Judge Kelly died on October 21, 1998. This opinion is consistent with the vote 1

he cast at conference on this case.

The Hon. Russell G. Clark, United States District Judge for the Western District 2

of Missouri.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

_____________

No. 98-1884WM

_____________

United States of America, *

*

Appellant, *

* On Appeal from the United

v. * States District Court

* for the Western District

* of Missouri.

Nanci Carter Woods, *

*

Appellee. *

___________

Submitted: September 22, 1998

Filed: November 5, 1998 

___________

Before RICHARD S. ARNOLD, WOLLMAN, and KELLY, Circuit Judges. 1

___________

RICHARD S. ARNOLD, Circuit Judge.

Pursuant to an agreement with the United States, Nanci Carter Woods pleaded

guilty to one count of bankruptcy fraud under 18 U.S.C. § 152 and one count of money

laundering under 18 U.S.C. § 1957. The District Court sentenced Ms. Woods to a 2
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three-year term of probation, six months of which were required to be served in home

confinement. The government appeals the sentence, arguing that the Court erred by

using the fraud provision of the Sentencing Guidelines, rather than the moneylaundering provision, to determine the offense level for sentencing. The government

also argues that the Court erred in awarding a one-level departure for Ms. Woods’s

charitable activity. We affirm.

I.

The events that led to Ms. Woods’s conviction began in 1996, when she filed for

bankruptcy. Ms. Woods was required to list all of her assets and to turn over certain

of them for liquidation. Among these, she identified to the Bankruptcy Court and

turned over to the Trustee 200 shares of Wal-Mart stock and 100 shares of Food Lion

stock. In fact, Ms. Woods owned 800 shares of Wal-Mart stock and 500 shares of

Food Lion stock. She sold the other 600 shares of Wal-Mart stock for $16,045, and,

without reporting the transaction to the Bankruptcy Trustee, deposited the proceeds,

in the form of a check, into her husband’s bank account. The next day, Ms. Woods and

her husband obtained four $2,500 cashier’s checks from the account, and used the

money to pay personal expenses and to repay a loan from a relative. When confronted

by the Trustee about the Wal-Mart stock, Ms. Woods admitted the diversion, but

claimed that she had disclosed all of her other assets. According to the government,

however, Ms. Woods had also sold the other 400 unreported shares of Food Lion stock

for $3,274.25, and had used that money to pay personal expenses. The diversion of the

Food Lion stock was not discovered until the matter had been referred to the United

States Attorney by the Trustee.

In 1997, the United States filed a two-count indictment against Ms. Woods,

alleging that she committed: 1) bankruptcy fraud, under 18 U.S.C. § 152, when she

knowingly and fraudulently concealed the Wal-Mart stock from the Bankruptcy

Trustee; and 2) money laundering, under 18 U.S.C. § 1957, when she knowingly
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deposited the check representing the proceeds of the sale of this stock into her

husband’s bank account.

Ms. Woods agreed to plead guilty. The plea agreement contained a stipulation

that the offense level under the Sentencing Guidelines was 13 for the bankruptcy fraud

count and 19 for the money-laundering count, before any reduction for acceptance of

responsibility. The agreement also stated that “[t]he parties further agree that the

sentence ultimately imposed is within the sole discretion of the Court.” Appellant’s

Add. at 11. Before sentencing, Ms. Woods moved for departure from the moneylaundering guideline, U.S.S.G. § 2S1.2, arguing that the case presented factors that

took it outside the “heartland” of money-laundering cases, and that the appropriate

level for sentencing should take into account § 2F1.1, the guideline for the underlying

offense, bankruptcy fraud. Specifically, Ms. Woods argued that the main purpose of

the money-laundering statutes was to combat drug trafficking and organized crime, that

the money-laundering guidelines were designed to be used principally in that context,

and that her deposit of proceeds from the sale of the Wal-Mart stock was not typical

of the conduct the Sentencing Commission intended to punish under § 2S1.2. The

District Court agreed, finding that “[t]he statute on money laundering was not intended

to be imposed in this type of case,” and that “the offense committed in this case is

outside the heartland of cases.” Appellant’s Add. at 6. Ms. Woods also argued that

her extensive charitable activity warranted an additional departure under § 5H1.11.

Again, the Court agreed, and granted a one-level downward departure. Ms. Woods

was sentenced to three years’ probation.

II.

In this appeal, the United States argues that the District Court erred in departing

below the money-laundering guidelines because the activity engaged in by Ms. Woods

(depositing the check into her husband’s bank account and using the funds to purchase

cashier’s checks) falls within the range of conduct prohibited by 18 U.S.C. § 1957.
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That statute, in pertinent part, provides that: “Whoever . . . knowingly engages or

attempts to engage in a monetary transaction in criminally derived property that is of

a value greater than $10,000 and is derived from specified unlawful activity, shall be

punished . . ..” 18 U.S.C. § 1957(a). The term “specified unlawful activity”

encompasses a wide range of criminal conduct, including bankruptcy fraud. See 18

U.S.C. § 1956(c)(7)(D). Ms. Woods does not argue that her conduct did not violate

the money-laundering statute. It clearly did. Her argument is that the deposit of the

check was not serious money laundering as contemplated by the Sentencing

Commission when it promulgated the money-laundering guidelines.

