Source: https://law.justia.com/cases/federal/appellate-courts/F3/39/479/512043/
Timestamp: 2019-08-24 12:02:04
Document Index: 656683486

Matched Legal Cases: ['§ 846', '§ 371', '§ 841', '§ 2', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956', '§ 1956']

United States of America, Plaintiff-appellee, v. Ira Nathan Heaps, Defendant-appellant, 39 F.3d 479 (4th Cir. 1994) :: Justia
Justia › US Law › Case Law › Federal Courts › Courts of Appeals › Fourth Circuit › 1994 › United States of America, Plaintiff-appellee, v. Ira Nathan Heaps, Defendant-appellant
United States of America, Plaintiff-appellee, v. Ira Nathan Heaps, Defendant-appellant, 39 F.3d 479 (4th Cir. 1994)
US Court of Appeals for the Fourth Circuit - 39 F.3d 479 (4th Cir. 1994)
Argued June 9, 1994. Decided Oct. 31, 1994
* The defendant, Ira Nathan Heaps, has appealed from the judgment of the United States District Court for the Eastern District of Virginia finding him guilty of all counts of an eight-count indictment. Count 1 charged the defendant with conspiracy to possess and distribute methylendioxyamphetamine (MDA), commonly known as "ecstasy," in violation of 21 U.S.C. § 846. Count 2 charged the defendant with conspiracy to commit money laundering in violation of 18 U.S.C. § 371. Counts 3 and 4 charged the defendant with distribution of ecstasy in violation of 21 U.S.C. § 841(a) (1) and 18 U.S.C. § 2. Counts 5 and 7 charged the defendant with money laundering in violation of 18 U.S.C. §§ 1956(a) (1) (A) (i) and 2. Finally, Counts 6 and 8 charged the defendant with money laundering in violation of 18 U.S.C. §§ 1956(a) (1) (B) (i) and 2. The defendant was sentenced on October 29, 1993, to 41 months confinement as to Counts 1, 3, and 4, and to 78 months confinement as to Counts 2, 5, 6, 7 and 8, to run concurrently with one another. He was also sentenced to a two-year period of supervisory release and special assessments totalling $400.
The decision whether to transfer a case is committed to the sound discretion of the district court. United States v. Espinoza, 641 F.2d 153, 162 (4th Cir.), cert. denied, 454 U.S. 841, 102 S. Ct. 153, 70 L. Ed. 2d 125 (1981). The district court may only be reversed if it has abused its discretion.
At the outset, we note that venue was proper in the Eastern District of Virginia. We have held that venue is proper, in a multi-district conspiracy, in any district in which a conspirator has committed an overt act. United States v. Martinez, 901 F.2d 374, 376 (4th Cir. 1990). Moreover, when a conspiracy is formed in one district and overt acts are taken in furtherance of it in other districts, venue is proper against all of the defendants in any one of those districts. United States v. Levy Auto Parts, 787 F.2d 946, 952 (4th Cir.), cert. denied, 479 U.S. 828, 107 S. Ct. 108, 93 L. Ed. 2d 56 (1986). Since in the instant case overt acts in furtherance of two charged conspiracies occurred in the Eastern District of Virginia, the Southern District of New York, and the District of Columbia, venue properly lay in each of the three districts for Counts 1 and 2 of the indictment.
Similarly, the Government has asserted that venue was proper in the Eastern District of Virginia for Counts 3 through 8. We agree. The two distribution counts alleged distribution of ecstasy in Alexandria, Virginia. The money laundering counts stemmed from the wire transfer of money representing the proceeds of the sale of LSD in the Eastern District of Virginia. See United States v. Beddow, 957 F.2d 1330, 1336 (6th Cir. 1992) (venue for a money laundering case is proper in any district in which the specified unlawful activity occurs).
Though the defendant's argument is not without some appeal, we are unable to find that the district court abused its discretion in allowing the case to proceed in the Eastern District of Virginia. In making its decision, the district court relied on the factors enumerated by the Supreme Court in Platt v. Minnesota Mining & Mfg. Co., 376 U.S. 240, 84 S. Ct. 769, 11 L. Ed. 2d 674 (1964). There, the court noted ten factors which a court may consider in exercising its discretion: (1) location of the defendant; (2) location of witnesses; (3) location of events likely to be in issue; (4) location of documents and records; (5) disruption of the defendant's business; (6) expense to the parties; (7) location of counsel; (8) relative accessibility of place of trial; (9) docket conditions in each district; and (10) any other specific element which might affect the transfer. Id. at 243-44, 84 S. Ct. at 771-72.
