United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 4, 2001 Decided February 12, 2002
No. 00-3030
United States of America,
Appellee
v.
Denise Braxtonbrown-Smith,
Appellant
Appeal from the United States District Court
for the District of Columbia
(No. 99cr00154-01)
Lisa B. Wright, Assistant Federal Public Defender, argued
the cause for appellant. With her on the brief was A. J.
Kramer, Federal Public Defender. Neil H. Jaffee, Assistant
Federal Public Defender, entered an appearance.
David B. Goodhand, Assistant U.S. Attorney, argued the
cause for appellee. With him on the brief were Roscoe C.
Howard, Jr., U.S. Attorney, John R. Fisher, Roy W. McLeese
III and Mark H. Dubester, Assistant U.S. Attorneys.
Before: Sentelle and Rogers, Circuit Judges, and
Williams, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge Rogers.
Rogers, Circuit Judge: Denise Braxtonbrown-Smith ap-
peals her conviction and sentence on numerous fraud and
money laundering charges. Her principal contention is that
the government failed to prove, by tracing or otherwise, that
any of the funds used in the alleged money laundering
transactions represented the proceeds of unlawful activity.
In turn, she contends, this failure to trace necessarily tainted
other counts of the judgment of conviction. In addition to
several claims of instructional error, she contends that the
district court erred in calculating her offense level, in delegat-
ing authority over the terms of her restitution payments to
the Probation Office, and in ordering her to pay past due
income taxes. We affirm the judgment of conviction except
we remand for correction of her sentence and clarification of
the restitution order.
I.
Viewing the evidence, as we must, in the light most favor-
able to the government, see United States v. Harrison, 204
F.3d 236, 239 (D.C. Cir. 2000) (quoting Jackson v. Virginia,
443 U.S. 307, 319 (1979)), the evidence showed that Braxton-
brown-Smith used Medicaid reimbursements paid to her
company, Psychological Development Associates ("PDA"), for
personal purposes, did not pay taxes on that money, and
attempted to obtain loans through the submission of false
documents. In early 1994, PDA began a day-treatment pro-
gram for mentally retarded adults called Better Treatment
Centers ("BTC") that enabled it to obtain a provider number
for billing Medicaid for services provided to its Medicaid-
eligible clients. PDA began receiving its first clients in
February 1994 for its day-treatment program, who were
assigned to the centers by the Mental Retardation and Devel-
opmentally Disabled Administration ("MRDDA") of the D.C.
Department of Human Services, at an approved rate of
$175.44 per client, per day. Prior to this time, PDA had been
in desperate financial shape, missing payrolls on occasion
throughout 1994 and failing to pay its debts. Its financial
condition changed by the end of 1994 by which time Medicaid
had reimbursed PDA for over $400,000. The BTC program
accounted for nearly all of the income that PDA was receiving
and by 1995, Braxtonbrown-Smith and Kenneth A. Strachan,
the PDA controller, were able to skim funds from PDA for
personal purposes. For example, numerous checks were
drawn on the PDA operating account at NationsBank, rang-
ing from $6000 to $8000, for Braxtonbrown-Smith's personal
benefit.
In May 1995, PDA obtained a second Medicaid provider
number for services it was to provide through a "free-
standing" mental health clinic. Braxtonbrown-Smith's ef-
forts over the next two years to set up the clinic in accord
with Medicaid rules for staffing never proved fruitful. Not-
withstanding the fact that PDA had failed to set up and
operate the clinic, Braxtonbrown-Smith, through PDA's con-
troller Kenneth Strachan, used the provider number to bill
Medicaid for services that PDA never actually provided.
This billing scheme continued for several years, surviving
Strachan's dismissal in October 1996 and continuing under
Braxtonbrown-Smith's direction until 1998.
