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Second Circuit: Money Concealment Guilty Plea Vacated for Lack of Evidence to Support Factual Finding of Required Mens Rea

by David M. Reutter

The U.S. Court of Appeals for the Second Circuit vacated a defendant’s conviction because the required mens rea for concealment money launderingwas not supported by the evidence or plea record. The sentences for both counts at plea were also vacated.

The facts of the case showed that Francis Jose Aybar-Peguero, between May 2019 and October 2019, conspired with members of a drug trafficking organization to sell narcotics out of his Waterbury, Connecticut, based convenience store. A law enforcement investigation resulted in a search of the store. Police found “large quantities of heroin and fentanyl, other evidence of drug trafficking such as digital scales and a concealed compartment, and, in the store’s cash register, drugs packaged for distribution.”

While officers concluded the store was a front for drug trafficking, they “concluded that the store also did legitimate business as its shelves were stocked and it did heavy foot traffic,” noted the Second Circuit. The parties “stipulated that Aybar-Peguero was responsible for trafficking one kilogram of heroin and 400 grams of fentanyl. The investigation concluded that Aybar-Peguero concealed proceeds from drug trafficking by depositing them into a business checking account, personal checking account, and a personal savings account along with his store’s legitimate earnings.

Aybar-Peguero agreed to plead guilty to one count of conspiracy to distribute and possession with intent to distribute heroin and one count of concealment money laundering. At the plea hearing, during his allocution, Aybar-Peguero stated he “was involved in these financial transactions through illegal acts, and I know that I did this and that it’s illegal.” Upon further questioning by the magistrate judge, Aybar-Peguero stated that “I was putting money from my work and I was joining it with money from the drugs.”

The magistrate judge recommended accepting the plea, and the U.S. District Court for the District of Connecticut agreed. It sentenced Aybar-Peguero to concurrent prison terms of 87 months on each of the two counts, a period of supervised release, a fine, and a special assessment. Aybar-Peguero timely appealed.

The Court’s analysis was based on the mandates of Rule 11(b)(3) of the Federal Rules of Criminal Procedure. “Before entering judgment on a guilty plea,” the court must “assure itself … that the conduct to which the defendant admits is in fact an offense under the statutory provision under which he is pleading guilty.” Rule 11(b)(3). Although this is not a difficult standard to meet, it is essential. See United States v. Maher, 108 F.3d 1513 (2d Cir. 1997). Additionally, under the Rule, the court must determine whether the defendant’s conduct satisfies the elements of the offense to which he is pleading guilty. Irizarry v. United States, 508 F.2d 960 (2d Cir. 1974). It’s critical that the defendant’s colloquy include an admission that covers each of the elements of the offense. See Brady v. United States, 397 U.S. 742 (1970).

The Court noted that “a guilty plea is no mere formality, but a grave and solemn act.” United States v. Lloyd, 901 F.3d 111 (2d Cir. 2018). Strict adherence to the rules governing guilty pleas is required, so courts must “examine critically even slight procedural deficiencies to ensure that the defendant’s guilty plea was a voluntary and intelligent choice, and that none of the defendant’s substantial rights ha[s] been compromised.” United States v. Livorsi, 180 F.3d 76 (2d Cir. 1999).

Section 1956(a)(1)(B)(i) provides in relevant part: “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 … knowing that the transaction is designed in whole or in part … to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity … shall be [guilty].” The concealment element of the statute requires that the purpose, not simply the result, of the action must have been to conceal or disguise the proceeds of illegal activity. United States v. Garcia, 587 F.3d 509 (2d Cir. 2009).

The Court concluded that the evidence in the record at the time of Aybar-Peguero’s plea hearing did not satisfy the mens rea requirement for concealment money laundering. Its conclusion was based upon the fact he never acknowledged a concealment purpose, and the record lacked sufficient evidence to establish that fact.

The Court reasoned that Aybar-Peguero only ever stated in “the most general terms that he had engaged in illegal financial transactions,” but he never acknowledged that it was his intent to do so. However, the Court pointed out that “a defendant’s characterizing his conduct as ‘illegal’ does not make it so.” The Court explained that Rule 11’s factual basis requirement “protect[s] a defendant who is pleading guilty but does not realiz[e] that his conduct does not actually fall within the charge.”

The Court referenced Aybar-Peguero’s response to the magistrate judge’s questioning regarding the purpose of his depositing the drug-trafficking money in concluding that he lacked the requisite mens rea. The magistrate judge asked whether his motivation to deposit the drug proceeds into the bank was to conceal the fact it was illegal drug money. Aybar-Peguero responded: “It wasn’t so much hiding it from drugs. I was working. I wanted to put it with the money that I was making.” Thus, the Court ruled that Aybar-Peguero never conceded that he engaged in the transactions in question with the purpose of concealment and held that it was plain error for the District Court to accept his guilty plea without a sufficient factual basis in the record at the time of the plea hearing.

Accordingly, the Court vacated Aybar-Peguero’s conviction under § 1956(a)(1)(B)(i) and the sentences for both counts of conviction and remanded. See: United States v. Aybar-Peguero, 72 F.4th 478 (2nd Cir. 2023).  

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United States v. Aybar-Peguero



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