United States v. Huff

FILED
United States Court of Appeals
Tenth Circuit

April 19, 2011
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,
v. No. 10-4079
JERRY C. HUFF,

Defendant-Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
(D.C. NO. 2:08-CR-00371-CW-1)

Submitted on the briefs: *

Steven B. Killpack, Utah Federal Defender, Scott Keith Wilson, Assistant Federal
Defender, and Daphne Oberg, Assistant Federal Defender, Utah Federal
Defender’s Office, Salt Lake City, Utah, on briefs for Appellant.

Carlie Christensen, United States Attorney, District of Utah, Elizabethanne C.
Stevens, Assistant United States Attorney, United States Attorney’s Office, Salt
Lake City, Utah, on brief for Appellee.

Before LUCERO, BALDOCK, and TYMKOVICH, Circuit Judges.

*
After examining the briefs and the appellate record, this three-judge
panel has determined unanimously that oral argument would not be of material
assistance in the determination of this appeal. See Fed. R. App. P. 34(a); 10th
Cir. R. 34.1(G). The cause is therefore ordered submitted without oral argument.
TYMKOVICH, Circuit Judge.

The question presented in this case is whether the deposit of checks

obtained through wire fraud constitutes money laundering. As part of a mortgage

fraud scheme, Jerry Huff received from a title company two checks for a total of

$87,570. He concedes he received the checks and went so far as to deposit them

in his business’s bank account. But Huff argues he never obtained the proceeds

of the wire fraud until after he deposited the checks and therefore cannot stand

convicted for money laundering—which requires a person to obtain the proceeds

of unlawful activity before laundering them.

We conclude the elements of a money laundering charge are met when the

defendant obtains proceeds in the form of a check as a result of wire fraud and

then deposits the check into a bank account. Here, Huff received two checks

representing proceeds of wire fraud and deposited those checks into his bank

account. Thus, the district court did not err, much less plainly err, when it

determined the government presented sufficient evidence to establish Huff

engaged in money laundering of proceeds from wire fraud.

Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM Huff’s

conviction.

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 I. Background

Huff owned property in Moab, Utah. In October 2003, after he began

construction on a new home, he submitted a loan application to First Greensboro

Home Equity (FGHE), in Greensboro, North Carolina, for a $250,000 second-

mortgage on the Moab property. In the loan application, Huff made false

statements regarding his personal income and ability to repay the loan. Huff also

submitted with the application false and fraudulent documents, including (1) a

fictitious appraisal of the house, (2) photographs of the house altered to represent

construction was complete, and (3) copies of his 2001 and 2002 tax returns, which

created the impression Huff had filed the returns for those years, even though he

had not.

In December 2003, the loan application and supporting documents were

faxed from the First Greensboro New World office in Ogden, Utah to the FGHE

office in Greensboro, North Carolina. Huff’s loan application was approved.

FGHE wire transferred $254,100.25 to Precision Title Company, which issued to

Huff two checks for partial loan amounts of $66,709.07 and $20,861.00. Huff

deposited both checks into his business’s account at Zions National Bank.

In June 2008, Huff was indicted on one count of wire fraud (18 U.S.C.

§ 1343), two counts of money laundering (18 U.S.C. § 1957(a)), and two counts

of failure to file tax returns (26 U.S.C. § 7203). The government alleged the fax

of the fraudulent mortgage application as the basis for the wire-fraud charge and

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the specified unlawful activity underlying the two money-laundering charges.

The two check deposits were the alleged monetary transactions underlying the

money-laundering charges. A jury found Huff guilty on all counts. Huff did not

move for a judgment of acquittal on the money-laundering charges either during

or after trial. The court sentenced him to one year and one day in prison, sixty

months’ supervised release, and $264,050.34 in restitution.

II. Discussion

Huff challenges only the money-laundering convictions, arguing the

government did not prove he possessed the proceeds of wire fraud before he

allegedly engaged in money laundering. He concedes our review is for plain error

because he did not move for a judgment of acquittal on the money-laundering

charges.

To obtain relief, Huff must demonstrate:

(1) an error, (2) that is plain, which means clear or obvious under
current law, and (3) that affects substantial rights. If he satisfies
these criteria, this Court may exercise discretion to correct the error
if it seriously affects the fairness, integrity, or public reputation of
judicial proceedings.
United States v. Goode, 483 F.3d 676, 681 (10th Cir. 2007). Plain error review

on a claim of insufficient evidence raises “the noncontroversial proposition that a

conviction in the absence of sufficient evidence of guilt is plainly an error, clearly

prejudiced the defendant, and almost always creates manifest injustice.” Id. at

681 n.1.

