Case o' The Week: The Webster Definition - Money Laundering Proceeds in US v. Webster

Q: What is the most frustrating thing about the "rule of lenity," where a defendant catches a rare break thanks to an ambiguous term in a statute?

A: The courts' and Congress' eagerness to limit and clean up the ambiguity as quickly as humanly possible (in ways that never help the defense).

This week's decision is a case study for this phenomenon. In United States v. Webster, the Ninth Circuit further whittles down a righteous application of the rule of lenity by the Supreme Court in Santos -- and notes that Congress has done the same. United States v. Webster, 2010 WL 3784829 (9th Cir. Sept. 30, 2010), decision available here.

Players: Decision by Judge Thompson.

Facts: [On June 2, 2008, the United States Supreme Court decided United States v. Santos, 553 U.S. 507 (2008). The plurality decision in Santos required that the term, “proceeds” in money laundering jury instructions refer only to “profits,” and not to all gross receipts (at least in some cases).]

Six months later, Lamar Webster went to trial in Montana. 2010 WL 3784829, *1. Four cooperators testified against Lamar Webster on federal meth and money laundering charges. Id. at *1. The jury instructions for the money laundering counts referred to “proceeds,” but did not further define that term. Id. The jury returned guilty verdicts on all counts. Id.

Issue(s): “In instructing the jury on the money laundering counts, the district court did not define ‘proceeds’ as ‘profits,’ a failing which Webster now challenges for the first time. Because Webster did not raise a timely objection to the instructions, we review for plain error. . . . . Webster contends our decision in Moreland compels the conclusion that the district court's failure to define ‘proceeds’ as ‘profits’ in the jury instructions constitutes plain error. See Moreland, slip op. at 14319-320 (discussing and applying United States v. Santos, 553 U.S. 507, 128 S.Ct. 2020 (2008)).” Id. at *3 (some internal quotations and citations omitted).

Held: “We disagree.” Id. “We . . . read Santos as holding that where, as here, a money laundering count is based on transfers among co-conspirators of money from the sale of drugs, ‘proceeds’ includes all ‘receipts’ from such sales. . . . Because the broad ‘receipts’ definition of ‘proceeds’ was permissible, the district court did not err in its jury instructions by failing to define ‘proceeds’ narrowly to mean ‘profits.’” Id. (internal quotations and citations omitted).

Of Note: Santos was the great 2008 Supreme Court victory, which reigned in the money laundering statute by refusing to allow all receipts of a crime to be deemed “proceeds” and subject to laundering prosecution. That victory was immediately whittled down – first, because it was only a plurality of the Supreme Court that arrived at that a narrow decision.

Then, in the 2009 Van Alstyne case, the Ninth Circuit held that this plurality opinion was limited to money laundering from offenses presenting the danger of “merger” between the laundering and the substantive crime (like pyramid schemes, where there was the “merger” danger that every fraud crime creating income would automatically become money laundering if “receipts” weren’t distinguished from “profits). See blog here.

To make matters worse, on May 20, 2009 Congress amended 18 USC § 1956 (the money laundering statute) by gutting Santos with a new definition of “proceeds.” The new definition is terrifically broad: “the term ‘proceeds’ means any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including the gross receipts of such activity.” PL 111-21, May 20, 2009, 123 Stat 1617.

In sum, Santos had a short run.

How to Use: There are probably ex post facto problems with applying the new § 1956 definition of “proceeds” to fraud cases with conduct before May 20, 2009 (the effective date of the statute). For these pipeline cases with money laundering charges and “merger” problems, Santos should still control and modified jury instructions are in order.

For Further Reading: For a thoughtful and concise summary of the very confusing Santos tangle, the new definition of “proceeds” in the money laundering statute, and ideas how to use all of this wonderful mess to defend criminal and forfeiture charges, see Carlos F. Gonzalez and Regan Kruse, U.S. Anti-Money Laundering Laws in the Wake of U.S. v. Santos, Nov. 6, 2009, .pdf available here.



Money laundering image from http://www.tesionline.com/intl/img/focus/money-laundering.jpg

Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcalfpd.org


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Case o' The Week: "Cursing the Opacity of Guidance Received from Above," Autery and Post-Booker Sentencing review

District and appellate courts after Booker and Gall are "like Hansel and Gretel, looking for the now-missing breadcrumbs that would lead us back to clarity in sentencing." United States v. Autery, __ F.3d __, No. 07-30424, 2008 WL 349801 (9th Cir. Feb. 13, 2009), decision available here. In an interesting -- and potentially, double-edged -- decision, Judge Milan Smith creates a new rule for the Ninth: appellate review for the substantive "reasonableness" of a sentence is under the abuse of discretion standard, regardless of whether there was an objection below. A decision that makes dissenting Judge Tashima want to "figuratively curse the opacity of the guidance [courts] have received from above." Id. at *12 (or, maybe, literally curse . . . .)

