Revised May 3, 1999

UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 97-40241

UNITED STATES OF AMERICA,

Plaintiff - Appellee - Cross-Appellant,

VERSUS

WALTER MATTHEW THREADGILL, JR.; WALTER MATTHEW

THREADGILL, III; MICHAEL GLENN RIGLER; TIMOTHY

RAY KLEMENT; MARK VICTOR THREADGILL,

Defendants - Appellants - Cross-Appellees.

Appeals from the United States District Court

for the Eastern District of Texas

 April 13, 1999

Before REYNALDO G. GARZA, JONES, and DeMOSS, Circuit Judges.

DeMOSS, Circuit Judge:

In this appeal we are asked to review the convictions and

sentences of five defendants who operated a gambling operation in

Gainesville, Texas. We also are presented with a cross-appeal

from the government, challenging the district court’s decision to

depart downward at sentencing. As explained in this opinion, we

detect no infirmity in the defendants’ convictions or sentences,
 

1 On August 14, 1996, the grand jury returned a

superseding indictment, alleging the same charges with minor

modifications.

2

and affirm.

I.

On February 15, 1996, a federal grand jury returned a

fourteen count indictment charging Walter Matthew Threadgill, Jr.

(“Walter Threadgill”), and his sons, Walter Matthew Threadgill,

III (“Matthew Threadgill”) and Mark Victor Threadgill (“Mark

Threadgill”), with various crimes relating to their involvement

with an illegal gambling operation in Gainesville, Texas. Also

charged in the indictment were codefendants Michael Glen Rigler

(“Rigler”), and Timothy Ray Klement (“Klement”), who were closely

involved with the Threadgills. Count one of the indictment

charged the defendants with conducting an illegal gambling

business in violation of 18 U.S.C. § 1955.1 Count two alleged

that the defendants had conspired to commit money laundering in

violation of 18 U.S.C. § 1956(h). Counts three through ten

charged the defendants with various instances of money laundering

in violation of 18 U.S.C. § 1956(a)(1)(A)(i) and (B)(i), and with

aiding and abetting in the commission of those crimes in

violation of 18 U.S.C. § 2. Counts eleven through fourteen were

brought against Rigler only, alleging that he structured various
 

2 During a typical month in football season the group

would write about $1,000,000 in wagers. Basketball, in

comparison, brought in roughly $100,000. 

3

financial transactions to evade reporting requirements, in

violation of 31 U.S.C. § 5324.

At trial the evidence showed that Walter Threadgill had been

a bookmaker since the early 1980s. He started alone, but was

later joined by his sons Matt and Mark when the great Texas oil

bust hit. That small family business eventually blossomed into a

large scale gambling operation that handled millions of dollars

in bets every year, and serviced hundreds of bettors in numerous

states.2 Eventually, the Threadgills were joined by Klement, who

brought his own bookmaking business to the organization, and

Rigler, who was a practicing accountant.

The enterprise was profitably run for several years out of a

windowless building in Gainesville, Texas. On an ordinary day

the defendants would arrive in the morning, make sure that the

game schedules in the computers were accurate, and then obtain

various point spreads from a service in Florida. As the day

progressed the defendants would take bets over the telephone and

would enter the wagers on several computers, which ran on

customized software designed to manage wagering. All

conversations with bettors were automatically recorded on

cassette tapes to avoid later disagreements. Once a week a

computer printout was run of the bettors’ accounts in order to
4

settle the balances. Generally, bettors were told to make their

checks payable to “Tom Johnson,” a fictitious person, although

some checks were made payable to the individual defendants. 

Rigler, who worked for the organization as its accountant,

would endorse and deposit the checks in the bank account of

Hesperian Investment Corp (“Hesperian”), at North Texas Bank &

Trust, a nationally insured bank. Hesperian was a legitimate

business, owned by Rigler and Matthew Threadgill, that made small

loans to individuals in advance of their income tax returns. 

Once the checks from the gambling operation were commingled with

Hesperian’s money, Rigler would withdraw cash from the account in

amounts always less than $10,000. The proceeds were then divided

equally among the other defendants, although some of the money

was used to pay the gambling operation’s expenses. For his

services, Rigler initially charged $500 a month, which later

increased to $700.

In the Fall of 1994, the Texas Department of Public Safety

received anonymous tips about the Threadgills’ bookmaking

operation. The ensuing investigation revealed that ten telephone

lines were being operated in the Threadgills’ building, all

listed to Cool Water Productions, a defunct corporation. The

investigation also revealed heavy telephone activity at that

address: over 1,600 calls were made to that location in one

weekend alone. In December 1994, the defendants heard rumors
5

that the police were investigating their gambling operation. The

operation was then temporarily closed, and later reopened in a

barn owned by Paul Smith (“Smith”), who also worked for the

bookmaking operation. On March 8, 1995, state law enforcement

officers searched Smith’s residence and arrested Smith and Mark

Threadgill for engaging in organized crime in violation of Texas

law. In a search of the barn the police recovered gambling

computers, cassette tapes, and sports schedules. Additional

gambling records and cassette tapes were found in Smith’s home

and vehicle. When the officers realized how extensive the

operation was -- wagers were coming from nineteen states outside

of Texas -- federal assistance was requested.

On April 22, 1995, federal officers searched numerous

locations related to the gambling operation. Discovered at

Walter Threadgill’s house were numerous sports schedules and

excerpts from the Texas Penal Code, including a copy of Chapter

71 on organized crime, as well as §§ 47.02 through 47.06 of the

Code, which covers various gambling activities. At Matthew

Threadgill’s house the officers found several computer printouts

of betting records and sports schedules. At Klement’s residence

the officers found gambling records, notebooks containing betting

information, bettors’ names and addresses, and cashier’s checks

made payable to various bettors. Similar evidence was found at

Mark Threadgill’s home. A search of the Hesperian offices
6

produced numerous corporate documents related to the bookmaking

operation. The officers also found carbon copies of cashier’s

checks made payable to known bettors, and a ledger that tracked

the various transactions. 

At trial the jury heard 30 taped telephone conversations in

which the defendants accepted wagers from their clients. Several

bettors who had been given immunity also testified about their

dealings with the defendants. Several of those bettors were from

out of state. The jury also heard testimony from Smith, who

turned government’s witness and provided the jury with many

details about the gambling operation. Finally, the jury heard

from Rigler’s bookkeeper, who stated that at Rigler’s behest she

commingled checks made payable to “Tom Johnson” with legitimate

Hesperian funds. The jury ultimately found the defendants guilty

on count one, the gambling charge, and guilty on count two, the

conspiracy charge. The jury acquitted the defendants on the

substantive money laundering offenses alleged in counts three

through ten. Rigler was also found guilty on counts eleven

through fourteen, the unlawful structuring counts.

The district court subsequently sentenced each of the

defendants to 42 months imprisonment. Although their respective

guideline ranges varied, the district court arrived at that

uniform sentence by departing downward as to each defendant under

U.S.S.G. § 5K2.0. The defendants now appeal their convictions.
7

Mark Threadgill is the only defendant that appeals his sentence. 

The government cross-appeals, contending that the district court

erred in departing downward.

II.

 The defendants contend that their convictions must be set

aside because federal agents used gambling tax records kept by

the organization to secure search warrants and to later obtain a

grand jury indictment. The defendants assert that the federal

agents’ use of those records abridged their Fifth Amendment

rights against self-incrimination, and also violated the

statutory requirements of 26 U.S.C. § 4424(c).

Walter Threadgill raised this argument in a motion to

suppress filed in the district court, which was subsequently

adopted by each of his codefendants. The district court, after

holding a hearing, denied the motion in a written order. In

reviewing a district court’s denial of a defendant’s motion to

suppress, we review factual findings for clear error and

conclusions of law de novo. See United States v.

