Petition for Writ of Certiorari — Aerovias de Mexico, S. A. de C. V. v. Prevoisin

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_ Supreme Court,

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No. ——

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IN THE

Supreme Court of the United States

AEROVIAS DE MEXICO S.A. DEC.V..

DOING BUSINESS AS AEROMEXICO,

Petitioner

¥.

GERARDO DE PREVOISIN; GP INVESTMENTS INC..

Respondents

On Petition for Writ of Certiorari

to the United States Court of Appeals

for the Fifth Circuit

PETITION FOR WRIT OF CERTIORARI

JOHN HOLMAN BARR

M. FOREST NELSON

Counsel of Record

BURT BARR & ASSOCIATES, L.L.P.

304 S. RECORD STREET

DALLAS, TEXAS 75202

(214) 742-8001

PLR RIAA IIE OBURARLRE: REL TONE NO LORY OSI TOE RSENS RIA, SS ENS IE RR! NOR

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

54 Pe

QUESTIONS PRESENTED FOR REVIEW

Can the federal courts engraft a conducts and effects test

upon a federal statute—18 U.S.C. § 1956(c)(7)(B)—that

expressly provides for extraterritorial jurisdiction.

Does a foreign bank have to suffer damages for the any

scheme or attempt to defraud \anguage in 18 U.S.C.

§ 1956(c)(7)(B)(iii) to trigger extraterritorial jurisdiction.

Will promotion of an unlawful activity after the initial

phase of “reinvestment” money laundering or an act in

furtherance of “concealment” money laundering warrant the

exercise of subject matter jurisdiction under 18 U.S.C.

§ 1956.

(i)

PARTIES TO THE PROCEEDING/CORPORATE

DISCLOSURE STATEMENT

Under Rule 29.6, petitioner discloses its parent corporation,

Servicios Corporativos CINTRA, S.A.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED FOR REVIEW ................. i

PARTIES TO THE PROCEEDING/CORPORATE

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"| _____,_ E A e TN 8

CAN THE FEDERAL COURTS ENGRAFT AN

INITIAL CONDUCTS TEST UPON A FEDERAL

STATUTE—I18 U.S.C. § 1956(f}—THAT EX-

PRESSLY PROVIDES FOR’ EXTRATERRI-

ee PTs CURIE cccsnnsesscsesesccsesenonsetortannccemees 8

DOES A FOREIGN BANK HAVE TO SUFFER

DAMAGES FOR THE ANY SCHEME OR

ATTEMPT TO DEFRAUD LANGUAGE IN 18

U.S.C. § 1956(c)(7)(B (iii) TO TRIGGER EXTRA-

TERRITORIAL JURISDICTION ........... cc eecceceeeeeeees 13

WILL PROMOTION OF AN UNLAWFUL

ACTIVITY AFTER THE INITIAL PHASE OF

“REINVESTMENT” MONEY LAUNDERING

OR AN ACT IN FURTHERANCE' OF

“CONCEALMENT” MONEY LAUNDERING

DICTATE SUBJECT MATTER JURISDICTION

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SORE TEIIDIIITIT csciatahsesntuseuesienhlidshancdedenneebnennesnenssoountuinnts 20

TABLE OF AUTHORITIES

Cases

Alfadda v. Fenn, 935 F.2d 475 (2nd Cir. 1991)...

Bersch v. Drexel Firestone, Inc., 519 F.2d 974

(2nd Cir.), cert. denied, 423 U.S. 1018 (1975)..

Equal Employment Opportunity Commission v.

Arabian American Oil Co., 499 U.S. 244, 245

Sareea cuiininaseiiheceie bikennteasciaaeiaigaianiscpianindniaille Mecsas ene

North South Financial Corp. v. Al-Turki, 100

F.3d 1046, 1051 (2nd Cir.1996)... eee

Psimenos v. EF. Hutton & Co., 722 F.2d 1041

Ce ee NI css be vincceseccutenebachaatéeucatsicedsvaasestenuens

Schmuck v. United States, 489 U.S. 705, 710-15

iF i aisaiiiactinelotedeiehiebadndaeaubianisebiedbbbubipabtionabiencaectonisiontendn

United States v. Abuhouran, 162 F.3d 230 (3rd

Cir.1998), cert. denied, 526 U.S. 1077 (1999)...

United States v. Butler, 211 F.3d 826 (4th Cir.

FAR RP NTE OPER AY SRO RTL SEPT EERE RET 15,

United States v. Cole, 988 F.2d 681, 684 (7th

Ais NaF D nennncicanpnchabiesebiccnninciebtnedasagenmunassalamadaaiin

United States v. Conley, 37 F.3d 970 (3rd Cir.

PUD ssisnsitinestnnnisiaactunsinctianenecinndisdeoninneninionaioente

United States v. Hildebrand.\52 F.3d 756, 762

(8th Cir.), cert. denied, 525 U.S. 1033 (1998)...

United States v. Mankarious, 151 F.3d 694, 706

(7th Cir.), cert. denied, 525 U.S. 1056 (1998)...

United States v. Morelli, 169 F.3d 798 (3rd Cir.),

cert. denied, 120 S.C. 63 (1999) .......cccccccccccevees

United States v. Savage, 67 F.3d 1435 (9th Cir.

1995), cert. denied, 516 U.S. 1136 (1996).........

United States v. Sayakhom, 186 F.3d 928 (9th

Cir. 1999), cert. denied, 120 S.C. 1216 (2000)..

Page

12,

18,

-§2

TABLE OF AUTHORITIES—Continued

Statutes Page

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1B USC. BIDRGIIIID sicisccsteiciesnerntictonerinttes - 45

1S CLS. SUDSU OID snsrcsidicnnessniscntsicnsnassnicins 15

18 U.S.C. § 1956(C)7)(B) ...cccccecescseeceees i, 10, 11, 13, 14

18 U.S.C. § 1956(C)7)(B)(iii) .eeeeceeeeeeseee. i, 2, 8, 13, 14

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Other Authorities

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Constitutional Provisions

13 ae RN: TS OF oii 1]

BASIS FOR JURISDICTION

The United States Court of Appeals For The Fifth Circuit

_ entered the judgment for review, on June 29, 2000. On August

9, 2000, the United States court of appeals entered its order

denominated On Petition For Rehearing. This Court has

jurisdiction to review on a writ of certiorari the court of appeals’

judgment under 28 U.S.C.A. § 1254(1) (West 1993).

STATUTES IN ISSUE

§ 1956. Laundering of Monetary Instruments

(c)(7) the term “specified unlawful activity” means—

(A) any act or activity constituting an offense

listed in section 1961(1) of this title except

an act which is indictable under subchapter

11 of chapter 53 of title 31;

(B)

with respect to a financial transaction

occurring in whole or in part in the United

States, an offense against a foreign nation

involving-

(i)

(ii)

(iit)

the manufacture; importation, sale, or

distribution of a controlled substance

(as such term is defined for the

purposes of the Controlled Substances

Act);

murder, kidnapping, robbery, extortion,

or destruction of property by means of

explosive or fire;

fraud, or any scheme or attempt to

defraud, by or against a foreign bank

(as defined in paragraph 7 of section

1(b) of the International Banking Act of

1978;

18 U.S.C.A. § 1956(c)(7)(B (iii) (West 2000).

§ 1956. Laundering of Monetary Instruments

(f) There is extraterritorial jurisdiction over the

conduct prohibited by this section if-

(1) the conduct is by a United States citizen or,

in the case of a non-United States citizen,

the conduct occurs in part in the United

States, and

(2) the transaction or series of related trans-

actions involves funds of monetary

instruments of a value exceeding $10,000.

18 U.S.C. § 1956(f) (West 2000).

STATEMENT OF THE CASE

The basis for federal jurisdiction emanates from a federal

question under 28 U.S.C.A. § 1331 (West 1993). The United

States laws in issue include 18 U.S.C.A. § 1961 (West 2000)

and 18 U.S.C.A. § 1956 (West 2000).

On January 12, 1995, petitioner filed suit against Gerardo de

Prevoisin (Prevoisin) and GP Investments, Inc. (GP). (CR 11)'.

Prevoisin moved to dismiss the action for lack of subject matter

and personal jurisdiction. (CR 133). The United States district

court granted the motion to dismiss for lack of subject matter

jurisdiction and personal jurisdiction. (CR 1055).

The district court granted petitioner’s motion for recon-

sideration (CR 1325), and denied Prevoisin’s motion to reinstate

the dismissal order. (CR 4031). In the March 31, 1999 order

granting reconsideration, the district court held it had subject

matter jurisdiction under the money laundering element of the

'“CR” represents the Court Record. The “{Number]” refers to page

numbering in the lower right hand corner of the documents in the Court

Record.

RICO claim and that it had personal jurisdiction over Prevoisin

and GP. (CR 4031).

Prevoisin filed a second motion to dismiss, which the district

court granted for lack of subject matter jurisdiction over the

federal claims. (CR 4541). In affirming the dismissal order, the

United States court of appeals contended the complained of

predicate acts occurred primarily in Mexico. (App.A at 2a)

Factually, Prevoisin served as Aeromexico’s chief executor

officer and chairman of the board from 1989 until September,

1994. (CR 156). During his tenure, Prevoisin defalcated over

$75,000,000.00 in Aeromexico funds for his personal benefit,

through five transactions. The transactions involved the transfer

of monies from Mexico to or through the United States and the

subsequent transfer of proceeds from those transactions into or

through the United States by wire or mail. Prevoisin used

proceeds from those transactions to purchase, maintain, and

preserve four condominiums in Vail, Colorado, which are held

in the name of GP, a shell Delaware corporation.

1. DYNAWORLD

A. In 1992, Aeromexico wired $15,250,000.00 (all figures

will be in American Dollars unless indicated

otherwise) from Mexico City to Dynaworld Bank and

Trust's (Dynaworld) account in New York City. The

monies were invested in two Dynaworld certificates of

deposit. (CR 34).

B. Prevoisin then personally borrowed $15,250,000.00

from Dynaworld, a foreign bank. (CR 461). To procure

the loan, Prevoisin fraudulently signed a pledge of

Aeromexico’s certificates of deposit to secure his

personal loan. (CR 461). Dynaworld was instructed to

wire $6,500,000.00 of the loan proceeds to Prevoisin’s

numbered account in New York City.

C. Prevoisin did not have the inherent, apparent, actual or

implied authority to secure his personal loan with the

Aeromexico certificates of deposit, but he

misrepresented to Dynaworld that he did. (CR 207,

562, 548, 1916).

