GREGORY F. VAN TATENHOVE, District Judge.
Defendants were convicted by a jury of their peers, over two years ago, of crimes related to the theft of motorcycles in violation of the laws of the United States. Postverdict challenges to the indictment in the days preceding their original sentencing caused the Court to continue that proceeding. What followed was a barrage of filings calling into question everything from the sufficiency of the indictment to the motivations and tactics employed by both defense counsel and the prosecutors. Both the Sixth Circuit and the United States Supreme Court rebuffed efforts to prematurely delay the natural consequences of the jury's verdict. [R. 824; 836; 849; 860.] Even so, the Court was required to conduct an exhaustive and time consuming review of a record replete with complicated and concerning issues arising from the litigation decisions of both sides.
Having now resolved those concerns, the Court now turns to the motion to reconsider. [R. 794.] For the reasons set forth below, it will be
While the procedural history of this case has been previously set out, it is important to thoroughly address both its current posture and how it got here. Richard Meade was charged with one count of Conspiracy to Money-Launder in violation of 18 U.S.C. § 1956(h); three counts of Money-Laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i); and one count of Trafficking in Certain Motor Vehicle Parts in violation of 18 U.S.C. § 2321. [R. 157.] Mark Justice was charged with one count of Conspiracy to Money-Launder in violation of 18 U.S.C. § 1956(h); one count of Money-Laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i); and one count of Trafficking in Certain Motor Vehicle Parts in violation of 18 U.S.C. § 2321. [Id.]
The fourteen day trial concluded on March 19, 2013. Meade was found guilty on all but one count of Money Laundering. [R. 615; 618.] Justice was found guilty on all counts. [R. 615; 616.] After trial, Justice filed timely Motions for a New Trial [R. 624] and to Set Aside the Verdict [R. 625]. Meade and Justice have both asked this Court to consider allowing them to remain at liberty pending appeal. [R. 701; 713.] On August 8, 2013, nearly five months following the verdict, and less than one week before Sentencing was scheduled, Meade filed a motion to Arrest Judgment and Dismiss the Indictment for Failure to Charge an Offense [R. 711] which Justice joined [R. 712]. The Court continued Defendants' Sentencing so that it could consider and rule on post-verdict motions. [R. 722.] The case quickly devolved into name-calling, finger-pointing and disorganized, excessive briefing.
In late August, 2013, the United States asked the Court to Order Defense Counsel to show cause for what the Government perceived as inappropriate statements and behavior employed by Defense Counsel. [R. 729; 730]. Soon thereafter, Defendants asked the Court to recuse, alleging that the Government's request for a show-cause order was so biased that the Court was caught in a catch-22 with recusal as the only means of escape. [R. 734.] The Court denied that request. [R. 753.] Extensive, and often argumentative, briefing ensued for months. Amidst that briefing, Defendants also asked for attorney's fees and that Sanctions be imposed against the Government. [R. 743.]
On February 10, 2014, this Court issued a Memorandum Opinion and Order which denied the Defendants' motions for a new trial, judgment not-withstanding the verdict and to arrest judgment. [R. 792.] Following the entry of that Order, Defense Counsel filed an Interlocutory Appeal with the Sixth Circuit [R. 793], requested that the case be stayed and a preliminary injunction entered [R. 797], and also filed a motion asking the Court to reconsider its Order citing both Federal Rules of Civil Procedure 59(e) and 60(b). [R. 794.] The Sixth Circuit, however, refused to consider the Appeal while the Rule 59(e) motion to reconsider was pending before this Court. [R. 795.]
