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Supreme Court curbs law against money laundering

June 03, 2008|David G. Savage | Times Staff Writer

WASHINGTON — Hiding $81,000 in cash under the floorboard of a car and driving toward Mexico is not enough to prove the driver was guilty of money laundering, the Supreme Court ruled Monday. Instead, the court said, prosecutors must also prove the driver was traveling to Mexico for the purpose of hiding the true source of the funds.

This was one of a pair of decisions handed down Monday that could make it harder for prosecutors to win convictions for money laundering. This law has been one of the government's most powerful weapons in the war on drugs.

In the second ruling, the court said the law against laundering money applies only to profits of an illegal operation, not all of the cash it generates.

Although there are other laws that can be used to prosecute the smuggling of cash, Congress hoped to interrupt the drug trade when it made it a separate crime in 1986 to transport cash into or out of the country so as to carry on "unlawful activity" or to "conceal or disguise" the source of the money. This sometimes allowed prosecutors to win convictions and long prison terms by catching defendants who could not explain why they had large quantities of cash.

Defense lawyers complained the law was used to press defendants to plead guilty to other crimes, such as drug dealing.

A Washington lawyer who represents white-collar defendants said the justices were concerned about the law being used too broadly. "The decisions today significantly raise the bar for prosecutors to prove money laundering charges," said Jeffrey Green, who filed a friend-of-the-court brief for the National Assn. of Criminal Defense Lawyers.

Most people who carry large amounts of cash are inclined to hide it for security, he said, so this alone should not be enough to prove the crime.

On July 14, 2004, Humberto Cuellar of Acuna, Mexico, was driving very slowly in southern Texas toward the Mexican border. He ran off the road, and a patrol officer saw that his Volkswagen Beetle did not have a license plate.

Officers found $81,000 in cash in a secret compartment under the floorboard. Cuellar changed his story several times and could not explain where he was going or where he got the money. He was convicted of money laundering and sentenced to 6 1/2 years in prison. The Supreme Court reversed his conviction in a 9-0 vote.

"We agree with [Cuellar] that merely hiding funds during transportation is not sufficient to violate the [money laundering] statute, even if substantial efforts have been expended to conceal the money," Justice Clarence Thomas said.

In the second ruling, the court voted 5 to 4 to reverse an Indiana man's conviction for money laundering that was based on cash from an illegal lottery. Efrain Santos got five years in prison for his gambling operation and nearly 18 years more for money laundering.

But Justice Antonin Scalia said the law referred to the "proceeds of some form of unlawful activity." Congress did not define that word; Scalia said the court should give the benefit of the doubt to the defendant.

Chief Justice John G. Roberts and Justices Anthony M. Kennedy, Steven G. Breyer and Samuel A. Alito Jr. dissented.


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