Articles Posted in Money Laundering

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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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It is a Federal crime to export any firearms outside the United States without of license. When two or more persons agree to commit a Federal offense and take some action in furtherance of the crime, it becomes a conspiracy and is a separate crime. Frazier was convicted in federal district court of the federal crime of conspiracy to export firearms to Canada without a license. He was also convicted of the federal offense of making a false statement in a form to a firearms dealer.

The evidence at jury trial showed he used straw buyers to purchase firearms on his behalf. At trial he claimed in his defense that the identity of the buyer on the ATF form 4473 was not material as both would have been eligible to buy the firearm.

The appellate court rejected this argument finding that falsifying the identity of the actual buyer on the ATF form is material, making this a federal offense. For these reasons the Federal court of appeals found the evidence was sufficient to support a conviction for making false statements on ATF forms used in gun purchases.