Académique Documents
Professionnel Documents
Culture Documents
No. 12-4469
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte.
Robert J. Conrad,
Jr., Chief District Judge. (3:10-cr-00023-RJC-DCK-1)
Argued:
Decided:
Simmons
appeals
his
convictions
on
one
count
of
laundering,
imprisonment.
as
well
as
his
sentence
of
fifty
years
money
laundering
constituted
essential
expenses
of
his
I.
A.
From April 2007 to December 2009, Simmons operated a $35
million
Ponzi
scheme
called
Black
Diamond
Capital
Solutions.
money
in
lucrative
and
exclusive
foreign
currency
sizeable profits.
of
these
returns,
which
seemed
to
Upon the
evidence
Black
As
First,
he
claimed
that
withdrawals
were
Later, he
asserted
that
he
was
negotiating
with
German
named
Klaus
was
lying.
reflected
Diamond
bank
In
total
account
2009,
of
had
when
more
in
investors
than
fact
$292
earning
million,
dwindled
to
the
$523.60.
investor.
Moreover,
investors
began
demanding
dissembling
2009,
existing
the
became
FBI
more
raided
his
desperate.
offices.
Finally,
During
in
long
Some lost
one
count
laundering.
Ponzi
scheme
of
wire
fraud,
and
two
counts
of
money
which,
according
5
to
the
superseding
did
not
predicate
Simmonss
two
fraud
The
charges
on
Simmons
executed
what
is
commonly
known
as
ponzi
scheme.
from
discrete
two
Government
payments
alleged
that
to
investors
these
made
payments
in
also
2008.
The
involved
the
. .
testified
managers,
an
confessed.
was
IRS
against
agent,
him,
and
as
the
FBI
neophyte
investors.
financier
who
did
Nine of his
certain
agent
to
hedge
whom
fund
Simmons
never
intended
to
defraud
his
report
imprisonment.
calculating
The
probation
Simmonss
officer
recommended
recommended
an
term
of
offense
criminal
Guidelines-recommended
history
category
produced
The
district
court
varied
downward
from
the
probation
consecutively
to
the
fraud
counts,
and
360
months
of
that
but
this
was
an
enormous
sentence,
explained
that
it
was
sufficient,
but
not
greater
than
necessary,
to
accomplish justice.
II.
On
appeal,
Simmons
laundering convictions. 2
primarily
challenges
his
money-
We
review
acquittal de novo.
the
denial
of
motion
for
judgment
of
to
engage
proceeds
of
promote
the
in
specified
carrying
1956(a)(1)(A)(i)
financial
unlawful
on
(2006).
transaction
activity
of
that
The
involving
with
the
activity.
statute
the
intent
18
defines
to
U.S.C.
specified
securities
fraud
and
wire
fraud.
Id.
at
1956(c)(7)(A).
Both of Simmonss money-laundering convictions arose from
payments that he made to investors during the course of his
Ponzi scheme.
$250,000
in
Black
Diamond
prior
to
Bazluki had
receiving
this
second
money-laundering
conviction
was
based
on
wire
Lux had
invested
$40,000
in
Black
Diamond.
He
testified
that
after
to
invest
in
Black
Diamond.
Lux
also
continued
to
in
which
the
Supreme
Court
reversed
the
money-
to
the
concluded
operating
lottery
that
an
these
illegal
winners
themselves.
payments
lottery,
The
involved
and
could
the
lower
court
proceeds
therefore
of
constitute
members
plurality
of
the
Supreme
concluded
that
Court
the
disagreed.
term
proceeds
fourin
the
Id. at 514
(plurality
opinion).
money-laundering
The
statute
plurality
only
covers
rejecting
the
thus
concluded
transactions
that
the
involving
Id. at 524.
statutes
broader
interpretation,
the
Id. at 515.
The plurality
If
of
his
illegal
activity,
all
illegal
gambling
punish
defendant
twice
for
an
offense
that
Congress
Id. at 517.
explained:
Few crimes are entirely free of cost, and costs are
not always paid in advance.
Anyone who pays for the
costs of a crime with its proceeds -- for example, the
felon who uses the stolen money to pay for the rented
getaway car -- would violate the money-laundering
statute. And any wealth-acquiring crime with multiple
participants would become money laundering when the
initial recipient of the wealth gives his confederates
their shares.
Generally speaking, any specified
unlawful activity, an episode of which includes
transactions which are not elements of the offense and
in which a participant passes receipts on to someone
else, would merge with money laundering.
10
Id.
at
516.
The
plurality
concluded
that
interpreting
Id. at 515.
money
cases
laundering
involving
statutes
large-scale
principally
criminal
approach,
target,
operations
that
that
is,
continue
the
money-laundering
statute
could
not
profits
may
often
be
unclear.
But
determining
the
lifespan
of
the
plurality
According to the
long-term
criminal
profits,
would
raise
no
difficulties
because
an
520
n.7
(plurality
opinion).
