Opinions of the United 2004 Decisions States Court of Appeals for the Third Circuit
8-23-2004
USA v. Grasso Precedential or Non-Precedential: Precedential
Docket No. 03-1441
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation "USA v. Grasso" (2004). 2004 Decisions. Paper 358. http://digitalcommons.law.villanova.edu/thirdcircuit_2004/358
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu. PRECEDENTIAL Patrick L. Meehan United States Attorney UNITED STATES Laurie Magid COURT OF APPEALS Deputy United States Attorney FOR THE THIRD CIRCUIT for Policy and Appeals Robert A. Zauzmer Assistant United States Attorney Nos. 03-1441 / 03-1442 Senior Appellate Counsel Anne Whatley Chain (Argued) Assistant United States Attorney UNITED STATES OF AMERICA Peter F. Schenck, Esq. Office of United States Attorney v. 615 Chestnut Street, Suite 1250 Philadelphia, PA 19106 MICHAEL J. GRASSO, JR., Attorneys for Appellee Appellant
On Appeal from the OPINION OF THE COURT United States District Court for the Eastern District of Pennsylvania D.C. Criminal Action Nos. AM BRO, Circuit Judge 00-cr-00051-1/01-cr-00783-1 ( Honorable Berle M. Schiller) Michael J. Grasso appeals his conviction and sentence for money laundering. He argues that the term Argued December 12, 2003 “proceeds” in the money laundering statute, 18 U.S.C. § 1956, encompasses only the net profits, and not the gross Before: AMBRO, FUENTES receipts, of criminal activity. This and GARTH, Circuit Judges proposed statutory construction is incompatible with the text of the statute as (Opinion filed August 23, 2004) well as existing case law in our Circuit. We therefore affirm Grasso’s conviction. Walter M. Phillips, Jr., Esq. (Argued) However, we do remand for the District Kevin J. Kotch, Esq. Court to reconsider its restitution award. Hoyle, Fickler, Herschel & Mathes I. Factual and Procedural History One South Broad, Suite 1500 Philadelphia, PA 19107 Grasso sold various fraudulent work-at-home schemes from early 1997 Attorneys for Appellant until late 1999. The programs, which were advertised in national magazines, purported to enable purchasers to earn 01-783.3 In February 2002 the District substantial payments for at-home work, Court severed the obstruction of justice with profits to be divided between the count in the superseding indictment in participants and Grasso. In reality, the Criminal No. 00-51, which involved programs simply instructed purchasers to Grasso’s first attempt to obtain frozen solicit new customers who would purchase funds, and consolidated that count with the the same programs for similar amounts.1 proceeding in Criminal No. 01-783. In February 2000, Grasso was Trial on the superseding indictment indicted for mail fraud, wire fraud, and took place in February 2002. At the close money laundering, in Criminal No. 00-51. of the Government’s case, Grasso moved The money laundering counts charged that orally for judgment of acquittal on the mail he funded his ongoing criminal activity and wire fraud counts, as well as four of with the proceeds of his fraudulent the money laundering counts. The motion schemes. Grasso allegedly reinvested the was denied, and thereafter a jury convicted proceeds of his criminal activity to cover Grasso on all charges.4 He subsequently advertising, printing, and m ailing pled guilty to the obstruction of justice expenses. Nine months later, a count originally filed in Criminal No. 00- superseding indictment was filed, which 51, and the cases were consolidated for added a count for obstruction of justice sentencing. based on Grasso’s attempt to access frozen Payment of defense counsel fees funds and slightly modified the money was a recurring issue during the criminal laundering charges.2 In December 2002, proceedings. In March 2000, Grasso filed Grasso was indicted yet again, for forgery a motion to release funds from his frozen and obstruction of justice, in Criminal No. accounts to pay defense counsel fees and expenses, and the motion was denied. The case was assigned to another judge in 1 March 2001, and in December 2001 that In addition to fraudulently promoting judge ordered the release of $200,000 work-at-home employment schemes, toward these expenses. In March 2002, Grasso allegedly sold mailing lists and defense counsel sought the release of engaged in other illegal activity. He contests many of the representations made 3 by the Government. Because these factual The indictment charged that Grasso matters do not affect our resolution of the forged the signatures of a district judge issues on appeal, we do not discuss them. and a deputy clerk in conjunction with fictitious letters directing various financial 2 The original indictment contained 508 institutions to release his frozen funds. coun ts alleging money laundering, 4 whereas the superseding indictment Two money laundering counts were included 482 counts. dismissed during the course of the trial.
