TABLE OF CONTENTS

TABLE OF AUTHORITIES    iii

ARGUMENT           1

I.              DEFENDANTS WILFULLY LAUNDERED $20,000 IN ILLEGAL PROCEEDS TO CONCEAL THE SOURCE, OWNERSHIP AND NATURE OF THE FUNDS      3

II.            THE DISTRICT COURT ABUSED ITS DISCRETION IN CONCLUDING THAT DEFENDANTS DID NOT COMMIT “HEARTLAND” MONEY LAUNDERING             9

A.            Defendants Misstate the Standard of Review            10

B.             The Money Laundering Guideline Covers Not Just “Professional” Money Launderers              12

1.             Nature of Proceeds Laundered  12

2.             Amount of Proceeds Laundered                14

3.             Rejected Amendment to Guideline            15

C.             Neither the DOJ Text nor the Statistical Profile Supports Departure in the Present Case         17

D.            The Independent Counsel’s Role as Prosecutor is Not a Basis for Departure             20

E.             The District Court Erred in Departing on the Basis of the Source of the Proceeds Laundered and the Purpose of the Laundering     22

III.           THE DISTRICT COURT ABUSED ITS DISCRETION IN APPLYING THE FRAUD GUIDELINES TO DEFENDANTS’ MONEY LAUNDERING CONDUCT            23

IV.           REVERSAL AND REMAND OF THE SENTENCE IS REQUIRED BECAUSE THE DISTRICT COURT RELIED ON IMPROPER FACTORS IN DEPARTING DOWNWARD        26

V.             THE DISTRICT COURT MISAPPLIED THE GUIDELINES BY FAILING TO CONSIDER WHETHER FERROUILLET ABUSED A POSITION OF PUBLIC TRUST AND WHETHER HE USED A SPECIAL SKILL IN CONNECTION WITH HIS NON-MONEY LAUNDERING CRIMES      29

CONCLUSION         30

TABLE OF AUTHORITIES

CASES

Koon v. United States, 116 S.Ct. 2035 (1996)          7, 11, 12, 15, 28

United States v. Adams, 74 F.3d 1093 (11th Cir. 1996)           7, 8

United States v. Bart, 973 F. Supp. 691 (W.D. Tex. 1997)       9

United States v. Brennick, 134 F.3d 10 (1st Cir. 1998)             11, 12

United States v. Carpenter, 95 F.3d 773 (9th Cir. 1996)          19, 20

United States v. Davidson, 984 F.2d 651 (5th Cir. 1993)         27

United States v. Dethlefs, 123 F.3d 39 (1st Cir. 1997)              12, 22

United States v. Dobbs, 63 F.3d 391 (5th Cir. 1995)                22, 23

United States v. Green, 964 F.2d 365 (5th Cir. 1992)              19, 20, 26

United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990)           6, 7, 19, 20, 24, 26

United States v. LeBlanc, 24 F.3d 340 (1st Cir. 1994)              7, 8

United States v. Leonard, 61 F.3d 1181 (5th Cir. 1995)           9

United States v. McDowell, 109 F.3d 214 (5th Cir. 1997)        12

United States v. Morris, 131 F.3d 1136 (5th Cir. 1997)            29

United States v. Morris, 18 F.3d 562 (8th Cir. 1994)                7, 8

United States v. Pierro, 32 F.3d 611 (1st Cir. 1994) 7, 8

United States v. Ripinsky, 109 F.3d 1436 (9th Cir. 1997)         7, 8

United States v. Searcy, 132 F.3d 1421 (11th Cir. 1998)         12

United States v. Skinner, 946 F.2d 176 (2d Cir. 1991)              9

United States v. Snyder, --- F.3d ---, 1998 WL 49094 (1st Cir. Feb.13, 1998)         12, 20

United States v. Stout, 32 F.3d 901 (5th Cir. 1994)  27

United States v. Tello, 9 F.3d 1119 (5th Cir. 1996)  27

United States v. Willey, 57 F.3d 1374 (5th Cir. 1995)               8, 9, 13

United States v. Winters, 105 F.3d 200 (5th Cir. 1997)             3, 8, 10-12, 15, 21

Williams v. United States, 503 U.S. 193 (1992)        27, 28

STATUTES

18 U.S.C. § 1956      23

2 U.S.C. § 441b        19

28 U.S.C. § 594        21

LAWS

Federal Election Campaign Act                1

MISCELLANEOUS

1st Cir. Rule 36.2(b)6               9

2nd Cir. Rule 0.23    9

Craig Donsanto, Federal Prosecution of Election Offenses, (6th ed. 1995)               18,
                23

H.R. Rep. No. 104-272 (1995), reprinted in 1995 U.S.C.C.A.N. 335       14, 16, 17

