In the Courts

Seventh Circuit: Charity and Restitution Do Not Justify De Minimus Sentence

In United States v. Repking, ____ F.3d ____, 2006 WL 3201034 (7th Cir. Nov. 7, 2006), the Seventh Circuit held that a 1-day sentence for making false entries in a bank's records and filing a false tax return, based in large part on defendant's charitable works and restitution, was unreasonably low.

The defendant, a former bank president, pled guilty to making false entries in the bank's records and to filing a false tax return. At sentencing, his advisory guidelines range was calculated to be 41 to 51 months, and the government recommended a sentence of 24 months to reflect his substantial cooperation. The sentencing judge, however, sentenced him to only 1 day of imprisonment, 3 years of supervised release, and a $100,000 fine. The government appealed the sentence as unreasonably low, and the Seventh Circuit agreed. The circuit court held that the trial court improperly considered the defendant's charitable work as a mitigating factor. The circuit court also expressed concern that the trial court accepted the representation that the defendant had made restitution without more on the record development of what that restitution entailed, noting that mere repayment of stolen money is not sufficient to justify a downward departure.

Second Circuit Holds That No Direct Evidence of Concealment Is Required for A Money Laundering Conviction

In United States v. Ness, 05-4401-CR (2nd Cir. Oct. 10, 2006), the Second Circuit held that a jury is entitled to infer that the defendant's acts were designed to conceal the unlawful nature of the funds at issue, even absent direct evidence of that concealment.

The defendant was convicted after a jury trial of conspiring to commit three money-laundering offenses and one substantive count of transaction money laundering. On appeal, he challenged the sufficiency of the evidence supporting his convictions. Specifically, he argued that the concealment element of money laundering is only satisfied when there is evidence that the transaction or transportation at issue was designed to give unlawful proceeds the appearance of legitimacy, and that there was no such evidence presented at trial. The Second Circuit disagreed. While noting that the Fifth and Tenth Circuits have required direct evidence of concealment, the Second Circuit held that, at least where there is evidence that the transactions at issue involve elaborate stratagems and a measure of secrecy, a jury may infer that the acts were designed to conceal the identity of the funds without direct evidence of that intent.

Minor Participant in Conspiracy May Properly Be Held Accountable for Entire Loss

The Seventh Circuit held that the sentencing court did not err by holding the defendant liable for the entire loss created by a conspiracy, despite her unchallenged testimony that the bulk of the loss occurred before she joined the conspiracy, in United States v. Zaccagnino, ____ F.3d ____, 2006 WL 3113538 (7th Cir. Nov. 3, 2006).

The defendant pled guilty to racketeering conspiracy, conspiracy to commit mail and wire fraud and money laundering conspiracy. The charges were related to a fraudulent bond scheme operated by the defendant, her husband, and another conspirator. The defendant appealed her 97-month prison sentence, arguing that the district court improperly held her accountable for losses that occurred before she became involved in the conspiracy. On appeal, the circuit court affirmed the sentence. The circuit court rejected her argument that she could only be held accountable for funds she personally received. The circuit court also rejected her contention that because no witness challenged her claim that she was unaware of her husband's scheme until 1999, that she could not be held liable for losses before that date. Because loss determination is a question of fact, and because the trial court was entitled not to credit the defendant's version of events, the circuit court deferred to the sentencing court's determination of the amount of loss attributable to the defendant and affirmed the sentence.

In the Courts and Business Crimes Hotline were written by Thomas M. Craig, an Associate at Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.

Admitting Business Records And Public Records Does Not Implicate the Right to Confrontation

In United States v. Feliz, ____ F.3d _____, 2006 WL 3021118 (2d Cir. Oct. 25, 2006), the Second Circuit held that the admission of business records and public records does not implicate the defendant's Sixth Amendment rights and the defendant need not be given the opportunity to confront the preparer of properly admitted business or public records.

