U.S. v. Ness

• Decision Date: 08 May 2009
• Docket Number: Docket No. 05-4401-cr.
• Parties: UNITED STATES of America, Appellee, v. Samuel NESS, Defendant-Appellant.
• Court: U.S. Court of Appeals — Second Circuit

565 F.3d 73

UNITED STATES of America, Appellee, v. Samuel NESS, Defendant-Appellant.

Docket No. 05-4401-cr.

United States Court of Appeals, Second Circuit.

Argued: April 11, 2006.

Decided: May 8, 2009.

Vivian Shevitz, South Salem, New York (Jane Simkin Smith, South Salem, New York, of counsel, Walter E. Dellinger, Mark S. Davies, Scott M. Edson, O'Melveny & Meyers, LLP, Washington, DC, co-counsel), for Appellant.

Jocelyn E. Strauber, Assistant United States Attorney (Michael J. Garcia, United States Attorney, on the brief, Karl Metzner, Assistant United States Attorney, of counsel), United States Attorney's Office for the Southern District of New York, New York, NY, for Appellee.

Before: WINTER, CALABRESI, and POOLER, Circuit Judges.

WINTER, Circuit Judge:

Samuel Ness was convicted, after a jury trial, of one count of conspiring to commit three money laundering offenses and one substantive count of violating 18 U.S.C. § 1956(a)(1)(B)(i). On appeal, Ness argued that the evidence against him was legally insufficient because the applicable statutes' concealment element had not been met. See United States v. Ness, 466 F.3d 79, 80 (2d Cir.2006). We affirmed the convictions, concluding that a reasonable jury could find that Ness's actions were designed, at least in part, to conceal the identity of the proceeds. Id. at 81, 82. On June 9, 2008, the United States Supreme Court vacated our decision and remanded for further consideration in light of Regalado Cuellar v. United States, ___ U.S. ___, 128 S.Ct. 1994, 170 L.Ed.2d 942 (2008). See Ness v. United States, ___ U.S. ___, 128 S.Ct. 2900, 171 L.Ed.2d 839 (2008) (mem.). Cuellar held that the concealment element of the charged crimes requires a showing that the purpose of the transportation was to conceal or disguise a listed attribute of the proceeds. Cuellar, 128 S.Ct. at 2005. In light of Cuellar, we now reverse.

BACKGROUND

A jury convicted Ness of one count of conspiring to commit three money laundering offenses and one substantive count of violating 18 U.S.C. § 1956(a)(1)(B)(i) ("transaction money laundering"). The three objects of the charged conspiracy were violations of: (1) 18 U.S.C. § 1957(a) ("monetary transaction in unlawful funds"); (2) 18 U.S.C. § 1956(a)(1)(B)(i); and (3) 18 U.S.C. § 1956(a)(2)(B)(i) ("transportation money laundering"). Following denial of his post-verdict motion for a judgment of acquittal, see United States v. Ness, No. 01-cr-699, 2003 WL 21804973 (S.D.N.Y. Aug.6, 2003), Ness was sentenced to fifteen years' imprisonment, with three years' supervised release.

On appeal, Ness argued, inter alia, that the evidence presented at trial was insufficient to sustain his conviction with respect to the element of concealment, which included both a transaction money laundering statute and transportation money laundering statute. Specifically, these statutes proscribe certain "financial transaction[s]" (in the case of 18 U.S.C. § 1956(a)(1)(B)(i)) and the "transportation, transmission, or transfer" of certain funds (in the case of 18 U.S.C. § 1956(a)(2)(B)(i)) that are "designed in whole or in part . . . to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity." The evidence showed that Ness, who ran an armored car carrier business, received millions of dollars in narcotics proceeds from drug traffickers, which the government argued Ness and his associates transported to destinations abroad at the traffickers' behest. Ness contended that the concealment element of the transaction and transportation money laundering statutes could be satisfied only when the transaction or transportation at issue was designed to cloak the unlawful proceeds with the appearance of legitimate wealth. He maintained that the government showed only that he received cash from drug transactions for shipment from one place to another and failed to show that such actions were designed to give the appearance of legitimate wealth.

We rejected Ness's arguments in light of our decision in United States v. Gotti, 459 F.3d 296 (2d Cir.2006). See United States v. Ness, 466 F.3d 79, 81 (2d Cir.2006) ("Ness I"). In Gotti, we had upheld convictions under 18 U.S.C. § 1956(a)(1)(B)(i) against a sufficiency challenge with respect to concealment where the evidence showed that defendants participated in a system of "tribute" payments from lower to higher figures in an organized crime hierarchy, with the proceeds deriving from unlawful activity. Id. at 308-11, 337-38. We noted that the "highly complex and surreptitious" process through which the funds were transferred — involving coded language, the use of intermediaries, secretive handoffs, and cash transactions — sufficed to permit the inference that the deliveries "had been designed in a way that would conceal the source of the moneys." Id. at 337 (footnote reference omitted).

