The Chicago Syndicate: Victory for Organized Crime and Drug Traffickers at the Supreme Court

Wednesday, June 11, 2008

Victory for Organized Crime and Drug Traffickers at the Supreme Court

The Supreme Court ruled Monday that federal prosecutors have gone too far in their use of money laundering charges to combat drug traffickers and organized crime.

In two decisions — one a 5-4 split, the other unanimous — the justices found that money laundering charges apply only to profits of an illegal gambling ring and cannot be used when the only evidence of a possible crime is when someone hides large amounts of cash in his car when heading for the border.

The government brings money laundering cases against more than 1,300 people annually and the justices appeared to agree with defense lawyers who said government prosecutors have been stretching the bounds of the law. The Justice Department drew little sympathy from Justice Antonin Scalia.

"The government exaggerates the difficulties" of enforcing a narrowed interpretation of money laundering, Scalia wrote in the gambling case involving an illegal lottery. Scalia drew the support of three other justices. The deciding fifth vote came in a separate opinion from a member of the liberal wing of the court, Justice John Paul Stevens. Stevens declined to go as far as Scalia did in rejecting the government's position.

While deciding in the defendants' favor in both cases, justices took pains to say that they were engaging in carefully calibrated adjustments, not radical change. Defense lawyers had a different perspective.

"The rulings significantly raise the bar for prosecutors to prove money laundering," said Jeffrey Green, who represents the National Association of Criminal Defense Lawyers.

Green said the decisions also will significantly affect the white-collar world, where money laundering charges are frequently tacked onto alleged violations of the Foreign Corrupt Practices Act, the law designed to prosecute American companies that bribe foreign officials.

The White House referred questions on the rulings to the Justice Department, which declined to comment.

Congress enacted the anti-money-laundering law in 1986 after the President's Commission on Organized Crime highlighted the growing problem of "washing" criminal proceeds through overseas bank accounts and legitimate businesses.

The law carries 20-year maximum prison terms and heavy fines on conviction.

In the 5-4 ruling siding with defendants Efrain Santos and Benedicto Diaz, a federal judge and the 7th U.S. Circuit Court of Appeals in Chicago said that paying off gambling winners and compensating employees who collect the bets don't qualify as money laundering. Those are expenses, and prosecutors must show that profits were used to promote the illegal activity, the appeals court ruled in a decision affirmed by the Supreme Court.

At oral arguments before the court last October, the Justice Department spelled out the problem of separating profit from gross receipts in a criminal enterprise. "Criminals often don't keep accounting records," the Justice Department solicitor general's office argued.

In the case decided unanimously, Justice Clarence Thomas wrote that a money laundering case against a man headed to Mexico with $81,000 in cash cannot be proven merely by showing that the funds were concealed in a secret compartment of a car.

Instead, the court said that prosecutors must show that the purpose of transporting funds in a money laundering case was to conceal their ownership, source or control.

In passing the money laundering law, Congress intended to fill a gap in law enforcement by preventing the concealment and reinvestment of money derived from criminal activity.

Between $8 billion and $25 billion a year from Mexican and Colombian drugs is moved across the border and laundered, says the Justice Department's National Drug Intelligence Center.

The cases are U.S. v. Santos, 06-1005, and Cuellar v. U.S., 06-1456.

Thanks to Pete Yost

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