Court Opinion

ID: 2970164
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:06:14.393994+00
Date Added: 2024-06-11T11:43:28.529943
License: Public Domain

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.DUDP 3(5$/7$ -2+16721 	 .$5$0 6W &ODLU                       Whether this court views the district court’s action as a
6KRUHV 0LFKLJDQ IRU $SSHOODQW  -HQQLIHU - 3HUHJRUG       choice between guidelines or a departure, the result is the
$66,67$17 81,7(' 67$7(6 $77251(< 'HWURLW                       same. The heartland analysis that should be applied prior to
0LFKLJDQIRU$SSHOOHH                                              determining which guideline applies is identical to the
                                                                     analysis that should be applied in determining whether a
                     BBBBBBBBBBBBBBBBB                               departure is warranted. See Smith, 186 F.3d at 298.
                                                                     Moreover, in the departure context, this court has held that the
                         23,1,21                                     fact that a money laundering offense involved proceeds
                     BBBBBBBBBBBBBBBBB                               related to unlawful activity other than drug trafficking or
   1$7+$1,(/5-21(6&LUFXLW-XGJH'HIHQGDQW-DFN                organized crime is not sufficient to take the offense outside of
&KLOLQJLULDQDSSHDOVKLVIHGHUDOFRQYLFWLRQDQGVHQWHQFHRQ          the heartland of the money laundering guideline. United
PRQH\ODXQGHULQJFKDUJHV2Q$SULODJUDQGMXU\           States v. Reed, 167 F.3d 984, 995 (6th Cir. 1999); United
RIWKH(DVWHUQ'LVWULFWRI0LFKLJDQUHWXUQHGDPXOWLSOHFRXQW        States v. Ford, 184 F.3d 566, 587 (6th Cir. 1999). Thus, even
LQGLFWPHQWDJDLQVW&KLOLQJLULDQDQDWWRUQH\DQGWKUHHRIKLV       if the district court’s decision is treated not as a departure but
FOLHQWV-DFN&KDUOHVDQG*HRUJH5DVKLG7KH5DVKLGVZHUH        as an application of a more appropriate guideline, the district
LQGLFWHG RQ WKH EDVLV RI IUDXGXOHQW EXVLQHVV YHQWXUHV         court’s rationale was not sufficient to warrant the lower
FRQFHUQLQJ WKH GHYHORSPHQW PDQXIDFWXUH DQG VDOH RI           court’s decision not to apply the money laundering guideline
DXWRPRELOHUDGDUEUDNLQJV\VWHPVWRDYRLGFROOLVLRQV$WD         to the money laundering offense. Accordingly, the district
EHQFK WULDO &KLOLQJLULDQ ZDV FRQYLFWHG RI FRQVSLUDF\ WR      court’s sentence should be reversed and remanded with
FRPPLWPRQH\ODXQGHULQJ+HZDVVHQWHQFHGWRPRQWKV              instructions to re-sentence Chilingirian in accordance with the
LPSULVRQPHQWWZR\HDUVVXSHUYLVHGUHOHDVHDQGUHVWLWXWLRQLQ       money laundering guideline.
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  The Third Circuit has since clarified the holding of Smith:      WKHVDOHRIDXWRPRELOHUDGDUEUDNLQJV\VWHPVDQGUHODWHGUDGDU
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  Where money laundering is not ‘minimal or incidental,’
  and is ‘separate from the underlying crime’ and intended           &KLOLQJLULDQVHUYHGDVWKHDWWRUQH\IRUWKH5DVKLGVDQGWKH
  to ‘make it appear that the funds were legitimate’ or to         5DVKLGIDPLO\¶VFRPSDQ\9HKLFOH5DGDU6DIHW\6\VWHPV,QF
  funnel money into further criminal activities, § 2S1.1 is        ³9566´  IURP  RU  WKURXJK WKH GDWH RI WKH
  an applicable guideline. The guideline may also be               LQGLFWPHQW+HKHOGDILIWHHQSHUFHQWVKDUHLQ9566
  applicable if there is evidence that the activities which
  fulfilled the broad statutory requirements for money                ,Q  &KLOLQJLULDQ UHSUHVHQWHG 9566 ZKHQ LW ILOHG D
  laundering were extensive with drug trafficking or other         &KDSWHU  EDQNUXSWF\ UHRUJDQL]DWLRQ SHWLWLRQ ZKLFK ZDV
  serious crime.                                                   ODWHU FRQYHUWHG LQWR D &KDSWHU  OLTXLGDWLRQ SURFHHGLQJ
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United States v. Mustafa, 238 F.3d 485, 495 (3d Cir. 2001)         RILQYHVWRUVUHIHUUHGWRDVWKH³5XGGHU*URXS´HQWHUHGWKH
(quoting United States v. Bockius, 228 F.3d 305, 313 (3d Cir.      SLFWXUH  ,Q $XJXVW  &KDUOHV 5XGGHU PHW WKH 5DVKLGV
2000)). In this case, it could also be argued that even if this    ZKHQKHZDVZRUNLQJIRU*HQFRUS$HURMHW³$HURMHW´ZKLFK
Circuit were to apply Smith, its rationale would fail to           ZDVGLVFXVVLQJZLWK9566WKHSRVVLELOLW\RIEX\LQJLWVUDGDU
produce the result desired by Chilingirian. The money              EUDNLQJWHFKQRORJ\RUSHUKDSVWKHFRPSDQ\,Q'HFHPEHURI
laundering in this case was not minimal nor incidental, and it     $HURMHWLQIRUPHGWKH5DVKLGVWKDWWKH\ZRXOGQRWJR
appears to have been funneled through the client trust account     IRUZDUG ZLWK DQ\ GHDOV  1HYHUWKHOHVV 5XGGHU DQG RWKHU
in order to make it appear legitimate and to further the radar     SHRSOHZKRNQHZ&KLOLQJLULDQDOVRLQYHVWHGLQ9566
technology/fraud scheme.