D. Prevoisin concealed this transaction by rolling over his

debt and the pledge every 180 days, until he resigned

from Aeromexico. (CR 1916). Prevoisin paid the

interest on his personal loan by directing the wire

transfer of Aeromexico monies from Mexico City to

Chemical Bank in New York. (CR 35). Prevoisin also

concealed this transaction by filing false statements

with the Securities and Exchange Commission

regarding the purported pledge of Aeromexico assets

and by failing to disclose and making false

representations to the external auditors. (CR 4483-

4485).

2. INVERWORLD

A. In 1991 and 1992, by fraud, Prevoisin had Aeromexico

advance monies to entities and accounts controlled by

Prevoisin. (CR 4139). The advances included wire

transfers to Citibank and Chemical Bank in New York

City and Banamex in Houston as well as a mailing to

Houston. (CR 4328-4341). The advances with

interest totaled about $37,500,000.00, by December

28, 1992. (CR 35).

Before Aeromexico closed its 1992 books,

Aeromexico's treasurer was instructed to invest $37.5

million with and through Inverworld, Inc. (Inverworld)

and Inverworld Securities, Inc. (ISI), two companies in

San Antonio, Texas. (CR 1920).

C. Aeromexico wired $37.5 million for investment to

Inverworld and ISI, on December 28, 1992. (CR

4360). The wire went from Mexico City to, and

through, Citibank and Swiss Bank in New York City.

(CR 4360). Inverworld, from San Antonio, Texas,

wired back confirmation of the investment to

Aeromexico. (CR 1270).

D. On the same day, Prevoisin executed a personal loan to

an Inverworld lending entity for $37,500,000.00. (CR

458). An unauthorized, fraudulent pledge signed by

Prevoisin pledged Aeromexico’s $37,500,000.00

investment against Prevoisin’s personal loan. (CR

1870-1872). On December 28, 1992, Inverworld

wired the $37,500,000.00 to Invermonedas, S.A. de

C.V.in Mexico City through Swiss Bank in New York

City and Bank of America, N.A. in California.

Invermonedas, exchanged the $37.5 million to

Mexican Pesos and deposited the exchanged monies

into an Aeromexico bank account to pay-off the

outstanding accounts receivable described above,

including Prevoisin’s personal account. (CR 1174,

1920-1921, 4366).

E. Again, Prevoisin did not have the inherent, apparent,

actual or implied authority to secure his personal loan

with Aeromexico’s assets. (CR 188-189, 1924 ,1934).

Prevoisin also concealed this transaction by rolling

over his debt and the pledge every 180 days, until he

resigned from Aeromexico (CR 1829-1847), by

directing the wire transfer of Aeromexico monies to

Citibank and Swiss Bank in New York City to cover

interest on his personal loan. (CR 1723, 4343-4385).

Prevoisin also set up a shell Cayman Island company,

Latin Credit Corporation, in 1994, to further the fraud

by having Inverworld denominate Aeromexico’s

investment as Latin Credit Corporation commercial

paper in monthly account statements and _ letters

transmitted to Aeromexico. (CR 1359, 4765).

Prevoisin also failed to disclose the purported pledging

of assets to the external auditors and to the Securities

and Exchange Commission. (CR 3676-3677, 4483-

4485).

3. AM-MEX AND ABC

A. Prevoisin had two shell companies formed in 1992.

The companies were Am-Mex Services Corporation

(Am-Mex), a Texas corporation, and ABC Services,

Inc. (ABC) a British Virgin Islands entity subject to

secrecy laws. (CR 1925) Prevoisin established separate

accounts at Texas Commerce Bank - San Antonio,

N.A. for Am-Mex and ABC. (CR 984, 1754).

B. From 1992 through 1994, Prevoisin had Aeromexico

issue five checks totaling $220,000.00 to Am-Mex

and twelve checks totaling $400,000.00 to ABC on

Aeromexico’s account in Houston. (CR 941-942).

Prevoisin deposited the checks at the San Antonio

bank. (CR 988-994).

C. After these fraudulent deposits, Am-Mex, to close its

account, issued one check to ABC. (CR 996). ABC

then issued, and Prevoisin signed, about 70 checks for

Prevoisin’s and GP’s personal benefit, primarily to

payees in the United States. (CR 4413-4436).

4. CITIBANK

A. In 1994, on eight occasions, Prevoisin had Aeromexico

wire $1,000,000 to his personal numbered account at

Citibank in New York City. (CR 158, 467-482).

Prevoisin contends these monies were for illegal

campaign contributions to the ruling party in Mexico.

(CR 158).

B. Prevoisin used these illegally obtained funds to

purchase a condo in Vail, Colorado, by wire transfer

from New York City to Houston, Texas. (CR 1082,

1223, 1221). Prevoisin also transferred some of these

funds from New York to Texas to purchase a Ferrari

and four BMWs. (CR 1186-1187). Prevoisin, a few

days after resigning and leaving Mexico, closed-out his

account at Citibank by wire transferring $5,000,000.00

from his personal numbered account at Citibank to a

Swiss Bank account in the Bahamas, which is subject

to bank secrecy laws. (CR 1181-1182).

5. ADVANCES

A. Prevoisin had two personal receivable accounts at

Aeromexico, one in dollars and one in pesos. (CR

226-230). His advances totaled over $13 million

dollars when he resigned. (CR 196, 226-230). The

unpaid advances included Aeromexico monies wired

from Mexico City to Citibank, Chemical Bank, and

Swiss Bank in New York City to pay interest on

Prevoisin’s personal loans at Dynaworld and

Inverworld. (CR 4312, 4328-4341, 4343-4385).

Prevoisin also had Aeromexico monies wired and

transmitted to Houston and San Antonio to purchase a

Bentley and pay for armoring of the Bentley and other

vehicles owned by Prevoisin. (CR 446-447).

Prevoisin failed to disclose and concealed the above five

transactions from Aeromexico’s board of directors, external

auditors, and major creditors- four foreign Mexican banks:

Banco Mexicano, Banco Serfin, Bancomer, and Banamex (CR

1916, 4483-4485). Prevoisin also attempted to defraud the two

foreign banking entities from which he obtained personal loans

by executing unauthorized pledge agreements of Aeromexico

assets.

ARGUMENT

CAN THE FEDERAL COURTS ENGRAFT AN

INITIAL CONDUCTS TEST UPON A FEDERAL

STATUTE - 18 U.S.C. § 1956(f) - THAT EXPRESSLY

PROVIDES FOR EXTRATERRITORIAL JURIS-

DICTION.

The Money Laundering Statute provides that

[T]here is extraterritorial jurisdiction over the conduct

prohibited by this section if:

(1) the conduct is by a United States citizen or, in the

case of a non-United States citizen. the conduct

occurs in part in the United States: and

(2) the transaction or series of related transactions

involves funds or monetary instruments of a value

exceeding $10,000.00.

18 U.S.C.A. § 1956(f) (West 2000). The United States district

court, at footnote four to its memorandum opinion and order

(App. B at 8a), stated that the parties conceded “that the alleged

money laundering occurred in part in the United States.” No

one contests that the transactions in issue involved funds

exceeding $10,000.00. Thus, alleged prohibited conduct will

trigger extraterritorial jurisdiction.

Under section 1956(c)(7)(B)(iii), prohibited conduct, namely,

a “specified unlawful activity,” regarding a financial transaction

that occurs in part in the United States means—

fraud, or any scheme or attempt to defraud, by or against a

foreign bank (as defined in paragraph 7 of section 1(b) of

the International Banking act of 1978: .. . .

18 U.S.C.A. § 1956(c)(7)(B)(iii) (West 2000).

Rather than follow the express language of the statute, the

United States court of appeals engrafted an initial conducts test

on the money laundering statute, not unlike that employed in

RICO claims that lack express extraterritorial jurisdiction. See

North South Financial Corp. v. Al-Turki, 100 F.3d 1046, 1051

(2nd Cir.1996). The United States court of appeals disregarded

the parties’ concession that the alleged money laundering

occurred in part in the United States. The United States court

of appeals just looked at where the first phase of each

complained of financial transaction took place. Finding that the

first phase of each financial transaction occurred in Mexico, the

United States court of appeals rejected extraterritorial

jurisdiction.

The United States court of appeals has decided an important

question of federal law that has not been, but should be, settled

by this Court. To wit, can the federal courts engraft tests for the

exercise of extraterritorial jurisdiction when a statute expressly

provides for such jurisdiction.

Congress recognized limited court resources and has

restricted the express provision of extraterritorial jurisdiction to

five circumstances: 18 U.S.C. § 351 (Congressional, Cabinet,

and Supreme Court assassination, kidnapping, and assault); 18

U.S.C. § 1751 (Presidential and Presidential staff assassination.

kidnapping, and assault); 18 U.S.C. § 1956 (money laundering);

18 U.S.C. § 2332b (terrorist acts); and 18 U.S.C. § 3042 (a

fugitive from justice charged with or convicted of federal

crime). By restricting dictated extraterritorial jurisdiction,

Congress also recognized that the courts were not to use those

limited resources to ascertain extraterritorial jurisdiction under

these five circumstances, which the United States court of

appeals has done.

Congress intended to send a clear message, that if you kill a

President, assault a Congressman, kidnap a Supreme Court

Justice, blow up a plane, flee to Paraguay or launder money, you

can expect to be haled into a United States court, without

exception. By engrafting a test or basis for exception on one of

these statutes, the United States court of appeals, of necessity,

engrafts a test and basis for exception on all five statutes.

One can see the practical import of engrafting a test or basis

for exception on these five statutes in the murder of a

Congressman. Suppose a Mexican drug dealer contracts a

Mexican citizen to murder a Congressman vacationing in

Mexico. Then suppose the Mexican drug dealer has the contract

payment converted to dollars at a Mexican exchange house and

wired to the account of a shell Delaware corporation at a San

Diego bank. Then assume that monies from the San Diego bank

account are used for the purchase of a house in La Jolla. Under

the United States court of appeals’ analysis, the murdered

Congressman’s family and estate could not bring a civil action

against the Mexican drug dealer and contract killer in United

States federal court in San Diego, because the initial/predicate

conduct occurred in Mexico.

Under the United States court of appeals’ analysis. one also

has to question whether a federal criminal prosecution could

proceed, because all the “predicate” acts occurred in Mexico,

and thus, would not constitute a “specified unlawful activity”

under 18 U.S.C. § 1956(c)(7)(B). And absent a “specified

unlawful activity,” a material element of a money laundering

claim, no offense has occurred. 18 U.S.C. § 1956(a)(1-3).

The United States court of appeals’ analysis is also

particularly telling because the U.S. Attorney’s Office in San

Francisco just indicted the former prime minister of the Ukraine,

Pavel I. Lazerenko, under 18 U.S.C. § 1956(c)(7)(B), for

laundering proceeds from extortion activities committed solely

in the Ukraine. (Case No. CROO-0284, N.D.Cal.).

