United States v. Mathias Pizano , 421 F.3d 707 ( 2005 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 04-1459/1625
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United States of America, *
*
Appellee/Cross-Appellant, *
*
v. *
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Mathias Pizano, *
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Appellant/Cross-Appellee. *
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Appeals from the United States
Nos. 04-1591/1835 District Court for the
_______________ Southern District of Iowa.
United States of America, *
*
Appellee/Cross-Appellant, *
*
v. *
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Celia Pizano, *
also known as Celia Gallardo *
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Appellant/Cross-Appellee. *
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Nos. 04-1592/1682
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United States of America, *
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Appellee/Cross-Appellant, *
*
v. *
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Jessica Pizano, also known as *
Jessica Pizano-Cruz, *
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Appellant/Cross-Appellee. *
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Submitted: December 15, 2004
Filed: August 31, 2005
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Before BYE, HANSEN, and GRUENDER, Circuit Judges.
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GRUENDER, Circuit Judge.
This appeal involves three related defendants. Mathias Pizano and Jessica
Pizano are brother and sister. Celia Pizano is their mother.
Mathias, Jessica and Celia were convicted on all counts of a twenty-count
indictment. After a lengthy trial, a jury found Mathias, Jessica and Celia guilty of
one count of conspiracy to commit money laundering in violation of 18 U.S.C. §§
1956(a)(1)(B)(i) and 1957 (Count 20). In addition to their money-laundering
convictions, Mathias, Jessica and Celia were convicted of the following: Mathias
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was convicted of one count of conspiracy to distribute controlled substances (cocaine
and marijuana) in violation of 21 U.S.C. §§ 846, 841(b)(1)(A) and 841(b)(1)(B)
(Count 1), two counts of making false statements to a financial institution in violation
of 18 U.S.C. § 1014 (Counts 13 and 16), and three counts of engaging in transactions
in criminally derived property in violation of 18 U.S.C. § 1957 (Counts 14, 17 and
18); Jessica was convicted of three counts of bank fraud in violation of 18 U.S.C. §
1344 (Counts 8, 9 and 11) and two counts of engaging in transactions in criminally
derived property in violation of 18 U.S.C. § 1957 (Counts 10 and 12); and Celia was
convicted of five counts of mail fraud in violation of 18 U.S.C. § 1341 (Counts 2, 3,
4, 5 and 15), two counts of wire fraud in violation of 18 U.S.C. § 1343 (Counts 6 and
7) and one count of engaging in transactions in criminally derived property in
violation of 18 U.S.C. § 1957 (Count 18).
With respect to Mathias, the district court imposed concurrent sentences of 360
months’ imprisonment on Counts 1, 13 and 16; 240 months’ imprisonment on Counts
19 and 20; and 120 months’ imprisonment on Counts 14, 17 and 18. As to Jessica,
the district court imposed concurrent sentences of 121 months’ imprisonment on
Counts 8, 9, 11 and 20, and 120 months’ imprisonment on Counts 10 and 12. Lastly,
with respect to Celia, the district court imposed concurrent sentences of 151 months’
imprisonment on Counts 2, 3, 4, 5, 6, 7, 15 and 20, and 120 months’ imprisonment
on Count 18.
All three defendants appeal their convictions and sentences on various grounds,
and the Government has cross-appealed with respect to two sentencing issues. For
the reasons discussed below, we affirm the convictions. We also affirm Jessica’s and
Celia’s sentences. However, we vacate Mathias’s sentence and remand for
resentencing.
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I. BACKGROUND
The factual background of this case dates back to 1992. Due to the volume and
complexity of the facts involved, related facts will be grouped accordingly.
A. In General
Jessica is the mother of five children. She worked as a laborer for Oscar Mayer
in Davenport, Iowa. Her tax returns show adjusted gross income of about $26,000
in 1991 to approximately $46,000 in 2001. Her husband, Fernando Cruz, filed no tax
returns from 1991 through 2001, except for 1998 when he filed jointly but reported
no income.
Celia applied for and obtained two separate Social Security numbers–one under
the name of Celia Gallardo and the other under the name of Celia Pizano. In 1985,
using the Gallardo name and Social Security number, Celia applied for Supplemental
Security Income based on her claimed inability to work and lack of assets. She
received monthly payments from the Social Security Administration.
Mathias’s reported income in 1991 and 1992 was $2,940 and $6,146.70,
respectively. In 1994, he reported income of $5,876.39. In 1993 and from 1995 to
2002, Mathias had no reported income and filed no tax returns.
In 1998, Mathias and Randy Husky became partners in a retaining-wall
business they called “National Retainment Systems.” They did a few jobs, but the
next year, they ended their partnership. However, Mathias continued to use the
National Retainment Systems name and bank account for his own criminal purposes.
In 2000, Mathias and Celia (using the name Celia Pizano) opened the Caliente
Restaurant in Bettendorf, Iowa. The restaurant was in operation from early 2000 until
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the end of 2001. It was not profitable, reporting sales of $22,395 during that period.
Nevertheless, an analysis of the bank account for the restaurant showed cash deposits
of over $50,000 and total deposits of over $74,000.
B. Drugs and Automobiles
In 1992, Mathias, Jessica and Celia were living in Moline, Illinois. Mathias
resided at 160 Fourth Avenue. Jessica, Celia and other family members resided at
162 Fourth Avenue, which was jointly owned by Mathias, Jessica, their sister Jennifer
and Celia. In November 1992, Mathias conveyed his residence at 160 Fourth Avenue
to Jessica. However, Jessica paid no money in the transaction and did not reside in
the house.
On May 9, 1992, the Moline Police Department received reliable information
that there would be a drug party at 160 Fourth Avenue. Mathias was hosting a party
for a drug dealer who had been sentenced and would be leaving for prison. Several
known drug dealers, such as Fernando Castillo, were present at the party. The police
officers obtained a search warrant and raided the house. Mathias and another drug
dealer fled the residence through the back of the house. Mathias escaped to his
family’s house next door. The police found one ounce of powder cocaine in
Mathias’s laundry room and $2,600 in a bag in Mathias’s bedroom. The police told
Jessica that drugs were found at Mathias’s house and that they were looking for him.
Mathias was charged in state court with possession of cocaine. Celia posted his
$5,000 bond, and the charge against Mathias was later dropped. However, Fernando
Castillo and another were convicted on the charge.
Rafael Martinez and Mathias grew up in the same neighborhood and were
friends. In 1992, at the time of the party, Martinez was a drug dealer, and he and
Mathias possibly discussed drug dealing activities with each other. Martinez thought
that Castillo looked up to Mathias, describing Castillo as Mathias’s “lackey.”
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Jonathan Reyes lived in Moline. Reyes initially bought marijuana from
Castillo, and he believed Mathias was Castillo’s source. In 1996 or 1997, Reyes
began purchasing marijuana from Mathias, and in 1997 or 1998, he also began
purchasing cocaine. Mathias would always “front” the drugs to him, meaning that
Mathias would give Reyes the marijuana or cocaine, and Reyes would sell some and
keep some for himself and then pay Mathias back with the proceeds of his own drug
sales. This continued until February 2002, just before Mathias’s arrest.
Jose Leal and Gilbert Quijas distributed cocaine and marijuana to Mathias
beginning in 1997 until around 2000. They delivered approximately 8 to 10
kilograms of cocaine and 150 pounds of marijuana to Mathias during that time. On
three occasions, Mathias paid Leal for drugs with vehicles–a 1993 Nissan Pathfinder,1
a 1995 Chevy Tahoe and a 1991 Chevy Blazer. When Leal received the vehicles, the
titles to the Pathfinder and Tahoe were in Celia’s name. County title records
indicated that Celia received the Chevy Tahoe as a gift from her son and that Jose
and Rosemary Leal purchased the car from Celia for $14,000.
After Leal had problems collecting from Mathias, Leal’s source, Juan Ledesma,
began dealing with Mathias directly. Mathias then met Salvador Ramos-Santos
through Ledesma. After Ledesma was arrested in February 2000, Ramos-Santos and
Mathias agreed that he would sell drugs to Mathias. Between February 2000 and
March 2001, Ramos-Santos sold approximately two and one-half kilograms of
cocaine and 150 pounds of marijuana to Mathias.
