Cuellar v. US

From ScotusWiki

Jump to: navigation, search

Authorship: Scott Stewart

Contents

[edit] Briefs and Documents

Docket: 06-1456

Argument Transcript

Merits briefs

Amicus briefs

Certiorari Filings

[edit] Pre-Argument Articles

[edit] Grant write-up

This section was originally written by Lyle Denniston for SCOTUSblog.

The Supreme Court agreed on Monday to spell out when an individual engaged in “laundering” of crime proceeds has illegally concealed their real source — in effect, what it means to “launder” money. The issue arises in Cuellar v. U.S. (06-1456). This was the only case granted Monday.

In the newly granted Cuellar case, here is the question raised: “Whether merely hiding funds with no design to create the appearance of legitimate wealth is sufficient to support a money laundering conviction?” Relying on dictionary definitions and legal argument, the petition contends that “as a matter of plain English, to ‘launder’ money ‘is to disguise illegally-obtained money by making it appear legitimate’ ” — in other words, to make “dirty money” look “clean.”

Under the principal federal money laundering law, criminalizing both transactions in or transportation of crime proceeds, it is a violation if the accused individual knows that either activity was “designed in whole or in part….to conceal or disguise” the nature, location, source, ownership or control of those proceeds.

The new case involves Humberto Fidel Regalado Cuellar, who was convicted of international money laundering and was sentenced to 78 months in prison. A divided panel of the Fifth Circuit Court overturned his conviction, but that Court granted en banc review and upheld the conviction.

The case arose in July 2004, when Cuellar was driving toward Mexico, when his car was stopped by a deputy sheriff near Eldorado, Texas. The officer suspected the driver had been drinking. After the car was stopped, and another officer summoned to converse with Cuellar in Spanish, officers noted a bulge in his pocket, and found a roll of $10 and $20 bills; the officers thought they smelled of marijuana. A drug-sniffing dog then alerted to the scent of the currency and to a floorboard in the rear of the car. Inside a compartment there, officers found $83,000 in cash wrapped in duct-taped bundles. He was charged with and convicted of the concealment prong of the international money-laundering law.

The case probably will be scheduled for argument in February or March.


[edit] Argument Preview

On February 25, 2008, the Supreme Court will hear argument in No. 06-1456, Cuellar v. United States, which presents the question whether hiding funds without a plan to create the appearance of legitimate wealth is sufficient to support a conviction for money laundering under 18 U.S.C. § 1956(a)(2)(B)(i).

[edit] Background

On July 14, 2004, petitioner Humberto Cuellar was traveling toward Mexico on State Highway 77 in Texas. A county sheriff’s officer pulled over Cuellar’s vehicle after it swerved onto the shoulder, about 114 miles north of the Mexican border. Cuellar appeared suspicious – avoiding eye contact and seeming nervous – and gave conflicting stories about his travels. After Cuellar pulled from his pocket a large wad of cash that smelled to officers like marijuana, the officers called in a narcotics-detection canine unit. While waiting for the canine unit, Cuellar consented to a search of his vehicle.

During the search, the officers noticed drill marks, evidence of tampering on the gas tank, and mud splashes on the car – all signs that indicated the possible construction of a secret drug-transportation compartment in the vehicle. When the canine unit arrived, the dog alerted on the money in Cuellar’s pocket and on the back floorboard area of his car. The officers found a hidden compartment underneath the floorboard that contained $83,000 in cash, wrapped in duct tape bundles. The compartment was filled with animal hair, which is thought (incorrectly) to distract a dog during a search. The officers arrested Cuellar.

A federal grand jury indicted Cuellar with international money laundering in violation of 18 U.S.C. § 1956(a)(2)(B)(i), which provides: “(a)(2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States – . . . (B) knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer 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 . . . shall be sentenced to . . . imprisonment for not more than twenty years . . . .”

The government established the foregoing facts at trial, and also provided testimony that Cuellar’s actions were consistent with “the typical drug courier.” The government did not present evidence to show that by concealing the $83,000 in cash petitioner planned to create the appearance of legitimate wealth. Cuellar took the stand and denied knowing anything about the money; he argued he was returning the car to Mexico.

