United States v. Chilingirian

• Court: Court of Appeals for the Sixth Circuit
• Decided: February 13, 2002
• Docket: 99-2376
• Status: Published

Opinion

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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$WD to the money laundering offense. Accordingly, the district EHQFK WULDO &KLOLQJLULDQ ZDV FRQYLFWHG RI FRQVSLUDF\ WR court’s sentence should be reversed and remanded with FRPPLWPRQH\ODXQGHULQJ+HZDVVHQWHQFHGWRPRQWKV instructions to re-sentence Chilingirian in accordance with the LPSULVRQPHQWWZR\HDUVVXSHUYLVHGUHOHDVHDQGUHVWLWXWLRQLQ money laundering guideline. WKH DPRXQW RI   &KLOLQJLULDQ QRZ DSSHDOV KLV FRQYLFWLRQ FLWLQJ LQDGHTXDFLHV LQ WKH LQGLFWPHQW DQG ,9&21&/86,21 LQFRQVLVWHQFLHV LQ WKH YHUGLFWV DQG FKDOOHQJLQJ WKH %DLO )RUWKHUHDVRQVVWDWHGDERYHZH5(9(56(WKHGLVWULFW 5HIRUP$FW7KHJRYHUQPHQWFURVVDSSHDOVFRQWHQGLQJWKDW FRXUW¶V VHQWHQFLQJ RUGHU DQG 5(0$1' WKH FDVH WR WKH WKHGHIHQGDQWZDVVHQWHQFHGXQGHUWKHZURQJJXLGHOLQH:H GLVWULFW FRXUW ZLWK LQVWUXFWLRQV WR UHVHQWHQFH -DFN DJUHH ZLWK WKH JRYHUQPHQW¶V FRQWHQWLRQ DQG WKHUHIRUH &KLOLQJLULDQ LQ DFFRUGDQFH ZLWK WKH PRQH\ ODXQGHULQJ $)),50  WKH GHIHQGDQW¶V FRQYLFWLRQ EXW 5(0$1' WKH JXLGHOLQH:H$)),50WKHUHPDLQGHURIWKHGLVWULFWFRXUW¶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

The Third Circuit has since clarified the holding of Smith: WKHVDOHRIDXWRPRELOHUDGDUEUDNLQJV\VWHPVDQGUHODWHGUDGDU WHFKQRORJ\ 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 'XULQJWKHSHQGHQF\RIWKHEDQNUXSWF\SURFHHGLQJVDJURXS 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 $HURMHWLQIRUPHGWKH5DVKLGVWKDWWKH\ZRXOGQRWJR appears to have been funneled through the client trust account IRUZDUG ZLWK DQ\ GHDOV  1HYHUWKHOHVV 5XGGHU DQG RWKHU in order to make it appear legitimate and to further the radar SHRSOHZKRNQHZ&KLOLQJLULDQDOVRLQYHVWHGLQ9566 technology/fraud scheme. ,QHDUO\LQOLJKWRIWKHEDQNUXSWF\WKH5XGGHUVEHJDQ 7KH7KLUG&LUFXLWUHOLHGRQ866*$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. LQ WKH FRXQW RI ZKLFK WKH GHIHQGDQW ZDV FRQYLFWHG´ 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.  )RU D PRUH GHWDLOHG DFFRXQW RI WKH IDFWV UHJDUGLQJ WKH 5DVKLG LQYHVWPHQW VFKHPHV DQG WKH WULDOV DQG DSSHDOV RI -DFN DQG &KDUOHV 5DVKLG VHH 8QLWHG 6WDWHV Y 5DVKLG  )G WK &LU  *HRUJH SOHDGHG JXLOW\ WR D OHVVHU FKDUJH DQG GLG QRW DSSHDO  8QLWHG6WDWHVY&KLOLQJLULDQ 1RV 1RV 8QLWHG6WDWHVY&KLOLQJLULDQ 

