§360 Money Laundering
(U.S.S.G. §2S)
9th Circuit finds defendant knew the source of laundered funds was drug trafficking. (360) At defendant’s sentencing for money laundering, the district court added six levels under § 2S1.1(b)(1), finding that defendant knew the laundered money was the result of drug trafficking. The Ninth Circuit affirmed, finding the evidence “overwhelming,” because the government’s proof at trial centered on the source of the funds and proved that defendant knew that the source of the money was drug trafficking. U.S. v. Singh, __ F.3d __ (9th Cir. May 3, 2021) No. 18-50423.
5th Circuit says “value of funds” enhancement does not require loss. (218)(360) Defendants, who ran a bitcoin business, pled guilty to operating an unlicensed money servicing business. Guideline § 2S1.3 provides for a base offense level of “6 plus the number of offense levels from the table in § 2B1.1 … corresponding to the value of the funds.” Based on this, the district court applied a 16-level enhancement. Defendants argued that § 2B1.1 did not apply, because none of their clients lost money, so there was no “actual loss,” and no evidence that they intended for any money to be lost, stolen or defrauded. The Fifth Circuit upheld the increase, finding it was a “straightforward application” of § 2S1.3(a)(2) and its commentary. Nowhere did § 2S1.3 suggest that there must be a “loss” associated with the structuring or reporting offense. U.S. v. Lord, __ F.3d __ (5th Cir. Feb. 15, 2019) No. 17-30486.
1st Circuit finds sufficient evidence that defendant laundered drug proceeds. (360) Defendant pleaded guilty to money laundering, in violation of 18 U.S.C. § 1956(h). The guideline for that offense, § 2S1.1(b)(1), provides for a six-level increase if the defendant knew or believed that the laundered funds were drug proceeds. The district court found the enhancement applicable because defendant had told law enforcement officers after his arrest that his job was to collect money from drug sales and launder it. On appeal, the First Circuit affirmed, finding that defendant’s post-arrest statements were sufficient to uphold the enhancement. U.S. v. Calderón-Lozano, __ F.3d __ (1st Cir. Jan. 10, 2019) No. 17-1977.
5th Circuit upholds money laundering calculation despite lack of notice in PSR. (360)(761) Guideline §2S1.1(a), outlines two ways to calculate the base offense level for money laundering: (1) based on the offense level for the underlying offense; or (2) based on the value of the laundered funds. Defendant’s PSR used the second method, but at sentencing, the prosecutor argued for the first method, and the court agreed. Defendant claimed that the switch deprived him of the right to notice under Federal Rule of Criminal Procedure 32(i)(1)(C) and guideline §6A1.3. The Fifth Circuit disagreed. Defendant knew all of the underlying facts that led the court to apply the first method of calculation under §2S1.1(a). He therefore had sufficient notice that it might be more appropriate. In addition, even if the court had erred by denying him notice, any error was harmless. Because defendant was a part of the conspiracy that produced the laundered funds, §2S1.1(a)(1), not (a)(2), was the proper method. U.S. v. Stanford, __ F.3d __ (5th Cir. May 18, 2016) No. 15-40127.
6th Circuit reverses for insufficient explanation of how defendant laundered more than $200,000. (360) Defendant was convicted of drug and money laundering conspiracy charges. Over defendant’s objection to the PSR, the district court, citing trial testimony from co-conspirator Stack, determined that defendant laundered in excess of $200,000 during the course of the money laundering conspiracy. The Sixth Circuit ruled that the court failed to make adequate findings of fact on the record to support this conclusion, and reversed. The district court simply stated that “[t]he testimony of Amber Stack, among others, established that the money laundering was easily in excess of $200,000.” The district court did not explain whether the $200,000 was laundered by defendant individually, and, if so, the facts that supported such conclusion. Alternatively, if the district court determined that the $200,000 figure incorporated the reasonable and foreseeable money laundering acts committed by co-conspirators, it failed to state its reasons to support that finding. U.S. v. Randolph, __ F.3d __ (6th Cir. July 24, 2015) No. 13-5477.
1st Circuit affirms calculation of amount of money laundered. (360) Defendant was convicted of drug traf¬ficking conspiracy and money laundering charges. The district court calculated the amount of laundered funds to be $1,153,137.30, producing a base offense level of 24. Defendant challenged this calculation for the first time on appeal, but did not offer an alternative to the court’s tally. Although the district court did not explain its cal¬culation, the government pointed out that the trial record showed 20 car purchases, 18 car insurance payments, and two cash deposits attributable to defendant, which totaled $1,155,948.91. The government’s figure would also have established a base offense level of 24. The First Circuit concluded that the district court calculation was a “reasonable estimate” of the amount of laundered funds attributable to defendant. Therefore, there was no plain error. U.S. v. Adorno-Molina, __ F.3d __ (1st Cir. Dec. 19, 2014) No. 13-1065.
Supreme Court holds that increase of 6 to 21 months shows “prejudice” for ineffective assistance claim. (360) Defendant argued that his attorney was ineffective in failing to argue that the money laundering counts should have been “grouped” for sentencing with the counts for labor racketeering and tax evasion. Absent this ineffective assistance, he argued, his guidelines range would have been 63-78 months. Thus, he claimed his 84-month sentence was an unlawful increase of between six and 21 months. The Seventh Circuit found it unnecessary to decide whether counsel was ineffective, ruling that an increase of 6-21 months was not significant enough to amount to prejudice. In a unanimous opinion written by Justice Kennedy, the Supreme Court reversed, holding that “[a]lthough the amount by which a defendant’s sentence is increased by a particular decision may be a factor to consider in determining whether counsel’s performance in failing to argue the point constitutes ineffective assistance, … it cannot serve as a bar to a showing of prejudice.” The court’s ruling abrogated the Seventh Circuit’s prior decisions in Durrive v. U.S., 4 F.3d 548 (7th Cir. 1993) and Martin v. U.S., 109 F.3d 1177 (7th Cir. 1996), which were based on an incorrect reading of Lockhart v. Fretwell, 506 U.S. 364 (1993). As the court explained last term, Lockhart did not supplant the analysis in Strickland v. Washington, 466 U.S. 668 (1984). The question of whether the counts should have been grouped was left for the lower courts to decide. Glover v. U.S., 531 U.S. 198, 121 S.Ct. 696 (2001).
Supreme Court holds forfeiture of entire amount of unreported cash violates Excessive Fines Clause. (360) Defendant was convicted of attempting to leave the United States without reporting $357,144 in cash. There was no proof that the money was connected to any crime. In a 5-4 decision, the Supreme Court held that criminal forfeiture of the entire $357,144 under 18 U.S.C. § 982(a)(1) violated the Excessive Fines Clause because the amount of a forfeiture cannot be “grossly disproportional to the gravity of the defendant’s offense,” and defendant’s only crime was a failure to report the otherwise legal possession of money. Emphasizing that § 982(a)(1) is a criminal forfeiture statute plainly punitive in character, the Court found this forfeiture was a “fine” within the meaning of the Clause. The Court held that the cash was not an “instrumentality” of the crime of failure to report, and thus its forfeiture was not akin to civil forfeitures of “guilty property.” The Court identified two factors as “particularly relevant” to the excessiveness inquiry: (1) judicial deference to legislative judgments about the appropriate punishment for an offense; and (2) the standard of gross disproportionality articulated in the Court’s Cruel and Unusual Punishment Clause precedents. District court determinations of constitutional excessiveness will be reviewed de novo. Justices Kennedy, Rehnquist, O’Connor, and Scalia filed a vigorous dissent. [Ed. Note: Whatever the merits of its result, the reasoning of the majority will certainly engender profound confusion in the lower courts. As but one example, the Court relies heavily on the fact that this case is a “punitive” in personam criminal forfeiture, strongly implying that civil in rem forfeitures, which it characterizes as “nonpunitive,” are not subject to the same excessiveness analysis. The Court then suggests that a “modern,” as opposed to “traditional,” civil in rem forfeiture may be subject to excessiveness analysis if it “constitutes punishment even in part, regardless of whether the proceeding is styled in rem or in personam.” Taken as a whole, the opinion can fairly be read either to include or exclude all civil forfeitures from the ambit of the Eighth Amendment.] U.S. v. Bajakajian, 524 U.S. 321, 118 S.Ct. 2028 (1998).
1st Circuit rejects distinction between funds laundered for concealment vs. promotion. (360) Defendant pled guilty to one count of conspiring to commit money laundering. The district court found that the total amount laundered for sentencing purposes was between $2.5 and $7 million, which triggered an 18-level enhancement under § 2S1.1(a)(2). Defendant argued that concealment money laundering and promotional money laundering were two distinct offenses, and therefore, the quantity of funds used to calculate his offense level should have included only those funds that were laundered for promoting illegal activity, rather than for concealing the source of the funds. The First Circuit disagreed. Promotional and concealment money laundering are not distinct crimes, but rather alternative means of committing the general offense of money laundering. Accordingly, in calculating the total amount of funds laundered for the purposes of sentencing, the district court did not have to distinguish between those funds that may have been laundered for concealment rather than for promotion. U.S. v. Lucena-Rivera, 750 F.3d 43 (1st Cir. 2014), opinion after remand, __ F.3d __ (1st Cir. July 15, 2014) No. 12-2200.
1st Circuit says court properly evaluated whether laundered funds were proceeds of prior drug deals. (360) Defendant pled guilty to one count of conspiring to commit money laundering. The district court found that the total amount laundered was between $2.5 and $7 million, which triggered an 18-level enhancement under § 2S1.1(a)(2). Defendant noted the distinction between collecting money as “proceeds” of prior drug deals and later using that money to “promote” unlawful activity by purchasing more drugs in the future. He claimed that the district court wrongly conflated these two activities in evaluating whether the laundered funds were “proceeds” of prior drug deals. The First Circuit found no error. Although the district court unquestionably considered evidence that the laundered funds were involved in future drug deals, there was no indication that the court unduly relied on such evidence in making its determination that those funds were “proceeds of” prior drug deals. In the context of a long-running criminal conspiracy, it is appropriate to consider the use of laundered funds for the perpetuation of an unlawful activity as circumstantial, but not conclusive, evidence that those funds were derived from that same unlawful activity. U.S. v. Lucena-Rivera, __ F.3d __ (1st Cir. Apr. 24, 2014) No. 12-2200.
1st Circuit remands for failure to make findings on listed factors for “in the business” increase. (360) Defendant pled guilty to conspiring to commit money laundering. The district court applied an enhancement under § 2S1.1(b)(2)(C) for being “in the business of laundering funds.” An application note to § 2S1.1 directs the court to consider a non-exhaustive list of factors, including that the defendant (1) regularly engaged in laundering funds, (2) during an extended period of time, (3) from multiple sources, and (4) generated a substantial amount of revenue in return for laundering funds. The district court specifically acknowledged these factors, but made no factual findings as to their existence. The First Circuit held that the lack of adequate findings on these factors prevented adequate appellate review, and remand¬ed the case for findings on these factors on the existing record. U.S. v. Lucena-Rivera, __ F.3d __ (1st Cir. Apr. 24, 2014) No. 12-2200.
1st Circuit rejects distinction between funds laundered for concealment vs. promotion. (360) Defendant pled guilty to one count of conspiring to commit money laundering. The district court found that the total amount laundered for sentencing purposes was between $2.5 and $7 million, which triggered an 18-level enhancement under § 2S1.1(a)(2). Defendant argued that concealment money laundering and promotional money laundering were two distinct offenses, and therefore, the quantity of funds used to calculate his offense level should have included only those funds that were laundered for promoting illegal activity, rather than for concealing the source of the funds. The First Circuit disagreed. Promotional and concealment money laundering are not distinct crimes, but rather alternative means of committing the general offense of money laundering. Accordingly, in calculating the total amount of funds laundered for the purposes of sentencing, the district court did not have to distinguish between those funds that may have been laundered for concealment rather than for promotion. U.S. v. Lucena-Rivera, __ F.3d __ (1st Cir. Apr. 24, 2014) No. 12-2200.
1st Circuit says court properly evaluated whether laundered funds were proceeds of prior drug deals. (360) Defendant pled guilty to one count of conspiring to commit money laundering. The district court found that the total amount laundered was between $2.5 and $7 million, which triggered an 18-level enhancement under § 2S1.1(a)(2). Defendant noted the distinction between collecting money as “proceeds” of prior drug deals and later using that money to “promote” unlawful activity by purchasing more drugs in the future. He claimed that the district court wrongly conflated these two activities in evaluating whether the laundered funds were “proceeds” of prior drug deals. The First Circuit found no error. Although the district court unquestionably considered evidence that the laundered funds were involved in future drug deals, there was no indication that the court unduly relied on such evidence in making its determination that those funds were “proceeds of” prior drug deals. In the context of a long-running criminal conspiracy, it is appropriate to consider the use of laundered funds for the perpetuation of an unlawful activity as circumstantial, but not conclusive, evidence that those funds were derived from that same unlawful activity. U.S. v. Lucena-Rivera, __ F.3d __ (1st Cir. Apr. 24, 2014) No. 12-2200.
1st Circuit remands for failure to make findings on listed factors for “in the business” increase. (360) Defendant pled guilty to conspiring to commit money laundering. The district court applied an enhancement under § 2S1.1(b)(2)(C) for being “in the business of laundering funds.” An application note to § 2S1.1 directs the court to consider a non-exhaustive list of factors, including that the defendant (1) regularly engaged in laundering funds, (2) during an extended period of time, (3) from multiple sources, and (4) generated a substantial amount of revenue in return for laundering funds. The district court specifically acknowledged these factors, but made no factual findings as to their existence. The First Circuit held that the lack of adequate findings on these factors prevented adequate appellate review, and remanded the case for findings on these factors on the existing record. U.S. v. Lucena-Rivera, __ F.3d __ (1st Cir. Apr. 24, 2014) No. 12-2200.
1st Circuit agrees that structured funds were proceeds of unlawful activity. (360) Defendant swindled various sums of money from an elderly widower. In one instance, he took out an $89,000 loan on some jointly owned property in Maine that he had induced the widower to invest in. Defendant wired the loan proceeds to his own bank account, and withdrew all of these funds, always in increments of less than $10,000. Defendant was convicted of structuring financial transactions to evade reporting requirements. The district court found that defendant knew the structured funds were the proceeds of unlawful activity, and applied a two-level increase under § 2S1.3(b)(1)(A). The First Circuit affirmed, rejecting defendant’s argument that the widower consented to the Maine transaction. Defendant misrepresented the nature of the Maine transaction by failing to disclose to the widower and his financial manager that the other partners in the property were defendant’s sons or that the widower was providing all of the purchase money. Defendant also promised illusory returns on the investment, and then convinced the widower to take out a loan on the property and to transfer the bulk of the loan proceeds to defendant’s account. Thus, defendant knew the structured funds derived from unlawful activity. U.S. v. Souza, 749 F.3d 74 (1st Cir. 2014).
1st Circuit affirms finding that grocery store was “in the business of laundering funds.” (360) Defendant operated an illegal scheme in which the supermarkets he owned and operated provided cash for food stamps. He was convicted of conspiracy to commit food stamp fraud and money laundering, and the district court applied a four-level increase under § 2S1.1(b)(2)(C) for being “in the business of laundering funds on behalf of others, thus gaining financially from engaging in such transactions.” On appeal, the First Circuit found no plain error. The parties did not cite any case law interpreting this guideline, nor was it obvious what the outcome should be where the same business from which the fraud arose is used to launder the funds, and where a number of co-conspirators commit the fraud and assist each other in laundering the fraudulent proceeds into the business’s larger pool of assets. Any error was not plain. It was also not clear that this issue mattered to the sentence ultimately imposed, since defendant was the beneficiary of a significant downward variance. U.S. v. Aguasvivas-Castillo, 668 F.3d 7 (1st Cir. 2012).
1st Circuit says offense-level reduction for money laundering conspiracy is inapplicable when defendant knew source of funds. (360) The money laundering guideline, § 2S1.1(b)(2) (B), requires a two-level enhancement for defendants convicted of violating 18 U.S.C. § 1956, which makes it a crime to launder money when the defendant knows that the laundered funds derive from unlawful activity. An application note provides that the enhancement should not be applied to a defendant who is convicted of conspiracy to launder money, in violation of 18 U.S.C. § 1956(h), and the sole object of the conspiracy was to commit an offense under 18 U.S.C. § 1957, which makes it a crime to launder funds that derive from unlawful activity. Defendant was convicted of conspiracy to launder money in violation of § 1956(h), but the district court found that he knew that the proceeds involved in his offense derived from drug trafficking. For that reason, the First Circuit held that the application note did not apply to defendant. U.S. v. Torres-Velazquez, 480 F.3d 100 (1st Cir. 2007).
1st Circuit sees no clear error in finding that defendant knew laundered funds were drug proceeds. (360) The money laundering guideline provides for a six-level enhancement if the defendant knew or believed that the laundered funds were the proceeds of, or were intended to promote, an offense involving the manufacture, importation, or distribution of a controlled substance. Defendant, who had two prior drug convictions, drove his codefendants to a meeting where his codefendants agreed to give money to an undercover agent to be laundered, but defendant did not participate in the meeting. The next day, defendant drove his codefendants to the meeting to deliver the cash. Police officers attempted to pull over defendant’s car before the exchange, and defendant led the officers on a high-speed chase. When the officers stopped the car, they found more than $750,000 inside. At defendant’s sentencing for conspiracy to launder money, a government agent testified that defendant and his co-defendants followed the method of operation used for laundering drug proceeds. The First Circuit held that the district court did not clearly err in finding that defendant knew or believed that the money was the proceeds of drug trafficking. U.S. v. Torres-Velazquez, 480 F.3d 100 (1st Cir. 2007).
1st Circuit rules court properly applied special offense characteristic provisions of §2S1.1(b) after calculating offense level under extortion guideline. (360) Defendant, the former major of a city in Puerto Rico, extorted money from government contractors and embezzled city funds. Section 2S1.1, the money laundering guideline, directs a sentencing court to take as the base offense level the full calculated offense level that applies to the offense that produced the laundered funds. Following this instruction, the district court calculated defendant’s offense level as it would have applied to the extortion counts standing alone, making reference to §2C1.1. The court then returned to §2S1.1 and found that a further two-level enhancement was warranted under §2S1.1 (b)(2)(B) because defendant was convicted of money laundering under 18 U.S.C. §1956. Defendant argued that, having once turned from §2S1.1 to §2C1.1, the court should not have turned back to a consideration of the special offense characteristics under §2S1.1(b). The First Circuit found this argument “flatly incorrect.” Section 2S1.1 contemplates that that the adjustments for special offense characteristics specified in its part (b) will be applied after the base offense level specified in its part (a) has been calculated whether or not that base offense level is calculated by reference to another provision of the guidelines. U.S. v. Cruzado-Laureano, 440 F.3d 44 (1st Cir. 2006).
1st Circuit holds that partner in scheme was responsible for full amount of loss from scheme. (360) Defendants, officers of the Puerto Rico Department of Education, devised an extortion and kickback scheme that involved fraudulent payments of more than $4.3 million in cash and property from contractors. The district court used the total loss alleged in the indictment in calculating defendant’s sentence under the money laundering guideline, § 2S1.1. He argued that his sentence should have been based on the amount attributed to him in his plea agreement, $600,000, which would have triggered only a three-level increase. The First Circuit found no clear error. Although defendant was not personally implicated in the full $4.3 million loss charged in the indictment, the sentencing court believed that defendant and Fajardo were equally culpable “partners in crime.” Based on defendant’s extensive involvement throughout the relevant six-year period, as detailed in his plea and cooperation agreement, the district court supportably found that defendant shared responsibility as a partner for the full amount of loss. U.S. v. Cruz-Mercado, 360 F.3d 30 (1st Cir. 2004).
1st Circuit finds insufficient evidence to hold defendant accountable for all money laundered by conspiracy. (360) Defendant helped a drug dealer launder money by participating with the dealer in the purchase of a boat, which was placed in defendant’s name despite the fact that he put up no money for the boat. Defendant also aided the dealer in transporting cash to purchase other items for the dealer. At sentencing, the district court held defendant accountable for that the full amount of money laundered by the conspiracy, since it was foreseeable to defendant. The First Circuit reversed, finding insufficient evidence to support the theory that defendant was aware of any money laundering transactions beyond those in which he participated. Under the guidelines, defendant was responsible for the entire $2 million laundered by the conspiracy only to the extent that he could foresee that the dealer was using this single conspiracy or joint undertaking to launder all of his drug money or, that the specific conspiracy or joint undertaking in which defendant was involved was large enough to encompass $2 million. The government did not point to any such evidence. U.S. v. Rivera-Rodriguez, 318 F.3d 268 (1st Cir. 2003).
1st Circuit holds that evidence supported increase for knowledge that funds transmitted were drug proceeds. (360) The district court applied a § 2S1.1(b)(1) enhancement due to defendant’s knowledge that the funds he transmitted were the result of drug dealing. Defendant argued that because he entered an Alford plea to the money laundering charges, the increase could not be applied because he did not admit the requisite knowledge. The First Circuit ruled that it is not necessary that defendant admit to the facts upon which an enhancement is based. The evidence supporting the court’s finding was more than sufficient. The court was entitled to consider evidence presented in the trial prior to defendant’s guilty plea, as well as the facts recorded in the PSR, such as that defendant was the principal contact with several of the drug dealers, and that the undercover officer represented the funds he wished to transfer were drug proceeds. The court expressly adopted the facts set out in the PSR, and defendant did not dispute these facts. U.S. v. Bierd, 217 F.3d 15 (1st Cir. 2000).
1st Circuit says money laundering offenses listed on same row of § 3D1.2(d) are grouped “automatically.” (360) Following § 3D1.2(d), the district court grouped together defendants’ two money laundering counts (§ 2S1.2) with his four counts of engaging in monetary transactions with the proceeds of illegal activity (§ 2S1.1). Some cases have suggested that inclusion on the list of offenses under § 3D1.2(d) does not mean that grouping is automatic. The First Circuit found that these cases only question whether it is imperative to group all offense covered by guidelines listed in paragraph 2 of § 3D1.2(d), and not those offenses listed in the same row of that paragraph (each row is set off by a semicolon). See e.g. U.S. v. Harper, 972 F.2d 321 (11th Cir. 1992) (refusing to group offenses under §§ 2S1.1 and 2D1.1, stating that “grouping is not automatic” for offenses on the list in paragraph 2 of § 3D1.2(d)). The panel also concluded held that counts under guideline §§ 2S1.1 and 2S1.2, which are listed in the same row of paragraph 2 of § 3D1.2(d) “are to be grouped automatically.” Since the grouping was proper, the district court was required to aggregate the total value of the funds involved in all the grouped offenses. U.S. v. Zanghi, 189 F.3d 71 (1st Cir. 1999).
1st Circuit says court properly used fraud table to determine loss in money laundering case. (360) Defendant was convicted of failing to report that he was transporting over $10,000 in currency out of the United States. He argued that the court erred in applying a § 2F1.1(b)(1) (h) loss enhancement, because there was no “loss” in his crime. The First Circuit found that the district court properly followed § 2S1.3, which provides the base offense level for the “Failure to File Currency and Monetary Instrument Report.” The base offense level is “6 plus the number of offense levels from the table in § 2F1.1 … corresponding to the value of the funds.” The district court thus properly enhanced defendant sentence because the “value of the funds” exceeded $120,000. U.S. v. Beras, 183 F.3d 22 (1st Cir. 1999).
1st Circuit says money laundering amendment applies to mistaken belief about money from government sting. (360) Defendants were convicted of RICO and money laundering charges. Section 2S1.1(b)(1) in effect at sentencing, provided an enhancement if the defendant “knew or believed” that the laundered money was the proceeds of narcotics sales. Before November 1991, the enhancement applied only if the defendant “knew” that the money came from narcotics. The First Circuit held that the amended guideline did not violate the ex post facto clause because defendants knew that the laundered funds were drug proceeds. The amendment was intended to apply to cases in which a defendant “knew” that drug trafficking was involved, but the knowledge turned out to be mistaken because the operation was a government sting and no narcotics were involved. Here, the money was in fact drug proceeds, so belief and knowledge were the same thing. The volume of funds, the duration, the geographic source, the use of small bills and other circumstances made it reasonable to infer that direct participants in the enterprise knew that the funds were derived from drugs. U.S. v. Hurley, 63 F.3d 1 (1st Cir. 1995).
1st Circuit says money laundering amendment did not affect defendant’s sentence. (360) Defendant ran a large money laundering organization. He argued that the district court violated the ex post facto clause by enhancing his offense level under a 1991 amendment to § 2S1.1(b)(1) that applied to defendants who “knew or believed” that the funds they laundered were illegal proceeds. Before 1991, the enhancement applied only to defendants who “knew” the funds were illegal proceeds. The First Circuit affirmed the enhancement. First, defendant waived the issue by not raising it below. Second, defendant was the mastermind of the money laundering ring. He most likely both knew and believed that the money was the proceeds of illegal activity. He did not demonstrate how the guideline amendment made any real difference in his case. U.S. v. Saccoccia, 58 F.3d 754 (1st Cir. 1995).
1st Circuit finds no double counting in using same money for laundering and stolen goods offenses. (360) Defendant stole computer equipment from a manufacturer’s warehouse, and then resold the equipment. He was convicted of transporting stolen property and money laundering (in connection with his use of the sale proceeds). He asked for a downward departure on the ground that the same amount of money was double counted—once in the offense level calculations for money laundering and once in the offense level calculations for transporting stolen goods. The 1st Circuit doubted that this practice could be called double counting, since each crime was separate and distinct with its own measure of loss. The two figures were determined differently. The existence of some indeterminate degree of overlap between these figures did not constitute double counting. Moreover, even if there was double counting, it was not sufficiently “unusual” or “special” to warrant a downward departure. U.S. v. Pierro, 32 F.3d 611 (1st Cir. 1994).
1st Circuit says money laundering offense did not fall outside of “heartland.” (360) Defendant stole computer equipment from a manufacturer’s warehouse, and then resold the equipment. He was convicted of interstate transportation of stolen property and money laundering. The district court departed downward, finding this was a garden-variety theft case that the guidelines treated as a money laundering case. The 1st Circuit reversed, holding the case did not fall outside the “heartland” of money laundering cases. Defendant’s money laundering arose out of his use of proceeds from the sale of stolen property. The statute does not exempt people who merely launder money in furtherance of underlying criminal activity. Congress meant to address conduct undertaken after, but in connection with, an underlying crime, rather than merely affording an alternative means of punishing the underlying crime. U.S. v. Pierro, 32 F.3d 611 (1st Cir. 1994).
1st Circuit says gambling operators should have been sentenced under money laundering guideline. (360) Defendants operated an illegal gambling operation. They were convicted of money laundering for accepting and negotiating checks from gamblers who bet on sporting events. The district court found it was more appropriate to sentence defendants under the guidelines for operating an illegal gambling business, rather than under the money laundering guidelines. The 1st Circuit reversed, ruling that defendants’ conduct fell within the “heartland” of money laundering and therefore did not justify a downward departure. One defendant asked gamblers to structure their checks in amounts less than $10,000 and make them payable to fictitious payees. Both defendants received and negotiated the checks. Thus, defendants committed two offenses: gambling, followed by money laundering. The money laundering activity was within the full contemplation of Congress when it enacted 18 U.S.C. § 1956. U.S. v. LeBlanc, 24 F.3d 340 (1st Cir. 1994).
1st Circuit affirms enhancement despite “sentencing entrapment” claim. (360) Defendant was caught laundering money in a government sting operation. He contended that the government engaged in “sentencing entrapment” by having an undercover agent advise him that the money was drug proceeds, for the sole purpose of increasing his sentence under 2S1.3(b)(1). Defendant had already conducted three laundering transactions when the agent told him the supposed origin of the funds. The 1st Circuit found that even if under certain extreme circumstances the government’s manipulation in a sting operation must be filtered out of the sentencing process, this was not such a case. Defendant was clearly on notice after the undercover agent advised him that the money was criminally derived, yet he continued to launder money for the agent. There was no evidence that the agent threatened defendant into continuing with the operation. U.S. v. Connell, 960 F.2d 191 (1st Cir. 1992).
1st Circuit remands for district court to consider whether to reduce defendant’s sentence in light of amended guideline. (360) Defendant received a five-level enhancement under guideline section 2S1.3(b)(1). After he was sentenced, that section was amended (effective November 1991) to provide for only a four level enhancement. The 1st Circuit remanded the case for the district court to consider whether defendant should receive a one level reduction in offense level. Guideline section 1B1.10(a) provides that where a defendant is serving a term of imprisonment and his guideline range is subsequently lowered as a result of certain referenced amendments, then a reduction of sentence may be considered. The amendment to section 2S1.3(b)(1) was one of the amendments to which section 1B1.10(a) applied. The court found it preferable that the matter of sentence reduction be considered first by the sentencing court, not the appellate court. U.S. v. Connell, 960 F.2d 191 (1st Cir. 1992).
1st Circuit reviews determination that defendant knew laundered money was criminally derived for clear error. (360) The 1st Circuit reviewed the district court’s determination under guideline section 2S1.3 that defendant knew laundered money was criminally derived for clear error. U.S. v. Connell, 960 F.2d 191 (1st Cir. 1992).
1st Circuit rules that stockbroker’s special skill was not specific offense characteristic of structuring charge. (360) Defendant, a stockbroker, was convicted of structuring financial transactions to avoid currency reporting requirements. He received an enhancement under guideline section 3B1.3 for using a special skill to significantly facilitate his crime. The 1st Circuit rejected the argument that the enhancement was improper because the skill was already included in the base offense level or a specific offense characteristic. The essence of illegally structuring monetary transactions is a defendant’s ability to convert large sums of cash into smaller sums, thereafter passing the smaller sums through a bank account or investment medium in a way that avoids the need to file a currency report. In its simplest form, the crime does not need any detailed knowledge or specialized skill of financial markets. Defendant’s use of his special skill was not a prerequisite to committing the crime; it merely facilitated the crime. U.S. v. Connell, 960 F.2d 191 (1st Cir. 1992).
2nd Circuit bases money laundering offense level on larger drug quantity involved in underlying drug conspiracy. (360) Defendant and his principal co-conspirator engaged in a conspiracy to distribute drugs and to launder money. The district court grouped the counts together pursuant to § 3D1.2(c), then calculated defendant’s base offense level for the money laundering count by applying the total amount of drugs involved in the drug conspiracy count. Defendant argued that, because U.S.S.G. § 2S1.1(a)(1) incorporates the relevant conduct guideline, § 1B1.3, then just as a defendant’s relevant conduct can elevate the offense level, it can also reduce the offense level. Under this logic, defendant claimed that the relevant mitigating conduct here was that he laundered only 2-3.5 kilograms worth of drug proceeds rather than the entire 21 kilograms involving in the drug conspiracy. The Second Circuit rejected this argument, finding it lacked support in the text and purpose of the Guidelines. The district court properly applied the base offense level for the drug conspiracy count to the money laundering count without giving any reduction in offense level based on the lesser amount of funds actually laundered in the criminal scheme. U.S. v. Menendez, 600 F.3d 263 (2d Cir. 2010).
