Opinion ID: 174353
Heading Depth: 2
Heading Rank: 5

Heading: Stein’s Money Laundering Convictions

Text: Stein raises various arguments to his conviction on Count Two (money laundering 10 See Gov’t Supp’l App. 78–79 (Preliminary Jury Instructions) (“[Y]ou must bear in mind that your verdict as to each defendant must be determined separately with respect to him, solely on the evidence or lack of evidence presented against him, without regard to the guilt or innocence of anyone else. . . . Let me emphasize that any evidence admitted solely against one defendant may be considered only as against that defendant, and may not, in any way, enter into your ultimate deliberations with respect to any other defendant.”); id. 564–65 (Closing Jury Instructions) (“[S]ome of the evidence in this case was limited to just one defendant or another. For example, the Government introduced as evidence tape recordings of conversations between Mr. Kaboni Savage and other inmates at the Federal Detention Center. These tape recordings were only admitted against Mr. Savage. Let me emphasize that any evidence admitted solely against one defendant may be considered as only against that defendant and may not in any respect enter into your deliberations on any other defendant. In reaching your verdict, bear in mind that guilt or innocence is personal and individual. Your verdict of guilty or not guilty must be based solely upon the evidence with respect to each defendant. The case against each defendant on each count with which he is charged stands or falls upon the proof or lack of proof against that defendant alone. Your verdict as to any defendant on any count should not control your decision as to any other defendant in any other count.”). 15 conspiracy in violation of 18 U.S.C. § 1956(h)) and Count Three (money laundering in violation of 18 U.S.C. §§ 1957 and 2). We discern no reversible error.
Count Two charged Stein (together with Thomas, who, as noted, died before trial) with conspiracy under 18 U.S.C. § 1956(h). The object of the charged conspiracy was money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i). That statute provides, in relevant part: 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— ... (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 . . . 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)(1)(B)(i) (emphasis added). Stein argues that the District Court incorrectly defined the term “proceeds,” as used in 18 U.S.C. § 1956, in its instructions to the jury. Because Stein raises this argument for the first time on appeal, we review the jury instruction for plain error. United States v. Williams, 464 F.3d 443, 445 (3d Cir. 2006). Under the plain error standard, before an appellate court can correct an error not raised at trial, there must be (1) error, (2) that is plain, and (3) that affects substantial rights. If all three conditions are met, an appellate court may then exercise its discretion to notice a forfeited error, but only if (4) the error 16 seriously affects the fairness, integrity, or public reputation of judicial proceedings. Id. (internal quotation marks, citation, and brackets omitted). At the time of trial, “proceeds” was not defined in the statute. The District Court instructed the jury that “proceeds” were “any property or any interest in property that someone acquires or retains as a result of the commission of the specified unlawful activity.” (Gov’t Supp’l App. 566.) The “specified unlawful activity” in this case was “the conspiracy to manufacture and distribute cocaine and cocaine base.” (Id.) According to Stein, the Court’s instruction was contrary to the Supreme Court’s decision in United States v. Santos, 128 S. Ct. 2020 (2008), because it did not distinguish between “profits” and “receipts” in defining “proceeds.” 11 In Santos, the five-Justice majority was fractured. Justice Scalia, writing for a four-Justice plurality, invoked the rule of lenity to hold that “proceeds” always means “profits” under 18 U.S.C. § 1956—the more defendant-friendly interpretation. 128 S. Ct. at 2025 (plurality opinion). Justice Alito wrote for the four Justices in dissent to reach the opposite conclusion—that “proceeds” always means “gross receipts.” See id. at 2036 (Alito, J., dissenting). Justice Stevens concurred in the judgment to provide the fifth vote, but disagreed that “proceeds” always means “profits.” Instead, he concluded that the meaning of “proceeds” in § 1956 depends on the underlying “specified unlawful 11 In 2009, Congress legislatively overruled Santos by amending § 1956 to add the following definition of proceeds: “any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.” 18 U.S.C. § 1956(c)(9) (2009). 17 activity.” Id. at 2031–32 (Stevens, J., concurring). He agreed with the four-Justice plurality that, in the illegal-gambling business context, “proceeds” means “profits.” Id. at 2033 (Stevens, J., concurring). Because “his vote [wa]s necessary to [the] judgment, and . . . his opinion rests upon the narrower ground, the Court’s holding is limited accordingly.” Id. at 2031 (plurality opinion); see also Marks v. United States, 430 U.S. 188, 193 (1977). Thus, we only know from Santos what “proceeds” means when an illegal gambling business is the “specified unlawful activity.” When instead a drug conspiracy is the “specified unlawful activity,” the law is unclear as to whether “proceeds” means “profits” or “gross receipts.” See United States v. Kratt, 579 F.3d 558, 563 (6th Cir. 2009) (“Even after accounting for Justice Scalia’s and Justice Stevens’ opinions, ‘proceeds’ remains an ambiguous term . . . .”). Because there is no governing precedent resolving this issue, we cannot say that the District Court committed plain error.12 See United States v. Chau, 426 F.3d 1318, 1322 (11th Cir. 2005) (per curiam) (when “the explicit language of a statute or rule does not specifically resolve an issue, there can be no plain error where there is no precedent from the Supreme Court or this Court directly resolving it” (internal quotation marks and 12 Moreover, we note that, contrary to Stein’s argument, a majority of the Santos Court appeared to agree that “proceeds” in the context of a drug conspiracy means “gross receipts,” not “profits.” See 128 S. Ct. at 2036 & n.1 (Alito, J., dissenting) (stating that “five Justices agree with the position” that “the term ‘proceeds’ ‘include[s] gross revenues from the sale of contraband and the operation of organized crime syndicates involving such sales’”) (quoting Justice Stevens’s concurrence) (alteration in original). 18 citation omitted)). We thus affirm Stein’s conviction on Count Two.
Count Three charged Stein with “knowingly engag[ing]. . . in a monetary transaction in criminally derived property of a value greater than $10,000 . . . derived from specified unlawful activity.” 18 U.S.C. § 1957(a). “Monetary transaction” is defined as “the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in § 1956(c)(5) of this title) by, through, or to a financial institution . . . , including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title.” Id. § 1957(f)(1). The indictment alleged that, in June 2001, Stein gave a $50,000 check to Paul Daniels, payable to Philadelphia Entertainment Group, in exchange for $50,000 in cash drug proceeds. Stein held the cash in his possession for six months as collateral.13 (Gov’t Supp’l App. 27.) Stein argues that the indictment failed to allege that a “financial institution” was involved, as required for conduct to violate 18 U.S.C. § 1957. We exercise plenary review over the challenge to the sufficiency of the indictment, and look only to “the facts alleged within the four corners of the indictment.” United States v. Vitillo, 490 F.3d 314, 13 At trial, Daniels testified that he wanted to use his cash drug money to start a concert promotion company. (Stein Deferred App’x 263.) He therefore asked Stein for a check “to make the paper trail look legit for the show.” (Id.) Daniels packaged $5,000 stacks of $20 bills in a black shoebox, which he delivered to Stein at his home. (Id. 267.) Daniels testified that Stein charged him 12% interest to make the loan appear legitimate. (Id. 269–70.) 19 320–21 (3d Cir. 2007) (internal quotation marks and citation omitted). “An indictment is generally deemed sufficient if it: (1) contains the elements of the offense intended to be charged, (2) sufficiently apprises the defendant of what he must be prepared to meet, and (3) allows the defendant to show with accuracy to what extent he may plead a former acquittal or conviction in the event of a subsequent prosecution.” United States v. Rankin, 870 F.2d 109, 112 (3d Cir. 1989) (internal quotation marks, citation, and brackets omitted). An indictment does not state an offense sufficiently if the specific facts that it alleges “fall beyond the scope of the relevant criminal statute, as a matter of statutory interpretation.” United States v. Panarella, 277 F.3d 678, 685 (3d Cir. 2002). Though Stein did not raise this argument before or at trial, a “defendant may challenge an