In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 02-1070

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

ARLENE F. DIAMOND,

Defendant-Appellant.

____________

Appeal from the United States District Court

for the Central District of Illinois.

No. 00 CR 20046—Michael P. McCuskey, Judge.

____________

ARGUED APRIL 9, 2004—DECIDED AUGUST 10, 2004

____________

Before BAUER,EASTERBROOK, andKANNE, Circuit Judges.

BAUER, Circuit Judge. Arlene F. Diamond was convicted

of mail fraud, wire fraud, conspiracy to commit mail and

wire fraud, conspiracy to conduct monetary transactions

with the proceeds of illegal activities, and conducting

monetary transactions with proceeds of illegal activities.

She appeals; we reverse in part and affirm in part.
2 No. 02-1070

I. Backgound

In 1994, Clyde Hood, a man who claimed to be one of only

eight people experienced enough to trade international

“Prime Bank Notes” announced that he had received a

message from God who told him to use his expertise in the

secretive and lucrative trading of Prime Bank Notes to

“help the little people.” Accordingly, Hood would allow investors to make as many hundred dollar loans as they liked

to Omega Trust and Trading, Ltd. The money would be

used to facilitate trades in Prime Bank Notes. Each unit, at

one hundred dollars a piece, was promised a fifty- to-one

return in less than a year. Furthermore, an investor could

roll over his or her profits by reinvesting them into Omega,

guaranteeing millions of dollars in return for a small initial

investment. 

That was the pitch. Like most things that sound too good

to be true, it was; it was a scam. Hood was actually a

retired electrician who had come up with the idea for a

Prime Bank Notes scam through his association with other

scam artists. Sad to relate, God had not spoken to Hood.

The whole thing was completely fabricated. 

Nevertheless, Hood worked hard in creating an image of

legitimacy. For example, he created a database of the investors to facilitate communication between the investors

(more properly, victims) and himself. Later, he set up a recorded message hotline to keep investors up to date on the

status of Omega. The status of Omega was always the same;

pay-out was just around the bend. Other written communications stated the same, often times including religious

references and biblical quotations. 

To accomplish this fraud, Hood enlisted the help of others.

These individuals would market the scam and explain to

potential investors that they could join Omega by sending

their monies to Clyde Hood in cash, money order, or cashier’s check. The investor would then receive a “Private
No. 02-1070 3

Party Loan Agreement” that purported to represent his or

her interest in the Omega funds.

One such marketeer was Michael Kodosky. Arlene F.

Diamond invested in Omega under Kodosky. She frequently

contacted the hotline and Kodosky to check on the status of

her investment. At some point between 1996 and 1999—

specifically when makes no difference to this opinion—

Diamond began marketing the Omega scam. In 1998 she

met with Hood and asked him about the ongoing investigation into Omega and told Hood that she knew it was an

illegal scam. She also told Hood that she knew a way to

circumvent the law. She had two additional meetings with

Hood which made it even clearer that she was aware that

the Omega Trust and Trading transactions were fraudulent.

By the time she returned home from the first meeting

with Hood, Diamond was sending out her own Private Party

Loan Agreements, maintaining her own investor database

and telling investors to make their checks payable to her as

opposed to Hood.

By late 1998 or early 1999, after Diamond’s third meeting

with Hood, she was involved in the Omega scam up to her

eyebrows. Various investors were told that they could

receive their Omega updates from Diamond and that she

was coordinating Omega activities for California. One such

individual was Reverend Jody Boyd. Boyd, a retired minister who was earning income by housecleaning and passing

out free supermarket samples, was informed that Diamond

and Hood were setting up another Omega-like fund in

Belize. Boyd declined to invest in that venture. When Boyd

called again in the summer or fall of 1999, Diamond told

Boyd that she had just attended a victory party for Omega.

She asserted that George W. Bush and one of the

Rockerfellers were in attendance, as they were on the

Omega board of trustees. Pay-out was again delayed—this
4 No. 02-1070

time because George Bush, Senior wanted his son to get the

credit for the economic boom inherent in creating so many

millionaires.

Another minister, Reverend Greg Bryant accepted a request from Diamond to assist in secretarial work involving

Omega. While assisting Diamond, Bryant saw large amounts

of correspondence which referred to money sent to Diamond.

The amounts were typically between one hundred and eight

hundred dollars. He also answered Diamond’s phone

approximately ten times. These phone calls were usually

from people asking about the time frame for Omega’s payout. The callers were assured that pay-out was imminent.

