Thursday, February 21, 2019

10th Circuit Reverses Tax Money Laundering Conviction For Lack of Sufficiency of Evidence (2/21/19)

In United States v. Christy, ___ F.3d ___, 2019 U.S. App. LEXIS 4594 (10th Cir. 2019), here, the Court opens with this summary:
On May 21, 2014, CNB auditors conducted a surprise audit of the Burlington, Kansas Central National Bank ("CNB" or "Bank") vault. The vault was missing $764,000. When they began to suspect Ms. Christy, she forged documents to purport that she had sent the missing cash to the Federal Reserve Bank of Kansas City ("FRB"). A grand jury indicted her on one count of bank embezzlement, six counts of making false bank entries, six counts of failing to report income on her taxes, and 10 counts of money laundering. After a six-day trial, a jury found Ms. Christy guilty of all charges except four money laundering counts. 
On appeal, Ms. Christy argues that (1) cumulative prosecutorial misconduct violated her due process rights, (2) the evidence was insufficient for her money laundering convictions, and (3) the jury instructions improperly omitted a "materiality" element for the false-bank-entry charges.
Of these three issues identified by the Court, I address on the second -- the money laundering because it is tax money laundering, not commonly encountered.  The prosecutorial misconduct issue is interesting but so long (from p. 9 to p. 39) that I did not delve deeply into it.

I also address an issue discussed by the majority in the first footnote (spanning from p. 2 to p. 3) regarding whether, even with counts of conviction reversed because the Guidelines calculations would be the same.

Tax Money Laundering.

The Court offers this additional procedural background (p. 40):
The jury found Ms. Christy not guilty of the four money laundering counts based on loan payments the Christys made before 2014 (Counts 14-17). The cash payments underlying Ms. Christy's six money laundering convictions (Counts 18-23) were made on two loans in the Christys' names at the Farmers State Bank in Aliceville, Kansas. 
Count 18 charged Ms. Christy with money laundering for making a $1,000 payment on March 17, 2014 on Loan 7521, a home loan that originated in 2011 and called for a minimum monthly payment of $600. With one exception, a payment of $1,848 that was not charged in the indictment, every one of the Christys' payments on Loan 7521 in 2013 and 2014 was $1,000. Counts 19-23 concerned cash payments on Loan 7962, a refinancing agreement for the Christys' home loan. n13 Ms. Christy was convicted based on five cash payments on this loan made between March 17, 2014 and May 12, 2014, ranging from $834.49 to $3,200 and averaging approximately $2,167. 
Ms. Christy filed a motion for acquittal on the money laundering counts at the close of the Government's case, arguing there was insufficient evidence to show that her loan payments were made with embezzled funds. She did not argue that [*45]  there was insufficient evidence of specific intent. She renewed her motion at the end of trial. The district court denied the motion, stating, 
A reasonable jury could infer from the circumstantial evidence presented at trial that the cash used to make these loan payments came from funds that Ms. Christy had embezzled from the vault at CNB and that Ms. Christy conducted the financial transactions with the intent to file a false income tax return in violation of 26 U.S.C. § 7206(1).
The issue was whether the evidence was sufficient to show that Christy had the required "intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986."  Section § 1956(a)(1)(A)(ii).  The Government argued that two types of acts were sufficient:

First, Christy made payments on loans with proceeds from the unlawful activity.  The Court held: "The Government's first argument fails because the evidence does not show that Ms. Christy's loan payments were made to enable her to file false tax returns."  Further, "The Government has not shown that Ms. Christy's intent to make the loan payments rested on anything other than her contractual obligation to make them."

Second, Christy filed false tax returns not reporting the income.  The Court held (pp. 64=65):
Ms. Christy's failure to report income on her tax filings does not show that she made the loan payments with the purpose of evading taxes. It shows she evaded taxes. Congress made Ms. Christy's failure to report income on tax returns a separate crime under 26 U.S.C. § 7206(1), and she was sentenced for each of her six violations of that statute. She also was sentenced for her bank embezzlement in violation of 18 U.S.C. § 656. Apart from the evidence of those crimes, the Government (and the dissent) cannot point to evidence that shows Ms. Christy's specific intent to further her tax fraud by engaging in specified financial transactions, as required for a violation of § 1956(a)(1)(A)(ii). Accepting the Government's argument would require us to hold that every cash payment made with ill-gotten funds amounts to money laundering, provided the defendant also fails to report those funds when filing a tax return the next year. n28 
* * * * 
We decline to adopt such a sweeping interpretation. Instead, as we have done under other subsections of § 1956, we "reject the government's argument that the money laundering statute should be interpreted to broadly encompass all transactions, however ordinary on their face, which involve the proceeds of unlawful activity." Sanders, 928 F.2d at 946.
The dissenting opinion rejects the majority's reasoning.

Reversal for resentencing.

The other issue that I address is the majority's dispute with the dissenter as to whether a remand for resentencing was necessary given the fact that the Guidelines calculations would likely be the same even with vacation of the money laundering convictions.  The dispute is set forth in footnote 1 spanning pp. 2 and 3.
    The dissent thinks resentencing is unnecessary, id. at 1 n.1, predicting, based on a U.S. Sentencing Guidelines analysis, that Ms. Christy’s advisory sentencing range and her sentence would be the same even without her money laundering convictions. Perhaps that would be so, but we are less certain than the dissent, whose analysis omits the district court’s responsibility to “consider all of the [18 U.S.C.] § 3553(a) factors to determine” the sentence after “correctly calculating the applicable Guidelines range.” Gall v. United States, 552 U.S. 38, 49-50 (2007). 
The first factor is “the nature and the circumstances of the offense,” § 3553(a)(1), and the second is “the need for the sentence imposed to reflect the seriousness of the offense,” § 3553(a)(2)(A). The absence of six money laundering convictions may affect the sentencing court’s view of those factors. Even if it does not, the evaluation of those factors lies within “the traditional exercise of discretion by a sentencing court.” Koon v.
United States
, 518 U.S. 81, 98 (1996). 
The dissent cites no case in which we have instructed a district court to vacate multiple convictions and then declined to order resentencing. In United States v. Michel, 446 F.3d 1122, 1127-32 (10th Cir. 2006), this court affirmed a conviction for possession of a firearm by a felon, vacated two additional gun-related convictions for insufficient evidence, and remanded for resentencing even though the district court had given the defendant concurrent sentences of 240 months of imprisonment for each count. Id. at 1136. Similarly, in United States v. Morris, 247 F.3d 1080, 1084-85, 1091 (10th Cir. 2001), we affirmed two convictions for Hobbs Act robbery and two convictions for use of a gun during a crime of violence, reversed three other gun-related convictions as multiplicitous, and remanded for resentencing even though concurrent sentences had been imposed for the robbery and gun offenses. We see no reason to depart from this practice. 
  In sum, remand for resentencing adheres to our appellate role in the sentencing process. See Koon, 518 U.S. at 98. And not addressing the allocution issue comports with the maxim that we decide only those issues necessary to resolve an appeal. See People for Ethical Treatment of Prop. Owners v. U.S. Fish & Wildlife Serv., 852 F.3d 990, 1008 (10th Cir. 2017) (“If it is not necessary to decide more, it is necessary not to decide more.” (brackets omitted) (quoting PDK Labs. Inc. v. DEA, 362 F.3d 786, 799 (D.C. Cir. 2004) (Roberts, J., concurring in part and concurring in the judgment))

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