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 A person violates § 1957(a) when he “knowingly engages or attempts to

engage in a monetary transaction in criminally derived property of a value greater

than $10,000 and is derived from specified unlawful activity.” 18 U.S.C.

§ 1957(a). To prove money laundering, the government must prove five

elements:

[T]hat the defendant (1) engaged or attempted to engage, (2) in a
monetary transaction, (3) in criminally derived property, (4) knowing
that the property is derived from unlawful activity, and (5) that the
property is, in fact, derived from specified unlawful activity.
United States v. Baum, 555 F.3d 1129, 1131 (10th Cir. 2009). A “monetary

transaction” includes deposits to financial institutions. See § 1957(f)(1). “[T]he

term ‘criminally derived property’ means any property constituting, or derived

from, proceeds obtained from a criminal offense.” § 1957(f)(2). Wire fraud is a

type of “[s]pecified unlawful activity.” Baum, 555 F.3d at 1131.

The sole issue Huff raises on appeal focuses on the second and third

elements—whether he engaged in monetary transactions in criminally derived

property when he deposited the two checks into his bank account. Huff argues

the government failed to prove he obtained the proceeds of the wire fraud—the

criminally derived property—before he deposited the checks—the monetary

transactions. He contends the deposits themselves were not money laundering but

simply the means to obtain the proceeds of the wire fraud. In his view, he

obtained the proceeds of the wire fraud not when he received the two checks from

Precision Title, but only after the checks were deposited into his bank account.

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Huff alleges the deposits alone cannot be money laundering because he could not

launder proceeds he did not yet possess. Since the check deposits were simply

the means to obtain the proceeds (when the checks cleared), he argues those same

deposits cannot be money laundering in those proceeds and thus his convictions

on these counts cannot be sustained.

We disagree. When a person receives illicit proceeds in the form of a

check, he obtains criminally derived property. When he deposits the criminally

derived property—the check—in a bank, he commits money laundering. It does

not matter whether the check clears or he accesses the money in his account.

When he possesses the check, he possesses “any property” arising from the

proceeds of a criminal offense—whether that property is in the form of cash or

checks is of no moment. See 18 U.S.C. § 1957(f)(2); see also § 1956(c)(5)

(defining “monetary instruments” used in money laundering transactions to

include U.S. and foreign currency as well as “travelers’ checks, personal checks,

bank checks, and money orders”); United States v. Silvestri, 409 F.3d 1311, 1333

(11th Cir. 2005) (“Proceeds does not mean only cash or money. . . . There is

nothing in § 1957 that requires that the proceeds be in the form of cash or that the

checks must be contained in a bank account before being considered

‘proceeds.’”).

To be sure, Huff finds some support from a case where we considered when

funds derived from wire transfers could constitute proceeds for purposes of the

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money-laundering statute. In United States v. Johnson, we reviewed a money-

laundering scheme involving the exchange of Mexican currency. 971 F.2d 562,

564 (10th Cir. 1992). The charges involved three types of wire transfers: (1)

investors transferring funds to the defendant’s account, (2) the defendant

transferring funds to investors, and (3) the defendant’s withdrawals from his

account. Id. at 567. The government alleged all the funds involved in these

transactions were proceeds of wire fraud.

The defendant argued the first set of wire transfers—the investors’ transfers

to his account—was not money laundering because he had not yet obtained the

proceeds of the wire fraud until the funds were credited to his account. We

agreed, finding:

Whether or not the funds that were wired to the defendant were
“criminally derived property” depends upon whether they were
proceeds obtained from a criminal offense at the time the defendant
engaged in the monetary transaction. We find they were not. Section
1957 appears to be drafted to proscribe certain transactions in
proceeds that have already been obtained by an individual from an
underlying criminal offense. The defendant did not have possession
of the funds nor were they at his disposal until the investors
transferred them to him. The defendant therefore cannot be said to
have obtained the proceeds of the wire fraud until the funds were
credited to his account.
Id. at 569–70 (emphasis added). The government could not allege the same wire

transfers supported both wire-fraud and money-laundering charges. We reversed

the money-laundering convictions that were based on the investors’ wiring of

funds to the defendant because these were not transactions in proceeds of the wire

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fraud—they were transactions to obtain those proceeds. Johnson thus requires

conduct distinct from wire fraud to support the monetary-transaction element of

money laundering.