Carrillo-Morales, 27 F.3d 1054, 1060-61 (5th Cir. 1994), cert.

denied, 513 U.S. 1178 (1995). Additionally, we review the

evidence in the light most favorable to the prevailing party

which, in this case, is the government. United States v.

Ishmael, 48 F.3d 850, 853 (5th Cir.), cert. denied, 516 U.S. 818
 

3 Section 4424(a) provides:

(a) General rule.--Except as otherwise

provided in this section, neither the

Secretary nor any other officer or employee

of the Treasury Department may divulge or

make known in any manner whatever to any

person--

(1) any original, copy, or abstract of any

return, payment, or registration made

pursuant to this chapter,

(2) any record required for making any

such return, payment, or registration,

which the Secretary is permitted by the

taxpayer to examine or which is produced

pursuant to section 7602, or 

(3) any information come at by the

exploitation of any such return, payment,

registration, or record.

8

(1995).

Under federal law, persons who unlawfully accept wagers must

nevertheless pay an excise tax equal to two percent of the

unauthorized wagers. 26 U.S.C. §§ 4401 & 4411. That tax must be

paid on a monthly basis, and must be reported on what is known as

an IRS Form 730. 26 C.F.R. § 44.6011(a)(1)(a). To assist the

IRS in determining whether a taxpayer has correctly stated his

taxes, the taxpayer must “keep a daily record showing the gross

amount of all wagers on which he is so liable.” 26 U.S.C. §

4403.

There are limits, however, on the extent to which those

records may be used against a taxpayer. Under § 4424(a) of the

Internal Revenue Code, officials or employees of the Treasury

Department are forbidden from divulging the tax records.3 26
26 U.S.C. § 4424(a)

 

4 Section 4424(c) provides:

(c) Use of documents possessed by taxpayer.--

Except in connection with the administration

or civil or criminal enforcement of any tax

imposed by this title--

(1) any stamp denoting payment of the

special tax under this chapter,

(2) any original, copy, or abstract

possessed by a taxpayer of any return,

payment, or registration made by such

taxpayer pursuant to this chapter, and

(3) any information come at by the

exploitation of any such document,

shall not be used against such taxpayer in

any criminal proceeding.

26 U.S.C. § 4424(c).

9

U.S.C. § 4424(a). Moreover, § 4424(c) prohibits the use of

certain gambling tax records “in any criminal proceeding.”4 An

added constraint also flows from the Fifth Amendment, which

protects every person from being “compelled in any criminal case

to be a witness against himself.” U.S. Const. amend. V. With

those principles in mind, we turn to the particular facts of this

case.

On March 8, 1995, two search warrants were executed by state

law enforcement officers on Smith’s residence, barn, and vehicle. 

The search produced computers, ledgers, tape recordings of

telephone calls with bettors, address books containing coded

information on bettors, and numerous sports schedules. The

evidence was eventually turned over to federal authorities who

then applied for a search warrant with an affidavit summarizing
10

the evidence. The acting magistrate judge granted the

application, and the resulting search by the federal agents

uncovered more incriminating evidence: additional gambling

records in the form of computer printouts, financial ledgers, and

a notebook containing bettors’ names and addresses. The federal

agents then used the evidence to obtain the grand jury indictment

that gave rise to the present action.

In their motion to suppress, the defendants argued that the

gambling records were kept for the specific purpose of complying

with the federal tax laws. The defendants thus reasoned that the

federal agents’ subsequent use of those records violated their

rights under the Fifth Amendment and § 4424(c). Notably, the

defendants explicitly limited their argument to the seized

computer records, two ledgers, and 170 tape recordings.

In denying the motion, the district court found that the

defendants’ Fifth Amendment rights had not been violated because

the challenged materials were not the types of records compelled

by the tax statutes. The court observed that the computer

records were irreversibly purged every two weeks, strongly

suggesting that they were not used for tax purposes. Similarly,

the court found that the defendants permanently erased

information on the cassette tapes by routinely taping over

conversations. As for the two ledgers, the district court found

that one was used simply to account for checks taken to Rigler,
11

while the other was used to keep track of bettors’ accounts.

On those facts the district court concluded that the

gambling records were kept to further the gambling business, not

to comply with federal tax laws. We agree. The record plainly

establishes that the defendants used the gambling records to

better the profitability of their criminal enterprise. There is

little, if any, evidence that the gambling records were actually

used for a law-abiding purpose. We affirm the district court’s

denial of the motion to suppress.

III.

The defendants contend that the superseding indictment was

deficient with respect to count two, the conspiracy charge. We

review de novo a challenge to the sufficiency of an indictment.

United States v. Fitzgerald, 89 F.3d 218, 221 (5th Cir.), cert.

denied, 117 S. Ct. 446 (1996). Generally, we measure the

sufficiency of an indictment “by whether (1) each count contains

the essential elements of the offense charged, (2) the elements

are described with particularity, without any uncertainty or

ambiguity, and (3) the charge is specific enough to protect the

defendant against a subsequent prosecution for the same offense." 

United States v. Lavergne, 805 F.2d 517, 521 (5th Cir. 1986)

(citing United States v. Gordon, 780 F.2d 1165, 1171-72 (5th Cir.

1986)). The elements of the offense of conspiracy to commit
 

5 Presently, there is an open question in this Circuit as

to whether conspiracy to commit money laundering under 18 U.S.C.

§ 1956(h) requires proof of an overt act in furtherance of the

conspiracy as one of its required elements. The Supreme Court

has held that a conviction for conspiracy to commit a drug 

offense in violation of 21 U.S.C. § 846 does not require an overt

act. See United States v. Shabani, 513 U.S. 10, 15 (1994). As

we have recognized on a previous occasion, the language of § 846

is nearly identical to the language of § 1956(h), and neither the

Supreme Court nor this Court has squarely decided whether §

1956(h) also lacks an overt act requirement. United States v.

Garcia Abrego, 141 F.3d 142, 163-64 (5th Cir.), cert. denied, 119

S. Ct. 182 (1998). We need not address that issue here, however,

because even if an overt act is an element of § 1956(h), count

two of the superseding indictment alleges several overt acts. 

 

6 Each of the defendants raised this challenge in the

district court in a joint motion to dismiss count two of the

superseding indictment.

12

money laundering are: (1) that there was an agreement between

two or more persons to commit money laundering; and (2) that the

defendant joined the agreement knowing its purpose and with the

intent to further the illegal purpose.5 United States v. Garcia

Abrego, 141 F.3d 142, 163-64 (5th Cir.), cert. denied, 119 S. Ct.

182 (1998).

On appeal, the defendants argue that count two is flawed

because it fails to recite two necessary elements of the crime. 

First, the defendants contend that the count fails to allege that

they knew the specified property represented the proceeds of

unlawful activity. Second, they assert that the count fails to

allege that the defendants knew the specified unlawful activity,

illegal gambling, was a felony.6

Count two cites the applicable statute for conspiracy to
 

7 Count two provides in pertinent part:

[the defendants] did knowingly, unlawfully,

and willfully combine, conspire, confederate,

and agree with each other . . . to conduct

and attempt to conduct financial transactions

affecting interstate commerce, which involved

the proceeds of a specified unlawful

activity, that is:

An illegal gambling business in

violation of Title 18, United States

Code § 1955 and more completely

described in Count One;

a. With the intent to promote the carrying

on of specified unlawful activity; and,

b. Knowing that the transaction was

designed in whole or in part to conceal and

disguise the nature, location, source,

ownership and control of the proceeds from

specified unlawful activity;

In violation of Title 18, United States

Code § 1956(a)(1)(A)(i) and (B)(i). 

