United States v. Conley , 37 F.3d 970 ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
9-30-1994
United States of America v. Conley, et al.
Precedential or Non-Precedential:
Docket 93-3504
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 93-3504
___________
UNITED STATES OF AMERICA,
Appellant
vs.
JOHN F. "Duffy" CONLEY; WILLIAM C. CURTIN; SHEILA
SMITH; JOHN FRANCIS "Jack" CONLEY; THOMAS "Bud"
MCGRATH; MARK A. ABBOTT; THOMAS ROSSI; WILLIAM
STEINHART; ROBERTA FLEAGLE; ROBIN SPRATT; MONICA C.
KAIL; WILLIAM J. REED; JOANNE T. SMITH; KENNETH "Ron"
GOODWIN; LAWRENCE N. "Neudy" DEMINO, SR.; CHRISTOPHER
"Chris" KAIL; JOSEPH A. DEVITA; FRANK GAROFALO;
THOMAS D. CIOCCO; MICHAEL SUKALY; PHILLIP M. "Mike"
FERRELL; ANESTOS "Naz" RODITES; WILLIAM E. RUSIN
___________
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Crim. No. 91-cr-00178)
___________
Argued
April 26, 1994
Before: MANSMANN, HUTCHINSON and ROTH, Circuit Judges.
(Filed September 30, 1994)
___________
Paul J. Brysh, Esquire (ARGUED)
Linda L. Kelly, Esquire
Office of the United States Attorney
633 United States Post Office
& Courthouse
Pittsburgh, PA 15219
COUNSEL FOR APPELLANT
Anthony M. Mariani, Esquire
36th Floor Grant Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE CURTIN
Ellen M. Viakley, Esquire
436 Seventh Avenue
1550 Koppers Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE SMITH
Alisa N. Carr, Esquire
Laughlin, Difenderfer & Boyle
140 Fort Pitt Commons Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE JOHN F. CONLEY
Caroline M. Roberto, Esquire (ARGUED)
5th Floor, Law & Finance Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE MCGRATH
Lee Markovitz, Esquire
1040 Fifth Avenue
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE SMITH
Foster A. Stewart, Esquire
Stewart & Associates
1550 Koppers Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE KAIL
John P. Goodrich, Esquire
Goodrich, Micale & Search
436 Boulevard of the Allies
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE SUKALY
Gary B. Zimmerman, Esquire
312 Boulevard of the Allies
Suite 620
Pittsburgh, PA 15222
COUNSEL FOR APPELLEE FERRELL
Vincent R. Baginski, Esquire
430 Boulevard of the Allies
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE RODITES
Peter V. Marcoline, Jr., Esquire
1414 Grant Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE RUSIN
Carl M. Janavitz, Esquire
519 Allegheny Building
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE GAROFALO
Gary Gerson, Esquire
220 Grant Street
Pittsburgh, PA 15219
COUNSEL FOR APPELLEE JOHN FRANCIS CONLEY
___________
OPINION OF THE COURT
__________
MANSMANN, Circuit Judge.
The United States Government appeals a pre-trial order
of the district court dismissing, with prejudice, the money
laundering object of a criminal conspiracy count against Thomas
"Bud" McGrath and thirteen other defendants who joined his motion
to dismiss. This complicated case originally involved a total of
twenty-nine counts against twenty-three defendants who were
alleged to have conducted an illegal gambling business. The
general question before us is whether the district court erred as
a matter of law when it dismissed the money laundering object of
the conspiracy alleged in Count One of the indictment due to the
district court's perception that double jeopardy concerns are
implicated when both a conspiracy to commit money laundering and
the substantive offense of illegal gambling are alleged.
We must decide whether Title 18, United States Code
Section 1956(a)(1)(A)(i) proscribes money laundering transactions
with the proceeds of an illegal gambling business, in the absence
of some other form of specified unlawful activity. Because we
find that money laundering with the proceeds of an illegal
gambling business is one of the types of specified unlawful
activity the money laundering statute proscribes and because we
find that Congress did intend to impose a further punishment
under § 1956 for using the proceeds of an illegal gambling
business to promote that illegal activity, we will vacate the
district court's order dismissing the money laundering object of
the conspiracy charged in Count One of the indictment and remand
this case to the district court for reinstatement of this portion
of Count One.
I.
On September 26, 1991, a grand jury sitting in
Pittsburgh, Pennsylvania, returned a twenty-nine count indictment
charging twenty-three individuals with participation in an
illegal gambling business involving video poker machines.1 The
1
. The twenty-three persons named in the indictment are:
John F. "Duffy" Conley, William C. Curtin, Sheila F. Smith, John
Francis "Jack" Conley, Thomas "Bud" McGrath, Mark A. Abbott,
Thomas Rossi, William Steinhart, Roberta Fleagle, Robin Spratt,
Monica C. Kail, William J. Reed, Joanne T. Smith, Kenneth "Ron"
Goodwin, Lawrence N. "Neudy" Demino, Sr., Christopher "Chris"
Kail, Joseph A. Devita, Frank Garofalo, Thomas D. Ciocco, Michael
Sukaly, Phillip M. "Mike" Ferrell, Anestos "Naz" Rodites, and
indictment identified John F. "Duffy" Conley as the central
figure in the extensive illegal gambling operation, alleging that
Duffy Conley was the owner and operator of Duffy's Vending and/or
Three Rivers Coin, which had the primary purpose of facilitating
an illegal gambling business through video poker machines.
