USA. v. Butler

• Decision Date: 01 March 2000
• Docket Number: No. 99-4153,CR-97-146-S,99-4153
• Citation: 211 F.3d 826
• Parties: (4th Cir. 2000) UNITED STATES OF AMERICA, Plaintiff-Appellee, v. EDWARD R. BUTLER, Defendant-Appellant. (). . Argued:
• Court: U.S. Court of Appeals — Fourth Circuit

Page 826

211 F.3d 826 (4th Cir. 2000)

UNITED STATES OF AMERICA, Plaintiff-Appellee, v. EDWARD R. BUTLER, Defendant-Appellant.

No. 99-4153 (CR-97-146-S).

UNITED STATES COURT OF APPEALS,FOR THE FOURTH CIRCUIT.

Argued: March 1, 2000.

Decided: May 3, 2000.

Appeal from the United States District Court for the District of Maryland, at Baltimore.

Eric N. Smalkin, District Judge.

COUNSEL ARGUED: Nathan Z. Dershowitz, DERSHOWITZ & EIGER, P.C., New York, New York, for Appellant. Barbara Slaymaker Sale, Assistant United States Attorney, Baltimore, Maryland, for Appellee. ON BRIEF: Victoria B. Eiger, DERSHOWITZ & EIGER, P.C., NewYork, New York; Andrew Shear, ALAN M. DERSHOWITZ, Cam-bridge, Massachusetts, for Appellant. Lynne A. Battaglia, United States Attorney, Baltimore, Maryland, for Appellee.

Before LUTTIG, WILLIAMS, and MOTZ, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Luttig and Judge Williams joined.

OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

A jury convicted Edward R. Butler of one count of bankruptcy fraud, in violation of 18 U.S.C. § 152 (1994 & Supp. IV 1998) and five counts of money laundering, in violation of 18 U.S.C. § 1957 (1994). On appeal, Butler's principal contention is that his money laundering convictions cannot stand because they are based on the very same transactions that form the basis for his bankruptcy fraud conviction. Butler maintains that the funds involved in these transactions could not constitute "criminally derived property," as required by the money laundering statute, because these funds became "criminally derived" only after the fraudulent transactions were complete. Although we agree that the statute prohibits only the laundering of "criminally derived property," we must reject Butler's argument. At the time of the charged money laundering transactions, Butler had already concealed the funds from the bankruptcy trustee, and the funds that he laundered therefore were "criminally derived property." We also reject Butler's other arguments and so affirm his convictions and sentence.

I.

The government introduced evidence from which the jury could find the following facts. After filing for bankruptcy in July 1990, Butler settled a debt owed to him by the Rhema Development Corporation and its principals, Reverend and Mrs. Cornelius Showell, who were also in bankruptcy at the time. Butler had sold a funeral home to the Showells during the 1980's, and he had taken the note as part of the purchase price, with stock in the funeral home held as collateral. The Showells agreed to pay Butler a $350,000 settlement, with payments to be made into an escrow account for which the parties' attorneys would be joint signatories. Butler disclosed the settlement plan to his creditors, but he did not obtain the approval of the bankruptcy court.

Pursuant to this plan, the Showells paid $65,000 into the escrow account but fell behind in their payments. The parties then negotiated a new arrangement. On October 15, 1991, Butler released back to the Showells the $65,000 that had been held in escrow; the Showells then issued three checks: one for $100,000 payable to Butler, and two others, for $100,000 and $150,000 respectively, payable to James Adkins, an associate of Butler who had acquired an interest in the funeral home. Butler did not report any of these transactions to the bankruptcy trustee or his creditors.

Butler used the funds realized from the first $100,000 check, payable to him, for personal expenses; Adkins kept the funds from the second $100,000 check. The government alleged that Butler fraudulently concealed from the bankruptcy trustee the funds derived from both of these checks.

With respect to the remaining $150,000 check, Butler was alleged to have both concealed these funds from the bankruptcy trustee and laundered them. Upon receipt of this check, Butler caused Adkins to endorse it and transfer it to him. Butler then gave the check to Father Edward Miller, a trusted friend. Father Miller, apparently unaware of the origins of the check, held the funds realized from this check on Butler's behalf in bank accounts for over a year.

