Sunday, October 25, 2009

Case o' The Week: Ninth Airs Supreme's Dirty Laundry (Money Laundry Analysis, that is): Van Alstyne

Who has the temerity to call out the Supreme Court for a fractured decision that does far more to muddy money laundering cases, than to clarify them? Judge Marsha "Calls 'em Like She Sees 'em" Berzon, in United States v. Van Alstyne,__ F.3d __, No. 07-50105, 2009 WL 3381144 (9th Cir. Oct. 22, 2009), decision available here.

Players: Important victory on complex issue for CD Cal AFPD James Locklin and Defender Sean Kennedy. Decision by Judge Berzon (right).

Facts: Val Alstyne ran a Ponzi scheme and was charged with mail fraud and money laundering. Id. at *1. Two of the three money laundering counts involved transfers from a corporation to a partnership, used to make lulling payments to investors. Id. The third was a similar transfer, used to completely refund an investor’s outlay after the scheme began to unravel. Id. at *2.

He was convicted of seven mail fraud counts and all three money laundering counts. Id. at *2. After his conviction, and before this appeal, the Supreme Court decided United States v. Santos, 128 S. Ct. 2020 (2008). Id. at *1. Santos addressed the question of which financial transactions constitute “proceeds” that are chargeable under the federal money laundering statute. Id. at *3.

Issue(s): Van Alstyne now argues that Santos requires us to reverse his money laundering conviction. Id. at *1. “Van Alstyne contends that his payments to investors were no different than those held insufficient to sustain Santos’ money laundering conviction because the payments were ‘necessary for the operation to continue.’” Id. at *3. [Because these payments were not ‘proceeds’ as defined in the money laundering statute], “Van Alstyne now argues that Santos requires us to reverse his money laundering conviction.” Id. at *1.

Held:We hold that Santos undermines our earlier approach to determining whether funds arising from a specified illegal activity constitute ‘proceeds’ for the purposes of the money laundering statute, 18 USC § 1956, and requires a reversal of Van Alstyne’s money laundering conviction for two of the three money laundering counts.” Id. at *1. “We . . . view the holding that commanded five votes in Santos as being that ‘proceeds’ means ‘profits’ where viewing ‘proceeds’ as ‘receipts’ would present a ‘merger’ problem of the kind that troubled the plurality and concurrence in Santos. Id. at *7.

Of Note: Before he was a Judge, one of Professor W. Fletcher’s memorable lectures was a forceful attack on fractured appellate decisions. Santos proves his point. In Van Alstyne, Judge Berzon struggles to glean the holding of Santos, reading the tea leaves from a plurality decision, a dissent, and a Stevens’ swing vote that irked everyone. Van Alstyne is a careful, honest – indeed, blunt – decision that is a worthwhile read in an era where divided Supreme Court opinions are the norm. See id. at *5 (bluntly describing earlier Lazarenko panel’s erroneous reading of Santos, available here).

How to Use: Q: After Van Alstyne, when will Santos preclude a money laundering prosecution? A: It depends. Van Alstyne cannot be cited for the proposition that the distribution of money from mail fraud will always – or never – support a money laundering conviction: the “analysis of the ‘merger’ problem must focus on the concrete details of the particular ‘scheme to defraud,’ rather than on whether mail fraud generally requires payments of the kind implicated in Santos.” Id. at *8. Van Alstyne illustrates this context-specific analysis: the first two of the three money-laundering counts were reversed, while the third survived. Id. at *8.

The acid test, it seems, is “merger:” if the funds at issue are treated as “proceeds,” would this transform the underlying substantive crime (like mail fraud) into a simultaneous money launder crime in every case (i.e., “merge” the substantive offense with money laundering?) Id. at *4. Through no fault of Judge Berzon, this fact-bound test is difficult to understand and will be even more difficult to apply: thus preserve Santos objections to money laundering counts, a fertile field for appellate error.

For Further Reading: This was a prolific panel: last week the same three judges decided United States v. $186,416 in U.S. Currency, No. 07-56549, 2009 WL 33503042 (decision available here.

$186,416 is also worth a read for its compelling argument that the Fourth Amendment should apply – with even more force – in the civil forfeiture context (here, regarding funds forfeited from a medical marijuana clinic by the feds). Id. at *5-*6.

Image of the Hon. Marsha Berzon from . Image of medical marijuana symbol from

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


Labels: , , ,


Post a Comment

<< Home