The United States court of appeals’ opinion serves as a road

map for foreigners laundering money from drug dealing,

murder, kidnapping, robbery, extortion, bombing, and fraud.

Namely, commit crimes on foreign soil and then convert crime

proceeds from a foreign currency to dollars before wiring the

proceeds to the United States.

The Constitution’s structure also refutes the Fifth Circuit’s

engrafted conduct test. Under the Constitution’s structure,

legislative powers fall to Congress. U.S. Const. art.1, § 1. By

engrafting a conducts test to ascertain extraterritorial

jurisdiction, the Fifth Circuit invalidated the express

extraterritorial jurisdiction provisions of the Money Laundering

Statute and exercised a legislative power. The Constitution

does not afford an Article III Court the ability to rewrite 18

U.S.C. § 1956(f) to read:

[T]here is extraterritorial jurisdiction over the conduct

prohibited by this section if:

(1) the conduct does not initially or primarily occur on

foreign soil, regardless of the complained of

person's citizenship; and

(2) the transaction or series of related transactions

involves funds or monetary instruments of a value

exceeding $10,000.00.

Petitioner asked the Fifth Circuit to interpret 18 U.S.C.

§ 1956(c)(7)(B), not invalidate, modify or engraft tests on the

extraterritorial provisions of 18 U.S.C. § 1956(f). Petitioner and

similarly situated multinational companies with foreign

subsidiaries and affiliates need to know under what circum-

stances a United States courthouse will be open to address their

losses/damages when the proceeds from the murder of their

employees, the kidnapping of their officers, their extortion, the

bombing of their property, and the attempted fraud of their

foreign bankers find their way to the United States.

Legislative history also undercuts the Fifth Circuit’s holding.

Congress enacted the money laundering statute to attack

specified unlawful activity on a second front, the disposition of

the ill-gotten proceeds. See. S.Rep. No. 99-433 at 2 (1986). By

criminalizing the transfer of such gains, Congress wanted to

foreclose any impression that the United States would serve as a

repository for ill-gotten gains. See United States v. Savage, 67

F.3d 1435, 1441 (9th Cir. 1995), cert. denied, 516 U.S. 1136

(1996).

Congress, however, did have due process concerns, namely,

would a foreign citizen operating outside the United States have

an understanding/appreciation of United States law. See S.Rep.

No. 99-433 at 14 (1986). This due process concern led to a list

of criminal acts that foreigners would understand/appreciate,

e.g., murder, kidnapping, assault, drug dealing. The addition of

bank fraud recognized that persons capable of defrauding or

attempting to defraud a foreign bank would be sophisticated

enough to understand/appreciate United States law.

No one can question Sr. de Prevoisin’s sophistication or that

he understood and appreciated the consequence of attempting to

defraud or defrauding foreign banks. This case reflects the very

conduct Congress sought to address through the money

laundering statute.

From an ethical argument viewpoint, the United States court

of appeals” opinion warrants scrutiny by this Court. Mexico

recently elected Vincente Fox, the first President from outside

the political party that has ruled Mexico for 71 years. Sr. Fox

ran on a platform of removing corruption from the Mexican

political and business systems.

When presented with an opportunity to assist the Mexican

people to address corruption that seeks refuge in the United

States, the United States, through its courts, shies away. All the

while requesting the Mexican people to fight drug traffickers

who seek refuge in Mexico. As an ethical imperative, the

United States, through its courts, should assist a sister country in

fighting the criminal conduct that tears at the fabric of that

country.

Additionally, the Fifth Circuit’s opinion conflicts with

holdings in the Second Circuit. Alfadda v. Fenn, 935 F.2d 475

(2nd Cir.1991); Psimenos v. E.F. Hutton & Co., 722 F.2d 1041

(2nd Cir.1983); Bersch v. Drexel Firestone, Inc., 519 F.2d 974

(2nd Cir.), cert. denied, 423 U.S. 1018 (1975). The Second

Circuit has held that a conduct analysis only becomes necessary

if the federal statute is silent on extraterritorial jurisdiction.

In Alfadda, the Second Circuit wrote:

[T]he Securities and Exchange Act is silent as to its

extraterritorial jurisdiction. . . . Thus, in addressing

transnational frauds, courts must ascertain “whether

Congress would have wished the precious resources of the

United States courts” to be devoted to such transactions.

Psimenos v. E.F. Hutton & Co., 722 F.2d 1041, 1045 (2nd

Cir.1983) (quoting Bersch v. Drexel Firestone, Inc., 519

F.2d 974, 985 (2nd Cir.), cert. denied, 423 U.S. 1018, 96

S.Ct. 453, 46 L.Ed.2d 389 (1975).

The above argument indicates the need for this Court to

address the engrafting of tests and exceptions to a statute that

expressly provides for extraterritorial jurisdiction.

DOES A FOREIGN BANK HAVE TO SUFFER

DAMAGES FOR THE ANY SCHEME OR ATTEMPT

TO DEFRAUD LANGUAGE IN 18° USS.C.

§ 1956(c)(7)(B\(iii) TO TRIGGER EXTRATERRI-

TORIAL JURISDICTION.

This issue also presents an important question of federal law

that has not been, but should be, settled by this Court, even

though the United States court of appeals avoided the issue.

The United States district court held that a foreign financial

transaction had to involve a listed activity in section

1956(c)(7)(B) of the money laundering statute to be a “specified

unlawful activity.” The district court then went on to hold that

the foreign bank fraud activity in section 1956(c)(7)(B)(iii)

required Aeromexico to allege injury to the foreign bank.

Indeed, the district court suggested that only a foreign bank had

standing to assert a claim under section 1956(c)(7)(B)(iil). (CR

4550). The statute’s plain language refutes the district court’s

reading.

The money laundering statute does not even speak to a

foreign bank suffering losses. The statute simply states “fraud,

or any scheme or attempt to defraud by or against a foreign

bank.” The attempt, alone, to defraud a foreign bank constitutes

a “specified unlawful activity.” 28 U.S.C.A. § 1956(c)\(7)(B\iii)

(West 2000).

Likewise, section 1956(c)(7)(B) of the money laundering

statute does not limit standing to the foreign bank. Nothing in

that section of the money laundering statute precludes a

corporation from asserting money laundering against a corporate

officer that fraudulently executes a corporate pledge for a

personal loan from a foreign bank. And the fact that the foreign

bank retains control over the improperly pledged corporate

assets does not militate against the attempt to defraud the

foreign bank. Nor does the fact that the corporation suffers a

loss from the fraud, instead of the foreign bank that had the

foresight to retain the corporation’s assets to offset the

fraudulently procured loan.

Again, the United States court of appeals’ judgment serves as

a road map. A road map for officers and directors of inter-

national corporations and entities to launder embezzled monies

in the United States. Following the Fifth Circuit's directions, an

officer need only collude with a foreign bank to effectively

obtain immunity from prosecution in the United States for

money laundering. Congress did not intend that message or

countenance such a road map in the money laundering statute.

Technology has made the global economy a neighborhood

store. The United States courts have to recognize, as Congress

has, that extraterritorial jurisdiction reflects today’s global

economy when it comes to money laundering. And the United

States courts of appeal and district courts have to further

recognize that Congress can calibrate extraterritorial

jurisdiction, in a way, the courts cannot. Equal Employment

Opportunity Commission y. Arabian American Oil Co.. 499

U.S. 244, 245 (1991).

WILL PROMOTION OF AN UNLAWFUL ACTIV-

ITY AFTER THE INITIAL PHASE OF “REINVEST-

MENT” MONEY LAUNDERING OR AN ACT IN

FURTHERANCE OF “CONCEALMENT” MONEY

LAUNDERING WARRANT THE EXERCISE OF

SUBJECT MATTER JURISDICTION UNDER 18

U.S.C. § 1956.

The Fifth Circuit's decision to restrict the analysis of money

laundering jurisdiction to the situs of the initial phase of money

laundering conflicts with decisions in the Third Circuit (United

States v. Conley, 37 F.3d 970 (3rd Cir. 1994)); Fourth Circuit

(United States v. Butler, 211 F.3d 826 (4th 2000); Seventh

Circuit (United States v. Febus, 218 F.3d 784 (2000)); and

Ninth Circuit (United States v. Sayakhom, 186 F.3d 928 (9th

Cir. 1999), cert. denied, 120 S.C. 1216 (2000)).

The conflict among the circuits speaks to both forms of

money laundering in issue—“reinvestment™ money laundering

under 18 U.S.C. §1956(a)(2)(A) and “concealment” money

laundering under 28 U.S.C. §1956(a)(2)(B)(i). See United

States v. Hildebrand, \52 F.3d 756, 762 (8th Cir.), cert. denied,

525 U.S. 1033 (1998).

Section 1956 speaks of “reinvestment” money laundering as

promoting the carrying on of specified unlawful activity.

Namely, using the proceeds of the initial phase of unlawful

activity to promote the on-going scheme to defraud. “Con-

cealment”™ money laundering looks to acts that serve to perpet-

uate concealment of the initial unlawful activity. See United

States v. Conley, 37 F.3d 970, 979 (3rd Cir.1994). The Fifth

Circuit disregarded the concept of promotion or perpetuation,

and limited its analysis to the initial phase—predicate act—of

the money laundering. Finding that the predicate act for all five

transactions in issue began and ended with an unlawful act in

Mexico, i.e., the fraudulent transfer of monies from

Aeromexico’s Mexican bank to a Mexican exchange house for

Pn a ee ee

conversion from Mexican pesos to United States dollars, the

Fifth Circuit stopped its analysis at the Mexican border.

The Fifth Circuit refused to consider the following

subsequent acts in promotion and perpetuation of the fraud upon

Aeromexico and the foreign banks:

1. The mailing of fraudulent financial statements to the

Securities and Exchange Commission to conceal the fraudulent

° ° >

pledging of Aeromexico assets”;

2. The wire transfer of $5,000,000.00 from Prevoisin’s

numbered account in New York to an undisclosed account in the

Bahamas, where bank secrecy laws apply;

3. The faxing of a statement from Inverworld in San Antonio

to Aeromexico to perpetuate the concealment of a sham

investment of $37,500,000.00;

4. Prevoisin’s formation of a shell Cayman Island entity as

the investment vehicle that appears on false monthly account

Statements transmitted from Inverworld in San Antonio to

Aeromexico in perpetuation of a concealed sham investment of

$37,500,000.00;

5. The mailing of unauthorized renewal pledge agreements in

perpetuation of the Dynaworld and Inverworld fraudulent

transactions;

6. The wire transfer of $37,500,000.00 in the Inverworld

transaction from Mexico to New York, New York to the

Cayman Islands, the Cayman Islands to New York, New York to

California, and California to Mexico:

* See Schmuck v. United States, 489 U.S. 705, 710-15 (1989) (Mailings

further concealment by maintaining a legal facade, even if the mailings do no

generate additional monies.)

