effects, positively or negatively,
that commercial enterprise. Wickard, 317 U.S. at 125-28
(“[E]ven if appellee’s activity be local and though it may
not be regarded as commerce, it may still, whatever its
nature, be reached by Congress if it exerts a substantial
effect on interstate commerce, and this irrespective of
whether such effect is what might at some earlier time have
been defined as ‘direct’ or ‘indirect.’ ”).


                      CONCLUSION
  Turner argues policy in this court, i.e., that embezzlement
and most other criminal acts are best left to the states to
regulate and Congress should not go around federaliz-
No. 02-1443                                                13

ing every local criminal act. Whether the statute should
have been enacted was a policy decision made by Congress.
See Black, 125 F.3d at 459 (“Congress has often used this
positive power to pass laws that ‘help the States solve
problems that defy local solutions.’ ”) (quoting United States
v. Sage, 92 F.3d 101, 105 (2d Cir. 1996). And, of course,
Turner, like any other citizen, is free to petition the gov-
ernment to change the law. But the statute at issue, 18
U.S.C. § 1033, regulates an activity that affects the busi-
ness of insurance, which either affects interstate com-
merce or is itself a channel of commerce. Congress may
therefore regulate the insurance industry and those
activities which positively or negatively affect the business
as incidental to the larger regulatory scheme. As embezzle-
ment negatively affects the insurance industry, Congress
may prohibit that conduct through a proper exercise of
its Commerce Clause authority. AFFIRMED.

A true Copy:
       Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit




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