Opposition Brief — Arditti v. United States

In the Supreme Court of the Hnited States

OCTOBER TERM, 1992

VICTOR ARDITTI, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

KENNETH W. STARR >

Solicitor General i.

ROBERT S. MUELLER, III

VICKI S. MARANI +9

J ney ‘ a

Department of Justice _

Washington, D.C. 20530 y

(202) 514-2217 oN

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~ ite a 4 fey a Nome nee ki 4

boas a TR a &

QUESTION PRESENTED

Whether petitioner was entrapped as a matter of law as

a result of the undercover investigation that led to his

prosecution for conspiracy and money laundering.

(1)

TABLE OF CONTENTS

Page

NESE AI ee 1

SRG TEES 1

ASSESSES 2

a loa. SRR BA Re a 11

EAR aed A 16

TABLE OF AUTHORITIES

Cases:

Jacobson v. United States, 112 S. Ct. 1535 (1992) ......... 11, 13, 14

Sherman v. United States, 356 U.S. 369 (1958) ............... 15-16

Sorrells v. United States, 287 U.S. 435 (1932) ................. 12

United States v. Akinseye, 802 F.2d 740 (4th Cir. 1986),

cert. denied, 482 U.S. 916 (1987) ....ccccccccccccccosecccceceeeceee, 13

United States v. Collins, 957 F.2d 72 (2d Cir.), cert. de-

Ue Wy Se MI CUPID 5. cnceccscrscecocceccenerecceccacecececss 13

United States v. Ford, 918 F.2d 1343 (8th Cir. 1990) ...... 13

United States v. Johnson, 872 F.2d 612 (5th Cir. 1989) ... 13

United States v. Nations, 764 F.2d 1073 (5th Cir. 1985) .. 3

Statutes:

Nea srevedeunancavacsduducedecoccceceace 2

oc evbuacvnwnwis cobacdce ccs 2

Miscellaneous:

Fifth Circuit Pattern Jury Instructions (West 1990) ...... 14

(III)

Jn the Supreme Court of the United States

OCTOBER TERM, 1992

No. 92-382

VicTOR ARDITTI, PETITIONER

v.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals, Pet. App. 1-38, is

reported at 955 F.2d 331. The order of the district

court, Pet. App. 40-43, denying petitioner’s post-

verdict motion for a judgment of acquittal is un-

reported.

JURISDICTION

The judgment of the court of appeals was entered on

February 27, 1992. A petition for rehearing was

denied on June 2, 1992. Pet. App. 39. The petition for

a writ of certiorari was filed on August 31, 1992. The

jurisdiction of this Court is invoked under 28 U.S.C.

1254(1).

(1)

2

STATEMENT

After a jury trial in the United States District

Court for the Western District of Texas, petitioner

was convicted on one count of conspiring to avoid

filing currency transaction reports and to launder a

monetary instrument, in violation of 18 U.S.C. 371,

and five counts of money laundering, in violation of 18

U.S.C. 1956(a)(3). He was sentenced to a prison term

of 18 months, to be followed by three years’ supervised

release. He was also ordered to pay a fine of $10,000.

The court of appeals affirmed. Pet. App. 1-38.

1. In 1988, IRS Agent Gary Gallman began an

undercover investigation of money laundering in El

Paso, Texas. Gallman had information that Gabriel

Yanez, who owned a money exchange business, was

laundering money. Using the name “Gary W.

Adams,” Gallman posed as a cocaine dealer and

contacted Yanez. Gallman intimated to Yanez that

Gallman and his associates were involved in illegal

activity. Gallman told Yanez that he wanted Yanez’s

help in moving large amounts of cash “off-shore” and

in returning it to the United States in usable form.

Yanez arranged for Gallman to open a bank account in

Mexico under the name “Ricardo Guerra-Battle.”

Yanez twice funneled $100,000 in cash through

Mexico, arranged for the money to be wire-trans-

ferred to Gallman’s bank account in Dallas, and then

collected a fee from Gallman. Pet App. 2-3; Gov’t C.A.

