Court Opinion

ID: 40568
Source: CourtListenerOpinion
Date Created: 2010-04-25 20:49:32+00
Date Added: 2024-06-11T09:26:36.903433
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
                      REVISED FEBRUARY 13, 2006
                                                              January 13, 2006
                IN THE UNITED STATES COURT OF APPEALS
                                                          Charles R. Fulbruge III
                        FOR THE FIFTH CIRCUIT                     Clerk

                           ______________

                            No. 04-30859
                           ______________

UNITED STATES OF AMERICA

                 Plaintiff - Appellee

          v.

HARRY H ADAIR

                 Defendant - Appellant

          Appeal from the United States District Court
       for the Eastern District of Louisiana, New Orleans

Before KING, Chief Judge, and BARKSDALE and CLEMENT, Circuit
Judges.

KING, Chief Judge:

     Upon reconsideration, this panel’s previous opinion in this

case, United States v. Adair, 2005 WL 2990586 (5th Cir. Nov. 8,

2005), is hereby withdrawn in its entirety and replaced by the

following.

     Defendant-Appellant Harry Adair was convicted of conspiring

to commit money laundering in violation of 18 U.S.C. § 1956(a)

(1)(B)(i) & (h).   Pursuant to the then-mandatory sentencing

guidelines, the district court sentenced him to 240-months

                                - 1 -
imprisonment.   The court also imposed an alternative sentence of

fifty-one months in the event that the guidelines were later

struck down in their entirety as unconstitutional or if the

Supreme Court’s decision in Blakely v. Washington, 542 U.S. 296,

124 S. Ct. 2531 (2004), were held applicable to the guidelines.

Adair now appeals his conviction and sentence.   We AFFIRM his

conviction and VACATE and REMAND for resentencing.

                          I.   BACKGROUND

A.   Factual Background

     In late 2002 or early 2003, the United States Customs

Service received word from an informant that Adair was attempting

to broker a transaction involving Venezuelan bonds that were

suspected of being counterfeit.   United States Secret Service

Special Agent Shane Davis contacted Adair, posing as the nephew

of a drug dealer who was looking to launder drug profits.    Adair

told Agent Davis that he wanted to broker the sale of $155

million in Venezuelan bonds.   Agent Davis expressed interest in

the bonds, explicitly telling Adair that he was interested in

purchasing the bonds in an effort to launder drug proceeds.

Adair subsequently arranged a meeting between Agent Davis and the

sellers of the bonds, Ken Vicknair and Dave Wallace.    The meeting

was scheduled for January 15, 2003.

     On January 14, 2003, Adair met with Sabrina Gonzales, a

Special Agent with the United States Drug Enforcement

                               - 2 -
Administration (“DEA”), to discuss the possibility of becoming a

DEA informant.    Adair told Agent Gonzales about the bond

transaction that was scheduled to be consummated the next day.

Adair, however, neglected to tell Agent Gonzales that the deal

was being arranged to launder drug profits.    He told her that the

bond deal was completely legitimate.    Adair proposed to Agent

Gonzales that he would discuss the possibility of a cocaine deal

with Agent Davis after the bond meeting.    He asked her to come

along and pose as his financial advisor.

     The next morning, Adair again met with Agent Gonzales.      She

told him that he was not approved to work as an informant because

of his past unsatisfactory work as an informant for the DEA.      She

also told him that he was free to meet with her supervisor at

some point after the meeting to discuss why he could not be

employed as an informant.    Later that day, Adair went to the

hotel where the bond meeting was scheduled to take place.    Before

the meeting, Adair met with Agent Davis and Secret Service

Special Agent Patrick Roche, who was also working undercover.

The three briefly discussed a potential drug deal, but Agent

Davis told Adair that they could discuss the matter further after

the bond meeting.    Adair, Agent Davis, and Agent Roche then went

into the conference room where the meeting was scheduled to take

place.    They joined Vicknair and Wallace, as well as a third man

who was identified as a security guard, who were already in the

room.    Contrary to what Adair had promised, Vicknair and Wallace

                                - 3 -
had brought only one $5 million note, rather than the entire $155

million.   Agent Davis attempted to delay the transaction until

Vicknair and Wallace produced all of the notes.   However,

Vicknair and Wallace insisted on doing the transaction that day.