The indictment also identified the remaining defendants
and their roles. William L. Curtin was the general manager of
Duffy's Vending, assisting Duffy Conley in daily operations.
Sheila Smith was an office manager, accountant and bookkeeper for
Duffy Conley, also supervising employees who placed, moved and
serviced video poker machines. Jack Conley recorded service
calls from locations and facilitated the movement, repair and
servicing of video poker machines. Thomas Bud McGrath, Duffy
Conley's employee, marketed and secured locations for Duffy
Conley's video poker machines. Mark Abbott, another employee of
Duffy Conley, also marketed, moved and secured locations for
Duffy Conley's video poker machines.2
(..continued)
William E. Rusin. Three of the defendants -- William Steinhart,
Monica Kail and William Reed -- have pleaded guilty.
2
. The indictment alleged that certain defendants assisted
Duffy Conley by facilitating the placement and use of illegal
gambling devices at various locations under their control as
follows: Thomas Rossi (Carnegie American Legion), William
Steinhart (Carnegie American Legion), Robert Fleagle (Terry's
Snack Shop), Robin Spratt (Terry's Snack Shop), Monica Kail
(Kail's Coffee Corner), William Reed (Idlewood Inn), Joanne Smith
(The Coffee Pot), Kenneth "Ron" Goodwin (The Coffee Shop and
Bloomfield Snack Shop), Lawrence "Neudy" Demino, Sr. (The Sunny
Farms Deli), and William Rusin (Mugshots and Cruisin II).
The indictment further alleged that Duffy Conley
employed Chris Kail, Joseph Devita, Frank Garofalo, Thomas
The indictment originally charged twenty-nine counts
against various combinations of these defendants. We set forth
in detail the charges and overt acts alleged in Counts One and
Two of the indictment because the sufficiency of these counts to
charge certain offenses is at issue here.
Count One charged all twenty-three defendants with
conspiracy to conduct an illegal gambling business, in violation
of Title 18, United States Code, Section 1955, and conspiracy to
engage in money laundering to promote the unlawful gambling
business in violation of Title 18 United States Code, Section
1956.3 Specifically, Count One charged that "[i]t was an
(..continued)
Ciocco, Michael Sukaly, Phillip "Mike" Ferrell, Anestos "Naz"
Rodites and others known and unknown to the Grand Jury as
"collectors" whose duties included visiting machine locations and
collecting the proceeds of video poker machine gambling. The
indictment also alleged that William Rusin was an "associate" of
Duffy Conley, who entrusted Rusin with depositing proceeds of the
illegal gambling business into a Pittsburgh National Bank
account, the Duffy's Vending Account. For more detail, see the
opinion of the district court, United States v. Conley, 833 F.
Supp. 1121 (W.D. Pa. 1993).
3
. The substantive illegal gambling statute provides, in
pertinent part:
(a) Whoever conducts, finances, manages,
supervises, directs, or owns all or part of
an illegal gambling business shall be fined
not more than $20,000 or imprisoned not more
than five years, or both.
(b) As used in this section--
(1) "illegal gambling business" means a
gambling business which--
(i) is a violation of the law of a
State or political subdivision in which it is
conducted;
(ii) involves five or more persons
who conduct, finance, manage, supervise,
essential part of the illegal gambling business run by John F.
``Duffy' Conley that the proceeds of this unlawful activity be
collected from the various locations where the video poker
machines were in use as illegal gambling devices." (¶18; App.
57). Count One also charged that the collection of such proceeds
involved the division of money with persons at the video poker
machine locations, the delivery of proceeds to other employees of
Conley, and the depositing of money into bank accounts controlled
by Conley. (¶ 18, App. 57.) The acts of collecting, dividing,
transferring, and depositing the proceeds are all transactions as
(..continued)
direct, or own all or part of such business;
and
(iii) has been or remains in
substantially continuous operation for a
period in excess of thirty days or has a
gross revenue of $2,000 in any single day.
Prohibition of illegal gambling businesses, 18 U.S.C. § 1955
(1988).
The substantive money laundering statute provides, in
pertinent part:
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--
(A)(i) with the intent to promote the
carrying on of specified unlawful activity
. . . shall be sentenced to a fine of not
more than $500,000 or twice the value of the
property involved in the transaction,
whichever is greater, or imprisonment for not
more than twenty years, or both.
Laundering of monetary instruments, 18 U.S.C.A. §
1956(a)(1)(A)(i) (Supp. 1993).
defined in Title 18, United States Code, Section 1956(c)(3)
("Laundering of Monetary Instruments").
Count One further charged that Conley conducted
financial transactions affecting interstate commerce with the
proceeds of illegal gambling with video poker machines "with the
intent to promote the carrying on of the specified unlawful
activity, illegal gambling with video poker machines. . . ."
(¶21(b); App. 59-60). In addition, it stated that Conley used
illegal gambling proceeds to purchase more video poker machines
and to pay employees of Duffy's Vending/Three Rivers Coin (¶29,
31; App. 65). The overt acts of the conspiracy to launder money
included numerous payments to Matrix, an entity used to service
the video poker machines. (Indictment ¶33; App. 66.)
