Filed: Feb. 13, 2002
Latest Update: Mar. 02, 2020
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Summary: 5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH DS 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB 81,7(' 67$7(6 2) $0(5,&$ ; 3ODLQWLII$SSHOOHH &URVV$SSHOODQW 1RV Y ! -$&. &+,/,1*,5,$1 'HIHQGDQW$SSHOODQW &URVV$SSHOOHH 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW 1R ²-RKQ&RUE..
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5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
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81,7(' 67$7(6 2) $0(5,&$ ;
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-3HUHJRUG$66,67$1781,7('67$7(6$77251(<
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.DUDP 3(5$/7$ -2+16721 .$5$0 6W &ODLU Whether this court views the district court’s action as a
6KRUHV 0LFKLJDQ IRU $SSHOODQW -HQQLIHU - 3HUHJRUG choice between guidelines or a departure, the result is the
$66,67$17 81,7(' 67$7(6 $77251(< 'HWURLW same. The heartland analysis that should be applied prior to
0LFKLJDQIRU$SSHOOHH determining which guideline applies is identical to the
analysis that should be applied in determining whether a
BBBBBBBBBBBBBBBBB departure is warranted. See Smith, 186 F.3d at 298.
Moreover, in the departure context, this court has held that the
23,1,21 fact that a money laundering offense involved proceeds
BBBBBBBBBBBBBBBBB related to unlawful activity other than drug trafficking or
1$7+$1,(/5-21(6&LUFXLW-XGJH'HIHQGDQW-DFN organized crime is not sufficient to take the offense outside of
&KLOLQJLULDQDSSHDOVKLVIHGHUDOFRQYLFWLRQDQGVHQWHQFHRQ the heartland of the money laundering guideline. United
PRQH\ODXQGHULQJFKDUJHV2Q$SULO DJUDQGMXU\ States v. Reed, 167 F.3d 984, 995 (6th Cir. 1999); United
RIWKH(DVWHUQ'LVWULFWRI0LFKLJDQUHWXUQHGDPXOWLSOHFRXQW States v. Ford,
184 F.3d 566, 587 (6th Cir. 1999). Thus, even
LQGLFWPHQWDJDLQVW&KLOLQJLULDQDQDWWRUQH\DQGWKUHHRIKLV if the district court’s decision is treated not as a departure but
FOLHQWV-DFN&KDUOHVDQG*HRUJH5DVKLG7KH5DVKLGVZHUH as an application of a more appropriate guideline, the district
LQGLFWHG RQ WKH EDVLV RI IUDXGXOHQW EXVLQHVV YHQWXUHV court’s rationale was not sufficient to warrant the lower
FRQFHUQLQJ WKH GHYHORSPHQW PDQXIDFWXUH DQG VDOH RI court’s decision not to apply the money laundering guideline
DXWRPRELOHUDGDUEUDNLQJV\VWHPVWRDYRLGFROOLVLRQV$WD to the money laundering offense. Accordingly, the district
EHQFK WULDO &KLOLQJLULDQ ZDV FRQYLFWHG RI FRQVSLUDF\ WR court’s sentence should be reversed and remanded with
FRPPLWPRQH\ODXQGHULQJ+HZDVVHQWHQFHGWRPRQWKV instructions to re-sentence Chilingirian in accordance with the
LPSULVRQPHQWWZR\HDUVVXSHUYLVHGUHOHDVHDQGUHVWLWXWLRQLQ money laundering guideline.