U.S.S.G. § 2S1.1       14, 15

United States Attorney’s Manual § 9-105.000         21

ARGUMENT

                Defendants repeatedly and continually urge they violated the Federal Election Campaign Act.  That may well have been the motive for their actions, but it is their conduct, not their motive for that conduct, that determines their sentences.  Although both defendants may have intended to funnel stolen money to a defeated political candidate, Henry Espy, who just happened to be the brother of the Secretary of Agriculture with some very sensitive issues regarding defendant Hemmingson’s company before him, defendants’ conduct was to ensure that their illegal contribution would go undetected.  To accomplish that goal, the defendants fraudulently obtained $20,000 through the phony retainer letter and an accounting adjustment in the corporation’s books and records.  They then laundered the check through an Algiers grocery store to disguise and conceal the true source, ownership and nature of those funds.  Appropriately, a grand jury indicted and a petit jury convicted both defendants of money laundering, the offense for which they should be sentenced.

                Defendants’ primary assertion to justify the district court’s erroneous downward departure is that their conduct only technically fell within the language of the money laundering statutes.  But this representation proceeds from a fragmented, selective, and distorted view of the facts developed at trial.  The entirety of defendants’ conduct demonstrates that they engaged in financial transactions typical of those seeking to conceal ill-gotten proceeds, which falls foursquare within the heartland of money laundering.

                Hemmingson also contends that the district court cited factors permissibly removing this case from the “heartland” of the money laundering guideline.  He asserts as well that the degree of departure, to bring conduct punishable by 41 to 51 months imprisonment down to 12 months in a half-way house/work release program, was reasonable.  These claims are unavailing because the district court cited as a basis for departure only impermissible factors and factors already taken into account by the money laundering guideline without finding them exceptional.

                Ferrouillet contends that a recent Sentencing Commission report supports defendants’ sentences, and that the district court properly concluded that he did not abuse a position of trust or use a special skill warranting a two point enhancement under U.S.S.G. § 3B1.3.  These arguments also fail because the Sentencing Commission issued the report four months after the district court’s departure opinion and the district court misapplied U.S.S.G. § 3B1.3 by not considering whether Ferrouillet abused a position of public trust or whether he used a special skill in committing his non-money laundering crimes.

I.              DEFENDANTS WILFULLY LAUNDERED $20,000 IN ILLEGAL PROCEEDS TO CONCEAL THE SOURCE, OWNERSHIP AND NATURE OF THE FUNDS

                Defendants’ principal argument is that the district court properly departed because their criminal activity amounted only to a FECA violation, i.e., the making of an illegal corporate contribution to a political candidate.  (Ferr. brief 12-14; Hemm. brief 30-89).^[1]  If this argument fails, this Court must conclude that the district court abused its discretion in departing to the fraud guideline.  See United States v. Winters, 105 F.3d 200, 206-208 (5th Cir. 1997) (holding district court abused its discretion in departing from guidelines based on factor unsupported by the record).  The evidence presented at trial refutes defendants’ argument and the district court’s erroneous downward departure.

                The Government, in its Opening Brief, described for this Court the evidence of illegal conduct — interstate transportation of a $20,000 security misappropriated by fraud and money laundering — that distinguished this case from a typical FECA prosecution.  (See Brief for the United States of America “U.S. Brief” at pp. 17-23).  During the summer of 1994, Henry Espy, the brother of Secretary of Agriculture Michael Espy, had less than $500 to cover the remaining $50,000 due on a seriously delinquent bank loan resulting from his unsuccessful race to succeed his brother in Congress the previous year.  (20R.A.11-12; Ex.108Ka).  In May 1993, Ferrouillet signed his law firm as guarantor on these obligations because he wanted to ingratiate himself with Henry Espy.  (25R.A.28-29, 37-38; Ex.46I).  In February and March 1993, Hemmingson, the president of the second largest crop insurance company in the United States with critical legislation in the hands of Secretary Espy, choreographed an illegal conduit scheme to contribute corporate funds to Henry Espy’s campaign.  (23R.A.10-12, 58-59, 95-96, 114-18, 24R.A.144-145, 172-75, 181-83; Exs. 15, 16, 26, 29, 59A-59C, 59J, 59K, 60E, 60F, 61A and 61B).  Between Henry Espy’s defeat and Mike Espy’s introduction of the legislation, Hemmingson met on at least two occasions with, and sent three letters concerning matters of importance to himself and his company, to, Secretary Espy.  (27R.A.85, 22R.A.29-33, 28R.A.89; Exs. 43, 44, 45, 70, 91B).

                Less than three months after Hemmingson and Ferrouillet met at a debt retirement event for Henry Espy, they agreed to perpetrate and carry out a scheme to funnel corporate funds to Henry Espy’s campaign accounts to settle a portion of the pressing debt.  Hemmingson and Ferrouillet manufactured a phoney legal retainer whereby Hemmingson’s now publicly-held crop insurance company agreed to pay Ferrouillett $20,000 in exchange for purported legal services.  (Ex. 89C; 13R.E.232).  In accordance with the sham contract, a subsidiary of the Hemmingson-controlled company, also under Hemmingson’s direction and control, issued a $20,000 check payable to “Alvarez T. Ferrouillet, Attorney at Law.”  (Ex. 3; 14R.E.238).  The defendants caused the fraudulently obtained check to be sent from the Hemmingson-controlled subsidiary in Montana to Ferrouillet in Louisiana.

