1994 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

9-30-1994

United States of America v. Conley, et al.

Precedential or Non-Precedential:

Docket 93-3504

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http://digitalcommons.law.villanova.edu/thirdcircuit_1994/150
 UNITED STATES COURT OF APPEALS 

 FOR THE THIRD CIRCUIT 

 ___________ 

 No. 93-3504 

 ___________ 

 UNITED STATES OF AMERICA, 

 Appellant

 vs. 

 JOHN F. "Duffy" CONLEY; WILLIAM C. CURTIN; SHEILA 

SMITH; JOHN FRANCIS "Jack" CONLEY; THOMAS "Bud" 

MCGRATH; MARK A. ABBOTT; THOMAS ROSSI; WILLIAM 

STEINHART; ROBERTA FLEAGLE; ROBIN SPRATT; MONICA C. 

KAIL; WILLIAM J. REED; JOANNE T. SMITH; KENNETH "Ron" 

GOODWIN; LAWRENCE N. "Neudy" DEMINO, SR.; CHRISTOPHER 

"Chris" KAIL; JOSEPH A. DEVITA; FRANK GAROFALO; 

THOMAS D. CIOCCO; MICHAEL SUKALY; PHILLIP M. "Mike" 

FERRELL; ANESTOS "Naz" RODITES; WILLIAM E. RUSIN 

 ___________ 

 Appeal from the United States District Court 

 for the Western District of Pennsylvania 

 (D.C. Crim. No. 91-cr-00178) 

 ___________ 

 

Argued 

 April 26, 1994 

 Before: MANSMANN, HUTCHINSON and ROTH, Circuit Judges. 

 (Filed September 30, 1994) 

 ___________ 

Paul J. Brysh, Esquire (ARGUED) 

Linda L. Kelly, Esquire 

Office of the United States Attorney 

633 United States Post Office 

 & Courthouse 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLANT 

Anthony M. Mariani, Esquire 

36th Floor Grant Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE CURTIN 

Ellen M. Viakley, Esquire 

436 Seventh Avenue 

1550 Koppers Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE SMITH 

Alisa N. Carr, Esquire 

Laughlin, Difenderfer & Boyle 

140 Fort Pitt Commons Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE JOHN F. CONLEY 

Caroline M. Roberto, Esquire (ARGUED) 

5th Floor, Law & Finance Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE MCGRATH 

Lee Markovitz, Esquire 

1040 Fifth Avenue 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE SMITH 

Foster A. Stewart, Esquire 

Stewart & Associates 

1550 Koppers Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE KAIL 

John P. Goodrich, Esquire 

Goodrich, Micale & Search 

436 Boulevard of the Allies 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE SUKALY 

Gary B. Zimmerman, Esquire 

312 Boulevard of the Allies 

Suite 620 

Pittsburgh, PA 15222 

 COUNSEL FOR APPELLEE FERRELL 

Vincent R. Baginski, Esquire 

430 Boulevard of the Allies 

Pittsburgh, PA 15219 
 COUNSEL FOR APPELLEE RODITES 

Peter V. Marcoline, Jr., Esquire 

1414 Grant Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE RUSIN 

Carl M. Janavitz, Esquire 

519 Allegheny Building 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE GAROFALO 

Gary Gerson, Esquire 

220 Grant Street 

Pittsburgh, PA 15219 

 COUNSEL FOR APPELLEE JOHN FRANCIS CONLEY 

 ___________ 

 OPINION OF THE COURT 

 __________ 

MANSMANN, Circuit Judge. 

 The United States Government appeals a pre-trial order 

of the district court dismissing, with prejudice, the money 

laundering object of a criminal conspiracy count against Thomas 

"Bud" McGrath and thirteen other defendants who joined his motion 

to dismiss. This complicated case originally involved a total of 

twenty-nine counts against twenty-three defendants who were 

alleged to have conducted an illegal gambling business. The 

general question before us is whether the district court erred as 

a matter of law when it dismissed the money laundering object of 

the conspiracy alleged in Count One of the indictment due to the 

district court's perception that double jeopardy concerns are 
implicated when both a conspiracy to commit money laundering and 

the substantive offense of illegal gambling are alleged. 

 We must decide whether Title 18, United States Code 

Section 1956(a)(1)(A)(i) proscribes money laundering transactions 

with the proceeds of an illegal gambling business, in the absence 

of some other form of specified unlawful activity. Because we 

find that money laundering with the proceeds of an illegal 

gambling business is one of the types of specified unlawful 

activity the money laundering statute proscribes and because we 

find that Congress did intend to impose a further punishment 

under § 1956 for using the proceeds of an illegal gambling 

business to promote that illegal activity, we will vacate the 

district court's order dismissing the money laundering object of 

the conspiracy charged in Count One of the indictment and remand 

this case to the district court for reinstatement of this portion 

of Count One. 

I. 

 On September 26, 1991, a grand jury sitting in 

Pittsburgh, Pennsylvania, returned a twenty-nine count indictment 

charging twenty-three individuals with participation in an 

illegal gambling business involving video poker machines.1 The 

 

1. The twenty-three persons named in the indictment are: 

John F. "Duffy" Conley, William C. Curtin, Sheila F. Smith, John 

Francis "Jack" Conley, Thomas "Bud" McGrath, Mark A. Abbott, 

Thomas Rossi, William Steinhart, Roberta Fleagle, Robin Spratt, 

Monica C. Kail, William J. Reed, Joanne T. Smith, Kenneth "Ron" 

Goodwin, Lawrence N. "Neudy" Demino, Sr., Christopher "Chris" 

Kail, Joseph A. Devita, Frank Garofalo, Thomas D. Ciocco, Michael 

Sukaly, Phillip M. "Mike" Ferrell, Anestos "Naz" Rodites, and 
indictment identified John F. "Duffy" Conley as the central 

figure in the extensive illegal gambling operation, alleging that 

Duffy Conley was the owner and operator of Duffy's Vending and/or 

Three Rivers Coin, which had the primary purpose of facilitating 

an illegal gambling business through video poker machines. 

