Money Laundering and Specific Intent Can Be Difficult to Prove

By Terence Grugan

A recent decision out of the United States District Court for the Eastern District of Virginia adjudicating a seemingly straight-forward alleged fraud and money laundering scheme reminds us that money laundering charges still require the government to establish elements which can be difficult to prove, including, importantly, specific intent.

United States v. Millender involved an investment fraud scheme charged against a husband and wife and their associate. Terry and Brenda Millender were, respectively, the founder and pastor, and the “First Lady” of the Victorious Life Church (“VLC”) in Alexandria, Virginia. The evidence at trial established that Mr. Millender conceived of and founded Micro-Enterprise Management Group (“MEMG”), purportedly for the purpose of helping the poor in developing countries by making small, short-term loans to entrepreneurs who wished to start or expand existing businesses. Mrs. Millender was the co-founder, registered agent, and signatory of MEMG. To fund the enterprise, MEMG solicited “loans” from VLC congregants and other private lenders. MEMG promised its investors high rates of return through profits on the entrepreneur loans and assured them that the loans were securely backed by MEMG assets. Moreover, written materials soliciting investment represented that MEMG had a successful history of making micro-loans in Africa and had established relationships with on-going projects. Later, Mr. Milliner founded a second entity, Kingdom Commodities Unlimited (“KCU”), purportedly for the purpose of brokering Nigerian oil deals, and promising investors substantial returns on what they claimed were short term loans. The defendants solicited over $600,000 from investors from 2008 until 2015.

The Millender opinion reflects the complexity of the different prongs of the money laundering statutes, and their somewhat overlapping and competing requirements. The opinion is particularly noteworthy because of its procedural posture: despite jury verdicts finding guilt, the district court nonetheless found at least as to some counts that there was insufficient evidence as a matter of law of knowledge and specific intent.

On June 29, 2017, the grand jury returned a superseding indictment charging the Millenders and Grentta Wells, an associate, with 31 counts of wire fraud, tax fraud and money laundering. The government charged that the defendants traded the borrowed funds in high risk investments on foreign exchanges (“FOREX”), losing a substantial portion of the investments. MEMG allegedly never made any micro-loans or consummated any oil deals. Instead, and according to the superseding indictment, the defendants squandered their investors’ assets on unsuccessful FOREX trading and used the remained to fund personal expenses. Investors never were repaid their loans and were provided falsified information and, in some instances, small “lulling” payments when the promised full repayments were not forthcoming. After Wells pleaded guilty to one count of conspiracy to commit wire fraud, the Millenders went to trial. They were convicted.

Following an eight day trial, Terry Millender was convicted of wire fraud, conspiracy to commit wire fraud, filing false tax returns and aiding and assisting in the filing of false returns, obstruction of justice, and various money laundering charges. As to the money laundering charges, he was convicted of committing, or conspiring to commit, money laundering with an intent to “promote” the underlying criminal activity, in violation of 18 U.S.C. § 1956(a)(1)(A)(i), or an intent to “conceal” the illegal proceeds derived from that activity, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). He also was convicted under the “international” prong of the money laundering statute, in violation of 18 U.S.C. § 1956(a)(2)(A), of conducting a cross-border financial transaction with the intent to promote a specified unlawful activity (as we have blogged, this is a unique money laundering provision because it does not require the use of previously-obtained illegal proceeds in the transaction), and under the “spending” money laundering statute, in violation of 18 U.S.C. § 1957, which requires a transaction involving over $10,000 of illegal funds.

Brenda Millender was convicted of conspiracy to commit wire fraud, conspiracy to commit money laundering, and substantive money laundering. Similar but not identical to the charges against her husband, her money laundering charges variously involved an intent to “promote” the underlying criminal activity, in violation of 18 U.S.C. § 1956(a)(1)(A)(i), and an intent to “conceal” the illegal proceeds derived from that activity, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). Mrs. Millender was not charged with any “international” money laundering charges.

Following the verdict, the Millenders both moved for judgment of acquittal under Federal Rule of Criminal Procedure 29, and Mrs. Millender also moved for a new trial under Federal Rule of Criminal Procedure 33. Although the Court denied Mr. Millender’s motion, it granted Mrs. Millenders’ motions, overturning the jury’s decision and vacating its guilty verdict against her.

The Underlying Fraud Scheme: Husband vs. Wife

Describing the underlying schemes as “hair brained,” the Court distinguished Mr. Millenders’ involvement from Mrs. Millender’s. Addressing the wire fraud charges first, the Court explained that Mr. Millender “was the moving force, leader and manager” of the fraudulent schemes and “he effectively controlled and directed” the scheme by “review[ing] and approv[ing] all of the informational brochures and documents for investors that contained false and misleading information; and clearly knew that some of the representations used to solicit borrowed funds were false or misleading.” Further, Mr. Milliner “actively and knowingly concealed the fraudulent nature of the schemes through both MEMG and KCU, and engaged in further misrepresentations in order to induce lenders to either part with more money or not press for repayment.”

