On 25 October 2000, the defendant was charged with 120 counts of fraud and money laundering in connection with an illegal pyramid scheme.
It was alleged that the defendant sold fraudulent securities to more than 50, mostly elderly, individuals, and then used the proceeds to distribute money as purported returns on investments to those who had previously bought the securities, which encouraged continued investment in the fraudulent scheme. This defrauded the victims of approximately USD 1.7 million in total. In addition, it was alleged that the defendant stole at least USD 900,000 of the funds raised and used the money for personal mortgage payments, country club dues, personal credit card bills and lavish entertainment.
Under the façade of providing financial planning services, the defendant uncovered information about the victims’ assets and investments. He then used this to encourage them to liquidate their investments and to use the proceeds to purchase ‘annuities’ purportedly paying 11% interest or more. Concealed from investors, however, was the fact that the defendant had minimal business operations, insufficient revenue to pay the promised interest rate and that he used funds from later investors to make principal and interest payments to earlier investors.
United States District Court for the Northern District of Texas, Dallas Division
On 25 October 2000, the defendant was charged in an indictment with 120 counts of fraud and money laundering in connection with an illegal pyramid scheme.
Count 1 charged the defendant with securities fraud, in violation of 15 U.S.C. §§ 77q(a) and 77x. Counts 2 through 63 charged the defendant with mail fraud, in violation of 18 U.S.C. § 1341. Counts 64 through 115 charged the defendant with money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A)(i). Counts 116 through 120 charged the defendant with monetary transactions in property derived from specified unlawful activity, in violation of 18 U.S.C. § 1957.
On 12 December 2000, a jury in the Northern District of Texas found the defendant guilty on all 120 counts.
On 15 May 2001, the defendant was sentenced to a total of 276 months of imprisonment and three years of supervised release. He was ordered to pay a special assessment of USD 11,850 and USD 1,705,964 in restitution.
United States District Court for the Eastern District of Texas, Texarkana Division
The defendant brought a petition for a writ of habeas corpus pursuant to 28 U.S.C. § 2241.
On 2 Juy 2009, the court dismissed the application for a writ of habeas corpus, stating that the defendant's claim did not meet the necessary requirements set forth in previous jurisprudence.
United States Court of Appeals for the Fifth Circuit
The defendant appealed the dismissal of his habeas petition by the United States District Court for the Eastern District of Texas.
The defendant argued that he was entitled to release in light of a US Supreme Court decision in the case of Santos, which held that the money laundering statute's term ‘proceeds’ was ambiguous and in certain circumstances was read to mean ‘profits’. Under this case, the defendant argued he was wrongfully convicted of money laundering because the indictment did not require the Government to prove that he used 'profits' to pay 'returns' to investors in his illegal pyramid scheme.
On 13 August 2010, the Court of Appeals reversed the District Court's dismissal.
The court reversed the dismissal because it appeared that the alleged transactions underlying the money-laundering charge did not involve profits as the only allegation was that the prisoner took proceeds from his criminal activities and used it to maintain the criminal enterprise. Thus, it appeared that the government did not prove or attempt to show that the prisoner engaged in money laundering with proceeds, narrowly defined as profits rather than as gross receipts. In addition, it appeared that the same transaction might have been used to prove both the underlying unlawful activity and the money laundering charges; and therefore the convictions for mail and securities fraud potentially merged with the money laundering conviction.
Thus, the Court reversed the District Court's dismissal and remanded the case to the District Court for a further hearing.
United States District Court for the Eastern District of Texas, Texarkana Division
After the Court of Appeals' reversal of the District Court's dismissal of the application for a writ of habeas corpus, the Court remanded the case to the District Court.
The magistrate recommended that the defendant's convictions under counts of money laundering should be vacated, and the case should be remanded to the United States District Court for the Northern District of Texas for resentencing.
United States District Court for the Eastern District of Texas, Texarkana Division
The magistrate in the previous proceeding had recommended the granting of the petition to the extent that the defendant's convictions under counts of money laundering should be vacated. The magistrate also recommended remanding the case to the United States District Court for the Northern District of Texas for resentencing.
The findings of fact and conclusions of law of the magistrate were found to be correct by the District Court, and the report of the magistrate was adopted.
United States Court of Appeals for the Fifth Circuit
The defendant argued that the District Court, on remand, erroneously limited its consideration of his claims to those pertaining to his convictions of money laundering under U.S.C. § 1956. He maintained that the Santos decision applied with equal force to his convictions of monetary transactions in property derived from specified unlawful activity under U.S.C. § 1957 and that the District Court should have vacated those convictions as well.
On 31 July 2012, the Court of Appeals affirmed the judgment of the District Court.
Contrary to the defendant’s assertion, subjecting him to resentencing on the remaining counts of conviction under U.S.C §1957 did not give rise to a double jeopardy violation.
United States District Court for the Eastern District of Texas, Texarkana Division
These proceedings concerned the resentencing of the defendant.
The defendant was resentenced to 252 months of imprisonment.
United States Court of Appeals for the Fifth Circuit
Following his resentencing, the defendant appealed his sentence of 252 months of imprisonment imposed for the amended judgment of conviction. He asserted that the sentence was procedurally and substantively unreasonable.
The Court held that the defendant had not shown that the District Court abused its discretion in sentencing. The defendant had not rebutted the presumption that his sentence is reasonable.
15 U.S.C. §§ 77q(a) and 77x
Securities Fraud
The defendant was charged with one count of securities fraud.
18 U.S.C. § 1341
Mail Fraud
The defendant was charged with 62 count of mail fraud.
18 U.S.C. § 1956(a)(1)(A)(i)
Money laundering, larceny and theft and aiding and abetting
The defendant was charged with 34 counts of money laundering, larceny and theft and aiding and abetting.
The defendant was first convicted of these counts. The courts later vacated them.
18 U.S.C. § 1956(a)(1)(A)(i)
Money laundering
The defendant was charged with 18 count of money laundering.
The defendant was first convicted of these counts. The courts later vacated them.
18 U.S.C. § 1957
Monetary transactions in property derived from specified unlawful activity (money laundering)
The defendant was charged with 5 count of monetary transactions in property derived from specified unlawful activity.
United States Court of Appeals for the Fifth Circuit
Garland v. Roy 615, F.3d 391
Garland v. United States, 2004 U.S. Dist. LEXIS 13403
United States v. Garland, 552 Fed. Appx. 381
Garland v. Roy 2009, U.S. Dist. LEXIS 56334
Garland v. Roy 2011, U.S. Dist. LEXIS 104896
Garland v. Roy, 477 Fed. Appx. 287
The significance of this decision lies in the application by the United States Court of Appeals for the Fifth Circuit of the Supreme Court decision in Santos and the reference of the Court of Appeals to articles 6 and 2 of UNTOC in construing the term ‘proceeds’.
In particular, and with reference to the case of Santos, it was noted that article 2(e) of UNTOC defines ‘proceeds of crime’ as ‘any property derived from or obtained, directly or indirectly, through the commission of an offence’. Justice Alito, in Santos, found that UNTOC supported a definition of ‘proceeds’ as ‘gross receipts’. This would, thus, include ‘gross revenues from the sale of contraband and the operation of organized crime syndicates involving such sales’. Indeed, this would align with the intent of the US Congress in creating the money-laundering offence.
The United States Court of Appeals, nonetheless, rejected the definition provided by article 2(e) of UNTOC (and that preferred by the dissenting justices in Santos). The Court determined that ‘proceeds’ must mean ‘profits’.