Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-09-10201/USCOURTS-ca9-09-10201-0/pdf.json

Parties Involved:
Guo Jun Xu
Appellant
United States of America
Appellee

Document Text:

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

CHAO FAN XU,

Defendant-Appellant.

No. 09-10189

D.C. No.

2:02-CR-00674-

PMP-LRL-1

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

YING YI YU,

Defendant-Appellant.

No. 09-10193

D.C. No.

2:02-CR-00674-

PMP-LRL-4

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

GUO JUN XU,

Defendant-Appellant.

No. 09-10201

D.C. No.

2:02-CR-00674-

PMP-LRL-2

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2 UNITED STATES V. XU

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

WAN FANG KUANG,

Defendant-Appellant.

No. 09-10202

D.C. No.

2:02-CR-00674-

PMP-LRL-3

OPINION

Appeal from the United States District Court

for the District of Nevada

Philip M. Pro, District Judge, Presiding

Argued and Submitted

April 17, 2012—San Francisco, California

Filed January 3, 2013

Before: Alfred T. Goodwin, Stephen Reinhardt,

and Mary H. Murguia, Circuit Judges.

Opinion by Judge Goodwin

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UNITED STATES V. XU 3

 This summary constitutes no part of the opinion of the court. It has

*

been prepared by court staff for the convenience of the reader.

SUMMARY

*

Criminal Law

The panel affirmed the convictions and vacated the

sentences of four Chinese nationals who participated in a

scheme to steal funds from the Bank of China and to escape

prosecution and retain the proceeds by illegal transfers of

funds and by immigration fraud.

The panel held that the defendants’ RICO conspiracy

convictions are not the result of an improper extraterritorial

application of 18 U.S.C. § 1962(d) because the defendants’

criminal enterprise involved both bank fraud and immigration

fraud centered on stealing money from the Bank of China and

traveling freely with the stolen money in the United States. 

Explaining that conspiracy does not require completion of

the substantive crime, the panel held that there was sufficient

evidence to support the defendants’ money laundering

conspiracy convictions under 18 U.S.C. § 1956(h), and that

18 U.S.C. § 1957(d)’s jurisdictional requirement is met

because the transactions took place in the United States. The

panel likewise held that there was sufficient evidence to

support the defendants’ convictions for conspiracy to

transport stolen money under 18 U.S.C. § 2314.

The panel held that the district court did not plainly err in

its treatment of videotaped testimony at trial, that the

defendants’ Confrontation Clause rights were not violated,

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4 UNITED STATES V. XU

and that the district court did not abuse its discretion in

limiting the testimony of the defendants’ expert witnesses.

The panel rejected as meritless the defendants’ jury

instruction challenges related to burden shifting, Chinese law,

fatal variance/constructive amendment, theory of defense,

aiding and abetting, the definition of “on or about,” and the

incomprehensibility of the numerous Chinese names

presented to the jury.

The panel held that the district court did not violate the Ex

Post Facto Clause by applying the 2007 Sentencing

Guidelines to a conspiracy that did not end until the

defendants’ 2004 arrest.

The panel remanded for resentencing under U.S.S.G.

§ 2S1.1(a)(2) because the district court improperly relied on

the defendants’ foreign conduct to meet the requirements of

U.S.S.G. § 2S1.1(a)(1)(A). The panel rejected as meritless an

objection to an abuse of trust enhancement under U.S.S.G.

§ 3B1.3, and deemed waived an objection to an enhancement

for relocation to avoid law enforcement under U.S.S.G.

§ 2B1.1(b)(9)(A).

Because the district court did not provide sufficient

grounds to support the $482 million restitution order, the

panel remanded for reconsideration regarding its legal and

factual basis.

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UNITED STATES V. XU 5

COUNSEL

Mario D. Valencia, Henderson, Nevada, for DefendantAppellant Chao Fan Xu; Marc Picker, Reno Nevada, for

Defendant-Appellant Guo Jun Xu; Loren Graham, Stateline,

Nevada, for Defendant-Appellant Ying Yi Yu; Chad A.

Bowers, Las Vegas, Nevada, for Defendant-Appellant Wan

Fang Kuang.

Krista Tongring, United States Department of Justice,

Organized Crime and Gang Section, Washington, D.C.;

Ronald L. Cheng, United States Department of Justice,

Organized Crime and Gang Section, Los Angeles, California,

for Plaintiff-Appellee.

OPINION

GOODWIN, Circuit Judge:

Four Chinese nationals appeal their convictions and

sentences for federal crimes that they committed as part of a

scheme to steal funds from the Bank of China, where two of

the defendants were high-level employees, and to escape

prosecution and retain the proceeds by illegal transfers of

funds and by immigration fraud. We affirm the convictions,

and vacate the sentences and remand for resentencing.

Defendants Xu Chaofan (“Chaofan”), Xu Guojun

(“Guojun”), Yu Ying Yi (“Yingyi”), and Kuang Wan Fang

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 Chinese custom puts a person’s surname first and given name last. We

1

refer to Defendants by their first name to avoid confusion with certain

witnesses who share a surname with a defendant.

(“Wanfang”) (collectively, “Defendants”), challenge the 1

application of the Racketeer Influenced and Corrupt

Organizations Act (“RICO”) to extraterritorial conduct which

occurred in China, as well as various rulings on evidence and

defense motions. They also challenge their sentences.

The scheme involved diverting bank funds from the Bank

of China to a holding company in Hong Kong. Defendants

were charged with manipulating auditing controls to conceal

their diversion of bank funds, and using the funds to speculate

in foreign currency, to make fraudulent loans, to purchase

real estate in Asia and North America, and to finance

gambling trips to Las Vegas and other casino venues. As an

essential part of the scheme, each of the Defendants entered

into a fraudulent marriage with a spouse who held valid

United States immigration status. After the Bank of China

discovered their scheme, Defendants fled to the United States

using their falsified immigration documents. Defendants

were arrested and brought to trial in the United States District

Court for the District of Nevada.

We have jurisdiction under 28 U.S.C. § 1291 and

18 U.S.C. § 3742.

I. Facts and Procedural Background

Guojun and Yingyi were legally married in China in

1985. Chaofan and Wanfang were legally married in China

in 1992. Chaofan was employed by the Bank of China from

1982 through 2001. The Bank of China is a state-owned

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UNITED STATES V. XU 7

bank that is headquartered in Beijing. It operates throughout

China through a series of provincial branches, second-level

branches, and sub-branches. In 1992, Chaofan was promoted

to president/general manager of the Kaiping sub-branch in

Guangdong province, and he served in that position until

August 1998. Guojun was hired in 1994 as head of

accounting at the Kaiping sub-branch. In August 1998,

Chaofan was promoted, and unindicted co-conspirator Yu

Zhendong (“Zhendong”) became president/general manager

of the Kaiping sub-branch. When Zhendong was promoted

in May 2000, Guojun took over at the Kaiping sub-branch

and served as president/general manager until the Bank of

China discovered the fraud in October 2001.

During their management of the Kaiping sub-branch, the

three managers engaged in three types of fraud: (1) foreign

exchange speculation, resulting in a loss to the Bank of China

of approximately $147 million; (2) “out-of-book” loans,

which are loans that were not properly recorded in the bank’s

accounting system, resulting in a loss of approximately $181

million; and (3) false loans, in which loans totaling $90-95

million were entered into the bank’s accounts, but the

proceeds from the loans were diverted into a Hong Kong

conduit company named Ever Joint.

In 1995, the Bank of China conducted a foreign exchange

audit including the Kaiping sub-branch. To avoid discovery

of the foreign currency exchange losses, Chaofan, Guojun,

and Zhendong directed Kaiping sub-branch employees to

falsify bank records. These efforts succeeded. The three

managers were able to pass subsequent audits by the Bank of

China in the same way.

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During the course of the fund diversions, Chaofan,

Guojun, Wanfang, and Yingyi entered into false marriages

with spouses who held valid United States immigration

status. The purpose of the false marriages was to gain

residency status in the United States to avoid Chinese Law

enforcement.

During the time alleged in the indictment, Chaofan,

Guojun, Wanfang, and Yingyi made numerous gambling trips

to Macao, Australia, Malaysia, and the Philippines. These

trips were financed with wire transfers totaling more than $80

million from Ever Joint accounts. Using counterfeit visas and

passports, the group also traveled to Las Vegas in 2000 and

2001, where they stayed at casino hotels and spent substantial

sums playing baccarat. The gambling money was arranged

through intermediaries who used cashier’s checks drawn from

Ever Joint accounts to set up credit lines at the casinos. The

Las Vegas gambling money included wire transfers totaling

over $2 million from Ever Joint accounts that resulted in

checks being issued by the casinos to the intermediaries to

facilitate the return of the funds to Defendants for their

personal use.

On October 12, 2001, due to a change in accounting

procedures, the Bank of China discovered a $482 million

discrepancy in bank records that was attributed to the Kaiping

sub-branch. Chaofan and Guojun fled to Hong Kong. Using

their fraudulent passports and visas, they flew to Vancouver,

British Columbia, and continued on to Las Vegas. Chaofan

and Guojun then discovered that Chinese authorities had

frozen the $8 million that they had transferred to Caesars

Palace casino for their personal use. Wanfang and Yingyi

fled separately to Vancouver and then to the United States

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UNITED STATES V. XU 9

using their fraudulently obtained immigration status. The

United States does not have an extradition treaty with China.