                To further conceal their illegal conduct, Ferrouillet and Hemmingson then laundered the check through a third party, Evergreen Supermarket, causing that third party to exchange the check through the store’s Belle Chasse, Louisiana bank account.  (21R.A.25-28; Exs. 4, 5).  Ferrouillet structured the generated cash into a Metairie campaign account that Ferrouillet opened for the purpose of collecting funds.^[2]  (21R.A.42-52; Exs. 7, 7A, 9, 9A-1, 9A-2, 108I, 108Ia).  Ferrouillet then wired those funds to the lending bank in Mississippi to cover a portion of an “NSF” campaign check that Ferrouillet issued to the Mississippi bank knowing full well that there were insufficient funds in the account.  (25R.A.86-87; Ex. 108K).  When federal investigators questioned Ferrouillet about the source of the funds, Ferrouillet lied, claiming they were contributions from various individuals, and provided a document falsely identifying forty-six individuals and the purported contribution from each.  (20R.A.26-27, 26R.A.228-229; Ex. 1).

                Defendants essentially contend that they laundered money only in the course of perfecting and concealing an illegal campaign contribution, and that the district court therefore properly declined to punish them for the money laundering.  In United States v. Hopkins, 916 F.2d 207 (5th Cir. 1990), this Court rejected a similar approach to criminal culpability.  (See U.S. brief at 93-94).  This Court explicitly held that a defendant who makes an illegal campaign contribution is liable, not only for violating FECA, but also for all other criminal statutes he violates in the course of perfecting the underlying FECA crime.  Hopkins, 916 F.2d at 218-219.  Although the Hopkins defendants contested only the authority of the Government to charge them with Title 18 violations and did not expressly address sentencing, the heart of the issue in Hopkins was whether a defendant’s culpability is limited to his ultimate objective or, instead, encompasses all illegal activity he commits to effectuate that crime.  This Court correctly recognized that the commission of additional distinct offenses opens a defendant to further criminal liability.  Id.  To hold otherwise now, and conclude that a defendant’s sentence should be determined not by the criminal acts he commits but rather by his ultimate objective, would eviscerate, if not overrule, the Hopkins decision.

                The Government cited numerous cases in its principal brief in support of the Hopkins analysis in sentencing determinations.  (See U.S. brief at 91-93).^[3]  In an unavailing attempt to distance himself from these persuasive authorities, Hemmingson asserts that the majority of these cases were overruled by Koon’s “dramatic[] alter[ation of] the state of sentencing law.”  (Hemm. brief at 55-56 citing Koon v. United States, 116 S.Ct. 2035 (1996)).  Hemmingson’s claim is simply wrong, because Koon did nothing to impair the position advanced by Adams, LeBlanc, Morris, or Pierro — that defendants should be sentenced based on their conduct, not their motive or ultimate criminal objective.  The four opinions cited by the Government, therefore, remain instructive after Koon.^[4]  See Winters, 105 F.3d at 206-09 (relying on pre-Koon decisions to determine whether facts present in instant case provide a sufficient basis for departure).

                Further, this Court’s heartland analysis in United States v. Willey, 57 F.3d 1374 (5th Cir. 1995), wholeheartedly supports the reasoning of the Adams, LeBlanc, Morris, Pierro and Ripinsky decisions.  In Willey, the defendant perpetrated a bankruptcy fraud scheme, during the course of which he aided and abetted money laundering in order to conceal his criminal actions.  Id. at 1383-88. Following his conviction, the defendant argued that his conduct did not fall within the heartland of the money laundering guideline because “the money laundering transactions were only a relatively small fraction of the criminal conduct of which he was convicted.”  Id. at 1392.  Dismissing this contention, this Court held that “[t]his is not what the ‘heartland’ requirement contemplates . . . rather, it focuses on the type of conduct for which the defendant is convicted, not the amount of the conduct relative to other criminal acts.”  Id.  Thus, this Circuit recognizes both in charging (Hopkins) and in sentencing (Willey), that a defendant’s conduct determines his culpability.  A defendant’s culpability is not mitigated because he commits one crime only to perfect and conceal another.^[5]  Accordingly, Hemmingson’s and Ferrouillet’s laundering of the stolen $20,000 check necessitates sentencing under the money laundering guideline.

II.            THE DISTRICT COURT ABUSED ITS DISCRETION IN CONCLUDING THAT DEFENDANTS DID NOT COMMIT “HEARTLAND” MONEY LAUNDERING

                Contrary to Hemmingson’s representation (Hemm. brief at 45-46, 63-64), the Government has never advanced the argument that “it is categorically impermissible for district courts ever to depart” from the guidelines in a money laundering case.^[6]  The Government’s position, and the question properly before this Court, is whether the conduct of these defendants fell within the heartland of the money laundering guideline making departure in this case erroneous.  While certain cases may fall outside the heartland, this is certainly not such a case.

