United States of America v. Edward R. Butler

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 99-4153
EDWARD R. BUTLER,
Defendant-Appellant.
Appeal from the United States District Court
for the District of Maryland, at Baltimore.
Frederic N. Smalkin, District Judge.
(CR-97-146-S)
Argued: March 1, 2000
Decided: May 3, 2000
Before LUTTIG, WILLIAMS, and MOTZ, Circuit Judges.
_________________________________________________________________
Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Luttig and Judge Williams joined.
_________________________________________________________________
COUNSEL
ARGUED: Nathan Z. Dershowitz, DERSHOWITZ & EIGER, P.C.,
New York, New York, for Appellant. Barbara Slaymaker Sale, Assis-
tant United States Attorney, Baltimore, Maryland, for Appellee. ON
BRIEF: Victoria B. Eiger, DERSHOWITZ & EIGER, P.C., New
York, New York; Andrew Shear, ALAN M. DERSHOWITZ, Cam-
bridge, Massachusetts, for Appellant. Lynne A. Battaglia, United
States Attorney, Baltimore, Maryland, for Appellee.
_________________________________________________________________

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OPINION
DIANA GRIBBON MOTZ, Circuit Judge:
A jury convicted Edward R. Butler of one count of bankruptcy
fraud, in violation of 18 U.S.C. § 152 (1994 & Supp. IV 1998) and
five counts of money laundering, in violation of 18 U.S.C. § 1957
(1994). On appeal, Butler's principal contention is that his money
laundering convictions cannot stand because they are based on the
very same transactions that form the basis for his bankruptcy fraud
conviction. Butler maintains that the funds involved in these transac-
tions could not constitute "criminally derived property," as required
by the money laundering statute, because these funds became "crimi-
nally derived" only after the fraudulent transactions were complete.
Although we agree that the statute prohibits only the laundering of
"criminally derived property," we must reject Butler's argument. At
the time of the charged money laundering transactions, Butler had
already concealed the funds from the bankruptcy trustee, and the
funds that he laundered therefore were "criminally derived property."
We also reject Butler's other arguments and so affirm his convictions
and sentence.
I.
The government introduced evidence from which the jury could
find the following facts. After filing for bankruptcy in July 1990, But-
ler settled a debt owed to him by the Rhema Development Corpora-
tion and its principals, Reverend and Mrs. Cornelius Showell, who
were also in bankruptcy at the time. Butler had sold a funeral home
to the Showells during the 1980's, and he had taken the note as part
of the purchase price, with stock in the funeral home held as collat-
eral. The Showells agreed to pay Butler a $350,000 settlement, with
payments to be made into an escrow account for which the parties'
attorneys would be joint signatories. Butler disclosed the settlement
plan to his creditors, but he did not obtain the approval of the bank-
ruptcy court.
Pursuant to this plan, the Showells paid $65,000 into the escrow
account but fell behind in their payments. The parties then negotiated
a new arrangement. On October 15, 1991, Butler released back to the
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Showells the $65,000 that had been held in escrow; the Showells then
issued three checks: one for $100,000 payable to Butler, and two oth-
ers, for $100,000 and $150,000 respectively, payable to James
Adkins, an associate of Butler who had acquired an interest in the
funeral home. Butler did not report any of these transactions to the
bankruptcy trustee or his creditors.
Butler used the funds realized from the first $100,000 check, pay-
able to him, for personal expenses; Adkins kept the funds from the
second $100,000 check. The government alleged that Butler fraudu-
lently concealed from the bankruptcy trustee the funds derived from
both of these checks.
With respect to the remaining $150,000 check, Butler was alleged
to have both concealed these funds from the bankruptcy trustee and
laundered them. Upon receipt of this check, Butler caused Adkins to
endorse it and transfer it to him. Butler then gave the check to Father
Edward Miller, a trusted friend. Father Miller, apparently unaware of
the origins of the check, held the funds realized from this check on
Butler's behalf in bank accounts for over a year.
Between September 1992 and January 1993, Butler directed Father
Miller to draw on the $150,000 in order to purchase four cashier's
checks payable to Bishop Randolph Caines, a Philadelphia pastor and
associate of Butler. These four transactions constitute the basis for
Counts II through V of the indictment, which charge Butler with aid-
ing and abetting money laundering in violation of 18 U.S.C. § 1957.
