U.S. v. Montague, 93-1676

• Decision Date: 12 July 1994
• Docket Number: No. 93-1676,93-1676
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Mara Beth MONTAGUE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 317

29 F.3d 317

UNITED STATES of America, Plaintiff-Appellee, v. Mara Beth MONTAGUE, Defendant-Appellant.

No. 93-1676.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 10, 1993.

Decided July 12, 1994.

Stephen B. Clark, Asst. U.S. Atty., Office of U.S. Atty., Criminal Div., Fairview Heights, IL (argued), for plaintiff-appellee.

George Edward Moorman (argued), Williamson, Webster, Groshong, Moorman & Falb, Donald Groshong, Alton, IL, for defendant-appellant.

Before MANION and KANNE, Circuit Judges, and WILL, District Judge. ^*

WILL, District Judge.

The defendant, Mara Beth Montague ("Montague"), was named in a 29-count indictment. She was convicted, on Count 1, of conspiring with several other defendants to violate 18 U.S.C. Sec. 1956(a)(1)(A)(i), which prohibits what is commonly known as money laundering in connection with criminal activity. The indictment involved charged her with and she was convicted on 28 other counts (2-29) of money laundering a total of $10,320.00 in connection with separate prostitution transactions. She was sentenced to 60 months on the conspiracy count and 120 months on the 28 individual transaction counts, all to run concurrently.

Montague appeals, claiming (1) the evidence was insufficient to establish that she knew the money involved represented the proceeds of prostitution, a crime under Missouri law and (2) the sentencing judge erred in making findings and rulings in applying the Sentencing Guidelines.

We affirm, notwithstanding the fact that the sentences imposed are essentially for conduct in violation of state prostitution law, and are severe in comparison with those customarily imposed by state courts for similar conduct. This is a classic example of the federalization of a traditional state crime, prostitution, in order to obtain enhanced sentences by converting the state crime into money laundering, a federal offense. It demonstrates how an aggressive United States Attorney can use the money laundering statute as a means to take over from state prosecutors the prosecution of long-established state crimes and, in the process, secure more draconian sentences and increase the population of the already overcrowded federal prisons.

I. BACKGROUND

Montague operated several escort service businesses--Aaron's, A-1 Escorts, A Gentlemen's Preference, and A Absolute Angel--for customers in the St. Louis, Missouri metropolitan area. The proceeds from these escort businesses were deposited into an account at the First National Bank of Collinsville, located in Collinsville, Illinois, and an account at the Anna State Bank, located in Anna, Illinois. Many of the deposits consisted of credit card receipts under the merchant name "Ahead of the West," which Montague used to guarantee discretion for her customers on their monthly credit card statements.

In order for the Ahead of the West bank account to obtain funds from the credit card receipts, the banks forwarded the receipts to Credit Systems, Inc. in St. Louis, which then obtained funds by wire from the cardholders' banks. When the Ahead of the West account was opened, the banks were told that it was a horse-supply business.

For some time, Montague was assisted in the escort operation by her father--Francis Montague, her boyfriend--John Strother, and numerous others. In early 1988, Montague and Strother broke up; Strother then established his own escort services--Penthouse, Famous French Quarter Escorts, Absolute Angel, and A Gentlemen's Preference. Notwithstanding their separation (both personal and business), Strother and Montague continued to perform business services for each other such as staffing telephones and depositing proceeds until early 1990.

Both Montague's and Strother's escort operations advertised in the yellow pages of the local telephone directory. When potential customers called any of the services, the telephone operators would obtain the customer's name and location, ask what type of woman was preferred, and dispatch one of several female escorts employed by Montague or Strother to the customer's location. The fees for the escort service were $125.00 (cash payment) and $150.00 (credit card payment). Apparently, in many instances the escorts would perform acts of sexual intercourse, oral sex, or manual sex in return for the payment. ¹ The escorts would then deliver the cash or credit card receipts to Montague, Francis Montague, Strother, or others designated by them, who deposited the proceeds in the banks.

