U.S. v. Hollingsworth

• Citation: 9 F.3d 593
• Decision Date: 29 October 1993
• Docket Number: 92-2483,92-2694,Nos. 92-2399,s. 92-2399
• Parties: UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Arnold L. HOLLINGSWORTH, Jr. and William A. Pickard, III, Defendants-Appellants, Cross-Appellees. , and 92-2695.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 593

9 F.3d 593

62 USLW 2297

UNITED STATES of America, Plaintiff-Appellee, Cross-Appellant, v. Arnold L. HOLLINGSWORTH, Jr. and William A. Pickard, III,

Defendants-Appellants, Cross-Appellees.

Nos. 92-2399, 92-2483, 92-2694, and 92-2695.

United States Court of Appeals, Seventh Circuit.

Argued June 3, 1993.

Decided Oct. 29, 1993.

Rehearing En Banc Granted; Decision Vacated Jan. 10, 1994.

Mark D. Stuaan, Asst. U.S. Atty., (briefed and argued), Ice, Miller, Donadio and Ryan, Indianapolis, IN, for U.S.

Bradley L. Williams (argued), Indianapolis, IN, for William A. Pickard, III.

James E. Evans, Jr., Springdale, AR, for Arnold L. Hollingsworth, Jr.

Before POSNER, Chief Judge, and RIPPLE and ROVNER, Circuit Judges.

POSNER, Chief Judge.

The defendants, Pickard and Hollingsworth, were convicted by a jury of money laundering in violation of federal law. 18 U.S.C. Sec. 1956(a)(3); 31 U.S.C. Sec. 5324(3) (1988). (Section 5324(3) has since been revised and renumbered 5324(a)(3).) They were sentenced to 24 and 18 months in prison respectively. The main issue on appeal is whether a reasonable jury could have found beyond a reasonable doubt that the government had not entrapped the defendants into committing their crimes.

Pickard is an orthodontist practicing in Fayetteville, Arkansas. Hollingsworth is a farmer and businessman, also in Arkansas. Although Pickard's dental practice is successful, he has repeatedly tried to augment his income by business ventures, all of which have failed. The last and most disastrous failure began in 1988 when he and Hollingsworth decided to become international financiers--a vocation for which neither had any training, contacts, aptitude, or experience. Pickard formed a Virgin Islands corporation, CIAL (Compagnie d'Investement de Les Antilles Limitee), to conduct international banking. The corporation was financed by capital contributions totaling $400,000. Almost all the money came from Pickard and his family, but Hollingsworth and a Taiwanese investor made small contributions. With this money, the corporation advertised for customers and obtained two foreign banking licenses, one Grenadan. No customers were obtained through advertising or otherwise, and with the enterprise steadily losing money the corporation decided to sell the Grenadan license to raise additional working capital. Pickard placed a classified ad in the May 4, 1990, issue of USA Today offering to sell the unused license for $29,950. The ad listed CIAL's phone number and told callers to ask for "Bill."

Enter U.S. customs agent J. Thomas Rothrock, working out of the Indianapolis office of the customs service, who that very day was attending a seminar on money laundering. Rothrock read USA Today and his eye lit on Pickard's ad. Knowing that foreign banks are sometimes used for money laundering, Rothrock "assumed that someone who wanted to sell one would possibly be interested in money laundering." So on May 11 he called the phone number listed in the ad. He left a message for "Bill," but no one returned the call. He called again on the seventeenth and this time Pickard returned his call. Using as his nom de guerre "Tom Hinch," Rothrock told Pickard that he had money from an organization and wanted to deposit it offshore. Pickard responded that he had a bank for sale, and other vehicles or instruments for achieving "Hinch's" purposes that might be less expensive; and in a later call he described a variety of international financial services, all lawful. Hinch explained that his organization had a lot of cash, that the profit margin generated by the organization's activities was very large, and that the organization wanted to accumulate cash and deposit it somewhere. Pickard pointed out that a cash deposit of less than $10,000 would not have to be reported to federal banking authorities, and hence that a larger sum could be broken up into smaller ones and deposited in different banks; alternatively the whole sum could be deposited outside the United States. Rothrock expressed interest in the first maneuver. After this conversation, which occurred on May 18, Rothrock opened a formal investigation "to determine the past and present unlawful activities of William Pickard" and his corporation. In a subsequent conversation with Rothrock, Pickard retracted the suggestion that the money might be deposited outside the United States, remarking that that would violate the law. (There is no evidence that he realized that "structuring" a large cash deposit to avoid federal reporting requirements would also violate the law.) He asked "Hinch" for assurance that the cash wasn't from drug sales and that Hinch himself was not a federal agent or informer, and Hinch gave him the requested assurances. In another telephone conversation, this one at the end of May, Pickard asked Hinch whether he wanted Pickard merely to "clean and polish" funds or for "extended services"; Hinch was evasive. In subsequent conversations Pickard turned coy, indicating that he was interested only in a long-term banking relationship.