2 additional funds from frozen accounts for (five months of which would run payment of counsel fees. As a result, consecutively to the first sentence), a fine Grasso w as orde red to prov ide of $30,000, and a $300 special assessment. documentation related to one of the non- The restitution, fines, and special frozen accounts, and the Probation Office assessments, as well as $100,000 in examined his income and assets. The counsel fees, were to be paid from the subsequent investigation of his accounts frozen funds. Grasso appeals. 5 revealed that he had deposited more than II. Discussion $800,000 into his non-frozen accounts after the entry of a preliminary injunction We address two principal issues. in 1999, which was intended to protect his First, did the Government need to establish assets for distribution to victims. tha t Gra s s o ’ s m o n ey launde ring transactions were conducted with the net Prior to sentencing, Grasso objected profits, as opposed to gross receipts, of his to the Government’s proposed sentencing illegal activity? Second, did the District order on various grounds. He moved for a Court err by failing to specify in its order downward departure and submitted a of restitution the manner and schedule of memorandum in support of a “renewed” payment? motion for judgment of acquittal on the money laundering counts, relying on the A. Money Laundering Convictions Seventh Circuit’s recent decision in United and Sentence States v. Scialabba, 282 F.3d 475 (7th Grasso alleges that the Government Cir.), cert. denied, 537 U.S. 1071 (2002). transformed a “garden variety fraud case Although Grasso suggested in the with no hint of organized crime memorandum that he had submitted an involvement into a 482 count money earlier motion for acquittal on all money laundering case.” Grasso’s conviction for laundering counts, that motion challenged money laundering was based on his the sufficiency of the evidence as to “reinvestment of proceeds” for the Counts 444 through 447 only, and for purchase of advertisements, telephone factually specific reasons. services, printing, envelopes, and other The District Court sentenced materials in furtherance of his fraudulent Grasso for the fraud and money laundering activity by means of wire transfer, checks, convictions to 97 months incarceration, and credit cards. Simply put, Grasso paid three years supervised release, a fine of $150,000, restitution in the amount of $761,126.39, and a special assessment of 5 The District Court exercised $49,500. The Court made no findings in jurisdiction over this case pursuant to 18 support of its award of restitution. In U.S.C. § 3231. We have appellate addition, for the obstruction of justice plea, jurisdiction under 18 U.S.C. § 3742 and 28 Grasso received 15 months imprisonment U.S.C. § 1291.
3 for his business expenses with the receipts nature, the location, the from his sales.6 The relevant statute, 18 source, the ownership, or U.S.C. § 1956, provides: the control of the proceeds of spec ified unla wf ul (a)(1) Whoever, knowing activity; or that the property involved in a financial tran sactio n (ii) to avoid a transaction represents the proceeds of reporting requirement under some form of unlawful State or Federal law, a c t i vi ty, c o n d u c t s o r [commits a felony]. attempts to conduct such a financial transaction which in fact involves the proceeds The statute does not define “proceeds.” o f specified unlaw ful Grasso contends that the term should be activity— understood—as a matter of textual (A)(i) with the intent to interpretation, congressional intent, and promote the carrying on of policy—to mean “net profits.” The specified unlawful activity; Government, by contrast, urges us to adopt or a broader definition encompassing all gross receipts of illegal activity. (ii) with intent to engage in conduct constituting a 1. Standard of Review violation of section 7201 or Grasso has framed the question 7206 of the Internal presented in his appeal as “[w]hether a Revenue Code of 1986; or defendant can be convicted of and (B) knowing that the sentenced for money laundering under 18 transaction is designed in U.S.C. § 1956(a)(1)(A)(i) for reinvesting whole or in part— the proceeds of specified unlawful activity, where the government’s proof fails to (i) to conceal or disguise the show that the money allegedly laundered represented the proceeds, or net profits, 6 from the unlawful activity as opposed to Grasso argues that the payments were gross receipts or revenue.” At its core, made for past purchases. The Government Grasso’s appeal challenges the sufficiency disputes this claim as a factual matter. We of the evidence upon which he was have held, in any case, that it is possible to convicted.7 In other words, “[h]e contends “promote” unlawful activity, within the meaning of the money laundering statute, even if it has already been completed. 7 United States v. Paramo, 998 F.2d 1212, It is undisputed that the Government 1218 (3d Cir. 1993). presented no evidence suggesting that
