Opinion ID: 1388566
Heading Depth: 1
Heading Rank: 3

Heading: b. Effect of Recent United States Supreme Court Opinion

Text: On appeal, Fernandez argues that a Supreme Court decision handed down after his conviction requires reversal of his money laundering convictions. See United States v. Santos, ___ U.S. ___, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008). In Santos, a plurality of the Court held that the phrase proceeds of some form of unlawful activity, found in Section 1956(a)(1), means the profits, rather than merely the receipts, of the activity. Id. at 2025. Here, the district court instructed the jury that `proceeds' includes any property, or any interest in property, that someone acquires or retains as a result of the commission of the underlying specified unlawful activity. That instruction did not require jurors to focus on profits. We may review a claim raised for the first time on appeal, even when based on an intervening Supreme Court decision, only for plain error. United States v. Rios-Quintero, 204 F.3d 214, 215 (5th Cir.2000). Such a review requires that there be error, that is plain, and that affects the defendant's substantial rights. Id. Even then, the court must determine that the error seriously affects the fairness, integrity or public reputation of judicial proceedings in order to correct it. Id. We will judge whether the error is plain based on the state of the law at the time of the appeal, not of the trial. Johnson v. United States, 520 U.S. 461, 468, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997). Here, the first two prongs of the inquiry are closely related. In light of Santos, it might seem apparent that proceeds may not be defined simply as any property acquired at some point during the transaction; profit is commonly defined as the excess of revenues over expenditures. BLACK'S LAW DICTIONARY 1228 (7th ed.1999). The issue is complicated by the fact that in Santos, Justice Stevens wrote a concurring opinion that was necessary to forming a majority. The plurality justices acknowledged that the Stevens opinion governed to the extent it was narrower than the Court's opinion. Santos, 128 S.Ct. at 2031. Justice Stevens found that Congress intended proceeds to have different meanings in different contexts. Specifically, he suggested, on the basis of legislative history, that Congress intended the term `proceeds' to include gross revenues from the sale of contraband and the operation of organized crime syndicates involving such sales. Id. at 2032 (Stevens, J., concurring). Thus, he did not agree with the plurality that the rule of lenity must apply to the definition of `proceeds' for these types of unlawful activities. Id. at 2032 n. 3. Justice Stevens's comment that gross revenues were the relevant proceeds applies to the sale of contraband and the operation of criminal organizations, precisely the type of offenses for which Fernandez was convicted. While Justice Stevens and the plurality disagreed over the precise precedential effect of his statement, the uncertainty renders any error here not plain. Even were there error that was plain, we must decide whether the error affects Fernandez's substantial rights; that is, whether it must have affected the outcome of the district court proceedings. United States v. Mares, 402 F.3d 511, 521 (5th Cir.2005). The sharp factual distinctions between this case and Santos explain why Fernandez cannot meet that burden. In Santos, the defendant was convicted of money laundering based on his role in operating an illegal lottery. He supervised the use of funds collected in the lottery to pay the salaries of those working beneath him, as well as to pay off the winners of the lottery. Santos, 128 S.Ct. at 2022-23. He was convicted under 18 U.S.C. § 1956(a)(1)(A)(i), which prohibits conducting a financial transaction with the proceeds of illegal activity with the intent to promote the carrying on of additional illegal activity, which in Santos was the continued operation of the lottery. It was thus apparent in Santos that the conviction could not stand under the new definition of proceeds, because all the defendant was accused of was plowing the receipts of the gambling operation back into the business. By contrast, Fernandez's convictions rest on Section 1956(a)(1)(b)(i) and (ii), which prohibit transactions designed to conceal or disguise the origins or location of the proceeds of illegal activity, or to avoid legal reporting requirements. Given the scope of the government's evidence that Fernandez was involved in a string of transactions over a period of fifteen years involving real estate, horses, and multiple shell corporations, we are unable to find that the outcome of the trial on these charges would necessarily have been different had the jury known that it must find the transactions were conducted with the profits of, rather than property acquired or retained from, the drug-trafficking activity. Fernandez did not simply take the receipts of the Organization and use them to purchase more drugs or pay salaries. Rather, the evidence was that his machinations were designed to conceal large amounts of money not apparently needed to run the operation. That would be profits. Because we do not find that the third prong of the plain error test is met, we reject the Santos challenge to Fernandez's convictions.