Meanwhile, on April 1 of last year, this Court set a hearing on the motion to reconsider for April 10. [R. 814.] Defense Counsel objected and asked to set aside the scheduled hearing, arguing that while the above-mentioned Sixth Circuit filings remained pending that this Court was stripped of jurisdiction. [R. 815.] The Court disagreed, and entered an order reaffirming its intent to hold the hearing on the motion to reconsider and stated in that order that "it is important that Counsel responsible for developing and drafting the arguments underlying the contested issues be present." [R. 818.] On April 9, in a tactical move designed to provide the Sixth Circuit with jurisdiction, Defendants withdrew their Rule 59(e) motion (but not the Rule 60(b) motion). [R. 819; 820; 822.] On that same day, this Court converted the hearing scheduled for April 10 to a telephonic-status-conference to discuss the posture of the case. [R. 821.] The Court held that status conference and heard arguments from the parties about whether the District Court retained jurisdiction during the pendency of the filed interlocutory appeal. Over the objections of Defense Counsel, the Court concluded that, absent an Order from the Sixth Circuit stating otherwise, it would proceed with a hearing on the merits of the motion to reconsider. The Court sought input on convenient dates and everyone agreed that they would be available for a hearing on April 29.
On April 14, Defense Counsel asked the Court to move the hearing to April 28 due to a scheduling mistake and the Court accommodated this change. [R. 826; 830.] On April 25, the Court issued an Order providing additional guidance on the substantive topics to be argued at the hearing [R. 833] and, separately, the Sixth Circuit also denied a single-judge request for a stay [R. 836].
Finally, on April 28, the Court held the scheduled hearing. Despite an explicit Court Order to the contrary, Ms. McPherson, Defense Counsel primarily responsible for the framing of the arguments before the Court, was not in attendance.
Defendants' original Motion to Reconsider the February 10, 2014 Order of this Court sought relief pursuant to both Federal Rules of Civil Procedure 59(e) and 60(b). [R. 794.] As discussed above, Defendants withdrew their 59(e) motion and now seek relief solely under Federal Rule of Civil Procedure 60(b). [R. 819.] Neither of these civil rules apply in criminal proceedings. Nevertheless, the Court will consider Defendants' attack on the Indictment pursuant to its power under Federal Rule of Criminal Procedure 12(b).
Rules 59(e) and 60(b) are unavailable in criminal proceedings. See United States v. Moon, 527 F. App'x 473, 474 (6th Cir. 2013) (Affirming District Court's denial of Rule 59(e) and 60(b) Motions seeking relief from criminal judgment because "neither rule of civil procedure applies to criminal proceedings."); United States v. Gibson, 424 F. App'x 461, 464 (6th Cir. 2011) ("`Rule 60(b) is not applicable to criminal proceedings,' United States v. Diaz, 79 Fed.Appx. 151, 152 (6th Cir. 2003), and may not be used to disturb a criminal sentence or conviction.") (additional citations omitted); United States v. Bender, 96 F. App'x 344, 345 (6th Cir. 2004) ("Fed.R.Civ.P. 60(b) does not apply in criminal proceedings" but "may be used to seek relief from the denial of § 2255 motion.") (internal citations omitted).
The parties agree, however, that Rule 12 provides the Court with authority to go back and review the validity of the indictment. [R. 850 at 17-23, Apr. 28 Tr.] At the time these motions were made, Rule 12(b)(3) provided that:
Fed. R. Crim. P. 12 (Apr. 29, 2002, eff. Dec. 1, 2002) (amended December 1, 2014) (emphasis added). While the Court will ultimately reach these issues using Rule 12, it is not entirely clear that the Defendants' allegations actually amount to a suggestion that that the indictment "fails to invoke the court's jurisdiction or to state an offense," as required by the plain language of the rule. This ambiguity is owed in large part to the Supreme Court's holding in U.S. v. Cotton, 535 U.S. 625 (2002), where it was held that defective indictments do not deprive a court of Subject Matter Jurisdiction. Id. at 630. At least in party because of this ambiguity, the Federal Rules of Criminal Procedure have been amended since the time that the pending motions were filed.