4 that, as a matter of law, the facts do not February 25, 2002. He did not file a support the conclusion that money motion within seven days of the verdict, laundering occurred.” United States v. nor did the Court extend the applicable Morelli, 169 F.3d 798, 802 (3d Cir. 1999) period. On October 9, 2002, however, he (classifying as a “sufficiency of the filed a memorandum including an evidence” argument the defendant’s claim argument in support of his “renewed that his conviction for money laundering motion for judgment of acquittal on the was premised on a faulty statutory money laundering counts.” Although it construction). While Grasso urges us to was clear that Grasso had failed to file a review the District Court’s judgment de timely Rule 29 motion,8 the parties agreed novo, the Government contends that we at oral argument that the District Court should review it for plain error because he would consider the “renewed” motion “for failed to raise his statutory argument in a the limited purpose of determining Rule 29 motion for judgment of acquittal whether Defendant should be sentenced and therefore forfeited it. under the money laundering or fraud gui delin es.” 9 Tha t motion d id The Federal Rules of Criminal Procedure dictate when a criminal defendant may challenge a conviction that 8 As already noted, at the close of the is based on insufficient evidence. Rule 29 Government’s case the defense moved for provides that a defendant must make an judgment of acquittal on four of the money appropriate motion within seven days after laundering charges. The motion did not a guilty verdict is entered, or within an allege that the Government had failed to extended time specified by the Court demonstrate the use of net proceeds. during the seven-day period. If a 9 defendant fails timely to raise an argument Grasso has framed his argument as a that may establish his or her innocence, the challenge to his sentence rather than his court is unlikely to find it persuasive at a conviction. As a general matter, “[w]e later time. See, e.g., United States v. review the district court’s application of Powell, 113 F.3d 464, 466–67 (3d Cir. the sentencing guidelines de novo.” See 1997) (“If a defendant fails to file a timely United States v. Omoruyi, 260 F.3d 291, motion for judgment of acquittal, we 297 n.8 (3d Cir. 2001). We thus may review sufficiency of evidence for plain vacate a sentence if we find that it was error.”). improperly entered. But in this case the District Court had no choice but to The jury convicted Grasso on sentence Grasso for money laundering. “In cases . . . in which several counts, including fraud and money laundering, Grasso’s payments and expenditures were have been grouped, . . . the count carrying funded with net profits of the fraudulent the highest applicable offense level must scheme rather than gross receipts. apply to the entire group for sentencing
5 not serve to preserve the statutory argument for de novo review. purposes. Under the guidelines as The forfeiture principle may lead to amended, . . . courts have no discretion to harsh results. “‘No procedural principle is decide that the money laundering guideline more familiar to this Court than that a is inappropriate or not the most applicable constitutional right,’ or a right of any other guideline on the facts of a given case.” sort, ‘may be forfeited in criminal as well United States v. Diaz, 245 F.3d 294, 303 as civil cases by the failure to make timely (3d Cir. 2001) (citation omitted). Plenary assertion of the right before a tribunal review of the sentence alone does Grasso having jurisdiction to determine it.’” no good, because we may inquire only United States v. Olano, 507 U.S. 725, 731 whether, assuming he was lawfully (1993) (citing Yakus v. United States, 321 convicted of money laundering, the U.S. 414, 444 (1944)). Its effects are District Court properly calculated his mitigated, however, by Federal Rule of sentence. Upon the facts presented, there Criminal Procedure 52(b), which permits is no doubt that it did. a court of appeals to consider a “plain Grasso’s strategy, of course, is slightly outside the letter of Diaz. He urged the District Court to sentence him laundering conviction in a Rule 29 motion. for fraud rather than money laundering not In Morelli, the jury found that money because the sentencing guidelines laundering was merely one among several applicable to the latter more appropriately bases for his RICO conspiracy conviction. reflected the scope of his criminal activity, Because the conviction rested on but rather because he contended he should i n d e p e n d e n t p r e dic a te a c t s , a n y not have been convicted of money contemporaneous objection to the money laundering in the first place. Were we to laundering allegations would have been accept this gambit, we would permit futile; even if the court had agreed that the Grasso to end-run the principle that a court money laundering statute was inapplicable, should not disturb a jury verdict unless the there were adequate alternative bases to defendant timely objects. See Carlisle v. sustain the conviction. Consequently, the United States, 517 U.S. 416, 433 (1996) defendant’s interpretation of the money (holding that a district court is without laundering statute affected only his discretion to grant a defendant’s untimely sentence, and the District Court’s decision motion for judgment of acquittal pursuant at sentencing was “not bound up with the to Rule 29). jury’s verdict.” Id. at 803. In our case, by In a similar vein, Grasso relies contrast, the jury specifically found that heavily on our decision in United States v. Grasso was guilty of money laundering. Morelli, 169 F.3d 798, 801 (3d Cir. 1999), The District Court could not have in which we held that the defendant was modified Grasso’s sentence without not obligated to challenge his money disturbing the underlying conviction.
