United States v. Thomas Farese, A.K.A. Tom Mix, A.K.A. Tommy, Etc., Cross- United States of America, Plaintiff-Appellant-Cross-Appellee v. Frank Derosa, A.K.A. Old Man, Defendant-Appellee-Cross-Appellant

Citation: 248 F.3d 1056Docket: 98-4909

Court: Court of Appeals for the Eleventh Circuit; April 26, 2001; Federal Appellate Court

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Appellants Thomas Farese and Frank DeRosa pleaded guilty to conspiracy to participate in racketeering activities. They were sentenced under U.S.S.G. 2S1.1, which pertains to money laundering, despite their claims that they did not commit money laundering. Farese also challenged the enhancement of his sentence due to his alleged role as an organizer in the conspiracy. The government cross-appealed, contesting the district court's calculation of the laundered funds affecting interstate commerce. The Eleventh Circuit vacated the sentences and remanded the case for resentencing.

The background of the case reveals that in April 1995, the DEA began investigating DeRosa, who was approached by informants posing as cocaine dealers seeking to exchange large sums of cash from drug sales for larger denominations. DeRosa conducted twelve exchanges from April to November 1995, receiving $1,062,000 in cash and earning $95,080 in commissions.

A federal grand jury indicted Farese and DeRosa on multiple counts, including conspiracy to engage in racketeering, with specific acts of money laundering, obstruction of justice, and mail fraud as the objects of the conspiracy. Farese previously filed a motion asserting he did not engage in money laundering, arguing he did not conceal the proceeds of unlawful activity and was not involved in transactions affecting interstate commerce. A magistrate judge recommended denial of this motion, but the record does not show that the district court ruled on it.

Eleven days after the magistrate judge's recommendation on Farese's motion, the appellants pleaded guilty to money laundering and mail fraud. In Farese's plea agreement, he retained the right to challenge the money laundering issues at sentencing, which he did, and the district court permitted this. The government acknowledged that Farese preserved these issues for appeal, which pertain only to sentencing and not guilt. A three-day sentencing hearing allowed for a thorough examination of the money laundering aspects. The district court determined that the government met its burden of proof to show money laundering was part of the racketeering conspiracy, sentencing Farese and DeRosa under the appropriate guidelines.

Farese's offense level was increased by four for his role as an organizer in the crimes. However, the court did not enhance their offense levels further due to insufficient evidence regarding the amount of funds involved in interstate commerce exceeding $100,000. Farese received a total offense level of 24, leading to a 72-month prison sentence and three years of supervised release. DeRosa had a total offense level of 20, resulting in a 33-month prison sentence and two years of supervised release. Both appellants appealed their sentences, with the government cross-appealing.

Despite pleading guilty to racketeering conspiracy, the appellants argued they did not commit money laundering, claiming the district court's reliance on money laundering as the object offense was erroneous. They contended that their cash-for-cash transactions did not constitute money laundering, as such transactions do not create an appearance of legitimate wealth. The court, however, disagreed with this interpretation.

Section 1956(a)(3)(B) addresses the criminalization of financial transactions intended to conceal the nature, location, source, ownership, or control of property believed to be derived from unlawful activities. It highlights that converting large-denomination bills into smaller ones aids in hiding funds, as smaller bills are more numerous and easier to transport discreetly. Informants indicated to DeRosa that such exchanges were designed to facilitate concealment of drug money for international transport. 

The appellants challenge the district court's sentencing based on the premise that money laundering was the objective of their racketeering conspiracy. They argue that the court erred by applying a preponderance of the evidence standard instead of the beyond a reasonable doubt standard, as established in United States v. Ross. They seek to have their sentences vacated and the case remanded for the correct standard to be applied.

Further, the determination of the underlying racketeering activity for sentencing under U.S.S.G. 2E1.1(a) can be complex when the jury's verdict or guilty plea does not clarify the specific offenses involved. U.S.S.G. 1B1.2(d) indicates that a conviction on a conspiracy count involving multiple offenses should be treated as separate convictions for each offense. However, care must be taken to ensure that the court would find the defendant guilty of the specific object offense before applying this guideline.

The interpretation of "were it sitting as a trier of fact" implies that the court must find beyond a reasonable doubt that the defendant conspired to commit the specific offense before sentencing on that basis. The appellants' guilty pleas do not clarify whether money laundering or mail fraud was the conspiracy’s object, as one appellant reserved the right to contest the money laundering charge. Consequently, the district court could only impose a sentence under the money laundering guideline if it found beyond a reasonable doubt that the offense was committed, which it did not, applying instead a preponderance of the evidence standard, constituting an error.

The district court's incorrect application of the standard of proof at sentencing necessitates the vacating of the appellants' sentences and a remand for resentencing. The appellate court cannot reassess evidence or witness credibility. On remand, the district court must evaluate whether the government has proven beyond a reasonable doubt that the appellants committed money laundering and must issue specific findings related to intent and interstate commerce, as raised by Farese's motion. The appellate court will not address the remaining arguments from the appellants or issues from the government's cross-appeal, leaving those for the district court to consider if the parties choose to pursue them. The appellants' sentences are vacated, and the case is remanded for consistent resentencing. Additionally, the appeal of defendant William Cresta is dismissed due to his death during the appeal process, which renders the appeal moot. The plea agreements of the appellants did not address obstruction of justice, which is charged but not contested. Although DeRosa did not reserve the right to contest sentencing issues in his plea agreement, the district court allowed him to preserve these issues for appeal during the change-of-plea hearing, despite the lack of a formal reservation.