Under Koon v. United States, 518 U.S. 81 (1996), a district court may depart

from the Sentencing Guidelines if “the court finds that there exists an aggravating 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.” Id. at 92 (quoting 18 U.S.C. §

3553(b)). The Supreme Court noted that the Sentencing Commission “did not

adequately take into account cases that are, for one reason or another, ‘unusual,’ ” 518

U.S. at 93 (citing 1995 U.S.S.G. ch. 1, pt. A, intro. comment. 4(b)), and said that,

under the Guidelines, departures may be considered in “atypical” cases.

Before departing from the Guidelines, a sentencing court first must determine

whether a particular case presents features that “take it outside the Guidelines’

‘heartland’ and make of it a special, or unusual, case.” Koon, 518 U.S. at 95. The

court must then decide whether the Sentencing Commission has forbidden, encouraged,

or discouraged departures based on those features. While a forbidden factor may not

be used as a basis for departure, an encouraged factor may be considered if the

Guidelines have not already taken it into account. A discouraged factor -- or an

encouraged factor already taken into account -- may also be used as a basis for

departure if the factor is present to an exceptional degree. If the factor is unmentioned,

the sentencing court must consider the “structure and theory of both relevant individual
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guidelines and the Guidelines taken as a whole,” and decide whether the factor is

sufficient to take the case out of the heartland. Id. at 96 (citing United States v. Rivera,

994 F.2d 942, 949 (1st Cir. 1993)). The Commission specifically said that it did “not

intend to limit the kind of factors, whether or not mentioned anywhere else in the

guidelines, that could constitute grounds for departure in an unusual case.” U.S.S.G.

ch. 1, pt. A, intro. comment. 4(b).

In Ms. Woods’s case, the District Court found that, because the underlying

offense was bankruptcy fraud, and not drug trafficking or some other offense typical

of organized crime, the facts of her money laundering did not fall into the “heartland”

of cases involving that offense. The Court thought the sentence for bankruptcy fraud

would more appropriately reflect the severity of the money-laundering offense. We

believe ample evidence exists in the record, in the case law, and in the legislative and

administrative history of the money-laundering guidelines to support the District

Court’s downward departure. Under Koon, “[t]he appellate court should not review

the departure decision de novo, but instead should ask whether the sentencing court

abused its discretion.” 518 U.S. at 91.

Significant support for Ms. Woods’s position can be found in the work of the

Sentencing Commission. In 1995, the Commission proposed amendments to the

money-laundering guidelines. The Commission had conducted an extensive study of

sentencing results under those guidelines, and found that “the broad and inconsistent

use of money laundering charges, coupled with an inflexible, arbitrarily determined

guideline structure, [had] result[ed] in substantial unwarranted disparity and

disproportionality in the sentencing of money laundering conduct.” Report to the

Congress: Sentencing Policy for Money Laundering Offenses, including Comments on

Department of Justice Report, United States Sentencing Comm’n (Sept. 18, 1997), p.

9. Notably, the Commission concluded that money-laundering sentences were “being

imposed for a much broader scope of offense conduct, including some conduct that is

substantially less serious than the conduct contemplated when the . . . guidelines were
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first formulated.” Id. at 5. The proposed amendments to the guidelines would have

tied the punishment for money laundering to the level of punishment for the underlying

crime. Under the new guidelines, according to the Commission, penalties would be

“more proportionate to both the seriousness of the underlying criminal conduct from

which the laundered funds were derived and to the nature and seriousness of the

laundering conduct itself.” Id. at 2.

Congress, however, disapproved the amendments. See Act of October 30, 1995,

Pub. L. No. 104-38, § 1, 109 Stat. 334. The report of the House Judiciary Committee

recommending disapproval of the amendment said that the Sentencing Commission’s

changes “appear to respond in part to the class of money laundering cases in which the

money laundering activity is not extensive, including ‘receipt and deposit’ cases --

those in which the money laundering conduct is limited to depositing the proceeds of

unlawful activity in a financial institution account identifiable to the person who

committed the underlying offense. While the application of the current guidelines to

receipt-and-deposit cases, as well as to certain other cases that do not involve

aggravated money laundering activity, may be problematic . . . past sentencing

anomalies arising from relatively few cases do not justify a sweeping downward

adjustment in the money laundering guidelines.” H.R. Rep. No. 104-272, at 14-15,

reprinted in 1995 U.S.C.C.A.N. 335, 348-49. We believe these statements support Ms.

Woods’s contention that her case is outside the Guidelines’ “heartland.” In addition,

we find nothing in the report that suggests Congress, in disapproving the proposed

amendments, also intended to prohibit sentencing courts from departing downward,

where appropriate, in receipt-and-deposit cases or in those individual cases “that do not

involve aggravated money laundering activity.”

