Articles Posted in Money Laundering

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In U.S v. Leon, Leon appeals from her conviction following a jury trial of three counts of attempting to cause a financial institution to not file a required currency transaction report (a CTR) in violation of 31 U.S.C. § 5324(a)(1). On appeal Leon claimed that the government and the district court constructively amended the indictment allowing her to be tried and convicted of violation §5324(a)(3) and not §5324(a)(1). The indictment alleges that Leon knowingly willfully and for the purpose of avoiding federal reporting requirements attempted to cause Bank of America not to file required CTRs concerning currency transactions exceeding $10,000 while violating another federal law and as part of a pattern of illegal activity involving more than $100,000 in a 12-month period. She was charged with making five cash withdrawals in the amounts of $9,500, $5,500, $1,430, $1,000 and $400. Another count charge her with making three cash withdrawals in amounts of $6,000, $3,995 and $500. And two cash withdrawals in the amounts of $9,846 and $300. The indictments alleged that these withdrawals, when aggregated on a daily basis, triggered Bank of America’s obligation to file CTRs and that Leon make the withdrawals in amounts less than $10,000 to try to cause Bank of America to not file CTRs.

Leon contended that the government’s theory and evidence as well as the district court’s jury instructions constructively amended the federal criminal indictment by allowing her to be convicted of violating §5324(a)(3) instead of §5324(a)(1). She claimed that the offense of structuring is prohibited by §5423(a)(3) but not by §5423(a)(1). Building on this premise Leon argues that there was a constructive amendment allowing her to be convicted of uncharged §5342(a)(3) offenses because the government repeatedly use the term “structuring” when referring to the three counts.

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In US v. Damion St. Patrick Baston (“Baston”), the Defendant worked as a pimp and forced various women to work as prostitutes in Florida and around the world while keeping the money they earned As a result he was indicted for violating 18 U.S.C. 1593 and charged in Miami federal court for sex trafficking by force, fraud, or coercion in Florida and in the countries of Australia and United Arab Emirates. He was also charged with several counts of money laundering in violation of 18 U.S.C. 1956 based his having wired the sex-trafficking proceeds from Australian to Miami.

At his trial the government called three prostitutes that worked for him as witnesses who testified how they met Baston and how he used violence and coercion to force them into prostitution. His defense what that he never coerced the woman into prostitution and they were already prostitute when they met. He said they did it freely and voluntarily and in Australia prostitution is legal trade from which they could make money.
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In USA v. Thomas the Defendant was convicted of knowingly accessing with intent to view child pornography in violation of 18 U.S.C. 2252(a)(4)(B). Prior to his federal court trial he filed a motion to suppress the incriminating images of child pornography that were seized from his desktop computer at his home in violation of the Fourth Amendment. He appealed the trial court’s denial of the motion to suppress asking the Eleventh circuit court of appeals to overturn the trial court’s decision.

These are the facts of the seizure. A police officer arrived at Thomas’s home in response to a telephone report from Thomas’s wife that there was child pornography on a computer within the home. The officer was greeted by Thomas’s wife who told the officer that she found eight to ten child pornography websites on a computer in their shared home. The wife described what appeared to be minors engaged in sexual conduct with an adult. The wife told the officer that the defendant was home but sleeping and did not give consent to view the computers, but the wife said they both use the computer though Thomas used the computers more often, and the wife gave permission to search all the electronic equipment. Other officers arrived while Thomas still slept and approached the computer screen where they saw in plain view web sites “pictures of young girls that had only their underwear on” though not engaged in any sexual activity. The officers learned from the wife that she had seen nude photos of 4 – 13 year old children in sex poses and being sexually abused but the wife mistakenly closed the web pages before the police arrived. The officer started to conduct a forensic search/scan of the hard drive of the computer and began a forensic search.
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In U.S. v. Massam, the defendant was convicted of theft and embezzlement of an employee benefit fund (E.R.I.S.A) he set of for himself and his employees and for which he served as the pension plan administrator. After divorcing his fifth wife, the state divorce court entered a distribution order to his ex-wife in the amount of $452,242. The defendant then attempted to illegally transfer of the funds in the pension plans to a foreign bank account so he could later withdraw the funds. His attempt to transfer the funds failed when the foreign bank refused to accept the wire and the funds were returned to the domestic bank. Following that failed attempt he appealed the state court judgment awarding his wife’s funds pension funds, and in filing the appeal he posted a supersedeas bond in an amount which covered the court ordered amount for the ex-wife. Subsequently, the divorce court order was affirmed and his obligation to pay her was met by the supersedeas bond. Following all that, the defendant was investigated for his theft of the pension plans and eventually indicted and he pleaded guilty to the federal crime of theft, embezzlement, and money laundering in connection with his attempted transfer of the employee benefit funds.

