Court Opinion

ID: 3021815
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:25:31.127352+00
Date Added: 2024-06-11T11:40:17.404578
License: Public Domain

United States Court of Appeals
                            FOR THE EIGHTH CIRCUIT
                                   _____________

                                  No. 98-1884WM
                                  _____________

United States of America,                *
                                         *
             Appellant,                  *
                                         * On Appeal from the United
      v.                                 * States District Court
                                         * for the Western District
                                         * of Missouri.
Nanci Carter Woods,                      *
                                         *
             Appellee.                   *
                                    ___________

                              Submitted: September 22, 1998
                                  Filed: November 5, 1998
                                   ___________

Before RICHARD S. ARNOLD, WOLLMAN, and KELLY,1 Circuit Judges.
                           ___________

RICHARD S. ARNOLD, Circuit Judge.

        Pursuant to an agreement with the United States, Nanci Carter Woods pleaded
guilty to one count of bankruptcy fraud under 18 U.S.C. § 152 and one count of money
laundering under 18 U.S.C. § 1957. The District Court2 sentenced Ms. Woods to a

      1
       Judge Kelly died on October 21, 1998. This opinion is consistent with the vote
he cast at conference on this case.
      2
       The Hon. Russell G. Clark, United States District Judge for the Western District
of Missouri.
three-year term of probation, six months of which were required to be served in home
confinement. The government appeals the sentence, arguing that the Court erred by
using the fraud provision of the Sentencing Guidelines, rather than the money-
laundering provision, to determine the offense level for sentencing. The government
also argues that the Court erred in awarding a one-level departure for Ms. Woods’s
charitable activity. We affirm.

                                          I.

        The events that led to Ms. Woods’s conviction began in 1996, when she filed for
bankruptcy. Ms. Woods was required to list all of her assets and to turn over certain
of them for liquidation. Among these, she identified to the Bankruptcy Court and
turned over to the Trustee 200 shares of Wal-Mart stock and 100 shares of Food Lion
stock. In fact, Ms. Woods owned 800 shares of Wal-Mart stock and 500 shares of
Food Lion stock. She sold the other 600 shares of Wal-Mart stock for $16,045, and,
without reporting the transaction to the Bankruptcy Trustee, deposited the proceeds,
in the form of a check, into her husband’s bank account. The next day, Ms. Woods and
her husband obtained four $2,500 cashier’s checks from the account, and used the
money to pay personal expenses and to repay a loan from a relative. When confronted
by the Trustee about the Wal-Mart stock, Ms. Woods admitted the diversion, but
claimed that she had disclosed all of her other assets. According to the government,
however, Ms. Woods had also sold the other 400 unreported shares of Food Lion stock
for $3,274.25, and had used that money to pay personal expenses. The diversion of the
Food Lion stock was not discovered until the matter had been referred to the United
States Attorney by the Trustee.

       In 1997, the United States filed a two-count indictment against Ms. Woods,
alleging that she committed: 1) bankruptcy fraud, under 18 U.S.C. § 152, when she
knowingly and fraudulently concealed the Wal-Mart stock from the Bankruptcy
Trustee; and 2) money laundering, under 18 U.S.C. § 1957, when she knowingly

                                         -2-
deposited the check representing the proceeds of the sale of this stock into her
husband’s bank account.

