United States v. Santos

Facts of the Case

In an illegal lottery run by respondent Santos, runners took commissions from the bets they gathered, and some of the rest of the money was paid as salary to respondent Diaz and other collectors and to the winning gamblers. Based on these payments to runners, collectors, and winners, Santos was convicted of, inter alia, violating the federal money-laundering statute, 18 U.S.C. § 1956, which prohibited the use of the proceeds of criminal activities for various purposes, including engaging in, and conspiring to engage in, transactions intended to promote the carrying on of unlawful activity, § 1956(a)(1)(A)(i) and § 1956(h). Based on his receipt of a salary, Diaz pleaded guilty to conspiracy to launder money. The Seventh Circuit affirmed the convictions. On collateral review, the District Court ruled that, under intervening Circuit precedent interpreting the word proceeds in the federal money-laundering statute, § 1956(a)(1)(A)(i) applied only to transactions involving criminal profits, not criminal receipts. Finding no evidence that the transactions on which respondents’ money-laundering convictions were based involved lottery profits, the court vacated those convictions. The Seventh Circuit affirmed. Petitioner United States appealed.

Question

In the federal money laundering statute 18 U.S.C. 1956(a)(1), which makes it a crime to use the proceeds of an illegal activity to promote the activity or conceal the proceeds, does the word proceeds refer to the gross income received from the illegal activity or to the net income (profits, or gross income minus expenses)?

CONCLUSION

Splitting 5 to 4, the Court affirmed the Seventh Circuit, answering that proceeds refers to net income or profits and not to gross income. Because the statute nowhere defines the term proceeds, the plurality applied the so-called rule of lenity which requires such ambiguous statutes to be interpreted in favor of defendants. Justice Antonin Scalia announced the judgment and wrote a plurality opinion for himself and three other justices. Justice John Paul Stevens concurred in the judgment. Justice Samuel Alito wrote a dissenting opinion, joined by Chief Justice John G. Roberts, Jr., Justices Anthony Kennedy and Stephen G. Breyer.

Case Information

  • Citation: 553 US 507 (2008)
  • Granted: Apr 23, 2007
  • Argued: Oct 3, 2007
  • Decided Jun 2, 2008