Court Opinion

ID: 3013865
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Date Created: 2015-10-13 21:59:12.215984+00
Date Added: 2024-06-11T12:04:05.512835
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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

8-23-2004

USA v. Grasso
Precedential or Non-Precedential: Precedential

Docket No. 03-1441

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"USA v. Grasso" (2004). 2004 Decisions. Paper 358.
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                         PRECEDENTIAL       Patrick L. Meehan
                                               United States Attorney
         UNITED STATES                      Laurie Magid
        COURT OF APPEALS                       Deputy United States Attorney
      FOR THE THIRD CIRCUIT                    for Policy and Appeals
                                            Robert A. Zauzmer
                                               Assistant United States Attorney
        Nos. 03-1441 / 03-1442                 Senior Appellate Counsel
                                            Anne Whatley Chain (Argued)
                                               Assistant United States Attorney
   UNITED STATES OF AMERICA                 Peter F. Schenck, Esq.
                                            Office of United States Attorney
                    v.                      615 Chestnut Street, Suite 1250
                                            Philadelphia, PA 19106
     MICHAEL J. GRASSO, JR.,
                                                   Attorneys for Appellee
                            Appellant

           On Appeal from the                     OPINION OF THE COURT
        United States District Court
 for the Eastern District of Pennsylvania
        D.C. Criminal Action Nos.           AM BRO, Circuit Judge
       00-cr-00051-1/01-cr-00783-1
      ( Honorable Berle M. Schiller)                Michael J. Grasso appeals his
                                            conviction and sentence for money
                                            laundering. He argues that the term
       Argued December 12, 2003             “proceeds” in the money laundering
                                            statute, 18 U.S.C. § 1956, encompasses
                                            only the net profits, and not the gross
     Before: AMBRO, FUENTES                 receipts, of criminal activity.        This
      and GARTH, Circuit Judges             proposed statutory construction is
                                            incompatible with the text of the statute as
(Opinion filed August 23, 2004)             well as existing case law in our Circuit.
                                            We therefore affirm Grasso’s conviction.
Walter M. Phillips, Jr., Esq. (Argued)       However, we do remand for the District
Kevin J. Kotch, Esq.                        Court to reconsider its restitution award.
Hoyle, Fickler, Herschel & Mathes
                                             I.   Factual and Procedural History
One South Broad, Suite 1500
Philadelphia, PA 19107                              Grasso sold various fraudulent
                                            work-at-home schemes from early 1997
       Attorneys for Appellant              until late 1999. The programs, which were
                                            advertised in national magazines,
purported to enable purchasers to earn            01-783.3 In February 2002 the District
substantial payments for at-home work,            Court severed the obstruction of justice
with profits to be divided between the            count in the superseding indictment in
participants and Grasso. In reality, the          Criminal No. 00-51, which involved
programs simply instructed purchasers to          Grasso’s first attempt to obtain frozen
solicit new customers who would purchase          funds, and consolidated that count with the
the same programs for similar amounts.1           proceeding in Criminal No. 01-783.
       In February 2000, Grasso was                       Trial on the superseding indictment
indicted for mail fraud, wire fraud, and          took place in February 2002. At the close
money laundering, in Criminal No. 00-51.          of the Government’s case, Grasso moved
The money laundering counts charged that          orally for judgment of acquittal on the mail
he funded his ongoing criminal activity           and wire fraud counts, as well as four of
with the proceeds of his fraudulent               the money laundering counts. The motion
schemes. Grasso allegedly reinvested the          was denied, and thereafter a jury convicted
proceeds of his criminal activity to cover        Grasso on all charges.4 He subsequently
advertising, printing, and m ailing               pled guilty to the obstruction of justice
expenses.      Nine months later, a               count originally filed in Criminal No. 00-
superseding indictment was filed, which           51, and the cases were consolidated for
added a count for obstruction of justice          sentencing.
based on Grasso’s attempt to access frozen
                                                        Payment of defense counsel fees
funds and slightly modified the money
                                                  was a recurring issue during the criminal
laundering charges.2 In December 2002,
                                                  proceedings. In March 2000, Grasso filed
Grasso was indicted yet again, for forgery
                                                  a motion to release funds from his frozen
and obstruction of justice, in Criminal No.
                                                  accounts to pay defense counsel fees and
                                                  expenses, and the motion was denied. The
                                                  case was assigned to another judge in
   1
                                                  March 2001, and in December 2001 that
    In addition to fraudulently promoting         judge ordered the release of $200,000
work-at-home employment schemes,                  toward these expenses. In March 2002,
Grasso allegedly sold mailing lists and           defense counsel sought the release of
engaged in other illegal activity. He
contests many of the representations made
                                                      3
by the Government. Because these factual                The indictment charged that Grasso
matters do not affect our resolution of the       forged the signatures of a district judge
issues on appeal, we do not discuss them.         and a deputy clerk in conjunction with
                                                  fictitious letters directing various financial
  2
   The original indictment contained 508          institutions to release his frozen funds.
coun ts alleging money laundering,
                                                      4
whereas the superseding indictment                    Two money laundering counts were
included 482 counts.                              dismissed during the course of the trial.