Johnson creates one difficulty for Huff. In dicta, we distinguished the

investors’ wire transfers from money-laundering transactions and addressed a

factually similar situation to that presented in this appeal:

In this case, the result achieved by causing the investors to wire the
funds directly into the defendant’s account was no different than if
the defendant had first obtained the funds and then deposited them
himself. This latter transaction would clearly have violated § 1957.
It would be logical, then, to assume that the former transaction would
also be proscribed by the statute. Yet, both the plain language of
§ 1957 and the legislative history behind it suggest that Congress
targeted only those transactions occurring after proceeds have been
obtained from the underlying unlawful activity.
Id. at 569 (emphasis added).

The government argues this dicta settles the issue in this case because Huff

first obtained the funds from Precision Title and then deposited them into his

bank account. In contrast, Huff contends it settles nothing because, unlike cash,

he did not obtain the funds until after the checks were deposited. The dicta

reinforces the general notion that a person must obtain the proceeds of a predicate

crime before he can launder them. But it does not address whether a person, like

Huff here, has obtained the proceeds of wire fraud when he possesses, but has not

yet deposited, checks representing the proceeds.

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 Huff argues a subsequent case conflicts with our holding in Johnson, and

should be disregarded. In United States v. Kennedy, 64 F.3d 1465 (10th Cir.

1995), 1 we reviewed when the deposit of checks and foreign currency into an

account constituted money laundering. In that case, the government alleged the

defendant violated § 1956—a companion statute to § 1957—by depositing

proceeds in the form of checks and foreign currency obtained from investors

through mail fraud. Each deposit was alleged to be a separate transaction in the

proceeds of the mail fraud.

The defendant argued the deposits were not money laundering because he

alleged § 1956 only covered transactions that occurred after he took control of the

funds from the mail fraud. Relying on Johnson, the defendant claimed the

government was required to allege another transaction—subsequent to his taking

possession of the funds through their deposit—to prove a money-laundering

violation. We disagreed and stated:

All that is required to violate § 1956 is a transaction meeting the
statutory criteria that takes place after the underlying crime has been
completed. Thus, the central inquiry in a money laundering charge is
determining when the predicate crime became a “completed”
offense—and it is that inquiry that distinguishes this case from
Johnson.
Id. at 1477–78.

1
The government contends Huff’s argument that Johnson and Kennedy conflict
defeats any claim he has for plain error. See United States v. Torres-Duenas, 461
F.3d 1178, 1182 (10th Cir. 2006). However, we need not address this issue
because we discern no conflict.

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 We distinguished Johnson on the fact that “the only wirings that were

alleged to support the predicate wire fraud crimes . . . were the very transfers of

funds identified in the money laundering transactions.” Id. at 1478. By contrast,

in Kennedy, the government alleged multiple discrete, earlier mailings by the

defendant as the predicate mail-fraud offense. These mailings occurred, and the

mail fraud was complete, before the alleged money-laundering transactions.

Thus, unlike in Johnson, the government alleged “subsequent and distinct

transfers of funds” by the defendant involving the proceeds of the earlier mail

fraud. Id. We emphasized that Congress intended the money-laundering statutes

“to punish new conduct that occurs after the completion of certain criminal

activity, rather than simply create an additional punishment for that criminal

activity.” Id.

These cases support our conclusion that Huff’s deposit of the Precision Title

checks were monetary transactions in violation of § 1957. Both cases address

when the underlying illegal activity was complete and whether the government

had alleged separate transactions for the money-laundering offenses. In Johnson,

the wire fraud was not complete until the investors used the wires to transfer their

funds and thus those same transfers could not support separate money-laundering

charges. In Kennedy, the mailings occurred before the deposits and therefore the

mail fraud was complete at the time of the deposits which allowed the deposits to

constitute monetary transactions supporting the separate money-laundering

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charges. Both cases stand for the principle that a money-laundering transaction

must be separate and apart from the completed predicate offense generating the

proceeds used in the money-laundering transaction. See United States v.

Mankarious, 151 F.3d 694, 706 (7th Cir. 1998) (“As we read Kennedy, however,

the Tenth Circuit was merely reaffirming the proceeds rule announced in

Johnson—a money laundering transaction must follow and must be separate from

any transaction necessary for the predicate offense to generate proceeds.”).