indictment for failure to charge an offense for the first time on appeal.” United States v. Cefaratti, 221 F.3d 502, 507 (3d Cir. 2000). “[I]ndictments which are tardily challenged are liberally constructed in favor of validity,” and the indictment will be upheld “unless it is so defective that it does not, by any reasonable construction, charge an offense.” Vitillo, 490 F.3d at 324 (internal quotation marks and citations omitted). We do not agree with Stein’s assertion that the mere exchange of drug proceeds for a check is not “by, through, or to a financial institution.” As the Government points out, the term “monetary transaction” also “includ[es] any transaction that would be a financial transaction under [18 U.S.C. §] 1956(c)(4)(B).” Section 1956(c)(4)(B), in turn, defines “financial transaction” as “a transaction involving the use of a financial institution which 20 is engaged in, or the activities of which affect, interstate commerce in any way or degree.” In our case, Stein wrote a check to Daniels to be drawn on an account Stein maintained at a financial institution. In exchange, he received $50,000 cash. The indictment sufficiently charged the exchange of a monetary instrument “through” and “involving the use of” a financial institution.14 See United States v. Jackson, 935 F.2d 832, 841 (7th Cir. 1991) (“Writing a check, whether for cash or to a vendor who has provided services, falls within the definition of a ‘financial transaction’ contained in § 1956(c)(4)(B) because it involved [a bank] . . . .”).15 In addition, Stein argues that the indictment was constructively amended (or, in the alternative, that there was a prejudicial variance) because the Government presented evidence that Daniels deposited Stein’s check, rather than relying solely on the exchange of the check for cash as alleged in Count Three. Because Stein did not raise this argument before or during trial, we review for plain error. United States v. Vosburgh, 602 F.3d 512, 531 (3d Cir. 2010). “An indictment is constructively amended when, in the absence of a formal amendment, the evidence and jury instructions at trial modify essential terms of the 14 Stein also argues that the monetary transaction was not “in criminally derived property.” However, the $50,000 cash was alleged to be proceeds from the drug conspiracy, and the check he wrote was derived from those proceeds. This element was thus satisfied. Cf. United States v. Covey, 232 F.3d 641, 645–46 (8th Cir. 2000). 15 Stein asserts that the evidence was insufficient to prove that he engaged in a “monetary transaction,” but in doing so does not actually argue that the Government failed to prove at trial the facts as alleged in the indictment. Instead, he merely reiterates his legal challenges to the sufficiency of the indictment itself. 21 charged offense in such a way that there is a substantial likelihood that the jury may have convicted the defendant for an offense differing from the offense the indictment returned by the grand jury actually charged.” Id. at 532 (internal quotation marks and citation omitted). This can occur “through evidence, arguments, or the district court’s jury instructions.” Id. (internal quotation marks and citation omitted). A constructive amendment is presumptively prejudicial even under plain error review. Id. “A variance occurs where the charging terms of the indictment are not changed but when the evidence at the trial proves facts materially different from those alleged in the indictment.” Id. (internal quotation marks and citation omitted). A variance must prejudice some substantial right to constitute reversible error. Id. Stein’s support in the record for his argument is slim. He relies on the Government’s entering into evidence the check he wrote to Daniels, the back of which showed the endorsement. The endorsement was mentioned briefly during testimony, when Daniels testified on direct examination that the check was endorsed by his sister. (Stein Supp’l App. 266.) But Stein cites to no other mention by the Government of the check’s deposit. Despite Stein’s suggestion to the contrary. the Government did not discuss the deposit in its closing arguments. (See Stein Br. 46, 48 (citing Stein Supp’l App. 345).) Nor did the Court’s jury instructions mention the check deposit (as Stein himself admits) or suggest that the jury could convict Stein based on it. As the brief mentions of the check’s deposit are far from sufficient to constitute a constructive amendment or a prejudicial variance, there was no plain error. 22