       Ms. Woods agreed to plead guilty. The plea agreement contained a stipulation
that the offense level under the Sentencing Guidelines was 13 for the bankruptcy fraud
count and 19 for the money-laundering count, before any reduction for acceptance of
responsibility. The agreement also stated that “[t]he parties further agree that the
sentence ultimately imposed is within the sole discretion of the Court.” Appellant’s
Add. at 11. Before sentencing, Ms. Woods moved for departure from the money-
laundering guideline, U.S.S.G. § 2S1.2, arguing that the case presented factors that
took it outside the “heartland” of money-laundering cases, and that the appropriate
level for sentencing should take into account § 2F1.1, the guideline for the underlying
offense, bankruptcy fraud. Specifically, Ms. Woods argued that the main purpose of
the money-laundering statutes was to combat drug trafficking and organized crime, that
the money-laundering guidelines were designed to be used principally in that context,
and that her deposit of proceeds from the sale of the Wal-Mart stock was not typical
of the conduct the Sentencing Commission intended to punish under § 2S1.2. The
District Court agreed, finding that “[t]he statute on money laundering was not intended
to be imposed in this type of case,” and that “the offense committed in this case is
outside the heartland of cases.” Appellant’s Add. at 6. Ms. Woods also argued that
her extensive charitable activity warranted an additional departure under § 5H1.11.
Again, the Court agreed, and granted a one-level downward departure. Ms. Woods
was sentenced to three years’ probation.

                                           II.

      In this appeal, the United States argues that the District Court erred in departing
below the money-laundering guidelines because the activity engaged in by Ms. Woods
(depositing the check into her husband’s bank account and using the funds to purchase
cashier’s checks) falls within the range of conduct prohibited by 18 U.S.C. § 1957.

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That statute, in pertinent part, provides that: “Whoever . . . knowingly engages or
attempts to engage in a monetary transaction in criminally derived property that is of
a value greater than $10,000 and is derived from specified unlawful activity, shall be
punished . . ..” 18 U.S.C. § 1957(a). The term “specified unlawful activity”
encompasses a wide range of criminal conduct, including bankruptcy fraud. See 18
U.S.C. § 1956(c)(7)(D). Ms. Woods does not argue that her conduct did not violate
the money-laundering statute. It clearly did. Her argument is that the deposit of the
check was not serious money laundering as contemplated by the Sentencing
Commission when it promulgated the money-laundering guidelines.

       Under Koon v. United States, 518 U.S. 81 (1996), a district court may depart
from the Sentencing Guidelines if “the court finds that there exists an aggravating or
mitigating circumstance of a kind, or to a degree, not adequately taken into
consideration by the Sentencing Commission in formulating the guidelines that should
result in a sentence different from that described.” Id. at 92 (quoting 18 U.S.C. §
3553(b)). The Supreme Court noted that the Sentencing Commission “did not
adequately take into account cases that are, for one reason or another, ‘unusual,’ ” 518
U.S. at 93 (citing 1995 U.S.S.G. ch. 1, pt. A, intro. comment. 4(b)), and said that,
under the Guidelines, departures may be considered in “atypical” cases.

       Before departing from the Guidelines, a sentencing court first must determine
whether a particular case presents features that “take it outside the Guidelines’
‘heartland’ and make of it a special, or unusual, case.” Koon, 518 U.S. at 95. The
court must then decide whether the Sentencing Commission has forbidden, encouraged,
or discouraged departures based on those features. While a forbidden factor may not
be used as a basis for departure, an encouraged factor may be considered if the
Guidelines have not already taken it into account. A discouraged factor -- or an
encouraged factor already taken into account -- may also be used as a basis for
departure if the factor is present to an exceptional degree. If the factor is unmentioned,
the sentencing court must consider the “structure and theory of both relevant individual

                                           -4-
guidelines and the Guidelines taken as a whole,” and decide whether the factor is
sufficient to take the case out of the heartland. Id. at 96 (citing United States v. Rivera,
994 F.2d 942, 949 (1st Cir. 1993)). The Commission specifically said that it did “not
intend to limit the kind of factors, whether or not mentioned anywhere else in the
guidelines, that could constitute grounds for departure in an unusual case.” U.S.S.G.
ch. 1, pt. A, intro. comment. 4(b).

