Category: Fraud

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California Money Laundering

Since AMC’s premier of Breaking Bad, many people have became intrigued with the criminal world and how criminal enterprises logistically function. Disguising their obscene wealth becomes a significant factor for the characters, and they purchase a car wash to use as a filter for their money. Their actions exemplify California Money Laundering at it’s most basic. The criminals use an intermediary to conceal the source of criminal funds in order to appear legitimate, thereby avoiding suspicion from law enforcement officials.

 

California law describes two distinct forms of money laundering. California State Penal Code 186.10 defines money laundering related to any type of crime. California State Health and Safety Code 11370.9 concerns money earned from drug crimes.

 

 

An example of money laundering under California State Penal Code 186.10  involves a married couple. The husband runs an illegal gambling ring on the weekends and brings home an average of $5,000 every week. During the week his wife consistently deposits the cash into their joint banking account. Although she never takes part in the illegal activity, she knows where the money came from. This is enough to convict a person of money laundering.

 

An example of money laundering under California State Health and Safety Code 11370.9  involves a successful drug dealer. Throughout the month he makes $30,000 by selling black tar heroin and cocaine. He uses the cash from drug sales to stock the registers of a fleet of food trucks that he owns. He uses the food trucks to conceal the source of the drug money, and thus can be convicted of money laundering.

 

 

 

The prosecution must prove three elements of the crime in order to convict someone of money laundering in the State of California.

  • The individual conducted or attempted to conduct a transaction through a financial institution.
  • The transaction met the minimum amount of money required by California state law.
    • $5,000 over a 7-Day period or $25,000 over a 30 day period
  • The individual took part in the financial transactions to promote illegal activity.

 

The State of California can convict people of money laundering whether or not they were involved with the other illegal activities that generated the funds.

 

California law considers both forms of money laundering as wobblers. meaning the prosecution may pursue misdemeanor or felony charges for money laundering. The charges depend on the defendant’s criminal history as well as on the facts of the case.

 

Misdemeanor penalties can include jail time of up to one year, and fines of up to $1,000.

 

Felony penalties include jail sentences of from 16 months to four years, and fines of up to $250,000, or twice the amount of money laundered, whichever sum is greater.

 

cartoon portrait of al capone

 

History of Money Laundering

 

Al Capone arguably ran the most successful organized crime ring in the United States during the prohibition era.  Although he earned upwards of 100 million dollars annually through bootlegging, extortion, prostitution, and illegal gambling, the authorities could not find the money. Capone invested in cash-only laundromats as a way to obscure the source of his financial gains, thereby coining the phrase “money laundering.”

 

Currently, the term refers to any process that “cleans” criminally attained funds of their illicit origins. This process allows the funds to be used legally.

 

While Capone’s actions coined the term “money laundering,” the practice has been around as long as money has existed.

 

The three integral steps of money laundering involve placement, layering, and integration.

 

Placement involves converting illegally obtained money into assets that seem legitimate. The practice could involve an individual depositing funds into a bank account of a separate entity. The separate entity then functions as a middleman between the criminal money and legitimate spending.

 

Layering involves using a multitude of transactions in order to distance the funds from their criminal origins. The practice could involve multiple transfers across multiple accounts, or the purchase of tangible property. Basically, layering disguises the money’s source.

 

Integration allows the money to reenter the mainstream economy. Moreover, it benefits the original owner. The owner can invest the money in legitimate businesses and produce fake invoices to further mask the origin of the money.

 

Prior to 1986, the federal government did not recognize money laundering as an independent crime. Federal prosecutors needed to link money laundering to a separate crime, such as tax evasion in the Al Capone case. However, the Money Laundering Control Act of 1986 permanently outlawed money laundering as an individual crime.

 

The Money Laundering Control Act of 1986 began to crack down on money obtained from transporting and selling illegal drugs. Drug trafficking often occurred through large-scale organized crime rings. However, low-level workers handled the actual transportation and sale of the drugs while crime ring leaders were able to keep the profits.