2nd Circuit remands to allow more flexible approach in applying money laundering guideline. (360) Defendant operated a fraudulent charity that illegally sent money to Iraq. He argued that the sentence for his money laundering charges should have been calculated under § 2S1.1(a)(1) because he used the proceeds of the fraud to conduct the money laundering. The Second Circuit found no error, but nonetheless remanded for the district court to consider whether a different sentence would result from the application of a more flexible approach. The district court was correct that choosing § 2S1.1(a) (2) rather than § 2S1.1(a)(1) would avoid the odd result that defendant would receive a lower sentence if the laundered money was criminally-derived than if it was “legally-obtained.” However, post-Booker, there was no need for the judge to pigeonhole the case into § 2S1.1(a)(2) to avoid an illogical result and run the risk of setting a bad precedent; there was no need to choose between the two at all. The district court was not bound in ambiguous circumstances such as these to choose one Guideline range in particular, and was free to take the more flexible approach of arriving at a more appropriate sentence outside the Guidelines. U.S. v. Dhafir, 577 F.3d 411 (2d Cir. 2009).
2nd Circuit says labor union was not a “victim” of money laundering conspiracy. (360) As part of a money laundering scheme, the president of a corporation used cash to pay union employees off the books. A local labor union moved for restitution pursuant to the MVRA, contending that the collective bargaining agreements between itself and the corporation required the corporation to make payments to union funds, and that by paying employees in cash, the company had evaded that requirement. The Second Circuit held that the union was not a “victim” of the money laundering conspiracy, and thus was not entitled to restitution. The union argued that it was a victim of defendant’s scheme to get cash to pay union workers, thus avoiding an obligation to pay monies owed to the union under collective bargaining agreement. This was not the case. While the president admittedly had a plan to obtain laundered money and then use that money to pay his employees in cash while simultaneously avoid paying taxes and union obligations, the only criminal charge that defendant stood convicted of was conspiracy to engage in money laundering. The crime of conspiracy to launder money had already been committed by the time the cash was given to the union workers. In re Local #46 Metallic Lathers Union and Reinforcing Iron Workers, 568 F.3d 81 (2d Cir. 2009).
2nd Circuit uses less serious money laundering guideline for RICO conspiracy defendant. (360) Defendant was convicted of a racketeering conspiracy. Section 2E1.1, the racketeering guideline, provides for an offense level of the higher of (1) 19, or (2) the offense level applicable to the underlying racketeering activity. The underlying racketeering activity here was money laundering, for which § 2S1.1(a) provides for a base offense level of.: “(1) 23, if convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A); (2) 20, otherwise.” The government argued that although defendant was convicted of a RICO conspiracy under 18 U.S.C. § 1962(d), his base offense level should be calculated as if he were convicted under one of the listed promotion offenses in subsection (1). The Second Circuit disagreed, and held that the district court properly determined defendant’s base offense level to be 20 under subsection (2). Defendant’s conviction was based on the offense of participation in a RICO conspiracy, 18 U.S.C. 1962(d), not “conspiracy, attempt, solicitation, aiding or abetting, accessory after the fact, or misprision of felony” in respect to 18 U.S.C. 1956(a)(1)(A), (a)(2)(A) or (a)(3)(A). U.S. v. Rosse, 320 F.3d 170 (2d Cir. 2003).
2nd Circuit says heartland of money laundering guideline not limited to organized crime and drugs. (360) The district court granted defendant’s motion for a downward departure on his money laundering offense, finding that defendant’s crime was outside the heartland of the money laundering guideline. It found that the heartland of the money laundering guideline involved “widespread and far-reaching schemes such as those associated with organized crime, racketeering offenses, or serious drug crimes and conspiracies.” In contrast, defendant’s business, asbestos abatement and removal, “was at its core legitimate.” The Second Circuit found that the district court erred in finding that defendant’s offense was atypical simply because he did not launder the proceeds of serious crimes like drug trafficking and organized crime. In U.S. v. McCarthy, 271 F.3d 387 (2d Cir. 2001), decided 17 days before defendant was sentenced, the court rejected the argument that the money laundering guideline was limited to proceeds derived from drugs or organized crime. The case was remanded for consideration by the district court in light of McCarthy. U.S. v. Thorn, 317 F.3d 107 (2d Cir. 2003).
2nd Circuit says Apprendi did not bar consideration of laundered money not included in indictment. (360) Defendant was convicted of violating the Clean Air Act and conspiracy to promote money laundering. He argued that Apprendi v. New Jersey, 530 U.S. 466 (2000) required the court to limit the amount of money laundered under § 2S1.1 to the $939,079.98 identified in the indictment. The district court agreed, excluding from its calculations the $1.45 million for the remaining projects that were not included in the indictment. The Second Circuit reversed, holding that Apprendi did not preclude the court from including funds derived from uncharged projects. “Apprendi does not apply to enhancements that determine a sentence that is within the applicable statutory maximum and that would otherwise be above the applicable statutory minimum.” U.S. v. Norris, 281 F.3d 357 (2d Cir. 2002). The statutory maximum term for the money laundering offense was 20 years. Had the district court found, by a preponderance of the evidence, that the value of the laundered funds was over $2 million, Apprendi would only have been implicated only if the sentencing judge had imposed a sentence greater than the statutory maximum of 240 months. U.S. v. Thorn, 317 F.3d 107 (2d Cir. 2003).
2nd Circuit upholds separate grouping of fraud and money laundering offenses. (360) Defendants were involved in an extensive securities fraud scheme. The Second Circuit upheld the district court’s decision to group the fraud and money laundering counts separately. The victims of the fraud and money laundering offenses were distinct – the individual investors suffered defendants’ fraud, while the public as a whole was the victim of defendants’ attempts to conceal their relationship to one another and the source of their illegally obtained funds. For example, when asked about the source of the funds obtained from one entity, defendant lied to the NASD, claiming that the funds were compensation for consulting services. This impeded the discovery of the source of the funds, and delayed the revelation of the fraudulent scheme to the public. U.S. v. Szur, 289 F.3d 200 (2d Cir. 2002).
2nd Circuit holds that money laundering scheme involved intent to promote unlawful activity. (360) Defendant operated a classic Ponzi scheme. He offered clients the opportunity to pool their money with other clients to buy master CDs with higher face values and higher rates of return. In reality, he never purchased any CDs, using some of the investment funds to make interest payments to earlier investors, and diverting the rest of the funds to maintain a lavish lifestyle. Under the version of § 2S1.1 in effect at the time of sentencing, the base offense level for money laundering was 23 if the defendant was convicted under 18 U.S.C. § 1956(a)(1)(A), (a)(2)(A) or (a)(3)(A), the subsections covering money laundering that “promotes” an unlawful activity. The base offense level for money laundering that concealed the proceeds of an unlawful activity was 20. Defendant was charged with and sentenced for violating § 1956(a)(1)(A) for money laundering with the intent to promote the carrying on of unlawful activity. Defendant argued that his money laundering was only intended to conceal his fraud, not to promote it. The Second Circuit disagreed, finding that by using some of the fraudulently obtained funds to make purported interest payments, defendant engaged in money laundering with intent to promote unlawful activity. A Ponzi scheme by definition uses the purportedly legitimate but actually fraudulently obtained money to perpetuate the scheme, thus attracting both further investments and, in many cases, new investors to defraud. U.S. v. Moloney, 287 F.3d 236 (2d Cir. 2002).
2nd Circuit says it cannot review court’s refusal to depart based on atypical nature of money laundering. (360) Defendant was convicted of multiple counts of embezzlement from employee benefits funds, money laundering, and related counts. He argued that the district court erred as a matter of law by not deeming his money laundering atypical, and sentencing him under the embezzlement guideline as “the guideline section most applicable to the nature of this offense.” Appendix A. After defendant’s sentencing, Appendix A was amended and now no longer permits the court to find a case “atypical” and sentence outside the offense guideline. See Amendment 591 (2000). The Second Circuit did not reach the issue of whether the amendment applied retroactively because it found the court’s decision unreviewable. A district court’s refusal to downwardly depart based on the atypical nature of the conduct charged is unappealable unless the court fails to recognize it has authority to depart. During sentencing, the district court recognized it had authority to depart “on any of the areas … any and all …” that defendant briefed in his sentencing memo to the court. Further, the district court correctly found defendant’s conduct did not represent an “atypical” money laundering case. U.S. v. McCarthy, 271 F.3d 387 (2d Cir. 2001), abrogation on other grounds recognized by U.S v. Robinson, 430 F.3d 537 (2d Cir. 2005).
2nd Circuit rules case is not atypical and upholds use of money laundering guideline. (360) Defendant devised a scheme to transfer his failing company’s assets to himself and his wife. He withdrew over one million dollars from the company and deposited this money into five different accounts under his or his wife’s name. Defendant then transferred the money a second time into secret accounts that he had set up using his wife’s maiden name, his mother-in-law’s home address, and false social security numbers. Defendant was convicted of a variety of bankruptcy fraud counts and money laundering. The Second Circuit held that defendant was properly sentenced under the money laundering guideline rather than the fraud guideline. Defendant relied on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), which held that a defendant’s money laundering conviction was atypical, and directed the district court on remand to apply the fraud guideline. The panel here found Smith unpersuasive, noting that the Sentencing Commission has recently deleted the language in Appendix A referring to “atypical cases.” Moreover, defendant’s money laundering was not atypical. Defendant’s money laundering activity consisted of a serious of financial transactions completely separate from his bankruptcy fraud. U.S. v. Sabbeth, 262 F.3d 207 (2d Cir. 2001).
2nd Circuit says defendant cannot avoid responsibility by consciously avoiding knowledge of source of funds. (360) Section 2S1.1(b)(1) directs a court to apply a three-level enhancement if “the defendant knew or believed” that the funds he laundered were drug proceeds. Although defendant claimed that he had no actual knowledge that the money he laundered was drug proceeds, the PSR found that such knowledge should be imputed to him because of his willful blindness to circumstances that made it apparent that the money was drug proceeds. Defendant argued that the doctrine of conscious avoidance was inapplicable to § 2S1.1(b)(1), since it uses the word “knew” rather than “knew or should have known.” The Second Circuit disagreed, holding that a defendant’s conscious avoidance of knowledge that funds underlying money laundering activities can be considered in applying § 2S1.1(b)(1). Evidence of conscious avoidance is a proper consideration at sentencing. There was sufficient evidence, largely from defendant’s own statements, that he consciously avoided knowing that the funds he laundered were drug proceeds. For example, he told an FBI agent that he “eventually suspected” that the source of the cash was narcotics, because “people were being arrested right and left.” Although he was never told directly that the cash came from drugs, he said “you would have to be stupid” not to suspect that this was the source of the money. U.S. v. Finkelstein, 229 F.3d 90 (2d Cir. 2000).
2nd Circuit infers from convoluted steps that laundered money was drug proceeds. (360) Defendant laundered drug money for Colombian drug traffickers. The money laundering statute authorizes a fine “of not more than twice the amount of the criminally derived property involved in the transaction.” 18 U.S.C. § 1957(b)(2). The judge imposed a fine of $6.3 million based on three money laundering transactions involving a total of $3,150,000. The Second Circuit rejected defendant’s claim that the money that passed through his Swiss bank account to purchase an aircraft for Colombian buyers was not criminally derived. The scheme required many convoluted steps, involving front companies and numerous wire transfers from different accounts, a ruse that is characteristic of drug traffickers. The fine was not inconsistent with the district court’s refusal to enhance defendant’s sentence under USSG § 2S1.2 to reflect his knowledge that he was laundering drug proceeds. The requirements of § 1957 and USSG § 2S1.2 are different. Moreover, the court used a more lenient standard of proof in calculating defendant’s fine. U.S. v. Reiss, 186 F.3d 149 (2d Cir. 1999).
2nd Circuit groups money laundering and fraud counts separately. (360) Defendant participated in a scheme to lure foreign buyers to make sizeable deposits for the delivery of non-existent cigarettes. The Second Circuit held that the district court properly refused to group his fraud and money laundering counts together under either § 3D1.2(b) or (d). Section 3D1.2(b) only allows for grouping when counts involve the same victim. Section 3D1.2(d) requires grouping when “the offense level is determined largely on the basis of the total amount of harm or loss … or some other measure of aggregate harm …” Note 6 says that two counts that measure harm in quantities should be grouped only if the counts are also of the “same general type.” The offense level for fraud depends primarily on the amount of loss involved. By contrast, because the money laundering guideline sets the base offense level at either 20 or 23, the total offense level is based primarily on the base offense level, rather than the amount of money involved. Finally, grouping fraud and money laundering counts would produce anomalous result in cases where only a small portion of the funds obtained by a fraud are laundered. Grouping such counts would actually increase the defendant’s sentence. U.S. v. Napoli, 179 F.3d 1 (2d Cir. 1999).
2nd Circuit holds that defendant did not use funds for unlawful purpose. (360) Defendant was an officer of a corporation that agreed to purchase real estate for $950,000. The deal called for a secret $100,000 cash payment to the seller at closing. Defendant’s corporation tendered $50,000 and a $50,000 cashier’s check. When the sellers refused to accept the check, defendant drafted six checks totaling $50,000, each made payable to “cash” for an amount less than $10,000. Defendant arranged for the checks to be cashed, and then delivered the $50,000 in cash to complete the transaction. Defendant pled guilty to conspiring to structure financial transactions to evade reporting requirements. Guideline § 2S1.3(b)(2) provides for a reduction if four conditions are met, including the condition that the funds were used for a lawful purpose. The Second Circuit held that the district court erred as a matter of law in finding that defendant used the funds for an unlawful purposes. Although the money was to be used by the sellers to commit tax evasion, § 2S1.3(b)(2)(D) speaks in terms of the purpose for which the structured funds were used by the defendant. Here the funds were used for the wholly legal purpose of purchasing real estate. Although § 2S1.3(c) cross references § 2T1.1 if the offense was committed to violate tax laws, the government did not seek defendant’s sentencing on that predicate. U.S. v. Bove, 155 F.3d 44 (2d Cir. 1998).
2nd Circuit does not require a significant proportion of laundered funds to be illegal proceeds. (360) Defendant owned a car dealership that sold cars to drug dealers, who frequently purchased the cars with cash using names other than their own. The dealership routinely substituted checks for the cash payments to avoid cash reporting requirements. Defendant was convicted of money laundering. The district court refused to apply a § 2S1.1(b)(1) enhancement for knowing that the laundered funds came from illegal activity since there was no evidence that a significant proportion of the $832,000 that defendant laundered was the proceeds of narcotics trafficking. The Second Circuit reversed, holding that § 2S1.1(b)(1) does not require that the defendant know that a “significant proportion” of the laundered funds were illegal proceeds. This would be inconsistent with the plain meaning and purpose of this provision. U.S. v. Wisniewski, 121 F.3d 54 (2d Cir. 1997).
2nd Circuit bases laundered amount on acquitted conduct. (360) The district court added three points to defendant’s offense level for having laundered over $500,000. Defendant asserted that this represented the total amount of laundered funds charged in all 28 money laundering counts and 14 related racketeering acts, despite the fact that he was acquitted of all but 6 of the money laundering counts and 3 of the related racketeering acts. The amounts involved in the counts of conviction totaled only $70,000. The Second Circuit held that the district court properly enhanced defendant’s sentence based on acquitted conduct that the district court found to have occurred by a preponderance of the evidence. U.S. v. Zagari, 111 F.3d 307 (2d Cir. 1997).
2nd Circuit finds defendant in sting operation believed laundered money was from drugs. (360) Defendant agreed to launder money for an undercover agent. During their first meeting, the agent told defendant that the money he wished to launder was derived from cocaine trafficking. The district court imposed a § 2S1.1(b)(1) enhancement because defendant believed the money she was laundering was derived from drug transactions. The Second Circuit rejected defendant’s argument that the enhancement should not apply where a defendant’s sole reason for believing the money is tainted is an unsolicited statement by an undercover agent in a sting operation. The language of § 2S1.1(b)(1) effective 1991 is sufficiently broad to encompass a defendant who “believed” the funds she was laundering were drug proceeds, even though that belief was misplaced. The result is not different simply because the source of the mistaken belief is an undercover agent’s statement in a sting operation. U.S. v. Knecht, 55 F.3d 54 (2d Cir. 1995).
2nd Circuit rejects upward departure because defendant’s bank fraud was not money laundering. (360) Defendant’s associates were involved in a scheme to deposit counterfeit checks in a Swiss bank account, and transfer the proceeds back to the United States. The conspirators were unable to negotiate any of the fraudulent checks. However, with defendant’s help, they were able to cash a small number of stolen checks at a Texas bank and obtain $500,000. Defendant pled guilty to bank fraud. His associates were also convicted of international money laundering charges. The district court departed upward under note 13 to § 2F1.1, believing that defendant’s offense essentially involved money laundering, rather than bank fraud. The Second Circuit reversed, since engaging in a domestic financial transaction with the proceeds of a simple theft is not money laundering under 18 U.S.C. § 1956(a)(1). While bank fraud is a specified unlawful activity under the money laundering statute, it was not the source of proceeds in this case. U.S. v. Napoli, 54 F.3d 63 (2d Cir. 1995), superseded by guideline on other grounds as stated in U.S. v. Genao, 343 F.3d 578 (2nd Cir. 2003).
2nd Circuit says higher money laundering level does not require knowledge that funds were criminally derived. (360) Defendant was convicted of several counts of structuring financial transactions to evade reporting requirements. Guideline section 2S1.3 provides for a base offense level of 13 if the defendant structured transactions to evade reporting requirements, or made false statements to conceal or disguise the evasion of reporting requirements, or reasonably should have believed that the funds were criminally derived. Otherwise the offense level is five. The 2nd Circuit rejected defendant’s claim that level 13 was only intended to cover those currency structuring transactions that involve illegally derived funds. Section 2S1.3 provides for a base offense level of 13 if the defendant structured transactions to evade reporting requirements, which is exactly what defendant did. The belief that funds were criminally derived provides an alternative basis for the level 13 base offense level; it is not a condition to the higher offense level. U.S. v. Caming, 968 F.2d 232 (2nd Cir. 1992), abrogation on other grounds recognized by Peck v. U.S., 73 F.3d 1220 (2d Cir. 1995).
2nd Circuit rules district court had authority to depart downward based on atypical money laundering crime. (360) On several occasions, one defendant sent cocaine to his co-defendant from Alaska via Express Mail. The co-defendant then sold the cocaine, converted the proceeds into a money order, and sent it to defendant. Money orders totaling $3,320 were purchased. Defendants were convicted of drug offenses and money laundering. The 2nd Circuit held that the district court mistakenly believed that it lacked authority to depart downward based on the atypical nature of the money laundering offense. Defendants did not use the financial transactions to conceal a serious crime; the money orders were simply used pay for illegal drugs. Although defendants’ conduct fell within the words of Money Laundering Act, the terms of the relevant commentary showed that their conduct fell well outside the “heartland” of such cases. U.S. v. Skinner, 946 F.2d 176 (2nd Cir. 1991).
2nd Circuit affirms four-level downward departure based upon minimal role of defendants in money laundering scheme. (360) Based on their minimal role in a money laundering offense, defendants received both a four-level offense level reduction for minimal role under guideline § 3B1.2 and a four-level downward departure. The 2nd Circuit affirmed, holding that such a departure beyond the adjustments in § 3B1.2 is authorized where the minimal role is “extraordinary.” Defendants’ case presented such a situation. As a result of the large amount of cash involved, defendants received a nine-level increase in offense level. This single factor raised defendants’ guideline range from 33-41 months to 87 to 108 months. The sentencing commission apparently contemplated some connection between the quantity of money implicated and the extent of a defendant’s role in the offense. No such correlation was involved here. Defendants’ sole role in the offense was to load boxes of money in a warehouse on one particular date. U.S. v. Restrepo, 936 F.2d 661 (2nd Cir. 1991).
2nd Circuit affirms defendant knew money was criminally derived. (360) Defendant was convicted of failing to file a currency report, and his sentence was enhanced under guideline § 2S1.3 after the judge found that defendant knew or believed that the funds were criminally derived. The 2nd Circuit found that there was sufficient evidence to justify the enhancement. There was testimony by the probation officer that defendant told him he knew the money was “probably narco dinero,” which was supported by notes the officer took during the presentence interview. Defendant presented a facially implausible story that after one brief meeting with a total stranger, he was given a radio containing $876,000 in negotiable money orders, and thought the money was “profit from raffles.” This story was particularly implausible since defendant was arrested attempting to board a plane to Colombia. U.S. v. Cortes, 922 F.2d 123 (2nd Cir. 1990).
3rd Circuit affirms rabbi’s money laundering scheme as sophisticated despite Note 5. (360) Defendant, a rabbi, laundered money through tax-exempt Jewish charities known as “gemachs.” He challenged on appeal a § 2S1.1(B)(3) enhancement for sophisticated money laundering, contending that his conduct was not “complex or intricate” and involved none of the factors of sophisticated money laundering in Application Note 5. The Third Circuit ruled that the listed factors were not necessary for a finding that a particular laundering scheme was sophisticated, and upheld the enhancement. The elements that the district court found to be relevant were the duration of the scheme, the difficulty in uncovering it because of the use of multiple outlets for cash exchanges, multiple couriers and other participants, and multiple locations; the secrecy of the underlying aspects of the scheme; the efforts to evade detection by the use of codes and untraceable electronic devices; and the multiple sources of cash. The facts supported the district court’s conclusion that the scheme was sophisticated. U.S. v. Fish, 731 F.3d 277 (3d Cir. 2013).
3rd Circuit applies direct money laundering guideline. (360) Defendant shipped cocaine from California to Philadelphia, and received packages of cash back from his co-conspirator in Philadelphia. He was convicted of conspiracy to distribute cocaine and money laundering. The money laundering guideline, § 2S1.1, distinguishes between direct money launderers under subsection (a)(1) and third-party money launderers under subsection (a)(2). Direct launderers are those who also commit the crime that produces the illicit funds, whereas third-party launderers have no involvement in the underlying offense. Defendant argued that he should have been considered a third-party money launderer under subsection (a)(2) because the $15,000 in drug proceeds he received was supplied by the government as part of a sting operation. The Third Circuit upheld the application of § 2S1.1(a)(1). In his plea agreement, defendant admitted the $15,000 was drug proceeds that he accepted as payment for shipping one kilogram of cocaine to Philadelphia. Thus, he committed the underlying offense of cocaine distribution. U.S. v. Blackmon, 557 F.3d 113 (3d Cir. 2009).
3rd Circuit treats drug quantity as relevant conduct for money laundering conspiracy. (360) Defendant shipped cocaine from California to Philadelphia, and received packages of cash back from his co-conspirator in Philadelphia. He was convicted of conspiracy to distribute cocaine and money laundering. The Third Circuit held that the drug quantity from the cocaine conspiracy was properly incorporated as relevant conduct in calculating the base offense level under § 2S1.1(a)(1), the money laundering guidelines. Relevant conduct under § 1B1.3 must be considered when calculating the base offense level for direct money launderers under § 2S1.1 (a)(1). Defendant did not appeal the court’s finding that between 50 and 150 kilograms of cocaine were involved in the drug conspiracy. Thus, 36 was the correct base offense level for the money laundering count. U.S. v. Blackmon, 557 F.3d 113 (3d Cir. 2009).
3rd Circuit holds that money laundering amendment is substantive and cannot be applied retroactively. (360) In 1997, defendant was convicted of fraud and money laundering charges. In 2002, he sought to modify his sentence under 18 U.S.C. § 3582 based on Amendment 634 to the Sentencing Guidelines. Amendment 634, which became effective after defendant was sentenced, altered the guideline ranges for money laundering offenses. Because Amendment 634 is not listed in Subsection (c) of USSG § 1B1.10, the district court found that there was no basis for a modification of defendant’s sentence. The Third Circuit agreed that Amendment 634 was a substantive, rather than a clarifying amendment, which could not be given retroactive effect. Four other circuits agree with this position. Amendment 634 “redefines the way in which the offense level associated with the crime of money-laundering is calculated, so that the offense level for money laundering may now be dependent upon the offense level assigned to the underlying offense.” U.S. v. Edwards, 309 F.3d 110 (3d Cir. 2002).
3rd Circuit upholds use of money laundering guideline, rather than fraud guideline. (360) Someone stole from the mail ten blank “convenience checks” attached to the bottom of credit cards statements. Defendant opened three savings accounts at different banks under false names. Thereafter, all ten of the stolen checks were deposited, either by mail or teller deposit, into the savings account. After the banks credited the accounts with the deposits, defendant began withdrawing funds from the accounts. He pled guilty to several mail fraud counts and was convicted of eight money laundering counts. The Third Circuit held that defendant was properly sentenced under the money laundering guideline rather than the fraud guideline. First, the eight teller window withdrawals were separate from the underlying crime of obtaining and mailing the convenience checks to the various banks. Second, defendant’s conduct involved a concerted effort to conceal or legitimize the funds obtained through the mail fraud. The deposits were intended to conceal the source and nature of the proceeds and create an appearance of their legitimacy. Moreover, defendant laundered the proceeds through accounts using two different aliases, further compounding his attempts to conceal the funds and his control over them. U.S. v. Omoruyi, 260 F.3d 291 (3rd Cir. 2001).
3rd Circuit holds that money laundering defendant should be sentenced under fraud guideline. (360) Defendant, one of the owners of a vocational school, directed employees to prepare and mail falsified forbearance and deferment forms to lenders in the name of former students who had obtained financial assistance and were close to defaulting. This allowed the school to continue to participate in federal student loan programs. She was convicted of fraud and money laundering charges. The Third Circuit, applying U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), ruled that defendant should have been sentenced under the fraud guideline rather than the money laundering guideline. In light of recent amendments, Smith is no longer good law for those defendants sentenced after November 2000. However, for those cases not governed by the November 2000 guidelines, Smith says that the money laundering guidelines are not applicable to ordinary cases of routine fraud, to the simple receipt and deposit or use of illegally obtained funds, or to cases in which any money laundering is not separate from the underlying fraud. Here, defendant never used the proceeds of her fraud to promote additional criminal conduct. This was a simple receipt and deposit case to which § 2S1.2 should not apply. U.S. v. Diaz, 245 F.3d 294 (3d Cir. 2001).
3rd Circuit upholds use of money laundering guideline in food stamp fraud case. (360) Defendant, who operated a supermarket, purchased $1.5 million in food stamps from persons trafficking in illegal food stamps, and deposited those stamps into a bank authorized to receive food stamps. He pled guilty to food stamp fraud, money laundering, and making false statements. The Third Circuit upheld the district court’s use of § 2S1.1, the money laundering guideline. In U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), the court rejected the use of the money laundering guidelines in an embezzlement/ kickback case, ruling that in selecting the proper guideline the court should determine if the conduct being punished falls within the particular guideline’s heartland. Here, defendant admitted engaging in conduct that involved deposits of over $1.5 million that were intended to disguise the source and nature of the proceeds of his fraudulent activity. Each of those deposits was separate and distinct from the criminal activity from which they were derived. The district court did not plainly err in concluding that the financial transactions were separate from the underlying food stamp fraud, or that the deposits were intended to make it appear that the foods stamps were legitimate. Thus, the court properly sentenced defendant using the money laundering guideline. U.S. v. Mustafa, 238 F.3d 485 (3d Cir. 2001).
3rd Circuit holds that § 2S1.1 not limited to activity connected with drug trafficking and serious crime. (360) Defendant, a principal of a brokerage firm, stole $600,000 from the brokerage and its clients and fled to the Cayman Islands. He pled guilty to fraud and money laundering. Citing U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), the district court declined to sentence defendant under the money laundering guideline because it believed the § 2S1.1 heartland included only money laundering associated with extensive drug trafficking and serious crime. The Third Circuit held that the district court read Smith to create too narrow a heartland—Smith clearly contemplates applying § 2S1.1 to “typical” money laundering as well as to those activities connected with extensive drug trafficking and serious crime. “Typical” money laundering occurs when a defendant knowingly conducts a financial transaction to conceal tainted funds or funnel them into additional criminal conduct. Defendant’s activities appeared to constitute typical money laundering. After embezzling $600,000, defendant engaged in several acts to conceal the illegal source of the money. After wiring funds from the brokerage’s escrow account to an account in New York, defendant wired them a second time to casinos where he converted them to cash. He then secretly carried the cash to the Cayman Islands where he formed a corporation under a false name, and planned to deposit the money in bank accounts under different names in amounts under the $10,000 report limit. U.S. v. Bockius, 228 F.3d 305 (3d Cir. 2000).
3rd Circuit uses money laundering guideline where defendant used fraud proceeds to promote fraud. (360) Defendant, the owner of a vocational school, manipulated the loan default rate of the school’s students by submitting false documents to lenders and making payments on behalf of student borrowers on the verge of default. He pled guilty engaging in monetary transactions with the proceeds of specified unlawful activity, in violation of 18 U.S.C. § 1957. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant argued that his was an atypical money laundering case for which the fraud guideline should have been used. Smith found that the money laundering involved in an embezzlement-kickback scheme was an “incidental by-product” of the scheme, and applied the fraud guideline to the defendants’ § 1956 convictions. The Third Circuit found Smith distinguishable and upheld the use of § 2S1.2. First, although Smith said that the heartland of § 2S1.1 was money laundering connected with extensive drug trafficking and organized crime, it did not say that §§ 2S1.1 and 2S1.2 can only be used for defendants who have engaged in such conduct. Second, over 90 percent of defendant’s school revenues came from student loan funds. Defendant admitted that he used the proceeds of his crimes to continue his fraud, for example by making payments to various lenders so that it would appear as if the students were not in default. Since defendant used criminally derived property to promote further fraud, such conduct was not minimal or incidental to the underlying fraud. U.S. v. Cefaratti, 221 F.3d 502 (3d Cir. 2000).
3rd Circuit counts all funds in money laundering scheme, including funds returned to victims. (360) Defendants stole checks worth $352,220 and deposited them in a bank under a fictitious business name. They were able to withdraw all but $99,561 before the bank discovered the illegal activities and froze the account. The $99,561 was returned to the victims. The Third Circuit held that the calculation of “the value of the funds” under § 2S1.1(a)(2) includes the aggregate of all funds involved in the money laundering scheme, without regard to either the actual loss which the victims suffered or the return of any monies to the victims. Thus, the district court correctly calculated the value of the funds as $352,220. U.S. v. Thompson, 40 F.3d 48 (3rd Cir. 1994).
3rd Circuit agrees that courier knew money was proceeds of unlawful activity. (360) Defendant was convicted of a money laundering conspiracy after being arrested at the Miami airport carrying $186,000. The 3rd Circuit upheld an enhancement under section 2S1.1(b), agreeing that the evidence showed defendant knew the funds were proceeds from illegal drug transactions. In 1990, defendant wired to Colombia significantly more money than he reported on his federal tax return. He visited a business several times during the period in which cash exchanges took place between the money launderers and a cooperating witness. There was no legitimate reason for the visits. Police found large sums in small denomination bills and drug packaging materials at his residence. The confiscated cash contained traces of illegal drugs. U.S. v. Carr, 25 F.3d 1194 (3rd Cir. 1994).
3rd Circuit remands to consider amendment to structuring guideline. (360) The guideline for structuring currency transactions, § 2S1.3, was amended effective November 1, 1993, to reduce the base offense level. The 3rd Circuit remanded to consider whether, under the amended guideline, a reduction was warranted pursuant to 18 U.S.C. § 3582(c)(2) and guideline § 1B1.10(d). Under section 3582 and circuit case law, defendant’s sentence was final. Thus, he would be entitled to a modification only if the amendment was listed in the “retroactivity” section of the guidelines, § 1B1.10(d), and the district court exercised its discretion to apply the more lenient guideline. Here, the amendment to section 2S1.3 was listed in section 1B1.10(d), and therefore the court had discretion to apply it retroactively. The case the remanded for the district court to consider whether a reduction in sentence was appropriate. U.S. v. Marcello, 13 F.3d 752 (3rd Cir. 1994).
3rd Circuit rejects departure even though transactions involved legally-derived money. (360) Defendant was convicted of structuring bank deposits to evade currency reporting requirements. The currency was loan proceeds from a legitimate transaction. Defendant argued that a downward departure was warranted under section 5K2.11 because his conduct did not cause or threaten the harm that the statute sought to prevent. The district court rejected the argument, finding that U.S. v. Shirk, 981 F.3d 1382 (3rd Cir. 1992) barred a departure, and the 3rd Circuit agreed. Defendant’s violation was not “technical.” He structured the transactions to prevent the filing of the currency transaction reports. The fact that defendant’s money was legally obtained and subject to tax did not distinguish it from Shirk. Defendant’s conduct fell squarely within the conduct prohibited by statute. U.S. v. Marcello, 13 F.3d 752 (3rd Cir. 1994).
4th Circuit holds that series of deposits exceeding $100,000 were part of pattern of unlawful activity. (360) As part of her divorce settlement, defendant was to pay her husband $100,000 from cash defendant had stored in a safe deposit box. In an attempt to evade the currency reporting requirements in 31 U.S.C. § 5313(a), defendant made 11 separate deposits of $9,500 or less into a bank account between August 8 and August 29. She pled guilty to structuring transactions to evade financial reporting requirements. Section 2S1.3(b)(2) provides a two-level enhancement if the defendant committed “the offense as part of a pattern of unlawful activity involving more than $100,000 in a 12-month period.” Defendant argued that she committed only one chargeable offense of structuring, and thus her offense was not part of a pattern of unlawful activity. The Fourth Circuit disagreed. Because defendant made more than one unlawful deposit and the total of her 11 deposits in a 12-month period exceeded $100,000, she committed her offense as part of a pattern of unlawful activity under § 2S1.3(b)(2). U.S. v. Peterson, 607 F.3d 975 (4th Cir. 2010).
4th Circuit says defendants failed to demonstrate that funds they structured were from lawful activity. (360) Defendants, who operated an money-transmitting service, pled guilty to conspiracy to structure financial transactions to evade reporting requirements, in violation of 31 U.S.C. § 5324. Guideline § 2S1.3(b)(2) provides for an offense level reduction if (A) the defendants had no knowledge of whether the funds that they structured were the proceeds of unlawful activities or were to be used for unlawful purposes, (B) the defendants did not act with reckless disregard of the source of the funds, (C) the funds were the proceeds of lawful activity, and (D) the funds were to be used for a lawful purpose. At issue here was conditions (C) and (D). The Fourth Circuit ruled that defendants failed to meet their burden of proving their entitlement to the reduction. The funds held by defendants were their customers’ funds, not the proceeds of the wire-transmittal business, and thus were the proceeds of some other transactions by which their customers obtained the monies. Defendants failed to provide evidence regarding the lawfulness of those proceeds. The same could be said for defendants’ argument that the funds were used for lawful purposes in transmitting them to the Al-Barakat network, an international money-transmitting exchange. Al-Barakat handled the customers’ funds and transmitted them to some other recipient, and the legality of any given recipient’s actual or intended use of the funds was not demonstrated one way or the other. U.S. v. Abdi, 342 F.3d 313 (4th Cir. 2003).
4th Circuit holds that court improperly reduced “value of the funds.” (360) Defendants, who operated a money-transmitting service, pled guilty to conspiracy to structure financial transactions to evade reporting requirements, in violation of 31 U.S.C. § 5324. On appeal, the government argued that the court erred in determining the defendants’ base offense level under § 2S1.3(a) by failing to take into account the entire amount of funds the defendants structured – over $4.2 million for one defendant and over $3.3 million for the other. The district court found that the apply these amounts would be “unjust” and contrary to sentencing guidelines on conviction for money laundering and tax law violations. Accordingly, it used for “value of the funds,” an amount that represented 3% of the total structured funds because 3% remitted to Al-Barakat “went to an unlawful purpose (Al-Barakat’s support of Al Qaeda). In addition, defendants contended alternatively that the “value of the funds” should be limited to “that amount of money without which there would be no structuring violation.” The Fourth Circuit rejected both interpretations. The “value of the funds” is the entire amount of the funds that the defendants structured because that is the amount “involved in the structuring or reporting conduct.” The value is not limited to the portion of the funds above $10,000 on any given day, and the provision grants no discretion to the court to reduce the amount. U.S. v. Abdi, 342 F.3d 313 (4th Cir. 2003).
4th Circuit calculates amount of money laundered based on all of fraud proceeds sent to defendant. (360) Defendant was convicted of wire fraud and money laundering based on his efforts to obtain investors for a bogus scheme to market a drug that was supposed to treat AIDS and cancer. Defendant argued that the court erred in setting the loss under the money laundering guidelines at $1.8 million, the total of the funds wired to defendant by his co-conspirators. He argued that the government failed to prove that he used all of the wired funds to promote his fraud scheme, and that the loss should have been limited to $875,000, the amount involved in the two money laundering counts. The Fourth Circuit found no error, since all of the $1.8 million that defendant received from his co-conspirators was used by defendant to promote his ongoing fraudulent activities. At trial the government presented evidence that defendant constantly requested money from his co-conspirators, in amounts far exceeding the $875,000 specified in the money laundering counts, to pay for clinic expenses, including rent, staff salaries, and medical supplies, and for other expenses such as maintenance of a corporate jet. The loss figure under the money laundering guidelines was properly fixed at $1.8 million. U.S. v. Caplinger, 339 F.3d 226 (4th Cir. 2003).
4th Circuit rules court properly grouped fraud and money laundering counts. (360) Defendant was convicted of wire fraud and money laundering based on his efforts to obtain investors for a bogus scheme to market a drug that was supposed to treat AIDS and cancer. Defendant argued that because this was essentially a fraud case, the district court erred in referring to the money guideline instead of just the fraud guidelines. The Fourth Circuit disagreed. The Statutory Index (Appendix A) directed the court to the money laundering guidelines, § 2S1.1, for defendant’s convictions for money laundering under 18 U.S.C. § 1956, and to the fraud guidelines, § 2F1.1, for his convictions for wire fraud under 18 U.S.C. § 1343. The district court properly grouped the money laundering and fraud counts together under § 3D1.2(d), and applied the higher offense level for money laundering under § 3D1.3(b). At the time of defendant’s sentencing, the law in this circuit was that fraud and money laundering offenses could be grouped together when they were “closely related.” Amendment 634, which completely changed the way the offense level for money laundering is calculated, did not become effective until November 1, 2001, two days after sentencing. Since it did not apply retroactively, defendant could not benefit from it. U.S. v. Caplinger, 339 F.3d 226 (4th Cir. 2003).
4th Circuit uses money in mail fraud to calculate amount in money laundering counts. (360) Defendant, a disbarred attorney who worked as an insurance agent, diverted client money into his personal account. To perpetuate the scheme, he mailed fictitious purchase confirmations, account statements and interest payments to his defrauded customers. He received a total of $850,913.59 and made “interest” payments of about $5000. He pled guilty to mail fraud and money laundering. The Fourth Circuit affirmed the district court’s use of the money defendant obtained through mail fraud to calculate the amount in the money laundering offense. The counts were properly grouped together under § 3D1.2(d). Defendant’s money laundering was part of his fraudulent scheme because the funds were used to make fictitious interest payments. Note 3 to § 3D1.3 states that specific offense characteristics apply based upon the combined offense behavior taken as a whole. U.S. v. Walker, 112 F.3d 163 (4th Cir. 1997).
4th Circuit says money laundering enhancements were not improper double counting. (360) Defendant pled guilty to multiple counts of money laundering. The district court enhanced his sentence under § 2S1.1(b)(1) because he knew the funds were proceeds of unlawful drug activity, and under § 2S1.1(b)(2)(F) because the value of the funds was more than $1,000,000. The Fourth Circuit, expressly disagreeing with U.S. v. Atterson, 926 F.2d 649 (7th Cir. 1991), held that the § 2S1.1(b)(1) and § 2S1.1(b)(2) enhancements were not improper double counting. The guidelines are explicit when double counting is forbidden. If conduct falls within the applicable definitions, then it is appropriate to increase the offense level for each enhancement. The commentary to § 2S1.1 does not prohibit double counting, and explicitly notes that the amount of money laundered as a result of criminal activity is a factor in determining the offense level. U.S. v. Puckett, 61 F.3d 1092 (4th Cir. 1995).
4th Circuit finds defendant substantially completed money laundering attempt. (360) Defendant pled guilty to attempted money laundering. The 4th Circuit held he was not entitled to a reduction under § 2X1.1(b)(1) because his attempt to launder money was substantially completed. Although he may have engaged in some “outlandish puffery” to establish his credentials with the government informants and undercover agents, the district court could conclude that defendant was capable of fulfilling his role in the money laundering scheme. At least one of the three schemes he described to agents was well formulated. Defendant’s acceptance of the suitcase of money from the agents was the first step of his planned delivery of the purported drug money to his associate, through whose accounts it would be laundered. U.S. v. Barton, 32 F.3d 61 (4th Cir. 1994).
4th Circuit says value of laundered funds in sting operation is not limited to government’s “flash money.” (360) Defendant was arrested in a money laundering sting operation after agents gave him a suitcase which they told him contained $500,000. In fact it only contained $50,000. The 4th Circuit held that the value of the laundered funds under § 2S1.1(b)(2) was not limited by the government’s “flash money.” Focusing on flash money would create the potential for government manipulation. A more important factor is the amount of money the defendant agreed and intended to launder. Here, defendant agreed and intended to launder $500,000 and accepted the briefcase believing it contained that amount. U.S. v. Barton, 32 F.3d 61 (4th Cir. 1994).
4th Circuit holds that defendant cannot “know” government sting funds were drug proceeds. (360) Defendant received an enhancement under the 1989 version of § 2S1.1(b)(1) because he “knew” that the funds in a government sting operation were the proceeds of an unlawful activity. The 4th Circuit reversed, holding that the 1989 enhancement did not apply to money that was not, in fact, drug proceeds. The court noted that a 1991 amendment to § 2S1.1(b)(1) changed the language from “knew” to “knew or believed.” According to the Sentencing Commission’s statement of purpose, the amendment was to reflect the enactment of a new law designed to net targets of government stings who could not “know” that the money was from illegal trade. This makes it clear that the addition of “or believed” was necessary for the guideline to apply to sting convictions for money laundering. U.S. v. Barton, 32 F.3d 61 (4th Cir. 1994).
4th Circuit finds that enhancement based on amount of money laundered does not violate ex post facto clause. (360) Defendant’s base level offense for money laundering was increased based on the large amount of money laundered. Since defendant accumulated the money prior to the effective date of the guidelines, defendant argued that an enhancement of his base level offense based upon the large amount of money laundered violated the ex post facto clause. The 4th Circuit rejected this argument, noting that even though the illegal proceeds were accumulated prior to the effective date of the guidelines, every element of the money laundering offense took place after such effective date. U.S. v. Porter, 909 F.2d 789 (4th Cir. 1990).
4th Circuit finds that gambling and money laundering are not closely related offenses. (360) Defendant used the proceeds of an illegal gambling operation to purchase a house. Two years later, he sold the house and fled the country with the proceeds. Defendant challenged the district court’s failure to group his money laundering conviction with his gambling conviction as closely-related counts. The 4th Circuit acknowledged that acts of money laundering which are closely integrated with an illegal gambling operation might, under certain circumstances, qualify as closely-related counts. However, in this case, but for the fact that the home defendant sold was originally purchased with gambling proceeds, the money-laundering offense was completely unrelated to the gambling operation. Therefore, the two counts were not closely-related. U.S. v. Porter, 909 F.2d 789 (4th Cir. 1990).
5th Circuit finds sophisticated means where defendant created two sets of books and skimmed income. (360) Defendant, who maintained the books of a hotel used in a conspiracy to harbor illegal aliens, created two sets of books for the hotel: one that accurately portrayed the gross receipts, and another that substantially understated gross receipts. He was convicted of conspiring to smuggle, transport, and harbor illegal aliens, money laundering, and willfully aiding and assisting in filing of false tax returns. The Fifth Circuit upheld a § 2S1.1(b)(3) increase for using sophisticated means in committing the money-laundering offense. Maintaining two sets of books, skimming income on a daily basis, and disguising alien-smuggling proceeds as “parking income” in an attempt to make the criminally-derived funds appear legitimate was sufficiently complex to support the enhancement. here. U.S. v. Chon, 713 F.3d 812 (5th Cir. 2013).
5th Circuit says entire amount of funds sent out of country could be included in laundered funds. (360) Defendants raised funds through a charitable foundation that was created solely to provide money to Hamas, a terrorist organization. They challenged the district court’s finding that the total amount of the funds laundered from their money laundering offense was about $16.6 million, which represented the total amount the foundation wired out of the country between 1995 and 2001. Defendants argued that some portion of the funds was sent to places that served legitimate charitable needs. The Fifth Circuit found no error and affirmed the total amount. First, defendants did not explain how the allegedly erroneous calculation of the laundered funds affected their guidelines range, and the issue was therefore deemed abandoned. Second, the amount of laundered funds was not used to calculate defendants’ offense levels and did not factor into the guidelines computations. Finally, the foundation’s provision of some funds to legitimate charitable organizations helped to hide its true agenda of supporting Hamas. Since the sole purpose of the foundation was to provide financial support for Hamas, the entire amount was properly included as laundered funds. U.S. v. El-Mezain, 664 F.3d 467 (5th Cir. 2011).
5th Circuit affirms grouping fraud and money laundering counts. (360) Defendant was convicted of fraud and money laundering charges based on her involvement in a mortgage fraud operation. She argued that the court improperly sentenced her under § 2S1.1 (money laundering) instead of § 2B1.1 (fraud and deceit). The Fifth Circuit found that the court correctly followed § 3D1.2, which requires counts involving substantially the same harm to be grouped together into a single group. The court was required to “group” together the fraud and money laundering offense because those crimes involve the same victim and involved multiple acts that were linked by a common illegal objective or part of a common scheme. Once grouped, the district court properly determined that money laundering produced the higher offense level and imposed sentence under that guideline, § 2S1.1. U.S. v. Stalnaker, 571 F.3d 428 (5th Cir. 2009).
5th Circuit upholds sophisticated means increase for multiple transactions and shell corporations. (360) Defendant was convicted of a variety of offenses arising from his participation in a major drug-trafficking conspiracy. The Fifth Circuit upheld a § 2S1.1(b)(3) enhancement for sophisticated money laundering. The commentary lists four circumstances to be considered in determining whether the enhancement applies: (1) fictitious entities, (2) shell corporations, (3) layered transactions with illegitimate funds, and (4) off-shore accounts. The district court could have concluded that the charged transactions involved multiple transactions, i.e. “layering,” and that a number of defendant’s corporations were shell corporations. The court has upheld the sophisticated money laundering enhancement where the conduct was arguably less egregious than here. U.S. v. Fernandez, 559 F.3d 303 (5th Cir. 2009).
5th Circuit holds that uncharged fraud was relevant conduct to scheme that produced laundered funds. (360) Defendant pleaded guilty to laundering money generated by a Ponzi scheme. The money laundering guideline, § 2S1.1 (b)(2), requires an offense-level enhancement based on the value of the funds laundered. The government argued that defendant’s offense level should be enhanced based on funds generated by a second fraudulent scheme for which defendant was never charged. Defendant operated the second scheme about three years after the scheme that led to his conviction. In the first and second schemes, defendant did not have common accomplices or victims, but both schemes used a similar modus operandi. The Fifth Circuit held that two fraudulent schemes do not have to be jointly planned and executed to qualify as relevant conduct for each other. On that basis, the court held that the district court did not clearly err in concluding that the second scheme constituted relevant conduct for defendant’s money laundering conviction and thus that the court properly considered the losses generated by the second scheme is setting defendant’s offense level. U.S. v. Hinojosa, 484 F.3d 337 (5th Cir. 2007).
5th Circuit holds that layered transaction to hide source of money was “sophisticated laundering.” (360) The district court found that defendant’s fraud involved “sophisticated laundering” under U.S.S.G. § 2S1.1(b)(3) (2001). The PSR cited one transaction involving a $45,000 check that took place in a series of steps: (1) defendant’s home health care corporation issued a $45,000 check made payable to defendant; (2) two days later, defendant exchanged the check for three cashier’s checks and $6000 in cash at a bank; (3) that same day, defendant deposited two of these checks in her account at a different bank and took a fourth cashier’s check out from this bank; (4) again, on the same day, this fourth check was used to purchase a brand-new car; (5) in her fourth transaction of the day, defendant cashed the third cashier’s check at a casino. Note 5(A) defines “sophisticated laundering” in part as “complex or intricate conduct … [which] typically involves the use of … two or more levels (i.e., layering) of transactions…” The Fifth Circuit affirmed the sophisticated laundering enhancement. Although defendant was not very successful in obscuring the source of her illegally obtained funds, the conduct, although inept, was paradigmatic “layering.” U.S. v. Miles, 360 F.3d 472 (5th Cir. 2004).
5th Circuit holds that money laundering amendment is substantive, not clarifying. (360) Amendment 634, which became effective after defendant’s sentencing, amended § 2S1.1 and deleted former § 2S1.2 to provide a uniform method for determining the base offense level for money laundering convictions. Defendant argued that the amendment was a clarifying amendment that should be applied retroactively. The Fifth Circuit disagreed, holding that the Amendment’s combining of §§ 2S1.1 and 2S1.2 and the resulting change in the calculation of the base offense level was a substantive change, not a clarification. The commentary to Amendment 634 does not state it is intended to clarify. Instead, the commentary clearly indicates that the amendment’s purpose was to effect substantive changes in the punishment for money laundering offenses based upon the underlying conduct. U.S. v. McIntosh, 280 F.3d 479 (5th Cir. 2002).
5th Circuit says unaccounted income cannot be used for enhancement absent evidence it was laundered. (360) A search of defendant’s house revealed financial documents and records that formed the basis of money laundering charges. The search also revealed cash, multiple vehicles, and many personal luxury items. The record were used to establish defendant’s yearly expenditures from 1996 to 2000. They were compared to defendant’s recorded annual income, and revealed an excess of $275,683.85 more in expenditures than income. To calculate the amount of money defendant laundered under § 2S1.1, the PSR took into account the amount of money he spent in excess of his reported income. The Fifth Circuit held that defendant could not be held accountable for the additional money in the absence of evidence that the unaccounted income was laundered. All the government showed was a discrepancy between the income defendant earned and the value of his total assets. The government failed to prove that $275,683.85 was laundered or how it was laundered. It was clearly erroneous for the district court to consider the entire $275,683.85 without further proof that it was laundered. U.S. v. Rodriguez, 278 F.3d 486 (5th Cir. 2002).
5th Circuit rejects “heartland” analysis for initial selection of applicable guideline. (360) Defendant contended that the court should have used his fraud count to calculate his offense level, rather than the money laundering count. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant contended that the court failed to conduct a “heartland” analysis to determine if his conduct was the type that the money laundering statute was designed to punish. Smith held that in “atypical cases,” the guidelines require that the court determine whether the defendant’s conduct fall in the “heartland” of the applicable guideline. The Fifth Circuit rejected the Smith test, noting that circuit precedent has interpreted the heartland analysis as a permissive basis for exercising discretion to apply a downward departure, rather than a component of the initial selection of the applicable guideline. See, e.g. U.S. v. McClatchy, 249 F.3d 348 (5th Cir. 2001). This approach is more consistent with the overall intent of the guidelines. There was no indication in the record that the court believed it did not have the authority to apply a downward departure and sentence defendant according to the fraud count rather than the money laundering count. U.S. v. Martinez, 263 F.3d 436 (5th Cir. 2001).
5th Circuit cannot review refusal to depart from money laundering guidelines. (360) Defendant was convicted of crop insurance fraud, money laundering, and conversion of crops pledged as collateral for a loan. Pursuant to § 3D1.3(b), the trial court used the offense guideline that produced the highest offense level to compute the applicable guideline range. Therefore, the court used an adjusted offense level of 20, the level used for money laundering. Defendant argued that his sentence should have been based on § 2F1.1, the fraud guideline, because his money laundering was outside the “heartland” of the money laundering guidelines. The Fifth Circuit found no error. The trial court properly grouped together the six counts on which defendant was convicted. A court can choose to depart downward where the particular conduct falls outside the heartland of offenses considered by the Sentencing Commission. However, a court’s refusal to grant a downward departure may only be reviewed “if the refusal was based on a violation of the law.” Because defendant had not shown that the trial court mistakenly applied the Sentencing Guidelines, its decision could not be reviewed on appeal. U.S. v. McClatchy, 249 F.3d 348 (5th Cir. 2001).
5th Circuit holds that refusal to apply different guideline was non-reviewable refusal to depart. (360) Defendant argued that the fraud was the essence of her offense, and therefore the district court erred in sentencing her under the money laundering guideline, rather than the fraud guideline. The Fifth Circuit found no error in the district court’s decision to apply § 2S1.2 to defendant’s violation of 18 U.S.C. § 1957. Appendix A of the guidelines indicates that § 2S1.2 corresponds with violations of 18 U.S.C. § 1957. “[W]here a court finds that the facts in a section 1957 case are sufficiently atypical as to warrant the application of a lower guideline range, its decision constitutes a downward departure. The court in such an instance does not misinterpret the Guidelines by failing to apply section 2S1.2, it exercises its discretion under the facts of that case.” The district court’s refusal to apply a different guideline constituted a refusal to grant a downward departure, a decision which was not reviewable. U.S. v. Loe, 248 F.3d 449 (5th Cir. 2001).
5th Circuit holds that drug and money laundering counts should have been grouped together. (360) Guideline § 3D1.2(c) provides that multiple counts should be grouped together if “one of the counts embodies conduct that is treated as a specific offense characteristic in, or other adjustment to, the guideline applicable to another of the counts.” The Fifth Circuit held that defendant’s money laundering and drug convictions should have been grouped together for sentencing purposes under § 3D1.2(c), since the drug offenses would otherwise be counted both in the drug count and as a specific offense characteristic of the money laundering scheme. Just as in U.S. v. Rice, 185 F.3d 326 (5th Cir. 1999), defendant received a three-point increase to his money laundering offense level because he knew that the funds were the proceeds of an unlawful activity involving the distribution of drugs. This was the exact conduct embodied by the drug trafficking count. U.S. v. Salter, 241 F.3d 392 (5th Cir. 2001).
5th Circuit holds that money returned to fraud victims properly included in amount of funds laundered. (360) Defendant was the financial advisor for three elderly widows who entrusted him with $1,090,000, $800,000, and $70,000, respectively. Rather than managing the funds for their benefit, he spent the money on personal expenses. He was convicted of fraud and money laundering. He contended that the amount laundered did not exceed $1,000,000, but in fact totaled only $523,868, because he returned some of the funds to his intended victims. The Fifth Circuit held that the funds returned to the intended victim were properly included in the amount of money defendant laundered. The money laundering guideline does not depend on loss, it depends on the “value of the funds” that the defendant laundered. Defendant received about $1,918,000 from his three victims, some of which he did return to them. However, on several occasions, defendant returns the “investments” only under duress or when not doing so would have been highly suspicious. It was reasonable to find that defendant intended to launder a larger portion of the victims’ funds than he ultimately succeeded in laundering. U.S. v. Sprick, 233 F.3d 845 (5th Cir. 2000).
5th Circuit affirms where court found defendant’s case fell within money laundering heartland. (360) Defendant was convicted of fraud and money laundering charges in connection with his operation of an advance fee scheme. Because defendant was convicted of closely related offenses, the counts were grouped together and assigned a single offense level. See USSG §§ 3D1.1, 3D1.2 The grouping rules led to the court’s use of the money laundering guideline, § 2S1.2. Defendant argued that the district court should have sentencing him under the fraud guidelines, rather than the money laundering guidelines. However, defendant did not argue that the court misapplied the grouping rules, but rather that his case fell outside the heartland of money-laundering offenses covered by § 2S1.2. Thus, his argument actually was that the district court erred in refusing to depart from the money laundering guideline. The Fifth Circuit held that it lacked authority to review the district court’s refusal to depart, since nothing in the record suggested that the court based its decision upon the erroneous belief that it lacked the authority to depart. At sentencing, the judge evaluated the facts of the case, determined that they fell within the heartland, and therefore declined to depart. Thus, its decision not to depart was unreviewable. U.S. v. Davis, 226 F.3d 346 (5th Cir. 2000).
5th Circuit approves downward departure where money laundering was incidental to gambling business. (360) Five defendants were convicted of conducting an illegal gambling business and money laundering. The district court departed downward, because the money laundering activities were “incidental” to the gambling operations, and defendants never used laundered money to further other criminal activities. The Fifth Circuit held that the district court did not abuse its discretion in departing. Neither of the cited factors are expressly forbidden by the guidelines, and thus under Koon v. United States, 518 U.S. 81 (1996), the district court was not precluded from relying on those matters. The court did not ignore the money laundering convictions and simply sentence defendants under the gambling provisions. Instead, the court used the applicable offense levels for money laundering as its baseline, and then departed to an offense level of 21, a far cry from the offense level of 12 for gambling. “Given the district court’s special competence in making the refined factual comparisons necessary to the determination of whether to depart in this case … we are not inclined to substitute our judgment for the considered findings of the district judge.” U.S. v. Threadgill, 172 F.3d 357 (5th Cir. 1999).
5th Circuit upholds sentence based on grouped money laundering and fraud counts. (360) Defendant was employed as a gas marketer for an energy company. Rather than selling the company’s gas directly to end-users, defendant sold gas to a shell corporation. The shell corporation then sold the gas to end-users for a profit. Defendant and another man split the profits from the shell corporation. He was convicted of money laundering and fraud charges. He argued that because of the substantial disparity between guideline ranges, the district court erred in sentencing him under the money laundering guideline instead of the fraud guideline. The Fifth Circuit ruled that the district court properly used the money laundering guideline as required by the grouping rules. The district court was required to group together defendant’s fraud and money laundering offenses because the crimes involved the same victim and involved multiple acts that were linked by a common illegal objective or were part of a common scheme. Once grouped, the district court properly determined that money laundering produced the higher offense level and imposed sentence under that guideline. U.S. v. Powers, 168 F.3d 741 (5th Cir. 1999).
5th Circuit says defendant properly held accountable for all funds laundered by co-conspirators. (360) Defendant participated in a fraudulent investment scheme that raised about $6.4 million, resulting in a net loss to investors of about $6.1 million. Defendant argued that the district court erred in grouping together his fraud and money laundering offenses in order to consider the aggregated $6.1 million as the harm of a single offense. The Fifth Circuit found that defendant misinterpreted the district court’s actions. The court did not group his offense. The court held defendant responsible for the entire $6.1 million because this was the total foreseeable amount laundered by his co-conspirators. Virtually all of the $6.1 million acquired by the scheme during defendant’s involvement was laundered. This laundering was reasonably foreseeable to defendant, who helped devise a shell company to hide the fraudulently obtained funds. Moreover, the district court could have properly grouped the money laundering and fraud counts together. Grouping is proper where, as here, the money laundered was reinvested into and perpetrated the fraud scheme. U.S. v. Landerman, 167 F.3d 895 (5th Cir. 1999).
5th Circuit affirms downward departure for money laundering in campaign finance case. (360) Defendant was the chairman of a defeated candidate’s congressional campaign. To disguise a corporate campaign contribution, he entered into a “consulting agreement” with the corporation and received a $20,000 “retainer.” He cashed the check at a friend’s store, deposited the cash in the campaign’s bank account, and used it to pay off the campaign’s debt. He told the FBI that the money came from individual donors, and provided agents with a phony list. Defendant was convicted of money laundering and related charges. The district court departed downward because his conduct fell outside the heartland of the money-laundering guideline. The Fifth Circuit affirmed. A Department of Justice manual says that the use of conduits to conceal corporate funds infused into a political campaign should be prosecuted as a misdemeanor. Defendant’s conduct was atypical compared to conduct usually prosecuted under the money laundering statute. However, the district court did err in departing because the case was prosecuted by an Independent Counsel. U.S. v. Hemmingson, 157 F.3d 347 (5th Cir. 1998).
5th Circuit applies § 2S1.1 to money laundering conspiracy. (360) Defendant, a church pastor, was caught in a government sting operation after agreeing to launder $10 million that he believed was drug money to help his church through some financial difficulties. He was arrested after laundering a total of $350,000 in three separate “tests.” He was convicted of three substantive money laundering counts in connection with the $350,000 and a money laundering conspiracy in connection with the proposed $10 million. He argued that the district court should have applied § 2X1.1 rather than § 2S1.1 to the conspiracy count. The Fifth Circuit upheld the application of § 2S1.1 to the conspiracy count. In sentencing, the conspiracy and substantive counts were properly grouped under § 3D1.2. The statutory provision for the money laundering conspiracy, 18 U.S.C. § 1956(h), provides that any person who conspires to commit a money laundering offense shall be subject to the same penalties as those for the substantive offense. U.S. v. Brace, 145 F.3d 247 (5th Cir. 1998).
5th Circuit uses entire amount as value of laundered funds and basis for restitution. (360) Defendant, a bank executive, hired a co-conspirator as a consultant to the bank. The co-conspirator hired subcontractors to do the actual work on the bank’s projects and then charged a markup on the amount the subcontractors charged him. Over a several-year period, the co-conspirator charged the bank approximately $10.5 million in consulting fees. The invoices that the co-conspirator received from the subcontractors totaled only $2.8 million. Defendant received about $2 million in kickbacks funneled through his attorney. The Fifth Circuit used the total amount of funds transferred from the bank to the co-conspirator as the “value of the funds” involved in the money laundering under § 2S1.1. All of the funds became “proceeds” of the criminal activity once they left the bank’s control. The court also properly ordered restitution for the entire amount of consulting fees the bank paid to the co-conspirator. Because of defendant’s fraud, it was not possible to determine how much of the fees paid to the consulting firm were for actual value. Thus, the court’s use of the total amount of the consulting fees was not clearly erroneous. U.S. v. Cihak, 137 F.3d 252 (5th Cir. 1998).
