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UNITED STA TES COURT OF APPEALS FO R T HE TH IRD CIR CU IT

Nos. 03-1441 /

03-1442

UNITED S TATES OF AMERI CA

v.

M ICH AE L J. G RA SS O, J R.,

Appellant

On Appeal from the United S tates District Court for the Easte rn D istrict of P enns ylvania D.C . Cri min al A ction No s. 00-cr-000 51-1/01-c r-00783 -1 ( Hon orable B erle M . Schiller)

Argued December 12, 2003

Before: AMB RO, FUENTES and GA RT H, Circuit

Judges
(Opinion fi led August 23, 2004)

Walter M. Phil lips , Jr ., Esq. (Argued) Kevin J. Kotch, Esq. Hoyle, Fickler , Herschel& M athes One South Broad, Suite 1500 Philadelphia, PA 19107
Attorney s for Appel lant Patri ck L. Meehan United States Attorney Lau rie M agid Deputy United State s Attorne y for P olicy and Ap peals Robert A. Zauzmer Assist ant Unite d States Attorney Senior Appell ate Counsel Anne Whatley Chai n (Argued) Assist ant Unite d States Attorney Peter F. Schenck, Esq. Office of United St ates Att orney 615 Chestnut St

reet, Suite 1250 Philadelphia, PA 19106
Attorney s for Appel lee

OPINI ON OF THE COURT

AM BR O, Circuit

Judge

Michael J. Gra sso ap peals h is
co nvi ction and sentenc e for money lau ndering. He argu es that th e te r m “proceeds” in the moneylaunderi ng stat ute, 18 U.S.C. § 1956, encom pa sses only the net pro fits, and not the gross receipts, of crim inal ac tiv it y. This proposed stat utory constr uction i s incom patible with the tex t of the statute as we ll as ex isting ca se law in ou r Circu it. We theref

ore affi rm Grasso’s c onvicti on. How eve r, we do remand for the Dis tri ct Co urt to reco nsid er its r estitu tion aw ard

. I. Factualand Procedural History
Grasso sold various fr au dulent work -a t- home schem es fro m early 1997 until late 1999. The p rogram s, which w ere adverti sed in nati ona l magazine s ,2

purport ed to enable pu rchasers to earn substant ial payment s forat -home work, with profit s to be di vided bet ween the parti cip ants and Grasso. I n reali ty , the pr ogr ams simpl y i nstruc ted pu rchas ers to solicit new customers w ho wou ld purchase the same programs for similar amounts. 1
In February2000, Grasso was indicted for mail fraud, wire frau d, and money laund ering, in Criminal No. 00-51. The money launderi ng counts char ged that he fu nd ed his ong oing crimin al activity with the proce eds of his fraudule nt schemes. Grasso all egedlyreinves ted the proceeds of

his criminal acti vity

to cover adver tis ing, print ing, and m ailin g expe nses. Nine mon ths later , a supersedi ng indict

ment was fil ed , which added a count for

obstruc tion of j usti ce based on Grasso’s attempt to acces s frozen funds and sli ghtly

modified t

he money l aundering charges. 2 In December 200 2 , Grasso was indicted yet again, for forgery and obstruc tion of j usti ce, i n Criminal No. 01-783. 3 In February2002 the Dist rict Cou rt seve red the obst ructi on of justice count in the supe rsedin g ind ictme nt in Criminal No. 00-51, which i nvolved Grasso ’s first

at tempt t o obtain f

rozen funds, and consoli dated that c ount with the pro cee din g in Cri min al N o. 01 -78 3.
Trial on the supersedi ng indict ment took place in Feb ru ar y 200 2. At the close of the Governme nt’s case , Grasso moved orally for judgment

of acqu ittal on the mail and wire fraud count s, as well as fo ur o f the money laundering cou nts. The motion
was denied, and there after a juryconvict ed Grasso on all c har ges
. 4 He subs eque ntly pled guilt

y t o th e obstruction of justice count origi nally

file d in Crimi nal No. 00- 51, and the cas es were con so lidated for
sen tenc ing

. Payment of de fense counselfees
was a recurring is sue d uring t he crimi nal proceedings. In March 2000, Grasso fi led
a mot io n t o r el eas e fu nds fr om h is fro zen acco unts to paydefense counselfe e s and expenses, and the motion was denie d. The
case wa s assign ed to a noth er judg e in March 200 1, a nd i n December 2001 that judge ordered t

he rele ase of $ 20 0,000 toward these expe nses. In March 2002, defense counsel s ought the rel ease of 1 In addition to fr audulently promoting work -a t- home emp loy ment schemes , Grasso allegedlysold mailing li st s a nd engaged in othe r i ll eg al ac ti vi ty . H e conte sts many of the repres entations made by the Government. Because thes e factual matter s do notaffectour resolution of t he issu es on appe al , we do n otdi sc uss th em.

2 The origi nal indi ctment cont ained 508
coun ts alle ging money l aunde rin g , wherea s the superse ding indi ctment inclu ded 482 cou nts. 3 The indictment ch arged that Grasso forged t he s ignatures of a dis tri ct judge and a dep uty cle rk in con junctio n w ith fictiti ous letters di recti ng various financi al instit utions to rel ease his frozen funds.

