Perhaps one of the most celebrated charging strategies by the federal government was to investigate and charge Al Capone with tax evasion. The feds weren’t really after him for tax crimes – they wanted Al Capone because he was a mobster. Yet by charging the tax offense, the federal government was able to get a conviction that stuck.
Yet the government runs a risk when it charges an auxiliary crime – one that isn’t the main offense that they’re targeting but, rather, something that derives from it.
The Fifth Circuit’s recent opinion in United States v. Harris illustrates this point.
Two men, named Harris and Miller, were involved in some drug transactions between Texas and California. No, not cocaine or marijuana, these guys were trafficking in codeine cough syrup. [FN1]
Instead of being charged with drug trafficking, they were charged with money laundering for paying for the drugs, under 18 U.S.C. § 1956.
Money laundering, as relevant to this case, is basically when a person participates in a financial transaction to conceal that the money in the transaction came from some illegal activity.
The government’s theory, from its opening statement, was that,
In any drug transaction there are drugs going one way and money coming back the other way. That’s the nature of a drug transaction.
Now, because drug transactions are illegal, they have to be concealed by those people who are participating in them. The people who are transporting and distributing the drugs have to conceal their actions. Likewise, the people that are paying the money,
transporting the money and distributing the money have to conceal their actions. That’s the nature of drug transactions, that they have to be concealed from law enforcement, both the drugs and the money.
The government’s theory was that because the money was sent to pay for the drugs, the folks who sent the money engaged in money laundering.
Miller and Harris were both convicted at trial. Miller was sentenced to 252 months in prison, or 21 years. Harris was sentenced to 293 months, or more than 24 years.
The Fifth Circuit reversed, and rejected the government’s theory for what makes money laundering.
In essence, the court of appeals held that when the transfers of money are a part of the illegal transaction, those transactions can’t be money laundering. Money laundering only arises once the illegal transaction is done.
As the court of appeals described it, the evidence that money was sent to purchase drugs does not show that
the funds transferred from Miller to Harris were proceeds of drug trafficking or anything other than payment of the purchase price for drugs. Money does not become proceeds of illegal activity until the unlawful activity is complete. The crime of money laundering is targeted at the activities that generally follow the unlawful activity in time.
And, as a result Mr. Miller and Mr. Harris are now saved decades in prison. And a very aggressive attempt to construe money laundering by the government has been brushed back.
(Hat tip to the White Collar Crime Prof Blog for the heads up on this opinion.)
[FN1] – This may be too much information, gentle reader, but I was recently prescribed codeine cough syrup for a bronchial infection. I’m not sure I see why folks would buy and sell it illegally, but there is likely something I’m missing. Perhaps it’s more interesting when you mix it with Four Loco?