 

The money laundering Control Act of 1986 allowed prosecutors to charge drug bosses for merely handling the money attained through illicit activity.

 

drawing of a gangster in a hat smoking a cigarette

 

Defining California Money Laundering

 

Understanding the various terms used in California law pertaining to money laundering can facilitate an understanding of the crime and it’s definition.

 

California State Juror Instructions 2997, Money Laundering, provides the following explanations:

 

 

“Financial institution” means any national bank or banking institution located or doing business in the State of California.

 

A “transaction” includes the deposit, withdrawal, transfer, or bailment, loan, pledge,  payment, or exchange of currency or a monetary instrument, or the electronic, wire, magnetic, or manual transfer of funds between accounts by, through, or to, a financial institution.

 

A “monetary instrument” means money of the United States of America, or of any other separate entity

 

“Criminal activity” means a criminal offense punishable under the laws of the State of California by death or imprisonment in the state prison, or a criminal offense committed in another jurisdiction which, under the laws of that jurisdiction, is punishable by death or imprisonment for a term exceeding one year.

 

A “foreign bank draft” means a bank draft or check issued or made out by a foreign bank, savings and loan, casa de cambio, credit union, currency dealer or exchanger,  check cashing business, money transmitter, insurance company, investment or private bank, or any other foreign financial institution that provides similar financial services, on an account in the name of the foreign bank or foreign financial institution held at a bank or other financial institution located in the United States or a territory of the United States.

 

 

California State Penal Code 186.10

 

California State Penal Code 186.10 defines general money laundering as:

Conducting or attempting to conduct, a transaction through a financial institution.

 

The transaction or series of transactions through the financial institution must add up to a total value of more than $5,000 over a 7-Day period, or more than $25,000 over a 30-day period.

 

The individual must conduct the transactions:

–   in a deliberate attempt to promote criminal activity

–    with the knowledge that the funds originally came from illegal activity

 

 

Example

 

An example of General money laundering involves Jan. Jan runs a brothel and makes $1,500 a day.  Every Monday and Thursday she deposits $4,500 into the same bank account. The State of California could convict Jan of general money laundering.  Even though she never attempted to conceal the origin of the funds, she did make multiple deposits within a seven-day period totaling more than $5,000. The money came from an illegal source.

 

However, the prosecution must prove the defendant intended to support criminal activity.

 

Another example involves Ryan and Kelly.  Ryan and Kelly began dating years ago. Ryan explains to Kelly that he wants to start a business, but needs start up money.  Kelly gives Ryan $15,000 as an investment for what she believes to be equity in a legitimate business. However, Ryan uses the money to start a meth lab.

 

Kelly did not know that her money would be used to finance criminal activity involving controlled substances. She therefore cannot be convicted of money laundering.

 

California Health and Safety Code 11370.9

 

California Health and Safety Code 11370.9 describes money laundering in connection with controlled substance crimes.

 

The prosecution must prove three things in order to convict an individual of money laundering in connection with controlled substance crimes.

  1. The individual received, acquired, or engaged in financial transactions involving money or tangible property that he or she understood to have resulted from a controlled substance offense.
  2. He or she did so to conceal or disguise the source, ownership, or control of the money.
  3. The amount of money laundered totaled more than $25,000 over a 30-day period.

 

table with drugs, money, and a pistol on top

 

Illustrative Examples

 

Example A.

 

Michael sells cocaine. One week he deposits $10,000 into a single bank account. He intends to use that drug money to pay his living expenses over the next two months.

Under California State Health and Safety Code 11370.9, Michael cannot be convicted for two reasons. First, he did not attempt to conceal the origin of the money that he deposited into a bank. Second, he only deposited $10,000, which is less than the required amount of $25,000.

 

However he may very well be charged under California State Penal Code 186.10.