Because
the
Government
charged
as
money
laundering
11
during
that
lifespan
involved
profits,
predicate crime.
rather
than
essential
expenses,
of
the
Id.
view
that
proceeds
always
means
profits.
of
the
term
proceeds
on
case-by-case
basis
by
He concluded that
essential
expenses
money laundering.
that
there
was
of
Id. at 528.
no
that
business
cannot
constitute
explanation
for
why
Congress
would
have
considered
Criminal
Code,
crime.
Id.
and
to
appropriately
radically
punished
increase
the
elsewhere
sentence
in
for
the
that
Id.
B.
Congress amended the money-laundering statute in May 2009;
that amendment effectively overruled Santos, defining proceeds
to include gross receipts.
However, because
the amendment was not enacted at the time of the conduct giving
rise
to
Simmonss
money-laundering
convictions,
this
expanded
We are
and
money
laundering.
634
F.3d
270
(4th
Cir.
2011).
from his transfer of the illicit gains into his personal bank
account.
concurring).
To
resolve
exactly, Santos
disposition.
Halsteads
argument
held
task
--
we
first
complicated
by
examined
the
what,
fractured
at 279.
force
both
the
pluralitys
and
Justice
Stevenss
Id. at 278-79.
We concluded that a
the
crime.
essential
expenses
of
operating
the
underlying
But if the
Id. at 279-80.
this
rule
to
Halstead,
we
held
was
healthcare
into
his
complete
as
soon
reimbursements.
own
account
as
he
received
Transferring
thereafter
these
constituted
that
no
merger
His healthcare
the
ill-gotten
reimbursements
an
altogether
Id. at 280.
We
Id. at 406.
Id. at 407.
on
Santos
convictions.
to
reverse
defendants
money-laundering
Abdulwahab had
we
found
that
these
payments
Id. at 506-07.
were
for
As in
services
that
Id. at
the Santos plurality, who uses stolen money to pay for the
rented getaway car.
Id.
Id.
15
III.
Simmons argues that Santos, Halstead, Cloud, and Abdulwahab
require that we reverse his money-laundering convictions.
He
criminal
activity
but
rather
separately
of
money
essential
expenses
of
laundering
for
payments
that
were
problem
identified
in
Santos.
The
Government,
by
and
controlling
money-laundering
admitted
at
law,
convictions
Simmonss
ongoing
success
of
earlier
investors,
his
trial
we
conclude
cannot
stand.
irrefutably
Ponzi
including
scheme
those
that
Simmonss
The
evidence
established
depended
payments
on
that
payments
charged
in
the
to
the
money-laundering counts.
The
evidence
against
Simmons
confirmed
the
commonsense
schemes
without
some
16
evidence
that
they
will
see
Simmons
paid
to
early
was
essential
to
payment
basis
formed
the
of
Simmonss
first
money-laundering
other
money-laundering
count
--
testified
that
the
fact that he was able to withdraw from his account made him 100
percent confident in his investment, convinced him that his
gains
were
not
just
friends to invest.
on
paper,
and
made
him
encourage
his
scheme
when
the
payments
ceased
suggests
just
the
opposite.
Furthermore,
this
case,
investors
as
indictment
transfers
the
we
note
Government
essential
to
characterized
to
that
wire
ponzi
throughout
itself
treated
Simmonss
the
wire
payment
its
the
fraud.
fraud
to
prosecution
payments
The
offense
investors
of
to
superseding
as
and
including
to
their
argument,
the
Government
contended
that
And in its
payments
to
confidence
that
their
investment
was
sound
and
induce[d] them to put even more money back into the scheme.
The Government explained that the payments were one of the ways
the defendant kept the scheme going.
In addition to the evidence proving that this particular
Ponzi
scheme
payments
are
Ponzi schemes.
relied
on
understood
payments
to
to
constitute
early
investors,
essential
such
features
of
in which early investors are paid off with money received from
later investors in order to prevent discovery and to encourage
additional and larger investments.
107
F.3d
257,
259
n.1
(4th
Cir.
The
Oxford
English
invested
by
others.
Ponzi
Scheme,
Oxford
English
Dictionary (2013).
Given these definitions, it is hardly surprising that the
only other appellate court to decide a case involving a Ponzischeme operator convicted of both fraud and money laundering has
reached the same conclusion as we do.
Alstyne,
the
the
laundering
purported
Ninth
Circuit
convictions
returns
to
on
reversed
the
early
ground
investors
defendants
that
were
convictions
payments
inherent
the
money-
to
of
the
suffered
from
merger
problem
because
the
very
we
note
that
Id. at 815.
when
Congress
amended
the
money-
laws
definition
of
proceeds,
19
the
Senate
Report
money
laundering
under
the
existing
statute.
The
Report
Of course, the
constitute
returns
to
essential
early
expenses
investors
of
Ponzi
are
understood
schemes
rather
to
than
Government
concedes
that
this
case
involves
that
we
must
arguments
affirm.
as
to
The
why
Government
Simmonss
raises
three
money-laundering
constitute
the
reinvestment
of
profit
to
finance
Govt
Br.
criminal
profits
to
at
56.
finance
Although
a
future
the
line
fraud
between
and
using
using
gross
self-evident,
see
Santos,
dissenting),
Santos
both
553
U.S.
requires
us
at
to
544
draw
(Alito,
this
line
J.,
and
gambling
scheme
and
Simmonss
Ponzi
scheme
ongoing
transactions.
schemes
rather
than
discrete
Both
criminal
paid
his
lottery
winners,
presumably
hoping
that
Santos
could
instead
pocketed
the
have
declined
cash.
