United States v. Baker, Everette O. ( 2000 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 99-3840
United States of America,
Plaintiff-Appellee,
v.
Everette O. Baker, d/b/a Bettye’s Touch Above,
d/b/a Fantasyland Theater & Arcade, d/b/a/ Fantasyland
Night Club, d/b/a Fantasyland
Massage Parlor, d/b/a Fantasy Massages,
d/b/a Fantasy Massage Parlor, d/b/a American
Printing & Publishing Company,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 97 CR 30079--William D. Stiehl, Judge.
Argued May 19, 2000--Decided September 20, 2000
Before Flaum, Chief Judge, and Manion and Williams,
Circuit Judges.
Manion, Circuit Judge. Everette Baker operated
massage parlors that were fronts for his
prostitution business. In addition to cash, his
operation used credit card and automatic teller
machine (ATM) transactions. He used the proceeds
from his prostitution business to maintain and
expand that business, as well as several other
legal "adult businesses." He was convicted of
money laundering and conspiracy to commit money
laundering and in addition to being sentenced to
fifteen years in prison, was ordered to forfeit
millions of dollars. We affirm Baker’s
convictions, sentence, and the forfeiture order.
I. Background
From 1989 to 1997, Baker operated a complex of
interrelated sex businesses in Brooklyn,
Illinois, including striptease bars, adult
bookstores and movie theaters, and x-rated video
arcades. The cornerstone of Baker’s "Fantasyland"
complex, however, was the "massage parlors" that
were fronts for prostitution. The businesses were
related in that customers who indulged in the
legal adult businesses would fulfill their
fantasy in another building in the compound where
the prostitutes disguised as masseuses held
forth. Customers would select a "masseuse" from a
line-up and then rent a room by paying a "house
charge" up front. After the customer and the
"masseuse" went into a room, the customer would
select the type of "massage" he wanted. The
prostitutes never discussed specifics with the
customers; they simply told the customers that
the more they were willing to pay, the more
"sensual" the massage would be. Customers would
pay the prostitutes with "tips." Both the room
rentals and "tips" were often paid by credit card
or ATM transactions.
Over the years, Baker employed hundreds of
prostitutes, so likely everyone in Brooklyn who
cared knew what was going on. Indeed, two
daughters of the chief of police, and at one time
the brother and the cousin of the mayor, were on
Baker’s payroll. Around the holidays, Baker
provided a sort of "Christmas bonus"--free
"massages" to various municipal employees as a
show of gratitude for allowing him to operate in
Brooklyn without much (if any) interference. And
Baker had good reason to be appreciative. His
"adult businesses" (both legal and illegal) were
extremely lucrative. Baker had gross revenues
during this time of about nine million dollars.
It was obviously a fairly extensive operation,
with various managers helping Baker with the
business (e.g., collecting money, reconciling
accounts, stocking on-site ATMs).
To disguise his activities, he set up dummy
checking accounts and credit card clearinghouse
accounts at area banks under the name of American
Printing and Publishing Company. He deposited the
proceeds from his prostitution and other ventures
into these accounts and wrote checks on the
accounts to pay his operating expenses, such as
utilities and payroll. Baker not only plowed the
proceeds from his sex empire back into his
businesses to maintain their operation, he
reinvested the proceeds by building additional
"massage parlors" and other adult businesses in
the Fantasyland complex. Between January 1990 and
December 1996, the massage parlors accepted
credit cards for prostitution services. "In May
of 1995, the defendant, keeping up with modern
times and for the convenience of his customers,
installed an ATM machine in the Fantasyland
massage parlor and adjacent topless nightclub."
See United States v. Baker, 82 F. Supp.2d 936,
939 (S.D. Ill. 1999). In 1996 Baker stopped
accepting credit card payments after he learned
that other people "in the business" had faced
federal prosecution for money laundering.
While local officials apparently weren’t
inclined to interfere with Baker’s illegal
enterprise, the federal prosecutors had seen
enough. In January 1997, his operation was
raided. Baker reacted by transferring ownership
of his businesses to his son, but he continued to
maintain de facto control over the operation.
Although prostitution is not a federal offense,
money laundering is if the laundering is carried
out using the means of interstate commerce. Baker
allowed customers to pay for "massages" with
credit card and ATM transactions which went
across state lines to clearinghouses (the
proceeds of which were deposited into dummy
accounts). Baker thus used interstate wires to
further and facilitate his prostitution business.
In late 1997, the United States indicted Baker on
fifteen counts of money laundering under 18
U.S.C. sec. 1956(a)(1)(A)(i), six counts of
engaging in monetary transactions in criminally-
derived property under 18 U.S.C. sec. 1957, and
one count of conspiracy to launder money under 18
U.S.C. sec. 1956(a)(1)(A)(i) & (h). It also
requested a forfeiture of millions of dollars
under 18 U.S.C. sec. 982. See Baker, 82 F.
Supp.2d at 937.
A jury convicted Baker of all counts except for
the forfeiture count (which Baker agreed to have
the court resolve on the briefs). The court
sentenced Baker to 120 months on the money
laundering charges and 180 months on the
conspiracy charge (to run concurrently). In
determining Baker’s sentence, the district court
increased his offense level by seven by including
as relevant conduct millions of dollars of income
from his "massage parlor" business as funds that
were involved in his conspiracy to launder money
(it did not include money from Baker’s legal sex
businesses, although it concluded that this money
too was involved in Baker’s money laundering
conspiracy). The district court also increased
Baker’s offense level by five for leading a
criminal enterprise of five or more persons. And
it increased his offense level by two for
obstruction of justice, which was based on
transferring ownership of the businesses to his
son.