On April 2, 2001, officers of the Quad City Metropolitan Enforcement Group,
a drug enforcement agency, caught Ramos-Santos in a Mazda MX-6 with
approximately twenty pounds of marijuana in the trunk. The previous owner of the
1
Mathias had purchased the Pathfinder with approximately $8,000 cash, which
he gave to the seller in a brown paper bag.
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vehicle was Kristine Martens. Martens was Mathias’s live-in girlfriend. Mathias
used the Mazda MX-6 to pay Santos for ten to twelve pounds of marijuana.
Ramos-Santos consented to a search of his residence in Bettendorf where an
additional thirty-nine pounds of marijuana was seized from a box in a pick-up truck.
The police founds handwritten notes that reflected drug quantities and dollar
amounts. These drug ledgers identified Mathias, Michael Pizano2 and others as
customers. Cellular telephone records found in the house showed calls placed to the
telephones of Mathias and Michael Pizano.
The police also found a 1996 Chevrolet pick-up truck registered to Mathias at
Ramos-Santos’s residence. Mathias purchased the truck from a local Ford dealer on
September 11, 2000, for $16,846.50 using a check drawn on the account of Mathias
Pizano, doing business as National Retainment Systems. In December 2000, Mathias
used the truck to pay Ramos-Santos for approximately twenty pounds of marijuana.
On March 5, 2002, federal agents and police executed a search warrant for
Mathias’s home. In the garage, the police found one pound of marijuana, a drug scale
and plastic baggies. Mathias’s fingerprint was found on the plastic bag containing
the marijuana. Two semi-automatic pistols were found in the residence–one in a
duffel bag by Mathias’s bed and the other in a closet. The guns were identified by
Leal and Ramos-Santos as ones shown to them by Mathias during drug transactions.
2
Michael Pizano is Jessica’s son. He lived with Jessica. Testimony at trial
indicated that he sold drugs out of their house. A neighbor even testified that, based
on the amount of traffic and the frequent comings and goings of people at the house,
she thought drug activity was occurring at the house. Michael Pizano was charged
with drug conspiracy. He pled guilty and is not a party to this appeal.
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C. Real Estate Purchases
In 1993, Mathias decided to move from Moline, Illinois to Iowa. He located
a home in the 800 block of Grant Street (“Grant Street”) in Bettendorf, Iowa. Mathias
made an offer to purchase the Grant Street home, subject to successfully closing on
the sale of the property located at 160 Fourth Avenue in Moline, which he claimed
to own. Mathias closed on the purchase of Grant Street soon after the sale of the
Moline property and placed the deed to the Grant Street home in Jessica’s name.
Mathias moved into the Grant Street home.
In August 1995, Jessica applied for a loan with Mercantile Bank and used the
Grant Street property as collateral. On August 25, 1995, she met with a loan officer,
and together they completed a residential loan application. On the form, Jessica
stated that she was the sole owner of the property located at 162 Fourth Avenue in
Moline. She also listed the value of 162 Fourth Avenue at $65,000. In a separate
letter, she explained that the purpose of the loan was to obtain funds to purchase a
home for Mathias in San Antonio, Texas and that she was going to move into the
Grant Street home. In another letter dated October 13, 1995, she stated that Mathias
had taken a job in Texas. On October 26, 1995, Jessica signed a typewritten final
loan application that reiterated the information she previously provided. The bank
approved the loan. On October 31, 1995, loan proceeds in the amount of $65,811.02
and $9,000 in cash were deposited into Jessica’s bank account at IH Mississippi
Valley Credit Union (“IHMVCU”).
Meanwhile, Mathias was planning on purchasing a home located at 2225
Parkway Drive (“Parkway”) in Bettendorf, Iowa, not Texas. He contacted a real
estate agent and negotiated the purchase of Parkway for approximately $72,000.
However, Mathias used Jessica’s name in the offer to purchase the home, and the
deed was placed in her name. In addition, one week after the loan proceeds from the
Grant Street refinancing were deposited into Jessica’s IHMVCU bank account, they
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were used to purchase Parkway. Mathias moved into Parkway, and Jessica and her
family moved into the Grant Street home.
In 1997, Mathias sought more real estate, this time in California. He traveled
to the Huntington Beach area and met with a realtor. After looking at properties,
Mathias decided to buy a condominium located at 310 Lake Street (“Lake Street”).
However, Jessica applied for the loan to purchase the property.
The realtor referred Jessica to Larry Rochelle, a real-estate loan broker.
Rochelle corresponded with Jessica by telephone and mail to complete a loan
application to World Savings Bank. In statements made by Jessica to Rochelle and
in the loan application and supporting materials submitted to World Savings Bank,
Jessica represented that the down-payment for the purchase of Lake Street was to be
provided to her as a gift from her father. She submitted to the bank two gift letters
signed by her father, Matias Pizano (“Mr. Pizano”)–one in the amount of $15,000 and
one in the amount of $35,000.
Mathias and Jessica both contacted Mr. Pizano to ask for money for the
purchase of Lake Street. Mr. Pizano testified that although he signed a $15,000 gift
letter, he agreed to loan them $7,700 for the purchase of Lake Street. He also testified
that he did not sign the $35,000 gift letter that Jessica submitted to World Savings
Bank.
World Savings Bank approved Jessica’s loan for the purchase of Lake Street.
The loan amount was $104,300. The deed to the Lake Street condominium was
placed in Jessica’s name.
During the weeks prior to closing on the Lake Street condominium, more than
$30,000 in cash was deposited into Jessica’s IHMVCU bank account. The deposits
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were made in increments under $10,000, except for a single deposit of $10,800.3 The
manner of these deposits is significant: (1) on October 30, 1997, a deposit of $7,500
cash was made to Celia’s IHMVCU account which was then used to purchase a
cashier’s check payable to Celia and Jessica; (2) on the same day, Celia purchased
another $7,500 cashier’s check from Mercantile Bank made payable to Jessica; (3)
on November 1, 1997, a deposit of $5,350 cash was made to Jessica’s IHMVCU
account; (4) on November 4, 1997, the $7,500 cashier’s check from Mercantile Bank
was deposited into Jessica’s IHMVCU account; (5) on November 5, 1997, the other
$7,500 cashier’s check was paid directly to Tiempo Escrow Inc. and applied toward
the purchase of Lake Street; and (6) on November 5, 1997, a check in the amount of
$40,500 drawn on Jessica’s IHMVCU account was paid to Tiempo Escrow Inc. for
the purchase of Lake Street.
About a year after the purchase of the Lake Street condominium, Mathias
approached the same Huntington Beach realtor about purchasing more property in the
area. Mathias decided on a condominium located at 200 Pacific Coast Highway (the
“PCH condominium”). The agreed upon purchase price was $190,000. Once again,
after Mathias performed all of the leg work, Jessica was substituted to close the deal
in her name. As in the Lake Street deal, she was referred to World Savings Bank to
obtain financing. And again, to explain the source of the down-payment of
approximately $53,000, she submitted a $30,000 gift letter signed by her father. Mr.
Pizano, however, testified that he neither agreed to give nor gave money to Jessica
3
Internal Revenue Service special agent Brian Berntsen testified about the
concept of “structuring.” He explained that when an individual conducts a
transaction at a bank that involves more than $10,000, the bank is required to file a
currency transaction report with the IRS. The report details, for example, the name
and address of the individual who conducted the transaction and the denominations
of the currency involved. Structuring occurs when an individual attempts to
circumvent the reporting requirement by conducting separate transactions in amounts
of less than $10,000.
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for the purchase of the PCH condominium. He also testified that he did not sign or
have any knowledge of the $30,000 gift letter.
To come up with the necessary funds for the PCH down-payment, several
thousand dollars in cash or cashier’s checks were deposited into Jessica’s bank
accounts in increments under $10,000 over a period of a couple of months. The
record shows the following: (1) on September 14, 1998, a deposit of $8,000 cash was
made to Jessica’s Mercantile Bank account; (2) on September 23, 1998, a deposit of
$7,500 cash was made to Jessica’s Mercantile Bank account; (3) on September 28,
1998, another deposit of $7,500 cash was made to Jessica’s Mercantile Bank account;
(4) on September 30, 1998, a deposit of $9,500 cash was made to Celia’s IHMVCU
account, and on the same day, Celia purchased a cashier’s check at the IHMVCU
made payable to her and Jessica in the amount $9,500; (5) also on September 30,
1998, Jessica issued a check on her IHMVCU account to Celia in the amount of
$6,966, and on the same day, Celia cashed the check; (6) on October 1, 1998, Jessica
deposited the $9,500 cashier’s check from IHMVCU and $6,966 cash into her
Mercantile Bank account; and (7) on October 2, 1998, a wire transfer in the amount
of $53,450 was made from Jessica’s Mercantile Bank account to the escrow agent in
California for the purchase of the PCH condominium.