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  8QLWHG6WDWHVY&KLOLQJLULDQ 1RV 1RV 8QLWHG6WDWHVY&KLOLQJLULDQ 

'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). &KLOLQJLULDQGLGQRWUDLVHWKLVFODLPXQWLOKLVDSSHDOWRWKLV 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 $335,167.50. 2QDSSHDO&KLOLQJLULDQDUJXHV DJDLQVW VXFFHVVLYH SURVHFXWLRQV IRU WKH VDPH FULPH DQG WKDWWKHGLVWULFWFRXUW¶VGHQLDORIKLVPRWLRQIRUEDLOYLRODWHG DJDLQVW PXOWLSOH SXQLVKPHQWV IRU WKH VDPH FULPH 6HH KLV FRQVWLWXWLRQDO ULJKWV  +H DOVR DUJXHV WKDW WKH GLVWULFW 0LVVRXULY+XQWHU868QLWHG6WDWHV FRXUW¶VDFTXLWWDORIKLPRQFHUWDLQRIIHQVHVZDVLQFRQVLVWHQW Y 6KDUSH  )G   WK &LU   ³>7@KH ZLWKWKHFRXUW¶VYHUGLFWRIJXLOW\RQWKHFRQVSLUDF\WRFRPPLW SURWHFWLRQ DJDLQVW PXOWLSOH SURVHFXWLRQV LV QRW LPSOLFDWHG PRQH\ODXQGHULQJFKDUJH)XUWKHU&KLOLQJLULDQDOOHJHVWKDW ZKHQ D GHIHQGDQW IDFHV PXOWLSOH FKDUJHV LQ D VLQJOH FHUWDLQFRXQWVZLWKLQWKHLQGLFWPHQWFKDUJHGWKHVDPHRIIHQVH SURFHHGLQJ´8QLWHG6WDWHVY%DUUHWW)GWK DQGWKXVWKHLQGLFWPHQWZDVPXOWLSOLFLWRXV2QFURVVDSSHDO &LU&KLOLQJLULDQZDVSURVHFXWHGRQDOORIWKHFKDUJHV WKH JRYHUQPHQW DOOHJHV WKDW WKH GLVWULFW FRXUW HUUHG E\ LQDVLQJOHSURFHHGLQJ+HZDVFRQYLFWHGRQRQO\RQHFRXQW VHQWHQFLQJ&KLOLQJLULDQDFFRUGLQJWRWKHIUDXGJXLGHOLQHV DQGVHQWHQFHGRQO\RQWKDWFRXQW7KXVWKHGRXEOHMHRSDUG\ FODXVHLVQRWLPSOLFDWHG II. STANDARD OF REVIEW )LQDOO\&KLOLQJLULDQDUJXHVWKDWKLVFRQVWLWXWLRQDOULJKWWR This court reviews a district court's denial of bail under an GXHSURFHVVZDVYLRODWHGE\WKHGLVWULFWFRXUW¶VUHIXVDOWRLVVXH abuse of discretion standard. /HHY-DEH)G VSHFLDOILQGLQJV7KHFRXUWHQWHUHGLWVJHQHUDOILQGLQJRIQRW WK&LU7KH%DLO5HIRUP$FW86&†E JXLOW\RQDOORIWKHFRXQWVH[FHSW&RXQWRQ$SULO FUHDWHVDSUHVXPSWLRQDJDLQVWUHOHDVHSHQGLQJDSSHDO8QLWHG /DWHU RQ 0D\   &KLOLQJLULDQ PRYHG IRU VSHFLDO 6WDWHVY9DQFH)GWK&LU ILQGLQJVSXUVXDQWWR)(' 5 &5,0 3 7KHFRXUWGHQLHG WKHPRWLRQEHFDXVHLWZDVQRWPDGHEHIRUHWKHFRXUWHQWHUHG 7KLV&RXUWUHYLHZVIRUFOHDUHUURUDGLVWULFWFRXUW¶VIDFWXDO LWV JHQHUDO ILQGLQJ  5XOH  SURYLGHV ³>,@Q D FDVH WULHG ILQGLQJVLQLWVDSSOLFDWLRQRIWKH6HQWHQFLQJ*XLGHOLQHV6HH ZLWKRXWDMXU\WKHFRXUWVKDOOPDNHDJHQHUDOILQGLQJDQGVKDOO 8QLWHG 6WDWHV Y -RQHV  )G   WK &LU  LQDGGLWLRQRQUHTXHVWPDGHEHIRUHWKHJHQHUDOILQGLQJILQG FLWLQJ8QLWHG6WDWHVY:LQVWRQ)GWK&LU WKHIDFWVVSHFLDOO\´7KXVWKHGLVWULFWFRXUWDSSURSULDWHO\  +RZHYHUWKHGLVWULFWFRXUW¶VOHJDODSSOLFDWLRQRIWKH GHQLHGWKHPRWLRQ6HH8QLWHG6WDWHVY*XVWDIVRQ1R JXLGHOLQHVLVUHYLHZHGGHQRYR6HH8QLWHG6WDWHVY0RVHV :/DW WK&LU-XQH )GWK&LU7KLV&RXUWUHYLHZVWKH  8QLWHG6WDWHVY&KLOLQJLULDQ 1RV 1RV 8QLWHG6WDWHVY&KLOLQJLULDQ 

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