Agent Davis agreed to the deal, and Adair, Vicknair, and Wallace

were thereafter arrested.

B.   Procedural Background

     On January 23, 2003, Adair, Vicknair, and Wallace were each

charged in a one-count indictment with conspiracy to commit money

laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i) & (h).

After Adair’s trial was severed from that of his co-defendants,

his case was tried before a jury on March 1 and 2, 2004.

Pursuant to FED. R. EVID. 404(b), the government submitted

evidence, over Adair’s objection, of Adair’s previous involvement

with a similar scheme to launder drug money.   This evidence

consisted of testimony by United States Customs Service Special

Agent Mike Tyson.   Agent Tyson’s testimony was offered to

discredit Adair’s defense that he did not intend to launder money

but instead intended to set up a prosecution for the DEA.    Agent

Tyson testified that in 2000, posing undercover, he assisted

Adair in a scheme in which Adair sought to convert $4.2 million

in Italian currency into $4 million in cashier’s checks.     Adair

then sought to purchase $4 million worth of gemstones with the

cashier’s checks.   Adair would then have sold the gemstones to

                               - 4 -
drug dealers for $10 million in cash.     This series of

transactions was never completed, and the Customs Service closed

its undercover operation.

     On March 2, 2004, the case went to the jury, and it returned

a guilty verdict.   Adair was sentenced on August 18, 2004.

Applying the then-mandatory United States Sentencing Guidelines,

the court sentenced Adair to 240-months imprisonment.      The court

also levied an alternative sentence, stating: “should the

sentencing guidelines later be found to be unconstitutional in

their entirety, or, should the Blakely case apply to the federal

sentencing guidelines, it will be the judgment and order of this

Court that you be committed . . . for a term of fifty-one

months.”

     Adair timely filed the instant appeal, arguing that: (1) the

government failed to provide sufficient evidence to meet the

statutory requirements of the offense with which he was charged;

(2) the district court erred in admitting Agent Tyson’s testimony

under Rule 404(b); and (3) his sentence should be vacated and

remanded to the district court for imposition of the alternative

fifty-one month sentence.

                            II.   DISCUSSION

A.   The Government Provided Sufficient Evidence to Prove the
     Charged Offense

     Adair was convicted under § 1956(h) of conspiring to violate

§ 1956(a)(1)(B)(i).   Subsection (h) of § 1956 states: “Any person

                                  - 5 -
who conspires to commit any offense defined in this section . . .

shall be subject to the same penalties as those prescribed for

the offense the commission of which was the object of the

conspiracy.”   In the instant case, the offense defined elsewhere

in § 1956 was subsection (a)(1)(B)(i).   This subsection states:

     Whoever, knowing that the property involved in a
     financial transaction represents the proceeds of some
     form of unlawful activity, conducts or attempts to
     conduct such a financial transaction which in fact
     involves the proceeds of specified unlawful activity–-
                                . . .
           (B) knowing that the transaction is designed in
           whole or in part--
                (i) to conceal or disguise the nature, the
                location, the source, the ownership, or the
                control of the proceeds of specified unlawful
                activity . . .
                               . . .
     shall be sentenced to a fine of not more than $500,000
     . . . or imprisonment for not more than twenty years, or
     both.

18 U.S.C. § 1956(a)(1)(B)(i) (2000) (emphasis added).    To be

guilty under this provision, a defendant need not have

specifically intended to conceal or disguise the proceeds of the

unlawful activity.   It is sufficient for the defendant merely to

be aware of the perpetrator’s intent to conceal or disguise the

nature or source of the funds.

     Adair argues that the government failed to provide

sufficient evidence of his guilt under § 1956(h) because it

neglected to prove a critical element of § 1956(a)(1)(B)(i).