Bishop Caines used a substantial portion of the money to open an
account, over which Butler had control, at First Fidelity Bank in Phil-
adelphia. In April 1993, Butler directed Alice Tatum, Bishop Caines'
assistant, to purchase a cashier's check payable to"S. Lee Martin."
This transaction became the basis for Count VI of the indictment, also
charging Butler with aiding and abetting money laundering. The gov-
ernment alleges that the funds represented by this last check were
eventually used to purchase a lien on Butler's house.
Count I of the indictment charges that, from on or about the date
of the Rhema-Showell settlement until 1995, Butler fraudulently con-
cealed from the bankruptcy estate the entire $350,000 received from
the settlement.
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Butler's first trial ended in a hung jury, but his second trial resulted
in convictions on all six counts.
II.
Butler contends that we must reverse his convictions for money
laundering because the funds used to purchase the five cashier's
checks involved in the five money laundering counts did not consti-
tute "criminally derived property." Butler argues that these funds did
not become "criminally derived property" until he completed some act
of bankruptcy fraud, and he maintains that the government failed to
prove completion of such an act prior to the purchase of the checks.
Although the extent to which Butler has preserved this argument for
appellate review is not entirely clear,1 for purposes of this appeal we
give him the benefit of the doubt and treat it as a challenge to the suf-
ficiency of the evidence, fully preserved for review by a timely Rule
29 motion. See Fed. R. Crim. P. 29. As such, we must sustain his con-
victions if the record, viewed most favorably to the government, con-
tains substantial evidence to support the convictions. See Glasser v.
United States, 315 U.S. 60, 80 (1942).
Federal law defines money laundering as "a monetary transaction
in criminally derived property that is . . . derived from specified
unlawful activity," 18 U.S.C. § 1957(a); such activity includes con-
cealment of assets in bankruptcy. See 18 U.S.C. § 1956(c)(7)(D)
_________________________________________________________________
1 The government maintains that Butler has waived this argument by
his failure to challenge either the indictment or the jury instructions. See
Fed. R. Crim. P. 12(f) and 30. Butler disclaims any intent to challenge
either the indictment or jury charge; he contends that he is relying on a
"legal defect" in the evidence. Reply Brief at 2. Although there is some
support for the view that Butler's argument constitutes a challenge to the
indictment, see United States v. West, 22 F.3d 586, 590 n.11 (5th Cir.
1994), most courts have regarded similar arguments as challenges to the
sufficiency of the evidence. See United States v. Sayakhom, 186 F.3d
928, 942-43 (9th Cir. 1999); United States v. Morelli, 169 F.3d 798, 802-
03 (3d Cir. 1999); United States v. Christo, 129 F.3d 578, 579 (11th Cir.
1997); United States v. Johnson, 971 F.2d 562, 566-67 (10th Cir. 1992);
see also United States v. Levine, 970 F.2d 681, 685-86 (10th Cir. 1992)
(viewing argument as challenge both to the indictment and to the suffi-
ciency of the evidence).
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(1994 & Supp. IV 1998); 18 U.S.C. § 152. The plain language of the
money laundering statute thus requires that the funds involved in the
forbidden "monetary transaction[s]" represent the proceeds of "speci-
fied unlawful activity."
In enacting the statute, Congress expressed concern about crimi-
nals' use of "complex schemes to disguise the illegal nature and true
source" of the proceeds of their illegal activity. See S. Rep. No. 99-
433 at 2 (1986). The legislative history indicates that "Congress
passed the money laundering statutes to criminalize the means crimi-
nals use to cleanse their ill-gotten gains." United States v. Savage, 67
F.3d 1435, 1441 (9th Cir. 1995).
In other words, Congress did not fashion the money laundering
statute to create a new source of criminal liability for every fraudulent
monetary transaction. Rather, "both the plain language of § 1957 and
the legislative history behind it suggest that Congress targeted only
those transactions occurring after proceeds have been obtained from
the underlying unlawful activity." See Johnson, 971 F.2d at 569
(reversing certain money laundering convictions). To provide the
basis for a money laundering offense, a financial transaction must
involve funds that have been "criminally derived."
Funds are "criminally derived" if they are"derived from an already
completed offense, or a completed phase of an ongoing offense."
