/ 03-1442 United States of America v. Michael J. Grasso, Jr

PRECEDENTIAL
UNITED STATES
COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 03-1441 / 03-1442
UNITED STATES OF AMERICA
v.
MICHAEL J. GRASSO, JR.,
Appellant
On Appeal from the
United States District Court
for the Eastern District of Pennsylvania
D.C. Criminal Action Nos.
00-cr-00051-1/01-cr-00783-1
( Honorable Berle M. Schiller)
Argued December 12, 2003
Before: AMBRO, FUENTES
and GARTH, Circuit Judges
(Opinion filed August 23, 2004)
Walter M. Phillips, Jr., Esq. (Argued)
Kevin J. Kotch, Esq.
Hoyle, Fickler, Herschel & Mathes
One South Broad, Suite 1500
Philadelphia, PA 19107
Attorneys for Appellant
Patrick L. Meehan
United States Attorney
Laurie Magid
Deputy United States Attorney
for Policy and Appeals
Robert A. Zauzmer
Assistant United States Attorney
Senior Appellate Counsel
Anne Whatley Chain (Argued)
Assistant United States Attorney
Peter F. Schenck, Esq.
Office of United States Attorney
615 Chestnut Street, Suite 1250
Philadelphia, PA 19106
Attorneys for Appellee
OPINION OF THE COURT
AM BRO, Circuit Judge
Michael J. Grasso appeals his
conviction and sentence for money
laundering. He argues that the term
“proceeds” in the money laundering
statute, 18 U.S.C. § 1956, encompasses
only the net profits, and not the gross
receipts, of criminal activity. This
proposed statutory construction is
incompatible with the text of the statute as
well as existing case law in our Circuit.
We therefore affirm Grasso’s conviction.
However, we do remand for the District
Court to reconsider its restitution award.
I. Factual and Procedural History
Grasso sold various fraudulent
work-at-home schemes from early 1997
until late 1999. The programs, which were
advertised in national magazines,

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purported to enable purchasers to earn
substantial payments for at-home work,
with profits to be divided between the
participants and Grasso. In reality, the
programs simply instructed purchasers to
solicit new customers who would purchase
the same programs for similar amounts.1
In February 2000, Grasso was
indicted for mail fraud, wire fraud, and
money laundering, in Criminal No. 00-51.
The money laundering counts charged that
he funded his ongoing criminal activity
with the proceeds of his fraudulent
schemes. Grasso allegedly reinvested the
proceeds of his criminal activity to cover
advertising, printing, and m ailing
expenses. Nine months later, a
superseding indictment was filed, which
added a count for obstruction of justice
based on Grasso’s attempt to access frozen
funds and slightly modified the money
laundering charges.2 In December 2002,
Grasso was indicted yet again, for forgery
and obstruction of justice, in Criminal No.
01-783.3 In February 2002 the District
Court severed the obstruction of justice
count in the superseding indictment in
Criminal No. 00-51, which involved
Grasso’s first attempt to obtain frozen
funds, and consolidated that count with the
proceeding in Criminal No. 01-783.
Trial on the superseding indictment
took place in February 2002. At the close
of the Government’s case, Grasso moved
orally for judgment of acquittal on the mail
and wire fraud counts, as well as four of
the money laundering counts. The motion
was denied, and thereafter a jury convicted
Grasso on all charges.4 He subsequently
pled guilty to the obstruction of justice
count originally filed in Criminal No. 00-
51, and the cases were consolidated for
sentencing.
Payment of defense counsel fees
was a recurring issue during the criminal
proceedings. In March 2000, Grasso filed
a motion to release funds from his frozen
accounts to pay defense counsel fees and
expenses, and the motion was denied. The
case was assigned to another judge in
March 2001, and in December 2001 that
judge ordered the release of $200,000
toward these expenses. In March 2002,
defense counsel sought the release of
1In addition to fraudulently promoting
work-at-home employment schemes,
Grasso allegedly sold mailing lists and
engaged in other illegal activity. He
contests many of the representations made
by the Government. Because these factual
matters do not affect our resolution of the
issues on appeal, we do not discuss them.
2The original indictment contained 508
counts alleging money laundering,
whereas the superseding indictment
included 482 counts.
3The indictment charged that Grasso
forged the signatures of a district judge
and a deputy clerk in conjunction with
fictitious letters directing various financial
institutions to release his frozen funds.
4Two money laundering counts were
dismissed during the course of the trial.