By her own admission at trial, Montague had previously been convicted of prostitution in St. Louis County, Missouri. She also occasionally made escort calls herself, even while pregnant, when other women were unavailable.

Three prostitutes--Janet Hake, Tina Brown, and Donna Holloway--testified at trial that they had been employed by Montague for her escort services. Hake testified that the entries in her diary recorded the dates of visits that she made to customers for prostitution services and that the diary also contained the names and addresses of the customers on whom she called. She further testified that Montague would also go out on calls personally to provide sexual services to customers. Both Brown and Holloway testified that they had been in the prostitution business before being hired by Montague and that Montague recognized and appreciated the value of their past prostitution experience. For example, Brown, who was twenty-four years old at the time of trial, testified that she had been a prostitute for eleven years.

Each prostitute testified that escort businesses generally (and Montague's in particular) are engaged in prostitution. The prostitutes testified that they checked customers' identifications upon arrival to determine whether they were law enforcement officers. The prostitutes further testified that they received $62.50 per call, plus tips. Holloway testified that the prostitutes delivered credit card receipts and cash to Montague or her designates. Hake testified that she occasionally sent credit card receipts from St. Louis to Montague by Federal Express.

Brian Moreland testified that he answered the phones in Dongola, Illinois, for the escort businesses and that he dispatched escorts to the customers' locations. He occasionally travelled to St. Louis to pick up credit card receipts from the escorts, which he then delivered to Montague. Strother testified that he and Montague ran escort businesses together until 1988, and that they worked together until approximately February 1990.

Montague testified that she ran several escort businesses during the times alleged in the indictment. She further testified that she knew that some of the proceeds were from prostitution, although she claimed that it was solely up to the escorts whether or not to have sex. She testified that she received the same amount of money per call regardless IRS Agent Robert Jenkins testified that Montague's check register showed numerous payments to telephone and other utility companies, as well as payments to Moreland, Francis Montague, and to cash. Numerous checks introduced into evidence represented large payments to Southwestern Bell, AT & T, and GTE, for telephone services for the escort businesses. A summary of credit card receipts, a summary of documented credit card transactions, and a summary of bank deposits were also introduced into evidence to track the flow of credit card receipts used by male customers for escort services.

of whether or not the escort engaged in prostitution. She claimed at trial that she ran a horse-related business, although there is no evidence of this (except that she happened to own several horses). On her 1988 income tax returns, she indicated that her sole income was derived from a "Riding Academy;" however, she admitted at trial that she received income from her escort businesses in 1988, 1989, and 1990 (although her income is not identified as such on her tax returns for those years).

Thirteen of Montague's customers testified that copies of their credit card slips under the merchant name "Ahead of the West," which were entered into evidence represented payments for sexual services from an escort service. These customers each indicated that it was common knowledge that escort services in the St. Louis area are, in reality, prostitution services. Each also testified that he knew, before calling the escort service, that he could expect sex for money when he called and that he was calling the service for the specific purpose of obtaining sex in return for payment.

Although the time period referenced in the indictment is from December 1988 through February 1990, Hake testified that the defendant operated the escort businesses after February 1990. Hake testified that Montague continued to run the business in 1991 and in 1992 from the hospital where she had just given birth to her child. Count 1 charged Montague and several others with conspiracy to commit money laundering. Counts 2-29 of the indictment charged Montague with laundering various amounts of prostitution proceeds totalling $10,320.00, each count reflecting a deposit at the bank of one or more credit card slips signed by customers who received sex in return for the charges. On September 28, 1992, a jury found Montague guilty on all counts. ²

Although Counts 2-29 total only $10,320.00, the total amount deposited during the relevant time period was $64,870.26. Strother testified that Montague has not been in any business other than prostitution since 1988. Therefore, the total amount of money deposited from December 1988 through February 1990--$64,870.26--was assumed to be from illegal activities and was used to calculate a base offense level of 23. A two-level increase was made for obstruction of justice. An additional four levels were added for the defendant's role as organizer or leader, resulting in a base offense level of 29. Her criminal history category was III. The guideline...