Count Two charged the substantive offense of conducting
an illegal gambling business in violation of Title 18, United
States Code, Section 1955. Count Two alleged that "on or around
June of 1984 and continuing to on or around September 1991 . . .
defendants . . . did unlawfully and knowingly conduct, finance,
manage, supervise, direct and own all or part of an illegal
gambling business involving video poker machines. . . ." This
illegal gambling business "involved five or more persons who
conducted, financed, managed, supervised, directed and owned all
or part of the business, remained in substantially continuous
operation for a period in excess of thirty (30) days and had a
gross revenue of more than $2,000 for a single day."4
4
. Counts three to five, seven to ten and twelve charged
interstate travel to promote an illegal gambling business, in
On May 18, 1992, McGrath filed a motion to dismiss the
money laundering object of the conspiracy count, joined by
thirteen other defendants.5 McGrath advanced four legal
arguments in support of his motion. First, McGrath asserted that
the government had failed to establish that he satisfied the
essential elements of the substantive money laundering statute.
Next, he asserted that the government had placed him in double
jeopardy by charging him with both conspiracy to launder money
and the substantive offense of conducting an illegal gambling
operation. McGrath's third assertion was that the substantive
money laundering statute was unconstitutionally vague as it
applied to him. Finally, McGrath maintained that the substantive
money laundering statute was overbroad.6
(..continued)
violation of Title 18 U.S.C. § 1952 (a)(3). Counts six and
eleven charged interstate transportation of gambling devices, in
violation of Title 18 U.S.C. §§ 1172 and 1176. Counts thirteen
to twenty-nine charged thirteen of the defendants with
substantive money laundering offenses in violation of Title 18
U.S.C. § 1956(a)(1)(A)(i). On July 17, 1993, upon motion of
these defendants, the district court issued an opinion and order
dismissing most of the substantive money laundering counts
(Counts 13, 14, 16, 17, 18, 21, 22, 23, 24, 26, 27, 28 and 29) on
duplicity grounds. The government has not appealed that order.
5
. They are Duffy Conley, Sheila Smith, Jack Conley, Mark
Abbott, Joanne Smith, Ken Goodwin, Laurence Demino, Thomas
Ciocco, Michael Sukaly, Phillip Ferrell, Anestos Rodites and
William Rusin. On September 3, 1993, the district court granted
their motions to join in McGrath's motion.
6
. We note that although all four of these issues were
raised before the district court, the district court's opinion
focused on addressed McGrath's double jeopardy argument. Because
the district court granted McGrath's motion on the basis of this
argument, the court decided that McGrath's remaining contentions
were mooted by its Memorandum Opinion. United States v. Conley,
833 F. Supp. at 1158, n.33.
On June 19, 1992, the government responded to these
arguments, observing that, "Virtually all of McGrath's challenges
to Count One of the Indictment . . . fail for a very simple
reason. McGrath has not addressed or applied the directives of
the law governing a conspiracy charge." The government further
observed, "McGrath is charged with conspiracy, not money
laundering . . . . McGrath instead proceeds from the false
assumption that the government must marshall the evidence to
demonstrate that he is guilty of a substantive money laundering
violation." (App. at 156).7
On September 3, 1993, the district court granted
McGrath's motion to dismiss and ordered that the money laundering
object of the conspiracy alleged in Count One of the indictment
at ¶21(b) be stricken with prejudice. The district court's forty
page opinion focused on McGrath's double jeopardy argument,
identifying two separate aspects of this argument. Paraphrasing
the motion, the district court stated, "First, [McGrath] contends
that the conspiracy to launder money is the same offense as the
substantive illegal gambling charge." The district court
(..continued)
Accordingly, we need not reach any of these issues on
appeal, as none of these other issues has been raised by the
appellees as alternative grounds in support of the district
court's decision.
7
. McGrath acknowledges that he has not been charged with
a substantive violation of the money laundering statute; he
argues that he was entitled to dismissal of Count One because "he
had not been charged with any substantive money laundering
offenses, nor had he been charged with any overt money laundering
acts in furtherance of a money laundering conspiracy." (App. at
125, 134.)
correctly rejected this double jeopardy argument, concluding
that, "Conspiracy to launder money and conducting an illegal
gambling operation were not the same offense for purposes of
double jeopardy." United States v. Conley, 833 F. Supp. at 1130.
The district court, however, was troubled by McGrath's "implicit"
argument that "an illegal gambling business is a lesser included
offense of laundering the ``proceeds' of an illegal gambling
business, despite [McGrath's] being charged with substantive
illegal gambling, but not money laundering." Id. The district
court opined, "If violation of the illegal gambling prohibition
is a lesser included offense of money laundering and Congress's
intent to impose multiple punishments is not clear, the propriety
of alleging a ``lesser included object' as a separate object must
be addressed." The district court surmised that "If Congress
intended the facts alleged to be covered by both statutes, with
multiple punishments, a conspiracy alleging both objects is
properly charged." Id.