7. The wire transfer of Aeromexico monies through New

York to cover interest payments on the personal loans Prevoisin

procured from foreign banks with fraudulent pledges’; and

8. The use of the fed wire system to negotiate checks drawn

for Prevoisin’s personal benefit on a Texas bank account funded

with embezzled Aeromexico monies’.

The Fifth Circuit’s analysis also fails to recognize that money

laundering can occur in phases, and accordingly, determining

jurisdiction does not stop at the first phase but includes analysis

of subsequent phases. In United States v. Morelli, 169 F.3d 798

(3rd Cir.), cert. denied, 120 S.C. 63 (1999), the Third Circuit

looked at an embezzlement that involved a series of wire

transfers. Morelli and his cohorts took possession of the

embezzled monies at the beginning of the scheme: they would

then wire transfer the monies up and down a chain of entities,

one of which was a shell entity that would take the fall for the

failure to pay excise taxes. Morelli argued that the wire

transfers could not reflect proceeds, and thus money laundering,

until the excises taxes became due from the shell company.

In rejecting Morelli’s argument, the Third Circuit wrote,

[W]e reject this conclusion because we believe that the

money became the proceeds of fraud as soon as it entered

the hands of members of the scheme. Alternatively,

Morelli submits that the money was not the proceeds of

wire fraud because the money came into the possession of

the scheme as a result of fraud before any of the wirings

involving the money occurred. But he ignores the fact that

the scheme succeeded as a result of each and every wiring

within each and every series of transactions. Accordingly,

the money within each series of transactions was the

* See United States v. Cole, 988 F.2d 681, 684 (7th Cir. 1993) (defendant's

payment of interest to defrauded investors promoted the fraudulent

investment scheme).

* See United States v. Abuhouran, 162 F.3d 230 (3rd Cir.1998), cert.

Denied, 526 U.S. 1077 (1999),

proceeds of wire fraud because the fraud from which it

resulted was promoted by the wire transfers within the

preceding series of transactions.

: United States v. Morelli, 169 F.3d at 800.

The Third Circuit’s holding should apply to this case. Thus,

when determining jurisdiction, the Fifth Circuit should have

factored in the series of wire transfers through the United States

to promote the Inverworld, Dynaworld, and Citibank trans-

actions. The Fifth Circuit’s analysis should not have stopped in

Mexico when the proceeds of the fraud “entered the hands of

members of the scheme”; and, the Fifth Circuit should not have

ignored “the fact that the scheme succeeded as a result of each

and every wiring within each and every series of transaction.”

Id.

On “concealment” money laundering, the Fifth Circuit also

failed to recognize the concept of separate phases in an offense.

For example, in the Citibank transaction, the Fifth Circuit failed

to separate the initial eight $1,000,000.00 wire transfers into

Prevoisin’s numbered account in New York City from the

subsequent wire transfer of $5,000,000.00 dollars from

Prevoisin’s numbered account in New York to a bank account in

the Bahamas, where bank secrecy laws apply.

The Fourth Circuit in Butler recognized phases in

“concealment” money laundering. Butler committed bankruptcy

fraud by concealing bankruptcy estate assets. Butler deposited

the concealed assets in a friend’s bank account. Butler then

directed his friend to purchase cashier’s checks drawn on the

concealed assets for deposit into another account.

Butler contended he could only be charged with bankruptcy

fraud and not also with money laundering because the cashier’s

checks just made up the assets initially concealed from the

bankruptcy trustee. In rejecting Butler’s argument, the Fourth

Circuit noted that the initial deposit into the friend’s account

was a “completed phase of an ongoing offense,” and the

cashier’s checks constituted money laundering because Butler

was “engagling] i in a monetary transaction in criminally derived

property.” United States v. Butler, 211 F.3d at 830.

Had the Fifth Circuit recognized the distinction between

phases of an ongoing offense, it would have had to find

extraterritorial jurisdiction under the money laundering statute.

For when Prevoisin, shortly after resigning from Aeromexico

and leaving for Europe to establish a new residency, wire

transferred $5,000,000.00 from his personal numbered account

in New York City to an account in the Bahamas, jurisdiction

would have attached for that new phase of concealed money

laundering.

The Seventh Circuit’s holding in United States v.

Mankarious, 151 F.3d 694, 706 (7th Cir.), cert. denied, 525 U.S.

1056 (1998) also conflicts with the Fifth Circuit’s holding that

the predicate offense is the sole focus of money laundering

object matter jurisdiction.

In Mankarious, the Seventh Circuit wrote,

[Because as we already explained, money laundering does

not focus on the specifics of the predicate offense, it does

not matter when all the acts constituting the predicate

offense take place. It matters only that the predicate

offense has produced proceeds in transactions distinct from

those transactions allegedly constituting money laundering.

Id., at 706. The same reasoning should have obtained for the

Fifth Circuit. It should not matter where the predicate acts take

place, it should only matter where the alleged money laundering

took place, namely, the wire transfers, mailings, and

concealment of assets in the United States.

Had the Fifth Circuit employed the same reasoning as the

other four circuits, money laundering jurisdiction would have

In United States v. Savage, 67 F.3d 1435, 1442 (9th Cir.1995), cert.

denied, 516 U.S. 1136 (1996), the Ninth Circuit concluded that “criminally

derived property” under section 1957 of the money laundering statute is

equivalent to ‘proceeds’ under section 1956 of that statute.

attached to this case. Because civil money laundering actions

will become more prevalent with a global economy, this Court

needs to provide the United States courts of appeals and district

courts with clear guidance on how to determine such subject

matter jurisdiction.

CONCLUSION

Congress does not want the United States to become a haven

for money laundering. Indeed, Congress took the extraordinary

step of expressly providing for extraterritorial jurisdiction over

money laundering. This step should have cautioned against any

United States court from trying to engraft tests or conditions on

the money laundering statute’s plain language. For as this Court

has said, Congress is better equipped to calibrate the law.

Moreover, if this Court allows the money laundering statute

to become a hybrid among the circuits, it will invite money

laundering by circuit, according to hybrid. Thus, this Court

should grant certiorari to remove the graft placed upon the

money laundering statute by the Fifth Circuit and foreclose any

attempt to engraft other tests and conditions on express

extraterritorial jurisdiction.

Respectfully submitted,

JOHN HOLMAN BARR

M. FOREST NELSON

Counsel of Record

BURT BARR & ASSOCIATES, L.L.P.

304 S. RECORD STREET

DALLAS, TEXAS 75202

(214) 742-8001

APPENDICES

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APPENDIX A

{Filed Jun. 29, 2000]

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-41162

AEROVIAS DE MEXICO, S.A. DE C.V., D/B/A, AEROMEXICO,

Plaintiff-Appellant,

Vv.

GERARDO DE PREVOISIN AND GP INVESTMENT, INC.,

Defendants-Appellees.

Appeal from the United States District Court

for the Eastern District of Texas

(4:95-CV-48)

Before GARWOOD, DeMOSS and PARKER, Circuit

Judges. PER CURIAM:

Plaintiff-Appellant, Aerovias de Mexico, S.A. de C.V.

(“Aerovias”), appeals the district court’s dismissal of its suit

for lack of subject matter jurisdiction. We agree with the

district court’s analysis and affirm its decision.

Discussion

Aerovias brought suit against Gerardo de Prevoisin

“Prevoisin”) and GP Investment, Inc. (“GP”), claiming that

Prevoisin committed a series of wrongful acts while

* Pursuant to STH Cir. R. 47.5, the Court has determined that this

opinion should not be published and is not precedent except under the

limited circumstances set forth in STH Cir. R. 47.5.4.

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Chairman of the Board of Aerovias. Aerovias claimed that,

through a series of transactions, Prevoisin and GP committed

fraud, converted and wasted Aerovias’s corporate assets,

breached fiduciary duties and violated the Racketeer

Influenced and Corrupt Organizations Act (“RICO”). See 18

U.S.C. §§ 1951-68 (1994)., After successful removal by the

defendants and a series of procedural rulings, the district

court concluded that it did not have subject matter jurisdiction

and dismissed the case.

We agree with the district court that because ail predicate

acts for the transactions that form the basis of Aerovias’s

money laundering claim occurred outside of the United

States, it lacked subject matter jurisdiction under RICO. See

18 U.S.C. §1956(c)(7)(B) (West Supp. 2000) (listing

specified unlawful activities necessary to establish subject

matter jurisdiction under the money laundering statute).

In addition, we agree with the district court that it also

lacked subject matter jurisdiction based on the conduct or

effects test. While some of the proceeds of the alleged

fraudulent activity may have been used to procure property in

the United States, the conduct itself occurred in Mexico.

“Mere preparatory activities, and conduct far removed from

the consummation of the fraud, will not suffice to establish

jurisdiction.” North South Fin. Corp. v. Al-Turki, 100 F.3d

1046, 1051 (2d Cir. 1996) (quoting //T v. Vencap, Ltd., 519

F.2d 1001, 1017 (2d Cir. 1975)). We have adopted the

Second Circuit's articulation of the conduct test. See Robinson

v. TCHU/US West Communications, Inc., 117 F.3d 900, 906

(Sth Cir. 1997)

Conclusion

Because we agree with the district court’s analysis, we

affirm its dismissal of Aerovias’s suit based on lack of subject

matter jurisdiction.

AFFIRM

APPENDIX B

[Filed Aug. 10, 1999]

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF TEXAS

SHERMAN DIVISION

4:95cv48

AEROVIAS DE MEXICO, S.A., DEC.V.

d/b/a AEROMEXICO

Plaintiff,

Vv.

GERARDO DE PREVOISIN & GP INVESTMENT, INC.,

Defendant.

MEMORANDUM OPINION and ORDER

On this day came on for consideration Defendant Gerardo

De Prevoisin’s Second Motion to Dismiss and _ after

considering the motion, the response, and the reply, the Court

is of the opinion that the Motion to Dismiss should be

granted.

Introduction

Aerovias de Mexico, S.A. de C.V. (“Aerovias”) brings suit

against Gerardo De Prevoisin (“Prevoisin”) and G.P.

