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).

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.

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."

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.

Posted in Cuellar v. US, Everything Else