Drawing on the words “in fact,” Adair asserts that criminal

liability under § 1956(a)(1)(B)(i) requires that the government

                                 - 6 -
prove that the laundered funds were actually proceeds from

unlawful activity.    In this case, Adair claims, the funds to be

laundered, if they existed at all, were government funds and

clearly were not drug proceeds.   Adair thus argues that the

government’s failure to prove this element of the underlying

money-laundering offense precludes a finding of liability for

conspiracy to launder money.

     Adair asserts that Congress intended sting operations to be

prosecuted through § 1956(a)(3), the so-called “government sting

provision.”   This provision states:

     (3) Whoever, with the intent [to conceal the true nature
     or ownership of property believed to be the proceeds of
     unlawful activity] conducts or attempts to conduct a
     financial transaction involving property represented to
     be the proceeds of specified unlawful activity, or
     property used to conduct or facilitate specified unlawful
     activity, shall be fined [or imprisoned]. . . . [T]he
     term “represented” means any representation made by a law
     enforcement officer . . . .

Citing 134 CONG. REC. S17360-02 (1988),1 Adair claims that

§ 1956(a)(3) was added specifically to allow prosecutions in

undercover sting operations involving money laundering because

the laundering of government-supplied funds is not an offense

under § 1956(a)(1).   Citing the same section of the Congressional

Record, Adair argues that § 1956(a)(3) included a stricter mens

rea requirement than is required for § 1956(a)(1).   Adair claims

     1
        Adair cited 134 CONG. REC. S27420 in support of these
claims. However, it appears that the passage to which he refers
is properly cited as 134 CONG. REC. S17360-02 (1988).

                                - 7 -
that in the instant case, the government made no attempt to meet

this heightened mens rea requirement, nor did the jury

instructions call for such a heightened mens rea.   Adair argues

that allowing the government to prosecute a participant in a

sting operation through a conspiracy charge would allow it to

make an end-run around § 1956(a)(3)’s heightened mens rea

requirement.   Because the funds involved in the sting were not

actually proceeds of illegal activity and because the government

made no attempt to meet § 1956(a)(3)’s heightened mens rea

requirement, Adair concludes that the government failed to prove

its case against him.

     In reviewing challenges to the sufficiency of evidence, we

must consider “all the evidence in the light most favorable to

the verdict, [and determine whether] a rational trier of fact

could have found that the evidence established the elements of

the offense beyond a reasonable doubt.”    United States v.

Villanueva, 408 F.3d 193, 201 (5th Cir. 2005).   It is clear that

a rational trier of fact could have found beyond a reasonable

doubt that Adair was guilty of the charged offense.

     In United States v. Threadgill, 172 F.3d 357 (5th Cir.

1999), we previously considered the argument that prosecution

under § 1956(h) requires proof of the elements of the substantive

offense under § 1956(a)(1).   We stated:

     The critical error in the defendants’ position is its
     presumption that a conspiracy charge must also describe
     the legal elements that comprise the substantive crime

                               - 8 -
     that is the object of the conspiracy. It is settled law
     that conspiring to commit a crime is an offense wholly
     separate from the crime which is the object of the
     conspiracy.   Thus, we have consistently held that a
     conspiracy charge need not include the elements of the
     substantive offense the defendant may have conspired to
     commit.

Id. at 367 (internal citations omitted).   Further, allowing the

government to charge Adair with conspiracy under § 1956(a)(1)

does not frustrate congressional intent.   When Congress added

§ 1956(h), the conspiracy subsection, in 1992, both § 1956(a)(1)

and § 1956(a)(3) were already in place.2   The broad language in

§ 1956(h) does not preclude the government from charging Adair

with conspiracy under § 1956(a)(1), even in a government sting

operation.   Had Congress wished to prevent conspiracy charges

under § 1956(a)(1) for government sting operations, it could have

drafted § 1956(h) to preclude such a result.