Investment, Inc. (“GP”) claiming that Prevoisin committed a

series of wrongful acts while acting as Chairman of the Board

for Aerovias. As claimed by Aerovias, the allegedly wrongful

acts relate to the following five main transactions: (1) The

pledge of Aerovias’s $15,250,000 in certificates of deposit

from Dynaworld Bank and Trust for a personal loan (the

“Dynaworld transaction’’); (2) The conversion of Aerovias’s

$37,500,000 investment’in Inveworld, Inc. and Inverworld

Securities (the “Inverworld transaction’’); (3) The payment of

Soha: aera aa

Aerovias’s funds to Am-Mex Services Corporation (“Am-

Mex”) and ABC Services, Inc. (“ABC’), two companies

controlled by Prevoisin; (4) Aerovias’s $8,000,000 payment,

at Prevoisin’s direction, to Prevoisin’s personal account at

Citibank in New York City (the “Citibank transaction”); and

(5) Prevoisin’s payment of $11,000,000 from Aerovias’s

funds for interest payments associated with the Dynaworld

and Inverworld transactions. These transactions form the

basis for Aerovias’s claims that Prevoisin and GP committed

fraud, converted and wasted Aerovias’s corporate assets,

breached fiduciary duties, and violated the Racketeer

Influenced and Corrupt Organizations Act (“RICO”).' In its

RICO claim, Aerovias contends Prevoisin and GP violated

RICO by engaging in a pattern of wire and mail fraud, by

fraudulently dealing in the purchase and sale of Aeromexico

securities within the meaning of 15 U.S.C. § 77q, and by

engaging in money laundering. Pls.’ First Am. Compl. at 24.

Aerovias originally filed its action in state court, and

Prevoisin and GP filed their notice of removal on diversity of

citizenship and federal question grounds. Prevoisin filed a

motion to dismiss and claimed that the Court lacked personal

jurisdiction. By Memorandum Opinion and Order dated

March 24, 1997, the Court determined it lacked subject

matter jurisdiction over the action; therefore, the Court

dismissed the case as to both Prevoisin and GP.

‘In its First Amended Complaint, Aerovias asserted the following

eight state law causes of action (the “state law claims”) against Prevoisin:

(1) Money had and received; (2) Fraud; (3) Conversion; (4) Breach of

fiduciary duty; (5) Waste of corporate assets; (6) Constructive trust; (7)

Injunction and receiver appointment; and (8) Blue Sky laws. The RICO

violation is the only federal claim asserted by Aerovias.

> At the time the Court entered the March 24, 1997 Memorandum

Opinion and Order, Aerovias’s RICO claim did not include allegations

that Prevoisin engaged in money laundering. See Pls.’ First Am. Orig.

Pet. at 12. On Novemnber, 14, 1997, Aerovias amended its ie Comngeaans to

include such allegations.

Additionally, the Court found that it did not have personal

jurisdiction over Prevoisin based on a determination that the

conduct at issue occurred solely in Mexico. Thereafter,

Aerovias filed a motion for reconsideration, which the Court

granted in order to allow the parties to conduct further

discovery on subject matter and personal jurisdiction. After

additional discovery, Prevoisin filed his Motion to Reinstate

the Court’s Order dated March 24, 1997, which the Court

denied by Order dated March 31, 1999. Because Aerovias

alleged a RICO claim predicated in part on racketeering

activity of money laundering, the Court determined it had

subject matter jurisdiction due to the grant of extraterritorial

jurisdiction in the money laundering statute. Additionally, the

Court concluded it had personal jurisdiction over Prevoisin

because the Amended Complaint alleged contacts in Texas.

Thereafter, Prevoisin filed his Second Motion to Dismiss

and requested that the Court clarify its findings of specific

personal jurisdiction and subject matter jurisdiction.

Specifically, Prevoisin would like the Court to determine that

it does not have personal jurisdiction over Prevoisin for

claims relating to the Inverworld or Dynaworid transactions.

Additionally, Prevoisin requests that the Court specify what

claims are within the Court’s subject matter jurisdiction.

Subject Matter Jurisdiction

A party seeking to invoke the jurisdiction of a federal court

must demonstrate that the case rests within the court’s

jurisdiction. Marathon Oil Co. v. Ruhrgas, 145 F.3d 211, 216

(Sth Cir. 1998) , rev'd on other grounds, 119 S. Ct. 1563

(1999). “A court may base its disposition of a motion to

dismiss for lack of subject matter jurisdiction on (1) the

complaint alone: (2) the complaint supplemented by

undisputed facts; or (3) the complaint supplemented by

undisputed facts plus the court’s resolution of disputed facts.”

Robinson vy. TCI/US West Communications Inc., 117 F.3d

900, 904 (Sth Cir. 1997). “When a defendant makes a “factual

attack’ on the court’s jurisdiction, the plaintiff must ‘prove

the existence of subject-matter jurisdiction by a

preponderance of the evidence.’ An attack is ‘factual’ rather

than ‘facial’ if the defendant ‘submits affidavits, testimony, or

other evidentiary materials.’” /rwin v. Veterans Admin., 874

F.2d 1092. 1096 (Sth Cir. 1989) (citations omitted)

Discussion

Because the Court concludes that it lacks subject matter

jurisdiction, the Court need not address the issue of personal

jurisdiction.

I. Subject Matter Jurisdiction

Since Aerovias asserts a RICO claim and the state law

claims, the Court will address subject matter jurisdiction as it

relates to each group of claims.

A. RICO Claim

|. Plaintiff's Allegations in the Amended Complaint

In its RICO claim, Aerovias alleges that “Latin Credit

Corporation, Am-Mex, ABC, and LG. Services, Ltd. are

enterprises within the meaning of 18 U.S.C. § 1961(4)....” ’

PI's First Am. Compl. At § 78. Additionally, Aerovias

claims, “The fraudulent misrepresentations and procurement

of money by such false pretenses, representations, or

promises by Prevoisin and GP described represented a

scheme and artifice to defraud [Aerovias] ... . “Id. at § 79.

Further, Aerovias contends the scheme was facilitated by the

3 While Prevoisin has not claimed that Aerovias’s RICO claim should

be dismissed for failure to state a claim and the Court has made no

determinations of such, the Court does note that a plaintiff asserting a

RICO claim “must plead specific facts, not mere conclusory allegations,

which establish the enterprise.” Montesano v. Seafirst C ommercial Corp.,

818 F.2d 423, 427 (Sth Cir. 1987). Aerovias’s First Amended Complaint

.appears to be lacking in this respect.

————————————eeEEEEE————EE

——-

use of the United States mail and wire systems and

constituted mail and wire fraud. Finally, Aerovias alleges that

Prevoisin and GP engaged in securities fraud and money

laundering to further the RICO violation.

2. Defendant’s Motion

Prevoisin argues that Aerovias’s RICO claim must be

dismissed because the Court lacks subject matter jurisdiction.

- He begins by, pointing out that the Court’s determination that

it had subject matter jurisdiction over the RICO claim in its

March 31, 1999 Memorandum Opinion and Order was based

on the grant of extraterritorial jurisdiction in the money

laundering statute. Prevoisin’s arguments stem from the

following provision of the money laundering statute:

[W]ith respect to a financial transaction occurring in_

whole or in part in the United States, [the specified

unlawful activity which creates dirty money that is later

laundered is defined as] an offense against a foreign

nation involving—(i) the manufacture, importation, sale,

or distribution of a controlled substance . . . ; (ii) murder,

kidnapping, robbery, extortion, or destruction of

property by means of explosive or fire; (iii) fraud, or any

scheme or attempt to defraud, by or against a foreign

bank...

18 U.S.C. § 1956(c) (7) (B). From this statute, Prevoisin

argues that the Court only has jurisdiction if the underlying

specified unlawful activity (“SUA”) that created the dirty

_money resulted from crimes involving drug trafficking or

other violent offenses. Since the SUA in this case is based on

embezzlement, Prevoisin argues that the money laundering

statute is not triggered and, therefore, jurisdiction is lacking.

In the alternative, Prevoisin asserts that the Court’s

jurisdiction is limited to Aerovias’s RICO claim based on

payments to Am-Mex and the Citibank transaction.

3. Plaintiff's Response

Aerovias responds by claiming that the underlying SUA’s

of which it complains do come within the express language of

“fraud, or any scheme or attempt to defraud, by or against a

foreign bank” provided in Title 18, United States Code

Section 1956(c) (7) (B). Aerovias claims Prevoisin made

false statements to external auditors who prepared financial

statements for Aerovias, which were then supplied to

Aerovias’s banks in Mexico. Aerovias states that Prevoisin’s

misrepresentations influenced the banks’ decisions not to take

steps to prevent Prevoisin from continuing in his position of

control at Aerovias. Additionally, Aerovias claims that the

acts of mail and wire fraud alleged in its Amended Complaint

constitute the SUA’s, as defined in Section 1956(c) (7) (A),

underlying its money laundering claim.

4. Court’s Analysis

4. Jurisdiction Based on Money Laundering

In this case, the parties concede that the alleged money

laundering occurred in part in the United States.” This being

the case, according to the statute, the Court has subject matter

jurisdiction if the underlying SUA was a drug related offense,

murder, kidnapping, robbery, extortion, destruction of

property by fire, or fraud against a foreign bank. See 18

U.S.C. §1956(c) (7) (B). Contrary to Aerovias’s assertion that

mail and wire fraud can form the STJA’s in this case, the

Court concludes that since the financial transaction occurred

in part in the United States, the SUA is limited to those

offenses listed in Section 1956(c) (7) (B).

The Court finds that the extraterritorial jurisdiction

provision of the money laundering statute fails to provide the

Court with subject matter jurisdiction over Aerovias’s RICO

4 P1.’s Resp. To Def.’s Mot. to Reinstate Order and J. at 4.

claim.” After reviewing Aerovias’s Amended Complaint, the

Court is of the opinion that the acts of malfeasance for ali five

transactions alleged by Aerovias occurred in Mexico. While

Aerovias has alleged wire transfers in the United States for

purchases in the United States, this does not avoid the

statutory requirement that the SUA must be an offense listed

in Section 1956(c) (7) (B). Aerovias’s allegations of fraud,

conversion, mail fraud, and wire fraud do not fall within any

of the listed offenses of Section 1956(c) (7) (B). Since

Aerovias is unable to point to a SUA on which to base its

money laundering claim, the extraterritorial jurisdiction of the

money laundering statute provides no jurisdictional basis for

the Court.° While Aerovias attempts to bring itself within

Section 1956(c) (7) (B) by claiming that the acts constitute

fraud against a foreign bank, the Court finds no merit to such

contention. Up to this point, Aerovias has claimed Prevoisin’s

conduct caused injury to Aerovias. Although Aerovias

alleged that funds were negotiated through or transferred to

: Although the Court determined that it did have subject matter

jurisdiction in its Memorandum Opinion and Order dated March 31, 1999,

the Court came to such determination without the benefit of Prevoisin’s

current argument that the underlying SUA must fall within one of the

listed offenses in Section 1956 (c) (7) (B). In its prior Order, the Court

was not limiting the SUA to the offenses listed in that section, therefore,

the Court is of the view that its earlier determination was incorrect.