                In analyzing whether the defendants’ conduct was “atypical,” the Court must not be misguided as to the conduct for which Hemmingson was convicted.  Hemmingson’s money laundering liability was not predicated, as Hemmingson offhandedly suggests, on the simple fact that “the check was deposited in a bank account,” or “simply because, to get cash, the $20,000 check had to be negotiated.” (Hemm. brief at 59).  Rather, in furtherance of their concealment efforts, Hemmingson and Ferrouillet laundered the fraudulently obtained check through a third party, causing that third party to exchange the check through the grocery store bank account.  They did this to conceal the nature and source of the funds as well as their intent that the proceeds be used illegally to pay down Henry Espy’s campaign debt.^[7]  (See 9R.A.2194; U.S. Brief at 20-21, 46).  To further conceal their activity, Ferrouillet structured the generated cash into a campaign account so as to avoid the filing of a currency transaction report.  (9R.A.2197-2198).

                A.            Defendants Misstate the Standard of Review

                Hemmingson places considerable weight on the length of the district court’s opinion and on the standard of review. (Hemm. brief at 35-36, 58-59).  The length of a court’s opinion is irrelevant to whether the district court articulated facts, supported by the record, sufficient to remove a case from the heartland.  See Winters, 105 F.3d at 208-209 (“Although it is true that the district court gave the sentencing decision regarding [the defendant’s] lengthy consideration, the departure cannot stand because . . . the court’s reasons for departure are not permitted by the Sentencing Guidelines.”); see also United States v. Brennick, 134 F.3d 10, 12, 16 (1st Cir. 1998) (vacating and remanding sentence despite lengthy opinion by district court setting forth its reasons for departure because factors weighing against departure received inadequate attention).

                Although Hemmingson insists that Koon requires this Court to employ a unitary abuse of discretion standard, this and other circuits have held otherwise.  Koon provided that “a district court’s decision to depart from the guidelines on the basis of a permissible factor is reviewed for an abuse of discretion.”  (U.S. brief at 73 citing Koon, 116 S.Ct. at 2046-47 (1996)) (emphasis added).  However, as this Court clarified and held in Winters, “[w]hether a factor is a permissible basis for departure under any circumstances is a question of law, and the court of appeals need not defer to the district court’s resolution of the point.”  Id., 105 F.3d at 206.  Hemmingson contends that this statement refers only to those factors explicitly prohibited by the guidelines as bases for departure.  (See Hemm. brief at 45-46).  Koon does discourage appellate courts from establishing impermissible bases for departure not explicitly prohibited by the Guidelines.  But circuit courts have recognized that, “[notwithstanding that most categorical interpretations are disfavored under the Koon Court's regime, some boundaries are essential if the guidelines are not to be emptied of all meaning.” United States v. Dethlefs, 123 F.3d 39, 47 (1st Cir. 1997) (concluding that departure based upon a defendant’s plea of guilty is impermissible as a matter of law); see also United States v. Snyder, --- F.3d ---, 1998 WL 49094, 3 (1st Cir. Feb. 13, 1998) (holding that the disparity between potential sentence under state versus federal law is an improper basis for departure as a matter of law); United States v. Searcy, 132 F.3d 1421 (11th Cir. 1998) (same); cf. United States v. McDowell, 109 F.3d 214, 219 (5th Cir. 1997) (holding that district court’s dissatisfaction with available sentencing range is impermissible basis for departure although not expressly prohibited as such by U.S.S.G. Ch. 1 Pt. A, intro. comment 4(b)).  Moreover, “even if review [of sentencing departures] is hedged by deference [under Koon], it has to mean something.” Brennick, 134 F.3d at 16; cf. Winters, 105 F.3d at 208 (reversing downward departure where district court failed “to cite the compelling facts necessary to satisfy the very high standard for [a] departure from the Guidelines.”).

                B.            The Money Laundering Guideline Covers Not Just “Professional” Money Launderers

                                1.             Nature of Proceeds Laundered

                Hemmingson contends that the district court properly concluded that the “typical” case addressed by the money laundering guideline is one involving the laundering of proceeds relating to organized crime or drug trafficking.  (Hemm. brief at 63-66).  Remarkably, throughout his brief, Hemmingson repeatedly cites Willey, 57 F.3d 1374, this Court’s opinion undermining his present argument and the district court’s conclusion concerning this issue.   In Willey, despite the obvious absence of any connection to organized crime or drug trafficking, this Court rejected the contention that a defendant’s laundering of the proceeds of bankruptcy fraud fell outside the heartland of the money laundering guideline.  Id. at 1391-92.  The district court in the present case abused its discretion in holding to the contrary.  Similarly, the district court erred by ignoring the explicit recognition by the Sentencing Commission that the money laundering guideline already takes into account the presence of drug related proceeds.  See U.S.S.G. § 2S1.1 (commentary) (“Narcotics trafficking is included as a factor because of the clearly expressed Congressional intent to adequately punish persons involved in that activity.”).^[8]