 The indictment also identified the remaining defendants 

and their roles. William L. Curtin was the general manager of 

Duffy's Vending, assisting Duffy Conley in daily operations. 

Sheila Smith was an office manager, accountant and bookkeeper for 

Duffy Conley, also supervising employees who placed, moved and 

serviced video poker machines. Jack Conley recorded service 

calls from locations and facilitated the movement, repair and 

servicing of video poker machines. Thomas Bud McGrath, Duffy 

Conley's employee, marketed and secured locations for Duffy 

Conley's video poker machines. Mark Abbott, another employee of 

Duffy Conley, also marketed, moved and secured locations for 

Duffy Conley's video poker machines.2

(..continued) 

William E. Rusin. Three of the defendants -- William Steinhart, 

Monica Kail and William Reed -- have pleaded guilty. 

2. The indictment alleged that certain defendants assisted 

Duffy Conley by facilitating the placement and use of illegal 

gambling devices at various locations under their control as 

follows: Thomas Rossi (Carnegie American Legion), William 

Steinhart (Carnegie American Legion), Robert Fleagle (Terry's 

Snack Shop), Robin Spratt (Terry's Snack Shop), Monica Kail 

(Kail's Coffee Corner), William Reed (Idlewood Inn), Joanne Smith 

(The Coffee Pot), Kenneth "Ron" Goodwin (The Coffee Shop and 

Bloomfield Snack Shop), Lawrence "Neudy" Demino, Sr. (The Sunny 

Farms Deli), and William Rusin (Mugshots and Cruisin II). 

 The indictment further alleged that Duffy Conley 

employed Chris Kail, Joseph Devita, Frank Garofalo, Thomas 
 The indictment originally charged twenty-nine counts 

against various combinations of these defendants. We set forth 

in detail the charges and overt acts alleged in Counts One and 

Two of the indictment because the sufficiency of these counts to 

charge certain offenses is at issue here. 

 Count One charged all twenty-three defendants with 

conspiracy to conduct an illegal gambling business, in violation 

of Title 18, United States Code, Section 1955, and conspiracy to 

engage in money laundering to promote the unlawful gambling 

business in violation of Title 18 United States Code, Section 

1956.3 Specifically, Count One charged that "[i]t was an 

(..continued) 

Ciocco, Michael Sukaly, Phillip "Mike" Ferrell, Anestos "Naz" 

Rodites and others known and unknown to the Grand Jury as 

"collectors" whose duties included visiting machine locations and 

collecting the proceeds of video poker machine gambling. The 

indictment also alleged that William Rusin was an "associate" of 

Duffy Conley, who entrusted Rusin with depositing proceeds of the 

illegal gambling business into a Pittsburgh National Bank 

account, the Duffy's Vending Account. For more detail, see the 

opinion of the district court, United States v. Conley, 833 F. 

Supp. 1121 (W.D. Pa. 1993). 

3. The substantive illegal gambling statute provides, in 

pertinent part: 

 (a) Whoever conducts, finances, manages, 

supervises, directs, or owns all or part of 

an illegal gambling business shall be fined 

not more than $20,000 or imprisoned not more 

than five years, or both. 

 (b) As used in this section-- 

 (1) "illegal gambling business" means a 

gambling business which-- 

 (i) is a violation of the law of a 

State or political subdivision in which it is 

conducted; 

 (ii) involves five or more persons 

who conduct, finance, manage, supervise, 
essential part of the illegal gambling business run by John F. 

`Duffy' Conley that the proceeds of this unlawful activity be 

collected from the various locations where the video poker 

machines were in use as illegal gambling devices." (¶18; App. 

57). Count One also charged that the collection of such proceeds 

involved the division of money with persons at the video poker 

machine locations, the delivery of proceeds to other employees of 

Conley, and the depositing of money into bank accounts controlled 

by Conley. (¶ 18, App. 57.) The acts of collecting, dividing, 

transferring, and depositing the proceeds are all transactions as 

(..continued) 

direct, or own all or part of such business; 

and 

 (iii) has been or remains in 

substantially continuous operation for a 

period in excess of thirty days or has a 

gross revenue of $2,000 in any single day. 

Prohibition of illegal gambling businesses, 18 U.S.C. § 1955 

(1988). 

 The substantive money laundering statute provides, in 

pertinent part: 

 Whoever, knowing that the property involved 

in a financial transaction represents the 

proceeds of some form of unlawful activity, 

conducts or attempts to conduct such a 

financial transaction which in fact involves 

the proceeds of specified unlawful activity-- 

 (A)(i) with the intent to promote the 

carrying on of specified unlawful activity 

. . . shall be sentenced to a fine of not 

more than $500,000 or twice the value of the 

property involved in the transaction, 

whichever is greater, or imprisonment for not 

more than twenty years, or both. 

Laundering of monetary instruments, 18 U.S.C.A. § 

1956(a)(1)(A)(i) (Supp. 1993). 
defined in Title 18, United States Code, Section 1956(c)(3) 

("Laundering of Monetary Instruments"). 