Fernandez argues that the district court erred in refusing to sever his trial from that of his co-defendants. A district court's refusal to grant a severance is reviewed for any abuse of discretion. United States v. Arzola-Amaya, 867 F.2d 1504, 1516 (5th Cir. 1989). A severance must be granted only if there is a serious risk that a joint trial would compromise a specific trial right of one of the defendants or prevent the jury from making a reliable determination of guilt or innocence. United States v. Bermea, 30 F.3d 1539, 1572 (5th Cir.1994). Fernandez acknowledges the general rule that co-conspirators should be tried together. Zafiro v. United States, 506 U.S. 534, 537, 113 S.Ct. 933, 122 L.Ed.2d 317 (1993). He argues that the seriousness of the drug and conspiracy to kill charges against his co-defendants, together with the breadth of evidence admitted under those counts but irrelevant to the money laundering charges he faced, were sufficient to require severance here. Fernandez argues that the murder charge against Marquez-Ramos was particularly likely to create unfair prejudice against him. See United States v. Cortinas, 142 F.3d 242, 248 (5th Cir.1998). Unlike in Cortinas, Fernandez's involvement with the conspiracy overlapped with the time of the murder, and his co-defendants were not, as in Cortinas, unknown to him or operating wholly independently. Any prejudice created by a joint trial can generally be cured through careful jury instructions. Bermea, 30 F.3d at 1572. Such was the case here. The district court emphasized that each charge against each defendant was to be considered separately. The jury was instructed that 19 of the 41 witnesses were not testifying against Fernandez. Other instructions were that each defendant's case should be considered separately and individually and separate consideration given to each defendant. Fernandez has not overcome the presumption that jury instructions can cure prejudice, or shown that the district court otherwise abused its discretion in refusing to sever his trial.
Fernandez argues that the district court violated evidentiary rules in admitting a proffer letter to him from the government. In June 2005, Immigration and Customs Enforcement agents met with Fernandez to inform him of a threat against his life. The conversation caused Fernandez to provide some information about the Organization and offer to provide more in exchange for immunity from prosecution. The next day, agents brought Fernandez a proffer letter signed by an Assistant United States Attorney (AUSA), but he asked for time to consult with his attorney. No deal was ever consummated. At trial, the district court permitted agents to testify about this exchange. The admissibility of evidence is reviewed for abuse of discretion. United States v. Coleman, 997 F.2d 1101, 1104 (5th Cir.1993). When, as here, no objection was made at trial, this court reviews for plain error. United States v. Jones, 484 F.3d 783, 792 (5th Cir.2007). A statement made in the course of plea discussions with an attorney for the prosecuting authority which do not result in a plea of guilty is not admissible. F.R. E. 410(4). That prohibition is inapplicable because Fernandez's discussions were with government attorneys, not with law enforcement officers. United States v. Keith, 764 F.2d 263, 265 (5th Cir.1985). Although a prosecutor signed the proffer letter that Fernandez sought after the first day's discussions, Fernandez does not explain how his initial statements to law enforcement agents, prior to contacting any attorney, could have been made in the course of plea discussions with an attorney for the prosecution. Rule 408 makes inadmissible evidence of furnishing or offering or promising to furnish . . . a valuable consideration in compromising or attempting to compromise a claim, as well as conduct or statements made in compromise negotiations regarding the claim. In this circuit, Rule 408 applies to criminal cases. United States v. Hays, 872 F.2d 582, 588-89 (5th Cir.1989). Even assuming that it was error to admit the evidence under Rule 408, the mistake would not satisfy the plain error test, which requires that an error be plain, affect substantial rights, and seriously affect the fairness, integrity, or public reputation of judicial proceedings. Jones, 484 F.3d at 792. To ask whether a substantial right was affected is to ask whether the error must have affected the outcome of the district court proceedings. United States v. Mares, 402 F.3d 511, 521 (5th Cir.2005). The defendant bears the burden of persuasion. Id. Fernandez does not meet that burden. He does not address the effect of the weight of the evidence against him, which, as we have discussed, was substantial and sufficient for conviction without the proffer letter evidence. Moreover, the most that Rule 408 would appear to bar is Fernandez's opening of the discussion about immunity and the ensuing letter; the preceding conversation with the agents, including his knowledge and possession of records relating to Marquez and perhaps even his offer to help out, which occurred before he decided to ask for protection, would remain admissible. Thus, Fernandez cannot show that any violation of Rule 408 was plain error, and we affirm on this issue.
