United States v. Corchardo-Peralta
318 F.3d 255, 2003 WL 187240, 2003 U.S. App. LEXIS 1399 (2003)
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Rule of Law:
To convict a defendant for money laundering by concealment, the government must prove not only that the defendant knew the funds were proceeds of unlawful activity, but also that the defendant knew the financial transaction was specifically designed, at least in part, to conceal or disguise the nature, location, source, ownership, or control of those proceeds. Simply spending illicit funds on a conspicuous, lavish lifestyle is insufficient, without more, to satisfy this second knowledge requirement.
Facts:
- Elena Corchado Peralta ('Corchado') married Ubaldo Rivera Colon ('Colon'), a major drug smuggler who presented himself as a legitimate businessman.
- Corchado, who has a degree in business administration, managed many of the couple's finances, writing hundreds of checks for a lavish lifestyle.
- She made numerous expensive purchases, including a BMW, a Mercedes Benz, and a Porsche, and signed checks for large amounts, such as one for over $18,000 to American Express and three totaling $350,000 for a land purchase.
- The couple's expenditures far exceeded their reported income; joint tax returns signed by Corchado between 1992 and 1997 showed a total income of only approximately $150,000.
- Corchado regularly deposited $6,000 checks into one of Colon’s accounts as part of a loan repayment scheme he had arranged to disguise drug profits.
- Corchado signed a car lease application that falsely stated she worked at E.J. Auto Sales and earned a salary of $48,000 per year, information Colon had inserted into the form.
Procedural Posture:
- Elena Corchado Peralta ('Corchado') was indicted in federal district court for one count of conspiracy to commit money laundering and one count of bank fraud.
- After an eight-day trial, a jury found Corchado guilty on both counts.
- The U.S. District Court sentenced Corchado to 27 months in prison.
- Corchado, as appellant, appealed her convictions to the U.S. Court of Appeals for the First Circuit, arguing the evidence presented by the appellee, the United States, was insufficient to support the guilty verdicts.
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Issue:
Does a defendant's act of knowingly spending illicit funds on a series of conspicuous and expensive consumer goods and services constitute sufficient evidence to prove they knew the transactions were designed to 'conceal or disguise' the nature of the proceeds under the federal money laundering statute, 18 U.S.C. § 1956(a)(1)(B)(i)?
Opinions:
Majority - Boudin, Chief Judge
No. Knowingly spending criminally-derived money, even lavishly, does not by itself prove the defendant knew the transaction was designed to conceal or disguise the proceeds. The court reasoned that the money laundering statute has two distinct knowledge requirements: (1) knowledge that the funds are tainted and (2) knowledge that the transaction is designed to conceal that fact. While a jury could rationally conclude Corchado satisfied the first element due to the vast disparity between the couple's spending and their reported income, the government failed to prove the second. The purchases were for conspicuous items (luxury cars, real estate) and were not executed in a manner indicative of concealment, such as using false names, converting funds to easily hidden assets like diamonds, or moving them to foreign accounts. To convict on these facts would effectively criminalize any spending of tainted money, which is covered by a different statute (18 U.S.C. § 1957), not the concealment provision of § 1956. The court affirmed the bank fraud conviction, however, finding a jury could reasonably infer she knew the application contained false information because the employment details were prominent on the one-page form she signed.
Analysis:
This decision significantly clarifies the 'design to conceal or disguise' element of the federal money laundering statute, 18 U.S.C. § 1956(a)(1)(B)(i). It establishes a crucial distinction between merely spending illegal proceeds and actively laundering them through concealment. The ruling prevents prosecutors from using the statute to target individuals, often family members, who benefit from a lavish lifestyle funded by crime but do not participate in the specific act of hiding the money's origins. Future money laundering prosecutions based on spending will require specific evidence of concealment, such as the use of shell corporations, transactions in others' names, or the purchase of easily concealable assets, rather than relying solely on the fact that tainted money was spent.
