T o a v oid co n fu si o n w e w ill refer to M y u ng O k L ee as “M s. 1 L ee ” an d K en n et h L ee as “M r. L ee .”



## In the 

# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N os. 06

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- 3040 and 06- 3438 U NI T ED S T A T E SOF A MERI CA, P la intif f-A pp ellee, v. K EN NE T H L EE AN D M Y UNG O. L EE, D efend a nts-A pp ella nts.

A pp ealsfr o m the United S t ates Di strictC our t fo r the N o rthernDi stricto f Illino is, We stern Div isi on. No s. 05 CR50007 and05 C R 50010

—Philip G. Re inha rd, Judg e.
A RG UE D J AN UA RY 9, 2008

— D ECI DE D M AR CH 11, 2009

Befo re W OO D , S YKES, a nd T INDER, C ircu it Judges. T INDER, C i r c uit Ju dg e. T h i s c a s e i n v o l v e s t wo defe nd ants, M yung Ok L ee and K enneth Lee. The Lees 1 a r e u n r e l a t e d a n d we r e t r i e d i n s e p a r a t e c a s e s c o nsol i dated here o n appeal

. W hi l e s epara te case s, they invol ve si m i l arf acts and ove rl apping l ega li ssues . Both2 N os. 06

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- 3040 and 06- 3438 defe nd ants w er e invol ved w i th “s pas” which were fro nts f orpro sti tuti on busine sse s in the Rockf or d, I l l i noi s a re a. Bo thwer e ch ar g ed, i n se par at e buts i m i l art wo- co unt su p erced ing ind ictm en ts, w ith con s p ir a cy to us e interst at e facil i ti es i n vi ol ati on o f18 U
. S. C. §§ 371 and 1952( a) as Count On e a nd co nspir acy to com m i t m oney l au nde r i ngi n v i o l at i o n o f1 8 U. S. C
. § 19 56 ( h) a s Cou nt Tw o. They were co nvi cted, f ol l owing j ury tr ials, o n both Cou nt s, a nd they no w appe al

. The Le es make a j o i nt ar gum en t co nc erni ng“ p r o ce eds ” i n c ha l l en g i ngthe m oney l aund er i ng co nspir acy convi cti ons, and they ar gue tha t i den ti ca lerrors o cc ur r ed i n b o tho fthe i r s en tenci ng ca l cul ati ons. M r. Lee ind epen d en tl y a rgues that th e r e w a s i n s u ffi c i e n te v i d e n c e wi t h r e s p e c tt o h i s me mber shi p i n the consp ira c ies i n both Counts, and M s. Lee c on te st s t h e a d m i s s i o n of w itn es s A n n a K im ’s a lleg ed ly “u n fair ly p rej u d icia l” t es tim on y in h er tria l.

I . B a c kg r o und The s pas a nd pr o st i tu ti o n bu sine ss es wi thwhi chthe L ees w ere involved w ere allope rated i n th e sam e m an ne r. U pon ar ri val, custo m er s w oul d pay the re cepti oni st an en tr an ce fee f o r a m as sa g e. Thi s woul d b e r ec o r ded i n the spa ’ s “b o o ks. ” Aft ermakings pec i ala r r an g ement s i n the i nd i vi du al“m ass age ” r oo m s, custo m er s co uld then pay ana ddi ti o na lfee di r ec tly t o a “ m as se us e” f o r s ex a ct s. The m as se us es woul d re co r d the se e xc ha ng es i n the b o o k s but wi tha mis singzero

— th us, an a dd i ti onal$2 00 w as re cord ed as $20 . S o m e cus tom ers w ou ld p ay th ese ex tra f ees an d/ o r the e nt r a nc e fe e s wi th c r e di tc a r ds

. T he c a r dsN os. 06

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w er e s w i ped through cr edi t card m achi nes c onnecte d to i nter sta te tel ephone f aci l i ti es to re cei ve paym ent a uthori zati on. These fund s were deposi ted into busi ness checki ng ac counts. The m ass euses spl i t t h e pros ti tuti on pro fi ts w i th the o w ners /o pe rator s 5 0/50, with the m ass euses ’ po r ti o n us ua l l y t ak eno uto fthe a va i l ab l e cas h. The fu n d s deposi ted i n the busi ness acco unts were used to pay f orvar i ous b usi ness and prom ot i onalexpenses , i ncl ud i ng uti l i ti es, r ent, and adver ti si ng. M r. Lee was i nvol ved i n two spas

— the P i ne T re e S pa an d th e P ar ad ise H e a lth Sp a. Y ou n g Ja H w an g w as in charg e o fbo th busi nesse s, Pi ne Tre e b et w een J une 200 2 an d Oct o be r 20 03 , an d Pa r adi se be twe enJ an ua r y 2 00 4 an d F e b r u a r y 2 0 0 5
. E u n S o o kC h o i, Hwa n g ’ s s i s t e r - i n - l a w, se r ve d a s a fr o ntf o r the b us i ne ss , s i g ni ng the b ui l di ng l ea ses an d se r vinga s th e si gna to r y o n the Pa r adi se b an k acco u n t. M r. Lee, wh o w as ro m anti cal l y invol ved w i th H w a n g , assisted i n th e op eration of these m assa ge p arl o r s. He o fte n tr an sl at ed f o r he r an d o th er empl o y ee s who spoke Korea n. H e a l so did constr ucti on w or k and m ai ntenance o n the busi nesse s’ pre m i ses and w as i nvol ved w i th obta ining li cen ses an d m assa ge p erm its for the sp a. M r. Le e wo ul d a l s o fr e qu e nt l y s e nd po s t a l mon e y o r de rs o n be ha l fo fthe mass eu se s. M o re de ta i l s o fhi s i nv o l ve m en t a r e d i s c u s s e d b e l o w. M s. Lee ow ned and oper ate d the Tokyo O ri entalH eal th S p a a s a fr o n tf o r a p r o s t i t u t i o n b u s i n e s s b e t we e n D e c e mber20 02 and F eb ru ar y 2 005. S he r an the day- to- day oper ati ons i ncl ud i ng paying the bi l l s, ar ra ngi ng adver ti si ng, hi ring m ass euse s , a nd s o for th. M s. Lee’ s co - defe nd ant,4 N os. 06

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Uni t e d S t a t e s v. Sc i a l a bb a , 2 8 2 F .3 d 47 5 (7t h C ir . 20 0 2 ); Sant os 2 v. U n ite d S tat es , 46 1 F .3d 88 6 (7t h C ir . 20 0 6 ), a ff’d, U n i te d S tat es v. Sant os , 12 8 S. C t. 2 0 2 0 (20 0 8 ). M i a Deboe r, di d the co ok i ng and cl eani ng and co l l ecte d m o ne y fr o m the mass eu se s when M s. Le e was o ut o ft o wn. I n b o thc as es th e us e o fthe c r edi t ca r d m ac hi ne s an d i nter sta te tel ephone f aci l i ti es to pro m ote the pros ti tuti on busi nesse s s er ved as the basi s forthe convict i ons und er 18 U .S.C . §§ 3 71 an d 19 52 . Th e p ay m en ts ou t o f th e b u sine ss c he ck i nga cc o unt s were use d t o e st ab l i shthe m oneyl aund er i ng vi ol ati ons.

