Opinion ID: 187186
Heading Depth: 2
Heading Rank: 1

Heading: The Conspiracy to Launder Money

Text: At trial, the Government argued and the jury found Farrell had agreed with Fletcher to launder the proceeds of their narcotics activities by using those proceeds to pay the mortgage on the Rosedale building, which was owned by Karlene Thomas. Farrell contends the evidence was not sufficient to support the jury's verdict. We review the sufficiency of the evidence de novo, considering it in the light most favorable to the government, to determine whether any rational trier of fact could have found [the defendant] guilty beyond a reasonable doubt of all the required elements of the crime. Valdes v. United States, 475 F.3d 1319, 1322 (D.C.Cir.2007) (en banc). The federal money-laundering statute proscribes the conversion of cash into goods and services as a way of concealing or disguising the [illegal] wellspring of the cash. United States v. Wynn, 61 F.3d 921, 924 (D.C.Cir.1995) (quotation marks omitted). [2] We have emphasized that 18 U.S.C. § 1956 prohibits the laundering of money, not merely the spending of money obtained illegally. Thus, the Government must prove that [the subject transaction was] motivated by a desire to conceal or disguise the source or the ownership of the money. Id. (citation omitted); see also United States v. Hall, 434 F.3d 42, 50 (1st Cir.2006) (the money laundering statute does not criminalize the mere spending or investing of illegally obtained assets). Accordingly, it is generally the case that [i]f transactions are engaged in for present personal benefit, and not to create the appearance of legitimate wealth, they do not violate the money laundering statute. United States v. Majors, 196 F.3d 1206, 1213 (11th Cir. 1999) (quotation marks omitted); cf. Cuellar v. United States, ___ U.S. ___, 128 S.Ct. 1994, ___ L.Ed.2d ___ (2008) (holding § 1956(a)(2)(B)(i), which prohibits transportation designed to conceal certain attributes of illegally obtained funds, does not require proof that defendant attempted to create appearance of legitimate wealth, but recognizing such attempt may signal violation of money laundering statute and indeed is manner in which classic money laundering occurs). The statute also punishes as a principal anyone who conspires to launder money. § 1956(h). Farrell argues the evidence was insufficient to show the mortgage payments were designed to conceal the source of the funds rather than to profit[] from the excess rental income or[ to] maintain[] the premises to further drug trafficking. To be sure, the Government's evidence need not exclude every reasonable hypothesis of innocence or be wholly inconsistent with every conclusion except that of guilt. United States v. Lam Kwong-Wah, 924 F.2d 298, 302 (D.C.Cir.1991) (quotation marks omitted). But when faced with an innocent explanation sufficiently supported by the evidence to create a reasonable doubt about the defendant's guilt, the Government's burden is to present evidence sufficient to dispel that doubt. The need for evidence that excludes such an innocent explanation is especially important in relation to a charge of money laundering because of the fine line between laundering and merely spending illicit funds. Both of Farrell's innocent explanations create a reasonable doubt about his guilt such that no reasonable jury could conclude that Farrell's purpose in paying the mortgage on the Rosedale building was to conceal the source of illegally obtained funds. First, the evidence showed that Farrell profited from the excess rental income derived from the building. The monthly mortgage payment on the Rosedale building was about $600. The monthly rent for each apartment in the Rosedale building, which Farrell collected when he was paying the mortgage, was typically $400 or $450. Although all the apartments were not always rented, it is easy to see that Farrell's rental income exceeded his mortgage payments, making his decision to take over the mortgage a profitable one. Second, the evidence showed Farrell maintained the Rosedale building to further his drug trafficking, for which maintaining he was in fact convicted on Count 3. As detailed below, Farrell's paying the mortgage and collecting the rent were integral to the control he exerted over the Rosedale building. In sum, there was ample evidence to show Farrell paid the mortgage to gain present benefits, not to create the appearance of legitimate wealth. At trial, the Government presented and now points to three pieces of evidence intended to show Farrell paid the mortgage in order to conceal the source of his funds. We find the Government's evidence insufficient to its taskit neither makes for a strong affirmative case nor tends to exclude Farrell's innocent explanations. First, the Government notes Farrell paid the mortgage in Karlene Thomas's name rather than in his own. Farrell did this sometimes by purchasing a money order in Thomas's name and then making the money order payable to the mortgagee, and sometimes by giving the money to Thomas to make the payment. The Government cites two decisions in which a court of appeals upheld the conviction of a person who had laundered money by making a payment in another's name. Those cases, however, involved circumstances that tended to exclude the possibility that the defendant was merely spending the illicit funds. In neither case was there any plausible legitimate reason for using another's name. In both cases the pseudonymous purchase provided the defendant no benefit other than a way to convert the illegally obtained funds; that is, the purchase merely created the appearance of legitimate wealth. Indeed, in one case the defendant admitted he was trying to launder the money. See Wynn, 61 F.3d at 925-26 (one defendant obtains and uses cashier's checks in other defendant's name to buy luxury vehicle and soon thereafter to pay difference between trade-in value of that vehicle and price of another); Hall, 434 F.3d at 52-53 (defendant bought truck with money order in sister's name and told acquaintance account from which funds came was fictitious `inheritance account' in which the money `was cleaned'). No such circumstance is present in this case. There was a simple, benign reason for paying the mortgage in Thomas's name: Thomas was the mortgagor, making it easier for Farrell to pay the mortgage in her name than to make clear to the mortgage company that payments in his name were to be applied to her mortgage. And, as discussed above, making the mortgage payments provided Farrell with legitimate benefits, namely, rental income and a base for his drug operation. Therefore, under the circumstances Farrell's decision to pay the mortgage in Thomas's name does not reasonably suggest a purpose to conceal the source of the funds. Cf. United States v. Sanders, 928 F.2d 940, 946 (10th Cir.1991) (insufficient evidence of purpose to conceal where defendant purchased cars in daughter's name but defendant was present at these purchases[, was] readily identified by the respective salespersons involved, and conspicuously used the cars). Second, the Government points to Farrell's alleged belief that, by paying the mortgage from 1993 to 2001, he acquired a property interest in the building. The Government does not, however, explain how this alleged belief shows a design to conceal the source of the funds. We find this alleged belief has little or no probative value because it does not distinguish mere spending from laundering; legitimate spending to pay for real estate ordinarily comes with the expectation of acquiring a property interest. Third, the Government emphasizes that Farrell refuse[d] to deal with government entities regarding the Rosedale building, such as paying sanitation bills or helping with tax filings, and [refused] to provide Thomas with money to handle such bills. [3] Left again to grope for the significance of this allegation, we find none. For starters, this allegation relates not to the use (and thus possible cleansing) of the illicit funds but rather to the funds' non-use, the significance of which is at best unclear. Moreover, Farrell's refusal to pay sanitation and tax-preparation bills may have reflected nothing more than his desire to avoid diminishing the profit from his investment in the Rosedale building. If Thomas was willing to pay these bills even while Farrell was collecting the rent, then Farrell had no incentive to pay them. Or Farrell may have avoided paying the bills because he did not want his name associated with a building he knew was used for drug activities. In sum, no reasonable jury could conclude that Farrell's purpose in paying the mortgage on the Rosedale building was to conceal the source of illegally obtained funds. We therefore vacate Farrell's conviction on Count 2 for conspiring to launder money. [4]