United States v. Frigerio-Migiano

United States Court of Appeals
For the First Circuit

No. 00-1863

UNITED STATES OF AMERICA,

Plaintiff, Appellee,

v.

OSCAR FRIGERIO-MIGIANO
AKA OSCAR MIGIANO-FRIGERIO,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

[Hon. José Antonio Fusté, U.S. District Judge]

Before

Torruella and Selya, Circuit Judges,

Campbell, Senior Circuit Judge.

Benjamín Ortíz-Belaval, for appellant.
Timothy S. Vázquez, Assistant U.S. Attorney, with whom Guillermo
Gil, United States Attorney, Jorge E. Vega-Pacheco, Assistant U.S.
Attorney, and Nelson Pérez-Sosa, Assistant U.S. Attorney, were on
brief, for appellee.

June 29, 2001
-2-
 TORRUELLA, Circuit Judge. On December 8, 1999, defendant-

appellant Oscar Frigerio-Migiano stood trial for one count of

conspiracy to launder money in violation of 18 U.S.C. § 1956(a)(1).

After the government rested its case, Frigerio twice filed a motion for

a judgment of acquittal. Although the court agreed that the evidence

against Frigerio was "very thin," both motions were denied and the case

was sent to a jury. On December 13, 1999, the jury returned a verdict

against Frigerio. Frigerio filed another motion to set aside the

verdict based on insufficiency of evidence, which was again denied. We

conclude that there was insufficient evidence to convict Frigerio and

reverse the decision of the district court.

BACKGROUND

On September 7, 1999, a federal grand jury for the District

of Puerto Rico returned a one-count indictment charging Frigerio, Jaime

Rafael Muñoz and Neida Ortíz Acosta with conspiring to launder money in

violation of 18 U.S.C. § 1956(a)(1). The government joined the trial

of Frigerio and Neida Ortíz Acosta, and a jury was impaneled and sworn

for these defendants on December 8, 1999. On that same day, Frigerio

filed a motion for severance under Federal Rule of Criminal Procedure

14, alleging prejudicial joinder of defendants. The court denied the

motion and the trial continued.

The government established at trial that Frigerio began

working at "Phone Home," a money remittance business, around the end of

-3-
October 1998. He was hired to assemble kitchen door hinges and clean

the office. The government evidence showed that in addition to sending

legitimate money from workers employed on cruise ships to their homes

in foreign countries, Phone Home channeled over $26 million of drug

money out of Puerto Rico. Frigerio worked at Phone Home until the

business was shut down by government agents on December 9, 1998.

At trial, the government presented six witnesses. IRS

Special Agent Donald Semesky testified in general terms about the

structure of money laundering operations. José Mercado Febles, a

convicted drug trafficker familiar with Phone Home, testified that a

Colombian national known as "Fabio" sold heroin in Puerto Rico and

brought the proceeds to Phone Home. Jesús Iván Saenz Blanco, another

convicted drug trafficker, testified that he had, on various occasions,

carried $10,000 to $170,000 in small denominations to Phone Home for

the purpose of transmitting the money to Colombia. Saenz Blanco stated

that his money was counted upon arrival, and that he provided the

workers at Phone Home with the fictitious names and phone numbers of

the recipients in Colombia. Special Agent Gene Joseph Driggers, an

agent with the U.S. Customs Service and a computer investigation

specialist, identified the files of money transactions stored in the

Phone Home computer. Finally, government witness Nelson Laracuente,

assistant manager of the Old San Juan branch of Banco Popular,

testified to the large amounts of cash deposited in Phone Home's bank

-4-
accounts. None of these witnesses testified to knowing or meeting

Frigerio, and the government stipulated that Frigerio's name was not

found in Phone Home's computer database.

