Opinion ID: 77841
Heading Depth: 2
Heading Rank: 7

Heading: Acquittal on the Money-laundering Conspiracy Count

Text: In its cross-appeal, the government contends that the district court relied on an overly narrow definition of the term proceeds as used in the money laundering statutes, leading to the improper entry of judgments of acquittal on the money-laundering conspiracy charges (Count 55). In entering post-verdict judgments of acquittal on the charge that the defendants had conspired to launder the proceeds of their immigration offenses, mail fraud, and wire fraud, the district court ruled that profits or revenue indirectly derived from labor or from the failure to remit taxes cannot constitute proceeds of a specified unlawful activity pursuant to 18 U.S.C. § 1956 or § 1957. Maali, 358 F.Supp.2d at 1160. The government posits that the correct interpretation of the term proceeds includes profits the defendants earned as a result of their § 1324(a) offenses and their mail and wire fraud offenses. Such a definition, the government asserts, is consistent with other provisions of the money-laundering statutes and with cases addressing the term proceeds in contexts other than the sale of goods. Khanani and Portlock respond that the district court correctly granted a judgment of acquittal on the charge of conspiracy to launder money. They assert that the court properly concluded that the government's theory of tax and cost savings did not give rise to proceeds capable of being laundered in a financial transaction. Essentially, the defendants posit that the predicate offense conduct involved no sale or exchange by which they received money or property and the funds actually being deposited into the accounts of the nominal companies consisted of revenues generated through lawful retail sales. We review de novo a district court's decision to grant a judgment of acquittal. See United States v. Miranda, 425 F.3d 953, 959 (11th Cir.2005). To establish that defendants violated 18 U.S.C. § 1956(h), the government had the burden of showing that Khanani and Portlock conspired to launder or to engage in a monetary transaction involving the proceeds of specified unlawful activity [`(SUA')]. [5] Here, the United States charged that the defendants had conducted financial transactions in the proceeds of the section 1324(a) violations charged in counts 1-54 of the indictment, mail fraud as charged in Count 57 of the indictment, and wire fraud as charged in Count 56 of the indictment, all of which are delineated as SUAs under the money laundering statute. See 18 U.S.C. §§ 1956(c)(7)(A), 1961(1). At trial, the government claimed that the tax and cost savings from hiring illegal aliens constituted proceeds that Khanani and Portlock then deposited into the accounts of shell companies for the purposes of concealing their unlawfully derived income and promoting their illegal employment scheme. The defendants, citing United States v. Christo, argued that they never completed a predicate offense that yielded proceeds that they could have laundered. See 129 F.3d 578, 579-80 (11th Cir.1997) (per curiam) (holding that it is only after a predicate crime becomes `a completed offense' that a money laundering can occur.). Moreover, they continued, neither the tax nor labor cost savings that they enjoyed from hiring illegal aliens constituted proceeds. While rejecting the defendants' broad interpretation of Christo, the district court nevertheless granted their motions for acquittal, finding that the government's cost savings theory [was] at odds with the plain and ordinary meaning of `proceeds,' Maali, 358 F.Supp.2d at 1158, because the underlying predicate offense conduct had contained no sale, transaction, or exchange component by which the defendants had obtained proceeds. In other words, the district court refused to equate BBW's jean retail sales revenues with proceeds on the rationale that the revenues were illegally obtained because BBW had used illegal workers and had filed false employment tax forms. In granting the judgments of acquittal, the district court acknowledged that the United States had proved that the defendants had paid unauthorized aliens with income skimmed from sales at their businesses; had not reported that income to the IRS; and had failed to remit federal or state employment taxes on the workers' wages. Id. at 1156. The district court also acknowledged that there is disagreement among courts and dictionaries as to whether proceeds contemplates net profits, gross receipts, or gross profits, but, where the basic meaning of proceeds is concerned (as opposed to the precise scope of the term), it found courts generally in accord. Essentially, the district court concluded that proceeds `are something which is obtained in exchange for the sale of something else as in, most typically, when one sells a good in exchange for money.' Id. at 1158. The district court observed that: [T]he government's approach would stretch the definition of `proceeds' well beyond any ordinary conception of the term and thereby lay the foundation for an unprecedented expansion of the money laundering statute. Id. at 1159. We agree with the district court that it is clear that the term [`proceeds'] does not contemplate profits or revenue indirectly derived from labor or from the failure to remit taxes. While it is natural and clearly correct to say that Defendants received `proceeds' from the sale of jeans, it is, by contrast, both causally tenuous and decidedly unnatural to say that the moneys one has received from the sale of a good are, not the `proceeds' from the sale of a good, but `proceeds' of the labor used to produce the good. Id. at 1160; see also Anderson v. Smithfield Foods, Inc., 209 F.Supp.2d 1270, 1275 (M.D.Fla.2002) (Saving money as a result of the alleged noncompliance with the requirements of an environmental statute does not make the money illegally obtained for the purposes of the money laundering statute.). The government fails to point to any binding case law that requires us to construe proceeds as broadly as it advocates in this situation here. [6] In fact, two cases cited by the government support the district court's construction of the term proceeds. See United States v. Rudisill, 187 F.3d 1260, 1262, 1267 (11th Cir.1999) (where the SUA was interstate transportation of securities taken by fraud, proceeds were the monies that the defendants obtained from the victims of their fraudulent telemarketing scheme in the form of checks); United States v. Baker, 227 F.3d 955, 958, 964 (7th Cir.2000) (where instances of SUA were violations of the Travel Act, proceeds were the monies that defendants obtained from their prostitution business by credit card and ATM transactions); see also United States v. Adams, 74 F.3d 1093, 1096 (11th Cir. 1996) (where SUA was impeding the lawful functions of the Resolution Trust Corporation, defendants obtained proceeds by fraudulently inducing transfers of funds from the RTC in the form of checks). [7] As a result, the district court did not err by entering a judgment of acquittal.