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additional funds from frozen accounts for
payment of counsel fees. As a result,
Grasso w as orde red to prov ide
documentation related to one of the non-
frozen accounts, and the Probation Office
examined his income and assets. The
subsequent investigation of his accounts
revealed that he had deposited more than
$800,000 into his non-frozen accounts
after the entry of a preliminary injunction
in 1999, which was intended to protect his
assets for distribution to victims.
Prior to sentencing, Grasso objected
to the Government’s proposed sentencing
order on various grounds. He moved for a
downward departure and submitted a
memorandum in support of a “renewed”
motion for judgment of acquittal on the
money laundering counts, relying on the
Seventh Circuit’s recent decision in United
States v. Scialabba, 282 F.3d 475 (7th
Cir.), cert. denied, 537 U.S. 1071 (2002).
Although Grasso suggested in the
memorandum that he had submitted an
earlier motion for acquittal on all money
laundering counts, that motion challenged
the sufficiency of the evidence as to
Counts 444 through 447 only, and for
factually specific reasons.
The District Court sentenced
Grasso for the fraud and money laundering
convictions to 97 months incarceration,
three years supervised release, a fine of
$150,000, restitution in the amount of
$761,126.39, and a special assessment of
$49,500. The Court made no findings in
support of its award of restitution. In
addition, for the obstruction of justice plea,
Grasso received 15 months imprisonment
(five months of which would run
consecutively to the first sentence), a fine
of $30,000, and a $300 special assessment.
The restitution, fines, and special
assessments, as well as $100,000 in
counsel fees, were to be paid from the
frozen funds. Grasso appeals.5
II. Discussion
We address two principal issues.
First, did the Government need to establish
that Gra s s o ’ s m o n ey launde ring
transactions were conducted with the net
profits, as opposed to gross receipts, of his
illegal activity? Second, did the District
Court err by failing to specify in its order
of restitution the manner and schedule of
payment?
A. Money Laundering Convictions
and Sentence
Grasso alleges that the Government
transformed a “garden variety fraud case
with no hint of organized crime
involvement into a 482 count money
laundering case.” Grasso’s conviction for
money laundering was based on his
“reinvestment of proceeds” for the
purchase of advertisements, telephone
services, printing, envelopes, and other
materials in furtherance of his fraudulent
activity by means of wire transfer, checks,
and credit cards. Simply put, Grasso paid
5The District Court exercised
jurisdiction over this case pursuant to 18
U.S.C. § 3231. We have appellate
jurisdiction under 18 U.S.C. § 3742 and 28
U.S.C. § 1291.

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for his business expenses with the receipts
from his sales.6 The relevant statute, 18
U.S.C. § 1956, provides:
(a)(1) Whoever, knowing
that the property involved in
a financial tran saction
represents the proceeds of
some form of unlawful
a c t i vi ty, c o n d u c t s o r
attempts to conduct such a
financial transaction which
in fact involves the proceeds
of specified unlawful
activity—
(A)(i) 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 spec ified unlawful
activity; or
(ii) to avoid a transaction
reporting requirement under
State or Federal law,
[commits a felony].
The statute does not define “proceeds.”
Grasso contends that the term should be
understood—as a matter of textual
interpretation, congressional intent, and
policy—to mean “net profits.” The
Government, by contrast, urges us to adopt
a broader definition encompassing all
gross receipts of illegal activity.
1. Standard of Review
Grasso has framed the question
presented in his appeal as “[w]hether a
defendant can be convicted of and
sentenced for money laundering under 18
U.S.C. § 1956(a)(1)(A)(i) for reinvesting
the proceeds of specified unlawful activity,
where the government’s proof fails to
show that the money allegedly laundered
represented the proceeds, or net profits,
from the unlawful activity as opposed to
gross receipts or revenue.” At its core,
Grasso’s appeal challenges the sufficiency
of the evidence upon which he was
convicted.7 In other words, “[h]e contends
6Grasso argues that the payments were
made for past purchases. The Government
disputes this claim as a factual matter. We
have held, in any case, that it is possible to
“promote” unlawful activity, within the
meaning of the money laundering statute,
even if it has already been completed.
United States v. Paramo, 998 F.2d 1212,
1218 (3d Cir. 1993).
7It is undisputed that the Government
presented no evidence suggesting that