I I . “ Proc eeds” Bo thM s. Le e an d M r . Le e ch al l en g e th ei r c o nv i ct i o ns und erthe m on ey l aund er i ng st atute
. They a rgue that und erthe ter m “pro ceeds”

— m eani ng “ne t” ra therthan “gr oss ” as outl i ned i n our ci rcui t ca ses Sc i al ab b a a nd San t os an d recen tly affi rm ed by the Sup rem e C ou rt

— ther e was 2 i nsuffi ci ent e vi dence f orcon sp i ra cy to com m i t m oney l aund er i ng. In re vi ew i ng f ors uffi ci ency ofthe evi dence, w e con sid er the evi dence i n the l i ght m ostf avo rabl e t o th e g o ve r nm en t, dr awi nga l lr ea so nabl e infer en ce s i n the govern m en t’s f avor. U nite d States v. M orr is , 49 8 F
. 3d 634, 637 ( 7th Ci r. 2 00 7). W e wil lr eve rs e o nl y i fa ra ti onaltr i er o ff ac t co ul d no t ha ve f o und the e ss en ti ale l ement s o fthe c rim e b ey o n d a re as on ab le d ou b t. U ni t e d S t at e s v. M al one, 484 F.3d 916, 920 (7th Cir. 2007). The evi dence used bythe gov er nm ent a t b ot h tr i al s t o est abl i sh the m oneyla u n deri ng vi ol ati ons f ocuse d onN os. 06

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ex pen di tu r es made o uto fthe b us i ne ss c he ck i nga cc o unt fo r e ac h s pa. Re co r ds wer e al so i nt r o duce d fr o m the pu bl i cati ons i n w hi ch t h e spas a dvert i sed. A t bo th tr i al s, M r . M ur r ay, a n I RS a cc o unt an t, t esti fi ed r eg ar di ngthe ch ec k i ngacc o unt s an d pr o vi ded a su m m ar y o fthe wi th

dr a wa la c t i v i ty. The fun ds i n the s e a c c o un t s c o ns i s t e d, i n l ar ge part, o fthe deposi ts fro m the cre ditcar d paym ents b y m as sa ge p ar lor c u st om er s. Fr om th e s u m m ar ies , i t appe ar s th ata s ubs ta nt i alpo r tion o fthe funds i n the busi ness checking ac counts w as spent o n adver ti si ng, and i n M r. Lee’ s ca se ther e w as al so evi dence that M r. Lee tol d FBI A gent Dav id Chil dre in a r eco rded conve rs ati on that they spent ab out $18, 000 a m on th o n adver ti si ng. O th erpa y m en ts o uto fthe a cc o unt s i nc l ude d r en t, pho ne bi l l s, and so m e wages. The r el ev an t l an gu age fr o m the mone y l au nde r i ng sta tute i s a s fol l ows: ( a) ( 1) W ho ev er, kno wi ngtha t th e pro per tyi nvo l ve d i n a fi na nc i alt r an sa ct i o n r epr es en ts the pr o ce eds o fs o m e f o r m o funl awfula ct i vi ty, c o ndu cts orat tem pts to co nd uct such a fi nanci al tr ansac tio n wh i ch i n f act i nvol ves the pr oce eds o f speci fi ed unla w ful acti vi ty

— ( A)( i ) wi th th e i nt en t to pr o m o te the c ar r y i ngo n o fs pec i fi ed unl awful ac tiv ity
. . . ; or (B ) kn ow in g t h at th e t ra n sa c tio n is d esigned i n w hole or i n p art

— ( i ) to co ncealo r d i sgui se the na tu r e, the l o ca ti o n, the s o ur ce , the ow n er sh ip , or th e con tr ol of th e p ro c ee d s o f sp ec ified u n law fu l ac tiv ity
. . . sh all b e s en te n c ed

. . . . 18 U
. S. C. § 1 956( a) ( 1)
. H er e the defendants were pros ecuted und ersubpart( a)(1) ( A ) f orpro m oti on, r atherthan6 N os. 06

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The conspirac y is sue i s disc uss ed se p a ra tely i n the nexts ec- 3 t i on re gar d i ng Mr. Lee
. M s . Lee di d notputf or th a ny a rg um ent chall enging the conspir acy as pect ofthi s charge. und er( B) forco nceal m ent. A ccor dingl y, to m ak e its case , t h e govern m en t had to show that the d efend an ts w ere i n f act part ofthe c onsp i ra cy to l aund erm oney, and that 3 the defendants “( 1) co nd ucted a fi nancialtr ansact i on wi ththe pr o ce eds o fa n i l l eg ala ct i vi ty ; ( 2) kne w the proper ty re prese nted i l l ega lpro ceeds; and ( 3) co nd ucted the tra nsacti on w i th the intentto p ro m ote the car ry i ng o n ofthe unlawfulact i vi ty. ” M al one, 4 84 F
. 3d at9 20 ( quo ting U ni t e d S t at e s v. Fe b us , 218 F.3d 784 , 789 (7th C ir. 2000)). U nd erthe fi rs t pr ong, the paym ents o ut o fthe busi ness checking ac counts cl ear l y m eetthe defini ti on of“fi nanci al tr an sa ct i o n. ” I t i s al so cl ea r, sinc e th e cr edi t ca r d pr o st i tu
ti o n fee s were d ep osi te d i nt o the a cc o unt s, tha t th e m oneywas fro m an “ i l l ega lact i vi ty. ” ( N o one conte sts tha t the “ e xt r a s ” o ffe r e d b y the mas s e us e s a mou nt ed to illeg al p ro st itu tio n u n d er Il lin ois law .) I t is eq u ally ob viou s, un d er the th ird p r o ng, that the ad vertising p urchases pro m ote d the ca rr yi ng o n ofthe use ofi nter sta te telep h on e fa ci l i ti es i n ai d ofthe com m i ssi on o fi l l ega l pros ti tuti on o perat ion s. “[ T]he prom oti on e l em ent c an be m et by ‘t ra nsacti ons that prom ote the continued pro sp eri ty ofthe und er l yi ng o ffense’
. . . . ” M al one, 4 8 4 F
. 3d at 921 ( quo ting Fe b us , 218 F.3d at79 0); s e eal s o S ant os v. U nited Sta tes , 46 1 F
. 3d 88 6, 89 3 ( 7th Ci r . 20 06) (exp l aini ng that re i nvest i ng neti ncom e t o prom ote the car ry in g o n ofthe cri m i nalo perat i on co nsti tutes m oneyl aund er i ng)N os. 06

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- 3040 and 06- 3438 7 aff’d, U ni t e d St at e s v. Sa ntos , 128 S. Ct
. 2020 (2008). Pu rchasi ng adver ti si ng i nherent l y pr om ote d the pro speri ty ofthe und er l yi ng offense. T he governm ent al so al l ege s that the “ future re nt” p ay m ents out ofthe acco unt al so am ou n te d to m on ey lau n d er in g. T h os e p ay m en ts cle ar ly s a t i s fy the r e qui r e men ttha tthe t r a ns a c t i o ns we r e ma de w i th the intentto p ro m ote the car ry i ng o n ofthe und er l yin g illeg al op er at ion as w ell. Se eM al one, 48 4 F
. 3d at 921 ( “[ A]tl ea sts o m e ac ti vi ti es tha t are p art a nd pa r ce lo fthe unde r l y i ngo ffen se can b e co ns i der ed to pr o m o te the c ar ry in g on of th e u n law fu l ac tiv ity .”); s ee also Fe b us , 219 F. 3d at 790. The m or e d i ffi cul t i ssue bef or e us i s whether the g over nm ent e stabl i shed that the t ra nsacti ons i nvol ved i l l eg al“ pr o ce eds

. ” W e spo k e atg r ea t l en g tho n the mean i ngofthe s ta tu to r y t er m “ pr o ce eds ” i n Scialabb a a nd San t os . I n Sc i al ab b a the underl yi ng business enter p ri se w as an illeg al c oin g a m b lin g b u sin es s. Scialabb a , 28 2 F
. 3d at 475- 76
. Pa r ti ci pan ts putc o i ns i nt o g ami ngmachine s an d t h en rec eiv ed on sc re en cr ed its if th ey w on . Th ey co u ld continue to pl ay w i th the se cre dit s o r re deem them at re ta il ou tle ts for ca sh

. Id. Th e acts in q ue stion, for l au nd eri ngpur po se s, wer e g i vings o m e o fthe mone y i n the co i n b o xe s t o the out l et s’ owner s a nd spe ndi ngso m e o fthe mon e y t o me e tb us i ne s s e xp e ns e s l i k e l e a s i ngthe v i deo m ac h in es an d ob ta in in g lice n se s. Id. We f o und, r ely i ng on th e ru le of le n i t y , th at “a t le as t w h en th e c rim e e n ta ils vol untary, busi ness- l i ke oper ati ons, ‘ proce eds’ m ust be net i ncom e; othe rwis e the predi cate cri m e m er ge s int o m oneylau nd er i ng ( f orno busi ness can be car ri ed on w i thout expenses) an d t he word ‘ proce eds’ l ose s o pera-8 N os. 06

