Skip to content

U.S. v. Santos, Pt. III: 1956(a)(1) "Proceeds" a Term of Art, But Does 2339C(e)(3) Define "Proceeds" as "Receipts"?

January 6, 2009

Here we are: We have reached the summit of U.S. v. Santos, 553 U.S. ___(2008), wherein Justice Scalia elevates 1956(a)(1) “proceeds” to a term of art. We’ve reviewed the facts of Santos against the backdrop of precedent, and why the line in the sand that has been drawn is worthy of note–it affects the severity of sentences imposed pursuant to the USSG points program. Now lets turn our attention to Justice Scalia’s actual opinion.

The charging statute, 18 U.S.C. section 1956(a)(1)(A)(i) uses the term “proceeds” in two of the offense’s elements, i.e., that: (1) The “proceeds” were, in fact, somehow garnered from the criminal activity (the actual “proceeds” element); and (2) the knowledge element (D knew the “proceeds” were from the specified unlawful activity). Because of the manner in which the term “proceeds” is used, as seen from the illustration in the previous post, it could be interpreted to mean either gross receipts or profits (as an undefined term).

Justice Scalia notes that Congress defined “proceeds” in two other criminal provisions of the Code, to wit: 18 U.S.C. sections 2339C(e)(3) and 981(a)(2).

18 U.S.C. section 2339C(e)(3) relates to financing terrorism. It defines “proceeds” as:

  • Any funds derived from or obtained, directly or indirectly, through the commission of an offense set forth in subsection (a)[.]

Justice Scalia noted in parens that the foregoing definition indicated a classification of receipts and, on its face, that appears to be the case. “Funds,” however, is also a defined term (the kitchen sink variety) that can be summarized as follows: Any kind of assets whatsoever that can be tied to the defendant. Assets, by definition, cannot be liabilities, thus it appears that section 2339C(e)(3) is more akin to profits because “proceeds” appears to be defined to basically limit “funds” to every particulate of receipts that does not go towards liabilities. In other words, Congress defined “funds” as receipts and proceeds as “profits.”

Justice Scalia cites the 2000 Supp. definitions for these parallel provisions–maybe the definitions were different in 2000–but I don’t see anything in the available legislative history to indicate such a change, nor is any kind of change that would affect the analysis noted in the opinion. It appears the way the statute is written that section 2339C(e)(3) supports a profits definition. I would be very interested in hearing what people have to offer on this question, especially.

Justice Scalia also cites section 981(a)(2)(A), which is the forfeiture statute relevant to, inter alia, 1956 actions. That section specifically defines “proceeds” as receipts in cases involving illegal goods, illegal services, unlawful activities, and telemarketing and health care fraud. In contrast, subsection (a)(2)(B) defines “proceeds” for lawful goods or services sold or provided in an illegal manner as receipts, but allows a strict deduction for the direct costs incurred in providing the goods or services (overhead is specifically excluded). Justice Scalia indicates (a)(2)(B) is a profits definition, which, even with the overhead exclusion, is logical because once deductions are taken from receipts, you’re left with gross profits.

Consequently, because the Congress knew how to define “proceeds,” and did, but did so inconsistently (depending on your interpretation of section 2339C(e)(3)), there is not a basis for making an in pari materia, argument, i.e., that the statutes should be construed with reference to one another. Hence, Justice Scalia swiftly dismisses any notion of a contextual argument, noting that the statutes can be interpreted with “proceeds” meaning either receipts or profits without rendering any relevant provisions of the statutory scheme nugatory or absurd.

Thus, Justice Scalia’s opinion considers, but cannot resolve the matter by: (1) Application of the plain meaning doctrine (discussed in the first Santos post); or (2) the in pari materia doctrine, neither of which lead to a construction of the statute that would render any relevant provisions nugatory or absurd. Consequently, that leaves the Rule of Lenity, which brings us back to the first post, wherein that rule of construction was briefly explained. I will examine it further in relation to Justice Scalia’s opinion and the precedent he cites in Part (B) to this post, which will (hopefully) be posted later today.

Meanwhile, I better take a break to study for the bar.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: