U.S.A. v. Febus et al

• Citation: 218 F.3d 784
• Decision Date: 28 October 1999
• Docket Number: Nos. 98-1252,98-2709,98-2508,98-2053,98-4060,s. 98-1252
• Parties: (7th Cir. 2000) United States of America, Plaintiff-Appellee, v. Roberto FEBUS, a/k/a Bobby Santos; Efrain Santos, a/k/a Frank Santos, a/k/a Puerto Rican Frank; Benedicto Diaz, a/k/a Ito; Jose Santos; and Angel Morales, a/k/a Wiso, Defendants-Appellants. Argued <A HREF="#fr1-*" name="fn1-*">*
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 784

218 F.3d 784 (7th Cir. 2000)

United States of America, Plaintiff-Appellee, v. Roberto FEBUS, a/k/a Bobby Santos; Efrain Santos, a/k/a Frank Santos, a/k/a Puerto Rican Frank; Benedicto Diaz, a/k/a Ito; Jose Santos; and Angel Morales, a/k/a Wiso, Defendants-Appellants.

Nos. 98-1252, 98-2709, 98-2053, 98-4060, 98-2508

In the United States Court of Appeals For the Seventh Circuit

Argued^* October 28, 1999

Decided July 14, 2000

Appeals from the United States District Court for the Northern District of Indiana, Hammond Division. No. 96 CR 44--James T. Moody, Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted]

Before Ripple, Manion, and Evans, Circuit Judges.

Manion, Circuit Judge.

Efrain Santos, Roberto Febus, Benedicto Diaz, Angel Morales, and Jose Santos ran an illegal lottery. For their roles, a jury convicted Efrain Santos and Febus of conspiracy to conduct an illegal gambling enterprise, and of conducting an illegal gambling enterprise. The jury also convicted Efrain Santos of laundering the proceeds of the illegal lottery. Diaz and Morales pleaded guilty to conspiracy to launder the gambling proceeds. And Jose Santos¹ was convicted of conspiracy and of aiding and abetting an illegal gambling business. All defendants appeal, and we affirm.

I.

Efrain Santos operated an illegal lottery, known as a "bolita," in East Chicago, Indiana from the 1970's until 1994. He based the bolita's winning numbers on the daily Pick Three and Pick Four Illinois lottery games, and on the Puerto Rican Lottery. He first worked for a man named Ken Eto who ran a larger bolita in Indiana and Illinois in the late 1960's and early 1970's, until Santos took over the Indiana operation in the 1970's. While Santos was in prison on narcotics charges during the late 1970's and early 1980's, Roberto Febus served as the bolita's interim leader until Santos returned in 1984.

In Santos's bolita, runners accepted bets primarily in bars and restaurants in East Chicago, withheld their commissions from the cash, and delivered the money to the collectors, Benedicto Diaz and Angel Morales. Diaz and Morales collected the betting slips and money from the runners at a bar and delivered the proceeds to Santos. Santos used some of the proceeds to pay the salaries of Diaz and Morales, and to pay the bolita's winners.

The FBI and IRS began investigating the bolita in January 1992. On March 30, 1993, the FBI searched Santos, his residences and vehicles, as well as Diaz and Morales and their vehicles, and discovered betting slips, ledgers, cash and other evidence of a gambling enterprise. Although the lottery shut down for a couple of weeks after the search, Diaz and Morales resumed the operation by collecting at a different location. On June 22, 1993, the FBI searched Santos, Diaz and Morales again, and found further evidence of the illegal gambling scheme. But even after this second search, the lottery continued. And after conducting a third search on October 12, 1993, the FBI discovered more betting slips, cash, and other evidence of the bolita.

Presented with this and other evidence, a federal grand jury returned a ten-count indictment against Santos, Febus, Diaz and Morales. Count 1 charged them with conspiracy to conduct an illegal gambling business from January 1989 to December 1994, in violation of 18 U.S.C. sec. 371. Count 2 charged the defendants with conducting an illegal gambling business, in violation of 18 U.S.C. sec. 1955. Count 3 charged Santos, Diaz, and Morales with conspiracy to use the proceeds of an illegal gambling business to promote the carrying on of the business, in violation of 18 U.S.C. sec. 1956(h). Count 4 charged Santos and Diaz with money laundering by completing a financial transaction with the proceeds of the illegal gambling business with the intent to promote the carrying on of the business, in violation of 18 U.S.C. sec. 1956(a)(1)(A)(i). Count 5 charged Santos and Morales with money laundering to promote the gambling business, in violation of 18 U.S.C. sec. 1956(a)(1)(A)(i). And Counts 6-10 constituted more money laundering charges.

