United States v. Grasso ( 2004 )

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Precedential or Non-Precedential: Precedential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
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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 1United 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.
15