13

commit money laundering, 18 U.S.C. § 1956(h), and proceeds to

charge the defendants with the necessary elements of that

offense.7 Critically, the wording of the charge is sufficiently

specific to apprise the defendants of the charged crime, and to

protect them from subsequent prosecution for the same offense. 

See Lavergne, 805 F.2d at 521 (5th Cir. 1986) (setting forth the

criteria for determining the validity of an indictment).

The defendants’ argument is unavailing because the two

elements the defendants claim are missing from count two are not

even elements of the crime of conspiracy. Cf. 18 U.S.C. §

1956(h) (statutory language not reflecting these elements);

Garcia Abrego, 141 F.3d at 163-64 (5th Cir. 1998) (setting forth
14

list of elements that does not include defendants’ claimed

elements). The claimed elements go instead to the substantive

crime of money laundering. 18 U.S.C. § 1956; see also United

States v. Burns, 162 F.3d 840, 847 (5th Cir. 1998) (stating that

the government must prove (1) conducted or attempted to conduct a

financial transaction, (2) which the defendant knew involved the

proceeds of unlawful activity, and (3) which the defendant knew

was designed to conceal or disguise the nature, location, source,

ownership, or control of the proceeds of the unlawful activity). 

The critical error in the defendants’ position is its presumption

that a conspiracy charge must also describe the legal elements

that comprise the substantive crime that is the object of the

conspiracy. It is settled law that conspiring to commit a crime

is an offense wholly separate from the crime which is the object

of the conspiracy. United States v. Nims, 524 F.2d 123, 126 (5th

Cir. 1975), cert. denied, 426 U.S. 934 (1976). Thus, we have

consistently held that a conspiracy charge need not include the

elements of the substantive offense the defendant may have

conspired to commit. United States v. Fuller, 974 F.2d 1474,

1479-80 (5th Cir. 1992), cert. denied, 510 U.S. 835 (1993);

United States v. Graves, 669 F.2d 964, 968 (5th Cir. 1982). 

Accordingly, the defendants’ attempt to challenge count two by

referencing the elements of money laundering is improper. We
 

8 The defendants contend that the jury instructions were

defective for the same reasons. We reject that argument as well.

15

reject the claim that count two is defective.8

IV.

The defendants jointly argue that the district court’s jury

instructions were defective. Rigler and Mark Threadgill also

bring separate, individual challenges to the jury instructions. 

We review each argument in turn.

A.

The defendants jointly contend that the district court erred

by giving the jury a “deliberate ignorance” instruction when

there was insufficient evidence to support its submission. We

review challenges to jury instructions by determining “whether

the court’s charge, as a whole, is a correct statement of the law

and whether it clearly instructs jurors as to the principles of

law applicable to the factual issues confronting them.” United

States v. Stacey, 896 F.2d 75, 77 (5th Cir. 1990) (citation and

quotation omitted). “A district court has broad discretion in

framing the instructions to the jury and this Court will not

reverse unless the instructions taken as a whole do not correctly

reflect the issues and law.” United States v. Moser, 123 F.3d

813, 825 (5th Cir.) (citation and quotation omitted), cert.
 

9 The appellants timely objected to the deliberate

ignorance instruction in the district court.

16

denied, 118 S. Ct. 613 (1997).

At trial the defendants claimed that they lacked the

necessary criminal intent because they did not know that their

gambling activities were a felony. See 18 U.S.C. § 1956(c)

(establishing the felony-knowledge requirement for money

laundering, that is, knowledge that the laundered property

represents proceeds from a felony under state, federal, or

foreign law). Accordingly, in its charge to the jury the

district court instructed that:

The fact of knowledge or willfulness may be

established by direct or circumstantial

evidence. The element of knowledge or

willfulness may be satisfied by inference

drawn from proof that a Defendant closed his

eyes to or acted in deliberate ignorance of

what would otherwise have been obvious to

him. A showing of negligence or mistake is

not sufficient to support a finding of

willfulness or knowledge.

The district court placed the instruction at the end of the jury

instructions in a general section that explained the various mens

rea requirements. As such, the deliberate ignorance instruction

applied to all of the counts in the superseding indictment.9

On appeal, the defendants assert that the district court’s

use of the deliberate ignorance instruction was an abuse of

discretion because the evidence at trial did not satisfy the

legal requirements for invoking the charge. We look first to the
17

general principles that guide the use of a deliberate ignorance

instruction. 

A deliberate ignorance charge is intended “to inform the

jury that it may consider evidence of the defendant’s charade of

ignorance as circumstantial proof of guilty knowledge.” United

States v. Lara-Velasquez, 919 F.2d 946, 951 (5th Cir. 1990). It

is only to be given when a defendant claims a lack of guilty

knowledge and the proof at trial supports an inference of

deliberate indifference. United States v. Wisenbaker, 14 F.3d

1022, 1027 (5th Cir. 1994). Although we have stated that a

deliberate ignorance instruction “should rarely be given,” United 

States v. Ojebode, 957 F.2d 1218, 1229 (5th Cir. 1992), cert.

denied, 507 U.S. 923 (1993), we also have “consistently upheld

such an instruction as long as sufficient evidence supported its

insertion into the charge.” United States v. Daniel, 957 F.2d

162, 169 (5th Cir. 1992). The instruction is proper where the

evidence shows (1) subjective awareness of a high probability of

the existence of illegal conduct, and (2) purposeful contrivance

to avoid learning of the illegal conduct. United States v.

Cavin, 39 F.3d 1299, 1310 (5th Cir. 1994).

The defendants assert that the use of the deliberate

ignorance instruction was improper in this case because there was

no evidence that the defendants were subjectively aware, to a

high probability, that their gambling operation was a felony. 
18

The defendants also maintain that there was no evidence that they

purposefully contrived to avoid learning that fact. There are

serious flaws in the defendants’ position.

The basic thrust of the defendants’ argument is that the

deliberate ignorance instruction should not have been used to

assist the jury in determining whether the defendants knew their

gambling operation was a felony. That assertion, of course, is

only relevant to counts three through ten, the substantive money

laundering counts, since those are the only counts in the

superseding indictment which carry that particular mens rea

requirement. Compare 18 U.S.C. § 1956(a), with 18 U.S.C. § 1955,

and 18 U.S.C. § 1956(h), and 31 U.S.C. § 5324. Thus, the first

flaw in the defendants’ argument is that it overlooks the fact

that the jury acquitted the defendants on counts three through

ten. Whether the deliberate ignorance instruction was properly

submitted with respect to the money laundering counts is an

interesting, but irrelevant, question.

However, even if we generously construe the defendants’

argument as a challenge to the deliberate ignorance instruction

as applied to all of the counts in the superseding indictment, we

still must reject the contention. We concede, after reviewing

the record, that there is little evidence that the defendants

purposefully contrived to avoid knowing that their actions were

unlawful. In fact, the evidence reveals just the opposite, that
19

the defendants knew that their conduct was criminal and took

elaborate measures to hide it. Thus, we must conclude that the

district court erred by including the deliberate ignorance

instruction in the jury instructions. However, it is the

evidence of actual knowledge that proves fatal to the defendants’

claim. We have consistently held that an “error in giving the

deliberate ignorance instruction is . . . harmless where there is

substantial evidence of actual knowledge.” United States v.

Cartwright, 6 F.3d 294, 301 (5th Cir. 1993), cert. denied, 513

U.S. 1060 (1994); United States v. Breque, 964 F.2d 381, 388 (5th

Cir.1992), cert. denied, 507 U.S. 909 (1993). Accordingly, even

if we construe the defendants’ argument liberally, and find that

the district court erred in giving the deliberate ignorance

instruction, the error was harmless.

B.