- 3029 , 06

- 3040 and 06- 3438 tio nalsi gni fi cance. ” Id. at 4 7 5 , 4 7 7
. We f o un d tha tthese w er e no t “p ro ceeds” because theydi d not a m ount t o pr o fi t
. T he mo ne y l a un de r i ngc o nv i c t i o ns we r e v a c a t e d. W e v i e we d Sa nto s ess enti al l y as a head-on re - l i ti gat i on of Sc i al ab b a and declined to ove rr ule Scialabb a . Sant os , 46 1 F
. 3 d a t 8 8 8

- 8 9. I n San t os the defe nd ant o perat ed an il legal lottery

— a “ bol i ta. ” Gam bl er s would p l ace bets with bol i ta runners , w ho turned the m oney ove r to co llect or s, who, i n tur n, g av e th e m o ne y t o S an to s. The r unne r s, the col l ecto rs , and the w i nners al lwere pai d out o fthe tot al am ou n t c olle c te d

. Id. at 888. The di str i c t c ou rtvac ate d the c onvi cti ons f ol l owing Scialabb a . O n a p p e a l we f o und tha t th es e tr an sa ct i o ns wer e “c o nc eptua l l y i ndi st i ng ui sh ab l e” f r o m tho se i n Scialabb a . Id. at 89 1. W e a c kn ow ledged thatthe Fi rs t, T h ird, and Eighth Cir cui ts had concl ud ed differ ently. Id. at 891- 92. W e a l so re cogni zed th e legi tim acy of the gove rnm en t’s co n ten tion th at th ere w oul d be e vi dent iar y probl em s in re ading“pro ceeds” to m eann e ti nc o me a s we l la s di s pa r i t i e s i n the s e nt e nces for th e u n d er lyin g off en se an d th e m on ey lau n d er in g. Id. a t8 9 3
. B u tn o n e o fth e s e c o n c e r n s wa r r a n t e d o v e r t ur ni ng Scialabb a . Id. at89 3- 94. W e d id c lar i fy a nd co nfi rm that the s tatute doe s ind eed pro hibit both concea l m ent o fnet proce eds a n d the re i nvest m ent o fnet proce eds to p ro m ot e th e il licit a c tiv ity ; Sc i al ab b a had not s ugges ted ot h er w ise
. Id. at 89 2-9 3; s e eal s o 18 U
. S. C
. § 1956(a)(1) (A )( i) , (B)(i ). I n a ffi r m i ngo ur d eci si o n in San t os , the Su p rem e C ou rt ag r ee d tha t ani l l eg al l o tt ery ’ s pay m en ts t o wi nne r s an d em pl o y e e s a r e no t “ pr o c e e ds ” wi thin the mea ning o fN os. 06

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. 12 8 S
. Ct. at20 31. A pl ural i ty off ou r J usti ces a l s o a d o p t e d Scialabb a ’s d efin itio n of p ro c ee d s a s a bu sine s s ’ n e t“ pr o fi t s , ” r a the r tha n i t s g r o s s “ r e c e i pt s. ” Id. at 20 25 ( pl ur al i tyo pi ni o n)
. Howev er, i n h i s con tr o l l i ng c on c u rr ence, J usti ce S tev ens decl i ned to “pi ck a s i ngle defi ni ti o n o f‘ pr o ce eds ’ a ppl i cabl e to ev ery unl awful acti vi ty. ” Id. at20 32 ( St eve ns, J
. , co ncurr i ng)
. Fo r J usti ce St eve ns, the m eani ng o f“pro ceeds” shoul d turn o n whethe r l eg i sl at i ve hi st o r y i ndi ca te s th atCo ng r es s i ntended to re ach the gr oss r eve nues o fa speci fi ed cr i m e. Id. at20 32. Fin ally , in an op in ion r e lea se d to d ay , U ni t e d S t at e s v. Hodge, No s . 0 6

- 3 4 5 8 & 0 6

- 3 0 5 2 ( 7 th C i r . Ma r . 1 1 , 2 0 0 9 ) , we exam i ne the appli cati on o f§ 1956 ( a) ( 1) to pro sti tuti on bus i n e s s e s s i mi l a r t o th e s p a s o p e r a t e d b y th e L e e s . T he g o ve r nm en t i n Ho dg e obt ain ed a j ury convi cti on o f m o ne y l au nd er i nga fte r i nt r o ducinge vi den ce o fthe busi nesse s’ r en t, uti l i ti es, and adver ti si ng expenses . Hodge, sl i p op. at3. W e co ncl ud e tha t th e e vi dence of re nt and uti l i ti es i s insuffi ci ent t o supp or t the con victi o n. The se c o st s ar e es se nt i al oper at i nge xpe ns es , whi ch, unde r b o th Scialabb a a nd San t os , do not count as “p ro c ee d s” w ith inth e m ea n in g of § 19 56 (a)( 1). Id. at3- 4. W e al so no te i n Hodgetha t th e que sti on o fwhethe r the b us i ne s s e s ’ a dv e r t i s i nge xp e ns e s may qu a l i fy a s p r o c e e ds i s m or e di ffi cul t. A l thou gh o rdi naryadver ti si ng co sts woul d no t f al lwi th i n Scialabb a ’ s net
- profi ts defini ti on o f pr oc eeds, tr eat i ng the se cos ts as proce eds m ay be c onsi stent w i th J usti ce S tev ens’ c ri m e- speci fi c i nter preta ti on o f § 1 95 6(a )(1)
. Id. a t 4

- 6
. No ne the l e s s , we do not dec i de10 N os. 06

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- 3040 and 06- 3438 wh e th e r th e a d v e r t i s i n g e x p e n s es i n Hodgeco unt as pr o c e e ds b e c a us e o fa p r o b l e m wi th the j ur y ’ s g ener al ver dict

. The j ury i nstr ucti ons did not d istingui sh betw een ad vertising an d other ex p en s e s . Th us , the j ury m ay have convi cted ba sed o n evi dence ofthe busi nesses’ re nt and u tilit i es

— e xp e ns e s tha t, a s a ma t t e r o fl a w, do n otco n s tit u te p ro c ee d s u n d er § 19 56 (a)( 1). Id. at8. Because i t i s i m possibl e t o tel lwh etherthe j ury re l i ed on the l ega l l y insuffi ci ent e vi dence ofr ent a nd uti l i ti es or the po ss ibl y l eg al l y s uffi ci en t ev i den ce o fa dve r ti sing co st s, we co nc l ude tha t th e g en er alve r di cti n Hodgecannot st an d

. Id. ( ci ti ng Ya tes v . U nited Sta tes , 354 U
. S. 298 (1957)). W i ththi s ba ck dr o p, the i ss ue no w be f o r e th e co ur t i n the i nstant case i s whether ther e was s u ffi ci ent e vi dence of fi nanci altr ansact i ons in volv i ng pro ceeds up on wh i ch to co nv i ctthe Le es . In the se mass ag e par l o r op erati o ns , the m ass euses ’ ta ke ofthe pr os tit u ti on m oneywas pai d to them pri m ar i l y o ut o fthe sp as’ cas h. The cas h w as al so u s e d t o b u y “ s u p p l i e s . ” T h e c r e d i tc a r d i n c o me a n d s o me ca shwer e depo si te d i n the busine ss es ’ a cc o unt s. Va r i o us bi l l s were pai d out o fthe acco unts. These paym ents appe art o i nc l ude bi l l s, so m e wag es , r en t, a nd a dve r ti sing expe nses, acc or ding to the c hecking ac count s um m ar i es subm i tte d by the go ver nm ent. As i n Hodge, we fi nd tha tth e e v i d e n c e i n th e s e t wo ca se s o fthe spa s’ r en t, ut i l i ti es , a nd wag es i s i ns uffi ci en t to su p p or t a co nvi cti on o fm oneyl aund er i ng. Because th es e co sts ar e r egul arexpenses thatar e e sse nti alto th e spa s’ oper at i o n, the y a r e no t “pr o ce eds ” wi th i n the m ean ing of § 1956 (a)( 1).N os. 06