Fernandez alleges that the government failed to provide all evidence favorable to him, as it is required to do. Brady v. Maryland, 373 U.S. 83, 87, 83 S.Ct. 1194, 10 L.Ed.2d 215 (1963). The alleged violation was the failure to turn over to the defense a 1995 internal report written by a former IRS agent. According to Fernandez, his investigator located the agent after trial. The report was issued at the conclusion of the earlier investigation. Fernandez argues that it found no evidence against him of money laundering or tax evasion. Though there are issues now regarding the report itself and what it said, the 1995 investigation and its discontinuation were known at the time of trial. Jurors were told in closing argument that the government had all this evidence in 1995 and did nothing. Only after the trial was the report finally obtained at the request of the prosecutor from the regional office of the IRS. The district judge examined the report in camera when it was submitted as part of the motion for a new trial. He found no exculpatory material in the report. When a defendant seeks a new trial on the basis of a Brady violation, he must show that (1) the prosecution did not disclose the evidence; (2) the evidence was favorable to the defense; and (3) the evidence was materiali.e., there is a reasonable probability that if the government had disclosed the evidence, the result of the proceeding would have been different. United States v. Infante, 404 F.3d 376, 386 (5th Cir.2005). We review the existence of a Brady violation de novo. Id. The government argues that neither the second nor third factors are satisfied here. We have noted that the district court found that there was no exculpatory material in the report. The only evidence Fernandez offers that the report was exculpatory is an unsworn post-trial interview with the former IRS agent who wrote it. Other courts have held that the subjective opinion of a non-witness agent as to the quantity or quality of evidence is not relevant to this question. See Williams v. United States, 74 F.3d 1242, 1996 WL 4358, at  (7th Cir.1996) (unpublished table decision); United States v. Montalvo, 20 F.Supp.2d 270, 279 (D.P.R.1998). Even if there was favorable evidence, it was not material. That is because Fernandez's counsel was already aware that an investigation had taken place in the mid-1990s that led to no action against his client, and argued this point to the jury at closing argument. Given the scope of the evidence against Fernandez over the entire period of the charged conspiracy, there is no reasonable probability that the outcome would have changed had a report from 1995ten years before the end of the conspiracy been introduced. Moreover, Fernandez does not offer an analysis of the document or explain why the district court's evaluation of it as non-exculpatory was erroneous. We find no Brady violation.
Finally, Fernandez raises a number of claims with respect to his sentence. Sentences are reviewed for reasonableness. A sentence within the properly calculated Guidelines range is presumed reasonable on appeal. United States v. King, 541 F.3d 1143, 1145 n. 1 (5th Cir. 2008) (stating that we continue to apply this presumption after it was approved in Rita v. United States, 551 U.S. 338, 127 S.Ct. 2456, 2466-68, 168 L.Ed.2d 203 (2007)). Findings of fact used in calculating the Guidelines range are reviewed for clear error, while interpretation of the Guidelines themselves is reviewed de novo. United States v. Conner, 537 F.3d 480, 489 (5th Cir.2008). Fernandez challenges several aspects of the calculation. The first concerns the amount of laundered funds. The district court found that the total amount of laundered funds for which Fernandez was responsible was $535,514.78. Fernandez's principal objection to this sum is that the court should not have included the $100,000 proceeds from the sale of thoroughbred horses that had been owned by Mario Marquez and purchased by a Fernandez-operated company a few days after Marquez was arrested. Fernandez testified about his sale of the horses and return of the money to the Marquez family. Part of the basis for alleging error is a dispute over the meaning of Fernandez's testimony at trial. He was asked if he remembered the sales price for the horses, and he answered: Just kind of guessing would be maybe, like, 100,000, if the horses were sold for what they should have; maybe 120. The punctuation, of course, was provided by the court reporter. At sentencing, the district court agreed with the prosecutor's opinion that Fernandez was asserting that the horses should have sold for $120,000, but in fact only sold for $100,000. While the testimony is perhaps subject to more than one plausible interpretation, the district judge chose a plausible meaning. We find no clear error. Fernandez argues that, even if $100,000 was the correct amount, it was improper to attribute the money to the proceeds of illegal drug activity. There was, though, substantial evidence on the scope of the Marquez Organization and the cash flow it generated. The evidence was overwhelming that Mario Marquez was a major international drug smuggler, who had no other apparent source of income, and the horses were sold and $100,000 transferred in response to his arrest. Thus, the court could permissibly conclude that the horses had originally been purchased with drug proceeds. Fernandez also objects to a six-level increase due to his belief that the funds were the proceeds of, or were intended to promote, a controlled-substance offense. See U.S.S.G. § 2S1.1(b)(1). The jury had to find that Fernandez was aware the proceeds stemmed from controlled-substance violations in order to convict him of the money laundering counts. It was not error for the district court to make the same finding. Next, Fernandez objects to a two-level increase for abusing a public trust or using a special skill in the commission of his offenses. See U.S.S.G. § 3B1.3. The special skill adjustment was justified in the PSR by Fernandez's position as a licensed real estate broker, which it found was instrumental to the means by which he laundered money. This adjustment is supported by the facts. The district court could have found in at least two of the real estate transactions examples of particular skill. The application note for the special skill enhancement refers to occupations for which licensing is required; Fernandez was a licensed real estate agent. Finally, Fernandez objects to a two-level enhancement for sophisticated money laundering. See U.S.S.G. § 2S1.1(b)(3). Both sides rely on commentary for that provision. It lists four circumstances to be considered in determining whether the enhancement applies: 1) fictitious entities, 2) shell corporations, 3) layered transactions with illegitimate funds, and 4) offshore accounts. The district court could have concluded that the charged transactions involved multiple transactions, i.e., layering, and that a number of Fernandez's corporation were shell corporations. We once upheld use of the sophisticated money laundering enhancement when the conduct was arguably less egregious than that here. See United States v. Charon, 442 F.3d 881, 891 (5th Cir.2006). We affirm Fernandez's convictions and sentence.