Players: Decision by Judge M. Smith, joined by Judge Thompson, vigorous dissent by Judge Tashima.

Facts: Autery’s possession-of-child-porn guidelines were 41-51 months. Id. at *1. He took a plea agreement and argued for low-end, while the government asked for high. Id. The district court sentenced Autery to five years probation, citing the defendant’s “redeeming personal characteristics” and need for continued family support. Id. at *2. The government didn’t object – then appealed. Id. at *2.

Issue(s): “Before deciding whether to uphold the district court’s sentence, we must first determine the appropriate standard of review under the facts presented.” Id. at *3. “Neither this circuit nor the Supreme Court has squarely addressed the proper standard of review where the appellant fails to object to the sentence’s substantive reasonableness at sentencing.” Id.

Held: “The slight majority of those courts [that have considered this issue] has held that where no objection was made to the sentence at sentencing, the court still reviews for abuse of discretion to determine whether the sentence was reasonable.” Id. at *4. “After weighing Supreme Court authority, the views of other circuits, and public policy considerations, we hold that abuse of discretion is the proper standard of review in this case." Id. at *3. “[T]he substantive reasonableness of a sentence – whether objected to or not at sentencing – is reviewed for abuse of discretion.” Id. at *5. “We further hold that the district court did not abuse that discretion in sentencing Autery to five years probation with conditions.” Id. at *12.

Of Note: Judge Milan Smith (right), a W. Bush appointee, upholds a child-porn sentence of probation. Judge Tashima (left), a Carter appointee, vigorously dissents. What gives? Autery illustrates the imprudence of predicting outcomes from a judge’s political affiliation. The opinion may also reveal that some grizzled liberals fear Scalia’s unfettered and unreviewable sentencing discretion – a fear shared by many grizzled vets in the defense bar.

Autery explains the difference between a sentence reviewed for procedural error, and one reviewed for substantive reasonableness. Id. at *3-*4. Remember that in Gall the Supreme Court explained that the standard of review for substantive reasonableness is abuse of discretion . Autery only addresses the narrow question of substantive reasonableness review when there is no objection in the district court. The new Ninth rule? Substantive reasonableness is reviewed for “abuse of discretion,” regardless of whether the parties objected in the district court.

How to Use: Judge Smith’s thoughtful recitation of each § 3553(a) factor (and how that factor could justify this probationary sentence) is a welcome template for child-porn sentencing and a vindication of our sentencing mitigation arguments. Id. at *7-*8. Moreover, as Judge Tashima notes in his dissent, Autery was actually a run-of-the mill child porn defendant – and nonetheless his whopping “variance” was upheld. Id. at *12 (Tashima, J., dissenting). Use Autery and this dissent to reassure a sentencing court that its good § 3553(a) sentence will be bullet-proof on appeal.

The problem? A bad § 3353(a) sentence will be bullet-proof on appeal. A bad judge, or bad facts, means a client’s exposure is effectively the stat-max. For those courts and cases, Autery reinforces the value of 11(c)(1)(C) deals.

Finally, note that a separate standard-of-review remains for procedural sentencing error. If you fail to object at sentencing to procedural error, you’ll plunge into the tar pit of “plain error” review on appeal. Id. at *3. Object to everything – don’t risk having your issue characterized as “procedural” and getting stuck with plain error review.

For Further Reading: Remember that recent and disappointing Gonzalez-Zotelo decision, that held it was unreasonable to impose a reduced § 3553(a) sentence given fast-track disparities in illegal reentry cases? See blog here. How can Gonzalez-Zotelo possibly be reconciled with the deference afforded in Autery? Short answer? It can’t – Hubachek cited Autery in his Gonzalez-Zotelo petition for rehearing before the ink was dry in Judge Smith’s decision. Hopefully Autery will help spark review of Gonzalez-Zotelo.