Alternatively, the parties argue that the Court may exercise its power to consider these arguments under Rule 34. At the time the motion was filed, the rule provided that "[u]pon the defendant's motion or on its own, the court must arrest judgment if:
Defendants' post-trial objections are expansive. Due to the aforementioned breadth, the irregular and disorganized filings and Defendants' confusing withdrawal of the Rule 59(e) component of its Motion to Reconsider, this Court entered into a very specific dialogue with Defense Counsel at the April 28, 2014 hearing on the question of what issues were still before the Court in the Motion to Reconsider. [R. 850 at 19-21, Apr. 28 Tr.] As has already been addressed supra, Defense Counsel's primary challenge is to this Court's February 10 Order that denied the Motion to Arrest Judgment as untimely. Furthermore, Defense Counsel argues the indictment was insufficient for a number of reasons but most significantly in the way the government defined criminal proceeds, the way that the term criminally derived property was incorporated into Count 1 of the indictment, and how the specified unlawful activity (SUA) was described. It is to these arguments that the Court now turns.
In 2008, the Supreme Court considered the meaning of "proceeds" as it is defined in the Federal Money Laundering Statute, 18 U.S.C. § 1956.
In Santos, the Supreme Court confronted the seemingly esoteric question of whether the term proceeds, as used in 18 U.S.C. § 1956, refers to profits or gross receipts of the criminal enterprise. This question is significant because of a practical problem the Supreme Court calls merger. Every money-laundering conviction requires proof that the Defendant committed an underlying or predicate offense, also identified in the money laundering statute. In the case of Santos, if proceeds was defined to mean gross receipts then the Court concluded that "nearly every violation of the illegal-lottery statute would also [have been] a violation of the money-laundering statute, because paying a winning bettor is a transaction involving receipts that the defendant intends to promote the carrying on of the lottery." Santos, 553 U.S. at 515. Lotteries almost always pay winners so virtually every violation of the illegal-lottery statute would equate to a money laundering conviction. Id. As a result, Santos would automatically be guilty of money laundering by the very act of committing the predicate offense (of which he was also charged). This is what the Court refers to as merger and it is problematic when the money laundering conviction carries a longer sentence because it effectively increases the sentence that Congress established for the predicate crime. Id. at 516-517. When, however, proceeds are defined as profits then the problem of merger is avoided completely. Id. at 517.
Ultimately, the Supreme Court held that sometimes proceeds mean profits and sometimes proceeds means gross receipts. Adding to the confusion of this conditional holding is the fact that the Justices did not answer this question with a unified voice, but delivered a splintered opinion with three distinct perspectives on how to define proceeds.
Four justices, the plurality, applied the rule of lenity and adopted a defensefriendly definition where proceeds means profits in all cases. Id. at 513-14. This places a higher burden on the Government, requiring that they always prove that proceeds are more than just gross receipts. Id. at 519-521. These justices concluded that defining proceeds as gross receipts would create a merger problem for a number of predicate offenses under § 1956 and concluded this was an unanticipated and unwanted consequence. Conversely, four Justices dissented, holding that proceeds means gross receipts in all circumstances. Id. at 531. This is the pro-prosecution approach. Finally, Justice Stevens wrote separately and concluded that proceeds means profits for some predicate crimes and gross receipts for others. Id. at 525. In Santos, Stevens defined proceeds as profits, requiring the higher degree of proof, because holding otherwise would create a merger problem and there was no legislative history demonstrating this was Congress' intent. Id. at 528. The plurality, led by Scalia, attempted to limit the impact of Steven's concurrence by explaining that they believe the holding to be "`proceeds' means `profits' where there is no legislative history to the contrary."
The Sixth Circuit has adopted Justice Steven's "interpretive approach" as was first explained in United States v. Kratt:
579 F.3d 558, 562 (6th Cir. 2009)
First, this case does not present a merger problem because the defendants were not charged with both the predicate offense of Transportation of stolen vehicles in violation of 28 U.S.C. § 2312 and Money Laundering in violation of 18 U.S.C. § 1956. The Defendants do not believe that this matters. They argue that the Sentencing Guidelines support their view that a Defendant must "be convicted of a predicate offense before he can be guilty of money laundering." [R. 719 at 1; R. 850 at 32, Apr. 28 Tr.] This argument is erroneous.
