Supreme Court Raises Doubts About the Money-Laundering Trap

The federal money-laundering statute prohibits both the concealment of proceeds from crime and the use of such proceeds to promote illegal activities.  While designed primarily with drug kingpins in mind, the statute’s broad language can easily become a trap for low-level criminals doing fairly routine things.  (I posted recently on a good example of an aggressive use of the money-laundering statute.)  Expansive readings of the statute mean that the penalties attached by Congress to many predicate offenses become meaningless, as nearly everyone becomes subject to the twenty-year maximum prison term triggered by a money-laundering conviction.  Responding to this concern, the Supreme Court recently adopted narrow constructions of the money-laundering statute in two cases, United States v. Santos, 128 S.Ct. 2020 (2008), and Cuellar v. United States, 128 S.Ct. 1994 (2008).  The cases may point the way towards a more discriminating money-laundering jurisprudence that attempts to reserve the harsh penalties of the statute for the most deserving defendants.

Santos was the more hotly contested of the two cases.  The Court confronted a straightforward legal question (does “proceeds” mean “receipts” or “profits”), but was unable to produce a straightforward answer.  The government favored the “receipts” definition, as the competing definition might require the government to prove that the defendant’s crimes were profitable, and to distinguish between paying expenses and spending (or reinvesting) profits.  In the end, four justices wholly accepted the government’s proposed definition, while four justices wholly rejected it.  Justice Stevens-who is rarely thought of as a swing vote-broke the tie in favor of the defendant, but without endorsing an across-the-board equation of “proceeds” with “profits.”  Instead, Stevens suggested that “proceeds” should be interpreted to mean “receipts” with respect to some predicate offenses, and “profits” with respect to others.  Without the benefit of a majority opinion, lower courts and litigants will doubtlessly continue to struggle with the meaning of “proceeds” outside the specific context of the Santos case itself (i.e., proceeds of an illegal gambling operation).

Beyond its uncertain answer to the specific legal question presented, two aspects of Santos stand out.  First, Justice Scalia’s plurality opinion rests on the rule of lenity, which “requires ambiguous criminal laws to be interpreted in favor of the defendants subjected to them.”  Although not providing quite as strong an endorsement of the rule as the plurality-he would prefer to use legislative history to resolve ambiguities-Justice Stevens also thought the rule an appropriate basis on which to resolve the case.  Santos thus becomes a helpful case for criminal defendants trying to show that lenity remains a robust doctrine of statutory interpretation.  Second, all of the justices seemed sensitive-in varying ways and to varying degrees-to what the Court termed the “merger” problem: “If ‘proceeds’ meant ‘receipts,’ nearly every violation of the illegal-lottery statute would also be a violation of the money-laundering statute, because paying a winning bettor is a transaction involving receipts that the defendant intends to promote the carrying on of the lottery.”  As I suggested above, variations on this problem can be found in cases involving a wide range of predicate offenses, so there is potentially some broader significance to the Court’s view that not every illegal-lottery defendant should also automatically be a money-laundering defendant.

The second case, Cuellar, interpreted a different provision of the money-laundering statute, one that prohibits attempts to transport illegal proceeds out of the country when the transportation is “designed . . . to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds.”  Cuellar was arrested while driving to Mexico with money from drug sales hidden in his car.  (Whether the money was “proceeds” was not questioned by the Court.)  The government established that Cuellar had concealed the money for transportation, but did not prove what the purpose of the transportation was.  The Court thus had to decide whether the statute prohibits concealment for transportation (the government’s position) or transportation for concealment (the defendant’s position-which would have required the government to prove something about what was expected to happen to the money once it arrived in Mexico).  The Court unanimously sided with the defendant on this question, holding that “design” implies “purpose or plan”; the government had to prove that concealment was not just incidental to transportation, but was actually a purpose of transportation.  Lurking in the background (as in Santos), was the Court’s view that the money-laundering statute should not become a trap for low-level defendants based on trivial or routine transactions.  Thus, the Court noted with concern that the government’s interpretation would result in money-laundering liability for the “petty thief who hides money in his shoe and then walks across the border to spend the money in local bars.”  The Court appropriately concluded that Congress did not intend for the money-laundering statute to have such a broad sweep.

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