5th Circuit applies money laundering guideline to multiple-object conspiracy. (360) Defendant pled guilty to conspiracy to commit fraud, money laundering, and mail fraud. The district court refused to apply the money laundering guideline, § 2S1.1, because defendant had not been charged with a substantive count of money laundering. The Fifth Circuit held that the court should have applied the money laundering guideline. Section 1B1.2(d) requires a multiple-object conspiracy to be treated as if the defendant were convicted of a separate count for each object of the conspiracy. Note 5 provides that where, as here, the plea does not establish which offense was the object of the conspiracy, the court should apply the guideline for an object offense only if it would have convicted defendant of conspiring to commit that object offense. However, this analysis is not necessary if the object offenses specified in the conspiracy count would be “grouped” under § 3D1.2(d). The conspiracy to commit mail fraud, the use of a fictitious name and money laundering are to be grouped together because their offense levels are determined largely on the total amount of harm or loss. Section 3D1.3 directs the court to apply the highest offense level of the counts in the group, in this case, money laundering. Therefore, the district court erred in using the fraud guideline. U.S. v. Coscarelli, 105 F.3d 984 (5th Cir. 1997), reinstated on rehearing en banc, 149 F.3d 342 (5th Cir. 1998).
5th Circuit approves downward departure where defendant received no personal benefit from money laundering. (360) Defendant, an insurance company employee, was convicted of money laundering and fraud in connection with a scheme to conceal the nature and source of payments his company made to a local politician as a fee for helping the company obtain a government insurance contract. The district court departed downward under note 10 to § 2F1.1, which authorizes a departure where the loss under § 2F1.1 overstates the seriousness of the harm caused by defendant’s crime. The Fifth Circuit held that the departure was justified under § 5K2.0, because the money laundering guidelines make no mention of the failure to receive a personal benefit as a mitigating factor. The six-month departure was reasonable, leaving defendant with a two‑year prison sentence. U.S. v. Walters, 87 F.3d 663 (5th Cir. 1996).
5th Circuit considers entire amount of funds parties intended to launder. (360) Defendants’ company presented fraudulent invoices to the VA requesting a progress payment on a $1.1 million roofing project. The VA wired $450,972 to the company’s escrow account, which transferred $202,937 to the roofing company. The district court treated the entire $202,937 as the amount of money laundered under § 2S1.2(b)(2). The court was not required to offset the total amount defendants received from the VA with the expenses they incurred pursuant to the roofing contract. The record supported the finding that defendants intended to launder the full $202,937 sent by the VA, and that they did in fact receive that amount. Moreover, there was evidence at trial that they intended to obtain as much of the $1.1 million contract price as possible. U.S. v. Leahy, 82 F.3d 624 (5th Cir. 1996).
5th Circuit says money laundering sentence depends on funds laundered, not loss. (360) Defendant, a banker, was convicted of conspiracy, money laundering and fraud charges in connection with an elaborate series of interlocking schemes to defraud various banks. The district court based the § 2S1.1(b(2) enhancement on the amount of money diverted to defendant’s benefit. Defendant argued that the court should have excluded amounts that were used to repay one of the loans, and that there was no evidence that the funds from another loan were laundered. The Fifth Circuit affirmed. The money laundering guideline does not depend on loss; it depends on the “value of the funds” that are laundered. The contested loan was properly included because defendant flushed the proceeds through a trust account, used some of the money to repurchase bonds that a co‑conspirator had converted to his own use, and returned the bonds and remaining cash to the banks. The trial court could have inferred that the purpose of using the trust account as a conduit was to conceal the fact that defendant, and not the co‑conspirator, was making the banks whole. U.S. v. Allen, 76 F.3d 1348 (5th Cir. 1996).
5th Circuit groups money laundering and fraud where laundering facilitated fraud. (360) Defendant ran a scam in which callers telephoned victims to inform them they had won a prize. To obtain the prize, worth $15.00, callers were required to pay $395.50. Defendant argued that the court erred in sentencing him under the money laundering guidelines instead of the fraud guidelines. The Fifth Circuit affirmed, since the fraud guideline could only be used through the use a downward departure, and a decision not to depart downward is not reviewable. Because of the guideline’s grouping rules, where money laundering and fraud offenses can be properly grouped, the imposition of the higher offense level attached to money laundering is required. The money laundering and fraud counts were properly grouped together under § 3D1.2(d) because they involved the same victim and acts that were part of a common scheme. Cases cited by defendant holding that money laundering and fraud have different victims were distinguishable. In none of those cases did the money laundering activities of the defendants perpetuate the underlying crimes. Here, defendant’s money laundering activity, regardless of its limited extent, advanced the fraud scheme that victimized nearly 500 people. The victims of the fraud were also victims of the money laundering activities. U.S. v. Leonard, 61 F.3d 1181 (5th Cir. 1995).
5th Circuit holds that defendant was properly sentenced under money laundering guideline. (360) Defendant, who had declared personal and corporate bankruptcy, engaged in a series of financial transactions to shield the majority of his and his company’s assets from creditors. He was convicted of bankruptcy fraud and money laundering charges. Defendant argued that he should not be sentenced under the money laundering guideline because his conduct did not fall within the “heartland” of criminal activity the money laundering statute was meant to punish. The D.C. Circuit upheld the application of the money laundering guideline. The fact that the money laundering transactions were only a small portion of his criminal conduct did not mean the conduct fell outside the heartland of money laundering. The heartland requirement focuses on the type of conduct for which the defendant is convicted, not the amount of conduct relative to other criminal acts. U.S. v. Willey, 57 F.3d 1374 (D.C. Cir. 1995).
5th Circuit finds applying wrong offense level and grouping rule was plain error. (360) Defendant pled guilty to money laundering in violation of 18 U.S.C. § 1956(a)(1)(B) as well as drug charges. He argued for the first time on appeal, that the court assigned the wrong offense level under the money laundering guideline and misapplied § 3D1.4 in determining his combined offense level. The Fifth Circuit held that applying the wrong offense level and misapplying the grouping rules was plain error. Defendant should have received a base offense level of 20, rather than 23, for his money laundering violation. In addition, the court should have disregarded the other two counts in determining the combined offense level since they were nine or more levels less serious than the money laundering count. Absent these two errors, defendant’s total offense level would have been 27 rather than 31, which substantially affected his sentence. U.S. v. Franks, 46 F.3d 402 (5th Cir. 1995).
5th Circuit finds no ex post facto violation where at least one offense occurred after guideline amendment. (360) Defendants were convicted of money laundering. At least one count for each defendant was committed after November 1, 1991, when § 2S1.1(b)(1) was added to the sentencing guidelines. Defendants argued that applying this section to their prior offenses violated the ex post facto clause. The 5th Circuit found no ex post facto violation, because the district court properly “grouped” the money laundering counts together in accordance with § 3D1.3(d). The enhancement was proper since a reasonable jury could have found that both defendants knew or believed that the source of the money being laundered was the result of either illegal drug or weapons sales. U.S. v. Castaneda-Cantu, 20 F.3d 1325 (5th Cir. 1994).
5th Circuit upholds consideration of entire amount of funds defendant attempted to launder. (360) Defendant ran a telemarketing scam. Because most banks would not handle telemarketing transactions, defendant had to find companies to launder the various credit card purchases. The middlemen sent the purchases through their own merchant accounts in order to launder the credit card monies. The 5th Circuit affirmed that the amount of laundered money under section 2S1.1(b) should include money defendant had deposited at various banks but had not yet laundered. The larger amount of money that was processed through the various middlemen and then deposited in various banks was part of the laundering process, and the fact that all the money was not withdrawn was irrelevant. Defendant clearly intended to launder all of the monies involved in the conspiracy and was also reasonably capable of accomplishing this. U.S. v. Tansley, 986 F.2d 880 (5th Cir. 1993).
5th Circuit affirms enhancement based on money defendants were capable of laundering. (360) Defendants were convicted of conspiracy to launder money. They received an enhancement under section 2S1.1(a)(2) based on the district court’s determination that $2,097,000 was the amount of money to be laundered under the scheme. The court noted the negotiations during which defendants discussed the ease with which $1 million a month could be laundered. The court also observed that placing the amount at $2,097,000 was conservative and the actual sum could have been as high as $25 million. The 5th Circuit affirmed, finding sufficient evidence that defendants were capable of laundering $2,097,000. One defendant had a perfect cover, a Brazilian land sale for $25 million, that would provide a shade of validity to launder the drug money. U.S. v. Fuller, 974 F.2d 1474 (5th Cir. 1992).
5th Circuit says money laundering enhancement is triggered by belief that funds were criminally derived. (360) The 1988 version of guideline section 2S1.3(b)(1) provided for an increase in base offense level for money laundering if the defendant “knew or believed that the funds were criminally derived.” Despite this language, defendant argued that the increase only applies if the defendant knew the funds were criminally derived. The 5th Circuit affirmed that the enhancement applied if the defendant “knew or believed” the funds were criminally derived. Although a sentence in the background section of the application notes to section 2S1.3 states in part that the increase applies if the defendant knew the funds were criminally derived, the unambiguous language of the guideline controls. U.S. v. Levy, 969 F.2d 136 (5th Cir. 1992).
5th Circuit rejects enhancement under prior guideline for believing sting funds were drug proceeds. (360) Defendant was convicted of money laundering. Section 2S1.1(b)(1) provides for an enhancement if the defendant knew that the funds were the proceeds of an unlawful drug activity. Defendant claimed that this enhancement was inapplicable to him because the money involved in his offense was not the proceeds of an unlawful activity but government “sting” money. Relying on the amended section effective November 1, 1991, the 5th Circuit reversed the enhancement. The amended section, which was not applicable to defendant, provides that the enhancement applies if the defendant knew or believed that the funds were the proceeds of an unlawful activity. The revised guideline reflects the enactment of section (a)(3) of 18 U.S.C. section 1956 that authorizes undercover “sting” operations in money laundering cases. The addition of the word “believe” suggested that the word “know” in the prior version was insufficient, by itself, to cover government sting money. Hence, the enhancement was in error. U.S. v. Breque, 964 F.2d 381 (5th Cir. 1992).
5th Circuit grants rehearing to apply reduced money laundering guideline amendment retroactively. (360) Defendant was convicted of failing to file a currency report declaring that he was transporting more than $10,000 in cash from the United States. He was sentenced under guideline section 2S1.3(a)(1)(B), which carries an offense level of 13, and the 5th Circuit affirmed. On rehearing, the 5th Circuit vacated that portion of its opinion because after the decision was published, amendments to the guidelines rendered defendant’s sentence excessive. Amendment 379, effective November 1, 1991, created a new section 2S1.4, carrying a reduced offense level for offenses involving the failure to file a currency report. Section 1B1.10(d) provides that Amendment 379 applies retroactively. U.S. v. Park, 951 F.2d 636 (5th Cir. 1992), vacating in part U.S. v. Park, 947 F.2d 130 (5th Cir. 1991).
5th Circuit reverses downward departure for defendant who failed to report “clean money.” (360) Defendant was convicted of importing more than $10,000 without reporting it. Defendant contended that the money was derived from legitimate business sources in Mexico. The district court departed downward based on (a) the lack of showing that the funds were criminally derived, and (b) its determination that defendant’s conduct was not what the currency reporting requirements were designed to address. The 5th Circuit reversed. Guideline section 2S1.3(b)(1) provides for a five-level increase in offense level if defendant knew or believed that the funds were criminally derived. “Therefore, the guidelines fix the base offense level on an assumption that the defendant did not know or believe that the funds were criminally derived. Accordingly, a downward departure from the base offense level for ‘clean money’ is erroneous.” Moreover, the purposes of the currency reporting requirements go beyond detecting monies derived from criminal activity. Unreported but legitimately derived money could be the subject of future income tax or regulatory evasion. U.S. v. O’Banion, 943 F.2d 1422 (5th Cir. 1991).
5th Circuit affirms enhancement based on knowledge that laundered money was criminally derived. (360) The 5th Circuit upheld a five-level enhancement under guideline section 2S1.3(b)(1) based upon defendant’s knowledge that his money was criminally derived, even though the government did not prove the precise source of defendant’s funds. During a two-year period, defendant deposited into his bank accounts four times as much money as he earned from verified legitimate sources. His bank accounts showed a series of large deposits and withdrawals, usually in cash, in denominations smaller than $100. A search of his home uncovered $7,000 in cash and $39,000 worth of jewelry. Defendant admitted he tried to conceal from the government the source of his funds. Moreover, ledgers found at a club he operated indicated the existence of an extensive cocaine distribution network involving thousands of dollars. Defendant claimed that the money came from unspecific sources, such as gambling, an unidentified inheritance and insurance. U.S. v. Sanders, 942 F.2d 894 (5th Cir. 1991).
5th Circuit affirms that defendant knew money was criminally derived. (360) The 5th Circuit found no error in the district court’s enhancement of defendant’s offense level under guideline § 2S1.3(c) because she “reasonably should have believed that the [laundered] funds were criminally derived property.” Defendant’s only evidence was polygraph reports and her statements that she thought the money was legitimately procured. The district court was not required to credit defendant’s self-serving testimony, and was free to consider other evidence, such as the way defendant handled the funds, to conclude that she was aware of the money’s character. U.S. v. Allibhai, 939 F.2d 244 (5th Cir. 1991).
5th Circuit upholds consideration of funds involved in transactions that were part of same course of conduct. (360) Defendant pled guilty to two counts of structuring transactions to evade reporting requirements. His offense level was increased under guideline § 2S1.3 because the district court found that the value of the funds involved exceeded $100,000. Defendant argued that this was improper since the money involved in the offense of conviction was less than $100,000. The 5th Circuit upheld the enhancement, finding that the district court could properly consider funds involved in transactions which were part of the same course of conduct or common scheme as the offense of conviction. U.S. v. Rodriguez, 925 F.2d 107 (5th Cir. 1991).
5th Circuit finds no separation of powers violation in government’s determination of money involved in “sting” operation. (360) Defendant was convicted of two counts of money laundering in connection with a “sting” operation run by government agents. Under guideline § 2S1.1, a defendant’s offense level may be increased based upon the amount of money involved in the offense. Defendant argued that the power of the executive branch to determine a defendant’s sentence based on the amount of money that undercover agents bring to the table in a sting operation violates the separation of powers doctrine. The 5th Circuit found no violation, since the district court retains the authority to find that money brought by the government was not legitimately part of the laundering conspiracy and was therefore not relevant conduct. Moreover, the government did not violate due process by unfairly manipulating the amount of money involved in the offense. Evidence showed that defendant repeatedly asked for larger sums to launder, and suggested additional laundering scenarios. U.S. v. Richardson, 925 F.2d 112 (5th Cir. 1991).
5th Circuit upholds determination that defendant participated in money laundering scheme involving $450,000. (360) The 5th Circuit affirmed the increase in defendant’s offense level under § 2S1.1(b)(2) for laundering $450,000. Even if defendant did not know at the time that the initial $225,000 transaction was illegal, his knowledge of its illegality at the time he agreed to the second money laundering transaction rendered the initial transaction relevant conduct under the guidelines. The court rejected defendant’s argument that it was improper to consider the second $225,000 transaction because he never touched the money and did not intend to launder it. His intention to take the money was obvious from his arrival at the scene with a valise and a loaded pistol. A co-conspirator counted the money, put the money in the valise, and placed the valise near defendant. His intent was also supported by his extensive conversation with agents concerning his laundering expertise. U.S. v. Richardson, 925 F.2d 112 (5th Cir. 1991).
5th Circuit upholds money laundering sentence for defendant who attempted to smuggle cash into Mexico. (360) Defendant attempted to smuggle $20,000 out of the United States by dividing the money among three companions and himself, and driving into Mexico in a single truck. During a customs search, the money was found hidden in each of the men’s underwear. Defendant contended on several grounds that it was improper to sentence him under guideline § 2S1.3(a)(a)(A) for structuring transactions to evade reporting requirements. The 5th Circuit rejected each of defendant’s arguments and concluded that a single border crossing involving two or more individuals in one vehicle, each possessing cash below the reporting threshold, in a scheme to evade the reporting requirements, can constitute a structured transaction. It was not necessary for defendant’s acts to involve a financial institution for his conduct to constitute a structuring offense. U.S. v. Morales-Vasquez, 919 F.2d 258 (5th Cir. 1990).
5th Circuit upholds calculation of defendant’s offense level where defendant failed to raise objection at sentencing. (360) Defendant brought $55,000 in cash into the United States from Mexico for the purpose of purchasing marijuana. Defendant pled guilty to money laundering. The district court determined that defendant knew or should have known that the money he was laundering was criminally derived proceeds, and increased his offense level pursuant to guideline § 2S1.3(a)(1)(C). The PSI contained statements from the defendant that indicated that he was aware that the money was illegally derived. The 5th Circuit held that since defendant did not object to the PSI and failed, at the sentencing hearing, to argue that his offense level should not be increased under § 2S1.3(a)(1)(C), this issue could not be raised on appeal. The district court also increased defendant’s offense level by another five levels pursuant to § 2S1.3(b)(1) based upon its belief that defendant actually knew or believed that the funds were criminally derived. U.S. v. Mourning, 914 F.2d 699 (5th Cir. 1990), superseded on other grounds by guidelineas stated in U.S. v. Castano, 999 F.2d 615 (2nd Cir. 1993).
5th Circuit holds defendant entitled to reduction where money laundering scheme was not completed. (360) Defendant pled guilty to conspiring to launder money and was sentenced under guideline § 2X1.1(b)(2), which provides that for a decrease of by 3 levels, “unless the defendant or a co-conspirator completed all the acts the conspirators believed necessary on their part for the successful completion of the offense.” The district court refused to decrease defendant’s offense level because it found that he had completed the offense of conspiracy to launder money. The 5th Circuit disagreed, finding that the “offense” referred to in § 2X1.1(b)(2) was the underlying offense of money laundering, and not the charged offense of conspiracy to launder money. The case was remanded to determine whether defendant had substantially completed the offense of money laundering. U.S. v. Rothman, 914 F.2d 708 (5th Cir. 1990).
6th Circuit refuses to correct “invited error” in applying money laundering guidelines. (360) Defendant was convicted of conspiring to export property to Iraq, money laundering, and making false statements to customs agents. Under the money laundering guideline, § 2S1.1(a)(1), the offense level is that of the underlying offense, as long as the “level for that offense can be determined.” Subsection (a)(2) only applies “otherwise,” i.e., when the level cannot be determined because it is not listed in Appendix A. The Sixth Circuit found that the district court improperly declined to sentence defendant under subsection (a)(1), instead electing to proceed under subsection (a)(2). However, because the district court’s error was induced by defendant, it was invited error and did not warrant reversal. The district court determined that the guideline reference in Appendix A for defendant’s exportation offense was inappropriate, and decided this meant she could move on to subsection (a)(2). However, under § 2S1.1(a)(1), the judge is required to use the base offense level for the underlying offense if it can be determined. Nonetheless, the court’s decision to sentence defendant under (a)(2) was directly in response to defendant’s urging it to take that very course. U.S. v. Hanna, 661 F.3d 271 (6th Cir. 2011).
6th Circuit says violation of embargo to Iraq “involved” threat to national security. (360) Defendant shipped telecommunications and navigation equipment to Iraq, in violation of the U.S. embargo. She was convicted of exporting property to Iraq, money laundering, and making false statements to customs. She challenged a six-level increase under § 2S1.1(b)(1)(iii), arguing that the record did not support a factual finding that she “knew or believed that any of the laundered funds were the proceeds of, or were intended to promote . . . an offense involving . . . national security.” The Sixth Circuit upheld the enhancement. The jury was required to find that defendant knew her shipments were destined for Iraq in order to convict her. Defendant knew that the laundered funds “were the proceeds of” these shipments. Because the embargo was implemented to deal with a national security threat, any violation of the embargo was necessarily an offense that “involves” national security. The enhancement did not require that defendant believe her exports would threaten national security; it merely required that she knew the offense “involved” national security. U.S. v. Denny, 653 F.3d 6 (6th Cir. 2011).
6th Circuit applies specific offense characteristics from § 2S1.1 to offense level for underlying offense. (360) Defendant pled guilty to money laundering. The district court, pursuant to § 2S1.1(a)(1), set the base offense level based on the drug guideline, § 2D1.1. Defendant argued that § 2S1.1(a)(1)’s instruction to use the guideline for the underlying offense meant only § 2D1.1 should be used to determine her guideline range. The Sixth Circuit held that the court properly applied the specific offense characteristics under § 2S1.1(b) to the offense level obtained from § 2D1.1. The “offense level” from § 2D1.1 only constitutes the base offense level for purposes of § 2S1.1. Thus, the district court properly applied a two-level enhancement under § 2S1.1(b)(2)(B). U.S. v. Anderson, 526 F.3d 319 (6th Cir. 2008).
6th Circuit bases money launderer’s sentence on offense level for drug dealing. (360) Defendant’s son was a drug dealer. She was aware that her son was a drug dealer, and she helped him conceal his illegal proceeds and also assisted her son in his drug trade. She pled guilty to money laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). The Sixth Circuit held that the district court properly calculated her offense level under § 2S1.1(a)(1) based on the underlying offense of dealing methamphetamine. Subsection (a)(1) requires (A) that the defendant is responsible of the underling offense; and (B) that the base level of the underlying offense is determinable. Here, the district court properly found that defendant was responsible for participating in the drug conspiracy, and that the drug quantity for which she was responsible was ascertainable. Defendant allowed her son to use her house, while she was present, to conduct his methamphetamine operation. This included receiving drug shipments at the house, during which defendant would sometimes retrieve money for her son to pay for the shipment. Defendant also sometimes acted as a courier of her son’s drug proceeds, and also accepted guns from her son to store for him. Based on the $90,000 in drug money defendant handled, the district court conservatively determined that she was responsible for three pounds of methamphetamine. U.S. v. Anderson, 526 F.3d 319 (6th Cir. 2008).
6th Circuit bases role reduction on defendant’s role in money laundering, not drugs. (360) Defendant’s son was a drug dealer. She was aware that her son was a drug dealer, and she helped him conceal his illegal proceeds and also assisted her son in his drug trade. She pled guilty to money laundering. The district court, pursuant a cross-reference in § 2S1.1(a)(1), referenced § 2D1.1 to obtain defendant’s base offense level. The Sixth Circuit held that the district court erred by granting defendant a four-level reduction for her mitigating role in the drug conspiracy. Section 1B1.5(c) states that if the offense level is determined by reference to another guideline, the adjustments in Chapter Three also are determined in respect to the referenced offense level guideline, except as otherwise expressly provided. Note 2(c) to § 2S1.1 says that “Notwithstanding § 1B1.5(c), in cases in which subsection (a)(1) applies, application of any Chapter Three adjustments shall be determined based on the offense covered by this guidelines (i.e. the laundering of criminally derived funds)….” Thus, the court should have considered defendant’s role in the money laundering offense. Defendant clearly did not hold a minor role in that offense, since she was the only person criminally responsible for laundering the money. U.S. v. Anderson, 526 F.3d 319 (6th Cir. 2008).
6th Circuit rules cross-reference required applying guideline and specific offense characteristics. (360) Defendant pled guilty to money laundering. Section 2S1.1(a)(1) bases the offense level on the guideline for the underlying offense. In this case, defendant was laundering funds for a drug dealer. Defendant argued that because the district court cross-referenced § 2D1.1, the court was also required to apply the specific offense characteristics of § 2D1.1(b). The Sixth Circuit agreed. Section 1B1.5(b)(1) states that “[a]n instruction to use the offense level from another offense guideline refers to the offense level from the entire offense guideline (i.e., the base offense level, specific offense characteristics, [etc.]).” Thus, § 2S1.1(a)(1)’s direction to apply “the offense level for the underlying offense from which the laundered funds were derived,” meant applying § 2D1.1 in its entirety, rather than only § 2D1.1’s base offense level. Defendant was arguably eligible for a two-level safety valve reduction under § 2D1.1(b)(7). U.S. v. Anderson, 526 F.3d 319 (6th Cir. 2008).
6th Circuit says court lacked authority on limited remand to review sentence under new amendment. (360) On defendant’s first appeal, the court remanded for resentencing to determine the amount of laundered funds for which defendant should be held accountable. The Sixth Circuit held that the district court was correct in applying the guidelines in effect at the time of defendant’s original sentencing, rather than the version in effect at resentencing. The remand was limited to determining the amount of laundered money for which defendant was accountable. Thus, the court lacked the authority to review defendant’s sentence de novo under the amended version of § 2S1.1. No ex post facto issues were raised by this approach. Moreover, the recent enactment of 18 U.S.C. § 3742(g), in 2003, has clarified that the correct approach for a court to take on remand is to apply the guidelines in effect at the time of a defendant’s original sentencing. U.S. v. Orlando, 363 F.3d 596 (6th Cir. 2004).
6th Circuit says laundered funds were proceeds of specified unlawful activity. (360) Defendant obtained a $50 cashier’s check, altered the amount to $500,000, presented the check as payment for a $340,000 house, and then laundered the $160,000 difference several times before his fraud was discovered. He was convicted of bank fraud, money laundering, and uttering a counterfeit security. The Sixth Circuit affirmed an enhancement under § 2S1.2(b)(2) for knowing that the funds laundered “were the proceeds of … specified unlawful activity (see 18 U.S.C. § 1956(c)(7).” A specified unlawful activity is defined in § 1956(c)(7) to include “an offense under … section 513 (relating to securities of States and private entities).” It also incorporates “any act or activity constituting an offense listed in section 1961(1),” which includes acts indictable under “section 1344 (relating to financial institution fraud).” Count One charged defendant with violating 18 U.S.C. § 513, and Counts Two and Three charged violations of 18 U.S.C. § 1344. Moreover, the enhancement did not constitute improper double counting. The facts giving rise to the increase are not included in the money laundering statute – while the statute itself require that the transaction in fact be derived from a specified unlawful activity, the enhancement requires that the defendant know that the funds were the proceeds of a specified unlawful activity. U.S. v. Foreman, 323 F.3d 498 (6th Cir. 2003).
6th Circuit upholds use of money laundering guideline for group that included fraud counts. (360) Defendant was convicted of 12 counts relating to the manufacture and sale of unauthorized satellite television access devices. The offenses were deemed related and therefore were grouped for sentencing. The district court sentenced defendant using the offense level for the most serious of the counts, money laundering. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant argued that the elements of money laundering present in the scheme were incidental to what was basically a pattern of fraud, and that his sentence should have been calculated under the more lenient fraud guidelines. However, the Sentencing Commission recently deleted the language in the Appendix that the Smith court relied on and made it clear that a court is to use the guideline referenced in the Statutory Index. After this case was briefed and argued, the Sixth Circuit decided U.S. v. Chilingirian, 280 F.3d 704 (6th Cir. 2002) and U.S. v. Rashid, 274 F.3d 407 (6th Cir. 2001), which rejected Smith and held that the district court did not err by finding a defendant’s conduct had remained in the heartland even though it did not involve proceeds from drug trafficking or organized crime. The Sixth Circuit found Chilingirian and Rashid on point, and concluded that the district court did not err in sentencing defendant under the money laundering guidelines. U.S. v. Lewis, 296 F.3d 487 (6th Cir. 2002).
6th Circuit upholds aggregation of transaction in calculating money involved in laundering transactions. (360) Defendant was convicted of a variety of illegal gambling and money laundering charges. Applying § 2S1.1(b)(2), the district court added three levels because the total value of the funds involved in the illegal transactions exceeded $350,000 but was less than $600,000. Defendant argued that only individual transaction greater than $10,000 are illegal under 18 U.S.C. § 1957, and there was no evidence that any transaction (other than one $20,000 transaction) included in that aggregation exceeded $10,000. The Sixth Circuit held that the aggregation of the transactions was not plain error. This circuit has previously rejected this argument in an unpublished opinion, as have most other circuits that have addressed the issue. Therefore, even if defendant could show that the court’s aggregation of transactions was error, it certainly could not be plain error, inasmuch as it followed the law, albeit unpublished, of this circuit, and the law of at least four other circuits. U.S. v. Crouch, 288 F.3d 907 (6th Cir. 2002).
6th Circuit reverses where court failed to make specific findings of amount of laundered funds. (360) The district court, in responding to defendant’s objection to his PSR’s calculation of the amount of laundered funds for which he should be held responsible, said that “during Defendant’s involvement in the conspiracy, approximately $449,000 was laundered and was reasonably foreseeable by Defendant. Pursuant to U.S.S.G. § 2S1.1(b)(2), the range of $350,000 to $600,000 applies and three (3) points are added to the Offense Level. Accordingly, the objection is DENIED.” No other explanation was found in the record. The Sixth Circuit held that the district court failed to make adequate findings to support its calculation. In applying the guidelines to particular defendants who have been convicted for their role in a conspiracy, a district court must differentiate between the co-conspirators and make individualized findings of fact for each defendant. Here, the court neglected to identify the particular evidence presented at trial and at the sentencing hearing that led it to find defendant accountable for $449,000, and did not present anything other than general conclusions in its Rule 32(c) findings. Although the evidence might justify holding defendant accountable for $449,000 in laundered money, the court’s failure to explain its factual determination required remand. U.S. v. Orlando, 281 F.3d 586 (6th Cir. 2002).
6th Circuit upholds calculation of amount of laundered funds. (360) The district court held defendant accountable for in excess of $2 million of laundered money after hearing testimony from the probation officer who prepared defendant’s PSR, his bookkeeper, and defendant. The probation officer testified that she reached a figure of $2.5 million by adding all of the business tax license receipts from July 1993 to November 1998. Although this time frame did not correspond exactly with the superceding indictment, the corrected figure was still greater than the $2 million necessary to justify a six-level guideline enhancement. In addition, the bookkeeper testified that the dollar value of the business licenses were too low, and that the actual total would require doubling the $2.5 million figure. Although defendant challenged the bookkeeper’s assessment and claimed that the totals were cumulative, the court did not find defendant’s testimony credible in light of the evidence presented at trial, including defendant’s testimony that she had been offered $650,000 and five cars for her business. The Sixth Circuit held that the district court did not err in holding defendant accountable for more than $2 million of laundered money. U.S. v. Orlando, 281 F.3d 586 (6th Cir. 2002).
6th Circuit upholds court’s refusal to depart in money laundering case. (360) Defendant argued that the circumstances surrounding her money laundering conviction were atypical of what occurs in traditional money laundering offenses because she did not attempt to conceal her profits or use the laundered money to further other criminal activities. Therefore, she argued that the district court should have granted her a downward departure. The Sixth Circuit found that the court’s refusal to depart was unreviewable because the court was fully aware that it possessed the authority to grant a downward departure and simply declined to do so. The court specifically addressed the argument that defendant raised on appeal, stating that “the money laundering wasn’t incidental to the underlying offense.” A November 2001 amendment to the guidelines did not benefit defendant. U.S. v. Orlando, 281 F.3d 586 (6th Cir. 2002).
