US v. David Howard, No. 07-4146 (4th Cir. 2009)

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UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-4146 UNITED STATES OF AMERICA, Plaintiff Appellee, v. DAVID L. HOWARD, Defendant Appellant. No. 07-4147 UNITED STATES OF AMERICA, Plaintiff Appellee, v. NICHOLAS RAGIN, Defendant Appellant. No. 07-4168 UNITED STATES OF AMERICA, Plaintiff Appellee, v. TRACY HOWARD, Defendant Appellant. Appeals from the United States District Court for the Western District of North Carolina, at Charlotte. Robert J. Conrad, Jr., Chief District Judge. (3:04-cr-00271) Argued: December 5, 2008 Decided: January 29, 2009 Before TRAXLER and AGEE, Circuit Judges, and Rebecca Beach SMITH, United States District Judge for the Eastern District of Virginia, sitting by designation. Affirmed in part, vacated in part, unpublished per curiam opinion. and remanded in part by ARGUED: Ann Loraine Hester, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA, INC., Charlotte, North Carolina; Richard A. Culler, CULLER & CULLER, Charlotte, North Carolina; Sue Genrich Berry, BOWEN AND BERRY, P.L.L.C., Wilmington, North Carolina, for Appellants. Amy Elizabeth Ray, OFFICE OF THE UNITED STATES ATTORNEY, Asheville, North Carolina, for Appellee. ON BRIEF: Claire J. Rauscher, Executive Director, Matthew R. Segal, Peter S. Adolf, FEDERAL DEFENDERS OF WESTERN NORTH CAROLINA, INC., Charlotte, North Carolina, for Appellant David L. Howard. Gretchen C. F. Shappert, United States Attorney, Charlotte, North Carolina, for Appellee. Unpublished opinions are not binding precedent in this circuit 2 PER CURIAM: David L. Howard ( David ), Tracy Howard ( Tracy ), and Nicholas Ragin ( Ragin ) (collectively the Defendants ) appeal their convictions related to and sentences prostitution and on various illegal charges primarily sales. (JA drug 65). Relevant to this appeal for all the Defendants are convictions for conspiracy to promote prostitution in violation of 18 U.S.C. §§ 2422, possess 2423, with 1952 intent (2008), to (JA distribute 66-68), more and than conspiracy fifty grams cocaine base in violation of 21 U.S.C. § 846. (JA 70). and Tracy were also convicted for conspiracy to to of David launder prostitution proceeds in violation of 18 U.S.C. § 1956. (JA 69). David contends that he was deprived of his Fifth and Sixth Amendment rights to present a defense and that he was sentenced based on an incorrect advisory guideline range. that the district court suppress certain evidence. the district money court laundering gave count. erroneously denied Tracy argues his motion to David and Tracy jointly assert that incorrect The jury Defendants instructions collectively for the appeal their sentences, arguing that the district court gave incorrect jury instructions and that the sentences violate their Fifth and Sixth Amendment rights. For the following reasons, we affirm the judgment of the district court in part, vacate in part, and remand as to David for resentencing. 3 I. Tracy s Motion to Suppress In reviewing a denial of a motion to suppress, this Court reviews the district court s factual findings for clear error and its legal conclusions de novo. United States v. Johnson, 114 F.3d 435, 439 (4th Cir. 1997). A. Relevant Facts In September 2004, Vice Detective M.J. Grimsley ( Grimsley ) received information from David, who was acting as a confidential prostituting informant, underage that Tracy girls. On was selling September 16, drugs 2004, and David informed Grimsley that Tracy had rented a hotel room and was staying in the room with his girlfriend, Keshia ( Burris ) who was listed as a guest at the hotel. Burris David also reported that Tracy and Burris had a fourteen year old girl in the room. minor was Grimsley was unable to confirm whether the alleged staying in the room but determined there was an outstanding warrant for Tracy s arrest. Instead of arresting Tracy in the hotel room, detectives waited until he left the room and drove a few blocks away from the hotel where they conducted a traffic stop. (JA 129). During the stop, Grimsley questioned Tracy about his activities at the hotel, including whether he kept a minor there or had any instrumentalities of crime in his 4 room. Grimsley asked for Tracy s consent to search the room and Tracy responded that he would consent to [Grimsley s] searching for a body but he did not want [Grimsley] poking around because he had a little money in the room. (JA 132). Tracy was then arrested on the outstanding to warrant and taken the local law enforcement center for questioning. Officers then approached Burris at the hotel and asked her permission to enter and search the hotel room. the search and opened the door with her key. She consented