Between September 1992 and January 1993, Butler directed Father Miller to draw on the $150,000 in order to purchase four cashier's checks payable to Bishop Randolph Caines, a Philadelphia pastor and associate of Butler. These four transactions constitute the basis for Counts II through V of the indictment, which charge Butler with aiding and abetting money laundering in violation of 18 U.S.C. § 1957. Bishop Caines used a substantial portion of the money to open an account, over which Butler had control, at First Fidelity Bank in Philadelphia. In April 1993, Butler directed Alice Tatum, Bishop Caines' assistant, to purchase a cashier's check payable to"S. Lee Martin." This transaction became the basis for Count VI of the indictment, also charging Butler with aiding and abetting money laundering. The government alleges that the funds represented by this last check were eventually used to purchase a lien on Butler's house.

Count I of the indictment charges that, from on or about the date of the Rhema-Showell settlement until 1995, Butler fraudulently concealed from the bankruptcy estate the entire $350,000 received from the settlement.

Butler's first trial ended in a hung jury, but his second trial resulted in convictions on all six counts.

II.

Butler contends that we must reverse his convictions for money laundering because the funds used to purchase the five cashier's checks involved in the five money laundering counts did not constitute "criminally derived property." Butler argues that these funds did not become "criminally derived property" until he completed some act of bankruptcy fraud, and he maintains that the government failed to prove completion of such an act prior to the purchase of the checks. Although the extent to which Butler has preserved this argument for appellate review is not entirely clear,¹ for purposes of this appeal we give him the benefit of the doubt and treat it as a challenge to the sufficiency of the evidence, fully preserved for review by a timely Rule 29 motion. See Fed. R. Crim. P. 29. As such, we must sustain his convictions if the record, viewed most favorably to the government, contains substantial evidence to support the convictions. See Glasser v. United States, 315 U.S. 60, 80 (1942).

Federal law defines money laundering as "a monetary transaction in criminally derived property that is . . . derived from specified unlawful activity," 18 U.S.C. § 1957(a); such activity includes concealment of assets in bankruptcy. See 18 U.S.C. § 1956(c)(7)(D) (1994 & Supp. IV 1998); 18 U.S.C. § 152. The plain language of the money laundering statute thus requires that the funds involved in the forbidden "monetary transaction[s]" represent the proceeds of "specified unlawful activity."

In enacting the statute, Congress expressed concern about criminals' use of "complex schemes to disguise the illegal nature and true source" of the proceeds of their illegal activity. See S. Rep. No. 99433 at 2 (1986). The legislative history indicates that "Congress passed the money laundering statutes to criminalize the means criminals use to cleanse their ill-gotten gains." United States v. Savage, 67 F.3d 1435, 1441 (9th Cir. 1995).

In other words, Congress did not fashion the money laundering statute to create a new source of criminal liability for every fraudulent monetary transaction. Rather, "both the plain language of § 1957 and the legislative history behind it suggest that Congress targeted only those transactions occurring after proceeds have been obtained from the underlying unlawful activity." See Johnson, 971 F.2d at 569 (reversing certain money laundering convictions). To provide the basis for a money laundering offense, a financial transaction must involve funds that have been "criminally derived."

Funds are "criminally derived" if they are"derived from an already completed offense, or a completed phase of an ongoing offense." United States v. Conley, 37 F.3d 970, 980 (3d Cir. 1994); see also Sayakhom, 186 F.3d at 943 (finding that receipt of funds in response to fraudulent mailing could support money laundering conviction when initial fraudulent mailing formed completed phase of the offense); Morelli, 169 F.3d at 806-07 (finding that first set of fraudulent wire transfers was not money laundering but that subsequent wire transfers involved proceeds of the first set of transfers, and therefore did constitute money laundering); Christo, 129 F.3d at 580-81 (reversing money laundering conviction when "withdrawal of funds charged as money laundering was one and the same as the underlying criminal activity of bank fraud and misapplication of bank funds"); Savage, 67 F.3d at 1441 (holding that money laundering involves "funds obtained from prior, separate criminal activity"). Put plainly, the laundering of funds cannot occur in the same transaction through which those funds first become tainted by crime.

This conclusion does not assist Butler, however. At trial, the government introduced evidence from which a jury could conclude that Butler engaged in the concealment of assets from the bankruptcy trustee almost immediately upon receipt of the settlement proceeds from the Showells. At latest, the funds at issue in the five money laundering counts became "criminally derived property"--property derived from Butler's bankruptcy fraud--when Butler passed the $150,000 check from the Showell settlement to Father Miller in October 1991. Thus, by September 1992, when Butler began directing the purchase of the cashier's check in question, the transfer of funds to Father Miller was a "completed phase of an ongoing offense," Conley, 37 F.3d at 980; with Father Miller's apparently unwitting assistance, Butler had managed to conceal these funds from the bankruptcy trustee and his creditors for...