U.S. v. Maali

• Citation: 358 F.Supp.2d 1154
• Decision Date: 28 February 2005
• Docket Number: No. 6:02-CR-171-ORL-28KR.,6:02-CR-171-ORL-28KR.
• Parties: UNITED STATES of America v. Jesse Issa MAALI M. Saleem Khanani Khan Aslam Saeedullah Awan Mahmood Jamal Big Bargain World, Inc. SS Mart, Inc. Jeans Unlimited, Inc. Denim Unlimited, Inc. Barakat Corporation Barakat International, Inc. David Portlock
• Court: U.S. District Court — Middle District of Florida

358 F.Supp.2d 1154

UNITED STATES of America v. Jesse Issa MAALI M. Saleem Khanani Khan Aslam Saeedullah Awan Mahmood Jamal Big Bargain World, Inc. SS Mart, Inc. Jeans Unlimited, Inc. Denim Unlimited, Inc. Barakat Corporation Barakat International, Inc. David Portlock

No. 6:02-CR-171-ORL-28KR.

United States District Court, M.D. Florida, Orlando Division.

February 28, 2005.

Elizabeth M. Dunne, Jennifer L. Tomsen, Tucker H. Byrd, Greenberg Traurig, P.A., Russell Eugene Crawford, Law Office of Russell E. Crawford, Mark E. NeJame, NeJame, Harrington & Barker, P.A., Robert Alan Leventhal, Harrison T. Slaughter, Jr., Joseph A. Fisher, III, Leventhal & Slaughter, Charles M. Greene, Greene & Lee, P.L., Donald R. West, Federal Public Defender's Office, Robert James Buonauro, Law Office of Robert J. Buonauro, John Yates Benford, John Y. Benford, P.A., Orlando, FL, Mark P. Schnapp, Greenberg Traurig, P.A., Miami, FL, W. Bryan Park, II, Law Offices of W. Bryan Park II, Chandler Robinson Muller, Thomas Devlin Sommerville, Law Offices of Muller & Sommerville, P.A., Robert B. White, Jr., Sobering, White & Luczak, P.A., Winter Park, FL, John David Galluzzo, John D. Galluzzo, P.A., Fern Park, FL, Roland Augustine Hermida, Law Office of Roland A. Hermida, Tampa, FL, for Defendants.

Cynthia A. Hawkins, U.S. Attorney's Office Middle District of Florida, Daniel W. Eckhart, U.S. Attorney's Office, Orlando, FL, for Plaintiff.

MEMORANDUM

ANTOON, District Judge.

This Memorandum sets forth the reasoning for the Court's earlier decision to grant Defendants David Portlock ("Portlock") and M. Saleem Khanani's ("Khanani") Motions for Acquittal on Count Fifty-Five of the United States Government's ("the Government") Third Superceding Indictment (Doc. 552).

I. Procedural Background

The Government's Third Superceding Indictment ("Indictment") against Defendants included charges that they: knowingly encouraged or induced aliens to reside in the United States unlawfully in violation of 8 U.S.C. § 1324(a)(1)(A)(iv); conspired to conceal, harbor, or shield from detection, or encouraged or induced aliens to illegally enter or reside in the United States in violation of 8 U.S.C. § 1324(a)(1)(A)(v)(l): conspired to engage in money laundering or conspired to engage in monetary transactions in property derived from specified unlawful activity in violation of 18 U.S.C. § 1956(h); and committed wire and mail fraud in violation of 18 U.S.C. §§ 1341 and 1343. On December 14, 2004. the jury returned verdicts finding Defendant Khanani guilty on all seventy-one counts against him and Defendant Portlock guilty on Counts Fifty-Four through Seventy-One. (Docs.805-06).

Defendants had previously moved for acquittal on Count Fifty-Five of the Indictment, which charged that Defendants conspired to commit money laundering offenses in violation of 18 U.S.C. § 1956(h). Pursuant to Rule 29(b) of the Federal Rules of Criminal Procedure, the Court reserved decision on Defendants' motions until after the jury returned its verdicts. On January 7, 2005, the Court, ruling from the bench, granted Defendants' motions for acquittal on Count Fifty-Five.

II. Facts

The following facts formed the basis for the Government's case against Defendants. Defendant Khanani was a 40% owner of Big Bargain World, Inc., SS Mart. Inc., and several retail stores, including Jeans Unlimited, Inc. ("Jeans Unlimited") and Denim Unlimited, Inc. ("Denim Unlimited"). At least some of the employees at Jeans Unlimited and Denim Unlimited were aliens who were not authorized to work in the United States. Defendants organized and implemented a scheme whereby they paid the undocumented workers with money skimmed from sales at Jeans Unlimited and Denim Unlimited which they channeled into four shell companies-Florida Freight & Distributors, Rainbow Merchandising, Center Care Maintenance, and T & S Printing. Defendants did not report the income that they used to pay the workers and also failed to remit federal or state employment taxes on the workers' wages. Defendants also failed to pay the undocumented workers "time-and-a-half" wages for overtime, as required by federal law. As a result of the scheme, Defendants enjoyed increased profits and decreased tax liability.