Rigler was the only defendant charged and convicted of

structuring transactions to evade reporting requirements in

violation 31 U.S.C. § 5324(a)(3). On appeal Rigler challenges

the deliberate ignorance instruction as it relates to those

convictions. Specifically, he contends that the use of the

instruction was improper as a matter of law because it violated

the Supreme Court’s holding in Ratzlaf v. United States, 510 U.S.

135 (1994). In Ratzlaf, the Supreme Court held that a defendant
20

may be convicted of violating § 5324 only on a showing that the

defendant “willfully” violated anti-structuring laws. Id. at

136-38. According to the Court, the government must “prove that

the defendant acted with knowledge that his conduct was unlawful”

in order to prove a “willful” violation of § 5324. Id. at 137.

Rigler maintains that under Ratzlaf the government was

required to prove that he had particularized knowledge; in other

words, that he knew that the subject transactions were in

violation of § 5324. He then asserts that the district court’s

deliberate ignorance instruction conflicts with Ratzlaf because

it lessens the government’s burden. In Rigler’s view, the

instruction allowed the government to secure his conviction on

mere evidence that he knew, only in a general sense, that

structuring was against the law. We do not agree.

Our review of the jury instructions reveals that the

district court correctly explained the law with respect to the

unlawful structuring counts, and did not lessen the government’s

burden under Ratzlaf. Although we base our conclusion on the

jury instructions as a whole, we call attention to a particular

provision that significantly undermines Rigler’s claim: 

if you find beyond a reasonable doubt that

the defendant structured a transaction in

currency with a financial institution, that

the defendant did so for the purpose of

evading the transaction reporting

requirement, and that the defendant knew that

the structuring itself was unlawful, then you
21

should find the defendant guilty as charged.

(emphasis added.) Parsed, that statement required proof beyond a

reasonable doubt that “the defendant structured a transaction .

. . for the purpose of evading the transaction reporting

requirement . . . [knowing] that the structuring itself was

unlawful.” In that way, it permitted a conviction under § 5324

only upon evidence that Rigler knew the particular structuring

transactions were in violation of § 5324. We reject Rigler’s

claim that the deliberate ignorance instruction reduced the

government’s burden under Ratzlaf.

C.

Mark Threadgill contends that his convictions must be

reversed because the jury instructions constructively amended the

superseding indictment. He raises that issue for the first time

on appeal, so we must review it under our plain error standard. 

United States v. Rogers, 126 F.3d 655, 660 (5th Cir. 1997). 

Under that doctrine, a defendant must show (1) the existence of

actual error; (2) that the error was plain; and (3) that it

affects substantial rights. United States v. Calverley, 37 F.3d

160, 162-64 (5th Cir. 1994) (en banc). Applying this stringent

standard to the facts of this case, we cannot conclude that plain

error occurred.

“The Fifth Amendment guarantees that a criminal defendant
22

will be tried only on charges alleged in a grand jury

indictment." United States v. Arlen, 947 F.2d 139, 144 (5th Cir.

1991), cert. denied, 503 U.S. 939 (1992). As a result, “[t]he

indictment cannot be ‘broadened or altered’ except by the grand

jury." Id. (citations omitted). “A constructive amendment

occurs when the trial court, through its instructions and facts

it permits in evidence, allows proof of an essential element of a

crime on an alternative basis permitted by the statute but not

charged in the indictment.” Id. (citation and quotation

omitted). Normally, a constructive amendment is considered

prejudicial per se and grounds for reversal of a conviction. 

United States v. Fletcher, 121 F.3d 187, 192 (5th Cir. 1997),

cert. denied, 118 S. Ct. 640 (1997). However, if a defendant

raises a claim of constructive amendment for the first time on

appeal, we nonetheless have the discretion to deny the claim. 

Id.; United States v. Reyes, 102 F.3d 1361, 1364-66 (5th Cir.

1996).

Mark Threadgill’s allegations regarding a constructive

amendment are advanced with suspect reasoning. He starts by

noting that the jury instructions for count two, the conspiracy

charge, reference the money laundering instructions for counts

three through ten. He next observes that the jury instructions

for counts three through ten allege three state law crimes as

possible underlying felonies, a required element of money
23

laundering, 18 U.S.C. § 1956, and notes that those same crimes

have not been alleged in the corresponding counts in the

indictment. He then leaps to the conclusion that a constructive

amendment occurred, without addressing what relevance a

constructive amendment on the money laundering counts, which

resulted in an acquittal, would have on the conspiracy charge in

count two. Having looked at that question ourselves, we conclude

that any constructive amendment which did occur had no legal

bearing on Mark Threadgill’s conspiracy conviction under count

two.

Mark Threadgill makes a colorable argument that the jury

instructions for money laundering constructively amended the

corresponding money laundering counts in the superseding

indictment. However, we do not see what legal relevance that has

to Mark Threadgill’s conspiracy conviction. As noted, the

elements for proving the crime of conspiracy are separate and

distinct from the elements needed to establish the substantive

offense of money laundering. See Nims, 524 F.2d at 126. 

Therefore, while the purported amendment may have impermissibly

broadened the money laundering counts in the superseding

indictment by alleging three new state crimes that could satisfy

the underlying felony requirement of § 1956, that specific

amendment could not have broadened the conspiracy charge, which

has an entirely different set of elements. See Garcia Abrego,
24

141 F.3d at 163-64 (providing that elements of money laundering

are (1) agreement between two or more persons to commit money

laundering, and (2) that the defendant joined the agreement

knowing its purpose and with the intent to further the illegal

purpose). Thus, if the jury instructions for counts three

through ten worked a constructive amendment, they did so only

with respect to the money laundering counts. We find no error

that warrants relief under our plain error standard.

V.

The defendants contend that the district court erred in

failing to dismiss the superseding indictment because the

gambling, money laundering, and unlawful structuring counts are

worded in a manner that violates the federal Commerce Clause. 

The defendants also argue that the jury instructions are flawed

for the same reason.

We note as an initial matter that the defendants were

acquitted on counts three through ten, the money laundering

counts. Thus, we limit our consideration to whether the

superseding indictment and jury instructions allege the gambling

and unlawful structuring counts in a manner inconsistent with the

Commerce Clause. We begin that inquiry with a review of the

elements of those offenses.

The elements of the crime of illegal gambling are (1) the
 

10 After Ratzlaf, Congress expressly overruled the Court's 

decision by passing a new statute, 31 U.S.C. § 5324 (1994),

making plain that knowledge of the law against structuring was

not required for guilt. See H.R. Rep. No. 103-438, at 22 (1994)

(stating that § 5324 restores Congress’ clear intent that

currency reporting crime requires only an intent to evade

reporting requirements, not proof that the defendant knew that

structuring was illegal).

25

existence of a gambling business which is illegal under the laws

of the state in which it is conducted; (2) the involvement of

five or more persons in the operation of the business; and (3)

the substantially continuous operation of the business for a

period in excess of 30 days, or, gross revenues of $2,000 in any

single day. 18 U.S.C. § 1955; United States v. Tucker, 638 F.2d

1292, 1294 (5th Cir.), cert. denied, 454 U.S. 833 (1981). The

elements of the crime of unlawful structuring were, at the time

of the offenses in question, (1) that the defendant willfully and

knowingly structured a currency transaction; (2) with the purpose

of evading the reporting requirements; (3) the transaction

involved one or more domestic financial institutions; and (4)

the defendant knew that the structuring was unlawful.10 31

U.S.C. § 5324; see also Ratzlaf v. United States, 510 U.S. 135

(1994).

In this case, the superseding indictment and jury

instructions carefully track the language of the gambling and

unlawful structuring statutes, accurately reciting all of the

generally recognized elements of those offenses. The defendants,
26

however, insist that the counts are constitutionally infirm

because they fail to allege that the charged conduct had a

“substantial effect on interstate commerce,” as that term was

explained in United States v. Lopez, 514 U.S. 549 (1995). They

assert that after Lopez the federal government cannot prohibit

individual conduct without proving that jurisdictional element. 