Michael made a deposit to a bank account that totaled more than $5,000, and he understood the money came from criminal activity.

 

 

Example B.

 

A related example  involves Michael and his cocaine business. Over the next month, Michael sells $40,000 worth of cocaine, and now has $40,000 in cash. Michael understands the inherent risk of carrying that much cash. However, he also knows that he cannot deposit $40,000 of illegal money into a bank account.

Michael makes a deal with his friend Scott. Scott owns a pawn shop, and can use the cash to stock the register. Michael agrees to give Scott $40,000 in cash. In return,  Scott will give Michael $40,000 in the equity of his pawn shop.

 

The prosecution could not charge Michael under California State Penal Code 186.10 because he never made a transaction through a financial institution.

The prosecution could charge Michael under Health and Safety Code 11370.9 because he engaged in financial transactions designed to hide the origin of illegal money derived from a drug crime. Plus, the total amount of money totaled more than $25,000.

 

 

Example C.

Yet another way money laundering can be conducted is exemplified by Michael’s cocaine business. After selling $40,000 worth of cocaine, he recognizes that he needs to get rid of the cash. On January 1st, he approaches a gold dealer and purchases $20,000 in gold. On February 19th, he spends the other $20,000 on gold from the same gold dealer.

 

Although Michael engaged in transactions designed to conceal the origin of his cocaine money, he could not be convicted of money laundering.

Michael only purchased $20,000 in one month, and his transactions never totaled more than $25,000 in a 30 day period. Therefore, Michael cannot be convicted under Health and Safety Code 11370.9.

Michael also cannot be convicted under Penal Code 186.10 because the transactions involved a gold dealer, and not a financial institution.

 

 

Penalties of California Money Laundering

 

The State of California considers both forms of money laundering to be wobblers. This means the prosecution may pursue either misdemeanor or felony charges for money laundering depending on the defendant’s criminal history, and on the specific facts of the case.

 

Misdemeanor penalties for either form of money laundering include the following:

  • Up to one year in county jail
  • Fines of up to $1,000

 

The felony penalties for Penal Code 186.10, General Money Laundering, include the following:

  • Jail time of from 16 months to 3 years
  • Fines of up to $250,000 or twice the amount of money laundered, whichever sum is greater
  • The maximum fines increase if the defendant has any prior money laundering convictions.
  • The maximum prison sentence increases if the total amount of money laundered is more than $50,000.

 

The felony penalties under California State Health and Safety Code 11370.9, Controlled Substances Money Laundering, include:

  • Prison sentences of from 2 to 4 years
  • Fines of up to $250,000, or twice the amount of money laundered, whichever sum is greater

 

laundromat

 

Understanding Money Laundering in California

 

Money laundering covers any process designed to obscure the origin of illicitly obtained money.

 

The State of California recognizes two forms of money laundering. Penal Code 186.10 concerns money laundering related to any type of criminal activity, while Health and Safety Code 11370.9 pertains to money laundering related to any drug crime.

 

The State of California considers both crimes to be wobblers. Consequently, the prosecution can pursue either felony or misdemeanor charges.

 

The misdemeanor penalties include county jail time of up to one year, and fines of up to $1,000.

 

On the other hand, felony money laundering charges include penalties of from 16 months to four years in prison, as well as fines of up to $250,000, or twice the amount of money laundered, depending on which sum is greater.

 

 

Defending Against Money Laundering Charges in Callifornia

 

Regardless of the money laundering charge, experienced criminal defense attorneys can mount the most effective legal defenses.

 

Money laundering convictions under Penal Code 186.10 require both intent and knowledge. Experienced defense attorneys can show that the defendant neither intended to promote criminal activity, nor understood that the money came from criminal activity.

 

Because conviction under Health and Safety Code 11370.9 requires an intent to hide the source or owner of drug proceeds, the prosecution must prove that the defendant both knew the source of the funds, and intended to hide it.