6 error that affects substantial rights . . . 2. Definition of “Proceeds” even though it was not brought to the Under the plain error standard, the court’s attention.” 10 defendant ordinarily bears the burden of Grasso failed to file a Rule 29 proving that: (1) the court erred; (2) the motion within the designated time. His error was “plain” at the time of appellate claim does not fall within any of the consideration; and (3) the error affected recognized exceptions to the forfeiture substantial rights, usually meaning that the rule. We therefore review his argument error “must have affected the outcome of for plain error. We note, however, that the the district court proceedings.” Olano, standard of review is ultimately irrelevant 507 U.S. at 734; see also Johnson v. to our resolution of this case. Because we United States, 520 U.S. 461, 466–68 conclude that the District Court properly (1997). “If all three conditions are met, an construed § 1956, we would affirm even appellate court may then exercise its under de novo review.11 discretion to notice a forfeited error, but only if (4) the error seriously affects the fairness, integrity, or public reputation of 10 “Rule 52(b) leaves the decision to judicial proceedings.” Johnson, 520 U.S. correct the forfeited error within the sound at 467 (citation omitted). Grasso cannot discretion of the court of appeals.” Olano, meet the first and most important element 507 U.S. at 732. Nonetheless, we “should because the District Court did not err. not exercise that discretion unless the error Thus we need go no further. seriously affects the fairness, integrity or We agree with the District Court public reputation of judicial proceedings.” that sentencing Grasso for money Id. (citations omitted). The Supreme Court laundering was within the scope of the has clarified that we may “correct the error money laundering statute. Grasso (either vacating for a new trial, or contends, citing the Seventh Circuit’s reversing outright)” only if it is “plain” recent decision in United States v. and “affects substantial rights.” Id. Scialabba, 282 F.3d 475 (7th Cir.), cert. (emphasis in original). denied, 523 U.S. 1071 (2002), that he was 11 improperly convicted of and sentenced for Grasso argues that the Court may exercise plenary review of his claim even if he forfeited it, because it is based on statutory interpretation. This proposition (reviewing for plain error the district is inconsistent with the Supreme Court’s court’s failure to submit to the jury the decisions in Olano, 507 U.S. 725 question whether a false statement was (applying plain error re vi ew to material despite intervening Supreme interpretation of the Federal Rules of Court case deciding as a matter of Criminal Procedure), and Johnson v. constitutional law that materiality is a jury United States, 520 U.S. 461 (1997) question).
7 money laundering because th e concerns underlying the statute—namely, Government failed to establish that the they are not “financial transactions to hide money allegedly laundered derived from or invest profits in order to evade the net profits of his illegal activity. The detection, the normal understanding of Seventh Circuit held in Scialabba that money laundering.” Id. when a “crime entails voluntary, business- While Judge Easterbrook’s opinion like operations, ‘proceeds’ must be net in Scialabba is well-argued and intuitively income; otherwise the predicate crime appealing, we believe it reaches an merges into money laundering (for no incorrect result. We consider various business can be carried out without interpretations of proceeds in light of the expenses) and the word ‘proceeds’ loses conventional understanding of the term, operational significance.” Id. at 475. the text and purpose of § 1956, and In Scialabba, the defendants were existing case law in our Circuit. In so convicted of operating an unlawful doing, we conclude that “proceeds,” as gambling business, filing false tax returns, that term is used in the money laundering conspiring to defeat tax collection, and statute, means gross receipts rather than money laundering. The last charge was profits. based on the defendants’ use of revenue Section 1956 does not define from their gambling operations to meet the proceeds. Judge Easterbrook assumed that expenses of the business. As in our case, “most speakers of English would conviction for money laundering understand” the term proceeds to reach substantially increased the defendants’ only the “profits of the business.” prison terms, and they therefore appealed Scialabba, 282 F.3d at 477. Viewed in a their convictions under the money vacuum, however, we discern no clear laundering statute, § 1956(a). meaning of the term. Congress might The Seventh Circuit rejected the easily have used “gross receipts” if it so Government’s argument that use of gross intended. Cf. Scialabba, 282 F.3d at 477 receipts to fund ongoing criminal activity (“It would have been easy enough to write constituted money laundering. The Court ‘receipts’ in lieu of ‘proceeds’ in explained that accepting the Government’s § 1956(a)(1).”) But it might just as readily theory would be “equivalent to saying that have used the term “profits.” every drug dealer commits money Secondary sources defining the laundering by using the receipts from sales word “proceeds” undercut Grasso’s to purchase more stock in trade, that a proposed interpretation based on bank robber commits money laundering by Scialabba. For example, the Uniform using part of the loot from one heist to Commercial Code defines “proceeds” as rent a getaway car for the next, and so on.” “whatever is acquired upon the sale, lease, Id. at 476. Transactions of this nature, the license, exchange, or other disposition of Court explained, do not implicate the
8 collateral. . . .” U.C.C. § 9-102(64)(A). Simmons, 154 F.3d 765, 770–71 (8th Cir. Similarly, Black’s Law Dictionary 1222 1998). See generally Anup M alani, The (7th ed. 1999) defines “proceeds” as “the Scope of Criminal Forfeiture Under amount of money received from a sale” RICO: The Appropriate Definition of and lists “net proceeds” as a distinct sub- “Proceeds,” 66 U. Chi. L. Rev. 1289 entry under “proceeds.” Nonetheless, (1999). dictionary definitions are neither uniform Turning to the money laundering nor dispositive. Webster’s first definition statute, the Seventh Circuit is alone in its of proceeds is “the total amount brought restrictive definition of “proceeds.” The in,” but the second is “net profit,” and the Sixth Circuit has noted that “proceeds,” as third is “the net sum received . . . after used in § 1956, is a “commonly deduction of any discount or charges.” understood word in the English language,” Webster’s Third New International and includes “what is produced by or Dictionary 1807 (1986). derived from something (as a sale, Judicial definitions of “proceeds” in investment, levy, business) by way of total other contexts also vary, though they are revenue.” United States v. Haun, 90 F.3d generally more expansive than the 1096, 1101 (6th Cir. 1996) (quoting interpretation Grasso urges. In construing Webster’s Third New International the scope of criminal forfeiture of Dictionary 1807 (1971)). Similarly, the “proceeds” under the Racketeer Influenced Ninth Circuit has adopted an expansive and Corrupt Organizations (“RICO”) Act, definition of “proceeds” as it is used in the most courts have held that proceeds money laundering statute, relying on involve more than net profits. In fact, the dictionary definitions to assign it the Seventh Circuit was unique in holding “broad[] meaning of that which is otherwise. See United States v. Masters, obtained . . . by any transaction.” United 924 F.2d 1362, 1369–70 (7th Cir. 1991). States v. Akintobi, 159 F.3d 401, 403 (9th The Second Circuit and a District Court in Cir. 1998) (internal citation omitted). our Circuit have held that proceeds Only one Circuit has explicitly represent “gross profits,” meaning total considered the Seventh Circuit’s decision revenues minus marginal costs, but not in Sciallaba. In United States v. Iacaboni, fixed costs. United States v. Lizza Indus., 221 F. Supp. 2d 104, 112 (2002), reversed Inc., 775 F.2d 492, 497–99 (2d Cir. 1985); in part on other grounds by 363 F.3d 1 United States v. Milicia, 769 F. Supp. 877, (1st Cir. 2004), the United States District 888 (E.D. Pa. 1991). The First, Fourth, Court for the District of Massachusetts and Eighth Circuits understand the term to rejected the Seventh Circuit’s conclusion mean “gross revenues.” United States v. that proceeds should be interpreted as Hurley, 63 F.3d 1, 21 (1st Cir. 1995); profits rather than total revenue. In March United States v. McHan, 101 F.3d 1027, 2004, the First Circuit approved the 1041–43 (4th Cir. 1996); United States v. District Court’s reasoning, noting simply:
9 “We h a v e p r e v io usly rejected suggests that concealment is only one of [Appellant’s] interpretation of the term the statute’s two purposes. The “normal ‘proceeds’ in the RICO forfeiture context. understanding of money laundering” may [He] has offered no rationale for entail “hid[ing] or invest[ing] profits in abandoning that approach here.” 363 F.3d order to evade detection,” as the Seventh at 4 (citation omitted). Circuit posited, Scialabba, 282 F.3d at 476, but the bifurcated text of the statute Given the many definitions of strongly suggests that Congress had a “proceeds” and the uncertain value of broader definition of money laundering in congressional records in choosing among mind. them,12 the best approach, we believe, is to examine the statute itself for indications of To be sure, 18 U.S.C. § 1956 the intended scope of the term. The criminalizes financial transactions that Seventh Circuit’s opinion reasons that satisfy the conventional understanding of proceeds must be limited to net profits money laundering— namely, transactions because money laundering is about intended “to conceal or disguise the nature, concealment and only profits need be the location, the source, the ownership, or concealed. But the wording of the statute the control of the proceeds of specified unl a w f u l activit y.” 18 U.S .C . § 1956(a)(1)(B)(i). But it is equally 12 Grasso presents extensive evidence unlawful under the statute to engage in a that Congress intended the Money financial transaction, knowing that the Laundering Control Act of 1986, of which property involved represents the proceeds § 1956 is part, “to fill the gap in the of unlawful activity, “with the intent to criminal law with respect to the post-crime promote the carrying on of specified hiding of ill-gotten gains.” United States v. u n l a w f u l acti v i ty .” 1 8 U . S .C . Bockius, 228 F.3d 305, 310 (3d Cir. 2000) § 1956(a)(1)(A)(i). In other words, the (quoting United States v. LeBlanc, 24 F.3d money laundering statute prohibits not 340, 346 (1st Cir. 1994)). “But that was only the concealment of proceeds, but also not the sole purpose of the statute.” Id. the promotion of illegal activity. By Other rationales undercut this theory. See, reinvesting the proceeds of his fraudulent e.g., Iacaboni, 221 F. Supp. 2d at 112 n.2 scheme in order to sustain it, Grasso (“[The Seventh Circuit’s interpretation promoted unlawful activity within the would imply that] so long as the illegal meaning of the statute—regardless enterprise had no net profit, no money whether the funds were profits or gross laundering prosecution would be possible. receipts.13 Because Congress could not have intended such a result, the court follows the 13 majority of circuits in holding that Because we believe the meaning of ‘proceeds’ should be interpreted as ‘total “proceeds” is clear from the text of § 1956, revenue’ rather than ‘net profits.’”). we need not consider the related policy
10 Finally, we note that we have the offenses differ; an individual is guilty explicitly rejected one of the principal of money laundering only if he or she factors cited by the Seventh Circuit in intended to conceal or promote unlawful support of its construction of the statute. activity. The Seventh Circuit The Court commented in Scialabba: “If distinguished our decision in Conley, . . . the word ‘proceeds’ is synonymous suggesting that if “proceeds” is interpreted with gross income, then we would have to broadly, the similarity between money decide whether, as a matter of statutory laundering and the underlying criminal construction (distinct from double activity is problematic as a matter of jeopardy), it is appropriate to convict a statutory construction. But our Court has person of multiple offenses when the resolved the latter issue as well. In United transactions that violate one statute States v. Omoruyi, 260 F.3d 291, 295 (3d necessarily violate another.” Scialabba, Cir. 2001), we recognized that “conduct 282 F.3d at 477 (internal citations constituting the underlying offense omitted). Our Court, however, has conduct may overlap with the conduct concluded that § 1956 may subject an constituting money laundering.” An individual to multiple penalties based on individual may be convicted for money the same crime without violating either laundering as long as the financial double jeopardy or the principles transactions are conducted with proceeds governing statutory interpretation. of the illegal transaction and with the intent to promote the underlying offense. In United States v. Conley, 37 F.3d Id. 970, 978–79 (3d Cir. 1994), we held that prosecution for both gambling and money We have regularly upheld money laundering did not implicate double laundering prosecutions based on the jeopardy because the statutory elements of reinvestment (“plowing back ”) of proceeds. See, e.g., United States v. Diaz, 245 F.3d 294, 305 (3d Cir. 2001); United arguments. We note, however, that States v. Cefaratti, 221 F.3d 502, 511 (3d various factors favor adoption of a broad Cir. 2000); Conley, 37 F.3d at 972. And definition of the term. For example, it we have never suggested that proceeds would be very difficult to prove that must be net. We see no reason to adopt “profits” were used to promote an illegal such a requirement now. We therefore venture, since criminals rarely keep hold that “proceeds,” as that term is used records of the overhead expenses of their in § 1956, means simply gross receipts illegal activities. Similarly, in an ongoing from illegal activity. An individual may criminal business, it would be difficult to engage in money laundering regardless determine at what point a defendant had whether his or her criminal endeavor netted out all business expenses. When do ultimately turns a profit. criminal businesses operate by recognized auditing standards?
