U.S. v. Nunez

• Decision Date: 05 August 2005
• Docket Number: No. 04CR0086-DMS.,04CR0086-DMS.
• Citation: 419 F.Supp.2d 1258
• Parties: UNITED STATES of America, Plaintiff, v. Salvador Esquino NUNEZ (1), Monica Sanchez-Navarro (2) Defendants.
• Court: U.S. District Court — Southern District of California

419 F.Supp.2d 1258

UNITED STATES of America, Plaintiff, v. Salvador Esquino NUNEZ (1), Monica Sanchez-Navarro (2) Defendants.

No. 04CR0086-DMS.

United States District Court, S.D. California.

August 5, 2005.

U.S. Attorney CR, U.S. Attorneys, District of California Criminal Division, San Diego, CA, for Plaintiff.

Federal Defenders, Federal Defenders of San Diego, San Diego, CA, for Defendant.

ORDER GRANTING-IN-PART AND DENYING-IN-PART GOVERMENT'S MOTION TO RECONSIDER; REINSTATING COUNTS ELEVEN THROUGH THIRTEEN OF THE INDICTMENT; AND STRIKING CERTAIN ALLEGED OVERT ACTS FROM COUNT ONE

SABRAW, District Judge.

On December 10, 2004, this Court granted Defendant Salvador Esquino Nunez's motion to dismiss Counts Ten through Thirteen of the indictment (the "money laundering counts"). The Government has moved to reconsider that ruling. The Court heard argument on July 7, 2005. Attorney Timothy D. Coughlin appeared for the Government. Attorney Todd W. Burns appeared for Defendant Esquino; he also appeared specially for Defendant Monica Sanchez-Navarro. The Court commends the litigants for their excellent presentation of the legal issues. Upon careful consideration of the arguments of counsel, the relevant pleadings, and the applicable law, the Government's motion for reconsideration is GRANTED-in-part and DENIED-in-part. Counts Eleven though Thirteen of the indictment are REINSTATED. Count Ten, however, remains DISMISSED. In addition, overt acts "jj," "kk," and "ll" in furtherance of Count One (Conspiracy to Commit Bankruptcy Fraud), are STRICKEN from the indictment.

I. BACKGROUND

Despite the indictment's numerous counts and complicated factual averments, the Government's money laundering theory is simply stated. Essentially, the Government maintains that Defendant Esquino illegally concealed his yacht from the bankruptcy court (bankruptcy fraud); he then sold the yacht, and laundered the proceeds from that sale in three subsequent transactions (money laundering).

The following is a summary of the Government's theory of the case, as stated in the indictment. Defendant Esquino petitioned for Chapter 7 Bankruptcy (liquidation) in April 1998. When he filed for bankruptcy, he had an affirmative duty to apprise the bankruptcy court of all known property. Despite this duty, Defendant Esquino did not report his 83' yacht: the Caval D'Mar. By omitting the yacht from the bankruptcy petition and the various related schedules of assets, Defendant Esquino concealed that property from the bankruptcy court, constituting actionable bankruptcy fraud on the date that the duty to report attached: April 24, 1998.¹ This omission was charged as Count 3 of the indictment: bankruptcy fraud through concealment of assets, in violation of 18 U.S.C. § 152(1).

Next, once the yacht was "concealed," Defendant Esquino conducted a series of transactions by which he sold the yacht through Cays Yacht Sales ("Cays"). He then endorsed and deposited the proceeds from the yacht sale into a joint account (with his son) at Bank of America, referred to in the indictment as the "Coronado Account."

In August 1998, Defendant Esquino presented the yacht for inspection at the U.S. Customs Port of Entry in San Diego, listing his son as the owner. On October 14, 1998, he obtained a power of attorney from his son for all matters related to the yacht. That same day, Defendant Esquino negotiated an advance loan of $100,000 from Cays for the yacht sale. He then opened the Coronado Account, by depositing a $10,000 check issued by Cays, and made payable to his son.

On October 21, 1998, Defendant Esquino endorsed and deposited a $38,000 check into the Coronado Account, issued by Cays to his son. On November 25, 1998, he entered into a contract to sell the yacht for $650,000. On December 7, 1998, he endorsed and deposited a $5,000 check into the Coronado Account, issued by Cays to his son. On December 11, 1998, Defendant Esquino arranged for the deposit of a $35,000 check into the Coronado Account, issued by Cays to his son. Finally, on January 11, 1999, he endorsed and deposited a $365,275 check into the Coronado Account, issued by Cays to his son. In total, the yacht sale generated at least $453,275, which Defendant Esquino endorsed and deposited into the Coronado Account.²

