U.S. v. Hill

• Decision Date: 17 February 1999
• Docket Number: 97-6308,Nos. 97-6051,97-6309,97-6286,s. 97-6051
• Citation: 167 F.3d 1055
• Parties: UNITED STATES of America, Plaintiff-Appellee, Plaintiff-Appellant (97-6308/6309), v. David Tex HILL, Defendant-Appellant (97-6051/6286), Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1055

167 F.3d 1055

UNITED STATES of America, Plaintiff-Appellee Plaintiff-Appellant (97-6308/6309), v. David Tex HILL, Defendant-Appellant (97-6051/6286) Defendant-Appellee.

Nos. 97-6051, 97-6286, 97-6308, 97-6309.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 3, 1998.

Decided Feb. 17, 1999.

Order Denying Rehearing En Banc April 15, 1999.

David C. Jennings (argued and briefed), Nancy Stallard Harr, Office of the U.S. Attorney, Knoxville, TN, for Plaintiff-Appellant.

Peter J. Strianse (argued and briefed), Tune, Entrekin & White, Nashville, TN, David "Tex" Hill, Maryville, TN, for Defendant-Appellee.

Before: MERRITT and COLE, Circuit Judges; EDMUNDS ^*, District Judge.

OPINION

EDMUNDS, District Judge.

David Tex Hill was convicted by a jury on charges of conspiracy and conducting an illegal gambling operation in violation of 18 U.S.C. § 1955 and on charges of money laundering in violation of 18 U.S.C. §§ 1956(a)(1)(A) and (B). The jury also returned a special criminal forfeiture verdict finding that certain of Hill's properties were involved in the money laundering convictions. On appeal, Hill asserts multiple challenges to his convictions, sentence, and criminal forfeiture. The government has also filed an appeal challenging the district court's decisions (1) allowing Hill to substitute $500,000 cash in lieu of forfeiting the actual property the jury determined was involved in his money laundering convictions; and (2) staying the execution of that portion of the criminal forfeiture judgment as it relates to residential real property owned by bona fide purchasers for value pending this appeal.

As to Hill's money laundering convictions, we conclude that the district court did not err when it denied Hill's motion to dismiss the indictments. The Tennessee gambling statute is not unconstitutionally vague as applied in this case, and the indictments sufficiently alleged the knowledge element as required under § 1956(a)(1) of the money laundering statute. The statute does not require allegations or proof that the defendant knew the precise nature of the unlawful activity that produced the money he is accused of laundering; i.e., that he knew it came from felonious, as opposed to misdemeanor, activity. We similarly conclude that the district court did not err when it declined Hill's request to instruct the jury that a money laundering conviction under § 1956(a)(1) requires the government to prove that the defendant not only knew that the proceeds being laundered were derived from criminal activity but must also prove that the defendant knew the precise nature of the criminal activity creating the laundered proceeds. The jury was properly instructed that the government must prove that the defendant knew the laundered funds came from criminal activity and must also prove that the criminal activity at issue was a felony under state or federal law.

Likewise, we conclude that the district court did not abuse its discretion or preclude Hill from presenting a defense as to the knowledge requirement of § 1956(a)(1) when it held inadmissible Hill's proffered evidence construing Tennessee's gambling statute and opining that mere possession or placement of gambling machines without more did not constitute a violation of Tennessee's gambling statute. Finally, as to these convictions, we conclude that the district court was not required to dismiss the § 1956 money laundering charges despite its dismissal of § 1957 charges and a structuring charge brought pursuant to 31 U.S.C. § 5324(a) because the latter are not lesser included offenses of the § 1956 money laundering offenses.

As to Hill's sentence, we conclude that this Court lacks jurisdiction to consider Hill's appeal of the district court's discretionary refusal to depart downward, and further conclude that the district court did not err when it found Hill was not entitled to a two-level reduction for acceptance of responsibility under U.S.S.G. § 3E1.1(a). As to Hill's forfeiture challenges, we conclude there was sufficient evidence connecting Hill's purchase of 616 shares of Greene County Bancshares stock to money gained from his illegal gambling business and reject as meritless Hill's claim that a draw on a line of credit, which is basically a loan, cannot constitute a money laundering transaction under 18 U.S.C. § 1956. We further conclude that Hill's criminal forfeiture is not disproportionate to his crimes, and thus does not violate the Excessive Fines Clause of the Eighth Amendment. Therefore, we AFFIRM Hill's convictions, sentence and criminal forfeiture.