11 Thus we conclude that Grasso was According to the pre-sentence report, properly convicted and sentenced for Grasso at one time had assets of money laundering in violation of § 1956. $1,127,691.79, of which $900,000 was in In the context of our review standard, he “frozen funds.” But because most of the has failed to establish error of any sort, let frozen funds were in market-sensitive alone plain error. securities and brokerage funds, they fluctuated in value. Indeed, from the time B. The District Court’s Award of of the pre-sentence report’s calculation to Restitution the date of sentencing the funds’ value had We next address Grasso’s decreased by more than $200,000, contention that the District Court erred by resulting in an apparent shortfall for the ordering him to pay restitution because it payment of restitution. failed to make factual findings in support The Mandatory Victims Restitution of the award. We remand for clarification. Act (“MVR A”), 18 U.S .C. The context is that at the time of §§ 3663A–3664, enacted in 1996, requires Grasso’s sentencing, the Court ordered a sentencing court to order full restitution p a y m e n t of $49,800 i n s pecia l to identified victims of certain crimes and assessments, $180,000 in fines, $100,000 to specify the manner and order in which in counsel fees, and $761,126.39 in restitution is to be paid. The MVRA restitution to victims of Grasso’s crimes.14 amended the provisions for restitution set out previously in the Victim and Witness Protection Act, 18 U.S.C. § 3663 et seq., 14 18 U.S.C. § 3612(c) sets the priority pursuant to which district courts had for payments by defendants ordered at discretionary authority to award restitution sentencing: and were required to consider such factors Any money received from a as the defendant’s financial ability to pay. defendant shall be disbursed See United States v. Coates, 178 F.3d 681, so that each of the following 683 n.3 (3d Cir. 1999). obligations is paid in full in Under the amended provision, the the following sequence: discretion of a district court in awarding (1) A penalty assessment restitution is limited. Coates set out two under section 3013 of title steps for application of the statute. First, 18, United States Code. (2) Restitution of all victims. (3) All other fines, penalties, assessments, fines, and counsel fees from costs, and other payments the frozen funds, with the restitution required under the sentence. ordered in Criminal No. 00-51 to be paid Id. The District Court’s judgment out of the balance. On remand, the order provided for the payment of special of payment should be reset per § 3612.