By early 1996, Braxtonbrown-Smith's personal financial
needs were becoming more pronounced, as she had contract-
ed to purchase a $400,000 house and needed to show cash in
her personal account to support a down payment. She also
needed funds for her wedding, honeymoon, improvements on
the new house, and to support an expensive lifestyle. She
would later generate and submit false income tax statements
for this time period to Provident Mortgage Corporation in
order to obtain a mortgage, and to Mellon Bank in order to
obtain a line of credit. By the Spring of 1996, the false
billings escalated. For example, in April 1996 in response to
Braxtonbrown-Smith's growing personal financial needs,
Strachan began submitting false claims to Medicaid repre-
senting that BTC clients were receiving psychotherapy from
a psychiatrist every day, despite the fact that the clinic was
not yet operational and many of BTC's clients were non-
communicative and could not speak. Although alerted to
billing irregularities by Arnett Smith, an employee of PDA
and a former MRDDA employee, Braxtonbrown-Smith took
no steps to stop the submission of false bills to Medicaid.
Braxtonbrown-Smith and Strachan together diverted over
$400,000 of funds from PDA accounts for their personal use.
All told, PDA's false claims totaled $1,693,708, representing
approximately 30% of PDA's total Medicaid billings. Addi-
tionally, Braxtonbrown-Smith drew down her line of credit
with Mellon Bank to the point that when PDA went out of
business in the summer of 1998, she owed Mellon approxi-
mately $440,000.
In 1997 Braxtonbrown-Smith was indicted for conspiracy,
18 U.S.C. s 371 (Count 1); mail fraud, 18 U.S.C. s 1341
(Counts 2 & 3); tax evasion, 26 U.S.C. s 7201 (Counts 4-6);
money laundering, 18 U.S.C. ss 1956(a)(1)(A(ii) &
1956(a)(1)(B)(i) (Counts 7-12); bank fraud, 18 U.S.C. s 1344
(Counts 13 & 14); and wire fraud, 18 U.S.C. s 1343 (Count
15). At trial, Braxtonbrown-Smith's evidence was confined to
six character witnesses who testified regarding her reputation
for truthfulness and honesty in the community. The jury
convicted her on all counts except one count of mail fraud.
The district court sentenced Braxtonbrown-Smith to 60
months imprisonment for conspiracy, mail fraud, tax evasion,
and wire fraud, and to 87 months on the remaining counts,
the sentence on each count to run concurrently. The court
imposed five years of supervised release on all counts, to run
concurrently as well. The district court also ordered that she
make restitution payments including $2,132,484.70 (the total
of her fraudulent Medicaid billings and her Mellon Bank line
of credit spending), to be paid from 50% of her prison
earnings and upon her release from custody at a monthly rate
of "no less than $250 as directed by the probation office."
The court further ordered her to arrange with the Internal
Revenue Service to pay all past and present taxes, interest
and penalties, and to provide proof of her filing of returns to
the Probation Office.
II.
On appeal, Braxtonbrown-Smith contends that instead of
proving that any of the funds used in the alleged money
laundering transactions represented the proceeds of unlawful
activity, the government relied on a judicially-created pre-
sumption that any withdrawal of funds from a commingled
account involves unlawful proceeds, even when the amount of
legitimately earned money in the account exceeds the amount
withdrawn. Because the presumption relieved the govern-
ment of its burden of proof under the plain language of 28
U.S.C. s 1956(a)(1)(A), she contends that the money launder-
ing counts must be dismissed for insufficient evidence. Fail-
ing that, she contends the jury was erroneously instructed on
the unconstitutional commingling presumption, and those
counts must be remanded for a new trial. Likewise, she
contends that she must be granted a new trial on the conspir-
acy count because the jury was instructed on three alterna-
tive conspiracy objects, including money laundering, and it is
impossible to determine from the general conspiracy verdict
that it is not tainted by the allegedly improper money laun-
dering instruction. In addition, she contends that she is
entitled to a new trial on the conspiracy and money launder-
ing counts because the district court's supplemental instruc-
tion on the interstate commerce element included a mandato-
ry presumption. Finally, as to her sentence, she seeks
correction of her sentences under the United States Sentenc-
ing Guidelines ("Guidelines") and contends that the restitu-
tion order impermissibly delegated the court's authority to
the probation office with respect to the terms of the restitu-
tion payment and impermissibly required that she make
restitution to the Internal Revenue Service by making pay-
ment of past and present federal taxes a condition of her
supervised release.
A.
