United States v. Carucci ( 2004 )

United States Court of Appeals
For the First Circuit
No. 02-2198
UNITED STATES,
Appellant,
v.
MICHAEL L. CARUCCI,
Defendant, Appellee,
No. 03-1158
UNITED STATES,
Appellee,
v.
MICHAEL L. CARUCCI,
Defendant, Appellant,
No. 03-1244
UNITED STATES,
Appellant,
v.
MICHAEL L. CARUCCI,
Defendant, Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Robert E. Keeton, U.S. District Judge]
Before
Lipez, Circuit Judge,
Campbell, Senior Circuit Judge,
and Stahl, Senior Circuit Judge.
Michael G. Weinberg, with whom Oteri, Weinberg & Lawson, were
on brief, for Michael L. Carucci.
Demetra Lambros, Attorney, with whom Michael J. Sullivan,
United States Attorney, Richard L. Hoffman, Assistant United States
Attorney, and James D. Herbert, Assistant United States Attorney,
were on brief, for the United States.
April 13, 2004
STAHL, Senior Circuit Judge. Defendant-appellant Michael
Carucci was a real estate broker and a business associate of
Stephen Flemmi, the notorious leader of Boston's "Winter Hill
Gang." Carucci and Flemmi were indicted on charges relating to
money-laundering, but only Carucci's case was tried. Both during
and after the jury trial, the district court, pursuant to Fed. R.
Crim. P. 29, entered judgments of acquittal on dozens of the
charged counts. Ultimately, Carucci was found guilty of two counts
of engaging in monetary transactions in criminally-derived property
in violation of 18 U.S.C. § 1957.
On appeal, Carucci contends that the evidence was
insufficient to establish criminal liability under the statute, and
challenges the trial court's "willful blindness" instruction to the
jury. The government cross-appeals, contending that the district
court erred in entering the post-verdict judgments of acquittal; in
ordering a conditional new trial should the Rule 29 rulings be
reversed; and in sentencing. For the reasons set forth below, we
reverse Carucci's conviction on the two counts and affirm the
district court's judgments of acquittal on the remainder.
I. BACKGROUND
A. Factual history
We set forth the facts underlying Carucci's convictions
in the light most favorable to the verdict. See United States v.
Diaz, 300 F.3d 66, 69 (1st Cir. 2002).
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1. 238 Marlborough Street
Carucci's company, Group Boston Real Estate, managed a
building at 238 Marlborough Street in Boston. One of the owners of
the property expressed interest in selling, and Carucci offered to
help find a buyer. In 1991, Carucci submitted a bid from Flemmi.
During the negotiations, the seller asked Carucci where Flemmi's
money was coming from, and Carucci told them it was from lottery
winnings. Flemmi, however, told others that the money was from a
family trust. A few months after the sale, Carucci told the seller
that the money had come from Flemmi's family.
In the course of the property sale, Carucci referred
Flemmi to Anthony Summers, a real estate lawyer. At trial, Summers
testified that in September, 1992, Carucci asked Summers whether he
thought it would be a problem to sell real estate to Flemmi.
Summers responded, "as long as he did everything legally, that I
didn't think he'd have a problem."
On October 2, 1992, the Marlborough Street deal closed
for $945,000. Carucci, Summers, and Flemmi, among others, attended
the closing. The purchaser was a nominee trust set up by Summers,
the "238 Marlborough Street Trust." The trustees were Carucci and
one of Flemmi's sons, Stephen Hussey; Flemmi was the beneficial
owner. Flemmi paid in cash with seven checks. The checks were
drawn from different accounts, none of which bore Flemmi’s name,
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and different banks. Three were payable to the Mary Irene Trust1
(of which Flemmi was a trustee), three were payable to Mary Flemmi
(Flemmi’s mother) and one was payable to Jeanette Flemmi (Flemmi’s
ex-wife). In conjunction with the sale, Summers drafted a mortgage
evidencing a $975,000 loan from the Mary Irene Trust to the 238
Marlborough Street Trust. The mortgage, on which Flemmi's name
appeared, was publicly recorded.
Also on October 2, 1992, Flemmi and Carucci entered a
joint venture agreement concerning the development and sale of the
condominium units at 238 Marlborough Street. Carucci invested
$15,000 of his sales commission into the joint venture, and Flemmi
handled the remaining costs.
