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Florida Appellate Court Rejects Money Laundering Prosecution for Fleeing the Scene of a Drug Transaction with $400.00 in Cash
Posted by: Mark Horwitz
December 05, 2008

The aggressive use of money laundering statutes by police and prosecutors has given rise to complaints that the statutes are not being used as they were intended, but rather as a way to add another charge and to increase sentencing for the underlying crime. The case of Dallas v. State, ___ So. 2d ___ , WL 4949123 (Fla. 5th DCA 2008) is an example of the aggressive use of the state money laundering statute that was rejected by an appellate court.

In this case the defendant was charged with delivery of cocaine within 1,000 feet of a childcare facility, as well as unlawful transportation of currency in violation of section 896.101(3)(b)1., Florida Statutes (2007). This statute is part of Florida's money laundering statutes which makes it unlawful to "transport or attempt to transport a monetary instrument or funds with the intent to promote the carrying on of specified unlawful activity." One of the "specified unlawful activities" is drug offenses under Chapter 893, Florida Statutes.

A deputy sheriff observed the defendant, Mr. Dallas taking something out of his mouth and exchanging it for money with another person. The deputy then approached the person who received the item from the mouth of the defendant, and observed that it was crack cocaine. As the deputy was arresting the person who received the crack cocaine, he saw Mr. Dallas running away. The deputy and pursued and ultimately arrested the defendant.

At trial, the defendant moved for judgment of acquittal as to the unlawful transportation of currency count, arguing that the state failed to present any evidence that the transportation of the currency was with unlawful intent. A jury convicted the defendant of both delivery of cocaine and unlawful transportation of currency. He was sentenced to four years in prison on each count, running concurrently. The state argued on appeal that no Florida cases address the issue of whether the transportation money laundering statute includes transporting money to promote past crimes, and that the Court should look to federal cases dealing with that issue under the federal money laundering statute. The Appellate Court noted that the federal circuit courts are not in agreement on this issue.

The Court avoided deciding whether the Florida statute applies to promoting past criminal conduct stating that the scant evidence in this case was insufficient to prove the defendant's guilt under either theory. The Court further noted that:

Dallas sold a piece of cocaine, put the cash in his pocket and ran. He was later caught. The State urges us to conclude that Dallas' act of running away with the money to avoid being caught created a reasonable inference that he intended to promote the just-completed crime and to promote future drug selling. We cannot. Unlike the defendants in the cases cited by the State, Dallas did not have to cash a check or take any other action to realize a benefit. Thus, his act of running with the cash did not create an inference that he intended to promote past criminal activity because the activity was complete. Likewise, it did not create an inference that he intended to use the cash to promote future drug sales. Based on the evidence presented, such an inference would be based on pure speculation.

Dallas at 3.

The Court in Dallas did not mention the recent supreme court case of Cuellar v. U.S., ___ U.S. ___ , 128 S. Ct. 1994 (2008).

The Cuellar case was a subject matter of another blog which involved limiting the federal money laundering transportation statute. Both Cuellar and Dallas involved the rejection of the prosecution's argument that the scant evidence presented was sufficient circumstantial evidence to justify the conviction.

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SUPREME COURT ISSUES IMPORTANT MONEY LAUNDERING DECISION DEFINING THE TERM "PROCEEDS"
Posted by: Mark Horwitz
November 07, 2008

The money laundering statute, which was originally passed with the intent of stopping organized crime and drug dealers from being able to clean their money, that is, legitimize money that was earned in illegal activities, has been greatly expanded by federal prosecutors. Over the years it has come to apply to almost any economic crime. For many years under the sentencing guidelines, the inclusion of a money laundering charge to the underlying offense would usually result in a sentence that was two to three times greater than was provided under the sentencing guidelines for the underlying offense itself.

It is hard to imagine any crime resulting in the receipt of money that would not support the government's charge of money laundering. Its most common use by the government involved attaching a money laundering charge to fraudulent conduct, including mail fraud and wire fraud. The money laundering statute, however, also applies to such things as copyright infringements and counterfeiting goods and services.

In the case of U.S. v. Santos,128 S. Ct. 2020 (2008) the Supreme Court was presented with a case that turned on the definition of the word "proceeds" under the money laundering statute.

This case involved the prosecution of a person running an illegal lottery operation. A jury found Santos guilty of one count of conspiracy to run an illegal gambling business, one count of running an illegal gambling business, one count of conspiracy to launder money, and two counts of money laundering. The court sentenced Santos to five years on the two gambling counts and 17 ½ years on the three money laundering counts.

This is another example of the enhanced punishment that is brought to bear upon almost any economic crime by including a money laundering charge.

The facts of the Santos case that supported the money laundering charges involved Santos's payments to runners and collectors who were involved in his illegal gambling activity, as well as paying off winners.

The opinion of the court was delivered by Justice Scalia and was joined in by three other justices. Justice Stevens joined in the judgment, but wrote a concurring opinion which has a limiting effect on the holding in this case.

The court discusses what Congress meant by the term "proceeds." The government argued that the term "proceeds" in the statute should be interpreted to mean receipts, rather than profits. The government contended that the gross receipts of a crime accurately reflect the scale of the criminal activity because illegal activity generated all of the funds. The Supreme Court analyzed the statute and pointed out that the term "proceeds" is not defined and could be interpreted to mean either receipts or profits. It then applied the rule of lenity and held that proceeds means profits, not receipts.

