Opinion ID: 776551
Heading Depth: 3
Heading Rank: 5

Heading: Fraud Guideline or Money Laundering Guideline?

Text: 36 The government, on cross-appeal, argues that the district court erred by sentencing Chilingirian according to the fraud guidelines, rather than the money laundering guidelines. Chilingirian was found guilty of conspiracy to commit money laundering and Jack Rashid pleaded guilty to the same offense. However, Judge O'Meara sentenced the defendants according to different sentencing guidelines. He sentenced Jack Chilingirian according to the sentencing guideline for fraud (§ 2F1.1) and sentenced Jack Rashid according to the sentencing guideline for money laundering (§ 2S1.1). The fraud guideline results in a significantly lower offense level. The government argues that the court should have applied the guidelines for money laundering to Chilingirian. 37 This is a case of first impression in this circuit. Chilingirian and the district court rely on case law from the Third Circuit. In United States v. Smith, 186 F.3d 290 (3d Cir.1999), the Third Circuit held that the money laundering guidelines were too harsh to apply to what it described as a routine fraud case in which the money laundering activity was an incidental by-product of a kick-back scheme. Id. at 300. The court explained that the sentencing court must perform a heartland analysis when deciding what guideline should be applied and when deciding whether to depart. See id. at 298. Thus, in order to determine whether the money laundering guideline should apply, the court had to determine what conduct was considered by the Sentencing Commission to fall within the heartland cases covered under the money laundering guideline. The court considered the Sentencing Commission's proposed amendments to the money laundering guideline, which were rejected by Congress, and conclude[d] that the Sentencing Commission itself has indicated that the heartland of U.S.S.G. § 2S1.1 is the money laundering activity connected with extensive drug trafficking and serious crime. Id. at 300. 38 The Third Circuit has since clarified the holding of Smith: Where money laundering is not `minimal or incidental,' and is `separate from the underlying crime' and intended to `make it appear that the funds were legitimate' or to funnel money into further criminal activities, § 2S1.1 is an applicable guideline. The guideline may also be applicable if there is evidence that the activities which fulfilled the broad statutory requirements for money laundering were extensive with drug trafficking or other serious crime. 39 United States v. Mustafa, 238 F.3d 485, 495 (3d Cir.2001) (quoting United States v. Bockius, 228 F.3d 305, 313 (3d Cir.2000)). In this case, it could also be argued that even if this Circuit were to apply Smith, its rationale would fail to produce the result desired by Chilingirian. The money laundering in this case was not minimal nor incidental, and it appears to have been funneled through the client trust account in order to make it appear legitimate and to further the radar technology/fraud scheme. 40 The Third Circuit relied on U.S.S.G. Appendix A (1999), which states [i]f, in an atypical case, the guideline section indicated for the statute of conviction is inappropriate because of the particular conduct involved, use the guideline section most applicable to the nature of the offense conduct charged in the count of which the defendant was convicted. Similarly, this court has previously relied on this language and held that the district court must decide which guideline is most applicable considering the facts involved. See United States v. Hood, 210 F.3d 660, 664 (6th Cir.2000). 41 This portion of the Guidelines Manual has since been amended so that the sentencing court is now required to use the guideline that Appendix A says is applicable. See U.S.S.G., Appendix A (2000). Thus, the Smith approach is no longer relevant. 42 Whether this court views the district court's action as a choice between guidelines or a departure, the result is the same. The heartland analysis that should be applied prior to determining which guideline applies is identical to the analysis that should be applied in determining whether a departure is warranted. See Smith, 186 F.3d at 298. Moreover, in the departure context, this court has held that the fact that a money laundering offense involved proceeds related to unlawful activity other than drug trafficking or organized crime is not sufficient to take the offense outside of the heartland of the money laundering guideline. United States v. Reed, 167 F.3d 984, 995 (6th Cir.1999); United States v. Ford, 184 F.3d 566, 587 (6th Cir.1999). Thus, even if the district court's decision is treated not as a departure but as an application of a more appropriate guideline, the district court's rationale was not sufficient to warrant the lower court's decision not to apply the money laundering guideline to the money laundering offense. Accordingly, the district court's sentence should be reversed and remanded with instructions to re-sentence Chilingirian in accordance with the money laundering guideline.