UNITED STATES, Appellant, v. MICHAEL L. CARUCCI, Defendant, Appellee, UNITED STATES, Appellee, v. MICHAEL L. CARUCCI, Defendant, Appellant, UNITED STATES, Appellant, v. MICHAEL L. CARUCCI, Defendant, Appellee.
No. 02-2198, No. 03-1158, No. 03-1244
United States Court of Appeals For the First Circuit
April 13, 2004
Before Lipez, Circuit Judge, Campbell, Senior Circuit Judge, and Stahl, Senior Circuit Judge.
APPEALS FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS [Hon. Robert E. Keeton,
Michael G. Weinberg, with whom Oteri, Weinberg & Lawson, were on brief, for Michael L. Carucci.
Demetra Lambros, Attorney, with whom Michael J. Sullivan, United States Attorney, Richard L. Hoffman, Assistant United States Attorney, and James D. Herbert, Assistant United States Attorney, were on brief, for the United States.
STAHL, Senior Circuit Judge. Defendant-appellant Michael Carucci was a real estate broker and a business associate of Stephen Flemmi, the notorious leader of Boston‘s “Winter Hill Gang.” Carucci and Flemmi were indicted on charges relating to money-laundering, but only Carucci‘s case was tried. Both during and after the jury trial, the district court, pursuant to
On appeal, Carucci contends that the evidence was insufficient to establish criminal liability under the statute, and challenges the trial court‘s “willful blindness” instruction to the jury. The government cross-appeals, contending that the district court erred in entering the post-verdict judgments of acquittal; in ordering a conditional
I. BACKGROUND
A. Factual history
We set forth the facts underlying Carucci‘s convictions in the light most favorable to the verdict. See United States v. Diaz, 300 F.3d 66, 69 (1st Cir. 2002).
1. 238 Marlborough Street
Carucci‘s company, Group Boston Real Estate, managed a building at 238 Marlborough Street in Boston. One of the owners of the property expressed interest in selling, and Carucci offered to help find a buyer. In 1991, Carucci submitted a bid from Flemmi. During the negotiations, the seller asked Carucci where Flemmi‘s money was coming from, and Carucci told them it was from lottery winnings. Flemmi, however, told others that the money was from a family trust. A few months after the sale, Carucci told the seller that the money had come from Flemmi‘s family.
In the course of the property sale, Carucci referred Flemmi to Anthony Summers, a real estate lawyer. At trial, Summers testified that in September, 1992, Carucci asked Summers whether he thought it would be a problem to sell real estate to Flemmi. Summers responded, “as long as he did everything legally, that I didn‘t think he‘d have a problem.”
On October 2, 1992, the Marlborough Street deal closed for $945,000. Carucci, Summers, and Flemmi, among others, attended the closing. The purchaser was a nominee trust set up by Summers, the “238 Marlborough Street Trust.” The trustees were Carucci and one of Flemmi‘s sons, Stephen Hussey; Flemmi was the beneficial owner. Flemmi paid in cash with seven checks. The checks were drawn from different accounts, none of which bore Flemmi‘s name, and different banks. Three were payable to the Mary Irene Trust1 (of which Flemmi was a trustee), three were payable to Mary Flemmi (Flemmi‘s mother) and one was payable to Jeanette Flemmi (Flemmi‘s ex-wife). In conjunction with the sale, Summers drafted a mortgage evidencing a $975,000 loan from the Mary Irene Trust to the 238 Marlborough Street Trust. The mortgage, on which Flemmi‘s name appeared, was publicly recorded.
Also on October 2, 1992, Flemmi and Carucci entered a joint venture agreement concerning the development and sale of the condominium units at 238 Marlborough Street. Carucci invested $15,000 of his sales commission into the joint venture, and Flemmi handled the remaining costs.
2. 362 Commonwealth Avenue
In mid-1992, another real estate broker told Carucci that 362 Commonwealth Avenue in Boston, a commercial condominium containing a laundromat, was available as an investment property. Carucci submitted an offer on the property signed by Hussey as trustee of SMS Realty Trust and provided a binder check for $1,000 signed by him and drawn on the account of Group Boston. He also participated in the sale negotiations.