       In Ms. Woods’s case, the District Court found that, because the underlying
offense was bankruptcy fraud, and not drug trafficking or some other offense typical
of organized crime, the facts of her money laundering did not fall into the “heartland”
of cases involving that offense. The Court thought the sentence for bankruptcy fraud
would more appropriately reflect the severity of the money-laundering offense. We
believe ample evidence exists in the record, in the case law, and in the legislative and
administrative history of the money-laundering guidelines to support the District
Court’s downward departure. Under Koon, “[t]he appellate court should not review
the departure decision de novo, but instead should ask whether the sentencing court
abused its discretion.” 518 U.S. at 91.

      Significant support for Ms. Woods’s position can be found in the work of the
Sentencing Commission. In 1995, the Commission proposed amendments to the
money-laundering guidelines. The Commission had conducted an extensive study of
sentencing results under those guidelines, and found that “the broad and inconsistent
use of money laundering charges, coupled with an inflexible, arbitrarily determined
guideline structure, [had] result[ed] in substantial unwarranted disparity and
disproportionality in the sentencing of money laundering conduct.” Report to the
Congress: Sentencing Policy for Money Laundering Offenses, including Comments on
Department of Justice Report, United States Sentencing Comm’n (Sept. 18, 1997), p.
9. Notably, the Commission concluded that money-laundering sentences were “being
imposed for a much broader scope of offense conduct, including some conduct that is
substantially less serious than the conduct contemplated when the . . . guidelines were

                                            -5-
first formulated.” Id. at 5. The proposed amendments to the guidelines would have
tied the punishment for money laundering to the level of punishment for the underlying
crime. Under the new guidelines, according to the Commission, penalties would be
“more proportionate to both the seriousness of the underlying criminal conduct from
which the laundered funds were derived and to the nature and seriousness of the
laundering conduct itself.” Id. at 2.

       Congress, however, disapproved the amendments. See Act of October 30, 1995,
Pub. L. No. 104-38, § 1, 109 Stat. 334. The report of the House Judiciary Committee
recommending disapproval of the amendment said that the Sentencing Commission’s
changes “appear to respond in part to the class of money laundering cases in which the
money laundering activity is not extensive, including ‘receipt and deposit’ cases --
those in which the money laundering conduct is limited to depositing the proceeds of
unlawful activity in a financial institution account identifiable to the person who
committed the underlying offense. While the application of the current guidelines to
receipt-and-deposit cases, as well as to certain other cases that do not involve
aggravated money laundering activity, may be problematic . . . past sentencing
anomalies arising from relatively few cases do not justify a sweeping downward
adjustment in the money laundering guidelines.” H.R. Rep. No. 104-272, at 14-15,
reprinted in 1995 U.S.C.C.A.N. 335, 348-49. We believe these statements support Ms.
Woods’s contention that her case is outside the Guidelines’ “heartland.” In addition,
we find nothing in the report that suggests Congress, in disapproving the proposed
amendments, also intended to prohibit sentencing courts from departing downward,
where appropriate, in receipt-and-deposit cases or in those individual cases “that do not
involve aggravated money laundering activity.”

       Congress, moreover, took another step: it directed the Department of Justice to
prepare a report on the prosecution of money-laundering offenses and to ensure that the
statutes against money laundering were being prosecuted consistently and uniformly
by the United States Attorneys’ offices. See Report for the Senate and House Judiciary

                                          -6-
Committees on the Charging and Plea Practices of Federal Prosecutors with Respect
to the Offense of Money Laundering, Dept. of Justice (June 17, 1996). The report
prepared by the Department stated that the money-laundering statutes “should not be
used in cases where the money laundering activity is minimal or incidental to the
underlying crime. . . . The money laundering statutes should be used only where they
reflect the nature and extent of the criminal conduct involved . . ..” Id. at 14. The
procedures implemented to ensure consistent and uniform prosecutions among
jurisdictions involve various approval, consultation, and notification requirements. Id.
at 12-16. In addition, the United States Attorney’s Manual provides that “only
particularly complex and sensitive cases should be prosecuted” under the money-
laundering statutes. United States v. Bart, 973 F. Supp. 691, 697 (W.D. Tex. 1997)
(citing U.S. Dept. of Justice, United States Attorney’s Manual, Section 9-3.400.)