The defendants’ interpretation of Lopez is incorrect.

In Lopez, the Supreme Court struck 18 U.S.C. § 922(q)(1)(A),

a statute which prohibited “‘any individual knowingly to possess

a firearm at a place [he] knows . . . is a school zone,’” as an

unconstitutional exercise of Congress’ power under the Commerce

Clause. Id. at 551. That power, the Court observed, only

extends to three types of activity: (1) the use of the channels

of interstate commerce; (2) the instrumentalities of interstate

commerce, or persons or things in interstate commerce; and (3)

those activities having a substantial relation to interstate

commerce, namely, those activities that substantially affect

interstate commerce. Id. at 558-59. Since § 922(q)(1)(A) did

not involve channels or instrumentalities of interstate commerce,

the Court reasoned that the statute would be constitutional only

if it qualified under the third category, as a statute that

regulated an activity which substantially affected interstate

commerce. Id. at 559.

In considering that question, the Court recognized that its
27

case law had not always been clear as to whether an activity must

“affect” or “substantially affect” interstate commerce. The

Court then explained that “consistent with the great weight of

our case law . . . the proper test requires an analysis of

whether the regulated activity ‘substantially affects’ interstate

commerce.” Id. at 559. Having clarified that point, the Court

concluded that several critical factors prevented § 922(q)(1)(A)

from qualifying as a valid exercise of congressional authority

under the third category. First, since § 922(q)(1)(A) did not

regulate a commercial activity, the statute could not be upheld

as regulating “activities that arise out of or are connected with

a commercial transaction, which viewed in the aggregate,

substantially affects interstate commerce.” Id. at 561. 

Further, the statute contained no “jurisdictional element which

would ensure, through case-by-case inquiry, that the [activity]

in question affects interstate commerce.” Id. Finally, the

statute was not supported by specific “congressional findings

[that] would enable [the Court] to evaluate the legislative

judgment that the activity in question substantially affected

interstate commerce, even though no such substantial effect was

visible to the naked eye.” Id. at 563.

On appeal, the defendants essentially argue that Lopez has

created a new jurisdictional element in all federal prosecutions

of individual conduct. That element would require the government
 

11 The defendants have failed to cite a single case that

supports their novel interpretation of Lopez.

 

12 Furthermore, § 1955 contains a jurisdictional element

that ensures a sufficient jurisdictional nexus on a case-by-case

basis. See 18 U.S.C. § 1955(b). Also, the gambling statute is

supported with express congressional findings that have prompted

this Court to affirm the constitutionality of § 1955, see United

States v. Harris, 460 F.2d 1041, (5th Cir.) (finding § 1955 valid

exercise of Commerce Clause power after summarizing legislative

history), cert. denied, 409 U.S. 877 (1972).

28

to plead and prove that the charged conduct “substantially

affected” interstate commerce. We are not persuaded. Lopez is

significant because it limits Congress’ ability to regulate

intrastate activities not related to the channels or

instrumentalities of interstate commerce. But contrary to the

defendants’ contention, nothing in Lopez purports to announce any

broader rule.11

Whether a defendant’s conduct has a “substantial effect on

interstate commerce” is a question that only becomes relevant

when the statute at issue, or the facts of the case, cast doubt

on Congress’ ability to use the Commerce Clause to regulate the

charged conduct. In this case neither circumstance is present. 

Unlike the Gun Free Zones Act in Lopez, the gambling and unlawful

structuring statutes regulate purely commercial activities.12

Also, the facts of this case indicate that the defendants

actually engaged in significant interstate activity in

furtherance of their gambling operation. Accordingly, we reject

the defendants’ claim that the gambling and structuring counts
29

are invalid under Lopez for not alleging a “substantial effect on

interstate commerce.”

VI.

Finally, Klement argues that count one of the superseding

indictment, the gambling count, was defective because it did not

cite the particular state statute that the defendants allegedly

violated. See 18 U.S.C. § 1955(b) (requiring the existence of a

gambling business that is illegal under state law). Normally,

this Court applies a de novo standard of review to a district

court’s finding that an indictment is sufficient. United States

v. Fitzgerald, 89 F.3d 218, 221 (5th Cir.), cert. denied, 117 S.

Ct. 446 (1996). But because Klement raised this issue after

trial, the indictment must be liberally construed in favor of

validity, “unless it is so defective that by any reasonable

construction, it fails to charge an offense for which the

defendant is convicted.” United States v. Salinas, 956 F.2d 80,

82 (5th Cir. 1992) (citations and quotations omitted).

As we have explained, a person violates § 1955 if he

operates an “illegal gambling business . . . [in] violation of

the law of a State . . . in which it is conducted.” 18 U.S.C. §

1955(b)(1). In this case, the superseding indictment tracked the

language of § 1955, recited all of its necessary elements, and

alleged that the defendants operated a “bookmaking business” that
30

“violated the laws of the State of Texas.” As Klement points

out, however, it did not specifically cite the Texas statute that

prohibits bookmaking. That argument need not detain us long.

The Federal Rules of Criminal Procedure provide that the

failure to cite a statute in an indictment “shall not be ground

for . . . reversal of a conviction if the error or omission did

not mislead the defendant to the defendant’s prejudice.” Fed. R.

Crim. P. 7(c)(3). Moreover, this Court has recognized that “to

be sufficient, an indictment needs only to allege each essential

element of the offense charged so as to enable the accused to

prepare his defense and to allow the accused to invoke the double

jeopardy clause in any subsequent proceeding." United States v.

Webb, 747 F.2d 278, 284 (5th Cir. 1984). The test for the

validity of an indictment is “not whether the indictment could

have been framed in a more satisfactory manner, but whether it

conforms to minimal constitutional standards." Id.

Here, the Texas Penal Code criminalizes bookmaking in only

one location See Tex. Penal Code Ann. § 47.03(2). Thus, in

light of the fact that the superseding indictment expressly

alleged the crime of “bookmaking,” the defendants must have known

that they were being charged with violating § 47.03 of the Texas

Penal Code. The superseding indictment’s identification of the

state offense provided adequate notice. Thus, Klement was not

prejudiced by the superseding indictment’s failure to expressly
31

cite the statutory provision. We reject Klement’s challenge to

count one of the superseding indictment.

VII.

In its cross-appeal, the government challenges the district

court’s decision to downwardly depart at to each defendant’s

sentence. As a general rule, when a case before a district court

is a typical one, the court must impose a sentence within the

applicable Sentencing Guidelines range. 18 U.S.C. § 3553(a);

United States v. Arce, 118 F.3d 335, 338 (5th Cir. 1997), cert.

denied, 118 S. Ct. 705 (1998). However, the Sentencing

Commission recognized that unusual cases would arise requiring

special consideration. See U.S.S.G. Ch. 1, Pt. A, intro. comment

4(b). Thus, the district courts were reposed with a significant

measure of sentencing discretion for cases with atypical or

unusual circumstances. The Commission explained:

The Commission intends the sentencing courts

to treat each guideline as carving out a

“heartland,” a set of typical cases embodying

the conduct that each guideline describes. 

When a court finds an atypical case, one to

which a particular guideline linguistically

applies but where conduct significantly

differs from the norm, the court may consider

whether a departure is warranted.

