Friday, April 12, 2013

No Merger of Wire Fraud and Money Laundering Convictions

United States v. Kennedy, No. 11-60531 (Feb. 7, 2013) (Jolly, Jones, Graves)

Defendants argued that the wire fraud convictions merged with the money laundering convictions to impermissibly result in convictions for two crimes on the same facts. The panel rejected this argument.

In the Fifth Circuit, merger in the money laundering context
may be proved in two ways: (1) a defendant may demonstrate the underlying unlawful activity was not complete at the time the alleged money laundering occurred; or (2) a defendant may show the transaction upon which the money laundering count is based was not a payment from profits of the underlying crime made in support of new crimes, but, instead, was a payment from gross receipts of the previously committed crime made to cover the costs of that same crime.

Calhoun was a licensed home mortgage loan originator and a preacher who fleeced the flock. Larry and Keith Kennedy (collectively, "Kennedys"), who operated a loan closing business, Loan Closing and Title Service ("LCTS"), helped with the shearing.

First, the panel finds that the wire fraud crimes were complete before the conduct underlying the money laundering counts began. "Wire fraud is a consummated crime when the illicitly obtained funds are transmitted . . . ." Once that was completed, the indictment charges the defendants with money laundering for subsequent transactions.

Second, the panel concluded that the money laundering counts were not based on gross receipts of the wire fraud. The money laundering counts relied on transfers of money from LCTS to shell corporations and did not pay for the initial wire fraud, which was all profit. Thus, these crimes did not merge.

The panel also found that the evidence was sufficient for the convictions, and the deliberate ignorance instruction was proper. The district court did not err in denying the defendants’ Batson challenge, motion for mistrial, or motion for severance.

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