       Congress also directed the Sentencing Commission to respond to the Department
of Justice’s report. See Report to the Congress: Sentencing Policy for Money
Laundering Offenses, including Comments on Department of Justice Report, United
States Sentencing Comm’n (Sept. 18, 1997). In this report, the Commission noted that
the current sentencing structure for money-laundering offenses had been promulgated
less than six months after the two primary money-laundering statutes had become
effective, and that “no actual prosecutorial experience or judicial guidance existed to
inform the Commission’s formulation of the initial money laundering guidelines.” Id.
at 3. The Commission wrote that it set the “relatively high” base offense levels “to
penalize the conduct about which Congress seemed most concerned when it enacted
the money laundering statutes, namely: 1) situations in which the ‘laundered’ funds
derived from serious underlying criminal conduct such as a significant drug trafficking
operation or organized crime; and 2) situations in which the financial transaction was
separate from the underlying crime and was undertaken to either: a) make it appear that
the funds were legitimate, or b) promote additional criminal conduct by reinvesting the
proceeds in additional criminal conduct.” Id. at 4. The Commission reviewed the steps
taken by the Department of Justice to ensure that money-laundering offenses were

                                          -7-
being prosecuted uniformly, but concluded that the Department’s efforts, without a
“properly restructured money laundering guideline,” were not adequate to avoid
“unwarranted sentencing disparity.” Id. at 13.

       The government cites United States v. Morris, 18 F.3d 562 (8th Cir. 1994),
where a panel of this Court reversed the District Court for departing downward from
the money-laundering guidelines. In Morris, the financial transaction was intended to
promote the carrying on of a complex bank fraud scheme involving an officer of a
financial institution. We believe Ms. Woods’s case is distinguishable, because her
deposit of the check had the effect of concluding, rather than promoting, the bankruptcy
fraud.

       The government also cites United States v. O’Kane, 1998 WL 568813 (8th Cir.
1998). In O’Kane, this Court, in reversing a sentence arrived at after the District Court
grouped mail-fraud and money-laundering counts together, held that the offenses
invaded different interests and were “not so closely related as to justify grouping . . ..”
1998 WL 568813 at * 3. O’Kane is not a departure case, however. And while we
agree that bankruptcy fraud and money laundering invade different interests, we do not
read O’Kane to prohibit a District Court from departing from the Guidelines when it
determines that a case is outside the “heartland.”

       In summary, we do not believe the deposit of the check by Ms. Woods into her
husband’s account, or their obtaining of the cashier’s checks, constitutes serious
money-laundering conduct as contemplated by the Sentencing Commission for
punishment under the money-laundering guidelines. At least the District Court could
have so found within its discretion. This is not the sort of conduct one normally thinks
of as money laundering. Accordingly, we hold that the District Court did not abuse its
discretion when it found that Ms. Woods’s case fell outside the “heartland” and granted
her motion for a downward departure.

                                           -8-
                                         III.

       The government also appeals the one-level downward departure granted by the
District Court for Ms. Woods’s charitable activity. The Sentencing Guidelines provide
that a defendant’s charitable conduct is not an appropriate basis for a downward
departure unless it is exceptional. See Koon, 518 U.S. at 95-96. Ms. Woods brought
into her own home two troubled young women, one of whom was a former employee
who had stolen from Ms. Woods. The other was the defendant’s niece, who had had
difficulty living at home, and who had dropped out of school. Ms. Woods paid for
them to attend a private high school, both were graduated, and they are now productive
members of society. Ms. Woods also helped an elderly friend, who was unhappy living
in a nursing home, move into an apartment near her home. She helped to care for him,
and he was able to live out his remaining years with greater independence. The District
Court thought these efforts by Ms. Woods were exceptional, and we have no basis for
holding that they were not.

                                         VI.

      For the reasons given above, the judgment of the District Court is affirmed.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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