United States v. Adair ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS November 8, 2005
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
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No. 04-30859
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UNITED STATES OF AMERICA
Plaintiff - Appellee
v.
HARRY H ADAIR
Defendant - Appellant
Appeal from the United States District Court
for the Eastern District of Louisiana
Before KING, Chief Judge, and BARKSDALE and CLEMENT, Circuit
Judges.
KING, Chief Judge:
Defendant-Appellant Harry Adair was convicted of conspiring
to commit money laundering in violation of 18 U.S.C. § 1956(a)
(1)(B)(i) & (h). Pursuant to the then-mandatory sentencing
guidelines, the district court sentenced him to 240-months
imprisonment. The court also imposed an alternative sentence of
fifty-one months in the event that the guidelines were later
struck down in their entirety as unconstitutional or if the
Supreme Court’s decision in Blakely v. Washington, 542 U.S. 296,
124 S. Ct. 2531 (2004), were held applicable to the guidelines.
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Adair now appeals his conviction and sentence. We AFFIRM his
conviction and VACATE and REMAND for resentencing.
I. BACKGROUND
A. Factual Background
In late 2002 or early 2003, the United States Customs
Service received word from an informant that Adair was attempting
to broker a transaction involving Venezuelan bonds that were
suspected of being counterfeit. United States Secret Service
Special Agent Shane Davis contacted Adair, posing as the nephew
of a drug dealer who was looking to launder drug profits. Adair
told Agent Davis that he wanted to broker the sale of $155
million in Venezuelan bonds. Agent Davis expressed interest in
the bonds, explicitly telling Adair that he was interested in
purchasing the bonds in an effort to launder drug proceeds.
Adair subsequently arranged a meeting between Agent Davis and the
sellers of the bonds, Ken Vicknair and Dave Wallace. The meeting
was scheduled for January 15, 2003.
On January 14, 2003, Adair met with Sabrina Gonzales, a
Special Agent with the United States Drug Enforcement
Administration (“DEA”), to discuss the possibility of becoming a
DEA informant. Adair told Agent Gonzales about the bond
transaction that was scheduled to be consummated the next day.
Adair, however, neglected to tell Agent Gonzales that the deal
was being arranged to launder drug profits. He told her that the
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bond deal was completely legitimate. Adair proposed to Agent
Gonzales that he would discuss the possibility of a cocaine deal
with Agent Davis after the bond meeting. He asked her to come
along and pose as his financial advisor.
The next morning, Adair again met with Agent Gonzales. She
told him that he was not approved to work as an informant because
of his past unsatisfactory work as an informant for the DEA. She
also told him that he was free to meet with her supervisor at
some point after the meeting to discuss why he could not be
employed as an informant. Later that day, Adair went to the
hotel where the bond meeting was scheduled to take place. Before
the meeting, Adair met with Agent Davis and Secret Service
Special Agent Patrick Roche, who was also working undercover.
The three briefly discussed a potential drug deal, but Agent
Davis told Adair that they could discuss the matter further after
the bond meeting. Adair, Agent Davis, and Agent Roche then went
into the conference room where the meeting was scheduled to take
place. They joined Vicknair and Wallace, as well as a third man
who was identified as a security guard, who were already in the
room. Contrary to what Adair had promised, Vicknair and Wallace
had brought only one $5 million note, rather than the entire $155
million. Agent Davis attempted to delay the transaction until
Vicknair and Wallace produced all of the notes. However,
Vicknair and Wallace insisted on doing the transaction that day.
Agent Davis agreed to the deal, and Adair, Vicknair, and Wallace
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were thereafter arrested.
B. Procedural Background
On January 23, 2003, Adair, Vicknair, and Wallace were each
charged in a one-count indictment with conspiracy to commit money
laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i) & (h).
After Adair’s trial was severed from that of his co-defendants,
his case was tried before a jury on March 1 and 2, 2004.
Pursuant to FED. R. EVID. 404(b), the government submitted
evidence, over Adair’s objection, of Adair’s previous involvement
with a similar scheme to launder drug money. This evidence
consisted of testimony by United States Customs Service Special
Agent Mike Tyson. Agent Tyson’s testimony was offered to
discredit Adair’s defense that he did not intend to launder money
but instead intended to set up a prosecution for the DEA. Agent
Tyson testified that in 2000, posing undercover, he assisted
Adair in a scheme in which Adair sought to convert $4.2 million
in Italian currency into $4 million in cashier’s checks. Adair
then sought to purchase $4 million worth of gemstones with the
cashier’s checks. Adair would then have sold the gemstones to
drug dealers for $10 million in cash. This series of
transactions was never completed, and the Customs Service closed
its undercover operation.