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  7KH7KLUG&LUFXLWUHOLHGRQ866*$SSHQGL[$          WDSLQJ WHOHSKRQH FRQYHUVDWLRQV ZLWK WKH 5DVKLGV DQG
ZKLFKVWDWHV³>L@ILQDQDW\SLFDOFDVHWKHJXLGHOLQHVHFWLRQ     &KLOLQJLULDQ,QRQHRIWKHVHFRQYHUVDWLRQV&KLOLQJLULDQVDLG
LQGLFDWHGIRUWKHVWDWXWHRIFRQYLFWLRQLVLQDSSURSULDWHEHFDXVH   WKDWKHKDGEHHQZRUNLQJRQVRPHWKLQJWKDWZDVJRLQJWREH
RIWKHSDUWLFXODUFRQGXFWLQYROYHGXVHWKHJXLGHOLQHVHFWLRQ      IDEXORXV  Chilingirian also reassured RWKHUs that he was
PRVWDSSOLFDEOHWRWKHQDWXUHRIWKHRIIHQVHFRQGXFWFKDUJHG       working on several deals.
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6LPLODUO\WKLVFRXUWKDVSUHYLRXVO\UHOLHG RQWKLVODQJXDJH        In mid-1995, Chilingirian attempted to settle all of the
DQGKHOGWKDWWKHGLVWULFWFRXUWPXVWGHFLGHZKLFKJXLGHOLQHLV    bankruptcy claims against VRSS and the Rashids with money
PRVWDSSOLFDEOHFRQVLGHULQJWKHIDFWVLQYROYHG6HH8QLWHG        available from a group of investors known as the "Tindall
6WDWHVY+RRG)GWK&LU                 Group." Paul Tindall, and his wife Ann Louise, lived in
                                                                   Canada and were related to Jack Rashid’s wife. The Tindalls
  This portion of the Guidelines Manual has since been             met with Jack Rashid in January 1995. In late June 1995, the
amended so that the sentencing court is now required to use        Rashids went to Toronto to present their technology to, and
the guideline that Appendix A says is applicable. See
U.S.S.G., Appendix A (2000). Thus, the Smith approach is
no longer relevant.                                                    
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seek investments from, a group of over thirty people who         E. Fraud Guideline or Money Laundering Guideline?
learned of this opportunity through Paul Tindall.
                                                                    The government, on cross-appeal, argues that the district
   In December 1995, Advanced Radar Systems ("ART") was          court erred by sentencing Chilingirian according to the fraud
incorporated in Canada in order to take in the money from the    guidelines, rather than the money laundering guidelines.
Canadian investors. Neither the Rashids nor Chilingirian         Chilingirian was found guilty of conspiracy to commit money
informed the Canadian investors about VRSS’s bankruptcy or       laundering and Jack Rashid pleaded guilty to the same
their plan to use the investors’ money to pay creditors. The     offense. However, Judge O’Meara sentenced the defendants
Canadians invested heavily, but the money was put into           according to different sentencing guidelines. He sentenced
VRSS. According to the government’s summary, the records         Jack Chilingirian according to the sentencing guideline for
of Chilingirian’s client trust fund show that $2.48 million in   fraud (§ 2F1.1) and sentenced Jack Rashid according to the
checks was given to Jack Rashid by ART-Canada investors.         sentencing guideline for money laundering (§ 2S1.1). The
Chilingirian endorsed $2.267 million of those checks into his    fraud guideline results in a significantly lower offense level.