As to the government's appeal, we REVERSE the district court's post-verdict forfeiture decisions because (1) the district court lacked authority, under 18 U.S.C. § 982, to allow Hill to substitute $500,000 cash in lieu of the property subject to forfeiture; and (2) the district court abused its discretion when it stayed, pending this appeal, the execution of that portion of the criminal forfeiture judgment relating to residential real property owned by bona fide purchasers for value.

I.

Defendant David "Tex" Hill owed businesses known as Play and Play Amusement and Playtime Amusements between 1987 and 1992. Through these businesses, Hill supplied Tennessee area businesses, such as restaurants, bars, and convenience stores, with video poker and video slot machines along with juke boxes, pinball machines, and pool tables. At issue here are the video poker and slot machines which accepted coins and dollar bills; some up to $20. After playing and winning at one of these machines, the business proprietor would pay the customer his cash winnings. Hill did not allow the video poker and slot machines to be placed in businesses that did not make payoffs. He and the business proprietors split the cash proceeds from these machines on a 50/50 basis.

Most of the proprietors using Hill's machines settled their accounts with Hill in cash and did not keep records of the proceeds. Hill's employees regularly emptied the cash from the machines and then settled up with the business owners; paying them in cash. Hill's employees were also paid in cash. Although Hill did not want records kept on the income generated by his gambling machines, two proprietors, Pete Campbell and Alice Sauls, did use checks to pay him. Each emptied Hill's machines, figured out Hill's 50 percent share, and wrote Hill a check for that amount. Alice Sauls also kept a ledger for 13 months between 1991 and 1992 of the breakdown of cash generated by the video poker and slot machines and the jukebox and pinballs machines located at her business. During the time Ms. Sauls kept the ledger, 84% of the cash came from the gambling machines and 16% came from the jukebox and pinball machines.

These checks and the Sauls ledger provided much of the government's proof that Hill's illegal gambling business generated cash income to Hill of approximately $1 million a year. The cash and checks paid to Hill for his 50f the take from the machines were also traced to a checking account and a bank line of credit maintained on his behalf. Hill's proceeds from the machines were further traced to financial transactions intended to promote his gambling business, to financial transactions designed to conceal the nature of the proceeds or designed to avoid reporting requirements under federal law, and to the forfeited property. Also, as proof that Hill knowingly and willfully conducted an illegal gambling business, the government presented evidence that when some of Hill's machines were seized from a Monroe County, Tennessee restaurant by the Federal Bureau of Investigation (FBI) pursuant to a seizure warrant executed in October 1989, Hill replaced the machines within a day of their seizure. That October 1989 seizure warrant was found in Hill's Play and Play business headquarters in Maryville, Tennessee, during the execution of a search warrant by the FBI on May 20, 1992.

In August of 1992, Hill and 18 other defendants were charged in a 71-count indictment with multiple counts of conspiring to operate and operating an illegal gambling business in violation of 18 U.S.C. § 1955, and multiple counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i) (money laundering with the intent to promote the illegal gambling business), § 1956(a)(1)(B)(i) (money laundering with the intent to conceal the nature of the proceeds of the illegal gambling business), and § 1957 (money laundering offenses involving monetary transactions of a value greater than $10,000 derived from the illegal gambling business). Hill was also charged with criminal forfeiture under 18 U.S.C. § 982 and 21 U.S.C. § 853 (demanding forfeiture of real and personal property directly or indirectly involved in the money laundering offenses).

In March of 1993, a federal grand jury returned a second indictment against Hill, his brother and two other defendants. Hill was charged with one count of money laundering involving a monetary transaction of value greater than $10,000 in violation of 18 U.S.C. § 1957. Hill was also charged with three counts of money laundering designed to avoid reporting requirements in violation of 18 U.S.C. § 1956(a)(1)(B)(ii); one count of "structuring" money transactions to avoid reporting requirements in violation of 31 U.S.C. §§ 5322 and 5324; and one count of criminal forfeiture under 18 U.S.C. § 982 and 21 U.S.C. § 853.

The two indictments were consolidated for trial. Extensive pretrial litigation ensued over the next three years, which included three interlocutory appeals to this Court. Ultimately, all charges against several codefendants were disposed of, leaving only the charges against Hill for trial. ¹

The trial was bifurcated to allow the forfeiture counts to be separately considered. Defendant Hill went to trial on October 1, 1996. Several counts of the first indictment were dismissed prior to trial upon motion by the government. At the close of...