Section 1956 provides, in relevant part,
(a)(1) Whoever, knowing that the property involved in a
financial transaction represents the proceeds of some
form of unlawful activity, conducts or attempts to con-
duct such a financial transaction which in fact involves
the proceeds of specified unlawful activity--
(A)(i) with the intent to promote the carrying on of
specified unlawful activity; or
(ii) with intent to engage in conduct constituting a viola-
tion of section 7201 or 7206 of the Internal Revenue Code
of 1986;
...
shall be [subject to fine and imprisonment].
18 U.S.C. s 1956(a)(1) (2000).
Braxtonbrown-Smith focuses on the phrase "property in-
volved" and the word "represents" in contending that the
government failed to meet its burden to prove that each of
her withdrawals from the PDA account at NationsBank for
her personal use included funds that were diverted from
Medicaid reimbursements to PDA. In other words, Braxton-
brown-Smith contends that the plain language of s 1956(a)(1)
requires the government to demonstrate affirmatively that
the particular illegitimate dollars were laundered and urges
adoption of a presumption, based on the rule of lenity, that
withdrawals from a commingled account are withdrawals of
any "clean" money in the account. Although acknowledging
"substantial" circuit precedent contrary to a complete tracing
requirement, she maintains that the statutory language does
not permit the government to rely on evidence that she
personally spent money she withdrew from an account in
which illegal and legitimate funds were commingled. This is
because millions of dollars from legitimate Medicaid billing
were in the PDA account, and hence there was a sufficient
amount of legal funds in the account to cover the alleged
unlawful transactions under s 1956. As an issue of statutory
construction, our review is de novo. Calloway v. District of
Columbia, 216 F.3d 1, 5 (D.C. Cir. 2000) (citing United States
v. Williams-Davis, 90 F.3d 490, 512 (D.C. Cir. 1996)).
In construing a statute, the court begins with the plain
language of the statute. Estate of Cowart v. Nickols Drilling
Co., 505 U.S. 469, 474 (1992) (citing Demarest v. Manspeaker,
498 U.S. 184, 190 (1991)). Where the language is clear, that
is the end of judicial inquiry "in all but the most extraordi-
nary circumstances." Id. Where the language is subject to
more than one interpretation and the meaning of Congress is
not apparent from the language itself, the court may be
forced to look to the general purpose of Congress in enacting
the statute and to its legislative history for helpful clues.
E.g. Sante Fe Pacific R.R. Co. v. Sec'y of Interior, 830 F.2d
1168, 1174 (D.C. Cir. 1987). In addressing Braxtonbrown-
Smith's interpretation of s 1956(a)(1), it is helpful to keep in
mind the Supreme Court's observation in United States v.
American Trucking Ass'ns, Inc., 310 U.S. 534 (1940), that
"even when the plain meaning did not produce absurd results
but merely an unreasonable one 'plainly at variance with the
policy of the legislation as a whole' this Court has followed
that purpose, rather than the literal words." Id. at 543
(quoting Ozawa v. United States, 260 U.S. 178, 194 (1922));
see also United States v. Ron Pair Enter., Inc., 489 U.S. 235,
242 (1989). Thus, the court must avoid an interpretation that
undermines congressional purpose considered as a whole
when alternative interpretations consistent with the legisla-
tive purpose are available. American Trucking, 310 U.S. at
543; Haggar Co. v. Helvering, 308 U.S. 389, 394 (1940).
Contrary to Braxtonbrown-Smith's contention, a no-tracing
rule is consistent with the plain language of the statute. The
broad language of the statute suffices to reach transactions
that "involve[ ]" illegal proceeds. As the Seventh Circuit
observed, "money need not be derived from crime to be
'involved' in it; perhaps a particular sum is used as the
bankroll facilitating the fraud." United States v. $445,342.85,
969 F.2d 474, 476 (7th Cir. 1992). Although "involve" might
also be read to mean that the individual transaction must
include illegal proceeds in some amount, no circuit to con-
sider this issue has held that complete tracing of the
sort that Braxtonbrown-Smith urges is required under
s 1956(a)(1)(A).1 See United States v. Wilkinson, 137 F.3d
214, 222 (4th Cir. 1998); United States v. Tencer, 107 F.3d
1120, 1131 (5th Cir.), cert. denied, 522 U.S. 960 (1997); United
States v. Voigt, 89 F.3d 1050, 1080-81 (3d Cir.), cert. denied,
519 U.S. 1047 (1996); United States v. Cancelliere, 69 F.3d
1116, 1120 (11th Cir. 1996); United States v. Bencs, 28 F.3d
555, 562 (6th Cir. 1994); United States v. Garcia, 37 F.3d
1359, 1365 (9th Cir. 1994), cert. denied, 513 U.S. 1117 (1995);
United States v. Jackson, 935 F.2d 832, 840 (7th Cir. 1991).
