Judge's ruling favors moonshiners
A federal judge in Roanoke reversed the guilty verdict against two people who were convicted of money laundering.
By Laurence Hammack
When it comes to making moonshine, there's a lot of overhead: the cost of the land where the still sits, the sugar that goes into the mix, the plastic jugs that hold the finished corn liquor.
Those costs are "essential expenses" of the operation, a federal judge in Roanoke has ruled, and cannot be used to prove money laundering.
In a written opinion Monday, Judge James Turk threw out 25 money laundering convictions against Jody Smith and Margaret Smith -- even while agreeing that they had helped run a major still site in Pittsylvania County.
Federal prosecutors argued during a six-day trial in September that the Smiths turned their ill-gotten proceeds back into the moonshine business, making mortgage payments on the land and buying sugar, plastic jugs and even surveillance cameras for the operation.
But in taking the unusual step of reversing a jury's guilty verdicts, Turk cited a recent U.S. Supreme Court case.
When revenue from an illegal activity is used to support the activity's essential expenses, the Supreme Court ruled, it cannot be considered proceeds for the purpose of money laundering. The ruling applies only to cases where the punishment for money laundering is substantially greater than for the underlying criminal activity.
The maximum sentence for making moonshine in the Smiths' case is five years; money laundering carries a punishment of up to 20 years.
After the Supreme Court's precedent, Turk wrote that "it would be a 'perverse result' if revenue from the illegal moonshine business used to pay its essential expenses could constitute a money laundering violation."
Authorities have said the operation yielded at least 16,000 gallons of illegal liquor during its operation in 2005 and 2006, making the Smiths' trial one of the biggest moonshine cases in recent years for the region.
Jody Smith lives in Franklin County, long considered the moonshine capital of the world.
"There's kind of a mystique about it, and frankly it's something that is quite hard to suppress because so much of it goes on," said his attorney, Gil Davis of Fairfax.
But it's not like the Smiths, who were once married overseas in a ceremony not recognized in the United States, will go unpunished for paying the costs of the moonshining business.
The same payments played a role in their convictions on charges directly related to the production of untaxed liquor -- verdicts that Turk upheld.