By September 1999, Reverend Bryant was duped into investing in Omega. Diamond informed him that she needed

the money quickly if it was to be invested. As per her instructions, Bryant sent Diamond two hundred dollars, payable

to Diamond’s account, New Hope Trust.

In November 1999, Diamond sent Bryant documents to

open a trust for his Omega pay-out. The letter was marked,

“URGENT!!! RUSH!!! Must be returned immediately!!” The

sense of urgency led Bryant to believe that he must make

any additional contributions to Omega immediately and he

gave her an additional thousand dollars. When Bryant inquired about the status of Omega in early 2000, Diamond

told him that pay-out was delayed by satellite limitations

caused by sunspots and magnetism.

Later still, possibly in early 2000, Reverend Boyd called

Diamond to get an Omega update. Boyd was told that

Diamond had just attended another Omega victory party in

San Francisco. Shortly after that conversation, Diamond

sent Boyd a power of attorney document giving Diamond

control over Boyd’s finances. Boyd balked at signing such a

document.

Linda Stark, who was involved in Omega as an investor

since 1998 received the same message as everyone else; pay-
No. 02-1070 5

out was right around the corner. She received this message

a number of times in 1998, 1999, and 2000. By 2000, Stark

was instructed by Diamond that additional monies for

investment should be deposited into Diamond’s New Hope

Trust account. Diamond also instructed Stark to send the

money in cash via FedEx. The cash was to be wrapped in

aluminum foil. Stark did so. After repeated calls about the

status of Omega and consistently being told that pay-out

was coming soon, Stark concluded that she had been defrauded—she was, of course, right.

One final individual’s experiences with Omega deserve

some attention because they show the depths of Diamond’s

exploitation. Neva McKibben met Diamond in 1999 while

they were both working in the Omega offices in Mattoon,

Illinois. McKibben was responsible for cleaning the offices,

for which she received one hundred dollars per week. It was

in this capacity that she overheard that Hood was involved

in “offshore trading.” McKibben asked Hood if she could

invest $25,000 from an IRA into Omega. Hood refused to

take her money but said that he would invest on her behalf.

Diamond, however, lacked such a fine-tuned conscience. 

In February 2000, Diamond asked McNibben about her

Omega investment and the return Hood told her to expect.

When McNibben said that Hood had promised a fifty-to-one

return, Diamond told McNibben that she could get two

hundred-to-one if she gave Diamond the money instead.

Diamond told McNibben not to tell Hood about the arrangement. In less than six months, Diamond had swindled

McNibben out of her family’s entire retirement savings of

$57,600.

By 2000 things were starting to go bad for the conspiracy.

That year, various peripheral actors were subpoenaed to

testify before a Grand Jury investigating Omega. Diamond

schemed to interfere in the investigation by encouraging the

witnesses not to testify. In one instance, she supplied a
6 No. 02-1070

witness with a legal-looking document which purported to

excuse him from testifying. Another incident involved

Diamond telling a subpoenaed witness that she was an

attorney and advised the witness not to testify. When that

witness failed to appear before the Grand Jury, she was

summoned for a hearing before the Chief Judge of the

Central District of Illinois. Diamond met with the witness

after the hearing and asked for and obtained a written report

on the hearing. Diamond then informed the witness that

she would not need to appear before the Grand Jury again.

On August 28, 2000, the same month Diamond was arrested, a search warrant was executed on Diamond’s Mattoon,

Illinois apartment. Among the items seized were Omegarelated documents, a notebook computer, and Diamond’s

passport. The passport indicated trips to Belize, Canada, and

the United Arab Emirates. Among the documents were

various Cease and Desist Orders from Hawaii and Missouri.

Also included were documents prepared by Diamond that

purported to make financial claims against governmental

officials—judges, prosecutors, investigators, and such. Various

e-mails were recovered. These messages were complaints

from investors averring fraud on the part of Omega. Other

e-mails from Diamond were responses to inquiries about

investing in Omega. In those messages, Diamond told investors to send cashier’s checks to New Hope Trust or to

send cash wrapped in aluminum foil. There were also Private

Party Loan Agreements and copies of checks written to

Omega or Diamond. These loan agreements indicated a total dollar figure of just over $1.5 million. The warrant also

turned up a fake Mexican Certificate of Deposit and a fake

$100 million United States Federal Reserve Note. 

