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.DUDP 3(5$/7$ -2+16721 	 .$5$0 6W &ODLU                       Whether this court views the district court’s action as a
6KRUHV 0LFKLJDQ IRU $SSHOODQW  -HQQLIHU - 3HUHJRUG       choice between guidelines or a departure, the result is the
$66,67$17 81,7(' 67$7(6 $77251(< 'HWURLW                       same. The heartland analysis that should be applied prior to
0LFKLJDQIRU$SSHOOHH                                              determining which guideline applies is identical to the
                                                                     analysis that should be applied in determining whether a
                     BBBBBBBBBBBBBBBBB                               departure is warranted. See Smith, 186 F.3d at 298.
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                         23,1,21                                     fact that a money laundering offense involved proceeds
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   1$7+$1,(/5-21(6&LUFXLW-XGJH'HIHQGDQW-DFN                organized crime is not sufficient to take the offense outside of
&KLOLQJLULDQDSSHDOVKLVIHGHUDOFRQYLFWLRQDQGVHQWHQFHRQ          the heartland of the money laundering guideline. United
PRQH\ODXQGHULQJFKDUJHV2Q$SULODJUDQGMXU\           States v. Reed, 167 F.3d 984, 995 (6th Cir. 1999); United
RIWKH(DVWHUQ'LVWULFWRI0LFKLJDQUHWXUQHGDPXOWLSOHFRXQW        States v. Ford, 184 F.3d 566, 587 (6th Cir. 1999). Thus, even
LQGLFWPHQWDJDLQVW&KLOLQJLULDQDQDWWRUQH\DQGWKUHHRIKLV       if the district court’s decision is treated not as a departure but
FOLHQWV-DFN&KDUOHVDQG*HRUJH5DVKLG7KH5DVKLGVZHUH        as an application of a more appropriate guideline, the district
LQGLFWHG RQ WKH EDVLV RI IUDXGXOHQW EXVLQHVV YHQWXUHV         court’s rationale was not sufficient to warrant the lower
FRQFHUQLQJ WKH GHYHORSPHQW PDQXIDFWXUH DQG VDOH RI           court’s decision not to apply the money laundering guideline
DXWRPRELOHUDGDUEUDNLQJV\VWHPVWRDYRLGFROOLVLRQV$WD         to the money laundering offense. Accordingly, the district
EHQFK WULDO &KLOLQJLULDQ ZDV FRQYLFWHG RI FRQVSLUDF\ WR      court’s sentence should be reversed and remanded with
FRPPLWPRQH\ODXQGHULQJ+HZDVVHQWHQFHGWRPRQWKV              instructions to re-sentence Chilingirian in accordance with the
LPSULVRQPHQWWZR\HDUVVXSHUYLVHGUHOHDVHDQGUHVWLWXWLRQLQ       money laundering guideline.
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  The Third Circuit has since clarified the holding of Smith:      WKHVDOHRIDXWRPRELOHUDGDUEUDNLQJV\VWHPVDQGUHODWHGUDGDU
                                                                   WHFKQRORJ\
  Where money laundering is not ‘minimal or incidental,’
  and is ‘separate from the underlying crime’ and intended           &KLOLQJLULDQVHUYHGDVWKHDWWRUQH\IRUWKH5DVKLGVDQGWKH
  to ‘make it appear that the funds were legitimate’ or to         5DVKLGIDPLO\¶VFRPSDQ\9HKLFOH5DGDU6DIHW\6\VWHPV,QF
  funnel money into further criminal activities, § 2S1.1 is        ³9566´  IURP  RU  WKURXJK WKH GDWH RI WKH
  an applicable guideline. The guideline may also be               LQGLFWPHQW+HKHOGDILIWHHQSHUFHQWVKDUHLQ9566
  applicable if there is evidence that the activities which
  fulfilled the broad statutory requirements for money                ,Q  &KLOLQJLULDQ UHSUHVHQWHG 9566 ZKHQ LW ILOHG D
  laundering were extensive with drug trafficking or other         &KDSWHU  EDQNUXSWF\ UHRUJDQL]DWLRQ SHWLWLRQ ZKLFK ZDV
  serious crime.                                                   ODWHU FRQYHUWHG LQWR D &KDSWHU  OLTXLGDWLRQ SURFHHGLQJ
                                                                   'XULQJWKHSHQGHQF\RIWKHEDQNUXSWF\SURFHHGLQJVDJURXS
United States v. Mustafa, 238 F.3d 485, 495 (3d Cir. 2001)         RILQYHVWRUVUHIHUUHGWRDVWKH³5XGGHU*URXS´HQWHUHGWKH
(quoting United States v. Bockius, 228 F.3d 305, 313 (3d Cir.      SLFWXUH  ,Q $XJXVW  &KDUOHV 5XGGHU PHW WKH 5DVKLGV
2000)). In this case, it could also be argued that even if this    ZKHQKHZDVZRUNLQJIRU*HQFRUS$HURMHW³$HURMHW´ZKLFK
Circuit were to apply Smith, its rationale would fail to           ZDVGLVFXVVLQJZLWK9566WKHSRVVLELOLW\RIEX\LQJLWVUDGDU
produce the result desired by Chilingirian. The money              EUDNLQJWHFKQRORJ\RUSHUKDSVWKHFRPSDQ\,Q'HFHPEHURI
laundering in this case was not minimal nor incidental, and it     $HURMHWLQIRUPHGWKH5DVKLGVWKDWWKH\ZRXOGQRWJR
appears to have been funneled through the client trust account     IRUZDUG ZLWK DQ\ GHDOV  1HYHUWKHOHVV 5XGGHU DQG RWKHU
in order to make it appear legitimate and to further the radar     SHRSOHZKRNQHZ&KLOLQJLULDQDOVRLQYHVWHGLQ9566
technology/fraud scheme.