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that, as a matter of law, the facts do not
support the conclusion that money
laundering occurred.” United States v.
Morelli, 169 F.3d 798, 802 (3d Cir. 1999)
(classifying as a “sufficiency of the
evidence” argument the defendant’s claim
that his conviction for money laundering
was premised on a faulty statutory
construction). While Grasso urges us to
review the District Court’s judgment de
novo, the Government contends that we
should review it for plain error because he
failed to raise his statutory argument in a
Rule 29 motion for judgment of acquittal
and therefore forfeited it.
The Federal Rules of Criminal
Procedure dictate when a criminal
defendant may challenge a conviction that
is based on insufficient evidence. Rule 29
provides that a defendant must make an
appropriate motion within seven days after
a guilty verdict is entered, or within an
extended time specified by the Court
during the seven-day period. If a
defendant fails timely to raise an argument
that may establish his or her innocence, the
court is unlikely to find it persuasive at a
later time. See, e.g., United States v.
Powell, 113 F.3d 464, 466–67 (3d Cir.
1997) (“If a defendant fails to file a timely
motion for judgment of acquittal, we
review sufficiency of evidence for plain
error.”).
The jury convicted Grasso on
February 25, 2002. He did not file a
motion within seven days of the verdict,
nor did the Court extend the applicable
period. On October 9, 2002, however, he
filed a memorandum including an
argument in support of his “renewed
motion for judgment of acquittal on the
money laundering counts.” Although it
was clear that Grasso had failed to file a
timely Rule 29 motion,8 the parties agreed
at oral argument that the District Court
would consider the “renewed” motion “for
the limited purpose of determining
whether Defendant should be sentenced
under the money laundering or fraud
gui delin es.” 9 That motion did
Grasso’s payments and expenditures were
funded with net profits of the fraudulent
scheme rather than gross receipts.
8As already noted, at the close of the
Government’s case the defense moved for
judgment of acquittal on four of the money
laundering charges. The motion did not
allege that the Government had failed to
demonstrate the use of net proceeds.
9Grasso has framed his argument as a
challenge to his sentence rather than his
conviction. As a general matter, “[w]e
review the district court’s application of
the sentencing guidelines de novo.” See
United States v. Omoruyi, 260 F.3d 291,
297 n.8 (3d Cir. 2001). We thus may
vacate a sentence if we find that it was
improperly entered. But in this case the
District Court had no choice but to
sentence Grasso for money laundering.
“In cases . . . in which several counts,
including fraud and money laundering,
have been grouped, . . . the count carrying
the highest applicable offense level must
apply to the entire group for sentencing

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not serve to preserve the statutory
argument for de novo review.
The forfeiture principle may lead to
harsh results. “‘No procedural principle is
more familiar to this Court than that a
constitutional right,’ or a right of any other
sort, ‘may be forfeited in criminal as well
as civil cases by the failure to make timely
assertion of the right before a tribunal
having jurisdiction to determine it.’”
United States v. Olano, 507 U.S. 725, 731
(1993) (citing Yakus v. United States, 321
U.S. 414, 444 (1944)). Its effects are
mitigated, however, by Federal Rule of
Criminal Procedure 52(b), which permits
a court of appeals to consider a “plain
purposes. Under the guidelines as
amended, . . . courts have no discretion to
decide that the money laundering guideline
is inappropriate or not the most applicable
guideline on the facts of a given case.”
United States v. Diaz, 245 F.3d 294, 303
(3d Cir. 2001) (citation omitted). Plenary
review of the sentence alone does Grasso
no good, because we may inquire only
whether, assuming he was lawfully
convicted of money laundering, the
District Court properly calculated his
sentence. Upon the facts presented, there
is no doubt that it did.
Grasso’s strategy, of course, is
slightly outside the letter of Diaz. He
urged the District Court to sentence him
for fraud rather than money laundering not
because the sentencing guidelines
applicable to the latter more appropriately
reflected the scope of his criminal activity,
but rather because he contended he should
not have been convicted of money
laundering in the first place. Were we to
accept this gambit, we would permit
Grasso to end-run the principle that a court
should not disturb a jury verdict unless the
defendant timely objects. See Carlisle v.
United States, 517 U.S. 416, 433 (1996)
(holding that a district court is without
discretion to grant a defendant’s untimely
motion for judgment of acquittal pursuant
to Rule 29).
In a similar vein, Grasso relies
heavily on our decision in United States v.
Morelli, 169 F.3d 798, 801 (3d Cir. 1999),
in which we held that the defendant was
not obligated to challenge his money
laundering conviction in a Rule 29 motion.
In Morelli, the jury found that money
laundering was merely one among several
bases for his RICO conspiracy conviction.
Because the conviction rested on
i n d e p e n d e n t p r e dicate a c t s , a n y
contemporaneous objection to the money
laundering allegations would have been
futile; even if the court had agreed that the
money laundering statute was inapplicable,
there were adequate alternative bases to
sustain the conviction. Consequently, the
defendant’s interpretation of the money
laundering statute affected only his
sentence, and the District Court’s decision
at sentencing was “not bound up with the
jury’s verdict.” Id. at 803. In our case, by
contrast, the jury specifically found that
Grasso was guilty of money laundering.
The District Court could not have
modified Grasso’s sentence without
disturbing the underlying conviction.

