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U.S. v. HOWARD

February 5, 2003

UNITED STATES OF AMERICA
V.
KINLEY W. HOWARD, DEFENDANT.



The opinion of the court was delivered by: Reggie B. Walton, District Judge

  MEMORANDUM OPINION

This matter is before the Court on the defendant's motion for judgment of acquittal on two counts of the indictment and a new trial on the remaining counts of the indictment. After careful consideration of the parties' pleadings, the Court concludes, as conceded by the government, that judgments of acquittal must be entered on counts four and five of the indictment (the money laundering counts). However, despite the defendant's claims of prejudice regarding the other three counts of the indictment, the Court finds all of these claims to be without merit and therefore concludes that he is not entitled to a new trial on counts one, two, and three of the indictment.

I. Summary of Facts:*fn1

The defendant in this matter, Dr. Kinley W. Howard, was accused of fraudulently acquiring control over the assets of the estate of his deceased aunt, Mildred Powell, by defrauding the Probate Division of the Superior Court of the District of Columbia to get himself appointed as a co-personal representative of his aunt's estate. In a five count indictment, Dr. Howard was charged with two counts of mail fraud (counts one and two), 18 U.S.C. § 1341 (2000); one count of wire fraud (count three), 18 U.S.C. § 1343 (2000); and two counts of engaging in monetary transactions in property derived from unlawful activity ("money laundering") (counts four and five), 18 U.S.C. § 1957 (2000). The mail fraud counts were based upon letters the defendant wrote on February 26, 1997, and March 26, 1997, respectively, to Riggs Bank and Paine Webber, Inc., closing the accounts of Mildred Powell at these institutions. Indictment ¶ 30, at 7-8. The wire fraud count alleged that on or about January 15, 1997, the defendant sent a letter from his office in Florida to Crestar Bank in Washington D.C., requesting the wire transfer of some of Ms. Powell's funds to an account he had established at the Florida First Bank, which resulted in $61,572.02 being wired from Crestar to the Florida First Bank on January 23, 1997. Id. ¶ 4, at 9. On March 26, 1997, the defendant again sent a letter to Crestar requesting a further transfer of Ms. Powell's account assets. Thereafter, on or about April 9, 1997, the defendant caused a second wire transfer to be made in the amount of $12,859.98 from Crestar Bank to the Florida First Bank. Id. ¶ 6, at 9.

Count Four, although incorporating the first twenty-eight Paragraphs of the indictment, specifically asserted that on or about April 9, 1997, the defendant engaged in money laundering by causing the wire transfer of the same funds ($12,859.98) that also constituted part of the predicate conduct for the wire fraud offense charged in count three of the indictment. Id. ¶ 2, at 10. Count Five, which again incorporates the first twenty-eight paragraphs of the indictment, specifically charged that on or about February 26, 1997, the defendant engaged in money laundering by causing the mail transfer of the same funds ($23,903.43) that also constituted the predicate conduct for count one of the indictment, wherein the defendant is charged with mail fraud. Id. ¶ 2, at 10-11.

The parties appeared before the Court on August 20, 2002, for the commencement of the trial. However, before jury selection began, for the first time the defendant challenged, orally, the sufficiency of the money laundering counts based upon the theory that there was no illegal activity from which funds were acquired by the defendant and then laundered as alleged in the money laundering counts of the indictment, separate from the conduct the government also claimed constituted either mail or wire fraud as charged in counts one and three of the indictment, respectively. Prior to the Court's formal ruling on the defendant's challenge, the defendant filed a written motion to dismiss counts four and five, alleging that he could not be lawfully convicted of money laundering in violation of 18 U.S.C. § 1957 "where there is no proof of an independent criminal transaction separate from the underlying offense[,]" and that the indictment was flawed in this regard. In a Memorandum Opinion dated August 28, 2002, the Court denied the defendant's motion to dismiss. Although agreeing that a conviction for money laundering could not be based upon the same events that constituted either the mail or wire fraud charges, the Court concluded that dismissal was not required because the government had "alleged unlawful activity [other than the conduct charged in the mail and wire fraud counts] that preceded the activity that constituted the defendant's money laundering." United States v. Kinley W. Howard, No. 02-0079, slip op. at 21 (D.D.C. Aug. 28, 2002) (Walton, J.). The Court also concluded that "even if details about this underlying unlawful conduct were not set forth in the indictment, this would not be grounds for dismissal of the indictment because whether the criminally derived proceeds `existed before the laundering transaction is a question of proof, not a question of the adequacy of the indictment.'" Id. at 24 (quoting United States v. Seward, 272 F.3d 831, 837 (7th Cir. 2001)). Thus, the Court denied the defendant's motion to dismiss counts four and five of the indictment with the caveat that the defendant could renew his motion at the close of the government's case-in-chief "based upon a challenge to the sufficiency of the evidence presented in support of the government's position that the laundered proceeds were derived from illegal activity." Id. at 24 n. 13.

