Opinion ID: 3011156
Heading Depth: 2
Heading Rank: 3

Heading: Did the Transactions Involve the Proceeds

Text: of the Fraud? The government only proved financial transactions, i.e., wirings of money up the daisy chain, occurring before the money reached the burn company. Accordingly, if the money did not become proceeds until after it passed through the burn company, as Morelli contends, the government's proof of money laundering would have failed because it would not have proved a financial transaction involving proceeds. Morelli argues that the money did not become proceeds until it moved past the burn company. In essence, he contends that since the duty to pay the taxes lay with the burn company, no fraud occurred until the burn company itself failed to collect and pay the taxes. Hence, before the burn company failed to do so, the money was entirely legitimate. But the taxes were not, as Morelli claims, collected and passed on, and then diverted. They were never collected. The paperwork that indicated that the taxes had been collected was falsified. The transactions going down the chain --purporting to represent sales of fuel -- were fraudulent, and the payments going back up the chain were proceeds of that fraud. In our view, the key point is that the entire chain of companies was operated by the Association; it was all part of the conspiracy. Once the money entered the control of the street company, it entered the control of the Association. The Association never had any intention of 12 paying the taxes. It organized the chain precisely to avoid having to do so. Although in a paperwork sense the taxes were not embezzled until they passed the burn company, the reality is that the taxes were embezzled as soon as the funds entered the chain. The fact that the Association organized the daisy chain to make it appear that distinct companies were buying and selling the gas and that the tax was collected at each step prior to the burn company does not alter our conclusion. We conclude that the fraud was completed when the money entered the control of the Association acting through the street company, since at that time it had no present intent to pay the taxes. Under these circumstances, the taxing authorities were defrauded out of their funds at the time the money entered the chain. In sum, we find no reason to set aside the judge's and jury's implicit conclusion that the money derived from this scheme became proceeds for the Association as soon as it entered the street company's hands. Legally, the money was the proceeds of fraud as soon as it entered the hands of the street company.