                                              2
additional funds from frozen accounts for            (five months of which would run
payment of counsel fees. As a result,                consecutively to the first sentence), a fine
Grasso w as orde red to prov ide                     of $30,000, and a $300 special assessment.
documentation related to one of the non-             The restitution, fines, and special
frozen accounts, and the Probation Office            assessments, as well as $100,000 in
examined his income and assets. The                  counsel fees, were to be paid from the
subsequent investigation of his accounts             frozen funds. Grasso appeals. 5
revealed that he had deposited more than
                                                                  II.   Discussion
$800,000 into his non-frozen accounts
after the entry of a preliminary injunction                  We address two principal issues.
in 1999, which was intended to protect his           First, did the Government need to establish
assets for distribution to victims.                  tha t Gra s s o ’ s m o n ey launde ring
                                                     transactions were conducted with the net
        Prior to sentencing, Grasso objected
                                                     profits, as opposed to gross receipts, of his
to the Government’s proposed sentencing
                                                     illegal activity? Second, did the District
order on various grounds. He moved for a
                                                     Court err by failing to specify in its order
downward departure and submitted a
                                                     of restitution the manner and schedule of
memorandum in support of a “renewed”
                                                     payment?
motion for judgment of acquittal on the
money laundering counts, relying on the              A.     Money Laundering Convictions
Seventh Circuit’s recent decision in United                 and Sentence
States v. Scialabba, 282 F.3d 475 (7th
                                                             Grasso alleges that the Government
Cir.), cert. denied, 537 U.S. 1071 (2002).
                                                     transformed a “garden variety fraud case
Although Grasso suggested in the
                                                     with no hint of organized crime
memorandum that he had submitted an
                                                     involvement into a 482 count money
earlier motion for acquittal on all money
                                                     laundering case.” Grasso’s conviction for
laundering counts, that motion challenged
                                                     money laundering was based on his
the sufficiency of the evidence as to
                                                     “reinvestment of proceeds” for the
Counts 444 through 447 only, and for
                                                     purchase of advertisements, telephone
factually specific reasons.
                                                     services, printing, envelopes, and other
       The District Court sentenced                  materials in furtherance of his fraudulent
Grasso for the fraud and money laundering            activity by means of wire transfer, checks,
convictions to 97 months incarceration,              and credit cards. Simply put, Grasso paid
three years supervised release, a fine of
$150,000, restitution in the amount of
$761,126.39, and a special assessment of                     5
                                                               The District Court exercised
$49,500. The Court made no findings in
                                                     jurisdiction over this case pursuant to 18
support of its award of restitution. In
                                                     U.S.C. § 3231. We have appellate
addition, for the obstruction of justice plea,
                                                     jurisdiction under 18 U.S.C. § 3742 and 28
Grasso received 15 months imprisonment
                                                     U.S.C. § 1291.

                                                 3
for his business expenses with the receipts                 nature, the location, the
from his sales.6 The relevant statute, 18                   source, the ownership, or
U.S.C. § 1956, provides:                                    the control of the proceeds
                                                            of spec ified unla wf ul
       (a)(1) Whoever, knowing
                                                            activity; or
       that the property involved in
       a financial tran sactio n                            (ii) to avoid a transaction
       represents the proceeds of                           reporting requirement under
       some form of unlawful                                State or Federal law,
       a c t i vi ty, c o n d u c t s o r
                                                            [commits a felony].
       attempts to conduct such a
       financial transaction which
       in fact involves the proceeds
                                                     The statute does not define “proceeds.”
       o f specified unlaw ful
                                                     Grasso contends that the term should be
       activity—
                                                     understood—as a matter of textual
       (A)(i) with the intent to                     interpretation, congressional intent, and
       promote the carrying on of                    policy—to mean “net profits.”         The
       specified unlawful activity;                  Government, by contrast, urges us to adopt
       or                                            a broader definition encompassing all
                                                     gross receipts of illegal activity.
       (ii) with intent to engage in
       conduct constituting a                               1.     Standard of Review
       violation of section 7201 or
                                                            Grasso has framed the question
       7206 of the Internal
                                                     presented in his appeal as “[w]hether a
       Revenue Code of 1986; or
                                                     defendant can be convicted of and
       (B) knowing that the                          sentenced for money laundering under 18
       transaction is designed in                    U.S.C. § 1956(a)(1)(A)(i) for reinvesting
       whole or in part—                             the proceeds of specified unlawful activity,
                                                     where the government’s proof fails to
       (i) to conceal or disguise the
                                                     show that the money allegedly laundered
                                                     represented the proceeds, or net profits,
   6                                                 from the unlawful activity as opposed to
   Grasso argues that the payments were
                                                     gross receipts or revenue.” At its core,
made for past purchases. The Government
                                                     Grasso’s appeal challenges the sufficiency
disputes this claim as a factual matter. We
                                                     of the evidence upon which he was
have held, in any case, that it is possible to
                                                     convicted.7 In other words, “[h]e contends
“promote” unlawful activity, within the
meaning of the money laundering statute,
even if it has already been completed.
                                                        7
United States v. Paramo, 998 F.2d 1212,                  It is undisputed that the Government
1218 (3d Cir. 1993).                                 presented no evidence suggesting that

