Supreme Court to Hear Double Jeopardy Case with Implications for Mueller

Blockbuster decisions about the president’s travel ban and public sector unions dominated the news during the final week of the Supreme Court’s term. Less noticed was the Court’s surprising announcement that next term it will hear an important double jeopardy case, Gamble v. United States. The Court’s decision in Gamble could have implications for the Mueller investigation and the president’s ability to undermine it by pardoning witnesses against him. How the Court  — which by then may include a new Justice Kavanaugh — resolves the case also could provide new clues about its willingness to overturn firmly-established constitutional precedents.

The petitioner, Terance Gamble, was convicted of robbery in Alabama in 2008. That felony conviction made it illegal for him to possess a firearm under both Alabama and federal law. In November 2015 police in Mobile pulled Gamble over for a broken taillight and smelled marijuana. When they searched his car they found marijuana, a scale, and a 9 mm handgun.

Alabama prosecuted Gamble for the state crime of being a felon in possession of a firearm. He was convicted and served a one year sentence. While the state case was pending, federal prosecutors charged him with the federal version of the same offense, based on the same incident. Gamble pleaded guilty to the federal charge but preserved his right to appeal and argue that this second conviction violated the double jeopardy clause of the Fifth Amendment. The federal case resulted in Gamble being sentenced to an additional three years in prison.

Protection against Double Jeopardy is in the Fifth Amendment

Double Jeopardy and Dual Sovereignty

The protection against double jeopardy is one of the English common law doctrines that the framers of our Constitution included in the Bill of Rights. The Fifth Amendment provides: “No person shall . . . be subject for the same offence to be twice put in jeopardy of life or limb.” The government is not allowed to prosecute you repeatedly for the same conduct until it gets the result that it wants. Once jeopardy attaches – typically when you plead guilty or a jury is sworn in – the government generally gets one shot at the prosecution.

But the clause is subject to a “dual sovereignty exception.” For more than 150 years the Supreme Court has said it does not violate double jeopardy for a state and the federal government to prosecute a defendant for crimes based on the same act and consisting of the same elements. The rationale is that within our federalist system the federal and state governments are two different sovereigns, each with the right to enforce its own laws. State and federal crimes based on the same conduct thus have not been considered to be the same “offence” for purposes of double jeopardy.

Gamble’s Arguments

In urging the Court to take his case, Gamble argued the dual sovereignty exception is inconsistent with the history and purpose of the Fifth Amendment and should be discarded. He first relied on history and original intent, claiming the exception did not exist at common law and that a conviction or acquittal in another country was commonly understood to bar a prosecution in England based on the same misconduct.

Gamble also noted that the Supreme Court first adopted the dual sovereignty exception back when the Fifth Amendment was considered not to apply to the states. That’s no longer the case – the double jeopardy clause is now one of the protections in the Bill of Rights that the Court has incorporated to the states through the Fourteenth Amendment. Gamble argued this makes the older holdings suspect and ripe for reexamination. Now that double jeopardy clearly applies to the states as well, he argued, it’s improper to allow the state and federal government to do together what each could not do on its own.

Gamble also claimed the dual sovereignty exception undermines the purpose of the double jeopardy clause. The clause is supposed to promote finality. It protects an individual from repeated exposure to the stress, humiliation, and expense that accompany a prosecution. These injuries from a repeated prosecution, Gamble urged, are the same whether those prosecutions are from the same sovereign or two different ones.

Finally, Gamble argued the exception needs to be overturned due to the dramatic growth of federal criminal law. When the exception was first adopted the federal criminal code was much less extensive. It would have been relatively rare for the same conduct to be prosecutable by both federal and state authorities. But with the dramatic expansion of the federal criminal code in the past few decades, in the hands of a creative prosecutor most state crimes may now be prosecuted federally as well. As a result, the risk of the harm resulting from a dual prosecution are far greater. These changed circumstances, Gamble argued, require a new legal standard.

The Government’s Response

In urging the Court not to take the case, the government argued there is no reason to reconsider a doctrine that has been firmly established for more than 150 years. It claimed the dual sovereignty exception is part of the unique American system, where the federal and state governments each preserve their own sovereign spheres of influence. It argued that English common law precedents involving prosecutions in other countries have no relevance to our federal system, where both federal and state governments have territorial jurisdiction over crimes occurring within their respective borders.

