U.S. v. Grasso

• Citation: 381 F.3d 160
• Decision Date: 23 August 2004
• Docket Number: No. 03-1441.,No. 03-1442.,03-1441.,03-1442.
• Parties: UNITED STATES of America v. Michael J. GRASSO, Jr., Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

381 F.3d 160

UNITED STATES of America v. Michael J. GRASSO, Jr., Appellant.

No. 03-1441.

No. 03-1442.

United States Court of Appeals, Third Circuit.

Argued December 12, 2003.

Opinion Filed August 23, 2004.

Appeal from the United States District Court for the Eastern District of Pennsylvania, Berle M. Schiller, J Walter M. Phillips, Jr., (Argued), Kevin J. Kotch, Hoyle, Fickler, Herschel & Mathes, Philadelphia, PA, for Appellant.

Patrick L. Meehan, United States Attorney, Laurie Magid, Deputy United States Attorney for Policy and Appeals, Robert A. Zauzmer, Assistant United States Attorney, Senior Appellate Counsel, Anne Whatley Chain (Argued), Assistant United States Attorney, Peter F. Schenck, Office of United States Attorney, Philadelphia, PA, for Appellee.

Before AMBRO, FUENTES and GARTH, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

Michael J. Grasso appeals his conviction and sentence for money laundering. He argues that the term "proceeds" in the money laundering statute, 18 U.S.C. § 1956, encompasses only the net profits, and not the gross receipts, of criminal activity. This proposed statutory construction is incompatible with the text of the statute as well as existing case law in our Circuit. We therefore affirm Grasso's conviction. However, we do remand for the District Court to reconsider its restitution award.

I. Factual and Procedural History

Grasso sold various fraudulent work-at-home schemes from early 1997 until late 1999. The programs, which were advertised in national magazines, purported to enable purchasers to earn substantial payments for at-home work, with profits to be divided between the participants and Grasso. In reality, the programs simply instructed purchasers to solicit new customers who would purchase the same programs for similar amounts.¹

In February 2000, Grasso was indicted for mail fraud, wire fraud, and money laundering, in Criminal No. 00-51. The money laundering counts charged that he funded his ongoing criminal activity with the proceeds of his fraudulent schemes. Grasso allegedly reinvested the proceeds of his criminal activity to cover advertising, printing, and mailing expenses. Nine months later, a superseding indictment was filed, which added a count for obstruction of justice based on Grasso's attempt to access frozen funds and slightly modified the money laundering charges.² In December 2002, Grasso was indicted yet again, for forgery and obstruction of justice, in Criminal No. 01-783.³ In February 2002 the District Court severed the obstruction of justice count in the superseding indictment in Criminal No. 00-51, which involved Grasso's first attempt to obtain frozen funds, and consolidated that count with the proceeding in Criminal No. 01-783.

Trial on the superseding indictment took place in February 2002. At the close of the Government's case, Grasso moved orally for judgment of acquittal on the mail and wire fraud counts, as well as four of the money laundering counts. The motion was denied, and thereafter a jury convicted Grasso on all charges.⁴ He subsequently pled guilty to the obstruction of justice count originally filed in Criminal No. 00-51, and the cases were consolidated for sentencing.

Payment of defense counsel fees was a recurring issue during the criminal proceedings. In March 2000, Grasso filed a motion to release funds from his frozen accounts to pay defense counsel fees and expenses, and the motion was denied. The case was assigned to another judge in March 2001, and in December 2001 that judge ordered the release of $200,000 toward these expenses. In March 2002, defense counsel sought the release of additional funds from frozen accounts for payment of counsel fees. As a result, Grasso was ordered to provide documentation related to one of the non-frozen accounts, and the Probation Office examined his income and assets. The subsequent investigation of his accounts revealed that he had deposited more than $800,000 into his non-frozen accounts after the entry of a preliminary injunction in 1999, which was intended to protect his assets for distribution to victims.