                Congress drafted the money laundering statute broadly to criminalize a broad array of financial crimes.  (U.S. Brief at 74-75). The money laundering guideline applies to the “typical” set of cases brought under the money laundering statute; therefore, it is illogical to conclude that that guideline covers only defendants who are “professional” money launderers.  As several members of Congress recognized, “the [United States Sentencing] Commission . . . issued a report . . . [noting] that the typical money laundering defendant is not a specialized money launderer for some criminal enterprise such as a drug cartel or the mafia, but rather someone who conducted a financial transaction in connection with his own underlying offense — he spent, deposited or withdrew the stolen money.”  H.R. Rep. No. 104-272, at 21 (1995), reprinted in 1995 U.S.C.C.A.N. 335, 354.

                                2.             Amount of Proceeds Laundered

                The amount of money laundered does not remove this case from the heartland of the money laundering guideline because the guideline clearly and incontrovertibly already takes this factor into account.  See U.S.S.G. § 2S1.1(b)(2)(A) (If the value of the funds is “$100,000 or less,” there is “no increase” in the offense level); U.S.S.G. § 2S1.1 (commentary) (“The amount of money involved is included as a factor because it is an indicator of the magnitude of the criminal enterprise, and the extent to which the defendant aided the enterprise.”).   When the guideline takes a factor into account, departure on that basis is prohibited unless the sentencing court finds the factor present to an exceptional degree.  Koon, 116 S.Ct. at 2045.  As the district court did not find the amount laundered “exceptional,” Hemmingson’s efforts to support this basis for departure (Hemm. brief at 67-68) are futile.^[9]  See Koon, 116 S.Ct. at 2053 (holding that district court abused its discretion in departing on basis of defendant’s likelihood of recidivism, a factor the Commission already took into account); Winters, 105 F.3d at 208-209 (holding departure improperly based upon defendant’s health because “physical condition” is discouraged factor and district court failed to find on the record that defendant’s physical ailments were exceptional).

                                3.             Rejected Amendment to Guideline

                Hemmingson expends great effort to justify the lower court’s dependence upon a rejected amendment to the money laundering guideline proposed by the Sentencing Commission Working Group.  (Hemm. brief at 80-86).  But Hemmingson’s lengthy discussion fails to address the Government’s principal argument — Congress’s rejection of a proposed amendment that would make sentences under the money laundering guideline more closely correlate with the underlying crime emphasizes its intent that district courts determine sentences for money launderers based on their money laundering conduct, not the underlying criminal activity.

                Hemmingson’s assertion that Congress rejected the amendment because it was “sweeping in nature” does not advance his position.  The amendment may have represented a proposed drastic change in sentencing money laundering defendants.  “Current sentencing guidelines treat various acts of concealing the proceeds of illegal activity the same, regardless of the penalties for the underlying criminal activity attempting to be concealed.  The Commission’s amendment would reduce the sentences for acts of money laundering for certain categories of ‘less serious’ criminal activities.”  H.R. Rep. No. 104-272, at 11 (1995), reprinted in 1995 U.S.C.C.A.N. 335, 345.  More importantly, Congress noted that the principle intent of the proposed amendment was to prevent “receipt and deposit” cases^[10] from being sentenced under the current money laundering guideline.  Id., 1995 U.S.C.C.A.N. at 348.  Ultimately, Congress refused to tie money laundering defendants’ sentences to their underlying crime on the basis of a few “anomalous” cases, concluding instead that “stiff sentences, which treat the act of money laundering itself as a serious offense, should be preserved.”  Id. at 338, 349.  The district court ignored this Congressional mandate and abused its discretion.

                                4.             Post-departure Sentencing Commission Report

                Ferrouillet attempts to provide post hoc support for the district court’s departure by citing a September 18, 1997 Sentencing Commission Report to Congress.  (Ferr. brief at 14).  The lower court did not rely on this report, prepared four months after the district court granted defendants’ downward departure, as a basis for departure.  Furthermore, although Ferrouillet implies that the report cited defendants’ departure with approval, in reality the Commission cited the lower court’s opinion as an example of the disparate sentencing resulting from district court “heartland” determinations in money laundering prosecutions.  (See Ferr. Brief Appendix at 7-8).  The report, therefore, was not intended to and did not support the lower court’s departure.