The jury returned a verdict of guilty, and the district court denied Cuellar’s motions for a judgment of acquittal. Cuellar was sentenced to 78 months’ imprisonment and three years of supervised release.

A divided panel of the U.S. Court of Appeals for the Fifth Circuit reversed and rendered a judgment of acquittal. The panel majority concluded that a reasonable trier of fact could conclude that Cuellar was attempting to transport funds from the United States into Mexico, that the money was the proceeds of drug trafficking, and that Cuellar knew the money was proceeds of drug trafficking. The panel noted, however, that to sustain a money laundering conviction, the government must have shown at trial that the transportation “was designed in whole or in part to conceal or disguise its nature, location, ownership or control” and that the defendant knew that. The government thought it proved the “design” prong merely by showing that the money was hidden in Cuellar’s car. But the federal money laundering statute requires more; the transportation had to have been designed to conceal certain illicit attributes of the money. Thus, Cuellar’s activity had to have been designed to “create the appearance of legitimate wealth” by smuggling drug money across the border. It was not enough to show that he had concealed the money so that he would be able to smuggle it across the border.

Judge Davis dissented from the panel opinion. He argued that “[t]he jury could have found concealment on several levels”: first, there was an overall design to covertly move cash proceeds of drug sales from the United States to Mexico; second, by removing the drug proceeds from a higher-up’s hands, Cuellar participated in a plan that concealed the ownership and control of the funds; and third, Cuellar quite literally concealed the funds in the hidden compartment in his vehicle.

The court of appeals granted the government’s petition for rehearing en banc, reversed, and reinstated Cuellar’s conviction. Judge Davis wrote the majority opinion on behalf of thirteen judges. In the view of the en banc majority, the government had established that Cuellar’s transportation of the funds was designed at least in part to conceal the nature, location, source, ownership, or control of the funds – in several ways. First, the transportation was designed to conceal the odor of the hidden funds (the money in the compartment was surrounded by animal hair which could have counteracted an odor of drugs on that money). Second, the transportation was designed to conceal the location of the funds. Third, the transportation was designed to conceal the source, ownership, or control of the funds, because the transportation allowed the owner of the cash to have the funds placed in the vehicle in a way that would not implicate him as the owner – thus making it difficult for authorities to track the him. The en banc majority rejected Cuellar’s claim that a conviction under the statute requires proof that a defendant created the appearance of legitimate wealth, or converted dirty money into clean money, reasoning that such a conversion is just one way to conceal illicit funds. The en banc majority found decisions from other circuits to be in accord.

Judge Smith – the author of the panel majority opinion – dissented vigorously. He argued that the government charged the wrong crime, and that Cuellar should instead have been charged under the federal bulk cash smuggling statute (31 U.S.C. § 5332), which carries a maximum penalty of five years’ imprisonment (rather than the twenty-year maximum that the federal money laundering statute carries). He argued that Congress intended “to combat not the mere transportation of hidden cash, but the cleansing of illegitimate cash to make it appear legitimate.” In support, Judge Smith argued for a contextual reading of the words “conceal” and “location”; he turned to the statute’s title (“Laundering of monetary instruments”) to emphasize that Congress sought to punish money laundering; he surveyed legislative history, which he argued showed Congress’s clear intent to combat money laundering and not mere transportation of concealed money; he invoked the rule of lenity to argue that ambiguity in criminal statutes should be resolved in the defendant’s favor; he invoked the canon against absurdities to emphasize what he found to be absurd implications of the majority’s holding; and he argued that the caselaw of other circuits provided no support for the en banc decision. One judge joined this dissent and another judge joined most of it.

[edit] Petition for Certiorari

Cuellar filed a petition for certiorari, which the Supreme Court granted on October 15, 2007.