His presentence investigation report calculated is guideline range based on the intended loss of $1,185,863.00 which was the amount that he attempted to transfer to the foreign bank. The presentence report gave him some credit for the funds still remaining in the pension fund. The district court rejected his argument that he should receive credit and for the amount he paid out of the bond to satisfy his pension related obligations to in his ex-wife under the asset allocation order. Credit for this amount would have reduced his sentencing guideline range significantly but the district court refused to give them credit.

The 11th Circuit found that he should not be given credit for the bond posted to pay his ex-wife because in his case the sentencing guidelines required that the calculation be based upon the intended loss which was the amount the defendant attempted to transfer to the foreign bank. It rejected his argument that his guideline should be reduced by the amount his wife received from the bond posted after he appealed from the divorce order. While the guidelines provide that a loss they would be reduced by the money returned by the defendant, the credit-against-loss is not available where the guideline range is based upon intended loss alone. It is also not available here because there is no victim in the case of an intended loss. The 11th Circuit also rejected the defense argument that the wife became a victim because her property interests was imperiled by the attempted overseas transfer. The court found the overseas transfer attempt took place long before his wife was due to receive the funds, which she eventually received from the supersedeas bond.

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The defendant in U.S. v. Salgado was indicted and convicted of the federal crimes of drug conspiracy, money laundering conspiracy, and possession with intent to distribute as least one kilogram of heroin. Prior to sentencing the presentence investigation report (psi) calculated his guidelines sentence range by grouping his convictions together under USSG § 3D1.2(c) because the drug conspiracy and distribution offenses were “the underlying offenses from which the laundered funds were derived.” The psi used the money laundering guideline, USSG § 2S1.1 to determine the defendant’s base offense level. To calculate the offense level under § 2S1.1, the psi set his base offense level using the guideline for the underlying conspiracy to distribute heroin. Under the facts of this case it came to a level 34. It then determined that certain enhancements applied under § 2S1.1, including a role enhancement, for his role in the heroin transactions that qualified him as a manager, leader or supervisor.

The issue in this appeal was not whether Salgado’s role in the heroin distribution conspiracy made him a manager, leader, or supervisor. Instead, the issue was whether the district court misapplied the guidelines by using Saldgado’s conduct in the underlying drug conspiracy to impose a role enhancement when calculating his offense level for money laundering under USSG § 2S1.1(a)(1).

According to §1B1.5(c), if the offense level adjustments is determined by reference to another guideline, the Chapter Three adjustments also are determined in respect to the referenced offense guideline “except as otherwise expressly provided.” This means that where a guideline determines a defendant’s offense level by reference to another offense, the Chapter Three adjustments are to be based on the guideline and rules for that other offense. But the 11th Circuit pointed out that this is a default rule because the “except as otherwise” provided language. Application note 2(c) of § 2S1.1 is one of the otherwise provided exceptions. It instructs courts that when setting an offense level under § 2S1.1(a)(1), a court should make Chapter Three adjustments based on the defendant’s conduct in the money laundering offense itself, and not based on his conduct in the offense from which the money that was laundered was obtained. This meant that when the district court calculated Salgado’s offense level under § 2S1.1(a)(1), it could base his role enhancement on conduct in the money laundering conspiracy but not on his conduct in the underlying drug offense.