Id. That intent has been codified in 18 U.S.C. § 3553(b), which

provides that a district court may depart from the applicable

guideline range when it “finds that there exists an aggravating
 

13 Before Koon, this Court utilized a two-step inquiry

based on the Supreme Court’s decision in Williams v. United

States, 503 U.S. 193 (1992). See United States v. Kay, 83 F.3d

98, 100-01 (5th Cir. 1996). That approach asked (1) whether the

sentence was imposed either in violation of law or as a result of

an incorrect application of the Guidelines; and (2) whether the

sentence is an unreasonable departure from the computed guideline

range. Id. In Koon, the Supreme Court elaborated at length on

the first step of that approach. In this opinion we have refined

our two-step approach to incorporate Koon’s teachings.

32

or mitigating circumstance of a kind, or to a degree, not

adequately taken into consideration by the Sentencing Commission

in formulating the guidelines that should result in a sentence

different from that described.” 18 U.S.C. § 3553(b). In

determining whether a circumstance was adequately taken into

consideration by the Sentencing Commission, our inquiry is

limited to the Sentencing Guidelines, policy statements, and

official commentary of the Commission. 18 U.S.C. § 3553(b). In

this appeal, the government alleges that the facts of this case

do not support the district court’s determination that the

defendants’ case was “outside the heartland” of money laundering

cases. To properly consider that claim, we must first set forth

the basic framework for analyzing a district court’s decision to

depart.

After the Supreme Court’s landmark decision in Koon v.

United States, 518 U.S. 81 (1996), our analysis of a district

court’s decision to depart consists of three separate

determinations.13 An appellate court must ask: (1) whether the
33

factors relied on by the district court for departure are

permissible factors under the Guidelines; (2) whether the

departure factors, as supported by evidence in the record, remove

the case from the heartland of the applicable guideline; and (3)

whether the degree of departure is reasonable. See United States

v. Whiteskunk, 162 F.3d 1244, 1249 (10th Cir. 1998) (recognizing

the same determinations, although dividing them into four

separate inquiries). In this case, the parties’ arguments center

on the first two questions, so that is where we turn our

attention.

A.

The first question an appellate court must ask is whether a

particular factor relied on by the district court is a

permissible factor for departure under the Guidelines. See Koon,

518 U.S. at 92-96. In addressing that question, we start with

the basic rule that a district court may depart based on

circumstances “not adequately taken into consideration” by the

Sentencing Commission. 18 U.S.C. § 3553(b). But how do we

determine whether a given factor has been adequately considered

by the Commission? Koon speaks to that question at length.

In Koon, the Supreme Court explained that a court must

specifically look to whether the departure factor is forbidden,

encouraged, discouraged, or unmentioned by the Guidelines. Id.
34

at 94-96; United States v. Winters, 105 F.3d 200, 205-06 (5th

Cir. 1997). If the factor is expressly forbidden in the

Guidelines, Koon instructs that the sentencing court is

completely precluded from using it as a basis for departure. 

Koon, 518 U.S. 95-96. However, the Court noted that the

Sentencing Commission “chose to prohibit consideration of only a

few factors, and not otherwise to limit, as a categorical matter,

the considerations which might bear on the decision to depart.” 

Id. at 94. Thus, Koon makes clear that except for a limited

number of forbidden factors, the Guidelines do not limit the

kinds of factors that could constitute grounds for a departure. 

See also U.S.S.G. Ch. 1, Pt. A, intro. comment 4(b) (indicating

that the Commission “does not intend to limit the kinds of

factors, whether or not mentioned anywhere else in the

guidelines, that could constitute grounds for departure in an

unusual case”). Thus, a district court must not be precluded,

categorically, from considering a factor unless the use of that

factor is plainly foreclosed by the Guidelines. United States v.

Green, 152 F.3d 1202, 1207 (9th Cir. 1998).

If the departure factor is not forbidden, the district court

may presumably depart on that factor although the appropriate

circumstances will vary depending on whether the factor is

encouraged, discouraged, or unmentioned. Koon, 518 U.S. at 94-

96. If a factor is encouraged, courts can depart only “if the
35

applicable Guideline does not already take it into account.” Id.

at 96. If the factor is discouraged, or encouraged but already

taken into account by the applicable guideline, courts can depart

“only if the factor is present to an exceptional degree or in

some other way makes the case different from the ordinary case

where the factor is present.” Id. If the factor is unmentioned,

“the court must, after considering the ‘structure and theory of

both relevant individual guidelines and the Guidelines taken as a

whole’ . . . decide whether [the factor] is sufficient to take

the case out of the Guideline’s heartland.” Id. (quoting United

States v. Rivera, 994 F.2d 942, 949 (1st Cir. 1993)).

So, whether a given factor is permissible depends on how the

factor is classified. An impermissible factor is a forbidden

factor, a discouraged factor not present to an exceptional

degree, or an encouraged factor already considered by the

Guidelines and not present to an exceptional degree. Id. at 94-

96. All other factors cannot be precluded categorically as a

possible basis for departure. Id. at 94. These rules comprise

the method by which we determine whether a particular factor is a

permissible ground for departure under the Guidelines. However,

we are still left with the question of what deference to accord

various aspects of district court’s decision. Fortunately, Koon

speaks to that point as well.
36

B.

In Koon the Supreme Court fashioned a straightforward rule

that guides appellate review: “[t]he deference that is due

depends on the nature of the question presented.” Id. at 98. 

Thus, when the question presented by the district court’s

decision to depart is legal in nature, the appellate court gives

no deference to the district court. Id. at 100. For instance,

“whether a factor is a permissible basis for departure under any

circumstances is a question of law, and the court of appeals need

not defer to the district court’s resolution on the point.” Id.

at 100; United States v. Hemmingson, 157 F.3d 347, 360 (5th Cir.

1998).

When the question presented to the appellate court is

factual, on the other hand, appellate review must accord

substantial deference to the district court’s decision to depart. 

Koon, 518 U.S. at 97-99; United States v. Collins, 122 F.3d 1297,

1302-33 (10th Cir. 1997). Deference is required “to afford the

district court the necessary flexibility to resolve questions

involving ‘multifarious, fleeting, special, narrow facts that

utterly resist generalization.’” Koon, 518 U.S. at 99 (citation

and quotation omitted). As the Court explained in Koon, most

departure cases hinge on factual determinations, and thus fall

within this category: “[a] district court’s decision to depart

from the guidelines . . . will in most cases be due substantial
37

deference, for it embodies the traditional exercise of discretion

by the sentencing court.” Id. at 98. As such, an appellate

court must expect that in many instances:

The district court’s [decision to depart] .

. . will not involve a ‘quintessentially

legal’ interpretation of the words of a

guideline, but rather will amount to a

judgment about whether the given

circumstances, as seen from the district

court’s unique vantage point, are unusual,

ordinary or not ordinary, and to what extent. 

Rivera, 994 F.2d at 951. But when are the particular

circumstances of a case so unusual as to warrant a departure

under the Guidelines? That question takes us to the second

determination an appellate court must make when reviewing a

district court’s decision to depart.

C.

After determining whether a departure factor relied on by

the district court was permissible, the appellate court must ask

whether the given factor is present to a degree not adequately

considered by the Commission. Koon, 518 U.S. at 98. In other

words, are the circumstances of the case so unusual as to remove

the case from the heartland? Id. (“Before a departure is

permitted, certain aspects of the case must be found unusual

enough for it to fall outside the heartland of cases in the

Guideline.”). In Koon the Supreme Court explained that this

question is largely within the province of the district court. 
38

Id. at 97-99. The Court observed that “[d]istrict courts have an

institutional advantage over appellate courts in making these

sorts of determinations.” Id. at 98. The Court further added

that “[t]o resolve this question, the district court must make a

refined assessment of the many facts bearing on the outcome,

informed by its vantage point and day-to-day experience in

criminal sentencing.” Id.