Br. 3-8. j

Yanez next tried to help Gallman open a bank

account in the Cayman Islands by using a letter of

introduction from a commercial lawyer in E] Paso to

a Cayman Islands attorney. When Yenez learned that

3

the account could not be opened in the name of an

individual, he suggested that Gallman form a corpora-

tion for that purpose in the British Virgin Islands.

Gallman agreed that Yanez should have the necessary

documents prepared. Gallman later asked Yanez to

recommend an attorney who could ‘handle their

financial transactions. Yanez mentioned that peti-

tioner, an El Paso criminal defense lawyer, had

handled several cases involving deposits. Pet. App. 3;

Gov't C.A. Br. 9-10.

On September 21, 1988, Yanez introduced Gallman

to petitioner.' Yanez said that he had told petitioner

about the two prior laundering transactions. When

petitioner asked Gallman the nature of his business,

Gallman replied that he would have to trust petitioner

before revealing that information. Gallman identified

several drug dealers with whom he claimed to have

been involved, and he explained that Yanez was

helping him “get [his money] out and get it back” so

that he could use it. Petitioner reassured Gallman by

mentioning the attorney-client privilege, his previous

work with clients involved in drugs, and his distrust-

ful nature. Petitioner also told Gallman that because

Gallman was “into that kind of business,” he should

fund a war chest in preparation for the day that he

would need money to get out of jail on bond and hire a

lawyer. Gallman replied that he could not spend any of

the money “the way it is right now” and that he had

“to get it out and get it back.” When petitioner told

Galiman that he could not advise him on how to

' All meetings between petitioner and Agent Gallman were

videotaped. Gov’t C.A. Br. 39.

4

launder illegal funds, Gallman responded that Yanez

was doing that for him and that one of the reasons he

wanted to go off-shore was to keep people from asking

questions. Gallman said that he wanted to spend

$200,000 to $300,000 in cash on houses “here and

there,” and petitioner advised him on structuring real

estate transactions so as to avoid arousing suspicion.

In particular, petitioner recommended that Gallman

avoid cash purchases and bypass the banking system

with owner financing. Petitioner added that if

Gallman used his services, the government would not

discover Gallman’s payments to him. Pet. App. 3-4;

Gov't C.A. Br. 10-14.

In petitioner’s presence, Yanez told Gallman that

the corporation they had previously discussed had

been set up in the British West Indies. Gallman then

signed the documents authorizing the opening of the

Cayman Islands bank account both in his undercover

name and in the name “Ricardo Guerra.” Gallman

said that he would return in October. Pet. App. 14;

Gov't C.A. Br. 14.

In October, Yanez channeled another $100,000 of

Gallman’s cash to Gallman’s Dallas account. At a

meeting about the transfer, Gallman told Yanez that

he and his group were “in the ‘coke business,’ ” that

he was responsible for handling the money derived

from the sales, and that he had several million dollars

with which he wanted to buy houses and invest in the

stock market. The two agreed to follow petitioner’s

advice about avoiding cash purchases of property;

they decided to use Mexican cashier’s checks instead,

and to make all purchases in the corporate name to

protect Gallman’s identity. With respect to the

5

lawyers helping them, Yanez said that he hesitated to

let the commercial lawyer know about the source of

Gallman’s money because that lawyer was “straight.”

Yanez said that petitioner had agreed to assist

Galiman but would not take a retainer from him

because of the risk that the government would confis-

cate Gallman’s money. Yanez reiterated that peti-

tioner wanted Gallman to maintain a war chest in

Mexico for contingencies. Pet. App. 4; Gov’t C.A.

Br. 14-16.

On March 30, 1989, at Gallman’s request, Yanez

invited petitioner to meet them for lunch. The three

discussed methods of keeping money from being

traced. Noting that large depositors are required to

furnish information about themselves, petitioner said

that smaller deposits are safest. Petitioner sug-

gested that Gallman transact his business through

checks or wire transfers, and that he make the

standard down-payment on anything he bought and

pay the rest in installments. Pet. App: 7; Gov’t C.A.

