U.S. v. Castellini

• Decision Date: 15 December 2004
• Docket Number: No. 03-2252.,03-2252.
• Citation: 392 F.3d 35
• Parties: UNITED STATES of America, Appellee, v. Richard CASTELLINI, Defendant, Appellant.
• Court: U.S. Court of Appeals — First Circuit

392 F.3d 35

UNITED STATES of America, Appellee, v. Richard CASTELLINI, Defendant, Appellant.

No. 03-2252.

United States Court of Appeals, First Circuit.

Heard November 4, 2004.

Decided December 15, 2004.

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James C. Rehnquist, with whom Sarah Heaton Concannon and Goodwin Procter LLP were on brief, for appellant.

Allison D. Burroughs, Assistant United States Attorney, with whom Michael J. Sullivan, United States Attorney, was on brief, for appellee.

Before SELYA, Circuit Judge, STAHL, Senior Circuit Judge, and LYNCH, Circuit Judge.

LYNCH, Circuit Judge.

Richard Castellini ("Castellini"), a married man with three children and no prior criminal record, was convicted of the crime of money laundering the proceeds of a bankruptcy fraud and conspiracy to money launder. 18 U.S.C. §§ 1956(a)(3), (c)(7)(D), (h). In fact, the fraud was part of a sting operation by the government which ensnared at least six people. All were associated with Anderson Ark and Associates ("AAA"), a Costa Rican company which moved money offshore through trusts in several countries before returning the "cleansed" (but diminished) funds to investors.

At trial, Castellini testified and portrayed himself as an innocent and naive dupe, not a criminal, who was misled by Richard Gonet ("Gonet"), the architect of the money laundering scheme and chief malefactor. In fact, Castellini testified that he had been victimized by AAA and Gonet, who fleeced him of his own money. It was Gonet who introduced Castellini to his troubled friend "Jim Mitchell," and asked him to do two financial transactions for Mitchell. Unfortunately for Castellini, "Mitchell" was in fact James Dowling ("Dowling" or "Agent Dowling"), an undercover agent in a sting operation mounted by the Internal Revenue Service ("IRS") against Gonet.

The two financial transactions Castellini was asked to, and did in fact, engineer involved multiple offshore transfers of Mitchell's money; Mitchell told Castellini the monies were being hidden from the bankruptcy court.

Castellini was tried alone. Gonet pled guilty (but did not testify for the government). A properly instructed jury found that Castellini had engaged in money laundering by conducting financial transactions involving property represented to be the proceeds of "specified unlawful activity," "with the intent... to conceal ... the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity." 18 U.S.C. § 1956(a)(3).

On appeal, Castellini attacks his conviction and sentence.¹ First, he argues that the guilty verdicts on Counts One (for conspiracy to launder), Five, and Six (for the two instances of actual laundering) should be reversed for insufficiency of evidence. Second, he argues that he is entitled to a new trial for errors in the admission of coconspirator statements not meeting the requirements of United States v. Petrozziello, 548 F.2d 20, 22-24 (1st Cir.1977).

The insufficiency argument is premised on the correct principle that the "proceeds" used for money laundering must be "proceeds" from a different illegal activity than the illegal activity of money laundering itself. United States v. Mankarious, 151 F.3d 694, 705 (7th Cir.1998). The argument is that the agent did not explicitly or implicitly "represent" that the money Castellini laundered was the proceeds of a specified "unlawful activity," but rather left Castellini with the sense that at most he was helping in the commission of a bankruptcy fraud, not that he was laundering the money derived from an ongoing bankruptcy fraud. While skillfully presented, existing case law dooms the argument. The Petrozziello arguments are also far from frivolous; but they, too, do not prevail, because the statements were admissible on other grounds or their admission was harmless.

Castellini was sentenced to twenty-one months' imprisonment; he was not ordered to pay a fine. Castellini attacks this sentence. He argues that the district court wrongly concluded that it did not have authority to consider granting him a downward departure for aberrant conduct. The record reflects that the district court knew it had the authority but did not think Castellini qualified to receive the reduction given that more than one transaction was involved. We have no jurisdiction to review that determination. Castellini also argues for the first time on appeal that his sentence violated Blakely v. Washington, ___ U.S. ___, 124 S.Ct. 2531, 159 L.Ed.2d 403 (2004). We reject that challenge because there was no plain error.

I.

We set out the facts in the light most favorable to the jury's verdict. United States v. Glaum, 356 F.3d 169, 172 (1st Cir.2004).