to Upon entering the hotel room, officers did not see a minor or any other person, but drug paraphernalia, including packaging for cocaine, a scale, a razor blade, and a bag of crack cocaine were in plain view. Upon searching the room further, officers found more crack cocaine, money, and a pistol hidden at various places. Tracy filed a motion to suppress the evidence found in the hotel room as well as certain statements he made to police in an interview after his arrest. He contended that the hotel room search was unlawful because he did not give his consent. The district court denied the motion. B. Analysis Tracy avers that Burris s consent to a search of the hotel room was not sufficient to overcome his express refusal to give consent for a search. In support of his position, Tracy cites 5 the Supreme Court s holding in Georgia v. Randolph, 547 U.S. 103 (2006), which stated that a physically present inhabitant s express refusal of consent to a police search is dispositive as to him, regardless of the consent of a fellow occupant. Id. at 122-23. In that case, the defendant unequivocally refused to consent to a warrantless police search. Id. at 107. subsequently residence. gave Id. police The permission Supreme Court to search held that His wife their the marital search was unreasonable and invalid as to the husband. Id. at 120. Tracy argues that Randolph applies here because he only gave limited fourteen year consent to a old minor search, was not that in is, the to verify hotel the room. 1 Consequently, Tracy contends the police officers breached the rule in Randolph, because they conducted a full search which was beyond the limits of his consent. The Government responds that Randolph does not apply because Tracy was not physically present at the hotel when Burris consented to a full search of the room. 1 During the hearing on Tracy s motion, the district court made a factual finding that Grimsley s testimony that Tracy gave consent to the police officers to search his hotel room for a body was credible. The court did not credit Tracy s testimony that he did not consent to even a limited search. This finding was not clearly erroneous and will not be disturbed by this Court. United States v. Depew, 932 F.2d 324, 327 (4th Cir. 1991). 6 It is not necessary for us to reach the Randolph question because, under the facts of this case, the inevitable discovery rule applies. would have [W]here it appears that evidence inevitably been discovered by lawful means, the deterrence rationale of the exclusionary rule has so little basis that the rule should not be applied. United States v. Whitehorn, 813 F.2d 646, 650 (4th Cir. 1987) (quoting Nix v. Williams, 467 U.S. 431, 444 (1984)). The officers who entered Tracy s hotel room, on the basis of the limited consent to search the room for a body, discovered the drug paraphernalia paraphernalia in plain in plain view, arrested Burris and Tracy. view. officers Upon observing inevitably would this have Incident to that arrest, officers would have searched the surrounding area. Police may conduct a search of the area immediately adjoining the place of arrest from which an attack could be immediately launched. Maryland v. Buie, 494 U.S. 325, 334 (1990). The district court found that any in items seized that were not plain view were readily accessible by any inhabitant of that room. (JA 261). Thus, while conducting a search incident to arrest, officers would have inevitably discovered the other incriminating evidence which was not in plain view. Accordingly, the district court Tracy s motion to suppress. 7 did not err in denying II. David s Right to Present a Defense This Court reviews the trial court s determination of whether a defendant s constitutional right to a fair trial has been violated de novo. See United States v. Ali, 528 F.3d 210, 232 (4th Cir. 2008) (reviewing constitutional claims de novo). Evidentiary rulings generally are reviewed for abuse of discretion. United States v. Queen, 132 F.3d 991, 995 (4th Cir. 1997). A. Relevant Facts The government informed David s counsel before trial that it possessed evidence that he had cooperated with them against his co-conspirators prior to his arrest. David gave the officers information In a taped interview, about Tracy s use of underage girls, and told officers he was not involved in the prostitution of underage girls. He gave the officers the names of the girls Tracy was using and said he would do his best to help the officers find the runaway girls. The district court initially refused to allow into evidence testimony about the information David had provided to police citing Bruton v. United States, 391 U.S. 123 (1968). for David sought to elicit testimony from Officer Counsel