The defendant has asserted that the evidence was insufficient to convict him of money laundering under 18 U.S.C. § 1956. The statute provides in pertinent part:
shall be guilty of an offense. 18 U.S.C. § 1956(a) (1). In order to sustain a conviction under the statute, the Government must prove that: (1) the defendant conducted or attempted to conduct a financial transaction; (2) the property involved the proceeds of specified unlawful activity; (3) the defendant knew that the property involved represented the proceeds of some form of unlawful activity; (4) the defendant engaged in the financial transaction with the intent to promote the carrying on of specified unlawful activity; or (5) while knowing that the transaction was designed in whole or in part, to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of the unlawful activity. 18 U.S.C. § 1956(a) (1); United States v. Montoya, 945 F.2d 1068, 1076 (9th Cir. 1991).
The indictment charged violations of 18 U.S.C. § 1956 on two theories: first, that the $2,000.00 wire transfer from Beck to Stacey Maire was sent to promote the carrying on of specified unlawful activity, punishable under 18 U.S.C. § 1956(a) (1) (A) (i), and second, that the transaction was designed to disguise the source, ownership, or control of the proceeds of the unlawful activity, punishable under Sec. 1956(a) (1) (B) (i). The defendant has argued that the evidence was insufficient to support his conviction for two reasons. First, he has argued that the Government never established that he knew that the money was unlawful proceeds. Second, he has argued that the Government failed to prove that the transaction alleged was intended to promote the carrying on of specified unlawful activity, or that it was designed to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of the specified unlawful activity.
* Section 1956(a) (1) requires the Government to prove that the defendant had "actual subjective knowledge" that the money used in a money laundering transaction was derived from an unlawful source. United States v. Campbell, 977 F.2d 854, 857 (4th Cir.), cert. denied, --- U.S. ----, 113 S. Ct. 1331, 122 L. Ed. 2d 716 (1993). The defendant may not be convicted on just what he should have known. Id. However, both direct and circumstantial evidence can be used to establish knowledge and are given the same weight. United States v. Awan, 966 F.2d 1415, 1434 (11th Cir. 1992).
Viewing the evidence in the light most favorable to the Government, Goldsmith v. Witkowski, 981 F.2d 697, 701 (4th Cir.), cert. denied, --- U.S. ----, 113 S. Ct. 3020, 125 L. Ed. 2d 709 (1993), we find that the evidence of the defendant's subjective knowledge of the source of the funds was sufficient to sustain the conviction. The Government presented circumstantial evidence from which a jury could reasonably infer that the defendant knew that the $2,000 wired to him were proceeds from the sale of drugs. The evidence established that Beck and Boccia were drug dealers and that during the summer and fall of 1991 the defendant was their primary source of ecstasy. Boccia's primary means of support was by dealing drugs supplied by the defendant. Beck and the defendant were friends, and the evidence showed that she and Boccia were fronted drugs by the defendant for later payment.
As to Counts 5 and 7 of the indictment, the Government was required to prove that the defendant engaged in a financial transaction with the intent to promote the carrying on of specified unlawful activity. 18 U.S.C. § 1956(a) (1) (A) (i).
As mentioned, the second of the Government's theories is that the transfer of the $2,000 completed the antecedent drug transaction, and that this completion alone is sufficient to sustain the conviction. The Government relies on three cases from other circuits in support of its position. The first of these is United States v. Paramo, 998 F.2d 1212 (3d Cir. 1993), cert. denied, --- U.S. ----, 114 S. Ct. 1076, 127 L. Ed. 2d 393 (1994). In Paramo, the defendant embezzled IRS tax refund checks. Id. at 1215. Coconspirator Vega, a tax examiner for the IRS, sent fictitious refund checks to payees in New York. The defendant then picked up the checks and deposited them. Id. at 1215. The defendant argued that his participation in the cashing of the checks did not promote the carrying on of mail fraud. Id. at 1217. The Government argued that Paramo promoted mail fraud when he converted the embezzled checks into cash. Id.
The Government next relies on United States v. Montoya, 945 F.2d 1068 (9th Cir. 1991), a case cited with approval in Paramo. In Montoya, the FBI conducted a sting operation to uncover the bribery activity of the defendant, an elected official. Id. at 1077. The FBI undercover agent made a $3,000 payment to the defendant. The defendant deposited the check into his personal account and, on appeal, argued that the check could not have promoted the bribery because the unlawful activity was completed upon the receipt of the check from the FBI agent. Id. at 1076.