4 Two mon ey laundering co unts we re dism issed dur ing the c our se o f the trial.3

additi onal funds fr om frozen account s for payment of counsel fees. A s a resu lt, Grasso wa s orde red to prov id e documentati on related to one of the nonfrozen accounts, and the Probation Office examined his i ncom e and asset s. The subsequent

investigati on of hi s a ccou nts reveal ed that he had d epos ited m ore th a n $800,000 into his non -froz en ac coun ts aft er th e entry

of a prel iminary

injunct ion in 1999, which was intende d to prot ecthis
asse ts fo r dist ribu tion to v ictim s. Prior to sen tenc ing , G rasso objec te d to the Go vernm ent’s proposed sentenci ng orderon v ar io us gr oun ds . H e moved for a dow nwa rd departure and su bmitt ed a memorandum in suppo rt of a “re ne we d” motion for judgment

of acquittal on t

he
mone y launderi ng counts, rely ing on the Sev enth Circui t’s recen t deci sion i n United States v. Sc ial abba , 282 F .3d 47 5 (7th Cir.), cert. denied , 5 37 U.S. 10 71 (200 2). Although Grasso sugges ted in th e memor a ndum that he had submitted an earli er mo tion for acqui ttalon all money launderi ng counts, that

motion chal lenged the suff icienc y of the e viden ce as to Coun ts 444 through 447 onl y, and fo r fac tuall y spec ific r eas ons
. The Distri ct Court s entenced Grasso for the fraud and money launderi ng convictions to 9 7 months incarceration, three years s upe rvise d re leas e, a fi ne of $150,000, restitution in t he amount of $761,126.39, and a spe cial assess ment of $49,500. The Co urt m ade no f inding s in
s upport of its aw ard of r estitu tion

. I n ad di tion, for the obs truction of jus tice plea, Grasso recei ved 15 months impri sonment (five months of which w ould run consecuti velyto the firs t sent ence), a fine of $30,000, and a $300 spec ial asses sme nt. The re stituti on, fin es, and spec ia l assessments, as well as $100, 00 0 in counsel fee s, w ere to be paid from the frozen funds. Grasso appeals. 5

II. Dis cussion
We address two principal issues. First, did the Governm ent need to establis h that Gra sso’s mone y launde rin g trans acti ons wer e co nducted with the net profits, as opposed to gross receip ts, of his ill egal acti vity ? Second, did t he Di stri ct Cou rt err by fai ling to specifyin its o rde r o f restitution the manner

and schedu le o f pay ment ? A. Mo n ey Launderin g Convictions and Sentence
Grasso alle ges that

the Government trans formed a “ garden variety fraud case with no h int of o rgan ized c rim e involvemen t i nto a 482 count money launderi ng case.” Grasso ’s conviction for money laund ering w as ba sed o n his “reinve stmentof pro c eeds” for t he purchase of advertisements , te lephone services, printing, envelopes, an d other mate rials in f

u rther ance of his fraudule nt activity by means o f wire transfer, checks, and credit cards. Sim ply put, G rasso p aid

5 The Distric t Cou rt exerc ised juri sdiction over thi s case pur suant t o 18 U.S .C. § 323 1. W e hav e app ellate juri sdiction under 18 U.S.C. § 3742 and 28 U.S.C. § 1291.4

for his busin ess ex pens es w ith the re ceipts fr om his sales. 6 The relevant stat ute, 18 U.S.C. § 1956, provides: (a)( 1) Whoever, knowing that the prop erty invo lved in
a fina ncial tran sactio n repres ents the p ro ceeds of
so me form of unlawful
ac ti vi ty, conducts o r attem pts t o c onduct such a fin a ncial trans acti on which in fact i nvolves the proceeds of spec ifi ed unlawfu l
ac tiv ity— (A)(i) with the i ntent t o prom ote th e carry ing on of specifi ed unlaw ful ac tivit y ; or (ii) with intent to e ngage i n conduct consti tuti ng a violat ion of s e ction 7201 or 72 06 of the Int erna l Revenue Code of 1986; or (B) knowing that t he trans acti on is desig ned in wh ole or in part— (i) to concealor disgui se the nature, the loc ation, the source, the ownershi p, or the controlof t he proceeds of spec if ied unlawfu l acti vity ; or (i i) to avoid a

trans acti on reporting requir ement under St at e o r F ed er al la w, [com mits a felony].

The stat ute does not

def i ne “ pro cee ds.” Grasso contends t

hat the term shoul d be underst ood—as a matter of textual inter pretat ion, congressi onal intent, and policy— to me an “net pr ofits .” The Go vern men t, by cont

rast , urges us to adopt
a broade r defin ition en com passin g all gro ss re ceip ts of illeg al ac tivity.
1. Standard of Review
Grasso has framed the questi on present ed in his appeal as “[ w] hether a defe ndan t can be convicted of and sentence d for money l aundering unde r 18 U.S. C. § 1956(a)( 1)(A)(i ) for r einvesting the p rocee ds of spec ified u nlaw ful a ctivity , whe re the go vern men t’s proo f fails to show that t

he mone y al legedl y l aundered repres ented the proce eds , or net profits, from the u nlaw ful ac tivity as opp osed to gross receip ts or rev enue .” At it s cor e, Grasso ’s appeal chal lenges t he suffici ency of the evi dence upon which he wa s convict ed. 7 In other words, “[h]e cont ends 6 Grasso argues that the p ayments w ere made for past purchases . The Government disput es this clai m as a factualma t t er
. We have held, in any ca se, that it is poss ible to “promote” unlawful activit y, within t

he meaning of the money launderi ng stat ute,
even if it

has alr eady be en completed. United Stat es v. Par

amo , 998 F.2d 1212, 121 8 (3 d C ir. 19 93)

