United States v. Searles , 412 F. App'x 165 ( 2011 )

FILED
United States Court of Appeals
Tenth Circuit
February 11, 2011
UNITED STATES COURT OF APPEALS A. Shumaker
Elisabeth
Clerk of Court
TENTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
No. 09-5169
v. (D.C. No. 4:07-CR-195-CVE-1)
(N. Dist. Okla.)
ROBERT W. SEARLES,
Defendant-Appellant.
ORDER AND JUDGMENT *
Before O’BRIEN, SEYMOUR, and HOLMES, Circuit Judges.
Mr. Robert W. Searles pleaded guilty to conspiracy to commit money
laundering. He now appeals his sentence. We have jurisdiction pursuant to 28
U.S.C. § 1291 and AFFIRM.
In April 2009, Mr. Searles pleaded guilty to conspiracy to commit money
laundering under 18 U.S.C. §§ 1956(h), 1957(a). In the plea agreement, he
waived the right to directly appeal his conviction, but preserved the right to
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with the terms and conditions of Fed.
R. App. P. 32.1 and 10th Cir. R. 32.1.
appeal sentencing issues. Seven months later, he was sentenced to fifty-seven
months imprisonment with three years of supervised release. He was also ordered
to pay $3,634,192.79 in restitution and $260,288.24 in forfeiture.
Prior to Mr. Searles’s guilty plea, in 2008, the Supreme Court issued its
decision in United States v. Santos, 553 U.S. 507 (2008). Santos considered the
interaction between an illegal gambling operation and the meaning of the term
“proceeds” in the federal money-laundering statute, 18 U.S.C. § 1956. In a
fragmented 4-1-4 decision, the plurality and concurring opinions together held
that, at least in the illegal gambling context, the term “proceeds” in 18 U.S.C.
§ 1956 means “profits” rather than “gross receipts.” 1 See id. at 514 (plurality
opinion); id. at 528 & n.7 (Stevens, J., concurring in judgment).
Although Santos was decided a year before Mr. Searles was sentenced, he
did not object in district court to the meaning of “proceeds” with respect to his
conviction and sentencing for conspiracy to commit money laundering, which was
based on the predicate offense of conspiracy to commit mail and wire fraud. He
now appeals the legality of his sentence, by arguing the criminal charges were
1
In response to Santos, in May 2009, Congress amended the federal money
laundering statute to define “proceeds” to mean “any property derived from or
obtained or retained, directly or indirectly, through some form of unlawful
activity, including the gross receipts of such activity.” 18 U.S.C.A. § 1956(c)(9)
(2011). This opinion evaluates the legality of Mr. Searles’s sentence under the
earlier version of the statute, which was in effect at the time he entered into the
plea agreement. As a result, all of our references to the U.S. Code are to the
unrevised, 2006 version.
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erroneously based on “receipts” instead of “profits.” 2 He maintains Santos
requires the term “proceeds” in 18 U.S.C. § 1956 to be interpreted to mean
“profits” when there is no legislative history to the contrary. As a result, he
contends he was wrongfully “sentenced on a set of facts that did not fall within
conduct criminalized by the federal money laundering statute.” Aplt. Br. at 12.
Because Mr. Searles did not challenge the definition of “proceeds” in the
district court, we review his appeal for plain error. See United States v. Vonn,
535 U.S. 55, 59 (2002); Fed. R. Crim. P. 52(b). “Plain error occurs when there is
(1) error, (2) that is plain, which (3) affects substantial rights, and which (4)
seriously affects the fairness, integrity, or public reputation of judicial
proceedings.” United States v. Gonzalez-Huerta, 403 F.3d 727, 732 (10th Cir.
2005) (en banc) (internal quotation marks omitted). An error is plain if it is
“clear or obvious” under “current, well-settled law.” United States v. Whitney,
229 F.3d 1296, 1308-09 (10th Cir. 2000). “In general, for an error to be contrary
to well-settled law, either the Supreme Court or this court must have addressed
this issue.” United States v. Ruiz-Gea, 340 F.3d 1181, 1187 (10th Cir. 2003)
2
Because Mr. Searles waived his right to challenge his conviction, this
appeal only examines the legality of his sentencing. The government does not
contest Mr. Searles’s right to challenge his sentence based on Santos. But to the
extent Mr. Searles’s briefs imply that the validity of his conviction may also be
challenged, see, e.g., Aplt. Br. at 11 (“Searles [sic] guilty plea and sentence for
money laundering cannot stand.”), such arguments have been waived and we will
not examine them.