In his petition, Cuellar argued that the en banc court of appeals erroneously expanded the scope of the federal money laundering statute because a conviction under that statute “requires the government to prove that the defendant concealed or disguised funds to create the appearance of legitimate wealth.” Cuellar presented several arguments to support this interpretation. First, he cited the title of the statute – “Laundering of federal instruments” – to emphasize that the crime at issue is “money laundering.” He then cited several dictionaries to argue that “[a]s a matter of plain English, to ‘launder’ money is ‘to disguise illegally-obtained money by making it appear legitimate.’” Second, he argued that law enforcement agents give “money laundering” that same meaning. Third, he argued that the legislative history confirms this interpretation. Fourth, he argued that the en banc court’s construction causes the federal money laundering statute to reach the exact same conduct as the federal bulk cash smuggling statute, even though standard interpretive tools counsel against such an interpretation of distinct statutes. Fifth, he argued that the ambiguity in the scope of this criminal statute should be resolved in the defendant’s favor.

Cuellar argued that certiorari was also warranted because the federal courts of appeals are now divided four-to-three on the question presented, as a result of the en banc decision. Three courts of appeals, Cuellar argued, have held that money laundering requires a design to create the appearance of legitimate wealth. Four courts of appeals (including the Fifth Circuit below) have held that a money laundering conviction does not require proof of a design to create the appearance of legitimate wealth.

Finally, Cuellar argued that the statutory interpretation question in this case is very similar to the question the Supreme Court had recently granted certiorari on in United States v. Santos – which also involves a circuit conflict over the substantive meaning of the federal money laundering statute. He quoted the government’s argument in its Santos petition: “A circuit conflict is particularly problematic when, as here, the courts of appeals disagree on the substantive meaning of a widely used federal criminal statute.”

The government contended that certiorari was unwarranted because the en banc court of appeals’ holding is correct and the courts of appeals are not divided over the question presented. The government argued that Cuellar’s conduct fell within the plain language of the statute: Cuellar “transported wrapped bundles of large sums of cash derived from drug dealing concealed in a hidden compartment in his car that was covered with animal hair to hinder its discovery. Under any plain reading of the statutory text, that conduct constitutes a ‘design[],’ at least ‘in part,’ to ‘conceal or disguise’ the ‘nature’ of the proceeds . . . , the ‘location’ of the proceeds . . . , and the ‘source,’ ‘ownership’ and ‘control’ of the proceeds . . . .” The text is not so restrictive as to limit the statute only to a design to conceal proceeds for the purpose of creating the appearance of legitimate wealth. In fact, a defendant may be convicted under the statute based on conduct that creates “the appearance of having no wealth at all.”

The government asserted that reliance on the title of the statute is unwarranted because the statutory text is plain; that the legislative history supports the government’s position; and that the cases of other courts do not conflict with the decision below because two of those courts addressed a different issue, and the third court did not hold that proof of attempting to create the appearance of legitimate wealth is the only way to satisfy the statute.

The government closed by arguing that there is “no connection” between the issue in this case and the issue in Santos. The Santos case presents “a discrete question of statutory interpretation not presented here.”

[edit] Merits Briefing

Cuellar’s merits brief reprises many of the arguments that he made in his petition. First, he argues overall that a conviction under the statute requires that a defendant conceal proceeds of a specified unlawful activity by creating the appearance of legitimate wealth. He maintains that the statute addresses money laundering, which requires that one cleanse illicit money or property to make it appear legitimate and thus usable. He again cites the statute’s title and text, dictionary definitions, law enforcement usage, legislative history, and the rule of lenity. He emphasizes that the policy of the money laundering statute is to combat the ability of criminal groups to reap the profits of their activities by making illegally obtained funds appear legitimate. He also argues that the structure of the statute – which uses the term “conceal” in two different subsections – supports his interpretation, because under a contrary interpretation the word “conceal” would wrongly be given different meanings in different subsections. In addition, he argues that the federal bulk cash smuggling statute already punishes his conduct, which suggests that the money laundering statute was not meant to punish transportation of hidden illicit proceeds without any design to make those proceeds appear legitimate.