. 7 It is u ndisput ed that the Government present ed no evidenc e suggesti ng that5

that, as a matter

of law, the facts do not support the concl usion that money la undering occurred. ” United States v
. M orelli , 169 F.3d 79 8, 802 (3d Cir. 1999) (clas sify ing as a “suffi ciencyof the evidence” argumentthe defe ndan t’s claim that hi s c on vi cti on fo r m on ey la undering
was premised on a f aul t y statutory
cons tr ucti on). Wh ile Gra sso u rges u s to review the Dist

rict Court’s j udgment d e
novo , th e Go ve rn men t c onten ds th at we shou ld review it

for plai n error

because he f aile d to rai se his s tatutory argument i n a Ru le 29 motion for j udgment of acquit tal and ther efo re fo rfei ted it

. The Federal Rul es of Crimina l Proced ure dicta t e when a criminal defendantmay chall enge a conviction that is based on insuf ficien t evide nce. R ule 29 provides that a

defendant must

make a n appr opriate motion w ith in se ve n d ays after
a guilty verd ict is ente red, or w ith in an extended time specified by the Court during the sev en-d ay perio d. I f a defendantfails timely to raise an argument that may establishhis or he r innocenc e, the court is unlik ely to find it p ersuas ive at a late r time

. See, e. g. , Un ited St ates v. Pow ell , 113 F .3d 464, 46 6–67 (3 d Cir. 1997) (“If adefe ndan t fails to f ile a time ly motion fo r j udg men t o f a cq ui tt al , w e review suffici ency of ev idenc e for p lain
erro r.”).
The juryconvict ed Grasso o n Februa ry 25, 2002. He di d not fil e a motion with in sev en da ys of the v erdict,
nor did the Co urt exte nd th e app licable period. On Octob er 9, 2002 , howe ver, he file d a memorandum inc luding an argumentin suppo rt o f his “r enewed motion for judgment

of acquittal on t

he
mone y l aund ering c oun ts.” A lthoug h it
was clear

that Gras so had fail ed to fi le a timely Ru le 29 motion, 8 the part ies agr eed at oral argum ent that the D istrict Court
wo uld consider

the “re newed” motion “for the li mi t ed purpose of determining whether Defendant shoul d be senten c ed under the mone y launderi ng or fraud gui delin es.” 9 That motion di d

Grasso ’s payment s and expen ditures we re funded with net pr ofits of the fraudu le nt scheme rather than gross receipts. 8 As alreadynoted, at the close of t h e Gov ernmen t’s case the defense moved for judgmentof acquittal on four of the money launder ing charges. The motion did not alle ge that the Go vern men t had f ailed to dem ons trate the u se o f ne t pro cee ds.

9 Grasso has framed his argument as a chall enge to his se ntenc e rathe r than h is conviction. As a g eneral ma tter, “[w]e review the dis tri ct court ’s appl ica tion of the sent enc ing guidelines de novo .” See United Sta tes v . Om oru yi, 260 F.3d 291, 2 97 n.8 (3d Cir . 2001). We thus ma y vaca te a sentenc e if we find t ha t it was impro perly enter ed. B ut in t his cas e the Distri ct Co urt had no ch oice b ut to sentence Gr asso for moneylaunderi ng. “In cases . . . i n which sever al counts, includi ng fraud and money launderi ng, have been grouped,

. . . the count carry ing the h igh est applicable offense level must apply to the e nt ir e group for s entenci ng6 not ser ve to preserve the statutory argum ent for de novo re vi ew. The forfe iture prin ciple may lea d to harsh results. “‘No proceduralprincip le is
more fam iliar to this C ourt tha n that a consti tuti onal right ,’ or

a right of any ot her sort, ‘may be f

orfei te d in crim inal as w ell
as civilcases by the failure to ma ke tim ely assert ion of t he right

before a t

ribunal having jurisdiction to determine it.’” 

### United States v. Olano , 507 U.S. 725, 731 (1993) (citing Yakus v. United State s , 321 U.S. 414 , 444 ( 1944)). Its effec ts are mit igate d, however, byFederal Rul e of Criminal Procedure 52( b), which per mits
a co urt of ap peals to cons ider a “ plain purposes. Under the g uid eline s as ame nded , . . . courts have no d iscretion to decide that t

he money l aunde ring guidel ine is inappropriate or not t

he most applic able guideli ne on the fac ts of a giv en c ase .” United States v . Dia z , 245 F.3d 294, 303 (3d Cir. 2001) (citation omitted). Plenary
re view of

th e s en te nc e a lo ne doe s Gr ass o no good, because we may inq uire on ly wh ether, assum ing h e w as law fully convict ed of

money laundering, the Distri ct Court properly ca lcu lated h is sentence

. Upon the facts present ed, there is no dou bt th at it d id. Grasso ’s strategy, of cour se, is slightly outsi de the letter of Diaz . H e urged the Dist

rict Court to s enten ce him for fraud rat

her than money launderi ng not because the sent encing gui deline s applic able to the latter mo re app ropria tely refle cted the sco pe of his crimina l ac tiv ity, but rather b ecau se he conte nded he sh ould not have been conv ic ted of money launderi ng in the f

irst plac e . We re w e to acceptthis gam bit, we wo uld p ermit Grasso to end -run th e princ iple that a court shou ld not disturb a jury verdict unless the defendanttime ly obje cts. See C arli sle v. United States , 517 U.S. 416, 433 (1996) (holdi ng that a

dist rict court i s without discre tion to g rant a d efen dant’s untim ely motion for judgment

of acquittal pur suant to R ule 2 9). In a sim ilar v ein, G r asso rel ies heav ily on our decis ion in United Stat es v. M orelli , 169 F.3d 798, 801 (3d Cir. 199 9), in which we held that

the d efenda nt was not obligated to cha l lenge hi s money launderi ng conv iction in a Ru le 29 motion. In M orelli , t he juryfound that money launderi ng was merelyone among several bases for h is RICO conspiracy conviction. Because the convi ction r ested o n independent pred icat e acts, an y con temporaneous objection to t he money launderi ng alle gations would have been futil e; even if the court ha d agreed that t he money laundering st atute was ina pplica ble , there we r e ade quate alterna tive ba ses to sustai n the convi ction. Consequently , the defend ant’s inter

pretat ion of the money launderi ng statu te affe cted o nly his sentence , and the Dist

rict Court’s de cisi on at sente n cing was “not bound up wit h the jury’s verdict .” Id . at