On September 5, 2002, the jury found the defendant guilty of all five counts of the indictment. As to counts four and five, the jury had been instructed by the Court that if it found the defendant guilty of these counts, it "must indicate the specified criminal activity from which [it] concluded the money used in the money transaction alleged in [these] count[s] of the indictment [was] derived." Verdict Form at 2. Regarding count four, the jury concluded that the specified unlawful activity from which the laundered funds were obtained were part of the same funds that formed the basis for the wire fraud offense charged in count three of the indictment — the wire transfer of $12,859.98 from Crestar Bank to Florida First Bank on April 9, 1997. Similarly, the jury concluded that the specified unlawful activity in count five from which the laundered funds were acquired were the same funds that formed the basis for one of the mail fraud counts of the indictment (count one) — the mailing by Riggs Bank of a cashier's check in the amount of $23,903.43 on February 26, 1997. Thus, after receipt of the jury's verdict, the Court instructed counsel to file briefs addressing the legality of the defendant's money laundering convictions in light of the jury's findings regarding what constituted the specified criminal activity that formed the basis for the convictions of the money laundering charges.

On September 20, 2002, the defendant filed a Supplemental Memorandum in Support of Judgment of Acquittal ("Def.'s Mem."). In this pleading, the defendant argues that his convictions for money laundering can not survive because of the jury's inability to specify a predicate offense "which is separate from and prior in time to the alleged money laundering offense . . ." Def.'s Mem. at 1. The defendant further argues that he was prejudiced as a result of the introduction of evidence regarding the money laundering charges and the denial by the Court of his request to introduce evidence that the government had denied him access to the property it had seized pending the resolution of a separate forfeiture proceeding the government had instituted, thus preventing him from making financial distributions to the estate's heirs. Finally, the defendant argues that the Court should have instructed the jury on the good faith and advice of counsel defenses. The government filed its Memorandum in Support of Dismissing the Two Money Laundering Counts ("Gov.'s Mem.") also on September 20, 2002, in which it agreed that based upon the jury's findings, the money laundering counts were not supported by specified unlawful activities separate from the acts that constituted the predicates for one of the mail and the wire fraud charges. The government, however, disagrees that the defendant suffered any prejudice regarding the mail and wire fraud charges. The Court will address each of the defendant's contentions below.

II. The Money Laundering Counts

In ruling on the defendant's motion for judgment of acquittal, the Court must "view the evidence in the light most favorable to the Government giving full play to the right of the jury to determine credibility, weigh the evidence and draw justifiable inferences of fact." United States v. Treadwell, 760 F.2d 327, 333 (D.C. Cir. 1985) (citation omitted). The Court may only take the case away from the jury "when there is no evidence upon which a reasonable mind might fairly conclude guilt beyond a reasonable doubt." Id. (citation and internal quotation marks omitted).

The jury found the defendant guilty of two separate counts of money laundering. The specified unlawful activity that the jury concluded was the source of the funds the defendant laundered were also the same funds that formed the basis for the commission of two of the other counts of the indictment (i.e., one of the mail fraud counts and the wire fraud count). Although the Court denied the defendant's motion to dismiss the money laundering counts prior to the start of the trial, it warned the government at that time that it would have to prove at trial that the laundered funds were acquired independent from the funds that were the subject of the mail and wire fraud activity as charged in those counts of the indictment.

The government concedes that "the specified unlawful activities [,as found by the jury,] are not distinct from the money-laundering transactions[, and therefore,] . . . the verdict as returned by this jury is inconsistent with the Court's ruling in [its] Memorandum Opinion [of August 28, 2002]." Gov.'s Mem. at 5. And, because the jury's findings did not identify specified unlawful activities from which funds were acquired by the defendant that are distinct from the alleged money laundering activities, the convictions on those two counts cannot stand. See Seward, 272 F.3d at 836 ("The transaction or transactions that created the criminally-derived proceeds must be distinct from the money-laundering transaction because the money laundering statutes criminalize `transaction[s] in proceeds, not the transaction[s] that create [] the proceeds.'" (quoting United States v. Mankarious, 151 F.3d 694, 705 (7th Cir. 1998)); United States v. McGahee, 257 F.3d 520, 528 (6th Cir. 2001) (reversing defendant's money laundering conviction where the court found that "diverting the funds were part and parcel of the fraud and theft, and were not a separate act completed after the crime, as required under the money laundering statute.") (citations omitted); United States v. Butler, 211 F.3d 826, 830 (4th Cir. 2000) (holding that to establish a money laundering offense "the laundering of funds cannot occur in the same transaction through which those funds first become tainted by crime."); United States v. Christo, 129 F.3d 578, 579-80 (11th Cir. 1997) (holding that the allegations in support of the money laundering activity must include a "monetary transaction that [is] separate from and in addition to the underlying criminal activity" and reversing defendant's conviction for money laundering where "the withdrawal of funds charged as money laundering was one and the same as the underlying criminal activity of bank fraud and misapplication of bank funds."). Because the jury here did not identify specific unlawful activities from which laundered funds were acquired that were separate and distinct from the conduct charged as mail and wire fraud, the Court must vacate the defendant's two money laundering convictions and enter judgments of acquittal on those two counts of the indictment.

