For approximately 20 years, Efrain Santos operated an illegal lottery in Indiana. He employed a number of helpers to run the lottery. At bars and restaurants, Santos's runners gathered bets from gamblers, kept a portion of the bets as their commissions, and delivered the rest to Santos's collectors. Collectors, one of whom was Benedicto Diaz, then delivered the money to Santos, who used some of it to pay the salaries of collectors (including Diaz) and to pay the lottery winners. These payments to runners, collectors, and winners formed the basis of a 10-count indictment against Santos and Diaz filed in the United States District Court for the Northern District of Indiana. A jury found Santos guilty of running and conspiring to run an illegal gambling business, as well as one count of conspiracy to launder money and two counts of money laundering. Diaz pleaded guilty to conspiracy to launder money. The relevant provision of the federal money-laundering statute reads as follows: Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity . . . with the intent to promote the carrying on of specified unlawful activity . . . shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. After the district court sentenced Santos and Diaz to prison, the U.S. Court of Appeals for the Seventh Circuit affirmed the convictions and sentences. Santos and Diaz later attacked the validity of the convictions and sentences by seeking a writ of habeas corpus.
In the habeas corpus proceeding, the district court rejected all of their claims except for one, a challenge to their money-laundering convictions. The district court concluded that the money-laundering statute's prohibition of transactions involving criminal "proceeds" applies only to transactions involving criminal profits, not criminal receipts. Applying that holding to the cases of Santos and Diaz, the district court found no evidence that the transactions on which the money-laundering convictions were based (Santos's payments to runners, winners, and collectors and Diaz's receipt of payment for his collection services) involved profits, as opposed to receipts, of the illegal lottery. Accordingly, the district court vacated the money-laundering convictions. The Seventh Circuit affirmed. The U.S. Supreme Court granted the government's petition for a writ of certiorari in order to address this question: whether the term "proceeds" in the federal money-laundering statute means "receipts" or, instead, "profits." How did the Supreme Court rule?

  • CreatedJuly 16, 2014
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