After engaging in an extensive analysis of legislative
history, the district court concluded that congressional intent
to impose multiple punishments was not clear. As a consequence,
the court applied the rule of lenity, holding that double
jeopardy constraints prevented a defendant from being charged
with both substantive illegal gambling offenses and substantive
money laundering offenses. The district court then observed the
impossibility of being indicted for conspiring to do something
legal: "That Count One, the conspiracy count, does not charge
Defendants with substantive money laundering cannot save the
money laundering object of the conspiracy count. An agreement to
engage in conduct that is not illegal under Section 1956 can no
more be the basis of a conspiracy conviction than the conduct
itself can be the basis of a substantive conviction."8 833 F.
Supp. at 1158. Based upon this observation, the district court
concluded, "[T]he money laundering object of the conspiracy fails
to state an offense under 18 U.S.C. § 371 and 18 U.S.C. § 1956
(a)(1)(A)(i)." Accordingly, the district court dismissed the
money laundering object of the conspiracy contained in Count One.
The district court had subject matter jurisdiction
pursuant to Title 18, United States Code, Section 3231. We have
appellate jurisdiction of the dismissal of a portion of an
indictment pursuant to Title 28, United States Code, Section
3731. See Sanabria v. United States, 437 U.S. 54, 69 n.23 (1978)
(holding "there is no statutory barrier to an appeal from an
order dismissing only a portion of a count"). Our task is to
determine, on plenary review,9 whether the district court
8
. The district court noted:
The crux of the money laundering object of the
conspiracy count is that "during the period November
1986 through September 1991 cash proceeds from illegal
gambling involving video poker machines was received,
transferred, delivered, deposited or otherwise
transacted by the defendants in violation of Title 18,
United States Code, Section 1956. If this actually
could not be properly charged as substantive money
laundering, it cannot survive as a money laundering
object of the conspiracy count.
United States v. Conley, 833 F. Supp. at 1156.
9
. Our review of the sufficiency of an indictment to
charge an offense is a legal question subject to plenary review.
committed legal error in concluding that the indictment is
violative of the prohibition against double jeopardy.
II.
The Double Jeopardy clause provides that no person
shall "be subject for the same offense to be twice put in
jeopardy of life or limb." U.S. Const., Amdt. 5. This
protection applies both to multiple punishments and successive
prosecutions for the same criminal offense.10 In the contexts of
both multiple punishments and successive prosecutions, the double
jeopardy bar applies if the two offenses for which the defendant
is punished or tried constitute the same offense. Blockburger v.
United States, 284 U.S. 299 (1932).
Criminal statutes need not be identical to be
constitute the same offense for purposes of double jeopardy
analysis. Brown v. Ohio, 432 U.S. 161, 164 (1977). In order to
determine whether two offenses are the same offense sufficient to
warrant protection against multiple punishments, we inquire
whether "[e]ach of the offenses created requires proof of a
different element." Blockburger v. United States, supra. More
specifically, "[t]he applicable rule is that where the same act
or transaction constitutes a violation of two distinct statutory
(..continued)
United States v. Leo, 941 F.2d 181, 188 (3d Cir. 1991); United
States v. Olatunji, 872 F.2d 1161, 1163 (3d Cir. 1989).
10
. The principles we describe are well settled and the
district court appropriately applied them. We state them here
for the purpose of putting in context the second argument
advanced by the defendants which the district court adopted.
provisions, the test to be applied to determine whether there are
two offenses or only one, is whether each provision requires
proof of a fact which the other does not." Id. In Garrett v.
United States, 471 U.S. 773 (1985) the Supreme Court further
refined the Blockburger test in a double jeopardy analysis.
Under Garrett, "[t]he critical inquiry is whether the . . .
[broader] offense is considered the ``same offense' as one or more
of the predicate offenses within the meaning of the double
jeopardy clause." 471 U.S. at 786. In pursuing this inquiry,
the Court looked to the general meaning of the term "same" and to
the allegations of the actual crimes charged and asked if they
were the "same offense." 471 U.S. at 786.
As the Court held in Whalen v. United States, 445 U.S.
684, 692 (1980), however, the Blockburger test is one of
statutory construction: it reflects the assumption that
"Congress ordinarily does not intend to punish the same offense
under two different statutes." Id. Because the rule "serves as
a means of discerning congressional purpose [, it] should not be
controlling where, for example, there is a clear indication of
contrary legislative intent." Albernaz v. United States, 450
U.S. 333, 340 (1981). Congress, under this circumstance, may
impose cumulative punishments. The double jeopardy clause's
protection against multiple punishments in a single case ensures
only that a court does not impose a punishment in excess of the
punishment intended by the legislature. See Missouri v. Hunter,
459 U.S. 359, 368 (1983) ("[l]egislatures, not courts, prescribe
the scope of punishments").
Evidence which establishes a violation of more than one
criminal statute does not necessarily indicate that those
statutes proscribe the same offense. United States v. Felix, 112
S. Ct. 1377 (1992). Instead, the test enunciated in Blockburger
"focuses on the proof necessary to prove the statutory elements
of each offense rather than on the actual evidence to be
presented at trial." Illinois v. Vitale, 447 U.S. 410, 416
(1980).
