Opinion ID: 780593
Heading Depth: 3
Heading Rank: 1

Heading: Money Laundering Downward Departure

Text: 70 The District Court granted defendant's motion for a downward departure on the money laundering offense, finding that Thorn's crime was outside the heartland of the money laundering Guideline: 71 The heartland of crimes that the money laundering [sic] are intended to encompass are those involving widespread and far-reaching schemes such as those associated with organized crime, racketeering offenses, or serious drug crimes and conspiracies. That is not the situation here. 72 The defendant's business, asbestos abatement and removal, was at its core legitimate. Had defendant operated that business in accordance with the regulations governing the asbestos abatement industry, we would not be here today. The thrust of defendant's crime is his violation of those regulations, not engaging in a conspiracy to conduct financial transactions that involved the proceeds of mail fraud with the intent to promote the carrying on of further mail fraud. There is no question that defendant used the money he received through the mail from his customers whom he defrauded by improperly performing asbestos abatement work, and sending them false laboratory test results and assuring that he would not — or he would or had removed the asbestos in compliance with the appropriate state and federal regulations, pay his laborers and staff, office staff, purchase supplies, and finance additional asbestos abatement projects. However, these financial transactions were only tangentially related to the essence of the defendant's crime; his failure to perform asbestos abatement projects in compliance with appropriate state and federal regulations. Nor did the defendant attempt to conceal his fraudulent conduct through the use of these financial transactions. 73 The crime here is simply not the type of money laundering fraud that would warrant a 10- to 20-year sentence. To apply the money laundering guideline to this type of violation when the money laundering computations were derived from that guidelines [sic] relationship to drug crimes would produce a custodial range that grossly exaggerates the seriousness of the actual conduct. 74 For all of these reasons and the reasons cited by the defendant in his submissions, the Court finds that this case is outside the heartland of the money laundering guideline and therefore will depart downward from the guideline-specified sentence. 75 Thus, although the Guidelines calculation performed by the Court called for a range of imprisonment between 121 and 151 months, the District Court sentenced Thorn to sixty-five months imprisonment on the money laundering count. 76 We believe that the District Court made an error of law in granting a heartland departure in this case, to the extent it based its decision on a finding that Thorn's offense was atypical, and thus outside of the heartland, because he did not launder the proceeds of serious crimes like drug trafficking and organized crime. In so doing, we make reference to a ruling of this Circuit, United States v. McCarthy, 271 F.3d 387 (2d Cir.2001), which was decided seventeen days after Thorn's sentence was imposed and thus could not have been known to the District Court at the time of Thorn's sentencing. McCarthy involved a conviction for, inter alia, embezzling from ERISA trust funds and the subsequent laundering of those funds. The defendant sought a downward departure because his conduct was outside of the heartland of typical money laundering conduct. Id. at 401. The district court in that case, however, denied the request. On appeal, the defendant argued that the district court erred as a matter of law by not deeming his money laundering activity to be atypical and not sentencing him instead under the embezzlement Guideline, as the Guidelines section most applicable to his conduct. In rejecting this argument, we observed that the district court correctly found [that the defendant's] conduct did not represent an `atypical' money laundering case, since the way in which the funds were laundered was critical to the scheme's success. Id. at 402. Further, we were not persuaded that the defendant's money laundering conviction was atypical because the laundered funds were not the proceeds of serious crimes like drug trafficking and organized crime, because we do not believe the money laundering guidelines are limited only to proceeds derived from drugs or organized crime. Id.; see also United States v. Kayode, 254 F.3d 204, 216 (D.C.Cir.2001) (stating, in a similar case, that the court was not persuaded that the money laundering guideline covers only proceeds from drug or organized crimes and collecting cases) (cited to with approval in McCarthy ), cert. denied, 534 U.S. 1147, 122 S.Ct. 1107, 151 L.Ed.2d 1002 (2002). 11 77 In addition to our recent statement in McCarthy that the money laundering Guideline is not limited only to proceeds derived from drugs or organized crime, we note that the commentary to § 2S1.1 specifically refers to specified unlawful activity — a legal term defined at 18 U.S.C. § 1956(c)(7) (2000) (which incorporates crimes itemized in 18 U.S.C. § 1961(1) as well) to include a wide variety of crimes, well beyond drug and organized crimes, such as the destruction of aircraft, prohibited transactions involving nuclear materials, and mail fraud (the specified unlawful activity underlying Thorn's money laundering conviction). 12 This suggests that the Sentencing Commission, in writing the Guideline, was aware that Congress had defined specified unlawful activity quite broadly, and, by not stating otherwise, had incorporated this broad definition into the heartland of the Guideline. 78 Further, § 2S1.1, the Guideline applicable to money laundering offenses, provided, at the time of Thorn's sentencing, for an enhancement to the offense level when drugs were involved in the offense. U.S. SENTENCING GUIDELINES MANUAL § 2S1.1(b)(1) (2000). As the government argues, that the Commission provided for an enhancement when the laundered funds derived from drug activity is further evidence that § 2S1.1's heartland consists of more than just drug crimes. Additionally, this Guideline, at the time of Thorn's sentencing, used the value of the laundered funds to determine the seriousness of the crime and did not use the underlying criminal behavior as the measure of the seriousness of the offense. See id. § 2S1.1. 13 79 The defendant in fact concedes that the language of the statute would embrace the conduct for which the defendant was indicted and convicted here, but he asserts that Congress intended the statute, which was enacted as part of the Anti-Drug Abuse Act of 1986, primarily to combat large amounts of money being laundered by the drug trade and organized crime. In support of this argument, Thorn does not cite any controlling Circuit case law, however, and he fails to address — much less distinguish — McCarthy. 80 In light of the foregoing, that money laundering is not limited only to proceeds of serious crimes like drug trafficking and organized crime, we remand for consideration by the District Court in accordance with the dictates of McCarthy.