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In U.S. v. Lang the defendant was indicted on 85 counts of violating 18 U.S.C. § 5324 which makes it a crime to structure cash transactions for the purpose of evading the requirement that a financial institution file a report with the Department of Treasury of a cash transaction by any person on a single day exceeding $10,000. He was convicted of 70 counts and on appeal he challenged the sufficiency of the indictment. The statute prohibits a person from structuring any transaction with one or more domestic financial institutions, in an amount which by regulation is $10,000. In this federal white collar crime, the issue here is whether one or more structuring crimes has been committed for an evasion involving breaking down a single amount that exceeds $10,000. Structuring according to the Supreme Court precedent is breaking up a single transaction above the reporting threshold into two or more separate transactions for the purpose of evading a financial institutions reporting requirement. The court of appeals concluded that in order to evade the reporting requirements the structured transaction must involve an amount that is more than $10,000 or else there could be no evasion. A single cash transactions were not sufficient to set forth each structuring count. The court considered other circuit decisions regarding the question about the proper unit of prosecution for structuring. The Seventh and the Tenth Circuits found that the structuring itself and not the individual deposits is the unit of the crime. The Tenth Circuit reached the same conclusion in a case where a defendant paid a bank three separate payments of 9,000, 9,000 and 6,000 on three separate days to avoid a $24,000 cash payment.

In this case the indictment charged a separate structuring crime for each check less than $10,000 and no combination of two or more checks is alleged in any count. A cash transaction in an amount below the reporting threshold cannot in itself amount to structuring because the crime requires a purpose to evade the reporting requirement and that requirement does not apply to a single cash transaction below the threshold. The government’s theory is that Lang received from one source 21 payments exceeding $10,000 over a period of 8 months and had broken down the larger payments into multiple checks each of which was less than $10,000 and he cashed those checks separately to evade the reporting requirements. Instead of a series of counts each alleging payments totaling more than $10,000 that were structured into checks of smaller amounts, which were cashed, the indictment consists of 85 counts each of which separately alleges that a single check in an amount less than $10,000 was structured. “When cashed checks come to the structuring dance, it takes two to tango.” Allegations from separate counts cannot be combined to allege what is missing in the count itself. For these reasons the indictment was found to be so defective that it does not, by any reasonable construction, charge an offense for which the defendant was convicted.

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The defendant, an attorney in Dixie County Florida, was convicted of mail fraud and money laundering charges relating to two separate fraudulent schemes. One scheme involved the defendant’s conversion of funds developers gave him to hold in trust for future expenses associated with a development (River Shores Scheme). The other scheme was convincing victims to invest in a vitamin company called GenSpec Labs (GenSpec) by misrepresenting the anticipated return on the investment and the viability of the company (GenSpec Scheme). The court in U.S. v. Lander found the proof presented at trial in connection with the River Shores mail fraud count materially varied from the allegations contained in the superseding indictment.

Landers practiced as an attorney and served as the Dixie County Attorney. He had business dealings beyond his legal work as he tried to start GenSpec. A group of developers planning the River Shores project retained Landers to help guide their project through the county’s regulatory process. The developers did not know at first he was the county attorney, but after they did they gave him $820,000 as a level of security to assure buyers their project would pass through the county’s regulatory process.

The indictment charges that Landers misrepresented to developers that they were required to pay a performance bond to Dixie County through him as its county attorney. It charged that Landers deposited the $820,000 as payment for the performance bond. At the trial the government failed to present evidence to support the specific charges that the defendant made false representations about having to pay a performance bond. The government instead presented evidence of a scheme to defraud that was entirely different from the one alleged in the indictment charging the River Shores scheme. The misrepresentations that the government relies upon as proof of the offense do not coincide with the allegation of the indictment. The evidence the government offered at trial to support this fraud varied so greatly from the allegations of the indictment the Landers was unable to prepare his defense. When a material variance substantially prejudices the Defendant as it did here, the variance constitutes reversible error. The Court also reversed the money laundering convictions because they were predicated on the River Shores mail fraud count.

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In this appeal Juanita Davenport challenged a final order of criminal forfeiture of $214,980 seized from a safety deposit box. In U.S. v. Davenport, the defendant and her codefendants were charged in the indictment with participating in a drug conspiracy. In addition, Davenport was charged with making a false statement to a federal agent. The indictment also sought to forfeit all the defendants’ interest in any property derived from or used to facilitate the commission of the drug conspiracy. The Davenport pled to the false statement charge and the government dismissed the forfeiture count against her.

