Why driving with hidden cash is (probably) no longer money laundering in Mississippi

Article by Scott Gilbert Featured Author

Posted November 2016

Over the last two decades, law enforcement officers specially trained in the interdiction of drugs have become ubiquitous on Mississippi’s interstate highways. During that time, an incalculable amount of illegal drugs have been seized and the traffickers hauling the drugs prosecuted. In addition to the successful interdiction of illegal drugs, these specially trained law enforcement officers have also become adept at finding and seizing large amounts of money. Prosecuting money couriers, however, presented a challenge. Without actual drug evidence, the odds of bringing a successful prosecution for violating Mississippi’s Uniform Controlled Substances Act were low. And without a bulk currency smuggling statute, the discovery of hidden money seemed to fall between the proverbial “cracks” of Mississippi’s criminal code. In 2004, however, Mississippi’s interstate money laundering statute was successfully used for the first time to prosecute the driver of a vehicle with $170,040 found hidden in the gas tank.

Section § 97-23-101(1)(b)(ii)(1) of the Mississippi Code makes it a crime to “transport … funds … from a place in the state to … a place outside the state … knowing that the funds involved in the transportation represent the proceeds of some form of unlawful activity and knowing that such transportation is designed … to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of [the] specified unlawful activity.”

The practice of charging money couriers with money laundering continues in Mississippi today. However, a 2008 United States Supreme Court holding invalidated the federal law upon which Mississippi’s application of its money laundering statute is premised. This change in the law suggests that Mississippi’s prosecutors will no longer be able to sustain money laundering charges brought against bulk money couriers.

The Tran Case — Hidden Money Results in a Conviction

On December 10, 2002, Tran and Johnson Quoc Nguyen were stopped in Rankin County, Mississippi for a traffic violation.² The roadside encounter led to a consensual search of the vehicle in which Tran and Nguyen were traveling. That search revealed a secret panel cut into one of the gas tanks. Inspection of the gas tank led to the discovery of $170,040. The money was bundled and wrapped in tin foil and vacuum sealed plastic wrap.³ Both Tran and Nguyen were convicted of interstate money laundering, and were sentenced to 20 years in prison.⁴ The State’s theory of the case was that Tran’s attempt to transport the proceeds of drug trafficking through the State of Mississippi, while concealing the money inside the gas tank of the truck to prevent its discovery was sufficient to prove concealment money laundering.⁵

As an issue of first impression, in 2006, the Mississippi Court of Appeals affirmed Tran’s conviction and reversed and rendered Nguyen’s conviction⁶. The court recognized and relied on the federal case law interpreting the analogous federal international money laundering statute, which “’virtually tracks’ word-for-word” with Mississippi’s money laundering statute.”⁷

In Tran’s appeal, the appellate court based its analysis on the holding in United States v. Carr and found that Tran’s conduct satisfied the concealment element of the statute.

So, we can conclude that Tran, the admitted owner of the money, wrapped the money to disguise its scent and stowed the money in a false gas tank to disguise it from sight. Additionally, Tran gave an inconsistent statement when he told Deputy Penn that the money did not belong to him. While it defies logic for one to refuse to acknowledge ownership of one's life savings, only to attempt to reclaim it at a later date, that act arguably concealed Tran's ownership of the money, and thereby concealed the source of the money. The plan in which Tran participated effectively removed the funds from someone's hands and concealed someone's ownership and control of the funds. The movement of these funds to Texas, as a part of the cycle of the drug trade, was necessary because narcotics traffickers cannot actually go to a bank, deposit proceeds from narcotics trafficking, and pay a supplier. Thus, the concealed movement of the funds was an integral part of the business of the drug enterprise. Additionally, Tran's method of carrying out his mission included hiding or concealing the funds in the gas tank and packaging the money to conceal it from drug dogs.⁸

According to the court, Tran’s attempts to prevent the money from being found during its transportation provided sufficient evidence for the jury to conclude that Tran had violated the concealment element of the statute.¹³ The Mississippi Supreme Court adopted the findings of the Court of Appeals.¹⁰

The Cuellar case — Virtually Identical to Tran, but Conviction Reversed

Two years later, with Tran serving his state sentence, the United States Supreme Court rejected the reasoning used in Mississippi to affirm Tran’s conviction, when it held that traveling with drug money hidden in a vehicle is not sufficient to violate the identical federal money laundering statute.¹¹ The Court’s holding in Cuellar calls into substantial doubt the continued viability of the holding in Tran.