As to forfeiture, the government sought to
recover the "Fantasyland" complex and $7.5
million as proceeds from Baker’s conspiracy to
launder the monies from his prostitution
business. Baker countered that only $2,590 should
be subject to forfeiture as the amount of the
specific credit card transactions that the
indictment had set forth. The district court
ordered Baker to forfeit all the monies that had
been involved in the federal activities, not just
the credit card transactions the government had
proved. See Baker, 82 F. Supp.2d at 941-42. The
court found that Baker’s bank accounts were used
to facilitate his federal crimes and therefore
the millions of dollars that had passed into and
out of these accounts were subject to forfeiture.
Id. at 942-43. After deleting some entries to
avoid double-counting, it ordered Baker to
forfeit about $4.4 million as well as the real
estate where the "Fantasyland" compound was
located. See id. at 944.
II. Discussion
Baker appeals his conviction, arguing that the
indictment was constructively amended by the
district court’s jury instructions and the
government’s comments during closing argument. He
also appeals his sentence enhancements, arguing
that it was improper for the court to include
millions of dollars from his prostitution
business, to find that he led five or more people
in a criminal enterprise, and to find that he
obstructed justice. Finally, he appeals the
forfeiture order.
A. The Indictment
Baker contends that his conviction must be
overturned because the indictment in this case
was constructively amended in violation of the
Fifth Amendment. The Fifth Amendment to the
Constitution provides in relevant part that "No
person shall be held to answer for a capital, or
otherwise infamous crime, unless on a presentment
or indictment of a Grand Jury." U.S. Const.
Amend. V. A constructive amendment of an
indictment violates the Fifth Amendment, United
States v. Willoughby, 27 F.3d 263, 266 (7th Cir.
1994), and "occurs when either the government
(usually during its presentation of evidence
and/or its argument), the court (usually through
its instructions to the jury), or both, broadens
the possible bases for conviction beyond those
presented to the grand jury." United States v.
Cusimano, 148 F.3d 824, 829 (7th Cir. 1998).
Thus, a "constructive amendment occurs where the
offense proven at trial was not included within
the parameters of the indictment." United States
v. Remsza, 77 F.3d 1039, 1043 (1996). But not
every variation from the verbiage of the
indictment, either in terms of proof or jury
instructions, constitutes a constructive
amendment. See Willoughby, 27 F.3d at 266 (It "is
important to note that not all variations in
proof that contradict or supplement verbiage in
the indictment rise to the level of constructive
amendments."); United States v. Pigee, 197 F.3d
879, 886 (7th Cir. 1999) ("We believe that the
variances in the court’s instruction on Count 6
were so minor that they would not generate any
risk that Lipscomb would be convicted of a crime
not charged."). The proof at trial or jury
instructions must go "beyond the parameters of
the indictment in that it establishes offenses
different from or in addition to those charged by
the grand jury." Pigee, 197 F.3d at 886.
In this case, one of the bases for Baker’s
convictions, the federal money laundering
statute, provides that
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 . . . or imprisonment for not
more than twenty years or both.
18 U.S.C. sec. 1956(a)(1)(A)(i) (emphasis added).
"Specified unlawful activity" is defined in sec.
1956(c)(7) as "any act or activity constituting
an offense listed in [18 U.S.C. sec.] 1961(1)"
(which defines the predicate acts for a RICO
violation). Section 1961(1)(B), in turn, lists 18
U.S.C. sec. 1952 (the "Travel Act") as an
offense. And the Travel Act provides that:
(a) Whoever travels in interstate commerce or
uses the mail or any facility in interstate . . .
commerce, with intent to--
(3) otherwise promote, manage, establish, carry
on, or facilitate the promotion, management,
establishment, or carrying on, of any unlawful
activity,
and thereafter performs or attempts to perform--
(A) any act described in paragraph (1) or (3)
shall be fined under this title, imprisoned for
not more than five years, or both; . . . .
18 U.S.C. sec. 1952(a). The Travel Act defines as
an "unlawful activity" any crime of prostitution
under state law. Id. at sec. 1952(b). Thus, a
person launders money if he makes deposits and
withdrawals at banks (conducts "financial
transactions"), knowing that they contain
proceeds from prostitution ("some form of
unlawful activity"), in order to promote using
credit cards in a prostitution business (a
"specified unlawful activity") if the proceeds
from prostitution in fact involve monies from
credit card transactions in a prostitution
business ("specified unlawful activities"). See
18 U.S.C. sec. 1956(a)(1)(A)(i); United States v.
Griffith, 85 F.3d 284, 287 (7th Cir. 1996);
United States v. Montague, 29 F.3d 317, 321-22
(7th Cir. 1994).
To establish a Travel Act violation it is not
necessary for the government to prove that an act
of prostitution under Illinois law followed each
credit card transaction. See United States v.
Campione, 942 F.2d 429, 434 (7th Cir. 1991).
Section "1952 refers to state law only to
identify the defendant’s unlawful activity[;] the
federal crime to be proved in sec. 1952 is use of
the interstate facilities in furtherance of the
unlawful activity, not the violation of the law;
therefore sec. 1952 does not require that the
state crime ever be completed." Id. In short,
"[s]ince sec. 1952 does not incorporate state law
as part of the federal offense, violation of the
Act does not require proof of a violation of
state law." Id.Baker acknowledges that, in theory, the
government need not prove an underlying act of
prostitution to make out a violation of the
Travel Act. He argues, however, that the
government was required to do so here because the
indictment charged him with violating the Travel
Act by causing his employees to use credit cards
in order to "provide prostitution services," with
the implication being that an act of prostitution
must result from each credit card transaction. As
a result, he argues that the indictment was
constructively amended when the district court
instructed the jury that it was sufficient if the
government proved that a credit card transaction
entitled a customer to spend time with a
masseuse, thereby affording him the opportunity
to engage in sex, and that the government need
not prove that each credit card transaction
actually resulted in an act of prostitution.