     In light of the broad language in § 1956(h) and the fact

that it was enacted after both § 1956(a)(1) and § 1956(a)(3), we

find Threadgill persuasive and controlling in this case.   We thus

hold that a criminal defendant may be prosecuted for conspiracy

to commit money laundering under § 1956(h) in a government sting

case without proving that the funds provided by the government

     2
        See Anti-Drug Abuse Act of 1986, Pub. L. No. 99-570,
§ 1352, 100 Stat. 3207 (1986) (codified at 18 U.S.C. § 1956(a)(1)
(2000)); Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690,
§ 6465, 102 Stat. 4181 (codified at 18 U.S.C. § 1956(a)(3)
(2000)); Housing and Community Development Act of 1992, Pub. L.
No. 102-550, § 1530, 106 Stat. 3672 (codified at 18 U.S.C.
§ 1956(h) (2000)).

                               - 9 -
agent were actually the proceeds of unlawful activity.   See

Threadgill, 172 F.3d at 367.

B.   The District Court Did Not Err in Admitting the Rule 404(b)
     Evidence

     We review a trial court’s admission of evidence pursuant to

Rule 404(b) under a “heightened abuse of discretion standard.”

United States v. Alarcon, 261 F.3d 416, 424 (5th Cir. 2001).     For

extrinsic evidence to be admitted under Rule 404(b), it must meet

two criteria.   The evidence must: (1) be relevant under Rule 401

to some issue besides the defendant’s character; and (2) possess

probative value that substantially outweighs its prejudicial

impact under Rule 403.   United States v. Infante, 404 F.3d 376,

388 (5th Cir. 2005).

     Adair argues that Agent Tyson’s testimony was inadmissible

because it fails under the second prong of the test for 404(b)

evidence, i.e., its probative value fails to substantially

outweigh its prejudicial impact.   Adair contends that the

evidence was not particularly probative because Agent Gonzales’s

later testimony directly discredited Adair’s claim that he was

merely trying to set Agent Davis up for a drug prosecution,

whereas the 404(b) evidence merely discredited the defense by

inference.   At the same time, Adair claims, Agent Tyson’s

testimony was highly prejudicial because the prior scheme’s

similar factual circumstances increased the likelihood that the

jury would make impermissible character propensity inferences.

                               - 10 -
     To determine whether the probative value of Agent Tyson’s

testimony substantially outweighs any possible unfair prejudice,

we must make a common-sense assessment of the relevant

circumstances surrounding the extrinsic evidence.       See United

States v. Beechum, 582 F.2d 898, 914 (5th Cir. 1978).      Some of

the factors we must consider include: (1) “the extent to which

the defendant’s unlawful intent is established by other

evidence”; (2) the “overall similarity of the extrinsic and

charged offenses”; and (3) “how much time separates the extrinsic

and charged offenses [because] temporal remoteness depreciates

the probity of the extrinsic offense.”    Id. at 915.

     In this instance, the evidence of Adair’s prior money-

laundering scheme was highly probative.   First, Agent Tyson’s

testimony was not merely cumulative of Agent Gonzales’s

testimony.   Given that Adair argued at trial that Agent

Gonzales’s testimony established reasonable doubt as to his

intent, the government cannot now be penalized for having offered

additional evidence as to Adair’s intent.   This is particularly

so considering that Adair’s intent was the only meaningful issue

litigated in the district court.   Second, the prior scheme was

similar to the transaction at issue in the instant appeal, as

both transactions involved laundering drug money through the use

of foreign currency.   Third, Adair’s prior money-laundering

scheme was temporally significant, as it occurred less than three

years before the conduct at issue in the instant appeal.      We thus

                              - 11 -
conclude that Agent Tyson’s testimony was highly probative.      We

also conclude that Agent Tyson’s testimony had little opportunity

of creating unfair prejudice because: (1) Tyson’s testimony did

not occupy a significant portion of the trial; (2) the prior

scheme was not a more serious offense than the offense with which

Adair was charged in the instant case; and (3) the district court

mitigated any prejudicial effect by giving the jury a limiting

instruction.   Accordingly, we conclude that the district court

did not err in allowing Agent Tyson to testify pursuant to Rule

404(b).

C.   Adair’s Sentence Must Be Vacated and Remanded

     Adair argues that pursuant to United States v. Booker, 543

U.S. 220, 125 S. Ct. 738 (2005), both scenarios triggering the

court’s lower alternative sentence have come to pass.   He claims

that in Booker, the Supreme Court both (1) declared the

sentencing guidelines unconstitutional in their entirety, and (2)

applied Blakely to the sentencing guidelines.   Accordingly, he

argues that we should vacate his sentence and remand for

imposition of the alternative fifty-one month sentence.    The

government concedes that it was error for the district court to

sentence Adair pursuant to the mandatory sentencing guidelines.

