White Collar Crime News

Understanding Willful Blindness April 3, 2010

If the Government is investigating your client for money laundering, they may mention that your client is guilty via “willful blindness”.  Unlike most crimes which require a specific mental intent, money laundering via willful blindness will ensnare defendants who simply turned a blind eye to the crime.  As a result, your client may have a hard time understanding how he did anything wrong. 

The line between innocence and guilt due to willful blindness can be rather thin and a careful examination of all of the surrounding facts and circumstances will help you make a proper determination.  Of course, early attorney involvement and cooperation with the Government may prevent prosecution even if the facts tend to show guilt.   A good example of willful blindness is found in the case of U.S. v. Flores, 454 F.3d 149, 156 (3d Cir. 2006.

Luis Flores was an attorney who had a solo practice in Queens. In 1998, he was visited in his office by German Osvaldo Altamirano-Lean (“Altamirano”).  Altamirano presented himself as an Ecuadorian businessman eager to establish his flower, fruit, and seafood import/export business in the United States. According to Flores, a naturalized American citizen and native of Chile, he was persuaded that Altamirano was who he purported to be. Flores had recently finished work on a matter for the Republic of Argentina, and was interested in developing a practice assisting
South American businessmen.  Over the next several years, Flores opened several corporations for Altamirano, ultimately naming himself as the
nominal president of those companies. He also established several business checking accounts for each of the corporations at different banks, signed myriad blank checks drawn on those accounts, and authorized numerous wire-transfers from the accounts to various foreign and domestic recipients.

Ultimately, Altamirano, Flores and others were indicted for conspiracy to commit money laundering and other offenses. Altamirano cooperated with the Government and testified at Flores’ trial. The Government’s theory of the case was that Flores was “willfully blind” to Altamirano’s unlawful activities. The defense, on the other hand, argued that Altamirano had
deceived Flores into believing that he was a legitimate businessman and that Flores was Altamirano’s unknowing victim and not his co-conspirator.

In January 1999, Flores attemptedto obtain tax identification numbers for three corporations using first one and then another social security number provided byAltamirano, but in each instance Flores was informed that the
numbers were false. He warned Altamirano about the unlawfulness of using invalid social security numbers, and offered to take steps to obtain valid numbers. Instead, Altimirano removed the corporate books from Flores and gave them to co-conspirator Victoria Hernandez. Altamirano paid Hernandez $2,000 per week to open corporations and manage
his relationships with the banks. In April 1999, Altamirano learned that Hernandez had been stealing from him. Altamirano thus decided to return the books to Flores, who agreed to open and oversee bank accounts for the corporations in exchange for the $2,000 weekly salary that Hernandez had received. Flores was paid the $2,000 each week in cash.

In early May 1999, Flores arranged for the incorporation of three new companies and opened an account for each of them at four banks: Republic National Bank, European American Bank, Chase Manhattan Bank, and Citibank. As noted previously, Flores held himself out as the president of these corporations, and was the only person authorized to sign
checks, transfer money, and act on behalf of the entities. For each checkbook, Flores signed about 25 to 30 blank checks; Altamirano retained two or three of these checks to make transfers from one account to another, and sent the remaining checks to Columbia. As soon as the accounts were opened, multiple cash deposits were made and money began to be wired
in and out of the accounts and between accounts. Individual deposits were always less than $10,000, but on any given day the aggregate amount deposited in any account could exceed $10,000.

Just weeks after he had opened the new accounts, Flores received a letter from Republic National Bank (1) explaining what “structured” transactions are and why they are illegal, and (2) informing him that “when an account receives a large incoming wire [transfer of money] and immediately sends an outgoing wire or wires for approximately the same amount,
without apparent commercial justification, it mirrors the activity of an account opened by money launderers.” Flores and Altamirano were asked to attend an in-person meeting at Republic National Bank in late May 1999, at which they were expected to supply documentation of the source of the funds in the bank accounts. When they failed to do so, a bank employee
requested they speak with the bank manager, Thomas Grippa.

In response to Grippa’s questions concerning the number of accounts and seemingly “structured” cash transactions,  Altamirano stated that he maintained multiple accounts to create the appearance for his Ecuadorian suppliers that he had many profitable businesses and to get certain credits from the government of Ecuador. He also explained that he was paid in
cash by a customer at the Hunts Point produce market and that he had lost a lot of money after a hurricane delayed his ship and a large shipment of food spoiled. Grippa testified that he did not accept any of these excuses. Ultimately, both Republic National Bank and European American Bank closed the accounts. Flores told Altamirano that he felt more comfortable
working with Citibank and Chase, where he had personal contacts.

Flores’ accountant, Israel Rivera, who was hired to perform work for Altamirano in April 1999 due to the increasing difficulty of balancing Altamirano’s books, testified that he asked Flores for copies of invoices to document the source of funds in the accounts. He also reported that he had voiced concern to Flores about large payments to European
companies that bore no apparent relationship to the import/export of fruit, flowers, and fish from Ecuador. According to Rivera, he received neither an explanation nor copies of invoices in response to his requests.
Flores remained the sole signor and receiver of the companies’ multiple account statements for several additional months, during which approximately $1,288,085 passed through the companies’ remaining bank accounts. It is undisputed that the cash was transferred via checks and wire transfers signed by Flores to recipients in Columbian-operated
brokerage houses on the Black Market Peso Exchange. As a result of these activities, the Government charged Flores with
conspiracy to launder money, money laundering, and conspiracy to structure currency transactions. A jury convicted Flores on
all counts.
Flores argues that the Government failed to prove beyond a reasonable doubt that he knew or was willfully blind to the fact that the money laundered by Altamirano either “represent[ed] the proceeds of some form of illegal activity,” 18 U.S.C. § 1956(a)(1), or was “criminally derived property,” 18 U.S.C. § 1957(a). According to Flores, “[t]he only form of
unlawful activity identified at trial was drug trafficking. Yet the evidence the Government presented was wholly insufficient to establish [his] knowledge of, or willful blindness to, the fact that the funds originated in drug trafficking or any other crime.”