 Count One further charged that Conley conducted 

financial transactions affecting interstate commerce with the 

proceeds of illegal gambling with video poker machines "with the 

intent to promote the carrying on of the specified unlawful 

activity, illegal gambling with video poker machines. . . ." 

(¶21(b); App. 59-60). In addition, it stated that Conley used 

illegal gambling proceeds to purchase more video poker machines 

and to pay employees of Duffy's Vending/Three Rivers Coin (¶29, 

31; App. 65). The overt acts of the conspiracy to launder money 

included numerous payments to Matrix, an entity used to service 

the video poker machines. (Indictment ¶33; App. 66.) 

 Count Two charged the substantive offense of conducting 

an illegal gambling business in violation of Title 18, United 

States Code, Section 1955. Count Two alleged that "on or around 

June of 1984 and continuing to on or around September 1991 . . . 

defendants . . . did unlawfully and knowingly conduct, finance, 

manage, supervise, direct and own all or part of an illegal 

gambling business involving video poker machines. . . ." This 

illegal gambling business "involved five or more persons who 

conducted, financed, managed, supervised, directed and owned all 

or part of the business, remained in substantially continuous 

operation for a period in excess of thirty (30) days and had a 

gross revenue of more than $2,000 for a single day."4

 

4. Counts three to five, seven to ten and twelve charged 

interstate travel to promote an illegal gambling business, in 
 On May 18, 1992, McGrath filed a motion to dismiss the 

money laundering object of the conspiracy count, joined by 

thirteen other defendants.5 McGrath advanced four legal 

arguments in support of his motion. First, McGrath asserted that 

the government had failed to establish that he satisfied the 

essential elements of the substantive money laundering statute. 

Next, he asserted that the government had placed him in double 

jeopardy by charging him with both conspiracy to launder money 

and the substantive offense of conducting an illegal gambling 

operation. McGrath's third assertion was that the substantive 

money laundering statute was unconstitutionally vague as it 

applied to him. Finally, McGrath maintained that the substantive 

money laundering statute was overbroad.6 

(..continued) 

violation of Title 18 U.S.C. § 1952 (a)(3). Counts six and 

eleven charged interstate transportation of gambling devices, in 

violation of Title 18 U.S.C. §§ 1172 and 1176. Counts thirteen 

to twenty-nine charged thirteen of the defendants with 

substantive money laundering offenses in violation of Title 18 

U.S.C. § 1956(a)(1)(A)(i). On July 17, 1993, upon motion of 

these defendants, the district court issued an opinion and order 

dismissing most of the substantive money laundering counts 

(Counts 13, 14, 16, 17, 18, 21, 22, 23, 24, 26, 27, 28 and 29) on 

duplicity grounds. The government has not appealed that order. 

 

5. They are Duffy Conley, Sheila Smith, Jack Conley, Mark 

Abbott, Joanne Smith, Ken Goodwin, Laurence Demino, Thomas 

Ciocco, Michael Sukaly, Phillip Ferrell, Anestos Rodites and 

William Rusin. On September 3, 1993, the district court granted 

their motions to join in McGrath's motion. 

6. We note that although all four of these issues were 

raised before the district court, the district court's opinion 

focused on addressed McGrath's double jeopardy argument. Because 

the district court granted McGrath's motion on the basis of this 

argument, the court decided that McGrath's remaining contentions 

were mooted by its Memorandum Opinion. United States v. Conley, 

833 F. Supp. at 1158, n.33. 
 On June 19, 1992, the government responded to these 

arguments, observing that, "Virtually all of McGrath's challenges 

to Count One of the Indictment . . . fail for a very simple 

reason. McGrath has not addressed or applied the directives of 

the law governing a conspiracy charge." The government further 

observed, "McGrath is charged with conspiracy, not money 

laundering . . . . McGrath instead proceeds from the false 

assumption that the government must marshall the evidence to 

demonstrate that he is guilty of a substantive money laundering 

violation." (App. at 156).7

 On September 3, 1993, the district court granted 

McGrath's motion to dismiss and ordered that the money laundering 

object of the conspiracy alleged in Count One of the indictment 

at ¶21(b) be stricken with prejudice. The district court's forty 

page opinion focused on McGrath's double jeopardy argument, 

identifying two separate aspects of this argument. Paraphrasing 

the motion, the district court stated, "First, [McGrath] contends 

that the conspiracy to launder money is the same offense as the 

substantive illegal gambling charge." The district court 

(..continued) 

 Accordingly, we need not reach any of these issues on 

appeal, as none of these other issues has been raised by the 

appellees as alternative grounds in support of the district 

court's decision. 

7. McGrath acknowledges that he has not been charged with 

a substantive violation of the money laundering statute; he 

argues that he was entitled to dismissal of Count One because "he 

had not been charged with any substantive money laundering 

offenses, nor had he been charged with any overt money laundering 

acts in furtherance of a money laundering conspiracy." (App. at 

125, 134.) 
correctly rejected this double jeopardy argument, concluding 

that, "Conspiracy to launder money and conducting an illegal 

gambling operation were not the same offense for purposes of 

double jeopardy." United States v. Conley, 833 F. Supp. at 1130. 

The district court, however, was troubled by McGrath's "implicit" 

argument that "an illegal gambling business is a lesser included 

offense of laundering the `proceeds' of an illegal gambling 

business, despite [McGrath's] being charged with substantive 

illegal gambling, but not money laundering." Id. The district 

court opined, "If violation of the illegal gambling prohibition 

is a lesser included offense of money laundering and Congress's 

intent to impose multiple punishments is not clear, the propriety 

of alleging a `lesser included object' as a separate object must 

be addressed." The district court surmised that "If Congress 

intended the facts alleged to be covered by both statutes, with 

multiple punishments, a conspiracy alleging both objects is 

properly charged." Id. 