One codefendant in her case pled guilty to drug distribution and agreed to forfeit his interest in the $214,000 of U.S. currency found in Davenport’s safe deposit box. A preliminary order of forfeiture was entered pursuant to Rule 32.2(b) and the government filed a notice of intent to dispose of the property, giving persons with interest 30 days to petition the court to adjudicate their potential interest in the property. A written notice of the forfeiture went to Davenport’s attorney advising him his client had 30 days from the written notice to file a petition of 60 days from the first day of the government’s publication of the notice on its website. After the 30 day period ran out, Davenport’s attorney petitioned the district court to adjudicate her interest in the forfeited currency. The district court dismisses the claim as untimely.

First, the 11th Circuit held that Davenport lacked standing to challenge the validity of the preliminary order of forfeiture. Her sole mechanism for vindicating her purported interest in the forfeited property was through the ancillary proceedings of 18 U.S.C. section 853 and Rule 32.2(c). Third parties may not relitigate the merits of a forfeitability determination.

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The defendant business in U.S. v. Chaplin’s was a jewelry store in Atlanta from which the defendant, an employee, sold jewelry on a cash basis to persons he knew to be drug dealers. In one instance an undercover IRS agent posing as a narcotics trafficker purchased expensive jewelry in cash from the defendant at his store without completing a Form 8300. The undercover cash sales were structured to avoid individual payments in excess of $10,000, a transaction which required the defendant to file a report with the federal government (Form 8300) containing information about the such as buyer’s name and address. Chaplin’s, Inc., was indicted on money laundering counts and a count of failure to report, all arising out the undercover sale and the failure to file the Form 8300. Because the defendant committed the violations during the course of his employment at Chaplin’s, Chaplin’s Inc. was vicariously liable for his actions and charged by indictment.

The both counts of the indictment sought forfeiture of “any and all property involved in” the offenses including the jewelry store’s entire inventory. Following trial Chaplin’s was found guilty and the government moved to forfeit the inventory on the grounds that the inventory was “involved in” the money laundering and reporting offenses because it provided the defendant owner and employees and vicariously Chaplin’s with an “air of legitimacy.” The inventory totaled $1,877,262. The district court ordered forfeiture of the inventory, plus it imposed a $100,000 fines for two counts.

On appeal Chaplin’s challenged the monetary punishment as a violation of the 8th Amendment as the forfeiture was unconstitutionally excessive and grossly disproportional to the gravity of the offense.

In deciding gross-proportionality, the appellate court looked at three factors:

  • Whether the defendant falls into the class of persons against whom the criminal statute was principally directed;
  • Other penalties authorized by the legislature or the Sentencing Commission; and
  • The harm caused by the defendant.

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In United States v. Naranjo, the defendant’s wire fraud conviction resulted from a multi-million dollar scheme where he solicited investors for a chain of check cashing and pay-day loan stores known as the “Loan Shoppe” by offering high interest rates. The wire fraud statute Title 18 U.S.C. §1341 makes it a federal crime to use the telephone or any other interstate wired device to advance a fraud. It is commonly used federal statute in federal criminal white collar cases. Here Naranjo raised 1.5 million dollars through this fraud. Viewed in a light most favorable to the government, the evidence was sufficient for a reasonable jury to find Naranjo intended to operate a fraudulent scheme.

The evidence showed that money raised did not finance a legitimate business. These were the facts that supported the jury’s finding of a fraudulent scheme:
• The check cashing and payday loan business had no state license;
• The defendant hid his connection to the business by omitting his name on corporate records and license applications;
• He told his salesmen that the business was profitable when it made no profit;
• Only a small portion of investor funds went into expansion of the Loan Shoppe;
• High rates of return were promised yet few if any actually received;
• A majority of investor funds went to debt service and sales commissions without informing investors; and • The defendant personally made over $450,00 from a business that did not generate any profit.
The court of appeals found the evidence supported a finding that it was a ponzi scheme with considerable overhead and large payments to Naranjo.

The concealment money laundering statute prohibits financial transactions conducted for the purpose of concealing unlawfully obtained funds in violation of 18 U.S.C. § 1956(a)(1). Evidence showed three cash withdrawals for large sums of money from the business which occurred contemporaneously with the deposits from victim investors, which supported the concealment convictions. Converting illegally obtained funds into cash was proof of an attempt to hide the source of the funds and the defendant’s connections to them.
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