This is a necessary result of the fungibility of money, a factor
of which Congress was undoubtedly aware when it enacted
s 1956(a)(1) as part of the Money Laundering Control Act,
the purpose of which was to "punish transactions that are
undertaken with the proceeds of crimes or that are designed
to launder the proceeds of crime." H.R. Rep. No. 99-855, pt.
1, at 7 (1986); United States v. Sperry Corp., 493 U.S. 52, 62
n.9 (1989). The tracing of dollars emanating from a bank
account (as distinct from the tracing of actual bills used in a
particular cash transaction) to specific dollars deposited into a
bank account is no less than "a mathematical impossibility"
where, as in the instant case, "the amount of the transfer was
less than the amount of untainted funds in the account."
Voigt, 89 F.3d at 1081. To create a presumption, based on
the rule of lenity, as Braxtonbrown-Smith urges that with-
drawals from a commingled account are withdrawals of any
"clean" money therein would come close to rendering money
laundering invulnerable; a person who deposits $10,000 of
__________
1 The circuits have taken various approaches with regard to the
amount of tracing that is required. First, some courts have held
that any transaction out of a commingled account constitutes laun-
dering. See, e.g. United States v. Ward, 197 F.3d 1076, 1083 (11th
Cir. 2000). Second, some courts have suggested that defendants
will be responsible only for those transactions from a commingled
account that do not exceed the total amount of illegitimate funds.
See, e.g. United States v. Wilkinson, 137 F.3d 214, 222 (4th Cir.
1998). Finally, other courts have decided to treat spending from
commingled accounts as involving "proportional fractions of clean
and dirty money." United States v. Loe, 248 F.3d 449, 467 n.81 (5th
Cir. 2001).
dirty money in a $100,000 account could later withdraw
$10,000 repeatedly without penalty so long as there were
sufficient clean money in the account to cover the withdraw-
als. Were such a presumption required under s 1956(a)(1),
Congress' purpose would be undermined because such a
requirement would allow "participants in unlawful activities
[to] prevent their own convictions under the money launder-
ing statute simply by commingling funds derived from both
'specified unlawful activities' and other activities." Jackson,
935 F.2d at 840. This would be a nonsensical outcome in light
of the fact that "[i]t is precisely the commingling of tainted
funds with legitimate money that facilitates the laundering
and enables it to continue." Tencer, 107 F.3d at 1135 (cita-
tion omitted).
In contending that the plain language of s 1956(a)(1) re-
quires the government to show complete tracing, Braxton-
brown-Smith downplays these realities about the nature of
money as a fungible commodity and the unreasonable, if not
absurd, results her approach would produce. Her reliance on
United States v. Wynn, 61 F.3d 921 (D.C. Cir.), cert. denied,
516 U.S. 1015 (1995), is misplaced, for the holding in that case
did not rely on a circumstantial inference that the funds at
issue represented illegal proceeds as opposed to legitimate
income. In Wynn, the defendant maintained there was insuf-
ficient evidence that the cash used to purchase cashiers'
checks used to purchase a car constituted illegal proceeds
because the source laundering the funds had won $150,000 in
the Maryland lottery and could have used those funds to
make the purchase. Wynn, 61 F.3d at 926. The court did
not resolve the issue of whether tracing was required to be
proven by the government, although it did characterize the
argument as "an uncertain legal proposition." Id. Instead,
and fatal to Braxtonbrown-Smith's position, notwithstanding
evidence of lottery proceeds, the court held that the govern-
ment presented sufficient evidence from which a reasonable
juror could find that the money used to purchase the cashiers'
checks totaling nearly $9000 flowed directly from the major
narcotics trafficking operation of the source of the funds. Id.