 After engaging in an extensive analysis of legislative 

history, the district court concluded that congressional intent 

to impose multiple punishments was not clear. As a consequence, 

the court applied the rule of lenity, holding that double 

jeopardy constraints prevented a defendant from being charged 

with both substantive illegal gambling offenses and substantive 

money laundering offenses. The district court then observed the 

impossibility of being indicted for conspiring to do something 

legal: "That Count One, the conspiracy count, does not charge 

Defendants with substantive money laundering cannot save the 
money laundering object of the conspiracy count. An agreement to 

engage in conduct that is not illegal under Section 1956 can no 

more be the basis of a conspiracy conviction than the conduct 

itself can be the basis of a substantive conviction."8 833 F. 

Supp. at 1158. Based upon this observation, the district court 

concluded, "[T]he money laundering object of the conspiracy fails 

to state an offense under 18 U.S.C. § 371 and 18 U.S.C. § 1956 

(a)(1)(A)(i)." Accordingly, the district court dismissed the 

money laundering object of the conspiracy contained in Count One. 

 The district court had subject matter jurisdiction 

pursuant to Title 18, United States Code, Section 3231. We have 

appellate jurisdiction of the dismissal of a portion of an 

indictment pursuant to Title 28, United States Code, Section 

3731. See Sanabria v. United States, 437 U.S. 54, 69 n.23 (1978) 

(holding "there is no statutory barrier to an appeal from an 

order dismissing only a portion of a count"). Our task is to 

determine, on plenary review,9 whether the district court 

 

8. The district court noted: 

 The crux of the money laundering object of the 

conspiracy count is that "during the period November 

1986 through September 1991 cash proceeds from illegal 

gambling involving video poker machines was received, 

transferred, delivered, deposited or otherwise 

transacted by the defendants in violation of Title 18, 

United States Code, Section 1956. If this actually 

could not be properly charged as substantive money 

laundering, it cannot survive as a money laundering 

object of the conspiracy count. 

United States v. Conley, 833 F. Supp. at 1156. 

9. Our review of the sufficiency of an indictment to 

charge an offense is a legal question subject to plenary review. 
committed legal error in concluding that the indictment is 

violative of the prohibition against double jeopardy. 

II. 

 The Double Jeopardy clause provides that no person 

shall "be subject for the same offense to be twice put in 

jeopardy of life or limb." U.S. Const., Amdt. 5. This 

protection applies both to multiple punishments and successive 

prosecutions for the same criminal offense.10 In the contexts of 

both multiple punishments and successive prosecutions, the double 

jeopardy bar applies if the two offenses for which the defendant 

is punished or tried constitute the same offense. Blockburger v. 

United States, 284 U.S. 299 (1932). 

 Criminal statutes need not be identical to be 

constitute the same offense for purposes of double jeopardy 

analysis. Brown v. Ohio, 432 U.S. 161, 164 (1977). In order to 

determine whether two offenses are the same offense sufficient to 

warrant protection against multiple punishments, we inquire 

whether "[e]ach of the offenses created requires proof of a 

different element." Blockburger v. United States, supra. More 

specifically, "[t]he applicable rule is that where the same act 

or transaction constitutes a violation of two distinct statutory 

(..continued) 

United States v. Leo, 941 F.2d 181, 188 (3d Cir. 1991); United 

States v. Olatunji, 872 F.2d 1161, 1163 (3d Cir. 1989). 

10. The principles we describe are well settled and the 

district court appropriately applied them. We state them here 

for the purpose of putting in context the second argument 

advanced by the defendants which the district court adopted. 
provisions, the test to be applied to determine whether there are 

two offenses or only one, is whether each provision requires 

proof of a fact which the other does not." Id. In Garrett v. 

United States, 471 U.S. 773 (1985) the Supreme Court further 

refined the Blockburger test in a double jeopardy analysis. 

Under Garrett, "[t]he critical inquiry is whether the . . . 

[broader] offense is considered the `same offense' as one or more 

of the predicate offenses within the meaning of the double 

jeopardy clause." 471 U.S. at 786. In pursuing this inquiry, 

the Court looked to the general meaning of the term "same" and to 

the allegations of the actual crimes charged and asked if they 

were the "same offense." 471 U.S. at 786. 

 As the Court held in Whalen v. United States, 445 U.S. 

684, 692 (1980), however, the Blockburger test is one of 

statutory construction: it reflects the assumption that 

"Congress ordinarily does not intend to punish the same offense 

under two different statutes." Id. Because the rule "serves as 

a means of discerning congressional purpose [, it] should not be 

controlling where, for example, there is a clear indication of 

contrary legislative intent." Albernaz v. United States, 450 

U.S. 333, 340 (1981). Congress, under this circumstance, may 

impose cumulative punishments. The double jeopardy clause's 

protection against multiple punishments in a single case ensures 

only that a court does not impose a punishment in excess of the 

punishment intended by the legislature. See Missouri v. Hunter, 

459 U.S. 359, 368 (1983) ("[l]egislatures, not courts, prescribe 

the scope of punishments"). 
 Evidence which establishes a violation of more than one 

criminal statute does not necessarily indicate that those 

statutes proscribe the same offense. United States v. Felix, 112 

S. Ct. 1377 (1992). Instead, the test enunciated in Blockburger 

"focuses on the proof necessary to prove the statutory elements 

of each offense rather than on the actual evidence to be 

presented at trial." Illinois v. Vitale, 447 U.S. 410, 416 

(1980). 