Finally, in United States v. Cavalier, 17 F.3d 90 (5th Cir. 1994), the Fifth Circuit upheld the defendant's money laundering conviction based upon mail fraud. In Cavalier, the defendant took physical possession of a van, failed to satisfy the required monthly payments, and then sold the van for cash. Meanwhile, the defendant reported the van as stolen to the insurance company which paid off the remaining lien on the van. Id. at 95. The Fifth Circuit held that the transfer of a check from the insurer to the lien holder, because of the fraud of the defendant, promoted the completed mail fraud. Id. at 93. "Here, Cavalier caused to be reinvested or plowed back the proceeds of his mail fraud to promote his overall scheme to defraud...." Id.
United States v. Edgmon, 952 F.2d 1206, 1213-14 (10th Cir. 1991), cert. denied, --- U.S. ----, 112 S. Ct. 3037, 120 L. Ed. 2d 906 (1992). Although the Tenth Circuit considered the question in a different context and perhaps placed too much emphasis on the temporal distinction between past and future crimes, its insight into Congress' intention is valuable. Congress intended to prevent an ill other than those already prohibited by other laws. The statute should not be interpreted to make any drug transaction a money laundering crime.
To the extent that our holding conflicts with holdings by the Third and Ninth Circuits, see Montoya and Paramo, supra, we must respectfully disagree that the mere receipt of a money transfer and the subsequent placement of cash in a box can, of itself, constitute money laundering under the statute. A holding by the Seventh Circuit, United States v. Jackson, 935 F.2d 832 (7th Cir. 1991), is squarely consistent with our holding here. In the instant case, in the court below, the prosecution argued that the defendant could have used the funds to "turn around and buy more drugs," thereby promoting drug dealing. In Jackson, the Seventh Circuit described this class of money laundering offenses as "the practice of plowing back proceeds of 'specified unlawful activity' to promote that activity." Id. at 842. The Jackson defendant was convicted of money laundering under the "promoting" theory as to drug proceeds he used to purchase beepers, to buy a mobile phone, and to make rent payments, and via checks made out to cash. Id. at 841. With no dispute by the defendant that he knew the money was derived from unlawful activity, the court upheld his conviction as to the beepers, since there was evidence at trial that they were used to further drug activities. Id. As to money spent for a phone, for rental payments, and disbursed as cash however, the Seventh Circuit held the evidence insufficient because
We also must conclude that in the instant case the Government failed to sustain its burden of proof as to Counts 6 and 8 of the indictment, for which it was required to prove that the transactions were designed, in whole or in part, to disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity. 18 U.S.C. § 1956(a) (1) (B) (i). The Government's theory has been that the defendant instructed Boccia and Beck to transfer the $2,000 to his wife rather than to him in order to conceal and disguise the source and ownership of the funds from law enforcement authorities, conduct punishable under 18 U.S.C. § 1956(a) (1) (B) (i).
With respect to Ira Heaps' convictions on Counts 5 and 7 of the indictment, Part III B of the majority opinion concludes that the government failed to carry its burden of proving that Heaps engaged in a financial transaction with intent to promote unlawful activity within the meaning of the money laundering statute, 18 U.S.C. § 1956(a) (1) (A) (i). For the reasons that follow, I dissent from that portion of the opinion. In all other respects, I concur.
A jury convicted Heaps on Counts 5 and 7 of the indictment for money laundering in violation of 18 U.S.C. § 1956(a) (1) (A) (i). Count 5 alleges that on November 13, 1991, Gillian Beck transferred $1,500 by wire to Heaps "with the intent to promote the carrying on of such specified unlawful activity [illegal drug distribution]," and Count 7 alleges a similar transaction on the same date in the amount of $500. Our review, therefore, must take the facts presented to the jury in the light most favorable to the government and determine whether a reasonable jury could convict the defendant under the applicable standard of proof. I conclude that ample evidence supported the jury's verdict of conviction on those two counts and would therefore affirm.
Heaps does not dispute that the jury could conclude that the November money orders were the proceeds of illegal drug activities sent by wire in interstate commerce and that Heaps knew of the illegal nature of the proceeds. The point Heaps does argue is that he did not engage in the financial transactions "with the intent to promote the carrying on of specified unlawful activity." 18 U.S.C. § 1956(a) (1) (A) (i).