803. In our

case, by contra st , the jur

y spe cifi call y found t

hat Grasso wa s guilt y o f money l aundering. The Distri ct Court c ould not have
mo dif ied Grasso’s s entence wit ho u t distu rbin g th e un der lying c onv ictio n.7

error that a ffec ts sub stan tial rig hts . . .
even though it

was not brought

to the
cou rt’s a ttent ion .” 10
Grasso fail ed to f

ile a Rule 29 motion with in the d esign ated tim e. His claim do e s not fal l withi n any of t he recogniz ed excepti ons to the f orfeiture rule

. We therefore review his ar gument for plain error. We n ote, how ever, that t he standard of rev iew is ultima tely irr elevant to our re solutio n of this cas e. Bec au se we conclude that the Distric t Cou rt prop erly construed § 19 56 , we would affirm even under de novo re vi ew. 11 2. Definition of “Proceeds” Under the plain error st andard, t he defe ndant ordinarily

bears the burden of proving that: (1) the cour t erred; (2) the
error wa s “plain ” at the tim e of appe llate
cons ider ation; and (3) the error affected substant ial rights, usua lly meaning that the
error“must have affec ted the outcome of the dist ri ct court

proceedi ngs.” Olano , 507 U.S. at 734 ; see als o Johnson v. United States , 520 U.S. 461, 466–68 (1997). “If al l thr ee conditions ar e met, an appel late cour t may the n exe rcise its discr etion t o notice a forfei ted err or, but only if (4 ) the err or seri ouslyaffects the fairness, integrit y, or publi c reputation of judici al proce edings. ” Johnson , 520 U. S. at 467 (citation om itte d). Grasso cannot meet the first

and most import ant element because th e District Cou rt did not err. Thus w e need g o no fu rther.
We agree wi th the District Co urt thatsen tenci ng Grasso for mone y launderi ng w as wi thin t he scope of the money l aundering statute. Grasso
co n tends, citing the Seve nth Circuit’s recent decisi on in United Stat es v. Scialabba , 282 F. 3d 4 75 ( 7th Cir .), cert. denied , 523 U.S. 1071 (2002) , that he was impro perly convict ed of and sente nced for 10 “Ru le 52(b ) leave s the d ecision to correct the fo rfeited error w ithin the sound discr etion of the court of appeals. ” Olano , 507 U.S. at 732 . No nethe less, w e “sh ould not exerci se that

discr etion unl ess the error seriou sly aff ects the f airn ess, inte grity or pub lic rep utati on o f jud icial p roc eed ing s.” Id

. (cit ations omitt ed). The Supre m e Cou rt has clari fied th at w e m ay “ correct the err or (eit her vacati ng for a new trial , or revers ing outrig ht )” onlyif it is “pl ain”
a nd “affects substant ial rights .” Id

. (emph asis in original).

11 Gra sso arg ues th at the C ourt m a y ex erc ise pl enaryre vi ew of hi s c la im even if he forfeited it , because it i s based on statutory inter

pretat ion. Thi s proposi tion is inconsi stent

with the Supr eme Cou r t’s decisi ons in Olano , 5 07 U.S. 725 (apply ing plain erro r r ev ie w t o inter pretat ion of th e Fe deral Rul es of Criminal Procedure) , and Johnson v
. U nited States , 520 U.S. 461 ( 199 7 ) (revi ew ing for plai n error the dis tri ct court’s failure to sub mit to the jurythe qu es tion whether a fal se statement was materi al d es pi te in te rv eni ng Su pr eme Cou rt case deci ding as a matter of consti tuti onal law that materiali ty i s a jury que stion ).8

money launderi ng beca use th e Government fail ed to est ab lis h that t he
m oney alle gedlylaundere d derived f rom the net profi ts of hi s ill egal activit y. The Sev enth Circuit

held in Scia lab ba that when a “c ri me en tai ls v ol un tar y, businesslik e operati ons, ‘ proceeds’ must be net income; ot herwis e the p re di cate crime merges into moneylaun der ing (for no busi ness can be carried out wit hout expenses ) and the word ‘pr oceeds’ l oses operati onal si gnific ance.” Id . at 47 5. 