6th Circuit holds that money laundering enhancement did not violate Apprendi. (360) Relying on Apprendi v. New Jersey, 530 U.S. 466 (2000), defendant argued that the district court erred in holding her responsible for an amount of laundered money that was not set forth in the indictment. Because defendant’s sentence did not exceed the statutory maximum for the offenses that she was found guilty of committing, the Sixth Circuit found Apprendi inapplicable, and the amount of laundered money for which defendant was held responsible did not need to be set forth in the indictment, presented to the jury, and proven beyond a reasonable doubt. U.S. v. Orlando, 281 F.3d 586 (6th Cir. 2002).
6th Circuit finds court erred in applying fraud guideline to money laundering count. (360) Defendant, an attorney, was convicted of conspiracy to commit money laundering. Relying on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), the district court sentenced him under the fraud guideline rather than the money laundering guideline. Smith held that the money laundering guidelines were too harsh to apply to what it described as a routine fraud case in which the money laundering activity was an “incidental by-product” of a kick-back scheme. The Sixth Circuit reversed and remanded with instructions to resentence defendant under the money laundering guidelines. Even if this circuit were to apply Smith, the money laundering in this case was not minimal nor incidental – the laundered money was funneled through defendant’s client trust account in order to make it appear legitimate and to further his clients’ fraud scheme. Moreover, the Smith approach is not longer relevant. Smith relied on Appendix A, which used to direct a court in atypical cases to use the guideline most applicable to the nature of the conduct charged in the count of conviction. Effective November 2000, a sentencing court is required to use the guideline that Appendix A says is applicable. U.S. v. Chilingirian, 280 F.3d 704 (6th Cir. 2002).
6th Circuit upholds decision to sentence defendant under money laundering guideline. (360) Defendant pled guilty to money laundering and his attorney was found guilty on that count by the trial court. The judge sentenced both defendants. However, the judge sentenced the attorney under the fraud guideline, § 2F1.1, and sentenced defendant under the money laundering guideline, § 2S1.1. Defendant argued, based on U.S. v. Smith, 186 F.3d 290 (3d Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), that the district court should have applied the fraud guideline. In Smith, the Third Circuit held that the money laundering guidelines were too harsh to apply to what it described as a routine fraud case in which the money laundering activity was an “incidental by-product” of a kick-back scheme. The Sixth Circuit noted that it has previously rejected the idea that an offense is outside of the heartland of the money laundering guidelines merely because it involves proceeds from illegal activities other than drug trafficking and organized crime. See U.S. v. Ford, 184 F.3d 566 (6th Cir. 1999). In the current case, wire and mail fraud were the underlying illegal activities that generated the proceeds at issue, and both offenses are included within the money laundering statutes as “specified unlawful activities.” See 18 U.S.C. § 1956(c)(7)(A). Thus, the district court did not err in denying defendant’s motion to be sentenced under the fraud guideline. U.S. v. Rashid, 274 F.3d 407 (6th Cir. 2001).
6th Circuit holds that increases for abuse of trust and knowing funds were illegal proceeds not improper. (360) Defendant was convicted of embezzlement and money laundering charges. He argued that using his embezzlement activity as relevant conduct to apply the abuse of trust adjustment to his money laundering offense level, while at the same time applying a § 2S1.2(b) (1)(B) enhancement for knowing that the funds were proceeds of the embezzlement activity, raised a double counting issue. The Sixth Circuit affirmed the increases, finding both supported by separate policies. The § 2S1.2(b)(1)(B) enhancement was based on the fact that defendant knew that the funds he laundered emanated from a violation of 18 U.S.C. § 666(a)(1)(A), which is a specified unlawful activity pursuant to 18 U.S.C. §§ 1957(f)(3) and 1956(c)(7)(D). On the other hand, defendant’s money laundering offense level was further enhanced for abuse of trust because defendant’s acts of embezzlement, not his knowledge of those acts, was conduct relevant to the money laundering charge. U.S. v. Young, 266 F.3d 468 (6th Cir. 2001).
6th Circuit rules court properly considered incidental nature of defendant’s money laundering. (360) Defendant, a criminal defense attorney, was convicted of a money laundering conspiracy after she allowed her office to be used as a drop-off and pick-up point for cash that a client was owed by one of his drug distributors. The client had told defendant that he could not pay her legal fees until this $400,000 drug debt was repaid. The district court made a nine-level downward departure based on a variety of factors. Although six of the seven grounds for departure were improper, the Sixth Circuit ruled that the district court properly considered the fact that defendant’s conduct was incidental to the underlying criminal activity. Defendant was a third-party launderer who participated in only two laundering transactions. She was not a member of the drug trafficking conspiracy, and she did not stand to benefit from the reinvestment of criminal proceeds back into the conspiracy, aside from assuring that she would be paid for her legal services. Nonetheless, the nine-level departure was an abuse of discretion. Assuming that § 2S1.2 was the most appropriate guideline for comparison (it deals with money laundering without an intent to further the underlying drug activity), defendant would have had an adjusted offense level only four levels lower than applied here. U.S. v. Reed, 264 F.3d 640 (6th Cir. 2001).
6th Circuit rejects numerous grounds for downward departure in attorney money laundering case. (360) Defendant, a criminal defense attorney, was convicted of a money laundering conspiracy after she allowed her office to be used as a drop-off and pick-up point for cash that a drug supplier client was owed by one of his distributors. The district court made a nine-level downward departure based on a variety of factors. The Sixth Circuit ruled that six of the seven grounds were improper. The court found that defendant entered the drug trafficking conspiracy at its conclusion, when all drug trafficking had ceased. However, both §§ 2S1.1 and 2S1.2 account for this by using the amount of laundered money as a specific offense characteristic. The court’s finding that defendant did not intend to facilitate additional drug trafficking conflicted with the jury’s verdict. The client received a more lenient sentence than defendant because he accepted responsibility, did not abuse a position of trust, did not obstruct justice, and cooperated with authorities. The client’s wife was not prosecuted because all of the information against her was gathered pursuant to her cooperation agreement. Whether or not the client was permitted to keep the laundered funds was not related to defendant’s criminal behavior. The government’s decision to prosecute defendant under a statute with a severe penalty was not cause for a downward departure. U.S. v. Reed, 264 F.3d 640 (6th Cir. 2001).
6th Circuit relies on PSR loss rather than trial testimony. (360) Defendant contended that the trial court erroneously adopted the loss calculation computed by the probation officer who prepared the PSR. Defendant claimed that testimony at trial established a figure of less than one million dollars. At sentencing, the probation officer explained that he based his loss calculation on a report that he received from an IRS agent investigating the case. Noticing losses in the report that the victims had not reported previously, the probation officer contacted the victims and requested sworn statements. The sworn statements were consistent with the IRS report except for a few inconsistencies that the probation officer found. The district court found that the victim impact statements used in the preparation of the PSR were more accurate than the trial testimony, and supported the probation officer’s calculation. The court noted that the referenced testimony was incomplete and often taken out of context, and that some testimony related to a time midway in the scheme. Accordingly, the Sixth Circuit ruled that the loss calculation was not clearly erroneous. U.S. v. Prince, 214 F.3d 740 (6th Cir. 2000).
6th Circuit holds that court properly applied money laundering guideline. (360) Defendant fraudulently solicited investors for his company, and then converted the money for his own use. He was convicted of wire fraud and money laundering. He argued that the district court should have departed downward to apply the fraud guideline, rather than the money laundering guideline. The Sixth Circuit ruled that the district court was aware of his authority to depart downward, and exercised its discretion not to depart. After discussing both guidelines, the judge stated that “[e]ven though it’s a difficult question, it’s my conclusion that the money laundering statute is the appropriate guidelines to use as the starting point for the calculations in this case.” A court is not required to state that it has the discretion to depart. Moreover, a departure would be unwarranted because the facts of this case were not outside the heartland of the money laundering guideline. Defendant structured transactions to avoid a paper trail, concealing his fraudulent activities. Rather than accepting money directly from the victims, defendants directed victims to transfer money to third parties. Defendant then instructed the third parties to withdraw the money and transfer cash. Moreover, withdrawals from bank accounts were structured so that no amount exceeded $10,000. Defendant failed to explain how this case was atypical of money laundering cases. U.S. v. Prince, 214 F.3d 740 (6th Cir. 2000).
6th Circuit upholds estimate of value of funds involved in fraudulent food stamp redemption scheme. (360) At their two convenience stores, defendants purchased federal food stamp coupons at a discount for cash. They then redeemed the coupons for full value by depositing the coupons in various bank accounts held in the name of the grocery stores. During an eight-month period, $440,933 was deposited into six accounts located by the government. Of that amount, food stamps constituted $393,843, or 88.5% of the deposits. The Sixth Circuit found sufficient evidence to support the district court’s finding that the value of the funds exceeded $350,000. Defendants operated the illegal enterprise for two years, and the information on the bank deposits only covered an eight-month period. Defendants also admitted that the stores did about $150-200 a day in legitimate business, and that most of the business was in cigarettes and beer, neither of which could be purchased legally with food stamps. Thus, only a small portion of the food stamps deposited into the accounts could be attributed to legitimate business. Finally, defendants admitted that there were other accounts in which food stamps were deposited which were not discovered by the government. U.S. v. Bahhur, 200 F.3d 917 (6th Cir. 2000).
6th Circuit rules money laundering transactions involving gambling proceeds not outside heartland. (360) Defendant and his wife were convicted of operating an illegal gambling business and money laundering. In refusing to depart downward, the district court (1) rejected defendant’s suggestion that the money laundering guideline only applies to transactions connected with drugs or organized crime, and (2) rejected as a factual matter defendant’s explanation that he was required by state law to deposit the charitable gambling proceeds in the bank. The Sixth Circuit held that the district court’s conclusion that transactions in gambling proceeds are not per se outside the heartland was a question of law reviewable on appeal. However, the court’s rejection of defendant’s claim that he was trying to comply with state law when he engaged in the transactions was a discretionary refusal to depart, not reviewable on appeal. The Sixth Circuit further held that inclusion of gambling within the money laundering statutes as “specified unlawful activities” showed conclusively that transactions in gambling proceeds are not outside the heartland of money laundering offenses. U.S. v. Ford, 184 F.3d 566 (6th Cir. 1999).
6th Circuit says attorney’s conduct not outside heartland of money laundering statute. (360) Defendant, a criminal defense attorney, acted as a conduit for the flow of money and information between a client and a distributor to whom the client sold drugs. The district court departed downward, finding defendant’s conduct was “on the outer edges of that” contemplated by the money laundering statute, 18 U.S.C. § 1956. The judge also took into account the time and cost involved in an interlocutory appeal. The Sixth Circuit held that the departure was an abuse of discretion, disagreeing with the district court’s conclusion that defendant’s conduct was outside of the heartland of § 1956 offenses. Although the district court did not view defendant’s conduct as typical money laundering, defendant’s interlocutory appeal established that defendant “clearly … effected a disposition of the proceeds.” This decision brought the Sixth Circuit in line with other circuits and the plain meaning of the statute. Although the district court found defendant less culpable than the typical money launderer, the court did not provide any specifics. Finally, neither defendant nor the district court provided the appellate court with any evidence that the length of the delay or the costs involved in resolving the interlocutory appeal were unusual. U.S. v. Reed, 167 F.3d 984 (6th Cir. 1999).
6th Circuit attributes all commingled funds to money laundering operation. (360) Defendant was convicted of conspiracy and substantive charges relating to gambling, prostitution, and drug trafficking. He argued that the court should not have included monies potentially derived from legitimate business activities in the calculation of the amount of funds laundered, even if he had commingled those funds. The Sixth Circuit found no error. When a defendant commingles laundered money with funds derived from unspecified other sources, all such funds are attributable to the money laundering scheme. The court did not clearly err in finding that defendant had commingled funds. There was testimony that rental payments contained proceeds from prostitution and gambling, and that monies involved in the gambling scheme were commingled with money from the bar at one of the topless clubs. U.S. v. Owens, 159 F.3d 221 (6th Cir. 1998).
6th Circuit says relevant conduct may not be used in finding amount of funds structured. (360) Defendant structured a transaction to avoid reporting requirements by purchasing a $123,500 home with currency and cashier’s checks. The court held him accountable for structuring more than $100,000 under § 2S1.3(b)(2). The Sixth Circuit held that the court should have excluded $29,000 from two cashier’s checks for which defendant and his brother filled out the reporting forms. The enhancement would have been proper under Fifth Circuit law, which allows a court to consider all funds involved in the same course of conduct or common scheme or plan as the offense of conviction. However, under U.S. v. Wright, 12 F.3d 70 (6th Cir. 1993), the relevant conduct adjustment does not apply where a guideline provision restricts its application to specific conduct. Defense counsel’s failure to object to the additional point was not ineffective assistance because there was no prejudice. Defendant was already serving a 420-month drug sentence that ran concurrently with the 57-month sentence he received on the structuring charge. Green v. U.S., 65 F.3d 546 (6th Cir. 1995).
6th Circuit agrees that defendant knew funds were criminally derived. (360) Defendant structured a transaction to avoid statutory reporting requirements by purchasing a $123,500 home with currency and a series of cashier’s checks. The Sixth Circuit upheld a § 2S1.3(b)(1) enhancement for knowing or believing that the funds were criminally derived property. Although defendant’s mother-in-law originally stated that she had lent defendant $100,000 to buy the house, she repudiated this statement the day after he was convicted of drug charges. Defendant had no source of income other than drug trafficking. His lawyer’s failure to convince the court otherwise did not constitute ineffective assistance. Green v. U.S., 65 F.3d 546 (6th Cir. 1995).
6th Circuit holds that applying wrong guideline is clear error. (360) Defendants argued for the first time on appeal that the district court incorrectly sentenced them under section 2S1.1(a)(1) rather than 2S1.1(a)(2). At oral argument, the government conceded the error, but characterized it as technical in nature. The 6th Circuit held that applying an incorrect base offense level in sentencing is clear error, and remand was necessary. U.S. v. Moss, 9 F.3d 543 (6th Cir. 1993).
6th Circuit affirms that defendant knew funds were criminally derived. (360) Defendant was convicted of structuring financial transactions to evade reporting requirements after purchasing several luxury cars with $9,000 cash and numerous smaller cashier’s checks. The 6th Circuit affirmed an enhancement under section 2S1.3(b) based on defendant’s knowledge that the funds were criminally derived. The presentence report noted the enormous disparity between the legitimate income of defendant and his co-defendants and the cost of five luxury cars. The court also relied on the transcript of defendant’s detention hearing on a firearm charge at which the magistrate judge concluded that defendant was a member of a large-scale cocaine distribution network. Defendant stated to an undercover agent who attempted to purchase cocaine from him “Don’t deal with me; I’m too hot, deal with Chachi.” The court also relied on the affirmance of the detention order by a judge, and the indictment (now a conviction) of defendant by a county grand jury for cocaine trafficking. U.S. v. Akrawi, 982 F.2d 970 (6th Cir. 1993).
6th Circuit affirms application of 1990 version of money laundering guideline. (360) Defendant was convicted of attempted money laundering in violation of 18 U.S.C. section 1956(a)(3)(B). He argued that he should not have been sentenced under the November 1990 version of the sentencing guidelines because section 2S1.1, the guideline under which he was sentenced, was drafted before enactment of 18 U.S.C. section 1956(a)(3). Thus, it was designed to punish a class of defendants to which he did not belong. The 6th Circuit found no clear error in the district court’s application of the guidelines. Further, the district court correctly enhanced defendant’s offense level because the evidence was sufficient to provide that defendant had the necessary knowledge of belief that the source of the funds for the transaction was drug activity. U.S. v. Loehr, 966 F.2d 201 (6th Cir. 1992).
6th Circuit affirms enhancement for believing government sting funds were proceeds of an unlawful activity. (360) Defendant received an enhancement under guideline section 2S1.1 for believing the funds involved in a money laundering operation were the proceeds of an unlawful activity. He contended that the enhancement was improper because he was convicted in a sting operation and the money was not actually drug proceeds. The 6th Circuit held that as long as the defendant believes that the funds were the proceeds of an unlawful activity, the enhancement applies, regardless of the actual source of the money. U.S. v. Payne, 962 F.2d 1228 (6th Cir. 1992).
7th Circuit says money laundering guideline’s cross-reference treats substantive guideline as base offense level. (360) Defendant ran a health spa that was actually a brothel. She pled guilty to racketeering and money laundering. Section 2S1.1(a)(1) says that the base offense level comes from the offense level for the underlying offense from which the laundered funds were derived when that level is ascertainable. The court went to § 2G1.1, which deals with commercial prostitution. That guideline provides a base level of 14. The judge then returned to § 2S1.1(b) (2)(B) and added two levels because defendant had been convicted under § 1956. Defendant argued that it was improper for the court to return § 2S1.1, and that her offense level should have remained at 14. The Seventh Circuit, following the First and Sixth Circuits’ decisions in U.S. v. Anderson, 526 F.3d 319 (6th Cir. 2008) and U.S. v. Cruzado-Laureano, 440 F.3d 630 (1st Cir. 2006) held that the reference in § 2S1.1(a)(1) means that judges should use the offense level calculated under the substantive guideline as the base level for money laundering, and then make any other adjustments that the money laundering guideline provides.. U.S. v. Hodge, 558 F.3d 630 (7th Cir. 2009).
7th Circuit upholds below-guideline sentence for tax fraud and money laundering. (360) Defendant was convicted of tax fraud and money laundering, resulting in an 87-108 month advisory sentencing range. The Seventh Circuit affirmed a 24-month sentence, finding that the sentencing judge articulated sufficient reasons for the downward variance. Although the district court cited several factors, the court relied primarily on its finding that (1) based on defendant’s age, she was unlikely to commit future crimes, and (2) the seriousness and characteristics of her offenses were not part of the heartland of money laundering offenses. The district court considered defendant’s age (61) to be a mitigating factor, not because she was infirm, but because her age set her apart from the average offender and made it less likely that she would commit these crimes again. The district court’s conclusion that defendant’s offense was less serious than other types of money laundering was supported by the Sentencing Commission’s 1997 report, which highlighted its particular concern with concealment of the proceeds of drug trafficking, promotion of criminal conduct, and use of sophisticated forms of money laundering. U.S. v. Carter, 538 F.3d 784 (7th Cir. 2008).
7th Circuit holds that money laundering and money laundering conspiracy have same penalty. (360) Defendant was convicted of conspiring to defraud the U.S. and money laundering. The judge enhanced his offense level under § 2S1.1(b)(2)(b) because defendant had been convicted under § 1956, which forbids conspiracy to commit money laundering. However, Note 3(C) to § 2S1.1 provides that subsection (b)(2)(B) “shall not apply if the defendant was convicted of conspiracy under 18 U.S.C. § 1956(g) and the sole object of that conspiracy was to commit an offense set forth in 18 U.S.C. § 1957.” That described defendant’s situation precisely; he was convicted under § 1956(h), and the sole object of that conspiracy was the substantive offense specific in § 1957. The sentencing judge, however, declined to apply Note 3(c), deeming it limited to cases in which the base offense level is unrelated to any other crime. The Seventh Circuit reversed, finding that the text of Note 3(C) was unambiguous and covered defendant’s situation – the district court’s consideration of its heading to interpret the meaning of the Note was improper. “[T]he Sentencing Commission has decided not to use whatever leeway it possesses to prescribe different penalties for money laundering and money laundering conspiracies, but instead wants courts to impose the same punishment for these two offenses.” U.S. v. Tedder, 403 F.3d 836 (7th Cir. 2005).
7th Circuit holds that court properly used money laundering guideline. (360) A group of about 15 federal inmates devised and implemented an extensive check kiting scheme. Unable to conduct the bank transactions themselves, the inmates recruited numerous friends and relatives outside of the prison. Defendant, who was married to the sister of one of prisoners, was recruited to help in the scheme, and was convicted of conspiracy to commit bank fraud, bank fraud, wire fraud, and conspiracy to commit money laundering. He argued that because his conduct was “at the most incidental to the wire and bank fraud scheme run by the inmates,” it fell outside the “heartland” of cases under § 2S1.1, and therefore, the money laundering guideline should not have been used to calculated his sentence. The Seventh Circuit noted that it rejected a similar argument in U.S. v. Buckowich, 243 F.3d 1081 (7th Cir. 2001). The defendant in Buckowich was convicted of both wire fraud and money laundering. The court said that the judge in sentencing must consider both offenses and may not act as if the defendant had been convicted of just one. Moreover, although not applicable to the 1998 guidelines used in defendant’s case, as of November 1, 2000, the Sentencing Commission amended Appendix A to expressly rejects exceptions under the “heartland” analysis. The district court correctly determined there were no unusual circumstances and the facts of defendant’s case fell within the heartland of § 2S1.1. U.S. v. Gracia, 272 F.3d 866 (7th Cir. 2001).
7th Circuit remands to decide if money launderer could reasonably foresee drug sales. (360) At sentencing, the district court said defendant was “only being charged with his actual participation in the criminal offense for which he has been convicted” and that “none of the conspiracy activities are being charged to [him] in the sentencing.” However, the judge then proceeded to identify the amount of money that defendant laundered and counted it in the drug conspiracy, converting it into its rough equivalent in cocaine, as if defendant had actually sold drugs, and applied the drug trafficking guideline, § 2D1.1. On appeal, the Seventh Circuit held this was plain error, because the court’s comments made it unclear whether it knew it should be sentencing defendant for the reasonably foreseeable activities of his co-conspirators in furtherance of the conspiracy. The Seventh Circuit suggested that because defendant knew of the drug money, he may have reasonably foreseen the drug sales associated with that money, but this “conclusion is not preordained.” Moreover, on remand the court should indicate whether it was using retail or wholesale value of the drugs in converting the laundered money into drugs. “Not adjusting for the difference may make [defendant] accountable for a larger quantity of cocaine than was truly reasonably foreseeable.” U.S. v. Hunt, 272 F.3d 488 (7th Cir. 2001), superseded on other grounds by statute as stated in U.S. v. Rodriguez-Cardenas, 362 F.3d 958 (7th Cir. 2004).
7th Circuit says sentence for money laundering must be based on money laundering guideline. (360) Defendant argued that his money laundering activity was simply a part of his scheme to harbor illegal aliens and therefore was an “atypical” case to which the court should not have applied the money laundering guideline. The Seventh Circuit rejected the argument noting that the introduction to Appendix A of the Sentencing Guidelines had been amended effective November 1, 2000, to delete the language authorizing use of a different guideline in “atypical” cases and instead requiring courts to “apply the offense guideline referenced in the Statutory Index for the statute of conviction.” Applying this new amendment did not violate the Ex Post Facto Clause because U.S. v. Buckowich, 243 F.3d 1081 (7th Cir. 2001) had held that this amendment did not alter the state of the law in the Seventh Circuit. The court was also unpersuaded that a proposed November 1, 2001 amendment which the Commission explained “would tie offense levels for money laundering more closely to the underlying criminal conduct,” was “simply a proposal,” and the court declined to adopt it as the law of the Seventh Circuit. Finally, the panel rejected defendant’s argument that his conduct was “atypical” money laundering, noting that defendant’s scheme involved more than $350,000 in funds derived solely from hiring illegal workers. U.S. v. Kosmel, 272 F.3d 501 (7th Cir. 2001).
7th Circuit says “value of the funds” in money laundering includes uncharged relevant conduct. (360) Defendant was convicted of money laundering in a scheme that involved cashing paychecks of illegal alien employees. The district court added $53,000 in paychecks that defendant deposited in his personal bank account on behalf of Universal employees and the $344,000 that Universal paid a company called Roman that was later incorporated. He argued that the check cashing could not have been a part of the scheme to launder funds because it occurred prior to defendant opening Roman. He also argued that the $344,000 should not have been included because the government did not charge defendant for these transactions. The Seventh Circuit rejected both arguments holding that all of the transactions promoted the underlying criminal conduct. The financial support defendant provided to the illegal workers “certainly contributed to his later scheme, even if Roman’s formal incorporation came later.” Moreover, the $344,000, although not charged in the indictment, “was certainly part of the scheme for which [defendant] was convicted.” U.S. v. Kosmel, 272 F.3d 501 (7th Cir. 2001).
7th Circuit holds that transactions listed in indictment did not limit money “involved in” conspiracy. (360) Defendant operated massage parlors that were fronts for his prostitution business. He was convicted of money laundering charges. The district court found that about $4.4 million was involved in the money laundering conspiracy based on the income that defendant received from his “massage parlor” business from 1990 to 1997. Defendant argued that this was excessive because the “specified unlawful activity” charged in his indictment was his laundering of $2590 in specific credit card transactions. The Seventh Circuit held that the specific credit card transactions listed in the indictment did not limit the amount of money “involved” in defendant’s conspiracy. He was in fact convicted of laundering an amount much larger than that. Moreover, defendant’s relevant conduct was not limited by the funds charged in the money laundering counts themselves. In a conspiracy spanning several years, the value of funds is determined by the amount of money that is “reasonably foreseeable” to defendant, including monies that were generated to further or facilitate the conspiracy. It was not necessary for the government to separate out income from bona fide massages from income from sexual services. The clean money was also “involved in” the conspiracy since it helped further and facilitate the operation. U.S. v. Baker, 227 F.3d 955 (7th Cir. 2000).
7th Circuit holds that any error in base offense level was offset by failure to apply value of funds increase. (360) Defendant was convicted of conspiring to launder money, in violation of 18 U.S.C. § 1956(h). The money laundering guideline, § 2S1.1(a), provides for a base offense level of 23, if the defendant was convicted under § 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A). Otherwise the offense level is 20. Defendant argued that the district court’s use of the level 23 was wrong because he pled guilty to a violation of § 1956(h), which is not one of the subsections listed in § 2S1.1 as having an offense level of 23. Without deciding the merits of defendant’s claim, the Seventh Circuit found any error was harmless. Section 2S1.1 also requires an increase in the base offense level based on the value of the funds laundered. Here, that value was about $1.5 million, which would require a five-level increase under § 2S1.1(b)(2)(F). The district court failed to make this specific offense characteristic adjustment. The government did not appeal this, so defendant was not at risk of a higher sentence. However, any error the court may have made in selecting a base offense level of 23 was offset by the failure to make a specific offense characteristic adjustment. Moreover, it was not clear that the choice of offense level of 23 was in error. The sentence under § 1956(h) must be the same as for the person who commits the substantive offense, and the choice of a base offense level under § 2S1.1(a) depends on which substantive offense underlay the conspiracy. It was quite possible that defendant should have begun with level 23, and then also received another five levels for the value of the funds laundered. U.S. v. Haehle, 227 F.3d 857 (7th Cir. 2000).
7th Circuit upholds increase for knowledge that money was illegal proceeds. (360) When informed by Customs Inspectors that she needed to report currency in excess of $10,000, defendant responded that she had recently sold her house. She then falsely stated she was carrying only $400 in cash. In fact, her luggage contained about $129,710, hidden between plywood and wrapped in cellophane tape. She was convicted of failing to report currency that she was attempting to transport to Mexico. The Seventh Circuit affirmed a § 2S1.3(b)(1) increase for knowing or believing that the funds were proceeds of unlawful activity. The PSR and the district court reasonably interpreted defendant’s response to Customs as a statement that the money she was transporting was the proceeds from the sale of her house. However, defendant had received only about $55,000 from her house, and was unable to account for the remaining $73,000. She had previously earned about $600 a month, but was unemployed at the time of her arrest. The manner in which the money was packed, her dishonest response when asked if she was carrying more than $10,000, her false representation that the money constituted the proceeds of the sale of her home, and her employment history all supported the district court’s conclusion that the money had an illegal source. Defendant’s lack of a criminal record and her use of her true identity while traveling were insufficient to show clear error. U.S. v. Suarez, 225 F.3d 777 (7th Cir. 2000).
7th Circuit holds upholds calculation of laundered funds. (360) Defendant used the proceeds of his drug trafficking to purchase homes, cars, boats, and an airplane. He also used legitimate businesses to launder his drug proceeds, including Pocketown Records. The district court found that the value of the funds laundered, for § 2S1.1(b)(2) purposes, exceeded $2 million. Defendant challenged for the first time on appeal the district court’s finding that the Pocketown investment totaled $750,000 to $1 million. The Seventh Circuit found no plain error, since the value was supported by a co-conspirator’s testimony. Defendant also challenged the inclusion of amounts relating to the purchase of a yacht and a speed boat. The Seventh Circuit found no clear error. Under § 1B1.3(a)(1)(B), defendant was liable for funds laundered by his co-conspirators as long as the acts were reasonably foreseeable. Although defendant claimed there was no evidence that he ever used or even knew of the yacht, co-conspirator Tapes related how defendant was present during a conversation in which another conspirator described and bragged about the yacht. U.S. v. Ward, 211 F.3d 356 (7th Cir. 2000).
7th Circuit finds insufficient information to extrapolate value of funds from three shipments. (360) Defendant transported drug money for his employer. The first shipment contained $1.2 million; a second planned shipment was aborted; the third trip involved $800,000; and a fourth trip involved $ 1 million. The last trip involved an unspecified amount of cash. If the value of the funds laundered was more than $3.5 million, § 2S1.1(b)(2) calls for a 7-level enhancement. The district court found defendant responsible for more than $3.5 million by adding up the known value of the funds ($1.2 million, $800,000, and $1 million), and dividing the total of $3 million by three, for an average value of $1 million per trip. To be conservative, the judge cut that figure in half, and assumed that the aborted second trip and the last trip both involved at least $500,000, for a total amount of $4 million. The Seventh Circuit rejected this methodology, finding insufficient information for the average amount of the shipments to have any meaning. The average was drawn from only three samples. There was no information about either the maximum or the minimum amounts involved in the shipments. The samples were also problematic. They were not selected randomly from a larger pool of subjects; thus, this was an instance of non-probability sampling. This made it especially problematic to extrapolate from the three known values to the fourth unknown one. U.S. v. Johnson, 185 F.3d 765 (7th Cir. 1999).
7th Circuit rules conduct fell within heartland of money laundering. (360) Defendants were convicted of money laundering, wire fraud, and filing false tax returns based on their use of a false invoice scheme to take money from their company, and their subsequent use of the funds. They argued that the court misperceived its authority to depart because it believed that their conduct fell within the heartland of money laundering offenses. They argued that money laundering covers attempts to launder illicit money, not to later transactions involving washed funds. The Seventh Circuit found that defendants’ conduct did not fall outside the money laundering heartland. Defendants believed that their cashing and depositing of checks constituted a subsequent transaction in laundered money rather than the laundering transaction itself. On the contrary, defendant did launder the money. While they did not legitimate dirty money, they did move dirty money from an auditable account into hiding. Thus, their conduct fell under the statute’s coverage of attempts to conceal the ill-gotten proceeds of crime. U.S. v. Mankarious, 151 F.3d 694 (7th Cir. 1998).
7th Circuit holds defendant accountable for entire amount of laundered funds. (360) On two occasions, defendant laundered $75,000 for an undercover agent posing as a drug trafficker. An associate, who called himself defendant’s partner, helped with the transactions. Defendant and the associate then had several conversations with the agent over the next several months. In October, the associate accepted $80,000 for laundering. The district court found defendant laundered more than $200,000. The Seventh Circuit agreed that defendant was responsible for the full amount laundered. The court found the associate’s acts were reasonably foreseeable. In defendant’s plea agreement, he agreed to be responsible for a total of $230,000. The agreement also referred to the associate’s statement that he and defendant were still working together when the associate laundered the last $80,000. The recitation of facts also said that the associate told defendant about this transaction, that the associate told the undercover agent that he and defendant were still working together, and that he and defendant split the fee for the transaction. U.S. v. Gwiazdzinski, 141 F.3d 784 (7th Cir. 1998).