Decker ( Decker ) about specific statements David made while acting as an informant. The district court excluded this testimony based 8 on Bruton, although Decker was permitted to testify generically that David had provided information about the case and Tracy s hotel location. The court explained that, while David could establish that he acted as an informant, more specific testimony would not only violate the hearsay rule, but also create a danger of unfair prejudice and confusion under Federal Rule of Evidence 403. David testified in his own defense in an attempt to cure the Bruton issue. However, the government objected on hearsay grounds when David sought to testify about specific statements he had made to the police. The court sustained the objection, but ruled in the alternative under Rule 403 of the Federal Rules of Evidence and found that the evidentiary value of the statements would be de minimis, because David s motivation for acting as an informant was suspect. Ten days into trial, David filed a motion to admit exculpatory impeachment evidence, to call government counsel as a witness, and/or for severance of his trial from that of the other defendants. B. Analysis In Bruton, the Supreme Court held that the confrontation clause is violated by the defendant s statement against co-defendant. the introduction that 391 contains U.S. 9 of a non-testifying incriminating 124. As there evidence were co- defendants in incriminating this case, statements any testimony David made by about Decker as Tracy s to the activities while he was acting as an informant was barred under Bruton. Although remove the testimony David Bruton eventually barrier, nevertheless did the testify district remained in an court attempt held inadmissible. The that to the district court determined that, under Federal Rule of Evidence 403, the statements were unduly prejudicial and potentially confusing to the jury because they were only offered to counter one object of a multi-object conspiracy count which itself is but one of 17 counts against David Howard. (JA 2703). Furthermore, the proposed testimony s probative value would be de minimis, as it was just as likely that David cooperated with police for reasons other than his lack of involvement with the conspiracy, including bad blood between the brothers and in an attempt to minimize his culpability. We hold the district court did not abuse its discretion in making these determinations. Alternatively, David argues that his requests for severance should have circumstances, been granted. defendants However, indicted together together for the sake of judicial economy. Rusher, 966 F.2d 868, 877 (4th Cir. 1992). barring should special be tried United States v. David made his request for severance after nearly two weeks of trial. The district court determined that it would be unduly burdensome to 10 force vulnerable witnesses to again go through the trauma of testifying. Further, the district court found severance of the defendants at such a late date would impair the efficiency and fairness of the judicial system. The court did not abuse its discretion in refusing to sever David s trial from that of the other defendants. III. Jury Instructions and Collins Because the Defendants did not object to the district court s jury instruction, this Court reviews for plain error. United States v. Hastings, 134 F.3d 235, 239 (4th Cir. 1998). If plain error is shown the Court may correct the error if it seriously affect[s] the fairness, integrity or public reputation of judicial proceedings. Id. (quoting United States v. Olano, 507 U.S. 725, 732 (1993)). A. Relevant Facts The Defendants were each charged with and convicted of conspiring to possess with intent to distribute more than fifty grams count, of cocaine the court base. stated While in instructing relevant the part: jury you on this must then determine the quantity of cocaine base involved. You will be provided with a special verdict form that specifically addresses the drug and the quantity to be considered. (JA 3702). 