Money Laundering

Published on: February 17, 2012

Mail fraud counts dismissed for material variance between the evidence and the indictment

The defendant, an attorney in Dixie County Florida, was convicted of mail fraud and money laundering charges relating to two separate fraudulent schemes. One scheme involved the defendant’s conversion of funds developers gave him to hold in trust for future expenses associated with a development (River Shores Scheme). The other scheme was convincing victims to invest in a vitamin company called GenSpec Labs (GenSpec) by misrepresenting the anticipated return on the investment and the viability of the company (GenSpec Scheme). The court in U.S. v. Lander found the proof presented at trial in connection with the River Shores mail fraud count materially varied from the allegations contained in the superseding indictment.

Landers practiced as an attorney and served as the Dixie County Attorney. He had business dealings beyond his legal work as he tried to start GenSpec. A group of developers planning the River Shores project retained Landers to help guide their project through the county’s regulatory process. The developers did not know at first he was the county attorney, but after they did they gave him $820,000 as a level of security to assure buyers their project would pass through the county’s regulatory process.

The indictment charges that Landers misrepresented to developers that they were required to pay a performance bond to Dixie County through him as its county attorney. It charged that Landers deposited the $820,000 as payment for the performance bond. At the trial the government failed to present evidence to support the specific charges that the defendant made false representations about having to pay a performance bond. The government instead presented evidence of a scheme to defraud that was entirely different from the one alleged in the indictment charging the River Shores scheme. The misrepresentations that the government relies upon as proof of the offense do not coincide with the allegation of the indictment. The evidence the government offered at trial to support this fraud varied so greatly from the allegations of the indictment the Landers was unable to prepare his defense. When a material variance substantially prejudices the Defendant as it did here, the variance constitutes reversible error. The Court also reversed the money laundering convictions because they were predicated on the River Shores mail fraud count.

Published on: February 14, 2012

Third party’s failure to timely petition for adjudication of interest in forfeited property forecloses any opportunity for relief.

by The Swartz Law Firm

In this appeal Juanita Davenport challenged a final order of criminal forfeiture of $214,980 seized from a safety deposit box. In U.S. v. Davenport, the defendant and her codefendants were charged in the indictment with participating in a drug conspiracy. In addition, Davenport was charged with making a false statement to a federal agent. The indictment also sought to forfeit all the defendants’ interest in any property derived from or used to facilitate the commission of the drug conspiracy. The Davenport pled to the false statement charge and the government dismissed the forfeiture count against her.

One codefendant in her case pled guilty to drug distribution and agreed to forfeit his interest in the $214,000 of U.S. currency found in Davenport’s safe deposit box. A preliminary order of forfeiture was entered pursuant to Rule 32.2(b) and the government filed a notice of intent to dispose of the property, giving persons with interest 30 days to petition the court to adjudicate their potential interest in the property. A written notice of the forfeiture went to Davenport’s attorney advising him his client had 30 days from the written notice to file a petition of 60 days from the first day of the government’s publication of the notice on its website. After the 30 day period ran out, Davenport’s attorney petitioned the district court to adjudicate her interest in the forfeited currency. The district court dismisses the claim as untimely.

First, the 11th Circuit held that Davenport lacked standing to challenge the validity of the preliminary order of forfeiture. Her sole mechanism for vindicating her purported interest in the forfeited property was through the ancillary proceedings of 18 U.S.C. section 853 and Rule 32.2(c). Third parties may not relitigate the merits of a forfeitability determination.

Published on: July 18, 2011

Fine and forfeiture of Atlanta jewelry store’s entire inventory following money laundering and reporting conviction was not unconstitutional in U.S. v. Chaplin

by The Swartz Law Firm

The defendant business in U.S. v. Chaplin’s was a jewelry store in Atlanta from which the defendant, an employee, sold jewelry on a cash basis to persons he knew to be drug dealers. In one instance an undercover IRS agent posing as a narcotics trafficker purchased expensive jewelry in cash from the defendant at his store without completing a Form 8300. The undercover cash sales were structured to avoid individual payments in excess of $10,000, a transaction which required the defendant to file a report with the federal government (Form 8300) containing information about the such as buyer’s name and address. Chaplin’s, Inc., was indicted on money laundering counts and a count of failure to report, all arising out the undercover sale and the failure to file the Form 8300. Because the defendant committed the violations during the course of his employment at Chaplin’s, Chaplin’s Inc. was vicariously liable for his actions and charged by indictment.