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error that affects substantial rights . . .
even though it was not brought to the
court’s attention.”10
Grasso failed to file a Rule 29
motion within the designated time. His
claim does not fall within any of the
recognized exceptions to the forfeiture
rule. We therefore review his argument
for plain error. We note, however, that the
standard of review is ultimately irrelevant
to our resolution of this case. Because we
conclude that the District Court properly
construed § 1956, we would affirm even
under de novo review.11
2. Definition of “Proceeds”
Under the plain error standard, the
defendant ordinarily bears the burden of
proving that: (1) the court erred; (2) the
error was “plain” at the time of appellate
consideration; and (3) the error affected
substantial rights, usually meaning that the
error “must have affected the outcome of
the district court proceedings.” Olano,
507 U.S. at 734; see also Johnson v.
United States, 520 U.S. 461, 466–68
(1997). “If all three conditions are met, an
appellate court may then exercise its
discretion to notice a forfeited error, but
only if (4) the error seriously affects the
fairness, integrity, or public reputation of
judicial proceedings.” Johnson, 520 U.S.
at 467 (citation omitted). Grasso cannot
meet the first and most important element
because the District Court did not err.
Thus we need go no further.
We agree with the District Court
that sentencing Grasso for money
laundering was within the scope of the
money laundering statute. Grasso
contends, citing the Seventh Circuit’s
recent decision in United States v.
Scialabba, 282 F.3d 475 (7th Cir.), cert.
denied, 523 U.S. 1071 (2002), that he was
improperly convicted of and sentenced for
10“Rule 52(b) leaves the decision to
correct the forfeited error within the sound
discretion of the court of appeals.” Olano,
507 U.S. at 732. Nonetheless, we “should
not exercise that discretion unless the error
seriously affects the fairness, integrity or
public reputation of judicial proceedings.”
Id. (citations omitted). The Supreme Court
has clarified that we may “correct the error
(either vacating for a new trial, or
reversing outright)” only if it is “plain”
and “affects substantial rights.” Id.
(emphasis in original).
11Grasso argues that the Court may
exercise plenary review of his claim even
if he forfeited it, because it is based on
statutory interpretation. This proposition
is inconsistent with the Supreme Court’s
decisions in Olano, 507 U.S. 725
(applying plain error re vi ew to
interpretation of the Federal Rules of
Criminal Procedure), and Johnson v.
United States, 520 U.S. 461 (1997)
(reviewing for plain error the district
court’s failure to submit to the jury the
question whether a false statement was
material despite intervening Supreme
Court case deciding as a matter of
constitutional law that materiality is a jury
question).