According to the purchase and sale agreement, the purchaser of the property was Jeannette Benedetti, trustee of Comm-1 Realty Trust. The agreement was
At the property closing on December 9, 1992, three checks were tendered as payment: a Mount Washington Bank check in the amount of $30,500 and a Hyde Park Savings Bank check in the amount of $70,000, both payable to Benedetti, and a $16,408.37 Winter Hill Federal Savings Bank check payable to Summers & Summers.
Prior to the closing, in November, 1992, Commonwealth Laundries, Inc. was formed, with Carucci and Flemmi as the major stockholders. Jian-Fen Hu, Flemmi‘s girlfriend, was president, treasurer, clerk, and director. On December 11, 1992, Commonwealth Laundries entered into a lease of 362 Commonwealth Avenue with Comm-1 Realty Trust. Hu and Benedetti (as trustee) signed the lease. Commonwealth Laundries borrowed $120,000 from the Mary Irene Trust to purchase equipment and $110,000 from Flemmi for improvements.
At trial, Flemmi‘s other son, William St. Croix, testified pursuant to an immunity agreement about his many years of criminal activity. He also testified that he first met Carucci at his father‘s home in Milton, Massachusetts, in 1990 or 1991. At that time, Carucci told him he was going to broker the sale of the house. When St. Croix asked Carucci if he knew who his father was, Carucci responded, “Yes, everybody knows who your father is. Your father was the big guy.” St. Croix testified that he visited Group Boston‘s offices “probably hundreds of times.”
B. Procedural history
On March 11, 1997, a grand jury of the United States District Court for the District of Massachusetts returned a 103-count indictment against Flemmi and Carucci. It charged both defendants with conspiracy to commit money-laundering in violation of
In March and April, 2002, Carucci alone was tried before a jury. At the close of the government‘s case, pursuant to
On April 16, 2002, the jury returned a verdict finding Carucci not guilty on the
On December 20, 2002, the district court sentenced Carucci to ten months in the
II. DISCUSSION
A. Carucci‘s challenge to his conviction under 18 U.S.C. § 1957
Carucci contends that there was insufficient evidence to convict him on counts 73 and 75, which charge him with engaging in monetary transactions in criminally-derived property in violation of
To establish a violation of
Subsection (c) of the statute provides: “the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.”
Carucci maintains that the evidence as to each of these elements is insufficient to support conviction on counts 73 and 75. We need not address the first two requirements of
1. Scope of the specified unlawful activity
A threshold issue on appeal is the scope of the specified unlawful activity (“SUA“) charged to the jury. The indictment set forth four SUAs as underlying the
You are instructed that the offenses of conducting an illegal gambling business, engaging in extortionate credit transactions, interference with commerce by extortion, and distribution and conspiracy to distribute narcotics . . . constitute specified unlawful activity . . .
Later, after reciting the four offenses again, the court instructed:
Each of the crimes just listed qualifies as specified criminal activity. Thus, if you find beyond a reasonable doubt that any of the funds involved in the transactions listed in the indictment derived from the commission of any of these crimes by any person, then the transactions involved proceeds derived from specified criminal activity.3
The court then stated that it would provide further details as to the elements of the SUA offenses later.
In the context of instructing on
Carucci maintains that the district court‘s failure to set forth the elements of drug trafficking prevented the jury from basing a
2. Evidence of specified unlawful activity
As discussed supra, the statute requires proof that the property involved in the transaction was actually derived from specified unlawful activity.
Even applying this broad construction of
Q: What other types of criminal activities have you been involved in?
A: I have been involved in drug rip-offs, selling drugs, extortion, gambling, arson, operating an illegal club.
St. Croix then stated that Flemmi was involved in “some” of those activities, but did not specify which ones. No other witnesses testified about Flemmi‘s participation in gambling or extortion, or about proceeds therefrom. Thus, at very best, St. Croix‘s testimony fell short of stating that Flemmi engaged in gambling or extortion, and there was simply no other evidence on this critical point.