On March 2, 2004, the case went to the jury, and it returned
a guilty verdict. Adair was sentenced on August 18, 2004.
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Applying the then-mandatory United States Sentencing Guidelines,
the court sentenced Adair to 240-months imprisonment. The court
also levied an alternative sentence, stating: “should the
sentencing guidelines later be found to be unconstitutional in
their entirety, or, should the Blakely case apply to the federal
sentencing guidelines, it will be the judgment and order of this
Court that you be committed . . . for a term of fifty-one
months.”
Adair timely filed the instant appeal, arguing that: (1) the
government failed to provide sufficient evidence to meet the
statutory requirements of the offense with which he was charged;
(2) the district court erred in admitting Agent Tyson’s testimony
under Rule 404(b); and (3) his sentence should be vacated and
remanded to the district court for imposition of the alternative
fifty-one month sentence.
II. DISCUSSION
A. The Government Provided Sufficient Evidence to Prove the
Charged Offense
Adair was convicted under § 1956(h) of conspiring to violate
§ 1956(a)(1)(B)(i). Subsection (h) of § 1956 states: “Any person
who conspires to commit any offense defined in this section . . .
shall be subject to the same penalties as those prescribed for
the offense the commission of which was the object of the
conspiracy.” In the instant case, the offense defined elsewhere
in § 1956 was subsection (a)(1)(B)(i). This subsection states:
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Whoever, knowing that the property involved in a
financial transaction represents the proceeds of some
form of unlawful activity, conducts or attempts to
conduct such a financial transaction which in fact
involves the proceeds of specified unlawful activity–-
. . .
(B) knowing that the transaction is designed in
whole or in part--
(i) to conceal or disguise the nature, the
location, the source, the ownership, or the
control of the proceeds of specified unlawful
activity . . .
. . .
shall be sentenced to a fine of not more than $500,000
. . . or imprisonment for not more than twenty years, or
both.
18 U.S.C. § 1956(a)(1)(B)(i) (2000) (emphasis added). To be
guilty under this provision, a defendant need not have
specifically intended to conceal or disguise the proceeds of the
unlawful activity. It is sufficient for the defendant merely to
be aware of the perpetrator’s intent to conceal or disguise the
nature or source of the funds.
Adair argues that the government failed to provide
sufficient evidence of his guilt under § 1956(h) because it
neglected to prove a critical element of § 1956(a)(1)(B)(i).
Drawing on the words “in fact,” Adair asserts that criminal
liability under § 1956(a)(1)(B)(i) requires that the government
prove that the laundered funds were actually proceeds from
unlawful activity. In this case, Adair claims, the funds to be
laundered, if they existed at all, were government funds and
clearly were not drug proceeds. Adair thus argues that the
government’s failure to prove this element of the underlying
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money-laundering offense precludes a finding of liability for
conspiracy to launder money.
Adair asserts that Congress intended sting operations to be
prosecuted through § 1956(a)(3), the so-called “government sting
provision.” This provision states:
(3) Whoever, with the intent [to conceal the true nature
or ownership of property believed to be the proceeds of
unlawful activity] conducts or attempts to conduct a
financial transaction involving property represented to
be the proceeds of specified unlawful activity, or
property used to conduct or facilitate specified unlawful
activity, shall be fined [or imprisoned]. . . . [T]he
term “represented” means any representation made by a law
enforcement officer . . . .
Citing 134 CONG. REC. S17360-02 (1988),1 Adair claims that
§ 1956(a)(3) was added specifically to allow prosecutions in
undercover sting operations involving money laundering because
the laundering of government-supplied funds is not an offense
under § 1956(a)(1). Citing the same section of the Congressional
Record, Adair argues that § 1956(a)(3) included a stricter mens
rea requirement than is required for § 1956(a)(1). Adair claims
that in the instant case, the government made no attempt to meet
this heightened mens rea requirement, nor did the jury
instructions call for such a heightened mens rea. Adair argues
that allowing the government to prosecute a participant in a
sting operation through a conspiracy charge would allow it to
1
Adair cited 134 CONG. REC. S27420 in support of these
claims. However, it appears that the passage to which he refers
is properly cited as 134 CONG. REC. S17360-02 (1988).