Finally, on November 21, 2001, Mathias purchased property at 1831 Christie
Street in Davenport, Iowa (the “Christie Street property” ). On the date of the sale,
Celia used cash to purchase a $6,500 cashier’s check at the First National Bank in
Bettendorf, Iowa. She also purchased a $5,767.44 cashier’s check at a different bank.
Mathias used the two checks to purchase the Christie Street property.
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II. DISCUSSION
A. Trial Issues
1. Mathias Pizano
a. Sufficiency of the Evidence
Mathias argues that the evidence produced at trial by the Government
is insufficient to support his conviction for conspiracy to distribute cocaine and
marijuana in violation of 21 U.S.C. § 846. We reject this argument.
“Sufficient evidence exists to support a verdict if ‘after viewing the
evidence in the light most favorable to the prosecution, any rational trier of fact could
have found the essential elements of the crime beyond a reasonable doubt.’” United
States v. Jiminez-Perez, 238 F.3d 970, 972 (8th Cir. 2001) (quoting Jackson v.
Virginia, 443 U.S. 307, 319 (1979)). The standard for reviewing a claim of
insufficient evidence is strict, and a jury’s guilty verdict should not be overturned
lightly. Id. at 972-73.
Mathias contends that the evidence, at most, establishes a series of
buyer-seller relationships with Reyes, Leal, Quijas, Ramos-Santos and Ledesma,
rather than the existence of ongoing agreements to sell drugs. In order to convict
Mathias of conspiracy to distribute drugs, the Government needed to prove that: (1)
a conspiracy existed; (2) Mathias knew of the conspiracy; and (3) he knowingly
became part of the conspiracy. See United States v. Crossland, 301 F.3d 907, 913
(8th Cir. 2002). “To establish the existence of a conspiracy the government needed
to prove that there was an agreement among individuals to achieve an illegal
purpose.” Id. Proof of a formal, explicit agreement is not necessary; rather, “[t]he
government need only show that those involved operated pursuant to a common
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scheme or had a tacit understanding . . . .” United States v. Mickelson, 378 F.3d 810,
821 (8th Cir. 2004). Mere proof of a buyer-seller agreement without any prior or
contemporaneous understanding does not support a conspiracy conviction because
there is no common illegal purpose: “In such circumstances, the buyer’s purpose is
to buy; the seller’s purpose is to sell.” United States v. Prieskorn, 658 F.2d 631, 634
(8th Cir. 1981) (quoting United States v. Mancillas, 580 F.2d 1301, 1307 (7th Cir.
1978)) (internal quotation omitted).
After having carefully reviewed the record in the light most favorable
to the verdict, we reject Mathias’s argument that the evidence merely established the
existence of a series of buyer-seller relationships with Reyes, Leal, Quijas, Ramos-
Santos and Ledesma. The record is replete with evidence of distribution of large
amounts of marijuana and cocaine over a significant period of time. See United
States v. Finch, 16 F.3d 228, 231 (8th Cir. 1994) (noting that evidence of distribution
of large amounts of drugs over a significant period of time does not support a
defendant’s requested jury instruction that proof of a buyer-seller relationship is
insufficient to prove a conspiracy). For example, Reyes testified that in 1996 or 1997
he began purchasing marijuana from Mathias, and in 1997 or 1998 he also began
purchasing distributable amounts of cocaine.4 Reyes further testified that Mathias
would always “front” the drugs to him, meaning that Mathias would give Reyes the
marijuana or cocaine, and Reyes would sell some, keep some for himself and pay
Mathias back with the proceeds of his own drug sales. This continued until February
2002, just before Mathias’s arrest.
4
Reyes testified that he started out purchasing marijuana from Mathias in half-
pound quantities. As time went on, he began purchasing marijuana from Mathias in
larger quantities–one pound, two pounds or three pounds. In addition, Reyes testified
that he usually purchased cocaine from Mathias in one-ounce quantities, but that he
also made purchases in two- or three-ounce quantities.
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In addition, Leal and Quijas testified that they distributed cocaine and
marijuana to Mathias beginning in 1997 until around 2000. Altogether, they
delivered approximately 8 to 10 kilograms of cocaine and 150 pounds of marijuana
to Mathias. After Leal had problems collecting from Mathias, Leal’s source,
Ledesma, began dealing with Mathias directly. Mathias then met Ramos-Santos
through Ledesma. Ramos-Santos testified that after Ledesma was arrested in
February 2000, he and Mathias agreed that he would sell drugs to Mathias. Between
February 2000 and March 2001, Ramos-Santos sold approximately two and one-half
kilograms of cocaine and 150 pounds of marijuana to Mathias.
Accordingly, we conclude that there is ample evidence to support a
reasonable juror’s finding that Mathias had ongoing agreements with Reyes, Leal,
Quijas, Ramos-Santos and Ledesma for the common purpose of distributing cocaine
and marijuana, and we affirm his drug-conspiracy conviction.
b. Variance
Next, Mathias contends that the evidence fails to prove a single, over-
arching drug conspiracy as charged in the indictment. “A variance results where a
single conspiracy is charged but the evidence at trial shows multiple conspiracies.”
United States v. Morales, 113 F.3d 116, 119 (8th Cir. 1997). However, we will
reverse only if the variance infringed a defendant’s substantial rights. United States
v. Ghant, 339 F.3d 660, 662 (8th Cir. 2003). A defendant’s substantial rights are
infringed where: “(1) the defendant could not reasonably have anticipated from the
indictment the evidence to be presented against him; (2) the indictment is so vague
that there is a possibility of subsequent prosecution for the same offense; or (3) the
defendant was prejudiced by a ‘spillover’ of evidence from one conspiracy to
another.” United States v. Jones, 880 F.2d 55, 66 (8th Cir. 1989).
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It is somewhat unclear from his brief, but Mathias appears to argue that
he was prejudiced by a spillover of evidence from one conspiracy to another. This
argument is without merit. Assuming without deciding that the facts of his case show
multiple drug conspiracies rather than one, the evidence clearly shows that Mathias
participated in each of the conspiracies. In a case where the evidence shows that the
defendant was a member of each proven conspiracy, the danger of prejudicial
spillover “is minimal, if not non-existent.” United States v. Scott, 511 F.2d 15, 20
(8th Cir. 1975); see also Ghant, 339 F.3d at 664 (“[The defendant] has cited no case
in which, despite evidence that the defendant participated in all of the conspiracies,
a variance between the number of conspiracies charged and the number proven was
found to have prejudiced the defendant.”).
Therefore, we will not reverse Mathias’s drug-conspiracy conviction on
the basis of a variance between the indictment and the evidence. Even assuming a
variance did in fact exist, Mathias’s substantial rights were not infringed.
c. Other Purported Trial Errors
Mathias argues that the district court committed five trial errors. He
contends that: (1) he did not have sufficient time to review certain material under the
Jencks Act, 18 U.S.C. § 3500; (2) evidence of his nephew’s involvement in the drug
conspiracy should not have been admitted; (3) the district court failed to produce a
witness he needed; (4) the district court improperly excluded witness testimony
regarding a co-conspirator’s prior inconsistent statements; and (5) the Government
improperly housed Government witnesses together. Rule 28(a)(9) of the Federal
Rules of Appellate Procedure provides that an appellant must give reasons supporting
the contentions presented in his brief and must provide citations to the authorities and
parts of the record on which he relies. Mathias’s briefing of these issues fails to
comport with this rule. In his entire discussion of all five issues, he cites the record
only three times, cites only one case and barely provides any reasoning supporting his
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contentions. Therefore, we conclude that Mathias has abandoned these issues. See
United States v. Gonzales, 90 F.3d 1363, 1370 (8th Cir. 1996).
