The following is by Scott Stewart of Stanford Law School.
Arguing on behalf of petitioner Humberto Fidel Regalado Cuellar in No. 06-1456, Cuellar v. United States, Assistant Federal Public Defender Jerry V. Beard gave two reasons why the Court should reverse his client’s conviction under 18 U.S.C. § 1956 – the principal federal money laundering statute – for transporting $83,000 in hidden cash drug proceeds from the United States toward a destination in Mexico. First, although the method by which Cuellar transported drug money (hidden in a compartment in his vehicle) may have been “designed to conceal,†the transportation itself was not “designed to conceal.†Second, although Cuellar may have concealed the illicit money itself, he did not conceal any of the five attributes – the nature, source, location, ownership, or control – of that dirty money, as required to sustain a conviction.
Building off the first point, Beard argued that the statute requires a defendant to have a “design to conceal†– i.e., a plan to conceal – and that the transportation itself must be designed to conceal. In this case, however, the “design†of the transportation itself was not to conceal but instead was “just to get the money to Mexico.†Because Cuellar concealed money only so that he could transport it, he could not be properly convicted under the statute.
As to the second point, Beard argued that money laundering is, in essence, cleansing dirty money to make it appear legitimate, which the statute recognizes by requiring that a defendant conceal at least one of five attributes of illegally obtained money (rather than merely concealing the illegal money itself). Beard distinguished this from the government’s argument, which he understood to be “that the method of transportation signifies the listed attributes.â€
The Court peppered Beard with hypotheticals to flesh out his view of how broadly liability under the statute extends. Chief Justice John G. Roberts hypothesized a situation in which police go to investigate someone suspected of selling drugs in hopes of finding cash proceeds, only to find that someone else has taken those proceeds to another location across the border. Would that be “transportation to conceal the location or the ownership,†since (as Justice Stephen Breyer noted amidst the exchange) someone is “transporting this money to get it out of town so the police can’t find it.†Beard found that to be a “much closer†case than Cuellar’s: if the drug kingpin “had put in place some type of design . . . to flush the money†of its illegal taint then “you would be closer to . . . having money laundering liability†(at least for the kingpin, but perhaps not for the transporting courier).
Justice Samuel Alito hypothesized a situation in which someone transported money across a border knowing that the destination country had a cash-based economy, and thus the transporter was aware that “the act of transporting it from the United States to the other country will disguise the nature of the cash as drug money†as that money is easily spent and diffused into the economy. Beard argued that such conduct would not fall within the statute because it implicated money spending rather than money laundering. Such conduct did not seem to reach the statute’s core concern of a plan to make dirty money appear legitimate; under the hypothetical, the money remained dirty but just happened to be spent. Thus, the hypothetical did not implicate a “design,†let alone a design to conceal any of the critical attributes.
Justice Alito posed another hypothetical: If someone wired money to a bank in another country because that country had bank secrecy laws that made it impossible to locate the money once it is in the other country, would such conduct fall within the statute? Beard said that there would need to be more – there would need to be a design to conceal, which would require there to be different names on the accounts, or something else that reflected a design to conceal. If there were no such design then the transfer would merely cause the money to change locations, which would not be money laundering.
The Court also at times focused on some of the attributes listed in the statute, such as “nature†and “location.†Justice John Paul Stevens asked what “nature†means. After Beard answered that it means “dirty†or “unclean,†Justice Stevens pressed to see if that means merely that the money is the proceeds of unlawful activity. Justice Ginsburg interjected to suggest that concealing the nature of the proceeds simply means to make drug money look like it is innocent. Beard “brook[ed] no quarrel†with that conception. Chief Justice Roberts followed up by asking what it means to “conceal the location†of drug proceeds. Does it mean simply to conceal the proceeds? No, according to Beard. Concealing money and concealing the location of money are different; the latter “suggests that the individual is contemplating the money resurfacing later.â€
Lisa S. Schertler, Assistant to the Solicitor General, argued on behalf of the United States that “the international concealment money laundering statute contains no appearance of legitimate wealth requirement, nor does it demand proof that the illegal proceeds will be cleansed after they cross the United States border.†She advocated a different conception of the statute’s “design†element than the petitioner did – one that would include, for example, the method of transportation used to conceal the drug proceeds.
Justice Breyer accepted that the statute could be read either the way Schertler read it – to refer to a method of transportation rather than only to the transportation – but that the government’s reading causes the statute to reach conduct that has nothing to do with “money laundering†as traditionally understood. Under the government’s view, the statute would seem to apply any time a person hides proceeds (perhaps in his shoe) and takes it across a border to pay a drug player. Did Congress mean to sweep in all such concealing conduct? Schertler replied that the statute’s main purpose is “to prevent criminals from taking their proceeds abroad†where United States law enforcement agents would be unable to trace those proceeds back “to the crimes and criminals that generate them.â€
Justice Souter wondered that if the statute’s purpose was to trace illegally obtained proceeds to the criminals and crimes that generate them, why would the statute have an international component at all? Schertler argued that the international component underscores Congress’s desire to keep illegally obtained money within the United States so that the government could investigate the activity and actors that created it.
Justice Anthony M. Kennedy noted that that under the government’s theory, it seems that “any movement of illegal funds outside the country which is concealed is per se concealing a relevant attribute.†“We wouldn’t go that far,†Schertler responded. There needs to be a “design to conceal.†Justice Breyer returned to his concern that the government’s theory seemed to extend the statute’s reach far beyond money laundering – an odd result for a statute titled “Laundering of monetary instruments.†Justice Scalia in turn noted that the issue was whether the statute reaches transporting to conceal or concealing to transport, and that he agreed with Justice Breyer that it is odd to title a statute to reach money laundering if that statute reaches concealing to transport.
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