 

The amount of money laundered determines whether the prosecution can pursue money laundering charges. If the defendant did not make his transactions with the required amount of money as defined by law, he or she may not be convicted of money laundering.

 

One of the most important factors of any criminal charge pertains to police behavior. An experienced criminal defense attorney can examine the timeline, research the situation, and accurately understand the series of events. If the defense attorney discovers police misconduct, such as illegal searches or seizures, then all evidence against the defendant becomes inadmissible.

 

Working with an aggressive defense attorney can lead to the most successful outcome for defendants accused of money laundering crimes.

California Theft by False Pretenses

California Penal Code 532 defines theft by false pretenses. The state prohibits people from making false promises, thereby convincing someone else to give up their property.

People often think of theft as forcibly taking property belonging to others. In other words, someone takes property against the will of another person or entity. On the other hand, theft by false pretenses involves someone willfully giving up his or her property. However, he or she does this only because of false information deliberately provided by another person or entity. Some may describe this crime as theft through deception.

The penalties for theft by false pretenses are determined by the value of the stolen property. The state may classify the crime as petty theft if the value of the property stolen is assessed at less than $950, or as grand theft if the property is assessed at more than $950. Grand theft also includes firearms and automobiles. Grand theft convictions carry penalties of up to three years in state prison plus fines, while petty theft penalties include up to six months in jail plus fines.

The 2002 Movie Catch Me if You Can is based on Frank Abignale Jr.’s semi-autobiographical book of the same name, and depicts a young man stealing $2.5 million before his 21st birthday. He used confidence tricks and false pretenses to steal every cent.

 

man counting cash and cell phones

 

Defining Theft By False Pretenses in California

 

Theft by false pretenses in the State of California is outlined in Penal code 532, which defines a few key elements.

  • The defendant intentionally deceived the victim through false pretenses or misrepresentation.
  • The defendant did so in order to receive money or property from the victim.
  • The victim relied on the false pretenses or false representation of the defendant.

AND

  • The defendant actually misrepresented himself or herself, or made promises under false  pretenses.

The prosecution can illustrate false pretenses through any of the following:

    1. A false token
    2. A written note regarding the false pretenses signed by the defendant
    3. The testimony of two witnesses regarding the defendant’s false pretenses
    4. The testimony of one witness plus corroborating evidence

 

 

Example

 

A very real-world example of theft by false pretenses is illustrated by the Bre-X mining scandal , which occurred during the early to mid-1990’s. A Canadian gold mining company purchased a mine in Indonesia which initially produced a very limited amount of gold. Consequently, the company began to fail. However, one of the workers at the company began to “salt” the daily core samples. As a result, Bre-X began to accumulate more investors, and more money, but ultimately collapsed after the crime surfaced.

A core sample is “salted” by adding other, more valuable, minerals to the sample – in this case, gold. Salting the core samples of this particular mine indicated a much higher quantity of gold than there actually was.

Bre-X lied about the mine’s success to attract new investors. Moreover, the company convinced investors to continue supporting their failing mine through deceit. Bre-X leveraged their fraudulent core samples to acquire more investors for the struggling company.

large mining rig

Elements of The Crime

 

Convicting someone of theft by false pretenses requires the prosecution to prove the elements of the crime.

 

Element One

The first element concerns deliberate deceit. The defendant must have known that what he or she said was false, and have had the intent to convince the other person that it was true.

“False pretenses” can include:

  1. Making a reckless statement without checking its validity or the validity of any supportive facts of the statement
  2. Withholding critical information under the circumstances
  3. Making promises without any intent to keep them

 

Hypothetical Example

Tammy begins to produce what she describes as a panacea, In reality, however, there is no scientific evidence to support her claims. She convinces a person suffering from cancer to purchase her chemical compound with the promise that it will cure cancer. Tammy is guilty of theft by false pretenses even if she didn’t positively know her claims were not true. She recklessly claimed that her chemical compound could cure diseases without any scientific evidence.