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m o n e y l a u n d e r i n g b e c a u s e t h e
Government failed to establish that the
money allegedly laundered derived from
the net profits of his illegal activity. The
Seventh Circuit held in Scialabba that
when a “crime entails voluntary, business-
like operations, ‘proceeds’ must be net
income; otherwise the predicate crime
merges into money laundering (for no
business can be carried out without
expenses) and the word ‘proceeds’ loses
operational significance.” Id. at 475.
In Scialabba, the defendants were
convicted of operating an unlawful
gambling business, filing false tax returns,
conspiring to defeat tax collection, and
money laundering. The last charge was
based on the defendants’ use of revenue
from their gambling operations to meet the
expenses of the business. As in our case,
conviction for money laundering
substantially increased the defendants’
prison terms, and they therefore appealed
their convictions under the money
laundering statute, § 1956(a).
The Seventh Circuit rejected the
Government’s argument that use of gross
receipts to fund ongoing criminal activity
constituted money laundering. The Court
explained that accepting the Government’s
theory would be “equivalent to saying that
every drug dealer commits money
laundering by using the receipts from sales
to purchase more stock in trade, that a
bank robber commits money laundering by
using part of the loot from one heist to
rent a getaway car for the next, and so on.”
Id. at 476. Transactions of this nature, the
Court explained, do not implicate the
concerns underlying the statute—namely,
they are not “financial transactions to hide
or invest profits in order to evade
detection, the normal understanding of
money laundering.” Id.
While Judge Easterbrook’s opinion
in Scialabba is well-argued and intuitively
appealing, we believe it reaches an
incorrect result. We consider various
interpretations of proceeds in light of the
conventional understanding of the term,
the text and purpose of § 1956, and
existing case law in our Circuit. In so
doing, we conclude that “proceeds,” as
that term is used in the money laundering
statute, means gross receipts rather than
profits.
Section 1956 does not define
proceeds. Judge Easterbrook assumed that
“most speakers of English would
understand” the term proceeds to reach
only the “profits of the business.”
Scialabba, 282 F.3d at 477. Viewed in a
vacuum, however, we discern no clear
meaning of the term. Congress might
easily have used “gross receipts” if it so
intended. Cf. Scialabba, 282 F.3d at 477
(“It would have been easy enough to write
‘receipts’ in lieu of ‘proceeds’ in
§ 1956(a)(1).”) But it might just as readily
have used the term “profits.”
Secondary sources defining the
word “proceeds” undercut Grasso’s
proposed interpretation based on
Scialabba. For example, the Uniform
Commercial Code defines “proceeds” as
“whatever is acquired upon the sale, lease,
license, exchange, or other disposition of

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collateral. . . .” U.C.C. § 9-102(64)(A).
Similarly, Black’s Law Dictionary 1222
(7th ed. 1999) defines “proceeds” as “the
amount of money received from a sale”
and lists “net proceeds” as a distinct sub-
entry under “proceeds.” Nonetheless,
dictionary definitions are neither uniform
nor dispositive. Webster’s first definition
of proceeds is “the total amount brought
in,” but the second is “net profit,” and the
third is “the net sum received . . . after
deduction of any discount or charges.”
Webster’s Third New International
Dictionary 1807 (1986).
Judicial definitions of “proceeds” in
other contexts also vary, though they are
generally more expansive than the
interpretation Grasso urges. In construing
the scope of criminal forfeiture of
“proceeds” under the Racketeer Influenced
and Corrupt Organizations (“RICO”) Act,
most courts have held that proceeds
involve more than net profits. In fact, the
Seventh Circuit was unique in holding
otherwise. See United States v. Masters,
924 F.2d 1362, 1369–70 (7th Cir. 1991).
The Second Circuit and a District Court in
our Circuit have held that proceeds
represent “gross profits,” meaning total
revenues minus marginal costs, but not
fixed costs. United States v. Lizza Indus.,
Inc., 775 F.2d 492, 497–99 (2d Cir. 1985);
United States v. Milicia, 769 F. Supp. 877,
888 (E.D. Pa. 1991). The First, Fourth,
and Eighth Circuits understand the term to
mean “gross revenues.” United States v.
Hurley, 63 F.3d 1, 21 (1st Cir. 1995);
United States v. McHan, 101 F.3d 1027,
1041–43 (4th Cir. 1996); United States v.
Simmons, 154 F.3d 765, 770–71 (8th Cir.
1998). See generally Anup M alani, The
Scope of Criminal Forfeiture Under
RICO: The Appropriate Definition of
“Proceeds,” 66 U. Chi. L. Rev. 1289
(1999).
Turning to the money laundering
statute, the Seventh Circuit is alone in its
restrictive definition of “proceeds.” The
Sixth Circuit has noted that “proceeds,” as
used in § 1956, is a “commonly
understood word in the English language,”
and includes “what is produced by or
derived from something (as a sale,
investment, levy, business) by way of total
revenue.” United States v. Haun, 90 F.3d
1096, 1101 (6th Cir. 1996) (quoting
Webster’s Third New International
Dictionary 1807 (1971)). Similarly, the
Ninth Circuit has adopted an expansive
definition of “proceeds” as it is used in the
money laundering statute, relying on
dictionary definitions to assign it the
“broad[] meaning of that which is
obtained . . . by any transaction.” United
States v. Akintobi, 159 F.3d 401, 403 (9th
Cir. 1998) (internal citation omitted).
Only one Circuit has explicitly
considered the Seventh Circuit’s decision
in Sciallaba. In United States v. Iacaboni,
221 F. Supp. 2d 104, 112 (2002), reversed
in part on other grounds by 363 F.3d 1
(1st Cir. 2004), the United States District
Court for the District of Massachusetts
rejected the Seventh Circuit’s conclusion
that proceeds should be interpreted as
profits rather than total revenue. In March
2004, the First Circuit approved the
District Court’s reasoning, noting simply:

