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Sneaking Isn’t Laundering: Second Circuit Reverses Money Laundering Conviction for Insufficient Evidence of Intent to Disguise

In United States v. Rodriguez, a panel of the Second Circuit (Judges Katzmann, Walker, and Bolden (D. Conn., sitting by designation)) reversed the conviction of a defendant for money laundering.  It concluded that the Government had established only that the defendant, Angelo Rodriguez, had attempted to deliver $300,000 in cash proceeds from sales of cocaine to what turned out to be an undercover agent—but not that the purpose of the transaction was to “to conceal or disguise the nature of . . . the proceeds of specified unlawful activity,” as the money-laundering statute requires.  See 18 U.S.C. § 1956(a)(1)(B)(i).  Although the panel acknowledged that the Government had presented evidence that the attempted delivery of cash was covert, it held that the circumstances of the transaction were “equally consistent with the purpose of paying off a drug supplier or purchasing additional drugs, which aims do not entail the intent to conceal required by” the money-laundering statute.  In other words, the panel made clear that the mere covert delivery of money in connection with an illicit scheme does not amount to money laundering:  the Government must prove that the transaction was specifically intended to disguise the use of the funds for an unlawful purpose.

This case follows the Supreme Court’s decision in Cuellar v. United States, 553 U.S. 550, 564-65 (2008), which rejected the notion that concealment existed “whenever a person transported illicit funds in a secretive manner.”  The money laundering statute is susceptible to an overly broad reading based on its literal language, and courts have taken care over time to prevent a situation in which virtually all drug dealing becomes money laundering.  See United States v. Garcia, 587 F.3d 509, 518 n.5 (2d Cir. 2009) (holding that “a drug dealer’s use of cash to pay his supplier cannot, standing alone, evince a design to conceal a listed attribute of the funds”).  The Rodriguez reversal can be understood as being part of this line of precedent.

The panel rejected, however, Rodriguez’s two alternative arguments for reversal of his conviction for conspiracy to distribute cocaine.  First, it rejected his argument that the evidence was insufficient on that charge, concluding that the Government had introduced ample evidence that the defendant resided in an apartment that was found to contain a large quantity of cash and cocaine, and that he had sold the cocaine to a witness who testified at trial.  Second, it rejected Rodriguez’s argument that that witness’s testimony was inadmissible “prior bad acts” testimony unconnected to the charges at issue.  It reasoned that the witness’s testimony did not merely establish that the defendant had engaged in “bad acts,” but that he was engaged in a specific pattern of conduct—namely, selling cocaine in a distinctive wrapping at a particular place and time—that constituted the charged conspiracy. 

Read more coverage of the Second Circuit’s recent decisions finding Conviction Errors

-By Jane Metcalf and Harry Sandick