2. 362 Commonwealth Avenue
In mid-1992, another real estate broker told Carucci that
362 Commonwealth Avenue in Boston, a commercial condominium
containing a laundromat, was available as an investment property.
Carucci submitted an offer on the property signed by Hussey as
trustee of SMS Realty Trust and provided a binder check for $1,000
signed by him and drawn on the account of Group Boston. He also
participated in the sale negotiations.
1
The money contributed by the trust constitutes more than half
of the total payment and can be linked to a series of substantial
cash deposits over a one-month period in 1982 at Winter Hill
Savings Bank.
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According to the purchase and sale agreement, the
purchaser of the property was Jeannette Benedetti, trustee of Comm-
1 Realty Trust. The agreement was signed by Benedetti and Karen
Snow, Flemmi's daughters. On October 26, 1992, Carucci signed over
to the listing broker a check for $5,125 from the Mount Washington
Bank payable to Group Boston to serve as a deposit.
At the property closing on December 9, 1992, three checks
were tendered as payment: a Mount Washington Bank check in the
amount of $30,500 and a Hyde Park Savings Bank check in the amount
of $70,000, both payable to Benedetti, and a $16,408.37 Winter Hill
Federal Savings Bank check payable to Summers & Summers.
Prior to the closing, in November, 1992, Commonwealth
Laundries, Inc. was formed, with Carucci and Flemmi as the major
stockholders. Jian-Fen Hu, Flemmi's girlfriend, was president,
treasurer, clerk, and director. On December 11, 1992, Commonwealth
Laundries entered into a lease of 362 Commonwealth Avenue with
Comm-1 Realty Trust. Hu and Benedetti (as trustee) signed the
lease. Commonwealth Laundries borrowed $120,000 from the Mary
Irene Trust to purchase equipment and $110,000 from Flemmi for
improvements.
At trial, Flemmi's other son, William St. Croix,
testified pursuant to an immunity agreement about his many years of
criminal activity. He also testified that he first met Carucci at
his father's home in Milton, Massachusetts, in 1990 or 1991. At
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that time, Carucci told him he was going to broker the sale of the
house. When St. Croix asked Carucci if he knew who his father was,
Carucci responded, "Yes, everybody knows who your father is. Your
father was the big guy." St. Croix testified that he visited Group
Boston's offices "probably hundreds of times."
B. Procedural history
On March 11, 1997, a grand jury of the United States
District Court for the District of Massachusetts returned a
103-count indictment against Flemmi and Carucci. It charged both
defendants with conspiracy to commit money-laundering in violation
of 18 U.S.C. § 1956(h); substantive money-laundering offenses in
violation of 18 U.S.C. § 1956; transactions in criminally derived
property in violation of 18 U.S.C. § 1957; and RICO conspiracy in
violation of 18 U.S.C. § 1962(d). In May 2001, as part of a
consolidated plea in another case, Flemmi pleaded guilty to an
information that encompassed the money-laundering conspiracy
charges and the charges against him in this case were dismissed.
In March and April, 2002, Carucci alone was tried before
a jury. At the close of the government's case, pursuant to Fed. R.
Crim. P. 29(a), the district court granted Carucci's motions for
judgment of acquittal on counts 1, 14-66, and 76-103. It then
submitted counts 2-13 and 70-75 to the jury. These counts charged
violations of §§ 1956 and 1957 and concerned the laundromat
venture. Specifically, counts 9-13 and 73-75 related to the
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purchase of the condominium, and counts 2-8 and 70-72 related to
the purchase of the laundry equipment.
On April 16, 2002, the jury returned a verdict finding
Carucci not guilty on the § 1956 counts (2-13) and guilty on the §
1957 counts (70-75). At a post-verdict hearing, the district court
granted judgment of acquittal on counts 70-72 and 74, and
provisionally granted a new trial on those counts. This left
standing only the verdicts on counts 73 and 75, which concern,
respectively, the December 9, 1992, transfer of a Mount Washington
Bank check in the amount of $30,500 and a Hyde Park Savings Bank
check in the amount of $70,000.