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make an end-run around § 1956(a)(3)’s heightened mens rea
requirement. Because the funds involved in the sting were not
actually proceeds of illegal activity and because the government
made no attempt to meet § 1956(a)(3)’s heightened mens rea
requirement, Adair concludes that the government failed to prove
its case against him.
In reviewing challenges to the sufficiency of evidence, we
must consider “all the evidence in the light most favorable to
the verdict, [and determine whether] a rational trier of fact
could have found that the evidence established the elements of
the offense beyond a reasonable doubt.” United States v.
Villanueva, 408 F.3d 193, 201 (5th Cir. 2005).
It is clear that a rational trier of fact could have found
beyond a reasonable doubt that Adair was guilty of the charged
offense. In United States v. Threadgill, 172 F.3d 357 (5th Cir.
1999), we previously considered the argument that prosecution
under § 1956(h) requires proof of the elements of the substantive
offense under § 1956(a)(1). We stated:
The critical error in the defendants’ position is its
presumption that a conspiracy charge must also describe
the legal elements that comprise the substantive crime
that is the object of the conspiracy. It is settled law
that conspiring to commit a crime is an offense wholly
separate from the crime which is the object of the
conspiracy. Thus, we have consistently held that a
conspiracy charge need not include the elements of the
substantive offense the defendant may have conspired to
commit.
Id. at 367 (internal citations omitted). Further, allowing the
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government to charge Adair with conspiracy would not frustrate
congressional intent. As the section of the Congressional Record
to which Adair cites clearly reflects, when Congress amended
§ 1956, it was well aware of the unique issues posed by
government sting operations involving money laundering. Had
Congress wished to preclude conspiracy charges in such cases, it
very well could have amended § 1956(h) at the same time that it
added § 1956(a)(3). Its failure to do so suggests it had no such
intention to ban prosecution under § 1956(h) in government sting
cases. We thus hold that a criminal defendant may be prosecuted
for conspiracy to commit money laundering under § 1956(h) in a
government sting case without proving that the funds provided by
the government agent were actually the proceeds of unlawful
activity.
B. The District Court Did Not Err in Admitting the Rule 404(b)
Evidence
We review a trial court’s admission of evidence pursuant to
Rule 404(b) under a “heightened abuse of discretion standard.”
United States v. Alarcon, 261 F.3d 416, 424 (5th Cir. 2001). For
extrinsic evidence to be admitted under Rule 404(b), it must meet
two criteria. The evidence must: (1) be relevant under Rule 401
to some issue besides the defendant’s character; and (2) possess
probative value that substantially outweighs its prejudicial
impact under Rule 403. United States v. Infante, 404 F.3d 376,
388 (5th Cir. 2005).
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Adair argues that Agent Tyson’s testimony was inadmissible
because it fails under the second prong of the test for 404(b)
evidence, i.e., its probative value fails to substantially
outweigh its prejudicial impact. Adair contends that the
evidence was not particularly probative because Agent Gonzales’s
later testimony directly discredited Adair’s claim that he was
merely trying to set Agent Davis up for a drug prosecution,
whereas the 404(b) evidence merely discredited the defense by
inference. At the same time, Adair claims, Agent Tyson’s
testimony was highly prejudicial because the prior scheme’s
similar factual circumstances increased the likelihood that the
jury would make impermissible character propensity inferences.
To determine whether the probative value of Agent Tyson’s
testimony substantially outweighs any possible unfair prejudice,
we must make a common-sense assessment of the relevant
circumstances surrounding the extrinsic evidence. See United
States v. Beechum, 582 F.2d 898, 914 (5th Cir. 1978). Some of
the factors we must consider include: (1) “the extent to which
the defendant’s unlawful intent is established by other
evidence”; (2) the “overall similarity of the extrinsic and
charged offenses”; and (3) “how much time separates the extrinsic
and charged offenses [because] temporal remoteness depreciates
the probity of the extrinsic offense.” Id. at 915.
