In U.S. v. Martinelli, No. 04-13977 (July 10, 2006) (Dubina, Marcus, Cox), the Court upheld the money-laundering conviction of a defendant, arising out of a scheme to defraud small businesses, by persuading them to pay a fee for finding a buyer of the business, when, in reality, no such service was provided.
The Court rejected Martinelli’s challenge to the search of the business premises. The Court noted that although the affidavit upon which a search warrant was granted did not list the specific names of the complainant small businesses police contacted, "those people and entities were neither anonymous nor confidential." Each victim had personal knowledge of the crime. Moreover, there was a "high level of corroboration," with each complainant reporting that they paid money for the same purpose and never received services. Thus, there was a "fair probability" that contraband would be found at the business locations and the warrants were supported by probable cause.
The Court also rejected the argument that the warrant was overbroad in permitting seizure of "all" company files, noting that such a broad seizure was warranted when there were allegations of a pervasive scheme to defraud.
Reviewing the issue for "plain error," the Court rejected the argument that the money laundering jury instructions were erroneous in failing to instruct regarding the elements of mail fraud. The Court noted that Martinelli was charged with money laundering, not mail fraud. The government did not have to prove the elements of mail fraud, only that Martinelli knew that the funds he laundered "were derived from the specified unlawful activity of mail fraud." The Court further noted that it had found no plain error in like circumstances in U.S. v. Silvestri, 409 F.3d 1311 (11th Cir. 2005). [Note: Cox, J., concurring, stated that he thought Silvestri was wrongly decided, because a jury could not find that a defendant knew the proceeds were derived from mail fraud without being instructed on what "mail fraud" involved].
The Court also rejected the argument that the jury should have been instructed on the "materiality" element of mail fraud. The Court noted that Martinelli himself need not have committed a mail fraud offense in order to be guilty of money laundering. Further, the district court, though not specifically defining materiality, told the jury that the specified unlawful activity was a scheme to defraud. Finally, Martinelli’s misreprensentations "were anything but immaterial."
The Court agreed with Martinelli that the district court should have given his requested "good faith" defense jury instruction. However, based on the instruction regarding whether Martinelli knew the proceeds were from a scheme to defraud, and on the "knowingly" element of the offense, that the jury had to find that the act "was done voluntarily and intentionally and not because of accident or mistake," the jury had to rule out the possibility that Martinelli actually harbored a good-faith belief in the legitimacy of the business before it could have found that he knew the money represented proceeds of mail fraud. Finally, the failure to give a good faith instruction did not impair Martinelli’s ability to present a defense, having argued good faith to the jury in closing argument.
The Court also rejected Martinelli’s challenge to the failure to instruct the jury that mere "puffing" or mere carrying on normal business expenses, did not constitute fraud, or money laundering. The Court found that the misrpresentations went beyond mere "puffing," and that the instructions sufficiently excluded the possibility of convicting based on legitimate non-fraudulent expenses.
Turning to the sentence, the Court found Booker error and remanded for resentencing.