Br. 18-20.

Gallman offered petitioner the chance to “walk

away from the deal” if petitioner had a “problem with

the money or with what I do.” When petitioner

responded that he had not asked what kind of business

Gallman was involved in, Gallman said, “You under-

stand this is coke money,” to which petitioner replied,

“You don’t see me going anywhere, do you?” At the

end of the meeting, petitioner confirmed that he had

“no qualms, no qualms at all.” Pet. App. 7; Gov’t C.A.

Br. 20.

On May 2, Gallman again met with petitioner and

Yanez. Gallman mentioned that he had an opportunity

6

to invest $200,000 in an Oklahoma oil deal. Gallman

revealed that “this money we’re doing right now is

part of a ten-kilo deal that * * * I’m getting paid off for

* * * now,” and stressed the need to conceal his

involvement in the oil deal. Petitioner outhned a

complex arrangement for preventing the government

from learning Gallman’s identity, including the use of

a foreign corporation as the investor, the creation of a

group of corporations through which the money could

be transferred, and the setting up of a trust in a

foreign bank to receive and invest the money. Pet.

App. 7-8; Gov’t C.A. Br. 21-22.

Gallman repeated that “this is coke money” and

wanted to know whether he could count on petitioner

not to talk if “I end up * * * getting busted.” Pet-

itioner assured Gallman that he would not divulge

anything but again warned Gallman against spending

large amounts of cash. Petitioner agreed to draft

documents memorializing a “loan” of money from the

foreign corporation to Gallman, which would explain

the source of Gallman’s money, and to check on

establishing an escrow account to receive Gallman’s

money and invest it in the Oklahoma deal. Pet. App.

8; Gov't C.A. Br. 23.

The next week, Yanez told Gallman that the

preparation of the fake loan documents and the

opening of the escrow account would be delayed

because petitioner was being audited by the IRS.

Yanez added that petitioner was having trouble

opening the escrow account because the bank insisted

on knowing the identities of the parties to the

transaction and the purpose of the account. Yanez

reported that petitioner had expressed concern about

7

“being framed” by Gallman. When Yanez offered to

ask the commercial lawyer to handle the matter,

Galiman said that he was uncomfortable with that and

wanted to use petitioner because “he knows the

score.” Pet. App. 8; Gov’t C.A. Br. 25-26.

At the end of May, Gallman delivered $50,000 to

Yanez, who in turn funneled it to Gallman’s Dallas

account. Yanez attributed petitioner’s delay in im-

plementing their arrangements to procrastination

and to the press of other business. Yanez added,

however, that petitioner had told him just a few days

earlier that he had researched the escrow issue and

was “convinced” about how to proceed with the bank

in setting up the account. Gallman telephoned Yanez

a number of times over the next few weeks, asking

him to have petitioner complete the deal. Yanez

insisted that petitioner had no problem with partici-

pating in the venture but explained that petitioner

wanted to be careful in structuring the transaction.

Pet. App. 8-9; Gov’t C.A. Br. 26-28.

The first infusion of funds to Oklahoma occurred

through Yanez’s own bank account at the end of June,

not through the escrow account as originally planned.

At a meeting in mid-July, petitioner explained to

Gallman that he and Yanez had chosen that method of

transfer because of the complications involved in

establishing the escrow account. Petitioner offered

to set up a trust for Gallman and manage its funds, an

arrangement that would allow him to move money in

and out of the account on Gallman’s instructions

while preserving Gallman’s anonymity. The three

formulated an elaborate plan to funnel money from the

foreign corporate account through Mexico and into

8

the trust account without having to report the

transactions. They then completed the arrangements

for the fraudulent loan from “Guerra” to Gallman.

Pet. App. 9; Gov’t C.A. Br. 28-80.

Several days later, petitioner opened an account in

the name “V.R. Arditti Trust Account Number 3.”

No trust documents were prepared for the account,

and petitioner alone had signature authority and the

code to validate wire transfers. When petitioner

received a check for $50,000 from the corporate

account on August 2, he deposited it into the trust

account and instructed the bank to wire $49,000 to the

oil deal bank account in Oklahoma. Pet. App. 9-10;

Gov't C.A. Br. 32.

