UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA :
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v. : Case No. xx-139-01 (RCL)
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ET AL.
DEFENDANTS REPLY TO GOVERNMENT'S MEMORANDUM
IN OPPOSITION TO DEFENDANTS' MOTION TO DISMISS
COUNTS 5-15 FOR FAILURE TO STATE A CLAIM
The defense argument for dismissal is based on two theories: one, that the financial transactions alleged in counts 5-15 did not occur after the underlying, predicate criminal activity, and therefore do not constitute money laundering; and two, that counts 5-8, alleging violations of 18 U.S.C. § 1956(a)(1)(A)(i), do not allege any promotion of separate and distinct specified unlawful activity.
The government's argument with regard to counts 5-15 is that the underlying scheme to defraud, charged in counts 1-4, actually had two distinct stages and that the first phase, which involved "obtain[ing] control of the victim's money" ended on May 13, 1994, and that the second phase, which involved "lulling, stalling, and lying" occurred thereafter. The government further argues that the wire and mail fraud was complete at the end of the first stage, and that the alleged money laundering occurred during the second stage. By so describing the indictment, the government can then conclude that the mail and wire fraud was complete before the money laundering occurred, and the government can further argue that the counts do not run afoul of the requirement that the financial transactions which constitute the alleged money laundering must occur after the completion of the predicate crime. See United States v. Edgmon, 952 F.2d 1206, 1213 (10th Cir. 1991), cert. denied, 505 U.S. 1223 (1992).
The problem with the government's analysis is that the indictment contains no such clear distinction between the predicate activity and the money laundering counts. While the government for purposes of its argument suggests that phase one was complete on May 13, 1994, the indictment alleges only one act of mail and wire fraud prior to that date (count one alleges wire fraud from the fax transmission of a May 12th letter). The other counts of mail and wire fraud allege mailings or wirings on May 17, 1994 (count 2), August 1, 1994 (count 3), and June 6, 1994 (count 4). The indictment specifically states that the funds serving as the basis for the money laundering in counts 5-8 were "the proceeds of specified unlawful activities, that is wire fraud and mail fraud as set forth in Counts One through Four," and the criminally derived property serving as the basis for the money laundering charged in counts 9-15 were the "mail fraud and wire fraud as set forth in Counts One through Four of this Indictment." (emphasis added)
The government principally relies on United States v. Smith, 44 F.3d 1259, 1265 (4th Cir. 1995) as support for its argument. However, there is a critical factual distinction between Smith and this case. In Smith, which only involved 18 U.S.C. § 1957, the indictment did not incorporate the underlying mail and wire fraud counts from the indictment. Id. at 1265. Instead, the money laundering count simple stated that the funds were the proceeds of wire fraud. Id. at 1264 n.2. This permitted the government and the court to construct a factual scenario, like the one created by the government here, which separated the alleged conduct into phases, one of which was the wire fraud (which was complete when the funds were initially acquired by the defendants). Id. at 1265.(1)
Similarly, the government's reliance on United States v. Kennedy, 64 F.3d 1465 (10th Cir. 1995), is misplaced. In Kennedy, the Tenth Circuit reaffirmed the proposition cited in our original motion, that the financial transaction must "take[] place after the underlying crime has been completed." Id. at 1477-78. However, in that case, "the government alleged many prior mailings to prove the predicate mail fraud crimes, which occurred before the monetary transactions that formed the basis of his money laundering counts." Id. at 1478. The court further noted that the Section 1956 charges were legally sufficient because "[i]t was the subsequent and distinct transfers of funds that were alleged as the separate transactions involving 'proceeds of specified unlawful activity' which constituted the alleged money laundering...." 1478 (emphasis added).
Finally, with regard to the Section 1956 charges, counts 5-8, this Court can only avoid dismissing those counts if it embraces the broad definition of "promotion" adopted by the Third Circuit in United States v. Paramo, 998 F.2d 1212 (3d Cir. 1993), cert. denied, 114 S.Ct. 1076 (1994) or by the Ninth Circuit in United States v. Montoya, 945 F.2d 1068 (9th Cir. 1991). The government does not dispute that the specified unlawful activity which the defendants were allegedly promoting through the charged financial transactions was the underlying scheme to defraud. Yet, without adopting the reasoning of Paramo and Montoya, this Court can not find that these financial transactions could "promote" the mail and wire fraud which the government now argues was complete as of May 13, 1994. For the reasons set forth in our initial motion, we urge the Court to reject the holdings in Paramo and Montoya, and to instead follow the Fourth and Seventh Circuits. See United States v. Heaps, 39 F.3d 479, 484-86 (4th Cir. 1994); United States v. Jackson, 935 F.2d 832, 841 (7th Cir. 1991).
WHEREFORE, for the foregoing reasons, and other reasons this Court may deem just and proper it is respectfully requested that defendant Andrew's Motion be granted.
Respectfully submitted,
A.J. KRAMER
FEDERAL PUBLIC DEFENDER
L. Barrett Boss
Assistant Federal Public Defender
625 Indiana Avenue, N.W., Suite 550
Washington, D.C. 20004
(202) 208-7500
Counsel for Mr. xxxxxxxxx
CERTIFICATE OF SERVICE
I hereby certify that on 22nd day October, 1996, a copy of the foregoing Motion and Incorporated Memorandum were served on:
Harry Benner
Assistant U.S. Attorney
555 4th Street, N.W.
Washington, D.C. 20001
Joseph Conte
601 Pennsylvania Ave., N.W., #900
Washington, DC 20004
L. Barrett Boss
Assistant Federal Public Defender
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA :
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v. : Case No. xx-139-01 (RCL)
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xxxxxxxxxxxxxxxxxxxxx :
ET AL.
O R D E R
Upon consideration of defendant xxxxxxs defendants Reply to Government's Memorandum in Opposition to Defendants' Motion to Dismiss Counts 5-15 for Failure to State a Claim, the government's response thereto, and the entire record in this matter, it is this day of October, 1996, hereby
ORDERED, that defendant xxxxxxx Motion is granted; and it is further
ORDERED, that Counts 5-15 are dismissed.
ROYCE C. LAMBERTH
U.S. DISTRICT COURT JUDGE
Copies to:
L. Barrett Boss
Assistant Federal Public Defender
625 Indiana Avenue, N.W., Suite 550
Washington, D.C. 20004
Joseph Conte, Esquire
601 Pennsylvania Avenue, N.W., #900
Washington, D.C. 20004
Harry Benner
Assistant U.S. Attorney
555 4th Street, N.W.
Washington, D.C. 20001
1. While the Fourth Circuit also noted that it could have sustained the money laundering count even if it had expressly incorporated the wire fraud charged elsewhere in the indictment, this finding depends on the indictment alleging that the wire fraud was completed prior to the transactions which allegedly constitute money laundering. While such a finding was apparently possible in Smith, it is impossible here given the dates of the alleged mail and wire fraud (May 12, 17, June 6, and August 1, 1994).