Had
to
he
pay
done
his
so,
Of
winners
and
however,
his
A majority of
discrete
gambling
crimes.
Rather,
these
payments
in
the
hopes
of
attracting
21
and
repeat
gamblers
during
the
course
of
an
ongoing
lottery,
Simmons
paid
early
have absconded with the early investors money before paying any
returns, had he done so, his scheme certainly could not have
lasted
for
indictment.
the
nearly
three-year
period
charged
in
the
Rather,
lottery
enterprise
scheme
that
the
in
Santos,
defendant
represented
could
sustain
single,
only
by
ongoing
making
limited payouts.
The Government next argues that payments to innocent third
parties -- rather than to coconspirators -- cannot constitute
essential expenses of a criminal scheme.
were
made
to
the
defendants
criminal
accomplices
getaway
car,
paying
investors
in
order
to
maintain
Ponzi
payments
formed
the
553
were
believe
of
U.S.
collectors,
the
at
accomplices
runners,
basis
convictions.
collectors
to
and
defendants
509.
to
Although
Santoss
lottery
In
winners
money-laundering
the
runners
crime,
the
and
lottery
that
the
merger
problem
arises
only
when
the
See Santos,
will
illegal
not
pay
lotteries
statute.).
For
their
would
our
winners,
merge
part,
we
the
with
have
statute
the
criminalizing
money-laundering
repeatedly
explained
in
interpreting Santos that the essential nature of the payment -rather than the identity of the payments recipient -- dictates
whether a given transaction raises a merger problem.
See Cloud,
Finally,
payments
in
stretches
to
perhaps
this
recognizing
case
and
distinguish
those
them
by
the
in
similarity
Santos,
pointing
between
the
the
Government
the
assertedly
to
The
But
If a criminal scheme
these
payment
need
Simmonss
payments
not
Ponzi
be
arrive
regularly
predictable
scheme
depended
to
on
or
be
sporadically.
essential.
periodic
Because
payments
to
enterprise
regardless
of
whether
they
accrued
on
specified timetable.
IV.
Simmonss fraudulent scheme, like any typical Ponzi scheme,
depended
on
attracting
new
investments
through
occasional
payments
to
investors,
like
Santoss
payments
to
Punishing
Simmons
separately
for
these
payments
these
convictions,
reasons,
we
while
must
we
reverse
25
affirm
his
Simmonss
two
two
fraud
money-laundering
convictions,
vacate
his
sentence,
and
remand
for
further
We need not address Simmonss contention that his fiftyyear sentence was procedurally and substantively unreasonable.
And, given that Simmonss procedural challenge to his sentence
rests on an asserted misapplication of a money-laundering
sentence enhancement, this challenge should be moot on remand in
light of our reversal of the money-laundering convictions on
which it is based.
26
in
violation
of
18
U.S.C.
1956(a)(1)(A)(i)
fraud)).
And
obtaining
investors
money
completed
when
Simmons
the
fraud
was
received
committed
distinct,
the
by
Simmons
antecedent
money.
In
in
crime,
these
See United
to seek the higher penalty for the two merged crimes or both
penalties); United States v. Halstead, 634 F.3d 270, 278-79 (4th
Cir. 2011) (same).
Disagreeing with the majoritys analysis, I would conclude
that the payments to Bazluki and Lux were not the essential
expenses of Simmons wire fraud.
The wire fraud did indeed have expenses in marketing and selling
the scheme and paying employees to work the office.
But once
the
and
fraudulent
statements
were
made
to
customers
the
the
wire
fraud
statute,
18
U.S.C.
1343.
The
In
Cloud,
recruiters,
the
as
proceeds
of
the
coconspirators
of
Id. at 408.
fraud
the
were
paid
defendant,
to
who
Id. at 407.
As we stated:
F.3d
521,
531
payments
made
played
critical
to
(4th
the
Cir.
2013)
defendants
role
in
the
(likewise
agents
underlying
for
holding
that
services
that
fraud
scheme
were
in
Cloud
that
payments
to
nonparticipating
persons
to
this
case,
Bazluki
and
Lux
were
not
recruiters,
To
Simmons ability
victims
of
the
fraud
were
separate
transactions
that
1956(a)(1)(A)(i).
under
fraudulent
transactions
transactions.
prohibiting
distinct
scheme,
are
Simmons
was
Ponzi
scheme;
he
and
of
his
wire
fraud,
payment
the
used
But
crimes
laundering,
Ponzi
of
proceeds
to
not
was
earlier
in
future
engage
charged
charged
securities
monies
from
to
with
with
fraud,
crime
committing
and
investors
money
who
had
30