7th Circuit Affirms Car Dealers’ Convictions

CHICAGO (CN) - The 7th Circuit affirmed the convictions of two Chicago-area car dealership owners who made more than half of their sales to drug dealers from 1995 to 2005, hiding large cash payments from the government.

Amir Hosseini and Hossein Obaei each operated their own luxury car dealership, as well as jointly-owning a third. The pair frequently transferred large sums of money between the dealerships, purchased new inventory together, referred customers to each other, and pooled employee services and benefits.

Hosseini and Obaei also "regularly sold expensive cars to Chicago-area drug dealers, who usually paid in cash, often in small bills-tens, twenties, and fifties rubber-banded together and carried in paper or plastic bags or show boxes," 7th Circuit Judge Diane Sykes summarized.

To perpetuate this business model, the dealerships would doctor sales contracts, fail to report cash payments of over $10,000, and arrange their bank deposits to avoid triggering federal reporting requirements.

Both were eventually arrested and charged in a 100-count indictment which included RICO conspiracy, money laundering, mail and bank fraud, illegal transaction structuring, and aiding and abetting a drug conspiracy.

Three counts were dropped before trial and a jury convicted Hosseini and Obaei of the remaining 97 counts. Hosseini was sentenced to twenty years in prison. Obaei received a fifteen-year sentence. The court also ordered all three dealerships forfeited.

Hosseini and Obaei appealed, raising an unresolved legal question left open by a splintered 2008 Supreme Court decision.

Hosseini and Obaei were prosecuted for using money-laundering to conceal criminal activity, as opposed to "promotion" or "avoidance" of transaction reporting requirements. The pair claimed that because some dealers had used the vehicles purchased in furtherance of drug-trafficking, indicating that the car payments were business expenses, rather than the net profits of the drug trade.

The question, Sykes summarized, is "in a traditional money -laundering case-where the indictment alleges that the defendant engaged in specified financial transactions for the purpose of concealing the proceeds of criminal activity or avoiding a state or federal reporting requirement (as opposed to promoting the underlying crime)-must the government prove that the laundered 'proceeds' are the net profits or simply the gross receipts of the underlying crime?"

In 2008, the Supreme Court split on the "proceeds" question in Santos v. United States, with no opinion carrying the majority. Four justices held that "proceeds" always means net profits and four concluded that the term always means gross revenues. Justice Stevens wrote separately, suggesting that the term's meaning could vary depending on the type of conduct at issue and the penalties involved. The Supreme Court's opinion only applied to "promotional" money laundering, not the "concealment" laundering Hosseini and Obaei were charged with.

Three subsequent 7th Circuit cases had addressed the "proceeds" question, but had failed to resolve the issue because the court was reviewing for plain error.

Congress subsequently adopted the broader gross receipts definition in response to Santos, effectively resolving the issue for the purposes of Hosseini and Obaei's appeal. Additionally, the 7th Circuit noted, because the pair had failed to raise the issue at trial, the court could only conduct "plain error" review. And, as Sykes pointed out, "unsettled state of the law means that the claimed error is not plain."

The court also rejected several procedural challenges by the defendants, including alleged misjoinder of the drug-conspiracy count, failure to individually question prospective jurors about possible racial, ethnic, or religious prejudices, and improper admission of evidence.

The 7th Circuit ruled that sufficient evidence had been presented and affirmed the convictions.

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