Hansel and Gretel image from http://www.allposters.com/-sp/Hansel-and-Gretel-Posters_i2833314_.htm Image of the Hon. Judge Milan Smith from http://blog.oregonlive.com/mapesonpolitics/2008/07/this_smith_brother_made_the_di.html . Image of the Hon. Judge Wallace Tashima from http://www.ruttergroup.com/txfedaut.htm



Steven Kalar, Senior Litigator N.D. Cal. FPD. Website at www.ndcal.fpd

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Case o' The Week: Cal Burglary Convictions not "Violent" Felonies under USSG § 2L1.2, Aguila-Montes de Oca

A big defense win by the San Diego Defender knocks California burglary convictions out as "violent" offenses triggering a sixteen offense level increase under USSG § 2L1.2. United States v. Aguila-Montes de Oca, __ F.3d __, No. 05-50170, 2009 WL (Jan. 20, 2009), decision available here.

Players: Big win for San Diego AFPD Vince Brunkow, with assist by Steve Hubachek. Decision by Judge Thompson, (brief) dissent by Judge Gould.

Facts: After trial Aguila-Montes was sentenced 120 months for illegal reentry. Id. at *1. That whopping sentence was triggered by a +16 offense level increase for a California first degree burglary conviction (Penal Code § 459), characterized by the district court as a “crime of violence.” Id.

In the first panel decision, Judge Thompson wrote that this § 459 conviction qualified for the +16 OL bump under the “modified categorical approach.” 523 F.3d 1071, 1078 (2008) (withdrawn). Aguila-Montes petitioned for rehearing: the January 20th decision that is the subject of this memo is the revised decision.

Issue(s): “Aguila-Montes argues that because this 1988 state conviction could have been based upon criminal liability for conduct not included within the definition of burglary of a dwelling in section 2L1.2 of the Guidelines, the district court erred in applying the sixteen-level sentence enhancement.” Id. at *1.

Held: “Because California Penal Code section 459 does not require that an entry in the burglary context be ‘unlawful or unprivileged,’ the California statute lacks an element included in the generic definition of burglary of a dwelling incorporated into the Guidelines. Using a categorical approach, the two offenses do not ‘match.’ The modified categorical approach may not be applied to establish the missing element, and as a result, Aguila-Montes’s state conviction of first degree residential burglary is not a prior conviction of a crime of violence under section 2L1.2(b)(1)(A) of the Guidelines.” Id. at *4.

Of Note: The San Diego Defender deserves recognition for this victory, and for its aggressive litigation strategy on this issue. Attorneys in that office have been hanging tough on cases that involve a California burglary as a +16 OL specific offense adjustment – and are now being rewarded with better offers or great prospects on appeal. It is interesting to speculate how much custody time this decision will save illegal reentry defendants in border districts: many, many decades, safe to say.

How to Use: The important new rule of Aguila-Montes de Oca is that California burg convictions can never be +16 OL “violent” felonies in illegal reentry cases. The decision is also important, however, for its solid endorsement of the broader Navarro-Lopez rule: in the Ninth Circuit, if a state conviction doesn’t include the elements of the “generic” crime in the Taylor categorical analysis a court can’t move on to the modified categorical analysis. See blog here on Navarro-Lopez.

That broader Navarro-Lopez principle is a welcome rule far beyond the illegal reentry context; it is a limitation that squarely applies in Career Offender, ACCA, and 2K2.1 (felon in possession) cases as well.

For Further Reading: This win was a long time coming, and was presaged by Judge Milan Smith in his dissent in Snellenberger. See blog here.

Is the victory safe? Appellate guru Steve Hubachek thinks so: he notes that the Ninth unanimously relied on Navarro-Lopez’s reading of Taylor in Estrada-Espinoza v. Mukasey, 546 F.3d 1147, 1159 (9th Cir. Oct. 20, 2008) (en banc). The application of Taylor and Navarro-Lopez in the immigration context may remain controversial (see the cert. grant in Nijhawan v. Mukasey, blog summary here) but the dust has now settled on the Navarro-Lopez rule for criminal cases (at least in the Ninth).


Image of California Penal Code from http://upload.wikimedia.org/wikipedia/commons/b/b5/Californiapenalcode.jpg

Steven Kalar, Senior Litigator N.D. cal. FPD. Website at www.ndcalfpd.org


NB: On February 3, 2010, the Ninth Circuit granted the government's petition for rehearing en banc on Aguila-Montes de Oca:

02/03/2010

FILED ORDER FOR PUBLICATION (ALEX KOZINSKI) UPON THE VOTE OF A MAJORITY OF NONRECUSED ACTIVE JUDGES, IT IS ORDERED THAT THIS CASE BE REHEARD EN BANC PURSUANT TO CIRCUIT RULE 35-3. THE THREE-JUDGE PANEL OPINION SHALL NOT BE CITED AS PRECEDENT BY OR TO ANY COURT OF THE NINTH CIRCUIT.[7218682] (RP)

Be sure to check the status of this opinion before citing it.