To prove conspiracy to commit money laundering, the Government was required to show, inter alia, that Flores consorted with others in a money laundering scheme, knowing that the property involved in a financial transaction represent[ed] the proceeds of some form of unlawful activity [and] conduct[ed] or attempt[ed] to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity. 18 U.S.C. § 1956(a)(1). It is undisputed that the financial transactions Flores conducted on behalf of Altamirano “in fact involve[d] the proceeds of specified unlawful activity,” to wit, narcotics trafficking. Thus, the only question is whether the Government produced evidence that Flores knew of or was willfully blind to the fact that the funds originated in some form of unlawful activity, sufficient to obtain a conviction under § 1956(h). See 18 U.S.C. § 1956(c)(1) (stating that it is sufficient if “the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law”) (emphasis added). Accordingly, the defense’s argument that the Government needed to prove that Flores knew of, or was willfully blind to, the fact that the funds originated in drug trafficking is off point.

To prove money laundering, the Government was required to show that Flores, knowingly engage[d] or attempt[ed] to engage in
a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity. 18 U.S.C. § 1957(a). Again, because the monetary transactions that Flores conducted on behalf of Altamirano were “derived from specified unlawful activity,” the only question is whether the Government produced sufficient evidence that Flores knew that the monetary transactions represented the proceeds of criminally derived property. For the same reasons provided above, the defense’s argument—that the Government needed to prove that Flores knew of, or was willfully blind to, the fact that the funds originated in drug trafficking to obtain a money laundering conviction—fails. See 18 U.S.C. § 1957(c) (“[T]he Government is not required to prove that the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity.”).

Our remaining task is to determine whether there is substantial evidence in the record, viewed in the light most favorable to the Government, that Flores knew that the property involved in the financial transactions represented the proceeds of some form of unlawful activity and/or criminally derived property. Knowledge may be demonstrated by showing that a defendant either had actual knowledge or “deliberately closed his eyes to what otherwise would have been obvious to him concerning the fact in question.” United States v. Stewart, 185 F.3d 112, 126 (3d Cir. 1999). The Government establishes willful blindness by proving that a defendant “was objectively aware of the high probability of the fact in question,” Brodie, 403 F.3d at 148 (citation omitted), and “could have recognized the likelihood of [illicit acts] yet deliberately avoided learning the true facts.” Stewart, 185 F.3d at 126.

Here, the jury reasonably concluded that Flores participated in the money laundering conspiracy either knowingly or with willful blindness. The following record evidence, inter alia, created in Flores objective awareness of the high probability that Altamirano was involved in money laundering: (1) one of Flores’ initial interactions with Altamirano involved the supply of two false social security numbers; (2) as soon as Flores opened multiple bank accounts for the corporations, large amounts of cash began flowing in and out of the accounts, despite the fact that the corporations
had just opened for business and had no physical location other than Flores’ own offices; (3) Flores received a letter from the Republic National Bank explaining what “structured” transactions are and why they are illegal, and informing him that “when an account receives a large incoming wire and immediately sends an outgoing wire or wires for approximately
the same amount, without apparent commercial justification, it mirrors the activity of an account opened by money launderers”; (4) the manager of Republic National Bank disbelieved Altamirano’s explanation concerning his numerous accounts and financial transactions and told Altamirano and Flores that the accounts were “evidently” being used for “money
laundering”; (5) Flores’ accountant, Rivera, testified that he had sought invoices documenting the source of the funds but never received the documentation he requested; and (6) Rivera also questioned Flores about why the funds were being sent to foreign companies with no apparent relationship to the Ecuadorian fruit, fish or flower trade.

In response to the substantial evidence that Altamirano was involved in some sort of illegal activity, Flores willfully blinded himself to the truth. He never requested any proof of the legitimacy of the transactions from Altamirano or even any further explanation addressing either the bank manager’s or accountant’s concerns. That Flores “did not ask the natural
follow-up question[s] to determine the source of those funds could reasonably be considered by a jury to be evidence of willful blindness.” United States v. Wert-Ruiz, 228 F.3d 250, 257 (3d Cir. 2000). Indeed, when faced with the above-detailed
evidence, instead of making obvious inquiries, Flores engaged in additional money laundering transactions. For example, he continued to sign checks and wire transfers and to receive account statements documenting the flow of over $1,200,000 through the accounts. Moreover, Flores dissuaded Altamirano from discontinuing suspicious financial transactions after the
meeting with Republic National, and instead opened accounts at other banks, stating that he needed the $2,000 per week he was being paid in cash to oversee the bank accounts. Thus, the jury could have inferred that Flores was motivated to avoid learning the truth because the money laundering operation was profitable to him. See Brodie, 403 F.3d at 158.