                C.            Neither the DOJ Text nor the Statistical Profile Supports Departure in the Present Case

                Defendants cannot justify the district court’s departure on the basis of the DOJ handbook, Federal Prosecution of Election Offenses (Hemm. brief at 69-72), or on the basis of the predicate acts statistical profile (id. at 73-74).  The Government’s citation to the handbook as support for a proposed FECA jury instruction is irrelevant to the departure issue.  The Government sought a FECA instruction only so that the jury would understand the defendants’ motivation for their concealment efforts, i.e., their ultimate objective of providing corporate funds to a political candidate was illegal.  (8R.A.1959).  The defendants’ conduct here far exceeded that of an illegal campaign contribution.  They laundered misappropriated funds in order to conceal their illegal contribution.  By  relying on this text as grounds for departure, the district court determined the defendants’ sentence on the basis of the conduct of a typical FECA offender, rather than the defendants’ conduct.

                Typically, FECA violators do not engage in money laundering to perfect illegal contributions.  But where defendants do employ such concealment efforts, the DOJ handbook supports the Government’s position that they should be prosecuted and sentenced appropriately.^[11]  (U.S. Brief at 86-87 citing Craig Donsanto, Federal Prosecution of Election Offenses, (6th ed. 1995) at 135).  Hopkins, 916 F.2d 207, United States v. Green, 964 F.2d 365 (5th Cir. 1992) and United States v. Carpenter, 95 F.3d 773 (9th Cir. 1996), discussed at length in the Government’s principal brief, (U.S. brief at 87-91) support this position.  In both Green and Carpenter, the defendants were convicted of, and appropriately sentenced for, money laundering committed during the course of perfecting illegal campaign contributions.

                The Government, in its principal brief, also explained the fallacy in the district court’s reliance on the predicate acts statistical profile.  FECA is not a specified unlawful activity under the money laundering statute; therefore, it could not appear as a predicate to a money laundering case in the statistical profile.  (See U.S. brief at 84-85).  Hemmingson responds with the incongruous argument that the district court also reviewed the statistical profile for “corporate campaign contribution” predicated money laundering prosecutions.  (Hemm. brief at 73). The obvious flaw in this assertion is that a “corporate campaign contribution” case is necessarily a FECA case; “corporate campaign contribution” cases are violations of FECA.  See 2 U.S.C. § 441b.  The Government’s argument applies with equal strength, irrespective of the label placed upon the crime.  The district court abused its discretion in citing as a basis for departure “the absence of any mention or category of corporate campaign contribution (or FECA) cases” in the statistical profile as predicates for a money laundering prosecution (12R3236; 8R.E.174), because, by definition, this was impossible.

                D.            The Independent Counsel’s Role as Prosecutor is Not a Basis for Departure

                Defendants do not seriously attempt to support the district court’s departure on the feeble basis that this was an Independent Counsel prosecution.  Hemmingson makes only the fleeting and spurious argument that a United States Attorney’s Office would not have brought the present indictment.  Such speculation is sharply refuted by Hopkins, Green and Carpenter, discussed above, in which U.S. Attorneys brought Title 18 charges (including money laundering in Green and Carpenter) against defendants who committed other, distinct criminal acts in order to conceal illegal campaign contribution schemes.  Further, “it is a bedrock principle of our system of criminal justice that a federal judge may not interfere with the government's prosecutorial decisions solely to vindicate his subjective view of the wisdom of a given enforcement strategy.  It follows inexorably that the government's lawful selection of [a defendant] for federal prosecution has no relevance to the sentencing inquiry.”  Snyder, --- F.3d ---, 1998 WL 49094, *6 (1st Cir.) (rejecting “district court's attempt to hang its finding of atypicality on an aversion to federal prosecutors' discretionary power to target defendants under federal law.”) (internal quotations and citations omitted).  The Independent Counsel has “full power and independent authority to exercise all investigative and prosecutorial functions and powers of the Department of Justice [or] the Attorney General,” 28 U.S.C. § 594(a), and the court may not second-guess Congress by diminishing that prosecutorial prerogative.  The lower court improperly chose to substitute its views for the prosecutorial discretion of the Independent Counsel.

                Instead of accrediting the district court’s meritless “Independent Counsel” holding, Hemmingson argues that United States Attorney’s Manual § 9-105.000 supports departure.  (Hemm. brief at 75).  This provision is irrelevant to this appeal because the district court did not cite this provision as a basis for departure.  See Winters, supra (requiring a sentencing court to articulate on the record its reasons for departing).  Moreover, as this is not a “receipt and deposit” case (see footnote 10, supra), section 9-105.000 is factually irrelevant.

                Hemmingson also asserts that “[u]ltimately, the district court concluded that IC charged Hemmingson in a manner that artificially increased the severity of his sentence,” and, therefore, departed appropriately.  (Hemm. brief at 76).  But the district court never made such a finding.  The district court’s reliance upon the fact that this prosecution was brought by an independent counsel exceeds the legally permissible boundaries for departure and should be rejected as a matter of law.  Cf. Dethlefs, 123 F.3d at 47.