trust account. Chilingirian then wrote $275,000 worth of         The government argues that the court should have applied the
checks to himself, gave $1.473 million to Jack Rashid, and       guidelines for money laundering to Chilingirian.
disbursed $480,000 to settle various investors’ claims against
Rashid. Aside from Peter Tindall, none of the Canadian             This is a case of first impression in this circuit.
investors have ever recouped any money invested with the         Chilingirian and the district court rely on case law from the
Rashids.                                                         Third Circuit. In United States v. Smith, 186 F.3d 290 (3d
                                                                 Cir. 1999), the Third Circuit held that the money laundering
  When Chilingirian incorporated ART in Canada on behalf         guidelines were too harsh to apply to what it described as a
of Jack Rashid, he opened a new client trust account as well.    routine fraud case in which the money laundering activity was
According to the government, this account was used to            an "incidental by-product" of a kick-back scheme. Id. at 300.
launder money received from the last group of investors, the     The court explained that the sentencing court must perform a
"Kraft Group." James Kraft was a long time friend of Jack        "heartland" analysis when deciding what guideline should be
Rashid. He was solicited for money in April 1996, and            applied and when deciding whether to depart. See id. at 298.
invested money from his retirement account. He also brought      Thus, in order to determine whether the money laundering
in contributions from over thirty other investors.               guideline should apply, the court had to determine what
                                                                 conduct was considered by the Sentencing Commission to fall
  In 1996, Chilingirian and members of the Rudder Group          within the heartland cases covered under the money
discussed settlement of the investors’ claims against the        laundering guideline. The court considered the Sentencing
Rashids/VRSS. Some investors did get a portion of their          Commission’s proposed amendments to the money
money back, but they had to sign affidavits exculpating Jack     laundering guideline, which were rejected by Congress, and
Rashid. Similarly, despite numerous complaints from              "conclude[d] that the Sentencing Commission itself has
investors, Chilingirian continued to deposit money from the      indicated that the heartland of U.S.S.G. § 2S1.1 is the money
Kraft Group into his client trust account, then withdraw some    laundering activity connected with extensive drug trafficking
for Jack Rashid and a lesser amount for himself.                 and serious crime." Id. at 300.
  On April 23, 1997, Chilingirian was indicted on charges of
conspiracy in violation of 18 U.S.C. § 371, mail fraud in
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'0XOWLSOLFLW\GRXEOHMHRSDUG\DQGVSHFLDOILQGLQJV                violation of 18 U.S.C. § 1341, wire fraud in violation of 18
                                                                        U.S.C. § 1343, aiding and abetting the interstate
   &KLOLQJLULDQDUJXHVWKDW&RXQWFRQVSLUDF\WRFRPPLW              transportation of funds taken by fraud in violation of 18
PRQH\ODXQGHULQJDQG&RXQWIUDXGFRQVSLUDF\                U.S.C. § 2314, tampering with a witness in violation of 18
FKDUJHG WKH VDPH FRQVSLUDF\ DQG WKXV WKH LQGLFWPHQW ZDV        U.S.C. § 1512, and conspiracy to launder money instruments
PXOWLSOLFLWRXV$FODLPWKDWDQLQGLFWPHQWLVPXOWLSOLFLWRXV           in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i),
VKRXOG EH UDLVHG EHIRUH WULDO )(' 5 &5,0 3 E           1956(a)(1)(B)(i), and 1956(h).
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FRXUW7KXVWKHFODLPPDGHLVQRWWLPHO\6HH8QLWHG6WDWHV           On April 29, 1999, the district court convicted Chilingirian
Y+DUW)GWK&LU                           of conspiracy to commit money laundering. On October 8,
                                                                        1999, Chilingirian filed a Motion and Brief requesting bail
   &KLOLQJLULDQIXUWKHUDUJXHVWKDWZKHQWKHFRXUWDFTXLWWHG            pending appeal. On October 18, 1999, &KLOLQJLULDQ¶VUHTXHVW
KLP RQ WKH   FRQVSLUDF\ FKDUJH WKH GRXEOH MHRSDUG\        IRU EDLO ZDV GHQLHG DQG he was sentenced to 37 months
FODXVHSUHFOXGHGWKHFRXUWIURPFRQYLFWLQJKLPRQWKHPRQH\             imprisonment, 2 years supervised release, and restitution in
ODXQGHULQJ FKDUJH  7KH GRXEOH MHRSDUG\ FODXVH SURWHFWV          the amount of $335,167.50. 2QDSSHDO&KLOLQJLULDQDUJXHV
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