Zhendong was arrested in Los Angeles on December 19,

2002. Zhendong pleaded guilty to federal charges and agreed

to return to China. He cooperated with the FBI in the

investigation and prosecution of Defendants. Id. Guojun and

Yingyi were arrested in Wichita, Kansas, on September 22,

2004. Chaofan and Wanfang were arrested in Edmond,

Oklahoma, on October 6, 2004.

In the second superseding indictment, Defendants were

charged with RICO conspiracy in violation of 18 U.S.C.

§ 1962(d) (count one), money laundering conspiracy in

violation of 18 U.S.C. § 1956(h) (count two), conspiracy to

transport stolen money in violation of 18 U.S.C. § 371 (count

three), use of a fraudulently obtained visa in violation of

18 U.S.C. §§ 1546(a) & 2 (counts four through nine), and use

of a fraudulent passport in violation of 18 U.S.C. §§ 1542 &

2 (counts ten through fifteen).

From February 2005 through early 2008, the parties were

involved in lengthy pretrial motions and discovery, including

two rounds of videotaped depositions of witnesses who either

lived in or were incarcerated in China. The government,

together with Defendants and their counsel, conducted the

depositions from Las Vegas, Nevada, via video link with the

witnesses in China. Defendants cross-examined each

witness. Defendants waived their right to be present in China

to confront the witnesses face to face.

After a 38-day trial (from June 10, 2008, to August 29,

2008), the jury convicted Defendants on all counts. The

district court sentenced Chaofan to 25 years in prison, Guojun

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to 22 years, and Wangfan and Yingyi to 8 years each. The

court also sentenced each defendant to three years of

supervised release, and entered restitution orders totaling

$482 million. Defendants timely appealed to this court. The

appeals were assigned to this panel and consolidated.

We granted the government’s motion to expand the record

for this appeal to include 31 DVDs containing the complete,

unedited video depositions for all witnesses who appeared at

trial.

II. Defendants’ Count One Rico Conspiracy Convictions

A. Count One Activities

Viewed as a whole, the activities subject to count one

encompass a unified scheme, wherein the Defendants: stole

as much money as possible from the Bank of China;

transferred the stolen funds out of China; escaped, through

immigration fraud, to a safe harbor in the United States; and

then spent the funds in, among other places, Las Vegas

casinos. Defendants were thus engaged in an international

enterprise, using many of the tools of the global economy.

We therefore consider RICO’s application in a multinational

context.

B. Extraterritorial Application of Rico

Defendants argue that their count one convictions are

invalid because the charged conspiracy was extraterritorial

and outside the reach of RICO. We review de novo a

challenge to the extraterritorial application of criminal

statutes. See Vasquez-Velasco, 15 F.3d 833, 838–40 (9th

Cir. 1994); see also United States v. Felix-Gutierrez,

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UNITED STATES V. XU 11

940 F.2d 1200, 1203–04 (9th Cir. 1991); Chua Han Mow v.

United States, 730 F.2d 1308, 1311 (9th Cir. 1984).

In Morrison v. National Australia Bank Ltd., 130 S. Ct.

2869, 2875 (2010), the Supreme Court confronted the

question whether § 10(b) of the Securities Exchange Act

applies extraterritorially. The Court began its analysis under

the premise that “[w]hen a statute gives no clear indication of

an extraterritorial application, it has none.” Id. at 2878. The

Court then concluded that, because § 10(b) contained no

“affirmative indication” of extraterritorial effect, it could not

be applied extraterritorially. Id. at 2883.

In the wake of Morrison, this circuit has not considered

whether RICO applies extraterritorially. We have previously

held, however, that RICO is silent as to its extraterritorial

application. See Poulous v. Caesars World, Inc., 379 F.3d

654, 663 (9th Cir. 2004). Other courts that have addressed

the issue have uniformly held that RICO does not apply

extraterritorially. See generally Norex Petroleum Ltd. v.

Access Indus., Inc., 631 F.3d 29, 33 (2d Cir. 2010);

European Cmty. v. RJR Nabisco, Inc., 2011 WL 843957,

at *5 (E.D.N.Y Mar. 8, 2011); In re Toyota Motor Corp.,

785 F. Supp. 2d 883, 913 (C.D. Cal. 2011); Sorota v. Sosa,

842 F. Supp. 2d 1345, 1349 (S.D. Fla. 2012). Although those

cases addressed the civil rather than the criminal RICO

statute, they are faithful to Morrison’s rationale: “Rather

than guess anew in each case, this Court applies the

presumption [against extraterritorial application] in all cases,

preserving a stable background against which Congress can

legislate with predictable effects.” Morrison, 130 S. Ct. at

2881. Therefore, we begin the present analysis with a

presumption that RICO does not apply extraterritorially in a

civil or criminal context.

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Defendants argue that because RICO does not apply

extraterritorially, the government cannot apply the statute in

this case because the conspiracy took place in China and

Hong Kong, not the United States. Defendants define the

enterprise as having two parts. Indeed, Defendants were

charged here with membership in a criminal enterprise that

involved not only embezzlement against the Bank of China

that occurred in China and Hong Kong (part one) but also

immigration fraud to escape to the United States with their

ill-gotten gains (part two). Accordingly, we must determine

whether under the circumstances of this case RICO can be

lawfully applied to any, or all, of Defendants’

conduct—foreign or domestic. See id. at 2884 (the

“presumption here (as often) is not self-evidently dispositive,

but its application requires further analysis.”).

C. Determining RICO’s Focus

Morrison frames the extraterritorial inquiry in terms of

“the ‘focus’ of congressional concern” in enacting the statute.

Id. The Morrison Court further defined the concept of focus

in terms of the “objects of the statute’s solicitude” and “th[e]

transactions that the statute seeks to regulate.” Id. (internal

quotation marks omitted).

The inquiry into RICO’s focus is far from clear-cut. See

In re Toyota, 785 F. Supp. 2d at 914 (“It is unclear how

Morrison’s logic, which evaluates the ‘focus’ of the relevant

statute, precisely translates to RICO.”). The Second Circuit

side-stepped the issue by summarily declaring in Norex that

the defendants’ “slim contacts with the United States . . . are

insufficient to support extraterritorial application.” Norex,

631 F.3d at 33 (2d Cir. 2010). Given Morrison’s detailed

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UNITED STATES V. XU 13

analysis regarding the focus of the Exchange Act, however,

our best path forward is to determine RICO’s focus.

Courts that have addressed the issue fall essentially into

two camps. One camp asserts that RICO’s focus is on the

enterprise. See, e.g., Cedeno v. Intech Group, Inc.,

733 F. Supp. 2d 471, 473 (S.D.N.Y. 2010); European Cmty.,

2011 WL 843957, at *5; Farm Credit Leasing Servs. Corp. v.

Krones, Inc. (In re Le-Nature’s, Inc.), 2011 WL 2112533,

at *3 n.7 (W.D. Pa. May 26, 2011) (adopting the enterprisefocused model but acknowledging that “RICO may have

more than one ‘focus’—including, for example, the pattern of

racketeering activity required by the statute.”); Mitsui O.S.K.

Lines, Ltd. v. Seamaster Logistics, Inc., 2012 WL 1657108,

at *4 (N.D. Cal. May 10, 2012); In Re Toyota,

785 F. Supp. 2d at 914; United States v. To, 144 F.3d 737,

744 (11th Cir. 1998) (a pre-Morrison case); United States v.

Hoyle, 122 F.3d 48, 51 (D.C. Cir. 1997) (a pre-Morrison

case).

The other camp asserts that RICO’s focus is on the pattern

of racketeering activity. See, e.g., Agency Holding v. MalleyDuff, 483 U.S. 143, 154 (1987) (“the heart of any RICO

complaint is the allegation of a pattern of racketeering.”)

(emphasis in original omitted); United States v. Philip Morris

USA, Inc., 783 F. Supp. 2d 23, 29 (D.D.C. 2011) (addressing

the possibility that domestic conduct could provide the basis

for a foreign corporation’s RICO liability);CGC Holding Co.

v. Hutchens, 824 F. Supp. 2d 1193, 1209 (D. Colo. 2011)

(citing Philip Morris, 783 F. Supp. 2d at 29); Chevron Corp.

v. Donziger, 2012 WL 1711521, at *7–8 (S.D.N.Y. May 14,

2012) (quoting CGC Holding Co., 824 F. Supp. 2d at

1209–10); In re Le-Nature’s Inc., 2011 WL 2112533, at *3

n.7; accord Note, R. Davis Mello, Life After Morrison:

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Extraterritoriality and RICO, 44 VAND. J. TRANSNAT’L L.

1385, 1411 (2011) (arguing that courts should “apply RICO

in any case where a plaintiff alleges the commission of

enough predicate acts in the United States within the statutory

time period to establish a ‘pattern of racketeering activity,’

even if the ‘enterprise’ is a foreign enterprise or the scheme

involves the commission of predicate acts in a foreign

jurisdiction.”).

We address both models in turn.

