f. 18 U.S.C. § 1957 Money Laundering (Money Spending)
- This is a regulatory crime, so there is no need for an intent requirement
- Elements (NO intent requirement)
- Knowingly engaging in a monetary transaction
- Using criminally derived property from an SUA
- Of a value exceeding $10,000
- Monetary Transaction—The (1) deposit, withdrawal, transfer, or exchange (2) in or affecting IC or foreign commerce (3) of funds or monetary instruments (4) by, to, or through a financial institution.
- Financial Institution—One that is federally insured
- Criminally Derived Property—any property constituting or derived from proceeds obtained from a SUA
- Is there a traceability
- U.S. v. Rutgard (9th Cir.)
- Holding—Where there is tainted money comingled with clean money, the deposit of tainted funds is a violation of § 1957. However, when removing the money, it is only a crime IF there is less money left in the account than the total of criminal deposits AND the amount withdrawn is over $10,000.
- Basically, clean money comes out first, then criminal money. If, after clean money has been depleted, an excess of $10,000 in tainted money is removed, there IS a violation of § 1957.
- Moore (4th Cir.)
- There is NO requirement for the government to trace the money, presume that any money taken out is criminal first.
- Rejected by 9th Cir. because the statute does not contemplate funds involved in the SUA as § 1956 does, but rather contemplates mooney “derived from” a SUA.
- Lee (5th Cir.)
- Proportionality Rule—Look at the % of clean money and % of tainted money in total. Then apply those percentages to the transfer. If the value of the criminal percentage in the transfer exceeds $10,000 there is a violation.
g. Differences in § 1956 and § 1957
- The Intent Requirement
- § 1956(a)—D either has (a) intent to promote or evade taxes OR (b) knowledge that he is concealing it or avoiding reporting requirements
- § 1957—ONLY requires D to knowingly engage in a monetary transaction with criminally derived property
- The Transaction
- § 1956—Financial Transaction—Applies to the transfer of ANY property
- § 1957—Monetary Transaction—Restricted to money or its equivalents
- The Value
- § 1956—No value requirement
- § 1957—Only applies to transfers of criminal property in excess of $10,000
- Comingling Funds
- § 1956—No tracing requirement for comingled funds
- § 1957—Depending on the circuit, gov’t may have to trace the funds
X. Mail/Wire Fraud a. 18 U.S.C. §§ 1341 and 1343 Mail/Wire Fraud
- Jurisdictional Requirements
- Mail—All that needs to occur is for the D to use OR cause another to use the mail in furtherance of the scheme.
- Wire—Transfer via a wire, phone, or other telecommunication pathway.
- Elements
- D knowingly participated in, devised, or intended to devise a scheme to defraud in order to obtain money or property (that he is not entitled to)
- “Obtain money or property” (SEE P. 32)
- The scheme included a material misrepresentation or concealment of a material fact
- Material—Has a natural tendency to influence the decision of a RPP
- D had the intent to defraud
- Specific intent
- Must have the intent to cheat another out of his property.
- Determined at the time the agreement is made
- D used the mail or caused another to use the mail or a wire in furtherance of the scheme
- Additional Elements Using § 1346 Honest Services Prong (see p. 30-32)
- 3 Things that are NOT Required
- Central to the scheme
- Need not be false information
- Mailing was by the D
- § 1341 Definition of “Fraud”
- Durland v. U.S. (Brewer) (1896)
- Fraud, whether criminal or civil, must be the misrepresentation of a material existing or past fact, and cannot consist of the mere intention not to carry out a K in the future. HOWEVER, making a promise with absolutely no intention of paying it back in the future is fraud.
- Having no future intent suffices as a “scheme or artifice to defraud.”
- Purpose of § 1341—To protect the public of intentional efforts to despoil and prevent the post office from being used to carry these schemes into effect.
- Defense—The D had the real intent to pay the money back but was frustrated in that end.
- Neder—may signal a rollback of Durland. Holding—Charges of fraud require the use of the mail/wire to be material. Could later lead to a more conservative approach to fraud. But this seems to have been narrowed to the misrepresented fact, not materiality in the use of the mail.
- Penalties
- Standard = 20yr max
- During a Presidentially declared emergency = 30 year max
b. § 1346—Further defines “scheme or artifice to defraud” as a scheme to deprive another of the intangible right of honest services.
- Intangible Rights Theory (IRT)
- Only applies to (1) public officials and (2) commercial officers.
- After Skilling, the IRT contemplated in § 1346 has been narrowed to only apply to kickbacks and bribery, but does NOT criminalize undisclosed self-dealing.
- Overall, it is not a crime for public officials to enjoy the accoutrements of making connections with wealthy people who want their ear.
- Skilling v. U.S. (Ginsburg) (2010)
- Holding— § 1346 only applies to kickbacks and bribes.
- NO requirement for the victim to be directly deprived of anything of value
- Elements of Honest Services— (1) fiduciary duty is violated (2) by participating in a bribery or kickback scheme
- Kickback—any money, fee, commission, credit, figt, gratuity, thing of value, or compensation of any kind, which is provided, directly or indirectly, to D for the purpose of improperly obtaining or rewarding favorable treatment in connection with SUA. i.e., It is a bribe to be collected from the profit made off the official act.
- Scalia (concurring in part)
- Rejects the use of severance to save a full vacating of the law. States that this reading is an overextension of judicial power because it effectively creates new crimes. Thus, the whole law should be struck.
- His primary issue with the § 1346 is that it does not provide a criterion of guilt.
- Deus ex machina—an unexpected power or event saving a seemingly hopeless situation
- Essentially, the Court has construed § 1346 to be a specialized fraud statute for bribes and kickbacks that is applicable to both state and federal defendants.
- Operation of IRT outside “honest services”
- Without engaging in the IRT definition of “honest services,” the statute can also be used to prosecute fraud in the realm of intellectual property rights since they are intangible rights.