The court recognized that if the term "proceeds" meant "receipts" the result would be a "merger" of the underlying crime with the money laundering offense. The Supreme Court stated:

Since few lotteries, if any, will not pay their winners, the statute criminalizing illegal lotteries, 18 U.S.C. § 1955, would "merge" with the money-laundering statute. Congress evidently decided that lottery operators ordinarily deserve up to 5 years of imprisonment, § 1955(a), but as a result of merger they would face an additional 20 years, § 1956(a)(1). Prosecutors, of course, would acquire the discretion to charge the lesser lottery offense, the greater money-laundering offense, or both- which would predictably be used to induce a plea bargain to the lesser charge.

Santos at 2026.

This comment by the Supreme Court recognizes what has, in fact, been the practice of the government since the federal sentencing guidelines came into effect. By including money laundering charges, the government forces the defendant to plead guilty to avoid a greatly enhanced sentence if convicted of money laundering. At times, this can work as an injustice since a defendant, even though not guilty, may choose to avoid a trial and a potential catastrophic sentence.

The Supreme Court rejected the government's argument that it would be easier for the government to prove "receipts," rather than "profits." The Supreme Court noted that the government's position puts the long-established constitutional rule of lenity on its head by helping the government convict under an unclear criminal law rather than protecting the citizen.

Justice Scalia also mentions Justice Stevens's concurrent opinion and stare decisis effect on this case. Justice Scalia wrote:

Since his vote is necessary to our judgment, and since his opinion rests upon the narrower ground, the Court's holding is limited accordingly (citation omitted). But the narrowness of his ground consists of finding that "proceeds" means "profits" when there is no legislative history to the contrary. That is all that our judgment holds. It does not hold that the outcome is different when contrary legislative history does exist.

Santos at 2031.

The Supreme Court opinion limiting the definition of "proceeds" should alleviate some of the abuses seen in the use of the money laundering statute.

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SUPREME COURT REINS IN MONEY LAUNDERING TRANSPORTATION PROSECUTIONS
Posted by: Mark Horwitz
November 04, 2008

The government has expanded money laundering prosecutions from the purpose originally anticipated by Congress which was aimed to stop organized crime and drug dealers from legitimizing or cleaning illegal proceeds. The Supreme Court case of Cuellar v. U.S., 128 S. Ct. 1994 (2008), significantly impacted prosecutions under the money laundering transportation statute and is a long overdue step toward bringing money laundering prosecutions back to something approaching the laws original purpose.

The charge in Cuellar involved a violation of 18 U.S.C. § 1956(a)(2)(B)(i). This statute makes it a crime to attempt to transport the proceeds of unlawful activity across the border, knowing the transportation was designed to conceal or disguise the nature, location, source, ownership, or control of the money. The defendant was stopped approximately 100 miles north of the Mexican border in Texas driving a van in which was hidden $81,000.00 in cash.

Following a two-day jury trial, the defendant was convicted. The government's theory was that the conduct of the defendant, in driving the car with the cash hidden in an effort to prevent its detection, was proof of a violation of the transportation money laundering statute. The court pointed out that the defendant had to know that the effect of his transporting the money, if it made it into Mexico, effectively accomplished one of the purposes prohibited by the statute. Justice Alito, in his concurring opinion, gave the succinct description of the various purposes with the following language:

Transporting the funds across the border would have had the effect of achieving this objective if, once the funds made it into Mexico, it would have been harder for law enforcement authorities in this country (1) to ascertain that the funds were drug proceeds ("nature"), (2) to find the funds ("location"), (3) to determine where they came from ("source"), (4) to ascertain who owned them ("ownership"), or (5) to find out who controlled them ("control").

Cuellar at 2006.

The government argued to the Supreme Court that proof of concealing the money during transportation was sufficient to satisfy the element of the statute which requires that the money was taken into Mexico with a design to conceal the nature, location, source, ownership or control of the money. The government argued that circumstantial evidence established the ultimate

purpose of the transportation, that is, its design to accomplish the unlawful concealment or disguising of the funds. The Supreme Court rejected this argument and stated "we agree with petitioner that merely hiding funds during transportation is not sufficient to violate the statute, even if substantial efforts had been expended to conceal the money." Cuellar at 2003.

Concealing money for the purpose of facilitating the transportation was not sufficient to show the defendant knew that when the money reached Mexico it would be for the purpose of concealing or disguising the nature, location, source, ownership or control of the funds. The court held that the statute makes it clear that a conviction under 18 U.S.C. § 1956(a)(2)(B)(i) requires proof that the purpose, not merely the effect of the transportation, was to conceal or disguise the funds as prohibited under law.

This case is significant not only for its limitation of the purpose of the money laundering statute, but also in the Supreme Court's rejection of the government's ever-expanding utilization of what it calls circumstantial evidence.

On a practical note, hiding money while traveling may be indicative of many purposes including preventing theft. Even if the money is from illegal activity, the purpose of the transportation out of the country could be for spending rather than the purposes proscribed by this money laundering statute. The government may still prosecute the underlying criminal conduct without piling on an additional charge of money laundering which improperly expands the money laundering statute.

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