Koon thus teaches that when a district court decides to

depart based on the particular facts of a case, it is acting

within its special competence. Id. at 99 (“To ignore the

district court’s special competence -- about the ‘ordinariness’

or ‘unusualness’ of a particular case’ -- would risk depriving

the Sentencing Commission of an important source of information,

namely, the reactions of the trial judge to the fact-specific

circumstances of the case.” (citation and quotation omitted));

see also Hemmingson, 157 F.3d at 361 (“Koon also stresses that

courts of appeals owe considerable deference in reviewing a

decision to depart”). Accordingly, it is the near-exclusive

province of the district court to decide whether a particular

factor, or set of factors, removes a case from the applicable

heartland. We must accord those decisions the greatest

deference.

To summarize our departure principles in the context of the

present case, we first must determine whether the departure
39

factors relied on by the district court were permissible. Koon

tells us that we need not defer to the district court on that

question. We next must determine whether those factors, if

permissible, were sufficient to remove the case from the

applicable heartland. Koon teaches that the district court’s

resolution of that question must be accorded substantial

deference on appeal. We now apply this analysis to the case

before us.

D.

In the present action, the district court cited two separate

factors in support of its decision to depart. The court first

found that the defendants’ money laundering activities were 

incidental to the gambling operation. The court next found that

the defendants’ conduct was atypical because the defendants never

used the laundered money to further other criminal activities. 

Based on those two factors, the district court departed downward

under U.S.S.G. § 5K2.0, sentencing each of the defendants to 42

months imprisonment.

In reviewing the district court’s decision to depart, we

first must determine whether the district court relied on

permissible departure factors. As instructed, we turn to the

Guidelines Manual to see whether the two factors cited by the

district court are forbidden, encouraged, discouraged, or
40

unmentioned. Koon, 518 U.S. at 94-96; Hemmingson, 157 F.3d at

360-61. Sections 5H1 and 5K2 of the Guidelines list numerous

factors that a district court may, or may not, take into account

in deciding whether to depart. See U.S.S.G. §§ 5H1 & 5K2. 

Neither of the two factors relied on by the district court in

this case are mentioned in those provisions. Thus, since neither

of the factors are expressly forbidden by the Guidelines, under

Koon the district court cannot be precluded, as a categorical

matter, from relying on those factors. Koon, 518 U.S. at 94.

The government contends, however, that the district court’s

first factor, that the money laundering was incidental to the

gambling operation, must be declared impermissible based on this

Court’s holding in United States v. Willey, 57 F.3d 1374, 1392

(5th Cir.), cert. denied, 516 U.S. 1029 (1995). In that case, we

suggested that a downward departure could not be justified on a

finding that the subject crime was a disproportionately small

part of the overall criminal conduct. Id. at 1391-92. Willey is

inapplicable to the present case.

In Willey it was the defendant who appealed the district

court’s refusal to grant a downward departure, and we denied that

appeal based largely on the principle that “[a] district court’s

refusal to grant a downward departure provides no basis for

appeal.” Id. at 1391. More importantly, even if our language in

Willey could be read as casting doubt on the permissibility of
41

the district court’s first factor, that language is no longer

controlling authority in light of Koon. In Koon the Court made

clear that the Sentencing Commission “chose to prohibit

consideration of only a few factors, and not otherwise to limit,

as a categorical matter, the considerations which might bear on

the decision to depart.” Koon, 518 U.S. at 94. Thus, to the

extent that Willey conflicts with Koon, Willey is no longer

binding precedent.

Our conclusion comports with the expressed intent of the

Sentencing Commission. The Commission has stated that with the

exception of only a few forbidden factors, it “does not intend to

limit the kinds of factors . . . that could constitute grounds

for departure in an unusual case.” U.S.S.G. Ch. 1, Pt. A, intro.

comment 4(b). The Guidelines are intended to provide the

district courts with the flexibility needed to address the

“unusual cases outside the range of the more typical offenses for

which the guidelines were designed.” Id.

In light of Koon, and considering “the sentencing

guidelines, policy statements, and official commentary of the

Sentencing Commission,” 18 U.S.C. § 3553(b), we decline the

government’s invitation to declare, categorically, that the

district court’s reliance upon the fact that the money laundering

was incidental to the gambling operation was an impermissible

basis for departure under the Guidelines.
 

14 The government assails this finding on appeal, alleging

that it was incorrect for the district court to compare the

amount of laundered money to the amount of total wagers. The

government alleges instead that the district court should have

compared the amount of laundered money against the likely profits

of the gambling organization, roughly $1,000,000. We fail to see

the logic of that argument. Criminal organizations need to

launder not just the profits from the criminal enterprise, but

presumably the gross revenues as well.

42

E. 

Having concluded that the district court relied on

permissible factors, we move to the second inquiry in our

departure analysis, whether the district court’s two factors,

when viewed in light of the evidence, remove this case from the

heartland of the Guidelines. Since the factors are unmentioned

in the Guidelines, we “must, after considering the structure and

theory of both relevant individual guidelines and the Guidelines

taken as a whole, decide whether it is sufficient to take the

case out of the Guideline's heartland.” Koon, 518 U.S. at 96

(citation and quotation omitted). That question is highly

factual, so we review the district court’s findings with

substantial deference.

In considering the defendants’ motion for downward

departure, the district court concluded that this was not a

typical money laundering case. The court observed that the

defendants had received over $20,000,000 in gross wagers over the

course of the gambling operation, but had laundered only

$500,000, or roughly three percent.14 The district court further
 

15 The government takes issue with this finding as well,

asserting that “[i]t would be safe to say that most money

laundering cases are based on only one specified unlawful

activity.” We trust that this is the government’s belief. But

when we review the district court’s decision to depart, it is the

district court’s judgment which is due substantial deference, not

the government’s.

43

found that the defendants’ conduct was unusual because they never

used the laundered money to finance other criminal activities.15

Finally, the district court considered its decision to depart in

light of the statutory purposes of sentencing. See 18 U.S.C. §

3553. Referring specifically to 18 U.S.C. § 3553(a), the Court

found that its decision to depart would reflect the seriousness

of the offense, promote respect for the law, and afford adequate

deterrence. Id. 

Significantly, in departing the district court did not

ignore the money laundering convictions and only consider the

defendants’ sentences under the illegal gambling provisions. 

Instead, the district court used the applicable offense levels

for money laundering as its baseline, and then departed to an

offense level of 21, a far cry from the base offense level of 12

for illegal gambling. Thus, this was certainly not a case where

the district court disregarded an applicable Guidelines range in

favor of another it preferred. See U.S.S.G. § 5K2.2 commentary

(“dissatisfaction with the available sentencing range or a

preference for a different sentence than that authorized by the

guidelines is not an appropriate basis for a sentence outside the
 

16 We find the degree of the district court’s departure

entirely reasonable, and commend the district court for striking

a middle ground.

44

applicable guideline range”).16

Given the district court’s special competence in making the

refined factual comparisons necessary to the determination of

whether to depart in this case, see Koon, 518 U.S. 98-99, we are

not inclined to substitute our judgment for the considered

findings of the district judge. Accordingly, we conclude that

the district court did not abuse its discretion in finding the

facts of this case atypical and a proper basis for a departure. 

We quote a passage from Koon which bears repeating:

It has been uniform and constant in the

federal judicial tradition for the sentencing

judge to consider every convicted person as

an individual and every case as a unique

study in the human failings that sometimes

mitigate, sometimes magnify, the crime and

the punishment to ensue. We do not

understand it to have been the congressional

purpose to withdraw all sentencing discretion

from the United States District Judge. 

Discretion is reserved within the Sentencing

Guidelines, and reflected by the standard of

appellate review we adopt.

Koon, 518 U.S. at 113. Consistent with that principle, and in

view of the applicable Guidelines provisions, we affirm the

district court’s downward departure in this case.