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“We have previo usly rejected
[Appellant’s] interpretation of the term
‘proceeds’ in the RICO forfeiture context.
[He] has offered no rationale for
abandoning that approach here.” 363 F.3d
at 4 (citation omitted).
Given the many definitions of
“proceeds” and the uncertain value of
congressional records in choosing among
them,12 the best approach, we believe, is to
examine the statute itself for indications of
the intended scope of the term. The
Seventh Circuit’s opinion reasons that
proceeds must be limited to net profits
because money laundering is about
concealment and only profits need be
concealed. But the wording of the statute
suggests that concealment is only one of
the statute’s two purposes. The “normal
understanding of money laundering” may
entail “hid[ing] or invest[ing] profits in
order to evade detection,” as the Seventh
Circuit posited, Scialabba, 282 F.3d at
476, but the bifurcated text of the statute
strongly suggests that Congress had a
broader definition of money laundering in
mind.
To be sure, 18 U.S.C. § 1956
criminalizes financial transactions that
satisfy the conventional understanding of
money laundering— namely, transactions
intended “to conceal or disguise the nature,
the location, the source, the ownership, or
the control of the proceeds of specified
unl a w f u l activit y.” 18 U.S .C .
§ 1956(a)(1)(B)(i). But it is equally
unlawful under the statute to engage in a
financial transaction, knowing that the
property involved represents the proceeds
of unlawful activity, “with the intent to
promote the carrying on of specified
u n l a w f u l acti v i ty .” 1 8 U . S .C .
§ 1956(a)(1)(A)(i). In other words, the
money laundering statute prohibits not
only the concealment of proceeds, but also
the promotion of illegal activity. By
reinvesting the proceeds of his fraudulent
scheme in order to sustain it, Grasso
promoted unlawful activity within the
meaning of the statute—regardless
whether the funds were profits or gross
receipts.13
12Grasso presents extensive evidence
that Congress intended the Money
Laundering Control Act of 1986, of which
§ 1956 is part, “to fill the gap in the
criminal law with respect to the post-crime
hiding of ill-gotten gains.” United States v.
Bockius, 228 F.3d 305, 310 (3d Cir. 2000)
(quoting United States v. LeBlanc, 24 F.3d
340, 346 (1st Cir. 1994)). “But that was
not the sole purpose of the statute.” Id.
Other rationales undercut this theory. See,
e.g., Iacaboni, 221 F. Supp. 2d at 112 n.2
(“[The Seventh Circuit’s interpretation
would imply that] so long as the illegal
enterprise had no net profit, no money
laundering prosecution would be possible.
Because Congress could not have intended
such a result, the court follows the
majority of circuits in holding that
‘proceeds’ should be interpreted as ‘total
revenue’ rather than ‘net profits.’”).
13Because we believe the meaning of
“proceeds” is clear from the text of § 1956,
we need not consider the related policy

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Finally, we note that we have
explicitly rejected one of the principal
factors cited by the Seventh Circuit in
support of its construction of the statute.
The Court commented in Scialabba: “If
. . . the word ‘proceeds’ is synonymous
with gross income, then we would have to
decide whether, as a matter of statutory
construction (distinct from double
jeopardy), it is appropriate to convict a
person of multiple offenses when the
transactions that violate one statute
necessarily violate another.” Scialabba,
282 F.3d at 477 (internal citations
omitted). Our Court, however, has
concluded that § 1956 may subject an
individual to multiple penalties based on
the same crime without violating either
double jeopardy or the principles
governing statutory interpretation.
In United States v. Conley, 37 F.3d
970, 978–79 (3d Cir. 1994), we held that
prosecution for both gambling and money
laundering did not implicate double
jeopardy because the statutory elements of
the offenses differ; an individual is guilty
of money laundering only if he or she
intended to conceal or promote unlawful
activity. The Seventh Circuit
distinguished our decision in Conley,
suggesting that if “proceeds” is interpreted
broadly, the similarity between money
laundering and the underlying criminal
activity is problematic as a matter of
statutory construction. But our Court has
resolved the latter issue as well. In United
States v. Omoruyi, 260 F.3d 291, 295 (3d
Cir. 2001), we recognized that “conduct
constituting the underlying offense
conduct may overlap with the conduct
constituting money laundering.” An
individual may be convicted for money
laundering as long as the financial
transactions are conducted with proceeds
of the illegal transaction and with the
intent to promote the underlying offense.
Id.
We have regularly upheld money
laundering prosecutions based on the
reinvestment (“plowing back ”) of
proceeds. See, e.g., United States v. Diaz,
245 F.3d 294, 305 (3d Cir. 2001); United
States v. Cefaratti, 221 F.3d 502, 511 (3d
Cir. 2000); Conley, 37 F.3d at 972. And
we have never suggested that proceeds
must be net. We see no reason to adopt
such a requirement now. We therefore
hold that “proceeds,” as that term is used
in § 1956, means simply gross receipts
from illegal activity. An individual may
engage in money laundering regardless
whether his or her criminal endeavor
ultimately turns a profit.
arguments. We note, however, that
various factors favor adoption of a broad
definition of the term. For example, it
would be very difficult to prove that
“profits” were used to promote an illegal
venture, since criminals rarely keep
records of the overhead expenses of their
illegal activities. Similarly, in an ongoing
criminal business, it would be difficult to
determine at what point a defendant had
netted out all business expenses. When do
criminal businesses operate by recognized
auditing standards?

