Opinion ID: 2967751
Heading Depth: 4
Heading Rank: 2

Heading: The Proceeds Element

Text: The Boldens first contend that the evidence failed to prove that the money laundering offenses involved the proceeds of the specified unlawful activity spelled out in the indictment. In particular, it charged their involvement in a mail and wire fraud scheme — an offense which qualifies as a specified unlawful activity under the relevant money laundering statute. The Boldens assert, however, that the mail and wire fraud activity consisted only of the submission of the 1993 and 1994 Cost Reports, and that it was not until the submission of those Reports that their fraud scheme generated proceeds. According to the Boldens, the Industrial Check Transactions — the financial transactions underlying the money laundering convictions — could not have involved the proceeds of the specified unlawful activity because they occurred prior to the submission of the 1993 and 1994 Cost Reports. Contrary to the Boldens’ contention, the money laundering statute does not require the underlying criminal activity be completed prior to the money laundering transactions. See United States v. Butler, 211 F.3d 826, 829 (4th Cir. 2000) (Funds are criminally derived if they are derived from an already completed offense, or a completed phase of an ongoing offense. (internal quotation omitted) (emphasis added)). Thus, the key inquiry is not whether the specified unlawful activity was completed prior to the alleged money laundering transaction. Instead, we must determine whether the specified unlawful UNITED STATES v. BOLDEN 19 activity generated proceeds prior to the money laundering, and whether the money laundering actually involved those criminallyderived proceeds. We begin our analysis by noting that certain criminal activities can produce proceeds long before their completion. A mail fraud scheme, such as the Medicaid fraud scheme of the Boldens, is the prototype of an activity that can generate proceeds before the mailings take place. See United States v. Mankarious, 151 F.3d 694, 705 (7th Cir. 1998) (A mail fraud scheme . . . can create proceeds long before the mailing ever takes place.). Indeed, as the Tenth Circuit recognized in United States v. Massey, 48 F.3d 1560, 1566 (10th Cir. 1995), a ‘scheme to defraud’ has a wider meaning than an individual act of fraud. A mail or wire fraud scheme often encompasses a range of activities that occur prior to, and culminate in, mail and wire submissions. Accordingly, in order to sustain the Boldens’ money laundering convictions, there must simply have been sufficient evidence for the jury to have inferred that the [proceeds] came from a fraudulent scheme and that the use of the mails furthered that scheme. Mankarious, 151 F.3d at 703. The Boldens’ scheme to defraud Medicaid cast a wide net, and it was not limited to the submission of the Cost Reports. The scheme included, inter alia, the False Patient Billing; the Lease Transactions; the creation and use of a sham company, Industrial; the submission of the Industrial invoices to Emerald Health; the receipt of the prospective payments; and the inclusion of the Related Party Transactions as direct costs on the 1993 and 1994 Cost Reports. The Cost Reports were simply used to justify the prospective payments that Emerald Health had already received. Accordingly, the mail and wire submissions were merely the culminating acts in a scheme that had begun long before. And although their fraud scheme may not have been consummated until the submission of the Cost Reports, the Boldens had completed a substantial part of the scheme prior to the Industrial Check Transactions. For our purposes, the relevant fact is that the fraud scheme produced proceeds through the prospective payments prior to the financial transactions — the Industrial Check Transactions — on which the money laundering convictions were based. The 1993 and 1994 Cost 20 UNITED STATES v. BOLDEN Reports merely justified Emerald Health’s receipt of those prospective payments. See United States v. Allen, 76 F.3d 1348, 1361 (5th Cir. 1996) (concluding that fraud scheme produces proceeds at the latest when the scheme succeeds in disgorging the funds from the victim and placing them into the control of the perpetrators); United States v. Morelli, 169 F.3d 798, 800 (3d Cir. 1999) (concluding for purposes of money laundering statute that the money became the proceeds of fraud as soon as it entered the hands of members of the scheme). The prospective payments constituted the proceeds used by the Boldens in the Industrial Check Transactions. Accordingly, the contention that the money laundering offenses were not conducted with the proceeds of the fraud scheme must fail.