In this instance, the evidence of Adair’s prior money
laundering scheme was highly probative. First, Agent Tyson’s
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testimony was not merely cumulative of Agent Gonzales’s
testimony. Given that Adair argued at trial that Agent
Gonzales’s testimony established reasonable doubt as to his
intent, the government cannot now be penalized for having offered
additional evidence as to Adair’s intent. This is particularly
so considering that Adair’s intent was the only meaningful issue
litigated in the district court. Second, the prior scheme was
similar to the transaction at issue in the instant appeal, as
both transactions involved laundering drug money through the use
of foreign currency. Third, Adair’s prior money laundering
scheme was temporally significant, as it occurred less than three
years before the conduct at issue in the instant appeal. We thus
conclude that Agent Tyson’s testimony was highly probative. We
also conclude that Agent Tyson’s testimony had little opportunity
of creating unfair prejudice because: (1) Tyson’s testimony did
not occupy a significant portion of the trial; (2) the prior
scheme was not a more serious offense than the offense with which
Adair was charged in the instant case; and (3) the district court
mitigated any prejudicial effect by giving the jury a limiting
instruction. Accordingly, we conclude that the district court
did not err in allowing Agent Tyson to testify pursuant to Rule
404(b).
C. Adair’s Sentence Must Be Vacated and Remanded
Adair argues that pursuant to United States v. Booker, 125
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S. Ct. 738 (2005), both scenarios triggering the court’s lower
alternative sentence have come to pass. He claims that in
Booker, the Supreme Court both (1) declared the sentencing
guidelines unconstitutional in their entirety, and (2) applied
Blakely to the sentencing guidelines. Accordingly, he argues
that we should vacate his sentence and remand for imposition of
the alternative fifty-one month sentence. The government
concedes that it was error for the district court to sentence
Adair pursuant to the mandatory sentencing guidelines. The
government also does not contend that the error was harmless.
The government thus agrees with Adair that his sentence should be
vacated and that the case should be remanded to the district
court. The government, however, does not explicitly state
whether the alternative sentence should be imposed.
As an initial matter, it is clear that the district court
committed Booker error because it enhanced Adair’s sentence based
on factors that Adair never admitted to and that were not found
by a jury beyond a reasonable doubt. Booker, 125 S. Ct. at 756
(“Any fact (other than a prior conviction) which is necessary to
support a sentence exceeding the maximum authorized by the facts
established by a plea of guilty or a jury verdict must be
admitted by the defendant or proved to a jury beyond a reasonable
doubt.”). It is also clear that Adair preserved his objection to
this error. In response to the presentence report, Adair argued
that his recommended sentence violated his Sixth Amendment rights
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because the sentence was computed pursuant to factors that were
not found by the jury. The question now before us is whether we
should (1) remand to the district court for resentencing, or (2)
impose the alternate sentence.
In United States v. Walters, 418 F.3d 461 (5th Cir. 2005),
we previously considered the applicability of an alternate lower
sentence predicated on the outcome of Booker. In Walters, the
district court imposed a seventy-five month sentence pursuant to
the sentencing guidelines. The district court also stated that
if the sentencing guidelines were declared unconstitutional in
their entirety, it would impose an alternate sentence of sixty
months. Id. at 463. In Walters, rather than simply imposing the
lower alternative sentence, we vacated the defendant’s sentence
and remanded to the district court for resentencing in accordance
with Booker. Id. at 466. We noted that the condition for the
alternative sentence in that case, i.e., the sentencing
guidelines being declared unconstitutional in their entirety, did
not occur. Id. at 465-66. Rather than striking down the
sentencing guidelines in toto, Booker declared the guidelines
merely advisory. See United States v. Villegas, 404 F.3d 355,
359 (5th Cir. 2005). We thus find that the first trigger for
imposing Adair’s alternative sentence--that the Supreme Court in
Booker declared the sentencing guidelines unconstitutional in
their entirety--is not met.
We must next consider whether the second trigger for
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imposing Adair’s alternate sentence of fifty-one months is met,
i.e., whether the Supreme Court applied Blakely to the sentencing
guidelines. Although this court previously has remanded for
resentencing cases in which the district court imposed a lower
alternative sentence in the event that the sentencing guidelines
were declared unconstitutional, we have not yet considered a case
in which the district court predicated its lower alternative
sentence on Blakely’s applicability to the sentencing guidelines.
See, e.g., United States v. Henefield, 143 Fed. Appx. 586, 587
(5th Cir. Aug. 5, 2005) (remanding for resentencing where the
district court imposed a “discretionary sentence to take effect
if the Sentencing Guidelines were invalidated”); Walters, 418
F.3d at 465-66 (remanding for resentencing where the district
court imposed a lower alternative sentence if the guidelines were
declared entirely unconstitutional); United States v. Bell, 2005
WL 1390364, at *1 (5th Cir. June 10, 2005) (remanding for
resentencing where the district court imposed alternative
sentences depending on whether the guidelines were held
unconstitutional in whole or in part). Thus, because this is an
issue of first impression, we must decide what the district court
meant when it said it would impose an alternate lower sentence
“should the Blakely case apply to the federal sentencing
guidelines.”