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Thus we conclude that Grasso was
properly convicted and sentenced for
money laundering in violation of § 1956.
In the context of our review standard, he
has failed to establish error of any sort, let
alone plain error.
B. The District Court’s Award of
Restitution
We next address Grasso’s
contention that the District Court erred by
ordering him to pay restitution because it
failed to make factual findings in support
of the award. We remand for clarification.
The context is that at the time of
Grasso’s sentencing, the Court ordered
payment of $49,800 i n s pecia l
assessments, $180,000 in fines, $100,000
in counsel fees, and $761,126.39 in
restitution to victims of Grasso’s crimes.14
According to the pre-sentence report,
Grasso at one time had assets of
$1,127,691.79, of which $900,000 was in
“frozen funds.” But because most of the
frozen funds were in market-sensitive
securities and brokerage funds, they
fluctuated in value. Indeed, from the time
of the pre-sentence report’s calculation to
the date of sentencing the funds’ value had
decreased by more than $200,000,
resulting in an apparent shortfall for the
payment of restitution.
The Mandatory Victims Restitution
A c t ( “ M V R A ” ) , 1 8 U . S . C .
§§ 3663A–3664, enacted in 1996, requires
a sentencing court to order full restitution
to identified victims of certain crimes and
to specify the manner and order in which
restitution is to be paid. The MVRA
amended the provisions for restitution set
out previously in the Victim and Witness
Protection Act, 18 U.S.C. § 3663 et seq.,
pursuant to which district courts had
discretionary authority to award restitution
and were required to consider such factors
as the defendant’s financial ability to pay.
See United States v. Coates, 178 F.3d 681,
683 n.3 (3d Cir. 1999).
Under the amended provision, the
discretion of a district court in awarding
restitution is limited. Coates set out two
steps for application of the statute. First,
1418 U.S.C. § 3612(c) sets the priority
for payments by defendants ordered at
sentencing:
Any money received from a
defendant shall be disbursed
so that each of the following
obligations is paid in full in
the following sequence:
(1) A penalty assessment
under section 3013 of title
18, United States Code.
(2) Restitution of all
victims.
(3) All other fines, penalties,
costs, and other payments
required under the sentence.
Id. The District Court’s judgment
provided for the payment of special
assessments, fines, and counsel fees from
the frozen funds, with the restitution
ordered in Criminal No. 00-51 to be paid
out of the balance. On remand, the order
of payment should be reset per § 3612.

