Opinion ID: 799367
Heading Depth: 2
Heading Rank: 1

Heading: The Definition of Proceeds in the Money-Laundering Statute

Text: Hosseini and Obaei first argue that to convict them of money-laundering, 18 U.S.C. § 1956(a), the government was required to prove that they engaged in the specified financial transactions for the purpose of laundering the proceeds of some underlying crime, and that in this context, proceeds means net profit of the underlying crime, not gross receipts. Their argument is styled as a challenge to the sufficiency of the evidence. They contend that the government did not prove that the auto sales in question involved the net profit of the underlying drug trafficking. They point to evidence that some of the drug dealers used the vehicles they purchased from Hosseini and Obaei in furtherance of their drug-trafficking activities. This evidence, they contend, suggests that the car payments were business expenses, not the net profits of the drug trade. This argument about the meaning of proceeds in the money-laundering statute is new on appeal. To preserve a challenge to the sufficiency of the evidence, a defendant must move for a judgment of acquittal in the trial court. United States v. Tavarez, 626 F.3d 902, 906 (7th Cir.2010). Both defendants did so here; they moved for judgment of acquittal under Rule 29 of the Federal Rules of Criminal Procedure at the close of the government's case, and they renewed their motions at the close of evidence and again after the verdict. But they never raised the proceeds issue; instead, their Rule 29 motions identified other grounds for acquittal. For example, they argued that selling cars to drug dealers was not evidence of a RICO enterprise or a RICO or money-laundering conspiracy. Obaei also argued that the evidence was insufficient to find him guilty of aiding and abetting a drug conspiracy. As a general matter, and unlike its analogue in the Federal Rules of Civil Procedure, Rule 29 of the Federal Rules of Criminal Procedure does not require specificity when moving for a judgment of acquittal. Compare FED.R.CRIM.P. 29 with FED.R.CIV.P. 50(a)(2) (motions for judgment as a matter of law must specify the judgment sought and the law and facts that entitle the movant to the judgment). But we have held that a defendant's choice to raise specific arguments and omit others in a Rule 29 motion has consequences on appeal. We have held that when a defendant challenges the sufficiency of the evidence by motion for judgment of acquittal and makes specific arguments in support of that motion, any arguments omitted are thereby forfeited. See United States v. Groves, 470 F.3d 311, 324 (7th Cir.2006) (citing United States v. Moore, 363 F.3d 631, 637 (7th Cir.2004) ([W]hen ... a [Rule 29] motion raises specific arguments, any claims not presented in the motion are waived.), vacated on other grounds sub nom. Young v. United States, 543 U.S. 1100, 125 S.Ct. 1019, 160 L.Ed.2d 1001 (2005)). We might alternatively construe the proceeds argument as a claim of instructional error. But neither defendant raised the definition of proceeds as a ground of objection to the jury instructions. Accordingly, our review is only for plain error. Aslan, 644 F.3d at 540. [T]o reverse for plain error, we must find (1) error (2) that is plain, and (3) that affects the defendant's substantial rights. Id. (citing United States v. Olano, 507 U.S. 725, 732, 113 S.Ct. 1770, 123 L.Ed.2d 508 (1993)). If the defendant carries his burden on these points, the decision whether to correct the error is discretionary; we will do so only if it seriously affected the fairness or integrity of the proceedings. United States v. Robinson, 663 F.3d 265, 268 (7th Cir.2011). The federal money-laundering statute provides in relevant part: (1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity (A)(i) with the intent to promote the carrying on of specified unlawful activity; or (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or (B) knowing that the transaction is designed in whole or in part (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. 