The application of the double jeopardy clause to the states is irrelevant, according to the government. Even before application to the states, if Gamble were correct the clause still would have prevented federal prosecution for a crime already prosecuted by a state – but the Supreme Court has  rejected that argument for more than 150 years. Application of double jeopardy to the states, the government said, simply means a state cannot itself prosecute someone twice for the same crime. It has no effect on whether the state and federal governments may proceed separately to prosecute the same misconduct.

The government also argued that abandoning the exception could lead to state and federal governments interfering with each other’s law enforcement efforts. A state prosecutor could thwart federal law enforcement priorities by bringing a case for the same conduct and thereby foreclosing a federal prosecution — and vice-versa. This could lead to a “race to the courthouse” with federal and state prosecutors competing to get their charges filed first. Such a system would be inconsistent with the respect that state and federal governments owe each other under our federal system.

(In his reply brief, Gamble has a nice response to this point: “The purpose of the Double Jeopardy Clause, like the purpose of the Free Speech Clause or Free Exercise Clause, is not to protect the State and federal governments from each other but, rather, to secure the rights of the individual by circumscribing the powers of both.”)

As for the expansion of federal criminal law, the government argued this makes the exception more important, not less. That expansion means there are more potential opportunities for federal law enforcement potentially to encroach on the states. Federalism demands that the states be allowed to preserve their own sphere of influence and law enforcement priorities when it comes to crimes committed within their borders.

The bottom line argument for the government was that there is no good reason to disturb such a well-settled constitutional doctrine. Dual prosecutions are relatively rare, and judges always have the ability to take such factors into account when fashioning an appropriate sentence.

Why Did the Court Take the Case?

Gamble presents a fascinating mix of issues and implications. It’s not at all clear why the Court took the case. There was no split in the lower courts or other compelling reason to re-examine such a settled doctrine. That the Court agreed to hear the case anyway is probably a sign it’s inclined to rule in Gamble’s favor. On the other hand, the Court re-scheduled consideration of the case in conference a remarkable eleven times before finally deciding to grant the petition on the final day of the term. That suggests at least some members of the Court were really wrestling with the decision.

The Court’s action is even more surprising considering  it just reaffirmed the dual sovereignty doctrine two years ago in a case called Puerto Rico v. Sanchez Valle. In an opinion by Justice Kagan, the Court held that Puerto Rico and the United States are not separate sovereigns for purposes of double jeopardy and thus the defendant could not be prosecuted by both. But the majority opinion did not question the validity of the dual sovereignty exception and took it as settled law.

Justice Ginsburg, joined by Justice Thomas, wrote a concurrence in Sanchez Valle criticizing the dual sovereignty exception and suggesting it should be revisited in an appropriate case. Gamble relied heavily on that concurrence when urging the Court to grant his petition. Since Sanchez Valle was decided Justice Gorsuch also has joined the Court, and perhaps he was a third vote to take the case. But it takes four Justices to grant certiorari and it’s not clear where the fourth vote came from – or whether there will be five votes to actually overturn the dual sovereignty exception.

Arguments about the understanding of the clause in common law England may appeal to originalists like Justice Gorsuch. But conservative Justices also may be concerned about federalism and whether a federal prosecution can effectively trump a state’s own law enforcement efforts. On the other hand, arguments about the purpose of the clause and protecting defendants from repeated harassment may resonate with Justices on the Court’s more liberal wing, as suggested by Justice Ginsburg’s concurrence in Sanchez Valle. The case could lead to some very interesting voting alignments.

Paul Manafort

Potential Implications of Gamble

Gamble has potential implications for prosecutions that could be brought by special counsel Robert Mueller. An issue looming over the Mueller investigation has been whether president Trump might pardon members of his own family or potential witnesses against him — or even himself. One safeguard against that has been the availability of state prosecutions. The president cannot grant pardons for state crimes. That leaves open the possibility that even if Trump pardoned people such as Paul Manafort, New York state prosecutors might be able to pursue financial crimes that violated New York law. Reports that Mueller has been cooperating with the New York Attorney General’s office have noted that state prosecutions could be used as leverage to induce cooperation in Mueller’s inquiry even if Trump pardoned witnesses for federal crimes.

If the dual sovereignty exception is discarded, however, this safety net could be trimmed. For example, if Paul Manafort were convicted of financial crimes by federal prosecutors and then Trump pardoned him, New York state prosecutors may no longer be able to prosecute Manafort for the state crimes covering the same misconduct.

This highlights an interesting side effect of abandoning the dual sovereignty doctrine: it would mean the president could, in some cases, effectively grant pardons for state crimes by pardoning a federal defendant who had already been placed in jeopardy for the federal version of those same crimes. This would represent a dramatic expansion of the pardon power and of presidential ability to interfere with state law enforcement.