In contrast, the Court stated as to Mrs. Millender that “there was no evidence that she played any role in conceiving or understanding the scheme or ‘business model’ used to solicit borrowed funds [and she] . . . was not listed in promotional materials [or] was involved in generating any promotional materials or had ever seen the promotional materials provided to potential lenders.” The Court also explained that there was no evidence she had any active involvement in the creation or operation of the venture beyond being listed as its owner and registered agent. Although the Court found that Mrs. Millender “substantially benefited from the charged fraudulent scheme,” the Court determined there was still no evidence that Mrs. Milliner knew the distributions she received were improper or part of the fraudulent scheme. In addition, the Court discounted a bankruptcy filing jointly submitted by Mr. and Mrs. Millender “which contained false and misleading statements,” stating that there was no evidence establishing what role Mrs. Millender played in the filing. In essence, the Court made clear that it was not enough for the government to connect Mrs. Millender – or any similarly-situated fraud defendant – to the fraudulent enterprise. Rather, the connection must be to the actual fraudulent conduct: the government must present specific evidence that a defendant specifically intended to perpetrate or participate in the charged fraud.

The Money Laundering Scheme: Insufficient Evidence of Mental State

Turning to the money laundering charges, the Court overturned Mrs. Millender’s conspiracy to commit money laundering because “the evidence was insufficient to establish that she knew the funds involved in the . . . transactions represented the proceeds from some form of unlawful activity,” for the same general reasons underlying the vacation of her wire fraud convictions.

Finally, the Court dismissed all of the substantive money laundering charges against Mrs. Millender, and several of the substantive money laundering charges against Mr. Millender, as insufficiently proven. Mr. Millender was charged with two forms of money laundering: “promotional” money laundering and “concealment” money laundering – and the “promotional” money laundering charges involved both the traditional charge under Section 1956(a)(1)(A)(i), and the “international” charge under Section 1956(a)(2)(A), which, as noted, does not require proof that the transaction involved the use of previously-obtained illegal proceeds. Both Millenders were also charged with several substantive counts of “concealment” money laundering under 18 U.S.C. § 1956(a)(1)(B)(i), which requires in part proof that the defendant knew that the transaction was designed in whole or in part to conceal or disguise the nature, location, source, ownership, or control of the proceeds.

Addressing the promotional money laundering charges against Mr. Millender, the Court held the evidence was sufficient to prove that he used fraudulently-obtained funds to promote his scheme when he made wire transfers from the account of a British Virgin Islands company created by Mr. Millender to facilitate his FOREX trading to an MEMG account located in the United States. This holding by the Court is slightly incorrect, because it was unnecessary for the jury to find, at least for the purposes of any charges under the “international” prong, that fraudulently-obtained funds were used. Regardless, the point here is that there was sufficient evidence of an intent to promote.

However, the Court dismissed the concealment money laundering charges as to both Millenders. According to the Court, “concealment” money laundering requires the government prove “a specific intent to structure a transaction so as to conceal the true nature of the proceeds.” Those charges centered on debits from a bank account associated with the venture purportedly for business related expenses. The Court held that none of the transactions “was sufficiently structured such that a jury could infer the required mens rea” because none of the transactions concealed the source of the money or reflected any other indicia that their purpose was to conceal their source.

Arguably, as to Mrs. Millender, the Court should have vacated all of her money laundering charges once it found for the purposes of the conspiracy charge that she lacked knowledge that the proceeds at issue in the charged transactions involved the proceeds of specified unlawful activity. Given lack of knowledge by Mrs. Millender, it may have been unnecessary to assess her specific intent.

A Rare but Not Impossible Defense Victory

The Court’s opinion is noteworthy because of the posture from which it disposed of the charges against the Millenders. Fed. R. Crim. P. 29 permits the Court to overturn a jury’s guilty verdict only if it concludes that “after viewing the evidence in the light most favorable to the prosecution, no rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt.” This is an exceedingly deferential standard prohibiting the Court from “weighing the credibility of the evidence or resolving any conflicts in the evidence presented,” instead requiring the Court to “assume that the jury resolved all contradictions in the testimony in favor of the government.” Similarly, Fed. R. Crim. P. 33 permits a Court to grant a new trial after the jury has rendered a guilty verdict only “in the rare circumstance when the verdict is against the great weigh of the evidence.” Rule 29 and Rule 33 motions are rarely successful, particularly where, like with Mrs. Millender, circumstantial evidence connects the defendant with the fraudulent enterprise.

Nevertheless, intent remains a meaningful and sometimes elusive element of criminal offenses. As the Court here did, court should take care to ensure that intent is not conflated with other elements of the offense and accorded its full weight and meaning. However, recognizing the government may appeal its decision, and seemingly acknowledging that the government’s position may have some merit, the Court concluded its order by alternatively holding that Mrs. Millender still would receive a new trial if her convictions were reinstated.

https://www.natlawreview.com/article/money-laundering-and-specific-intent-can-be-difficult-to-prove