When Diamond’s notebook computer was analyzed, investigators found databases of Omega investors. The information went back as far as 1998. Another database purported

to track the Omega investment amounts. Digging further,

investigators found files on Diamond’s Palm Pilot which
No. 02-1070 7

named bank information for banks in Belize, Dubai, the

Cayman Islands, and Antigua. Also included on the Palm

Pilot was a list of book titles, including How to Hide Your

Assets and Disappear and The Law of Fraudulent

Transactions.

Of the numerous bank accounts probably used by Diamond

in perpetrating this scam, IRS agents analyzed three. The

first of these was a Bank of America account in Diamond’s

own name. This account showed little activity—$3,100 went

in and $3,100 went out during the thirteen month life-span

of the account. Another Bank of America account, the New

Hope International Trust account, with Diamond as general

manager, showed deposits totaling $50,000. This money

was deposited and withdrawn in three to four months. The

final Bank of America account, the New Hope Trust account,

with Diamond again acting as general manager, showed

activity for three years. The deposits, which totaled some

$1.8 million, were in the form of cash, checks, money orders,

cashier’s checks, and wire transfers in one hundred dollar

increments. The bulk of these deposits were checks made

payable to Arlene Diamond and New Hope Trust; others

were payable to Omega. $1.5 million had been withdrawn

from this account, of which $240,000 was definitively traced

to Hood. The whereabouts of the remaining $1.25 million is

still unknown.

Some months later, while incarcerated and awaiting trial,

Diamond struck up a conversation with another inmate,

Nelani Jackson. After failing to convince Jackson to invest

in Omega, Diamond confided in Jackson that she was a con

artist and that Omega was a scam. Digging the hole deeper,

Diamond explained to her new “friend” that during the

course of the scam, she would never use her own name

when dealing with real estate, personal property, or utilities. She also explained that she would meet prospective

investors in public places to keep her residence hidden.

Deeper still—in relation to one of the more creative yarns—
8 No. 02-1070

Diamond explained that she and Kodosky had read an article about George Bush and a Rockerfeller meeting on the

West Coast to discuss investments. The conspirators decided

that it would make Omega look legitimate if they wove this

real meeting into the tangled web of the Omega scam. Thus,

we have the genesis of the Omega victory parties. She

continued, telling Jackson that she discouraged refunds by

telling investors that pay-out was just about to occur.

Finally, Diamond told Jackson that some of the Omega

money she had received went to Hood and some went to her

own foreign bank accounts.

Obviously, with such large amounts of money flowing

through Omega, something had to be done to launder the

money. This process began in 1996 with Hood asking Chris

Engel, a co-conspirator, to deposit Omega monies into fourteen various personal and business accounts controlled by

Engel. Engel would then withdraw the money in cash or

cashier’s checks at Hood’s direction. Often times, hundreds

of times, in fact, Engel would withdraw cashier’s checks to

purchase real estate. Some of the approximately $4.5 million

laundered by Engel was in the form of checks made out to

Diamond and endorsed over to Engel by Diamond, or checks

directly from Diamond.

From April 1999 to September 1999, Engel’s sister, Susan

Hoehne, assisted in laundering Omega funds by depositing

them into her business account and then obtaining a cashier’s check which she would then send to Engel.

Further laundering involved Miller Hardwoods, a sawmill

started up with Omega money during the spring of 1998.

Hood supplied Raymond Miller with approximately $1.4

million to get the mill up and running. Hood estimated that

roughly $500,000 of the Miller Hardwoods start-up money

came from Diamond’s New Hope Trust account. The money

provided to Miller was often in the form of cashier’s checks

purchased by Diamond and Bank of America.
No. 02-1070 9

In yet another transaction, Hood flew to Dubai, United Arab

Emirates to purchase an oil refinery. Hood told Diamond

about his intentions and directed her to wire $80,000 from

her New Hope Trust account to his account at the Standard

Charter Bank in Dubai. Diamond transferred the money as

requested.

Apparently, Diamond liked the bank in Dubai enough to

entrust $240,000 to it. She did this by transferring money

from her New Hope Trust bank account and wiring it to the

United Arab Emirates. A letter from Diamond to a bank

employee also indicates that she wanted to send more money

to her Dubai account.

At trial, Diamond testified on her own behalf and essentially denied all of the incriminating evidence presented

therein. She claimed that she did not know Omega was a

scam until Hood testified against her on June 11, 2001. She

further denied knowledge of the cashier’s checks that she

had obtained in relation to the Miller Hardwoods account. 