On December 20, 2002, the district court sentenced
Carucci to ten months in the custody of the Bureau of Prisons, with
a recommendation that Carucci serve his sentence in a community
confinement center (CCC), followed by twenty-four months of
supervised release. The same day, the Department of Justice
announced that the Bureau of Prisons would no longer permit CCC
placement for more than ten percent of the sentence imposed. On
December 31, 2002, the district court revised the sentence to
encompass five months' incarceration and five months' home
confinement.
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II. DISCUSSION
A. Carucci's challenge to his conviction under
18 U.S.C. § 1957Carucci contends that there was insufficient evidence to
convict him on counts 73 and 75, which charge him with engaging in
monetary transactions in criminally-derived property in violation
of 18 U.S.C. § 1957. We review Rule 29 determinations de novo.
United States v. Boulerice, 325 F.3d 75, 79 (1st Cir. 2003) (citing
United States v. Carroll, 105 F.3d 740, 742 (1st Cir. 1997)). We
will affirm the conviction if, "after assaying all the evidence in
the light most amiable to the government, and taking all reasonable
inferences in its favor, a rational factfinder could find, beyond
a reasonable doubt, that the prosecution successfully proved the
essential elements of the crime." Id. (quoting United States v.
O'Brien, 14 F.3d 703, 706 (1st Cir. 1994)).
To establish a violation of 18 U.S.C. § 1957, the
government must prove that (1) the defendant engaged or attempted
to engage in a monetary transaction with a value of more than
$10,000; (2) the defendant knew that the property involved in the
transaction had been derived from some form of criminal activity;
and (3) the property involved in the transaction was actually
derived from specified unlawful activity. 18 U.S.C. § 1957(a)(1).2
2
18 U.S.C. § 1957(a)(1) states, in relevant part:
"Whoever . . . knowingly engages or attempts to engage in a
monetary transaction in criminally derived property of a value
greater than $10,000 and is derived from specified unlawful
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Subsection (c) of the statute provides: "the Government is not
required to prove the defendant knew that the offense from which
the criminally derived property was derived was specified unlawful
activity." Id. § 1957(c). In other words, a defendant may not be
convicted under § 1957(a) unless he knew that the transaction
involved "criminally derived property," but he need not know that
the property was derived from the "specified unlawful activity."
United States v. Richard, 234 F.3d 763, 768 (1st Cir. 2000)
(quoting United States v. Gabriele, 63 F.3d 61, 65 (1st Cir. 1995))
(internal quotation marks omitted).
Carucci maintains that the evidence as to each of these
elements is insufficient to support conviction on counts 73 and 75.
We need not address the first two requirements of § 1957, because
we hold that the government did not adduce sufficient evidence that
the purchase of 362 Commonwealth was derived from proceeds from
specified unlawful activity. We explain below.
1. Scope of the specified unlawful activity
A threshold issue on appeal is the scope of the specified
unlawful activity ("SUA") charged to the jury. The indictment set
forth four SUAs as underlying the §§ 1956 and 1957 charges: drug
trafficking, extortion, loan sharking, and gambling. During the
charge conference, the district court ruled that there was
activity, shall be punished . . ."
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insufficient evidence to submit loan sharking and drug dealing to
the jury.
In the jury charge, however, the court's instructions
were inconsistent. During two occasions in the charge, the court
instructed that all four crimes constituted specified unlawful
activity. First, it stated:
You are instructed that the offenses of
conducting an illegal gambling business,
engaging in extortionate credit transactions,
interference with commerce by extortion, and
distribution and conspiracy to distribute
narcotics . . . constitute specified unlawful
activity . . .
Later, after reciting the four offenses again, the court
instructed:
Each of the crimes just listed qualifies as
specified criminal activity. Thus, if you
find beyond a reasonable doubt that any of the
funds involved in the transactions listed in
the indictment derived from the commission of
any of these crimes by any person, then the
transactions involved proceeds derived from
specified criminal activity.3
The court then stated that it would provide further details as to
the elements of the SUA offenses later.
In the context of instructing on §§ 1956 and 1957,
however, the court described only the elements of extortion and
gambling. As to those two offenses, it stated that it was
3
This instruction was given during the portion of the charge
dealing with the § 1956 claim. It was expressly incorporated into
the portion concerning § 1957.