The only government witness to identify Frigerio was Luis

Rivera Valentín.1 Rivera worked at Phone Home from August 1997 until

it was closed in December 1998. He testified that though at first he

simply ran errands and "did little things," he became involved in money

transactions in January 1998. Rivera explained that the legitimate

part of Phone Home, mostly involving money remittance from workers on

cruise ships, was conducted in the front area of the office. This

money was deposited in an account at First Federal Bank. He further

testified that "flashy" and "suspicious people . . . drug dealers,"

would bring in large amounts of cash -- from $10,000 up to $300,000 --

in book bags, shoe boxes or computer boxes. Rivera understood from a

March 1998 conversation with Neida Ortíz Acosta that the money was from

the sale of drugs. He stated that these individuals were shown to the

back of the office, where the money was counted and a receipt issued,

"stating in code form the amount": for example, $45,000 would be

documented as $45. The money was deposited in an account at Banco

Popular.

1 Rivera was actually the third witness presented by the government,
but since his is the only testimony relevant to this appeal, we explore
it separately.

-5-
 According to Rivera, Frigerio accompanied him at night to

deposit cash at Banco Popular. He also testified that Frigerio

assisted in the process of counting money. To this end, the government

presented two videotapes from cameras that federal investigators had

installed and hidden in the back room of Phone Home. The first of

these tapes was taken on November 23, 1998. In this video. Rivera

identified Frigerio counting money and himself entering the room.

Rivera also identified Frigerio as the person counting money in another

videotape taken on November 27, 1998, alongside a man named "Pocho,"

who would bring in large amounts of currency. In addition, he stated

that "every once in a while" Frigerio participated in the issuance of

false receipts. Finally, Rivera testified that Frigerio was present

when Phone Home was scanned for surveillance devices.

After the government rested its case, Frigerio moved for a

judgment of acquittal pursuant to Federal Rule of Criminal Procedure

29(a). Although the court acknowledged that the case against Frigerio

was "very thin," it denied the motion, concluding from Rivera's

testimony regarding the coded receipts that "there [was] at least

something there that the jury could use to impute knowledge to him."

The only defense witness was Neida Ortíz Acosta, to whom the government

presented a rebuttal witness and concluded the evidence. After the

jury left to deliberate, Frigerio renewed his motion for a judgment of

acquittal, which was again denied.

-6-
 On December 13, 1999, the jury returned a verdict against

Frigerio as to the only count filed against him. On December 15,

Frigerio filed a third motion under Rule 29, this time asking the court

to set aside the verdict because of insufficiency of evidence. Fed. R.

Crim. P. 29(c). The court denied the motion, and, granting a downward

departure, sentenced Frigerio to a period of twenty-seven months

incarceration and two years of supervised release. This timely appeal

followed.

DISCUSSION

In assessing the sufficiency of the evidence in a criminal

case, we ask "whether the evidence, viewed in the light most favorable

to the prosecution, would permit a rational jury to find each essential

element of the crime charged beyond a reasonable doubt." United States

v. Zanghi, 189 F.3d 71, 79 (1st Cir. 1999) (quoting United States v.

Guerrero, 114 F.3d 332, 339 (1st Cir. 1997)) (internal quotations

omitted). The evidence presented by the government need not

"preclude[] every reasonable hypothesis inconsistent with guilt in

order to sustain a conviction." United States v. Hernández, 218 F.3d

58, 64 (1st Cir. 2000) (quoting United States v. Loder, 23 F.3d 586,

589 (1st Cir. 1994)). However, the jury's verdict must be one that is

"supported by a plausible rendition of the record." Id. (quoting

United States v. Ortíz, 966 F.2d 707, 711 (1st Cir. 1992)). We review

a district court's Rule 29 determination de novo. Id.

-7-
 Frigerio concedes that he engaged in "financial transactions"

as defined in 18 U.S.C. § 1956(c)(4), but contends that the government

failed to meet its burden of proving the knowledge elements of the

crime charged. 2 The knowledge requirement under 18 U.S.C. §

1956(a)(1)(B)(i) is twofold: the government must demonstrate (i) that

the defendant knew that the funds involved in the financial transaction

were the proceeds of some unlawful activity; and (ii) that he knew the

transaction itself was "designed in whole or in part to conceal the

nature, location, source, ownership, or control of the proceeds of such

unlawful activity." 18 U.S.C. § 1956(a)(1)(B)(i). We now turn to the

government's case.