18 U.S.C. § 1956(a). The statute describes several different types of money laundering. Subsection (a)(1)(A)(i), the promotion version of the offense, requires the government to prove that the financial transaction in question was intended to promote the underlying unlawful activity. Subsections (a)(1)(B)(i) and (ii), the concealment and avoidance versions of the offense, require the government to prove that the financial transaction was designed in whole or in part to conceal or disguise the underlying crime or to avoid a transaction reporting requirement. All three variations of the money-laundering offense require the government to prove that the defendant kn[ew] that the property involved in a financial transaction represent[ed] the proceeds of some form of unlawful activity. Id. § 1956(a)(1). At the time of this trial, the statute did not define the term proceeds. However, in United States v. Scialabba, 282 F.3d 475, 475 (7th Cir.2002), we held that proceeds means net profits, at least when the crime entails voluntary, business-like operations. The defendants in Scialabba owned illegal video-poker machines that they displayed in bars. They were charged with running an unlawful gambling operation and also with money laundering under § 1956(a)(1)(A)(i), the promotion version of the offense. The latter charge, which substantially increased the defendants' prison terms, was based solely on their having handed some of the money in the [machines'] coin boxes over to the [bars'] owners. Id. at 476. Under this theory every time the defendants spent money in support of their video-poker operation, they also promoted the underlying crime and therefore faced money-laundering charges. We worried that this created a merger problemin which the money-laundering offense merged with the predicate crimeat least when the promotion variation of the offense is charged. In a promotion money-laundering prosecution, the government is not required to prove that a defendant hid[ ] or invest[ed] profits in order to evade detection, the normal understanding of money laundering. Id. To avoid this merger potential, and based on the rule of lenity, we held that proceeds denotes net rather than gross income, at least for prosecutions under § 1956(a)(1)(A)(i), the promotion subsection of the money-laundering statute. Id. at 478. We reaffirmed Scialabba in Santos v. United States, 461 F.3d 886 (7th Cir.2006). The Supreme Court granted certiorari in Santos to resolve a circuit split on the proceeds question, but no opinion commanded a majority of the Court. Four justices held that proceeds always means net profits. United States v. Santos, 553 U.S. 507, 509, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008) (plurality opinion). Four held that proceeds always means gross revenues. Id. at 531, 128 S.Ct. 2020 (Alito, J., dissenting). Justice Stevens wrote separately, suggesting that the meaning of the term could vary depending on the type of conduct at issue and the penalties involved. Id. at 524, 128 S.Ct. 2020 (Stevens, J., concurring in the judgment). Under the circumstances in Santos, he agreed with the plurality that proceeds meant net profits. Id. at 528, 128 S.Ct. 2020. We have addressed the split opinions in Santos in three cases. See Aslan, 644 F.3d at 541-50; United States v. Lee, 558 F.3d 638 (7th Cir.2009); United States v. Hodge, 558 F.3d 630, 633 (7th Cir.2009). Two of these, howeverlike Santos itselfinvolved prosecutions for promotion money laundering. See Lee, 558 F.3d at 640; Hodge, 558 F.3d at 633-34. In Aslan we addressed the proceeds question in the context of a prosecution for concealment money laundering. 644 F.3d at 541-50. We noted that the merger problem dissipates when the government alleges that the defendant specifically entered into a transaction to conceal the source or nature of ill-gotten gains. Id. at 545-46. We suggested in Aslan that proof of net profits in a concealment prosecution is not necessary to prevent the money-laundering offense from merging into the underlying crime. Id. We did not ultimately resolve the question, however, because in Aslan, as here, we were reviewing only for plain error. It was enough to note that [t]he fractured Supreme Court opinion [in Santos ] addressed only promotional and not concealment money laundering[,] and even in that context, a majority of the Court could not decide whether proof of net profits is always required. Id. at 550, 128 S.Ct. 2020. More importantly, because none of our post- Santos cases had addressed the meaning of proceeds in a concealment money-laundering prosecution, we held that [t]he law remains unsettled and the error is therefore not plain. Id. at 547-48, 128 S.Ct. 2020. We also noted that Congress had since amended the money-laundering statute in response to the Supreme Court's decision in Santos, adopting the broader gross receipts definition of the term proceeds. [2] Id. at 549, 128 S.Ct. 2020. Our decision in Aslan controls here. Hosseini and Obaei were convicted of concealment money launderingand also the transaction-avoidance form of the offensebut they failed to preserve the proceeds issue in the district court. At the time of their trial, it was unclear whether proof of proceeds in a concealment or avoidance money-laundering prosecution required proof that the defendant laundered net profits of the underlying criminal activity. Accordingly, as in Aslan, the claimed errorif there was one was not plain.