On August 8, petitioner presented Gallman with a

$5,000 bill for his services and said that in the future

he would charge a fee of three percent of the money he

moved into and out of the trust account plus legal

fees. When Gallman protested the size of the transfer

fee, petitioner reduced it to two percent. Petitioner

asked Gallman not to pay him in cash in order to avoid

arousing suspicion. The three then devised a more

efficient plan for future laundering transactions,

focusing on the need to shield Gallman’s identity by

using the name “Guerra” and by procuring the funds

for deposit in the trust account at a Mexican bank in

the form of a cashier’s check. Pet. App. 10; Gov’t

C.A. Br. 32-35.

As planned, petitioner received a check for $50,000

the next day from a Mexican money exchanger, de-

posited it into the trust accovnt, and transferred the

money to the oil deal account five days later. On

August 29, petitioner followed the same procedure

ee

9

with another $50,000. Pet. App. 10; Gov’t C.A. Br. 35-

36. The undercover operation was subsequently ter-

minated, and petitioner and Yanez were indicted.

2. Petitioner raised an entrapment defense at trial

but was convicted. After trial, he moved for a post-

verdict judgment of acquittal on the ground that he

had been entrapped as a matter of law. The district

court denied the motion. Pet. App. 40-43. The court

observed, first, that “li]f a defendant properly raises

the defense of entrapment, as [petitioner] did in this

case, the government has the burden of proving

beyond a reasonable doubt that he was predisposed to

commit the crime charged.” Jd. at 42. The district

court noted that it was obliged to assess the evidence

of predisposition “in the light most favorable to the

government,” and that it was “not authorized to find

entrapment as a matter of law unless it conclude[d]

that no reasonable jury could have found that the

defendant was predisposed to commit the offense.”

Ibid.

Applying these principles to the facts of this case,

the district court concluded that

a reasonable jury could have found from all the

evidence that [petitioner] was predisposed to

commit the offenses charged. The jury could have

viewed the testimony of the Government’s under-

cover agent and especially the videotape record-

ings of [petitioner’s] conversations with the

undercover agent as showing him to be a willing

and active participant in the scheme.

Pet. App. 42-43.

3. The court of appeals affirmed. Pet. App. 1-38.

The court noted that the entrapment defense involves

10

“two factors: (1) government inducement; and (2) the

defendant’s predisposition, before contact’ with

government agents, to commit the crime charged.”

The court then explained that entrapment is estab-

lished as a matter of law “only where a reasonable

jury could not find that the government discharged

its burden of proving the defendant was predisposed to

commit the charged crime.” /d. at 25. With respect to

burdens of proof, the court stated:

Once a defendant makes a prima facie showing of

entrapment by presenting “some evidence that

government conduct created a substantial risk

that an offense would be committed by a person

other than one ready to commit it,” the burden

shifts to the government to prove beyond a rea-

sonable doubt that the defendant was predisposed

to commit the crime and, thus, [was] not en-

trapped.

Id. at 25-26. The court acknowledged that on appeal

from a conviction in which the jury has rejected the

entrapment defense, the standard of review is

whether, “viewing reasonable inferences and cred-

ibility choices in the light most favorable to the

Government, a reasonable jury could find, beyond a

reasonable doubt, that the defendant was predisposed

to commit the offense.” /d. at 26.

Under these principles, the court held, petitioner’s

post-verdict motion for a judgment of acquittal was

properly denied. The court noted that “there was no

overwhelming evidence of serious resistance by

[petitioner],” Pet. App. 26 (internal quotation marks

omitted), and that “[a] jury could view [Agent]

Gallman’s testimony and the tape recordings and

1]

video recordings of [petitioner] as proof that

[petitioner] was an eager, active participant in money

laundering,” id. at 27 (internal quotation marks

omitted). The court pointed out that after Agent

Gallman told petitioner that the money for the pro-

posed real estate investment was “coke money” and

that petitioner could just walk away if he did not want

to be involved in such a deal, petitioner replied, “You

don’t see me going anywhere.” /bid. The court added

that although petitioner did not initially seek out the

government agent, petitioner responded to the

opportunity that the agent offered him by “jumpfing]

in with both feet, helping Gallman formulate plans to

launder the ‘drug’ money and advising him on ways to

avoid arousing governmental suspicion.” Jbid. (in-

ternal quotation marks omitted); see also id. at 29.

