Cuellar v. United States

The Supreme Court has agreed to settle a controversy that has long dogged prosecutors in federal narcotics cases who are trying to prove that defendants were attempting to launder their proceeds.

The case, Cuellar v. United States, No. 06-1456, raises the question whether the government must introduce evidence of a scheme to portray illicit funds as legitimate wealth in order to secure a conviction under the federal money laundering statute. The alternative requirement, urged by the government, is that prosecutors must only show that the defendant attempted to conceal the money and its origins.

The appellant in the case is Humberto Fidel Regaldo Cuellar, who was apprehended in July 2004 in a Volkswagen Beetle that was crawling 30 miles below the speed limit on a main artery through Texas to Mexico. When police pulled Cueller over, they discovered that he had logged about 1,000 miles in the past two days stopping in major cities along the way for just hours each time. When questioned, Cuellar reacted nervously; he later turned over a large roll of cash that smelled like marijuana.

Suspicions aroused, police examined the vehicle, finding drill marks that suggested tampering with the drug tank, as well as an artful pattern of mud splashings that concealed further tool marks, and animal hair in the car's interior. The police testified at trial that criminals often use such ruses to conceal contraband and to throw off drug sniffing dogs. The police search eventually unearthed $83,000 in cash secreted in a compartment underneath the floorboard and wrapped in Walmart sacks.

Cuellar was indicted for violating the money laundering statute, 18 U.S.C. Sec. 1956(a)(2)(B)(i). That statute makes it a crime to "transport, transmit, or transfer . . . a monetary instrument or fnds from a place in the United States to or through a place outside the United States . . . knowing that the [money] involved . . . represent[s] the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity."

Cueller's conviction was overturned by a Fifth Circuit panel that found the government had failed to prove that his trip with the money was designed to conceal its provenance. The panel concluded that "[t]aking hidden cash to Mexico is not money laundering unless some further design to conceal can be proved." The Fifth Circuit later heard the case en banc, and affirmed the conviction. The majority of the panel held that the strenuous efforts to conceal the money itself was sufficient to prove money laundering.

Seeking Supreme Court review, Cuellar noted that the circuits have long wrestled with the question whether a defendant's concealment alone is enough to justify a money laundering conviction. The Sixth, Seventh and Tenth Circuits require proof that the defendant was trying to make the illicit money in question appear to be the result of legitimate work or investment, whereas the Second, Third and Eleventh require only that the defendant attempt to conceal the true nature of the money.

The interpretation of the federal money laundering statute is so controversial that the Court received three petitions for certiorari this Term raising the exact same question. The Court has not yet scheduled oral arguments in the Cuellar case.

The Supreme Court settled a controversy that has long dogged prosecutors in federal narcotics cases who are trying to prove that defendants were attempting to launder their proceeds.

The case, Cuellar v. United States, No. 06-1456, raises the question whether the government must introduce evidence of a scheme to portray illicit funds as legitimate wealth in order to secure a conviction under the federal money laundering statute. The alternative requirement, urged by the government, is that prosecutors must only show that the defendant attempted to conceal the money and its origins.

The appellant in the case is Humberto Fidel Regaldo Cuellar, who was apprehended in July 2004 in a Volkswagen Beetle that was crawling 30 miles below the speed limit on a main artery through Texas to Mexico. When police pulled Cueller over, they discovered that he had logged about 1,000 miles in the past two days stopping in major cities along the way for just hours each time. When questioned, Cuellar reacted nervously; he later turned over a large roll of cash that smelled like marijuana.

Suspicions aroused, police examined the vehicle, finding drill marks that suggested tampering with the drug tank, as well as an artful pattern of mud splashings that concealed further tool marks, and animal hair in the car's interior. The police testified at trial that criminals often use such ruses to conceal contraband and to throw off drug sniffing dogs. The police search eventually unearthed $83,000 in cash secreted in a compartment underneath the floorboard and wrapped in Walmart sacks.

Cuellar was indicted for violating the money laundering statute, 18 U.S.C. Sec. 1956(a)(2)(B)(i). That statute makes it a crime to "transport, transmit, or transfer . . . a monetary instrument or fnds from a place in the United States to or through a place outside the United States . . . knowing that the [money] involved . . . represent[s] the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity."

Cueller's conviction was overturned by a Fifth Circuit panel that found the government had failed to prove that his trip with the money was designed to conceal its provenance. The panel concluded that "[t]aking hidden cash to Mexico is not money laundering unless some further design to conceal can be proved." The Fifth Circuit later heard the case en banc, and affirmed the conviction. The majority of the panel held that the strenuous efforts to conceal the money itself was sufficient to prove money laundering.

Seeking Supreme Court review, Cuellar noted that the circuits have long wrestled with the question whether a defendant's concealment alone is enough to justify a money laundering conviction. The Sixth, Seventh and Tenth Circuits require proof that the defendant was trying to make the illicit money in question appear to be the result of legitimate work or investment, whereas the Second, Third and Eleventh require only that the defendant attempt to conceal the true nature of the money.

The interpretation of the federal money laundering statute is so controversial that the Court received three petitions for certiorari this Term raising the exact same question.

On June 2, a unanimous Supreme Court sided with Cuellar and overturned the Fifth Circuit's decision.

"The government failed to introduce any evidence that the reason drug smugglers move money to Mexico is to conceal or disguise a listed attribute of the funds," Justice Clarence Thomas wrote for the court.