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The only thing that is “clear and obvious” about the 4-1-4 Santos decision
is that it “raises as many issues as it resolves for the lower courts.” United States
v. Brown, 553 F.3d 768, 783 (5th Cir. 2008). Various circuit courts have
struggled to discern the meaning of Santos, and have greatly differed in their
interpretations of Santos’s holding and effect. See Garland v. Roy, 615 F.3d 391,
402-03 (5th Cir. 2010) (collecting cases and finding five different views of
Santos’s holding). Some courts have interpreted Santos as only applying in the
illegal gambling context. See, e.g., United States v. Johnson, No. 09-4417, 2010
WL 5394842, at *4 (4th Cir. Dec. 23, 2010) (unpublished and non-precedential)
(defining “proceeds” to mean “gross receipts” in mail and wire fraud case,
because “the plurality opinion in Santos does not appear to extend beyond illegal
gambling operations”); United States v. Spencer, 592 F.3d 866, 879 & n.4 (8th
Cir. 2010) (holding Santos does not apply in the drug context because Santos’s
holding was limited to illegal gambling cases); United States v. Demarest, 570
F.3d 1232, 1242 (11th Cir. 2009) (holding a conviction for money laundering of
illegal drug trafficking proceeds is not affected by Santos’s narrow holding “that
the gross receipts of an unlicensed gambling operation were not ‘proceeds’ under
section 1956”).
Other circuits have interpreted the case broadly. See, e.g., United States v.
Yusuf, 536 F.3d 178, 185-86 (3d Cir. 2008) (applying Santos to mail fraud case
and explaining “the term ‘proceeds,’ as that term is used in the federal money
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laundering statute, applies to criminal profits, not criminal receipts, derived from
a specified unlawful activity”); United States v. Lee, 558 F.3d 638, 642-43 (7th
Cir. 2009) (applying Santos and holding the regular expenses of operating a
“massage parlor” that provided prostitution services were not “proceeds” within
the meaning of 18 U.S.C. § 1956). Still other circuits have adopted
interpretations of Santos that will allow the meaning of “proceeds” to vary among
cases. See, e.g., Garland, 615 F.3d at 402-03 (extending Santos to mail and
securities fraud case after concluding Santos held “that the rule of lenity dictates
that ‘proceeds’ must be defined as ‘profits’ in cases where defining ‘proceeds’ as
‘gross receipts’ would result in the perverse result of the merger problem. . . .
[But otherwise there should be a] presumption that ‘proceeds’ should be defined
as ‘gross receipts’” unless legislative history contradicts this presumption
(internal quotation marks omitted)); United States v. Kratt, 579 F.3d 558, 562
(6th Cir. 2009) (applying a “gross receipts” definition of proceeds in bank fraud
case, after determining Santos held “‘proceeds’ . . . means profits only when the
§ 1956 predicate offense creates a merger problem that leads to a radical increase
in the statutory maximum sentence and only when nothing in the legislative
history suggests that Congress intended such an increase”); United States v. Van
Alstyne, 584 F.3d 803, 814-15 (9th Cir. 2009) (applying Santos to mail fraud case
after interpreting Santos as holding “that ‘proceeds’ means ‘profits’ where
viewing ‘proceeds’ as ‘receipts’ would present a ‘merger’ problem of the kind
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that troubled the plurality and concurrence in Santos,” but also explaining that not
all mail fraud schemes would implicate this merger problem).
Our circuit has not yet determined the effect of Santos. Nor do we decide
this issue today. In light of the confusion created by Santos, and the lack of
guidance from our circuit, the district court did not commit plain error in its
disposition of Mr. Searles’s case. Any error which the district court may have
made is neither “clear” nor “obvious” under well-settled law.
Accordingly, we AFFIRM Mr. Searles’s sentence.
ENTERED FOR THE COURT
Stephanie K. Seymour
Circuit Judge
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