Accordingly, the court concluded that “a reasonable

jury could have found beyond a reasonable doubt that

[petitioner] was predisposed to money laundering and

thus was not entrapped.” Jd. at 262

ARGUMENT

Petitioner contends (Pet. 12-21) that under the

concept of predisposition articulated in Jacobson v.

United States, 112 S. Ct. 1535 (1992), he was entrapped

as a matter of law. Petitioner is incorrect. The

Jacobson Court’s understanding of predisposition

* The court of appeals also rejected petitioner’s claims that

the government’s investigation of him was outrageous and

violative of due process, Pet. App. 28-31, that the district

court’s instructions on entrapment were inadequate, id. at 23-

25, and that the district court improperly quashed his subpoena

for IRS documents, id. at 31-34. Petitioner does not renew

those claims in this Court.

12

does not differ from that of the court of appeals.

Accordingly, review by this Court is not warranted.

Jacobson involved a sting operation in which the

government repeatedly contacted the defendant over a

two-and-a-half year period through various fictitious

organizations and a bogus pen pal before the defendant

accepted an invitation to purchase child pornography

through the mail. Relying on the well-settled propo-

sition that “[g]lovernment agents may not originate a

criminal design, implant in an innocent person’s mind

the disposition to commit a criminal act, and then

induce commission of the crime so that the Gov-

ernment may prosecute,” 112 S. Ct. at 1540 (citing

Sorrells v. United States, 287 U.S. 435, 442 (1932)), the

Court concluded that the defendant had been en-

trapped as a matter of law into ordering the prohibited

material. The Court reasoned that the government’s

prior contacts with the defendant “not only excited

[his] interest in sexually explicit materials banned by

law but also exerted substantial pressure on [him] to

obtain and read such material as part of a fight

against censorship and the infringement of individual

rights.” Jd. at 1542. In those circumstances, the

Court held, “[rJational jurors could not say beyond a

reasonable doubt that [the defendant] possessed the

requisite predisposition [to commit the offense

charged] prior to the Government’s investigation and

that it existed independent of the Government’s many

and varied approaches to [him].” Jd. at 1543.

Like the Jacobson Court, the court of appeals in

this case focused on whether petitioner was predis-

posed to commit the crimes charged independent of

the government’s conduct. See Pet. App. 25 (focus of

13

entrapment defense is “defendant’s predisposition,

before contact with government agents, to commit the

crime charged.”).*? After viewing the evidence in the

light most favorable to the government, as it was

required to do, see United States v. Collins, 957 F.2d

72, 77 (2d Cir.), cert. denied, 112 S. Ct. 2285 (1992):

United States v. Akinseye, 802 F.2d 740, 744 (4th Cir.

1986), cert. denied, 482 U.S. 916 (1987); United States

v. Ford, 918 F.2d 1348, 1848 (8th Cir. 1990), the court

specifically rejected petitioner’s claim that “the gov-

ernment offered no evidence of predisposition prior to

[petitioner’s| involvement in the offense.” Pet. App.

26 (internal quotation marks omitted). The court of

appeals’ conclusion finds ample support in the record.