United States v. Conley, 37 F.3d 970, 980 (3d Cir. 1994); see also
Sayakhom, 186 F.3d at 943 (finding that receipt of funds in response
to fraudulent mailing could support money laundering conviction
when initial fraudulent mailing formed completed phase of the
offense); Morelli, 169 F.3d at 806-07 (finding that first set of fraudu-
lent wire transfers was not money laundering but that subsequent wire
transfers involved proceeds of the first set of transfers, and therefore
did constitute money laundering); Christo, 129 F.3d at 580-81
(reversing money laundering conviction when "withdrawal of funds
charged as money laundering was one and the same as the underlying
criminal activity of bank fraud and misapplication of bank funds");
Savage, 67 F.3d at 1441 (holding that money laundering involves
"funds obtained from prior, separate criminal activity"). Put plainly,
the laundering of funds cannot occur in the same transaction through
which those funds first become tainted by crime.
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This conclusion does not assist Butler, however. At trial, the gov-
ernment introduced evidence from which a jury could conclude that
Butler engaged in the concealment of assets from the bankruptcy
trustee almost immediately upon receipt of the settlement proceeds
from the Showells. At latest, the funds at issue in the five money
laundering counts became "criminally derived property"--property
derived from Butler's bankruptcy fraud--when Butler passed the
$150,000 check from the Showell settlement to Father Miller in Octo-
ber 1991. Thus, by September 1992, when Butler began directing the
purchase of the cashier's check in question, the transfer of funds to
Father Miller was a "completed phase of an ongoing offense," Conley,
37 F.3d at 980; with Father Miller's apparently unwitting assistance,
Butler had managed to conceal these funds from the bankruptcy
trustee and his creditors for nearly a year. As a result, when Butler,
from September 1992 to early 1993, used these funds to purchase the
five cashier's checks, he was "engag[ing] in a monetary transaction
in criminally derived property," i.e., property derived from bank-
ruptcy fraud. See 18 U.S.C. § 1957(a).
At oral argument, Butler's counsel contended that the government
had not argued to the jury that any acts of asset concealment constitut-
ing bankruptcy fraud had occurred aside from the five transactions
also alleged to be money laundering. Butler stressed the fact that the
government, during closing argument at trial, characterized those five
transactions as "the most profound acts of concealment." Earlier in
jury argument, however, the prosecutor clearly described Butler's
activities in October 1991, immediately after the Rhema-Showell set-
tlement, as "the beginning of all of these means of concealment," and
further argued that Butler "secreted" the $150,000 check with Father
Miller prior to the purchase of the five cashier's checks.
After careful review of the record, we are satisfied that the govern-
ment presented the jury with sufficient evidence to support the con-
clusion that, at the time Butler ordered the purchase of each of the
five cashier's checks, he had completed a phase of the bankruptcy
fraud. The five transactions that form the basis for the money launder-
ing counts were thus transactions in "criminally derived property."2
_________________________________________________________________
2 In view of our holding on this issue, we need not, as Butler concedes,
address his contention that the district court improperly found for sen-
tencing purposes that he concealed the entire $350,000 from the bank-
ruptcy trustee, rather than only a portion of these funds.
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III.
Additionally, Butler maintains that the government's use at his
criminal trial of testimony he gave during a 1995 civil contempt pro-
ceeding constitutes reversible error. The bankruptcy court held Butler
in contempt for his failure to account for the proceeds of the Rhema-
Showell settlement; and the district court subsequently allowed Butler
to purge himself of contempt by either "(a) paying over the $350,000
to the Trustee, or (b) subjecting [himself] to examination under oath,
in open court, for the purpose of specifically disclosing all informa-
tion relating to disposition of the settlement funds. . . ." Butler ulti-
mately chose to testify. He now contends that this testimony, given
under threat of incarceration for civil contempt, was "compelled" in
violation of his Fifth Amendment privilege against self-incrimination,
and that this "compelled testimony" was improperly admitted into
evidence at his criminal trial. Brief of Appellant at 24.
Butler's argument requires us to determine the legal status of his
1995 civil contempt testimony; we review de novo the district court's
admission of that testimony at Butler's criminal trial, over Butler's
assertion of privilege. See Hawkins v. Stables , 148 F.3d 379, 382 (4th
Cir. 1998). Given the relevant facts as to how and when Butler
asserted his Fifth Amendment privilege, his argument must fail.