2. Jessica Pizano
a. Sufficiency of the Evidence
Jessica challenges the sufficiency of the evidence supporting her
convictions on Counts 8 and 9 for bank fraud in violation of 18 U.S.C. § 1344 and her
convictions on Counts 10 and 12 for engaging in monetary transactions in criminally
derived property in violation of 18 U.S.C. § 1957. “In reviewing the denial of a
motion for acquittal on the ground of insufficiency of the evidence, we review the
evidence in the light most favorable to the verdict, and reverse only if no reasonable
jury could have found the defendant guilty beyond a reasonable doubt.” United
States v. Howard, 235 F.3d 366, 373 (8th Cir. 2000). “[We] will reverse only if the
jury must have had a reasonable doubt concerning one of the essential elements of the
crime.” United States v. Sandifer, 188 F.3d 992, 995 (8th Cir. 1999).
i. Bank Fraud
For Jessica to be convicted of bank fraud under § 1344, the
Government had to prove that she knowingly executed or attempted to execute “a
scheme or artifice (1) to defraud a financial institution; or (2) to obtain any of the
moneys, funds, credits, assets, securities, or other property owned by, or under the
custody or control of, a financial institution, by means of false or fraudulent
pretenses, representations, or promises.” 18 U.S.C. § 1344. In Neder v. United
States, 527 U.S. 1, 25 (1999), the Supreme Court held that “materiality of falsehood”
is an element of the federal bank fraud statute. Jessica principally challenges the
sufficiency of the evidence offered to support the materiality element of § 1344.
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Jessica was convicted on Count 8 for bank fraud in connection
with her application for a loan from Mercantile Bank that was to be secured by the
Grant Street property. Viewed in the light most favorable to the verdict, the evidence
shows that in her loan application to Mercantile Bank, she misrepresented that she
was the sole owner of the property located at 162 Fourth Avenue in Moline and that
such property was worth $65,000. She also misrepresented the purpose of the loan.
In a letter to the bank, she explained that she wanted to obtain funds to purchase a
home for Mathias in San Antonio, Texas, where he had taken a job. However, one
week after the loan proceeds from the Grant Street refinancing were deposited into
Jessica’s IHMVCU account, the funds were used to purchase a home for Mathias on
Parkway in Bettendorf, Iowa.
Jessica was convicted on Count 9 for bank fraud in connection
with her application for the Lake Street mortgage with World Savings Bank. Viewed
in the light most favorable to the verdict, the evidence shows that in her mortgage
application to World Savings Bank, Jessica misrepresented that the source of the
down-payment for Lake Street was a gift from her father. Mr. Pizano testified that
although he signed a $15,000 gift letter, he only agreed to loan Mathias and Jessica
$7,700 for the purchase of Lake Street. He also testified that he did not sign the
$35,000 gift letter that Jessica submitted to World Savings Bank.
On appeal, Jessica argues that any misrepresentations she may
have made were not material to Mercantile Bank’s and World Savings Bank’s
respective decisions to approve her loan applications. She maintains that the value
of the 162 Fourth Avenue property, the location of the property ultimately purchased
for Mathias with the proceeds of the Grant Street refinancing, and the source of the
down-payment for Lake Street (whether from savings or a gift) were not material
factors in the underwriting process. We do not agree.
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Jessica’s argument fails because it misconstrues the materiality
element of bank fraud by improperly injecting a reliance requirement into the
analysis. Under the bank fraud statute, the Government need not prove that the
financial institution actually relied on the defendant’s misrepresentations. See Neder,
527 U.S. at 24-25. Like the defendants in United States v. Kenrick, Jessica
mistake[s] the character of the falsehood required for [a bank fraud]
conviction by arguing, in effect, that it must have actually induced the
bank to make a loan that would not otherwise have been made. On the
contrary, to be criminally fraudulent, a defendant’s deceptive course of
conduct must be material and it must be directed at obtaining money or
other property from the bank, but there is no requirement that it actually
cause the bank to change its behavior. A falsehood can be material even
if it did not in fact induce the bank to alter its conduct, although if such
alteration did occur it is obviously probative of materiality.
221 F.3d 19, 31-32 (1st Cir. 2000) (citations and footnote omitted). “The materiality
inquiry focuses on whether the false statement had a natural tendency to influence or
was capable of influencing the [financial institution].” United States v. Rashid, 383
F.3d 769, 778 (8th Cir. 2004) (internal quotation omitted).
Therefore, whether the banks actually relied on certain of Jessica’s
misrepresentations is not the issue.5 Rather, viewing the record in the light most
favorable to the verdict, a reasonable jury could find that Jessica engaged in a
deceptive course of conduct, which centered on representing herself as the true owner
of Parkway and Lake Street in order to obtain loans for her brother Mathias, a drug
dealer, and that such deception had a natural tendency to influence or was capable of
influencing the banks. We reject Jessica’s sufficiency-of-the-evidence challenge, and
we affirm her bank-fraud convictions.
5
Nonetheless, there is evidence in the record that the banks did, in fact, rely on
the truthfulness of those representations in approving Jessica’s loans.
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ii. Engaging in Monetary Transactions in Criminally
Derived Property
“A conviction under § 1957 requires a showing that: (1)
defendant knowingly engaged in a monetary transaction; (2) the defendant knew that
the property involved derived from specified unlawful activity; and (3) the property
is of a value greater than $10,000.” United States v. Van Brocklin, 115 F.3d 587, 599
(8th Cir. 1997).
Jessica was convicted of engaging in a monetary transaction of
more than $10,000 of criminally derived property for issuing a check on her
IHMVCU account in the amount of $40,500 for the purchase of the Lake Street
condominium. She was convicted on another count of the same offense for wiring
funds from her Mercantile Bank account in the amount of $53,450 for the purchase
of the PCH condominium. Jessica argues that the evidence was insufficient to
convict her on these counts because there was no proof that the down-payments were
in fact derived from specified unlawful activity. She also seems to challenge the
sufficiency of the evidence establishing that she knew the funds were criminally
derived.
Specifically, Jessica contends that there is no competent evidence
in the record to show that the funds for the down-payments came from Mathias and
were, therefore, proceeds of his drug-trafficking activities. Rather, she argues, the
record shows that the money she accumulated to purchase the Lake Street and PCH
condominiums came from legitimate sources–for example, her employment with
Oscar Mayer, the repair and sale of automobiles, rental income and hairstyling.
We reject this argument because the Government is not required
to trace funds to prove a violation of § 1957. United States v. Hetherington, 256 F.3d
788, 794 (8th Cir. 2001). The Government produced evidence showing that Jessica
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was the purchaser and owner of the California properties in name only. Mathias was
the one who actually selected the properties and negotiated their purchase. The
evidence supports the conclusion that Jessica could not have saved up enough funds
from her personal income to make the sizable down-payments. The evidence also
shows that Mathias was a drug dealer whose business generated large amounts of
cash. These facts, along with evidence of large cash deposits into Jessica’s IHMVCU
and Mercantile Bank accounts in the weeks prior to the Lake Street and PCH
closings, constitute sufficient evidence from which a reasonable jury could conclude
that Mathias was the source of the down-payments which came from his drug-dealing
activities.
In addition, the evidence was sufficient for the jury to infer
knowledge on the part of Jessica. The Government provided evidence that as early
as 1992, the police informed Jessica that Mathias’s home had been raided for drugs.
In addition, Jessica misrepresented the source of the down-payments by providing
false gift letters from her father. Based on this evidence, the jury could infer that
Jessica knew that the funds deposited into her accounts for the purchase of the
California properties were criminally derived. See United States v. Wynn, 61 F.3d
921, 927 (D.C. Cir. 1995) (“We believe that Wynn’s course of dealings with Edmond
and Lewis dating back to March 1987–in which they made cash purchases of nearly
a half-million dollars worth of merchandise and he attempted to disguise the source
of that cash–supports the jury’s inference that Wynn knew or was willfully blind to
the fact that the cash involved in this particular transaction was criminally derived.”).
Accordingly, we reject Jessica’s sufficiency-of-the-evidence
challenge, and we affirm her convictions on Counts 10 and 12.