Matters were at a standstill between August 20, 1990, the date of the last of the conversations in which Pickard expressed his lack of interest in providing spot services, and February 9, 1991, when Rothrock, having obtained $200,000 in sting money from his superiors, called Pickard, told him that he was "getting overwhelmed and I'm gonna be in need of your services," and arranged to meet Pickard in St. Louis ten days later. In this, their first face to face meeting, "Hinch" explained that the source of his cash was the smuggling of guns to South Africa. They agreed that Pickard would travel to a hotel room in Indianapolis where he would be shown $20,000 plus Pickard's fee of $2,405 in cash. The deal was that Pickard would arrange a wire transfer of $20,000 to Hinch's bank account and after the transfer was confirmed would take possession of the cash. The transaction took place on April 3, 1991, and subsequent transactions brought the total transferred in this manner to $200,000. Hollingsworth made one of the trips to Indianapolis, bringing back $30,000 in cash for Pickard in exchange for $405 in fee and expenses--all that Hollingsworth ever realized from the dealings with Hinch, so far as the record discloses. A further transaction was scheduled for September 13, at which Pickard was to transfer $235,000 for Hinch, but when Pickard showed up he was arrested. Hollingsworth was arrested at the same time back in Arkansas. When arrested Pickard was carrying false-name passports for himself and Hollingsworth issued by the mythical "Dominion of Melchizedek." So far as appears, before becoming involved with Hinch neither Pickard nor Hollingsworth had ever engaged in financial or for that matter any other wrongdoing, the Melchizedekian passports having been obtained after Hinch appeared on the scene. Nor did CIAL ever attract a single customer other than Hinch--who also was the only person who responded to the ad for the Grenadan banking license.

Once a defendant who has pleaded the defense of entrapment makes a colorable case that he was indeed entrapped, the government to convict is required to prove lack of entrapment beyond a reasonable doubt, Jacobson v. United States, --- U.S. ----, ----, 112 S.Ct. 1535, 1540, 118 L.Ed.2d 174 (1992); and the government concedes that Pickard made a sufficient showing to activate the requirement. (We discuss Hollingsworth's case separately at the end of this opinion.) The burden of proving anything beyond a reasonable doubt is heavy. But we must affirm if a reasonable jury could have found that the government carried it even if we doubt that we would have reached the same conclusion had we been on the jury. United States v. Kamel, 965 F.2d 484, 489-90 (7th Cir.1992); United States v. Jones, 950 F.2d 1309, 1315 (7th Cir.1991). The fact that the government had no basis other than Rothrock's hunch--which so far as appears was a pure shot in the dark--for believing that Pickard and Hollingsworth had engaged or were engaging in illegal money laundering does not by itself establish entrapment. United States v. Allibhai, 939 F.2d 244, 249 (5th Cir.1991); Kadis v. United States, 373 F.2d 370, 373 (1st Cir.1967). The government is no more required to establish probable cause, or even a lesser degree of cause such as reasonable suspicion, before launching a sting operation than it is required to establish probable cause or reasonable suspicion in order to employ an undercover agent to worm his way into the confidence of persons suspected (whether or not reasonably) of being criminals in order to obtain evidence of their criminal activity. United States v. Miller, 891 F.2d 1265, 1269 (7th Cir.1989); United States v. Harvey, 991 F.2d 981, 989-92 (2d Cir.1993); United States v. Jannotti, 673 F.2d 578, 608-09 (3d Cir.1982) (en banc); United States v. Luttrell, 923 F.2d 764 (9th Cir.1991) (en banc) (per curiam); cf. Hoffa v. United States, 385 U.S. 293, 87 S.Ct. 408, 17 L.Ed.2d 374 (1966). Indeed, a sting operation is merely a theatrically elaborated method of deploying undercover agents in criminal investigations.

To defeat a defense of entrapment the government must show either that it did not induce the defendants to commit the crime for which they are being prosecuted or, if it did, still they were predisposed to commit it. Mathews v. United States, 485 U.S. 58, 62-63, 108 S.Ct. 883, 886, 99 L.Ed.2d 54 (1988); United States v. Jones, supra, 950 F.2d at 1315; United States v. Evans, 924 F.2d 714, 716 (7th Cir.1991). The elements of inducement and predisposition have tended to merge. Id. at 716-17, and cases cited there. More precisely, inducement has tended to merge into predisposition, now often described as the principal element of the defense. Mathews v. United States, supra, 485 U.S. at 63, 108 S.Ct. at 886; see also United States v. Russell, 411 U.S. 423, 433-36, 93 S.Ct. 1637, 1643-45, 36...