                E.             The District Court Erred in Departing on the Basis of the Source of the Proceeds Laundered and the Purpose of the Laundering

                In two brief sentences, the district court announced a convoluted determination that departure was additionally warranted because the money laundered by defendants was corporate funds instead of the proceeds of an illegal activity.  (12R.A.3241).  In support of this position (Hemm. brief at 77), Hemmingson, as did the district court, ignores the fact that the transactions underlying his and Ferrouillet’s convictions were not legitimate exchanges of corporate funds.  Defendants laundered funds obtained through an underlying illegal activity — interstate transportation of a security taken by fraud.  That they defrauded a corporation to obtain the funds does not make their case atypical.

                Hemmingson’s attempts to support the lower court’s conclusion that “the laundering in this case was not done to legitimize a stream of illegal income into the mainstream economy” are equally meritless.  (Hemm. brief at 77-79).   The district court’s strange statement remotely echoes this Court’s pronouncement in United States v. Dobbs, 63 F.3d 391 (5th Cir. 1995), that to establish a violation of 18 U.S.C. § 1956(a)(1)(B)(I), “[i]t is necessary to show a desire to create the appearance of legitimate wealth or otherwise conceal the nature of funds so that it might enter the economy as legitimate funds.”  Id. at 397 (citation omitted).  In the instant case, however, Hemmingson and Ferrouillet laundered the proceeds of the stolen money so that the funds would enter the economy as ostensibly legitimate funds that could be used to pay down Henry Espy’s obligations.  Meanwhile, the true nature of the funds, that they were taken by fraud from the shareholders of a publicly held company for the purpose of making an illegal corporate contribution, would remain concealed.  These facts were clearly sufficient to establish an intent to “legitimize” illegal funds.

III.           THE DISTRICT COURT ABUSED ITS DISCRETION IN APPLYING THE FRAUD GUIDELINES TO DEFENDANTS’ MONEY LAUNDERING CONDUCT

                Hemmingson cannot justify the district court’s decision to depart to the fraud guidelines to sentence defendants for their money laundering conduct.  Hemmingson first insists that the DOJ handbook, Federal Prosecution of Election Offenses, is powerful authority for sentencing “aggravated” FECA violations under the fraud guideline.  However, as discussed above (pp.18-19) and in the Government’s principal brief (U.S. Brief at 86-87), that text endorses appropriate prosecution and sentencing under Title 18 of illegal conduct designed to perfect and conceal illegal contributions.  That means sentencing money launderers, such as these defendants, under the money laundering guidelines.

                Additionally, Hemmingson incorrectly asserts that this Circuit’s opinion in Hopkins mandates a sentence under the fraud guidelines.  (Hemm. brief at 87 n.44).  A step-by-step comparison of this case with Hopkins best illustrates the error of Hemmingson’s argument.  Ferrouillet and Hemmingson and the defendants in Hopkins “engaged in all of [their criminal] activities in order to disguise illegal corporate political contributions.”  Id., 916 F.2d at 210.  The Hopkins defendants caused corporate employees to make political contributions and subsequently reimbursed those “contributors” with corporate funds disguised in the corporations’ financial books and records either as pay raises or as reimbursements for legitimate business expenses.^[12]  Id. at 211.  During the Hopkins scheme, the defendants “falsified various records of . . . financial institutions involved and concealed certain facts from both bank examiners and federal election authorities”  Id. at 211.  The Government appropriately charged the Hopkins defendants, who committed felony fraud to effectuate their ultimate objective, with felony fraud.^[13]  Here, Hemmingson and Ferrouillet committed not just fraud but also money laundering to effectuate their ultimate objective of disguising illegal corporate campaign contributions, and the Government appropriately charged them with money laundering.  Whereas the Hopkins defendants were sentenced for felony fraud, Hemmingson and Ferrouillet escaped sentencing for money laundering.

                The following comparison chart displays the different results between this case and Hopkins:

                Hopkins, like the DOJ handbook, stands for the proposition that defendants should be charged and sentenced based on their conduct, not their ultimate objective. The district court’s drastic departure from 41-51 months imprisonment to 12 months in a half-way house is without justification or precedent.^[15]

IV.           REVERSAL AND REMAND OF THE SENTENCE IS REQUIRED BECAUSE THE DISTRICT COURT RELIED ON IMPROPER FACTORS IN DEPARTING DOWNWARD

                Where a sentencing court relies upon both permissible and impermissible factors in deciding to depart, “the burden [shifts] to the proponent of the sentence — whether that be the defendant or the government — to ‘persuade []the court of appeals that the district court would have imposed the same sentence absent the erroneous factor.’” United States v. Tello, 9 F.3d 1119, 1129 (5th Cir. 1996) (quoting Williams v. United States, 503 U.S. 193, 203 (1992)).   Should the proponent of the sentence meet that burden, “the court of appeals may affirm the sentence as long as it is also satisfied that the departure is reasonable under § 3742(f)(2).”  Williams, 503 U.S. at 203.