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the court must order full restitution15
“without consideration of the economic
circumstances of the defendant.” Coates,
178 F.3d at 683 (citing 18 U.S.C. §
3664(f)(1)(A)). Second, “[a]fter ordering
full restitution, the district court ‘shall
specify in the restitution order the manner
in which, and the schedule according to
which, the restitution is to be paid.’ In so
doing, the district court is required to
consider the financial resources, projected
earnings, and financial obligations of the
defendant.” Coates, 178 F.3d at 683
(citation omitted).16 C l e a r l y i t
makes no sense, when the mandatory
restitution sums will be paid entirely from
frozen funds, to require a district court to
consider the de fend ant’s financ ial
resources and responsibilities. While in
Coates we held that such determinations
were necessary to satisfy § 3664’s
mandate, id., the defendant there had no
frozen funds to which the restitution
claimants could look. We now hold that
when frozen funds are adequate to satisfy
restitution, a district court may stop short
of Coates’ second step. Here we have
frozen funds. But we do not know their
precise value, nor the number of claims to
be satisfied. At the sentencing colloquy,
the Government reported that the value of
the frozen funds had decreased to
$693,467.21, and counsel for Grasso
explicitly noted that they would not cover
the ordered expenditures.17 We are
15Grasso’s suggestion that a preliminary
determination must be made whether each
individual qualifies for restitution is
plainly incorrect. Each individual who
made a payment was “directly and
proximately harmed as a result of the
commission of the offense” within the
meaning of 18 U.S.C. § 3663A(a)(2) and
is consequently entitled to restitution.
16Thus, while full restitution is
mandatory, “[t]he court may order the
defendant to make a lump-sum payment,
reasonable periodic payments, or, if the
defendant is indigent, nominal periodic
payments.” Id. at 683–84.
17The transcript of oral argument
contains t he fo ll ow ing co nfu sing
exchange:
The Court: All right. Mr.
Phillips, any reason you
know of why this sentence
I’ve just stated should not be
imposed?
Mr. Phillips: Your Honor,
the only question I have had
to do I guess with the items
you listed, fine, restitution,
attorney’s fees, special
assessment. When you add
those numbers up, they’re
more than what is available
of the frozen assets.
The Court: That’s correct.
T he balance goes to
restitution.
Mr. Phillips: Oh, it was the
balance.
The Court: Right.
Mr. Phillips: Oh, okay.
I’m—

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therefore persuaded that a remand is
necessary.
On remand, if the District Court
should determine that the frozen funds are
adequate to satisfy the full amount of
restitution (after payment of $49,800 in
special assessments), nothing further need
be found to comply with the MVRA
requirements. If, however, the funds are
inadequate, the District Court should
proceed in accordance with 18 U.S.C.
§ 3664(f)(2) to determine the manner in
which, and schedule according to which,
restitution is to be paid.18
The Court: Whatever’s left
after those monies are paid
is for restitution.
Arguably the District Court intended
restitution to be paid only to the extent of
the frozen funds. As § 3664 requires full
restitution, however, this interpretation too
would necessitate remand.
18Three additional issues bear
consideration on remand. First, the
Government contends that Grasso failed to
claim that payment of $180,000 in fines
impaired his ability to pay restitution and
that he must therefore pay the fines from
assets outside the frozen funds. In United
States v. Torres, 209 F.3d 308, 312 (3d
Cir. 2000), we noted that “the defendant
has the burden of proving his or her ability
to pay [fines].” Moreover, “[w]here . . . a
defendant did not at sentencing raise the
issue of his or her inability to pay, a
sentencing court’s decision to impose a
fine and the amount of the fine is reviewed
for plain error.” Id. at 313. Nonetheless,
we were careful to note in Torres that the
defendant had not argued that the District
Court failed to consider his overall ability
to pay a fine. Rather, he argued only that
“the record before the District Court did
not establish whether he had the earning
capacity to pay a fine while on supervised
release.” Id. Applied to our case, if on
remand there is determined to be a
shortfall of funds available for fines
(obviously the case if the funds are
insufficient to pay restitution amounts), the
District Court should consider Grasso’s
ability to pay this amount as well.
Second, it is apparent from the
record that the District Court intended to
order the payment of restitution to the
30,007 victims id entified by the
Government. The judgment, however,
states that the restitution shall be paid to
“any payees” identif ied by th e
Government. We presume that these
payees are in fact the identified victims.
Finally, we note a discrepancy
between the District Court’s remarks
during the sentencing colloquy and the
payment terms set forth in the judgment.
We glean from one statement by the Court
at sentencing that it intended Grasso, upon
his release from custody, to pay $100 per
month toward any outstanding financial
obligations. This provision, however, was
not included in the written order. If on
remand there is a shortfall to pay
restitution, the Court should justify the
schedule of payment by reference to
Grasso ’s financial resources and

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III. Conclusion
Reviewing for plain error, we
conclude that the District Court’s
interpretation of “proceeds” in the money
laundering statute was correct, and we
therefore affirm Grasso’s conviction and
sentence. On the issue of restitution, we
vacate the District Court’s order and
remand for reconsideration in light of the
value of the frozen funds. If the Court
determines that those funds are inadequate
to pay restitution in the priority scheme set
by 18 U.S.C. § 3612, it should follow the
requirements of 18 U.S.C. § 3664(f)(2).
obligations, pursuant to § 3664.

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