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- 3040 and 06- 3438 11 The go ver nm ent a rgues tha t th e evi dence showed that future re nt paym ents cam e out of net ra ther th an gross proce eds be c au se they re prese nted r ei nvest m ent t ra nsacti ons, r atherthan past o perat i onalexpenses . U nd er th is vi ew , net p roceed s includ e allof th e reve n ue s left after the s pas pai d the pro sti tutes ’ sa l ar i es and bi l l s for past e xpenses. This tem pora lapproa ch fo r dis ti ngui shi ng be tw een ne t an d g r o ss pr oceed s i s i nc o ns i st en t wi th Scialabb a ’ s an d San t os ’ focu s on n et p rofi ts. A n o r d in a ry and nec essary b u sin es s e x p en se d oe s n otco m e o u t o fn e t p ro fits m er ely because i t r el ate s t o a future event. A nd payi ng r ent for a phy si ca ll o ca ti o n t o ho us e a bus i ne ss i s r i g ht l y c o nsi dered an or dinar y a nd nece ssa ryexpen se . I t i s no t l ogi cal or persuas i ve to say, as the gov er nm ent a ss erts, th ats i m pl y b ec au se r en t i s pai d f o r the upc o m i ng m ont h, be f o r e us e, a nd ut i l i ti es a r e pai d a t th e en d o fthe mon th, f o r the a mou ntu s e d, that one i s pai d forwith gr os s in c o m e a n d o n e p aid for w ith n et . Th e is su e is whe the r th e pa y men t s wer e r e i nv e s t men to fn e tp r o c e e ds to p ro m ote the car ry i ng o n ofthe oper ati on o r the a ct o f payi ng the o perat i on’ s e xpenses o ut o fgr oss i ncom e. W e also n o te tha t th i s i s no t ani ns ta nc e wher e r en t w as pai d m onths i n advance a s s om e s or t o fcapi tal i nvest m ent, o r w here an o perat i on e xpand ed an d rent ed ne w spa ce , o r ev en w her e a bus i ne ss ha d a monthto
- m o nth t en an cyw ith ea chmonth the de ci si o n b eing m ade a ne w whe the r t o i nv e s tthe i r p r o fi t s i nt o a no ther m on th o fbusi ness orto cas h out ( al lcas es i n w hi ch, at lea st arg u ab ly, ren t m igh t b e p ro p er ly c on sid er ed p aid12 N os. 06

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o uto fne t i nc o m e)
. Ra the r, the g o ve r nm en t’ s ac co unt sum m ar i es si m plysho w re gul ar, approxi m ate l y m onthl y, p aym en ts. T his is how rent is typically paid un d er a l eas e, ea ch m onth in advance. A l though the spas’ r ent c l ear ly does no t qual i fy a s “pr o ce eds , ” th e que st i o n ofw he th erthe s pas ’ a dve r ti sing e x p e n s e s qu a l i fy i s mo r e d i ffi c u l ti n l i g h to fth e S u p r e me Cou r t’ s dec i si o n in San t os . As we e xpl ain in Hodge, t r ea ting the a dvert i si ng co sts o fcer tain i l l ega lo perat i ons as “pro ceeds” m ay be consi ste nt w i th J usti ce S tev ens’ c rim e - s p ec ific in te rp re ta tio n of § 1 95 6(a )(1)
. Hodge, slip op. at6- 8. A nd ev en under the San t os pl ura lity ’ s net
profi ts defini tio n of proce eds, ther e m ay be s om e s i tuati ons w here adver ti si ng co uld b e p ai d fo r out of“net ” i nc o m e. F o r exam pl e, i fa b us i ne ss de ci des t o e xpa nd i nto a new m ar ket

— that i ni ti alexpenditure on new advert i si ng m i ght b e a “r ei nvest m ent of net pr oce eds. ” C f. San t os , 12 8 S
. Ct. at20 29 n. 7 ( “[ I ] t wil lbe up to t h e Gover nm ent t o sel ect that peri od of tim e fo r w hi ch i t ca n m o str ea di l y e st ab l i shthe ne ce ss ar y elem en ts o fthe ch ar g ed o ffen se s, i nc l udi ng( ifm o ne y l au nde r i ngi s o ne of th em ) p ro fita b ility .”); i d. a t 20 29 ( “[ T] he Go ve r nm en t w i l lhave to pro ve the pr ofi tabi l i ty of jus t three o ffenses , sel ecting ( aga i n) thos e f or w hi ch profi tabi l i ty is c l ear est
. A nd of c o ur s e a p r o s e c ut o r wi l lo ft e n b e ab l e t o c ha rg e th e un d erlyi ng c r im es instea d of th e overarch ing ent erp rise cri m e.”)
. I n the Le e s ’ c a s e s , h o we v e r, i ti s u nn e c e s s a r y to de c i de w hetherthe spas’ adver ti si ng expenses m ay quali fy a s pr o ce eds b ecaus e, a s i n Hodge, we encountera probl emN os. 06

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- 3040 and 06- 3438 13

w ith t h e ju rie s’ g en er al v er d ict s. T h e jur y in st ru c tio n s in the se c as es di d no t di st i ng ui shb etwee n a dve r ti sing e x p e n s e s a n d o t he r r e g u l a r b u s i n e s s e x p e n s e s . I ti s i mpossibl e t o tel lwh etherthe j u rie s based the i r ver dict s on the l ega l l y i nsuffi ci ent gr ound that re nt an d u ti l i ti es ar e ne t pr o ce eds , o r the po ss ibl y l eg al l y su ffi ci en t g r o und that advert i si n g c ost s a re net proce eds. Thus, the j uri es’ gener alve rdi cts cannot sta nd

. S e e Ya tes v. U nited Sta tes , 354 U
. S. 298, 311-12 (1957 ). The g o ve r nm en t po i nt s o uttha t th e j ur y i ns truct i o ns i n the Lees’ cas es cor re ctl y defi ned “proce eds” a s “ net ra th er th an gro ss p ro c ee d s.” W h ile th a t i s a n ot ab le di st i nction fr o m the i ns truct i o ns i n Hodge, s e eHodge, sl i p op. at8, the i nstr ucti ons w er e no t s peci fi c eno ugh to tel lthe j ur i e s tha to r di na r y r e nta nd u t i l i t i e s do n ot count a s netpro ceeds. S o i fthe gov ern m en t’s theory a t t r ia l w as th at evid en ce of rent an d utili ties could sup p ort a co nvi cti on ofm oneylaundering, the i nstr ucti ons do not perm it us to as sum e that the j uri es did notr el y o n that th eo ry to co n vic t t h e L ee s. C f. U ni t e d S t a t es v. Va n A llen , 524 F. 3d 81 5, 8 24 ( 7th Ci r . 2 00 8) ( r ej ec tingthe a r g um en t th at a convi cti on f orco nceal m ent o fas set s was bas ed on a l eg al l y i ns uffi ci en t th eo r y, wher e th e g o ve r nm en t d id n otarg u e t h at th eo ry to th e jur y ) ; U ni t e d S t at e s v. Wat s on , 52 5 F
. 3d 583 , 5 90 ( 7th Ci r. 20 08) ( concl ud i ng tha t a l i ne i n the g ove r nme nt ’ s i nd i c t men ttha tc o nt a i ne d a l ega l l y insuffi ci ent th eory ofj uri sdic ti on di d not i nv al i dat e a H o bb s Act co nv i cti on, whe r e th e g o ve r nm en t “ne ver even m en tioned ” tha t the ory to the j ury). The p ro se c uti on in thes e ca ses i ntro du ced evi dence of the s pa s ’ a dv e r t i s i nge xp e ns e s a l o ng s i de e v i de nc e o f14 N os. 06

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re n t a n d u tilit ies , an d n o a r g u m en t t h at ad ve rt isin g in parti cul arwas pai d fo r out ofnet ra therthan gr oss i nc o m e was e ve r p resente d t o the j ur i es . ( I n f ac t th e ac count sum m ar i es subm i tte d b y the gov er nm ent i n b oth case s incl ud ed uti l i ty paym ents

— whi chthe g o ve r nm ent no w co ncede s on ap pealwere paym ents out of g r o s s i n c o me

— r i g hta l o ngwi th r e ntp a y men t s a nd a dver ti si ng p aym ents. A t no poi nt di d the pro secuti on ar gue which o ft h es e it em s were pai d fo r w i th neto r w hich w ith gross.) On thes e facts, th e govern m en t’s th eo r y o fi ts mone y l au nde r i ngc as e was tha t al lo fthe spa s’ b us i ne ss e xpe ns es c o ul d b e “pr o ce ed s” wi th i n the m ea n in g of § 19 56 (a)( 1). A n d th e j u ry in st ru c tio n s, w h ile c or re c tly refe rrin g t o “ n et p ro c ee d s,” w er e n otsp ec ific en ou gh to te ll th e jur ies w h ich of th e g ov er n m en t ’s e vidence theyco uld r el y o n. Because the j uri es m ay h ave ba se d the i r g en er alv er di cts o n the l eg al l y i ns uffi ci en t th eo ry th at ren ts an d u tilit ies co u n t a s p ro c e e d s , Ya tes re quir es that these ve rdi cts be s et asi de.