In Ianelli v. United States, 420 U.S. 770, 777 (1975),
the Court noted that "[t]raditionally the law has considered
conspiracy and the completed substantive offense to be separate
crimes." Although the substantive offense forms a part of the
conspiracy offense and therefore could be considered by some to
be one of its "incidents," the Court held that "the conspiracy to
commit an offense and the subsequent commission of that crime
normally do not merge into a single punishable act." Id. Thus
the conspiracy and substantive offenses would not be considered
the same offense for double jeopardy purposes because
"[c]onspiracy is an inchoate offense, the essence of which is an
agreement to commit an unlawful act." Id. An agreement to
commit a substantive offense presents distinct dangers beyond
those associated with the commission of the offense itself:
Concerted action both increases the
likelihood that the criminal object will be
successfully attained and decreased the
probability that the individual involved will
depart from their path of criminality. Group
association for criminal purposes often, if
not normally, makes possible the attainment
of ends more complex than those which one
criminal could accomplish.
Id. at 778.
In cases involving the interactions between other, more
complex criminal statutes, similar reasoning effectively has
dispelled double jeopardy concerns about the imposition of
multiple punishments. See Garrett v. United States, 471 U.S. 773
(1985) (continuing criminal enterprise (21 U.S.C. § 848) and
predicate narcotics offenses (21 U.S.C. §§ 841, 843(b), 846, 952,
960, 963)); Albernaz v. United States, 450 U.S. 333 (1981)
(conspiracy to import narcotics (21 U.S.C. § 963) and conspiracy
to distribute narcotics (21 U.S.C. § 846)); United States v.
Console, 13 F.3d 641 (3d Cir. 1993), cert. denied, 62 U.S.L.W.
3722 (1994) (racketeering (18 U.S.C. § 1962) and predicate mail
fraud offenses (18 U.S.C. § 1341)).
A.
McGrath maintained before the district court that he
would be subjected to multiple punishments for these offenses:
conspiracy to commit money laundering, in violation of 18 U.S.C.
§ 371; and conducting an illegal gambling business, in violation
of 18 U.S.C. § 1955. The starting point -- and the ending point
as well -- are the essential elements of each of these statutes.
In order to prove conspiracy to commit money
laundering, the government must establish the following three
essential elements: (1) the conspiracy, agreement, or
understanding to commit money laundering was formed, reached, or
entered into by two or more persons; (2) at some time during the
existence or life of the conspiracy, agreement, or understanding,
one of its alleged members knowingly performed one of the overt
acts charged in the indictment in order to further or advance the
purpose of the agreement; and (3) at some time during the
existence or life of the conspiracy, agreement, or understanding,
the defendant knew the purpose of the agreement, and then
deliberately joined the conspiracy, agreement or understanding.
See United States v. Rankin, 870 F.2d 109, 113 (3d Cir.), cert.
denied, 493 U.S. 840 (1989).
To prove a violation of the illegal gambling statute,
the government must establish these three elements: (1) a
gambling business described in the indictment was conducted which
violated the laws of the state in which it was conducted; (2)
five more persons including the defendant, knowingly and
deliberately conducted, financed, managed, supervised, directed
or owned all or part of that gambling business; and (3) the
gambling business was either in substantially continuous
operation for more than thirty days, or, alternatively, the
gambling business, on at least one day, had gross revenues of two
thousand dollars or more. 18 United States Code § 1955(a) and
(b); Iannelli v. United States, 420 U.S. 770, 772 (1975).
Clearly, conviction of the conspiracy statute requires
proof of an element which the gambling statute does not: that
the conspiracy, agreement, or understanding to commit money
laundering was formed, reached, or entered into by two or more
persons, not necessarily including the defendant. Just as
clearly, conviction of the gambling statute requires proof of an
element which the conspiracy statute does not: that five or more
persons, including the defendant, knowingly and deliberately
conducted, financed, managed, supervised, directed or owned all
or a part of a gambling business. The statutes, therefore, do
not constitute the same offense for double jeopardy purposes.
Insofar as the district court found that a conspiracy
to launder money and a substantive violation of the illegal
gambling business prohibition were not the same under Blockburger
and thus concluded that Congress intended multiple punishments
for a conspiracy to launder money and violation of the
substantive illegal gambling prohibition, the district court was
correct in so holding. The district court's analysis, however,
did not end here; it is this second portion of its analysis that
gives us concern. We turn now to McGrath's second contention.
B.
McGrath next asserted before the district court that
the money laundering object of the conspiracy is the "same
offense" as the illegal gambling business object of the
conspiracy under Blockburger. The essence of McGrath's argument
was that "the money laundering activity charged in this case is
temporally and statutorily the same activity necessary to conduct
an illegal video poker gambling business." McGrath contends
before us that a wide variety of transactions involving the money
placed into the video poker machines is necessarily part of the
illegal gambling business, including collecting and counting
money, dividing up money, transferring and transporting money,
depositing money into banks and withdrawing money from banks.
McGrath contends that this same conduct cannot be properly
alleged to be money laundering. See 833 F. Supp. at 1156.
In analyzing the alleged "sameness" between the money
laundering activity and the "specified unlawful activity," i.e.,
the illegal gambling activity, the district court found that
conducting the illegal gambling business constituted a "species
of lesser included offense" of money laundering if it is the
elements of the illegal gambling business upon which the
government seeks to rely to prove "specified unlawful activity."