7th Circuit requires mail fraud and money laundering counts to be grouped together. (360) Defendant, an employee of the U.S. Postal Service, hired contractors to perform work on post offices in exchange for kickbacks of money, vehicles, services and real estate. He was convicted of mail fraud, conspiracy and money laundering. The Seventh Circuit held that the district court erred in refusing to group the mail fraud and money laundering convictions together. In U.S. v. Wilson, 98 F.3d 281 (7th Cir. 1996), the court held that mail fraud and money laundering convictions should be grouped as closely related counts under § 3D1.2 because the money laundering served the necessary purpose of concealing the fraud, keeping the scheme afloat, and perpetrating the scheme that produced the laundered funds. Wilson rejected the notion that mail fraud and money laundering should not be grouped because those crimes harm different victims. In addition, defendant was indicted and convicted under the “promotion” prong of the money laundering statute. Defendant laundered the proceeds of his mail fraud scheme with the intent of promoting that illegal scheme. Wilson involved the “concealment” prong of the money laundering statute. Merely concealing the proceeds of criminal activity evidences a lesser connection to the underlying criminality than actually promoting the activity. U.S. v. Emerson, 128 F.3d 557 (7th Cir. 1997).
7th Circuit finds defendant could foresee extent of drug and money laundering conspiracies. (360) Defendant was the leader of a drug and money laundering conspiracy. The Seventh Circuit upheld the court’s finding that defendant could foresee that the conspiracy laundered in excess of $600,000, and that it distributed more than 400 kilograms of marijuana. Although defendant only personally laundered about $87,000, he was involved in the drug and money laundering conspiracy from “top to bottom.” In additional to his own participation in receiving money orders and packaging and delivering substantial quantities of drugs, he transported other individuals to the airlines for the purpose of transporting drugs and to the Western Union offices for the purpose of picking up wire transfers. The extent of the money laundering conspiracy was reasonably foreseeable to defendant. U.S. v. House, 110 F.3d 1281 (7th Cir. 1997).
7th Circuit rules plea agreement supported base offense level of 23 for money laundering. (360) Defendants pled guilty to a money laundering conspiracy. Their plea agreements stated three objectives: to promote a specified unlawful activity in violation of § 1956(a)(1) (A)(i), to conceal the ownership or control of the unlawful activity in violation of subsection (B)(i), and to avoid a transaction reporting requirement, in violation of subsection (B)(ii). The district court applied a base offense level of 23, which applies to conspiracies to violate § 1956(a)(1)(A)(i), and on appeal, the Seventh Circuit agreed that defendants pled guilty to conspiracy to violate § 1956(a)(1)(A)(i), (B)(i) and (ii). The government presented considerable evidence through the testimony of a government investigator to support the guilty pleas, including the government’s allegations that the money laundering was done to promote the ongoing drug conspiracy and to ensure future deliveries of drugs. Defendants did not challenge this allegation at sentencing. U.S. v. House, 110 F.3d 1281 (7th Cir. 1997).
7th Circuit says 23 is base offense level for conspiracy to commit money laundering. (360) Defendant pled guilty to conspiracy to launder money under 18 U.S.C. § 1956(a)(1)(A), which is a violation of § 1956(h). Guideline section 2S1.1 requires a base offense level of 23 if the defendant is convicted under §§ 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A), and a base offense level of 20 if the defendant is “otherwise” convicted of money laundering. Defendant argued that he should have been given a base offense level of 20 because he was convicted under § 1956(h). The Seventh Circuit held that the appropriate base offense level for conspiring to violate § 1956(a)(1)(A) is 23. Section 2X1.1(a) provides that the appropriate base offense level for a conspiracy that is not covered by a specific offense guideline is the base offense level from the guideline for the substantive offense. U.S. v. Monem, 104 F.3d 905 (7th Cir. 1997).
7th Circuit holds that robberies and burglaries were not relevant conduct for money laundering. (360) Defendant made his living by stealing others’ property, selling it, and laundering the proceeds. He pled guilty to money laundering. Section 4A1.2(e)(1) directs a court to include in a defendant’s criminal history certain sentences that were imposed within 15 years of defendant’s “commencement of the instant offense.” This is defined to include any relevant conduct. The district court included in defendant’s criminal history a 1974 conviction that occurred within 15 years of the burglaries and thefts, even though the money laundering did not occur until after the expiration of the 15‑year window. The Seventh Circuit held that the robberies and burglaries were not relevant conduct for the money laundering offenses. The illegal conduct that furnishes the money that is later involved in a structuring transaction is not part of the structuring offense itself. Only when the effort to conceal the financial transaction begins does the relevant conduct for money laundering begin. Since the thefts and burglaries were not relevant conduct, the district court should not have included the 1974 sentence in defendant’s criminal history. U.S. v. Gabel, 85 F.3d 1217 (7th Cir. 1996).
7th Circuit says money found in car was relevant to money laundering. (360) Defendant made several deliveries of large sums of cash to an undercover agent posing as a money launderer. The cash was usually transferred in detergent boxes that had been emptied, filled with bills, and resealed. The boxes were usually left in the trunk of defendant’s car. When defendant was arrested, an additional $131,000 in cash was discovered inside emptied boxes of laundry detergent in the trunk of defendant’s car. The Seventh Circuit agreed that the money found in defendant’s car upon his arrest was properly included in the total amount laundered under § 2S1.1(b)(2). Defendant and the agent had an ongoing relationship, and the $131,000 was packaged in the same way and in the same place as previous deliveries. Also, there was evidence that defendant and the agent may have been getting together later that same day. U.S. v. Berrio, 77 F.3d 206 (7th Cir. 1996).
7th Circuit agrees that defendant believed that funds to be laundered were drug proceeds. (360) Defendant made several deliveries of large sums of cash to an undercover agent posing as a money launderer. The district court enhanced the sentence under § 2S1.1(b)(1) because defendant knew or believed the money was drug proceeds. Defendant argued that the word “believed” applied only to sting operations where the money was not in fact unlawfully derived, while the word “knew” applied to convictions like his and required actual knowledge. The Seventh Circuit disagreed, finding the enhancement can be based on knowledge or belief. Here, the evidence showed that defendant believed the funds were drug proceeds. He knew the money was mostly in small bills counted and sorted by denominations, knew the amount of each delivery, and knew the money was destined for Cali, Colombia. Moreover, the undercover agent repeatedly asked defendant to supply him with cocaine, and defendant hinted that he could. U.S. v. Berrio, 77 F.3d 206 (7th Cir. 1996).
7th Circuit agrees that defendant could foresee value of laundered money exceeded $6 million. (360) After defendant’s boyfriend was convicted of drug charges, defendant helped him hide his assets and launder his drug money. The Seventh Circuit upheld a eight level enhancement under § 2S1.1(b)(2), agreeing that defendant could reasonably foresee that the laundering activities involved $6 to 7 million. The boyfriend’s brother, who was also involved in the laundering activities, stated that there was $6 to 7 million in Swiss bank accounts at one time. Defendant admitted that her boyfriend told her each account contained $3 million. Although defendant presented evidence that the accounts contained far less by the time she became involved, the court weighed the credibility of all of the evidence and concluded otherwise. U.S. v. Maggi, 44 F.3d 478 (7th Cir. 1995).
7th Circuit upholds enhancements despite use of same enhancements in previous prosecution. (360) Defendant was convicted of conspiracy to commit bank fraud and money laundering. He had previously been convicted of conspiracy to commit wire fraud and bank fraud. He claimed that enhancements under § 2S1.1(b)(2) (A) for the amount of money laundered and under § 3B1.1(a) for his leadership role violated double jeopardy since the earlier court had already relied on some of the same facts (a $350,000 loss and two common participants). The 7th Circuit found no double jeopardy violation since the convictions were for separate offenses. While the offenses involved the same type of scheme, the banks and most of the participants were distinct. U.S. v. Brown, 31 F.3d 484 (7th Cir. 1994).
7th Circuit upholds aggregation of amounts in money laundering offenses. (360) Defendant was convicted of mail fraud, money laundering and securities fraud for depositing investor’s funds into accounts for his own personal use. His offenses were placed in two groups under section 3D1.2(d): a fraud group and a money laundering group. The 7th Circuit affirmed a four level enhancement based on the money involved in the money laundering group under section 2S1.1(b)(2)(E). The district court found that $88,438 had been laundered in furtherance of the scheme. In addition, defendant made a large number of transactions with his ill-gotten gains that were in excess of $10,000. The total amount involved in these transactions was $857,263. The purported interest and partial withdrawal payments were clearly undertaken as part of a common scheme to defraud investors, and thus, aggregation of the amounts involved in both offenses was appropriate. Thus, $941,701 was the total attributable to the money laundering offenses, and the four level enhancement was correct. U.S. v. Cole, 988 F.2d 681 (7th Cir. 1993).
7th Circuit says 2S1.3(a) applies to defendant who lied to customs officer about currency. (360) While boarding a flight out of the United States, defendant misrepresented to a customs officer that he was only carrying $6-7,000 in cash, when in fact he was carrying $24,000. Defendant was convicted of making false statements, in violation of 18 U.S.C. section 1001. The 7th Circuit affirmed that defendant was properly sentenced under the currency reporting guideline section 2S1.3, rather than 2F1.1, the guideline applicable to false statements. Although section 2F1.1 normally applies to false statements under section 2F1.1, application note 13 states that if the indictment establishes an offense more aptly covered by another guideline, apply that guideline. The government tried defendant on the theory that he lied to the customs officer to evade the currency reporting requirements. U.S. v. Obiuwevbi, 962 F.2d 1236 (7th Cir. 1992).
7th Circuit upholds determination that defendant knew money was criminally derived. (360) Defendant was convicted of failing to report a currency transaction in excess of $10,000. The 7th Circuit affirmed a 5-point increase in offense level because the defendant knew the money was criminally derived. When defendant was stopped at the airport on her way to Nigeria, she was carrying $13,000, $4,000 of which was hidden in her underwear. She lied to customs agents as to the amount of cash she carried. A narcotics dog reacted positively to the money taken from her. Her bank account showed a series of large deposits and withdrawals during the prior year. During the period in which defendant deposited over $12,000 in cash into the account, she earned about $4,000 from her job at a nursing home. The district court could determine, by a preponderance of the evidence, that defendant knew the money in her possession was criminally derived. U.S. v. Hassan, 927 F.2d 303 (7th Cir. 1991).
7th Circuit reverses double counting based on drug involvement in money laundering scheme. (360) As a result of his involvement in a drug conspiracy, defendant was convicted of money laundering, and was sentenced under guideline § 2S1.1(a)(1). Although evidence indicated that he received approximately $64,000, the court found the total funds exceeded $100,000. The court increased defendant’s offense level under § 2S1.1(b)(2)(B) by multiplying the total quantity of marijuana by its street value. The 7th Circuit reversed, ruling that this was double counting. The district court had already increased defendant’s offense level by three under guideline § 2S1.1(a)(1) because defendant knew that the laundered money was the proceeds of marijuana distribution. “To then include the value of those drugs in computing the total value of the funds involved in the money laundering scheme would result in [defendant’s] sentence being doubly enhanced due to the fact that drugs were involved in the money laundering scheme.” U.S. v. Atterson, 926 F.2d 649 (7th Cir. 1991).
8th Circuit upholds increase for subjective belief that laundered funds were drug proceeds. (360) Defendant was convicted of money laundering for cashing money orders for Epherson, a childhood acquaintance. Defendant told investigators that he believed that Epherson was a drug dealer. On one occasion, defendant had asked Epherson to sell him an ounce of cocaine for personal use, but Epherson declined, telling him he did not sell quantities that small. The Eighth Circuit upheld a § 2S1.1(b)(1) enhancement for knowing or believing that the laundered funds were the proceeds of a controlled substance offense. The government was not required to prove that the funds were, in fact derived from drug trafficking. The § 2S1.1(b)(1) enhancement does not turn on any objective characteristics of the funds, but rather upon the subjective knowledge or belief of the defendant. The district court found that defendant “knew the laundered proceeds were intended to promote the offense involving the distribution of controlled substances.” This finding was not clearly erroneous. U.S. v. Mitchell, 613 F.3d 862 (8th Cir. 2010).
8th Circuit says defendant failed to show that structured funds “were the proceeds of lawful activity.” (360) Defendant argued that she was entitled to a reduction in her base offense level for currency structuring because the currency funds “were the proceeds of lawful activity.” See § 2S1.3(b)(3)(C). The Eighth Circuit rejected the argument, noting that the defendant “bears the burden of proving a reduction applies.” U.S. v. Carasa-Vargas, 420 F.3d 733, 737 (8th Cir. 2005). The court found that the district court did not clearly err in concluding that there was insufficient evidence regarding the source of the funds used in the currency structuring offenses. U.S. v. Sweeney, 611 F.3d 459 (8th Cir. 2010).
8th Circuit reverses increase for being “in the business” of laundering funds. (360) Defendant was convicted of money laundering for cashing money orders for Epherson, a drug dealer. The district court imposed a four-level enhancement under § 2S1.1(B)(2)(c), determining that defendant was “in the business of laundering funds.” The Eighth Circuit reversed, finding defendant was not similar to a professional fence. The propriety of the enhancement depended on whether defendant regularly laundered money for an extended period of time and generated a substantial amount of revenue from it. The judge concluded that defendant had “generated a substantial amount of money” based upon the premise that defendant had negotiated money orders totaling about $42,000. The trial evidence did not support this conclusion. Epherson paid defendant between $50 and $100 per money order cashed, and defendant cashed about 45 money orders for Epherson. Thus, defendant only generated between $2,250 and $4,500 in total from Epherson over 16 to 18 months. U.S. v. Mitchell, 613 F.3d 862 (8th Cir. 2010).
8th Circuit upholds finding that loss to government was impossible to determine. (360) Defendant was convicted of making fraudulent statements to the government, tax fraud, and laundering money, acts designed to obtain more farm program benefits than were warranted by defendant’s farming operation. The district court calculated defendant’s offense level under § 2S1.1(a)(2) (based on the value of the laundered funds), rather than § 2S1.1(a) (based on the offense level for the underlying offense) because it found that it could not determine the offense level for the underlying fraud offense. It found that the calculation of the total amount of loss to the government was impracticable, if not impossible, to determine. While defendant was convicted of maintaining illegal farming operations in order to obtain farm program benefits to which he was not entitled, he also conducted a legitimate farming operation. The funds involved in both the legitimate and illegitimate farming operations were continually commingled. The Eighth Circuit held that the district court did not clearly err in ruling that the total amount of loss to the government was impracticable, if not impossible to determine. Thus, it properly used § 2S1.1(a)(2) to calculate defendant’s offense level. U.S. v. Huber, 462 F.3d 945 (8th Cir. 2006).
8th Circuit rules use of newer money laundering guideline would have violated Ex Post Facto Clause. (360) The district court sentenced defendant using the 2000 money laundering guidelines in effect at the time of his offenses, rather than the 2002 version in effect at sentencing. The Eighth Circuit ruled that the district court properly used to 2000 guidelines in order to avoid an Ex Post Facto Clause violation. Under the 2000 guidelines, defendant received an offense level of 21. Under the 2002 guidelines, the court would have applied the guideline for the underlying offense. U.S.S.G. § 2S1.1(a)(1) (2002). In this case, the primary underlying offense was fraud. Although defendant’s base offense level would have been six under § 2B1.1(a), the intended pecuniary loss to the government of at least $200,000 would have resulted in a 12-level enhancement § 2B1.1 (b)(1)(G). Moreover, three additional increases that were unavailable under the 2000 guideline would have been proper under the 2002 guidelines: (1) a two-level increase under § 2S1.1(b) (2)(B) for a conviction under 18 U.S.C. § 1956; (2) a two-level increase under § 2B1.1(b)(7)(C) because the offense involved a violation of a judgment in a prior case and a seizure order; and (3) a two-level increase under § 2B1.1(b)(8)(C) for using “sophisticated means.” This would have resulted in an offense level of 24, at least three levels higher than that which he received under the 2000 guidelines. U.S. v. Frank, 354 F.3d 910 (8th Cir. 2004).
8th Circuit holds that defendant not entitled to be sentenced under new money laundering guideline. (360) Defendants argued that their sentences should be vacated based on Amendment 634, which altered USSG § 2S1.1 (money laundering). Effective November 1, 2001, Amendment 634 changed the calculation of the offense level for money laundering in § 2S1.1. Rather than setting base offense levels of 23 or 20 like the earlier version, the amended version sets a base offense level of either the offense level for the underlying offense from which the laundered funds were derived, or eight plus the number of offense levels from the table in § 2B1.1 corresponding to the value of the laundered funds. The Eighth Circuit held that the amendment did not apply to defendants, since it substantively changed the guidelines, rather than merely clarified them. Further, the Sentencing Commission did not include Amendment 634 in the list of amendments to be applied retroactively. See USSG § 1B1.10(c). U.S. v. King, 280 F.3d 886 (8th Cir. 2002).
8th Circuit holds that decision not to depart from money laundering guideline was unreviewable. (360) Defendant argued that his conduct fell outside the heartland of money laundering offenses because it was a simple theft accompanied by a “receipt-and-deposit” diversion to conceal the theft, rather than the type of large scale drug trafficking and professional money laundering that Congress had in mind when it enacted the money laundering statutes. Although the court denied the motion, it expressed sympathy for defendant’s position as to the intent of Congress. The Eighth Circuit held that the court was aware of its authority to depart, and therefore, the decision not to depart was not reviewable. In support of his downward departure motion, defendant submitted a memorandum that correctly cited Eighth Circuit cases holding that courts may depart downward from the money laundering guideline in atypical cases. See U.S. v. Woods, 159 F.3d 1132 (8th Cir. 1998); U.S. v. Ross, 210 F.3d 916 (8th Cir. 2000). In this context, when the court observed that it agreed with defendant’s position as to the intent of Congress but was “required” by Eighth Circuit precedent to deny a departure, “it obviously meant that a departure based solely on the disparity between the money laundering and embezzlement guidelines would be reversed as an abuse of discretion, as in Ross.” The panel refused to interpret the court’s cryptic remarks as completely misconstruing the departure authority discussed in Woods and Ross. U.S. v. Riza, 267 F.3d 757 (8th Cir. 2001).
8th Circuit upholds separate grouping of fraud and “reinvestment” money laundering. (360) In U.S. v. O’Kane, 155 F.3d 969 (8th Cir. 1998), the Eighth Circuit held that fraud and money laundering counts cannot be grouped together under § 3D1.2(b) because those crimes have different victims. Defendant argued that O’Kane should be limited to “concealment” money laundering, noting that other circuits have held that the victims of “reinvestment” money laundering are the same as the victims of the underlying fraud. See, e.g., U.S. v. Leonard, 61 F.3d 1181 (5th Cir. 1995); U.S. v. Cusumano, 943 F.2d 305 (3d Cir. 1991). Rejecting these opinions, the Eighth Circuit held that the O’Kane analysis applies to all types of money laundering. Thus the district court properly refused to group defendants’ reinvestment money laundering counts with the underlying fraud counts. While reinvestment money laundering is more closely related to the underlying fraud than other kinds of money laundering, the offenses still entail different proscribed conduct, are punishable on different scales, and harm distinct and different victims. Reinvestment does not make the victim of money laundering the same as the victim of the fraud. Whether the criminal uses the fraud proceeds to buy an item for personal use or to pay promotion costs to further the fraud, money laundering invades society’s interest in deterring and detecting crime. In both cases, the funds have been given the appearance of legitimacy through laundering. U.S. v. Green, 225 F.3d 955 (8th Cir. 2000).
8th Circuit rejects departure based on disparity between guidelines’ treatment of wire fraud and money laundering. (360) Defendant was convicted of wire fraud and money laundering for operating an illegal “advance fee” scheme through which his company fraudulently obtained fees for loans it never intended to fund. The district court departed downward due to the “unfortunate” variation between the Guidelines’ treatment of basic fraud and money laundering, and because it found that not all the advance fees were put to a fraudulent use. The Eighth Circuit held that the district court abused its discretion in departing due to what it viewed as an “unfortunate” disparity between the treatment of wire and fraud and money laundering. “[D]issatisfaction with the available sentencing range or a preference for a different sentence than that authorized by the guidelines is not an appropriate basis for a sentence outside the applicable guideline range.” USSG § 5K2.0, commentary. In addition, the panel “questioned” the court’s finding that not all of the $3.2 million proceeds were put to fraudulent use. The proceeds generated from the underlying wire fraud were, in large part, the income stream that allowed the company to maintain the appearance of legitimacy for a number of years. The evidence showed that virtually all of the $3.2 million in fees was reinvested into the company’s business and expended to maintain its operation. U.S. v. Ross, 210 F.3d 916 (8th Cir. 2000).
8th Circuit remands for determination of when defendant joined conspiracy. (360) Defendant and several co-conspirators formed nine phony supply companies that billed the college where they worked for supplies that it never received. The district court held defendant accountable for the losses caused by all nine companies, even those under the control of his co-conspirators. Defendant claimed that a large portion of the combined losses occurred prior to his joining the illegal scheme and therefore were not attributable to him. The Eighth Circuit remanded for additional proceedings to determine when defendant joined the conspiracy. The district court made no finding regarding the precise time that defendant joined the conspiracy. The court found that the supply company scheme began about June 1991, and that defendant did not join until a later time. However, the court made no specific finding regarding the latter date, and there was insufficient evidence in the record to determine it. The close working relationship between defendant and co-conspirator Knudsen, the college’s vice president of business affairs, suggested that defendant may have already joined the conspiracy in January of 1992, when he was hired by the college. However, conflicting evidence suggested defendant may not have entered the scheme until September 1992 or mid-1994. U.S. v. Bad Wound, 203 F.3d 1072 (8th Cir. 2000).
8th Circuit holds defendant accountable for losses from co-conspirators’ companies. (360) Defendant and several co-conspirators formed nine phony supply companies that billed the college where they worked for supplies that it never received. The Eighth Circuit ruled that defendant was accountable both for the losses caused by his own three companies and for the losses caused by the six companies formed by his co-conspirators. The acts of his co-conspirators were reasonably foreseeable to defendant and were in furtherance of a joint scheme. First, although defendant did not realize financial gain directly from the phony companies not under his control, he benefited from his co-conspirators’ activities. For example, co-conspirator Knudsen issued checks from the college to each of the nine bogus companies, knowing that the college was receiving nothing in return. Second, defendant was substantially committed to the overall scheme, not just as it related to his three companies. Defendant and Knudsen discussed defendant destroying cancelled checks and vendor records to cover-up the scheme. Finally, defendant and his co-conspirators shared a close working relationship and the acts of fraud committed by each individual were remarkably similar. U.S. v. Bad Wound, 203 F.3d 1072 (8th Cir. 2000).
8th Circuit says defendant’s conduct did not constitute “serious” money laundering. (360) Defendant did not disclose to her bankruptcy trustee certain stock she owned. She sold the stock and deposited the proceeds into her husband’s bank account. The next day, she and her husband obtained cashier’s checks from the account, and used the money to pay personal expenses. She pled guilty to bankruptcy fraud and money laundering. The Eighth Circuit approved a downward departure that was based on the district court’s finding that defendant’s actions were not the type of serious money laundering contemplated by the Sentencing Commission when it promulgated the money-laundering guideline. Because defendant’s underlying offense was bankruptcy fraud, and not drug trafficking or some other offense typical of organized crime, the facts of her money laundering did not fall into the “heartland” of money laundering cases. U.S. v. Woods, 159 F.3d 1132 (8th Cir. 1998).
8th Circuit says money laundering and fraud counts should have been grouped separately. (360) Defendant, a baseball card collector, worked as an assistant manager of a grocery store. He ordered large volumes of cards on the store account, intercepted the shipments, took them home, sold some, and kept the remainder. He intercepted payments from dealers, deposited them into various bank accounts under his control, and used a portion of his ill-gotten gains to purchase a computer and a pickup truck. He pled guilty to fraud and money laundering. The Eighth Circuit held that the district court erred by grouping the fraud count together with the money laundering count. The counts could not be grouped under § 3D1.2(b), which requires that the same person or entity be the victim of both crimes. Defendant’s employer was the victim of his fraud. However, the victim of the money laundering was society–money laundering harms society’s interest in discovering and deterring criminal conduct. The court rejected defendant’s claim that the counts should be grouped because his act of money laundering involved the purchase of a truck that he used to facilitate his fraud. Defendant began his fraud and money laundering activities over a year before he purchased the pickup truck. Also, he pled guilty to a violation of 18 U.S.C. § 1957, a less serious form of money laundering that does not require the laundering activity to promote the underlying crime. U.S. v. O’Kane, 155 F.3d 969 (8th Cir. 1998).
8th Circuit says increase for knowing money was illegal proceeds was not double counting. (360) Defendant, a county sheriff, took money collected by the sheriff’s department for local youth programs and spent it on personal items. He was convicted of misappropriating county money and engaging in unlawful monetary transactions. The district court applied a § 2S1.2 (b)(1)(B) enhancement for knowing that the property was the proceeds of a specified unlawful activity. The Eighth Circuit held that this was not double counting because knowledge that the property came from an unlawful activity was not a required element of the money laundering offense. Defendant knew how the proceeds were derived and had control over how they were spent. He clearly knew he was using the money for purposes other than those for which it was intended. U.S. v. Hawkey, 148 F.3d 920 (8th Cir. 1998).
8th Circuit finds resentencing unnecessary despite ambiguous verdicts where evidence was strong. (360) Defendants were convicted by a jury of several counts of conspiracy and money laundering. They claimed that the general verdicts were ambiguous because the jury did not specify whether embezzlement, money laundering or both were the object of the conspiracy, and there was no indication on the money laundering verdict whether the jury found money laundering through promotion of the specified unlawful activity under subsection (a)(1)(A)(i), through a concealment of the source of the funds under (a)(1)(B)(i), or both. The Eighth Circuit found resentencing unnecessary, despite the ambiguous verdicts, since the evidence was so strong on each mode of violation that the jury must have found that defendants violated both prongs of 18 U.S.C. § 1956. Thus, the district court was correct in imposing a guideline sentence based on a violation of the (a)(1)(A)(i) alternative. U.S. v. Nattier, 127 F.3d 655 (8th Cir. 1997).
8th Circuit upholds increase where unreported money produced money for illegal activities. (360) Defendant, the president and majority stockholder of a commercial fossil business, was convicted of two minor counts of theft (for taking fossils from U.S. lands without permission) and two counts of failing to file a customs reports when transporting monetary instruments. The district court applied a § 2S1.3(b) enhancement, finding that the funds defendant failed to report taking with him to on a trip to collect fossils in Peru promoted defendant’s unlawful conspiracy to take fossils from U.S. lands. The Eighth Circuit affirmed. Both the funds defendant transported to Peru to acquire fossils, and the money defendant brought home from Japan after selling fossils, were intended to produce money for defendant’s business that would promote its ongoing conspiratorial enterprise. Because the funds defendant failed to report were to aid an unlawful conspiracy, the § 2S1.3(b)(1) enhancement was proper. Judge Beam dissented, believing the nexus between the customs violations and the “judge-found” conspiracy to be “tenuous.” U.S. v. Larson, 110 F.3d 620 (8th Cir. 1997).
8th Circuit approves enhancement for knowing laundered funds were proceeds of wire fraud. (360) Defendant was convicted of four counts of wire fraud and three counts of money laundering. The district court applied a § 2S1.2(b)(1)(B) enhancement because defendant knew that the funds he laundered were the proceeds of a specified unlawful activity. The Eighth Circuit affirmed, holding that wire fraud is a “specified unlawful activity.” The enhancement was not double counting, since knowledge that the property is from an unlawful activity is not an element of the money laundering offense. Defendant was one of the persons involved in committing the wire fraud, so he unquestionably knew that the laundered funds were obtained through wire fraud. U.S. v. Hare, 49 F.3d 447 (8th Cir. 1995).
8th Circuit binds defendant to agreement in plea that money laundering guideline applied. (360) Defendant argued that he should not have been sentenced under the money laundering guidelines, § 2S1.1, because he was primarily engaged in gambling. The Eighth Circuit found that defendant acknowledged in his plea agreement that § 2S1.1 would apply at sentencing to his money laundering offense. A defendant who explicitly and voluntarily exposes himself to a specific sentence may not challenge that punishment on appeal. Moreover, § 2S1.1 was the correct guideline for the crime to which defendant pled guilty. U.S. v. Nguyen, 46 F.3d 781 (8th Cir. 1995).
8th Circuit holds that defendant knew funds provided by long-time friend were drug proceeds. (360) Defendant, a licensed real estate agent, assisted a friend in purchasing property and was convicted of structuring a financial transaction to evade currency reporting requirements. The 8th Circuit upheld a § 2S1.3(b)(1) enhancement for using funds that defendant knew were criminally derived. Defendant and his friend had been friends a long time, and defendant knew that his friend was a drug dealer. Defendant had visited the home of defendant’s girlfriend on several occasions when significant amounts of cash and drugs were on hand. Defendant was aware of his friend’s extravagant lifestyle. The friend paid the bulk of the purchase price in cash in small denominations delivered in paper or plastic bags. U.S. v. Mitchell, 31 F.3d 628 (8th Cir. 1994).
8th Circuit rejects departure for first-time offender, nature of offense, age, and family responsibilities. (360) Finding the guideline range of 51 to 63 months “unduly harsh,” the district court departed downward to six months with work release, citing the absence of prior convictions, the “relatively minor” nature of the offense, defendant’s advanced age, and the need to care for his family. The 8th Circuit reversed. Section 4A1.3 notes that criminal history category I is reserved for first offenders. Defendant’s offense conduct under § 2S1.1 (advising a drug dealer client how to structure a cash deposit to avoid reporting requirements) was not merely technically unlawful. Although defendant was supporting three young sons, his family had multiple sources of income and a substantial net worth. Defendant was 67 years old and in good health, and thus his age also did not warrant a downward departure. However, on remand, the court should examine in closer detail whether defendant deserved a four level enhancement under § 2S1.1(b) based on knowledge that the laundered funds were illegal drug proceeds. Senior Judge Heaney dissented. U.S. v. Goff, 20 F.3d 918 (8th Cir. 1994).
8th Circuit says court should have used money laundering guideline rather than bank fraud. (360) Defendant was the CEO and director of a bank. Defendant, her husband and her nephew were involved in a bank fraud scheme, drawing insufficient funds checks on one account and depositing them into another, and then issuing cashier’s checks to themselves. She was convicted of money laundering and bank fraud. The money laundering charges stemmed from a loan obtained from a new bank. The loan proceeds were first deposited in one bank account, and then transferred into the account at defendant’s bank on which the insufficient funds checks were written. The district court refused to apply § 2S1.1, the money laundering guideline, to this count. The 8th Circuit reversed, holding that the financial transaction underlying the money laundering count was intended to promote the bank fraud. In enacting 18 U.S.C. § 1956(d), Congress intended cumulative punishment for money laundering and the activities underlying the money laundering. U.S. v. Morris, 18 F.3d 562 (8th Cir. 1994).