* In his Second Motion to Dismiss, Prevoisin claims that Aerovias has

admitted that the funds transferred to Am-Mex, ABC, and the Citibank

account were not embezzled but were mere advances which Prevoisin was

contractually bound to repay. Def.’s Second Mot. to Dismiss at 1.

Assuming as to these three transactions that the parties had not consented

that the financial transactions occurred in part in the United States and that

these funds were advances, the Court finds that Aerovias would still be

unable to satisfy the elements for a money laundering claim. This results

because Aerovias would have to argue that a wire transfer from one of

these accounts to purchase property is both the SUA and the money

laundering. This violates the nature of a money laundering claim, which

follows in time the underlying claim that creates the dirty money.

10a

banks, there have been no allegations of any knowing

execution or attempt to execute a scheme or artifice to

defraud a financial institution.’ See Pl.’s First Am. Compl.

b. Jurisdiction based on Conduct or Effects Tests

Since the Court has concluded that it does not have

jurisdiction based on the money laundering statute, the only

RICO act alleged by Aerovias that expressly provides for

extraterritorial jurisdiction, the Court is again faced with the

task of considering the limits of RICO’s extraterritorial

jurisdiction based on the “conduct” test and the “effects”

test.’ Under either test, the “critical consideration” is whether

the plaintiff, defendant, and the transaction are foreign or

domestic. Fidenas AG v. Compagnie Internationale, 606 F.2d

5, 8 (2d Cir. 1979).

i. The Conduct Test

(A) Legal Standard

The conduct test has been succinctly described by the

Second Circuit’:

[W]e entertain suits by aliens only where conduct

material to the completion of the fraud occurred in the

United States. Mere preparatory activities, and conduct

far removed from the consummation of the fraud, will

not suffice to establish jurisdiction. Only where conduct

“within the United States directly caused” the loss will a

district court have jurisdiction over suits by foreigners

7 Even if Aerovias could assert such a claim, which the Court does not

believe Aerovias would have standing to do, the Court will not permit

Aerovias to expand its claims at this late date.

8 The Court first undertook this task in its Memorandum Opinion and

Order dated March 24, 1997.

° The Fifth Circuit adopted the Second Circuit's evaluation of the

conduct test in Robinson v. TCIUUS West Communications, Inc., 117 F.3d

900, 906 (5th Cir. 1997).

. lla

who have lost money through sales abroad. Psimenos v.

E.F. Hutton & Co., Inc., 722 F.2d 1041, 1046 (2d Cir.

i983) (quoting Bersch, 519 F.2d at 993) . This test

focuses on how the conduct within the United States

relates to the alleged fraudulent scheme, “on the theory

that Congress did not want ‘to allow the United States to

be used as a base for manufacturing fraudulent security

devices for export, even when these are peddled only to

foreigners.”” Jd. at 1045 (quoting JIT v. Vencap, Ltd.,

519 F.2d 1001, 1017 (2d Cir. 1975)).

North South Fin. Corp. v. Al-Turki, 100 F.3d 1046, 1051 (2d

Cir. 1996); General Motors Corp. v. de Arriortua., 948 F.

Supp. 670, 681 (E.D. Mich. 1996). Courts recognize that

“conduct that is ‘merely preparatory’ to a fraud is not a basis

for jurisdiction of the fraud to be vested in a court of the

United States.’ Butte Mining PLC v. Smith, 76 F.3d 287, 291

(9th Cir. 1996). In fact, courts have refused:

to extend the jurisdictional scope of RICO to make

criminal the use of the mail and wire in the United States

as part of an alleged fraud outside the United States. We

do not suppose that Congress in enacting RICO had the

purpose of punishing frauds by aliens abroad even if

peripheral preparations were undertaken by them here.

Butte Mining, 76 F.3d at 291; North South Fin. Corp., 100

F.3d at 1053 (quoting Butte Mining language with approval).

(B) Court’s Analysis

The Court concludes that Prevoisin’s conduct occurred

almost entirely in Mexico. Distilled to their essence,

Aerovias’s complaints against Prevoisin are complaints of

various acts of malfeasance and fraud by Prevoisin acting in

his capacity as CEO of Aerovias. Specifically, Prevoisin is

accused of abusing his position to secure personal loans with

corporate assets and concealing this fraud by making

fraudulent entries on the books of Aerovias. Prevoisin is also

12a

accused of having checks drawn on Aerovias in favor of

brokerage houses in Mexico City and Am-Mex and ABC,

entities directly controlled by Prevoisin. See Pl’s. First Am.

Compl. at 4. The proceeds of this money were then used to

procure property in Colorado and Texas and to make interest

payments on Prevoisin’s personal loans relating to the

Dynaworld and Inverworld transactions. /d. at 4-5. Addi-

tionally, Aerovias alleges that the funds involved in the

Inverworid transaction, “in part, flowed through [the] fed

wire system.” /d. at 3.

Accordingly, the wrongful conduct in this case occurred

almost entirely in Mexico. While property may have been

bought in the United States with the proceeds of the fraud, the

fraudulent conduct itself occurred in Mexico at the time

Prevoisin allegedly directed the payment of Aerovias’s funds

for his benefit. At this point, the fraudulent conduct and the

injury to Aerovias was complete. The post-embezzlement

conduct of Prevoisin in the United States was not material to

the completion of the fraud and thus cannot serve as a basis

for subject matter jurisdiction.” Thus, the RICO statute is not

applicable to this case pursuant to the “conduct” test.

” Additionally, as to the Inverworld transaction, the bulk of Aerovias’s

claims relate to conduct by third parties. Specifically, Aerovias alleges

that “Inverworld, 151, and Zollino made all investment decisions for [the

Inverworld transaction].” /d. at 6. Further, Aerovias claims that

“Inverworld, ISI, and Zollino sustained the sham purchase and defalcation

of funds by sending monthly statements of account from San Antonio,

Texas” and that Aerovias “continued to rely upon the statements and the

representations of 151, Inverworid, Zollino, and Enrique Narciso

regarding their investment of $37.5 million on behalf of [Aerovias].” /d.

at 7-8.

13a

ii. The “Efects” Test

(A) Legal Standard

The “effects” test is designed to:

implement [] the intent of Congress that the securities

laws be given extraterritorial application “in order to

protect domestic investors who have purchased foreign

securities on American exchanges and to protect the

domestic securities market from the effects of improper

foreign transactions in American securities.” Schoen-

baum v. Firstbrook, 405 F.2d 200, 206 (2d Cir. 1968)

(Lumbard, C. J.), reh’g on other grounds, 405 F.2d 215

(in banc), cert. denied, 395 U.S. 906, 89 S.Ct. 1747, 23

L.Ed.2d .219 (1969). In this way, the United States’

prohibition of securities fraud “may be given extra-

territorial reach whenever a predominantly foreign

transaction has substantial'' effects within the United

States.” Consolidated Gold Fields PLC v. Minorco, S.A.,

871 F.2d 252, 261-62 (2d Cir. 1989). Transactions with

only remote and indirect effects in the United States do

not qualify as substantial. /d. at 262.

North South Fin. Corp. v. Al-Turki, 100 F.3d 1046, 1051 (2d

Cir. 1996); United States v. ALCOA, 148 F.2d 416, 443 (2d

Cir. 1945) (“[I]t is settled law . . . that any state may impose

liabilities, even upon persons not within its allegiance, for

conduct outside its borders that has consequences within its

''The Fifth Circuit has expressed reservations about requiring

“substantial” effect instead of requiring only “some” effect. American

Rice, Inc. v. Arkansas Rice Growers, 701 F.2d 408, 414 n.8 (Sth Cir.

1983) . Instead, the Court should apply multiple factors in determining

whether extraterritorial jurisdiction is proper. /d. at 414 n.9. However,

included within the factors is a determination of “the relative significance

of the effects on the United States . . . .” Jd. The Second Circuit has

expressly rejected the Fifth Circuit’s view. Totalplan Corp. of Am. vy.

Colborne, 14 F.3d 824, 830 (2d Cir. 1994). This Court is bound to follow

Fiftb Circuit authority on this point.

l4a

borders which the state reprehends . . . .); Les Batlets

Trockadero De Monte Carlo, Inc. v. Trevino, 945 F. Supp.

563, 566-67 (S.D.N.Y. 1996)

(B) Court’s Analysis

The Court concludes that the RICO statute is not applicable

to this case pursuant to the effects test. There are minimal, if

any, effects of Prevoisin’s alleged fraud which are felt in the

United States. The sellers of the properties in Colorado and

Texas as well as the banks in the United States have suffered

no damages as a result of Prevoisin’s alleged fraud. The

damages fall entirely upon Aerovias, a Mexican citizen.

In summary, the Court concludes that neither the money

laundering statute, the only statute alleged that expressly

provides for extraterritorial jurisdiction, nor the conducts or

effects tests support subject matter jurisdiction over

Aerovias’s RICO claim. Without such jurisdiction, the Court

does not possess the Constitutional authority to entertain this

controversy; therefore, Prevoisin’s Second Motion to Dismiss

for lack of jurisdiction should be granted as to Aerovias’s

RICO claim.

B. State Law Claims

1. Defendant’s Motion

Prevoisin urges the distinction between a money

laundering offense and the underlying crime that produces

proceeds which are later laundered. Prevoisin argues that this

distinction is critical because the money laundering statute is

aimed at the laundering of dirty money and does not penalize

the underlying unlawful activity that causes the money to be

dirty in the first place. In this case, Prevoisin contends that

the extraterritorial jurisdiction of the money laundering

statute does not extend to the state law claims, which are the

underlying activities that created the dirty money that was

later laundered.