Another interesting aspect of Gamble that will deserve attention is the role of stare decisis. The upcoming confirmation hearings for Trump’s Supreme Court nominee Brett Kavanaugh will undoubtedly focus on the doctrine of stare decisis and how it applies to landmark cases such as Roe v. Wade.

The same week that it agreed to hear Gamble, the Court overruled a forty-one year precedent involving public unions when it decided the Janus case. Gamble is asking the Supreme Court to overrule constitutional holdings that have been on the books for decades. Gamble will present the Court with another opportunity to discuss stare decisis and when it is appropriate to overturn settled Supreme Court precedents. That discussion will be closely watched, particularly if a new Justice Kavanaugh is on the Court.

Practically speaking, even if the dual sovereignty doctrine is overturned the effect may be relatively limited. In many situations state and federal crimes do not entirely overlap and both state and federal prosecutions for the same general conduct will still be possible. And my experience is that cases involving dual prosecutions are pretty rare. Prosecutors are busy; if justice is being pursued by their counterparts they are usually happy to turn their attention to other cases and not duplicate those efforts.

Some states, including New York, already provide a broader double jeopardy protection by statute. Professor Jed Shugerman has noted this could have implications for New York state prosecutions of people like Paul Manafort and Michael Cohen if they are prosecuted by Mueller and then pardoned by President Trump. That remains true whether or not Gamble overturns the dual sovereignty exception – unless New York amends its law, as Shugerman has urged. Professor Shugerman has also suggested Mueller may be strategically refraining from filing certain charges, effectively reserving those charges for the state prosecutors in the event Trump grants a pardon. That sort of tactic could become even more important based on the Court’s decision in Gamble.

But of course the Mueller investigation is not the norm. The unprecedented issues and concerns surrounding the Mueller investigation do not affect routine law enforcement. Most prosecutors, most of the time, do not have to worry about the president potentially obstructing their investigations by granting pardons. Gamble thus looms potentially larger in the Mueller investigation that it does for law enforcement generally.

Gamble should be argued late this year or early in 2019. The Court’s decision to hear Gamble seems like a sign that the dual sovereignty exception’s days may be numbered. But the decision, and how the Court reaches it, could end up having implications that extend far beyond the facts of Gamble’s own case.

Like this post? Click here to join the Sidebars mailing list

The Definition of Money Laundering (Part 2): Paul Manafort, Russian Oligarchs, and New York Real Estate

One of the charges pending against former Trump campaign manager Paul Manafort is conspiracy to commit money laundering. Prosecutors charge that Manafort laundered money through overseas shell companies to further his illegal lobbying activities in the United States on behalf of Ukraine, to purchase real estate, and to spend millions of dollars on personal goods and services while avoiding income taxes.

In Part One of this post I discussed the primary domestic money laundering statute, 18 U.S.C. 1956(a)(1), and whether it might apply to Trump’s hush money payoff to adult film star Stormy Daniels. In this post, I’ll examine the primary international money laundering statute, 18 U.S.C. 1956(a)(2). This statute is directly relevant to the case against Manafort, and potentially to shady New York real estate deals involving the Trump organization.

The Definition of Money Laundering

As I discussed in Part One, classic money laundering involves concealing the existence, nature, or illegal source of illicit funds to make them appear legitimate. The money launderer seeks to clean up his criminal proceeds so when the money is discovered or spent no one will ask questions about where it came from. This often involves running criminal proceeds through the books and bank accounts of a legitimate business or a shell corporation so the proceeds will appear to have a legal source – or at least so the true source will be obscured.

But the money laundering statutes cover more than just efforts to clean up dirty money. In particular, the international money laundering statute also prohibits the international transfer of “clean” money – money not generated by any unlawful activity – if the purpose of the transfer is to promote criminal activity.

The Elements of International Money Laundering

International money laundering is prohibited by 18 U.S.C. 1956(a)(2). It has the following elements:

  • The defendant transported, transmitted, or transferred, or attempted to transport, transmit, or transfer, monetary instruments or funds across the U.S. border;
  • With the intent to promote the carrying on of a Specified Unlawful Activity; or
  • With the knowledge that the funds were proceeds of some form of unlawful activity and that the movement of funds was designed in whole or in part:
    1. To conceal or disguise the nature, location, source, or ownership of the funds; or
    2. To avoid the filing of a Currency Transaction Report (CTR).