Similarly, he complains about the government
arguing to the jury that it need only prove that
"the use of the interstate facilities was in
furtherance of the illegal activity," and that
while the government did prove transactions "in
which customers actually did receive sex for the
use of credit cards," it was not required to do
so. In short, according to Baker, because the
jury instructions relieved the government of the
responsibility of proving that an act of
prostitution resulted from each credit card
transaction, the instructions and the
government’s statements during closing argument
constructively amended the indictment by allowing
him to be convicted of an offense that is broader
than or different from that set out in the
indictment.
It is true that if an indictment makes a fact or
a manner of committing an offense material to
that offense, that fact or manner must be proven,
not a substantially different one. See United
States v. Johnson, 152 F.3d 618, 630 (7th Cir.
1998) (where indictment specifically described
destructive devices, government was required to
provide proof substantially consistent with that
description); United States v. Leichtnam, 948
F.2d 370, 374-75, 379-81 (7th Cir. 1991). But
Baker misreads the indictment. The government did
not make committing an act of prostitution
material to the Travel Act violation (and hence
the money laundering and conspiracy crimes). As a
result, the jury instructions--which were taken
from Campione, see 942 F.2d at 434--did not
constructively amend the indictment (nor did the
government’s statements in accordance with them).
The indictment in this case listed the Travel
Act as the predicate offense for the "specified
unlawful activity" component for the money
laundering counts, and it set forth the Illinois
statute criminalizing the keeping of a house of
prostitution as the predicate offense for the
Travel Act. For all counts, the indictment also
stated that the instrument of interstate commerce
that Baker used to promote the unlawful activity
of prostitution (as required by the Travel Act)
was the processing of credit card charges for
"prostitution services." Examples of relevant
paragraphs of the indictment are as follows:
20. Each [financial transaction affecting
interstate commerce] in fact involved the
proceeds of unlawful activity specified in Title
18, United States Code, Section 1956(c)(7)--that
is, activity constituting an offense listed in
Title 18, United States Code, Section 1961(1),
namely:
activity in which defendant EVERETTE O. BAKER
caused use of facilities in interstate commerce
with intent to carry on the unlawful activity of
a business enterprise involved in Conspiracy to
Keep a Place of Prostitution, in violation of
Chapter 720, Act 5, Illinois Compiled Statutes
(formerly Chapter 38, Illinois Revised Statutes),
Sections 11-17 and 8-2, and in which defendant
EVERETTE O. BAKER thereafter caused to be
performed acts to carry on said unlawful
activity, in violation of Title 18, United States
Code, Section 1952(a)(3).
21. It was part of the manner and means of
accomplishing this specified unlawful activity
that defendant EVERETTE O. BAKER caused his
employees to use the wires in interstate commerce
to obtain credit approval from a credit card
clearing house in St. Louis, Missouri, for each
customer who presented his credit card to obtain
prostitution services at said defendant’s place
of business within the Southern District of
Illinois. After such approval was obtained, said
defendant’s employees engaged in prostitution
services with such customers.
The provisions of Illinois law to which paragraph
20 of the indictment refers is not the offense of
engaging in prostitution but of "Keeping a Place
of Prostitution" and "Conspiracy" or, as the
indictment states, a "Conspiracy to Keep a Place
of Prostitution." See 720 ILCS 5/8-2
("Conspiracy") and 720 ILCS 5/11-17 ("Keeping a
Place of Prostitution"). Thus, under paragraph
20, Baker only need use interstate facilities
with the "intent to carry on" his conspiracy to
keep a place of prostitution. See Campione, 942
F.2d at 434 ("But the indictments in this case
are not limited, as defendants would have us
believe, to oral sex or sexual intercourse. . . .
Those paragraphs of the Illinois Revised Statutes
[in the indictment] refer respectively to
Conspiracy [sec. 8-2], Prostitution, Soliciting
for a Prostitute, Pandering, Keeping a Place of
Prostitution [sec. 11-17], and Pimping.").
With respect to paragraph 21, it first states
that as part of Baker’s conspiracy to keep a
place of prostitution he "caused his employees to
use the wires in interstate commerce to obtain
credit card approval . . . for each customer who
presented his credit card to obtain prostitution
services at said defendant’s place of business .
. . ." This is the Travel Act violation. See id.
at 435 (using "the interstate telephone system to
secure authorization for the credit card
transactions set out in the indictment
facilitated the carrying on of keeping a place of
prostitution, one of the state offenses listed"
in the indictment). And this violation is not
tied to the actual commission of an act of
prostitution. It is clearly predicated on a
customer presenting his credit card to obtain
prostitution services, not on the customer having
actually obtained such services.
The next sentence is a closer question. This
part of paragraph 21 states that "[a]fter such
approval was obtained, [Baker’s] employees
engaged in prostitution services with such
customers." We think that this sentence merely
identifies the underlying state offense, as the
Travel Act requires. See Campione, 942 F.2d at
434. Unlike in Leichtnam, supra, this part of the
indictment does not make the actual completion or
commission of prostitution services material to
the offense; there is no "to wit" or similar
language. See also Willoughby, 27 F.3d at 266("’To wit’ is an expression of limitation which,
as our cases indicate, makes what follows an
essential part of the charged offense."). At any
rate, Baker concedes that he did not claim below
that the indictment was constructively amended,
so we review this forfeited issue for plain
error. See Fed. R. Crim. P. 52(b); United States
v. Hughes, 213 F.3d 323, 328 (7th Cir. 2000).
Under this standard, there must be: 1) an error;
2) that is clear or obvious; and 3) that affects
substantial rights. United States v. Olano, 507
U.S. 725, 732-35 (1993); Cusimano, 148 F.3d at
828. "In an effort to clarify when an error
affects substantial rights, the [Supreme] Court
said ’in most cases it means that the error must
have been prejudicial: It must have affected the
outcome of the District Court proceedings.’"