Second, Cuellar argues that the court of appeals’ theory is incorrect. The en banc court of appeals wrongly concluded that taking steps to hide illicit funds is by itself sufficient to prove concealment under the statute because, Cuellar argues, that court misapprehended the word “design” to mean “structure” rather than “purpose” or “plan.” Though Cuellar structured his transportation to conceal the money, to be convicted he needed to plan the transportation to conceal the money and make it appear legitimate.

Third, Cuellar argues that the government’s theory is incorrect. Under the government’s theory, according to Cuellar, the transportation needs to be designed to hide the funds at the end of the route, but need not be designed to create the appearance of legitimate wealth. Under this test, ultimate concealment is to be inferred from elaborate or substantial concealment of the funds en route. This is wrong, Cuellar argues, because this theory defies the statutory text and is un-administrable by juries, and there is no basis on which to assume that substantial concealment in transit proves an overall purpose of concealment.

Fourth and finally, Cuellar argues that because the government offered no evidence of a purpose to conceal, his conviction cannot stand.

In its brief on the merits, the government first argues that the money laundering statute prohibits transportation of illegally obtained funds when the defendant is aware that the funds are illegally obtained and that the transportation is designed to conceal or disguise any of five listed attributes (nature, location, source, ownership, or control) of those funds. This broad statute does not require that the transportation be designed to produce an “appearance of legitimate wealth.” That phrase is not in the statute and cannot be inferred from the text, and the text does not support Cuellar’s narrow construction. Moreover, the title of the statute cannot limit the plain meaning of the text, and the legislative history confirms Congress’s broad intent to criminalize a large swath of conduct.

Second, the government argues that the federal bulk cash smuggling statute does not support Cuellar’s construction. That statute applies to legitimate cash. The money laundering statute, by contrast, applies to illegally obtained cash that the defendant knew was illegally obtained.

Third, the government argues that the rule of lenity does not apply, because the money laundering statute is not ambiguous. Rather, the statute is broad and contains no “appearance of legitimate wealth” requirement. Moreover, the statute’s requirements – that the funds be illegally obtained and that the defendant know this – remove any reason to believe that the statute would criminalize innocent conduct.

Fourth and finally, the government argues that Cuellar’s conduct falls squarely within the money laundering statute’s coverage and that the evidence presented at trial supports Cuellar’s conviction.

[edit] Oral Argument Recap

The following is by Scott Stewart of Stanford Law School.

Arguing on behalf of petitioner Humberto Fidel Regalado Cuellar in No. 06-1456, Cuellar v. United States, Assistant Federal Public Defender Jerry V. Beard gave two reasons why the Court should reverse his client’s conviction under 18 U.S.C. § 1956 – the principal federal money laundering statute – for transporting $83,000 in hidden cash drug proceeds from the United States toward a destination in Mexico. First, although the method by which Cuellar transported drug money (hidden in a compartment in his vehicle) may have been “designed to conceal,” the transportation itself was not “designed to conceal.” Second, although Cuellar may have concealed the illicit money itself, he did not conceal any of the five attributes – the nature, source, location, ownership, or control – of that dirty money, as required to sustain a conviction.

Building off the first point, Beard argued that the statute requires a defendant to have a “design to conceal” – i.e., a plan to conceal – and that the transportation itself must be designed to conceal. In this case, however, the “design” of the transportation itself was not to conceal but instead was “just to get the money to Mexico.” Because Cuellar concealed money only so that he could transport it, he could not be properly convicted under the statute.

As to the second point, Beard argued that money laundering is, in essence, cleansing dirty money to make it appear legitimate, which the statute recognizes by requiring that a defendant conceal at least one of five attributes of illegally obtained money (rather than merely concealing the illegal money itself). Beard distinguished this from the government’s argument, which he understood to be “that the method of transportation signifies the listed attributes.”

The Court peppered Beard with hypotheticals to flesh out his view of how broadly liability under the statute extends. Chief Justice John G. Roberts hypothesized a situation in which police go to investigate someone suspected of selling drugs in hopes of finding cash proceeds, only to find that someone else has taken those proceeds to another location across the border. Would that be “transportation to conceal the location or the ownership,” since (as Justice Stephen Breyer noted amidst the exchange) someone is “transporting this money to get it out of town so the police can’t find it.” Beard found that to be a “much closer” case than Cuellar’s: if the drug kingpin “had put in place some type of design . . . to flush the money” of its illegal taint then “you would be closer to . . . having money laundering liability” (at least for the kingpin, but perhaps not for the transporting courier).