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b. Variance
Next, Jessica argues that a variance between Count 9 of the indictment
and the proof at trial entitles her to a new trial. Count 9 charged Jessica with bank
fraud on World Savings Bank in connection with her application for a mortgage to
purchase the Lake Street condominium. Count 9 misidentified the bank from which
she made the down-payment for the Lake Street condominium as Mercantile Bank,
when in fact, the evidence at trial established that the down-payment came from her
account at IHMVCU. Count 9 also misidentified the recipient of the down-payment
as World Savings Bank, rather than the escrow company.
“A variance that does not result in actual prejudice to the defendant is
harmless error, and does not require reversal of the conviction.” United States v.
Stuckey, 220 F.3d 976, 979 (8th Cir. 2000). “A variance between charge and proof
can affect the substantial rights of a defendant in a criminal case if the effect of the
variance is to prevent the defendant from presenting his defense properly, or if it
takes him unfairly by surprise, or if it exposes him to double jeopardy.” United States
v. Good Shield, 515 F.2d 1, 2 (8th Cir. 1975). Whether a variance prejudiced the
defendant is a question of law that we review de novo. Stuckey, 220 F.3d at 979.
Jessica’s variance argument is without merit because she fails to point
to any resulting prejudice to her case. See United States v. Reece, 547 F.2d 432, 435
(8th Cir. 1977) (holding that defendant’s variance argument was frivolous because
although he alleged that the error was significant, the defendant failed to point to any
prejudice to his case as a result of the error). After reviewing the record, we conclude
that the noted variance did not take Jessica by surprise, prevent her and her counsel
from preparing and presenting her case, or expose her to double jeopardy. See Good
Shield, 515 F.2d at 3. Count 9 involved bank fraud on World Savings Bank. The
indictment misstated the name of the bank from which the down-payment was made,
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not the bank upon which the fraud was perpetrated. The variance was harmless, and
reversal of Jessica’s conviction on Count 9 is therefore unwarranted.
c. Bank-Fraud Instruction
Next, Jessica contends that the district court improperly instructed the
jury regarding the offense of bank fraud.6 Specifically, she argues that the definition
of “scheme to defraud” in the instruction failed to include the element of intent which
is necessary for a bank-fraud conviction. Therefore, she argues, the definition made
6
The district court instructed the jury that the crime of bank fraud has three
essential elements:
One, the defendant knowingly executed a scheme to defraud a
financial institution to obtain monies, funds, assets or other
property owned by or under the custody and control of a financial
institution by means of material falsehoods, fraudulent pretenses,
false or fraudulent representations or promises;
Two, the defendant did so with intent to defraud; and
Three, the financial institution was insured by the United States
Government.
The instruction defined “scheme to defraud” as “any plan or course of action intended
to deceive or cheat another out of money or property by employing material
falsehoods, concealing material facts, or omitting material facts. It also means the
obtaining of money or property from a financial institution by means of material false
representations or promises.” The instruction further provided: “To act with an
‘intent to defraud’ means to act knowingly and with the intention or purpose to
deceive or to cheat. An intent to defraud is accompanied ordinarily by a desire or
purpose to bring about some gain or benefit to oneself or some other person or by a
desire or a purpose to cause some loss to some person.”
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a violation of 18 U.S.C. § 1344 (bank fraud) indistinguishable from a violation of 18
U.S.C. § 1014 (false statements to a bank). We do not agree.
A district court has wide discretion when instructing the jury. United
States v. Wright, 246 F.3d 1123, 1128 (8th Cir. 2001). On appeal, we view the
instructions as a whole, and we will affirm if the instructions “accurately and
adequately state the applicable law.” United States v. Clapp, 46 F.3d 795, 803 (8th
Cir. 1995).
Jessica’s argument fails to consider the bank-fraud instruction as a
whole. The instruction specifically stated that “intent to defraud” is an element of the
offense, and it also defined the phrase. The instructions given on the elements of
bank fraud and the definition of “scheme to defraud” followed the model jury
instructions for this Circuit. See Eighth Cir. Manual of Model Crim. Jury Instructions
6.18.1344 (2002); Feingold v. United States, 49 F.3d 437, 439 (8th Cir. 1995). In
addition, the definition of “intent to defraud” was the same definition upheld by this
Court in Clapp. See 46 F.3d at 802-03 (“Taken together, the court’s instructions on
intent to defraud and the specific elements of the charged [bank-fraud] offense
adequately informed the jury . . . .”). After reviewing the bank-fraud instruction as
a whole, we conclude that the instruction properly and adequately conveyed to the
jury the legal principles governing the offense.
3. Celia
Celia challenges the sufficiency of the evidence supporting her conviction on
Count 18 for engaging in monetary transactions in criminally derived property in
violation of 18 U.S.C. § 1957. Count 18 relates to Celia’s involvement with
Mathias’s purchase of the Christie Street property. Specifically, she argues that there
was no evidence of an intent to conceal or deceive on her part that would support the
conviction.
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This argument fails because a conviction under § 1957 “does not require that
the defendant know of a design to conceal aspects of the transaction or that anyone
have such a design.” Wynn, 61 F.3d at 926-27 (“Due to the omission of a ‘design to
conceal’ element, section 1957 prohibits a wider range of activity than money
‘laundering,’ as traditionally understood.”). Therefore, we affirm Celia’s conviction
on Count 18.
4. Conspiracy to Commit Money Laundering
Mathias, Jessica and Celia argue that the evidence produced at trial by the
Government is insufficient to support their convictions for conspiracy to commit
money laundering. We do not agree.
“The elements of a § 1956(a)(1)(B)(i) money laundering violation are: (1) that
the defendant conducted a financial transaction involving the proceeds of unlawful
activity; (2) that the defendant knew the proceeds involved in the transaction were the
proceeds of an unlawful activity; and (3) that the defendant intended ‘to conceal or
disguise the nature, the location, the source, the ownership, or the control of the
proceeds of specified unlawful activity.’” United States v. Dugan, 238 F.3d 1041,
1043 (8th Cir. 2001) (quoting 18 U.S.C. § 1956(a)(1)(B)(i)). “[T]he purpose of the
money laundering statute is to reach commercial transactions intended (at least in
part) to disguise the relationship of the item purchased with the person providing the
proceeds and that the proceeds used to make the purchase were obtained from illegal
activities.” United States v. Rounsavall, 115 F.3d 561, 565 (8th Cir. 1997) (internal
quotations omitted).
To convict a defendant of conspiracy to launder money, the Government must
prove that the defendant “knowingly joined a conspiracy to launder money and that
one of the conspirators committed an overt act in furtherance of that conspiracy.”
United States v. Evans, 272 F.3d 1069, 1082 (8th Cir. 2001). “At base, there must
-24-
exist an agreement to achieve an illegal purpose.” Id. A conspiratorial agreement
“need not be formal; a tacit understanding will suffice.” United States v. Sparks, 949
F.2d 1023, 1027 (8th Cir. 1991). “Moreover, the government may prove the
agreement wholly by circumstantial evidence or by inference from the actions of the
parties.” Id. (citations omitted).
Mathias and Celia contend that the evidence is insufficient to establish the
existence of an agreement among themselves and Jessica or any other persons. We
do not agree. We conclude that ample evidence was produced at trial from which a
reasonable jury could infer an agreement between Mathias, Celia and Jessica to
launder the proceeds of Mathias’s illegal drug-trafficking activity. For example, the
record supports a finding that Mathias, Jessica and Celia had a tacit understanding to
conceal that Mathias was the true owner of the Lake Street and PCH condominiums
and that the proceeds used to purchase the properties were obtained from his drug
dealing.
Jessica argues that her money-laundering conviction should be reversed
because there is insufficient evidence in the record to show that she knew or should
have known Mathias was involved in the distribution of controlled substances. This
argument also fails. For the same reasons discussed in Jessica’s sufficiency-of-the-
evidence challenge to her conviction under § 1957 (for example, as early as 1992 the
police informed Jessica that Mathias’s home had been raided for drugs), the jury
could infer that Jessica knew that the funds deposited into her accounts for the
purchase of the California properties were criminally derived. See Wynn, 61 F.3d at
927.
Accordingly, we reject this challenge to the sufficiency of the evidence, and we
affirm Mathias’s, Jessica’s and Celia’s convictions on Count 20 for conspiracy to
commit money laundering.