III. Rule 29 Standard

Federal Rule of Criminal Procedure 29(a) provides that "the court on the defendant's motion must enter a judgment of acquittal of any offense for which the evidence is insufficient to sustain a conviction." "In deciding a Rule 29 motion for judgment of acquittal, a district court must `determine whether, viewing all the evidence in the light most favorable to the Government and drawing all reasonable inferences and credibility choices in favor of the jury's verdict, a reasonable trier of fact could find that the evidence established guilt beyond a reasonable doubt.'" United States v. Grigsby, 111 F.3d 806, 833 (11th Cir.1997) (quoting United States v. O'Keefe, 825 F.2d 314, 319 (11th Cir.1987)).

IV. Analysis

Section 1956(h) provides that "[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy." Defendants were specifically charged with conspiring to commit money laundering in violation of §§ 1956(a)(1)(A)(i)-(ii), 1956(a)(1)(B)(i), and 1957(a). The portions of § 1956 which form the basis for the Government's conspiracy charge under § 1956(h) provide for the punishment of anyone who:

[K]nowing 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 7201 or 7206 of the Internal Revenue Code of 1986 [26 U.S.C. 7201 or 7206]; 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....

Section 1957(a) subjects to criminal liability any person who "knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 [which] is derived from specified unlawful activity." In short, to establish that Defendants violated 18 U.S.C. § 1956(h), the Government had the burden of showing that Defendants conspired to launder or to engage in a monetary transaction involving the "proceeds of specified unlawful activity."¹

At trial, the Government argued that Defendants laundered or engaged in financial transactions involving "proceeds" derived from violations of 18 U.S.C. §§ 1341 and 1343 (mail and wire fraud) and 8 U.S.C. § 1324 (relating to bringing in and harboring certain aliens), all of which are delineated as specified unlawful acts, or predicate offenses, under the money laundering statute. See 18 U.S.C. §§ 1956(c)(7)(A): § 1961(1). The Government claimed that the tax and cost savings from hiring illegal aliens constituted "proceeds" which Defendants then deposited into the accounts of shell companies for the purposes of concealing their unlawfully derived income and promoting their illegal employment scheme. Defendants raised essentially two arguments on their motions for acquittal. First. Defendants argued that they never completed a predicate offense which yielded "proceeds" that they could have laundered. Second, they argued that neither the tax nor labor cost savings that they enjoyed from hiring illegal aliens constituted "proceeds."

Defendants' first argument rests on the Eleventh Circuit's decision in United States v. Christo, in which the court determined that it is only after a "predicate crime becomes `a completed offense'" that a "money laundering can occur." 129 F.3d 578, 579-80 (11th Cir.1997). Defendants contend that channeling money into shell companies to pay their undocumented employees did not constitute "money laundering" because, rather than constituting a transaction separate from the underlying scheme to employ illegal aliens, it was instead an integral part of that scheme. Defendants' assumption appears to be that Christo stands for the proposition that to launder the "proceeds" of any illegal scheme, the alleged laundering cannot be an essential aspect of the scheme.

Defendants read Christo too broadly. The starting point for the court's analysis in Christo was its understanding that "[m]oney laundering is an offense to be punished separately from an underlying criminal offense." Id. at 580 (refusing to find that "money laundering is inherent in bank fraud or misapplication of funds"); see also United States v. Mankarious, 151 F.3d 694, 704 (7th Cir.) (finding that the requirement under Christo makes certain that "[a] money launderer must obtain proceeds before laundering [them]."), cert. denied 525 U.S. 1056, 119 S.Ct. 621, 142 L.Ed.2d 560 (1998). This rationale operates to preclude a money laundering charge based on a financial transaction which is an essential element of the underlying criminal act. Whether the financial transaction or underlying criminal act is part of an ongoing criminal scheme is irrelevant. If a conviction for money laundering is based on the use of funds from a completed predicate offense, the money laundering and predicate offense are sufficiently separate regardless of whether the predicate offense or the laundering were committed as part of a larger scheme. Thus, in this case, all that Christo required the Government to show was that Defendants completed a single predicate offense prior to the alleged laundering, not that they carried out their larger criminal scheme to its conclusion. Nor was the Government required to show that the alleged...