Justice Samuel Alito hypothesized a situation in which someone transported money across a border knowing that the destination country had a cash-based economy, and thus the transporter was aware that “the act of transporting it from the United States to the other country will disguise the nature of the cash as drug money” as that money is easily spent and diffused into the economy. Beard argued that such conduct would not fall within the statute because it implicated money spending rather than money laundering. Such conduct did not seem to reach the statute’s core concern of a plan to make dirty money appear legitimate; under the hypothetical, the money remained dirty but just happened to be spent. Thus, the hypothetical did not implicate a “design,” let alone a design to conceal any of the critical attributes.

Justice Alito posed another hypothetical: If someone wired money to a bank in another country because that country had bank secrecy laws that made it impossible to locate the money once it is in the other country, would such conduct fall within the statute? Beard said that there would need to be more – there would need to be a design to conceal, which would require there to be different names on the accounts, or something else that reflected a design to conceal. If there were no such design then the transfer would merely cause the money to change locations, which would not be money laundering.

The Court also at times focused on some of the attributes listed in the statute, such as “nature” and “location.” Justice John Paul Stevens asked what “nature” means. After Beard answered that it means “dirty” or “unclean,” Justice Stevens pressed to see if that means merely that the money is the proceeds of unlawful activity. Justice Ginsburg interjected to suggest that concealing the nature of the proceeds simply means to make drug money look like it is innocent. Beard “brook[ed] no quarrel” with that conception. Chief Justice Roberts followed up by asking what it means to “conceal the location” of drug proceeds. Does it mean simply to conceal the proceeds? No, according to Beard. Concealing money and concealing the location of money are different; the latter “suggests that the individual is contemplating the money resurfacing later.”

Lisa S. Schertler, Assistant to the Solicitor General, argued on behalf of the United States that “the international concealment money laundering statute contains no appearance of legitimate wealth requirement, nor does it demand proof that the illegal proceeds will be cleansed after they cross the United States border.” She advocated a different conception of the statute’s “design” element than the petitioner did – one that would include, for example, the method of transportation used to conceal the drug proceeds.

Justice Breyer accepted that the statute could be read either the way Schertler read it – to refer to a method of transportation rather than only to the transportation – but that the government’s reading causes the statute to reach conduct that has nothing to do with “money laundering” as traditionally understood. Under the government’s view, the statute would seem to apply any time a person hides proceeds (perhaps in his shoe) and takes it across a border to pay a drug player. Did Congress mean to sweep in all such concealing conduct? Schertler replied that the statute’s main purpose is “to prevent criminals from taking their proceeds abroad” where United States law enforcement agents would be unable to trace those proceeds back “to the crimes and criminals that generate them.”

Justice Souter wondered that if the statute’s purpose was to trace illegally obtained proceeds to the criminals and crimes that generate them, why would the statute have an international component at all? Schertler argued that the international component underscores Congress’s desire to keep illegally obtained money within the United States so that the government could investigate the activity and actors that created it.

Justice Anthony M. Kennedy noted that that under the government’s theory, it seems that “any movement of illegal funds outside the country which is concealed is per se concealing a relevant attribute.” “We wouldn’t go that far,” Schertler responded. There needs to be a “design to conceal.” Justice Breyer returned to his concern that the government’s theory seemed to extend the statute’s reach far beyond money laundering – an odd result for a statute titled “Laundering of monetary instruments.” Justice Scalia in turn noted that the issue was whether the statute reaches transporting to conceal or concealing to transport, and that he agreed with Justice Breyer that it is odd to title a statute to reach money laundering if that statute reaches concealing to transport.