The government also does not contend that the error was harmless.

The government thus agrees with Adair that his sentence should be

vacated and that the case should be remanded to the district

                              - 12 -
court.    The government, however, does not explicitly state

whether the alternative sentence should be imposed.

     As an initial matter, it is clear that the district court

committed Booker error because it enhanced Adair’s sentence based

on factors that Adair never admitted to and that were not found

by a jury beyond a reasonable doubt.     Booker, 125 S. Ct. at 756

(“Any fact (other than a prior conviction) which is necessary to

support a sentence exceeding the maximum authorized by the facts

established by a plea of guilty or a jury verdict must be

admitted by the defendant or proved to a jury beyond a reasonable

doubt.”).    It is also clear that Adair preserved his objection to

this error.    In response to the presentence report, Adair argued

that his recommended sentence violated his Sixth Amendment rights

because the sentence was computed pursuant to factors that were

not found by the jury.     The question now before us is whether we

should (1) remand to the district court for resentencing, or (2)

impose the alternate sentence.

     In United States v. Walters, 418 F.3d 461 (5th Cir. 2005),

we previously considered the applicability of an alternate lower

sentence predicated on the outcome of Booker.     In Walters, the

district court imposed a seventy-five month sentence pursuant to

the sentencing guidelines.    The district court also stated that

if the sentencing guidelines were declared unconstitutional in

their entirety, it would impose an alternate sentence of sixty

months.    Id. at 463.   In Walters, rather than simply imposing the

                                - 13 -
lower alternative sentence, we vacated the defendant’s sentence

and remanded to the district court for resentencing in accordance

with Booker.     Id. at 466.    We noted that the condition for the

alternative sentence in that case, i.e., the sentencing

guidelines being declared unconstitutional in their entirety, did

not occur.     Id. at 465-66.   Rather than striking down the

sentencing guidelines in toto, Booker declared the guidelines

merely advisory.     See United States v. Villegas, 404 F.3d 355,

359 (5th Cir. 2005).    We thus find that the first trigger for

imposing Adair’s alternative sentence--that the Supreme Court in

Booker declared the sentencing guidelines unconstitutional in

their entirety--is not met.

     We must next consider whether the second trigger for

imposing Adair’s alternate sentence of fifty-one months is met,

i.e., whether the Supreme Court applied Blakely to the sentencing

guidelines.    Although this court previously has remanded for

resentencing cases in which the district court imposed a lower

alternative sentence in the event that the sentencing guidelines

were declared unconstitutional, we have not yet considered a case

in which the district court predicated its lower alternative

sentence on Blakely’s applicability to the sentencing guidelines.

See, e.g., United States v. Henefield, 143 F. App’x 586, 587 (5th

Cir. Aug. 5, 2005) (remanding for resentencing where the district

court imposed a “discretionary sentence to take effect if the

Sentencing Guidelines were invalidated”); Walters, 418 F.3d at

                                  - 14 -
465-66 (remanding for resentencing where the district court

imposed a lower alternative sentence if the guidelines were

declared entirely unconstitutional); United States v. Bell, 148

F. App’x 194, 195 (5th Cir. June 10, 2005) (remanding for

resentencing where the district court imposed alternative

sentences depending on whether the guidelines were held

unconstitutional in whole or in part).   Thus, because this is an

issue of first impression, we must decide what the district court

meant when it said it would impose an alternate lower sentence

“should the Blakely case apply to the federal sentencing

guidelines.”

     The district court’s reference to the Supreme Court’s

potential application of Blakely to the sentencing guidelines is

somewhat unclear in light of what actually happened in Booker.

In Blakely, the Supreme Court invalidated the state of

Washington’s sentencing guidelines because they violated the

defendant’s Sixth Amendment rights.    Blakely, 124 S. Ct. at 2538.