Viewing the evidence in the light most favorable to the

government, the jury could have found the following. During the period

that Frigerio worked at Phone Home, he witnessed large amounts of

small-denomination cash, ranging from $10,000 to $300,000, brought in

bags and boxes by "flashy" and "suspicious" individuals. These were

distinct from the smaller amounts of cash -- ranging from $100 to

$5,000 -- brought in by seamen. Frigerio accompanied Rivera on a

regular basis to Banco Popular, where the money was deposited. These

deposits totaled $1,959,068 in the time that Frigerio worked at Phone

Home; since the cash consisted mainly of small bills, Frigerio

2 Frigerio also appeals, in the alternative, the district court's
denial of his severance motion. Our conclusion concerning the
sufficiency of the evidence makes it unnecessary to address this issue.

-8-
regularly carried a considerable and noticeable bulk of money on his

trips to the bank. Frigerio also witnessed the separation of

operations in the front and back of Phone Home, namely, that larger

amounts of cash were counted by machines in the rear while smaller

amounts brought in by seamen were accepted at the front counter.

Frigerio at least twice counted money himself in the rear, and on one

occasion did so in the presence of a known drug dealer (although

perhaps not known to Frigerio). Finally, Frigerio issued false

receipts, which "coded" the amount of money received so that it

appeared to be less than it actually was. Based on these findings, a

jury could infer that Frigerio knew there were unusually large sums of

money, brought into Phone Home on a regular basis, without any

identifiable source. In short, a jury could reasonably conclude that

Frigerio knew he was handling money derived from an illicit activity.

However, this, standing alone, is insufficient. As we have

previously indicated, the government must also prove beyond a

reasonable doubt that Frigerio knew that the transactions in which he

participated were part of a money laundering scheme. Though onerous,

the double-intent requirement serves an important function by shielding

innocent individuals who engage in otherwise legal financial activity.

The government's burden is compounded in the context of this case,

where activities such as counting money, making deposits, and issuing

receipts formed a routine part of the legitimate side of the business.

-9-
Nevertheless, for the verdict to stand, the government must prove this

element of knowledge for at least one of its proffered transactions.

We first address the nightly deposits at Banco Popular. The

government argues that since Phone Home had two bank accounts, "[i]t

could be inferred that Frigerio knew one was to deposit monies obtained

through legal means and the other [Banco Popular] to deposit money

acquired from illegal ventures." This conclusion simply lacks

evidentiary support. It may be true, and indeed the government

established, that Phone Home maintained separate bank accounts for its

legitimate and illegal deposits. However, there is no nexus between

the existence of these accounts and Frigerio's knowledge. The

government presented no evidence, for example, that Frigerio handled or

saw any bank account statements, that he was familiar with the account

numbers, or even that he made any of the deposits himself.3 It is also

conceded by the government that Frigerio did not have access to the

computer files which tracked the money laundering details of the two

accounts. Thus, no reasonable juror could infer that, by accompanying

Rivera to the bank and witnessing the deposits, Frigerio knew that the

purpose of the deposits was to conceal the source and ownership of the

money.

3 In fact, Rivera testified that Frigerio went with him for security
reasons; "[s]o just in case there[ was] an assault or anything, there
would be a witness."

-10-
 We next consider the videos showing Frigerio counting money

in the back area of Phone Home. The government concedes that,

regardless of its source, all of the money entering Phone Home was

counted. The evidence does show that money from legitimate and

illegitimate sources varied in amount and were counted in distinct

areas of the office and in different ways: we have noted already that

a jury could conclude from this evidence that Frigerio knew that the

money he was counting came from illegal sources. Even so, one cannot

further conclude that Frigerio knew he was participating in an attempt

to conceal the illicit nature of the money. That is, in a business

that provided the very service of counting money, there is nothing

about the act of machine counting money that is inherently connected to

money laundering activity. Consequently, this transaction also fails

to prove the requisite knowledge element.