I I I . M r . Lee’ s Conspir acy Ch al l enges M r. Lee m ake s tw o othe r suffi c ien cy- of

- the- evi dence ar gum en ts
. H ere, t o o , i n r ev i ewi ngf o r s uffi ci en cyo fthe evi dence, we consi der the ev i dence i n the l i ght m ost fav or ab le t o th e g ov er n m en t, d ra w in g a ll rea so n ab le in f e re n c es in t h e g ov er n m en t’s fav or , M orris , 49 8 F
. 3d at 637, r eve rs i ng o n ly i fa ra ti onaltr i ero ff act coul d not ha v e f o un d the e s s e nt i a le l e men t s o fthe c r i me b e y o nd a re as on ab le d ou b t, M al one, 484 F. 3d at 920. M r. L ee ar gues that ther e was i nsuffi ci ent evidence to convi ctN os. 06

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- 3040 and 06- 3438 15 hi m o fthe mo ne y l a un de r i ng cons pi r a c y a ta l l( r e g a r dl ess and a part fro m the net ver sus gr oss ar gum en t, d i scussed ab ove ) , and that ther e w as i nsuffi ci ent evi dence to convi ct hi m o fthe conspi ra cy to use in te rstat e f aci l i ti es. B as ic t o b ot h cla im s, h e a rg u es th e e vid en c e w a s in su ffici en t to e st ab l i shtha t he kno wi ng l y j o i ne d the c o nspi r ac i es i n que st i o n. W e ne ed no t co ns i derhi s ar g um en t wi thr es pect to th e m o ne y l au nde r i ngc l ai m , due t o o ur di sc us si o n sup ra i n w hi ch w e dete rm i ned that convi cti on cou ld n ot stan d

. W e d isagree, how ever, w ith M r. Le e’s ar gum ent with re spect to the conspi ra cy to use inter sta te f a c i litie s, fin d in g a m p le e vid en c e o n w h ich a j u ry co u ld co nc l ude he kno wi ng l y j o i ne d a nd pa r ti ci pat ed i n the charg ed conspi ra ci es. I n o r dert o pr o ve M r . Le e g ui l tyo fc o ns pi r ac y, the gov er nm ent had to s h ow (1 ) thatthe conspi ra cy charg ed in the superce ding i nd i ctm ent e xi ste d; ( 2) thatM r. Lee knowingl y b ecam e a m em bero fthe conspi ra cy w i th an i ntenti on t o furtherthe conspi ra cy; a n d ( 3) thatan ov er t a c t w as co m m itt ed by atlea st on e c on s p ira to r in fu rt h er an c e of th e c on sp ira c y. E.g
. , U ni t e d S t at e s v. H i ckok, 77F
. 3d 99 2, 1 00 4- 05 ( 7th Ci r . 1996). M r . Le e di spu te s th e se c on d el em ent. H e a rgues that he w as m er el y a handym an and a t ra nsl ato r and that he di d not a gr ee to use in te rs tat e f aci l i ti es. To the co ntra ry, however, the gov er nm ent showed that M r. Lee w as i nti m ately i nvol ved i n the enti re m ass age parl orente rpri se. M r. L ee w as freq u en tly atth e s p as an d co n tr ibu te d in m an y w ay s. T h er e w a s t e s tim on y a t t ria l th at h e d id c on st ru c tio n an d rem od el i n g f o r th e s p as . M r. L ee d ea lt16 N os. 06

- 3029 , 06

- 3040 and 06- 3438 wi ththe Ro ck f o r d Ci tyZ o ni ngDi vi si o n o n z o ni nga nd lice n sing i ssues f orthe spas. H e hel ped the m ass euses by se ndi ngpo st almone y o r der s f o r the m , us ua l l y c ha r g i ng 1%

. H e would pi ck the m ass euses up a t the ai rpor t. Codefe nd ant M iRan Par k t est i fi ed that M r. Lee he l ped her l earn to use the cre dit car d m achi ne and pl aced newspaper a ds wh e n Pa r kl a t e r b e g a n man a g i ngthe s pa und era diffe re nt o w ner. H i s num berwas al so poste d next to the phones/ cre ditcar d m achi ne al ong w i th H w ang’ s, fro m wh i ch i t co uld be i nfe rr ed t h at he was som eone the em plo yee s co uld ca l lf oras sist ance o r to r epo r t pr o bl ems. A det ec ti ve r ec o ve r ed $7 7, 00 0 i n c as h, so m e M r. L e e ’ s a n d so m e H w an g’s , from a sa fe d ep os it b ox in M r. L ee ’s n am e; M r. L ee to ld FB I A ge n t R an d all Se alby these fund s der i ved fro m the Pi ne Tre e S pa. D u rin g m ee tin g s w ith u n d er c ov er FB I A ge n t D av id Ch ild re , M r. Lee des cribed the busi ness i n detai l, fre que nt l y us i ngthe t er m “ we” a nd s pec i fi ca l l y e xpl aini ng that th ey d o a l ot ofcr edi t ca rd busi ness and that they spend cl ose to $1 8, 000 a m onth o n adver ti si ng. M r. Lee al so part i ci pated by tr ansl ating f orH w ang a nd o ther em plo yee s a nd at tended m eet i ngs with H w ang. Thi s wa s e n o u g h f o r a j u r y t o r e a s o n ab l y c o n c l u d e he j oin ed th e in te rs ta te fac ilitie s c on sp ira c y w ith fu ll kn ow ledge a nd i ntent that the pr ost i tuti on bus iness w oul d be advanced w i th the usag e o fthe cre dit car d m achi ne. I m port antl y, the gov er nm ent d id n ot have to prove that M r. L ee h im se lf u se d th e c re d it c ar d m ac h i n e . It is w ell est abl i shed that ci rcum sta nti alev i dence i s s uffi ci ent t o es ta b lish m em b er s h i p in t h e c on sp ira c y. Se e, e . g. , U nited Sta tes v. M iller, 4 05 F
. 3d 55 1, 5 55 ( 7th Ci r . 2 00 5) ( “T heN os. 06

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- 3040 and 06- 3438 17 govern m en t m ay estab li sh thes e elem en ts th roug h ‘circum sta nt ial evi dence and the re aso nabl e infe re nces th erein con cern ing th e p a rties’ relationsh ips, their overt acts , and thei r ove ra l lco nd uct. ’ ” ( quoti ng U ni t e d S t at es v. Nava rret e, 125 F. 3d 559, 562 ( 7th Cir
. 1997 ) ) )
. On e c ou ld ea sily infe r ba se d on h is s ta te m en ts an d ev id en c e o f h is extensi ve i nvol vem ent that M r. Lee know i ngl y a gr ee d to an d fur ther ed the conspi ra cy to use the cr edi t ca rd m ach i ne s i n c ar r y i ngo n the pr o st i tu ti o n b us i ne ss . Pa r tic ul ar l y, hi s st at ement s al one abo utus i ngc r edi t ca r ds an d th e te st i m o ny abo uthi m t ea ch i ngs o m eo ne t o u se th e m ach ine w ere su ffici en t evide nc e from w hic h th e j ury co ul d i nferhe kno wi ng l y b ec ame a mem ber of tha t co nspi ra cy. Give n the defe nd ant’ s v er y hea vy burden her e o n appeal and the am ount o fev i dence showingthathe w as i nv o l ve d i n the e nt i r e m as sa g e par l o r b us i ne ss , he si m plycannotpre vai lo n thi s a rgum ent.