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B. Sentencing Issues
1. Jessica
Under § 2S1.1(a)(2) of the United States Sentencing Guidelines (the
“guidelines”), the base offense level for a third party money-launderer is “8 plus the
number of offense levels in the table in § 2B1.1 . . . corresponding to the value of the
laundered funds.” U.S. Sentencing Guidelines Manual § 2S1.1(a)(2) (2003).
“‘Laundered funds’ means the property, funds, or monetary instrument involved in
the transaction, financial transaction, monetary transaction, transportation, transfer,
or transmission in violation of 18 U.S.C. § 1956 or § 1957.” U.S.S.G. § 2S1.1, cmt.
n.1.
At sentencing, the district court did not aggregate each layer of Jessica’s
money-laundering offense to determine the value of the laundered funds attributable
to her. Using this approach, the district court found that the value of the laundered
funds with respect to Jessica was $226,173.06, which added 12 levels to her base
offense level of eight based on the table in § 2B1.1.
The district court also applied a two-level enhancement for “sophisticated
laundering” under § 2S1.1(b)(3). “‘[S]ophisticated laundering’ means complex or
intricate offense conduct pertaining to the execution or concealment of the [money-
laundering] offense.” U.S.S.G. § 2S1.1, cmt. n.5(A). It “typically involves the use
of (i) fictitious entities; (ii) shell corporations; (iii) two or more levels (i.e., layering)
of transactions, transportation, transfers, or transmissions, involving criminally
derived funds that were intended to appear legitimate; or (iv) offshore financial
accounts.” Id. The district court imposed the enhancement because it found
“substantial layering” by Jessica. The court explained, “Defendant [Jessica] used
numerous small cash deposits, some on the same days, then wrote checks to her
mother, who obtained cashier’s checks to return the money to Jessica.” The district
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court concluded, “The flow of cash into and out of various accounts of Ms. Pizano
indicates a distinct effort to evade federal cash transaction reporting requirements and
an attempt . . . through multiple transactions, to hide large quantities of cash being
deposited into her account.”
The district court applied a six-level enhancement under § 2S1.1(b)(1) for
knowingly laundering the proceeds of a controlled-substance offense. The district
court also added two levels under § 3C1.1 for obstruction of justice, finding that
Jessica lied on the stand during trial and violated a restraining order. Finally, the
district court added another two levels under § 2S1.1(b)(2)(B) because Jessica was
convicted of an offense under 18 U.S.C. § 1956. Jessica’s resulting total offense level
was 32, which yielded a guidelines range of 121 to 151 months’ imprisonment based
on her criminal history category of I. The district court imposed concurrent sentences
of 121 months’ imprisonment on Counts 8, 9, 11 and 20, and 120 months’
imprisonment on Counts 10 and 12.7
On appeal, the Government argues that the district court erred in its application
of § 2S1.1(a)(2) because it did not aggregate each layer of Jessica’s money-
laundering offense in determining the value of the laundered funds for purposes of
her base offense level. Specifically, the Government contends that in a money-
laundering offense involving layering, the “value of the laundered funds” is the
aggregate total of the funds involved in each layer, not the amount originally derived
from criminal activity and then laundered. The Government argues that using the
aggregate approach, the value of the laundered funds involved in Jessica’s money-
laundering offense would exceed one million dollars, which, according to the table
in § 2B1.1, would add 16, rather than 12, to Jessica’s base offense level.
7
Counts 10 and 12 carried a ten-year maximum sentence.
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In addition to the Government’s challenge to the district court’s interpretation
and application of § 2S1.1(a)(2), Jessica raises a Blakely/Booker argument. We reject
the Government’s argument that the district court should have used the aggregate
approach in applying § 2S1.1(a)(2). We also conclude that Jessica’s Blakely/Booker
argument fails.
a. “Value of the Laundered Funds” Under § 2S1.1
After Booker, “we will continue to examine de novo whether the district
court correctly interpreted and applied the guidelines.” United States v. Mashek, 406
F.3d 1012, 1016-17 (8th Cir. 2005). Section 2S1.1 was amended extensively in 2001.
Analyzing the 2001 amendments to § 2S1.1, we conclude that the district court did
not err, and we hold that in a money-laundering offense involving layering, the “value
of the laundered funds” is the amount originally derived from criminal activity and
then laundered, not the aggregate total of the funds involved in each layer.
In the pre-amended version of § 2S1.1, the “value of the funds”8 was a
specific offense characteristic used to enhance a defendant’s base offense level.
According to the commentary on the pre-amended version of § 2S1.1, the value of the
funds was “an indicator of the magnitude of the criminal enterprise, and the extent to
which the defendant aided the enterprise.” U.S.S.G. § 2S1.1, cmt. background. For
example, in United States v. Martin, 320 F.3d 1223, 1226 (11th Cir. 2003), the
Eleventh Circuit held that under the pre-amended version of § 2S1.1, the value of the
funds should not be strictly limited to funds originally injected or infused into the
money-laundering scheme. Rather, the court reasoned that layered transactions
should be aggregated to determine the value of the funds because such a calculation
accurately reflects the scope of the criminal enterprise and the harm that befalls
society when law enforcement’s efforts to track the ill-gotten gains are impeded. Id.
8
The amended version uses the term “value of the laundered funds.”
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at 1227. The court in United States v. Li, 973 F. Supp. 567, 574 (E.D. Va. 1997),
reached the same holding and concluded that adding the value of funds in each layer
“would be an accurate indicator of the magnitude of the criminal enterprise in which
[the defendant] was involved.” Lastly, in another case which did not address the
specific issue of aggregation, the Fifth Circuit examined the term “value of the funds”
under the pre-amended version of § 2S1.1 and opined that “[s]ection 2S1.1 measures
the harm to society that money laundering causes to law enforcement’s efforts to
detect the use and production of ill-gotten gains.” United States v. Allen, 76 F.3d
1348, 1369 (5th Cir. 1996).
In contrast, after the 2001 amendments to § 2S1.1, the “value of the
laundered funds” is no longer a specific offense characteristic.9 “Instead, the base
offense level for money laundering is determined by reference to the underlying
offense from which the laundered funds were derived, or by reference to the chart in
§ 2B1.1 corresponding to the ‘value of the laundered funds.’” Martin, 320 F.3d at
1227 n.3; see § 2S1.1(a). The amended guideline also contains several new specific
offense characteristics, for example, a six-level enhancement for knowingly
laundering the proceeds of certain offenses and a four-level enhancement for being
in the business of laundering funds. See § 2S1.1(b)(1), (2). The most telling
addition, for purposes of the present issue, is the enhancement for “sophisticated
laundering,” which is defined as “complex or intricate offense conduct pertaining to
the execution or concealment of the [money-laundering] offense.” See § 2S1.1(b)(3);
U.S.S.G. § 2S1.1, cmt. n.5(A). The stated reason for the added enhancement is that
offenses involving sophisticated laundering “warrant additional punishment because
such offenses are more difficult and time consuming for law enforcement to detect
than less sophisticated laundering.” U.S.S.G. app. C.
9
In the pre-2001 version of § 2S1.1, the “value of the funds” was a specific
offense characteristic. In addition, the fact that the defendant knew or believed the
funds were proceeds of a controlled-substance offense was the only other specific
offense characteristic that could be used to enhance a defendant’s base offense level.
-29-
The 2001 amendments to § 2S1.1 convince us that the “value of the
laundered funds” should be limited to funds originally injected or infused into the
money-laundering scheme. The “value of the laundered funds” is no longer the only
factor reflecting the magnitude of the criminal enterprise. Magnitude also is reflected
in the specific offense characteristics that were added to the guideline. Specifically,
the sophisticated-laundering enhancement now accounts for the harm that befalls
society when law enforcement’s efforts to track the ill-gotten gains are impeded by
layering. Aggregation is no longer necessary to account for that harm. See Martin,
320 F.3d at 1227 n.3 (“[A]lthough the district court properly aggregated the funds
from layered transactions in determining the ‘value of the funds’ under § 2S1.1(b)(2)
of the 1998 Guidelines, it might be improper for a district court to do so when
determining the ‘value of the laundered funds’ under § 2S1.1(a)(2) of the 2001
Guidelines because § 2S1.1(b)(3) of the 2001 Guidelines provides for a two level
increase for ‘sophisticated laundering.’”).