Remsza, 77 F.3d at 1044 (quoting Olano, 507 U.S.
at 734). In this circuit it is clear that "the
constructive amendment ’must constitute a mistake
so serious that but for it the defendant probably
would have been acquitted in order for us to reverse.’"
Hughes, 213 F.3d at 329 (quoting Cusimano, 148
F.3d at 828); see also Remsza, 77 F.3d at 1044.
Even then, "we have the power to correct the
error but are not required to do so." Cusimano,
148 F.3d at 828 (citing Olano, 507 U.S. at 735).
"We will not reverse unless we find the error
seriously affects the fairness, integrity, or
public reputation of judicial proceedings." Id.;
see also, Remsza, 77 F.3d at 1044. Here, it is
not plain or obvious the "engaged in prostitution
services" sentence means that an actual act of
prostitution is part of the Travel Act violation
in this case--particularly in the context of the
preceding sentence and paragraph. Because it is
not obvious that the indictment narrowed the
charge as Baker contends, the jury instructions
and statements in closing argument did not
impermissibly broaden the indictment.
But even if it were plain that the indictment
narrowed the predicate state offense for the
Travel Act violation as Baker urges, we still
would not reverse his conviction. Baker does not
contend that the government did not prove that
acts of prostitution followed the credit card
transactions. As a result, we cannot say that
"but for [the constructive amendment] the
defendant probably would have been acquitted."
Hughes, 213 F. 3d at 329. Contrast Willoughby, 27
F.3d at 267 ("since no evidence linked the gun to
Willoughby’s actual distribution of cocaine . . .
the weapons conviction could only have been based
upon a" theory not charged in the indictment).
Moreover, given that Baker does not show that he
was prejudiced in his defense, we also cannot say
that this assumed error seriously affected "the
fairness, integrity, or public reputation of
judicial proceedings." Hughes, 213 F.3d at 329.
Finally, Baker argues that the indictment was
constructively amended when the district court
allowed the government to argue another theory
during closing argument: money laundering was
spending or withdrawing funds from the illegal
prostitution business, regardless of any
connection to interstate commerce. The government
points out that the statement Baker zeros in on
was from its introductory remarks at closing
argument when it was distinguishing the money
laundering in this case from "concealment" money
laundering (set out in 18 U.S.C. sec.
1956(a)(1)(B)(i)). Jury instructions are viewed
as a whole. United States v. Thornton, 197 F.3d
241, 254 (7th Cir. 1999). We have reviewed the
court’s instructions, and they accurately state
the law; indeed, as noted, most of the
instructions Baker complains about are from our
opinion in Campione. See also Montague, 29 F.3d
at 322. On the whole, then, the government’s
remark distinguishing the money laundering in
this case from "concealment" money laundering did
not constructively amend the indictment. See
Pigee, 197 F.3d at 886 ("We believe that the
variances in the court’s instruction on Count 6
were so minor that they would not generate any
risk that Lipscomb would be convicted of a crime
not charged.").
B. The Sentence Enhancements
In determining Baker’s sentence, the district
court’s factual findings are reviewed for clear
error and its interpretation of the Sentencing
Guidelines is reviewed de novo. United States v.
Emerson, 128 F.3d 557, 562 (7th Cir. 1997). A
district court’s "characterization of a
defendant’s role in an offense and its
determination of the . . . money attributable to
a defendant are factual determinations" that are
reviewed only for clear error. United States v.
House, 110 F.3d 1281, 1283 (7th Cir. 1997).
"Under this standard, we will vacate appellants’
sentences only if the district court’s findings
are without foundation in the evidence, such that
we are left with the definite and firm conviction
that a mistake has been committed." Id.
1. Including the proceeds involved in
the conspiracy.
The Sentencing Guidelines provide that 23 is the
base offense level for someone convicted under 18
U.S.C. sec. 1956(h) of conspiracy to launder
money in violation of 18 U.S.C. sec.
1956(a)(1)(A)(i). See U.S.S.G. sec. 2S1.1(a);
House, 110 F.3d at 1287-88. If the "volume of
funds" involved in the money laundering exceeds
$100,000, then the base level is enhanced,
depending upon the amount. See U.S.S.G. sec.
2S1.1(b)(2). And since the "value of funds"
involved in a money laundering offense is a
specific offense characteristic, we must look to
a defendant’s relevant conduct to determine that
value. See United States v. Sokolow, 91 F.3d 396,
410 (3d Cir. 1996) (citing U.S.S.G. sec.sec.
1B1.3(1) and 2S1.2(b)). The Relevant Conduct
section of the Sentencing Guidelines requires
courts to consider:
(A) all acts and omissions committed, aided,
abetted, counseled, commanded, induced procured,
or willfully caused by the defendant; and
(B) in the case of a jointly undertaken criminal
activity (a criminal plan, scheme, endeavor, or
enterprise undertaken by the defendant in concert
with others, whether or not charged as a
conspiracy), all reasonably foreseeable acts and
omissions of others in furtherance of the jointly
undertaken criminal activity, that occurred
during the commission of the offense of
conviction, in preparation for that offense, or
in the course of attempting to avoid detection or
responsibility for that offense;
U.S.S.G. sec. 1B1.3(a)(1) (emphasis added). The
Commentary to sec. 2S1.1 states that the "amount
of money involved is included as a factor because
it is an indicator of the magnitude of the
criminal enterprise, and the extent to which the
defendant aided the enterprise." (Emphasis
added.)