                                                 4
that, as a matter of law, the facts do not          February 25, 2002. He did not file a
support the conclusion that money                   motion within seven days of the verdict,
laundering occurred.” United States v.              nor did the Court extend the applicable
Morelli, 169 F.3d 798, 802 (3d Cir. 1999)           period. On October 9, 2002, however, he
(classifying as a “sufficiency of the               filed a memorandum including an
evidence” argument the defendant’s claim            argument in support of his “renewed
that his conviction for money laundering            motion for judgment of acquittal on the
was premised on a faulty statutory                  money laundering counts.” Although it
construction). While Grasso urges us to             was clear that Grasso had failed to file a
review the District Court’s judgment de             timely Rule 29 motion,8 the parties agreed
novo, the Government contends that we               at oral argument that the District Court
should review it for plain error because he         would consider the “renewed” motion “for
failed to raise his statutory argument in a         the limited purpose of determining
Rule 29 motion for judgment of acquittal            whether Defendant should be sentenced
and therefore forfeited it.                         under the money laundering or fraud
                                                    gui delin es.” 9    Tha t motion d id
        The Federal Rules of Criminal
Procedure dictate when a criminal
defendant may challenge a conviction that              8
                                                        As already noted, at the close of the
is based on insufficient evidence. Rule 29          Government’s case the defense moved for
provides that a defendant must make an              judgment of acquittal on four of the money
appropriate motion within seven days after          laundering charges. The motion did not
a guilty verdict is entered, or within an           allege that the Government had failed to
extended time specified by the Court                demonstrate the use of net proceeds.
during the seven-day period.             If a
                                                       9
defendant fails timely to raise an argument             Grasso has framed his argument as a
that may establish his or her innocence, the        challenge to his sentence rather than his
court is unlikely to find it persuasive at a        conviction. As a general matter, “[w]e
later time. See, e.g., United States v.             review the district court’s application of
Powell, 113 F.3d 464, 466–67 (3d Cir.               the sentencing guidelines de novo.” See
1997) (“If a defendant fails to file a timely       United States v. Omoruyi, 260 F.3d 291,
motion for judgment of acquittal, we                297 n.8 (3d Cir. 2001). We thus may
review sufficiency of evidence for plain            vacate a sentence if we find that it was
error.”).                                           improperly entered. But in this case the
                                                    District Court had no choice but to
       The jury convicted Grasso on
                                                    sentence Grasso for money laundering.
                                                    “In cases . . . in which several counts,
                                                    including fraud and money laundering,
Grasso’s payments and expenditures were             have been grouped, . . . the count carrying
funded with net profits of the fraudulent           the highest applicable offense level must
scheme rather than gross receipts.                  apply to the entire group for sentencing

                                                5
                                                    not serve to preserve the                statutory
                                                    argument for de novo review.
purposes.      Under the guidelines as                      The forfeiture principle may lead to
amended, . . . courts have no discretion to         harsh results. “‘No procedural principle is
decide that the money laundering guideline          more familiar to this Court than that a
is inappropriate or not the most applicable         constitutional right,’ or a right of any other
guideline on the facts of a given case.”            sort, ‘may be forfeited in criminal as well
United States v. Diaz, 245 F.3d 294, 303            as civil cases by the failure to make timely
(3d Cir. 2001) (citation omitted). Plenary          assertion of the right before a tribunal
review of the sentence alone does Grasso            having jurisdiction to determine it.’”
no good, because we may inquire only                United States v. Olano, 507 U.S. 725, 731
whether, assuming he was lawfully                   (1993) (citing Yakus v. United States, 321
convicted of money laundering, the                  U.S. 414, 444 (1944)). Its effects are
District Court properly calculated his              mitigated, however, by Federal Rule of
sentence. Upon the facts presented, there           Criminal Procedure 52(b), which permits
is no doubt that it did.                            a court of appeals to consider a “plain
        Grasso’s strategy, of course, is
slightly outside the letter of Diaz. He
urged the District Court to sentence him            laundering conviction in a Rule 29 motion.
for fraud rather than money laundering not          In Morelli, the jury found that money
because the sentencing guidelines                   laundering was merely one among several
applicable to the latter more appropriately         bases for his RICO conspiracy conviction.
reflected the scope of his criminal activity,       Because the conviction rested on
but rather because he contended he should           i n d e p e n d e n t p r e dic a te a c t s , a n y
not have been convicted of money                    contemporaneous objection to the money
laundering in the first place. Were we to           laundering allegations would have been
accept this gambit, we would permit                 futile; even if the court had agreed that the
Grasso to end-run the principle that a court        money laundering statute was inapplicable,
should not disturb a jury verdict unless the        there were adequate alternative bases to
defendant timely objects. See Carlisle v.           sustain the conviction. Consequently, the
United States, 517 U.S. 416, 433 (1996)             defendant’s interpretation of the money
(holding that a district court is without           laundering statute affected only his
discretion to grant a defendant’s untimely          sentence, and the District Court’s decision
motion for judgment of acquittal pursuant           at sentencing was “not bound up with the
to Rule 29).                                        jury’s verdict.” Id. at 803. In our case, by
        In a similar vein, Grasso relies            contrast, the jury specifically found that
heavily on our decision in United States v.         Grasso was guilty of money laundering.
Morelli, 169 F.3d 798, 801 (3d Cir. 1999),          The District Court could not have
in which we held that the defendant was             modified Grasso’s sentence without
not obligated to challenge his money                disturbing the underlying conviction.

