United States v. Ness, No. 05-4401-cr (2d Cir. May 8, 2009) (Winter, Calabresi, Pooler, CJJ)
Samuel Ness was convicted of money laundering offenses in connection with his armored car business, which received and distributed millions of dollars in narcotics proceeds. He was sentenced to 15 years in prison. On his first appeal, the circuit affirmed. He then sought certiorari in the wake of Regalado Cuellar v. United States, 128 S.Ct. 1994 (2008), and the Supreme Court vacated the affirmance and remanded the case for further consideration. This time, the circuit found that the evidence was insufficient and reversed the conviction.
Cuellar held that, for transportation money laundering offenses, the government must prove that the defendant’s purpose, “in whole or in part, was to conceal the nature, location, source, ownership or control of the funds.” A showing that a defendant hid funds during transportation is not sufficient to support a conviction, since there is “a difference between concealing something to transport it, and transporting something to conceal it.”
Ness was convicted of two counts. A substantive transaction money laundering count under 18 U.S.C. §§ 1956(a)(1)(B)(i), and a conspiracy with three objects:transaction money laundering, transportation money laundering under 1956(a)(2)(B)(i), and engaging in monetary transactions in unlawful funds under 18 U.S.C. § 1957(a).
With respect to the § 1956 charges, the circuit found no evidence that Ness’ “purpose in transporting the [drug] proceeds was to conceal” the nature, location, source, ownership or control of the money. All the government proved was “how” Ness moved the money, not “why.” Even Ness’ “avoidance of a paper trial” by hiding the proceeds and using code words showed “only that he concealed the proceeds in order to transport them. Under Cuellar, such evidence is not sufficient to prove transaction or transportation money laundering.”
A different analysis doomed the § 1957 object. This statute requires the government to prove a “monetary transaction” that involved a “financial institution.” Here, the evidence on that element was insufficient. “Financial institution” has a long and complex definition, comprising the twenty-six types of institutions listed in 31 U.S.C. § 5312, plus several others described in related regulations. Neither Ness nor his armored car company qualified under any of these definitions.
On appeal, the government relied solely on one of the regulations, 31 C.F.R. § 103.11, which covers money transmitters and the like. The circuit first held that since the government did not present this theory to the jury it “cannot support an affirmance.” In any event, it lacked merit, since Ness’ business lacked the features that the regulation requires of a money transmitter.