The district court determined that about $4.4
million was involved in Baker’s conspiracy to
launder money from his prostitution business, so
it increased his base level by seven. See id. at
sec. 2S1.1(b)(2)(H). The court arrived at this
figure by focusing on the amount of income Baker
received from his "massage parlor" business from
1990 to 1997; it declined to include monies that
Baker received from his related legal businesses,
although it concluded that the money from these
ventures was also involved in Baker’s money
laundering conspiracy. Baker argues that it was
excessive to include the income from his
prostitution business over eight years because:
1) the government charged in the indictment that
the "specified unlawful activity" of his
laundering of his prostitution proceeds was
$2,590 in specific credit card transactions; and
2) the conspiracy only lasted for the six months
he shared control with his son.
As to Baker’s first contention, Baker was not
just convicted of money laundering; he was also
convicted of conspiring to launder money. For
purposes of the conspiracy, the indictment
charged fifteen specific instances of credit card
usage (the $2,590) to establish some of the overt
acts of the conspiracy and to show that
interstate wires were in fact used to obtain
prostitution services (indeed, the primary
purpose of the credit card and ATM system was to
facilitate the prostitution business). These
specific credit card transactions do not serve to
limit the amount of money "involved" in Baker’s
conspiracy. Baker was in fact convicted of
laundering amounts much larger than $2,590 (about
$206,000), and he was convicted of conspiring
over the years to launder a lot more than that.
Indeed, the amount of funds that are included as
part of Baker’s "relevant conduct" is not even
limited by the funds charged in the money
laundering counts themselves. See Sokolow, 91
F.3d at 411 ("Funds associated with uncharged
instances of money laundering can be added in to
determine the offense level under sec. 2S1.1 if
those acts are within the scope of relevant
conduct under sec. 1B1.3(a)(2). Thus, in
determining the ’value of funds’ under sec.
2S1.1, the district court is not necessarily
limited only to the funds identified with the
counts of conviction."). In a conspiracy spanning
several years, the value of funds is determined
by the amount of money that is "reasonably
foreseeable" to Baker, including monies that were
generated (and then laundered) to further or
facilitate the conspiracy. See House, 110 F.3d at
1284-85 ("Because a sentencing court is required
to take into account not only the acts of a
defendant charged with conspiracy, but also ’all
reasonably foreseeable acts and omissions of
others in furtherance of the jointly undertaken
criminal activity,’ these total amounts would be
attributable to a defendant found to have
reasonably foreseen the scope of the
conspiracy.") (quoting U.S.S.G. sec.
1B1.3(a)(1)(B)). Here, the district court did not
clearly err in concluding that the millions of
dollars from Baker’s "massage parlor" business,
which over the years he conspired to launder by
depositing into and withdrawing from dummy
accounts, were reasonably foreseeable to him as
furthering and facilitating his conspiracy. These
funds "bankrolled" his prostitution business and
thereby his money laundering conspiracy,
including the conspiracy’s receipt and use of
credit card and ATM transactions. Cf. United
States v. $448,342.85, 969 F.2d 474, 477 (7th
Cir. 1992) ("Money need not be derived from a
crime to be ’involved’; perhaps a particular sum
is used as the bankroll facilitating the
fraud."). As the head and "mastermind" of the
operation, Baker was obviously privy to the funds
that were generated and used in the conspiracy.
See U.S.S.G. sec. 1B1.3(a)(B).
Furthermore, it is not necessary, as Baker
contends, for the government to separate out
income from bona fide massages (whatever those
were) from income from sexual services. The
"clean" money was also "involved in" the
conspiracy in that, as noted, it helped further
and facilitate the operation. Cf. $448,342.85,
supra; United States v. Tencer, 107 F.3d 1120,
1134 (5th Cir. 1997) (because "clean" money that
is commingled with "unclean" money facilitates
the money laundering operation, the "clean" money
is "involved" in the offense and is therefore
forfeitable); United States v. Jackson, 935 F.2d
832, 840 (7th Cir. 1991) (Section
1956(a)(1)(A)(i) allows "for convictions where
the funds involved in the transaction are derived
only in part from ’specified unlawful activities.’"
We "cannot believe that Congress intended that
participants in unlawful activity could prevent
their own convictions under the money laundering
statute simply by commingling funds derived from
both ’specified unlawful activities’ and other
activities. Indeed, the commingling in this case
is itself suggestive of a design to hide the
source of ill-gotten gains . . . ."). Nor is it
necessary for the government to attempt to
separate proceeds from ATM and credit card
transactions in the prostitution business from
other proceeds. The "other" proceeds from
prostitution also helped further and facilitate
the operation and thus were part of the money
laundering conspiracy. To determine the value of
funds, the government need not trace each dollar
of income by the means of payment, and it need
not trace each dollar to a specific instance of
laundering. Cf. id. (To prove money laundering
under 18 U.S.C. sec. 1956(a), "[w]e do not read
Congress’s use of the word ’involve’ as imposing
the requirement that the government trace the
origin of all funds deposited in a bank account
to determine exactly which funds were used for
what transaction.").
As to Baker’s second contention, the money
laundering conspiracy was much longer than the
six months that Baker’s son had nominal control.
It lasted for several years. Baker complains that
the government stipulated that his son was a part
of the conspiracy only for several months and
that during this time the only proven amount of
financial transactions was $235,000. But Baker
was not part of the stipulation, and the
stipulation did not purport to deal with all of
Baker’s activities. The government’s stipulation
as to the involvement of Baker’s son in the
conspiracy does not preclude it from showing that
Baker conspired with others for much longer. And
the district court did not clearly err in finding
that from 1990 to 1997 Baker conspired with at
least seven others-- upper-level and mid-level
managers, supervisors, and lower-level employees-
-to launder money from his prostitution business
(the involvement of whom we shall discuss next).
2.Leading five or more people in a
criminal enterprise.