VIII.

The defendants also allege that they were denied a fair trial
45

based on a laundry list of alleged mistakes by the district court.

That claim is meritless. Mark Threadgill also alleges that there

was insufficient evidence supporting his conviction for conspiracy

to commit money laundering. He also contends that the district

court erred in sentencing him to 42 months imprisonment because he

withdrew from the conspiracy, and the scope of the conspiracy was

not foreseeable to him. Alternatively, he asserts that the

district court should have reduced his sentence because he was a

minor participant. Having reviewed those arguments in light of the

record and applicable law, we find no cognizable grounds for

relief.

IX.

We affirm the defendants’ convictions and sentences in all

respects.
EDITH H. JONES, Circuit Judge, dissenting in part:

Because I disagree that these defendants’ moneylaundering is outside the “heartland” of such offenses, I

respectfully dissent only from the majority’s downward departure

holding. The district court’s departure reduced these defendants’

exposure by 40% to 75% of the otherwise applicable guideline range.

The Sentencing Guidelines were structured to carve out a

“heartland” of “typical cases embodying the conduct that each

guideline describes.” In typical criminal cases, courts are to

impose a sentence within the range set by the guidelines; only if

the facts of a particular case render it unusual or “one to which

a particular guideline linguistically applies but where conduct

significantly differs from the norm” are courts permitted to depart

from the guidelines and impose a sentence outside the range. In

commentary, the Commission states that “despite the courts’ legal

freedom to depart from the guidelines, they will not do so very

often.” U.S.S.G. ch. 1, pt. A (4)(b).

In Koon v. United States, the Supreme Court directed the

courts to ask four questions when considering whether a particular

case is atypical for departure purposes:

1. What features of this case, potentially, take it

outside the Guidelines’ “heartland” and make of it

a special, or unusual, case?

2. Has the Commission forbidden departures based on

those factors?

3. If not, has the Commission encouraged departures

based on those factors?
47

4. If not, has the Commission discouraged departures

based on those factors?

518 U.S. 81, 95, 116 S. Ct. 2035, 2045 (1996) (quoting United

States v. Rivera, 994 F.2d 942, 949 (1st Cir. 1993); see also

United States v. Hemmingson, 157 F.3d 347, 360-61 (5th Cir. 1998);

United States v. Winters, 105 F.3d 200, 205 (5th Cir. 1997).

District courts must articulate “compelling facts necessary to

satisfy the very high standard” of departures based on “outside the

heartland” reasoning. Winters, 105 F.3d at 208. 

The district court justified its departure because the

defendants’ money laundering was “incidental” to gambling and

because they allegedly did not recirculate the laundered money into

the gambling business. As such factors are not mentioned by the

Guidelines in connection with departures, the courts must “consider

the ‘structure and theory of both relevant individual guidelines

and the Guidelines taken as a whole’ and decide whether the

factor[s are] sufficient to take the case outside the heartland.”

Hemmingson, 157 F.3d at 361 (quoting Rivera, 944 F.2d at 949). It

is important to note that departures based on grounds not mentioned

in the guidelines, as in this case, should be “highly infrequent.”

Id. (quoting U.S.S.G. ch. 1, pt. A (4)(b)).

Neither the district court’s nor the panel majority’s

reasoning is persuasive. In no sense can the money laundering here

be deemed “incidental” or somehow divorced from the conduct of the

illegal enterprise. 
 

17According to the government, the reason the appellants could not

have laundered the full $20 million is because they earn money by

charging a 10% fee (called “juice”) to the losing gamblers. Thus,

assuming they were “even” (had equal bets on each side of the wager),

$20 million in wagers would net $1 million.

48

The district court considered the laundering of a half

million dollars “incidental” in relation to the overall $20 million

in bets placed with the Threadgills. To any average observer, a

half million laundered dollars is a lot of money. In fact, in a

recent telemarketing case, one defendant was sentenced to 60 months

imprisonment -- much longer than the 42 months imposed here -- for

laundering only $3,300! United States v. Leonard, 61 F.3d 1181

(5th Cir. 1995). Moreover, the devices used by the defendants --

checks payable to non-existent names and run through a legitimate

front business -- embody the classic laundering scheme. 

Beyond this, the court might more usefully have compared

the amount actually laundered (about $500,000) with the total

profits the defendants could have potentially laundered, which were

around 1 million dollars,17 rather than the $20 million in the whole

scheme. If the profit approach makes sense at all, then comparing

the laundering with the actual profits reflects the defendants’

substantial efforts to conceal their source of income.

Rejecting the government’s profits argument, the majority

observes, “[c]riminal organizations need to launder not just the

profits from the criminal enterprise, but presumably the gross

revenues as well.” Infra p. 41 n.14. I fully agree. To the
49

extent the defendants laundered the full amount of their gambling

revenues ($20 million) by recycling money from losers to winners

for a percent of the proceeds, then it cannot possibly be said that

the amount of money laundered was “incidental.” The majority

cannot have it both ways. Either the government is correct and the

amount of profit that could have been laundered was $1 million,

making the $500,000 actually laundered proportionately more

significant, or, as the majority notes, all of the money taken in

by the operation was laundered, negating the district court’s

finding that the amount laundered was insignificant. Regardless

which reasoning is adopted, this factor used by the district court

to conclude that the money laundering was atypical cannot be

upheld.

The district court also departed downward because

“[t]here is no evidence that the Defendants used any of this money

to finance any other criminal enterprise . . . .” This is wrong.

From a common-sense standpoint, a typical purpose for operating an

illicit gambling ring is to make easy money for personal use--not

to fund other criminal ventures. There is nothing unusual about an

illegal gambling conspiracy that takes its profits for personal

consumption instead of using them as seed money to fund other

criminal ventures. See e.g., United States v. LeBlanc, 24 F.3d

340, 346 (1st Cir. 1994); United States v. Termini, 992 F.2d 879

(8th Cir. 1993).
50

More generally, nothing about the appellants’ gambling

enterprise and associated money laundering takes the case outside

the heartland of money laundering cases. Congress passed the Money

Laundering Control Act of 1986 to fill “the gap in the criminal law

with respect to the post-crime hiding of ill-gotten gains,” United

States v. Johnson, 971 F.2d 562, 569 (10th Cir. 1992) (quoting

United States v. Edgman, 952 F.2d 1206, 1213 (10th Cir. 1991)), and

intended to “criminalize a broad array of transactions designed to

facilitate numerous federal crimes, including illegal gambling.”

LeBlanc, 24 F.3d at 346; see also Hemmingson, 157 F.3d at 361

(“[T]he money laundering guideline primarily targets large-scale

money-laundering, which often involves the proceeds of drug

trafficking or other types of organized crime.”). The facts of

this case fall well within the contemplation of Congress when it

passed the money laundering statute: The appellants collected

large amounts of cash to run an illicit gambling operation and,

with the complicity of an experienced accountant, deposited the

proceeds in a bank in such a way as to evade currency reporting

requirements and maintain the guise of conducting legitimate

business transactions. See LeBlanc 24 F.3d at 346. Since the

district court did not sufficiently “articulate relevant facts and

valid reasons why the circumstances of this case were of a kind or

degree not adequately considered by the Guidelines,” Winters, 105

F.3d at 208, I can see no basis for distinguishing this case from

other similar money laundering cases. See e.g. LeBlanc, 24 F.3d at
51

346-47 (reversing a district court’s decision to depart downward in

a gambling/money laundering case because the defendants’ acts were

typical of such cases).

Since the facts of this case and factors relied on by the

district court are not “highly infrequent,” U.S.S.G. ch. 1, pt. A

(4)(b), but in fact are typical of money laundering, I respectfully

dissent from the majority’s decision to uphold the downward

departure.