Braxtonbrown-Smith's reliance on United States v. Rutgard,
116 F.3d 1270 (9th Cir. 1997), is likewise misplaced; Rutgard
involved a prosecution under s 1957, which the Ninth Circuit
explicitly distinguished from s 1956, and its holding that
tracing is required under s 1957 is a minority view. See
United States v. Sokolow, 91 F.3d 396, 409 (3d Cir.), cert.
denied, 519 U.S. 1116 (1997); United States v. Moore, 27 F.3d
969, 976 (4th Cir.), cert. denied, 513 U.S. 979 (1994); United
States v. Johnson, 971 F.2d 562, 570 (10th Cir. 1992).
The risk of unduly harsh consequences that Braxtonbrown-
Smith maintains could occur in the absence of a tracing
requirement is mitigated by the statute. Under
s 1956(a)(1)(A), the government must prove that the defen-
dant, first, knew that the transaction "represents the pro-
ceeds" of unlawful activity, and, second, intended either to
promote the "carrying on of a specified unlawful activity" or
"to conceal or disguise the nature, the location, the source,
the ownership, or the control of the proceeds of specified
unlawful activity." After multiple transactions, then, the
government will have a difficult burden to prove the second
intent for recent transactions based on proof of a single
unlawful dollar deposited long ago.
Furthermore, there is no such harsh result in the instant
case. Braxtonbrown-Smith states in her brief that the gov-
ernment's evidence "was simply that the challenged transac-
tions, totaling approximately $500,000, were conducted using
funds from the PDA operating account at NationsBank and
that of the millions of dollars that went into that account, less
than 30%--approximately $1.6 million--was from illegal Med-
icaid billings." Appellant's Br. at 13. The amount of money
that the government's evidence showed was involved in the
money laundering scheme is hardly minuscule. In view of
the government's evidence, a reasonable juror could conclude
that the bilking engaged in by Braxtonbrown-Smith was
facilitated by her multitude of false Medicaid claims, which
provided an influx of surplus funds in the PDA account and
that these funds were "involved" in the charged transactions.
See United States v. Harrison, 204 F.3d 236, 239 (D.C. Cir.
2000). That is all the statute requires.
Accordingly, we need not decide among the various possible
tracing rules, see supra n.1, because it suffices for this appeal
to join our sister circuits in declining to "read Congress's use
of the word 'involve' as imposing the requirement that the
government trace the origin of all funds deposited into a bank
account to determine exactly which funds were used for what
transaction." Jackson, 935 F.2d at 840. Allowing the mere
commingling of legitimate funds to defeat a money laundering
conviction so easily would wholly undermine Congress's intent
and effectively nullify the offense.
B.
Braxtonbrown-Smith's remaining contentions do not re-
quire extended discussion. First, her claims of instructional
error fail. Because we reject the contention that the govern-
ment was required to trace the unlawful funds in each
transaction, we find no error, much less plain error (inasmuch
as Braxtonbrown-Smith did not object in the district court as
required by Fed. R. Crim. P. 30), in the jury instruction that
proof of spending from a commingled account was sufficient
to establish money laundering under s 1956. See U.S. v.
Norris, 873 F.2d 1519, 1524 (D.C. Cir. 1989) (quoting U.S. v.
Campbell, 684 F.2d 141, 148 (D.C. Cir. 1982)). Similarly, the
district court did not impermissibly invade the province of the
jury in instructing on the interstate commerce element of
s 1956. See United States v. Jones, 909 F.2d 533, 538 (D.C.
Cir. 1990). Not only was the instruction, given in response to
a note from the jury, a correct statement of the law, see, e.g.,
United States v. Ladum, 141 F.3d 1328, 1339 (9th Cir. 1998);
United States v. Peay, 972 F.2d 71, 74-75 (4th Cir. 1992), it
merely created a permissive inference from the evidence that
did "not relieve the [government] of its burden of persuasion
because it still requires the [government] to convince the jury
that the suggested conclusion should be inferred based on the
predicate facts proved." Francis v. Franklin, 471 U.S. 307,
314 (1985). Instructions must be viewed in the context of the
entire instructions to the jury, id. at 315, and the district
court instructed the jury that it alone was the finder of fact.