The Fifth Circuit recently considered this exact question of "whether there is a merger problem under the money-laundering statute where a defendant was not charged with the specified unlawful activity." United States v. Lineberry, 702 F.3d 210, 218 (5th Cir. 2012)
While the Sixth Circuit has not confronted this issue directly, its merger analysis has similar focused on avoiding the same "perverse result[s]," as were discussed in both Lineberry and Santos. See Wooten, 677 F.3d at 311. Those concerns are not present here. As discussed above, because the Defendants were only charged with money laundering, there is no concern that the same conduct is being used to convict them of two statutes.
Finally, the Defendants have presented no case where a Defendant was charged only with money laundering and a Santos violation was found to arise. This conclusion is further supported by a survey of Sixth Circuit cases considering the merger issue. In all Sixth Circuit cases where the Santos merger issue has been considered, the Defendant has been charged separately with both a predicate offense and money laundering. See United States v. Santos, 553 U.S. 507 (2008) (Defendant charged with both promotion moneylaundering under § 1956 and with predicate offenses of operating an illegal gambling business); Buffin v. United States, 513 F. App'x 441 (6th Cir. 2013)
Second, there is no merger problem because Defendants would not necessarily be convicted of money laundering even if they were (they were not) convicted of the predicate offense of transporting stolen vehicles. To prove the predicate offense, the Government must prove: (1) a Defendant transported a vehicle in interstate commerce and (2) knew that vehicle to be stolen. 18 U.S.C.A. § 2312.
A conviction on the above described predicate offense does not automatically result in a money laundering conviction because the money-laundering charge requires that additional elements be proven. Specifically, the predicate offense of transporting a stolen vehicle does not require proof of a financial transaction (titling the bikes in this case) whereas money laundering does. See United States v. Payton, 437 F. App'x 241, 243 (4th Cir. 2011) ("An actual financial transaction is not an element of Payton's drug conviction. Thus, the offenses do not merge, and Santos is inapplicable to Payton's claims."); see also United States v. Webster, 623 F.3d 901, 906 (9th Cir. 2010) (Court concluded that predicate drug crimes of which Defendant had also been convicted did "not merge with the money laundering crimes, because the drug crimes need not involve the exchange of money.") Also absent from the predicate offense is any requirement that evidence of concealment be shown as is required in proving the money laundering charge. See Buffin, 513 F. App'x at 447; see also United States v. Hosseini, 679 F.3d 544, 552 (7th Cir. 2012)
Because there is no merger problem, it is unnecessary to consider the remaining Kratt factors: whether there is a radical increase in the statutory penalty and whether there is any legislative history suggesting Congress intended such an increase in the penalty. Kratt, 579 F.3d at 562. Ultimately, because there is no merger problem, the Government was not required to prove more than "gross receipts" which is the default definition of proceeds. As such, Santos was not violated and there is no error.
The Defendants' remaining challenges attack the sufficiency of the indictment. A criminal defendant's "right to be informed of the charges brought against him" is guaranteed by the Sixth Amendment's Notice Clause. United States v. Superior Growers Supply, Inc., 982 F.2d 173, 176 (6th Cir. 1992) (citing Russell v. United States, 369 U.S. 749, 761 (1962)). In practice this requires that "[t]he indictment ... shall be a plain, concise and definite written statement of the essential facts constituting the offense charged." Fed. R. Crim. P. 7(c)(1). The Supreme Court requires the following of an indictment:
United States v. Resendiz-Ponce, 549 U.S. 102, 108 (2007) (quoting Hamling v. United States, 418 U.S. 87, 94 (1974)); see also United States v. Cor-Bon Custom Bullet Co., 287 F.3d 576, 579 (6th Cir. 2002). `"[T]he requirement that an indictment allege all of the elements of the offense charged ... seeks primarily to ensure that an accused is reasonably informed of the charge made against him so that he can prepare a defense."' Williams v. Haviland, 467 F.3d 527, 535 (6th Cir. 2006) (quoting Cor-Bon Custom Bullet Co., 287 F.3d at 580).