Element Two

The second element involves fraudulent end goals. The defendant must intend to persuade the victim to give up his or her property to the defendant.

Deception for another purpose does not qualify as an adequate element of this crime

Example

Ryan is curious about human behavior. He decides to pretend to be Jesus Christ and to go about announcing the Second Coming – simply to observe people’s reactions. Eventually, this gains traction on the internet and he becomes a well-known public figure within a certain demographic. As a result, people begin to send him money with no solicitation on his part. Ryan is not guilty of theft by false pretenses because he never intended to persuade anyone that he was Christ, nor  did he request that property be given to him.

 

Element Three

 

The third element involves trust. The defendant’s lies must be believed by the victim. The victim  must have given up his or her property because of false information deliberately given by the defendant. If the victim knew the individual was lying, and then chose to give up his or her property, it is more difficult to prove a case of theft by false pretenses.

 

A skilled defense attorney will be able to accurately assess the victim’s motives in this situation. After examining the relationship between the  defendant and the victim, a good defense lawyer will devote adequate resources to investigating both parties. The defense attorney will accurately analyze the facts, and will be able to show that the victim did not give the property based on the defendant’s statements, but for some other reason, thus removing the fault from the defendant.

Element Four

 

The fourth element involves a deliberate lie. The individual must cause the victim to believe in his or her lie through some means.

The law recognizes four ways to illegally acquire trust in a theft by false pretenses case.

  1. A “false token” could be counterfeit money or some related item supporting the false pretenses.
  2. Any note or documentation of the false pretenses signed or handwritten by the defendant.
  3. Testimony from two witnesses that supports the false pretenses.
  4. Testimony from one witness, together with supporting evidence that indicates the false pretenses.

 

close up of a $100 bill

 

Fighting Theft by False Pretenses in California

Building a defense against theft by false pretenses charges can be challenging. However the prosecution has the burden of proving the defendant’s intent to deceive. The defendant may genuinely believe in what he or she said, and therefore never intended to deceive the victim. Moreover, the defendant may have misunderstood the situation and the facts surrounding it. A skilled defense attorney can introduce enough reasonable doubt to prevent the prosecution from attaining a conviction.

Another key factor of theft by false pretenses involves the victim relying on the defendant’s word and acting accordingly. If the victim fully understood the situation, the risks involved, and the defendant’s intent, then the victim did not rely on the defendant’s lie. If the victim did not rely on the defendants actions, then the defendant cannot be convicted of theft by false pretenses.

The penalties for theft by false pretenses are the same as for other forms of theft, and vary according to whether the charge is a misdemeanor or a felony. Theft of property valued at $950 or less is considered petty theft.

 

Penalties for Theft by False Pretenses in California

 

Theft of property valued  at more than $950, or of a car, a firearm, or livestock, is considered grand theft under California State Penal Code 532. Grand theft is considered a wobbler crime, meaning that the charge will be determined by the specific circumstances of the case, as well as by the defendant’s criminal history. However, the State of California will always charge any theft of a firearm or automobile as a felony.

 

The penalties for misdemeanor petty theft include

  1. Up to 6 months in county jail
  2. Fines of up to $1,000

 

The penalties for misdemeanor grand theft are:

  1. Up to 1 year in county jail
  2. Fines of up to $1,000

 

The penalties for felony grand theft are:

  1. 16 months to 3 years in state prison
  2. Fines of up to $10,000

 

man using a debit card

 

Understanding California Theft By False Pretenses

 

Those facing a charge of theft by false pretenses owe it to themselves to seek the most skilled defense attorney possible in order to fight the charges, and to find a successful outcome.

 

The State of California prohibits theft by false pretenses as outlined in California Penal Code 532. Theft by false pretenses can also be described as a con, or confidence trick.

 

The state must prove that the defendant carried out a few specific elements of the crime:

First, the defendant intentionally deceived the victim through a lie.