III. Defendant's Motion for a New Trial on the Mail and Wire Fraud Counts

Defendant contends that he is entitled to a new trial on the remaining counts of the indictment on the grounds that he was prejudiced: (1.) by the confusion the jury allegedly had about whether it could acquit him of the mail and wire fraud charges if it convicted him of money laundering; (2.) by having evidence about the money laundering charges presented to the jury; (3.) by the government's introduction of evidence that the defendant failed to make financial distributions to the heirs of his aunt's estate; (4.) by the Court's denial of his request to introduce evidence that the government had seized the property the government is seeking to forfeit, which he contends prevented him from making distributions to the heirs of his aunt's estate; and (5.) by the Court's failure to instruct the jury on the good faith belief and advice of counsel defenses.

Pursuant to Federal Rule of Criminal Procedure 33, "the [C]ourt may grant a new trial to the defendant if the interests of justice so require." In order to grant a new trial,

the evidence must preponderate heavily against the verdict, such that it would be a miscarriage of justice to let the verdict stand. . . . This power should be exercised with caution, and is invoked only in those exceptional cases in which the evidence weighs heavily against the verdict. . . . The burden of proof that a new trial is justified rests with the party seeking the new trial.

United States v. Edmonds, 765 F. Supp. 1112, 1118 (D.D.C. 1991) (citations omitted). Unlike a motion for judgment of acquittal, when ruling on a motion for a new trial "the Court need not accept the evidence in the light most favorable to the government, and [it] may weigh the testimony and may consider the credibility of the witnesses." Id. at 1118-19 (D.D.C. 1991) (citations omitted). A motion for a new trial should only be granted "where the . . . government's case had been marked by uncertainties and discrepancies." Id. (citation omitted). With this standard in mind, the Court will now address the defendant's contentions.

A. Introduction of Evidence Concerning the Money Laundering Counts of the Indictment

First, the defendant argues that he sustained prejudice that entitles him to a new trial on the mail and wire fraud charges as a result of the government's introduction of evidence pertaining to the now dismissed money laundering counts. This allegation is without merit.

The evidence pertaining to the money laundering counts of the indictment would have been admissible regarding the mail and wire fraud counts even if the money laundering counts had not been charged in the indictment. This conclusion is really a no-brainer, since the identical conduct was alleged in the indictment as the predicates for one of the mail fraud charges and the wire fraud charge, as well as for the money laundering charges. And, even if that was not the case, all of the events concerning the money laundering activity were admissible to demonstrate the defendant's intent to defraud, see, e.g.,Fed.R.Evid. 404(b); United States v. Cassell, 292 F.3d 788, 795 (D.C. Cir. 2002) (holding that evidence of other crimes, wrongs, or acts is admissible to demonstrate intent and holding that admission of defendant's prior gun possession was "relevant to show his knowledge of and intent to possess the firearms recovered from his bedroom[]"), which is an element the government had to establish for both the mail and wire fraud charges. United States v. Alston, 609 F.2d 531, 536 (D.C. Cir. 1979) ("Conviction for mail or wire fraud requires proof of only two elements: (1) a scheme to defraud, and (2) use of the mails or wires for the purpose of executing the scheme."). In any event, the evidence of the defendant's guilt was so compelling that even if the evidence pertaining to the money laundering offenses had not been introduced, the other admitted evidence of the mail and wire fraud violations was overwhelming, and therefore the defendant cannot demonstrate that he suffered any prejudice due to the admission of the challenged evidence. See, e.g., United States v. Caballero, 277 F.3d 1235, 1245-46 (10th Cir. 2002) (holding that prosecutor's questions regarding defendant's conduct, which defendant argued was impermissible character evidence, did not amount to prosecutorial misconduct or prejudice the defendant "in light of the overwhelming evidence of guilt produced at trial . . ."); United States v. Green, 258 F.3d 683, 693-94 (7th Cir. 2001) (holding that court's admission of evidence regarding other convictions that resulted from informant's testimony "was harmless because of the overwhelming evidence of Green's guilt. . . . [,noting that the informant's identification of the defendant] was confirmed not only [by another witness's] testimony, but by three . . . agents who testified that Green confessed to that ...


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