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        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                    FILED
                                                                  December 7, 2012

                                 No. 11-40390                      Lyle W. Cayce
                                                                        Clerk

UNITED STATES OF AMERICA,

                                            Plaintiff-Appellee,
v.

JED STEWART LINEBERRY,

                                            Defendant-Appellant.



                 Appeal from the United States District Court
                       for the Eastern District of Texas


Before STEWART, Chief Judge, KING, and OWEN, Circuit Judges.
CARL E. STEWART, Chief Judge:
      Defendant-Appellant Jed Stewart Lineberry appeals the district court’s
dismissal of his motion pursuant to 28 U.S.C. § 2255, collaterally attacking his
convictions and sentences for money-laundering. On March 2, 2012, we granted
a certificate of appealability (“COA”) under 28 U.S.C. § 2253(c)(2) on the issue
of whether the district court erred in denying Lineberry’s claim that his money-
laundering convictions should be vacated in light of United States v. Santos, 553
U.S. 507 (2008). We now AFFIRM.
                                       I.
      In February 2004, Lineberry was indicted on 19 counts of money-
laundering under 18 U.S.C. § 1956(a)(1)(A)(i), and one count of false declaration
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                                      No. 11-40390

before a court pursuant to 18 U.S.C. § 1623. On October 13, 2004, following a
jury trial, Lineberry was convicted of 18 counts of money-laundering and one
count of making a false declaration. The aggravated promotion of prostitution
pursuant to Texas Penal Code § 43.04(a) was the unlawful activity underlying
the money-laundering convictions.
       In May 2005, Lineberry was sentenced to 90 months on each of the money-
laundering counts, and 60 months for the false declaration conviction, all terms
to run concurrently. We affirmed Lineberry’s convictions and sentence on direct
appeal. See United States v. Lineberry, 185 F. App’x 366 (5th Cir. 2006).
Lineberry subsequently filed a petition for a writ of certiorari, which the
Supreme Court denied on October 30, 2006.
       Lineberry timely filed a 28 U.S.C. § 2255 motion. In his § 2255 motion,
Lineberry primarily argued that his money-laundering convictions should be
vacated because they were non-existing offenses based on the definition of
“proceeds” under the Seventh Circuit’s decision in Santos v. United States, 461
F.3d 886 (7th Cir. 2006). Lineberry subsequently filed a supplemental petition
regarding his § 2255 motion, alleging that the definition of “proceeds” was
wrongfully applied in his case based on the Supreme Court’s intervening
decision in United States v. Santos, 553 U.S. 507 (2008). Lineberry further
contended that, because the money-laundering convictions were non-existent
offenses under Santos, the false declaration conviction must be vacated because
there was no nexus between his false declaration conviction and the money-
laundering convictions in light of Santos.1




       1
          Lineberry was convicted of making a false declaration to the court during his
sentencing in which he was charged with being a felon in possession of a firearm. Lineberry
represented he had not received any money from his escort business. At sentencing, this issue
was material to whether or not Lineberry possessed any firearms in connection with another
felony offense.

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       In assessing Lineberry’s claims made in his § 2255 motion and on appeal,
it is necessary to provide context by first discussing the Supreme Court’s Santos
decision, and our court’s application of Santos in Garland v. Roy, 615 F.3d 391,
396-404 (5th Cir. 2010).
                                              II.
                                              A.
       In Santos, the Supreme Court interpreted the meaning of “proceeds” under
the money-laundering statute in effect at the time, 18 U.S.C. § 1956(a)(1).2
Santos, 553 U.S. at 511. The statute provided that:
              Whoever, knowing that the property involved in a
              financial transaction represents the proceeds of some
              form of unlawful activity, conducts or attempts to
              conduct such a financial transaction which in fact
              involves the proceeds of specified unlawful activity–
              (A)(i) with the intent to promote the carrying on of
              specified unlawful activity; . . .

will be [penalized]. 18 U.S.C. § 1956(a)(1). The question before the Court was
whether the term “proceeds” in the statute meant the “profits” of the specified
unlawful activity, or the “receipts” of such activity. Santos, 553 U.S. at 509.
       Santos operated an illegal lottery, for which he employed a number of
helpers. Id. at 509. Santos’s operation included: runners, who gathered the bets



       2
         In response to the Santos decision, Congress amended 18 U.S.C. § 1956 in May 2009
to provide a definition for “proceeds.” See Fraud Enforcement and Regulatory Act of 2009,
Pub. L. No. 111–21, § 2(f)(1), 123 Stat. 1617, 1618 (2009), codified at 18 U.S.C. §1956(c)(9).
As amended, the statute defines “proceeds” broadly as “any property derived from or obtained
or retained, directly or indirectly, through some form of unlawful activity, including the gross
receipts of such activity.” 18 U.S.C. § 1956(c)(9) (emphasis added). This amendment
effectively overruled Santos and applies prospectively. See, e.g., United States v. Walker, 392
F. App’x 919, 928 n.11 (3d Cir. 2010), cert. denied, 131 S. Ct. 542 (2010) (“In 2009, Congress
legislatively overruled Santos by amending § 1956 . . . .”); United States v. French, No. 11-
10294, 2012 WL 4845561, at *2 n.3 (9th Cir. Oct. 12, 2012) (citing Walker, 392 F. App’x at 928
n.11) (same).


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and retained a percentage of the bets as commissions; and collectors, who
delivered the money to Santos. Id. Santos then used the money to pay the
collectors’ salaries, and to pay the winners. Id. The “payments to runners,
collectors, and winners formed the basis of the 10-count indictment” against
Santos. Id. at 509. A jury found Santos guilty of one count of conspiracy to run
an illegal gambling business, one count of running an illegal gambling business,
one count of conspiracy to launder money, and two counts of money-laundering.
Id. at 509-10. Santos’s co-defendant, Diaz, pleaded guilty to conspiracy to
launder money based on his receipt of a salary as a collector. Id. at 509.
      After the Seventh Circuit affirmed his convictions and sentences and the
Supreme Court denied a writ of certiorari, Santos filed a writ of habeas corpus
under 28 U.S.C. § 2255, challenging his convictions and sentences. Id. at 510.
The district court dismissed all of Santos’s claims, except his challenge to his
money-laundering convictions. Id. The district court relied on Seventh Circuit
precedent holding that the federal money-laundering statute’s prohibition of
transactions involving criminal “proceeds” applied only to transactions involving
criminal profits, not criminal receipts. Id. (citations omitted). Applying that
holding to Santos’s case, “the District Court found no evidence that the
transactions on which the money-laundering convictions were based (Santos’s
payments to runners, winners, and collectors and Diaz’s receipt of payment for
his collection services) involved profits, as opposed to receipts, of the illegal
lottery. . . .” Id. Accordingly, the district court vacated the money-laundering
convictions, and the Seventh Circuit affirmed. Id. The Government appealed to
the Supreme Court.
      Writing for the plurality in a fractured 4-1-4 decision, Justice Scalia held
that “proceeds” meant “profits,” and not “receipts” under the money-laundering
statute. Id. at 514. Justice Scalia first noted that the term “proceeds” in the
statute was undefined. Id. at 511. He further noted that the ordinary meaning

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of “proceeds” “can mean either ‘profits’ or ‘receipts.’” Id. Justice Scalia thus
applied the rule of lenity to conclude that “proceeds” meant “profits,” and not
“receipts.” Id. at 514. He reasoned, “Because the ‘profits’ definition of ‘proceeds’
is always more defendant-friendly than the ‘receipts’ definition, the rule of lenity
dictates that it should be adopted.” Id.
      Importantly, Justice Scalia also found the argument persuasive that
interpreting “proceeds” as “receipts” in the instant case would create the
“perverse result” of the “merger problem.” Id. at 515. He described the merger
problem as follows:
            If “proceeds” meant “receipts,” nearly every violation of
            the illegal-lottery statute would also be a violation of
            the money-laundering statute, because paying a
            winning bettor is a transaction involving receipts that
            the defendant intends to promote the carrying on of the
            lottery. Since few lotteries, if any, will not pay their
            winners, the statute criminalizing illegal lotteries, 18
            U.S.C. § 1955, would “merge” with the money-
            laundering statute. Congress evidently decided that
            lottery operators ordinarily deserve up to 5 years of
            imprisonment, § 1955(a), but as a result of merger they
            would face an additional 20 years, § 1956(a)(1).
            Prosecutors, of course, would acquire the discretion to
            charge the lesser lottery offense, the greater
            money-laundering offense, or both—which would
            predictably be used to induce a plea bargain to the
            lesser charge.

Santos, 553 U.S. at 515-16; see also Black’s Law Dictionary 1078 (9th ed. 2009)
(defining merger in the criminal law context as “[t]he absorption of a lesser
included offense into a more serious offense when a person is charged with both
crimes, so that the person is not subject to double jeopardy” (emphasis added)).
      Justice Scalia thus reasoned why interpreting “proceeds” to mean “profits”
under the money-laundering statute avoided this merger problem:



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            The Government suggests no explanation for why
            Congress would have wanted a transaction that is a
            normal part of a crime it had duly considered and
            appropriately punished elsewhere in the Criminal Code
            to radically increase the sentence for that crime.
            Interpreting “proceeds” to mean “profits” eliminates the
            merger problem. Transactions that normally occur
            during the course of running a lottery are not
            identifiable uses of profits and thus do not violate the
            money-laundering statute. More generally, 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.
            Defraying an activity’s costs with its receipts simply
            will not be covered.

Id. at 517. Justice Scalia reasoned that neither type of transaction underlying
the money-laundering charges in Santos could be characterized as the lottery’s
profits: Santos’s money-laundering charges were based on his payments to the
lottery winners and his employees; Diaz’s money-laundering charge was based
on his receipts of payments as an employee. Id. at 524. Accordingly, Justice
Scalia’s plurality opinion affirmed the Seventh Circuit’s vacatur of Santos’s and
Diaz’s money-laundering convictions. Id.
      Justice Stevens concurred in the judgment, providing the fifth vote to
vacate the money-laundering convictions. Id. at 524-29 (Stevens, J., concurring).
Justice Stevens agreed that the rule of lenity dictated that “proceeds” means
“profits,” and not “receipts,” where the specified unlawful activity of illegal
gambling creates the “perverse result” of the merger problem under the money-
laundering statute. Id. at 528. In discussing the merger problem, Justice
Stevens noted:
            Allowing the Government to treat the mere payment of
            the expense of operating an illegal gambling business
            as a separate offense is in practical effect tantamount


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                                  No. 11-40390

             to double jeopardy, which is particularly unfair in this
             case because the penalties for money laundering are
             substantially more severe than those for the underlying
             offense of operating a gambling business.

Id. at 527. Justice Stevens also considered that the Guidelines provide for
different ranges of punishment if the defendant is found guilty of two crimes.
Id. at 527 n.6
       Justice Stevens, however, clearly espoused that the definition of
“proceeds” could vary depending on the specified unlawful activity forming the
predicate for the money-laundering charges. Id. at 526. Thus, according to
Justice Stevens, “proceeds” does not absolutely connote a meaning of “profits”
under the statute. Id. Specifically, Justice Stevens agreed with Justice Alito’s
dissent that the legislative history indicates that “proceeds” means gross receipts
“from the sale of contraband and the operation of organized crime syndicates
involving such sales.” Id. at 525-26. Thus, Justice Stevens could not agree with
the plurality that the Court should apply the rule of lenity to these types of
unlawful activities. Id. at 525-26 & n.3. However, Justice Stevens reasoned
that this legislative history was not instructive in determining the meaning of
“proceeds” for other specified unlawful activities under the statute. Id. at 525-
26.    Accordingly, Justice Stevens advocated a case-by-case approach for
ascertaining whether a specified unlawful activity warrants the “profits” or the
“receipts” definition of “proceeds,” stating, “this Court need not pick a single
definition of ‘proceeds’ applicable to every unlawful activity, no matter how
incongruous some applications may be.” Id. at 525. Justice Stevens thus
summarized his opinion as follows:
             [M]y conclusion rests on my conviction that Congress
             could not have intended the perverse result that the
             dissent’s rule [always defining proceeds as “gross
             receipts”] would produce if its definition of “proceeds”
             were applied to the operation of an unlicensed gambling

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            business. In other applications of the statute not
            involving such a perverse result, I would presume that
            the legislative history summarized by Justice ALITO
            reflects the intent of the enacting Congress. . . . Its
            decision to leave the term undefined is consistent with
            my view that “proceeds” need not be given the same
            definition when applied to each of the numerous
            specified unlawful activities that produce unclean
            money.

Id. at 528 n.7 (citations omitted).
      Justice Scalia’s plurality opinion acknowledged that Justice Stevens’
concurrence on the narrowest ground limits the Court’s holding accordingly. Id.
at 523.
                                      B.
      In Garland, we interpreted Santos in the context of a 28 U.S.C. § 2241
“savings clause” claim and expressly held that the Santos decision applies
retroactively.   615 F.3d at 396-99.       After recognizing Justice Stevens’
concurrence as controlling, we then interpreted his concurrence as a “two-part”
holding. Id. at 399, 402-03 (citations omitted).
      The first part of Justice Stevens’ concurrence held that the rule of lenity
requires a finding that “proceeds” means “profits” in cases where defining
proceeds as “gross receipts” would result in a “merger problem.” Id. at 402. We
noted in Garland that a merger occurs “when a defendant could be punished for
the same ‘transaction’ under the money-laundering statute as well as under
another statute, namely the statute criminalizing the ‘specified unlawful
activity’ underlying the money-laundering charge.”           Id.   Thus, a “merger
problem” would exist “if ‘proceeds’ were to be defined as ‘receipts’ rather than
‘profits,’” and the money-laundering charge could be based on the same
“transaction” as the “predicate crime.” Id. at 400. The second part of Justice
Stevens’ concurrence held that, in cases where there is no “merger problem,”


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there should be a presumption that “proceeds” should be defined as “gross
receipts,” but that this presumption could be rebutted by the legislative history
of the money-laundering statute. Id. at 402.
       In Garland, the defendant was convicted of 52 counts of money-laundering
which were predicated upon 62 counts of mail fraud and one count of securities
fraud. Id. at 394. In applying Santos, we reasoned that:
              in light of the statute, indictment, and jury instructions
              of this case, it appears that (1) the Government did not
              prove or attempt to show that Garland engaged in
              money laundering with “proceeds,” narrowly defined as
              “profits” rather than as “gross receipts”; (2) the same
              “transaction” may have been used to prove both the
              underlying unlawful activity and the money-laundering
              charges; and therefore (3) Garland’s convictions for mail
              and securities fraud potentially “merged,” with his
              money-laundering conviction.

Id. at 404. We thus concluded that Garland may have been convicted of a “non-
existent offense.”3 Id. Accordingly, we reversed the district court’s dismissal of
Garland’s § 2241 petition and remanded for further proceedings. Id.
                                            III.
       In the instant case, Lineberry relied on Santos to claim that the term
“proceeds” in his case was wrongfully applied because the trial evidence showed



       3
          Garland thereby satisfied the third prong of our three-factor test for assessing
whether a petitioner may bring a petition for a writ of habeas corpus under 28 U.S.C. § 2241
in connection with 28 U.S.C. § 2255’s savings clause. Garland, 615 F.3d at 404. These three
factors are:
              (1) the petition raises a claim “that is based on a retroactively
              applicable Supreme Court decision”; (2) the claim was previously
              “foreclosed by circuit law at the time when [it] should have been
              raised in petitioner’s trial, appeal or first § 2255 motion”; and (3)
              that retroactively applicable decision establishes that “the
              petitioner may have been convicted of a nonexistent offense.”

Id. at 394 (quoting Reyes–Requena v. United States, 243 F.3d 893, 904 (5th Cir. 2001)).

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that his payments were “gross receipts,” not “profits.” Specifically, Lineberry
argued that the trial evidence showed that the payment of payroll, utilities,
transportation, photos, training, advertisements, and rent for his escort agency,
Worldwide Escorts, constituted “gross receipts” because these items were
business expenses. Lineberry also argued that the district court erroneously
instructed the jury that proceeds included any property acquired as a result of
the unlawful activity. Lineberry further argued that the jury could have found
him guilty of receiving “profits” of only $16,000.
      The magistrate judge issued a report and recommendation dismissing
Lineberry’s claim. With respect to Lineberry’s claim that his money-laundering
convictions were based on the wrong definition of “proceeds,” the magistrate
judge determined that this claim was procedurally barred and could have been
raised on direct appeal.    Therefore, the magistrate judge did not address
Lineberry’s Santos claim and recommended that both Lineberry’s § 2255 motion
and a COA be denied. Lineberry filed objections to the magistrate judge’s
recommendation, arguing that he could raise the issue concerning the meaning
of “proceeds” in a § 2255 motion because his claim was based on the intervening
change in the law announced by the Supreme Court in Santos. Lineberry also
asserted that this court concluded in Garland that Santos applied retroactively
on collateral review. Garland, 615 F.3d at 396-97. The magistrate judge,
however, issued an order on September 30, 2010, granting Lineberry’s motion
to file a supplemental motion to the extent that it offered a clarification of the
claims previously raised in his § 2255 motion.
      On March 22, 2011, the district court overruled Lineberry’s objections,
adopted the magistrate judge’s report and recommendation, denied the § 2255
motion, and dismissed the motion with prejudice. The district court also denied
a COA and Lineberry’s in forma pauperis (IFP) motion. Lineberry filed a timely
notice of appeal.

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       We granted Lineberry both a COA on the issue of whether the district
court erred in failing to vacate Lineberry’s money-laundering convictions in light
of the holding in Santos, and on his IFP motion. See United States v. Lineberry,
No. 11-40390 (5th Cir. filed Mar. 2, 2012) (order granting COA). We also
directed the Government to address the issue of whether vacating the money-
laundering convictions would have any effect on Lineberry’s conviction for
making a false declaration to the court.
                                           IV.
       The court reviews the district court’s factual findings relating to a 28
U.S.C. § 2255 motion for clear error and its legal conclusions de novo. United
States v. Redd, 562 F.3d 309, 311 (5th Cir. 2009).
                                            A.
       Lineberry primarily argues that his money-laundering convictions should
be dismissed because they were non-existing offenses based on the definition of
“proceeds” in light of Santos.        According to Lineberry, each count in the
indictment involved monetary transfers that were payments relating to business
expenses such as advertisements, office furniture, rent, and salaries. Thus,
Lineberry contends that he was convicted of a crime that did not meet the
definition of proceeds under Santos because “proceeds,” as applied in his case
means “gross receipts,” as opposed to “profits.” Accordingly, Lineberry argues
that all money-laundering counts “merged” with the lesser-included crime of
aggravated promotion of prostitution in order to obtain a harsher sentence.
       The Government, on the other hand, avers that a merger problem is
nonexistent in this case because Lineberry only was charged with money-
laundering and not with the underlying prostitution activity. The Government
maintains that, in Santos and all other cases4 in which a defendant was

      4
        We are aware of one exception in which the defendant was convicted only of the
conspiracy to commit promotional laundering, United States v. Bueno, 585 F.3d 847, 848 (5th

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                                       No. 11-40390

convicted of conspiracy to launder money, the defendant also was convicted of a
separate charge involving the underlying illegal activity, and thus, there was a
merger problem. Accordingly, the Government submits that in the absence of
a separate conviction for the underlying unlawful activity, there is no merger
problem, and notes that a recent district court’s decision has made that
determination in Golb v. Martin, No. 1:09CV7, 2011 WL 3511482 (E.D. Tex.
June 13, 2011). The Government further argues that the legislative history of
the money-laundering statute does not address the proceeds of prostitution.
Therefore, by default, the presumption of “gross receipts” applies to such
proceeds, and Lineberry’s convictions should be upheld.
                                              B.
       Applying Justice Stevens’ concurrence, we now consider the first part of
the holding: “whether giving ‘proceeds’ a broad interpretation to mean ‘receipts’
would result in merging the underlying illegal activity with the money
laundering charge.” Wilson v. Roy, 643 F.3d 433, 436 (5th Cir. 2011) (citing
Garland, 615 F.3d at 402–04).
       Unlike the defendants in Santos or Garland, Lineberry was not convicted
of the predicate crime underlying the money-laundering convictions. Thus, it is
a question of first impression whether there is a merger problem under the
money-laundering statute where a defendant was not charged with the specified
unlawful activity.
       We conclude that there is no “merger problem” present in this case, as
Lineberry’s case is factually distinguishable from Santos and Garland. Santos


Cir. 2009), a case which involved a drug trafficking operation. In drug trafficking cases, we
have relied on Justice Stevens’ acknowledgment that “proceeds” is not intended to mean
“profits” where the predicate offense involves the sale of contraband; rather, “gross receipts”
is the appropriate definition of proceeds in such cases. Wilson v. Roy, 643 F.3d 433, 436-37
(5th Cir. 2011) (citations omitted). Therefore, money-laundering convictions related to drug
trafficking proceeds do not implicate the merger problem.


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                                  No. 11-40390

was charged with and convicted of the specified unlawful activity of illegal
gambling, conspiracy to commit money-laundering, and the substantive offense
of money-laundering. Santos, 553 U.S. at 509-10. Additionally, in Garland, we
expressly considered the potential existence of the merger problem resulting
from Garland’s mail and securities fraud convictions in connection with his
money-laundering convictions. Garland, 615 F.3d at 395-96. The Garland court
stated, “it is possible that the same payout of proceeds as ‘returns’ to investors
[of the pyramid scheme] formed the basis of the mail and securities fraud
convictions, as well proved the element of the money-laundering charge that
Garland transacted in ‘proceeds’ of the underlying unlawful activity.” Id.
Therefore, because Lineberry was not charged with the underlying unlawful
activity of promoting prostitution, we discern no “perverse result” of the merger
problem as contemplated by Santos.          See Golb, 2011 WL 3511482 at *7
(concluding that there was no merger problem because the petitioner was not
charged with nor convicted of the underlying activity of drug trafficking);
Rippetoe v. Roy, No. 5:08-CV-210, 2011 WL 2652131, at *6 (E.D. Tex. June 9,
2011) (noting no potential of a “merger problem” where defendant pled guilty to
money-laundering charges but not to the underlying specified unlawful activity);
see also Black’s Law Dictionary 1078 (9th ed. 2009) (defining merger in the
criminal law context as “[t]he absorption of a lesser included offense into a more
serious offense when a person is charged with both crimes, so that the person is
not subject to double jeopardy” (emphasis added)).
      Moreover, the Supreme Court’s reasoning for being concerned about the
merger problem is largely inapplicable to Lineberry’s case. Most importantly,
Lineberry’s case does not embody Justice Stevens’ concern about “double
jeopardy” since Lineberry was only charged with money-laundering.             See
Santos, 553 U.S. at 527 (“[a]llowing the Government to treat the mere payment
of the expense of operating an illegal gambling business as a separate offense is

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                                  No. 11-40390

in practical effect tantamount to double jeopardy”). Lineberry’s underlying
specified unlawful activity also arose under the Texas Penal Code, not the
federal criminal code.    Therefore, Justice Scalia’s concern regarding “why
Congress would have wanted a transaction that is a normal part of a crime it
had duly considered and appropriately punished elsewhere in the Criminal Code
to radically increase the sentence for that crime,” id. at 517, is likewise
inapplicable here. Thus, we conclude that, under the specific facts of this case,
we are not confronted with a merger problem.
      In the absence of a merger problem, the term “proceeds” is presumptively
defined as “gross receipts,” unless the legislative history of the money-
laundering statute supports a finding that “proceeds” in a particular case means
“profits.” Garland, 615 F.3d at 401. While the legislative history refers to
prostitution generally, it does not address the proceeds of prostitution. See 132
Cong. Rec. H408-01 (1986), 1986 WL 770911 (statement of Rep. Meyers)
(“Attorney General Edwin Meese has stated that ‘money laundering supports,
encourages, and facilitates a large variety of criminal activities including
narcotics trafficking, income tax evasion, bribery, investment fraud, illegal tax
shelter programs, securities fraud, prostitution, and gambling. . . . It is
estimated that approximately $100 billion is laundered through U.S. financial
institutions annually. A large portion of this amount comes from illegal
gambling, prostitution, and other enterprises.”); 132 Cong. Rec. E3082-01 (1986),
1986 WL 794188 (statement of Rep. LaFalce) (“Money laundering is the process
by which criminals–and, most notably, drug dealers–disguise the origin of money
obtained illegally from activities such as drug dealing, prostitution, investment
fraud, gambling, or racketeering.”); 132 Cong. Rec. H5702-03 (1986), 1986 WL
783103 (statement of Rep. Lundine) (similar to Rep. LaFalce’s statement). As
we find no legislative history specifically addressing the proceeds of prostitution,