1. Focus on the Enterprise

Two district courts in the Second Circuit have concluded

that the focus of RICO is on the enterprise—specifically,

domestic enterprises.

In Cedeno, 733 F. Supp. 2d at 472, the district court

addressed extraterritorial application of RICO in a civil action

seeking damages arising out of a wide-ranging money

laundering scheme through which Venezuelan nationals used

United States banks as conduits for fraudulently obtained

funds. The scheme’s contacts with the United States were

limited to the movement of currency into and out of New

York bank accounts. Id. After determining that the focus of

RICO is on “the enterprise as the recipient of, or cover for, a

pattern of racketeering activity,” the court held that “RICO

does not apply where . . . the alleged enterprise and the

impact of the predicate activity upon it are entirely foreign.”

Id. at 474.

In European Community, 2011 WL 843957, at *5, the

district court, upon examining the elements of RICO,

concluded that “the statute does not punish the predicate acts

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of racketeering activity—indeed, each predicate act is, itself,

a separate crime—but only racketeering activity in

connection with an enterprise.” Thus, the “object of

[RICO’s] solicitude, and the focus of the statute” is the

enterprise. Id. (internal quotation marks omitted). The court

concluded that a RICO enterprise “must be a domestic

enterprise.” Id.

Determining the geographic location of an

enterprise—whether foreign or domestic—is a difficult

inquiry, however. See Chevron, 2012 WL 1711521, at *6

(“the emphasis on whether the RICO enterprise is domestic

or foreign simply begs the question of how to determine the

enterprise’s character.”). Two district courts have addressed

the issue of determining geographic location by utilizing the

“nerve center” test. See European Cmty., 2011 WL 843957,

at *5–6; Mitsui O.S.K. Lines, 2012 WL 1657108, at *4–5.

The nerve center test originated as “the vehicle of choice” in

determining the principle place of business for a corporation

when analyzing a federal court’s diversity jurisdiction. See

European Cmty., 2011 WL 843957, at *5 (internal quotation

marks omitted) (citing Hertz Corp. v. Friend, 130 S. Ct. 1181,

1192 (2010)). The nerve center test focuses on where the

enterprise’s decisions are made, as opposed to carried out,

and thus centers on the “brains” of an enterprise, not the

“brawn”. European Cmty., 2011 WL 843957, at *6.

European Community and Mitsui O.S.K. Lines entailed a

fairly straightforward application of the nerve center test that

resulted in different conclusions regarding extraterritoriality.

The European Community court concluded that a moneylaundering scheme that originated in South America and

Europe “issued from those criminal organizations located in

South America and Russia—not . . . in the United States,”

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and, consequently, the enterprise was extraterritorial. 2011

WL 843957, at *2–3, *7. Mitsui O.S.K. Lines involved a

fraudulent shipping scheme conceived by United States

corporations but executed primarily overseas. 2012 WL

1657108, at *1, *7. In that case, the decision making process

of the criminal enterprise “occurred substantially within the

territory of the United States,” and, thus, the enterprise was

considered domestic. Id. at *7.

Both courts emphasized the administrative ease,

familiarity, and consistency of the nerve center test.

European Cmty., 2011 WL84397, at *6; Mitsui O.S.K. Lines,

2012 WL 1657108, at *5. Both courts realized, however, that

application of the nerve center test could lead to “artificially

simplified results,” Mitsui O.S.K. Lines, 2012 WL 1657108,

at *4, and that “hard cases” will arise that do not “in all

instances, automatically generate a result,” European Cmty.,

2011 WL 84397, at *6. Indeed, as the Supreme Court has

noted, “it is a rare case of prohibited extraterritorial

application that lacks all contact with the territory of the

United States.” Morrison, 130 S. Ct. at 2884 (emphasis in

original).

The case before us presents just such a hard case that

illuminates the inadequacy of the nerve center test and the

enterprise-based model upon which it relies. As the Chevron

court pointed out, the nerve center test could “produce absurd

results” when applied to a hypothetical criminal prosecution

of two separate corporate entities—one foreign and one

domestic—both engaged in the same pattern of criminal

activity in the territorial United States. See Chevron, 2012

WL 1711521, at *6. The court labeled “risible” the notion

that the domestic corporation would be culpable whereas the

foreign corporation would be immune from prosecution

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UNITED STATES V. XU 17

simply because its ringleaders had the forethought to

incorporate overseas. Id. This is sound reasoning.

The geographic location of an enterprise may be relevant

under certain factual scenarios, like the criminal schemes at

issue in European Community and Mitsui O.S.K. Lines. But

in a case like this one, where the “brains” of the operation

were located overseas but the enterprise violated United

States immigration law in the United States, “there is no

necessary or . . . even probable connection between where the

RICO enterprise makes its decisions and whether the

application of RICO to the racketeering activity at issue . . .

was the sort of activity with which Congress would have been

concerned.” Chevron, 2012 WL 1711521, at *7. Moreover,

while administrative simplicity may be “a major virtue in a

jurisdictional statute.” Hertz , 130 S. Ct. at 1193, a statute’s

extraterritorial reach is a merits question, not a question of

subject-matter jurisdiction. See Morrison, 130 S. Ct. at 2877

(“to ask what conduct [a statute] reaches is to ask what

conduct [a statute] prohibits, which is a merits question.”).

Therefore, an inquiry into the application of RICO to

Defendants’ conduct is best conducted by focusing on the

pattern of Defendants’ racketeering activity as opposed to the

geographic location of Defendants’ enterprise.

2. Focus on the Pattern of Racketeering Activity

“[T]he heart of any RICO complaint is the allegation of

a pattern of racketeering.” Agency Holding, 483 U.S. at 154

(emphasis in original omitted); see also H.J. Inc. v. Nw. Bell

Tel. Co., 492 U.S. 229, 236 (1989) (describing “RICO’s key

requirement of a pattern of racketeering”). As noted, several

post-Morrison courts have determined that RICO’s focus is

on the pattern of racketeering activity for purposes of

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analyzing extraterritorial application of the statute. Philip

Morris, Inc., 783 F. Supp. 2d at 29; CGC Holding Co., 824 F.

Supp. 2d at 1209; Chevron, 2012 WL 1711521, at *7–8.

RICO’s statutory language and legislative history support

the notion that RICO’s focus is on the pattern of racketeering

activity. For example, 18 U.S.C. § 1962(c), which forms the

basis of Defendants’ count one convictions, prohibits the

conduct of a criminal enterprise’s affairs “through a pattern

of racketeering activity.” Other sections prohibit the use of

funds derived from a pattern of racketeering activity in the

investment in or acquisition of an enterprise involved in

interstate commerce. Id. §§ 1962(a)–(b). Furthermore,

RICO’s legislative history shows that the statute was enacted

to promote “the eradication of organized crime in the United

States by strengthening the legal tools in the evidencegathering process, by establishing new penal prohibitions,

and by providing enhanced sanctions and new remedies to

deal with the unlawful activities of those engaged in

organized crime.” Organized Crime Control Act of 1970,

Statement of Findings and Purpose, Pub. L. No. 91-452, 84

Stat. 922 (1970) reprinted in 1970 U.S. Code Cong. &

Admin. News 1073 (emphasis added).

Given this express legislative intent to punish patterns of

organized criminal activity in the United States, it is highly

unlikely that Congress was unconcerned with the actions of

foreign enterprises where those actions violated the laws of

this country while the defendants were in this country. See

Chevron, 2012 WL 1711521, at *6. Thus, to determine

whether Defendants’ count one convictions are within

RICO’s ambit, we look at the pattern of Defendants’

racketeering activity taken as a whole.

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3. Application to the Case at Hand

The second superseding indictment describes two parts of

the enterprise: (1) “Enriching the members and associates . . .

through among other things, fraud, money laundering, and

foreign and interstate transfer of funds,” and (2) “Enabling

the members and associates . . . through marriage, passport,

and visa fraud, to travel, among other countries . . .

[including] the United States, and to flee China and Hong

Kong in the event that the criminal activity of the Enterprise

was discovered.” One part consisted of racketeering

activities conducted predominantly in China, and one part

consisted of racketeering activities in the United States.

The first part centers on the Bank of China fraud and, to

the extent it was predicated on extraterritorial activity, it is

beyond the reach of RICO even if the bank fraud resulted in

some of the money reaching the United States. See Cedeno,

733 F. Supp. 2d at 472 (“the scheme’s contacts with the

United States . . . were limited to the movement of funds into

and out of U.S.-based bank accounts.”);Norex, 631 F.3d at 33

(“The slim contacts with the United States . . . are insufficient

to support extraterritorial application of the RICO statute.”).

The second part, however, bound the Defendants’

enterprise to the territorial United States. This second part

involved racketeering activities conducted within the United

States including the commission of RICO predicate crimes

based on violations of United States immigration laws, as

codified in 18 U.S.C. §§ 1542, 1546(a). Specifically,

Defendants entered the United States using fraudulent visas

and passports. Defendants traveled within the United States

to execute documents in furtherance of their immigration

fraud and to open bank accounts. Finally, Defendants were

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arrested in Kansas and Oklahoma in possession of these

fraudulent immigration documents.