So in one sense, the Supreme Court in Booker did not apply

Blakely because in Booker, the sentencing guidelines were not

invalidated in their entirety.   See Booker, 125 S. Ct. at 764

(severing and excising the two provisions that made the

sentencing guidelines mandatory but leaving the rest of the

guidelines intact).   On the other hand, the district court might

have meant for the alternate sentence to apply in the event that

the Supreme Court were to apply Blakely’s rationale and

                              - 15 -
interpretation of the Sixth Amendment to the sentencing

guidelines.   The basic rationale of Blakely is that it violates a

defendant’s Sixth Amendment right to a trial by jury for a judge

to enhance a sentence based on facts neither admitted by the

defendant nor proved to a jury beyond a reasonable doubt.   In

this sense, the Supreme Court most certainly did apply Blakely to

the sentencing guidelines.   Booker, 125 S. Ct. at 755 (holding

that “Blakely applies to the Sentencing Guidelines”).

     Because of the district court’s broad language--imposing a

lower alternative sentence “should the Blakely case apply to the

federal sentencing guidelines”--there is no way for us to discern

precisely what the district court meant when it conditioned

Adair’s alternate sentence on the Supreme Court’s application of

Blakely to the sentencing guidelines.   Additionally, there is

nothing in the record to suggest that the district court

anticipated Booker’s remedial holding and considered the

sentencing guidelines as one factor among others listed in 18

U.S.C. § 3553(a) in determining Adair’s sentence.   See Bell, 148

F. App’x at 195 (noting, in response to the defendant’s argument

that the court should impose one of the two alternative sentences

set forth in the district court’s judgment, that “‘[e]ven in the

discretionary sentencing system established by Booker/Fanfan, a

sentencing court must still carefully consider the detailed

statutory scheme created by the [Sentencing Reform Act] and the

Guidelines’” and remanding for resentencing so that the district

                              - 16 -
court could consider Booker when imposing the alternative

sentences) (quoting United States v. Mares, 402 F.3d 511, 518-19

(5th Cir. 2005)); see also United States v. Porter, 417 F.3d 914,

917-18 (8th Cir. 2005) (“[T]he district court’s explanation of

its alternative sentence--‘as if Blakely would apply’--is too

cryptic to conclude that the court’s alternative sentence was

imposed consistent with Booker.    We cannot say that the court

contemplated an advisory guidelines system under which it was

required to consider the advisory guideline range as one factor

among others listed in 18 U.S.C. § 3553(a). . . .     We therefore

conclude that the alternative sentence as formulated in this case

is not a sufficient basis to uphold the term of imprisonment . .

. .”) (internal citations omitted).     We thus find that neither

trigger for imposing Adair’s lower alternative sentence is met.

     At the same time, we find that Adair preserved his Booker

objection and that the district court’s imposition of his 240-

month sentence runs counter to Booker.     “Where, as here, a

defendant has preserved a Booker issue in the district court, ‘we

will ordinarily vacate the sentence and remand, unless we can say

the error is harmless under Rule 52(a) of the Federal Rules of

Criminal Procedure.’”    Bell, 148 F. App’x at 195 (quoting Mares,

402 F.3d at 520 n.9).    The government does not even contend that

the error is harmless.   The government has not met its burden of

proving beyond a reasonable doubt that the federal constitutional

error of which Adair complains did not contribute to the sentence

                               - 17 -
that he received.   See United States v. Akpan, 407 F.3d 360, 377

(5th Cir. 2005) (citing Chapman v. California, 386 U.S. 18, 24

(1967)); see also Henefield, 143 F. App’x at 587 (noting that the

“government concedes that . . . [the defendant’s] sentence was

not harmless error because the district court would have imposed

a lesser sentence under an advisory Sentencing Guidelines

scheme”) (internal quotation marks and citation omitted).

Accordingly, we vacate Adair’s sentence and remand for

resentencing pursuant to Booker.

                         III.    CONCLUSION

     For the foregoing reasons, we AFFIRM Adair’s conviction,

VACATE his sentence, and REMAND for resentencing consistent with

the Supreme Court’s decision in Booker.

                                - 18 -