                                                6
error that affects substantial rights . . .                2.      Definition of “Proceeds”
even though it was not brought to the
                                                           Under the plain error standard, the
court’s attention.” 10
                                                    defendant ordinarily bears the burden of
        Grasso failed to file a Rule 29             proving that: (1) the court erred; (2) the
motion within the designated time. His              error was “plain” at the time of appellate
claim does not fall within any of the               consideration; and (3) the error affected
recognized exceptions to the forfeiture             substantial rights, usually meaning that the
rule. We therefore review his argument              error “must have affected the outcome of
for plain error. We note, however, that the         the district court proceedings.” Olano,
standard of review is ultimately irrelevant         507 U.S. at 734; see also Johnson v.
to our resolution of this case. Because we          United States, 520 U.S. 461, 466–68
conclude that the District Court properly           (1997). “If all three conditions are met, an
construed § 1956, we would affirm even              appellate court may then exercise its
under de novo review.11                             discretion to notice a forfeited error, but
                                                    only if (4) the error seriously affects the
                                                    fairness, integrity, or public reputation of
    10
       “Rule 52(b) leaves the decision to           judicial proceedings.” Johnson, 520 U.S.
correct the forfeited error within the sound        at 467 (citation omitted). Grasso cannot
discretion of the court of appeals.” Olano,         meet the first and most important element
507 U.S. at 732. Nonetheless, we “should            because the District Court did not err.
not exercise that discretion unless the error       Thus we need go no further.
seriously affects the fairness, integrity or              We agree with the District Court
public reputation of judicial proceedings.”         that sentencing Grasso for money
Id. (citations omitted). The Supreme Court          laundering was within the scope of the
has clarified that we may “correct the error        money laundering statute.          Grasso
(either vacating for a new trial, or                contends, citing the Seventh Circuit’s
reversing outright)” only if it is “plain”          recent decision in United States v.
and “affects substantial rights.” Id.               Scialabba, 282 F.3d 475 (7th Cir.), cert.
(emphasis in original).                             denied, 523 U.S. 1071 (2002), that he was
    11                                              improperly convicted of and sentenced for
      Grasso argues that the Court may
exercise plenary review of his claim even
if he forfeited it, because it is based on
statutory interpretation. This proposition          (reviewing for plain error the district
is inconsistent with the Supreme Court’s            court’s failure to submit to the jury the
decisions in Olano, 507 U.S. 725                    question whether a false statement was
(applying plain error re vi ew to                   material despite intervening Supreme
interpretation of the Federal Rules of              Court case deciding as a matter of
Criminal Procedure), and Johnson v.                 constitutional law that materiality is a jury
United States, 520 U.S. 461 (1997)                  question).