I V . Ad m i ssi bil i ty o fRu l e 4 04( b) Ev i den ce as to

M s. Lee M s. Lee c hal l enges cer tain evi dence adm i tte d und er F ede r alRul e o fEv i den ce 4 04 ( b)

. At Ms. Le e’ s tr i al, the g o ve rnmentc al l ed I ns i k a “Anna ” Ki m t o t es ti fy . Anna K im h ad be en a “m as se u se ” a t t h e T ok yo S p a in R oc kfo rd an d att h e R ainb ow S p a t h at M s. L ee p u rp or te d ly o pe r a t e d in To l e do , Oh i o , fr o m 1 9 9 9

- 2 0 0 0
. Ms. Le e fi l e d a pr et r i almot i o n in l i m i ne t o k ee p out Ki m ’ s te st i m o ny re gard in g the Rai nbow S pa. M s. Lee’ s obj ecti on was to18 N os. 06

- 3029 , 06

- 3040 and 06- 3438 th e pat te r n/pr o pen si tyna tu r e o fthe t es ti m o ny, a r g ui ng th at it w as p rej u d icia l w h en M s. L ee w as ch ar g e d on ly i n connect i on w ith the Toky o Spa in Rockfor d. The go ver n m en t a ss er te d th at th e e vid e n c e w as ad m iss ible und erRule 404( b)

. M s. Lee’ s defense w as going to i nc l ude a n a r g um en t th at sh e was una war e o fthe pr o st i tu
ti on a t the Tokyo Spa. There f or e, th e g ove rnm ent a rgued t o th e d i s t r i c tj u d g e , Ms
. L e e ’ s p r i o r e x pe r i e n c e b e c a me re l evantand K i m ’ s t est i m ony shoul d b e ad m i tte d fo r th atl i m i te d pur po se o fde m o ns tr at i ngknow ledg e. The di s t r i c tj ud g e de c i de d tha tthe e v i de nc e wou l d b e a dm i ss ibl e unde r Rul e 40 4(b) wi tha l i m i tingi ns truct i o n. M s. Lee di d m ak e su ch a defen se as ea r l y as open i ng state m en ts, an d K im did te s tify. T he j ud ge gave th e j ury a l i m i ti ng i nstr ucti on, track i ng the f am i l i arS eve nth C i r c u i tp a t t e r n c r i mi n a li n s t r u c t i o n 3
. 0 4 , b o th a tth e t i me ofthe tes ti m ony and ag ain f ol l owing cl osing st ate m ents. Ki m t e s t i fi e d ab o utthe o pe r a t i o ns o fb oth th e T o l e do and R ock f or d spas, expl ai ni ng the bo okk eepi ng sy ste m at both spas, how condom s we re obtai ned and d i spose d ofatthe R ock f or d spa, and so f or th. Kim ’ s t est i m ony, both on di re ct a nd cr oss - exam in at ion, al so i ncl ud ed re fer ences to “f or ced se x. ” S he m enti oned duri ng her dir ect exam i nati on t h at she was pushed i nto a r oo m o n her fi rs t day at the Rai nbow Spa i n Tol edo t o ob ser ve a nd then o n s ub s e qu e ntda y s t o p e r f o r m s e xu a la c t s . On cr o ss - ex ami na ti o n, s he elabo r at ed fur th er, e ve n s ta ting she was put i n m eta lchai ns. M s. Le e no w ar g ue s o n a ppea ltha t Ki m ’ s “forced se x” tes ti m ony shoul d hav e been excl ud ed pu rs uant to R u l esN os. 06

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- 3040 and 06- 3438 19 403 and 404(b) , and that gi ven the “s hocking and devast ati ng” nature ofthe tes ti m ony, the l i m i ti ng i ns tr u c ti on w as not enough to counterthe prej ud i ce. The di str i ct cour t a dm i tte d K i m ’ s Rai nbow S pa tes ti m ony und er R u l e 4 04 (b ). W e re vie w for a b u se of d isc re tio n . U nited Sta tes v. R o ss , 510 F.3d 70 2, 71 3 (7t h C ir. 20 07 ). A d m iss ibili ty und erFe deralRule o fEvid en c e 404(b) i s g ove rned by a four-pa rt test: W he th er, ( 1) the evi denc e i s di re cted t oward est abl i shi ng a m at te r i n i ss ue o th er th anthe de fen dan t’ s pr o pen s i t y t o c o mm i tthe c r i me c ha r g e d; ( 2) the evi dence shows thatthe othe r act i s s i m i l ar enough and clo se enough i n ti m e to be rel evantto th e m at te r iniss u e; (3) th e evide nc e is su ffici en t to s u p p o r t a j ury fi nd i ngtha tthe de fe nd a ntc o mm i t t e d the s i m i l ar ac t; a nd ( 4) the proba ti ve val ue o f the evi dence i s no t s u b s ta n tia lly ou tw eig h ed by th e d an ge r of u n fair prej ud i ce. Id. ; U nite d State s v. Z apa ta , 871 F .2 d 6 1 6 , 620-21 (7th Cir. 198 9)
. Undera l lf o urpr o ng s, the di st r i ctj udg e’ s co nc l usi on t o a dmi tKi m’ s R a i nb o w S pa t e s t i mon y i n g e ne ra l w as correct
. Th e evide n c e w en t d irectly to M s. L ee’s knowle dge

— an i ssue othe r than th e d efendant’s pro p en sit y t o c om m it th e cr im e c h ar ge d . M s. L ee h er se lf m ade kno w l edge an iss ue by argui ng she w as unaw ar e o f th e p ro st itu tio n . Th u s, u n d e r t h e firs t p ro n g, K im ’s t es tim o ny was pr o per l y a dm i tt ed to prove kno wl edg e an d20 N os. 06

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- 3040 and 06- 3438 l ack ofm i sta ke oracc i de n t. T h e s eco nd pro ng was al so m et; the Tol edo s pa oper ati on was practi cal l y i d en ti cal i n o per at i o n to th e R o ck f o r d s pa ati ss ue i n the pr es en t case . The ti m e fra m e was withi n two ye ar s, cl ose eno ugh to be rele va n t t o th e m at te r iniss u e. Se e, e . g. , U nited Sta tes v. B est, 25 0 F
. 3d 1084, 10 92 ( 7th Ci r. 20 01) ( fi nd i ng a pri orid enti calco cai ne o ffense tw o yea rs ea rl i erwas su fficie n tly sim ilar ); U nite d State s v. Tri ngali, 71 F. 3d 13 75 , 137 9 (7 th C ir. 19 95 ) (co n c lu d in g e vid en c e w ith in ten years w as ad m issible to show pres en t know le d g e ). Ki m ’ s fi r st
- ha nd te st i m o ny was s uffi ci en t to s at i sfy pr o ng thre e, and M s. Lee did not ar gue othe rwis e. Th e fo urth prong i s the m ostco ntenti ous. M s. L ee arg u es t h at K im ’s te st im on y w as o ve rly p rej u d ic i a l

. T h e d i s t r i c t c o u r t j u d g e c o n c l u d e d th a t i t wa s n o t
. He ackno w l edged that som e peopl e m ay not l i ke that ki nd o f o per at i o n, b uttha t th e pr o ba ti ve v alue was no t su bs ta nt i a l l y o u t we i g h e d b y the d a n g e r o fu n f a i r p r ej u d i c e . We ag r ee w ith th atde te r m i na ti o n. Adm i tt i ngt es ti m o ny re gar d in g M s. Lee’ s business at the Rainbow S pa did not prese nt unf ai r prej ud i ce

— it w as essen tially the very sam e be havi orshe w as ch ar ge d with in connect i on wi ththe Ro ck f o r d s pa o per at i o n. El i ci tingt es ti m o ny about her previ ous e xperi en ce in an i denti calo perat i on to show her knowle dge i s no t s uch that i ts proba ti ve v a l ue wo ul d b e s u b stan tia llyou tw eigh edbythe danger of unfairpr ej udi ce . The r efo r e, a s to K i m ’ s te st i m o ny abo ut the Rainbow Spa gener al l y, the dist ri ct cour t’ s Rul e 4 04(b) deter m i nati on was co rr ect. I n h er b r i ef, M s. Le e f o cus es o n the pr ej udi ce o fthe “fo r ce d s ex ” te st i m o ny i n pa r ti cul ar . The f o ur thpr o ngN os. 06