This case involves one of two prosecutions of the leaders of and persons associated with AAA.² AAA is a Costa Rican company which was the central marketing instrumentality for money laundering schemes to move the proceeds of illegal activity out of the United States via entities such as offshore trusts and then to repatriate such funds back to the United States so as to make the proceeds appear to be from legitimate sources. The conspiracy involved individuals spanning the continent from California to Massachusetts and from Washington to Costa Rica.

In December of 1998, after months of investigations, the Criminal Investigation Division of the IRS began a sting operation targeted at Michael Gonet, a Massachusetts resident who had been promoting and marketing offshore trusts. Gonet did not work for AAA but ended up leading the sting operation to the leaders of AAA.

Agent Dowling first contacted Gonet by telephone on December 18, 1998. As "Jim Mitchell," Agent Dowling told Gonet a cover story that he ran a company named Pyramid Financial and owned three Burger King restaurants in the Phoenix, Arizona area. He said he had been sued for sexual harassment and was at risk of being forced into personal and corporate bankruptcy. As a result, he said he wanted to conceal some of his assets, namely, $100,000 in cash in a safe deposit box and $300,000 in a corporate bank account, from the bankruptcy court. Agent Dowling asked Gonet for help in concealing the funds from the bankruptcy court.³ Gonet responded affirmatively. Dowling then asked, as a way to move the money, whether Gonet, who had a company in the Bahamas, could "send [Dowling] invoices and [Dowling] could pay the invoices." Gonet told Dowling that this was possible. In a second phone call on December 30, 1998, Gonet and Agent Dowling discussed in some detail how they might move the funds. Gonet told Dowling, "I have a [consulting] company that I can bill it through, you know, however much you want me to bill it."

On January 22, 1999, Gonet and Agent Dowling met in person for the first time. Agent Dowling gave Gonet $60,000 in cash, which he told Gonet he wanted to conceal from the bankruptcy court. Gonet moved the cash in installments to an offshore trust account and then back to an undercover bank account designated by Dowling at LaSalle Bank in Chicago in the name of Century Marketing. Gonet kept $9,000 as his fee for assisting Dowling. Castellini visibly entered the picture around March 11 or 12, 1999.

Castellini testified that he first met Gonet in 1997, when Gonet tried to sell Castellini an offshore trust. Castellini explained to Gonet that he already had the use of an offshore structure through a complex business organization ("CBO") set up for him by AAA. Castellini had been involved with AAA since 1996, when he began to buy tapes and attend seminars offered by AAA purporting to teach strategies for minimizing taxes. In 1997, as a way to reduce taxes from his own business, Castellini paid $28,000 to have the CBO set up for him by the head of AAA, Anderson, and AAA's head accountant, Drummer, an unindicted coconspirator who also became Castellini's accountant. In late 1997, in accordance with Drummer's advice, Castellini moved about $175,000 of his own money, listed as a bogus "management fee," through the CBO in order to reduce his taxes. For this service, AAA charged him a 5% fee. These were the only times that Castellini used the CBO prior to his involvement in the activities in this case. Castellini also invested in various schemes offered by AAA members, but he lost money on all of them.

Castellini testified that Gonet called him on either March 11 or March 12, 1999, to ask him whether he still had his CBO and whether a third party would be allowed to use it. Gonet also explained Dowling's situation to Castellini. After Castellini consulted Drummer, he called Gonet back on March 15, 1999, and told Gonet that it was okay to use his CBO for somebody else's money.

Gonet and Agent Dowling spoke twice on March 16, 1999. Gonet told Dowling that he did not have the ability to move the money in the corporate bank account and he was concerned about the paper trail. Gonet did suggest to Dowling a way that the funds could be moved. He explained that he knew of a management company that could generate an invoice for non-existent "management consult[ing]" work. After Dowling paid the invoice with a check drawn on his corporate bank account, "the management company [would] take the funds, deposit them, and then move the funds offshore, and then ultimately back to wherever [Dowling] want[s] them." Gonet explained that the management company could move anything over $175,000 and still raise no suspicion for the high amount charged on the invoice because it did "this as a matter of business on a daily basis." Gonet said that the management company, a "Nevada corporation ... connected with a huge offshore conglomerate," would charge a fee of 25% of the funds moved in this way, and that Gonet's own fee would come out of that 25%. Gonet also assured Dowling that there would be no problems if the bankruptcy court questioned the management company because "they deal with this everyday. It's not like they're coming...