11 The relevant portion of the special verdict form for each individual defendant guilty, provided was containing more a this than inquiry 50 detectable for grams the jury of of amount a cocaine to mixture answer: and base if substance reasonably foreseeable to [individual defendant]? (JA 3756, 3761, 3764). B. Analysis The Defendants argue that the jury instructions given on the drug conspiracy count violate this Court s holding in United States v. Collins, 415 F.3d 304 (4th Cir. 2005). the district determining court the erred exact by amount not of charging drugs They contend the jury attributable to with each individual defendant, rather than to the conspiracy as a whole. The issue in Collins was whether an individual defendant . . . [should] be sentenced . . . by considering the amount of narcotics distributed by the entire conspiracy? Or should that defendant s sentence be more individualized, subjecting him to punishment only for distribution attributable to him? most reasonable of Id. at 312. interpretation of the amount of narcotics This Court held that the the relevant statutory provisions requires a sentencing court to assess the quantity of narcotics attributable to each coconspirator. Id. (quoting United States v. Irvin, 2 F.3d 72, 77 (4th Cir. 1993)). This Court held that the district court must instruct the jury to 12 determine what amount of cocaine base was attributable Collins using Pinkerton principles. 2 Id. at 314. to Thus, we must determine whether the court properly instructed the jury to make an individualized finding of reasonably foreseeable drug quantities as to each of the Defendants. See United States v. Brooks, 524 F.3d 549, 553 n.5 (4th Cir. 2008). In this specifically case, the instruct court s the jury bench that instructions it must did find amounts attributable to each individual defendant. the not drug However, the special verdict form, referred to and incorporated by the jury instructions, did specifically require the jury to find whether more than foreseeable fifty to grams each of the cocaine defendant. We base was believe reasonably the Collins requirement is satisfied in this case by the special verdict form. The Ninth Circuit has held that [v]erdict forms are, in essence, instructions to the jury. United States v. Reed, 147 F.3d 1178, 1180 (9th Cir. 1998). The Ninth Circuit was unwilling to conclude that the district court committed plain error in omitting this information 2 from the formal jury Pinkerton principles refers to the concept that a member of a conspiracy is guilty of his own overt acts, as well as acts by coconspirators that are reasonably foreseeable and a natural consequence of the unlawful agreement. Pinkerton v. United States, 328 U.S. 640, 646-48 (1946). 13 instructions when the information was included in the special verdict form. United States v. Alghazouli, 517 F.3d 1179, 1189 (9th Cir. 2008). The Second Circuit also concluded that [t]he court s special verdict questions must be read in conjunction with the judge s charge to the jury. Vichare v. AMBAC, Inc., 106 F.3d 457, 466 (2d Cir. 1996). that [w]e examine the court s The First Circuit has stated instructions to the jury and wording on the verdict form as a whole to determine whether the issues were fairly presented to the jury. Sheek v. Asia Badger, Inc., 235 F.3d 687, 699 (1st Cir. 2000). As a general principle, we must assume that the jury understood and followed the court s instructions. United States v. Udeozor, 515 F.3d 260, 271 (4th Cir. 2008) (quoting United States v. Hedgepeth, 434 F.3d 609, n.4 Based omitted)). 614 on (3d Cir. these 2006) (internal principles, taking quotations the jury instructions and the special verdict form as a whole, it is reasonable to conclude the jury understood that it was to determine the amounts of cocaine base reasonably foreseeable to each individual defendant in the conspiracy. The jury ultimately received the message that drug amounts must be determined for each individual defendant. Further, the evidence that the quantity was attributable to each individual was overwhelming and essentially uncontroverted, so the error, if any existed, would not rise to the level of plain error. 14 United States v. Foster, 507 F.3d 233, 252 (4th Cir. 2007) (stating that disturbing [the defendant s] sentence on the drug conspiracy count integrity, and . . . public would seriously reputation of affect judicial the fairness, proceedings ). Accordingly, we find no error, much less plain error, in the district court s jury instructions. IV. David s Sentence This Court reviews sentences for reasonableness, applying an abuse of discretion standard of review. Pauley, 511 F.3d 468, 473 (4th Cir. 2007). United States v. The district court s factual determinations as to a defendant s role in an offense are reviewed under the clearly erroneous standard. United States v. Hyppolite, 65 F.3d 1151, 1159 (4th Cir. 1995). A. Relevant Facts David s Presentence Investigation Report ( PSR ), as amended, calculated the base offense level for violating the money laundering statute by using the drug conspiracy as the underlying offense from which the laundered funds were derived. This produced a base offense level of 36, based on 612 grams of cocaine base. The PSR then added one level for the use of underage individuals in the commission of the crime, pursuant to 15 § 2D1.2(a)(2), and two more levels for possession of a firearm, pursuant to § 2D1.1(b)(1), resulting in a total base offense level of 39. The PSR then added two more levels because David was convicted of violating 18 U.S.C. § 1956. Lastly, the PSR added three levels for David s aggravating role as a manager or supervisor in the offense pursuant to § 3B1.1, resulting in a level of 44, which exceeds the maximum offense level of 43. David s final criminal history category was category V, which resulted in a guideline range of life imprisonment. David objected on Sixth Amendment grounds to any drug amount attribution beyond the fifty grams found by the jury as part of its verdict. He also objected to using the drug offense as the underlying offense on the money laundering charge and to the manager or supervisor enhancement. The district court rejected both objections and found a quantity of more than 500 grams but less than 1.5 kilograms of drugs was attributable to David. Further, the court found that he was a manager or supervisor of the money laundering operation within the meaning of § 3B1.1. of the The district court determined the PSR calculation life imprisonment guideline range was correct and sentenced David to life in prison. David contends that the district court s calculation of his offense argues level that was the erroneous court erred for by 16 two reasons. using the drug First, David conspiracy, instead of the prostitution offense for calculating the conspiracy, money as laundering the underlying offense level. David next argues that the court erred by enhancing that offense level by three levels under the manager or supervisor provision of § 3B1.1. B. The Underlying Offense to the Money Laundering Charge To determine the base offense level for a charge of money laundering, the Guidelines direct courts to use [t]he offense level for the underlying offense from which the laundered funds were derived . . . . § 2S1.1. Application Note 2(A) provides [i}n cases in which . . . there is more than one underlying offense, the offense level for the underlying offense is to be determined under the procedures set forth in Application Note 3 of the Commentary commentary offense. directs to the §1B1.5. court § 1B1.5 cmt. 3. to § use 2S1.1 cmt. 2(A). This the most serious such In the case at bar, the most serious offense is the drug charge, not the prostitution charge. David argues that using the drug charge as the underlying offense was error because the Government did not prove that any laundered funds were derived from selling drugs, and that the court consistently stated that the origin of the laundered funds was prostitution. 17 Although the court did refer to the prostitution ring as the origin of the laundered funds, this does not bar the court from using the drug conspiracy as the underlying offense for the laundering charge. language, and relevant conduct liberally, the Courts relevant are conduct provision, including to § consider provision, 1B1.3, applicable the conduct is broadly. to not Guidelines be The construed charged in the indictment. See United States v. Asch, 207 F.3d 1238, 1244 (10th Cir. 2000); United States v. Behr, 93 F.3d 764, 765 (11th Cir. 1996); United States v. Silkowski, 32 F.3d 682, 688 (2d Cir. 1994); United States v. Davern, 970 F.2d 1490, 1494 (6th Cir. 1992). Nonetheless, the drug conspiracy charge was incorporated by reference at the first paragraph of the indictment. David was on notice that the drug conspiracy was Thus, applicable throughout to all criminal conduct charged in the indictment. Moreover, there is sufficient evidence that the receipts from the prostitution commingled. rings were services and the sale of drugs were The record reflects that the drug and prostitution inextricably linked. Testimony established that money received from the sale of drugs helped pay rent, bail, and purchases of clothes, jewelry, and condoms for the prostitutes. Moreover, the prostitutes were also directly involved in the sale of drugs. Burris testified that she and another prostitute would help bag crack for Tracy if he was in a hurry or he 18 didn t feel like doing it. (JA 2823). Burris testified that she The did this at least twice a week. delivered the drugs to the buyers. prostitutes also Burris testified that she would go to Little Mexico to drop off [crack] for D or go drop something off to David about three times a week. (JA 2836-37). Clearly some of the money David received from selling drugs was used to purchase additional drugs expenses of the prostitution ring. drug rings were so intertwined or in furtherance of the Because the prostitution and and the laundered funds were derived from both, it was appropriate to use the drug offense as the base offense in calculating the guideline range on the money laundering