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instructing the jury "as to the elements of the offenses listed as
specified unlawful activity in the indictment . . ." It set forth
the elements of extortion and gambling that the government had to
prove beyond a reasonable doubt in order for the jury to find a
crime "from which Flemmi derived illegal proceeds." The court did
not state the elements of loan sharking or drug trafficking, and
did not mention those offenses again.
Carucci maintains that the district court's failure to
set forth the elements of drug trafficking prevented the jury from
basing a § 1957 conviction on that SUA.4 We need not decide this
issue because, even assuming that the jury was instructed
correctly, there is insufficient record evidence that the funds
used in the real estate transactions were actually derived from the
specified unlawful activities, as opposed to other criminally
derived proceeds. See section II(A)(2), infra.
2. Evidence of specified unlawful activity
As discussed supra, the statute requires proof that the
property involved in the transaction was actually derived from
specified unlawful activity. 18 U.S.C. § 1957(a). Application of
this requirement is not always straightforward. This circuit and
others have held that § 1957 convictions necessitate proof beyond
4
At oral argument before this court, the government expressly
abandoned its argument that loan sharking constituted a SUA for
purposes of the § 1957 charge. Accordingly, we do not consider it
further.
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a reasonable doubt of the predicate crime. See, e.g., United
States v. Burgos, 254 F.3d 8, 14 (1st Cir. 2001) (stating that in
order to convict the defendant of money-laundering, "the government
had to prove that he had attempted to distribute cocaine to satisfy
the specified unlawful activity element of the crime" (internal
quotation marks omitted)); United States v. Lovett, 964 F.2d 1029,
1041-42 (10th Cir. 1992) ("the elements of the particular
'specified unlawful activity' . . . are essential elements that the
prosecution must prove in order to establish a violation of §
1957"); see also United States v. Blackman, 904 F.2d 1250, 1257
(8th Cir. 1990). However, proof of a specific, individual
underlying offense -- i.e., a particular unlawful mailing in a mail
fraud SUA, or a particular drug sale in a drug trafficking SUA -–
is not necessary to support a § 1957 conviction. See United States
v. Richard, 234 F.3d 763, 768 (1st Cir. 2000); United States v.
Mankarious, 151 F.3d 694, 701-02 (7th Cir. 1998). Rather,
circumstantial evidence may suffice to allow a jury to infer a
predicate act from an overall criminal scheme. See, e.g.,
Mankarious, 151 F.3d at 702-03; United States v. Jackson, 983 F.2d
757, 766-67 (7th Cir. 1993); Blackman, 904 F.2d at 1257.
Even applying this broad construction of § 1957
liability, the evidence of specified unlawful activity adduced at
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Carucci's trial was insufficient to support his conviction.5 We
first consider the evidence of gambling and extortion, the two SUAs
that were unequivocally charged to the jury. During the extensive
trial testimony, the only specific mention of either gambling or
extortion was by Flemmi's son, St. Croix. Initially, he testified
as to his personal criminal history:
Q: What other types of criminal activities
have you been involved in?
A: I have been involved in drug rip-offs,
selling drugs, extortion, gambling, arson,
operating an illegal club.
St. Croix then stated that Flemmi was involved in "some" of those
activities, but did not specify which ones. No other witnesses
testified about Flemmi's participation in gambling or extortion, or
about proceeds therefrom. Thus, at very best, St. Croix's
testimony fell short of stating that Flemmi engaged in gambling or
extortion, and there was simply no other evidence on this critical
point.
5
The government attempted but failed to present additional
evidence concerning the SUAs. At trial, the district court
excluded extensive testimony by government witnesses concerning
Flemmi's participation in extortion, drug dealing and gambling
schemes, as well as his lack of legitimate income. The court
determined that the proffered evidence was insufficiently linked to
the transactions specified in the indictment and to Carucci's
criminal liability. Additionally, the court held that some of the
evidence suffered from hearsay and relevance problems. The
government's position on appeal is that the evidence that the
district court allowed in was sufficient, standing alone, to
support Carucci's § 1957 convictions.
