Sentencing: Value of Laundered funds does not include appreciated value of stock in which defendant had invested, but rather just the initial investment amount. United States v Paley, 442 F3d 1273 (11th Cir. 2006).
"Laundered funds" as used in § 2S1.1(a)(2) include "the property, funds, or monetary instrument involved in the [money laundering] transaction." U.S.S.G. § 2S1.1 cmt. n.1. This case involves funds and property, the property being the stock that was purchased with funds and then appreciated significantly in value. For two reasons we are persuaded that the "laundered funds" should not include the stock's appreciation in value.
First, 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 the stock scheme at issue in this case, the funds that were laundered by Paley are the $ 15,000 that Rowland contributed toward the stock investment. The appreciation of Rowland's share of the investment to $ 103,000 may have been merely fortuitous or may have resulted from Paley's investment acumen, but it was not the product of the money laundering scheme itself. It did not convert those funds to laundered funds.
Second, if we were to hold that the value of the laundered funds included the appreciation in value of an asset purchased with drug proceeds, we would open the door to an absurd result when laundered funds are used to purchase an asset that ultimately decreases in value. It would be unsound policy to interpret "value of the laundered funds" in § 2S1.1(a)(2) in a way that would make the sentence in a money laundering case (or misprision case where the underlying offense is money laundering) hinge on how successfully the proceeds of the crime are invested. (The forfeiture provision applicable to money laundering cases prevents the launderer and his criminal client from keeping the profits of the money laundering operation. See 18 U.S.C. § 982(a)(1) (requiring forfeiture of "any property, real or personal, involved in [money laundering], or any property traceable to such property") (emphasis added).)
Accordingly, we hold that the district court erred in its interpretation of the sentencing guidelines when it found that Paley was responsible for the stock's appreciation in value. Cf. United States v. Pizano, 421 F.3d 707, 727 (8th Cir. 2005) (holding that "in a money-laundering offense involving layering, the 'value of the laundered funds' is the amount originally derived from criminal activity and then laundered, not the aggregate total of the funds involved in each layer" and stating that "the 'value of the laundered funds' should be limited to funds originally injected or infused into the money-laundering scheme").
Evidence sufficient to sustain conviction on knowledge that funds were drug proceeds.
The Third Circuit Court of Appeals affirmed the conviction of an attorney in USA v Flores July 21, 2006 for conspiracy to money launder, money laundering and conspracy to structure currency transactions.
To prove conspiracy to commit money laundering, the Government was required to show that Flores consorted with others in a money laundering scheme,
knowing that the property involved in a financial transaction represent[ed] the proceeds of some form of unlawful activity [and] conduct[ed] or attempt[ed] to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity. 18 USC 1956(a)(1).
Flores argues that the Government failed to prove beyond a reasonable doubt that he knew or was willfully blind to the fact that the money laundered by Altamirano either "represent[ed] the proceeds of some form of illegal activity," 18 USC 1956(a)(1) or was "criminally derived property," 18 USC 1957(a). According to Flores, "[t]he only form of unlawful activity identified at trial was drug trafficking. Yet the evidence the Government presented was wholly insufficient to establish [his] knowledge of, or willful blindness to, the fact that the funds originated in drug trafficking or any other crime."
The Court found that, "it is undisputed that the financial transactions Flores conducted on behalf of Altamirano "in fact involve[d] the proceeds of specified unlawful activity," to wit, narcotics trafficking. Thus, the only question is whether the Government produced evidence that Flores knew of or was willfully blind to the fact that the funds originated in some form of unlawful activity, sufficient to obtain a conviction under 18 USC 1956(h) . See 18 USC 1956 (c)(1) (stating that it is sufficient if "the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law") (emphasis added). Accordingly, the defense's argument that the Government needed to prove that Flores knew of, or was willfully blind to, the fact that the funds originated in drug trafficking is off point.
To prove money laundering, the Government was required to show that Flores,
knowingly engage[d] or attempt[ed] to engage in a monetary transaction in criminally derived property of a value greater than $ 10,000 and is derived from specified unlawful activity.
