Eleventh Circuit Affirms Dismissal of Money Laundering Charges Against Attorney

In this post earlier this month, we discussed U.S. v. Velez, a federal criminal case in which an attorney, Ben Kuehne, was charged with money laundering based upon payments of legal fees. On Monday, the Eleventh Circuit affirmed the Southern District of Florida’s dismissal of the money laundering charges.

Fabio Ochoa-Vasquez was extradited to the U.S. in 2001 to faces charges for cocaine smuggling. His criminal defense team hired Kuehne to investigate the source of the money Ochoa would use to pay their legal fees and verify that it was not criminally derived property. Kuehne drafted six opinion letters advising that the funds were clean. The money to pay the legal fees were wired to his trust account, then he wired them, minus his retainer, to Ochoa’s defense team.

The government alleged that Kuehne and his co-defendants knew that the funds were tainted and supported the opinion letters with falsified documents. They were charged with money laundering in violation of 18 U.S.C. § 1957. However, § 1957(f)(1) excludes “any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution” from the scope of the money laundering statute.

The Government argued that the exception in § 1957(f)(1) was nullified by Caplin & Drysdale, a 1989 Supreme Court case holding that the sixth amendment right to counsel does not protect the right of a criminal defendant to use criminally derived proceeds for legal fees. That case, however, dealt with the criminal forfeiture statute, not the money laundering statute. The forfeiture statute contains no exemption for funds used to pay legal fees.

The Eleventh Circuit Court’s opinion pointed out that Caplin & Drysdale actually supports the statutory money laundering exception for payments of legal fees. In Caplin & Drysdale, the Court reasoned that Congress could have included such an exemption, but had not done so. The Eleventh Circuit viewed the exemption as “a crucial distinction” between the money laundering charges and the forfeiture provision, finding that Caplin & Drysdale‘s only bearing on the exemption is to affirm it.

The Kuehne opinion then turned to statutory construction, noting that the government had conceded its interpretation would read all meaning out of the exemption. Because only transactions involving criminally derived proceeds are criminalized by § 1957, reading the exemption to refer to only non-tainted funds would render it superfluous. “We do not believe Congress intended such an absurd result, which nullifies the provision and divorces it from its statutory context, thereby violating the basic canons of statutory construction.”

“The district court was eminently correct in holding that Defendants are not subject to criminal prosecution under § 1957(a).” While criminally derived proceeds are subject to forfeiture under Caplin & Drysdale, they may not be the basis for a criminal prosecution.

Significantly, the Eleventh Circuit also recently decided U.S. v. Kaley, another case involving the payment of legal fees to criminal defense attorneys. We discussed that case in this previous post.

The Eleventh Circuit’s opinion in Kuehne is available here.
Thorough commentary on the case is available at the Southern District of Florida Blog.