Prior to sentencing, Grasso objected to the Government's proposed sentencing order on various grounds. He moved for a downward departure and submitted a memorandum in support of a "renewed" motion for judgment of acquittal on the money laundering counts, relying on the Seventh Circuit's recent decision in United States v. Scialabba, 282 F.3d 475 (7th Cir.), cert. denied, 537 U.S. 1071, 123 S.Ct. 671, 154 L.Ed.2d 565 (2002). Although Grasso suggested in the memorandum that he had submitted an earlier motion for acquittal on all money laundering counts, that motion challenged the sufficiency of the evidence as to Counts 444 through 447 only, and for factually specific reasons.

The District Court sentenced Grasso for the fraud and money laundering convictions to 97 months incarceration, three years supervised release, a fine of $150,000, restitution in the amount of $761,126.39, and a special assessment of $49,500. The Court made no findings in support of its award of restitution. In addition, for the obstruction of justice plea, Grasso received 15 months imprisonment (five months of which would run consecutively to the first sentence), a fine of $30,000, and a $300 special assessment. The restitution, fines, and special assessments, as well as $100,000 in counsel fees, were to be paid from the frozen funds. Grasso appeals.⁵

II. Discussion

We address two principal issues. First, did the Government need to establish that Grasso's money laundering transactions were conducted with the net profits, as opposed to gross receipts, of his illegal activity? Second, did the District Court err by failing to specify in its order of restitution the manner and schedule of payment?

A. Money Laundering Convictions and Sentence

Grasso alleges that the Government transformed a "garden variety fraud case with no hint of organized crime involvement into a 482 count money laundering case." Grasso's conviction for money laundering was based on his "reinvestment of proceeds" for the purchase of advertisements, telephone services, printing, envelopes, and other materials in furtherance of his fraudulent activity by means of wire transfer, checks, and credit cards. Simply put, Grasso paid for his business expenses with the receipts from his sales.⁶ The relevant statute, 18 U.S.C. § 1956, provides:

(a)(1) 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; or

(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or

(B) knowing that the transaction is designed in whole or in part—

(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or

(ii) to avoid a transaction reporting requirement under State or Federal law, [commits a felony].

The statute does not define "proceeds." Grasso contends that the term should be understood-as a matter of textual interpretation, congressional intent, and policy-to mean "net profits." The Government, by contrast, urges us to adopt a broader definition encompassing all gross receipts of illegal activity.

1. Standard of Review

Grasso has framed the question presented in his appeal as "[w]hether a defendant can be convicted of and sentenced for money laundering under 18 U.S.C. § 1956(a)(1)(A)(i) for reinvesting the proceeds of specified unlawful activity, where the government's proof fails to show that the money allegedly laundered represented the proceeds, or net profits, from the unlawful activity as opposed to gross receipts or revenue." At its core, Grasso's appeal challenges the sufficiency of the evidence upon which he was convicted.⁷ In other words, "[h]e contends that, as a matter of law, the facts do not support the conclusion that money laundering occurred." United States v. Morelli, 169 F.3d 798, 802 (3d Cir.1999) (classifying as a "sufficiency of the evidence" argument the defendant's claim that his conviction for money laundering was premised on a faulty statutory construction). While Grasso urges us to review the District Court's judgment de novo, the Government contends that we should review it for plain error because he failed to raise his statutory argument in a Rule 29 motion for judgment of acquittal and therefore forfeited it.

The Federal Rules of Criminal Procedure dictate when a criminal defendant may challenge a conviction that is based on insufficient evidence. Rule 29 provides that a defendant must make an appropriate motion within seven days after a guilty verdict is entered, or within an extended time specified by the Court during the seven-day period. If a defendant fails timely to raise an argument that may establish his or her innocence, the court is unlikely to find it persuasive at a later time. See, e.g., United States v. Powell, 113 F.3d 464, 466-67 (3d Cir.1997) ("If a defendant fails to file a timely motion for judgment of acquittal, we review sufficiency of evidence for plain error.").

The jury convicted Grasso on February 25, 2002. He did not file a motion within seven days of the verdict, nor did the Court extend the applicable period. On October 9, 2002, however, he filed a memorandum including an argument in support of his "renewed motion for judgment of acquittal on the money laundering counts." Although it was clear that Grasso had failed to file a timely Rule 29 motion,⁸ the parties agreed at oral argument that the District Court would consider the "renewed" motion "for the limited purpose of determining whether Defendant should be sentenced under the...