Next, the Government focuses on three specific transactions, where money was moved out of the Coronado Account and transferred elsewhere. First, on January 19, 1999, Defendant Esquino directed the wire transfer of $320,000 from the Coronado Account into his account at the Casa de Cambio Interncontinental S.A.C.V., at Amtrade International Bank, in Miami, Florida ("Casa de Cambio Account"). Second, on January 25, 1999, he directed the wire transfer of $15,000 to his brother, out of the Coronado Account. Third, on February 7, 1999, he directed the wire transfer of $78,000 from the Coronado Account into his Casa de Cambio Account. These three transactions are alleged in Counts Eleven through Thirteen of the indictment as money laundering in violation of 18 U.S.C. § 1957(a). In addition, based on the entire scheme to launder the proceeds of the yacht sale (and other concealed property), the Government charged Defendant Esquino in Count Ten of the indictment with "conspiracy to commit money laundering," in violation of 18 U.S.C. §§ 1956(h) & 1957(a).

In sum, the Government contends Defendant Esquino concealed the yacht from the bankruptcy court by failing to report it on his petition and various schedules. That concealment was charged in Count Three of the indictment as bankruptcy fraud. Next, in a series of transactions, he sold the yacht and deposited the proceeds from the sale into the Coronado Account. He then conducted three specific transfers out of the Coronado Account. These three transactions are charged in Counts Eleven, Twelve, and Thirteen of the indictment as money laundering. Based on these (and other) transactions, Count Ten of the indictment charges a conspiracy to commit money laundering.

II. RELEVANT CRIMINAL STATUTES

At issue are two alleged crimes: (1) bankruptcy fraud through concealment of property; and (2) money laundering. These crimes are codified at 18 U.S.C. §§ 152(1) (bankruptcy fraud) & 1957(a) (money laundering).

18 U.S.C. § 152 catalogues nine separate types of bankruptcy crimes. The first of these crimes, listed in Section 152(1), concerns any person who "knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11 [Bankruptcy Code], from creditors or the United States Trustee, any property belonging to the estate of a debtor." 18 U.S.C. § 152(1). In other words, Section 152(1) proscribes concealment of property in a bankruptcy proceeding.

Section 1957(a) criminalizes "knowingly engag[ing] or attempt[ing] to engage in a monetary transactions in criminally derived property of a value greater than $10,000 [where the property is] derived from a specified unlawful activity ...." 18 U.S.C. § 1957(a). Congress specifically included bankruptcy fraud through concealment in the list of "specified unlawful activit[ies]," i.e., predicate acts that may form the basis of a subsequent money laundering charge. See 18 U.S.C. § 1956(c)(7)(D) (defining "specified unlawful activity" to include "an offense under ... section 152 (relating to concealment of assets; false oaths and claims; and bribery")). Section 1957 further defines "criminally derived property" as "any property constituting, or derived from, proceeds obtained from a criminal offense." 18 U.S.C. § 1957(f)(2).

III. ORDER DISMISSING MONEY LAUNDERING COUNTS

On December 10, 2004, this Court dismissed the money laundering counts of the indictment. The Court found that the Government had charged acts of money laundering that were not premised on a completed predicate offense; the alleged underlying bankruptcy fraud was still ongoing at the time of the money laundering. Moreover, many of the specific transactions forming the underlying bankruptcy fraud offenses simply reappeared to form the basis of the money laundering offenses.

In the Ninth Circuit, prosecution for money laundering must involve a transaction in proceeds from a "previous and completed criminal activity." United States v. Savage, 67 F.3d 1435, 1441-42 (9th Cir. 1995) (emphasis added). Read narrowly, this language implies that if the underlying offense is deemed to be ongoing, the Government may not charge as "money laundering" any subsequent transactions in proceeds from that ongoing crime. Some circuits, however, have read the money laundering statutes more liberally, and require only a completed phase of an ongoing offense. Because the Ninth Circuit has never expressly adopted this broad interpretation of the money laundering statutes, this Court declined to do so. See McElroy v. United States, 455 U.S. 642, 658, 102 S.Ct. 1332, 71 L.Ed.2d 522 (1982) ("ambiguity concerning the reach of a criminal statute should be resolved by reading the statute narrowly in order to encourage Congress to speak clearly, thus giving the populace `fair warning' of the line between criminal and lawful activity, and in order to have the Legislature, not the courts, define criminal activity.").

Based on the Ninth Circuit's requirement of a "completed" criminal activity both parties focused on when the underlying bankruptcy fraud in this case could be deemed "complete." (See Defendant's Response dated Dec. 2, 2004 [Doc. 71], at 3 ("the central inquiry in a money laundering charge is determining when the predicate crime became a completed offense") (citation omitted); Gov't's Supplemental Briefing dated Nov. 16, 2004 [Doc. 68], at 9 ("In the present case there is no dispute that the first phase of the bankruptcy fraud was complete when Esquino filed his fraudulent bankruptcy petition.").) Defendant Esquino argued the bankruptcy fraud was...