By conspiring to enter and hide out in the United States

with the fruit of their ill-gotten gains, Defendants engaged in

an enterprise that had the implicit goal to breach United

States immigration law in furtherance of the overall goal of

the enterprise. The dual parts of Defendants’ enterprise were

necessarily conjoined in pursuit of that goal—i.e., to steal

large sums of money from the Bank of China and to get away

with it in the United States. Defendants intended to use the

immigration fraud to consummate the purpose of the

enterprise: to acquire the money and safely enjoy it the

United States, beyond the reach of Chinese law. Without the

immigration fraud, the bank fraud would have been a

dangerous failure. See, e.g., CGC Holding Co.,

824 F. Supp. 2d at 1210 (“In the present case, the conduct of

the enterprise within the United States was a key to its

success.”).

In sum, Defendants’ violations of United States

immigration laws fall squarely within RICO’s definition of

racketeering activity. See 18 U.S.C. § 1961(1)(B) (listing

18 U.S.C. §§ 1542, 1546 as RICO predicates); cf. Rocha v.

United States, 288 F.2d 545, 548 (9th Cir. 1961) (sham

marriages in violation of § 1542 are “crimes directed toward

the sovereign itself [and] may be tried within the jurisdiction

even though committed without”) (internal quotation marks

omitted). Defendants’ pattern of racketeering activity may

have been conceived and planned overseas, but it was

executed and perpetuated in the United States. Under

Morrison, we look “not upon the place where the deception

originated,” but instead upon the connection of the challenged

conduct to the proscription in the statute. 130 S. Ct. at 2884.

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It was constitutional error for the jury to be instructed on the first part 2

of the second superseding indictment, to the extent that this part of the

indictment was predicated on extraterritorial activity that is not a basis for

RICO liability. See Hedgpeth v. Pulido, 555 U.S. 57, 60 (2008).

However, the error was harmless beyond a reasonable doubt as the

“evidence was overwhelming” as to the second part of the second

superseding indictment, and the jury would have convicted on the basis of

that evidence alone. United States v. Green, 592 F.3d 1057, 1071 (9th Cir.

2010).

Having determined that RICO’s focus is on the pattern of

racketeering activity, we conclude that Defendants’ criminal

plan, which included violation of United States immigration

laws while the Defendants were in the United States, falls

within the ambit of the statute.

We affirm Defendants’ count one convictions because the

convictions are not based on an improper extraterritorial

application of RICO, but rather are based on a pattern of

racketeering activities that were conducted by the Defendants

in the territorial United States.2

III. Defendants’ Count Two Convictions for Money

Laundering Conspiracy

Defendants challenge the sufficiency of the evidence on

their count two convictions for conspiracy in violation of

18 U.S.C. § 1956(h). We review sufficiency of the evidence

challenges de novo to determine whether, “viewing the

evidence in the light most favorable to the prosecution, any

rational trier of fact could have found the essential elements

of the crime beyond a reasonable doubt.” Jackson v.

Virginia, 443 U.S. 307, 319 (1979) (emphasis in original

omitted); accord United States v. Nevils, 598 F.3d 1158,

1163–64 (9th Cir. 2010) (en banc).

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Conviction under § 1956(h) with the object of the

conspiracy being a violation of 18 U.S.C. § 1957(a) requires

proof that Defendants agreed to engage in a monetary

transaction over $10,000 derived from a criminal act. See

18 U.S.C. §§ 1956(h), 1957(a); United States v. Alghazouli,

517 F.3d 1179, 1190 (9th Cir. 2008). Defendants allege that

the government introduced no evidence connecting their

monetary transactions to any theft or fraud. Defendants also

raise a jurisdictional challenge to the application of § 1957(a).

Defendants argue that the government cannot trace the

money used by the Defendants in the United States to any

money obtained fraudulently from the Bank of China, and

that this inability to trace is fatal to their count two

convictions. Generally, a conviction under § 1957 requires

that the government be able to trace the money transactions

at issue to a criminal act. United States v. Rutgard, 116 F.3d

1270, 1291–92 (9th Cir. 1997). The government concedes

that they are unable to trace the proceeds of the Bank of

China fraud directly to the money brought into the United

States. At best, the government can show only that the “vast

majority” of the funds in Ever Joint accounts were

fraudulently obtained.

But Defendants were charged with conspiracy, a crime

that does not require completion of the object offense. See

United States v. Alvarez-Cardenas, 902 F.2d 734, 736 (9th

Cir. 1990) (“a conspiracy conviction does not turn on the

question of whether defendant succeeds in doing all he

attempted to do.”). The conspiratorial agreement represents

the crystallization of the conspirator’s culpable criminal

intent; accomplishment of the underlying crime is immaterial

to culpability. United States v. Cruz, 127 F.3d 791, 803 (9th

Cir. 1997) (Hall, J., concurring in part and dissenting in part),

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UNITED STATES V. XU 23

abrogated on other grounds by United States v. Jimenez

Recio, 537 U.S. 270 (2003). Contrary to the Defendants’

contention, no tracing is necessary in this case. The

agreement itself establishes that the funds to be transferred

are a portion of the illegally derived proceeds. All that is

required here, where the crux of Defendants’ count two

convictions is that Defendants agreed to transfer to the

United States more than $10,000 in fraudulent proceeds, is

that: there was an agreement to transfer that amount of the

“fraudulent proceeds”; and Defendants’ criminal intent was

corroborated by “significant objective acts.” United States v.

Posey, 864 F.2d 1487, 1492 n.4 (9th Cir. 1989). A formal

agreement is not necessary; rather, the agreement may be

inferred from the defendants’ acts pursuant to the scheme, or

other circumstantial evidence. United States v. Bibbero,

749 F.2d 581, 587 (9th Cir. 1984).

At trial, through the video deposition testimony of

Zhendong and the direct testimony of Bank of China auditors,

the government introduced evidence that Chaofan and

Guojun engaged in various acts of fraud during their tenure

as managers at the Kaiping sub-branch. They engaged in

unauthorized foreign currency speculation. They concealed

the immense losses resulting from this speculation, almost

$150 million, by manipulating Bank of China account

records. Chaofan also approved loans, totaling approximately

$181 million, from the Kaiping sub-branch to local Kaiping

businesses that were not properly recorded in the Bank of

China accounting system. The interest payments for those

loans were channeled into Ever Joint accounts, which were

controlled by Chaofan and Guojun. The government also

introduced evidence of “false loans,” totaling $90–95 million

from the Kaiping sub-branch, that were approved by Chaofan

and intended for various Kaiping businesses but were actually

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diverted to Ever Joint accounts. Zhendong testified that

Chaofan authorized the loans, Guojun tracked the money as

it flowed into Ever Joint accounts, and all three men

discussed the need to alter bank records to conceal the

massive losses.

The government also introduced testimony regarding the

structure of the Ever Joint company and its relation to

Chaofan and Guojun’s criminal activities. Specifically, the

government introduced evidence that Chaofan was the

primary owner of Ever Joint during the course of its history.

Zhendong testified that he and Chaofan made false

representations that the Bank of China owned Ever Joint and

made payments using Ever Joint funds to influence at least

one Chinese government official. The government’s

accounting expert testified that Ever Joint had “no

commercial justification” but rather served as a “conduit for

funds” in order for Ever Joint’s principals to engage in

activities consistent with money laundering. Zhendong

testified that Chaofan and Guojun were aware of the

corporate structure and mission of Ever Joint and were aware

that Ever Joint would be funded from money sourced from

the Bank of China. Zhendong testified that he, Chaofan, and

Guojun paid an accountant, Yu Hongbin, to make transfers

from the Bank of China to Ever Joint to cover expenses.

These transfers involved the use of bank customer names and

account information on official loan documents to transfer the

loan proceeds to Ever Joint through “underground banks” to

evade China’s banking regulators. Zhendong characterized

this activity as “stealing” the customers’ money from Kaiping

sub-branch accounts and transferring the money to Ever Joint.

Zhendong testified that Chaofan oversaw a team of

accountants, including Chaofan’s cousin and his cousin’s

wife, who altered the account records to evade detection.

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UNITED STATES V. XU 25

Although Defendants allege that these real estate investments were 3

legitimate, Zhendong testified that Chaofan and Guojun improperly used

Bank of China assets to fund Ever Joint’s real estate purchases as well.

To be sure, the record reflects that Ever Joint engaged in

real estate investments that could have been legitimate,

including purchase and renovation of real estate in Hong

Kong. Zhendong testified, however, that speculation in

3

foreign currency was greater in volume than Ever Joint’s real

estate related activity. And the record reflects that, from

1995–2001, Chaofan, who determined Ever Joint bonuses,

received 1.7 billion Hong Kong dollars ($218 million U.S.)

and Guojun received 290.9 million Hong Kong dollars ($37.3

million U.S.) in Ever Joint bonus payments. During the

entire time they worked at Bank of China, Chaofan never

earned more than $40,000 per year for his work with the bank

and Guojun’s maximum salary was $30,000 per year.

The government also introduced evidence that Defendants

intended to transfer Ever Joint funds into the United States to

facilitate escape from Chinese authorities once their fraud

was discovered. Specifically, Zhendong testified regarding

an agreement between himself, Chaofan and Guojun to

transfer millions of dollars to Caesars Palace casino to fund

their escape to the United States. This money came from

Ever Joint accounts.

Defendants Wanfang and Yingyi similarly engaged in

activities that show their intent to conspire with Chaofan and

Guojun to bring fraudulently obtained funds into the United

States. According to Zhendong, Wanfang and Yingyi entered

into false marriages to acquire residency status in the United

States in order to flee there in the event their husbands’ bank

fraud was discovered. These false marriages were facilitated

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by a Kaiping government clerk who testified that he had

altered marriage records to remove evidence of Chaofan’s

marriage to Wanfang and Guojun’s marriage to Yingyi.

Wanfang’s and Yingyi’s false marriages with American

citizens were set up by intermediaries. Neither Wanfang nor

Yingyi ever lived with their respective sham spouses as

husband and wife. Wanfang was naturalized as an American

citizen on June 22, 2000, and she divorced her fake spouse on

July 28, 2000. Yingyi was naturalized on November 10,

1999, and she divorced her fake spouse on April 17, 2001. At

the time of their arrests in September 2004, Guojun and

Yingyi had been reunited and were living in Kansas. By the

time they were arrested in Oklahoma in October 2004,

Chaofan and Wanfang had also been reunited.

Evidence introduced at trial also showed that on at least

one occasion Wanfang and Yingyi traveled to Las Vegas with

Chaofan and Guojun and gambled with funds that, as

described above, were linked to Ever Joint. Specifically,

Defendants traveled to Las Vegas on or about October 4,

2000, and gambled at the Rio and Bellagio casinos using two

million dollars drawn from the Hua Chao Commercial Bank

in Hong Kong. These funds were sent to the Defendants in

Las Vegas via Wanfang’s brother, Kwong Wa Po, and the

funds were booked in Ever Joint’s ledger as a loan.

In light of the foregoing, viewing the evidence in the

government’s favor, a rational juror could find that the

Defendants violated § 1956(h) by conspiring to defraud the

Bank of China through activities related to the Ever Joint

company and that they conspired to engage in transactions

with domestic casinos using more than $10,000 of the

illegally derived funds. Conspiracy does not require

completion of the substantive crime. It requires an intent to

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UNITED STATES V. XU 27

complete the substantive crime. Defendants’ intent can

reasonably be inferred from their actions pursuant to the

scheme. Section 1957(d)’s jurisdictional requirement is met

because the transactions took place in the United States.

Therefore, we affirm Defendants’ convictions on count two.

IV. Defendants’ Count Three Convictions for

Conspiracy to Transport Stolen Money

Conviction for conspiracy to violate § 2314, count three,

requires proof beyond a reasonable doubt that Defendants

agreed to move at least $5000 into the United States while

“knowing the same to have been stolen, converted or taken by

fraud.” 18 U.S.C. § 2314. The count three conspiracy also

requires at least one overt act in furtherance of the agreement.

18 U.S.C. § 371. We review de novo Defendants’ challenge

to the sufficiency of the evidence, and we make all inferences

in favor of the government.

Defendants raise essentially the same challenge to their

count three convictions as they did regarding their count two

convictions—namely, that the government cannot trace the

Las Vegas casino transactions to the Bank of China fraud.

Their arguments fail under the same analysis as discussed

above. Conspiracy is an inchoate offense that centers upon

the agreement to commit an unlawful act, not the commission

of the unlawful act itself. Cruz, 127 F.3d at 803. Therefore,

this case is distinguishable from United States v. Lazarenko,

in which we reversed a conviction because the substantive

§ 2314 charge requires that the transferred money be directly

traceable to the underlying fraud. 564 F.3d 1026, 1042 (9th

Cir. 2009).

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 Defendants also argue that their Confrontation Clause rights were 4

violated when the videotaped deposition testimony was admitted without

the government making a showing at trial that the witnesses were

unavailable. As Defendants concede, however, this argument is waived

We affirm Defendants’ count three convictions here

because evidence in the record, summarized above, supports

a finding that Defendants agreed to commit the acts

prohibited by § 2314. Through the testimony of Zhendong,

forensic accounting experts, and Defendants’ false spouses,

the government introduced evidence sufficient to allow a

rational juror to find that Defendants reached an agreement to

steal large sums of money from the Bank of China and to use

that money, channeled through Ever Joint accounts, in the

United States.

V. Defendants’ Sixth Amendment Objections to the

Video Deposition Testimony at Trial

The government presented the jury with fourteen days of

videotaped deposition evidence involving witnesses in China.

During presentation of the evidence, it became clear that the

video replay was consuming a large amount of court time,

resulting in delay and juror fatigue. Accordingly, the district

court, with the consent of all parties, approved an edited

version of the videotapes to be shown to the jury. The edited

version omitted the translation into Chinese of counsel’s

questions in English, but it left unaltered the English

questions, the witnesses’ responses in Chinese, and the

English translations of the Chinese responses.

Defendants argue that the edited version violated their

Sixth Amendment rights to a fair trial and to confront the

witnesses against them. Because the Defendants failed to 4

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UNITED STATES V. XU 29

because they raised it for the first time in the reply brief. See Bazuaye v.

I.N.S., 79 F.3d 118, 120 (9th Cir. 1996).

object at the time the deposition testimony was introduced

into evidence, we review for plain error. See United States v.

Matus-Zayas, 655 F.3d 1092, 1101 n.7 (9th Cir. 2011).

Defendants raise two main challenges to the presentation

of the videotaped testimony. First, they argue that they were

denied a fair trial because the replay subjected the jury to

“brutally boring ‘spurts’ of video-taped deposition testimony,

marked by computer difficulties, erroneous redactions, and

confusing names.” Second, Defendants argue that the edited

video depositions impeded the jury’s ability to observe the

witnesses’ demeanor and body language while they were

being asked questions in their native language.

Regarding the fair trial argument, the parties do not

dispute that portions of the trial were long or that juror

attentiveness was an issue. Recognizing these problems, the

district court took steps to help the jury by clarifying the

names and roles of the parties, and by placing in the

courtroom a face and name chart of all relevant persons. The

district court also addressed juror attentiveness by dismissing

one of the alternate jurors who appeared to be falling asleep.

These actions were reasonable steps in managing a lengthy

and difficult trial. See, e.g., United States v. Springfield,

829 F.2d 860, 864 (9th Cir. 1987) (no abuse of discretion

where the district court took steps to ensure that missed

testimony was insubstantial).

Turning to Defendants’ Confrontation Clause argument,

we reiterate that the major purposes of the Confrontation

Clause are “(1) ensuring that witnesses will testify under

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 Defendants’ argument that they have been deprived of the opportunity 5

for meaningful appellate review because the government failed to enter the

videos into the record has been mooted by our decision to grant the

government’s motion to expand the record.

oath; (2) forcing witnesses to undergo cross-examination; and

(3) permitting the jury to observe the demeanor of witnesses.”

United States v. Sines, 761 F.2d 1434, 1441 (9th Cir. 1985)

(internal citations omitted). The district court conducted a

hearing during trial on the problems posed by video replay of

the depositions. The district court stated that editing the tapes

would speed up the proceedings while still allowing the jury

to view the body language of the witnesses as they responded

to questions. On this appeal, we granted the governments’

motion to expand the record to include thirty-one DVDs with

complete unedited versions of the depositions, and we have

reviewed that evidence. These DVDs reveal that the jury was

exposed to relevant witness body language and demeanor

even taking into account the district court’s edits. The fact

that the Defendants consented at trial to the edited format and

participated in crafting the structure for the edits further

militates against their assertion that the jury was deprived of

the opportunity to evaluate witness demeanor.

In sum, the district court did not plainly err in its

treatment of videotaped testimony at trial, and Defendants’

rights under the Confrontation Clause were not violated.5

VI. Defendants’ Expert Witnesses

Defendants challenge the district court’s ruling that

limited the testimony of three defense expert witnesses:

Professor John Copper, Professor Andy Sun, and Professor

Victor Shih. The district court’s decision to admit or exclude

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UNITED STATES V. XU 31

expert testimony is reviewed for an abuse of discretion. See

United States v. Freeman, 498 F.3d 893, 900–01 (9th Cir.

2007). Abuse of discretion is evaluated by looking at

whether the trial court determined the correct legal rule to

apply to the requested relief and then at whether the trial

court’s application of that rule was (1) “illogical,” (2)

“implausible,” or (3) without “support in inferences that may

be drawn from the facts in the record.” United States v.

Hinkson, 585 F.3d 1247, 1264 (9th Cir. 2009) (en banc)

(citation omitted).

“The admissibility of expert testimony is a subject

peculiarly within the sound discretion of the trial judge, who

alone must decide the qualifications of the expert on a given

subject and the extent to which his opinions may be

required.” Fineburg v. United States, 393 F.2d 417, 421 (9th

Cir. 1968). The district court conducted an extensive voir

dire of the witnesses outside the presence of the jury.