18 USC 1957(a).. Again, because the monetary transactions that Flores conducted on behalf of Altamirano were "derived from specified unlawful activity," the only question is whether the Government produced sufficient evidence that Flores knew that the monetary transactions represented the proceeds of criminally derived property. For the same reasons provided above, the defense's argument--that the Government needed to prove that Flores knew of, or was willfully blind to, the fact that the funds originated in drug trafficking to obtain a money laundering conviction--fails. See 18 USC 1957 (c) "The Government is not required to prove that the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.").
"Our remaining task is to determine whether there is substantial evidence in the record, viewed in the light most favorable to the Government, that Flores knew that the property involved in the financial transactions represented the proceeds of some form of unlawful activity and/or criminally derived property. Knowledge may be demonstrated by showing that a defendant either had actual knowledge or "deliberately closed his eyes to what otherwise would have been obvious to him concerning the fact in question." United States v Stewart, 185 F3d 112,126 (3d Cir 1999)." The Government establishes willful blindness by proving that a defendant "was objectively aware of the high probability of the fact in question," Brodie at 148. and "could have recognized the likelihood of [illicit acts] yet deliberately avoided learning the true facts. Stewart, 185 F3d at 126.
Here, the jury reasonably concluded that Flores participated in the money laundering conspiracy either knowingly or with willful blindness. The following record evidence, inter alia, created in Flores objective awareness of the high probability that Altamirano was involved in money laundering: (1) one of Flores' initial interactions with Altamirano involved the supply of two false social security numbers; (2) as soon as Flores opened multiple bank accounts for the corporations, large amounts of cash began flowing in and out of the accounts, despite the fact that the corporations had just opened for business and had no physical location other than Flores' own offices; (3) Flores received a letter from the Republic National Bank explaining what "structured" transactions are and why they are illegal, and informing him that "when an account receives a large incoming wire and immediately sends an outgoing wire or wires for approximately the same amount, without apparent commercial justification, it mirrors the activity of an account opened by money launderers"; (4) the manager of Republic National Bank disbelieved Altamirano's explanation concerning his numerous accounts and financial transactions and told Altamirano and Flores that the accounts were "evidently" being used for "money laundering"; (5) Flores' accountant, Rivera, testified that he had sought invoices documenting the source of the funds but never received the documentation he requested; and (6) Rivera also questioned Flores about why the funds were being sent to foreign companies with no apparent relationship to the Ecuadorian fruit, fish or flower trade.
In response to the substantial evidence that Altamirano was involved in some sort of illegal activity, Flores willfully blinded himself to the truth. He never requested any proof of the legitimacy of the transactions from Altamirano or even any further explanation addressing either the bank manager's or accountant's concerns. That Flores "did not ask the natural follow-up question[s] to determine the source of those funds could reasonably be considered by a jury to be evidence of willful blindness." United States v Wert-Ruiz, 228 F3d 250, 257 (3rd Cir.2000). Indeed, when faced with the above-detailed evidence, instead of making obvious inquiries, Flores engaged in additional money laundering transactions. For example, he continued to sign checks and wire transfers and to receive account statements documenting the flow of over $ 1,200,000 through the accounts. Moreover, Flores dissuaded Altamirano from discontinuing suspicious financial transactions after the meeting with Republic National, and instead opened accounts at other banks, stating that he needed the $ 2,000 per week he was being paid in cash to oversee the bank accounts. Thus, the jury could have inferred that Flores was motivated to avoid learning the truth because the money laundering operation was profitable to him. See Brodie 403 F3d at 158.
In sum, the jury's verdict reflects that it reasonably concluded, based on the evidence before it, that Flores was willfully blind to the illegal source and disposition of the funds in the accounts of the corporations he formed. "This is not to say that[Flores] did not proffer alternative explanations, but the verdict indicates that the jury did not credit them. Because [substantial] evidence supports that verdict, we [should] not second guess that decision." Wert-Ruiz, 228 F3d at 258.
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