St. Croix‘s testimony suffers from an additional weakness: it did not indicate a time frame in which the gambling and extortion, if any, occurred. In order to establish
After careful consideration of the record, we conclude that there was insufficient evidence for a rational jury to find that Flemmi derived proceeds from gambling or extortion before November 22, 1992. The gambling SUA, as the district court instructed, required proof beyond a reasonable doubt that Flemmi conducted a gambling business that (1) violated Massachusetts law; (2) was knowingly and intentionally conducted, financed, managed, supervised, directed or owned by five or more persons; and (3) which was either in substantially continuous operation for thirty or more days or had a gross revenue of $2000 or more on any single day. See
As to extortion, the SUA required the government to prove that (1) Flemmi knowingly and willfully obtained property from the victim by means of extortion; (2) Flemmi knew that the victim parted with property because of extortion; and (3) the extortion affected interstate commerce.6
As to the SUA of drug trafficking, the government points to two pieces of evidence purporting to link Flemmi to drug trafficking proceeds. First, St. Croix testified that a drug dealer named Johnny Debs agreed to purchase $100,000 of cocaine from him in the late 1980s. He stated that Debs knew nothing about
St. Croix, but approached him because of Flemmi‘s reputation as a narcotics dealer. Second, St. Croix testified that he took drugs from dealers whom he promised to pay after selling the drugs. He did not intend to repay the dealers, however, and said he instead “would divvy it up with people that I was involved in and later my father.” (It is not entirely clear from the testimony whether this scheme was merely a plan, or whether the “divvying” in fact took place.) St. Croix also testified that he was involved in drug trafficking from 1989 to 1997.
Assuming without deciding that this evidence shows that Flemmi engaged in drug trafficking, it falls short of establishing that the funds used in the real estate transactions were actually derived from drug funds as opposed to other criminally-derived proceeds. As with gambling and extortion, there is no evidence as to the amount of proceeds or the specific time frame in which the proceeds were conveyed to Flemmi. Indeed, the fact that St. Croix specified that any sharing with Flemmi happened “later” suggests that Flemmi was unlikely to have derived drug-trafficking proceeds before the 1992 transaction. Accordingly, to infer from this testimony that at least $10,000 of the funds involved in the real estate transaction in 1992 were derived from Flemmi‘s drug trafficking is too great a stretch.
The government points to evidence of Flemmi‘s leadership of an organized crime gang and apparent lack of legitimate income to support the SUAs. It argues that the testimony that Flemmi was a leader of the Winter Hill Gang “told the jury much about Flemmi and his money.”7 The government also points to the fact that Flemmi‘s parents had meager incomes and lived frugally, and hence could not have provided any money to Flemmi for the purchase.
Moreover, a
1998) (evidence of defendant‘s illegal drug purchases, and evidence that the money defendant provided for transaction had a drug scent); United States v. Meshack, 225 F.3d 556, 572 n.12 (5th Cir. 2000) (evidence of drug transactions at defendant‘s restaurant); United States v. King, 169 F.3d 1035, 1039 (6th Cir. 1999) (evidence that defendant “coordinated a multi-person drug distribution business“).
The government also contends that Flemmi‘s use of cash and money orders -- as well as his use of multiple banks, multiple checks, and nominee trusts -- supports the inference that the transactions were derived from SUAs. Again, this evidence does not establish a sufficient nexus to the specified SUAs. While it is true that a suspiciously structured financial transaction can constitute circumstantial evidence of money-laundering, the cases cited by the government consistently feature additional evidence of unlawful activity. See, e.g., United States v. Smith, 223 F.3d 554, 577 (7th Cir. 2000) (“Witnesses testified that Wilson personally bought and sold drugs, so the jury knew that he had illegal cash sloshing around that could have been used.“); United States v. Reiss, 186 F.3d 149, 152-53 (2d Cir. 1999) (in convoluted sale of airplane, an associate who was “heavily involved in narcotics trafficking and money laundering in the United States” facilitated the transaction). Here, there is no comparable evidence that Flemmi had engaged in the specified SUAs in the relevant time period.
In sum, the evidence in the
B. The government‘s cross-appeal
We now turn to the government‘s cross-appeal. The government contends that the district court erred in allowing Carucci‘s motion for acquittal on counts 70 through 72 and 74, which set forth additional violations of
As noted supra, we review Rule 29 determinations de novo. Counts 70-72 and 74 are fatally undermined by the government‘s failure of proof as to
III. CONCLUSION
For the reasons set forth above, we reverse Carucci‘s convictions on counts 73 and 75 of the indictment and affirm the district court‘s judgments of acquittal on counts 70-72 and 74.