While "[t]he sufficiency of an indictment is reviewed de novo," United States v. Gibson, 409 F.3d 325, 331 (6th Cir. 2005) (citing United States v. Gatewood, 173 F.3d 983, 986 (6th Cir. 1999)), when the indictment is challenged "for the first time after the defendant has been convicted, the indictment is `construed liberally in favor of its sufficiency.'"
Count 1 of the Superseding Indictment provides that from January 2000 until February 2008, Defendants were involved in a conspiracy to commit money laundering through the theft and transaction of stolen motorcycles in violation of 18 U.S.C. § 1956(h). [R. 157 at 1-2.] The Indictment alleges that the Defendants:
[R. 157-1 at 3 (emphasis added).] Defendants take issue with the fact that the Government used the term "criminally derived property," which is borrowed from 18 U.S.C. § 1957,
First, this Court has previously addressed, in this very case, what exactly is required to convict under 18 U.S.C. § 1956 (h):
[R. 402 at 4.] The Indictment was required to "contain[] the elements of the offense charged." Resendiz-Ponce, 549 U.S. 102, 108 (2007) (quoting Hamling, 418 U.S. 94). Because the crime charged was conspiracy, the Indictment only had to allege "(1) that two or more persons conspired to commit the crime of money laundering, and (2) that the defendant knowingly and voluntarily joined the conspiracy." Garcia, 259 Fed.Appx at 750. This frames the ultimate question: despite the Government's use of the term "criminally derived property," did the Indictment effectively allege that the Defendants "conspired to commit the crime of money laundering" in violation of 18 U.S.C. § 1956?
The answer to this question hinges on whether the two terms are in fact different legal concepts or just different ways of describing the same property. The Government conceded as much in the hearing, stating "[i]f the court thinks these are legally different things, then there is a problem." [R. 850 at 39, Apr. 28 Tr.] The definitions of the two terms as they existed at the time of the alleged crime shed some light on this question. 18 U.S.C. § 1956 (c)(1) establishes that:
18 U.S.C. § 1956 (Effective: March 9, 2006 to September 30, 2008) (emphasis added). At the same time, 18 U.S.C. § 1957(f)(2) defined "criminally derived property" as "any property constituting, or derived from, proceeds obtained from a criminal offense." 18 U.S.C. § 1957. Is there any practical difference between property that "represents the proceeds" of unlawful activity (as termed in § 1956) and "property constituting or derived from proceeds" of unlawful activity (as stated in § 1957)?
The Government submits that because "proceeds" is defined identically in both §§ 1956 and 1957, see Kratt, 579 F.3d at 560, that this Court should find that the two abovediscussed terms also have identical meanings. This argument, however, is unpersuasive. The Kratt Court was presented with the very different question of whether the same word should be given an identical meaning in two statutes rather than whether different terms should be identically defined. Despite this obvious difference, some of what Kratt says is still useful: § 1956 and § 1957 were enacted at the same time, the statutes criminalize similar behavior and they also cover the same predicate offenses. Kratt, 579 F.3d at 560-561. The Court's ultimate determination, however, is not rested on these factors. The Court is persuaded that the two terms do mean the same thing — they both refer to property that may be traced back to proceeds of criminal activity. While the Court understands the Defendant's structural arguments regarding the framing of this charge, and the Government concedes it is a mistake, the Court is unable to draw a practical distinction between these terms.