15a

2. Court’s Analysis

The Court begins by noting that Aerovias fails to respond

to Prevoisin’s arguments regarding the state law claims. Since

the Court has concluded that it lacks subject matter

jurisdiction over Aerovias’s federal claim, the Court must

now determine whether it should maintain supplemental

jurisdiction over Aerovias’s state law claims. When

determining whether a court should exercise jurisdiction over

pendent state law claims, “a federal court should consider and

weigh in each case . . . the values of judicial economy,

convenience, fairness, and comity in order to decide whether

to exercise jurisdiction over a case brought in that court

involving pendent state-law claims.” Carnegie-Mellon

University v. Cohill, 108 S.Ct. 614 (1988). Additionally, the

general rule provides that when the federal claims are

dismissed before trial; the pendent state claims should be

dismissed without prejudice. Wong v. Stripling, Etc., 881 F.2d

200, 204 (Sth Cir. 1989). Here, the factors of judicial

economy, convenience, fairness, and comity suggest that this

Court should decline jurisdiction over the remaining state law

claims; therefore, these claims should be dismissed without

prejudice. -

Conclusion

Defendant Prevoisin’s Second Motion to Dismiss should

be granted since the Court lacks subject matter jurisdiction

over Aerovias’s federal claim. Therefore, this case should

also be dismissed as to GP Investments, Inc. However, since

Aerovias has filed a Motion for Sanctions against Prevoisin,

the Court shall retain jurisdiction over this action and will

hold a hearing to determine whether any sanctions should be

imposed.

16a

IT IT SO ORDERED.

Signed this 17 day of August, 1999.

/s/ Paul Brown

UNITED STATES DISTRICT COURT

17a

APPENDIX C

[Filed Aug. 9, 2000]

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 99-41162

AEROVIAS DE MEXico, SA DECV,

doing business as Aeromexico

Plaintiff - Appellant

GERARDO DE PREVIOSIN; GP INVESTMENT INC.,

\ Defendants-Appellees

Appeal from the United States District Court

for the Eastern District of Texas, Sherman

ON PETITION FOR REHEARING

Before GARWOOD, DeMOSS and PARKER, Circuit

Judges.

PER CURIAM:

IT IS ORDERED that the petition for rehearing is denied.

ENTERED FOR THE COURT:

/s/ [Illegible]

United States Circuit Judge

18a

APPENDIX D

STATUTES

§ 1956. Laundering of monetary instruments

(a)(1) 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— -

(Ai) with the intent to promote the carrying on of

specified unlawful activity; or

(ii) with intent to engage in conduct constituting a

violation of section 7201 or 7206 of the Internal

Revenue Code of 1986 or

(B) knowing that the transaction is designed in whole

or in part—

(i) to conceal or disguise the nature, the location,

the source, the ownership, or the control of the

proceeds of specified unlawful activity; or

(ii) to avoid a transaction reporting requirement

under State or Federal law,

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.

(2) Whoever transports, transmits, or transfers, or

attempts to transport, transmit, or transfer a monetary

instrument or funds from a place in the United States to or

through a place outside the United States or to a place in the

United States from or through a place outside the United

States—

(A) with the intent to promote the carrying on of

specified unlawful activity; or

19a

(B) knowing that the monetary instrument or funds

involved in the transportation, transmission, or transfer

represent the proceeds of some form of unlawful activity

and knowing that such transportation, transmission, or

transfer is designed in whole or in part—

(i) to conceal or disguise the nature, the location,

the source, the ownership, or the control of the,

proceeds of specified unlawful activity; or

(ii) to avoid a transaction reporting requirement

under State or Federal law,

shall be sentenced to a fine of not more than $500,000 or

twice the value of the monetary instrument or funds involved

in the transportation, transmission, or transfer whichever is

greater, Or imprisonment for not more than twenty years, or

both. For the purpose of the offense described in

subparagraph (B), the defendant's knowledge may be

established by proof that a law enforcement officer represent-

ed the matter specified in subparagraph (B) as true, and the

defendant's subsequent statements or actions indicate that the

defendant believed such representations to be true.

(3) Whoever, with the intent—

(A) to promote the carrying on of specified unlawful

activity;

(B) to conceal or disguise the nature, location, source,

ownership, or control of property believed to be the

proceeds of specified unlawful activity; or

under State or Federal law,

conducts or attempts to conduct a financial transaction

involving property represented to be the proceeds of specified

unlawful activity, or property used to conduct or facilitate

specified unlawful activity, shall be fined under this title or

imprisoned for not more than 20 years, or both. For purposes

20a

of this paragraph and paragraph (2), the term “represented”

means any representation made by a law, enforcement officer

or by another person at the direction of, or with the approval

of, a Federal official authorized to investigate or prosecute

violations of this section.

(b) Whoever conducts or attempts to conduct a

transaction described in subsection (a)(I) or (a)(3), or a

transportation, transmission, oF transfer described in

subsection (a)(2), is liable to the United States for a civil

penalty of not more than the greater ot—

(1) the value of the property, funds, or monetary

instruments involved in the transaction; or

(2) $10,000.

(1) the term “knowing that the property involved in a

financial transaction represents the proceeds of some

form of unlawful activity” means that the person knew

the property involved in the transaction represented

proceeds from some form, though not necessarily which

form, of activity that constitutes a felony under State,

Federal, or foreign law, regardless of whether or not

such activity is specified in paragraph (7);

(2) the term “conducts” includes _ initiating,

concluding; or participating in initiating, or concluding a

transaction;

(3) the term “transaction” includes a purchase, sale,

loan, pledge, gift, transfer, delivery, or other disposition,

and with respect to a financial institution includes a

deposit, withdrawal, transfer between accounts,

exchange of currency, loan, extension of credit, purchase

or sale of any stock, bond, certificate of deposit, or other

monetary instrument, use of a safe deposit box, or any

other payment, transfer, or delivery by, through, or to a

financial institution, by whatever means effected;

Fe re a ernena ore

2la

(4) the term “financial transaction” means (A) a

transaction which in any way or degree affects interstate

or foreign commerce (i) involving the movement of

funds by wire or other means or (ii) involving one or

more monetary instruments, or (iii) involving the

transfer of title to any real property, vehicle, vessel, or

aircraft, or (B) a transaction involving the use of a

financial institution which is engaged in, or the activities

of which affect, interstate or foreign commerce in any

way or degree;

(5) the term “monetary instruments” means (i) coin or

currency of the United States or of any other country,

travelers’ checks, personal checks, bank checks, and

money orders, or (ii) investment securities or negotiable

instruments, in bearer form or otherwise in such form

that title thereto passes upon delivery;

(6) the term “financial institution” has the definition

given that term in section 5312(a)(2) of title 31, United

States Code, or the regulations promulgated thereunder;

(7) the term “specified unlawful activity” means—

(A) any act or activity constituting an offense

listed in section 1961(1) of this title except an act

which is indictable under subchapter II of chapter

53 of title 31;

(B) with respect to a financial transaction

occurring in whole or in part in the United States,

an offense against a foreign nation involving—

(i) the manufacture, importation, sale, or

distribution of a controlled substance (as such

term is defined for the purposes of the

Controlled Substances Act);

(ii) murder, kidnapping, robbery, extortion,

or destruction of property by means of

explosive or fire;

22a

(iii) fraud, or any scheme or attempt to

defraud, by or against a foreign bank (as

defined in paragraph 7 of section 1(b) of the

International Banking Act of 1978 2.

criminal enterprise, as that term is defined in

section 408 of the Controlled Substances Act (21

U.S.C. 848);

(D) an offense under section 32 (relating to the

destruction of aircraft), section 37 (relating to

violence at international airports), section 115

(relating to influencing, impeding, or retaliating

against a Federal official by threatening or injuring

a family member), section 152 (relating to conceal-

ment of assets; false oaths and claims; bribery),

section 215 (relating to commissions or gifts for

procuring loans), section 351 (relating to

congressional or Cabinet officer assassination), any

of sections 500 through 503 (relating to certain

counterfeiting offenses), section 5 13 (relating to

securities of States and private entities), section 542

(relating to entry of goods by means of false

statements), section 545 (relating to smuggling

goods into the United States), section 549 (relating

to removing goods from Customs custody), section

641 (relating to public money, property, or records),

section 656 (relating to theft, embezzlement, or

misapplication by ban officer or employee), section

657 (relating to lending, credit,-and insurance

institutions), section 658 (relating to property

mortgaged or pledged to farm credit agencies),

section 666 (relating to theft or bribery concerning

programs receiving Federal funds), section 793,

? So in original. Closing parenthesis was struck out.

23a

794, or 798 (relating to espionage), section 83 1

(relating to prohibited transactions involving

nuclear materials), section 844(f) or (i) (relating to

destruction by explosives or fire of Government

property or property affecting interstate or foreign

commerce), section 875 (relating to interstate’

communications), section 956 (relating to

conspiracy to kill, kidnap, maim, or injure certain

property in a foreign country), section 1005

(relating to fraudulent bank entries), 1006 (relating

to fraudulent Federal credit institution entries),

1007 (relating to fraudulent Federal Deposit

Insurance transactions), 1014 (relating to fraudulent

loan or credit applications), 1032 (relating to

concealment of assets from conservator, receiver, or

liquidating agent of financial institution), section

1111 (relating to murder), section 1114 (relating to

murder of United States law enforcement officials),

section 1116 (relating to murder of foreign officials,

official guests, or _ internationally protected

persons), section 1201 (relating to kidnapping),

section 1203 (relating to hostage taking), section

1361 (relating to willful injury of Government

property), section 1363 (relating to destruction of

property within the special maritime and territorial

jurisdiction), section 1708 (theft from the mail),

section 1751 (relating to Presidential assassination),

section 2113 or 2114 (relating to bank and postal

robbery and theft), section 2280 (relating to

violence against maritime navigation), section 2281

(relating to violence against maritime fixed

platforms), section 2319 (relating to copy-night

infringement), section 2320 (relating to trafficking

in counterfeit goods and services),’ section 2332

3 . i

* So in original.

24a

(relating to terrorist acts abroad against United

States nationals), section 2332a (relating to use of

weapons of mass destruction), section 2332b

(relating to international terrorist acts transcending

national boundaries), or section 2339A (relating to

providing material support to terrorists) of this title,

section 46502 of title 49, United States Code,’ a

felony violation of the Chemical Diversion and

Trafficking Act of 1988 (relating to precursor and

essential chemicals), section 590 of the Tariff Act

of 1930 (19 U.S.C. 1590) (relating to aviation

smuggling), section 422 of the Controlled

Substances Act (relating to transportation of drug

paraphernalia), section 38(c) (relating to criminal

violations) of the Arms Export Control Act, section

11 (relating to violations) of the Export Admin-

istration Act of 1979, section 206 (relating to penal-

ties) of the International Emergency Economic

Powers Act section 16 (relating to offenses and

punishment) of the Trading with the Enemy Act,

any felony violation of section 15 of the Food

Stamp Act of 1977 (relating to food stamp fraud)

involving a quantity of coupons having a value of

not less than $5,000, or any felony violation of the

Foreign Corrupt Practices Act; or

(E) a felony violation of the Federal Water

Pollution Control Act (33 U.S.C. 1251 et seq.), the

Ocean Dumping Act (33 U.S.C. 1401 et seq.), the

Act to Prevent Pollution from Ships (33 U.S.C.