The facts of this case fit comfortably within the principles set forth in

Johnson and Kennedy. The wire transaction that served as the basis for Huff’s

wire-fraud charge—the fax of the fraudulent mortgage application—was separate

and apart from the monetary transactions supporting the money-laundering

charges—Huff’s deposit of the two checks. Huff’s wire fraud was complete at the

time the fraudulent mortgage application was faxed. See Kennedy, 64 F.3d at 1478

(“The ‘completion’ of both wire and mail fraud occurs when any wiring or mailing

is used in execution of a scheme.”). Thus, Huff’s money laundering charges stem

from later conduct, after the wire fraud was complete, when Huff engaged in

monetary transactions—the deposit of the checks—in criminally derived

property—the fraudulently obtained second-mortgage.

While the government properly alleged separate conduct for the wire fraud

and money laundering, Huff contends nevertheless he did not possess the proceeds

of the wire fraud when he deposited the two checks. Huff argues he only acquired

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two checks—but not the proceeds themselves—from Precision Title, which were

simply an unguaranteed promise to wire funds later and did not constitute actual

possession of the proceeds of the wire fraud. In his view, the checks merely gave

him access to the proceeds and he only obtained the proceeds after their deposit

into his bank account.

At the outset, it appears we have not addressed the specific issue of whether

a check, itself, constitutes proceeds of criminal activity. But we have previously

upheld money-laundering convictions based on monetary transactions involving

check deposits. See, e.g., Kennedy, 64 F.3d at 1477 (noting the government

alleged Kennedy violated § 1956 “by depositing checks or foreign currency from

various investors into a [bank] account”); United States v. Lovett, 964 F.2d 1029,

1038 (10th Cir. 1992) (“Clearly, under the language of § 1957(f)(1), a [check]

deposit falls within the scope of a monetary transaction.”).

Several other circuits have addressed this issue directly and have uniformly

concluded a check may constitute proceeds of criminal activity. See Silvestri, 409

at 1333–34 (“[U]sing the ordinary meaning of the word ‘proceeds,’ the checks

themselves constituted proceeds of this criminal activity. . . . Indeed, common

usage of the term ‘proceeds’ suggests a broader definition of the word

encompassing checks.’”); United States v. Cefaratti, 221 F.3d 502, 511 (3d Cir.

2000) (“We see no legal basis for [defendant’s] argument that a check, as such,

cannot be proceeds.”) (quotations omitted); United States v. Hemmingson, 157

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F.3d 347, 355 (5th Cir. 1998) (“[Defendant’s] argument is that the funds from the

check, not the check itself, constituted the ‘proceeds’ of the crime . . . we reject

[defendant’s] contention that no crime is committed until the funds are

disgorged.”) (emphasis in original); United States v. Haun, 90 F.3d 1096, 1100

(6th Cir. 1996) (finding checks were proceeds of fraudulent activity and cashing or

depositing checks constituted a violation of § 1956); see also United States v.

Lomow, 266 F.3d 1013, 1018 (9th Cir. 2001) (“[D]epositing the check . . .

constituted a separate transaction from the fraud that generated the funds.”);

United States v. Richard, 234 F.3d 763, 768 (1st Cir. 2000) (“[G]iving criminally

derived checks to a co-conspirator, who deposits them into a bank account . . .

satisfies the definition of ‘monetary transaction’ in § 1957(f)(1).”). We agree with

their reasoning. A check may constitute the proceeds of criminal activity. Thus,

an individual’s deposit of a check into a bank can be a monetary transaction

sufficient to support this element of a money-laundering offense.

In response, Huff contends he received only uncertified checks from

Precision Title. He argues equating possession of uncertified checks with

possession of proceeds is inconsistent with the treatment of negotiable instruments

in the Uniform Commercial Code. An uncertified check lacks a guarantee of

payment and only suspends an obligation until payment or certification discharges

that obligation. See U.C.C. § 3-310(b)(1). Huff claims he obtained the funds

represented by the uncertified Precision Title checks only after they were

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deposited, negotiated, and cleared in his bank account. We find this argument

unpersuasive. Whether or not a check has a guarantee of payment does not change

the fact it can constitute proceeds of illegal activity. Cf. 18 U.S.C. § 1956(c)(5)(i)

(defining “monetary instruments” for money-laundering transactions to include

travelers’ checks, personal checks, bank checks, and money orders). An

uncertified check can be negotiated to a third party in a monetary transaction even

without an underlying guarantee of payment.

In sum, we reject Huff’s argument that he did not obtain the proceeds of his

wire fraud until after the checks were deposited in his bank account. Huff

obtained the proceeds of the wire fraud when he received the two checks and

before he deposited them. Therefore, he engaged in monetary transactions in

criminally derived property when he deposited those checks into his bank account,

in violation of § 1957.

III. Conclusion

For the foregoing reasons we AFFIRM Huff’s conviction.

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