The two rulings are likely to crimp the government’s ability to bring money-laundering cases, although not necessarily to the degree that an initial reading of either might suggest.
The Money Laundering Control Act, enacted in 1986, is a powerful prosecutorial tool, with conviction carrying a prison sentence of up to 20 years. Money-laundering counts are often added to charges for other crimes with less severe sentences, like the charge for running an illegal gambling operation at issue in one of the two cases.
The other case was an appeal by a courier who tried to drive across the Texas-Mexico border with $81,000 in cash, proceeds of a marijuana transaction, clumsily concealed in his Volkswagen Beetle.
The question in both cases was the proper scope of the law’s definitions of money laundering.
At issue in the gambling case, which concerned a long-running illegal lottery that operated in bars and restaurants in northwestern Indiana, was a section of the law defining money laundering as a financial transaction that “represents the proceeds of some form of unlawful activity.”
The question was whether “proceeds” referred to the total receipts of the activity or only the net profits. The man accused of running the operation, Efrain Santos, was charged with money laundering based on the payments he made to his runners, collectors and winners. He argued that these payments were made from his receipts, not his profits, and so could not be prosecuted as money laundering. The United States Court of Appeals for the Seventh Circuit, in Chicago, agreed and granted Mr. Santos a writ of habeas corpus, overturning his conviction.
By a vote of 5 to 4, the Supreme Court agreed. The decision, United States v. Santos, No. 06-1005, produced an unusual lineup, with two of the most conservative justices on one side and two on the other.
Justice Antonin Scalia wrote the main opinion, which was joined by Justices Clarence Thomas, David H. Souter and Ruth Bader Ginsburg. Justice John Paul Stevens agreed with the result but not with Justice Scalia’s reasoning, adding an important limitation that is likely to minimize the decision’s impact.
Justice Samuel A. Alito Jr., a former federal prosecutor, filed a spirited dissenting opinion that was signed by Chief Justice John G. Roberts Jr. and by Justices Anthony M. Kennedy and Stephen G. Breyer.
Justice Scalia’s opinion said that as a matter of dictionary definitions, “proceeds” can mean either “receipts” or “profits.” Since Congress did not specify what it meant, the statute was ambiguous, he said, adding, “We interpret ambiguous criminal statutes in favor of defendants, not prosecutors.”
Justice Alito objected that settling on profits as the correct definition “introduces pointless and difficult problems of proof.” Further, he said, it was contrary to Congress’s obvious intention to prevent criminal enterprises from enjoying the fruits of their illegal activities, regardless of whether prosecutors could prove that each activity earned a profit.
Justice Stevens, in his separate opinion, essentially split the difference. “Proceeds” need not have the same definition in every context covered by the statute, he said. He agreed that prosecutors should not be able to treat the simple expense of running a “stand-alone gambling venture” as a separate money-laundering offense. That would be “tantamount to double jeopardy,” he said.
But Justice Stevens said Congress clearly intended the money-laundering statute to capture “gross revenues from the sale of contraband and the operation of organized crime syndicates involving such sales.” So in prosecuting these major crimes, he said, prosecutors need not limit themselves to the operation’s profits.
This case was argued on Oct. 3, meaning that it was the oldest undecided case on the court’s calendar by more than two months, and making it the subject of much speculation.
The release of the opinion solved the mystery. The arguments before the court in October produced only eight decisions, and this was Justice Scalia’s second opinion, leaving Justices Alito and Breyer with none. No justice is ever assigned a second opinion from a sitting while others remain unassigned, so it is obvious that the sides switched in midstream. Justice Alito, initially assigned to write for the court, lost his majority along the way, probably due to the decision by Justice Stevens to join the judgment holding that the conviction of Mr. Santos was improper.
The court was unanimous in the second money-laundering case decided on Monday, with an opinion by Justice Thomas. The question in the case, Cuellar v. United States, No. 06-1456, was the scope of the foreign-transportation portion of the statute. Did it violate the statute simply to conceal cash while crossing the border, as the courier, Regalado Cuellar, was convicted of doing?
Rejecting this definition, the court held that the secrecy must be part of a larger “design” to disguise the source or nature of the money. Since the government did not prove that Mr. Cuellar had such a motivation, Justice Thomas said, his conviction, which the federal appeals court in New Orleans had upheld, must be reversed.
The government won one aspect of this case, however. The court rejected Mr. Cuellar’s further argument that the prosecution had to prove that he had intended to create “the appearance of legitimate wealth.”