In November 1991, the bankruptcy court, in response to an emer-
gency motion filed by Butler's attorney, ordered Butler to turn over
the $350,000 from the Rhema-Showell settlement. After he failed to
do so, the bankruptcy court issued an enforcement order in April 1992
and found Butler to be in civil contempt on June 2, 1992. Two years
later, the bankruptcy court granted the sanction of incarceration
against Butler for his failure to comply. On appeal, the district court
held hearings in November 1994 and March 1995. Butler invoked the
Fifth Amendment for the first time during the June 1994 hearing
before the bankruptcy court, 31 months after the bankruptcy court
first ordered him to turn over the Rhema-Showell settlement proceeds
and 24 months after the bankruptcy court held him in contempt for
failing to do so.
The bankruptcy court's April 1992 order enforcing the November
1991 turnover order was final and appealable. See Smith v. Revie (In
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re Moody), 817 F.2d 365, 367-68 (5th Cir. 1987). The enforcement
order necessarily contained a finding that, at the time the order was
issued, Butler possessed the ability to account for the $350,000--a
finding that Butler did not appeal, or even, apparently, contest. Two
years later, in 1994, when Butler first invoked the Fifth Amendment,
it was far too late for Butler to seek "reconsideration [of] the legal or
factual basis of the order alleged to have been disobeyed." Maggio v.
Zeitz, 333 U.S. 56, 69 (1948) (quoted in United States v. Rylander,
460 U.S. 752 (1983)). Butler could not argue in 1994, let alone at the
hearing in 1995, which afforded him the opportunity to purge himself
of civil contempt, that he had not possessed the $350,000 in 1992, or
that the 1992 enforcement order was otherwise invalid.
Rather, Butler's only available defense at the 1995 contempt hear-
ing, when he was facing incarceration for his long-term refusal to
comply with the turnover order and the subsequent contempt order,
was to assert "a present inability to comply with the order in ques-
tion." Rylander, 460 U.S. at 757. Butler could seek to show only that
he did not presently possess the funds to comply with the turnover
order. As the Supreme Court explained in Rylander, "[w]here compli-
ance is impossible, neither the moving party nor the court has any rea-
son to proceed with the civil contempt action. It is settled, however,
that in raising this defense, the defendant has a burden of production."
Id. Thus, in order to purge himself of civil contempt, Butler had to
meet the burden of producing evidence that he presently lacked the
funds to comply with the turnover order.
The Supreme Court's holding in Rylander clearly forecloses But-
ler's contention that the testimony he gave to meet this burden was
"compelled" in violation of the Fifth Amendment. The defendant in
Rylander, facing incarceration for his failure to turn over records that
had been subpoenaed by the IRS, had sought to avoid cross-
examination in a civil contempt proceeding as to his inability to pro-
duce those records. The Supreme Court rejected the argument that
requiring the defendant to testify under those circumstances was "a
form of `compulsion' which requires that the burden be shifted from
the defendant's shoulders to that of the government." Id. at 758; cf.
In re Grand Jury Subpoena Dated April 9, 1996 v. Smith, 87 F.3d
1198, 1202 n.3 (11th Cir. 1996) (distinguishing Rylander, and permit-
ting invocation of the Fifth Amendment, when defendant asserted her
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inability to comply with a subpoena at the enforcement stage, rather
than in contempt proceedings).
To avoid incarceration for civil contempt, Butler had to produce
evidence demonstrating his present inability to turn over the
$350,000. Instead of meeting this burden, he initially attempted to do
precisely what the Supreme Court in Rylander held a defendant can-
not do: assert inability to comply with a court order, while at the same
time refusing to answer any further questions on the issue through the
invocation of his Fifth Amendment privilege. The district court in the
contempt proceeding, citing Rylander, correctly denied Butler this
option.
True, Butler found himself in a difficult position during the civil
contempt proceedings. He faced the prospect of incarceration if he
refused to account for the settlement proceeds; he feared that he
would incriminate himself if he did testify. This pressure does not
amount to "compulsion" under the Fifth Amendment, however. In
Rylander, the Court likened the defendant, who faced a dilemma simi-
lar to Butler's, to a criminal defendant who must call witnesses or
take the stand himself in order to support an alibi defense.