8th Circuit rules that court failed to resolve objection to money laundering enhancement. (360) Based on the grand jury testimony of two accomplices, defendant’s presentence report concluded that defendant received $458,000 from these accomplices for drugs he sold to them, and that this money was concealed and laundered. Defendant objected, arguing that the witnesses were not credible and that the $458,000 should have been reduced by the amount defendant paid his suppliers and other business expenses. The 8th Circuit found that the district court failed to properly resolve defendant’s objection. The hearsay statements in the presentence report did not have “sufficient indicia of reliability to support their probable accuracy.” There was nothing to support the conclusion that defendant laundered all of the $458,000 of the drug proceeds he received. Once alerted to defendant’s objections, the district court had an obligation to receive evidence other than the probation officer’s conclusions and to make a specific factual finding, based on a preponderance of the evidence. U.S. v. Mahler, 984 F.2d 899 (8th Cir. 1993).
8th Circuit finds no double counting in enhancement for knowledge that laundered money was drug proceeds. (360) Defendant, convicted of money laundering, received an enhancement under section 2S1.1(b)(1) based on his knowledge that the laundered funds were drug proceeds. He argued that because he was charged with laundering drug money, an essential element of his crime was his knowledge that the laundered funds were drug proceeds, and therefore the enhancement constituted improper double counting. The 8th Circuit rejected this challenge. Defendant was convicted under 18 U.S.C. section 1956(a)(1)(B)(i), which prohibits the laundering of proceeds from a myriad of illegal activities, many of which have nothing to do with drugs. Thus, section 2S1.1(b)(1) distinguishes between classes of money launderers, punishing more severely those who knowingly launder drug proceeds. U.S. v. Long, 977 F.2d 1264 (8th Cir. 1992).
9th Circuit says foreign conduct should not be used to calculate offense level. (360) Defendants were convicted of a RICO violation in which the underlying predicates consisted of defrauding a bank in China and then committing immigration fraud to flee to the U.S. At sentencing, the district court calculated defendants’ sentence using § 2S1.1(a)(1), which instructs that the base offense level should be calculated by using the offense level for the underlying offense. The court determined that the underlying offense was fraud. The Ninth Circuit held that the district court erred in using conduct that occurred in a foreign country to calculate defendants’ offense level and remanded for recalculation of defendants’ base offense level. U.S. v. Chao Fan Xu, 706 F.3d 965 (9th Cir. 2013).
9th Circuit affirms 14-level increase in currency smuggling case. (360) Defendants were convicted of trying to export $500,000 cash from the U.S. to Mexico, in violation of 31 U.S.C. §§ 5324(c) and 5332. As required by guideline Section 2S1.3(a)(2), the district court referred to the loss table in Section 2B1.1 and increased their sentence by 14 levels for amounts over $400,000. Defendant argued that 2B1.1 is a penalty for loss, and because there was no loss (the government seized the money), the 14-level increase should not have been applied. The Ninth Circuit rejected the argument, noting that the 14-level enhancement was applied not because of loss, but rather because Section 2S1.3 incorporates the loss chart in 2B1.1 as a reference for the bulk cash smuggling guideline instead of simply reprinting the chart. U.S. v. Del Toro-Barboza, 673 F.3d 1136 (9th Cir. 2012).
9th Circuit says currency smuggler did not play minor role. (360) Defendant and his brother were convicted of attempting to smuggle $500,000 cash from the United States to Mexico in defendant’s van. He argued that the district court should have given him a 2-level reduction for his minor role, pointing to Congressional findings that bulk cash smugglers are “typically low-level employees of large criminal organizations.” The Ninth Circuit found no error, noting that defendant asserted lack of knowledge of the currency, and had not urged that he was carrying it for a large organization. In any event, the facts at trial indicated that his role was not minor. U.S. v. Del Toro-Barboza, 673 F.3d 1136 (9th Cir. 2012).
9th Circuit says money that was not laundered cannot be used to calculate offense level. (360) Defendant ran a Ponzi scheme in which he solicited funds from investors purportedly to buy oil and gas partnerships. In reality, he paid a portion of the solicited funds to investors, claiming that they were dividends from the scheme. Defendant also paid commissions to brokers, and he made a small number of oil and gas investments. Based on some of the payments he made to investors, defendant was convicted of money laundering. On appeal, the Ninth Circuit reversed some of defendant’s convictions because it found that the payments did not constitute money laundering. The government nevertheless argued that the funds underlying the reversed counts could be used in calculating defendant’s offense level under § 2S1.1. The Ninth Circuit rejected this contention, holding that a defendant’s money laundering offense level cannot be calculated based on transactions that do not constitute money laundering. U.S. v. Van Alstyne, 584 F.3d 803 (9th Cir. 2009).
9th Circuit reiterates that money laundering guideline should be used in all money laundering cases. (360) In U.S. v. Lomow, 266 F.3d 1013, 1018 (9th Cir. 2001), the court rejected the argument that the money laundering guideline, § 2S1.1, should not be used when the defendant’s money laundering is an “incidental by-product” of another offense. Here, the court reiterated that except in cases governed by the “stipulation exception” in § 1B1.2(a), courts should use § 2S1.1 for money laundering offenses. U.S. v. Johnson, 297 F.3d 845 (9th Cir. 2002).
9th Circuit upholds adoption of PSR in finding defendants could foresee entire scope of money laundering scheme. (360) Each of the defendants’ presentence reports supplied facts supporting a conclusion that the defendants knew or could have reasonably foreseen the full amount of money in the money laundering scheme. This resulted in a six-level increase under guideline § 2S1.1. The Ninth Circuit held that the district court complied with Rule 32, Fed. R. Crim. P. by specifically adopting the findings in the PSRs. The district court indicated its awareness of the defendant’s challenges to the statements in the PSR and made the specific findings necessitated by Rule 32. U.S. v. Tam, 240 F.3d 797 (9th Cir., 2001).
9th Circuit declines to group fraud and money laundering counts. (360) Defendant fraudulently induced investors to send him over $4.5 million, of which approximately $1.78 million was invested into the scheme. He was convicted of both money laundering and fraud. He argued that under § 3D1.2(d), the district court should have grouped these counts together at sentencing. The Ninth Circuit rejected the argument, noting that U.S. v. Taylor, 984 F.2d 298 (9th Cir. 1993) and U.S. v. Hanley, 190 F.3d 1017, 1033 (9th Cir. 1999) held that fraud and money laundering counts should not be grouped for sentencing because the guidelines for fraud and money laundering “measure harm differently.” The court distinguished U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994) on the ground that in that case there was “complete identity” between the laundered and the fraudulently obtained funds. The panel also rejected defendant’s argument that the counts should have been grouped under § 3D1.2(b), rather than (d) which requires grouping where the counts “involve the same victim” or a “common scheme or plan.” The offenses did not involve the same victim because “society” is the victim of money laundering. U.S. v. Syrax, 235 F.3d 422 (9th Cir. 2000).
9th Circuit upholds abuse of trust increase for money laundering even though it was inherent in extortion. (360) Defendant was convicted of extortion under color of official right, as well as money laundering. Because the money laundering guideline was higher, the district court ignored the extortion guideline when the two were “grouped” under § 3D1.3(b). On appeal, defendant argued that a § 3B1.3 abuse of trust enhancement was improper double counting because extortion under color of official right inherently involves an abuse of position of trust. The Ninth Circuit rejected the argument, because, under § 3D1.3(b), the extortion count was ignored in setting the base offense level, so it was proper to increase for abuse of position of trust. The court distinguished U.S. v. Calozza, 125 F.3d 687 (9th Cir. 1997) on the ground that the district court in Calozza used the enhancement twice when it only should have used it once. U.S. v. Smith, 196 F.3d 1034 (9th Cir. 1999).
9th Circuit refuses to “group” wire fraud and money laundering counts. (360) In U.S. v. Taylor, 984 F.2d 298, 303 (9th Cir. 1993), the Ninth Circuit held that because “the guidelines for wire fraud and money laundering measure harm differently … the dismissed wire fraud count cannot be grouped with the monetary transaction count under § 3D1.2(d).” In the present case, however, defendants argued that U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994) created an exception to Taylor where there is a “complete identity” between the fraudulently obtained funds and the laundered funds. The Ninth Circuit rejected the argument, holding that Rose simply permits trial courts to treat fraudulently derived funds as “relevant conduct” for sentencing purposes under § 2S1.1 when such funds are coextensive with the sums involved in money laundering. However, “Rose does not require grouping in those circumstances.” Accordingly, the district court did not err by refusing to group defendants’ wire fraud and money laundering counts. U.S. v. Hanley, 190 F.3d 1017 (9th Cir. 1999).
9th Circuit adopts rule to decide what “group” furnishes the base offense level. (360) Under guideline section 3D1.4 the rule for choosing which group furnishes the base offense level is to use “the offense level applicable to the Group with the highest offense level.” In this case, defendant argued that the fraud guideline rather than the money laundering guideline, should have been used to set the base offense level because the vulnerable victim and abuse of position of trust adjustments should have been considered only with respect to fraud. The Ninth Circuit rejected this argument, relying on U.S. v. Duran, 15 F.3d 131, 134 (9th Cir. 1994), and U.S. v. Haggard, 41 F.3d 1320 (9th Cir. 1994). Under these cases, “the test for whether such adjustments as vulnerable victim and abuse of position of trust can be applied is whether they are ‘relevant conduct’ as defined by the guidelines, not whether they apply to the victim or the criminal’s position with respect to the crime to which the adjustments are being applied.” Because defendant’s money laundering was relevant conduct to his offense of fraud, it was proper to use money laundering as the base offense level and apply the adjustments to that offense level. U.S. v. Calozza, 125 F.3d 687 (9th Cir. 1997).
9th Circuit says applying same adjustments to each “grouped” offense was improper double counting. (360) The district court adjusted defendant’s fraud offense level for vulnerable victim and abuse of position of trust. It then used the same adjustments to increase the offense level for money laundering. The result was that when both offenses were “grouped” under section 3D1.4, the fraud group was treated as one “unit” rather than ½ “unit.” In a 2-1 opinion, the Ninth Circuit held that this was improper double counting because “the effect is to add prison time twice for exactly the same abuse of trust and vulnerable victims.” District Judge Brewster dissented, arguing that double counting is permissible where, as here, the Commission intended it. U.S. v. Calozza, 125 F.3d 687 (9th Cir. 1997).
9th Circuit counts all drugs in conspiracy despite reversal on aiding and abetting. (360) In the first appeal in this case, the Ninth Circuit reversed defendant’s substantive drug convictions explaining that “as an aider and abettor [defendant] cannot be held liable under a Pinkerton theory for the subsequent acts of his co-conspirators.” On remand, the district court refused to consider drug quantities linked to defendant’s involvement in the conspiracy for sentencing. In this second appeal, the Ninth Circuit again reversed, holding that the district court was required to consider the quantity of drugs in the conspiracy in calculating the sentence even though the convictions on the substantive drug offenses had been reversed. The court noted that in U.S. v. Watts, 117 S.Ct. 633, 636 (1997), the Supreme Court had held that “a sentencing court may consider conduct of which a defendant has been acquitted.” Under the relevant conduct section of the guidelines, 1B1.3, the court must consider “all reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity.” U.S. v. Newland, 116 F.3d 400 (9th Cir. 1997).
9th Circuit bases offense level on amount of laundered funds, not net loss. (360) The Ninth Circuit agreed with the Tenth Circuit’s decision in U.S. v. Lowder, 5 F.3d 467, 472 (10th Cir. 1993), that the money laundering offense level under guideline § 2S1.2 should be based on the total amount of the funds involved in the transactions, not the net loss. In this case, because the same five level increase would apply regardless of how the district court calculated the figures, the failure to determine precisely the amount involved was harmless. U.S. v. Ripinski, 109 F.3d 1436 (9th Cir. 1997), amended, 129 F.3d 518 (9th Cir. 1997).
9th Circuit rejects departure based on disparity between money laundering and fraud guidelines. (360) At sentencing, the government asserted that the Sentencing Commission intended to impose harsher punishments on those who violate 18 U.S.C. § 1957 (money laundering) in addition to committing fraud. On appeal, the Ninth Circuit held that the government was correct in asserting that the district court had no authority to depart downward under the circumstances. In U.S. v. Rose, 20 F.3d 367, 374 & n.6 (9th Cir. 1994), the court concluded that no legal basis exists for departing downward to reduce sentencing disparity between § 2S1.1 money laundering and the underlying wire fraud. U.S. v. Ripinski, 109 F.3d 1436 (9th Cir. 1997), amended, 129 F.3d 518 (9th Cir. 1997).
9th Circuit requires “grouping” drug and money laundering counts. (360) Rejecting the Fifth and Eleventh Circuit opinions in U.S. v. Gallo, 927 F.2d 815, 824 (5th Cir. 1991) and U.S. v. Harper, 972 F.2d 321, 322 (11th Cir. 1992), the Ninth Circuit held that defendant’s convictions for money laundering and conspiracy to distribute marijuana and cocaine should have been “grouped” under guideline § 3D1.2, thereby reducing defendant’s sentence. The court reasoned that both offenses were victimless crimes that involved the same victim because “the societal interests that are harmed are closely related.” Moreover, both crimes were “connected by a common criminal objective.” Defendant “laundered money to conceal the conspiracy’s drug trafficking and thus facilitated the accomplishment of the conspiracy’s ultimate objective of obtaining the financial benefits of drug trafficking.” Judge Fernandez dissented, arguing that a person who has committed both offenses “has earned a sentence which is measurably greater than the sentence earned by a person who committed only one crime.” U.S. v. Lopez, 104 F.3d 1149 (9th Cir. 1997).
9th Circuit upholds finding that each defendant laundered over $10 million. (360) In calculating the “value of funds” laundered under 2S1.1(b)(2)(J), the district court must consider conduct beyond the counts on which the defendant was convicted where the acts “were part of the same course of conduct or common scheme or plan as the offense of conviction.” U.S.S.G. § 1B1.3(a)(2). Here, the uncharged transactions were for the same customers, during the same time period, and otherwise similar to those for which one defendant was convicted. The other defendant received over $10 million in deposits traced to money laundering operations, more than half of which was for the charged transactions. The district court’s findings wee affirmed. U.S. v. Golb, 69 F.3d 1417 (9th Cir. 1995).
9th Circuit upholds grouping of fraud and money laundering funds. (360) Two defendants were convicted of various fraud and money laundering counts arising out of fraudulent money lending and laundering activities of two companies they organized and operated. In determining the “value of funds” laundered under § 2S1.1(b)(2)(G), the district court “grouped” under § 3D1.2(d) the moneys involved in the fraud and money laundering counts including uncharged amounts. The Ninth Circuit upheld this calculation, finding all the moneys were relevant conduct. This case was distinguished from U.S. v. Taylor, 984 F.2d 298 (9th Cir. 1993) and U.S. v. Johnson, 971 F.2d 562 (10th Cir. 1992) where the courts precluded grouping of fraud and money laundering offenses. In those cases, the money schemes were related, but not relevant conduct. U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994).
9th Circuit rejects departure based on disparity between fraud and money laundering guidelines. (360) Defendant was convicted of various fraud and money laundering counts. He was sentenced under the more harsh money laundering guidelines, with the fraud moneys calculated as part of the “value of funds” under § 2S.1. Defendant requested a downward departure to minimize the sentencing disparity between the fraud and money laundering guidelines. Without deciding the issue of reviewability, the Ninth Circuit upheld the district court’s refusal to depart finding the disparity was intended by the Sentencing Commission. Therefore there was no mitigating factor upon which to base a departure. U.S. v. Rose, 20 F.3d 367 (9th Cir. 1994).
9th Circuit says car used to export currency could not be forfeited where charges were dismissed. (360) The claimant failed to report one million dollars in currency in the trunk of his car when he crossed the border into Canada. He was charged with violating the currency reporting statute, 31 U.S.C. § 5312, 5316, but was allowed to plead guilty to a lesser offense. Since the lack of a currency conviction prevented the government from forfeiting the car under § 5317 and 18 U.S.C. § 982, it relied on 22 U.S.C. § 401, which does not require a conviction, and provides for the forfeiture of vehicles used in exporting “any arms or munitions of war or other articles in violation of law.” On appeal, the 9th Circuit reversed, holding that permitting the government to use section 401 would undermine the forfeiture provisions of 31 U.S.C. § 5316 and 18 U.S.C. § 982. Section 982 requires a conviction of violating section 5316 as a prerequisite to the forfeiture of cars used in illegally exporting currency. U.S. v. One 1985 Mercedes-Benz, 300 SD, 14 F.3d 465 (9th Cir. 1994).
9th Circuit upholds finding that offense was money laundering, not structuring. (360) Defendant was charged with conspiring to engage in both money laundering and structuring financial transactions. The jury entered a general verdict, so the court was required to determine whether he was convicted of money laundering or structuring, for purposes of applying the guidelines. In response to defendant’s argument at sentencing, the judge stated that he was “satisfied that this is a laundering transaction, not a money structuring.” The 9th Circuit held that the judge was correct, and this statement was a sufficiently clear factual finding to satisfy the requirements of Rule 32. U.S. v. Castaneda, 9 F.3d 761 (9th Cir. 1994).
9th Circuit holds customs guideline was more “apt” than currency guideline for lying about exporting money. (360) Defendant lied to a customs agent in an effort to smuggle $51,000 cash out of the country. He pled guilty to 18 U.S.C. §1001, for which the applicable guideline is §2F1.1. Application note 13 authorizes the use of other guidelines instead, if they fit the facts of the case more closely. It gives as an example, “false statements to a customs officer, for which section 2T3.1 likely would be more apt.” Nevertheless, the district court sentenced defendant under the currency guideline, §2S1.4. On appeal, the 9th Circuit reversed, following its earlier decision in U.S. v. Carrillo-Hernandez, 963 F.2d 1316 (9th Cir. 1992), which reversed on almost identical facts. The court held that section 2T3.1 was the appropriate guideline to be applied. U.S. v. Mendoza-Fernandez, 4 F.3d 815 (9th Cir. 1993).
9th Circuit says court has discretion in applying retroactive currency guideline. (360) Defendant was convicted of making a false customs declaration regarding currency he was bringing into the United States. He was sentenced under section 2S1.3 before the effective date of Amendment 379 which modified section 2S1.3 and created a new section for offenses involving the failure to file currency reports. The case was remanded to the district court to determine whether or not to adjust the sentence in light of the amendment. Section 1B1.10(a) does not mandate the use of the lesser enhancement but permits discretion to use the amended guideline. The court concurred with the discretionary approach to this issue adopted in U.S. v. Connell, 960 F.2d 191, 197 (1st Cir. 1992). U.S. v. Wales, 977 F.2d 1323 (9th Cir. 1992).
9th Circuit reverses for failure to use Tax Table for false statements to evade currency reporting requirements. (360) The Guidelines’ Statutory Index is not dispositive authority on the proper guideline applicable to every statutory crime. When no guideline is directly on point, the most analogous guideline should be applied. While defendants were leaving the United States at the border with Mexico, they falsely reported they were carrying no cash in excess of $10,000. One of the defendants was carrying $31,000 in U.S. currency. The jury convicted both defendants of making false statements to a federal officer. At sentencing, the district court erroneously used U.S.S.G. § 2S1.3(a)(1) to set the base offense levels. The 9th Circuit reversed, holding that under these facts, the Tax Table in U.S.S.G. section 2T3.1 should be used because false statements about currency exporting can be viewed as violations of “trade regulations,” and false statements to evade export restrictions are most analogous to making false statements to evade import restrictions. U.S. v. Carrillo-Hernandez, 963 F.2d 1316 (9th Cir. 1992).
9th Circuit upholds higher offense level because defendant knew laundered money was criminally derived. (360) The district court increased defendant’s offense level by five points pursuant to U.S.G. section 2S1.3(b)(1), finding that he “knew or believed the money was criminally derived.” Reviewing this factual finding for clear error, the 9th Circuit ruled that the following evidence supported the judge’s conclusion that defendant was involved in money laundering: (1) ledger sheets reflecting large quantities of currency exchanged for monetary instruments; (2) the use of runners to obtain these instruments; and (3) the manner in which defendant used pagers. Law enforcement officers also seized from defendant’s hotel room a counterfeit currency detector and a coded ledger. U.S. v. Gomez-Osorio, 957 F.2d. 636 (9th Cir. 1992).
9th Circuit upholds aggregation of money involved in various currency reporting offenses. (360) Defendants were convicted of conspiracy, failure to file currency transaction reports and structuring financial transactions to avoid currency reporting requirements. The 9th Circuit found no error in the district court’s aggregation of the currency exchanged in the various transactions for which defendants were convicted. Under guideline section 3D1.2(d), the district court must group money laundering counts and counts involving the failure to file currency transaction reports. The appropriate offense level for the grouped offenses is the offense level corresponding to the aggregated quantity of all grouped counts. U.S. v. Yee Soon Shin, 953 F.2d 559 (9th Cir. 1992).
9th Circuit upholds higher offense level based on false statements to conceal failure to report currency. (360) Defendant was sentenced to 12 months for failing to report currency in excess of $10,000 upon entering the United States, in violation of 31 U.S.C. § 5316. Guideline § 2S1.3(a)(1)(B) provides for a base offense level of 13 if a defendant “made false statements to conceal or disguise” his failure to report currency. Defendant admitted that upon entering the United States he was twice asked by a U.S. Customs inspector whether he was carrying currency in excess of $10,000 and he twice responded that he was not. The 9th Circuit ruled that these statements were false, and the district court could reasonably conclude that defendant’s purpose was “to conceal or disguise” his failure to report the currency. Accordingly the district court correctly applied base offense level 13. U.S. v. Ruiz-Naranjo, 944 F.2d 475 (9th Cir. 1991).
10th Circuit says Chapter Three enhancements apply to other convictions, not just money laundering. (360) Defendant was convicted of drug and money laundering charges. Note 2(C) to § 2S1.1 says that “in cases where subsection [§ 2S1.1](a)(1) applies, application of any Chapter Three adjustments shall be determined based on the offense covered by this guideline (i.e., the laundering of criminally derived funds) and not the underlying offense from which the laundering funds were derived.” Relying on Note 2(C), he contended that the Chapter Three adjustments could not be applied to his drug conspiracy conduct unless the adjustment related specifically to his money laundering conviction. The Tenth Circuit affirmed the enhancements, interpreting Note 2(C) as governing only the applicability of adjustments on money-laundering convictions, as opposed to the offense calculations of other, related offenses. The phrase “in cases where subsection (a)(1) applies” refers to money laundering convictions whose base offense level are determined by reference to the offense level of the underlying offense. Thus, the sentencing court may still apply adjustments to other offenses of conviction for conduct relating to those convictions. U.S. v. Keck, 643 F.3d 789 (10th Cir. 2011).
10th Circuit says “sole object of that conspiracy” refers to object as defined in offense of conviction. (360) Defendant pled guilty to conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h). Guideline § 2S1.1(b)(2)(B) provides for a two-level enhancement if defendant was convicted under 18 U.S.C. § 1956. Note 3(C) to § 2S1.1 states that subsection (b)(2)(B) does not apply “if the defendant was convicted of a conspiracy under 18 U.S.C. § 1956(h) and the sole object of that conspiracy was to commit an offense set forth in 18 U.S.C. § 1957.” Defendant argued that “the sole object of that conspiracy” should be interpreted to mean what defendant understood to be the object of the conspiracy, and that the stipulated facts did not state that he had the required mens rea to commit a § 1956 offense. The Tenth Circuit, however, agreed with the government that the phrase “that conspiracy” refers to the conspiracy of which the defendant was convicted under 18 U.S.C. § 1956(h). It was undisputed that defendant, by pleading guilty to Count II of the indictment, was convicted of conspiring to commit the offenses defined in 18 U.S.C. § 1956(a)(1)(i) and (B)(i). The district court correctly applied the two-level increase in § 2S1.1(b)(2)(b). U.S. v. Adargas, 366 F.3d 879 (10th Cir. 2004).
10th Circuit upholds separate grouping of money laundering and fraud under 1995 guidelines. (360) Defendants ran an investment fraud scheme, taking in almost $14 million by promising investors that they would double their money. Money from later investors was used to pay earlier investors. The Tenth Circuit upheld the district court’s refusal to group the money laundering and fraud counts together under § 3D1.2. While some circuits take a different approach, under Tenth Circuit precedent such grouping is not permitted. See U.S. v. Johnson, 971 F.3d 562 (10th Cir. 1992); U.S. v. Kunzman, 54 F.3d 1522 (10th Cir. 1995). The rationale of those cases, which both involved Ponzi schemes, is that the relevant money laundering guideline focused not on loss to any particular group but on the total volume of money laundered, and the “victim” of fraud-related money laundering was not the particular victim of the fraud, but rather “society in general.” Because they measure different types of harm to different victims, the fraud and money laundering offenses could not be grouped. The fact that the 2001 guidelines make it clear that money laundering of fraud proceeds should be grouped with the underlying fraud did not matter. The application of 2001 guidelines would not be favorable to defendant, and to avoid ex post facto problems, the court applied the 1995 guidelines. U.S. v. Aptt, 354 F.3d 1269 (10th Cir. 2004).
10th Circuit again rejects grouping money laundering with underlying crimes. (360) Defendant was convicted of three counts of uttering forged checks and three counts of money laundering. She argued that the district court should have grouped the counts of uttering forged checks with the money laundering counts. The Tenth Circuit noted that although other circuits have adopted this position, it has expressly and repeatedly rejected her argument. U.S. v. Allen, 129 F.3d 1159 (10th Cir. 1997).
10th Circuit enhances for knowing money came from illegal activity, despite double counting. (360) Defendant was convicted of three counts of uttering forged checks and three counts of money laundering. She argued that a § 2S1.2(b)(1)(B) enhancement for knowing that the laundered funds were the proceeds of a specified unlawful activity was double counting because it punished her for the same conduct that served as the basis for her convictions for uttering false checks. The Tenth Circuit found no error, holding that Congress intended to impose separate punishments for the money-laundering transactions and for the underlying criminal activity. U.S. v. Allen, 129 F.3d 1159 (10th Cir. 1997).
10th Circuit requires separate grouping of money laundering and fraud counts. (360) Defendant was convicted of mail fraud, conspiracy and money laundering. He argued that § 3D1.2 required the grouping of the mail fraud and money laundering counts. The Tenth Circuit held circuit precedent required separate grouping because money laundering and fraud involve different harms and different victims. Although the court might be inclined to agree with defendant were this a case of first impression, one panel of the court may not overrule another. U.S. v. Hargus, 128 F.3d 1358 (10th Cir. 1997).
10th Circuit considers relevant conduct in finding amount of laundered funds. (360) Defendant argued that because he was convicted of laundering only $34,500, it was error for the court to enhance his sentence for offenses involving more than $100,000. The Tenth Circuit held that the district court properly considered uncharged relevant conduct in determining the § 2S1.1(b)(2) enhancement. A co-conspirator identified 107 checks as his share of the illicit proceeds, amounting to $272,098. U.S. v. Hargus, 128 F.3d 1358 (10th Cir. 1997).
10th Circuit holds defendant accountable for laundered funds outside counts of conviction. (360) The district court held defendant accountable for the total value of laundered funds in the indictment, including sums alleged in money laundering counts for which defendant was not convicted. The Tenth Circuit upheld the use of funds involved in counts outside the conviction. All of the money laundering counts of the indictment were associated with the same fraud scheme. A court is not necessarily limited to the funds identified with the crime charged in the indictment, or the crime which resulted in a judgment of guilty. U.S. v. Kunzman, 54 F.3d 1522 (10th Cir. 1995).
10th Circuit rejects higher offense level where no evidence of intention to commit further crimes. (360) Defendants were convicted of conspiring to launder money in violation of 18 U.S.C. § 1956(a)(1). Guideline § 2S1.1(a)(1) specifies a higher base offense level for defendants who violate § 1956(a)(1)(A)(i) by encouraging or facilitating the commission of further crimes. Since the jury instruction was in the disjunctive, it was impossible to determine whether the conviction was based on subsection (A)(i) or (B)(i). The 10th Circuit held that defendants should not receive the higher offense level under § 2S1.1(a)(1), because there was no evidence that defendants had any intention to commit further crimes which might be promoted by their money laundering. U.S. v. Linn, 31 F.3d 987 (10th Cir. 1994).
10th Circuit refuses to require that financial institution be affected by laundered funds. (360) Defendant received an enhancement under section 2S1.1(b)(1)(B) based on his knowledge that laundered funds were the proceeds of specified unlawful activity. He challenged the enhancement on the grounds that (a) the funds did not affect a financial institution, and (b) he was never aware that his conduct constituted a specified unlawful activity. The 10th Circuit upheld the enhancement. There is no requirement that a financial institution be affected. Defendant’s due process rights were not violated, because he knew that the source of the funds was his fraudulent investment scam. U.S. v. Lowder, 5 F.3d 467 (10th Cir. 1993).
10th Circuit refuses to decrease money laundered by amount defendant repaid investors. (360) Defendant was convicted of making false statements to a financial institution, fraud and money laundering as a result of his fraudulent investment scam. He argued that the amount of a house he purchased and then sold to his corporation should not be included in the amount of laundered funds because he used proceeds from the sale of the house to reimburse defrauded investors. The 10th Circuit rejected this argument. In calculating the offense level under section 2S1.2, the court looks to the total amount of funds involved in the laundering transactions, not the net loss. Defendant’s argument that the house sale did not constitute interstate commerce, as required by 18 U.S.C. section 1957(f)(1), was not raised below. There was no plain error in the sentence enhancement in light of minimum interstate contacts. U.S. v. Lowder, 5 F.3d 467 (10th Cir. 1993).
10th Circuit affirms that defendant was responsible for accomplice’s actions in money laundering scheme. (360) In determining the value of the funds laundered in defendant’s money laundering scheme under guideline section 2S1.1(b), the district court considered the full amount of funds that defendant and his associate took from investors. The 10th Circuit affirmed that defendant was properly held accountable for the actions of his accomplice. Relevant conduct under section 1B1.3(a)(1) includes all acts which the defendant aided and abetted or for which he would otherwise be held accountable. Note 1 to section 1B1.3 indicates that conduct of others acting in concert with the defendant will be factored into the defendant’s sentence. Here, there was abundant evidence at trial and at sentencing that defendant’s accomplice was acting in concert with defendant in operating the scheme. U.S. v. Johnson, 971 F.2d 562 (10th Cir. 1992).