The first requirement is that the defendant moved funds across the U.S. border, or attempted to do so. The movement can be either to or from the United States. This will most often involve international wire transfers between financial institutions, but could be something as simple as carrying a suitcase full of cash across the border or sending money in a Federal Express package. There are three different ways for such a transfer to constitute money laundering:

1) Intent to promote an SUA: under the first theory, the government must prove the defendant made the international transfer with the intent to promote the carrying on of a Specified Unlawful Activity (SUA). As discussed in Part One, SUA is a term of art in money laundering prosecutions and is defined in the statute at 18 U.S.C. 1956(c)(7). It includes a long list of federal crimes, including many related to violent crime, weapons offenses, terrorism and illegal drugs, as well as common white collar offenses such as mail and wire fraud, bribery, and obstruction of justice. Offenses against foreign nations, including violent crime, drugs, fraud, and corruption, also qualify as SUAs.

A key aspect of this particular violation is that it applies even to “clean” money. Most money laundering theories require that the transaction involved criminal proceeds and that the defendant knew it. But for international “promotion” money laundering, there is no such requirement. The source of the funds may be perfectly legal, as long as the funds are transmitted internationally to further criminal activity. Accordingly, for this particular violation, the term “laundering” is a bit of a misnomer – it could more accurately be called a prohibition of international criminal financing.

 2) Knowing that the transfer involves dirty money and is designed to conceal or disguise the funds: An alternative way to violate this statute is similar to the “concealment” theory of domestic money laundering discussed in Part One. This charge requires first that the defendant know that the funds involved in the transfer are “dirty money” – proceeds of some activity that is a felony under state, federal, or foreign law. Second, the government must also prove the defendant knew that the transfer was designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds of an SUA.

This is a more classic notion of money laundering: the money is moving internationally in order to “clean it up” and ultimately conceal its illegal origins. That in turn will allow the owner of the illicit funds to enjoy the proceeds and give them an aura of legitimacy.

 3) Knowing that the transfer involves dirty money and is designed to avoid a CTR filing requirement: The final money laundering theory under this statute prohibits international transfers when the defendant knows both that the transfer involves dirty money and that it is designed in whole or in part to avoid the reports that banks and merchants must file for any cash transactions in excess of $10,000.00.

Domestic vs. International Laundering Statutes

The international laundering statute 1956(a)(2) and the domestic statute 1956(a)(1) discussed in the Part One have a number of similarities. Both apply to efforts to promote an SUA, to disguise the source or ownership of criminal proceeds, and to avoid CTR requirements. There is a lot of overlap between the two, and many acts of money laundering could be charged under either or both. But there are a few key differences.

The first is the international requirement. As my shorthand name implies, domestic money laundering applies to laundering events that take place entirely with the United States. But international laundering under 1956(a)(2) may only be charged if there is a movement or attempted movement of funds across the United States border.

Another difference is the unit of prosecution. Domestic laundering focuses on “financial transactions,” which involve some kind of exchange involving a financial institution or otherwise affecting interstate commerce. Some transaction or exchange is required; it’s not enough simply to move money around. The international statute focuses not on a transaction but on the transfer or movement of funds. A defendant could violate (a)(2) simply by making an international wire transfer or even by carrying a bag of money across the U.S. border, even though no transaction is involved.

Finally, as noted above, if the purpose of an international transfer is to promote an SUA, the funds being transferred may have a perfectly legal source. Domestic laundering, on the other hand, always requires that the financial transaction involve criminal proceeds and that the defendant knows it.

Paul Manafort

Money Laundering Charges in the Manafort Case

The criminal indictment against Paul Manafort in the District of Columbia charges that he earned tens of millions of dollars doing public relations and lobbying work for politicians and political groups in Ukraine, failed to report that work as required, lied about the work on various government forms, and obstructed justice by seeking to tamper with witnesses. The indictment also includes one count of conspiracy to commit money laundering.

The Specified Unlawful Activity for the money laundering charges is the Foreign Agents Registration Act, or FARA. FARA prohibits individuals from performing lobbying or public relations work in the United States on behalf of a foreign principal unless they file sworn reports with the Department of Justice. The reports must include the identity of the principal and the nature of the work being done. (Manafort is also charged with failing for years to register as required under FARA and with making false statements in his FARA reports once he finally filed them in 2016 and 2017.)

The money laundering charge relies on both the international and domestic laundering statutes. First, it charges that Manafort conspired with others to transmit funds across the U.S. border to promote the carrying on of the SUA — the FARA violations — in violation of section 1962(a)(2). Manafort allegedly parked the payments for his Ukraine work in multiple corporate shell entities, many of them created in Cyprus. He then funneled money from those corporations to pay lobbying groups and law firms that were helping him with his undisclosed work on behalf of Ukraine. These international transfers of funds to promote the carrying on of the FARA violations would be international “promotion” laundering under (a)(2).