When [the defendant] presents his witnesses, he must reveal
their identity and submit them to cross-examination which
in itself may prove incriminating or which may furnish the
State with leads to incriminating rebuttal evidence. That the
defendant faces such a dilemma demanding a choice
between complete silence and presenting a defense has
never been thought an invasion of the privilege against com-
pelled self-incrimination. The pressures generated by the
State's evidence may be severe but they do not vitiate the
defendant's choice to present an alibi defense and witnesses
to prove it, even though the attempted defense ends in catas-
trophe for the defendant. However "testimonial" or "incrimi-
nating" the alibi defense proves to be, it cannot be
considered "compelled" within the meaning of the Fifth and
Fourteenth Amendments.
Rylander, 460 U.S. at 759 (quoting Williams v. Florida, 399 U.S. 78,
83-84 (1970)). Butler's 1995 testimony, with which he successfully
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purged himself of civil contempt, likewise cannot be viewed as "com-
pelled." See also Gniotek v. City of Philadelphia, 808 F.2d 241, 245-
46 (3d Cir. 1986) (finding no violation of Fifth Amendment when
police officers, faced with evidence of corruption that constituted
grounds for dismissal from their jobs, were dismissed after they
refused to testify at a predeprivation hearing).
At oral argument, Butler focused his challenge on the alternative
ruling of the district court in the contempt proceeding that, even if a
witness in Butler's position ordinarily could invoke the Fifth Amend-
ment, Butler had waived the privilege by submitting an affidavit
attesting to his present economic status and inability to pay the
$350,000. In Rylander, the Supreme Court specifically refused to
reach a similar waiver question. 460 U.S. at 761 n.2. We, too, need
not reach the question of whether Butler waived his Fifth Amendment
privilege.
We note, however, that this is not a case in which a party, seeking
to avoid the sanction of contempt at the enforcement stage of a judi-
cial order, submitted evidence as to inability to comply with the order.
Finding such conduct to constitute a waiver of the privilege would,
as the Eleventh Circuit has recognized, "create an intolerable result,
placing [the party] in the position of remaining silent and being held
in contempt for failing to produce the [evidence] that she did not
have, or saying that she did not have the [evidence] and then being
ordered to testify." In re Grand Jury Subpoena, 87 F.3d at 1204 (find-
ing no waiver of privilege).
By contrast, in this case Butler did not attempt to testify at the
enforcement stage of the turnover order under the protection of his
Fifth Amendment privilege. Rather, he ignored the turnover order and
was held in contempt for doing so. To purge himself of contempt, he
had to produce evidence of his inability to comply with the turnover
order. His submission of an affidavit did not meet that burden; his tes-
timony did. Butler made a difficult choice to testify rather than be
incarcerated for civil contempt, but the severity of his dilemma did
not transform his testimony at the contempt proceeding into "com-
pelled" testimony for purposes of the Fifth Amendment. See
Rylander, 460 U.S. at 758. For this reason, nothing prevented the gov-
ernment from using Butler's prior testimony in the subsequent crimi-
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nal case. See Fed. R. Evid. 801(d)(2); Harrison v. United States, 392
U.S. 219, 222 (1968) (finding defendant's statements at former trial
admissible when not obtained in violation of Fifth Amendment).
Accordingly, the district court did not err in permitting the introduc-
tion of this testimony at Butler's criminal trial.
IV.
Finally, Butler argues that the district court erred in refusing to
instruct the jury regarding his asserted reliance on the advice of coun-
sel during the course of conduct that led to his conviction. Butler con-
tends that, among the many attorneys who gave him advice during the
relevant time period, at least one gave him advice so erroneous that
it negated his intent to commit the crimes for which he was convicted.
The essential elements of the reliance-on-counsel defense are "(a)
full disclosure of all pertinent facts to an expert, and (b) good faith
reliance on the expert's advice." United States v. Miller, 658 F.2d
235, 237 (4th Cir. 1981). After reviewing the record, we find no evi-
dence that would entitle Butler to an instruction regarding reliance on
the advice of counsel in the context of any of his relevant interactions
with attorneys.
V.
For the foregoing reasons, Butler's convictions and sentence are
AFFIRMED.
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