 In Ianelli v. United States, 420 U.S. 770, 777 (1975), 

the Court noted that "[t]raditionally the law has considered 

conspiracy and the completed substantive offense to be separate 

crimes." Although the substantive offense forms a part of the 

conspiracy offense and therefore could be considered by some to 

be one of its "incidents," the Court held that "the conspiracy to 

commit an offense and the subsequent commission of that crime 

normally do not merge into a single punishable act." Id. Thus 

the conspiracy and substantive offenses would not be considered 

the same offense for double jeopardy purposes because 

"[c]onspiracy is an inchoate offense, the essence of which is an 

agreement to commit an unlawful act." Id. An agreement to 

commit a substantive offense presents distinct dangers beyond 

those associated with the commission of the offense itself: 

 Concerted action both increases the 

likelihood that the criminal object will be 

successfully attained and decreased the 

probability that the individual involved will 

depart from their path of criminality. Group 

association for criminal purposes often, if 

not normally, makes possible the attainment 

of ends more complex than those which one 

criminal could accomplish. 
Id. at 778. 

 In cases involving the interactions between other, more 

complex criminal statutes, similar reasoning effectively has 

dispelled double jeopardy concerns about the imposition of 

multiple punishments. See Garrett v. United States, 471 U.S. 773 

(1985) (continuing criminal enterprise (21 U.S.C. § 848) and 

predicate narcotics offenses (21 U.S.C. §§ 841, 843(b), 846, 952, 

960, 963)); Albernaz v. United States, 450 U.S. 333 (1981) 

(conspiracy to import narcotics (21 U.S.C. § 963) and conspiracy 

to distribute narcotics (21 U.S.C. § 846)); United States v. 

Console, 13 F.3d 641 (3d Cir. 1993), cert. denied, 62 U.S.L.W. 

3722 (1994) (racketeering (18 U.S.C. § 1962) and predicate mail 

fraud offenses (18 U.S.C. § 1341)). 

A. 

 McGrath maintained before the district court that he 

would be subjected to multiple punishments for these offenses: 

conspiracy to commit money laundering, in violation of 18 U.S.C. 

§ 371; and conducting an illegal gambling business, in violation 

of 18 U.S.C. § 1955. The starting point -- and the ending point 

as well -- are the essential elements of each of these statutes. 

 In order to prove conspiracy to commit money 

laundering, the government must establish the following three 

essential elements: (1) the conspiracy, agreement, or 

understanding to commit money laundering was formed, reached, or 

entered into by two or more persons; (2) at some time during the 
existence or life of the conspiracy, agreement, or understanding, 

one of its alleged members knowingly performed one of the overt 

acts charged in the indictment in order to further or advance the 

purpose of the agreement; and (3) at some time during the 

existence or life of the conspiracy, agreement, or understanding, 

the defendant knew the purpose of the agreement, and then 

deliberately joined the conspiracy, agreement or understanding. 

See United States v. Rankin, 870 F.2d 109, 113 (3d Cir.), cert. 

denied, 493 U.S. 840 (1989). 

 To prove a violation of the illegal gambling statute, 

the government must establish these three elements: (1) a 

gambling business described in the indictment was conducted which 

violated the laws of the state in which it was conducted; (2) 

five more persons including the defendant, knowingly and 

deliberately conducted, financed, managed, supervised, directed 

or owned all or part of that gambling business; and (3) the 

gambling business was either in substantially continuous 

operation for more than thirty days, or, alternatively, the 

gambling business, on at least one day, had gross revenues of two 

thousand dollars or more. 18 United States Code § 1955(a) and 

(b); Iannelli v. United States, 420 U.S. 770, 772 (1975). 

 Clearly, conviction of the conspiracy statute requires 

proof of an element which the gambling statute does not: that 

the conspiracy, agreement, or understanding to commit money 

laundering was formed, reached, or entered into by two or more 

persons, not necessarily including the defendant. Just as 

clearly, conviction of the gambling statute requires proof of an 
element which the conspiracy statute does not: that five or more 

persons, including the defendant, knowingly and deliberately 

conducted, financed, managed, supervised, directed or owned all 

or a part of a gambling business. The statutes, therefore, do 

not constitute the same offense for double jeopardy purposes. 

 Insofar as the district court found that a conspiracy 

to launder money and a substantive violation of the illegal 

gambling business prohibition were not the same under Blockburger

and thus concluded that Congress intended multiple punishments 

for a conspiracy to launder money and violation of the 

substantive illegal gambling prohibition, the district court was 

correct in so holding. The district court's analysis, however, 

did not end here; it is this second portion of its analysis that 

gives us concern. We turn now to McGrath's second contention. 
B. 

 McGrath next asserted before the district court that 

the money laundering object of the conspiracy is the "same 

offense" as the illegal gambling business object of the 

conspiracy under Blockburger. The essence of McGrath's argument 

was that "the money laundering activity charged in this case is 

temporally and statutorily the same activity necessary to conduct 

an illegal video poker gambling business." McGrath contends 

before us that a wide variety of transactions involving the money 

placed into the video poker machines is necessarily part of the 

illegal gambling business, including collecting and counting 

money, dividing up money, transferring and transporting money, 

depositing money into banks and withdrawing money from banks. 

McGrath contends that this same conduct cannot be properly 

alleged to be money laundering. See 833 F. Supp. at 1156. 

 In analyzing the alleged "sameness" between the money 

laundering activity and the "specified unlawful activity," i.e., 

the illegal gambling activity, the district court found that 

conducting the illegal gambling business constituted a "species 

of lesser included offense" of money laundering if it is the 

elements of the illegal gambling business upon which the 

government seeks to rely to prove "specified unlawful activity." 