10th Circuit rejects adding money obtained by fraud to funds in money laundering scheme. (360) Defendant defrauded investors out of millions of dollars. He was convicted of money laundering as a result of his use of the proceeds of his fraud to pay off his mortgage and to buy a car. In determining the offense level for the money laundering scheme under section 2S1.1(b), the district court added the funds obtained by fraud. This was based on section 1B1.3(a)(2), which provides that offenses which would require grouping with the offense of conviction under section 3D1.2(d) should be considered relevant conduct. The 10th Circuit reversed, ruling that the funds should not have been “grouped.” Under section 2F1.1, the fraud guideline, the offense level is determined on the basis of the “loss” resulting from the fraud, whereas under section 2S1.1, the money laundering guideline, the offense level is determined largely on the basis of the value of the funds. These are not the same concepts. U.S. v. Johnson, 971 F.2d 562 (10th Cir. 1992).
11th Circuit rejects use of aggravated role in drug conspiracy to increase money laundering sentence. (360) Defendant was convicted of two drug counts and one money laundering count. The PSR grouped the three convictions together. The court should have determined which of the three grouped convictions yielded the highest adjusted offense level by calculating defendant’s offense level under each guideline. Without explanation, the PSR used § 2S1.1, the money laundering guideline, to determine the base offense level, and applied a managerial role enhancement based on defendant’s role in brokering a heroin deal. However, note 2(C) to § 2S1.1 instructs courts to consider only the money laundering offense itself, and not the underlying crime that generated the money. The Eleventh Circuit held that the district court erred in using defendant’s conduct in the underlying drug conspiracy to impose a role enhancement when calculating his offense level for money laundering. Section 1B1.5(c) provides that “[i]f the offense level is determined by a reference to another guideline … the adjustments in Chapter Three (Adjustments) also are determined in respect to the referenced offense guideline, except as otherwise expressly provided.” Note 2(C) of § 2S1.1 is one of those “otherwise provided” situations. U.S. v. Salgado, 745 F.3d 1135 (11th Cir. 2014).
11th Circuit remands for failure to find which object offenses defendant conspired to commit. (360) Defendant challenged his sentence on a money laundering conspiracy count, which alleged that he had conspired to commit five money laundering objects. Despite being instructed that it could not convict defendant without determining that he had conspired to commit one of those acts, the jury returned a general verdict of guilty. The court accepted the PSR’s recommendation that defendant’s money laundering sentence be based on the money laundering object with the highest possible offense level. However, under § 1B1.2(d), when a defendant is convicted of a conspiracy to commit multiple object offenses, he must be sentenced as if he had been convicted on a separate count of conspiracy for each. Courts have held that note 4 to § 1B1.2(d) requires the district court to find beyond a reasonable doubt which offense(s) the defendant conspired to commit. The Eleventh Circuit held that the district court erred in failing to make this necessary finding. It vacated defendant’s sentence and remanded for resentencing. U.S. v. Bradley, 644 F.3d 1213 (11th Cir. 2011).
11th Circuit holds that appreciated value of stock should not be included in “value of laundered funds.” (360) Defendant laundered the proceeds of a friend’s drug sales. In one instance, he invested in the stock of a privately-held company, and the stock appreciated significantly in value. The Eleventh Circuit held that the appreciated value of the stock should not be included in the “value of the laundered funds” under § 2S1.1. Cases cited by defendant holding that interest earned on the funds should be included in the value of the laundered funds were decoded under a prior version of § 2S1.1. The 2001 revisions to § 2S1.1 changed the relevant term for sentencing calculation purposes from “the value of the funds” to “the value of the laundered funds.” The inclusion of the modifier “laundered” before “funds” indicates that the funds which should be considered for sentencing purposes are those that were actually laundered. In addition, if an asset’s appreciation were included in the amount of “laundered funds,” then the laundered funds would have to be reduced when they were used to purchase an asset that decreases in value. U.S. v. Paley, 442 F.3d 1273 (11th Cir. 2006).
11th Circuit holds defendant accountable for entire loss generated by fraud and money laundering scheme. (360) Defendant was convicted of fraud and money laundering in connection with an illegal Ponzi scheme. The Eleventh Circuit upheld the district court’s finding that the loss attributable to defendant for sentencing under § 1B1.3(a)(1)(B) was $51 million, the total amount of money laundered in the conspiracy. For a defendant convicted of conspiracy, the district court must first determine the scope of criminal activity the defendant agreed to jointly undertake, and then consider all reasonably foreseeable acts and omissions of others in the jointly undertaken criminal activity. Defendant was involved in contacting and recruiting clients into the fraud scheme. More importantly, he was involved in the scheme from nearly its inception, and placed a critical role in its success. Although he did not “design” the program, he concocted the method in which he could continue to pull investors into the program and further the scheme. U.S. v. McCrimmon, 362 F.3d 725 (11th Cir. 2004).
11th Circuit holds defendants were entitled to reduction for uncompleted money laundering. (360) Defendants were convicted of conspiracy to commit money laundering. They actually laundered $714,500, but the jury found that an additional six million dollars was agreed to be laundered in the future. Defendants sought a three-level reduction under § 2X1.1(b)(2) because they had not completed or were not close to completing all the acts they believed necessary for the scheme, particularly as to the six million dollars in future transactions. The Eleventh Circuit agreed. None of the defendants had taken crucial steps, such as contacting the undercover agents posing as drug dealers, or preparing paperwork for more transfers. The laundering of $ 6.7 million would require an 8-level increase under § 2S1.1(b)(2)(1), minus three levels under § 2X1.1(b)(2) for an uncompleted transaction, resulting in a enhancement of five levels. The actual laundering of $714,500 would have resulted in a four-level increase under § 2S1.1 (b)(2)(E). Hence, the five-level increase, resulting in the greater of the two offense levels, became the operative one for defendants. U.S. v. Puche, 350 F.3d 1137 (11th Cir. 2003).
11th Circuit says “value of funds” is not limited to amount initially infused into laundering scheme. (360) Defendant deposited a stolen check in the amount of $380,050.08 into an attorney trust account. From this account, defendant wrote nine checks totaling $380,003.21 and used those checks to obtain cash or purchase cashier’s checks for various other people. For example, defendant would obtain checks at one bank branch and cash those checks on the same day at other branches. The indictment identified 97 separate monetary transactions flowing from the $380,050.08 check. Since the proceeds from the check went through more than one transaction, the 97 transactions totaled $1,055,068.21, even though the original amount stolen was only $380,050.08. The Eleventh Circuit held that the “value of funds” under § 2S1.1 is based on the total amount of funds involved in each unlawful monetary transaction and is not limited to the amount of money initially injected into the money laundering scheme. Each unlawful monetary transaction harms society by impeding law enforcement’s efforts to track ill-gotten gains. Adding together the individual transactions for which defendant was convicted accurately reflected the scope of the criminal enterprise because each of the 97 money laundering counts constituted a separate harm to society. U.S. v. Martin, 320 F.3d 1223 (11th Cir. 2003).
11th Circuit holds court made adequate findings to support calculation of amount laundered. (360) Defendant was convicted of conspiracy to launder funds, which were derived from a wire fraud scheme. The district court found that defendant was responsible for laundering $23 million. The Eleventh Circuit held that the district court did not clearly err in calculating the amount of money laundered, given defendant’s involvement in contacting clients and introducing them to the scheme, and his establishment of a company used to defraud clients at later stages of the conspiracy. In addition, although defendant complained that the district court failed to make specific findings in this regard, the court stated that the loss figure was “a realistic, maybe low realistic figure of the loss for which this defendant should be legally held responsible, because of his knowledge, participation, and the foreseeability by him as to how much money was potentially at risk here from these victims.” U.S. v. Petrie, 302 F.3d 1280 (11th Cir. 2002).
11th Circuit reverses downward departure from money laundering guideline. (360) On several occasions, defendants sold computer equipment for over $10,000 cash and agreed not to file Form 8300 with the IRS, as required by law. They were convicted of money laundering. The district court determined that defendants’ money laundering was incidental to their failure to file Form 8300 and, thus, fell outside of the heartland of § 2S1.1. The court relied on the fact that defendants: (1) did not find out that the cash was derived from drug trafficking until after they made the first transaction; (2) did not know much of the money was derived from drug trafficking; (3) were lured into the operation before they knew that the cash was derived from drug trafficking; (4) did not use the proceeds to further criminal acts; and (5) kept internal records regarding the cash transactions. The Eleventh Circuit reversed. The first three circumstances cited by the district court conflicted with the jury’s verdict. The fourth factor, lack of “criminal purpose,” is already accounted for in the guidelines. The presence of such an intent is mentioned as a basis for upward departure under § 5K2.9. The fact that defendants kept internal records of their transactions did not justify a downward departure. While the paper trial might be inconsistent with planned concealment, the lack of sophisticated means does not merit a reward, but rather, avoids an enhancement. U.S. v. Schlaen, 300 F.3d 1313 (11th Cir. 2002).
11th Circuit affirms use of money laundering rather than fraud guideline. (360) Relying on U.S. v. Smith, 186 F.3d 290 (11th Cir. 1999), superseded by rule as stated in U.S. v. Omoruyi, 260 F.3d 291 (3d Cir. 2001), defendant argued that the district court should have computed his offense level under the more lenient fraud guideline because his money laundering was a minor, incidental part of his scheme, and thus outside the heartland of the money laundering guideline. However, the Eleventh Circuit has previously rejected this approach. See U.S. v. Adams, 74 F.3d 1093 (11th Cir. 1996). Moreover, money laundering was integral to defendant’s scheme. The jury returned a special verdict finding that defendants engaged in money laundering in order to conceal the origins of the illicit proceeds and to continue the bank fraud scheme. U.S. v. De La Mata, 266 F.3d 1275 (11th Cir. 2001).
11th Circuit applies money laundering guideline to exchange of large bills for small bills. (360) Informants posing as drug dealers told defendants they had cash drug proceeds that they needed to convert into large-denomination bills in order to more easily conceal it for transport out of the country. For a commission, defendants exchanged currency with the informants on 12 occasions. Defendants were convicted of racketeering conspiracy charges. The district court sentenced them under § 2S1.1, the money laundering guideline. Defendant argued that they did not commit money laundering, contending that the type of transaction they engaged in, swapping large bills for small bills, does not “create the appearance of legitimate wealth.” The Eleventh Circuit disagreed. Exchanging large bills for small bills facilitates concealment of the “location” of funds because one large bill is easier to hide than several small bills of the same total value. However, the district court erred in applying a preponderance of the evidence standard to determine that the object of the racketeering conspiracy was money laundering. Defendants’ guilty pleas did not establish whether money laundering or mail fraud was the object of the racketeering conspiracy. Under § 1B1.2(d), as interpreted by U.S. v. Ross, 131 F.3d 970 (11th Cir. 1997), the district court could sentence defendants under the money laundering guideline only if it was convinced beyond a reasonable doubt that they committed that offense. U.S. v. Farese, 248 F.3d 1056 (11th Cir. 2001).
11th Circuit bars use of money involved in transactions that predated enactment of money laundering statute. (360) Defendant argued that $1.2 million of the $2.9 million that the district court used to calculate his money laundering sentence involved transactions that predated the enactment of 18 U.S.C. §§ 1956 and 1957, the statutes that prohibit money laundering. The Eleventh Circuit agreed that money involved in transactions that occurred before the enactment of the money laundering statutes could not be included in the “value of the funds laundered” under USSG § 2S1.1. The term “funds” “obviously refer[s] to funds that are used by the defendant in an unlawful monetary transaction.” Although the guidelines mandate the inclusion of all amounts of money laundered as relevant conduct, this begs the question of how money could have been laundered prior to the enactment of the statutes that prohibit money laundering. Even if defendant could have been charged with violating other statutes, under § 2S1.1, a defendant’s culpability is determined by the amount of money laundering in violation of the money laundering statute, not by the amount of dirty money associated with the defendant. U.S. v. Miranda, 197 F.3d 1357 (11th Cir. 1999).
11th Circuit says grouping of fraud and money laundering not required. (360) Defendant was convicted of Medicaid fraud and money laundering. The Eleventh Circuit upheld separate grouping of the fraud and money laundering offenses. The mere listing of both of these guidelines under § 3D1.2(d) as offenses that “are to be grouped” does not automatically necessitate grouping. Note 6 to § 3D1.2 says that “[c]ounts involving offenses to which different offense guidelines apply are grouped together under subsection (d) if the offenses are of the same general type or otherwise meet the criteria for grouping under this subsection.” Thus, in cases involving Ponzi schemes where the laundered funds were paid out to old investors as false profits, the fraud and money laundering convictions can be grouped under § 3D1.2(d), because both were “integral cogs in continuing the scheme.” See, e.g. U.S. v. Mullens, 65 F.3d 1560 (11th Cir. 1995). In the present case, much of the $3 million at issue was either funneled to one of defendant’s businesses or withdrawn for personal use. The main connection between the laundered funds and the fraud scheme was that the money represented the proceeds of the fraud. If this connection alone was sufficient to justify grouping, “every act of money laundering would be closely related to the underlying crime which produced the money to be laundered.” U.S. v. McClendon, 195 F.3d 598 (11th Cir. 1999).
11th Circuit holds failure to apply 2X1.1 to money laundering conspiracy was plain error. (360) Defendants agreed to launder $2 million for an undercover agent posing as an accountant and financial advisor for a fictitious cocaine trafficker. Over a several month period, defendants laundered a total of $570,556 before they were arrested. The Eleventh Circuit held that the district court’s failure to apply 2X1.1 was plain error. Defendants intended to launder $2 million. However, at the time of their arrests, they had only laundered $570,556 and had not taken crucial steps (preparing falsified documents, securing cashier’s checks, or arranging meetings for the exchange) towards laundering the remaining money. Under note 4 to § 2X1.1, defendants’ offense level should be the greater of the offense level for the intended offense minus three levels under § 2X1.1(b)(1) for an uncompleted offense, or the offense level for the part of the offense for which the necessary acts were completed. Thus, the district court should have determined whether defendants’ offense level would be higher based upon the intended offense of laundering $2 million minus three levels under § 2X1.1(b)(2) or the offense of actually laundering $570,556. Because a proper application of the guidelines would have resulted in a lower offense level, the failure to apply § 2X1.1 was plain error. U.S. v. Khawaja, 118 F.3d 1454 (11th Cir. 1997).
11th Circuit applies § 2D1.1 to drug conspiracy based on money laundering activity. (360) Defendant was convicted of racketeering, money laundering and a drug conspiracy. He argued that the court should have sentenced him for the drug conspiracy and racketeering counts using § 2S1.1, the money laundering guideline, instead of § 2D1.1, the drug guideline. He contended that since there is no guideline for defendants convicted of a drug conspiracy based solely on money laundering activity, he should have been sentenced under the most analogous offense guideline. The Eleventh Circuit upheld the application of § 2D1.1, finding it was expressly promulgated for his conviction of conspiring to violate 21 U.S.C. § 841. The Statutory Index for 21 U.S.C. § 846 refers to, among other sections, 2D1.1. Section 2D1.1 itself contains the word “conspiracy” in its heading. U.S. v. Tokars, 95 F.3d 1520 (11th Cir. 1996).
11th Circuit remands for findings on departure where attorney learned of funds through attorney-client relationship. (360) Defendant, an attorney, pled guilty to receiving and depositing criminally derived property. The district court departed downward, finding the Sentencing Commission did not consider the impact of § 2S1.2 upon an attorney who derives knowledge of the source of the property through a legitimate attorney‑client relationship. The Eleventh Circuit remanded for explicit findings of fact with respect to the circumstances warranting a departure, its reasoning as to whether the guidelines adequately considered such circumstances, why a departure was consistent with the goals of the sentencing guidelines, and, if departure was appropriate, to justify the extent of the departure. Defendant had the burden of proving that a legitimate attorney-client relationship did exist at the relevant time. U.S. v. Miller, 78 F.3d 507 (11th Cir. 1996).
11th Circuit says court may not ignore money laundering conviction in sentencing defendant. (360) Defendants were convicted of conspiring to defraud the U.S., making false statements and misapplying funds belonging to the Resolution Trust Company, and money laundering. The district court refused to base the sentence on the money laundering guidelines, finding that the gravamen of the scheme was fraud and misapplication of RTC funds. The Eleventh Circuit reversed, holding that the money laundering convictions must be included in the sentence, and § 2S1.1 must be applied. The court’s alternative basis for the sentence, § 5K2.11, would only justify a departure if defendants’ conduct was not the harm sought to be prevented by the money laundering statute. The plain language of the statute prohibits a much broader range of conduct that just the “classic” example of money laundering. Defendants’ money laundering was of the type considered by Congress and the Sentencing Commission. U.S. v. Adams, 74 F.3d 1093 (11th Cir. 1996).
11th Circuit says amount of funds fraudulently collected was amount of funds laundered. (360) Defendant ran an investment group that was in reality a Ponzi scheme. The Eleventh Circuit agreed that the sums fraudulently collected equaled the amount laundered under § 2S1.1(b). Defendant collected over $27 million from investors and deposited that amount into the company’s accounts. Once deposited, the funds met the definition of “laundered funds” under 18 U.S.C. § 1956(a)(1) (A)(i) because they had no purpose other than to promote the illegal business of the scheme. The amount of money collected through fraud was coextensive with the sums involved in the charged and uncharged money laundering counts, and was, therefore, the total amount of funds involved in the scheme. U.S. v. Mullens, 65 F.3d 1560 (11th Cir. 1995).
11th Circuit holds that court erred in considering transactions not in excess of $10,000. (360) Defendant was convicted of multiple counts of transporting stolen and fraudulent securities in interstate commerce, and engaging in money laundering. He argued that the district court erred by including kickbacks of less than $10,000 in the value of the funds involved. The Eleventh Circuit agreed, holding that the rule of lenity required it to construe 18 U.S.C. § 1957 as applying only to single transactions exceeding $10,000, rather than a series of transactions that total more than $10,000. Under this interpretation, kickbacks of less than $10,000 are not illegal and cannot be considered in calculating the amount of funds involved. U.S. v. Jenkins, 58 F.3d 611 (11th Cir. 1995).
11th Circuit says district court decides whether to apply amended guideline retroactively. (360) Defendant was convicted of structuring financial transactions to avoid currency transaction reports. After he was sentenced, § 2S1.3 was amended to lower both the base offense level for his offense and an enhancement applicable to his offense. The Eleventh Circuit remanded to allow the district court to consider whether to retroactively apply the amended § 2S1.3. The district court, and not the appellate court, is the initial forum to determine whether to exercise discretion under 18 U.S.C. § 3582 and guideline § 1B1.10 to retroactively apply a new guideline that would reduce a defendant’s sentence. U.S. v. Vazquez, 53 F.3d 1216 (11th Cir. 1995).
11th Circuit finds carpenter who structured $1.5 million in cash knew money was criminally derived. (360) Defendant, a carpenter, opened various bank accounts and made multiple large cash deposits almost every day. Each individual deposit was less than the $10,000 currency report threshold, although the total for each day exceeded that amount. He was convicted of structuring financial transactions. The Eleventh Circuit agreed that under § 2S1.3(b)(1) defendant must have known or believed that the funds were criminally derived since there was no legitimate explanation for the funds. Given the amount of money involved (over $1.5 million in defendant’s accounts, and a total of $7.5 million through the accounts of co-conspirators), and defendant’s legitimate income as a carpenter ($15,000 annually), the district court could properly find that defendant knew or believed the funds were criminally derived. U.S. v. Vazquez, 53 F.3d 1216 (11th Cir. 1995).
11th Circuit applies §2S1.1(a)(1) to money laundering conspiracy. (360) Defendant was convicted of conspiring to commit a money laundering offense. Section 2X1.1(a) directed the district court to apply the guideline applicable to the underlying substantive offense. The district court found that §2S1.1(a), with a base offense level of 23, applied. Defendant argued that this section only applies to convictions under §§1956(a)(1)(A), (2)(A), or (3)(A), and because she was under 18 U.S.C. §371, she should be sentenced under §2S1.1(a)(2), which carries a base offense level of 20. The 11th Circuit held that §2S1.1(a)(1) applied to defendant’s convictions for both the substantive and conspiracy offenses under §1956(a)(1)(A). The word “otherwise” in §2S1.1(a)(2) is not ambiguous. It refers to the other sections of 1956 not expressly covered by §2S1.1(a)(1). U.S. v. Acanda, 19 F.3d 616 (11th Cir. 1994).
11th Circuit includes interest earned in laundered funds calculation. (360) Defendant sent $595,000 in drug proceeds to be laundered through various foreign bank accounts and subsequently received about $675,000 in return. The money then was further laundered through other anonymous corporations. The difference between these two figures represented “legitimate” interest earned on illegitimate drug proceeds. The 11th Circuit affirmed the inclusion of the interest in the calculation of the amount of laundered funds under section 2S1.1(b)(2). The interest on the drug proceeds stayed with the funds throughout the remainder of the laundering process. The court declined to determine whether profits earned after money laundering ended could be considered part of the value of the laundered funds. Including the interest gave an accurate reflection of the size of the money laundering scheme. U.S. v. Barrios, 993 F.2d 1522 (11th Cir. 1993).
11th Circuit says defendant can “know” the unlawful source of legally derived funds. (360) The version of section 2S1.1(b)(1) applicable to defendant provided for an enhancement where the defendant “knew” that the funds he laundered came from drug activity. Defendant argued that while he “believed” the funds had a drug source, he could not have “known” that fact because in truth the funds were provided by the government in a sting operation. The 11th Circuit disagreed. This section was later amended to apply whenever defendant “knew or believed” the funds came from drug money. Departing from the view of the Fifth Circuit, the 11th Circuit rejected defendant’s argument that the amendment indicated that the previous version was more limited. Instead, the court concluded that the Sentencing Commission simply meant to clarify its intention to reject the factual impossibility defense. U.S. v. Perez, 992 F.2d 295 (11th Cir. 1993).
11th Circuit upholds enhancement based upon reasonable belief that money was criminally derived. (360) Defendants were convicted of failing to report the transport of over $10,000 in currency out of the United States. The 11th Circuit found that it was proper to increase their offense level by five under guideline § 2S1.3(b) based upon defendants’ reasonable belief that the money was related to drug activity. One defendant admitted in her written statement that it was logical to assume that the money was drug related, and the other defendant admitted that he assumed that the money was drug related due to the nature of the business. The government need not show actual knowledge. U.S. v. Ortiz-Barrera, 922 F.2d 664 (11th Cir. 1991).
11th Circuit upholds consideration of funds found in defendant’s apartment. (360) Defendant pled guilty to money laundering, and was sentenced on the basis of $378,000 found in his apartment. The government contended that the district court misapplied the relevant conduct provision of the guidelines by failing to consider the amount of money involved in the total scheme rather than just the funds attributable directly to defendant. The 11th Circuit upheld the district court’s action. The government bore the burden of proof on this issue. A review of the record indicated that the district court understood it was to consider the total amount of funds involved in the criminal conduct. The district court’s calculation included the funds seized at defendant’s apartment and the monies he admitted delivering that day. U.S. v. De La Rosa, 922 F.2d 675 (11th Cir. 1991).
D.C. Circuit places burden on defendant to prove entitlement to safe harbor reduction. (360) Defendant was convicted of operating a money-transmitting business without a license, in violation of 18 U.S.C. §1960. Under the so-called “safe harbor” provision in §2S1.3(b)(3), a district court can disregard an enhancement based on the value of the funds if defendant can prove (1) that he did not act with reckless disregard to the source of the funds being transferred, (2) that the funds were the proceeds of lawful activity, and (3) that the funds were to be used for a lawful purpose. The D.C. Circuit upheld the district court’s finding that defendant was not entitled to the safe harbor sentencing reduction. The burden was not on the government to prove that the funds defendant transferred were related to illegal activity. The government bears the burden of proof in seeking sentencing enhancements under the Guidelines, but the defendant bears the burden in seeking sentencing reductions. U.S. v. Keleta, 553 F.3d 861 (D.C. Cir. 2009).
D.C. Circuit says money-transferring offense level does not depend on loss. (360) Defendant was convicted of operating a money-transmitting business without a license, in violation of 18 U.S.C. §1960. Section 2S1.3(a)(2) provides for an enhancement “corresponding to the value of the funds.” These additional levels are determined using the table in §2B1.1, with increased levels depending upon the loss incurred. Defendant argued that his 31-month sentence was not reasonable, that there was no loss, and the value of the funds he transferred had no relationship to the individual nature and circumstances of his crime. The D.C. Circuit upheld the sentence as reasonable. The sentencing scheme established by §2S1.3(a)(2) does not require proof that the monies involved in the offense were themselves the product of illegal activity, were being transmitted for illegal means, or could be classified as laundered funds. The court properly applied the Guidelines. A sentence within a properly calculated Guidelines range is entitled to a rebuttable presumption of reasonableness. U.S. v. Keleta, 553 F.3d 861 (D.C. Cir. 2009).
D.C. Circuit uses § 2S1.1(a) for defendant also convicted of evading taxes. (360) Defendant used Medicaid reimbursements paid to her company for personal purposes, did not pay taxes on that money, and attempted to obtain loans by submitting false documents. She was convicted of fraud, tax evasion, and money laundering. She argued that it was improper to sentence her under § 2S1.1(a)(1), because it only applies to convictions under §§ 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A), and it was impossible to determine from the jury’s general verdict whether she was convicted under (A) or (B). The D.C. Circuit found the argument meritless. The jury necessarily found an intent to evade income taxes when it convicted her of tax evasion under 26 U.S.C. § 7201. The evasive acts underlying the § 7201 charge were identical to those that formed the basis of the money laundering charges under § 1956(a)(1)(A). The court did not err in considering the total amount of money involved in the charged transactions, rather than only some portion of that amount based on the proportion of illegitimate funds in her company’s bank account. U.S. v. Braxtonbrown-Smith, 278 F.3d 1348 (D.C. Cir. 2002).
D.C. Circuit holds that laundering of fraud proceeds did not fall outside money laundering heartland. (360) Defendant was convicted of a money laundering conspiracy, in violation of 18 U.S.C. § 1956(h), which provides that a conspiracy to commit the offense defined in § 1957 is subject to the same penalties as the completed offense. The Statutory Index (Appendix A) provides that USSG § 2S1.2 applies to a defendant convicted of violating § 1957. Defendant argued that § 2S1.2 applies only when a defendant knowingly launders large sums of money from drug trafficking or serious organized crime, and that because her case involved neither, it was “atypical” within the meaning of Appendix A (at the time she was sentenced). The D.C. Circuit found that this case fell within the heartland of § 2S1.2. Defendant engaged in monetary transactions involving property derived from defrauding federally insured financial institutions. On five separate occasions, she deposited fraudulently obtained funds in her bank account. She then used a certified check to withdraw the deposited funds and purchase a vehicle registered in her name. The plain language of § 2S1.2 includes her activity within its scope. U.S. v. Kayode, 254 F.3d 204 (D.C. Cir. 2001).
Commission increases sentences for terrorism. (360) The Commission eliminated the six-level increase for terrorism in the money laundering guideline, §2S1.1, because this is adequately covered by the terrorism adjustment in §3A1.4. For offenses involving harboring a fugitive in a terrorism offense, the maximum offense level in §2X3.1 (Accessory After the Fact) was raised from level 20 to level 30. New offenses involving biological agents and toxins were referred to the guideline covering nuclear, biological, and chemical weapons and materials, §2M6.1. The base offense level for tampering with a public water system was increased from level 18 to level 26, and §§2Q1.5 and 2Q1.4 were consolidated. The six-level enhancement for the risk of death or serious bodily injury (in the predecessor guideline) was incorporated into the base offense level, as were two levels for bodily injury. Likewise, the base offense level for threatening to tamper with a public water system, without conduct evidencing an intent to carry out the threat, was increased from level 10 to level 16. A base offense level of level 22 was provided for conduct evidencing an intent to carry out the threat. Amendment 655, effective November 1, 2003.
Commission consolidates money laundering guidelines, increasing some penalties and decreasing others. (360) The Commission combined §§ 2S1.1 and 2S1.2 into a single new guideline, § 2S1.1, that applies to convictions under 18 U.S.C. § 1956 or § 1957, or 21 U.S.C. § 854. The new amendment provides increased penalties for defendants who launder funds derived from more serious underlying criminal conduct, such as drug trafficking, crimes of violence, and fraud offenses that generate relatively high loss amounts. However, the amendment decreases penalties for defendants who launder funds derived from less serious underlying criminal conduct, such as basic fraud offenses that generate relatively low amounts. The amendment ties offense levels for money laundering more closely to the underlying conduct that was the source of the criminal derived funds by separating money laundering offenders into two categories: direct money launderers, and third party money launderers, and provides a six-level enhancement for third party money launderers who knew or believed that any part of the laundered funds were the proceeds of, or were intended to promote, certain types of more serious underlying criminal conduct. The amendment also resolves a circuit conflict over “grouping,” by instructing that where a defendant is sentenced on a count of conviction for money laundering and a count of conviction for the underlying offense that generated the laundered funds, such counts shall be grouped pursuant to subsection (c) of § 3D1.2. Amendment 634, effective November 1, 2001.
Article offers sentencing strategies in defending white collar cases. (360) Defense attorneys Alan Ellis and James Feldman suggest that in fraud cases, defense counsel should ensure that losses are not double-counted, that defendants receive credit for value received by victims, and that losses that are not caused by the fraud do not impact the sentence. They point out that when fraud defendants have also been convicted of money laundering, some courts have permitted a downward departure from the higher money laundering offense level on the ground that the money laundering was simply incidental to the fraud. See, e.g., U.S. v. Hemmingson, 157 F.3d 347 (5th Cir. 1998). The article includes an extensive discussion of cases upholding departures in white collar cases on a variety of grounds. Alan Ellis and James H. Feldman, Jr., Representing the White-collar Client at Sentencing, 14 A.B.A. Criminal Justice 41 (Winter 2000).
Commission rewrites money laundering guidelines. (360) In proposed Amendment 17, effective November 1, 1995, the Commission revised and consolidated the money laundering guidelines, §§2S1.1 and 2S1.2. The revised guideline ties the base offense level for money laundering more closely to the underlying conduct that was the source of the illegal proceeds. If the defendant committed the underlying offense and the offense level can be determined, that offense level applies. In other instances, the base offense level is keyed to the value of the funds involved. Greater punishment is provided when the defendant knew or believed that the transactions were designed to conceal the criminal nature of the proceeds or when the funds were to be used to promote further criminal activity. The revised guideline provides “fallback” offense levels when the offense level for the underlying conduct cannot be determined. This fallback level is 8 plus the offense level from the fraud table in §2F1.1. If the defendant knew or believed the funds were derived from, or were to be used to further, certain serious offenses, the fallback level is 12 plus the offense level from the fraud table. Proposed 1995 Guideline Amendments, 60 Federal Register 25074.
Commission makes currency transaction amendment retroactive. (360) In an amendment which took effect November 1, 1993, the Commission reformulated sections 2S1.3 and 2S1.4 combining them into one guideline and lowering sentences in cases where there is no intent to hide money derived from unlawful activity. On July 27, 1993, the Commission voted to make this amendment retroactive under section 1B1.10.
Commission adds new guideline for failure to file currency report. (360) The November 1, 1991 amendments created a new guideline section 2S1.4 with a base offense level of 9 for offenses involving Currency and Monetary Instrument Reports, previously covered by section 2S1.3 (Failure to Report Monetary Transactions; Structuring Transactions to Evade Report Requirements).