The strongest piece of evidence offered by the government

regarding Frigerio's knowledge of the money laundering operation is his

issuance of "coded receipts." Rivera testified that these receipts

represented amounts significantly smaller than those actually received.

In addition, Rivera stated that the receipts indicated where the money

was going, which could have revealed to Frigerio that large amounts of

cash were destined for Colombia. For the government to prevail, it

must be reasonable to infer, based on this evidence, that Frigerio was

aware of the attempts to conceal drug-related money.

-11-
 We believe that such an inference is too attenuated to

sustain the verdict. Even if Frigerio issued coded receipts, there

must be something about the receipt itself that would permit the

inference that he knew the meaning and purpose of the code. However,

the government did not present the actual receipts themselves. Instead,

the record contains only Rivera's description of their contents.4 This

description, moreover, is wholly without context: we do not know when

Frigerio issued these receipts, to whom, or even whether they did

indeed indicate suspicious destinations. Frigerio did not participate

in this process regularly, but "every once in a while," in the course

of performing various other, non-financial duties at Phone Home.

Finally, it is a conceded fact that Frigerio was not engaged in the

process of entering these transactions under fictitious names in the

computer. Based on the evidence presented at trial, we do not believe

that a jury could infer Frigerio's knowledge of the money laundering

operation beyond a reasonable doubt.

The government contends, as an alternative argument, that to

the extent Frigerio lacked knowledge of the money laundering

4 Normally, to prove the contents of a writing, the original writing
is required in preference to testimony about its content. Fed. R.
Evid. 1002. However, since no objection was made on these grounds at
trial and the issue is not raised on appeal, we do not address the
admissibility of this testimony. See, e.g., United States v. McMahon,
938 F.2d 1501, 1509 n.4 (1st Cir. 1991) (noting that failure to object
for best evidence below lowers the standard of review when issue is
raised on appeal).

-12-
conspiracy, he was "willfully blind" to the illegal activities around

him. We have indeed stated that where there are prominent "red flags"

that signal criminal activity is afoot, a jury may infer that a

defendant deliberately ignored facts which would have otherwise been

obvious to a reasonable person. United States v. Gabriele, 63 F.3d 61,

66 (1st Cir. 1995). However, no such "red flags" were present here.

Rivera's testimony indicated that even he did not become wary of Phone

Home's business until he had worked there for over seven months. His

knowledge of the money laundering operation, moreover, was gained

through working with the computer. By contrast, Frigerio worked at

Phone Home for less than seven weeks and did not use the computer.

The activity occurring in Phone Home was therefore not a sufficient

"red flag" to permit an inference of willful blindness to the

conspiracy.

Likewise, Frigerio's presence during a scan for surveillance

devices is not a "red flag" in the context of this case. First, even

legitimate businesses -- particularly those dealing with financial

transactions -- might use surveillance devices as a valid security

measure. Even if we were to accept that the use of this equipment was

suspicious, however, we note that there is no evidence that Frigerio

was present on more than one occasion when this scanning occurred. As

a result, we do not believe that the scan rose to the level of a "red

flag" signaling money laundering activity.

-13-
 In reaching our conclusion, we acknowledge that this is a

close case. We agree with the district court, however, that the

government's evidence is, even at its best, "very thin" -- and can be

construed just as persuasively in favor of Frigerio. In such a case,

the defendant receives the benefit of the doubt: "[W]here an equal or

near equal theory of guilt and a theory of innocence is supported by

the evidence viewed in the light most favorable to the verdict, 'a

reasonable jury must entertain a reasonable doubt.'" United States v.

Andújar, 49 F.3d 16, 20 (1st Cir. 1995) (citing United States v.

Sánchez, 961 F.2d 1169, 1173 (5th Cir. 1992)). We conclude that the

jury's verdict is unsupported by the evidence.

Reversed.

-14-