Justices to Hear Challenge to Money-Laundering Law

R.A. Hettinga rah at shipwright.com
Tue Oct 16 13:42:21 PDT 2007


The New York Times

October 16, 2007


Justices to Hear Challenge to Money-Laundering Law


WASHINGTON, Oct. 15 - The Supreme Court agreed on Monday to decide whether
hiding the proceeds of an illegal activity, like a drug transaction, can be
prosecuted as money laundering under federal law.

This straightforward statutory question has roiled the lower federal
courts, prompting a complaint by two conservative members of the federal
appeals court in New Orleans earlier this year that the government's
expansive interpretation of the most commonly used money-laundering statute
amounted to "prosecution run amok."

That complaint, which came in a dissenting opinion, was perhaps what led
the Supreme Court to decide, over the Justice Department's opposition, to
review the decision that had prompted it. The case is an appeal by a man
who was stopped on a Texas highway on his way to the Mexican border and
found to be carrying $83,000 in cash hidden under the floorboards of his

The government's theory was that the driver's behavior in concealing the
cash met the description of international money laundering, defined in a
1986 statute as transportation or transmission designed to "conceal or
disguise the nature, the location, the source, the ownership, or the
control" of the proceeds of illegal activity.

The lower federal courts are split over whether "conceal" should be
understood in the literal sense as simply being hidden, or whether Congress
meant to criminalize only the hiding or disguising of cash with the intent
to create the false appearance that it was obtained legitimately.

The money-laundering statute at issue is a powerful prosecutorial tool
because of the heavy penalties it imposes: up to 20 years' imprisonment and
a fine of either $500,000 or twice the value of the transaction, whichever
is greater. While there are several money-laundering laws on the books, the
one involved in this case, the Money Laundering Control Act, accounted for
62 percent of convictions for all related crimes last year, nearly 1,000

The case, Cuellar v. United States, No. 06-1456, concerns a section of the
law that applies to transportation of "the proceeds of some form of
unlawful activity" into or out of the United States. The driver, Humberto
Regalado Cuellar, was convicted under that section and sentenced to six and
one-half years in prison. He was not charged under another law that applied
to his conduct, a statute that makes it a crime to carry more than $10,000
in cash across the border without reporting it. That law carries a much
lighter sentence.

Supported by a friend of the court brief by the National Association of
Criminal Defense Lawyers, Mr. Cuellar is arguing that federal prosecutors
are aggressively stretching the meaning of the money-laundering law far
beyond the traditional context and definition of money laundering. Money
laundering was long understood to mean investing proceeds in a legitimate
enterprise, so their origins would be obscured and the money would appear
to be clean when recovered.

At the least, Mr. Cuellar's lawyers argue, the money needs to be used in a
manner that creates the appearance of legitimate wealth, not hidden under
the floorboards of a car.

A three-judge panel of the United States Court of Appeals for the Fifth
Circuit initially accepted that argument and overturned Mr. Cuellar's
conviction. The full 16-member court then reheard the case and reinstated
the conviction, 13 to 3. The majority said that because "Congress had
chosen the broad, unqualified word 'conceal,'" there was no reason to apply
a narrower definition. "Simply taking steps to hide illicit funds is
sufficient to prove concealment," the Fifth Circuit said.

In a dissenting opinion, Judge Jerry E. Smith accused the government of
"making a mockery of the concept of money laundering." Judge Smith said
that under the majority's definition, a "young petty thief" who stole a
small sum and carried it across the border in his shoe to enjoy a night "at
the bars of Nuevo Laredo" would be guilty of international money laundering
and face up to 20 years in prison.

These were among the other developments at the court.

Special Education

For the second time in a week, the court bypassed the chance to clarify the
obligation of public school systems to reimburse parents who choose to send
children with disabilities to private school without trying an available
public school program first.

A recusal by Justice Anthony M. Kennedy left the court in a 4-to-4 deadlock
last week in a case from New York City. On Monday, Justice Kennedy recused
himself again, this time in a case from Long Island, Board of Education of
Hyde Park v. Frank G., No. 06-580, leading the court to turn the case down.

This raised the prospect that a personal involvement with the issue might
preclude Justice Kennedy from ever hearing a case presenting it, with the
result that the current nine justices could never decide the question.
Justice Kennedy declined to comment on his recusal.

Long Wait

The court turned down an appeal from an Arizona inmate, Joe C. Smith, who
argued that his 30 years on death row made his death sentence "cruel and
unusual" and therefore unconstitutional. His sentence was overturned twice
on appeal. Only Justice Stephen G. Breyer noted a dissent from the denial
of the appeal, Smith v. Arizona, No. 07-5847, observing that execution "at
this late date" would certainly be unusual and, after decades on death row,
perhaps cruel.

R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'

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