In Ness I, we held that the level of secrecy that attended Ness's dealings with the traffickers was comparable to that noted in Gotti, involving, for example, clandestine meetings to transfer large sums of concealed cash, the use of coded language, and the scrupulous avoidance of a paper trail. See 466 F.3d at 81. With respect to the 18 U.S.C. § 1957(a) offense, we declined to address Ness's sufficiency challenge because his conviction and sentence would still stand on the basis of the transaction and transportation money laundering convictions. See id. at 82.

On June 9, 2008, the United States Supreme Court vacated Ness I and remanded for further consideration in light of Regalado Cuellar v. United States, ___ U.S. ___, 128 S.Ct. 1994, 170 L.Ed.2d 942 (2008). See Ness v. United States, ___ U.S. ___, 128 S.Ct. 2900, 171 L.Ed.2d 839 (2008) (mem.).

DISCUSSION

a) Money Laundering

In Cuellar, the defendant had been convicted of international money laundering under 18 U.S.C. § 1956(a)(2)(B)(i) after police officers found $81,000 in narcotics proceeds during a search of his car. See id. at 1998. The Fifth Circuit reversed the conviction after concluding that the evidence failed to show that the purpose of the transportation was to conceal or disguise unlawful proceeds and create the appearance of legitimate wealth. See id. at 1998-99. The Fifth Circuit granted rehearing en banc and affirmed the conviction. See id. at 1999. The court rejected Cuellar's argument that the government must prove that he attempted to create the appearance of legitimate wealth. It held rather that Cuellar's extensive efforts to prevent detection of the funds during transportation showed that he sought to conceal or disguise the nature, location, and source, ownership, or control of the funds. See id. On certiorari, the Supreme Court rejected an interpretation of the statute that would require the government to prove that the defendant attempted to create the appearance of legitimate wealth. See id. at 2000. However, the Court concluded that the statute required evidence that the defendant's purpose (in whole or in part) in transporting the funds was to conceal the nature, location, source, ownership, or control of the funds. Id. at 2005.

Therefore, a conviction under Section 1956(a)(2)(B)(i) must be based on evidence that the defendant: (i) attempted to transport the funds across the United States border; (ii) knew that those funds "represent[ed] the proceeds of some form of unlawful activity;" and (iii) knew that such transportation was designed to "conceal or disguise the nature, the location, the source, the ownership, or the control" of the funds. See id. at 2002. With respect to this third prong, the Court held that a showing that the defendant hid funds during transportation is not sufficient to support a conviction under the statute, even if substantial efforts have been expended to conceal the money. See id. at 2003. Rather, the Court, looking to the meaning of "design" in the phrase "knowing that such transportation is designed . . . to conceal or disguise," concluded that because "design" means purpose or plan in this context, a conviction "requires proof that the purpose — not merely effect — of the transportation was to conceal or disguise a listed attribute" of the transported funds. Id. at 2003, 2005. As the Court explained, "[t]here is a difference between concealing something to transport it, and transporting something to conceal it; that is, how one moves the money is distinct from why one moves the money," and "[e]vidence of the former, standing alone, is not sufficient to prove the latter." Id. at 2005 (internal quotation marks and citation omitted).

We turn now to the application of Cuellar to the present matter. Ordinarily, we might remand this issue to the district court to benefit from its views. That is unnecessary, however, because, subsequent to the Cuellar decision, the district court stated its views in considering Ness's renewed motion for bail. See United States v. Ness, No. 01-cr-699, 2008 WL 3842961 (S.D.N.Y. Aug.15, 2008). The district court concluded that the government had provided sufficient evidence to sustain a conviction. See id. at *5. The court relied upon evidence that the proceeds of the drug sales were being transported to people in Europe and commingled with jewelry and other valuables that Ness declared to be part of his business of transporting such valuables internationally. See id. The court concluded that "[t]he transportation was designed to conceal or disguise the `nature' of that which was being transported, or its `location' among the valuables that Ness was allowed to transport and move from one airplane to another at JFK airport, or that the `source' of the items being transported was ecstasy distributions." Id.

The government echoes this reasoning on the remand. It contends that the evidence adduced at trial established two purposes behind Ness's transportation of the narcotics proceeds: "(1) to ensure the concealment of the funds ...