~SGK

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Case o' the Week: Ninth Unambiguous About Miranda Ambiguity, Rodriguez

Judge Milan Smith (left) delivers an important defense win on Miranda waivers. See United States v. Jose Rodriguez, __ F.3d __, 2008 WL 623982 (9th Cir. Mar. 10, 2008), decision available here. In Rodriguez, the Ninth finds that the old "clarification rule" survived the Supreme Court's limitations in Davis: an ambiguous assertion of Miranda rights at the outset of an interrogation must be clarified by law enforcement before interrogation can proceed.

Players: Big win by Las Vegas AFPD Jason Carr.

Facts: Rodriguez was stopped by a Park Ranger on suspicion of DUI. Id. at *1. The Ranger learned from dispatch that Rodriguez was a felon, then saw a pistol handle in the bed of Rodriguez’s truck. Id. Rodriguez admitted to a .40 caliber pistol under the driver’s seat; he was arrested and his two passengers, detained. Id.

The Ranger read Rodriguez his Miranda rights. When asked if he wanted to speak to the rangers, Rodriguez answered, “I’m good for tonight.” Id. A “short time later,” Rodriguez was questioned and gave a full confession.

He was charged with felon-in-possession and other federal crimes. Id. A magistrate denied Rodriguez’s Miranda challenge, holding “I’m good for tonight” was an ambiguous assertion of the right to silence. Id. at *2. The district court adopted the magistrate’s findings; a conditional plea followed. Id.

Issue(s): 1. Ambiguous? “Rodriguez argues first that this statement . . ., ‘I’m good for tonight,’ was an unambiguous invocation of his right to silence.” Id.

2. Duty to Clarify? “He next argues that, to the extent his statement was ambiguous, [the Ranger] was under a duty to further clarify its meaning before he or any other Ranger proceeded with interrogation.” Id.

Held: 1. Ambiguous? “We . . . hold the statement [‘I’m good for tonight’] to be, at best, an ambiguous invocation of the right to silence.” Id. at *3.

2. Duty to Clarify? “Prior to obtaining an unambiguous and unequivocal waiver, a duty rests with the interrogating officer to clarify any ambiguity before beginning general interrogation. In this case, the government cannot meet its ‘heavy burden’ of proving an initial knowing and intelligent waiver of Miranda with an ambiguous or equivocal reference to Miranda rights.” Id. at *5.

Of Note: This is a Big Case. Before ‘94, the 5th, 9th, and 11th Circuits had a broad “clarification rule.” Id. at *4. This rule required that “in the face of an ambiguous or equivocal assertion of Miranda rights, made at any time during interrogation, interrogating officers were required to clarify the statement before continuing the interrogation.” Id. In ‘94, the Supreme Court decided Davis v. United States, 512 U.S. 452 (1994). Five Justices in Davis rejected the clarification rule in the context of an ambiguous invocation of counsel after a valid Miranda waiver was obtained. Id. at * 4 (discussing and distinguishing Davis). The key issue for authoring Judge Milan Smith (and Judges Canby and Thompson) was whether the Ninth’s “clarification rule” survived Davis? Happily, it does. In a very thoughtful opinion, Judge Smith explains that the Davis decision only make sense if there has already been an valid waiver. Id. at *4-*5. Thus, in Rodriguez (or in any initial invocation case), the old “clarification rule” survives Davis: it remains the government’s “heavy burden” to show a clear and unambiguous Miranda waiver. (Here's hoping that the composition of this panel (a Reagan and a W. Bush appointee) will stave-off en banc and cert. interest . . . )

How to Use: To avoid the Davis rule, AFPD Carr argued the difference between invocation of the right to silence (Rodriguez) and the right to counsel (Davis). Id. at 4 & n.5. For the fifth time, the Ninth avoided this issue. Id.

A future case that involves: i) an ambiguous mid-stream invocation, ii) to the right to silence (instead of to counsel) deserves another run at Davis on this theory.

For Further Reading: For an interesting – though controversial – look at how law enforcement and courts have gutted the Miranda goals, see Professor Weisselberg’s piece, Mourning Miranda, available here. (Ernesto Miranda, the defendant, is shown right).

For another big (and recent) Ninth Miranda win, re-visit Anderson here.

Steven Kalar, Senior Litigator. Website at www.ndcalfpd.org


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