833 F. Supp. at 1133. 

 Apparently troubled by the superficial similarity 

between the substantive money laundering offense and the 

substantive illegal gambling offense, the district court 

addressed whether conducting "an illegal gambling business is a 
lesser included offense of laundering the `proceeds' of an 

illegal gambling business . . . ." Id. The district court 

reasoned that if the substantive illegal gambling statute is a 

lesser included offense of the substantive money laundering 

statute, double jeopardy principles may prohibit the government 

from charging conspiracy to commit money laundering and the 

substantive offense of conducting an illegal gambling business. 

 Because McGrath had not been charged with substantively 

laundering any "proceeds," the district court justified its 

consideration of these two statutes by reasoning that "[f]or an 

agreement to constitute a conspiracy . . . the object of the 

agreement or the means of effectuating it must be illegal." 833 

F. Supp. at 1156. This statement is certainly true. As we have 

observed, in order to convict a defendant of conspiracy, the 

government must "prove an agreement which contemplates the 

commission of a crime and that such crime is in fact and law a 

federal offense." United States v. Pepe, 512 F.2d 1192, 1132 (3d 

Cir.), cert. denied, 423 U.S. 893 (1975). In keeping with this, 

the district court should have ascertained whether the conduct 

alleged as the object of the conspiracy would, if completed, 

constitute a violation of the substantive money laundering 

statute. Indeed here it does constitute such a violation. See

App. at 73-83 (overt acts in the indictment detailing activities 

proscribed by the substantive money laundering statute). Because 

"the object of the agreement" was illegal, the district court 

should have concluded its inquiry. Instead, the district court 

made reference to an entirely different statute, one proscribing 
the conduct of an illegal gambling business. See 18 United 

States Code § 1955 (1988). 

 We are concerned with the district court's focus on 

whether the substantive offense of conducting an illegal gambling 

operation and the substantive offense of money laundering were 

the same for purposes of double jeopardy, because McGrath was 

never charged with the substantive offense of money laundering. 

Based upon its finding of a double jeopardy problem with the 

simultaneous application of these two statutes -- the substantive 

money laundering statute and the substantive illegal gambling 

statute -- the district court held, 

 Because the intent of Congress to impose a 

punishment under section 1956(a)(1)(A)(i) for 

acts already penalized under the illegal 

gambling statute is not clear, and because 

defendant McGrath and the joining defendants 

are entitled to the benefit of the rule of 

lenity, the court holds that activities 

penalized under section 1955, the Prohibition 

of Illegal Gambling Businesses, are not 

without more, also punishable under Section 

1956(a)(1)(A)(i). Section 1956(a)(1)(A)(i) 

will continue to apply in the context of an 

illegal gambling business where the 

"promoted" "specified unlawful activity" is 

other than the underlying illegal gambling 

business, and section 1956(a)(1)(A)(i) will 

continue to apply to the core of money 

laundering. 

833 F. Supp. at 1158 (citations omitted). We disagree with the 

district court's conclusion that a substantive illegal gambling 

offense can never constitute the "specified unlawful activity" 

for purposes of the money laundering statute. Its decision that 

a money laundering conviction under section 1956(a)(1)(A)(i) may 
not be based on the income from an illegal gambling business, 

unless there exists some additional form of specified unlawful 

activity, is erroneous and is not supported by the statutory 

language or legislative history. 

 As written, the money laundering statute requires that 

money laundering transactions be conducted with the "proceeds" of 

specified unlawful activity and that such transactions be 

committed with the intent either to promote the specified 

unlawful activity or to conceal the nature or source of the 

income. The money laundering activity and the illegal gambling 

activity, therefore, do not constitute the "same offense" within 

the meaning of Blockburger due to this "intent" requirement.11 

 The acts of conducting an illegal gambling business 

consist of placing, maintaining and servicing video poker 

machines in various locations. An additional aspect of 

conducting an illegal gambling business necessarily includes the 

collecting of the proceeds of the illegal gambling activity. The 

 

11. We have interpreted this "intent to promote" 

requirement broadly and have held that a defendant can engage in 

financial transactions that promote not only ongoing or future 

unlawful activity, but also prior unlawful activity. United 

States v. Paramo, 998 F.2d 1212, 1215 (3d Cir. 1993), cert. 

denied, 62 U.S.L.W. 3551 (1994). There, we held that Paramo had 

the intent to promote specified unlawful activity, mail fraud, by 

cashing embezzled IRS checks. Although none of the proceeds 

obtained from the earlier mail frauds were actually used to 

facilitate the subsequent frauds, we recognized that it did not 

have to be a future mail fraud that was promoted, it could be a 

past mail fraud or an ongoing mail fraud. Because cashing the 

checks was necessary to realize any benefit from the mail fraud, 

we held that it was permissible for the jury to infer Paramo 

cashed each stolen check with the intent to promote the carrying 

on of the antecedent fraud. 
district court touches upon the concern that the money laundering 

statute not be applied so broadly as to cover any and all 

dispositions of the proceeds of the specified unlawful activity. 

Obviously, whenever a defendant makes money from criminal 

activity he has to do something with it. As the district court 

correctly observed, Congress did not enact money laundering 

statutes simply to add to the penalties for various crimes in 

which defendants make money. 833 F. Supp. at 1155-56. 

 However, in prosecutions under Sections 1956(a)(1), 

this concern is adequately addressed by applying the "promotion" 

and "concealment" branches of § 1956's "intent" requirement. 