12 the court must order full restitution15 claimants could look. We now hold that “without consideration of the economic when frozen funds are adequate to satisfy circumstances of the defendant.” Coates, restitution, a district court may stop short 178 F.3d at 683 (citing 18 U.S.C. § of Coates’ second step. Here we have 3664(f)(1)(A)). Second, “[a]fter ordering frozen funds. But we do not know their full restitution, the district court ‘shall precise value, nor the number of claims to specify in the restitution order the manner be satisfied. At the sentencing colloquy, in which, and the schedule according to the Government reported that the value of which, the restitution is to be paid.’ In so the frozen funds had decreased to doing, the district court is required to $693,467.21, and counsel for Grasso consider the financial resources, projected explicitly noted that they would not cover earnings, and financial obligations of the the ordered expenditures.17 We are defendant.” Coates, 178 F.3d at 683 (citation omitted). 16 Clearly it makes no sense, when the mandatory 17 The transcript of oral argument restitution sums will be paid entirely from contains t he fo ll ow ing co nfu sing frozen funds, to require a district court to exchange: consider the de fend ant’s financ ial The Court: All right. Mr. resources and responsibilities. While in Phillips, any reason you Coates we held that such determinations know of why this sentence were necessary to satisfy § 3664’s I’ve just stated should not be mandate, id., the defendant there had no imposed? frozen funds to which the restitution Mr. Phillips: Your Honor, the only question I have had 15 Grasso’s suggestion that a preliminary to do I guess with the items determination must be made whether each you listed, fine, restitution, individual qualifies for restitution is attorney’s fees, special plainly incorrect. Each individual who assessment. When you add made a payment was “directly and those numbers up, they’re proximately harmed as a result of the more than what is available commission of the offense” within the of the frozen assets. meaning of 18 U.S.C. § 3663A(a)(2) and The Court: That’s correct. is consequently entitled to restitution. T he balance goes to restitution. 16 Thus, while full restitution is Mr. Phillips: Oh, it was the mandatory, “[t]he court may order the balance. defendant to make a lump-sum payment, The Court: Right. reasonable periodic payments, or, if the Mr. Phillips: Oh, okay. defendant is indigent, nominal periodic I’m— payments.” Id. at 683–84.
13 therefore persuaded that a remand is necessary. On remand, if the District Court for plain error.” Id. at 313. Nonetheless, should determine that the frozen funds are we were careful to note in Torres that the adequate to satisfy the full amount of defendant had not argued that the District restitution (after payment of $49,800 in Court failed to consider his overall ability special assessments), nothing further need to pay a fine. Rather, he argued only that be found to comply with the MVRA “the record before the District Court did requirements. If, however, the funds are not establish whether he had the earning inadequate, the District Court should capacity to pay a fine while on supervised proceed in accordance with 18 U.S.C. release.” Id. Applied to our case, if on § 3664(f)(2) to determine the manner in remand there is determined to be a which, and schedule according to which, shortfall of funds available for fines restitution is to be paid.18 (obviously the case if the funds are insufficient to pay restitution amounts), the District Court should consider Grasso’s The Court: Whatever’s left ability to pay this amount as well. after those monies are paid Second, it is apparent from the is for restitution. record that the District Court intended to Arguably the District Court intended order the payment of restitution to the restitution to be paid only to the extent of 30,007 victims id entified by the the frozen funds. As § 3664 requires full Government. The judgment, however, restitution, however, this interpretation too states that the restitution shall be paid to would necessitate remand. “ a ny pa ye es” ide ntif ied by th e Government. We presume that these 18 Three additional issues bear payees are in fact the identified victims. consideration on remand. First, the Finally, we note a discrepancy Government contends that Grasso failed to between the District Court’s remarks claim that payment of $180,000 in fines during the sentencing colloquy and the impaired his ability to pay restitution and payment terms set forth in the judgment. that he must therefore pay the fines from We glean from one statement by the Court assets outside the frozen funds. In United at sentencing that it intended Grasso, upon States v. Torres, 209 F.3d 308, 312 (3d his release from custody, to pay $100 per Cir. 2000), we noted that “the defendant month toward any outstanding financial has the burden of proving his or her ability obligations. This provision, however, was to pay [fines].” Moreover, “[w]here . . . a not included in the written order. If on defendant did not at sentencing raise the remand there is a shortfall to pay issue of his or her inability to pay, a restitution, the Court should justify the sentencing court’s decision to impose a schedule of payment by reference to fine and the amount of the fine is reviewed Grasso ’s financial resources and
14 III. Conclusion Reviewing for plain error, we conclude that the District Court’s interpretation of “proceeds” in the money laundering statute was correct, and we therefore affirm Grasso’s conviction and sentence. On the issue of restitution, we vacate the District Court’s order and remand for reconsideration in light of the value of the frozen funds. If the Court determines that those funds are inadequate to pay restitution in the priority scheme set by 18 U.S.C. § 3612, it should follow the requirements of 18 U.S.C. § 3664(f)(2).
obligations, pursuant to § 3664.