                                                                     ,QHDUO\LQOLJKWRIWKHEDQNUXSWF\WKH5XGGHUVEHJDQ
  7KH7KLUG&LUFXLWUHOLHGRQ866*$SSHQGL[$          WDSLQJ WHOHSKRQH FRQYHUVDWLRQV ZLWK WKH 5DVKLGV DQG
ZKLFKVWDWHV³>L@ILQDQDW\SLFDOFDVHWKHJXLGHOLQHVHFWLRQ     &KLOLQJLULDQ,QRQHRIWKHVHFRQYHUVDWLRQV&KLOLQJLULDQVDLG
LQGLFDWHGIRUWKHVWDWXWHRIFRQYLFWLRQLVLQDSSURSULDWHEHFDXVH   WKDWKHKDGEHHQZRUNLQJRQVRPHWKLQJWKDWZDVJRLQJWREH
RIWKHSDUWLFXODUFRQGXFWLQYROYHGXVHWKHJXLGHOLQHVHFWLRQ      IDEXORXV  Chilingirian also reassured RWKHUs that he was
PRVWDSSOLFDEOHWRWKHQDWXUHRIWKHRIIHQVHFRQGXFWFKDUJHG       working on several deals.
LQ WKH FRXQW RI ZKLFK WKH GHIHQGDQW ZDV FRQYLFWHG´
6LPLODUO\WKLVFRXUWKDVSUHYLRXVO\UHOLHG RQWKLVODQJXDJH        In mid-1995, Chilingirian attempted to settle all of the
DQGKHOGWKDWWKHGLVWULFWFRXUWPXVWGHFLGHZKLFKJXLGHOLQHLV    bankruptcy claims against VRSS and the Rashids with money
PRVWDSSOLFDEOHFRQVLGHULQJWKHIDFWVLQYROYHG6HH8QLWHG        available from a group of investors known as the "Tindall
6WDWHVY+RRG)GWK&LU                 Group." Paul Tindall, and his wife Ann Louise, lived in
                                                                   Canada and were related to Jack Rashid’s wife. The Tindalls
  This portion of the Guidelines Manual has since been             met with Jack Rashid in January 1995. In late June 1995, the
amended so that the sentencing court is now required to use        Rashids went to Toronto to present their technology to, and
the guideline that Appendix A says is applicable. See
U.S.S.G., Appendix A (2000). Thus, the Smith approach is
no longer relevant.                                                    
                                                                        )RU D PRUH GHWDLOHG DFFRXQW RI WKH IDFWV UHJDUGLQJ WKH 5DVKLG
                                                                   LQYHVWPHQW VFKHPHV DQG WKH WULDOV DQG DSSHDOV RI -DFN DQG &KDUOHV 5DVKLG
                                                                   VHH 8QLWHG 6WDWHV Y 5DVKLG  )G WK &LU  *HRUJH SOHDGHG
                                                                   JXLOW\ WR D OHVVHU FKDUJH DQG GLG QRW DSSHDO
    8QLWHG6WDWHVY&KLOLQJLULDQ        1RV      1RV         8QLWHG6WDWHVY&KLOLQJLULDQ     

seek investments from, a group of over thirty people who         E. Fraud Guideline or Money Laundering Guideline?
learned of this opportunity through Paul Tindall.
                                                                    The government, on cross-appeal, argues that the district
   In December 1995, Advanced Radar Systems ("ART") was          court erred by sentencing Chilingirian according to the fraud
incorporated in Canada in order to take in the money from the    guidelines, rather than the money laundering guidelines.
Canadian investors. Neither the Rashids nor Chilingirian         Chilingirian was found guilty of conspiracy to commit money
informed the Canadian investors about VRSS’s bankruptcy or       laundering and Jack Rashid pleaded guilty to the same
their plan to use the investors’ money to pay creditors. The     offense. However, Judge O’Meara sentenced the defendants
Canadians invested heavily, but the money was put into           according to different sentencing guidelines. He sentenced
VRSS. According to the government’s summary, the records         Jack Chilingirian according to the sentencing guideline for
of Chilingirian’s client trust fund show that $2.48 million in   fraud (§ 2F1.1) and sentenced Jack Rashid according to the
checks was given to Jack Rashid by ART-Canada investors.         sentencing guideline for money laundering (§ 2S1.1). The
Chilingirian endorsed $2.267 million of those checks into his    fraud guideline results in a significantly lower offense level.
trust account. Chilingirian then wrote $275,000 worth of         The government argues that the court should have applied the
checks to himself, gave $1.473 million to Jack Rashid, and       guidelines for money laundering to Chilingirian.
disbursed $480,000 to settle various investors’ claims against
Rashid. Aside from Peter Tindall, none of the Canadian             This is a case of first impression in this circuit.
investors have ever recouped any money invested with the         Chilingirian and the district court rely on case law from the
Rashids.                                                         Third Circuit. In United States v. Smith, 186 F.3d 290 (3d
                                                                 Cir. 1999), the Third Circuit held that the money laundering
  When Chilingirian incorporated ART in Canada on behalf         guidelines were too harsh to apply to what it described as a
of Jack Rashid, he opened a new client trust account as well.    routine fraud case in which the money laundering activity was
According to the government, this account was used to            an "incidental by-product" of a kick-back scheme. Id. at 300.
launder money received from the last group of investors, the     The court explained that the sentencing court must perform a
"Kraft Group." James Kraft was a long time friend of Jack        "heartland" analysis when deciding what guideline should be
Rashid. He was solicited for money in April 1996, and            applied and when deciding whether to depart. See id. at 298.
invested money from his retirement account. He also brought      Thus, in order to determine whether the money laundering
in contributions from over thirty other investors.               guideline should apply, the court had to determine what
                                                                 conduct was considered by the Sentencing Commission to fall
  In 1996, Chilingirian and members of the Rudder Group          within the heartland cases covered under the money
discussed settlement of the investors’ claims against the        laundering guideline. The court considered the Sentencing
Rashids/VRSS. Some investors did get a portion of their          Commission’s proposed amendments to the money
money back, but they had to sign affidavits exculpating Jack     laundering guideline, which were rejected by Congress, and
Rashid. Similarly, despite numerous complaints from              "conclude[d] that the Sentencing Commission itself has
investors, Chilingirian continued to deposit money from the      indicated that the heartland of U.S.S.G. § 2S1.1 is the money
Kraft Group into his client trust account, then withdraw some    laundering activity connected with extensive drug trafficking
for Jack Rashid and a lesser amount for himself.                 and serious crime." Id. at 300.
  On April 23, 1997, Chilingirian was indicted on charges of
conspiracy in violation of 18 U.S.C. § 371, mail fraud in
    8QLWHG6WDWHVY&KLOLQJLULDQ           1RV         1RV            8QLWHG6WDWHVY&KLOLQJLULDQ         

'0XOWLSOLFLW\GRXEOHMHRSDUG\DQGVSHFLDOILQGLQJV                violation of 18 U.S.C. § 1341, wire fraud in violation of 18
                                                                        U.S.C. § 1343, aiding and abetting the interstate
   &KLOLQJLULDQDUJXHVWKDW&RXQWFRQVSLUDF\WRFRPPLW              transportation of funds taken by fraud in violation of 18
PRQH\ODXQGHULQJDQG&RXQWIUDXGFRQVSLUDF\                U.S.C. § 2314, tampering with a witness in violation of 18
FKDUJHG WKH VDPH FRQVSLUDF\ DQG WKXV WKH LQGLFWPHQW ZDV        U.S.C. § 1512, and conspiracy to launder money instruments
PXOWLSOLFLWRXV$FODLPWKDWDQLQGLFWPHQWLVPXOWLSOLFLWRXV           in violation of 18 U.S.C. §§ 1956(a)(1)(A)(i),
VKRXOG EH UDLVHG EHIRUH WULDO )(' 5 &5,0 3 E           1956(a)(1)(B)(i), and 1956(h).
&KLOLQJLULDQGLGQRWUDLVHWKLVFODLPXQWLOKLVDSSHDOWRWKLV
FRXUW7KXVWKHFODLPPDGHLVQRWWLPHO\6HH8QLWHG6WDWHV           On April 29, 1999, the district court convicted Chilingirian
Y+DUW)GWK&LU                           of conspiracy to commit money laundering. On October 8,
                                                                        1999, Chilingirian filed a Motion and Brief requesting bail
   &KLOLQJLULDQIXUWKHUDUJXHVWKDWZKHQWKHFRXUWDFTXLWWHG            pending appeal. On October 18, 1999, &KLOLQJLULDQ¶VUHTXHVW
KLP RQ WKH   FRQVSLUDF\ FKDUJH WKH GRXEOH MHRSDUG\        IRU EDLO ZDV GHQLHG DQG he was sentenced to 37 months
FODXVHSUHFOXGHGWKHFRXUWIURPFRQYLFWLQJKLPRQWKHPRQH\             imprisonment, 2 years supervised release, and restitution in
ODXQGHULQJ FKDUJH  7KH GRXEOH MHRSDUG\ FODXVH SURWHFWV          the amount of $335,167.50. 2QDSSHDO&KLOLQJLULDQDUJXHV
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FODXVHLVQRWLPSOLFDWHG                                                              II. STANDARD OF REVIEW
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