Section 1956(a)(1), quite clearly, does not prohibit all

financial transactions that are conducted with the proceeds of 

specified unlawful activity. It only proscribes those 

transactions that are conducted with the intent to promote

certain further illegal activity, under subsection (A), or that 

are designed to conceal under subsection (B). 

 These requirements would preclude the application of 

section 1956 to non-money laundering acts such as a defendant's 

depositing the proceeds of unlawful activity in a bank account in 

his own name and using the money for personal purposes. See, 

e.g., United States v. Jackson, 935 F.2d 832 (7th Cir. 1991). In 

Jackson, the defendant was prosecuted for money laundering when 

he used the proceeds of drug transactions to purchase telephone 

paging beepers and car telephones. He also used the drug 

proceeds to make rental payments. The Court of Appeals for the 

Seventh Circuit held that the evidence showed that purchasing the 
beepers promoted further drug activity, but that purchasing the 

car phones and making rental payments did not. 

 Applying these principles here, we note that after the 

proceeds are collected, the treatment given to them may be such 

that it violates § 1956, as well as § 1955. If the proceeds are 

treated in a manner so as to conceal that their source is illegal 

gambling, § 1956(a)(1)(B) has been violated. If subsequent 

financial transactions are conducted with these proceeds with the 

intent to promote the illegal gambling activity, § 1956(a)(1)(A) 

has been violated.12 The element charged in the latter 

violation, which was not necessary for the offense of conducting 

an illegal gambling business is that of "promotion," i.e., the 

advancing or furthering of the illegal gambling business. 

 McGrath's assertion that the activity of dividing up, 

collecting, transferring and even depositing proceeds into a bank 

are essential facets of carrying on an illegal gambling business, 

and therefore, cannot, due to double jeopardy constraints, serve 

as the basis for a money laundering object of conspiracy must 

fail. The acts McGrath identifies as constituting an "integral 

 

12. Count One charged (¶ 21b, app. 59-60) that the 

defendant (Conley) conducted financial transactions affecting 

interstate commerce with the proceeds of illegal gambling with 

video poker machines "with the intent to promote the carrying on 

of specified unlawful activity, illegal gambling with video poker 

machines . . . ." Specifically, Count One charged that Conley 

used illegal gambling proceeds to purchase more video poker 

machines (¶ 29, app. 65) and to pay employees of Duffy's Vending. 

(¶ 31, app. 65). The overt acts alleged included numerous 

payments to Matrix, an entity used to service the poker machines. 

These allegations are sufficient to charge a money laundering 

offense under the promotion branch of 18 U.S.C. § 1956(a)(1). 
part of the illegal gambling business" would likewise constitute 

an integral part of many other criminal enterprises, such as a 

narcotics business. 

 In arguing that the money laundering activity in this 

case was "temporally" the same activity necessary to conduct an 

illegal video poker gambling business, McGrath relies on two 

recent cases interpreting the Money Laundering Control Act which 

suggest that § 1957 would apply only to monetary transactions 

occurring after the completion of the underlying criminal 

activity. In United States v. Edgmon, 952 F.2d 1206 (10th Cir. 

1991), cert. denied, 112 S.Ct. 3037 (1992) and United States v. 

Lovett, 964 F.2d 1029 (10th Cir.), cert. denied, 113 S. Ct. 169 

(1992), the Court of Appeals for the Tenth Circuit confronted 

double jeopardy challenges to convictions under the Money 

Laundering Control Act. In each of these cases, the Court of 

Appeals concluded that Congress intended to impose separate 

punishments for money laundering transactions and for the 

underlying criminal activity, and that it intended the money 

laundering statutes to apply to transactions occurring after the 

completion of the underlying criminal activity. With respect to 

§ 1956, the court stated that, "Congress aimed the crime of money 

laundering at conduct that follows in time the underlying crime 

rather than to afford an alternative means of punishing the prior 

`specified unlawful activity." Id. at 1214 (emphasis added). In 

United States v. Lovett, supra, the court reached the same 

conclusion with respect to § 1957. Later, in United States v. 

Johnson, 971 F.2d 562 (10th Cir. 1992), the Court of Appeals held 
that it was possible to construe the phrase "proceeds obtained 

from a criminal offense" more broadly than this. The court held 

that "one might logically infer that Congress would have intended 

§ 1957 to apply when the underlying criminal activity occurs 

simultaneously with a monetary transaction with the proceeds of 

the activity." 971 F.2d at 569. 

 Our decision in this case is not inconsistent with 

these cases requiring that there be some distinction between the 

specified unlawful activity and the financial transaction. Our 

decision today is consistent with our decision in United States 

v. Paramo, 998 F.2d 1212 (3d Cir. 1993), cert. denied, 62 

U.S.L.W. 3551 (1994), and with the statutory requirement that the 

financial transaction involve "proceeds" of unlawful activity. 

Although the money laundering statute does not define when money 

becomes "proceeds," it is obvious to us that proceeds are derived 

from an already completed offense, or a completed phase of an 

ongoing offense, before they can be laundered. See Paramo, 998 

F.2d 1212 (the specified unlawful activity was legally completed 

mail fraud -- the proceeds of which were ripe for laundering.)13 

Here, gambling activity occurred at various business 

establishments where the video poker machines were located. We 

find that the money, once collected from the poker machines, 

 

13. Paramo, however, did not involve financial transactions 

with proceeds obtained from an ongoing offense, which is what is 

alleged here. In Paramo, there was no dispute that the 

underlying offense and specified unlawful activity were legally 

completed prior to the financial transaction comprising the money 

laundering. Thus, Paramo does not answer the question of when 

money becomes "proceeds" ripe for laundering, at issue here. 
became "proceeds of specified unlawful activity" within the 

meaning of the money laundering statute. Accordingly, any 

subsequent financial transaction involving these proceeds that 

promotes or furthers the illegal gambling business could form the 

basis of a charge of money laundering. 