                The inquiry as to whether a district court would have delivered the same sentence, absent consideration of an improper factor, focuses on the extent of the departure and the degree to which the district court relied upon the impermissible factor as a basis for departure.  See United States v. Stout, 32 F.3d 901, 904 (5th Cir. 1994) (where sentencing court departed only two months and relied on factor found to be improper only as a small portion of justification for departure, remand was not necessary); United States v. Davidson, 984 F.2d 651, 657 (5th Cir. 1993) (where district court departed three months and only superfluous factors were found to be improper bases for departure, remand was not necessary).   Where the extent of the departure is great, as in this case where the court slashed 70% off the minimum appropriate sentence under the guidelines, a reviewing court should hesitate to conclude that the lower court would have departed so far without each supporting factor. 

                Hemmingson’s brief suggests that the district court could have departed as far as it did on the basis of on any one factor cited.^[16]  But the correct question is not whether the court could have based its departure on the permissible factors, but whether it would have chosen to do so.  Williams, 503 U.S. at 204.  On the question of whether the district court would have departed to the extent it did, Hemmingson asserts, without support, that the court would have departed to this extent on the basis of any one of the cited factors. (See Hemm. brief at 88-89).  Defendant’s unsupported assertion defies the record because the district court expressly stated “[w]ith all of the these factors in mind, the Court is compelled to find that defendant’s conduct is atypical and falls outside the heartland of money laundering cases.” (12R.A.3241; 8R.E.179) (emphasis added).  The district court makes clear that it departed from the guidelines based on the totality of factors discussed above.  In this situation, the appropriate remedy is remand for resentencing if this Court concludes that any one of the factors cited as a basis for departure is impermissible.  Cf. Koon, 116 S.Ct. at 2054 (after finding that district court abused its discretion relying on two of four factors cited for departure, Supreme Court remanded for resentencing where district court stated that none of the factors alone would justify the departure granted).

V.            THE DISTRICT COURT MISAPPLIED THE GUIDELINES BY FAILING TO CONSIDER WHETHER FERROUILLET ABUSED A POSITION OF PUBLIC TRUST AND WHETHER HE USED A SPECIAL SKILL IN CONNECTION WITH HIS NON-MONEY LAUNDERING CRIMES

                This Court reviews legal applications of the Guidelines de novo.  United States v. Morris, 131 F.3d 1136, 1138 (5th Cir. 1997).  The district court misapplied the Guidelines because, in conducting its U.S.S.G. § 3B1.3 analysis, it failed to determine whether Ferrouillet abused a position of public trust and limited its “special skill” determination to Ferrouillet’s money laundering conduct.^[17]  (U.S. brief at 98-102).  Ferrouillet responds that he did not abuse a position of public trust (Ferr. brief at 15-16) or use a special skill (Id. at 16-17).  But it is the responsibility of the district court to make that factual determination, not Ferrouillet.  The issue before this Court is not, given Ferrouillet’s actions, whether he should have received the section 3B1.3 adjustment, but whether the district court correctly applied section 3B1.3 in making this determination.  The Guidelines and Fifth Circuit precedent required the lower court to consider whether Ferrouillet, as an attorney, abused a position of public trust and whether he used a special skill in perpetrating any part of his crimes.  (See U.S. brief at 99-102).  By considering only whether Ferrouillet abused a position of private trust, and by limiting its special skill analysis to only Ferrouillet’s money laundering conduct (rather than the entirety of his criminal acts), the district court failed to perform the correct and complete analysis resulting in a misapplication of the Guidelines.  Ferrouillet’s sentence must be remanded for resentencing to account for both his abuse of public trust and use of a special skill.

CONCLUSION

                Defendants argue that the district court properly departed from the money laundering guideline because they essentially committed only a FECA violation.  Although the evidence does reveal that defendants’ ultimate objective was to effectuate an illegal campaign contribution, defendants engaged in other, more serious, criminal acts — specifically interstate transportation of a check taken by fraud and money laundering — in order to perfect and conceal that illegal contribution.   The Guidelines, Supreme Court decisions and Fifth Circuit precedent do not allow defendants to avoid responsibility for additional illegal actions.  Because the district court abused its discretion in relying upon impermissible factors as a basis for departure, this Court should vacate both defendants’ sentences and remand the case to the district court for resentencing.

Dated: March 25, 1998

                                                                                                DONALD C. SMALTZ

                                                                                                INDEPENDENT COUNSEL

                                                                                                __________________________

                                                                                                Charles M. Kagay

                                                                                                Chief Appellate Counsel

                                                                Jacob S. Frenkel

                                                                                                Associate Independent Counsel

                                                                                                Joseph P. Guichet

                                                                                                Associate Independent Counsel

                                                                                                Wil Frentzen

                                                                                                Associate Independent Counsel

                                                                                                Office of Independent Counsel

                                                                                103 Oronoco Street, Suite 200

                                                                Alexandria, VA  22313

                                                (703) 706-0010