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                                   No. 11-40390

we apply Justice Stevens’ default presumption that “proceeds” means “gross
receipts” in Lineberry’s case. See Santos, 553 U.S. at 528 n.7 (citations omitted).
        We also note that the transactions underlying Lineberry’s money-
laundering convictions represented “gross receipts,” rather than “profits.”
        First, Lineberry admitted during his cross-examination testimony that he
conducted several credit card transactions to purchase advertisements in adult
magazines for his escort agency. Lineberry further explained that the business
paid the escorts’ salaries, and that he either collected the cash generated from
their services or deposited the money in a bank account if the escort was out of
town.
        Second, the jury instructions provided that,“[t]he term ‘proceeds’ includes
any property, or any interest in property that one would acquire or retain as a
result of the commission of the underlying specified unlawful activity. Proceeds
can be any kind of property, not just money.” The jury also completed a special
verdict form that required a determination of the value of the laundered funds,
which the verdict form defined as “the property, funds, or monetary instrument
involved in the transaction, financial transaction, monetary transaction,
transfer, or transmission in violation of 18 U.S.C. § 1956.” The jury found the
value of the laundered funds to be $1,000,000 or less, but more than $400,000.
        Finally, on direct appeal, we explained Lineberry’s payment of “proceeds”
as the following: “Lineberry . . . generated approximately $560,000 from . . . .
illegal activities.”   Lineberry, 185 F. App’x at 368.       He “transferred and
distributed these proceeds via the United States banking system and various
credit-card systems; portions were used to promote and carry on the
organization’s activities, such as recruiting, advertising, apartment rental,
payroll expenses for prostitutes, and communications expenses.” Id.
        Based on the foregoing, we conclude that Lineberry’s convictions for
money-laundering were based in whole or in part on funds which can be

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    Case: 11-40390       Document: 00512076495          Page: 16     Date Filed: 12/07/2012



                                       No. 11-40390

characterized as “gross receipts,” rather than “profits.” The funds generated
from Lineberry’s prostitution business were used in recruiting, advertising,
apartment rental, payroll expenses for escorts, and communication expenses.
Id. Notably, the jury instructions and the special verdict form did not require
jurors to focus on “profits” as a definition of “proceeds.” See United States v.
Fernandez, 559 F.3d 303, 316 (5th Cir. 2009) (noting that jury instruction which
defined “‘proceeds’ as includ[ing] any property, or any interest in property, that
someone acquires or retains as a result of the commission of the underlying
specified unlawful activity. . . . did not require jurors to focus on ‘profits.’”).
Thus, we conclude that the jury’s finding that Lineberry laundered money under
a broad definition of “proceeds” does not warrant the vacatur of Lineberry’s
money-laundering convictions.
       Accordingly, we decline to vacate Lineberry’s money-laundering
convictions and sentence on the basis of Santos.

                                              V.

       For the foregoing reasons, we AFFIRM the district court’s dismissal of
Lineberry’s 28 U.S.C. § 2255 motion.5



       5
          Regarding his false declaration conviction, Lineberry argues that if the money-
laundering convictions are set aside, his conviction for making a false declaration under 18
U.S.C. § 1623 must be vacated as well. This false declaration charge was based on Lineberry’s
testimony that he never received any money from his escort business. Lineberry, 185 F. App’x
at 368. This statement occurred during Lineberry’s sentencing hearing for his conviction for
being a felon in possession of a firearm. Id. Lineberry later clarified that he used money from
the business to make house payments and pay bills. Id. Accordingly, Lineberry argues that,
because there was no evidence that he personally received proceeds as defined in Santos, he
made no false declaration.

       Prior to Santos, the money-laundering statute did not define the term “proceeds,” which
could have meant either “gross receipts” or “profits.” Santos, 553 U.S. at 511. Therefore, at
the time of trial, Lineberry’s statement that he never received any money from his escort
business was materially false regardless of whether he used some or all of the money to pay
expenses. Therefore, we decline to vacate Lineberry’s false declaration conviction.

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