As the court correctly euserved, petitioner “was

brought into the money laundering plot by his co-

conspirator, Yanez,” not by Agent Gallman. /d. at

29. The jury was permitted to infer that Yanez, who

indisputably was engaged in money laundering act-

ivities, sponsored petitioner’s participation in

Gallman’s money laundering scheme because he knew

from experience, or otherwise had reason to expect,

that petitioner would be a willing and reliable ally in

% The cases on which the court of appeals principally relied,

Pet. App. 26-27, also applied this standard. See United States

v. Johnson, 872 F.2d 612, 620-621 (5th Cir. 1989) (in determin-

ing whether defendant was entrapped as a matter of law, "[the]

relevant focus is on [his] predisposition to commit the crime

prior to any contact with the Government agents"); United

States v. Nations, 764 F.2d 1073, 1079 (5th Cir. 1985) (court

must focus on "the predisposition of the defendant, before con-

tact with government agents, to commit the crime charged").

There is thus no merit to petitioner’s contention, Pet. 21, that

Jacobson "clearly overturns" those cases.

14

the illegal enterprise. Once Yanez tendered peti-

tioner as a potential co-conspirator, Gallman merely

provided petitioner with an opportunity to commit the

crime, whereupon—as the court of appeals noted—

petitioner “jumped in with both feet.” Jd. at 27.

Petitioner “actively participated in the criminal

activity by formulating and carrying out investment

plans” for Gallman, Pet. App. 29, even though Gallman

had warned him that the money was “coke money” and

had assured him that he was free to walk away from

the deal if he was uncomfortable with it, id. at 27. The

court thus properly determined that “a reasonable

jury could have found beyond a reasonable doubt that

[petitioner] was predisposed to money laundering and

thus was not entrapped.” /d. at 26.4

In Jacobson, the Court reaffirmed the longstanding

principle that a prosecution will not be defeated when

government agents “merely afford opportunities or

facilities for the commission of the offense,” and that

4 The jury instructions ensured that petitioner could be

convicted only on the basis of predisposition that existed inde-

pendent of the government’s acts. As the court of appeals

noted, the instructions paralleled Fifth Circuit Pattern Jury

Instructions § 1.28, at 40 (West 1990) and provided in pertinent

part that:

[I]f the evidence in the case should leave you with a rea-

sonable doubt whether the defendant[] had the previous

intent or purpose to commit an offense of the character

charged apart from the inducement or persuasion of some

officer or agent of the government, then it is your duty to

find him not guilty. * * * The burden is on the government

to prove beyond a reasonable doubt that the defendant|]

[was] not entrapped.

Pet. App. 23; Gov’t C.A. Br. 46.

arsine aeatieaaiiiiaanl

15

“[alrtifice and stratagem may be employed to catch

those engaged in criminal enterprises.” 112 S. Ct. at

1540. The Court explained:

Thus, an agent deployed to stop the traffic in

illegal drugs may offer the opportunity to buy or

sell drugs, and, if the offer is accepted, make an

arrest on the spot or later. In such a typical case,

or in a more elaborate “sting” operation involving

government-sponsored fencing where the defen-

dant is simply provided with the opportunity to

commit a crime, the entrapment defense is of little

use because the ready commission of the criminal

act amply demonstrates the defendant’s predispo-

sition. See United States v. Sherman, 200 F.2d

880, 882 (CA2 1952). Had the agents in this case

simply offered petitioner the opportunity to order

child pornography through the mails, and peti-

tioner * * * had promptly availed himself of this

criminal opportunity, it is unlikely that his en-

trapment defense would have warranted a jury

instruction. Mathews v. United States, 485 U.S.

58, 66 * * * (1988).

1128S. Ct. at 1541. In this case, Agent Gallman simply

offered petitioner an opportunity to participate in a

criminal venture for which petitioner’s co-conspira-

tor Yanez had recommended him. Petitioner’s ready

acceptance of that opportunity in exchange for legal

fees and, later, for a percentage of the money

laundered through the trust that he set up in his own

name for that purpose demonstrate that he was an

“unwary criminal,” not an “unwary innocent,” see id.

at 1557 (quoting Sherman v. United States, 356 U.S.

16

369, 372 (1958)), and that he was therefore not

entrapped as a matter of law.

CONCLUSION

The petition for a writ of certiorari should be

denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor Ger ral

ROBERT S. MUELLER, III

Assistant Attorney General

VICKI S. MARANI

Attorney

NOVEMBER 1992