Defendants sought to have Copper testify about the

economic and political structure in China at the time of the

Defendants’ criminal activities at the Bank of China, about

defendant Guojun’s military service, and about Chinese

family structure and sociology. Defendants sought to have

Sun testify about the Chinese legal system, and they sought

to have Shih testify about the effect of Communist Party

politics on China’s banking system, including the operation

of the Bank of China. The district court allowed Copper’s

testimony on the comparative political and economic

situations in China and Hong Kong, and allowed brief

discussion of defendant Guojun’s military status. However,

the court found Copper unqualified to testify regarding the

respective roles of spouses in China because his experience

on that issue was merely anecdotal. After a long colloquy,

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the court allowed Sun’s testimony regarding the double

designation experience—whereby persons suspected of

criminal activity are subjected to isolated, indeterminate

detention during pending administrative and criminal

investigations. The district court also allowed Shih’s

testimony on “monitoring rooms”—rooms where bank

officials monitor activities at the branch and consider whether

to pursue Communist Party disciplinary actions—and

differences between private and state-owned banks in China,

but the court excluded his testimony on out-of-book loans

because Shih did not actually review any records for the

transactions at issue in the case.

In allowing all three defense witnesses to testify, the

district court adhered to circuit precedent requiring that

expert testimony be “construed liberally” in considering

admissibility. See United States v. Hankey, 203 F.3d 1160,

1168 (9th Cir. 2000). In light of the reasons stated at the

hearing, the district court understood its function as an

evidentiary gatekeeper and took seriously itsresponsibility to

admit only expert testimony that would help the jury

determine relevant issues. Therefore, the district court did

not abuse its discretion in limiting the testimony of

Defendants’ expert witnesses.

VII. Jury Instructions

Defendants raise seven challenges to the jury instructions.

“In reviewing jury instructions, the relevant inquiry is

whether the instructions as a whole are misleading or

inadequate to guide the jury’s deliberation.” United States v.

Garcia-Rivera, 353 F.3d 788, 792 (9th Cir. 2003) (internal

quotation marks omitted).

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UNITED STATES V. XU 33

 Defendants’ assertion that de novo review applies pursuant to United 6

States v. Shannon, 137 F.3d 1112, 1117 (9th Cir. 1998), is incorrect. See

United States v. Heredia, 483 F.3d 913, 922 (9th Cir. 2007) (en banc)

(overruling Shannon and reiterating the general applicability of abuse of

discretion review to the formulation of jury instructions).

 The record reflects two opportunities for preservation of this issue. 7

First, Defendants raised an objection to the government’s proposed

instructions on count two. After consultation, however, Defendants

withdrew their objection, thereby waiving it. See United States v.

Masters, 118 F.3d 1524, 1526 (11th Cir. 1997); United States v. Thomas,

896 F.2d 589, 591 (D.C. Cir. 1990). Defendants’ second objection

became moot when the district court declined to give the challenged

instruction. Thus, Defendants did not properly preserve their burdenshifting challenge, and plain error review applies.

A. Burden Shift Argument

Defendants argue that the inclusion of twenty statements

of what the government did not have to prove to meet certain

elements of the charged offenses impermissibly shifted the

burden to the defense by lessening the government’s burden

of proof. Defendants also allege that the district court erred

in failing to include specific language in the jury instructions

that the Defendants must be presumed innocent “unless and

until” proven guilty.

Challenges to the formulation of jury instructions are

generally reviewed under an abuse of discretion standard.6

See United States v. Dearing, 504 F.3d 897, 900 (9th Cir.

2007). Plain error review applies here, however, because

Defendants did not adequately preserve the burden-shifting

issue for appeal.7

The district court repeatedly instructed the jury regarding

the correct burden of proof. Specifically, the instructions

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referred to the presumption of innocence and the

government’s burden to prove guilt beyond a reasonable

doubt. The district court also instructed the jury that a guilty

verdict must be unanimous, and that the Defendants’ decision

not to testify should not be used to infer guilt. Despite

conclusory allegations, Defendants do not show how the

twenty references to what the government did not have to

prove lessened the government’s burden of proof.

Furthermore, the Defendants’ allegation that the district

court erred in failing to include specific language that the

Defendants are to be presumed innocent “unless and until”

proven guilty is unavailing. Defendants’ own authority,

Rhoades v. Henry, 598 F.3d 495, 506–08 (9th Cir. 2010),

subverts their argument. The Rhoades court professed no

preference for Defendants’ desired “unless and until”

language. See id. Moreover, even if omitting such language

was erroneous, when read in the context of the overall

instructions, it is unlikely that the omission would cause the

jury to misapply the government’s burden of proof. See id.

at 508.

B. Jury Instruction Based on Chinese Law

Over Defendants’ objection, the district court gave the

following jury instruction: “You are instructed that fraud, or

a scheme or attempt to defraud the Bank of China is a felony

under foreign Chinese law.” Defendants argue that this

instruction was improper because it: (1) took away from the

jury the ability to find an essential element of the alleged

crimes, (2) interpreted and sought to enforce unsettled

Chinese law that is different from law applied in the United

States, and (3) based its conclusions on extradition case law,

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UNITED STATES V. XU 35

 In relevant part, Rule 26.1 states, “[i]ssues of foreign law are questions 8

of law, but in deciding such issues a court may consider any relevant

material or source--including testimony--without regard to the Federal

Rules of Evidence.” Fed. R. Crim. P. 26.1.

which liberally construes criminality in violation of the rule

of lenity.

We review de novo all determinations of foreign law

under Rule 26.1 of the Federal Rules of Criminal Procedure.

See United States v. Fowlie, 24 F.3d 1059, 1064 (9th Cir.

1994). Rule 26.1 gives the district court broad discretion in

considering evidence to make determinations of foreign law.8

See United States v. Mitchell, 985 F.2d 1275, 1280 (4th Cir.

1993).

To support a conviction on the RICO conspiracy charge

in count one and the money laundering conspiracy charge in

count two, the government was required to prove that the

property at issue (the funds from the Bank of China) was

derived from a specified unlawful activity. The specified

unlawful activity the government identified was an offense

against a foreign nation involving “fraud, or any scheme or

attempt to defraud, by or against a foreign bank.” See

18 U.S.C. §§ 1956(c)(7)(B) & (B)(iii), 1957(a).

Defendants cite no case law in support of their challenge

to the district court’s authority to determine foreign law as a

predicate to jury determination of guilt on a substantive

offense. Given Rule 26.1’s express grant of authority to the

district court, “[i]t has long been thought . . . that the jury is

not the appropriate body to determine issues of foreign law.”

United States v. McClain, 593 F.2d 658, 669 n.17 (5th Cir.

1979) (internal quotation marks omitted). The challenged

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36 UNITED STATES V. XU

instruction here does not impinge on the jury’s fact finding

because the jury was still charged with determining beyond

a reasonable doubt whether the underlying fraud actually took

place.

Defendants’ other challenges based on the “unsettled”

nature of Chinese law and the district court’s reliance on

extradition cases are similarly unavailing. It is true that

extradition treaties are construed liberally, see United States

v. Kin-Hong, 110 F.3d 103, 109 (1st Cir. 1997); however, the

rule of lenity is not helpful to Defendants because the rule

applies where there is ambiguity concerning the applicability

of criminal statutes. See Liparota v. United States, 471 U.S.

419, 428 (1985); United States v. Gonzalez-Mendez, 150 F.3d

1058, 1061 (9th Cir. 1998) (“[W]e resort to the rule of lenity

only if the statute is ‘truly ambiguous.’”). No such ambiguity

exists here. American law provides a straightforward

definition of common fraud as, “wronging one in his property

rights by dishonest methods or schemes, and usually

signif[ies] the deprivation of something of value by trick,

deceit, chicane or overreaching.” See McNally v. United

States, 483 U.S. 350, 359 (1987) (citation and internal

quotation marks omitted), superseded on other grounds by

statute, Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690,

§ 7603, codified at 18 U.S.C. § 1346, as recognized in United

States v. Stoneman, 870 F.2d 102, 105 n.2 (3d Cir. 1989).

Chinese law is equally clear in prohibiting fraudulent acts.

Articles 192 and 382 of the Criminal Law of the People’s

Republic of China unambiguously criminalize Defendants’

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 Article 192, in relevant part, provides that “[w]hoever, for the purpose 9

of illegal possession, unlawfully raises funds by means of fraud shall be

[guilty of a crime].” Crim. L. PRC art. 192 (adopted by the Fifth Nat’l

People’s Cong., July 1, 1979, revised Mar. 14, 1997) (China) available at

http://www.cecc.gov/pages/newLaws/criminalLawENG.php.

Article 382, in relevant part, provides that “[a]ny state functionary,

who, by taking advantage of his office, appropriates, steals or swindles

public money or property or by other means illegally takes it into his own

possession shall be regarded as being guilty of embezzlement.” Crim. L.

PRC art. 382 (adopted by the Fifth Nat’l People’s Cong., July 1, 1979,

r e v i s ed M a r . 1 4 , 19 9 7 ) ( C h i na) a vai l abl e a t

http://www.cecc.gov/pages/newLaws/criminalLawENG.php.

 See Crim. L. PRC arts. 193–95, 266 (adopted by the Fifth Nat’l 10

People’s Cong., July 1, 1979, revised Mar. 14, 1997) (China)

(criminalizing fraud against banks and financial institutions regarding

loans, financial bills, and letters of credit, as well as criminalizing

swin d ling o f p u b lic o r p r iva te mone y) available a t

http://www.cecc.gov/pages/newLaws/criminalLawENG.php.

fraudulent acts against the Bank of China. Not incidentally, 9

four other articles in the Chinese criminal code would equally

cover the Defendants’ convicted conduct. Consequently, 10

Defendants’ arguments based on the shortcomings of the

Chinese criminal justice system fail because Defendants’

fraudulent acts are unlawful in both the United States and

China.