 The fact that there may be some overlap in the acts 

alleged to constitute the conduct of an illegal gambling business 

and money laundering does not give us pause. We are mindful that 

Blockburger is only a test of statutory construction. In 

conducting a double jeopardy analysis, the goal is to ascertain 

legislative intent and to apply the statute at issue, as written, 

in keeping with that intent. Here, we find that the district 

court erred in failing to apply the money laundering statute as 

written. 

 As enacted by Congress, Title 18, United States Code, 

Section 1956(a)(1) prohibits financial transactions with the 

proceeds of specified unlawful activity. Congress has determined 

that "specified unlawful activity" includes conducting an illegal 

gambling business under Title 18, United States Code, Section 

1955. The term "specified unlawful activity" is expressly 

defined in § 1956(c)(7)(A) as, "any act or activity constituting 

an offense listed in section 1961(1) of this title . . . ." 

Title 18, United States Code, Section 1961(1)(B) identifies 

specified unlawful activity as "any act which is indictable under 

any of the following provisions of Title 18, United States Code . 

. . ." Section 1955, the prohibition of illegal gambling 

business, is included in the list of offenses enumerated in Title 
18, United States Code, Section 1961(1)(B). By including the 

conducting of an illegal gambling business in its list of 

specified unlawful activities on the same footing with numerous 

other offenses, Congress has indicated that no additional 

"specified unlawful activity" is required for the money 

laundering statute to apply when the specified unlawful activity 

is an illegal gambling business.14

 Furthermore, the legislative history of the Money 

Laundering Crimes Act of 1986, of which section 1956 is a part, 

indicates that illegal gambling activity was an area of 

congressional concern. The comments by Senator Strom Thurmond, 

one of the bill's sponsors, are illustrative: 

 

14. The Court of Appeals for the First Circuit recently 

observed in United States v. LeBlanc, 24 F.3d 340 (1st Cir. 1994) 

that although the "classic" money laundering case is where a 

"drug trafficker collects large amounts of cash from drug sales 

and deposits the drug proceeds in a bank under the guise of 

conducting a legitimate business transaction," the Money 

Laundering Control Act "prohibits a much broader range of conduct 

than just the `classic' example of money laundering." The Court 

of Appeals stated, "The language of the statute, in conjunction 

with the definitions provided in 18 U.S.C. § 1956(c) indicates 

that Congress intended to criminalize a broad array of 

transactions designed to facilitate numerous federal crimes, 

including illegal gambling." 24 F.3d at 346. 

 In Leblanc, the court of appeals held that the 

defendants' offenses (money laundering and operating an illegal 

gambling business) fell within the "heartland" of money 

laundering cases and reversed the district court's grant of a 

downward departure under the sentencing guidelines on the theory 

that the offenses were essentially the operation of an illegal 

gambling business. See also United States v. Stavroulakis, 952 

F.2d 686, 691 (2d Cir. 1992) ("Congress has made clear that 

concealing the source of illegal gambling proceeds is just as 

detrimental to society as concealing the source of narcotics 

money."). 
 The President's Commission on organized crime 

has identified money laundering as one of the 

greatest challenges facing law enforcement 

today. A recent Wall Street Journal article 

states that illegal doings, gambling and vice 

generate $150 billion dollars annually. It 

is readily apparent that criminals rely on 

laundering schemes to hide the identities and 

true source of the proceeds. 

See Senate Report (S. Rep. 99-43), 99th Cong., 2d Session, pp.3-4 

(1986); Congressional Record (132 Cong. Rec. 17571, July 24, 

1986). 

 The district court, in holding that conducting an 

illegal gambling business cannot satisfy the specified unlawful 

activity requirement of the money laundering statute, has unduly 

narrowed the scope of the money laundering statute. In so doing, 

the district court has interpreted this statute in a manner 

inconsistent with its express provisions and legislative intent. 

 Since Count One did not charge any specified unlawful 

activity other than conducting an illegal gambling business, the 

district court found that Count One failed to charge a conspiracy 

to commit money laundering. Because we find that the conduct in 

this case, conducting an illegal gambling business, constitutes 

"specified unlawful activity" within the meaning of the money 

laundering statute, we conclude that Count One is sufficient to 

charge a conspiracy to commit money laundering.15 Accordingly, 

 

15. It is not our role at this juncture to comment on the 

sufficiency of the government's evidence to support a conviction 

for money laundering. We observe only that the government may 

allege and prove conspiracy even if the underlying substantive 

object of the conspiracy is never completed. For this reason, a 

conspiracy indictment need not allege every element of the 

underlying offense, but need only put defendants on notice that 
we will remand this case to the district court so that the money 

laundering object of the conspiracy alleged in Count One may be 

reinstated. 

 

III. 

 For the foregoing reasons, we will vacate the judgment 

of the district court dismissing the money laundering object of 

the Count One of the indictment and remand to the district court 

for its reinstatement. 

(..continued) 

they are charged with a conspiracy to commit the underlying 

substantive offense. United States v. Werme, 939 F.2d 108, 112 

(3d Cir. 1991), cert. denied, 112 S. Ct. 1165 (1992); United 

States v. Wander, 601 F.2d 1251, 1259 (3d Cir. 1979).