                                                7
money laundering because th e                      concerns underlying the statute—namely,
Government failed to establish that the            they are not “financial transactions to hide
money allegedly laundered derived from             or invest profits in order to evade
the net profits of his illegal activity. The       detection, the normal understanding of
Seventh Circuit held in Scialabba that             money laundering.” Id.
when a “crime entails voluntary, business-
                                                           While Judge Easterbrook’s opinion
like operations, ‘proceeds’ must be net
                                                   in Scialabba is well-argued and intuitively
income; otherwise the predicate crime
                                                   appealing, we believe it reaches an
merges into money laundering (for no
                                                   incorrect result. We consider various
business can be carried out without
                                                   interpretations of proceeds in light of the
expenses) and the word ‘proceeds’ loses
                                                   conventional understanding of the term,
operational significance.” Id. at 475.
                                                   the text and purpose of § 1956, and
       In Scialabba, the defendants were           existing case law in our Circuit. In so
convicted of operating an unlawful                 doing, we conclude that “proceeds,” as
gambling business, filing false tax returns,       that term is used in the money laundering
conspiring to defeat tax collection, and           statute, means gross receipts rather than
money laundering. The last charge was              profits.
based on the defendants’ use of revenue
                                                           Section 1956 does not define
from their gambling operations to meet the
                                                   proceeds. Judge Easterbrook assumed that
expenses of the business. As in our case,
                                                   “most speakers of English would
conviction for money laundering
                                                   understand” the term proceeds to reach
substantially increased the defendants’
                                                   only the “profits of the business.”
prison terms, and they therefore appealed
                                                   Scialabba, 282 F.3d at 477. Viewed in a
their convictions under the money
                                                   vacuum, however, we discern no clear
laundering statute, § 1956(a).
                                                   meaning of the term. Congress might
        The Seventh Circuit rejected the           easily have used “gross receipts” if it so
Government’s argument that use of gross            intended. Cf. Scialabba, 282 F.3d at 477
receipts to fund ongoing criminal activity         (“It would have been easy enough to write
constituted money laundering. The Court            ‘receipts’ in lieu of ‘proceeds’ in
explained that accepting the Government’s          § 1956(a)(1).”) But it might just as readily
theory would be “equivalent to saying that         have used the term “profits.”
every drug dealer commits money
                                                          Secondary sources defining the
laundering by using the receipts from sales
                                                   word “proceeds” undercut Grasso’s
to purchase more stock in trade, that a
                                                   proposed interpretation based on
bank robber commits money laundering by
                                                   Scialabba. For example, the Uniform
using part of the loot from one heist to
                                                   Commercial Code defines “proceeds” as
rent a getaway car for the next, and so on.”
                                                   “whatever is acquired upon the sale, lease,
Id. at 476. Transactions of this nature, the
                                                   license, exchange, or other disposition of
Court explained, do not implicate the

                                               8
collateral. . . .” U.C.C. § 9-102(64)(A).           Simmons, 154 F.3d 765, 770–71 (8th Cir.
Similarly, Black’s Law Dictionary 1222              1998). See generally Anup M alani, The
(7th ed. 1999) defines “proceeds” as “the           Scope of Criminal Forfeiture Under
amount of money received from a sale”               RICO: The Appropriate Definition of
and lists “net proceeds” as a distinct sub-         “Proceeds,” 66 U. Chi. L. Rev. 1289
entry under “proceeds.” Nonetheless,                (1999).
dictionary definitions are neither uniform
                                                            Turning to the money laundering
nor dispositive. Webster’s first definition
                                                    statute, the Seventh Circuit is alone in its
of proceeds is “the total amount brought
                                                    restrictive definition of “proceeds.” The
in,” but the second is “net profit,” and the
                                                    Sixth Circuit has noted that “proceeds,” as
third is “the net sum received . . . after
                                                    used in § 1956, is a “commonly
deduction of any discount or charges.”
                                                    understood word in the English language,”
Webster’s Third New International
                                                    and includes “what is produced by or
Dictionary 1807 (1986).
                                                    derived from something (as a sale,
        Judicial definitions of “proceeds” in       investment, levy, business) by way of total
other contexts also vary, though they are           revenue.” United States v. Haun, 90 F.3d
generally more expansive than the                   1096, 1101 (6th Cir. 1996) (quoting
interpretation Grasso urges. In construing          Webster’s Third New International
the scope of criminal forfeiture of                 Dictionary 1807 (1971)). Similarly, the
“proceeds” under the Racketeer Influenced           Ninth Circuit has adopted an expansive
and Corrupt Organizations (“RICO”) Act,             definition of “proceeds” as it is used in the
most courts have held that proceeds                 money laundering statute, relying on
involve more than net profits. In fact, the         dictionary definitions to assign it the
Seventh Circuit was unique in holding               “broad[] meaning of that which is
otherwise. See United States v. Masters,            obtained . . . by any transaction.” United
924 F.2d 1362, 1369–70 (7th Cir. 1991).             States v. Akintobi, 159 F.3d 401, 403 (9th
The Second Circuit and a District Court in          Cir. 1998) (internal citation omitted).
our Circuit have held that proceeds
                                                            Only one Circuit has explicitly
represent “gross profits,” meaning total
                                                    considered the Seventh Circuit’s decision
revenues minus marginal costs, but not
                                                    in Sciallaba. In United States v. Iacaboni,
fixed costs. United States v. Lizza Indus.,
                                                    221 F. Supp. 2d 104, 112 (2002), reversed
Inc., 775 F.2d 492, 497–99 (2d Cir. 1985);
                                                    in part on other grounds by 363 F.3d 1
United States v. Milicia, 769 F. Supp. 877,
                                                    (1st Cir. 2004), the United States District
888 (E.D. Pa. 1991). The First, Fourth,
                                                    Court for the District of Massachusetts
and Eighth Circuits understand the term to
                                                    rejected the Seventh Circuit’s conclusion
mean “gross revenues.” United States v.
                                                    that proceeds should be interpreted as
Hurley, 63 F.3d 1, 21 (1st Cir. 1995);
                                                    profits rather than total revenue. In March
United States v. McHan, 101 F.3d 1027,
                                                    2004, the First Circuit approved the
1041–43 (4th Cir. 1996); United States v.
                                                    District Court’s reasoning, noting simply:

                                                9
“We h a v e p r e v io usly rejected                 suggests that concealment is only one of
[Appellant’s] interpretation of the term             the statute’s two purposes. The “normal
‘proceeds’ in the RICO forfeiture context.           understanding of money laundering” may
[He] has offered no rationale for                    entail “hid[ing] or invest[ing] profits in
abandoning that approach here.” 363 F.3d             order to evade detection,” as the Seventh
at 4 (citation omitted).                             Circuit posited, Scialabba, 282 F.3d at
                                                     476, but the bifurcated text of the statute
       Given the many definitions of
                                                     strongly suggests that Congress had a
“proceeds” and the uncertain value of
                                                     broader definition of money laundering in
congressional records in choosing among
                                                     mind.
them,12 the best approach, we believe, is to
examine the statute itself for indications of                  To be sure, 18 U.S.C. § 1956
the intended scope of the term. The                  criminalizes financial transactions that
Seventh Circuit’s opinion reasons that               satisfy the conventional understanding of
proceeds must be limited to net profits              money laundering— namely, transactions
because money laundering is about                    intended “to conceal or disguise the nature,
concealment and only profits need be                 the location, the source, the ownership, or
concealed. But the wording of the statute            the control of the proceeds of specified
                                                     unl a w f u l activit y.”      18 U.S .C .
                                                     § 1956(a)(1)(B)(i). But it is equally
   12
     Grasso presents extensive evidence              unlawful under the statute to engage in a
that Congress intended the Money                     financial transaction, knowing that the
Laundering Control Act of 1986, of which             property involved represents the proceeds
§ 1956 is part, “to fill the gap in the              of unlawful activity, “with the intent to
criminal law with respect to the post-crime          promote the carrying on of specified
hiding of ill-gotten gains.” United States v.        u n l a w f u l acti v i ty .” 1 8 U . S .C .
Bockius, 228 F.3d 305, 310 (3d Cir. 2000)            § 1956(a)(1)(A)(i). In other words, the
(quoting United States v. LeBlanc, 24 F.3d           money laundering statute prohibits not
340, 346 (1st Cir. 1994)). “But that was             only the concealment of proceeds, but also
not the sole purpose of the statute.” Id.            the promotion of illegal activity. By
Other rationales undercut this theory. See,          reinvesting the proceeds of his fraudulent
e.g., Iacaboni, 221 F. Supp. 2d at 112 n.2           scheme in order to sustain it, Grasso
(“[The Seventh Circuit’s interpretation              promoted unlawful activity within the
would imply that] so long as the illegal             meaning of the statute—regardless
enterprise had no net profit, no money               whether the funds were profits or gross
laundering prosecution would be possible.            receipts.13
Because Congress could not have intended
such a result, the court follows the
                                                        13
majority of circuits in holding that                      Because we believe the meaning of
‘proceeds’ should be interpreted as ‘total           “proceeds” is clear from the text of § 1956,
revenue’ rather than ‘net profits.’”).               we need not consider the related policy