Accordingly, we conclude that the district court did not err in its
application of § 2S1.1(a)(2), and the Government’s cross-appeal on this issue is,
therefore, denied.
b. Blakely/Booker
Jessica argues that her sentence, pronounced under a mandatory
application of the guidelines, is erroneous under United States v. Booker, 125 S. Ct.
738 (2005). Before the district court, Jessica did not argue Apprendi or Blakely error
with respect to her sentencing or that the guidelines were unconstitutional. Therefore,
we review her sentence for plain error. United States v. Pirani, 406 F.3d 543, 549
(8th Cir. 2005) (en banc).
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We apply the plain-error test as set forth in United States v. Olano, 507
U.S. 725, 732-36 (1993). The test has been stated as follows:
[B]efore an appellate court can correct an error not raised at trial, there
must be (1) error, (2) that is plain, and (3) that affects substantial rights.
If all three conditions are met, an appellate court may then exercise its
discretion to notice a forfeited error, but only if (4) the error seriously
affects the fairness, integrity, or public reputation of judicial
proceedings.
Pirani, 406 F.3d at 550 (quoting Johnson v. United States, 520 U.S. 461, 466-67
(1997)) (internal quotation omitted).
As in Pirani, the first two factors are satisfied because the district court
committed error in applying the guidelines in a mandatory fashion, and the error is
plain at the time of appellate consideration. See Pirani, 406 F.3d at 550. To satisfy
the third Olano factor, Jessica must demonstrate “a reasonable probability that [she]
would have received a more favorable sentence with the Booker error eliminated by
making the Guidelines advisory.” Id. at 551. We have reviewed the record, and we
conclude that there is nothing to indicate a reasonable probability that Jessica would
have received a more favorable sentence but for the Booker error.
Accordingly, we affirm Jessica’s sentence.
2. Celia
As with Jessica, the district court did not aggregate each layer of Celia’s
money-laundering offense to determine the value of the laundered funds attributable
to her under § 2S1.1(a)(2) of the guidelines. Using this approach, the district court
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found that the value of the laundered funds with respect to Celia was $404,704.63,10
which added 14 levels to her base offense level of eight based on the table in § 2B1.1.
The district court also applied a two-level enhancement for “sophisticated
laundering” under § 2S1.1(b)(3), finding “substantial layering” by Celia. In addition,
the district court applied a six-level enhancement under § 2S1.1(b)(1) for knowingly
laundering the proceeds of a controlled-substance offense. Finally, the district court
added another two levels under § 2S1.1(b)(2)(B) because Celia was convicted of an
offense under 18 U.S.C. § 1956.
Celia’s resulting total offense level was 32, which yielded a guidelines range
of 151 to 188 months’ imprisonment based on her criminal history category of III.
The district court imposed concurrent sentences of 151 months’ imprisonment on
Counts 2, 3, 4, 5, 6, 7, 15 and 20, and 120 months’ imprisonment on Count 18.11
On appeal, the Government argues, as it did with respect to Jessica’s sentence,
that the district court erred in its application of § 2S1.1(a)(2) because it did not
aggregate each layer of Celia’s money-laundering offense in determining the value
of the laundered funds for purposes of her base offense level. Specifically, the
Government contends that using the aggregate approach, the value of the laundered
funds involved in Celia’s money-laundering offense would exceed one million
10
The district court arrived at the $404,704.63 figure as follows: (1) $3,500
earnest money for the purchase of the Lake Street condominium; (2) $5,000 earnest
money for the purchase of the PCH condominium; (3) $9,000 for the purchase of the
PCH condominium; (4) $14,676.44 for the purchase of the Christie Street property;
(5) deposits to the Caliente Restaurant account in the amount of $74,000; (6)
American Express payments totaling $70,546.19; (7) cash deposits to her bank
account totaling $37,129; (8) $149,303 from the purchase of vehicles; and (9)
$41,550 for the purchase of the Lake Street condominium.
11
Count 18 carried a ten-year maximum sentence.
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dollars, which, according to the table in § 2B1.1, would add 16, rather than 14, to
Celia’s base offense level. For the reasons we discuss in Section B.1.a, we conclude
that the district court did not err in its application of § 2S1.1(a)(2), and the
Government’s cross-appeal on this issue is denied.
Celia raises three challenges to her sentence. First, she argues that the district
court erred in calculating the value of the laundered funds attributable to her. She
also argues that the district court should not have applied the sophisticated-laundering
enhancement. Lastly, Celia raises a Blakely/Booker argument.
a. “Value of the Laundered Funds” Calculation
Celia disputes the following amounts included in the district court’s
determination of the value of the laundered funds attributable to her: (1) deposits to
the Caliente Restaurant account in the amount of $74,000; (2) American Express
payments totaling $70,546.19; and (3) $41,550 for the purchase of the Lake Street
condominium. After Booker, we continue to review the district court’s findings at
sentencing for clear error. Mashek, 406 F.3d at 1016-17. We have examined each
of Celia’s claims, and in light of our standard of review, we conclude that the district
court’s findings were not clearly erroneous.
b. Sophisticated-Laundering Enhancement
Celia challenges the two-level enhancement imposed by the district court
for “sophisticated laundering” under § 2S1.1(b)(3). As we noted, “‘sophisticated
laundering’ means complex or intricate offense conduct pertaining to the execution
or concealment of the [money-laundering] offense.” U.S.S.G. § 2S1.1, cmt. n.5(A).
The district court imposed the enhancement because it found “substantial layering”
by Celia. The court explained, “The flow of cash into and out of various of Celia’s
accounts indicates a distinct effort to evade federal cash transaction reporting
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requirements and an attempt, through multiple transactions, to hide large quantities
of cash being deposited into her accounts. Celia participated in numerous vehicle
transactions and frequently moved money from her own accounts to those of her
daughter.”
Celia contends that there was nothing complex or sophisticated in the
way she moved funds between accounts or in the purchase of cashier’s checks.
Specifically, she argues that numerous simple transactions do not equate to complex
conduct. Celia does not dispute the findings underlying the district court’s
conclusion that she engaged in layering. Rather, she challenges the district court’s
application of § 2S1.1(b)(3) to its findings. Therefore, we review de novo whether
the district court correctly applied the guidelines when it determined that its findings
constituted sophisticated laundering. See United States v. Finck, 407 F.3d 908, 913
(8th Cir. 2005) (in a fraud case, conducting de novo review of whether the district
court correctly applied the guidelines when it determined the facts constituted
sophisticated means under U.S.S.G. § 2B1.1(b)(1)(8)).
Under the plain language of § 2S1.1, layering constitutes sophisticated
laundering. See U.S.S.G. § 2S1.1, cmt. n.5(A) (noting that sophisticated laundering
“typically involves the use of . . . layering”); see also United States v. Miles, 360 F.3d
472, 482 (5th Cir. 2004) (“When an individual attempts to launder money through
‘two or more levels of transactions,’ the commentary clearly subjects an individual
to the sophisticated laundering enhancement.”). The guideline does not require a
finding that each layer was composed of a complex transaction. Therefore, because
the district court found that Celia engaged in layering and she does not dispute that
finding, we conclude that the district court did not err in applying the sophisticated
laundering enhancement.
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c. Blakely/Booker
Lastly, Celia argues that her sentence, pronounced under a mandatory
application of the guidelines, is erroneous under Booker. Like Jessica, Celia failed
to preserve the issue, and therefore, we review her sentence for plain error. Pirani,
406 F.3d at 549 (8th Cir. 2005).
As we concluded in Jessica’s case, the third Olano factor has not been
met because Celia has failed to demonstrate “a reasonable probability that [she]
would have received a more favorable sentence with the Booker error eliminated by
making the Guidelines advisory.” Id. at 551. We have reviewed the record, and there
is nothing to indicate a reasonable probability that Celia would have received a more
favorable sentence but for the Booker error.
Accordingly, we affirm Celia’s sentence.
3. Mathias
Based on the quantity of drugs found by the jury, Mathias’s base offense level
for the drug-conspiracy conviction was 32. The district court credited the trial
testimony of Leal and applied a two-level enhancement under § 2D1.1(b)(1) for
possession of a dangerous weapon during the drug offense. Another two levels were
added under § 2S1.1(b)(2)(B) because Mathias was convicted of an offense under 18
U.S.C. § 1956. The district court also applied a two-level enhancement under §
3C1.1 for obstruction of justice, finding that Mathias attempted to place a “hit” on the
prosecutor and that he assaulted a cooperating Government witness. In addition, the
district court applied a four-level enhancement under § 3B1.1(a) for Mathias’s role
as an organizer or leader of a criminal activity that involved five or more participants.