WKH DPRXQW RI &KLOLQJLULDQ QRZ DSSHDOV KLV
FRQYLFWLRQ FLWLQJ LQDGHTXDFLHV LQ WKH LQGLFWPHQW DQG ,9&21&/86,21
LQFRQVLVWHQFLHV LQ WKH YHUGLFWV DQG FKDOOHQJLQJ WKH %DLO )RUWKHUHDVRQVVWDWHGDERYHZH5(9(56(WKHGLVWULFW
5HIRUP$FW7KHJRYHUQPHQWFURVVDSSHDOVFRQWHQGLQJWKDW FRXUW¶V VHQWHQFLQJ RUGHU DQG 5(0$1' WKH FDVH WR WKH
WKHGHIHQGDQWZDVVHQWHQFHGXQGHUWKHZURQJJXLGHOLQH:H GLVWULFW FRXUW ZLWK LQVWUXFWLRQV WR UHVHQWHQFH -DFN
DJUHH ZLWK WKH JRYHUQPHQW¶V FRQWHQWLRQ DQG WKHUHIRUH &KLOLQJLULDQ LQ DFFRUGDQFH ZLWK WKH PRQH\ ODXQGHULQJ
$)),50 WKH GHIHQGDQW¶V FRQYLFWLRQ EXW 5(0$1' WKH JXLGHOLQH:H$)),50WKHUHPDLQGHURIWKHGLVWULFWFRXUW¶V
FDVHWRSHUPLWUHVHQWHQFLQJXQGHUWKHDSSURSULDWHSURYLVLRQV MXGJPHQW
RIWKH6HQWHQFLQJ*XLGHOLQHV
,)$&76
2Q$SULO DJUDQGMXU\LQWKH(DVWHUQ'LVWULFWRI
0LFKLJDQUHWXUQHGDPXOWLSOHFRXQWLQGLFWPHQWDJDLQVWWKUHH
EURWKHUV -DFN &KDUOHV DQG *HRUJH 5DVKLG DQG WKHLU
DWWRUQH\ -DFN &KLOLQJLULDQ 7KH LQGLFWPHQW DURVH RXW RI D
VFKHPHODUJHO\FDUULHGRXWE\-DFNDQG&KDUOHV5DVKLGWR
GHIUDXG LQYHVWRUV LQ IUDXGXOHQW EXVLQHVV HQWLWLHV EDVHG RQ
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The Third Circuit has since clarified the holding of Smith: WKHVDOHRIDXWRPRELOHUDGDUEUDNLQJV\VWHPVDQGUHODWHGUDGDU
WHFKQRORJ\
Where money laundering is not ‘minimal or incidental,’
and is ‘separate from the underlying crime’ and intended &KLOLQJLULDQVHUYHGDVWKHDWWRUQH\IRUWKH5DVKLGVDQGWKH
to ‘make it appear that the funds were legitimate’ or to 5DVKLGIDPLO\¶VFRPSDQ\9HKLFOH5DGDU6DIHW\6\VWHPV,QF
funnel money into further criminal activities, § 2S1.1 is ³9566´ IURP RU WKURXJK WKH GDWH RI WKH
an applicable guideline. The guideline may also be LQGLFWPHQW+HKHOGDILIWHHQSHUFHQWVKDUHLQ9566
applicable if there is evidence that the activities which
fulfilled the broad statutory requirements for money ,Q &KLOLQJLULDQ UHSUHVHQWHG 9566 ZKHQ LW ILOHG D
laundering were extensive with drug trafficking or other &KDSWHU EDQNUXSWF\ UHRUJDQL]DWLRQ SHWLWLRQ ZKLFK ZDV
serious crime. ODWHU FRQYHUWHG LQWR D &KDSWHU OLTXLGDWLRQ SURFHHGLQJ
'XULQJWKHSHQGHQF\RIWKHEDQNUXSWF\SURFHHGLQJVDJURXS
United States v. Mustafa, 238 F.3d 485, 495 (3d Cir. 2001) RILQYHVWRUVUHIHUUHGWRDVWKH³5XGGHU*URXS´HQWHUHGWKH
(quoting United States v. Bockius,
228 F.3d 305, 313 (3d Cir. SLFWXUH ,Q $XJXVW &KDUOHV 5XGGHU PHW WKH 5DVKLGV
2000)). In this case, it could also be argued that even if this ZKHQKHZDVZRUNLQJIRU*HQFRUS$HURMHW ³$HURMHW´ ZKLFK
Circuit were to apply Smith, its rationale would fail to ZDVGLVFXVVLQJZLWK9566WKHSRVVLELOLW\RIEX\LQJLWVUDGDU
produce the result desired by Chilingirian. The money EUDNLQJWHFKQRORJ\RUSHUKDSVWKHFRPSDQ\,Q'HFHPEHURI
laundering in this case was not minimal nor incidental, and it $HURMHWLQIRUPHGWKH5DVKLGVWKDWWKH\ZRXOGQRWJR
appears to have been funneled through the client trust account IRUZDUG ZLWK DQ\ GHDOV 1HYHUWKHOHVV 5XGGHU DQG RWKHU
in order to make it appear legitimate and to further the radar SHRSOHZKRNQHZ&KLOLQJLULDQDOVRLQYHVWHGLQ9566
technology/fraud scheme.