Pursuant to sec. 3B1.1 of the Guidelines, the
district court enhanced Baker’s offense level by
four for leading or organizing criminal activity
involving five or more people. As noted, Baker
argues that to the extent there was a conspiracy
to launder money, it only involved him and his
son; therefore, he contends that he should not
have his sentence increased under sec. 3B1.1. But
the "determination of a defendant’s role in the
offense is to be made on the basis of all conduct
within the scope of sec. 1B1.3 (Relevant
Conduct), i.e., all conduct included under sec.
1B1.3(a)(1)-(4), and not solely on the basis of
elements and acts cited in the count of
conviction." U.S.S.G., Chapter 3, Part B,
Introductory Comment; see also Montague, 29 F.3d
at 324 (The "effect of this commentary change is
to foreclose . . . any interpretation of the word
’offense’ that restricts it to the count of
conviction."). As with determining the specific
offense characteristics for Baker’s conspiracy
conviction, then, the district court was required
to consider the Relevant Conduct provision in
determining Baker’s role in the offense. This
meant it had to consider "all reasonably
foreseeable acts and omissions of others in
furtherance of the jointly undertaken criminal
activity, that occurred during the commission of
the offense of conviction, in preparation for
that offense, or in the course of attempting to
avoid detection or responsibility for that
offense." U.S.S.G. sec. 1B1.3(a)(1)(B) (emphasis
added).
The evidence clearly shows that Baker led and
organized at least seven employees. These people
processed credit card transactions, kept the
books, issued checks, accounted for shift
receipts, delivered the receipts to Baker and his
son, hired and fired masseuses, made schedules,
held meetings, and set policies; all knew that
Baker was laundering the proceeds of the
prostitution business which ultimately furthered
that business, including its receipt and usage of
credit card and ATM transactions. The activities
of these people were thus integral to the
conspiracy. The district court did not clearly
err in considering them in evaluating Baker’s
role in the offense. See House, 110 F.3d at 1284(although wires in a money laundering conspiracy
were sent and received by several people, the
defendant ultimately received the proceeds and
was the common connection between the co-
conspirators; therefore, he properly received a
four-level enhancement as an organizer or
leader).
3. Obstruction of justice.
The district court also enhanced Baker’s offense
level by two for attempting to obstruct justice
based on his transfer of the business to his son
after it was raided. See U.S.S.G. sec. 3C1.1.
Baker argues that his enhancement was improper
because the government did not prove that he
intended to obstruct justice, nor did it prove
that this transfer, in fact, caused it to spend
more resources to investigate or prosecute this
matter. With respect to Baker’s first argument,
the district court found that Baker transferred
the property to "divert" the authorities from his
enterprise. While Baker argues that "divert" is
not the same thing as "obstruct" or "impede,"
this parsing of the district court’s finding is
disingenuous: the district court found that Baker
transferred this property to "divert" the
authorities in the hope that it would cause them
to stop their efforts. Specifically, it found
that Baker "was going to put the business in his
son’s name, so it will all fall back on him." His
intent was "to divert at least the investigative
officers and agents and the prosecutors from
pursuing this matter any further . . . ." Thus,
the court found that he intended to obstruct
justice, and this finding is not clearly
erroneous.
As to Baker’s second argument, he notes that
real estate cannot be hidden (unlike chattel),
and that he transferred this property by way of a
deed which was on the public record. Because the
chain of title is clear, he argues, there is no
mystery as to ownership of the business. But an
attempt to conceal evidence that is material to
an investigation, such as by transferring assets
to another, warrants an enhancement for
obstruction of justice. See U.S.S.G. sec. 3C1.1,
App. Note 4(d). Evidence is "material" if, when
believed, it tends "to influence or affect the
issue under determination." U.S.S.G. sec. 3C1.1,
App. Note 6. Here, who owned the business was
material both to the offenses of conviction
(money laundering and conspiracy to launder
money), as well as the consequences of the
offense as it related to relevant conduct and
forfeiture. Thus, even if Baker did not succeed
in obstructing justice, the district court
properly enhanced his sentence for attempting to
do so. See United States v. Yusufu, 63 F.3d 505,
515 (7th Cir. 1995) ("A defendant’s mere attempt
to obstruct the government’s case is sufficient .
. . . Moreover, we believe that a finding of
attempt is tantamount to a finding of
willfulness. Implicit in the meaning of attempt
is the will of the actor to accomplish the act
attempted."); see also United States v. Gibbs, 61
F.3d 536, 539-40 (7th Cir. 1995) (attempting to
shield assets from forfeiture in a bogus
transaction constitutes obstruction and warrants
an increase under sec. 3C1.1.).
C. Forfeiture
As with the sentencing enhancements, the
district court’s factual findings regarding
forfeiture are reviewed for clear error and its
"determination whether the facts adduced at a
forfeiture hearing constitute proper forfeiture"
is reviewed de novo. See United States v. 1977
Porsche Carrera, 946 F.2d 30, 33 (5th Cir. 1991).
The criminal forfeiture statute, 18 U.S.C. sec.
982(a), provides in relevant part that:
The court, in imposing sentence on a person
convicted of an offense in violation of section .
. . 1956, 1957, or 1960 of this title, shall
order that the person forfeit to the United
States any property, real or personal, involved
in such offense, or any property traceable to
such property.
(Emphasis added.)/1 The district court ordered
Baker to forfeit about $ 4.4 million as proceeds
that had been involved in his offenses. It
arrived at this figure by focusing on the
"specified unlawful activity" under the money
laundering statutes. It held that the "specified
unlawful activity" was Baker’s prostitution
business, and then added up the proceeds over the
years from that business. The court also ordered
Baker to forfeit the Fantasyland compound on the
ground that it was financed with proceeds from
the prostitution business. See Baker, 82 F.
Supp.2d at 941-44. The court ordered the $4.4
million to be "FORFEITED as a personal monetary
judgment" and stated "that this judgment may be
enforced as a regular monetary judgment against"
Baker. Id. at 944.