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St. Croix's testimony suffers from an additional
weakness: it did not indicate a time frame in which the gambling
and extortion, if any, occurred. In order to establish § 1957
liability, Flemmi must have derived proceeds from gambling or
extortion before November 22, 1992, the last date money was
deposited into the accounts on which the transactions at issue were
drawn. See Mankarious, 151 F.3d at 704 ("A money launderer must
obtain proceeds before laundering can take place."); United States
v. Christo, 129 F.3d 578, 580 (11th Cir. 1997) (same).
After careful consideration of the record, we conclude
that there was insufficient evidence for a rational jury to find
that Flemmi derived proceeds from gambling or extortion before
November 22, 1992. The gambling SUA, as the district court
instructed, required proof beyond a reasonable doubt that Flemmi
conducted a gambling business that (1) violated Massachusetts law;
(2) was knowingly and intentionally conducted, financed, managed,
supervised, directed or owned by five or more persons; and (3)
which was either in substantially continuous operation for thirty
or more days or had a gross revenue of $2000 or more on any single
day. See 18 U.S.C. § 1955. Even if the jury could have reasonably
inferred a violation of Massachusetts law, there was no evidence
presented to the jury as to the second or third elements required
for the specified federal gambling crime. Moreover, the term
"gambling" is possessed of common meanings apart from the legal
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definition. See Webster's Third New International Dictionary 932
(1986). Even if the jury believed that Flemmi was involved with
"gambling," we cannot presume that it found that all of the
elements of § 1955 were satisfied.
As to extortion, the SUA required the government to prove
that (1) Flemmi knowingly and willfully obtained property from the
victim by means of extortion; (2) Flemmi knew that the victim
parted with property because of extortion; and (3) the extortion
affected interstate commerce.6 18 U.S.C. § 1951. Again, no
evidence was presented to the jury as to these elements. As with
gambling, St. Croix's equivocal identification of Flemmi with only
"some" of his own criminal activities fell short of indicating that
"extortion" was one of them. Furthermore, even if the jury could
reasonably surmise from St. Croix's use of the terms "gambling" and
"extortion" that Flemmi's conduct satisfied the statutory elements
of those offenses, there is no evidence linking it to the relevant
accounts during the relevant time period in the relevant amount.
As to the SUA of drug trafficking, the government points
to two pieces of evidence purporting to link Flemmi to drug
trafficking proceeds. First, St. Croix testified that a drug
dealer named Johnny Debs agreed to purchase $100,000 of cocaine
from him in the late 1980s. He stated that Debs knew nothing about
6
It appears to be undisputed that it is Flemmi's criminal
conduct that is at issue for purposes of § 1957, not St. Croix's.
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St. Croix, but approached him because of Flemmi’s reputation as a
narcotics dealer. Second, St. Croix testified that he took drugs
from dealers whom he promised to pay after selling the drugs. He
did not intend to repay the dealers, however, and said he instead
"would divvy it up with people that I was involved in and later my
father.” (It is not entirely clear from the testimony whether this
scheme was merely a plan, or whether the "divvying" in fact took
place.) St. Croix also testified that he was involved in drug
trafficking from 1989 to 1997.
Assuming without deciding that this evidence shows that
Flemmi engaged in drug trafficking, it falls short of establishing
that the funds used in the real estate transactions were actually
derived from drug funds as opposed to other criminally-derived
proceeds. As with gambling and extortion, there is no evidence as
to the amount of proceeds or the specific time frame in which the
proceeds were conveyed to Flemmi. Indeed, the fact that St. Croix
specified that any sharing with Flemmi happened "later" suggests
that Flemmi was unlikely to have derived drug-trafficking proceeds
before the 1992 transaction. Accordingly, to infer from this
testimony that at least $10,000 of the funds involved in the real
estate transaction in 1992 were derived from Flemmi's drug
trafficking is too great a stretch.
The government points to evidence of Flemmi's leadership
of an organized crime gang and apparent lack of legitimate income
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to support the SUAs. It argues that the testimony that Flemmi was
a leader of the Winter Hill Gang "told the jury much about Flemmi
and his money."7 The government also points to the fact that
Flemmi's parents had meager incomes and lived frugally, and hence
could not have provided any money to Flemmi for the purchase.