,QHDUO\ LQOLJKWRIWKHEDQNUXSWF\WKH5XGGHUVEHJDQ
7KH7KLUG&LUFXLWUHOLHGRQ866*$SSHQGL[$ WDSLQJ WHOHSKRQH FRQYHUVDWLRQV ZLWK WKH 5DVKLGV DQG
ZKLFKVWDWHV³>L@ILQDQDW\SLFDOFDVHWKHJXLGHOLQHVHFWLRQ &KLOLQJLULDQ,QRQHRIWKHVHFRQYHUVDWLRQV&KLOLQJLULDQVDLG
LQGLFDWHGIRUWKHVWDWXWHRIFRQYLFWLRQLVLQDSSURSULDWHEHFDXVH WKDWKHKDGEHHQZRUNLQJRQVRPHWKLQJWKDWZDVJRLQJWREH
RIWKHSDUWLFXODUFRQGXFWLQYROYHGXVHWKHJXLGHOLQHVHFWLRQ IDEXORXV Chilingirian also reassured RWKHUs that he was
PRVWDSSOLFDEOHWRWKHQDWXUHRIWKHRIIHQVHFRQGXFWFKDUJHG working on several deals.
LQ WKH FRXQW RI ZKLFK WKH GHIHQGDQW ZDV FRQYLFWHG´
6LPLODUO\WKLVFRXUWKDVSUHYLRXVO\UHOLHG RQWKLVODQJXDJH In mid-1995, Chilingirian attempted to settle all of the
DQGKHOGWKDWWKHGLVWULFWFRXUWPXVWGHFLGHZKLFKJXLGHOLQHLV bankruptcy claims against VRSS and the Rashids with money
PRVWDSSOLFDEOHFRQVLGHULQJWKHIDFWVLQYROYHG6HH8QLWHG available from a group of investors known as the "Tindall
6WDWHVY+RRG)G WK&LU Group." Paul Tindall, and his wife Ann Louise, lived in
Canada and were related to Jack Rashid’s wife. The Tindalls
This portion of the Guidelines Manual has since been met with Jack Rashid in January 1995. In late June 1995, the
amended so that the sentencing court is now required to use Rashids went to Toronto to present their technology to, and
the guideline that Appendix A says is applicable. See
U.S.S.G., Appendix A (2000). Thus, the Smith approach is
no longer relevant.
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LQYHVWPHQW VFKHPHV DQG WKH WULDOV DQG DSSHDOV RI -DFN DQG &KDUOHV 5DVKLG
VHH 8QLWHG 6WDWHV Y 5DVKLG )G WK &LU *HRUJH SOHDGHG
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seek investments from, a group of over thirty people who E. Fraud Guideline or Money Laundering Guideline?
learned of this opportunity through Paul Tindall.
The government, on cross-appeal, argues that the district
In December 1995, Advanced Radar Systems ("ART") was court erred by sentencing Chilingirian according to the fraud
incorporated in Canada in order to take in the money from the guidelines, rather than the money laundering guidelines.
Canadian investors. Neither the Rashids nor Chilingirian Chilingirian was found guilty of conspiracy to commit money
informed the Canadian investors about VRSS’s bankruptcy or laundering and Jack Rashid pleaded guilty to the same
their plan to use the investors’ money to pay creditors. The offense. However, Judge O’Meara sentenced the defendants
Canadians invested heavily, but the money was put into according to different sentencing guidelines. He sentenced
VRSS. According to the government’s summary, the records Jack Chilingirian according to the sentencing guideline for
of Chilingirian’s client trust fund show that $2.48 million in fraud (§ 2F1.1) and sentenced Jack Rashid according to the
checks was given to Jack Rashid by ART-Canada investors. sentencing guideline for money laundering (§ 2S1.1). The
Chilingirian endorsed $2.267 million of those checks into his fraud guideline results in a significantly lower offense level.
trust account. Chilingirian then wrote $275,000 worth of The government argues that the court should have applied the
checks to himself, gave $1.473 million to Jack Rashid, and guidelines for money laundering to Chilingirian.
disbursed $480,000 to settle various investors’ claims against
Rashid. Aside from Peter Tindall, none of the Canadian This is a case of first impression in this circuit.