Diana Marquez was convicted of conspiracy to possess with intent to distribute 1,000 kilograms or more of marijuana, and of conspiracy to import marijuana in the same amount. See 21 U.S.C. §§ 846, 841(a)(1), 841(b)(1)(A)(vii) (possession with intent to distribute); 21 U.S.C. §§ 952(a), 960(a)(1), 960(b)(1)(G) (importation). She argues that the evidence was insufficient to convict her on these counts. To prove a conspiracy, the government must show (1) an agreement between two or more persons to pursue an unlawful objective; (2) the defendant's knowledge of the unlawful objective and voluntary agreement to join the conspiracy; and (3) an overt act by one or more of the members of the conspiracy in furtherance of the objective of the conspiracy. Conner, 537 F.3d at 484. The evidence to prove these charges was largely circumstantial but fairly substantial. One of Diana Marquez's former employers testified that she admitted helping Mario Marquez deliver drugs by carrying them in her purse. She also told the witness that she had sent drug proceeds to her mother, who used the money to buy two houses. Neighbors of the Marquezes and employees of the Organization testified that they had seen marijuana in Diana Marquez's house on several occasions, including a load of marijuana, in burlap sacks and large boxes. There was testimony that Diana Marquez helped others stay aware of Mario's frequently changing cell phone numbers, and told one of the employees to throw away a slip of paper with the number on it. There was evidence that Diana Marquez was the one that knew the immigration people who could ease the importation of drugs at the border. She was involved in a trip to find a house in El Paso that became a convenient transhipment point for marijuana. Two witnesses testified that Diana Marquez was involved in conversations during the trip about the suitability of various houses for drug operations, including favoring one house because it had a basement for storage. A key witness against all the defendants was Ricardo Sepulveda, who had worked for the Organization. It was the murder of his mother in Juarez for which one of the other defendants was convicted. Sepulveda testified to overhearing Diana Marquez warn Mario Marquez not to return home after their house was searched, and that she had boasted about agents not finding drug-related documents during the search. There was testimony that she had helped Mario Marquez in his search for Sepulveda after he had fled the house where his mother was killed. In addition to the testimony about Diana Marquez's actions and words, there was incriminating evidence found in her locker at the Texas Alcoholic Beverage Commission office where she worked. When opened after her arrest, it contained $8,000 in cash, deposits slips totaling close to $90,000, and a statement from a Mexican bank showing a balance of $118,569.18. All this evidence was more than sufficient to support Diana Marquez's conviction for conspiracy to possess with intent to distribute marijuana. With respect to the importation count, there was testimony from Sepulveda that Diana Marquez would call Mario Marquez to inform him what traffic lane at the border station was harder that day to use for importation. Sepulveda testified that she played a role of importing marijuana and drugs through the port of entry. He also testified that drug couriers, after crossing the border from El Paso into Juarez, frequently saw Diana Marquez at the yellow and green house, where one saw her holding a six-inch stack of money, with another such stack nearby. This mass of evidence fully supports a finding that Diana Marquez was not just present during the conspiracy. Her presence and association is part of the circumstantial evidence that she voluntarily joined the conspiracy; that a party does not physically possess drugs and plays a minor rolethough whether Diana Marquez's role should be labeled minor is debatabledoes not defeat conviction. United States v. Ayala, 887 F.2d 62, 67-68 (5th Cir.1989). It is true that evidence of involvement in a conspiracy can be too attenuated to sustain a conviction. United States v. Gardea Carrasco, 830 F.2d 41, 44-45 (5th Cir.1987). That defect does not exist in the evidence against Diana Marquez. The testimony against her did not describe a person unluckily present on only a single occasion. Her knowledge of the illegal activity and assistance to its success were sufficiently proven. We affirm the convictions on the drug counts.