While these factors certainly suggest criminally derived
income in a general sense, the evidence fails to supply a link to
gambling, extortion or drug trafficking specifically. Accepting
that Flemmi's income was illegitimate, it could have been linked to
any number of criminal activities; to conclude from this evidence
that Flemmi derived proceeds from the specified SUAs is simply too
speculative.
Moreover, a § 1957 conviction cannot be based solely on
the finding that a known criminal had no other legitimate income.
Blackman, 904 F.2d at 1257. In the cases cited by the government,
courts generally affirm money-laundering convictions only where
such evidence is accompanied by additional, more specific indicia
of criminal activity. See, e.g., United States v. Hetherington,
256 F.3d 788, 794 (8th Cir. 2001) (evidence of defendant's
awareness that his company's "entire operation was based on
deceit"); United States v. Eastman, 149 F.3d 802, 804 (8th Cir.
7
The government also goes into some depth as to St. Croix's
involvement with drug dealing and extortion and expressly urges us
to apply the saying "like father, like son." None of the evidence
concerning St. Croix's conduct supports a conclusion that Flemmi
himself engaged in the SUAs.
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1998) (evidence of defendant's illegal drug purchases, and evidence
that the money defendant provided for transaction had a drug
scent); United States v. Meshack, 225 F.3d 556, 572 n.12 (5th Cir.
2000) (evidence of drug transactions at defendant's restaurant);
United States v. King, 169 F.3d 1035, 1039 (6th Cir. 1999)
(evidence that defendant "coordinated a multi-person drug
distribution business").
The government also contends that Flemmi's use of cash
and money orders -- as well as his use of multiple banks, multiple
checks, and nominee trusts -- supports the inference that the
transactions were derived from SUAs. Again, this evidence does not
establish a sufficient nexus to the specified SUAs. While it is
true that a suspiciously structured financial transaction can
constitute circumstantial evidence of money-laundering, the cases
cited by the government consistently feature additional evidence of
unlawful activity. See, e.g., United States v. Smith, 223 F.3d
554, 577 (7th Cir. 2000) ("Witnesses testified that Wilson
personally bought and sold drugs, so the jury knew that he had
illegal cash sloshing around that could have been used."); United
States v. Reiss, 186 F.3d 149, 152-53 (2d Cir. 1999) (in convoluted
sale of airplane, an associate who was "heavily involved in
narcotics trafficking and money laundering in the United States"
facilitated the transaction). Here, there is no comparable
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evidence that Flemmi had engaged in the specified SUAs in the
relevant time period.
In sum, the evidence in the § 1957 case against Carucci
is simply too thin. While Flemmi's apparent lack of legitimate
income and the structuring of his financial dealings certainly
suggest criminal activity, the government failed to prove a nexus
to the alleged specified unlawful activity, much less to the
accounts involved in the transactions at issue. Carucci's
convictions on counts 73 and 75 cannot stand.8
B. The government's cross-appeal
We now turn to the government's cross-appeal. The
government contends that the district court erred in allowing
Carucci's motion for acquittal on counts 70 through 72 and 74,
which set forth additional violations of § 1957. (Counts 70
through 72 related to the purchase of the laundry equipment; count
74 related to the purchase of the condominium.) As grounds for its
decision, the district court stated that there was insufficient
evidence to establish that Carucci knew that the property involved
in the transactions had been derived from criminal activity.
As noted supra, we review Rule 29 determinations de novo.
Counts 70-72 and 74 are fatally undermined by the government's
failure of proof as to § 1957's requirement that the transactions
8
Accordingly, we need not deal with the other issues Carucci
raises on appeal, including the adequacy of the jury instructions.
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at issue were derived from specified unlawful activity. As
discussed supra, no reasonable jury could conclude that the
purchases of the equipment or condominium involved proceeds from
Flemmi's gambling, extortion, or drug trafficking. Accordingly, we
affirm the district court's grant of Carucci's Rule 29 motion,
albeit on different grounds.9
III. CONCLUSION
For the reasons set forth above, we reverse Carucci's
convictions on counts 73 and 75 of the indictment and affirm the
district court's judgments of acquittal on counts 70-72 and 74.
9
As a result of this holding, we need not address the district
court's award of a conditional new trial should the Rule 29 rulings
be reversed. Nor do we address the sentencing issue raised by the
government.
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