Garland v. Keith Roy

Citation615 F.3d 391
Decision Date13 August 2010
Docket NumberNo. 09-40735.,09-40735.
PartiesGene Irving GARLAND, Petitioner-Appellant, v. Warden Keith ROY, Respondent-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

OPINION TEXT STARTS HERE

COPYRIGHT MATERIAL OMITTED.

Gene Irving Garland, Jr., Texarkana, TX, pro se.

Michael Wayne Lockhart, Asst. U.S. Atty., Beaumont, TX, for Roy.

Appeal from the United States District Court for the Eastern District of Texas.

Before KING, WIENER, and DENNIS, Circuit Judges.

DENNIS, Circuit Judge:

Pro se petitioner Gene Irving Garland appeals the dismissal of his habeas corpus petition brought pursuant to 28 U.S.C. § 2241. In that petition he argues that he is entitled to release in light of United States v. Santos, 553 U.S. 507, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008), which held that the money-laundering statute's, 18 U.S.C. § 1956(a)(1), term “proceeds” was ambiguous and as a result, in certain circumstances, must be read to mean “profits.” Santos clearly applies retroactively to Garland's convictions at issue in this case. United States v. McPhail, 112 F.3d 197, 199 (5th Cir.1997). Garland contends that, under Santos, he was wrongfully convicted of multiple nonexistent money laundering offenses because the indictment and the jury instructions did not require the Government to prove that he used “profits” to pay “returns” to investors in his illegal pyramid scheme. He also argues that his petition satisfies 28 U.S.C. § 2255's “savings clause” and thus can be brought under § 2241. We agree that Garland's petition states a claim falling within § 2255's “savings clause” and thus he may proceed under § 2241. Therefore, we REVERSE the dismissal and REMAND for further proceedings consistent with this opinion.

BACKGROUND

28 U.S.C. § 2255 ... is the primary means under which a federal prisoner may collaterally attack the legality of his conviction or sentence.” Reyes-Requena v. United States, 243 F.3d 893, 901 (5th Cir.2001). “However, § 2241 may be utilized by a federal prisoner to challenge the legality of his or her conviction or sentence if he or she can satisfy the mandates of the so-called § 2255 ‘savings clause.’ Id. at 901 .

The “savings clause” states:

An application for a writ of habeas corpus in behalf of a prisoner who is authorized to apply for relief by motion pursuant to this section, shall not be entertained if it appears that the applicant has failed to apply for relief, by motion, to the court which sentenced him, or that such court has denied him relief, unless it also appears that the remedy by motion is inadequate or ineffective to test the legality of his detention.

28 U.S.C. § 2255(e).

This court has interpreted § 2255(e) to mean that there are three “factors that must be satisfied for a petitioner to file a § 2241 petition in connection with § 2255's savings clause.” Jeffers v. Chandler, 253 F.3d 827, 830 (5th Cir.2001) (citing Reyes-Requena, 243 F.3d 893). They are: (1) the petition raises a claim “that is based on a retroactively applicable Supreme Court decision; (2) the claim was previously “foreclosed by circuit law at the time when [it] should have been raised in petitioner's trial, appeal or first § 2255 motion; and (3) that retroactively applicable decision establishes that “the petitioner may have been convicted of a nonexistent offense.” Reyes-Requena, 243 F.3d at 904. See also Christopher v. Miles, 342 F.3d 378, 382 (5th Cir.2003).

The petitioner bears the burden “to demonstrate that the § 2255 remedy is inadequate or ineffective.” Christopher, 342 F.3d at 382. He must “com[e] forward with evidence ... show[ing] each element of the Reyes-Requena test. Wesson v. U.S. Penitentiary, Beaumont, Tex., 305 F.3d 343, 347 (5th Cir.2002). Therefore, before allowing the petitioner to proceed under § 2241, [w]e must examine the merits of the petitioner's claim to determine whether” the Reyes-Requena factors are satisfied. Christopher, 342 F.3d at 383. Accordingly, in reviewing the instant dismissal, we need to become familiar with not only the background of Garland's habeas petition, but also the underlying convictions that Garland claims may have been for non-criminal conduct.

The challenged convictions consist in relevant part of 52 counts of money laundering pursuant to 18 U.S.C. § 1956(a)(1)(A)(I). In addition, those money-laundering charges were predicated upon Garland's commission of the unlawful acts described in 62 counts of mail fraud pursuant to 18 U.S.C. § 1341 and one count of securities fraud pursuant to 15 U.S.C. §§ 77q(a) and 77x.