The district court’s reference to the Supreme Court’s
potential application of Blakely to the sentencing guidelines is
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somewhat unclear in light of what actually happened in Booker.
In Blakely, the Supreme Court invalidated the state of
Washington’s sentencing guidelines because they violated the
defendant’s Sixth Amendment rights. Blakely, 124 S. Ct. at 2538.
So in one sense, the Supreme Court in Booker did not apply
Blakely because in Booker, the sentencing guidelines were not
invalidated in their entirety. See Booker, 125 S. Ct. at 764
(severing and excising the two provisions that made the
sentencing guidelines mandatory but leaving the rest of the
guidelines intact). On the other hand, the district court might
have meant for the alternate sentence to apply in the event that
the Supreme Court were to apply Blakely’s rationale and
interpretation of the Sixth Amendment to the sentencing
guidelines. The basic rationale of Blakely is that it violates a
defendant’s Sixth Amendment right to a trial by jury for a judge
to enhance a sentence based on facts neither admitted by the
defendant nor proved to a jury beyond a reasonable doubt. In
this sense, the Supreme Court most certainly did apply Blakely to
the sentencing guidelines. Booker, 125 S. Ct. at 755 (holding
that “Blakely applies to the Sentencing Guidelines”).
Because of the district court’s broad language--imposing a
lower alternative sentence “should the Blakely case apply to the
federal sentencing guidelines”--there is no way for us to discern
precisely what the district court meant when it conditioned
Adair’s alternate sentence on the Supreme Court’s application of
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Blakely to the sentencing guidelines. Additionally, there is
nothing in the record to suggest that the district court
anticipated Booker’s remedial holding and considered the
sentencing guidelines as one factor among others listed in 18
U.S.C. § 3553(a) in determining Adair’s sentence. See Bell, 2005
WL 1390364, at *1 (noting, in response to the defendant’s
argument that the court should impose one of the two alternative
sentences set forth in the district court’s judgment, that
“‘[e]ven in the discretionary sentencing system established by
Booker/Fanfan, a sentencing court must still carefully consider
the detailed statutory scheme created by the [Sentencing Reform
Act] and the Guidelines’” and remanding for resentencing so that
the district court could consider Booker when imposing the
alternative sentences) (quoting United States v. Mares, 402 F.3d
511, 518-19 (5th Cir. 2005)); see also United States v. Porter,
417 F.3d 914, 917-18 (8th Cir. 2005) (“[T]he district court’s
explanation of its alternative sentence--‘as if Blakely would
apply’--is too cryptic to conclude that the court’s alternative
sentence was imposed consistent with Booker. We cannot say that
the court contemplated an advisory guidelines system under which
it was required to consider the advisory guideline range as one
factor among others listed in 18 U.S.C. § 3553(a). . . . We
therefore conclude that the alternative sentence as formulated in
this case is not a sufficient basis to uphold the term of
imprisonment . . . .”) (internal citations omitted). We thus
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find that neither trigger for imposing Adair’s lower alternative
sentence is met.
At the same time, we find that Adair preserved his Booker
objection and that the district court’s imposition of his 240-
month sentence runs counter to Booker. “Where, as here, a
defendant has preserved a Booker issue in the district court, ‘we
will ordinarily vacate the sentence and remand, unless we can say
the error is harmless under Rule 52(a) of the Federal Rules of
Criminal Procedure.’” Bell, 2005 WL 1390364, at *1 (quoting
Mares, 402 F.3d at 520 n.9). The government does not even
contend that the error is harmless. The government has not met
its burden of proving beyond a reasonable doubt that the federal
constitutional error of which Adair complains did not contribute
to the sentence that he received. See United States v. Akpan,
407 F.3d 360, 377 (5th Cir. 2005) (citing Chapman v. California,
386 U.S. 18, 24 (1967)); see also Henefield, 143 Fed. Appx. at
587 (noting that the “government concedes that . . . [the
defendant’s] sentence was not harmless error because the district
court would have imposed a lesser sentence under an advisory
Sentencing Guidelines scheme”) (internal quotation marks and
citation omitted). Accordingly, we vacate Adair’s sentence and
remand for resentencing pursuant to Booker.
III. CONCLUSION
For the foregoing reasons, we AFFIRM Adair’s conviction,
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VACATE his sentence, and REMAND for resentencing consistent with
the Supreme Court’s decision in Booker.
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