### In Scialabba , the defenda nts we r e convictedof operating an unlawful gambling business, filin g false tax returns, conspir ing to defeat

tax collection, and money laundering. The last charg e was basedon the

defen dants ’ use

of re venue from their ga mblingoperations to meet the expenses of the bu siness. As in our case, convicti on for money launder in g substantially increa sed the defendant s ’ prison terms, andthey t

herefore appealed theirconvictions under the money laundering statute, § 1956(a). The Seventh Circuit re

jec ted the Government’s argume

nt that use of gross receipts to fund ongoin g criminal activity constituted

money laundering. The Court
ex plainedthat ac cepting the Government’ s theory would be“equivalent to sa ying that
everydrug dealer commits money laundering by us ing thereceipts from s ales to purchase more sto ck in trade, that a bank robbe r commits money l aundering by using part of the

loot from

on e he ist to rent a getaway

car for the nex t, and so on.” Id

. at 476. Tran sactions of th is nature, the Courtexplained, do not im plicat e the concernsunderly ing thest at ut e— na me ly, they are not “financial tran sactions to hide
or invest pr

ofits in or

der to eva

de detect ion, the normal un der standing of money laundering.” Id

. Wh ile Judge Easterbroo k’s opinion in Scialabba is well -argued andintuitively appeali ng, we believe it r eaches an incorr e ct resul t. We consi der vari ous inter pretat ions o f pr oceeds in l ight of t he conventi onal underst anding of th e t er m, the text an d purpose of § 1956, and
ex ist ing case law in our Circuit. I n so do ing, we conclude that “proceeds, ” as that term is used in t

he money l aundering stat ute, means gros s recei pts rather t han pro fits. Section 1956 doe s notde fine proceeds. 

### J udge Easte rbrook assumed that “mostspea kers o f English woul d understa nd ” the term proceeds to reach only the “profits o f th e bu siness.” Scialabba , 282 F.3d at 477

. Viewed in a
vac uum, however, we disce rn no c lear meaning of the term . Congress might easily have used “gross receipts” if it so intende d. Cf. Sc ialabba , 282 F.3d at 477 (“It would have been easy eno ugh to w rite ‘receipts’ in lieu o f ‘pro ceed s’ in § 1956(a )(1).”) But it mi ght jus t as readily hav e us ed th e term “pr ofits .”
Se co ndary sources de fining t he
w ord “proceeds” und ercut Gra sso’s proposed i nterpr etat ion based o n Scialabba

. For exa mple, the U niform Commerci a l Code defines “pr oceeds” as “whateveris acqui red upon the s ale, lease, lice nse, excha n ge, or ot her dis position of9

col lateral. . . .” U.C.C. § 9-1 02(64)(A ). Si m ila rly, Bla ck’ s La w D i ctionary 1222 (7 th ed. 1999) def

ines “pr oceeds” as “ the amount of money re cei ved from a sale ” and list s “net proceeds” a s a dist inct s ubentry under “proce e ds.” Nonetheless, dictionary d efinitions are neither unifo rm nor disp ositiv e. Webster ’s first defini tion of proceeds i s “the t otal a mount brought in,” b ut th e se con d is “ net p rof it,” and the third is “t

he net sum rec eived . . . a fter deducti on of

any disc oun t or c har ges .” Web ster’s Third New Inter nationa l Dictionary 180 7 (1 986 ).
Judici al defi niti ons of “proceeds ” in other con texts also vary, though the y are gene rally more ex pansive t han the inter pretat ion Grasso urges. In construing the scop e of c rimina l forfe itu r e of “pro ceeds” under the Racke teer Influenc e d and CorruptOrganizations (“RI CO ”) A ct, most courts have held that pr o ceeds involve m ore than ne t profits. In fact, the Sev enth Ci rc ui t wa s unique in hol ding otherwis e. S ee United States v. Masters , 924 F.2d 13 62, 1369 –70 (7th C ir. 1991). The Seco nd C ircuit and a Distric t Cou rt in
our Circuit

have held that proce eds repres ent “gross pr ofits ,” mea nin g total
revenues minu s ma rginal c osts, but not fixed cos ts. United Stat es v. Lizz a In dus ., Inc. , 775 F .2d 492, 49 7–99 (2 d Cir. 198 5); United States v . Milicia , 769 F. Supp. 877, 888 (E.D. Pa . 1991). Th e Firs t, Fourth, and Eighth C ircuits understand the term to
mean “ g ross r evenues.” United Stat es v. Hurley , 6 3 F.3d 1 , 21 (1st Cir. 199 5); United States v. McHan , 101 F.3d 1027, 1041–43 (4th C ir. 1996 ); United Stat es v. Simmons , 154 F .3d 765, 77 0–71 (8 th Cir.

1998). See g ener ally An up M alan i, The Scope of Criminal

Forfeiture Under RI CO: The Appropriate Defini tion of “Proceeds , ” 66 U. Chi. L. Rev . 1 289 (1999). 

### Turning to the m

on eylaundering statut e, th e Seventh C ircuit is alone in its restr ictive definiti on of “proceeds.” The Sixth Circuit has noted that “proceeds,” as used i n § 1956, is a “co mmonly understo od word in the English langu age, ” andin cl ud es “w ha t i s p ro du ce d b y o r derivedfrom something (as a sale, investment, levy, business) by way of total revenue.” United

States v. Haun , 90 F.3d 1096, 1101 (6 th Cir . 19 96) (quoting Webster’sThird New Internati ona l Dictionary 180 7 (1971)). Simila rly , the Ninth Ci rcui t has adopt

ed an expans ive definiti on of “proceeds” as it is used in the money laundering statut

e, rel ying on dictionary

definiti ons to ass ign it the “broa d[] meaning of th at which is ob ta ined . . . by

any tr ansaction.” United States v. Akint

obi , 159 F.3d 401, 403 (9th Cir. 1998 ) (internal citation o mitted). Only one Ci r cuit has explicitly consideredthe Sevent

h Circuit ’s deci sion in Sciallaba

. In United

States v. Iacaboni , 221 F. Supp. 2d 104, 112 (2002), reversed in part on o ther grounds by 363 F.3d 1 (1stCir. 2004), the United States Distri ct Courtfor the District of Massach usetts rejected the Seventh Cir

cuit’sconclusi on that proceeds should be interp rete d as profits rather than total

revenue. In March 2004, the Firs t Circuit ap proved the District Co ur t’ s r ea so ni ng , n ot in g s im pl y:10