charge. C. David s Role as a Manager or Supervisor David s offense level was increased by three levels because the district court determined that he played an aggravating role as a manager or supervisor of the money laundering operation. Section 3B1.1(b), the guideline provision applied to David, provides that [i]f the defendant was a manager or supervisor (but not an organizer or leader) and the criminal activity involved five or more participants or was otherwise extensive, increase by 3 levels. § 3B1.1(b). Chapter Three adjustments are determined based on the offense covered by this guideline (i.e., the laundering of criminally derived funds) and not on 19 the underlying derived. § offense 2S1.1 from which the 2. David argues cmt. laundered that funds the were district court s finding that he was a manager or supervisor of the money laundering scheme was erroneous. We agree. David contends that he was not sufficiently involved in the scheme to be characterized as a manager or supervisor. While the Guidelines do not define the term manager, this Court has utilized the profession business, dictionary is an the definition: management institution, or of a a a person whose specified particular work thing phase or (as or a activity within a business or institution). United States v. Chambers, 985 F.2d 1263, 1268 (4th Cir. 1993) (quoting Webster s Third New International record Dictionary fails to 1372 support (1986)). a The finding that evidence David in met the this description as to the money laundering scheme itself. The district court found that David created the business, (referring to his prostitution business), that his [c]ell phone number was used as a number for the business, and that he drove [the prostitutes] to the johns that they were servicing, collected mother. money (JA from 3992). them, [and] However, involvement in the prostitution involvement in the money David had evidence that split these with his go to David s and not to David s scheme. supervisory 20 money facts ring, laundering any the role There in the is no money laundering scheme, which was organized and carried out for the most part by Ila. was a manager constituted Thus, the district court s finding that David or supervisor procedural of error the money rendering laundering David s scheme sentence unreasonable under Gall v. United States, 128 S. Ct. 586, 597-98 (2007). See United States v. Diaz-Ibarra, 522 F.3d 343, 347 (4th Cir. 2008) ( An error in the calculation of the applicable Guidelines range . . . makes a sentence procedurally unreasonable. ). The district court s error in the calculation of the sentencing range in determining David s sentence requires that we vacate the district court s judgment fixing David s sentence, and we remand the case to the district court for resentencing without the Chapter Three adjustment. V. Defendants Sentences The pursuant Defendants to a argue mandatory that crack their sentences guideline Fifth and Sixth Amendment rights. that were imposed violated their They note that Kimbrough v. United States, 552 U.S. ___, 128 S. Ct. 558, 169 L.Ed.2d 481 (2007), was decided after the sentencing hearing and that the approach by the district contravenes Kimbrough. a district court may court in sentencing the Defendants The Supreme Court in Kimbrough held that conclude 21 that the Guidelines crack cocaine/powder cocaine disparity yields a sentence greater than necessary. Kimbrough, 128 S. Ct. at 574. This holding abrogated the precedent in this Circuit under United States v. Eura, 440 F.3d 625 (4th Cir. 2006), which held that the district court could not diverge from the advisory sentencing range under the Guidelines by substituting its own crack cocaine/powder cocaine ratio. However, Kimbrough did not hold that the district court must conclude that any sentences within the Guidelines involving crack cocaine yields a sentence greater than necessary. Instead, Kimbrough permits a district court to sentence outside the advisory sentencing range if the court deemed it appropriate under the circumstances of that case. clearly was not sentencing range. sentencing based Here, the district court solely on the advisory The district court specifically stated that a sentence within the Guideline range in this case was sufficient, but no greater than necessary, to accomplish the objectives set forth in § 3553(a). The court remarked [s]o the sentence imposed, although consistent with the advisory guideline range, is the sentence the Court would have imposed if the guidelines never existed. If the Court had authority to sentence anywhere within the statutory maximum without respect to any limitation or guidelines or anything else, this is the sentence the Court would have imposed . . . And the Court concludes that that sentence is sufficient but not greater than necessary to meet the sentencing objectives of Section 3553(a). 