833 F. Supp. at 1133.
Apparently troubled by the superficial similarity
between the substantive money laundering offense and the
substantive illegal gambling offense, the district court
addressed whether conducting "an illegal gambling business is a
lesser included offense of laundering the ``proceeds' of an
illegal gambling business . . . ." Id. The district court
reasoned that if the substantive illegal gambling statute is a
lesser included offense of the substantive money laundering
statute, double jeopardy principles may prohibit the government
from charging conspiracy to commit money laundering and the
substantive offense of conducting an illegal gambling business.
Because McGrath had not been charged with substantively
laundering any "proceeds," the district court justified its
consideration of these two statutes by reasoning that "[f]or an
agreement to constitute a conspiracy . . . the object of the
agreement or the means of effectuating it must be illegal." 833
F. Supp. at 1156. This statement is certainly true. As we have
observed, in order to convict a defendant of conspiracy, the
government must "prove an agreement which contemplates the
commission of a crime and that such crime is in fact and law a
federal offense." United States v. Pepe, 512 F.2d 1192, 1132 (3d
Cir.), cert. denied, 423 U.S. 893 (1975). In keeping with this,
the district court should have ascertained whether the conduct
alleged as the object of the conspiracy would, if completed,
constitute a violation of the substantive money laundering
statute. Indeed here it does constitute such a violation. See
App. at 73-83 (overt acts in the indictment detailing activities
proscribed by the substantive money laundering statute). Because
"the object of the agreement" was illegal, the district court
should have concluded its inquiry. Instead, the district court
made reference to an entirely different statute, one proscribing
the conduct of an illegal gambling business. See 18 United
States Code § 1955 (1988).
We are concerned with the district court's focus on
whether the substantive offense of conducting an illegal gambling
operation and the substantive offense of money laundering were
the same for purposes of double jeopardy, because McGrath was
never charged with the substantive offense of money laundering.
Based upon its finding of a double jeopardy problem with the
simultaneous application of these two statutes -- the substantive
money laundering statute and the substantive illegal gambling
statute -- the district court held,
Because the intent of Congress to impose a
punishment under section 1956(a)(1)(A)(i) for
acts already penalized under the illegal
gambling statute is not clear, and because
defendant McGrath and the joining defendants
are entitled to the benefit of the rule of
lenity, the court holds that activities
penalized under section 1955, the Prohibition
of Illegal Gambling Businesses, are not
without more, also punishable under Section
1956(a)(1)(A)(i). Section 1956(a)(1)(A)(i)
will continue to apply in the context of an
illegal gambling business where the
"promoted" "specified unlawful activity" is
other than the underlying illegal gambling
business, and section 1956(a)(1)(A)(i) will
continue to apply to the core of money
laundering.
833 F. Supp. at 1158 (citations omitted). We disagree with the
district court's conclusion that a substantive illegal gambling
offense can never constitute the "specified unlawful activity"
for purposes of the money laundering statute. Its decision that
a money laundering conviction under section 1956(a)(1)(A)(i) may
not be based on the income from an illegal gambling business,
unless there exists some additional form of specified unlawful
activity, is erroneous and is not supported by the statutory
language or legislative history.
As written, the money laundering statute requires that
money laundering transactions be conducted with the "proceeds" of
specified unlawful activity and that such transactions be
committed with the intent either to promote the specified
unlawful activity or to conceal the nature or source of the
income. The money laundering activity and the illegal gambling
activity, therefore, do not constitute the "same offense" within
the meaning of Blockburger due to this "intent" requirement.11
The acts of conducting an illegal gambling business
consist of placing, maintaining and servicing video poker
machines in various locations. An additional aspect of
conducting an illegal gambling business necessarily includes the
collecting of the proceeds of the illegal gambling activity. The
11
. We have interpreted this "intent to promote"
requirement broadly and have held that a defendant can engage in
financial transactions that promote not only ongoing or future
unlawful activity, but also prior unlawful activity. United
States v. Paramo, 998 F.2d 1212, 1215 (3d Cir. 1993), cert.
denied, 62 U.S.L.W. 3551 (1994). There, we held that Paramo had
the intent to promote specified unlawful activity, mail fraud, by
cashing embezzled IRS checks. Although none of the proceeds
obtained from the earlier mail frauds were actually used to
facilitate the subsequent frauds, we recognized that it did not
have to be a future mail fraud that was promoted, it could be a
past mail fraud or an ongoing mail fraud. Because cashing the
checks was necessary to realize any benefit from the mail fraud,
we held that it was permissible for the jury to infer Paramo
cashed each stolen check with the intent to promote the carrying
on of the antecedent fraud.
district court touches upon the concern that the money laundering
statute not be applied so broadly as to cover any and all
dispositions of the proceeds of the specified unlawful activity.
Obviously, whenever a defendant makes money from criminal
activity he has to do something with it. As the district court
correctly observed, Congress did not enact money laundering
statutes simply to add to the penalties for various crimes in
which defendants make money. 833 F. Supp. at 1155-56.
However, in prosecutions under Sections 1956(a)(1),
this concern is adequately addressed by applying the "promotion"
and "concealment" branches of § 1956's "intent" requirement.