Heaps argues, and the majority opinion agrees, that this transaction was nothing more than a payment for drugs. The majority notes, "Were the payment for drugs itself held to be a transaction that promoted the unlawful activity of that same transaction virtually every sale of drugs would be an automatic money laundering violation as soon as money changed hands." Cf. United States v. Edgmon, 952 F.2d 1206, 1213 (10th Cir. 1991) ("Congress appears to have intended the money laundering statute to be a separate crime distinct from the underlying offense that generated the money to be laundered.")
While I agree that the payment constituting a drug violation cannot serve as the basis for money laundering, that does not mean that a financial transaction after completion of the illegal drug activity, even if closely connected, cannot constitute money laundering. A violation of 18 U.S.C. § 1956(a) (1) (A) (i) requires a "financial transaction" (1) that is not necessary to the establishment of the underlying illegal activity; and (2) that supports or promotes the illegal activity.* This is typically revealed by evidence that the proceeds of a drug sale are "plowed back" into the purchase of drugs or equipment or in other ways used to continue the illegal conspiracy. See United States v. Jackson, 935 F.2d 832, 841-42 (7th Cir. 1991). Additionally, in circumstances where non-monetary proceeds are received in the form of a security, a violation may occur when the security is converted (by a financial transaction) into money, thereby yielding a benefit by a transaction which is distinct from the independently illegal underlying activity.
In this case, the most obvious demonstration of money laundering is the loan payback by Beck to Heaps which, in effect, continued the credit arrangement that facilitated the underlying illegal drug conspiracy. While there is no direct evidence that the $2,000 was actually "plowed back" into the illegal drug activity, the circumstantial evidence clearly supports the conclusion that the $2,000 supported an ongoing drug conspiracy through a "fronting" scheme by which Heaps distributed drugs to Beck and Boccia. Without the $2,000 payment, such a scheme would not have continued. The $2,000 payment satisfied a credit arrangement agreed to as part of the "fronting" scheme. The jury was presented with evidence of similar prior and subsequent transactions and could well have concluded that the $2,000 promoted the scheme which had been in existence for the entire summer and fall of 1991. Significantly, after her arrest in January 1993, Beck placed an undercover telephone call to Heaps in which the two coordinated the next installment of money owed for previously completed drug transactions, thus demonstrating the ongoing nature of their financial arrangement. In similar circumstances, the Second Circuit concluded, in United States v. Skinner, 946 F.2d 176 (2nd Cir. 1991), that the purchase of U.S. Postal Service money orders from the proceeds of drug sales and the transmission of those money orders to the drug supplier constituted money laundering because that financial transaction facilitated the drug conspiracy. Id. at 177-78.
Although the above evidence is sufficient to support the jury's verdict on the money laundering counts, I note that the verdict is further buttressed by the transaction with Western Union, which was (1) separate from the necessary elements of the drug violation and (2) supported it. In November 1991, after she had already received and distributed drugs, Beck transferred cash in Washington, D.C. to Western Union in exchange for a promise that Western Union pay cash in New York to a designated payee, i.e. Stacy Maire. This commercial transaction was more than the payment of money for drugs; it was a "financial transaction" in the private sector which fully supported the ongoing drug conspiracy, but was not necessary to establish the drug violation. Similar conclusions have been reached in somewhat distinguishable but no less apposite factual circumstances by the Third, Fifth, and Ninth Circuits. See United States v. Paramo, 998 F.2d 1212 (3rd Cir. 1993), cert. denied, --- U.S. ----, 114 S. Ct. 1076, 127 L. Ed. 2d 393 (1994); United States v. Cavalier, 17 F.3d 90 (5th Cir. 1994); and United States v. Montoya, 945 F.2d 1068 (9th Cir. 1991). In each of these cases, the defendants fraudulently obtained checks which they cashed to realize the benefits of their illegal conduct, and in each, the court held that by showing that the checks were cashed, money laundering had been established. As the court in Paramo said:
The lifeblood of any business is the resupply of capital, particularly when credit is extended, and for this reason, I conclude that the evidence was sufficient to allow a jury to conclude that the $2,000 money-order transactions between Beck and Heaps on November 13, 1991, promoted the carrying on of the alleged illegal drug conspiracy and therefore violated 18 U.S.C. § 1956(a) (1) (A) (i).
Cashing a money order falls within the definition of "financial transaction" because it involves "the movement of funds by wire or other means." 18 U.S.C. § 1956(c) (4) (A) (i)