The money-laundering statute under which Garland was convicted established four essential elements of the crime: (1) that he knew “that the property involved in a financial transaction represent[ed] the proceeds of some form of unlawful activity” (emphasis added); (2) that he “conduct[ed] or attempt[ed] to conduct such a financial transaction”; (3) that the financial transaction “in fact involve[d] the proceeds of [the] specified unlawful activity” (emphasis added); and (4) that the transaction was undertaken with “the intent to promote the carrying on of [a] specified unlawful activity.” 18 U.S.C. § 1956(a)(1)(A)(I). At the time Garland was convicted, the statute did not define the meaning of the term “proceeds.” 1 The indictment and the jury instructions tracked the language of the money-laundering statute by describing Garland's alleged money laundering as his knowing use of the “proceeds” of his pyramid scheme to pay sums falsely described as earnings to his investor-victims in order to further the operations of his scheme. 2 Thus, neither the indictment nor the jury instructions required the Government to prove that Garland transacted in “profits” of his unlawful activities, rather than “gross receipts,” in order to convict him of money laundering. In fact, it appears that the alleged transactions underlying the money-laundering charge could not have involved “profits,” as the only allegation was that Garland took “proceeds” from his criminal activities and used it to maintain the criminal enterprise.

As it explains on appeal and is reflected in the indictment, the Government proved that Garland engaged in securities fraud and at least one count of mail fraud by alleging that he conducted a “pyramid scheme” involving the sale of fraudulent securities. In other words, based on the indictment, the Government alleged that using the mails Garland sold fraudulent securities and then used the proceeds from those sales to distribute money to individuals who had previously bought his “securities,” under the guise that this was a return on the individuals' initial investments, thereby encouraging their continued investment in his fraud. See 15 U.S.C. § 77q(a) (stating that securities fraud occurs when “any person in the offer of sale or any securities” uses the “mails, directly or indirectly ... to employ any device, scheme or artifice to defraud; or ... to obtain money or property by means of any untrue statement of a material fact or ... to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser”); 3 18 U.S.C. § 1341 (stating that mail fraud occurs when one “places in any post office or authorized depository for mail matter, any matter or thing whatever ... or knowingly causes to be delivered by mail ... any such matter or thing” that was part of a “devised or intend[ed] ... scheme or artifice to defraud or for obtaining money or property by means of false or fraudulent pretenses ...”). In this manner, it is possible that the same payout of proceeds as “returns” to investors formed the basis of the mail and securities fraud convictions, as well proved the element of the money-laundering charge that Garland transacted in “proceeds” of the underlying unlawful activity.

Following his convictions, Garland filed two unsuccessful habeas petitions. His present petition pursuant to 28 U.S.C. § 2241 argues that the Supreme Court's interpretation of the money-laundering statute in United States v. Santos, 553 U.S. 507, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008), reveals retroactively that Garland was convicted of nonexistent crimes of using “receipts” rather than “profits” from his pyramid scheme to further the scheme's operations. The combination of the plurality and concurring opinions in Santos holds that in certain circumstances, elaborated on below, “proceeds” must be defined as “profits” instead of “gross receipts.” 128 S.Ct. at 2034 n. 7 (Stevens, J., concurring in the judgment). 4

The district court, which adopted without alteration the recommendations of the magistrate judge, dismissed Garland's petition on two grounds. First, the magistrate judge concluded that Santos's narrow definition of “proceeds” as “profits” is limited to the specific facts of that case, under which the petitioners were convicted of money laundering stemming from the unlawful activity of running an illegal gambling operation. Thus, the magistrate judge reasoned, Santos does not apply to Garland's conviction and therefore he was not convicted of a nonexistent offense in light of that case. Second, the magistrate judge stated that any claim that Garland could have raised in light of Santos was not previously “foreclosed,” as this circuit has never specifically held that “proceeds” should be defined as “receipts” rather than “profits.” Garland's objections on both points were overruled.

STANDARD OF REVIEW

This Court reviews de novo a district court's dismissal of a section 2241 petition on the pleadings.” 5 Pack v. Yusuff, 218 F.3d 448, 451 (5th Cir.2000).

DISCUSSION

We consider each of the Reyes-Requena factors in turn. We conclude that Garland's petition satisfactorily establishes each factor and therefore his claim may proceed under § 2241.

1. Claim based on a retroactively applicable Supreme Court decision

There can be no question that Garland's petition satisfies the first Reyes-Requena factor, i.e. that his...

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