Argument recap: US v. Santos

Although the Court granted cert. to consider whether the term “proceeds” as used in 18 U.S.C. 1956(a)(1) refers to gross receipts or net profits, it was not at all clear from the oral argument whether a majority of the Court would actually reach that issue.

Arguing on behalf of the United States, Assistant to the Solicitor General Matthew Roberts ran into tough questions from the justices. Specifically, although the United States wanted to reiterate its argument that the “profits” definition advocated by the Seventh Circuit below and respondents in this case is illogical because it would exclude transactions – such as the expense payments at issue in this case – that Congress obviously intended to cover, several justices were unwilling to accept the underlying premise of that argument. First out of the box was Justice Scalia, who responded to Roberts’s assertion that adopting a “profits” definition of proceeds would result in some gambling-related behavior not being covered by the statute by asking “so what? . . . Is there some rule up there that says every criminal statute has to cover as much as possible?” Scalia found it “extraordinary . . . that Congress would want to make all . . . betting operations like this a violation automatically of two criminal statutes.” Justice Ginsburg agreed. In her view, the expense payments were not an effort to conceal, but instead merely “an ordinary and necessary expense of the illegal business,” such that the government’s construction merely imposed stiffer penalties for the same conduct already covered by the basic gambling statute. Scalia then parried Roberts’s suggestion that the money-laundering statute did not involve the same conduct because paying the winners and collectors is not a required element of the basic gambling statute: “[C]ome on. Nobody – nobody runs a gambling operation without paying off the winners. It’s not going to last very long.”

Questions from Justices Kennedy and Souter followed before Justice Alito threw Roberts a temporary lifeline in the form of a question regarding whether the other justices’ concerns about treating payments of expenses as money laundering resulted from the Seventh Circuit’s broad construction of other statutory terms such as promotion and concealment – “concepts,” he noted, “that are not before us here.” Roberts quickly agreed, but was just as quickly drawn back into questions from other justices.

The Chief Justice then stepped in by noting that the other justices’ concerns would still be present even if the Court were to limit the definition of “proceeds” to profits. Roberts agreed with the Chief, but Justice Scalia was less convinced. He told Roberts that the narrower definition would “solve a lot” of the problems unless the government was “willing to come in and say, yes, do it to us, give us a narrower definition of concealment and a narrower definition of what’s a transaction.” When Roberts responded that those definitions were not at issue in this case, Justice Stevens disagreed. In his view, “the facts of the case do present it,” and Justice Stevens posited that “it’s theoretically possible we could agree with you on the profits issue, but nevertheless say this doesn’t fit the promotion.” Following up on Stevens’s suggestion, both Justice Ginsburg and Justice Scalia broached the possibility that the case could be sent back to the Seventh Circuit for it to reconsider the promotion/concealment issue.

Justice Breyer offered what he described as three solutions to the concerns voiced by several members of the Court: through the definition of “proceeds,” through a narrow definition of “promotion,” or through sentencing. Roberts contended that the Court should hold that “proceeds” for purposes of the statute equals “gross receipts,” but suggested that the best way to deal with the concerns was through sentencing. Justice Scalia immediately dismissed that suggestion as “extraordinary,” scoffing that “that’s no way to run a railroad.” Justice Ginsburg was equally skeptical, asking Roberts why if the respondents “did nothing more than engage in the underlying offense” they should “receive one day more than” the sixty-month sentence for the basic gambling violation. More questions followed, with Justice Kennedy summing up the views of several justices: “[T]he problem we have is we’re not sure that it is within the statute. So then you’re asking us to say how to make the statute work when we don’t think the statute’s applicable at all.”

Arguing for respondents Santos and Diaz, Todd Vare recognized his opportunity and tried to run with it. But he was instantly slowed by questions from the Chief Justice, who echoed a line of questioning posed to Matthew Roberts by Justice Alito regarding whether the same concerns voiced by several members of the Court would persist under a “profits” definition. Vare acknowledged that they would and was thus chastised by Justice Scalia, who asked why he would advocate a solution that would constitute “the worst of both worlds.” But Scalia ended with a softball, asking why the Court shouldn’t instead “focus in on what constitutes a transaction and what constitutes concealment – something other than the ‘proceeds’ definition?”

Vare wisely responded: “I think you’re absolutely correct, Justice Scalia.” Vare then had to convince the Court, however, that the other definitional questions were properly before it. And although Vare described it as “inherent” in the question presented, Justice Kennedy had other views, describing it as a “stretch.” And Justice Scalia later opined that he didn’t necessarily want to resolve the other definitional questions because they were “very difficult” and hadn’t been thoroughly argued. Eventually, Justice Alito turned to the question presented – i.e., the definition of “proceeds.” His questions, as well as others by the Chief and Justices Scalia and Kennedy, suggested that if the Court did actually reach the merits of the question presented, Diaz and Santos might have a tough time putting together a majority.