The defendant was convicted of racketeering activities and related charges including conspiracy to commit murder. He appealed his conviction arguing that the admission of business records, in this case autopsy reports, containing testimonial statements violated his rights under the Confrontation Clause of the Sixth Amendment as articulated in Crawford v. Washington , 541 U.S. 36 (2004). He argued that because the medical examiners preparing the report must have had a reasonable expectation that the report may be used in a subsequent trial, the statements in the report must be considered testimonial in nature. If the statements are testimonial then, under Crawford, his confrontation right was violated because he had no opportunity to cross-examine the medical examiners who prepared the reports. The Second Circuit disagreed. The circuit court explained that the reasonable expectation of the declarant is not what distinguishes testimonial from nontestimonial statements. The court held that statements properly admitted as business records under Federal Rule of Evidence 803(6) are not testimonial within the meaning of Crawford, even if the declarant is aware that his statements may be used at trial, and that therefore business records do not implicate the defendant's right to confrontation. The court went on to note that the autopsy records are also public records and that public records, like business records, are also nontestimonial in nature.

Seventh Circuit: Charity and Restitution Do Not Justify De Minimus Sentence

In United States v. Repking, ____ F.3d ____, 2006 WL 3201034 (7th Cir. Nov. 7, 2006), the Seventh Circuit held that a 1-day sentence for making false entries in a bank's records and filing a false tax return, based in large part on defendant's charitable works and restitution, was unreasonably low.

The defendant, a former bank president, pled guilty to making false entries in the bank's records and to filing a false tax return. At sentencing, his advisory guidelines range was calculated to be 41 to 51 months, and the government recommended a sentence of 24 months to reflect his substantial cooperation. The sentencing judge, however, sentenced him to only 1 day of imprisonment, 3 years of supervised release, and a $100,000 fine. The government appealed the sentence as unreasonably low, and the Seventh Circuit agreed. The circuit court held that the trial court improperly considered the defendant's charitable work as a mitigating factor. The circuit court also expressed concern that the trial court accepted the representation that the defendant had made restitution without more on the record development of what that restitution entailed, noting that mere repayment of stolen money is not sufficient to justify a downward departure.

Second Circuit Holds That No Direct Evidence of Concealment Is Required for A Money Laundering Conviction

In United States v. Ness, 05-4401-CR (2nd Cir. Oct. 10, 2006), the Second Circuit held that a jury is entitled to infer that the defendant's acts were designed to conceal the unlawful nature of the funds at issue, even absent direct evidence of that concealment.

The defendant was convicted after a jury trial of conspiring to commit three money-laundering offenses and one substantive count of transaction money laundering. On appeal, he challenged the sufficiency of the evidence supporting his convictions. Specifically, he argued that the concealment element of money laundering is only satisfied when there is evidence that the transaction or transportation at issue was designed to give unlawful proceeds the appearance of legitimacy, and that there was no such evidence presented at trial. The Second Circuit disagreed. While noting that the Fifth and Tenth Circuits have required direct evidence of concealment, the Second Circuit held that, at least where there is evidence that the transactions at issue involve elaborate stratagems and a measure of secrecy, a jury may infer that the acts were designed to conceal the identity of the funds without direct evidence of that intent.

Minor Participant in Conspiracy May Properly Be Held Accountable for Entire Loss

The Seventh Circuit held that the sentencing court did not err by holding the defendant liable for the entire loss created by a conspiracy, despite her unchallenged testimony that the bulk of the loss occurred before she joined the conspiracy, in United States v. Zaccagnino, ____ F.3d ____, 2006 WL 3113538 (7th Cir. Nov. 3, 2006).

The defendant pled guilty to racketeering conspiracy, conspiracy to commit mail and wire fraud and money laundering conspiracy. The charges were related to a fraudulent bond scheme operated by the defendant, her husband, and another conspirator. The defendant appealed her 97-month prison sentence, arguing that the district court improperly held her accountable for losses that occurred before she became involved in the conspiracy. On appeal, the circuit court affirmed the sentence. The circuit court rejected her argument that she could only be held accountable for funds she personally received. The circuit court also rejected her contention that because no witness challenged her claim that she was unaware of her husband's scheme until 1999, that she could not be held liable for losses before that date. Because loss determination is a question of fact, and because the trial court was entitled not to credit the defendant's version of events, the circuit court deferred to the sentencing court's determination of the amount of loss attributable to the defendant and affirmed the sentence.

In the Courts and Business Crimes Hotline were written by Thomas M. Craig, an Associate at Williams & Connolly LLP, Washington, DC, and Associate Editor of this newsletter.