22 (JA 4035) (as to David). As to Ragin, the court stated that the sentence of 360 months, though imposed with knowledge of the severity of the sentence, is sufficient but not greater than necessary to accomplish the goals of sentencing. (JA 4116). A Kimbrough analysis does not affect the Defendants sentences, because the sentencing approach taken by the district court was not contrary to the ruling in that case. The district court appropriately determined sentences it felt were sufficient but not greater than necessary and did not err in doing so. VI. Jury Instructions on the Money Laundering Count Count Twelve of the indictment charged David and Tracy with conspiracy to violate the money laundering statute, 18 U.S.C. § 1956(h) (2008). The court instructed the jury (in relevant part), that you must find beyond a reasonable doubt . . . that the funds or property involved in the financial transaction did, in fact, represent the proceeds of specified unlawful activity, in this case the proceeds of the use of interstate facilities to promote prostitution. (JA 3693-94). The jury was to use the ordinary, everyday meaning for the term proceeds, as the the term was not explicitly defined by the district court in the jury instructions. district court s Because the Defendants did not object to the instruction, this 23 Court reviews for plain error. United States v. Hastings, 134 F.3d 235, 239 (4th Cir. 1998). David and Tracy posit that the common definition proceeds could be either profits or receipts. of They argue that the Supreme Court, in a case decided subsequent to their opening brief, held that proceeds should be defined to mean profits and not receipts. the Government failed to Consequently, they contend that prove that operation of the prostitution ring resulted in any profits, as opposed to merely receipts. They contend all of the money earned by the prostitutes was put back into the business in the form of new clothes and room and board and therefore they had no profits and could not be found guilty under Count Twelve as a matter of law. A plurality of the Court in United States v. Santos, 128 S. Ct. 2020 (2008), held the term proceeds to mean profits and stated that a criminal who enters into a transaction paying the expenses of his illegal activity cannot possibly violate the money-laundering statute, because by definition profits consist of what remains after expenses are paid. Id. at 2027. However, because Santos was a plurality opinion, the holding of the Court for precedential purposes is the narrowest holding that garnered five votes. Marks v. United States, 430 U.S. 188, 193 (1977). Here, Justice holding. Stevens s concurrence Santos, 128 S. Ct. at 2031. 24 provides the narrowest Justice Stevens writes that the profits definition of proceeds is limited to money laundering cases involving a gambling operation like the one in that case. He explains that, [i]n other applications of the statute not involving such a perverse result [as in this case], I would presume that the legislative history summarized by Justice Alito [that proceeds means receipts ] reflects the intent of the enacting Congress. Id. at 2034 n. 7. Justice Stevens thus carves out an exception for gambling operations in which proceeds means profits, although the rule is that proceeds means receipts. Because Santos does not establish a binding precedent that the term proceeds means profits, except regarding an illegal gambling charge, establishing United that States v. we are bound proceeds Singh, 518 by means F.3d this Court s receipts. 236, 247 (4th precedent See, e.g., Cir. 2005) (recognizing that funds used by prostitutes to pay the cost of a hotel room for purpose of prostitution constituted proceeds ); United States v. Caplinger, 339 F.3d 226, 233 (4th Cir. 2003) (holding that the element of use of unlawful proceeds can be proven by circumstantial evidence that the defendant applied unlawful proceeds to promote and perpetuate his scheme); United States v. Stewart, 256 F.3d 231, 250 (4th Cir. 2001) (affirming a money-laundering conviction where proceeds from the sale of drugs were used to further the 25 drug operation). Thus, the district court did not err in instructing the jury to use the common dictionary definition of proceeds. VII. For the foregoing reasons, the judgment of the district court is affirmed in all respects except as to David s sentence. The judgment as to David s sentence is vacated and his case remanded for resentencing. AFFIRMED IN PART, VACATED IN PART, AND REMANDED IN PART 26

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