[edit] Opinion Analysis

The federal money laundering statute, 18 U.S.C. § 1956, prohibits international transportation of the proceeds of unlawful activity. The statute requires the defendant to know that such transportation is “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.” In Cuellar v. United States, No. 06-1456, the Court considered whether that part of the statute requires the government to prove (1) that the defendant attempted to make illegal funds appear legitimate or (2) merely that the defendant hid the money during transportation. The answer: neither. On Monday, June 2, 2008, the Court held that although the government does not need to show that the defendant attempted to make illegal funds appear legitimate, it is required to show that the defendant did more than merely hide the funds during transport. To sustain a conviction, the government must prove that the defendant knew that a purpose of the transportation was to conceal or disguise a listed attribute of the illicit funds.

In 2004, petitioner Humberto Cuellar was driving toward Mexico when a Texas sheriff’s officer pulled him over for driving erratically. The officer soon became suspicious that Cuellar may be involved in drug activity: Cuellar told conflicting stories of his travels, he appeared nervous, he pulled from his pocket a wad of cash that smelled of marijuana, and his car bore features that suggested it had a secret compartment. Cuellar consented to a search of his car and a narcotics-detection dog alerted to a hidden compartment underneath the floorboard that contained some $81,000 in cash.

Cuellar was convicted under the federal money laundering statute. On appeal, however, a panel of the Fifth Circuit reversed his conviction and rendered a judgment of acquittal, holding that the government had not shown that Cuellar’s transportation of the funds was itself designed to conceal or disguise a statutorily listed attribute of the funds. The Fifth Circuit then granted rehearing en banc and reinstated Cuellar’s conviction, believing that it was enough that Cuellar sought to conceal or disguise a listed attribute during transport.

The Supreme Court reversed and held that Cuellar’s conviction could not stand. Writing for the Court, Justice Clarence Thomas first considered Cuellar’s argument that the statute’s “designed . . . to conceal” element means “designed to create the appearance of legitimate wealth.” Cuellar had contended that this interpretation reflects the traditional definition of money laundering. The government had countered that Cuellar’s construction reflects just one of many ways to violate the statute and that the statute aims beyond traditional laundering. The Court resolved this issue in the government’s favor, explaining that the statutory text reflects an attempt to aim beyond traditional laundering and that the text does not include an “appearance of legitimate wealth” requirement. Violating the elements of the statute could cause illicit money to appear legitimate (for instance, by concealing the “nature” of the funds), but not necessarily: “It might be possible for a defendant to conceal or disguise a listed attribute without also creating the appearance of legitimate wealth.”

The Court next considered whether merely hiding money during transportation suffices to sustain a conviction, and agreed with Cuellar that it does not. The Court focused on the statutory word “design.” In context, “design” means purpose or plan. Thus, the purpose or plan of the transportation must be to conceal. The en banc court of appeals misread “design” to mean structure or arrangement (i.e., the car was structured to keep the money concealed). Such an interpretation would mean the statute applies whenever someone transports illegally obtained funds in a secretive manner, because he has then structured or arranged the funds in a way to conceal. The Court found such a construction implausible. Had Congress intended such a meaning, it could have written “knowing that such transportation conceals or disguises” rather than “knowing that such transportation . . . is designed . . . to conceal or disguise.” Instead, Congress likely “intended courts to apply the familiar criminal law concepts of purpose and intent [rather] than to focus exclusively on how a defendant ‘structured’ the transportation.”

The Court concluded that the government’s evidence suggested that the concealing aspects of the transaction aided the transportation and had the effect of concealing the funds, but the government failed to prove that the transportation’s purpose was to conceal. The government offered no evidence that Cuellar “knew about or intended the effect.” Because the government failed to prove this critical element and instead showed only that Cuellar concealed funds during transport, the conviction could not stand.

Justice Samuel Alito concurred, in an opinion that Chief Justice John Roberts and Justice Anthony Kennedy joined. Justice Alito joined the Court’s opinion but wrote separately to discuss the deficiency in the government’s case, noting that the government did not point to any evidence from which to infer that Cuellar knew that the transportation’s purpose was to conceal.

[edit] Links and further information

[edit] Blogosphere

Retrieved from "http://www.scotuswiki.com/index.php?title=Cuellar_v._US"
Personal tools