Defendants’ alternative argument that the government

impermissibly seeks to enforce Chinese law is meritless. The

Supreme Court has upheld criminal convictions based on

interpretations of foreign law where the foreign violations are

simply a means to violate United States laws. See

Pasquantino v. United States, 544 U.S. 349, 369 (2005). In

this case, Defendants’ foreign fraud was a means to violate

United States laws. The challenged instruction incorporates

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38 UNITED STATES V. XU

Chinese law only as a predicate to enforcement of the money

laundering statute.

C. Fatal Variance Regarding Count Two

Defendants challenge the omission of the phrase “foreign

commerce” from the first element in the count two money

laundering instruction. The challenged instruction states,

“The elements of money laundering, as charged in the second

superseding indictment, are as follows: First, an individual

engaged in or attempted to engage in a monetary transaction

in or affecting interstate commerce.” Defendants allege that

this omission is a fatal variance rendering their conviction on

that count invalid. Because Defendants did not object at trial,

we review for plain error.

Defendants’ challenge amounts to a “constructive

amendment” claim, although Defendants do not use that term.

A constructive amendment requires reversal and occurs

“when the charging terms of the indictment are altered, either

literally or in effect, by the prosecutor or a court after the

grand jury has last passed upon them.” United States v.

Hartz, 458 F.3d 1011, 1020 (9th Cir. 2006) (internal

quotation marks omitted).

Defendants’ argument fails for two reasons. First, the

omission was cured by a later instruction on the same page

that defines monetary transaction, as used in the challenged

instruction, as a “deposit, withdrawal, transfer or exchange,

in or affecting interstate or foreign commerce.” The

instructions on that same page also reference “foreign

commerce” two additional times. Second, we consider the

phrase “interstate or foreign commerce” to be a unitary

phrase; that is, by referencing one, the other is included as

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UNITED STATES V. XU 39

well. See United States v. Garcia, 94 F.3d 57, 64 (9th Cir.

1996) (describing the phrase “interstate or foreign commerce”

as “one concept”).

Because Defendants were not convicted at trial of an

offense broader than the one charged in the indictment,

Defendants’ fatal variance/constructive amendment claim

fails. See Hartz, 458 F.3d at 1020.

D. Defendants’ Proposed “Theory of Defense”

Instructions

The denial of a defendant’s jury instruction due to an

inadequate factual basis is reviewed for an abuse of

discretion. See United States v. Daane, 475 F.3d 1114, 1119

(9th Cir. 2007). Whether the instructions, taken as a whole,

adequately cover the defense theory is a question of law

reviewed de novo. See United States v. Wills, 88 F.3d 704,

715 (9th Cir. 1996).

At trial, the Defendants requested an instruction on the

necessity defense, based on the Defendants’ contention that

their immigration to the United States using fraudulently

obtained visas was due to fear of harm if they remained in

China after being caught.

Defendants invoke necessity without proper legal basis.

Fear of prosecution for crimes committed is not an

appropriate reason to claim necessity. Cf. United States v.

Schoon, 971 F.2d 193, 196–97 (9th Cir. 1991) (discussing

permissible uses of the necessity defense in cases such as:

prisoners escaping a burning prison, a person stealing food

from a cabin to survive if lost in the woods, and destruction

of property to prevent the spread of fire).

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Defendants also requested three related instructions

regarding governmental authorization based on the allegation

that their illegal money transactions were due to requirements

put in place by Chinese Communist Party leadership.

Defendants base their argument on the fact that the state

owned the Bank of China and the fact that the Chinese

banking sector was in a period of transition at the time of the

convicted offenses. The instruction is unnecessary, however,

because the elements of the charged conspiracy adequately

covered any claim of Chinese government approval of

Defendants’ actions. If the jury believed that the money

transactions at issue were not fraudulent because the

government approved the transactions, the jury could have

found for the Defendants under the elements of money

laundering and transportation of stolen money. See United

States v. Ramirez, 710 F.2d 535, 543 (9th Cir. 1983) (“The

refusal to give a requested instruction is not error if the

charge as a whole adequately covers the theory of the

defense.” (citation and internal quotation marks omitted)).

Moreover, Defendants provided no evidence that their

immigration fraud was in any way connected to a government

directive. See United States v. Dorrell, 758 F.2d 427, 430

(9th Cir. 1985) (where the evidence is insufficient to support

a theory of defense, the district court need not instruct the

jury on that defense). The district court did not err in refusing

to give Defendants’ proffered defense theory instructions.

E. The Aiding and Abetting Counts

Defendants argue that any conviction for aiding and

abetting in the conspiracy counts (counts one through three)

should be reversed because aiding and abetting was not

charged on those counts in the second superseding

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UNITED STATES V. XU 41

indictment. Plain error review applies because no objection

was made at trial.

The aiding and abetting charges, under 18 U.S.C. § 2,

applied to countsfourthrough fifteen only. Defendants admit

that the jury was instructed on aiding and abetting only for

counts four through fifteen. Juries are presumed to follow the

instructions given them. See Richardson v. Marsh, 481 U.S.

200, 206 (1987). There is no error here.

F. The Absence of an Instruction Defining “On or

About”

Defendants challenge the absence of an instruction

defining “on or about” as used in the second superseding

indictment. Although Defendants did not propose an “on or

about” instruction at trial, Defendants now argue that such an

instruction was needed to provide the jury with “sufficient

guidance” to navigate the time frames involved in the charged

crimes. Defendants did not object at trial, so we review for

plain error.

Defendants cite United States v. McCown, 711 F.2d 1441,

1450–51 (9th Cir. 1983), and United States v. ZepedaMartinez, 470 F.3d 909, 912 n.1 (9th Cir. 2006), but those

cases are inapposite. They concern challenges to crimes

charged during allegedly open-ended or indefinite time

frames. In this case, the dates alleged are not indefinite. The

RICO conspiracy was alleged to have begun in 1991 with the

improper foreign currency exchange speculation that resulted

in unlawful use of the Bank of China’s interbranch accounts

and to have ended with the arrests of Chaofan and Kuang in

2004. The conspiracies alleged in counts two and three began

in 1998 and ended with the same arrests in 2004. Counts four

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42 UNITED STATES V. XU

 Defendants allege that they preserved this claim of error during the 11

jury instructions hearing. The colloquy, however, dealt only with the jury

instructions in general and did not reference the Chinese language issues

specifically enough to preserve the issue for appeal. See United States v.

Klinger, 128 F.3d 705, 711–12 (9th Cir. 1997).

through fifteen allege that the various acts of immigration

fraud occurred on specific dates. Defendants do not argue

that the government presented evidence outside the dates

outlined in the indictment or otherwise deviated from the time

frames alleged in the indictment. Accordingly, we find no

error.

G. Defendants’ Incomprehensibility Claims Due to

Numerous Chinese Names Presented to the Jury

Defendants challenge the fairness of the proceedings

based on the numerous Chinese names before the jury.

Defendants argue that the names are essentially

interchangeable and incomprehensible to any juror who is not

familiar with Chinese, thus rendering the charging process

incomprehensible. Plain error review applies because no

objection was made at trial.11

We are not persuaded by Defendants’ argument. The

parties engaged in voir dire, which included a jury

questionnaire inquiring about any prospective bias or

difficulty with the fact that the defendants were Chinese.

Several interpreters were present during trial. The district

court also took steps to clarify the names and roles of the

parties by placing on display in the courtroom a chart with the

faces and names of all relevant persons. Furthermore,

Defendants point to no specific evidence of prejudice

warranting reversal on these grounds.

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UNITED STATES V. XU 43

In sum, Defendants’ seven challenges to the jury

instructions are meritless.

VIII. Sentencing Issues

A. Application of the 2007 Sentencing Guidelines

Defendants argue that the application of the 2007

Guidelines to their sentences violates the Ex Post Facto

Clause of the Constitution. We review de novo the district

court’s interpretation of the Sentencing Guidelines, including

challenges under the Ex Post Facto Clause. United States v.

Staten, 466 F.3d 708, 713 (9th Cir. 2006).

The district court “shall use the Guidelines Manual in

effect on the date that the defendant is sentenced” unless such

application violates the Ex Post Facto Clause. U.S.S.G.

§ 1B1.11 (2011). An ex post facto sentencing violation

occurs when application of a later edition of the Guidelines

would result in a higher base level. See United States v.

Rising Sun, 522 F.3d 989, 993 n.1 (9th Cir. 2008). The ex

post facto issue arises here because the sentences that the

Defendants received under the 2007 Guidelines were longer

than the sentences they likely would have received under

earlier Guidelines. Compare U.S.S.G. § 2B1.1(a) (2007)

(base offense level of either 6 or 7) with U.S.S.G. § 2B1.1(a)

(2000) (base offense level of 4). The district court found that

the charged conspiracy extended beyond November 1, 2001,

and thus it applied the amended Guidelines with the higher

base offense levels.