                                                10
        Finally, we note that we have               the offenses differ; an individual is guilty
explicitly rejected one of the principal            of money laundering only if he or she
factors cited by the Seventh Circuit in             intended to conceal or promote unlawful
support of its construction of the statute.         activity.      The Seventh Circuit
The Court commented in Scialabba: “If               distinguished our decision in Conley,
. . . the word ‘proceeds’ is synonymous             suggesting that if “proceeds” is interpreted
with gross income, then we would have to            broadly, the similarity between money
decide whether, as a matter of statutory            laundering and the underlying criminal
construction (distinct from double                  activity is problematic as a matter of
jeopardy), it is appropriate to convict a           statutory construction. But our Court has
person of multiple offenses when the                resolved the latter issue as well. In United
transactions that violate one statute               States v. Omoruyi, 260 F.3d 291, 295 (3d
necessarily violate another.” Scialabba,            Cir. 2001), we recognized that “conduct
282 F.3d at 477 (internal citations                 constituting the underlying offense
omitted).      Our Court, however, has              conduct may overlap with the conduct
concluded that § 1956 may subject an                constituting money laundering.” An
individual to multiple penalties based on           individual may be convicted for money
the same crime without violating either             laundering as long as the financial
double jeopardy or the principles                   transactions are conducted with proceeds
governing statutory interpretation.                 of the illegal transaction and with the
                                                    intent to promote the underlying offense.
      In United States v. Conley, 37 F.3d
                                                    Id.
970, 978–79 (3d Cir. 1994), we held that
prosecution for both gambling and money                    We have regularly upheld money
laundering did not implicate double                 laundering prosecutions based on the
jeopardy because the statutory elements of          reinvestment (“plowing back ”) of
                                                    proceeds. See, e.g., United States v. Diaz,
                                                    245 F.3d 294, 305 (3d Cir. 2001); United
arguments.     We note, however, that               States v. Cefaratti, 221 F.3d 502, 511 (3d
various factors favor adoption of a broad           Cir. 2000); Conley, 37 F.3d at 972. And
definition of the term. For example, it             we have never suggested that proceeds
would be very difficult to prove that               must be net. We see no reason to adopt
“profits” were used to promote an illegal           such a requirement now. We therefore
venture, since criminals rarely keep                hold that “proceeds,” as that term is used
records of the overhead expenses of their           in § 1956, means simply gross receipts
illegal activities. Similarly, in an ongoing        from illegal activity. An individual may
criminal business, it would be difficult to         engage in money laundering regardless
determine at what point a defendant had             whether his or her criminal endeavor
netted out all business expenses. When do           ultimately turns a profit.
criminal businesses operate by recognized
auditing standards?

                                               11
        Thus we conclude that Grasso was              According to the pre-sentence report,
properly convicted and sentenced for                  Grasso at one time had assets of
money laundering in violation of § 1956.              $1,127,691.79, of which $900,000 was in
In the context of our review standard, he             “frozen funds.” But because most of the
has failed to establish error of any sort, let        frozen funds were in market-sensitive
alone plain error.                                    securities and brokerage funds, they
                                                      fluctuated in value. Indeed, from the time
B.        The District Court’s Award of
                                                      of the pre-sentence report’s calculation to
          Restitution
                                                      the date of sentencing the funds’ value had
        We next address Grasso’s                      decreased by more than $200,000,
contention that the District Court erred by           resulting in an apparent shortfall for the
ordering him to pay restitution because it            payment of restitution.
failed to make factual findings in support
                                                              The Mandatory Victims Restitution
of the award. We remand for clarification.
                                                      Act (“MVR A”), 18                  U.S .C.
         The context is that at the time of           §§ 3663A–3664, enacted in 1996, requires
Grasso’s sentencing, the Court ordered                a sentencing court to order full restitution
p a y m e n t of $49,800 i n s pecia l                to identified victims of certain crimes and
assessments, $180,000 in fines, $100,000              to specify the manner and order in which
in counsel fees, and $761,126.39 in                   restitution is to be paid. The MVRA
restitution to victims of Grasso’s crimes.14          amended the provisions for restitution set
                                                      out previously in the Victim and Witness
                                                      Protection Act, 18 U.S.C. § 3663 et seq.,
     14
     18 U.S.C. § 3612(c) sets the priority            pursuant to which district courts had
for payments by defendants ordered at                 discretionary authority to award restitution
sentencing:                                           and were required to consider such factors
       Any money received from a                      as the defendant’s financial ability to pay.
       defendant shall be disbursed                   See United States v. Coates, 178 F.3d 681,
       so that each of the following                  683 n.3 (3d Cir. 1999).
       obligations is paid in full in
                                                              Under the amended provision, the
       the following sequence:
                                                      discretion of a district court in awarding
       (1) A penalty assessment
                                                      restitution is limited. Coates set out two
       under section 3013 of title
                                                      steps for application of the statute. First,
       18, United States Code.
       (2) Restitution of all
       victims.
       (3) All other fines, penalties,                assessments, fines, and counsel fees from
       costs, and other payments                      the frozen funds, with the restitution
       required under the sentence.                   ordered in Criminal No. 00-51 to be paid
Id.    The District Court’s judgment                  out of the balance. On remand, the order
provided for the payment of special                   of payment should be reset per § 3612.