The both counts of the indictment sought forfeiture of “any and all property involved in” the offenses including the jewelry store’s entire inventory. Following trial Chaplin’s was found guilty and the government moved to forfeit the inventory on the grounds that the inventory was “involved in” the money laundering and reporting offenses because it provided the defendant owner and employees and vicariously Chaplin’s with an “air of legitimacy.” The inventory totaled $1,877,262. The district court ordered forfeiture of the inventory, plus it imposed a $100,000 fines for two counts.

On appeal Chaplin’s challenged the monetary punishment as a violation of the 8th Amendment as the forfeiture was unconstitutionally excessive and grossly disproportional to the gravity of the offense.

In deciding gross-proportionality, the appellate court looked at three factors:

Whether the defendant falls into the class of persons against whom the criminal statute was principally directed;
Other penalties authorized by the legislature or the Sentencing Commission; and
The harm caused by the defendant.

Published on: February 15, 2011

Evidence of federal criminal fraud sufficient; United States v. Naranjo

by The Swartz Law Firm

In United States v. Naranjo, the defendant’s wire fraud conviction resulted from a multi-million dollar scheme where he solicited investors for a chain of check cashing and pay-day loan stores known as the “Loan Shoppe” by offering high interest rates. The wire fraud statute Title 18 U.S.C. §1341 makes it a federal crime to use the telephone or any other interstate wired device to advance a fraud. It is commonly used federal statute in federal criminal white collar cases. Here Naranjo raised 1.5 million dollars through this fraud. Viewed in a light most favorable to the government, the evidence was sufficient for a reasonable jury to find Naranjo intended to operate a fraudulent scheme.

The evidence showed that money raised did not finance a legitimate business. These were the facts that supported the jury’s finding of a fraudulent scheme:
• The check cashing and payday loan business had no state license;
• The defendant hid his connection to the business by omitting his name on corporate records and license applications;
• He told his salesmen that the business was profitable when it made no profit;
• Only a small portion of investor funds went into expansion of the Loan Shoppe;
• High rates of return were promised yet few if any actually received;
• A majority of investor funds went to debt service and sales commissions without informing investors; and • The defendant personally made over $450,00 from a business that did not generate any profit.
The court of appeals found the evidence supported a finding that it was a ponzi scheme with considerable overhead and large payments to Naranjo.

The concealment money laundering statute prohibits financial transactions conducted for the purpose of concealing unlawfully obtained funds in violation of 18 U.S.C. § 1956(a)(1). Evidence showed three cash withdrawals for large sums of money from the business which occurred contemporaneously with the deposits from victim investors, which supported the concealment convictions. Converting illegally obtained funds into cash was proof of an attempt to hide the source of the funds and the defendant’s connections to them.
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Published on: September 1, 2010

Conviction for false statements and money laundering upheld; United States v. Frazier,

by The Swartz Law Firm

It is a Federal crime to export any firearms outside the United States without of license. When two or more persons agree to commit a Federal offense and take some action in furtherance of the crime, it becomes a conspiracy and is a separate crime. Frazier was convicted in federal district court of the federal crime of conspiracy to export firearms to Canada without a license. He was also convicted of the federal offense of making a false statement in a form to a firearms dealer.

The evidence at jury trial showed he used straw buyers to purchase firearms on his behalf. At trial he claimed in his defense that the identity of the buyer on the ATF form 4473 was not material as both would have been eligible to buy the firearm.

The appellate court rejected this argument finding that falsifying the identity of the actual buyer on the ATF form is material, making this a federal offense. For these reasons the Federal court of appeals found the evidence was sufficient to support a conviction for making false statements on ATF forms used in gun purchases.