Finally, the district court denied a two-level enhancement for sophisticated laundering
under § 2S1.1(b)(3).
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Mathias’s resulting total offense level was 42, which yielded a guidelines range
of 360 months’ to life imprisonment based on his criminal history category of I. The
district court imposed concurrent sentences of 360 months’ imprisonment on Counts
1, 13 and 16; 240 months’ imprisonment on Counts 19 and 20; and 120 months’
imprisonment on Counts 14, 17 and 18.
Mathias and the Government both raise challenges to the sentence imposed by
the district court. Mathias argues that the district court erred in applying the
dangerous-weapon enhancement under § 2D1.1(b)(1) and the leadership-role
enhancement under § 3B1.1(a). The Government argues that the district court erred
in denying the sophisticated-laundering enhancement under § 2S1.1(b)(3). Finally,
Mathias raises a Blakely/Booker argument.
“We review the district court’s factual findings for clear error, and its
interpretation and application of the guidelines de novo.” United States v. Noe, 411
F.3d 878, 888 (8th Cir. 2005) (citing Mashek, 406 F.3d at 1020).
a. Dangerous-Weapon Enhancement
“Section 2D1.1(b)(1) mandates a two-level enhancement if the
Government can prove by a preponderance of the evidence that the defendant
possessed ‘a dangerous weapon (including a firearm)’ while violating 21 U.S.C. §
841(b).” United States v. Savage, 414 F.3d 964, 966 (8th Cir. 2005) (quoting §
2D1.1(b)(1)). The enhancement, which “reflects the increased danger of violence
when drug traffickers possess weapons[,] . . . should be applied if the weapon was
present, unless it is clearly improbable that the weapon was connected with the
offense.” U.S.S.G. § 2D1.1, cmt. n.3. “[T]he government need only prove a temporal
and spatial nexus among the weapon, defendant and drug-trafficking activity.”
United States v. Torres, 409 F.3d 1000, 1003 (8th Cir. 2005).
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The district court applied the enhancement, relying on Leal’s trial
testimony that Mathias showed him a gun during the course of one of their drug
transactions at Mathias’s house. Leal testified that Mathias got the gun out of a hall
closet and
[H]e [Mathias] just show it to me and extend his hand and kind of hand
it to me. So I grab it just for a few seconds and give it back to him, and
I ask him if . . . it was loaded. He say no. And then when he grabbed the
gun back, he pulled the–the thing in the bottom, and it was loaded, like,
with four bullets. Said, “Put that thing back,” because, you know, you
can get hurt.
Mathias argues that the district court erred in applying the enhancement
because it was clearly improbable that the gun was connected with the drug
transaction. Specifically, he contends that the incident amounted to nothing more
than showing an acquaintance his gun. This argument is totally lacking in merit.
Mathias’s seemingly innocent characterization of the incident with Leal falls apart
when placed in the context of § 2D1.1(b)(1). The fact that the “acquaintance” was
one of Mathias’s cocaine and marijuana suppliers and the fact that Mathias
brandished a loaded gun to such an acquaintance during a drug buy, see United States
v. Lopez, No. 04-2189, slip op. at 5 (8th Cir. Aug. 1, 2005) (noting the fact that the
gun was loaded suggests that it was being kept ready for immediate or emergency
use), constitute just the type of conduct § 2D1.1(b)(1) aims to address. The evidence
clearly shows a temporal and spatial nexus among the gun, Mathias and drug-
trafficking activity. The district court did not err.
b. Leadership-Role Enhancement
Section 3B1.1(a) provides for a four-level enhancement “[i]f the
defendant was an organizer or leader of a criminal activity that involved five or more
participants or was otherwise extensive.” A “participant” is “a person who is
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criminally responsible for the commission of the offense, but need not have been
convicted.” U.S.S.G. § 3B1.1, cmt. n.1. The enhancement “flows from the
defendant’s decision-making authority, type of participation in the offense, nature and
scope of the crime, and the degree of control or authority over others.” Noe, 411 F.3d
at 889. Furthermore, the enhancement applies “even if the defendant’s leadership role
did not encompass all the participants.” United States v. Payne, 119 F.3d 637, 646
(8th Cir. 1997).
The district court applied the enhancement, finding that Mathias
organized and led Celia, Jessica and Kristine Martens in a conspiracy to launder
money and that the following participants were also involved: Michael Pizano,
Jennifer Pizano, Leal and Ramos-Santos. Mathias argues that the district court erred
in applying the enhancement by improperly factoring in drug-conspiracy participants,
such as Leal and Ramos-Santos. Mathias’s argument fails because it relies on an
inaccurate characterization of the district court’s findings.
For example, the district court included Leal in its finding of “five or
more participants” based on his involvement in the money-laundering activity. A
preponderance of the evidence at trial showed that Mathias used a 1995 Chevy Tahoe,
purchased with proceeds of his drug-trafficking activity and titled in Celia’s name,
to buy drugs from Leal. Mathias’s drug-trafficking proceeds were further concealed
in that county records show Jose and Rosemary Leal purchasing the Tahoe from Celia
for $14,000.
We conclude that the district court did not clearly err in finding that
Mathias organized and led Celia, Jessica and Kristine Martens in a conspiracy to
launder money. We also conclude that the district court’s finding that Leal was a
participant in the money-laundering activity was not clearly erroneous. Therefore,
the district court’s enhancement of Mathias’s sentence under § 3B1.1(a) was proper
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because Mathias was an organizer or leader of a criminal activity that involved at
least five participants.
c. Sophisticated-Laundering Enhancement
The Government takes issue with the fact that despite applying the
sophisticated-laundering enhancement to Jessica and Celia, who, as the district court
found, were organized and led by Mathias in the money-laundering conspiracy, the
district court inexplicably denied application of the enhancement to Mathias. The
denial was based on the district court’s findings that National Retainment Systems
and the Caliente Restaurant were not “fictitious entities” and that Mathias’s conduct
in the scheme amounted to typical money-laundering activities. We cannot say that
the court’s finding on fictitious entities is clearly erroneous. However, we do
conclude that the district court erred in its application of the guidelines by failing to
apply § 1B1.3 to determine whether Mathias should be held accountable for Jessica’s
and Celia’s “layering” activities. We remand to the district court to make this
determination.12
Section 1B1.3(a)(1)(B) provides that “in the case of a jointly undertaken
criminal activity,” a defendant is responsible for “all reasonably foreseeable acts or
omissions of others in furtherance of the jointly undertaken criminal activity.”
“Accordingly, a defendant convicted of conspiracy is properly held accountable for
all reasonably foreseeable acts of co-conspirators advancing that conspiracy.” United
States v. Bad Wound, 203 F.3d 1072, 1076 (8th Cir. 2000). “Factors relevant to
foreseeability include whether the defendant benefitted from his co-conspirator’s
12
We must remand because the district court’s incorrect application of the
guidelines was not harmless. See Mashek, 406 F.3d at 1018. If the 2-level
sophisticated-laundering enhancement is applied, Mathias’s recommended sentence
under the guidelines is life imprisonment, rather than a range of 360 months’ to life
imprisonment.
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activities and whether he demonstrated a substantial level of commitment to the
conspiracy.” United States v. Brown, 148 F.3d 1003, 1008 (8th Cir. 1998).
Unless the district court finds that Jessica’s and Celia’s layering
activities were not reasonably foreseeable to Mathias in furtherance of the money-
laundering conspiracy, a finding this Court cannot imagine, see Miles, 360 F.3d at
482 (applying the sophisticated-laundering enhancement to defendant after finding
layering activities of co-conspirator reasonably foreseeable to the defendant), the
enhancement should apply to Mathias.
III. CONCLUSION
For the foregoing reasons, we affirm Mathias’s, Jessica’s and Celia’s
convictions. We also affirm Jessica’s and Celia’s sentences. However, we vacate
Mathias’s sentence and remand for resentencing consistent with this opinion and the
Supreme Court’s opinion in Booker.
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