### “We have previ o usly rejecte d [Appellan t’s] interpr

etati on o f the term ‘proceeds’ in the RICO forfeiture context. [He] has offered no rationa le for abandoningthat approachhere.” 363 F.3d at 4 (citation omitted).
Given the many de fi niti ons of “proceeds” and the uncertain va lue of congressi on a l records in choosi ng among th em, 12 the best

approach, we believe, is to examine the statu te its elf for i ndications of th e intende d scope of the term. The Sev enth Circui t’ s opini on reasons t hat proceeds mu st be lim ited to net pro fits because mo ney laun derin g is about concealmen t and onlyprofit s need be concealed. But the wording of the statute su gge sts that c oncealment i s onlyone of

the stat ut e’s two purposes. The “normal underst and ing of money l aundering” may entail “ hid[in g] or in vest[in g] pro fits in orderto eva de de te cti on,” a s the S even th Circu it pos ited, Scialabb a , 282 F.3d at 476 , but the bi furcat ed text of the st atut e strong ly suggests that Congre ss had a broaderdefini tion of money l aundering in min d.
To be sure, 18 U.S.C. § 1956 crimina lize s financi al tr ansacti ons that sat isfythe conventional unde rsta nding of money lau nd er in g— na m ely, trans acti ons intende d “to co ncea l o r di sguise t he nature , the location, the sour ce, the ownership, or the controlof the proc eeds of spe cif ied
un lawful activit y.” 18 U.S .C

. § 195 6(a)(1 )(B)(i). B ut it is equ ally unlawful under the s tatute to engag e in a financi al trans acti on, knowing that the prop erty involvedrepres ents the proce eds of unl awf ul a ctivity, “with the inte nt to pr om ote the carry ing on of speci fied unlawful acti vit y. ” 18 U.S. C

. § 1956(a)( 1)(A)(i ). I n other words, the money launderi ng stat ute prohi bits not only the concealment of proceeds, but also the prom otion o f ill ega l a ct iv ity . By reinves ting the proce eds of his fraudu le nt
sc heme in order t o su stain it , Grasso promoted unlawful activit y within t he meani ng of the st atute —rega rdles s whether the funds were profits or gross receipts. 13 12 

### Grasso presen ts extensive evid enc e that Congress intended the Money LaunderingControl Actof 1986, of which § 1956 is part, “to fill t he gap in the criminal law with resp ect to the p ost- crime hiding of ill-got

ten gains .” Un ited States v. Bockius , 228 F.3d 305, 310 (3d Cir . 2000) (quoting United Stat

es v. Le Blanc , 24 F.3d 340, 346 (1st Cir . 1994 )). “But that was not the sol e purpose of t he stat ut e.” Id

. Other ra tio na les un de rc ut th is t he or y. 

### See, e.g. , Iacaboni , 221 F. Supp. 2d at 112 n.2 (“[TheSeventh Cir

cuit’sint erpretat

ion would imply that] so lon g as the illegal
en terpr ise had no net profit, no money laundering prosec u tion would be possible. Because Congress co uld not have intended
s uch a re sult , the

court follo ws th e majorityof circ ui ts in holding that ‘proceeds’ s h ould be interpreted as ‘total revenue’ rath er than ‘net p rofits.’”). 13 Because we belie ve the meaning of “proceeds” is cl ear from the text of § 1956,
we need not consi der the relat ed po licy11



### Fi na ll y, we note that we h av e explicitly reject

ed one of the

pri ncipal fa ctors cited by the Seventh C ircuit i n supportof its construction of the statute. T he Court com

mented in Scialabba : “If

. . . the word ‘p roceeds’ is sy non ymo us with gross income, then we wo uld have to dec idewhether, as a matter of statuto r y construc tion ( distin ct from doubl e jeopardy), it is appropriate to convict a person of multiple of fense s when the transacti o ns that violate on e statute necessarilyviolate another.” Scialabba , 282 F.3d at 47 7 (internal cit ations omitted). Ou r Co urt, however, has concluded that § 1 9 56 may subject an individual to multiple penalt ie s based on thesame crime without violating either double je op ar dy or

the principle s governin g statutory interpretation. In United States v. Conley , 37 F.3d 970, 978–79 (3 d Cir. 1994), we held that prosecut ion for both gambling and money laund e ring did not implicate d ouble jeopardy because thestatutory

elem ents of theoffenses differ; an in dividual is g uilty

of money launderi ng only

if he or she intended to concea

l or prom ote unlawful activi ty. The Seventh Circ ui t distinguishedour decis ion in Conley , suggesting that if “proceeds” is inter pre ted br oa dl y, the sim

ilarity be t ween money laundering and the underlying criminal activityis proble matic as a matter of statutory construction. But

our Court has resolvedthe latter

issue as well . In United States v. Omoruyi , 260 F.3d 291, 295 (3d Cir. 2001), we recognize d th at “conduct constit uting the underlyin g offens e conductma y overlap with the conduct
co n stitut ing money

launderi ng.” An individual may

be convicted for money laundering as lon g as the financial transa ctions are conductedwi th proceeds of the illegal tr

ansact ion and with t

he intent to promote th e underlying offense. Id

. We have regul arlyupheld money la un dering prosecutions base d on the
re in ves tme nt (“plow ing back ”) o f proceeds. See, e.g. , United Stat es v. Diaz, 245 F.3d 294 , 305 ( 3d C ir. 2001 ); Un it ed States v. Ce

faratti , 221 F.3d 502, 5 11 (3d Cir. 200 0); Conley , 37 F.3d at 972. And
we have never sugge sted t hat proce eds must be n et. We s ee no reason to adopt
su ch a requirement now. We theref or e ho ld that “ proceeds, ” as that term is used in § 1956, mea ns simp ly gross rec eipts from ill egal activit

y. An i ndiv idual may engage in money laundering regardless whether hi s o r her criminal endeavor ultim ately tu rns a pro fit. arguments. We note, howev e r, t hat various facto rs fav or ad opti on of a broad defini ti on of th e term

. 