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It ap p ear s that M s. L ee rea lly d id n ot p reserv e he r ob jection to 4 the “for c ed s ex ” t es t i m ony. As adm i t t ed at o ra l ar gum en t, no obj ec t i on w as rai s ed duri ng tr i alwhenthe f or c ed- s ex t es t i m ony cam e o ut. M s. Lee argues thatthe i ss ue w as prese rved via her pr e t r i a l m ot i oni n l i m i ne t o pr e c l ude Ki m ’ s Ra i nb ow S pa t es t i m ony al t oge the r. Thi s , ho wever, was i ns uffi c i en tbe cau se with that obj ec t i on c am e no i ndi c at i on that the re would be an y tes ti m ony ab out f orced s ex

— M s . Lee s i m pl y obj ec t ed t o the p a t t e r n / p ro p en sit y as p ec t o f th e t es tim o n y . SeeUn i t ed Sta t es v. Sw an , 48 6 F .3d 26 0 , 26 4 (7t h C ir . 20 0 7 ); Wi l s o n v . Wi l l i a ms , 18 2 F
. 3d 5 62 ( 7th Cir

. 19 99 ) ; Fe d. R. ofEvi d. 10 3 ( re qui ri ng a party to st ate a “s pecific ground ” ofthe objec ti on). The ram ific at i on s o ff a i l i ngt o pr e s e r ve the i s s ue f or a ppe a l i s t o do wng r a de (co n tin u ed ...) o fthe Rul e 40 4(b) t es t ex cl ud es evide nc e o nl y whenthe dan g ero funf ai r pr ej udi ce s ubs ta nt i al l y o ut we ighs th e proba ti ve value . Th e f act that K i m sa i d she was pushed i nt o a r o o m t o wat cha nd/ o r e nga g e i n s ex ua la ct s i n the R ai nbow S pa i s probati ve, es tabl i shi ng M s. Lee’ s kn ow le dg e o fthe s pa p r o s t i tuti on, a s we a l r e a dydi s c us s e d. A rguabl y the f or ced aspecto fi t i s m or e pr ej ud i ci althan pros ti tuti on g ener al l y a s i t co uld be co ns tr ued as r ape. Furtherm or e, thatspeci fi c te sti m ony add ed l i ttl e new proba ti ve evid ence, since Kim ’ s o therte sti m ony re gar ding the Rainbow S pa had alr eady e stabl i shed M s. Lee’ s knowle dge. H owever, gi ven the circum sta nces, w hi ch w e di scuss furtheri n the f ollow i ng par agr aphs, ther e w as si m plyno tr ue “dangero funfa i r prej ud i ce” that wo u l d i n d u c e th e j u r y t o d e c i d e th e c a s e o n s o me im properbas i s. A dm i tting the te sti m ony w as not pla in er r o r . M o r ev er, e ven ifw e wer e to c o nc l ude tha t th e

422 N os. 06

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- 3040 and 06- 3438

(
. . . c on t i nu e d) 4 the stand ard of rev ie w fro m ab u se of d iscretion to p lain er ro r. Uni t e d S t a t e s v. Bl o unt, 502 F. 3d 674, 677-78 ( 7th Cir

. 20 07 )
. Dis c us s i ng thi s i n m or e det ai l , ho wever, i s no tw or thwhil e. M s . Lee ’ s c l ai m he re i s no tm er i t or i ous , f or the r ea s ons e x pl a i ne d i n

f ra , reg ard less of w ha t stand ard ap p lies. K im ’ s tes ti m ony d uring cros s w as rather unusual atti m es as 5 she d iscussed her life an d em p loy m en t histor y . In a d d ition to el abor at i ng on he r “f or c ed s ex ” t es t i m ony, s he t es t i fi ed thats he ha d w or ke d pre vi ous l y a s a par tne r i n a Tam pa r es t aur ant bus i ne s s ; wa s o wne r o fa m aj orm e di c a l h e a l th i ns urance b u siness in H ou ston ; b eca m e a p artn er o n a shrim p b oa t in Biloxi ; ow n ed a n apartm ent bu il ding; worked as a dental t ec hni c i an, walking s om e 35 m i l es e ac h way t o a nd fro m work dai l y; and bec am e a c ont ra c t or by re adi ng a l ibra ry book, to nam e only a few of her accom plis hm ents
. K im als o te sti fied thats he t ri ed to s el l one ofher kid n ey s fo r $26,000 at a m arket i n Hous t on. S he d es c ribed h ow s he c am e t o wor k a tthe T ol edo s pa, e xpl ai ni ng thata wom an i n a M i s s i s s i ppi ha ir s al on gave he r a ph one num ber

. Aft erc al l i ng thatnum ber, s he too k a b u s t o F lint, M ichig an . A p p are ntly she w as no t their (co n tin u ed ...) f or ced-s ex as pect o fthe tes ti m ony w as adm i tte d i n er ro r u n d er R u le 404 (b ), th at ad m iss ion, at its w or s t, w ou ld m ostcer tainl y b e har m l ess , f orthe f ol l owing re aso ns. F i r st, the maj o r i tyo fthe f o rced- se x de ta i l s ca m e o ut dur i ngc r o ss - ex am inati o n ( no tabl y no t bythe g o ve r nm ent duri ng di re ct) i n an at tem pt by the defense to discre ditKim
. A nd this at tem pt to di scr edi t was r ather su cc es sful i n pr o vi di ng pl en ty f o r th e defen se to arg ue to the j ury about K i m ’ s cr edibi l i ty. Giv en the unusual 5N os. 06

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(
. . . c on t i nu e d) 5 “ty p e,” so, after an oth er ca ll, she w en t to the R ai n b o w S p a in Tol edo. T he d et ai l s she d es c ribed ofher li fe were t ru l y no thi ng s ho r to fo dd. na tu re of he r testim ony , any p rej ud ici al i m p a c t or i m p erm i ss ibl e emot i o na lpul lo fthe f o r ce d- se x a l l egatio ns se ems n eg l i g ibl e. Af te r he ar i ngKi m di sc us s he r l i fe, a ny re aso nabl e j urorwas l i kel y t o car efully c onsi der what w ei ght t o gi ve her tes ti m ony. M or e i m port antl y, the f or ced-s ex te sti m ony el i ci ted o n di r ec t an d c r o ss c o m pr i se d o nl y a mer e han d fulo fs en tence s o ut o fKim ’ s hal f

- day- l ong tes ti m ony i n a four- day tr i al

. There w as a l so an abundance o fo therev i dence on wh i ch the j ury coul d pin M s. L ee’ s guil t. A dd i ti onal l y, t h e g o v e r n m e n t d i d n o t a r g u e th e f o r c e d s e x i n i t s s u mm at i on

— the r e wa s ab s o l ut e l y n o p ul lo n the j ur o rs ’ em ot ion s a sk in g t h em to co n v i c t h er be c au se sh e in so me wa y wa s a ffi l i a t e d wi thr a p e . T h e g o v e r n men t ask ed the j ury to c onvicthero n the evi dence, o fwh i ch th er e w as p len ty
. SeeU nited S tates v. D ennis , 49 7 F
. 3d 765, 77 0 (7 th C ir. 20 07 ) (m en tio n in g t h e “o ve rw h elm in g e vidence of[ the defendant’s ] gui l t” apartfro m ev i dence adm i tt ed unde r Rul e 40 4(b) i n de te r m i ni ngtha t an y R ule 404(b) error w ou ld ha ve been harm less); U nited Sta tes v. M alle tt, 4 96 F. 3d 79 8, 8 02 ( 7th Ci r . 2 00 7) ( m en ti o ni ngthe “overw he lm ing evid en ce of [the d efend an t’s] gu il t” ap art from eviden ce ad m itte d un d er Ru le 404(b)) ; U nited Sta tes v. B est, 25 0 F
. 3d 10 84, 10 93

- 94 ( 7th Ci r . 2 00 1) ( di sc us singthe i m por t a nc e o fo the r “ c o mpe l l i ng ” e v i de nc e o n whi c h to con vict the de fend an t, asid e from Ru le 404(b) testim ony ).24 N os. 06

- 3029 , 06

- 3040 and 06- 3438 T he re are also th e li m iting inst ruc tions to con side r. Pe r ha ps M s. Le e ha s a po i nt