The money laundering count also alleges a conspiracy to violate (a)(1), what I’ve called the domestic money laundering statute (even though this particular charge also involves international transfers – as I said, there’s a lot of overlap in the statutes). It alleges that Manafort conspired to conduct financial transactions in criminal proceeds that were designed to hide the origin, source and ownership of the proceeds and to evade taxes.

As discussed above, unlike the (a)(2) promotion violation, this violation requires that the transaction involved dirty money – proceeds of the SUA – and that the defendant knew it. The government’s theory is that the money in the overseas accounts represented Manafort’s earnings from his undisclosed Ukrainian lobbying work and thus constituted proceeds of his ongoing FARA violations. He used money from those accounts to buy real estate and to pay for millions of dollars in personal expenses such as home improvements, home furnishings, antiques, and clothing. By making the payments from accounts owned by shell corporations in Cyprus and elsewhere, he disguised the fact that the money was his and avoided paying income taxes on any of the money.

Money Laundering and New York Real Estate

Part of the money laundering allegations against Manafort are that he used shell corporations in Cyprus to purchase condos and homes in New York and Arlington VA for more than $6 million. Real estate in New York and other large American cities is a prime vehicle for international money laundering. Overseas criminals who have made millions through corruption and other unlawful means need a way to convert their illegal money into a safe and legal asset in a stable country. They often set up shell corporations in places like Cyprus or the Seychelles, put the money in bank accounts owned by those corporations, and then use the money to pay cash for real estate in the United States. (A cash purchase of expensive real estate, as opposed to financing and taking out a mortgage, is a potential red flag for money laundering.)

Purchasing real estate with cash from a shell company “cleans up” the dirty money by disguising its true origin and owner, because it’s not always easy to determine who actually owns the company. Sometimes the money will be funneled through several shells before the ultimate purchase, to make tracing the money’s origins even more difficult. After the purchase, the launderer owns a legal asset in a country with a stable government and legal system, which can then be used to generate rental income or later be sold to create proceeds that will appear to have a legitimate source.

There have long been allegations of money laundering through real estate connected to the Trump Organization. Former Trump advisor Steve Bannon was quoted in the book Fire and Fury predicting that Russian money laundering would end up being the centerpiece of the Mueller investigation. A recent analysis by McClatchy news found that buyers connected to Russia or former Soviet countries have made 86 cash purchases totaling nearly $109 million in Trump properties in New York and southern Florida.

Allegations of potential laundering activity involving the Trump Organization are important for reasons beyond the criminal acts themselves. They provide evidence of ties between Russians and members of Trump’s inner circle, which could be relevant to any possible conspiracy to affect the election. That’s why Mueller, who is charged with investigating Russian interference with the election, ended up investigating and charging Manafort for acts related to his work for Ukraine.

In addition, Russians aware of any such criminal activity could threaten to expose criminal acts by members of the Trump Organization, giving them leverage to blackmail the president. Given his persistent refusal to criticize or antagonize Russia, many have wondered whether the Russians “have something” on Trump. That could be a hotel room tape — or it could be information about money laundering.

Even if Russians were laundering money by purchasing Trump properties, the Trump family or others involved in the transactions would not be liable unless the government could prove they knew what was going on. That’s the problem with so much of the money laundering involving cash sales of real estate. When brokers and developers see the purchase in the name of shell company, they don’t know the true source of the money and don’t have any real incentive to find out. All they see is a buyer who has the cash and is ready to close. If questioned later, they can deny any knowledge that the transaction involved dirty money — after all, paying with cash, standing alone, is not illegal.

In the absence of direct evidence of knowledge by a developer or real estate broker, the doctrine of willful blindness or conscious avoidance may come into play. The jury instruction on willful blindness is sometimes called the “ostrich instruction”: the defendant stuck his head in the sand and refused to see what was happening. Prosecutors can use willful blindness to establish a defendant’s knowledge that a transaction involved dirty money – which in turn can make the defendant liable for aiding and abetting the money launderer, or for conspiracy.

Whether such knowledge can be shown beyond a reasonable doubt is a very case-specific question. Time will tell whether Mueller’s team uncovers evidence of money laundering involving purchase of Trump Organization properties – and whether Trump or members of his family knowingly furthered that illegal activity.

Click here to read Part One of this post on the definition of money laundering

Like this post? Click here to join the Sidebars mailing list