investors have ever recouped any money invested with the Chilingirian and the district court rely on case law from the
Rashids. Third Circuit. In United States v. Smith, 186 F.3d 290 (3d
Cir. 1999), the Third Circuit held that the money laundering
When Chilingirian incorporated ART in Canada on behalf guidelines were too harsh to apply to what it described as a
of Jack Rashid, he opened a new client trust account as well. routine fraud case in which the money laundering activity was
According to the government, this account was used to an "incidental by-product" of a kick-back scheme. Id. at 300.
launder money received from the last group of investors, the The court explained that the sentencing court must perform a
"Kraft Group." James Kraft was a long time friend of Jack "heartland" analysis when deciding what guideline should be
Rashid. He was solicited for money in April 1996, and applied and when deciding whether to depart. See
id. at 298.
invested money from his retirement account. He also brought Thus, in order to determine whether the money laundering
in contributions from over thirty other investors. guideline should apply, the court had to determine what
conduct was considered by the Sentencing Commission to fall
In 1996, Chilingirian and members of the Rudder Group within the heartland cases covered under the money
discussed settlement of the investors’ claims against the laundering guideline. The court considered the Sentencing
Rashids/VRSS. Some investors did get a portion of their Commission’s proposed amendments to the money
money back, but they had to sign affidavits exculpating Jack laundering guideline, which were rejected by Congress, and
Rashid. Similarly, despite numerous complaints from "conclude[d] that the Sentencing Commission itself has
investors, Chilingirian continued to deposit money from the indicated that the heartland of U.S.S.G. § 2S1.1 is the money
Kraft Group into his client trust account, then withdraw some laundering activity connected with extensive drug trafficking
for Jack Rashid and a lesser amount for himself. and serious crime." Id. at 300.
On April 23, 1997, Chilingirian was indicted on charges of
conspiracy in violation of 18 U.S.C. § 371, mail fraud in
8QLWHG6WDWHVY&KLOLQJLULDQ 1RV 1RV 8QLWHG6WDWHVY&KLOLQJLULDQ
'0XOWLSOLFLW\GRXEOHMHRSDUG\DQGVSHFLDOILQGLQJV violation of 18 U.S.C. § 1341, wire fraud in violation of 18
U.S.C. § 1343, aiding and abetting the interstate
&KLOLQJLULDQDUJXHVWKDW&RXQWFRQVSLUDF\WRFRPPLW transportation of funds taken by fraud in violation of 18
PRQH\ODXQGHULQJDQG&RXQWIUDXGFRQVSLUDF\ U.S.C. § 2314, tampering with a witness in violation of 18
FKDUJHG WKH VDPH FRQVSLUDF\ DQG WKXV WKH LQGLFWPHQW ZDV U.S.C. § 1512, and conspiracy to launder money instruments
PXOWLSOLFLWRXV$FODLPWKDWDQLQGLFWPHQWLVPXOWLSOLFLWRXV in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i),
VKRXOG EH UDLVHG EHIRUH WULDO )(' 5 &5,0 3 E 1956(a)(1)(B)(i), and 1956(h).
&KLOLQJLULDQGLGQRWUDLVHWKLVFODLPXQWLOKLVDSSHDOWRWKLV
FRXUW7KXVWKHFODLPPDGHLVQRWWLPHO\6HH8QLWHG6WDWHV On April 29, 1999, the district court convicted Chilingirian
Y+DUW)G WK&LU of conspiracy to commit money laundering. On October 8,
1999, Chilingirian filed a Motion and Brief requesting bail
&KLOLQJLULDQIXUWKHUDUJXHVWKDWZKHQWKHFRXUWDFTXLWWHG pending appeal. On October 18, 1999, &KLOLQJLULDQ¶VUHTXHVW
KLP RQ WKH FRQVSLUDF\ FKDUJH WKH GRXEOH MHRSDUG\ IRU EDLO ZDV GHQLHG DQG he was sentenced to 37 months
FODXVHSUHFOXGHGWKHFRXUWIURPFRQYLFWLQJKLPRQWKHPRQH\ imprisonment, 2 years supervised release, and restitution in
ODXQGHULQJ FKDUJH 7KH GRXEOH MHRSDUG\ FODXVH SURWHFWV the amount of $335,167.50. 2QDSSHDO&KLOLQJLULDQDUJXHV
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