After the jury found her guilty of all the charges against

her, Diamond proceeded to sentencing. The court found that

Diamond was liable for the full amount of money involved

in the Omega scam, as that amount was reasonably foreseeable to her. She was ultimately sentenced to the lowest

possible sentence under the guidelines—two hundred ten

months imprisonment and three years of supervised

release.

II. Analysis

A. Sentencing

Diamond’s first argument is based on the fact that the

district court sentenced her based on the entirety of the

Omega proceeds. She argues that because she was not part

of the conspiracy from its outset, she cannot be held liable

for the entire loss. We review a district court’s determination
10 No. 02-1070

of the money attributable to a defendant for clear error and

its application and interpretation of the guidelines de novo.

United States v. Baker, 227 F.3d 955, 964 (7th Cir. 2000).

We will reverse for clear error when we are left with the

firm and definite conviction that a mistake has been made.

United States v. Irby, 240 F.3d 597, 599 (7th Cir. 2001).

Section 1B1.3 of the sentencing guidelines controls the

determination of relevant conduct. That section allows a

sentence to be based upon “all reasonably foreseeable acts

and omissions of others in furtherance of the jointly undertaken criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B). However,

this section is tempered by application note 2(ii) which says,

“[a] defendant’s relevant conduct does not include the

conduct of members of a conspiracy prior to the defendant’s

joining the conspiracy, even if the defendant knows of that

conduct.” U.S.S.G. § 1B1.3, comment. (n.2(ii)). Failure to follow the commentary may constitute an incorrect application

of the guidelines. U.S.S.G. § 1B1.7.

It is undisputed that Diamond was not a part of the conspiracy at its conception. Since the guidelines clearly state

that a defendant is not liable for that conduct which takes

place before the defendant joins the conspiracy, we find that

the district court committed clear error when it sentenced

Diamond based on the entire Omega scheme. We therefore,

vacate Diamond’s sentence and remand for resentencing

based on her conduct after her becoming a co-conspirator.

B. Insufficiency of the Evidence

Diamond’s next argument attacks her convictions for conspiracy to commit money laundering, in violation of 18

U.S.C. § 1956(h), and conducting a monetary transaction

with the proceeds of an illegal activity, in violation of 18

U.S.C. § 1957(a), for insufficiency of the evidence. When

reviewing claims of insufficiency of the evidence, we view

the evidence in the light most favorable to government.
No. 02-1070 11

United States v. Reynolds, 64 F.3d 292, 297 (7th Cir. 1995).

The relevant question on appeal is whether any rational

trier of fact could have found the essential elements of the

crime beyond a reasonable doubt. Id. We reverse only when

the record contains no evidence, regardless of how it is

weighed, from which a jury could find guilt beyond a

reasonable doubt. Id.

1.) Conspiracy to Commit Money Laundering

To convict a defendant of conspiracy to commit money

laundering, the government must show the defendant was

involved with two or more people to launder money and

that the defendant knew the proceeds used to further the

scheme were derived from an illegal activity. United States

v. Gracia, 272 F.3d 866, 873 (7th Cir. 2001). 

As a housekeeping matter, we note that the evidence

clearly supports Diamond’s knowledge that the money involved was derived from an illegal activity. The money

constituted proceeds from Omega. Diamond explicitly and

repeatedly said that she knew Omega was a scam. Beyond

this direct evidence of her knowledge, circumstantial evidence

exists which also shows her knowledge—asking investors to

send cash, which she knew to be untraceable; attempting to

impede the Grand Jury investigation of Omega; the title of

a book, The Law of Fraudulent Transactions, on her Palm

Pilot; meeting investors at public places so as to hide her

residence; and so on. 

Diamond’s first argument is based on the fact “money

laundering criminalizes a transaction in proceeds, not the

transaction that creates the proceeds.” United States v.

Mankarious, 151 F.3d 694, 704 (7th Cir. 1998). In other

words, the predicate offense must be separate from the

money laundering. Id. Diamond claims that the evidence at

trial merely showed that she collected money which she

sent to Kodosky or Hood and that she deposited Omega
12 No. 02-1070

funds into her New Hope Trust account. This is not enough,

she argues, to convict her of conspiracy to commit money

laundering.