### For example, it would be very difficult to prove that “p r ofits” were used to promote an ille gal venture, since criminals r arely keep recordsof t

he overhead expenses of

their illegalac ti vi ti es . S im il ar ly, in an ongoing criminal business , it would be

difficult to determine at what point a defendant had nettedout all business expenses . When do criminal business es opera

te by recognized auditing stan dards?12

Thus we conclude that Gras so was prop erly convict ed and sente nced for money launderi ng in viol ation of § 1956. In th e con text of

our revi ew standard, he has failed to establ ish er ror of anysort, let alone plain erro r. B. The Distri ct Cou rt’ s Aw ard o f Restitution
We next address Grasso’ s contention that t

he Distri ct Court e rred by orderi ng him to payres titution b ecau se it fail ed to make factua l fi ndings in su pport of the award. We remand for clarifi cati on. The context

is that at

the t ime of Grasso ’s senten c ing, t he Court ordered payment of $49,800 in sp ecia l assessments, $180,000 in fi nes, $100, 000 in cou nse l fee s, an d $7 61,1 26.3 9 in restitution to vict

ims of Grasso’s crimes. 14 According to the pre-sent ence report , Grasso at one time had asset s of $1,127,691. 79, of w hich $ 900 ,000 w as in “frozen funds.” But be cau se mo st of t he frozen funds w ere in mark et-s ens iti ve securi ties and brokerage funds, t hey fluctuated in val ue. In dee d, fr om the time of the pre-se ntence rep ort’s calcu lation to the date of

sentenci ng the funds’ value had decrease d by more than $200, 000, resul ting in an appa rent shortf all f or the payment of restitution.
The M anda tory Victi ms Restit ution A c t (“M V R A ” ), 18 U.S . C

. §§ 3663A–3664, enactedin 1996, requi res a senten cing c ourt to orderfull resti tuti on to identi fied vi ctims of c ertai n crimes and to s pecifythe manner and or der in which restitution is to be p ai d. The MVRA amended the pro vis ions for res tit ution s et out previous ly in the Vic t im an d Witness Prot ecti on Act, 18 U.S. C. § 3663 et seq ., pursuant to which dis tri ct court s had discretionary autho rity to award restitution and were required to consi der such factors
as the de fend ant’s f inanc ial ability to pa y. See United

States v. Coates , 178 F.3d 681, 683 n.3 ( 3d C ir. 19 99)

. Under the am ended provis ion, t he discr etion of a di stric t court in awarding restitution is lim ited. Coates se t o uttwo steps for appli cati on of the st atute. F irst, 14 18 U .S.C. § 361 2(c) se ts the pr iority for pa ym en ts b y d efendants ordered at senten cing: Any money re cei ved fr om a defendantshall be disbur sed
so that e ach of the fol lowing ob ligat ions is paid in full i n the fol lowing sequence : (1) A penalty assess m ent under secti on 30 1 3 of title 18, Unite d States Code. (2 ) Res titution o f all victims. (3) All other fines, penalties, costs, and ot her

pay me n ts requir ed under the s entence. Id

. The Distri ct Court’ s judgment provided fo r th e p aym ent of specia l assessments, fines, and counsel fe es from the frozen funds , with the resti tuti on ord ered in Cr imina l No . 00-5 1 to b e paid out of the bal ance. On remand, the order of p ayme nt sh oul d be rese t per § 36 12.13

the cour t mus t orde r fullrestitution 15 “without consider ation o f the ec ono mic circu ms tanc es o f the def end ant.” Coates , 178 F. 3d at 683 (citin g 18 U.S .C. § 3664(f )(1)(A)). Second, “[a]ft er ordering full restitution , the distric t court ‘s hall specify in the resti tuti on order the manner in which, and the sche dule a ccord ing to wh ich, the r estitution is to be paid.’ In so doing, the dis tri ct cou rt is requ ired to consider the fi nancialresourc es, pr oject ed earnings, and f inanc ia l ob ligat ions of the def end ant.” Coates , 178 F.3d at 683 (citation omitted). 16 C lea rly i t
ma kes no sense , when the man datory restitution sum s will be paid entirel y fr om frozen fun ds, to req uire a d istrict cou rt to consi der t he de fend ant’s f inanc ia l
re sources and responsibili ties . While i n Coates we held th at such dete rm inati ons were necessary t o sa t isfy § 3664’s mandate, id ., the def enda nt th ere had no frozen fund s to which the re sti tuti on claim ants could look. We now hold that when frozen funds are adequate to sati sfy restit u tion, a district court may stop sho rt of Coates ’ sec ond step

. H ere w e hav e frozen fun ds. Bu t we d o no t kno w th eir precise value, nor the numb erof c la ims to be sati sfied

. A t th e s en ten cin g c ol lo qu y, the Government reported that the val ue of the froz en fu nds h ad de crease d to $693,467.21, and counsel for Grasso explic itl y not ed that

theywould not cover the ordered exp en ditures. 17 We are

15 Grasso ’s suggestion th at a preliminary determi nation must be made whether each indivi dual qualif ies for restitution is plainly inco rr ect. Each indivi dual who made a paym ent w as “direc tly and pro xima tely harmed as a re sult of t h e commission of t h e offense” wit hin the
me ani ng of 18 U.S.C. § 3663A(a)( 2) and is co nse que ntly en titled to re stitutio n.