The Court is further persuaded this is the correct decision because the Defendants were fairly informed of the charges they were tasked with defending. First, in addition to the money laundering conspiracy charge, the Defendants were also charged with multiple counts of money laundering, which properly outlined the 18 U.S.C. § 1956 elements. As a whole, the Indictment clearly explains what must be proved to be convicted under § 1956 and places the Defendants on notice of what is necessary to defend against a charge of concealment money laundering in violation of § 1956. Second, as the Government points out, the jury instructions got the wording right. See R. 707 at 14, Jury Instructions. Third, the Court also notes that the Defendants filed Motions to Dismiss that directly attacked the indictment (although on other grounds) before trial. Apparently, Defense Counsel did not identify these issues at that time—lending even more support to the argument that the error was harmless.
As has been demonstrated, despite the Government's admitted error, the indictment placed the Defendants on notice of the charges against them. For all the aforementioned reasons and because an indictment should be "construed liberally in favor of its sufficiency" when it is attacked for the first time post-conviction, Gibson, 409 F.3d at 331, the Court holds that Defendants attacks on Count 1 of the indictment must be overruled. "To hold otherwise would be to hold the government `to such strictness of averments as might defeat the ends of justice.'" Cor-Bon Custom Bullet Co., 287 F.3d at 581 (quoting Lott v. United States, 309 F.2d 115, 118 (5th Cir. 1962)).
Meade argues that the specified unlawful activity (SUA) alleged "throughout the entire indictment," the interstate shipment of stolen vehicles, is in fact not a SUA as defined by 18 U.S.C. § 1957 (c)(7). [R. 711-2 at 5.] He accuses the Government of "deliberately not identify[ing] a statute" associated with the SUA and argues that the Government failed to properly convey 18 U.S.C. § 2312's knowledge component in the indictment. [Id.]
First, the "interstate shipment of stolen vehicles" (as stated in the indictment) or the "Transportation of stolen vehicles" (as stated in 18 U.S.C. § 2312) is a proper SUA. § 1956(c)(7)(A) states that "any act or activity constituting an offense listed in section § 1961(1) of this title qualifies as a SUA." 18 U.S.C. § 1956(c). "Racketeering activity" is defined within § 1961(1) as, amongst many other things, "any act which is indictable under... sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles)." 18 U.S.C. § 1961(1). The Defendant cites to no case indicating that the Government was required to identify the SUA by specific reference to its statute.
Finally, the Defendants argue that 18 U.S.C. § 2312
The Court agrees that the knowledge component in the SUA need not be included in the Indictment. As has already been noted:
Cor-Bon Custom Bullet Co., 287 F.3d at 579 (citations omitted). The Defendants were charged with money laundering violations rather than violations of 18 U.S.C. § 2312. As such, the elements that had to be presented were those of money laundering, not the SUA.
A similar sentiment has been expressed by the Sixth Circuit in a discussion about whether a Defendant need know whether the unlawful activity referenced in the money laundering charge was a felony or a misdemeanor. While that particular question is not relevant, the Court's conversation sheds some light on the level of detail that must be included:
United States v. Hill, 167 F.3d 1055, 1067 (6th Cir. 1999) (quoting United States v. Maher, 108 F.3d 1513 (2nd Cir.1997) (internal quotes and citations omitted)); see also United States v. Caldwell, 302 F.3d 399, 412 (5th Cir. 2002) (quoting United States v. Crippen, 579 F.2d 340, 342 (5th Cir. 1978) (The indictment need not "allege in detail the factual proof that will be relied upon to support the charges.").
In light of the above arguments and the Court's obligation to construe the indictment liberally when arguments attacking the indictment are raised for the first time following conviction, no relief is merited.
18 U.S.C. § 2313. Even if this statute were the accurate predicate offense there is still no error because § 2313 does not require proof of a financial transaction and so it cannot merge with concealment money laundering. A conviction on the predicate offense does not automatically result in a money laundering conviction.
