Distinguishing Between Fact and Purpose of Concealment, Second Circuit Reverses Money Laundering Convictions
In an important decision on the “design to conceal” element of the money laundering statute, the Second Circuit has reversed the defendant’s convictions for money laundering in United States v. Ness, 2009 WL 1259081 (2d Cir. May 8, 2009). While there was plenty of concealment here – the defendant, after all, ran a highly secretive armored car carrier business – the Court found insufficient evidence of the required “design to conceal” the identity of tainted money. Applying the Supreme Court’s holding in Cuellar v. United States, 128 S.Ct. 1994 (2008), the Court distinguished between the fact of concealment – however elaborate – and a purpose to conceal. “How” the defendant moved money is an entirely separate issue to “why” he moved money.
The case is notable too because the district court had denied Ness’ motion for bail pending appeal (see here), in part because the court believed there was sufficient evidence to sustain the conviction. The case is therefore a precedent for erring on the side of granting motions for bail pending appeal where the question of whether the appeal raises a close question is . . . a close one.
Facts
Ness ran an armored car carrier business, which was used to transport millions of dollars in narcotics proceeds from drug traffickers. Ness’s dealings with the traffickers allegedly involved a high level of secrecy, including “clandestine meetings to transfer large sums of concealed cash, the use of coded language, and the scrupulous avoidance of a paper trail.” He was convicted after trial of one substantive count of engaging in a money laundering transaction, and one count of conspiracy to commit money laundering transactions and money laundering transportation. The Second Circuit had previously affirmed the convictions, but this decision was vacated by the Supreme Court and remanded for further consideration in light of its holding in Cuellar – a case which held that the concealment element of a money laundering transportation charge requires a showing that the purpose of the transportation was to conceal or disguise the identity of the proceeds.
Holding
On remand, the Second Circuit reversed, rejecting the government’s argument (and the holding of the district court in the bail pending appeal motion) that the surreptitious nature of Ness’s transportation activities established that “the drug proceeds were delivered to his company at least in part for purposes of concealment:”
The Court also reversed the substantive money laundering conviction under 18 U.S.C. § 1957(a), holding that there was insufficient evidence that either Ness or his company constituted a “financial institution” as defined in the statute.
Comment
The money laundering statute is a key component in the government’s charging arsenal to compel plea bargains. The fact that it is tagged on regularly in prosecutions involving all sorts of crimes was a factor in the Supreme Court’s important decisions in Cuellar, and its companion, Santos. Ness is a significant development in this judicial effort to reign in indiscriminate use of the money laundering statute and its heavy sanctions. Notably (to the extent there is any issue about this), Ness applies Cuellar’s ruling not just to transportation money laundering charges, but also to charges involving transaction money laundering.
Lawyers: Vivian Shevitz, Esq., and Jane Simkin Smith, Esq. (Defendant); AUSAs Jocelyn Strauber, Karl Metzner
The case is notable too because the district court had denied Ness’ motion for bail pending appeal (see here), in part because the court believed there was sufficient evidence to sustain the conviction. The case is therefore a precedent for erring on the side of granting motions for bail pending appeal where the question of whether the appeal raises a close question is . . . a close one.
Facts
Ness ran an armored car carrier business, which was used to transport millions of dollars in narcotics proceeds from drug traffickers. Ness’s dealings with the traffickers allegedly involved a high level of secrecy, including “clandestine meetings to transfer large sums of concealed cash, the use of coded language, and the scrupulous avoidance of a paper trail.” He was convicted after trial of one substantive count of engaging in a money laundering transaction, and one count of conspiracy to commit money laundering transactions and money laundering transportation. The Second Circuit had previously affirmed the convictions, but this decision was vacated by the Supreme Court and remanded for further consideration in light of its holding in Cuellar – a case which held that the concealment element of a money laundering transportation charge requires a showing that the purpose of the transportation was to conceal or disguise the identity of the proceeds.
Holding
On remand, the Second Circuit reversed, rejecting the government’s argument (and the holding of the district court in the bail pending appeal motion) that the surreptitious nature of Ness’s transportation activities established that “the drug proceeds were delivered to his company at least in part for purposes of concealment:”
While such evidence may indicate that Ness was concealing the nature, location, or source of the narcotics proceeds, it does not prove that his purpose in transporting the proceeds was to conceal these attributes. It evidences not “why” he moved the money, but only “how” he moved it. Ness’s avoidance of a paper trail, hiding of the proceeds in packages of jewelry, and use of code words show only that he concealed the proceeds in order to transport them. Under Cuellar, such evidence is not sufficient to prove transaction or transportation money laundering offenses.
The Court also reversed the substantive money laundering conviction under 18 U.S.C. § 1957(a), holding that there was insufficient evidence that either Ness or his company constituted a “financial institution” as defined in the statute.
Comment
The money laundering statute is a key component in the government’s charging arsenal to compel plea bargains. The fact that it is tagged on regularly in prosecutions involving all sorts of crimes was a factor in the Supreme Court’s important decisions in Cuellar, and its companion, Santos. Ness is a significant development in this judicial effort to reign in indiscriminate use of the money laundering statute and its heavy sanctions. Notably (to the extent there is any issue about this), Ness applies Cuellar’s ruling not just to transportation money laundering charges, but also to charges involving transaction money laundering.
Lawyers: Vivian Shevitz, Esq., and Jane Simkin Smith, Esq. (Defendant); AUSAs Jocelyn Strauber, Karl Metzner
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