Second, Braxtonbrown-Smith's challenges to her sentence
are, in the main, meritless. She contends for the first time on
appeal that she was improperly sentenced on an offense level
of 23 based on an application of s 2S1.1(a)(1) of the Guide-
lines because s 2S1.1(a)(1) only applies to convictions under
s 1956(a)(1)(A), (a)(2)(A), or (a)(3)(A), and it is impossible to
determine whether she was convicted under (A) or (B) from
the jury's general verdict. United States v. Merlos, 8 F.3d
48, 50 (D.C. Cir. 1993). The jury necessarily made the
requisite finding of an intent to evade income tax when it
convicted Braxtonbrown-Smith of tax evasion under 26
U.S.C. s 7201. The evasive acts underlying s 7201 charged
in the indictment are identical to those that form the basis of
the money laundering charges under s 1956(a)(1)(A). See
United States v. Smart, 98 F.3d 1379, 1392-93 (D.C. Cir.
1996). Nor can she show that the district court erred in
considering the total amount of money involved in the
charged transactions--$487,290.78--rather than only some
portion of that amount based on the proportion of illegitimate
funds in the PDA account in calculating the value of the
laundered funds for under s 2S1.1(b)(2) of the Guidelines.
"Section 2S1.1 measures the harm to society that the money
laundering causes to law enforcement's efforts to detect the
use and production of ill-gotten gains," United States v. Allen,
76 F.3d 1348, 1369 (5th Cir.), cert. denied, 519 U.S. 838 (1996),
and Braxtonbrown-Smith cites no authority for her claim of
entitlement to a pro-rata calculation. Indeed, those circuits
that have considered the question are to the contrary. Unit-
ed States v. Owens, 159 F.3d 221, 229 (6th Cir. 1998), cert.
denied, 528 U.S. 817 (1999); Allen, 76 F.3d at 1369; United
States v. Thompson, 40 F.3d 48, 52 (3d Cir. 1994). Addition-
ally, the district court did not clearly err in grouping, for
purposes of s 3D1.2(b) of the Guidelines, the fraud counts
(bank, mail, and wire) separately from the money laundering
and tax evasion counts given the district court's finding that
there were different victims (the Mellon Bank, the D.C.
Medicaid Fund, and the society at large). See United States
v. Kim, 23 F.3d 513, 517 (D.C. Cir. 1994); United States v.
Napoli, 179 F.3d 1 (2d Cir. 1999). United States v. Cusuma-
no, 943 F.2d 305 (3d Cir. 1991), on which Braxtonbrown-
Smith relies, is not to the contrary as that case did not
involve fraud counts or involve an express finding of different
victims.
However, as the government concedes on appeal, the dis-
trict court erred in sentencing Braxtonbrown-Smith to 5
years of supervised release on all counts; counts 1, 3-12, and
15 are either Class C or Class D felonies subject to 3 years of
supervised release. 18 U.S.C. s 3583(b)(2) (2000). Accord-
ingly, we remand the case to the district court to correct the
judgment. In addition, assuming ambiguity in the restitution
order, on remand the district court shall clarify that the
phrase "not less than $250 as directed by the probation
office" does not give the Probation Office authority to modify
the monthly amount of restitution that Braxtonbrown-Smith
is required to make upon release from custody. United
States v. Pandiello, 184 F.3d 682, 688 (7th Cir. 1999); United
States v. Johnson, 48 F.3d 806, 808-09 (4th Cir. 1998). On
remand the district court shall also strike from the judgment
the special condition regarding her participation in a mental
health treatment program for anger control that appears to
have been inadvertently carried over from another case.
Finally, Braxtonbrown-Smith's contention that the district
court's order to pay back taxes was an improper restitution
order is meritless as her obligation to pay back taxes is
established by the relevant provisions of the Internal Reve-
nue Code.
Accordingly, we remand the case to the district court for
correction of Braxtonbrown-Smith's sentence; otherwise we
affirm the judgment of conviction.