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Harder task to nail money launderers

Two high court rulings on Monday will complicate US efforts to prove certain crimes.

By Staff writer of The Christian Science Monitor / June 3, 2008

Jason Reed



The Supreme Court has made it more difficult for the government to prove certain money-laundering crimes.

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Ruling against federal prosecutors in two cases on Monday, the high court reversed the conviction of a man caught with cash hidden in his car in Texas near the Mexican border, and the court refused to reinstate a money-laundering conviction in a case involving an illegal gambling operation in Indiana.

Both decisions hold potentially important implications for crime fighting. In both cases the justices rejected the Justice Department's expansive reading of the federal money-laundering statutes.

In the hidden cash case, the court ruled 9 to 0 that prosecutors had failed to prove their case when Humberto Fidel Regalado Cuellar was convicted of money laundering after authorities discovered $81,000 in a secret compartment in his car.

An appeals court upheld the conviction, but the Supreme Court on Monday reversed it.

Writing for the court, Justice Clarence Thomas said: "We agree with the petitioner that the government must demonstrate that the defendant did more than merely hide the money during its transport."

At issue in the illegal gambling case was whether Congress used the word "proceeds" in the money-laundering statute to refer to the total amount of money received in a criminal operation or whether lawmakers were referring only to the criminal operation's profits after expenses were paid.

The question arose in a gambling case from East Chicago, Ind.

A federal appeals court ruled in 2006 that the "proceeds" referred to in the statute were merely the resulting profits of the gambling operation, not the larger amount of total receipts from all gamblers. The distinction isn't simply an accounting calculation or mere semantics. It can make the difference between a long prison sentence and an extraordinarily long sentence.

In embracing the narrower reading of the word "proceeds," the majority justices said that in the context of a case involving an illegal lottery, the term "proceeds" in the money-laundering law must be read as "profits."

The charges in the case were based on payments to lottery winners and employees of the lottery operation. "Neither type of transaction can fairly be characterized as involving the lottery's profits," Justice Antonin Scalia wrote. "Indeed, the government did not try to prove ... that they laundered criminal profits."

Justice Scalia said Congress did not clearly define in the statue what it meant by "proceeds," and that it was not the high court's role to "play the part of mind reader."

In rejecting government arguments to adopt the prosecutors' broad reading, Scalia noted: "We interpret ambiguous criminal statutes in favor of defendants, not prosecutors."

Although the question sounds like a routine exercise in statutory interpretation, the high court has been laboring over the answer since oral arguments in the case on Oct. 3, 2007. The issue split the nine-justice high court 4-1-4, with Justice John Paul Stevens in the middle.

Justice Stevens joined the plurality led by Justice Scalia, but the splintered decision means that the holding will apply in illegal gambling cases and will likely not apply in broader organized crime and racketeering cases.

Nonetheless, the decision undercuts what had become one of the government's strongest weapons against criminals. Had the high court accepted the Bush administration's broader reading of "proceeds," it would have strengthened the hand of prosecutors to substantially boost potential penalties by adding money-laundering charges to a criminal case. The greater potential punishment can encourage defendants to seek a plea deal rather than risk a conviction in a jury trial.