Section 1956(a)(1), quite clearly, does not prohibit all
financial transactions that are conducted with the proceeds of
specified unlawful activity. It only proscribes those
transactions that are conducted with the intent to promote
certain further illegal activity, under subsection (A), or that
are designed to conceal under subsection (B).
These requirements would preclude the application of
section 1956 to non-money laundering acts such as a defendant's
depositing the proceeds of unlawful activity in a bank account in
his own name and using the money for personal purposes. See,
e.g., United States v. Jackson, 935 F.2d 832 (7th Cir. 1991). In
Jackson, the defendant was prosecuted for money laundering when
he used the proceeds of drug transactions to purchase telephone
paging beepers and car telephones. He also used the drug
proceeds to make rental payments. The Court of Appeals for the
Seventh Circuit held that the evidence showed that purchasing the
beepers promoted further drug activity, but that purchasing the
car phones and making rental payments did not.
Applying these principles here, we note that after the
proceeds are collected, the treatment given to them may be such
that it violates § 1956, as well as § 1955. If the proceeds are
treated in a manner so as to conceal that their source is illegal
gambling, § 1956(a)(1)(B) has been violated. If subsequent
financial transactions are conducted with these proceeds with the
intent to promote the illegal gambling activity, § 1956(a)(1)(A)
has been violated.12 The element charged in the latter
violation, which was not necessary for the offense of conducting
an illegal gambling business is that of "promotion," i.e., the
advancing or furthering of the illegal gambling business.
McGrath's assertion that the activity of dividing up,
collecting, transferring and even depositing proceeds into a bank
are essential facets of carrying on an illegal gambling business,
and therefore, cannot, due to double jeopardy constraints, serve
as the basis for a money laundering object of conspiracy must
fail. The acts McGrath identifies as constituting an "integral
12
. Count One charged (¶ 21b, app. 59-60) that the
defendant (Conley) conducted financial transactions affecting
interstate commerce with the proceeds of illegal gambling with
video poker machines "with the intent to promote the carrying on
of specified unlawful activity, illegal gambling with video poker
machines . . . ." Specifically, Count One charged that Conley
used illegal gambling proceeds to purchase more video poker
machines (¶ 29, app. 65) and to pay employees of Duffy's Vending.
(¶ 31, app. 65). The overt acts alleged included numerous
payments to Matrix, an entity used to service the poker machines.
These allegations are sufficient to charge a money laundering
offense under the promotion branch of 18 U.S.C. § 1956(a)(1).
part of the illegal gambling business" would likewise constitute
an integral part of many other criminal enterprises, such as a
narcotics business.
In arguing that the money laundering activity in this
case was "temporally" the same activity necessary to conduct an
illegal video poker gambling business, McGrath relies on two
recent cases interpreting the Money Laundering Control Act which
suggest that § 1957 would apply only to monetary transactions
occurring after the completion of the underlying criminal
activity. In United States v. Edgmon, 952 F.2d 1206 (10th Cir.
1991), cert. denied, 112 S. Ct. 3037 (1992) and United States v.
Lovett, 964 F.2d 1029 (10th Cir.), cert. denied, 113 S. Ct. 169
(1992), the Court of Appeals for the Tenth Circuit confronted
double jeopardy challenges to convictions under the Money
Laundering Control Act. In each of these cases, the Court of
Appeals concluded that Congress intended to impose separate
punishments for money laundering transactions and for the
underlying criminal activity, and that it intended the money
laundering statutes to apply to transactions occurring after the
completion of the underlying criminal activity. With respect to
§ 1956, the court stated that, "Congress aimed the crime of money
laundering at conduct that follows in time the underlying crime
rather than to afford an alternative means of punishing the prior
``specified unlawful activity." Id. at 1214 (emphasis added). In
United States v. Lovett, supra, the court reached the same
conclusion with respect to § 1957. Later, in United States v.
Johnson, 971 F.2d 562 (10th Cir. 1992), the Court of Appeals held
that it was possible to construe the phrase "proceeds obtained
from a criminal offense" more broadly than this. The court held
that "one might logically infer that Congress would have intended
§ 1957 to apply when the underlying criminal activity occurs
simultaneously with a monetary transaction with the proceeds of
the activity." 971 F.2d at 569.
Our decision in this case is not inconsistent with
these cases requiring that there be some distinction between the
specified unlawful activity and the financial transaction. Our
decision today is consistent with our decision in United States
v. Paramo, 998 F.2d 1212 (3d Cir. 1993), cert. denied, 62
U.S.L.W. 3551 (1994), and with the statutory requirement that the
financial transaction involve "proceeds" of unlawful activity.
Although the money laundering statute does not define when money
becomes "proceeds," it is obvious to us that proceeds are derived
from an already completed offense, or a completed phase of an
ongoing offense, before they can be laundered. See Paramo, 998
F.2d 1212 (the specified unlawful activity was legally completed
mail fraud -- the proceeds of which were ripe for laundering.)13
Here, gambling activity occurred at various business
establishments where the video poker machines were located. We
find that the money, once collected from the poker machines,
1
3. Paramo, however, did not involve financial transactions
with proceeds obtained from an ongoing offense, which is what is
alleged here. In Paramo, there was no dispute that the
underlying offense and specified unlawful activity were legally
completed prior to the financial transaction comprising the money
laundering. Thus, Paramo does not answer the question of when
money becomes "proceeds" ripe for laundering, at issue here.
became "proceeds of specified unlawful activity" within the
meaning of the money laundering statute. Accordingly, any
subsequent financial transaction involving these proceeds that
promotes or furthers the illegal gambling business could form the
basis of a charge of money laundering.