Similar to his argument with respect to
"relevant conduct," Baker argues that the only
money that is forfeitable is the $2,590 that the
government proved at trial was used to obtain
prostitution services. He contends that the
district court erred by defining the "specified
unlawful activity" as his prostitution business.
According to Baker, the "specified unlawful
activity" is the federal crime, not the state
crime which is the predicate for the federal
crime. We agree with Baker that the district
court misanalyzed the "specified unlawful
activity," but not to the extent Baker would
hope.
As noted, under the federal money laundering
statute, 18 U.S.C. sec. 1956(a)(1)(A)(i), it is a
crime to conduct a financial transaction with the
proceeds of some form of "unlawful activity" with
the intent to promote the carrying on of a
"specified unlawful activity" if the proceeds of
the transaction in fact involved the proceeds of
a "specified unlawful activity." As also noted, a
"specified unlawful activity" under sec.
1956(c)(7)--via 18 U.S.C. sec. 1961--can be a
Travel Act violation (18 U.S.C. sec. 1952). But
to violate the Travel Act, a person must use the
facilities of interstate commerce to facilitate,
etc. "an unlawful activity" (a state prostitution
offense, for example). Here, Baker used
interstate wires to facilitate a state
prostitution offense which is the Travel Act
violation. It is the Travel Act violation which
is a "specified unlawful activity" under the
money laundering statutes, not the state offense
which helps identify the Travel Act violation.
See Campione, 942 F.2d at 434 (discussed, supra).
To be guilty of money laundering, then, a
financial transaction must not only be made up of
proceeds of any "unlawful activity" (e.g.,
prostitution); it must also contain the proceeds
of "specified unlawful activity" (e.g., credit
card transactions from prostitution) with the
intent to promote the carrying on of the
"specified unlawful activity." See sec.
1956(a)(1)(A)(i). The district court thus erred
in holding that the "specified unlawful activity"
under sec. 1956 is the "unlawful activity" under
the Travel Act--a state crime of prostitution.
The chain of analysis that we set out in Campione
confirms this, as does the fact that sec. 1956
uses both the terms "unlawful activity" and
"specified unlawful activity," indicating that
each has a separate meaning./2
But while Baker correctly argues that the focus
of the forfeiture statute is on property involved
in or traceable to the federal crime of which he
was convicted (not an underlying state offense),
he incorrectly asserts that this crime is the
Travel Act violation and that the property is
limited to the $2,590 in credit card
transactions. As noted, the fifteen credit card
transactions to which Baker points established
that interstate wires were used to obtain
prostitution services (the predicate act for the
Travel Act violation); that monies from the
prostitution business (the "unlawful activity")
that were laundered by being deposited and
withdrawn from dummy accounts did in fact contain
proceeds from credit card transactions for
prostitution services (the "specified unlawful
activity"); and that there were overt acts to the
conspiracy. Just as the amounts of these specific
credit card transactions do not limit Baker’s
"relevant conduct," they do not limit the amount
of his property that is forfeitable.
By analogy, in United States v. Trost, 152 F.3d
715 (7th Cir. 1998), a defendant was charged with
mail fraud and with eight specific acts of money
laundering, totaling $23,000. The district court
ordered him to forfeit $57,000-- the amount of
the money laundering and the mail fraud counts.
On appeal, Trost, similar to Baker, argued that
he only had to forfeit the specific sums set
forth in the money laundering counts. Id. at 720.
We rejected this argument, noting that the
district court had found that Trost’s "account
was used to facilitate the crimes of which Trost
was convicted and that significantly more than
$23,000 was funneled through the account to
conceal or disguise the true nature of his
activities." Id. at 721 (emphasis added). "Given
those findings," we held that the amount of the
forfeiture order was "well within acceptable
parameters. Money does not need to be derived
from the crime to be forfeited. It can be
forfeited if it is involved in the crime." Id.To arrive at the forfeitable amount here, the
district court excluded any income over the years
from Baker’s legal sex businesses. It then
concluded that Baker’s income over the years from
his "massage parlor" business was forfeitable
because all of these funds were involved in
Baker’s prostitution business. As noted, the
district court should not have based its analysis
on the prostitution business per se. Rather, it
should have based its analysis on the fact that
these funds were involved in Baker’s conspiracy
to launder the proceeds of his prostitution
business--one of the federal offenses of which he
was convicted. See 18 U.S.C. sec. 982(a). In this
case, however, this is a distinction without a
difference.
Specifically, as with the forfeited funds in
Trost, all of the funds from Baker’s prostitution
business over the years--both the proceeds from
credit card and ATM transactions and other
proceeds--were illegal, and as a result Baker
laundered all of them. All of these funds were
thus "involved in" the money laundering
conspiracy, not just the specific credit card
transactions the government proved were for
prostitution services and not just the specific
monies the government proved were laundered. See
Trost, 152 F.3d at 721. Furthermore, the funds
that were not from credit card and ATM
transactions facilitated the conspiracy by
helping to further the prostitution business,
and, more specifically, the use of credit card
and ATM transactions in that business. In short,
these funds helped "bankroll" the conspiracy. See
$448,342.85, 969 F.2d at 477 ("Money need not be
derived from a crime to be ’involved’; perhaps a
particular sum is used as the bankroll
facilitating the fraud.")./3 It would be
incorrect, then, to limit the forfeiture to
$2,590, as Baker contends:
Limiting the forfeiture of funds under these
circumstances to the proceeds of the initial
[illegal] activity would effectively undermine
the purpose of the forfeiture statute. Criminal
activity such as money laundering largely depends
upon the use of [other] monies to advance or
facilitate the scheme.
