Opinion ID: 774590
Heading Depth: 2
Heading Rank: 1

Heading: Application of the Money-Laundering Guidelines

Text: 49 In calculating Sabbeth's sentence for the money-laundering count, the District Court (not surprisingly) applied the section of the Sentencing Guidelines for money laundering. See U.S.S.G. § 2S1.1. Nonetheless, Sabbeth argues that this was error, and that the District Court should have applied the Guideline section for fraud. See id. § 2F1.1. 50 Appendix A to the 1998 version of the Guidelines-the version applicable at the time of Sabbeth's sentencing-states that in an atypical case, a court should use the guideline section most applicable to the nature of the offense conduct charged in the count of conviction. U.S.S.G. App. A at 425 (1998). Sabbeth argues that his money-laundering offense was atypical within the meaning of this provision and that, therefore, his sentence should have been determined by the Guideline provision that best fits his offense-namely, the fraud provision of the Guidelines. To support this argument, Sabbeth relies on United States v. Smith, 186 F.3d 290 (3d Cir. 1999), where the Third Circuit held that a defendant's money-laundering conviction was atypical and therefore directed a district court on remand to apply the fraud guideline. See id. at 300. 51 In Smith, the Third Circuit stated that in selecting the appropriate guideline to apply, a court must first determine whether a defendant's case falls outside the heartland of cases that typically fall within the guideline. See id. at 297-98. But cf. Koon v. United States, 518 U.S. 81, 98 (1996) (describing heartland analysis in context of a court's decision to depart downward from the Sentencing Guidelines). It held that if a defendant's case fell outside the heartland of cases typically within that guideline, the court should apply a different sentencing guideline-one that is more applicable to the nature of the offense conduct charged. See Smith, 186 F.3d at 297- 98. 52 Using this analysis, the Third Circuit concluded in Smith that the money-laundering guideline was inappropriate in that case because, even though the defendant had been convicted of money laundering pursuant to his plea of guilty, his money-laundering conduct was an incidental byproduct of routine fraud. Id. The defendant had left an extensive paper trail, and his action had indicated that there was no genuine effort at concealment. The Third Circuit therefore directed the district court on remand to apply the fraud guidelines pursuant to Appendix A of the Sentencing Guidelines. 53 We find Smith unpersuasive. No other Court of Appeals has held that, in order for a district court to determine the appropriate Guideline provision to apply, it should perform at the threshold a so- called heartland analysis, which is typically reserved for downward departures. Indeed, the U.S. Sentencing Commission has recently deleted the language relied on by the Third Circuit and has characterized Smith as the result of confusion. See U.S.S.G., Supplement to App. C, Amend. 591 at 30-32 (effective Nov. 1, 2000) (removing the reference to atypical cases). Accordingly, we decline to follow Smith here. 54 In any event, even assuming arguendo that Smith was correctly decided under the pre-amendment Guidelines, the facts of this case are readily distinguishable from those of Smith. Sabbeth's money- laundering offense did not fall outside the heartland of cases that typically fall within the money-laundering guideline. Unlike in Smith, where the money-laundering activity was said to be an incidental byproduct of the defendant's fraudulent scheme, Sabbeth's money- laundering activity in this case consisted of a series of financial transactions completely separate from the bankruptcy fraud. Sabbeth shuffled his fraud proceeds through at least two bogus accounts with two false social security numbers. Moreover, he structured many of his withdrawals in cash amounts of less than $10,000 in order to avoid currency-reporting requirements. Sabbeth's conduct was therefore not in any way atypical, and the District Court properly sentenced Sabbeth under the money-laundering guideline. 55