The fact that there may be some overlap in the acts
alleged to constitute the conduct of an illegal gambling business
and money laundering does not give us pause. We are mindful that
Blockburger is only a test of statutory construction. In
conducting a double jeopardy analysis, the goal is to ascertain
legislative intent and to apply the statute at issue, as written,
in keeping with that intent. Here, we find that the district
court erred in failing to apply the money laundering statute as
written.
As enacted by Congress, Title 18, United States Code,
Section 1956(a)(1) prohibits financial transactions with the
proceeds of specified unlawful activity. Congress has determined
that "specified unlawful activity" includes conducting an illegal
gambling business under Title 18, United States Code, Section
1955. The term "specified unlawful activity" is expressly
defined in § 1956(c)(7)(A) as, "any act or activity constituting
an offense listed in section 1961(1) of this title . . . ."
Title 18, United States Code, Section 1961(1)(B) identifies
specified unlawful activity as "any act which is indictable under
any of the following provisions of Title 18, United States Code .
. . ." Section 1955, the prohibition of illegal gambling
business, is included in the list of offenses enumerated in Title
18, United States Code, Section 1961(1)(B). By including the
conducting of an illegal gambling business in its list of
specified unlawful activities on the same footing with numerous
other offenses, Congress has indicated that no additional
"specified unlawful activity" is required for the money
laundering statute to apply when the specified unlawful activity
is an illegal gambling business.14
Furthermore, the legislative history of the Money
Laundering Crimes Act of 1986, of which section 1956 is a part,
indicates that illegal gambling activity was an area of
congressional concern. The comments by Senator Strom Thurmond,
one of the bill's sponsors, are illustrative:
14
. The Court of Appeals for the First Circuit recently
observed in United States v. LeBlanc, 24 F.3d 340 (1st Cir. 1994)
that although the "classic" money laundering case is where a
"drug trafficker collects large amounts of cash from drug sales
and deposits the drug proceeds in a bank under the guise of
conducting a legitimate business transaction," the Money
Laundering Control Act "prohibits a much broader range of conduct
than just the ``classic' example of money laundering." The Court
of Appeals stated, "The language of the statute, in conjunction
with the definitions provided in 18 U.S.C. § 1956(c) indicates
that Congress intended to criminalize a broad array of
transactions designed to facilitate numerous federal crimes,
including illegal gambling." 24 F.3d at 346.
In Leblanc, the court of appeals held that the
defendants' offenses (money laundering and operating an illegal
gambling business) fell within the "heartland" of money
laundering cases and reversed the district court's grant of a
downward departure under the sentencing guidelines on the theory
that the offenses were essentially the operation of an illegal
gambling business. See also United States v. Stavroulakis, 952
F.2d 686, 691 (2d Cir. 1992) ("Congress has made clear that
concealing the source of illegal gambling proceeds is just as
detrimental to society as concealing the source of narcotics
money.").
The President's Commission on organized crime
has identified money laundering as one of the
greatest challenges facing law enforcement
today. A recent Wall Street Journal article
states that illegal doings, gambling and vice
generate $150 billion dollars annually. It
is readily apparent that criminals rely on
laundering schemes to hide the identities and
true source of the proceeds.
See Senate Report (S. Rep. 99-43), 99th Cong., 2d Session, pp.3-4
(1986); Congressional Record (132 Cong. Rec. 17571, July 24,
1986).
The district court, in holding that conducting an
illegal gambling business cannot satisfy the specified unlawful
activity requirement of the money laundering statute, has unduly
narrowed the scope of the money laundering statute. In so doing,
the district court has interpreted this statute in a manner
inconsistent with its express provisions and legislative intent.
Since Count One did not charge any specified unlawful
activity other than conducting an illegal gambling business, the
district court found that Count One failed to charge a conspiracy
to commit money laundering. Because we find that the conduct in
this case, conducting an illegal gambling business, constitutes
"specified unlawful activity" within the meaning of the money
laundering statute, we conclude that Count One is sufficient to
charge a conspiracy to commit money laundering.15 Accordingly,
15
. It is not our role at this juncture to comment on the
sufficiency of the government's evidence to support a conviction
for money laundering. We observe only that the government may
allege and prove conspiracy even if the underlying substantive
object of the conspiracy is never completed. For this reason, a
conspiracy indictment need not allege every element of the
underlying offense, but need only put defendants on notice that
we will remand this case to the district court so that the money
laundering object of the conspiracy alleged in Count One may be
reinstated.
III.
For the foregoing reasons, we will vacate the judgment
of the district court dismissing the money laundering object of
the Count One of the indictment and remand to the district court
for its reinstatement.
(..continued)
they are charged with a conspiracy to commit the underlying
substantive offense. United States v. Werme, 939 F.2d 108, 112
(3d Cir. 1991), cert. denied, 112 S. Ct. 1165 (1992); United
States v. Wander, 601 F.2d 1251, 1259 (3d Cir. 1979).