                                                 12
the court must order full restitution15             claimants could look. We now hold that
“without consideration of the economic              when frozen funds are adequate to satisfy
circumstances of the defendant.” Coates,            restitution, a district court may stop short
178 F.3d at 683 (citing 18 U.S.C. §                 of Coates’ second step.       Here we have
3664(f)(1)(A)). Second, “[a]fter ordering           frozen funds. But we do not know their
full restitution, the district court ‘shall         precise value, nor the number of claims to
specify in the restitution order the manner         be satisfied. At the sentencing colloquy,
in which, and the schedule according to             the Government reported that the value of
which, the restitution is to be paid.’ In so        the frozen funds had decreased to
doing, the district court is required to            $693,467.21, and counsel for Grasso
consider the financial resources, projected         explicitly noted that they would not cover
earnings, and financial obligations of the          the ordered expenditures.17         We are
defendant.” Coates, 178 F.3d at 683
(citation omitted). 16        Clearly it
makes no sense, when the mandatory                        17
                                                          The transcript of oral argument
restitution sums will be paid entirely from
                                                    contains t he fo ll ow ing co nfu sing
frozen funds, to require a district court to
                                                    exchange:
consider the de fend ant’s financ ial
                                                          The Court: All right. Mr.
resources and responsibilities. While in
                                                          Phillips, any reason you
Coates we held that such determinations
                                                          know of why this sentence
were necessary to satisfy § 3664’s
                                                          I’ve just stated should not be
mandate, id., the defendant there had no
                                                          imposed?
frozen funds to which the restitution
                                                          Mr. Phillips: Your Honor,
                                                          the only question I have had
  15
    Grasso’s suggestion that a preliminary                to do I guess with the items
determination must be made whether each                   you listed, fine, restitution,
individual qualifies for restitution is                   attorney’s fees, special
plainly incorrect. Each individual who                    assessment. When you add
made a payment was “directly and                          those numbers up, they’re
proximately harmed as a result of the                     more than what is available
commission of the offense” within the                     of the frozen assets.
meaning of 18 U.S.C. § 3663A(a)(2) and                    The Court: That’s correct.
is consequently entitled to restitution.                  T he balance goes to
                                                          restitution.
       16
        Thus, while full restitution is                   Mr. Phillips: Oh, it was the
mandatory, “[t]he court may order the                     balance.
defendant to make a lump-sum payment,                     The Court: Right.
reasonable periodic payments, or, if the                  Mr. Phillips: Oh, okay.
defendant is indigent, nominal periodic                   I’m—
payments.” Id. at 683–84.

                                               13
therefore persuaded that a remand is
necessary.
        On remand, if the District Court             for plain error.” Id. at 313. Nonetheless,
should determine that the frozen funds are           we were careful to note in Torres that the
adequate to satisfy the full amount of               defendant had not argued that the District
restitution (after payment of $49,800 in             Court failed to consider his overall ability
special assessments), nothing further need           to pay a fine. Rather, he argued only that
be found to comply with the MVRA                     “the record before the District Court did
requirements. If, however, the funds are             not establish whether he had the earning
inadequate, the District Court should                capacity to pay a fine while on supervised
proceed in accordance with 18 U.S.C.                 release.” Id. Applied to our case, if on
§ 3664(f)(2) to determine the manner in              remand there is determined to be a
which, and schedule according to which,              shortfall of funds available for fines
restitution is to be paid.18                         (obviously the case if the funds are
                                                     insufficient to pay restitution amounts), the
                                                     District Court should consider Grasso’s
       The Court: Whatever’s left                    ability to pay this amount as well.
       after those monies are paid                           Second, it is apparent from the
       is for restitution.                           record that the District Court intended to
Arguably the District Court intended                 order the payment of restitution to the
restitution to be paid only to the extent of         30,007 victims id entified by the
the frozen funds. As § 3664 requires full            Government. The judgment, however,
restitution, however, this interpretation too        states that the restitution shall be paid to
would necessitate remand.                            “ a ny pa ye es” ide ntif ied by th e
                                                     Government. We presume that these
        18
          Three additional issues bear               payees are in fact the identified victims.
consideration on remand.          First, the                 Finally, we note a discrepancy
Government contends that Grasso failed to            between the District Court’s remarks
claim that payment of $180,000 in fines              during the sentencing colloquy and the
impaired his ability to pay restitution and          payment terms set forth in the judgment.
that he must therefore pay the fines from            We glean from one statement by the Court
assets outside the frozen funds. In United           at sentencing that it intended Grasso, upon
States v. Torres, 209 F.3d 308, 312 (3d              his release from custody, to pay $100 per
Cir. 2000), we noted that “the defendant             month toward any outstanding financial
has the burden of proving his or her ability         obligations. This provision, however, was
to pay [fines].” Moreover, “[w]here . . . a          not included in the written order. If on
defendant did not at sentencing raise the            remand there is a shortfall to pay
issue of his or her inability to pay, a              restitution, the Court should justify the
sentencing court’s decision to impose a              schedule of payment by reference to
fine and the amount of the fine is reviewed          Grasso ’s financial resources and

                                                14
            III.   Conclusion
        Reviewing for plain error, we
conclude that the District Court’s
interpretation of “proceeds” in the money
laundering statute was correct, and we
therefore affirm Grasso’s conviction and
sentence. On the issue of restitution, we
vacate the District Court’s order and
remand for reconsideration in light of the
value of the frozen funds. If the Court
determines that those funds are inadequate
to pay restitution in the priority scheme set
by 18 U.S.C. § 3612, it should follow the
requirements of 18 U.S.C. § 3664(f)(2).

obligations, pursuant to § 3664.

                                                15