— th ati n s o m e ex tr eme insta nces a l i m i ting i nstr ucti on m ay be insuffi ci ent t o quel lthe prej ud i ce a nd the pu l l to convi ct on a n i m perm i ssib le e m ot ion al b as is. H ow ev er , i f su c h a c as e e x i s t s , th is is certainly n ot it; the m en tion of forced sex in K im ’s tes ti m ony i n conte xt appear s nei th er “s hocking” no r “d ev as ta tin g” d es p ite h ow M s. L ee at te m p ts t o s p init in he r brief s. T he j ud ge gave a li m iti ng i ns tru ction be fore K im ’s R ainb ow Sp a t e s t i m on y in st ru c tin g t h e jur y t h at it w as onl y t o b e c on si dered f orthe l i m i ted purpose of est abl i shi ng M s. Lee’ s know l edge. A t the c on cl usi on o f the Rainbow S pa tes ti m ony an d b ef or e Kim beg an her te st im on y re ga rd in g t h e R oc kfo rd Sp a, th e jud ge ag ain em phasi zed the l i m i tat i on o n the Rai nbow S pa tes ti m ony. The l i m i ti ng inst r uct i o n was a l so g i ve n a g ain a t th e en d of c lo sing argu m en ts. “A bsen t any show ing tha t the j ury c o u l d n o tf o l l o w th e c o u r t ’ s l i mi t i n gi n s t r u c t i o n, we pr es um e th atthe j ur y l i m i te d i ts c o ns i der at i o n o fthe tes ti m ony i n acco rdance w i th the co urt’ s instr ucti on .” M alle tt, 49 6 F
. 3d at 802. Th e ex te nsi ve i nstr ucti on was m or e than suffi ci ent t o fully c ou n terthe sl i m chance th at K im ’s tes tim on y ha d a p rej u d icia l e f fec t. Se e, e . g. , D ennis , 49 7 F. 3d at 769 ( m enti oni ng the m i ti gat i ng i m pact ofl i m i ti ng i nstr ucti ons on any ri sk ofprej ud i ci ali m pact on th e j ury); B est, 2 50 F
. 3d at1 094 (m en ti o ni ngthe li m iti ng i ns tru ction). Therefor e, ther e doe s no t a pp ea r to be any dange r of p r ej udi ce fr o m the f o r ce d- se x t es ti m o ny ( l eta l o ne unfairprej ud i ce)
. N eve rthel ess , ev en i fther e was, i t was harm l ess er ro r. “Err or i n adm i tting Rule 404(b) ev idenceN os. 06

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M s . Lee al s o appe al s the adm i s s i on of“fi nge r c ott es t i m ony” 6 fr o m F B I A g e n tR i c h m a n a n d th e r e fe r e n c e in F B I A g e n tS e a lb y ’s testim on y to a n ew sp ap er a r ticle. T he se tw o a rg u m en ts ba rely w arrantdisc uss ion. The new spaper art ic le i ts el fw as nev er show n to the j ury. Inste a d a n ag ent si m ply tes ti fie d that an art ic le i n the R ockf ord R egis terSt ar in st igat ed the i nvesti gat i ons . T h i s o n e mi n o r me n t i o n wa s c e r t a i n l y h a r ml e s s , a n d the jury w as of cou rse instru cted no t to loo k at any ou tsid e m ater ials. The fi nge r c ot t es t i m ony i s al s o i ns i gni fi c ant
. Af t er t el l i ng the j ury w here she s ei z ed finger cots at the spa, Ag ent R ic hm an d escrib ed t h at the y w ere “ b asically con d om s, tiny little con d om s that g o o v er o ne ’ s fing er, and a r e u se d to inser t in som eone’ s anus t o st im ulate the pro sta te g land.

. . . ” M s. Lee the n o bj ec t ed fo r l ac k off ounda t i on and h ea rs ay. Fol l owin g the object ion, the te st im ony w as st ri cken from the rec ord. Late r, in the j ur y’ s a bs e nc e , Ms
. Le e m ov e d f ora m i s t r i a l , whi ch the dist ri ctj ud ge denied. Co nsi dering thatM s. Lee w as charged in co nn ectio n w i t h ru nn ing a b ro the l, an d since fing er co ts were m en t i o n e d, p e r mi s s ib l y , t o th e j u r y a s i t e ms f o u n d a tthe s pa, e xp lain ing w hata fi nge r c oti s t o the j ur y was no t unfai rl y prejudici al. The tes ti m ony w as st ri cken and that s uffi c i e nt l y de a l tw i th a ny pr ob l e m the t e s t i m on y c ou l d h a ve pr e s e nt e d. m ayb e dee m ed ha r m l es s i f we a r e co nv i nc ed th atthe er r o r d i d n o ti n fl u e n c e th e j u r y, o r h a d b u tv e r y s l i g ht effect, and can s ay w i th f ai r ass uranc e . . . that the j ud gm en t was notsubst anti al l y s w aye d by the er ro r.” D ennis , 497 F. 3d at 769-70 ( intern al qu otations om itted ). Give n the ci rcum sta nces, the f or ced

- sex t est i m ony had no no ti ce ab l e i m pac t o n Ms. Le e’ s co nv i ct i o n. 626 N os. 06

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- 3040 and 06- 3438 V . Sente ncing I ssues W e r e v i e w the a pp l i c a t i o n o fs e nt e nc i ngg ui del i ne s de n ov o. U nite d State s v. A cost a , 474 F.3d 999 , 1001 (7th Cir. 20 07 )
. M r . Le e was c onv ic te d o n b o thc o unt s o fthe su per ce di ngi ndi ct m en t

— the c onspi ra cy to use in terst ate facil iti es an d the c o n s p irac y to com m it m one y l au nd eri ng

— o n Mar ch2 0, 2 006. On J ul y 1 7, 2 00 6, he was s en tence d to 51 m onths ofim p ris onm ent o n both counts to ru n co n c u rre n tly , th re e y ea rs ’ su p er vis ed rele as e, a $250 fi ne, and a $2 00 speci alas ses sm ent. M s. Lee was al so convi cted o fb oth counts, o n M ar ch 30, 20 06. S he was se nt en ce d, o n J ul y 2 0, 2 00 6, t o 6 3 m o nt hs ofi m pr i so nm ent on both counts to run concurr entl y, plus th re e yea rs o fsuperv i sed r el eas e, a $500 fin e, and a $2 00 speci alas ses sm ent. Bo thdefen dan ts ’ bas e o ffen se l ev el s f o r CountTw o , the mon e y l a un de r i ngc o un t, we r e c al cul a t e d u nd e r U. S
. S
. G. § 2 S1. 1( a) ( 2) , with c ro ss- refer en c e t o U
. S. S. G. § 2 B1. 1 t o det er m i ne ho w m an y l ev el s sh o ul d b e adde d. F o l l o wi ng the s entencings, however, the tri alj ud ge deter m i ned th atthi s ca l cul at i o n in Mr. Le e’ s ca se was e rroneous a nd ex pr es se d thi s i n a pr o ce edi ng o n Aug us t 24, 2 00 6. The sa m e e rro r oc c u rre d in M s. L ee ’s c as e. T h e g ov er n m en t in i ts bri efco ncedes th at thi s ca l cul ati on was er ro neous, expla i ni ng tha t the bas e o ffense l eve l s sh ou l d have be en cal cul at ed u nd erU
. S. S. G. § 2 S1. 1( a) ( 1)
. A l lpart i es see m to agr ee w i th thi s point, and because a se ntence m ust b e b as e d on an ac c u ra te gu id elin e c alc u lat ion, U nited S ta te s v. G arre tt, 528 F.3d 525 , 527 (7th C ir. 2008), the sente nces m u st be v acat ed w i th the cas es re m andedN os. 06

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- 3040 and 06- 3438 27 f o r r e s e nt e nc i ng . Ac c o r di ngl y, a l lo the r a r g ume nt s a dvanced with r espectto se ntenci ng ar e m oo t. M o r eo ve r, g i ve n o ur co nc l us i o ns ab o ve , o ve r tu r ni ngthe convi cti ons w i th r espect to the m oneyl aund er i ng co unts, th e Le e s mus tb e r e s e nt e nc e d a ny wa y, i n l i g hto fthat, up o n r e man d.

V I . Concl usio n W e A FFIRM the c on victi ons on the i nter sta te f aci l i ti es c o ns pi r a c y c l a i m a nd R EV ERSE the c onvi ct i o ns f o r the m one y launderi ng co nspir acy. W i th r espectto the Lees’ sente nces, we V ACATE a nd R EMA ND forr ese ntenci ng.

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