Congress, moreover, took another step: it directed the Department of Justice to

prepare a report on the prosecution of money-laundering offenses and to ensure that the

statutes against money laundering were being prosecuted consistently and uniformly

by the United States Attorneys’ offices. See Report for the Senate and House Judiciary
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Committees on the Charging and Plea Practices of Federal Prosecutors with Respect

to the Offense of Money Laundering, Dept. of Justice (June 17, 1996). The report

prepared by the Department stated that the money-laundering statutes “should not be

used in cases where the money laundering activity is minimal or incidental to the

underlying crime. . . . The money laundering statutes should be used only where they

reflect the nature and extent of the criminal conduct involved . . ..” Id. at 14. The

procedures implemented to ensure consistent and uniform prosecutions among

jurisdictions involve various approval, consultation, and notification requirements. Id.

at 12-16. In addition, the United States Attorney’s Manual provides that “only

particularly complex and sensitive cases should be prosecuted” under the moneylaundering statutes. United States v. Bart, 973 F. Supp. 691, 697 (W.D. Tex. 1997)

(citing U.S. Dept. of Justice, United States Attorney’s Manual, Section 9-3.400.)

Congress also directed the Sentencing Commission to respond to the Department

of Justice’s report. See Report to the Congress: Sentencing Policy for Money

Laundering Offenses, including Comments on Department of Justice Report, United

States Sentencing Comm’n (Sept. 18, 1997). In this report, the Commission noted that

the current sentencing structure for money-laundering offenses had been promulgated

less than six months after the two primary money-laundering statutes had become

effective, and that “no actual prosecutorial experience or judicial guidance existed to

inform the Commission’s formulation of the initial money laundering guidelines.” Id.

at 3. The Commission wrote that it set the “relatively high” base offense levels “to

penalize the conduct about which Congress seemed most concerned when it enacted

the money laundering statutes, namely: 1) situations in which the ‘laundered’ funds

derived from serious underlying criminal conduct such as a significant drug trafficking

operation or organized crime; and 2) situations in which the financial transaction was

separate from the underlying crime and was undertaken to either: a) make it appear that

the funds were legitimate, or b) promote additional criminal conduct by reinvesting the

proceeds in additional criminal conduct.” Id. at 4. The Commission reviewed the steps

taken by the Department of Justice to ensure that money-laundering offenses were
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being prosecuted uniformly, but concluded that the Department’s efforts, without a

“properly restructured money laundering guideline,” were not adequate to avoid

“unwarranted sentencing disparity.” Id. at 13. 

The government cites United States v. Morris, 18 F.3d 562 (8th Cir. 1994),

where a panel of this Court reversed the District Court for departing downward from

the money-laundering guidelines. In Morris, the financial transaction was intended to

promote the carrying on of a complex bank fraud scheme involving an officer of a

financial institution. We believe Ms. Woods’s case is distinguishable, because her

deposit of the check had the effect of concluding, rather than promoting, the bankruptcy

fraud.

The government also cites United States v. O’Kane, 1998 WL 568813 (8th Cir.

1998). In O’Kane, this Court, in reversing a sentence arrived at after the District Court

grouped mail-fraud and money-laundering counts together, held that the offenses

invaded different interests and were “not so closely related as to justify grouping . . ..”

1998 WL 568813 at * 3. O’Kane is not a departure case, however. And while we

agree that bankruptcy fraud and money laundering invade different interests, we do not

read O’Kane to prohibit a District Court from departing from the Guidelines when it

determines that a case is outside the “heartland.”

In summary, we do not believe the deposit of the check by Ms. Woods into her

husband’s account, or their obtaining of the cashier’s checks, constitutes serious

money-laundering conduct as contemplated by the Sentencing Commission for

punishment under the money-laundering guidelines. At least the District Court could

have so found within its discretion. This is not the sort of conduct one normally thinks

of as money laundering. Accordingly, we hold that the District Court did not abuse its

discretion when it found that Ms. Woods’s case fell outside the “heartland” and granted

her motion for a downward departure.
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III.

The government also appeals the one-level downward departure granted by the

District Court for Ms. Woods’s charitable activity. The Sentencing Guidelines provide

that a defendant’s charitable conduct is not an appropriate basis for a downward

departure unless it is exceptional. See Koon, 518 U.S. at 95-96. Ms. Woods brought

into her own home two troubled young women, one of whom was a former employee

who had stolen from Ms. Woods. The other was the defendant’s niece, who had had

difficulty living at home, and who had dropped out of school. Ms. Woods paid for

them to attend a private high school, both were graduated, and they are now productive

members of society. Ms. Woods also helped an elderly friend, who was unhappy living

in a nursing home, move into an apartment near her home. She helped to care for him,

and he was able to live out his remaining years with greater independence. The District

Court thought these efforts by Ms. Woods were exceptional, and we have no basis for

holding that they were not.

VI.

For the reasons given above, the judgment of the District Court is affirmed.

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.