A jury convicted Santos of Counts 1 through 5, and Febus of Counts 1 and 2; the district court sentenced Santos to 210 months in prison, and Febus to 30 months in prison.

Diaz pleaded guilty to Count 3 and, as part of his plea agreement, the government dismissed the other counts against him and agreed to recommend a downward departure (under sec.5K1.1 of the Sentencing Guidelines) in exchange for his truthful testimony against his co-defendants. Diaz testified at Santos's trial, but the government declined to file the sec.5K1.1 motion, concluding that his testimony was inconsistent, untruthful, and bolstered his co-defendants' defense. Diaz moved to withdraw his plea agreement, alleging that the government breached it by failing to file the sec.5K1.1 motion, but the district court denied his motion and sentenced him to 108 months in prison.

Like Diaz, Morales pleaded guilty to Count 3, entered into an identical plea agreement, and testified at Santos's trial. The government filed the sec.5K1.1 motion, and then called him to testify at Santos's sentencing hearing as well. After Morales testified inconsistently at the sentencing hearing, the government moved to withdraw its sec.5K1.1 motion, which the district court granted. Morales filed a motion to reconsider, which the district court denied and sentenced him to 151 months in prison. This consolidated appeal followed.

II.

A. Efrain Santos

Efrain Santos appeals only his money laundering convictions, arguing that the evidence was insufficient to convict him of money laundering because his cash payments to the bolita's collectors and winners were essential transactions of the illegal gambling business, and thus cannot also constitute transactions under the promotion provision of the money laundering statute, 18 U.S.C. sec. 1956(a)(1)(A)(i).

"A defendant bears an extremely heavy burden in attempting to overturn a conviction on the basis of insufficient evidence;" United States v. Vega, 72 F.3d 507, 513 (7th Cir. 1995), and we will reverse a conviction "only if, after viewing the evidence in the light most favorable to the government, we determine that no rational trier of fact could have found the defendant guilty beyond a reasonable doubt." Id. Title 18 U.S.C. sec. 1956(a)(1)(A)(i) of the money laundering statute provides:

Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity--

(A)(i) with the intent to promote the carrying on of specified unlawful activity [shall be punished].

To prove money laundering under this promotion provision, the government must show that the defendant: 1) conducted a financial transaction with the proceeds of an illegal activity; 2) knew that the property represented illegal proceeds; and 3) conducted the transaction with the intent to promote the carrying on of the unlawful activity. United States v. Emerson, 128 F.3d 557, 561 (7th Cir. 1997).

While Santos acknowledges that he used illegal proceeds to pay the bolita's collectors and winners, he contends that his transactions merely completed the substantive offense of illegal gambling, and thus did not "promote the carrying on" of the bolita. He claims that since the money laundering statute created the separate crime of money laundering, it only punishes the practice of reinvesting the proceeds of an already completed unlawful activity to promote the expansion of that unlawful activity, and thus the government failed to prove that his transactions satisfied the statute's promotion requirement.

A transaction satisfies the promotion provision of the money laundering statute if it constitutes "the practice of plowing back proceeds of [the illegal activity] to promote that activity." United States v. Jackson, 935 F.2d 832, 842 (7th Cir. 1991). In Jackson, we affirmed a money laundering conviction in which a defendant, Joseph Davis, used the proceeds of drug transactions to purchase telephone paging beepers that were used to contact drug couriers and instruct them on the location of additional money pickups. We determined that since Davis purchased the beepers with the intent to promote the continued prosperity of his criminal enterprise by plowing money back into his drug operation, he violated sec. 1956(a)(1)(A)(i) of the money laundering statute. Id. at 841. According to Jackson, therefore, the money laundering statute created a separate crime of money laundering that is distinct from the substantive offense (in this case gambling) that initially generated the illegal funds, see United States v. Heaps, 39 F.3d 479, 486 (4th Cir. 1994); and it punishes transactions that promote the continued prosperity of the underlying offense. See United States v. Conley, 37 F.3d 970, 979 n. 12 (3d Cir. 1994) (evidence of the defendant's use of illegal gambling proceeds to pay vendors to service illegal poker machines constituted an offense under the promotion provision of 18 U.S.C. sec. 1956(a)(1)).

In this case, the government established that Santos reinvested the bolita's proceeds to ensure its continued operation for over 5 years, well beyond the 30 days required to complete the substantive offense of illegal gambling under 18 U.S.C. sec. 1955. Furthermore, his own records show that the income to his bolita expanded from approximately $250,000.00 per year for the years 1989 to 1992, to $330,000.00 for 1993, and up to $410,000.00 for 1994. His payments to his collectors, Diaz and Morales, compensated them for collecting the increased revenues and transferring those funds back to him. And his payments to the winning players promoted the bolita's continuing prosperity by maintaining and increasing the players' patronage. See United...