United States v. Quinones, No. 09-4361-cr (2d Cir. March 29, 2011) (Walker, Straub, Katzmann, CJJ)
Antonio Quinones and his son, Herman, were convicted of conspiring to distribute controlled substances. Antonio was also convicted of a money laundering conspiracy. In this opinion, the Court tries to make sense of a confusing Supreme Court money laundering case and displays a rare difference of opinion over a conscious avoidance jury instruction.
Antonio Quinones entered the internet pharmacy business in 2002 and, for several years, ran websites where customers could purchase prescription drugs with virtually no medical oversight. The purchaser would select the drug he wanted and fill out a brief medical questionnaire. This was then submitted to a doctor who reviewed it and approved the order. The doctors were paid per questionnaire reviewed, and often reviewed more than one hundred per day. Once approved, the prescription was transmitted to an actual pharmacy that Antonio controlled and the medicine was shipped out. Typically, he would send out one thousand orders per day.
Herman’s role was more limited – he filled orders and ran the customer service call center. Eventually, he developed his own “back end” administrative website to help Antonio process payments.
An Eastern District jury convicted them both; the court sentenced Herman to eighteen months’ imprisonment and Antonio to ninety-seven.
The Appellate Court’s Decision
Taking the issues in reverse order, here the court was required to sort out the confusing array of opinions relating to money laundering in United States v. Santos, 553 U.S. 507 (2008). In Santos, which involved an illegal gambling operation, a four-justice plurality applied the rule of lenity and concluded that the term “proceeds” in the money laundering statute means profits, not gross receipts. The plurality was concerned that if the definition of “proceeds” were not limited to profits, the money laundering would “merge” with the crime of running an illegal gambling business because the essence of the business itself, taking money from bettors and paying the winners, would also be money laundering transactions.
Here, Antonio argued that, under Santos, his money laundering conviction likewise could not stand because his case presented the same “merger problem.” The circuit, addressing a question of first impression, held that Santos does not apply to money laundering offenses that derive from the sale of contraband.
But getting there involved a very detailed look at Santos. The fifth vote in that case came from Justice Stevens, who held that the meaning of the term “proceeds” depended upon the nature of the underlying criminal conduct. His view of the legislative history of the money laundering statute was that Congress intended it to apply to the gross revenues, and not just the profits, of certain other activities, including “the sale of contraband.” The four justices who dissented would have held that the term “proceeds” means “gross receipts” in all circumstances. Accordingly, the circuit, in trying to identify the scope of Santos, looked to the “position taken by those Members [of the Court] who concurred in the judgment on the narrowest grounds.” Some circuits have limited Santos to its facts, while others have indicated that Santos applies more broadly, to any case that presents a “merger problem.”
Here, the court concluded that the Stevens concurrence determined the scope of Santos and thus that the statutory term “proceeds” includes “gross revenue from the sale of contraband.” It accordingly affirmed Antonio’s money laundering conviction.
To convict the defendants of unlawful distribution of controlled substances, the jury was required to find that they either knew or “reasonably should have known” that their doctors and pharmacists were acting in bad faith; that is, “outside the usual course of professional practice and without a legitimate medical purpose.” Their defense was good faith reliance on the determinations of the doctors and pharmacists. Here, the district court gave a conscious avoidance charge but the charge neglected to mention that the concept of conscious avoidance did not apply if the jury found that the Quinoneses actually believed that the doctors and pharmacists were acting in good faith.
A two-judge majority held that the error was harmless because defendants’ “actual but unreasonable belief in the existence of … the doctors’ and pharmacists’ good faith” could not absolve the defendants of culpability.
The government introduced “overwhelming evidence that the defendants knew or reasonably should have known that the doctors and pharmacists on whom they relied were acting in bad faith.” The defendants knew that their internet pharmacies permitted no interaction at all between a customer and a doctor. In fact, days after Florida enacted a law prohibiting Florida doctors from writing prescriptions without physically consulting with their patients, Antonio moved his filling pharmacy to New York. Moreover, he regularly changed locations as law enforcement raided or shuttered his pharmacies. Antonio was also aware that someone else in the same business had been arrested and that federal agents had informed some of his employees that his internet pharmacies were illegal.
Accordingly, the majority affirmed on this point as well.
Judge Straub vigorously dissented. In his view, the flawed language of the instruction required a new trial. The “actual belief” language is critical to the conscious avoidance instruction. “When knowledge of the existence of a particular fact is an element of an offense, such knowledge is established if a person is aware of high probability of its existence, unless he actually believes that it does not exist.” This language “must be incorporated into every conscious avoidance charge” and is particularly important in cases like this one, where the defendant “relied on his lack of knowledge of a crucial fact as a central element of his defense.” The conscious avoidance charge here was “completely silent on the Quinones’ actual beliefs” and thus was “wholly deficient and clearly erroneous.”
Judge Straub also found the error to be prejudicial. First, he disagreed with the majority’s premise that the Quinones’ actual but unreasonable belief in the doctors’ and pharmacists’ good faith could not absolve them. In his view, if the jury found that the Quinoneses actually believed that the doctors and pharmacists were acting in good faith, it could not have convicted them on a conscious avoidance theory.
Judge Straub also found significant evidence that the Quinoneses did indeed believe that the doctors and pharmacists were acting in good faith. Antonio testified; he explained the steps he took to ensure that his business was legal, and asserted that he actually believed that the doctors and pharmacists were acting in good faith. He also consulted with an attorney, who conducted an investigation and advised him that the businesses were legal. He moved his business out of states where it was not legal, and had a “block list” to prevent drug abusing customers from repeatedly purchasing pills.
Judge Straub also disagreed with the majority that there was “overwhelming evidence” that the Quinoneses should have known that the practitioners were acting in bad faith. The record here contained “conflicting testimony as to what the Quinoneses knew and believed,” as well as “clear evidence that Antonio consulted with both the doctors [and] attorneys about whether his business was legal.” Accordingly, “a jury should determine whether the Quinoneses are guilty after hearing a proper jury charge.”