## Facts

- Steve Graves Chevrolet–Pontiac–Cadillac, Inc. (SGC), an automobile dealership in Ruston, Louisiana, was operated by Leonard Steven “Steve” Graves (dealer, president, 41% owner); Gregory Dean Brown managed SGC’s body shop.
- A 120-count indictment alleged multiple fraud schemes connected to SGC’s sales and financing practices, with corresponding money-laundering counts tied to the alleged fraud proceeds.
- One fraud theory charged Graves with mail fraud based on SGC’s overcharging of document, title, and license fees; titles were mailed by the Louisiana Department of Motor Vehicles.
- Another fraud theory involved a “cash for gas” down-payment scheme in which SGC advanced some or all of a buyer’s down payment while increasing the vehicle price, concealing the absence of genuine buyer equity from lenders.
- The proceeds of the alleged frauds were deposited into SGC’s business bank account and used to pay routine dealership expenses (e.g., parts, materials, office supplies, advertising, used-car purchases, and other operating costs).
- A jury convicted Graves of certain fraud counts and related money-laundering counts under 18 U.S.C. § 1956(a)(1)(A)(i); Brown pleaded guilty to wire fraud and appealed only his sentence.

## Issues

1. Whether using fraud proceeds deposited into a business account to pay ordinary operating expenses of the same business constitutes “promotion” money laundering under 18 U.S.C. § 1956(a)(1)(A)(i).
2. Whether sufficient evidence supported certain fraud convictions challenged on appeal.
3. Whether the district court correctly calculated Brown’s sentence under the Sentencing Guidelines.

## Decision

- The court affirmed Graves’s challenged fraud convictions.
- The court reversed Graves’s promotion money-laundering convictions for insufficient evidence of intent to “promote” specified unlawful activity.
- The court vacated Graves’s sentence and remanded for resentencing because the reversal of the money-laundering counts affected the Guidelines calculation.
- The court affirmed Brown’s sentence.

## Legal Principles

- Promotion money laundering under 18 U.S.C. § 1956(a)(1)(A)(i) requires proof that the financial transaction with criminal proceeds was conducted with intent to promote the carrying on of specified unlawful activity.
- Paying ordinary, legitimate operating expenses of a business with criminal proceeds, without additional evidence of promotional intent directed at further unlawful activity, does not by itself satisfy the promotion element.
- The money-laundering statute must remain distinct from the underlying fraud offense; otherwise, routine spending of fraud receipts would effectively convert many fraud cases into automatic money-laundering prosecutions.

## Conclusion

The Fifth Circuit held that depositing fraud proceeds into a dealership’s account and using them to pay ordinary business expenses did not, on this record, establish the intent required for promotion money laundering under § 1956(a)(1)(A)(i); it therefore reversed Graves’s money-laundering convictions, affirmed the fraud convictions, remanded for resentencing, and affirmed Brown’s sentence.


United States v. Brown, 186 F.3d 661 (5th Cir. 1999)