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SCOTUS defines money-laundering 'proceeds'

Michael W. Hoskins
January 1, 2008
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The Supreme Court of the United States has defined money laundering and tossed out the convictions of an East Chicago man in a split decision today.

The high court ruled on U.S. v. Efrain Santos, et al., No. 06-1005, which involved a money-laundering ring in East Chicago. This was one of two money-laundering cases decided by the court today; the other came in Cuellar v. U.S., No. 06-1456, which held that mere concealment of money during a transport is not enough to support a conviction for money laundering.

In Santos, a majority of justices held that "proceeds" according to the federal money-laundering statute applies only to transactions involving criminal profits, not the total amount of money.

Justices applied a narrow interpretation that authoring Justice Antonin Scalia said will not unduly burden the federal government and law enforcement agencies, who must show only that a single instance of unlawful activity was profitable.

The court applied the rule of lenity that favors defendants, not prosecutors, as it pondered the statute and reflected on the word "proceeds."

"Under either of the word's ordinary definitions, all provisions of the federal money-laundering statute are coherent; no provisions are redundant and the statute is not rendered utterly absurd," the opinion states. "From the face of the statute, there is no more reason to think that 'proceeds' means 'receipts' than there is to think that 'proceeds' means 'profits.' Under a long line of our decisions, the tie must go to the defendants. Because the 'profits' definition of 'proceeds' is always more defendant-friendly than the (other) definition, the rule of lenity dictates that it should be adopted."

But in a dissenting opinion - with which Chief Justice John Roberts and Justices Anthony Kennedy and Steven Breyer concurred - Justice Samuel Alito wrote, "Concluding that 'proceeds' means 'profits,' the plurality opinion's interpretation would frustrate Congress' intent and maim a statute that was enacted as an important defense against criminal enterprises."

Specifically, the Santos case involves the federal prosecution of a tavern lottery raid where Santos - known as "Puerto Rican Frankie" - was arrested for running the illegal operation throughout the region from the 1970s to 1994. He was sentenced to 17 years in prison in 1998, but was released after the 7th Circuit issued rulings that changed the interpretation of money laundering. Following those decisions, U.S. District Judge James Moody in Hammond ruled that Santos' actions were no longer considered money laundering because of an interpretation of "net proceeds" and "gross proceeds" in federal laws.

Indianapolis lawyer Todd Vare with Barnes & Thornburg argued before the high court Oct. 3, 2007, making Santos the oldest case on its docket this term. This was the Hoosier attorney's first appearance before the SCOTUS and now represents a victory in a case that he took pro bono.

"My client is very pleased that he's properly being kept a free men," said Vare, indicating he spoke with his client within minutes of hearing about the ruling this morning. "Legally, I'm very pleased because it reflects the arguments we made about this ambiguous statute and, what's most interesting, is the division of justices on either side shows how difficult it was interpreting this statute and applying interpretations to the facts here."
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  1. Future generations will be amazed that we prosecuted people for possessing a harmless plant. The New York Times came out in favor of legalization in Saturday's edition of the newspaper.

  2. Well, maybe it's because they are unelected, and, they have a tendency to strike down laws by elected officials from all over the country. When you have been taught that "Democracy" is something almost sacred, then, you will have a tendency to frown on such imperious conduct. Lawyers get acculturated in law school into thinking that this is the very essence of high minded government, but to people who are more heavily than King George ever did, they may not like it. Thanks for the information.

  3. I pd for a bankruptcy years ago with Mr Stiles and just this week received a garnishment from my pay! He never filed it even though he told me he would! Don't let this guy practice law ever again!!!

  4. Excellent initiative on the part of the AG. Thankfully someone takes action against predators taking advantage of people who have already been through the wringer. Well done!

  5. Conour will never turn these funds over to his defrauded clients. He tearfully told the court, and his daughters dutifully pledged in interviews, that his first priority is to repay every dime of the money he stole from his clients. Judge Young bought it, much to the chagrin of Conour’s victims. Why would Conour need the $2,262 anyway? Taxpayers are now supporting him, paying for his housing, utilities, food, healthcare, and clothing. If Conour puts the money anywhere but in the restitution fund, he’s proved, once again, what a con artist he continues to be and that he has never had any intention of repaying his clients. Judge Young will be proven wrong... again; Conour has no remorse and the Judge is one of the many conned.

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