Second, the defendant lied in order to gain the victim’s trust and to receive property from the victim.

Third, the victim relied on the lie.

Finally, the defendant actually misrepresented himself or herself or made promises under false pretenses.

 

Working with an experienced legal team can make all the difference, both in a catastrophe and in a minor inconvenience. The defendant may have had genuinely good intent. Determining what other people are thinking, or thought, is not possible due to the current limitations of science and technology. The prosecution must prove intent to deceive. Since everyone makes mistakes, and since circumstances may change dynamically, proving intent to deceive is more challenging than it may appear at first glance.

White Collar Incarceration vs. Other Felony Incarceration

Incarceration is not the same for all criminals. Furthermore, not all states and counties are the same.

If you have a conviction for white collar crime, you may be wondering about your incarceration. Likely, you want to know if it will be different from those convicted of more violent felonies. The short answer: they’re different. For the longer answer, keep reading. While some call white collar prisons “resort prisons,” the dividing line is the protections for the outside world. To put it plainly, the biggest difference is the amount of security in the prisons for each type of offender.

Incarceration Type and Violence

Typically, white collar crimes non-violent in nature. They typically do not cause direct physical injury or harm to the victims. Therefore, white collar criminals get special sensitivity in some cases. In fact, in most cases, major-league, white-collar criminals don’t face much prison time. Consequently, the time they do spend in prison is in low-security penitentiaries where they enjoy freedoms unknown to other felons.

Minimum Security vs. Maximum Security Prisons

Prisoners who fall into the minimum security threshold typically sleep in dormitories or bunk beds with lockers. They use the lockers to secure their possessions. Also, there is very little supervision over the internal movements of prisoners, They are often given the freedom to wander the grounds and visit the different areas of the prison. Minimum security prisons often include libraries and entertainment rooms in which to read or watch television.

Minimum security facilities generally have a single fence that is watched, but not regularly patrolled. Prisoners often work off some of their time on community projects, like roadside litter cleanup or by working at a wilderness conservation. In most states, prisoners in minimum security facilities are allowed to access the internet and have more chances to see visitors.

The conditions of a minimum security prison are vastly different from maximum security prisons. In max, the prisoners have individual cells with sliding doors. A secure station controls when they open and close. It’s not uncommon for prisoners in maximum security prisons to spend 23 hours per day in their cell. When out of their cell, prisoners remain in the cellblock or an external cage. Movement in and out of these cellblocks is only with restraints and correctional officer escorts.

White Collar Criminals Adjust Well to Prison Life

According to researchers at the University of Cincinnati and the University of Missouri, white collar criminals adapt to prison just as well as other types of felony offenders. In some cases, they do even better. It’s true! The results of the study show that white collar criminals do have the same negative experiences as others. However, although this is the case, it is not true that white collar criminals don’t experience their own discomforts in a prison setting.

The assumption that white collar criminals can’t adjust to a prison environment is simply not true. Many theorize that because of their middle-class lifestyle, they struggle to acclimate. However, the truth is they are no more different than anyone else. In reality, white-collar criminals have the same number of problems and suffer from the same issues. In fact, in some cases, these offenders actually adapt better than others.

Criminal Defense Attorneys

About Darren Kavinoky and The Kavinoky Law Firm.

Darren Kavinoky receives recognition over and over for his commitment to clients and for being a top California defense lawyer. The Los Angeles Magazine repeatedly regards him as a Super Lawyer , and the American Trial Lawyers Association highlighted him as one of the Top 100 Trial Lawyers in California. Additionally, he is the legal analyst and special correspondent for the syndicated television program The Insider, and is a sought-after guest on shows that include Entertainment Tonight, Dr. Phil, NBC’s Today Show, and various programs on CNN and the Headline News Channel. Follow Darren on Twitter @DarrenKavinoky or www.DarrenKavinoky.com.