While we agree that the predicate offense and the conspiracy to launder money cannot be separated with surgical

precision, they are clearly distinct. Diamond did not simply

collect money from Omega investors and send it away to

Hood or, on the other hand, simply deposit that money into

her New Hope Trust Account. Looking at the evidence, it is

quite apparent that Diamond was actively involved with

others in engaging in financial transactions to conceal the

nature and source of the funds. The government rightly points

out five transactions, or types of transactions, that show

Diamond’s intent to do so: (1) she endorsed and transferred

Omega checks to Engel to deposit in his personal and

business accounts; (2) she repeatedly purchased cashier’s

checks with Omega funds—some of which were structured

to avoid Internal Revenue Service reporting requirements;

(3) she repeatedly withdrew Omega funds in cash—which

she knew to be untraceable and had discussed this property

of cash with Hood; (4) she wire transferred Omega funds to

a Dubai bank account to purchase an oil refinery; and (5)

she wire transferred Omega money to her own account in

Dubai. 

Diamond attempts to limit the effect of this evidence by

arguing that these transactions were all part of the predicate offense. Thus, she puts each of these transactions in

the context of “[s]he collected money from Omega victims

who believed Mr. Hood’s pitch and sent that money where

Mr. Hood told her to send it—usually to him.” This is an oversimplification and overly broad description of the scheme.

Diamond did not simply send her investor’s check, cashier’s checks, or cash to Hood. Nor did she simply deposit the

Omega funds in her New Hope Trust account. Instead, she

went far beyond those simple actions and engaged in
No. 02-1070 13

various transactions that were clearly designed to conceal

the nature and source of the funds. This concealment was

not part of the predicate offense. We find that such actions,

in the aggregate, are sufficiently distinct from the predicate

crime to support a conviction of conspiracy to commit money

laundering.

Diamond next argues that the evidence was insufficient

to show an agreement to launder money. When a defendant

joins a conspiracy, she joins an agreement rather than a

group. United States v. Townsend, 924 F.2d 1385, 1390 (7th

Cir. 1991). An agreement need not be explicit; a tacit

agreement is sufficient to support a conspiracy conviction.

United States v. Clay, 37 F.3d 338, 341 (7th Cir. 1994).

There is no bar to using circumstantial evidence in proving

the agreement. Id. A conspiracy may be shown by evidence

which shows that the conspirator embraced the criminal

objective of the conspiracy. United States v. Severson, 3 F.3d

1005, 1010 (7th Cir. 1993). 

Numerous incidents support the finding of an agreement

between the co-conspirators to launder money. Diamond’s

involvement in purchasing an Arab oil refinery, structuring

transactions to avoid reporting requirements, the various

conversations about cash and its untraceable nature, sending checks to Engel so that he could deposit them in personal and business bank accounts, and transferring money

out of the country to Dubai all show that Diamond embraced

the objective of the criminal conspiracy. While not dispositive in itself, the book title How to Hide Your Assets and

Disappear was found on her Palm Pilot. Bank information

regarding banks in Belize, the Cayman Islands, the United

Arab Emirates, and Antigua were also found on her Palm

Pilot. Putting all of this evidence together, it is clear that

Diamond embraced the object of the conspiracy and we have

no doubt that a reasonable juror could have found the

conspiracy beyond a reasonable doubt.
14 No. 02-1070

2.) Conducting a Monetary Transaction with Proceeds

of an Illegal Activity

Diamond’s final argument is that there was insufficient

evidence to support the conviction for conducting a monetary transaction with the proceeds of an illegal activity. In

order to find Diamond guilty of this offense, the government

needed to prove that she “derived property from a specified

unlawful activity and that [s]he engaged in a monetary

transaction involving that property.” United States v. Seward,

272 F.3d 831, 836 (7th Cir. 2001); accord 18 U.S.C. § 1957.

As we noted above, the evidence clearly supports a finding

that Diamond knew that Omega was a scam. Therefore,

Diamond knew that the money from Omega was derived

from an unlawful activity. The unlawful action falls within

those “specified” by 18 U.S.C. § 1957—a point which

Diamond does not argue.

The evidence also supports a finding that Diamond engaged in the monetary transaction. Bank records show that

Diamond purchased a $30,000 cashier’s check using her

New Hope Trust account funds. This money was ultimately

deposited in the Miller Hardwoods account. Hood testified

that he told Diamond about Miller Hardwoods and that

Omega money was being used for the sawmill. Under this

demanding standard of review, we find that a reasonable

jury could have found Diamond guilty as charged.

III. Conclusion

Diamond was improperly sentenced based on the entire

amount of money involved in the scam. This was an error

because she was not a part of the conspiracy for its entire

life-span. We vacate her sentence and remand for resentencing. Her convictions, however, are affirmed.

AFFIRMED in part, REVERSED and REMANDED in part
No. 02-1070 15

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—8-10-04