16 Thus, while full r estitution is
ma nd ato ry, “[t]he cou rt may order t h e defendantto ma ke a lum p-sum payme nt,
reaso nable periodi c p ayment s, or , if t he defendantis in di gen t, nomi n al perio dic payment s.” Id . at

683–84. 17 The transc ript of oral argument contai ns th e f ol lo wi ng co nfu sin g exchange: Th e Co urt: A ll righ t. M r
. Phillips, any r eason y ou know of why thi s sent en ce I’ve just stat ed should not

be imposed? Mr. Phillips: You r Hon or, the only questi on I have had to d o I g ues s wi th th e i te ms you li sted, fine, restitution, attorney’s f ees, sp ecia l
assess men t. W he n yo u add those nu m be rs u p, t he y’ r e more than w hat is av aila b le of th e fro zen asse ts. The Co urt: Th at’s co rrect. T he balance g oes t o restitu tion

. Mr. Ph ill ips: Oh, it was t he bala nce
. Th e C our t: Rig ht. Mr. Ph illi ps : O h, o ka y. I’ m—14

theref o re persu aded that a re man d is
ne ce ss ar y. On remand, if the Dist rict Cou rt shou ld determi ne that

the froz en funds are adeq uate to sati s fy t

he full amount of restit uti on (after p aymen t of $4 9,800 in specialassess ments), nothing further need be fou nd to com ply wit h t he MVRA requ ireme nts

. If, how ever, the fun ds are in ade quate, the D istrict Co urt sho uld proceed in accor da nc e wi th 18 U. S. C. § 366 4 (f)(2) to determ ine the man ner in which, and sched ule accordi ng to which, restitution is to be pai d. 18

The Court: Whatever ’s le ft after those mo nies ar e paid is for restitution. Arg uably the Dist

rict Court intended restitution to be pai d only to the e xtent of the fr oz en fu nds. A s § 36 64 re quires full restitution, how eve r, t his i nterpr etation too
wo uld nec essit ate re ma nd.

18 Th ree additi onal is sues bear
cons ideratio n o n remand. Fi rst, the Government contends that G rasso f ailed to claim that payment of

$180,000 in fi nes im p airedhis abi lit

y t o pay r esti tuti on and thathe must therefore pay the fines f ro m assets outsi de the fr ozen funds. I n Un it e d States v. Torre s , 209 F.3d 308, 312 (3d Cir. 2000), we noted t

hat “the de fendant has the burden of proving his or h er ability to pay[fines] .” M ore ove r, “[w ]he re . . . a defendantdid not at

senten cing rais e the issue of his or her in abili ty to pa y, a sentenci ng court’ s decis ion to i mpose a fine and the amount of t

he fine i s revi ewed for plain e rror. ” Id . a t 313. Nonetheless,
we we re care ful to n ote in To rres that t he defendanthad not argue d that the Dist rict Cou rt failed to con sider h is over all ability to paya fi ne. Ra ther, he argued onl y that “the record be fore the D istrict Co urt did not establ ish whether

he had the earning capa city to pa y a fine whil e on supervi sed
r elea se.” Id . Applie d to our cas e, i f o n remand the re is det ermined t o be a shortf all of funds ava ilab le for fi nes (obv iously the c a se if the fund s are in suffici ent to payrestitution amou nts), th e Di st rict Cou rt should con sider Grasso ’s abili ty to pa y this am oun t as w ell. Sec ond, it

is app ar ent

fr om th e record that the Distric t Cou rt intend ed to ordert he payment

of restitution to t

he 30,007 v ictims id entified by th e Go vern men t. Th e jud gm ent, h owe ver, stat es that the restitution shall be paid to “any payee s” ident if ied by th e Gove rn me n t. We presum e that these payees are in fact

the identifi ed victims. Fi na lly, we n ote a di screpancy between t he District Court ’s remarks during the sentenc i ng colloquy and the payment terms se t forth in the jud gm ent. We glean fr om one statement by the C ourt at sentenci ng that i t intended Grasso, upon his relea se from cu stody , to pa y $100 per
mo nth toward any out standi ng financi al obligations. This provisi on, however, was not included in the written ord er. If on remand there i s a shortf all to pay res tit ution, the Court s hould jus tify the sche dule of payment

by r eference t o Grasso ’s financi al res ources an d15 III. Conclusion
Re vi ewing fo r p la in erro r, we conclude t hat the D istrict Co urt’ s interpre tatio n of “proceeds” in the money launderi ng statu te w as co rr ec t, an d we therefore affirm Grass o’s convi ction a nd sentence

. On t he is su e o f r es ti tu ti on, we vaca te the Dist

rict Court’s order and remand for reconsi derat ion in l ight of t he value of th e fro zen fun ds. If the Cou rt determi nes that

those fun ds are inade quate to pay restitutio n in the prio rity scheme set by 18 U.S.C. § 36 12, it s hould foll ow the req uire me nts o f 18 U.S .C. § 366 4(f )(2).

obligat ions, pursuant

to § 3664.