Tencer, 107 F.3d at 1135; cf. id. at 1134("[C]ourts have concluded that the commingling of
crime proceeds with ’clean’ money makes money
laundering less difficult and may even be
necessary to the successful completion of the
offense. Such untainted funds have been found to
be ’involved’ for purposes of the forfeiture
statute."). While the district court may have
misperceived the precise focus of the proper
analysis, it made the relevant findings, and its
ultimate conclusion was correct. See, e.g.,
Baker, 82 F. Supp.2d at 942 ("Much like the
accounts in Trost, here the evidence clearly
established that the accounts were used to
facilitate the crimes of which the defendant was
convicted. By virtue of the defendant’s use of
these accounts, the total amount traceable to or
involved in the conspiracy to commit money
laundering is subject to forfeiture.").
Therefore, we need not reverse or remand the
issue for further findings./4
Finally, we note that the district court ordered
Baker to "forfeit" $4.4 million. He does not now
have anywhere near that amount. This figure
includes the income Baker generated over the
years, not what he now has. Significantly, Baker
does not assert on appeal that the court erred in
its order to forfeit a large amount of money that
he does not now have. Perhaps that is because the
district court did not err by including such non-
existent proceeds, cf. United States v. Ginsburg,
773 F.2d 798, 799, 801 (7th Cir. 1985) (en banc)
("The government’s right to forfeit the profits
or proceeds of racketeering activity under
section 1963(a)(1) is therefore not limited to
whatever is left over or unspent at the time of
the conviction, but instead includes the entire
amount that was acquired by the defendant in
violation of RICO."). Perhaps also the government
can satisfy part of the forfeiture award with
assets "traceable to" proceeds of Baker’s
conspiracy, or with substitute assets. See 21
U.S.C. sec. 853p; United States v. Hendrickson,
22 F.3d 170, 175 (7th Cir. 1994). At the
forfeiture hearing, though, the government noted
that whatever assets were recovered would be far
short of the forfeiture award.
The district court also stated that the
government could enforce its forfeiture award
against Baker as a regular in personam judgment.
This was proper, too. See United States v.
Candelaria-Silva, 166 F.3d 19, 42 (1st Cir. 1999)
("A criminal forfeiture order may take several
forms. First, the government is entitled to an in
personam judgment against the defendant for the
amount of money the defendant obtained as
proceeds of the offense."); accord United States
v. Voigt, 89 F.3d 1050, 1084 (3d Cir. 1996);
United States v. Lester, 85 F.3d 1409, 1413 (9th
Cir. 1996). In effect this places a judgment lien
against Baker for the balance of his prison term
and beyond. See Voigt, 89 F.3d at 1086 n. 21; cf.
United States v. $814,254.76, 51 F.3d 207, 211
(9th Cir. 1995) ("[T]he substitute assets
provision of the criminal forfeiture statute is
merely another mechanism for collecting a
judgment against the defendant criminal . . .
."). Because Baker does not assign this as an
error, we do not reach the question of whether
this constitutes an excessive fine or causes some
other injury.
III. Conclusion
Because the indictment did not make the
commission of acts of prostitution material to
the money laundering and conspiracy counts, it is
not "plainly obvious" that the indictment was
constructively amended when the district court
charged the jury that it need not find that an
act of prostitution accompanied each credit card
transaction that was presented to obtain
prostitution services, or when the government
made similar statements during closing argument.
Furthermore, the district court did not clearly
err in including as relevant conduct the proceeds
from Baker’s prostitution business over the years
as monies "involved in" the conspiracy because
they furthered and facilitated the money
laundering conspiracy. The district court also
did not clearly err in enhancing Baker’s offense
level for leading five or more people in the
conspiracy and for attempting to obstruct justice
by transferring ownership of his businesses to
his son. Finally, because the millions of dollars
that Baker generated from his prostitution
business over the years facilitated his money
laundering conspiracy, the district court did not
clearly err in including these proceeds in its
forfeiture order as monies "involved in" Baker’s
offense.
For the foregoing reasons, the judgment of the
district court is AFFIRMED.
/1 By incorporating 21 U.S.C. sec. 853, see 18
U.S.C. sec. 982(b)(1), the criminal forfeiture
statute allows the government to obtain
"substitute assets" if it cannot find property
"involved in" or "traceable to" the offense for
which a defendant was convicted. See 21 U.S.C.
sec. 853p.
/2 The district court based its conclusion on the
following passage from Montague: "[T]he Missouri
prostitution statute forms the basis for a
violation of sec. 1952, which is a type of
racketeering activity listed in sec. 1961, and is
a specified unlawful activity designated in the
money laundering statute--sec.1956." Baker, 82 F.
Supp.2d at 941 (quoting 29 F.3d at 322). Baker
notes that this passage from Montague is at the
end of a long quotation from Campione, which
discusses the fact that the Travel Act violation
is using the means of interstate commerce to
facilitate a state crime, not the underlying
state crime. Like Baker, then, we read this
passage from Montague to mean that while a state
prostitution statute "forms the basis for a
violation" of the Travel Act, it is the
"racketeering activity listed in sec. 1961"--the
Travel Act violation itself--that is the
"specified unlawful activity designated in the
money laundering statute."
/3 In this regard, the Fantasyland compound is
clearly forfeitable. Not only did the ATM and
credit card transactions occur on the premises;
the conspiracy was obviously run from this
compound. As the key to Baker’s operation, it was
obviously "involved in" the conspiracy.
/4 Because the district court excluded the proceeds
from Baker’s other businesses from its forfeiture
calculation, and the government does not cross-
appeal this exclusion, we need not address
whether the district court was required to make
this exclusion (at the forfeiture hearing, the
court indicated that it did not think it was). We
note, however, that even legitimate funds that
are commingled with illegitimate funds can be
forfeited if the legitimate funds were somehow
involved in the offense, such as by helping to
conceal the illegal funds. See Tencer, 107 F.3d
at 1134.