In Cuellar, Humberto Fidel Regalado Cuellar was stopped near the Texas border. During the encounter, the defendant claimed he was on a three day business trip but gave differing versions of his itinerary, and had no luggage or extra clothing. Subsequently, the officer discovered an amount of cash in the defendant’s pocket that smelled of marijuana, and observed goat hair spread throughout the rear of the vehicle. A drug detection dog alerted on the vehicle, and the defendant consented to a search. Police ultimately found $81,000 in currency hidden in a false compartment in the floor of the vehicle, which was wrapped in plastic and sealed with duct tape. The defendant was indicted and convicted of money laundering, in violation of Title 18, United States Code, Section 1956(a)(2)(B)(i).¹²

The Supreme Court rejected the idea that the mere concealment of money during transportation was sufficient proof to convict someone of money laundering.¹³ The Court held that the salient question is not “how one moves money” (i.e., how the courier hides the money to prevent its discovery during the transportation) but is instead “why one moves money” (i.e., why the money is being transported in the first place).¹⁴ While the Court did recognize that the concealment of the money during its transportation could be circumstantial evidence that the transportation of the money was “only one step in a larger plan to facilitate the cross-border transport of the funds,” the court ultimately held that the “probative force, in that context, is weak. ‘There is a difference between concealing something to transport it, and transporting something to conceal it.’”¹⁵

Even with abundant evidence that petitioner had concealed the money in order to transport it, the Government's own expert witness—ICE Agent Richard Nuckles—testified that the purpose of the transportation was to compensate the leaders of the operation. (“[T]he bulk of [the money] generally goes back to Mexico, because the smuggler is the one who originated this entire process. He's going to get a large cut of the profit, and that money has to be moved back to him in Mexico”). The evidence suggested that the secretive aspects of the transportation were employed to facilitate the transportation, (noting that “concealment of the funds during the U.S. leg of the trip [was] a vital part of the transportation design or plan”), but not necessarily that secrecy was the purpose of the transportation. Agent Nuckles testified that the secretive manner of transportation was consistent with drug smuggling, but the Government failed to introduce any evidence that the reason drug smugglers move money to Mexico is to conceal or disguise a listed attribute of the funds.¹⁶

Tran and Cuellar are essentially the same, as was the evidence at both of their trials. Both cases involved a DEA expert witness testifying that “the purpose of the transportation was to compensate the leaders of the [drug] operation.”¹⁷ The experts further similarly testified that the “secretive manner of transportation was consistent with drug smuggling.”¹⁸

While the facts were virtually identical, the holdings were different. The United States Supreme Court concluded that these secretive aspects of the transportation, which “were employed to facilitate the transportation” do not equate to proof “that secrecy was the purpose of the transportation.”¹⁹ The Supreme Court’s rationale is logical. The purpose of laundering money is to make it appear as if the money came from a legitimate source. Transporting money obtained from selling drugs for the purpose of giving it to the drug supplier is the antithesis of an attempt to conceal any one of the attributes listed in the statute. Instead of making the money appear to be the proceeds of some legitimate activity, delivering it back to the drug supplier actually proves that the nature of the money is illicit. Certainly transporting the money to the location where the drug supplier is located does nothing to conceal its true nature. Moreover, transporting the money for the purpose of taking it to the drug supplier proves — not conceals — that it is the drug supplier who is the owner of the money. The use of a money courier, and the employment of sophisticated techniques to hide the money during its transportation, are factors that tend to prove — not disprove — that the drug supplier is in control of the funds.

Where Does That Leave Mississippians?

The fact is, we don’t know — Mississippi Courts are not bound by federal law when interpreting Mississippi law. But the likely result is that the Cuellar result will control. Going to great lengths to hide money during its transportation and prevent its detection by police increases the odds that the transportation will be successful. That alone, however, should be insufficient to violate the money laundering statute.²⁰ Hiding money like Tran and Cuellar makes the money appear to be the proceeds of a crime. The purpose of laundering the proceeds of crime is to do just the opposite — to make it appear legitimate. Unless Mississippi’s legislature enacts a bulk currency smuggling law, prosecutors and law enforcement will have to find another way to prosecute drug money couriers in Mississippi.

1. Scott Gilbert is a former Assistant United States Attorney for the Southern District of Mississippi, where he litigated white-collar crime matters, including health care fraud, money laundering, the Bank Secrecy Act, bank fraud, asset forfeiture and public corruption. Scott is now counsel with the firm of Watkins & Eager, where he focuses his practice in Healthcare Litigation, White Collar Criminal Defense and state and federal asset forfeiture litigation and consulting.
2. Tran v. State, 963 So.2d 1, 4 (Miss.Ct.App. 2006).
3. Id. at 5.
4. Id. at 3-4.
5. Id. at 6.
6. Nguyen’s conviction was reversed for reasons unrelated to the issue addressed in this article. Tran, 963 So.2d at 4.
7. Id. at 7, citing also 18 U.S.C. § 1956(a)(2)(B)(i).
8. Id. at 12, citing United States v. Carr, 25 F.3d 1194 (3d. Cir. 1994).
9. Id.
10. Tran v. State, 962 So.2d 1237, 1240 (Miss. 2007).
11. See Cuellar v. United States, 128 S.Ct. 1994 (2008).
12. Id. at 1998.
13. Id. at 2002.
14. Id. at 2005.
15. Id. at 2004-05.
16. Id. at 2005, (internal citations omitted)(emphasis added).
17. Id.
18. Cuellar, 128 S.Ct. at 2005.
19. Cuellar, 128 S.Ct. at 2005 (emphasis included in original).
20. Id. at 2003 (“[M]erely hiding funds during transportation is not sufficient to violate the statute, even if substantial efforts have been expended to conceal the money.”).