1901 et seq.), the Safe Drinking Water Act (42

U.S.C. 300f et seq.), or the Resources Conservation

and Recovery Act (42 U.S.C. 6901 et seq.).

(F) Any act or activity constituting an offense

involving a Federal health care offense.

3 . oa

* So in original.

OF ITI, Or Fe:

25a

(8) the term “State” includes a State of the United

States, the District of Columbia, and any

commonwealth, territory, or possession of the United

States.

(d) Nothing in this section shall supersede any provision of

Federal, State, or other law imposing criminal penalties or

affording civil remedies in addition to those provided for in

this section.

(€) Violations of this section may be investigated by such

components of the Department of Justice as the Attorney

General may direct, and by such components of the

Department of the Treasury as the Secretary of the Treasury

may direct, as appropriate and, with respect to offenses over

which the United States Postal Service has jurisdiction, by the

Postal Service: Such authority of the Secretary of the

Treasury and the Postal Service shall be exercised in

accordance with an agreement which shall be entered into by

the Secretary of the Treasury, the Postal Service, and the

Attorney General. Violations of this section involving

offenses described in paragraph (c)(7)(E) may be investigated

by such components of the Department of Justice as the

Attorney General may direct, and the National Enforcement

Investigations Center of the Environmental Protection

Agency.

(f) There is extraterritorial jurisdiction over the conduct

prohibited by this section if—

(1) the conduct is by a United States citizen or, in the

case of a non-United States citizen, the conduct occurs in

part in the United States; and

(2) the transaction or series of related transactions

involves funds or monetary instruments of a value

exceeding $10,000.

(g) Notice of conviction of financial institutions.—If

any financial institution or any officer, director, or employee

26a

of any financial institution has been found guilty of an

offense under this section, section 1957 or 1960 of this title,

or section 5322 or 5324 of title 31, the Attorney General shall

provide written notice of such fact to the appropriate

regulatory agency for the financial institution.

(h) Any* person who conspires to commit any offense

defined in this section or section 1957 shall be subject to the

same penalties as those prescribed for the offense the

commission of which was the object of the conspiracy.

§ 1957. Engaging in monetary transactions property

derived from specified unlawful activity

(a) Whoever, in any of the circumstances set forth in

subsection (d), knowingly engages or attempts to engage in a

monetary transaction in criminally derived property of a value

greater than $10,000 and is derived from specified unlawful

activity, shall be punished as provided in subsection (b).

(b)(i) Except as provided in paragraph (2), the punishment

for an offense under this section is a fine under title 18,

United States Code, or imprisonment for not more than ten

years or both.

(2) The court may impose an alternate fine to that

imposable Under paragraph (1) of not more than twice the

amount of the Criminally derived property involved in the

transaction.

Government is not required to prove the defendant knew that

the offense from which the criminally derived property was

derived was specified unlawful activity.

(d) The circumstances referred to in subsection (a) are—

(1) that the offense under this section takes place in

the United States or in the special maritime and

territorial jurisdiction of the United States; or

* So in original. Probably should not be capitalized.

27a

(2) that the offense under this section takes place

outside the United States and such special jurisdiction,

but the defendant is a United States person (as defined in

section 3077 of this title, but excluding the class

described in paragraph (2)(D) of such section).

(€) Violations of this section may be investigated by such

components of the Department of Justice as the Attorney

General may direct, and by such components of the

Department of the Treasury as the Secretary of the Treasury

may direct, as appropriate and, with respect to offenses over

which the United States Postal Service has jurisdiction, by the

Postal Service. Such authority of the Secretary of the

Treasury and the Postal Service shall be exercised in accor-

dance with an agreement which shall be entered into by the

Secretary of the Treasury, the Postal Service, and the

Attorney General.

(f) As used in this section—

(1) the term “monetary transaction’ means the

deposit, withdrawal, transfer, or exchange, in or

affecting interstate or foreign commerce, of funds or a

monetary instrument (as defined in section 1956(c)(5) of

this title) by, through, or to a financial institution (as

defined in section 1956 of this title), including any

transaction that would be a financial transaction under

section 1956(c)(4)(B) of this title, but such term does not

include any transaction necessary to preserve a person’s

right to representation as guaranteed by The sixth

amendment to the Constitution;

(2) the term “criminally derived property” means any

property constituting, or derived from, proceeds obtained

from a criminal offense; and

(3) the term “specified unlawful activity” has the

meaning given that term in section 1956 of this title.

§ 1961. Definitions

Assused in this chapter—

(1) “racketeering activity” means (A) any act or threat

involving murder, kidnapping, gambling, arson, robbery,

bribery, extortion, dealing in obscene matter, or dealing

in a controlled substance or listed chemical (as defined

in section 102 of the Controlled Substances Act), which

is chargeable under State law and punishable by

imprisonment for more than one year, (B) any act which

is indictable under any of the following provisions of

title 18, United States Code: Section 201 (relating to

bribery), section 224 (relating to sports bribery), sections

471. 472, and 473 (relating to counterfeiting), section

659 (relating. to theft from interstate shipment) if the act

indictable under section 659 is felonious, section 664

(relating to embezzlement from pension and welfare

funds), sections 891-894 (relating to extortionate credit

transactions), section 1028 (relating to fraud and related

activity in connection with identification documents),

section 1029 (relating to fraud and related activity in

connection with access devices), section 1084 (relating

to the transmission of gambling information), section

1341 (relating to mail fraud), section 1343 (relating to

wire fraud), section 1344 (relating to financial institution

fraud), section 1425 (relating to the procurement of

citizenship or nationalization unlawfully), section 1426

(relating to the reproduction of naturalization or

citizenship papers), section 1427 (relating to the sale of

naturalization or citizenship papers), sections 1461-1465

(relating to obscene matter), section 1503 (relating to

obstruction of justice), section 1510 (relating to

obstruction of criminal investigations), section 1511

(relating to the obstruction of State or local law

enforcement) section 1512 (relating to tampering with a

witness, victim, or an informant), section 1513 (relating

29a

to retaliating against a witness, victim, or an informant),

section 1542 (relating to false statement in application

and use of passport), section 1543 (relating to forgery or

false use of passport), section 1544 (relating to misuse of

passport), section 1546 (relating to fraud and misuse of

visas, permits, and other documents), sections

1581-1588 (relating to peonage and slavery), section

1951 (relating to interference with commerce, robbery,

or extortion), section 1952 (relating to racketeering),

section 1953 (relating to interstate transportation of

wagering paraphernalia), section 1954 (relating to

unlawful welfare fund payments), section 1955 (relating

to the prohibition of illegal gambling businesses), sec-

tion 1956 (relating to the laundering of monetary

instruments), section 1957 (relating to engaging in

monetary transactions in property derived from specified

unlawful activity), section 1958 (relating to use of

interstate commerce facilities in the commission of

murder-for-hire), sections 2251, 2251A, 2252, and 2260

(relating to sexual exploitation of children), sections 23

12 and 2313 (relating to interstate transportation of

stolen motor vehicles), sections.2314 and 2315 (relating

to interstate transportation of stolen property); section

2318 (relating to trafficking in courterfeit labels for

phonorecords computer programs or computer program

documentation or packaging and copies of motion

pictures or other audiovisual works), section 2319

(relating to criminal infringement of a copyright),

section 2319A (relating to unauthorized fixation of and

trafficking in sound recordings and music videos of live

musical performances), section 2320 (relating to

trafficking in goods or services bearing counterfeit

marks), section 2321 (relating to trafficking in certain

motor vehicles or motor vehicle parts), sections 2341-

2346 (relating to trafficking in contraband cigarettes),

sections 2421-24 (relating to white slave traffic), (C) any

30a

act which is indictable under title 29, United States

Code, section 186 (dealing with restrictions on payments

and loans to labor organizations) or section 501(c)

(relating to embezzlement from union funds), (D) any

offense involving fraud connected with a case under title

11 (except a case under section 157 of this title), fraud in

the sale of securities, or the felonious manufacture,

importation, receiving, concealment, buying, selling, or

otherwise dealing in a controlled substance or listed

chemical (as defined in section 102 of the controlled

Substances Act), punishable under any law of the united

States, (E) any act which is indictable under the

Currency and Foreign Transactions Reporting Act, or (F)

any act which is indictable under the Immigration and

Nationality Act, section 274 (relating to bringing in and

harboring certain aliens), section 277 (relating to aiding

or assisting certain aliens to enter the united States), or

section 278 (relating to importation of alien for immoral

purpose) if the act indictable under such section of such

Act was committed for the purpose of financial gain;

(2) “State” means any State of the United States, the

District of Columbia, the Commonwealth of Puerto Rico,

any territory or possession of the United States, any

political subdivision, or any department, agency, or

instrumentality thereof;

(3) “person” includes any individual or entity capable of

holding a legal or beneficial interest in property;

(4) “enterprise” includes any individual, partnership,

corporation, association, or other legal entity, and any

union or group of individuals associated in fact although

not a legal entity;

(5) “pattern of racketeering activity” requires at least

two acts of racketeering activity, one of which occurred

after the effective date of this chapter and the last of which

3la

occurred within ten years (excluding any period of

imprisonment) after the commission of a prior act of

racketeering activity;

(6) “unlawful debt” means a debt (A) incurred or

contracted in gambling activity which was in violation of

the law of the United States a State or political subdivision

thereof or which is unenforceable under State or Federal

law in whole or in part as to principal or interest because of

the laws relating to usury, and (B) which was incurred in

connection with the business of gambling in violation of

the law of the United States, a State or political subdivision

thereof, or the business of lending money or a thing of

value at a rate usurious under State or Federal law, where

the usurious rate is at least twice the enforceable rate;

(7) “racketeering investigator” means any attorney or

investigator so designated by the Attorney General and

charged with the duty of enforcing or carrying into effect

this chapter;

(8) “racketeering investigation” means. any inquiry

conducted by any racketeering investigator for the purpose

of ascertaining whether any person has been involved in

any violation of this chapter or of any final order,

judgment, or decree of any court of the United States, duly

entered in any case or proceeding arising under this

chapter;

(9) “documentary material” includes any book, paper.

document, record, recording, or other material; and

(10) “Attorney General” includes the Attorney General

of the United States, the Deputy Attorney General of the

United States the Associate Attorney General of the United

States, any Assistant Attorney General of the United States,

or any employee of the Department of Justice or any

employee of any department or agency of the United States

so designated by the Attorney General to carry out the

32a

powers conferred on the Attorney General by this chapter.

Any department or agency so designated may Use in

investigations authorized by this chapter either the

investigative provisions of this chapter or the investigative

power of such department or agency otherwise conferred

by law.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.