Defendants argue that the second superseding indictment

alleged two separate groups of criminal activities—the Bank

of China fraud and the immigration fraud—and that the date

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44 UNITED STATES V. XU

of the last activity associated with the Bank of China fraud

ended prior to the immigration fraud. Specifically,

Defendants allege that any conspiracy to transport money

associated with their bank fraud ended when Chaofan and

Guojun crossed the border into the United States on October

15, 2001—before the November 1, 2001, effective date of the

new Guidelines.

Defendants’ arguments are unpersuasive because,

contrary to Defendants’ assertions, the second superseding

indictment did not allege two separate conspiracies. Instead,

it alleged a single RICO conspiracy with two purposes: the

Bank of China fraud and immigration fraud. Defendants

conspired to steal money from the Bank of China and then to

travel to the United States with their ill-gotten gains. The

charged conspiracy encompassed both the Defendants’ fraud

in China, including illegal money transactions and

transportation of stolen money, and the Defendants’ later

immigration fraud to escape to the United States to flee

Chinese law enforcement.

“Conspiracy is a continuing crime,” People of Territory

of Guam v. Ignacio, 852 F.2d 459, 461 (9th Cir. 1988), and a

conspiracy does not automatically terminate because the

government has defeated the conspiracy’s objective, see

Jimenez Recio, 537 U.S. at 274. Nevertheless, the duration of

a conspiracy cannot be indefinitely extended “merely because

the conspiracy is kept a secret, and merely because the

conspirators take steps to bury their traces, in order to avoid

detection and punishment.” Grunewald v. United States,

353 U.S. 391, 397 (1957).

A conspiracy to conceal cannot be implied from

circumstantial evidence supporting the existence of an

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UNITED STATES V. XU 45

agreed-upon coverup after the central purpose of a conspiracy

has been attained. Id. at 401–02. Courts should be wary of

finding an “actual” as opposed to “implied” conspiracy to

conceal based on “desperate attempts to cover up after the

crime begins to come to light.” Id. at 403. In this case,

however, the Defendants’ immigration fraud was not a

desperate attempt to cover up the bank fraud; it was part of

the bank fraud scheme. Defendants’ elaborate immigration

fraud scheme included false marriages involving all four

Defendants who entered into the marriages before the bulk of

the bank fraud even occurred. Those marriages were part of

an overall plan to steal the money and get away with it in the

United States. Recognizing the difference between “acts of

concealment done in furtherance of the main criminal

objectives of the conspiracy, and acts of concealment done

after these central objectives have been attained, for the

purpose only of covering up after the crime,” id. at 405, we

conclude that, to the extent that the immigration fraud was an

act of concealment, it was an integral part of the conspiracy’s

main criminal objective. 

Furthermore, the conspiracy continued until October

2004. During their flight from Chinese authorities,

Defendants traveled from California to Wichita, Kansas, in

2002. During these travels within the United States,

Defendants carried with them and used the false identities and

fraudulent immigration documents that were charged as part

of the conspiracy. Guojun and Yingyi were arrested in

Wichita on September 22, 2004. Documents related to

Defendants’ fraudulent marriages were found in the house

where they were living. Chaofan and Wanfang were arrested

in Edmond, Oklahoma, on October 6, 2004. A search of their

residence resulted in the seizure of jewelry and cash totaling

$154,000, stashed in various locations throughout the house.

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46 UNITED STATES V. XU

Because Defendants continued their hiding and flight

throughout the United States until October 2004—using

fraudulently obtained immigration documents and carrying

bundles of cash—the conspiracy continued until that date.

Therefore, application of the amended Guidelines as reflected

in the 2007 edition was appropriate.

Defendants argue that, even if the conspiracy did not end

until Defendants’ arrests, the 2004 Guidelines should have

been consulted to determine whether they would be more

favorable to Defendants. However, the Guidelines sections

relevant to Defendants’ RICO convictions (U.S.S.G. § 2S1.1

and § 2B1.1) are identical in the 2004 and 2007 editions.

Thus, Defendants were not prejudiced by application of the

2007 Guidelines over the 2004 Guidelines.

Defendants’ supplemental argument that application of

pre-2001 Guidelines to unindicted co-conspirator Yu

Zhendong should estop the government from applying later

Guidelines to Defendants is devoid of supporting authority.

Moreover, the district court considered Yu Zhendong’s lesser

sentence as a mitigating factor for Defendants.

In sum, the district court did not violate the Ex Post Facto

Clause by applying the 2007 Guidelines to a conspiracy that

did not end until Defendants’ 2004 arrests.

B. Procedural Error

Defendants argue that the district court erred in applying

Guidelines § 2S1.1(a)(1)instead of § 2S1.1(a)(2), resulting in

a higher base offense level. We agree and remand for

resentencing.

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“We review the district court’s interpretation of the

Guidelines de novo, the district court’s application of the

Guidelines to the facts of the case for abuse of discretion, and

the district court’s factual findings for clear error.” United

States v. Treadwell, 593 F.3d 990, 999 (9th Cir. 2010).

Incorrect calculation of the Guidelines range constitutes

procedural error. United States v. Carty, 520 F.3d 984, 993

(9th Cir. 2008) (en banc).

The district court determined that § 2S1.1(a)(1) applied to

Defendants’ count one RICO conspiracy conviction. Section

2S1.1(a)(1) instructs that Defendants’ base offense level

should be calculated by using the offense level for the

underlying offense (here, the specified unlawful activity of

“fraud, or a scheme to defraud, by or against a foreign bank”)

when two conditions are met. First, Defendants must have

“committed the underlying offense” or would be accountable

for the underlying offense under a relevant conduct analysis.

U.S.S.G. § 2S.1.1(a)(1)(A). Second, the offense level for that

underlying offense must be able to be determined. U.S.S.G.

§ 2S.1.1(a)(1)(B).

Here, Defendants were convicted of conspiracy, an

inchoate crime which does not require commission of the

underlying offense. See United States v. Thomas, 887 F.2d

1341, 1345 (9th Cir. 1989). Defendants did not admit guilt

on the substantive crimes enumerated in 18 U.S.C. §§ 1957

& 2314, and as discussed above, the government was unable

to establish the tracing of funds necessary to establish guilt on

those underlying offenses. Therefore, the government must

rely on relevant conduct to meet § 2S.1.1(a)(1)(A)’s first

condition. For the following reasons, we hold that applying

the relevant conduct analysis to Defendants’ foreign conduct

is not permissible.

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We have not addressed the applicability of foreign

conduct to a base offense level calculation in analogous

circumstances, but case law from other circuits that have

confronted the issue makes us hesitant to apply the

Defendants’ foreign conduct to the base level calculation

here. In United States v. Farouil, 124 F.3d 838 (7th Cir.

1997), the Seventh Circuit allowed consideration of drugs

found on an overseas co-conspirator in the determination of

a defendant’s base offense level. The drugs were discovered

in the co-conspirator’s carry-on luggage as she was preparing

to board a flight to the United States. Id. at 840, 845. The

court determined that the drugs should be counted against the

defendant because the drug crimes were directed against the

United States. Id. at 845.

Here, Defendants were Chinese nationals who committed

fraud against the Bank of China while on Chinese soil. The

fraudulent proceeds were, of course, later laundered through

Ever Joint and brought into the United States. However, the

United States was only indirectly affected by Defendants’

bank fraud. Put another way, the connection between

Defendants’ bank fraud and the United States is too

attenuated to be considered when calculating a base offense

level. By contrast, Defendants’ immigration fraud directly

impacted United States’ interests, and thus it is properly

considered domestic conduct that does not implicate the same

relevant conduct concerns.

Similarly, in United States v. Greer, 285 F.3d 158 (2d Cir.

2002), drugs intended for foreign distribution were also

included as relevant conduct in determining the base offense

level because the underlying statute criminalized foreign

conduct (i.e., drug possession abroad) where the drugs were

intended for distribution in the United States. 285 F.3d at

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UNITED STATES V. XU 49

179–180 n.10. In Greer, however, the district court had no

need to consider whether the defendant violated foreign law

to hold him responsible for his foreign acts because the

statute at issue specifically covered the extraterriorial

conduct. Id. at 179–80. But here, by instructing the jury that

Defendants’ fraud against the Bank of China was a crime

under Chinese law, the district court placed the issue of

determining foreign law front and center. Such

determinations are highly problematic for sentencing

purposes.

In United States v. Azeem, 946 F.2d 13 (2d Cir. 1991), the

Second Circuit warned that, “To permit foreign crimes to

figure in fixing the base offense level would require courts to

perform a careful comparative analysis of foreign and

domestic law in such instances.” 946 F.2d at 17. The issue

is more straightforward here because, as noted earlier, the

Defendants’ acts during the bank fraud would have been a

crime under Chinese or American law. Nevertheless, it is

easy to contemplate scenarios where a comparison of foreign

and domestic law is not so clear cut. See id. at 18.

(“Examples of activitiesthat violate one, but not both, foreign

and domestic laws could be the use and sale of certain drugs

that would have violated our law, but not the foreign law

where sold and used, or a certain use of alcohol that violates

the foreign law where used but would not have done so under

domestic law.”). Therefore, we follow the Second Circuit

and “decline to create the complexities that the inclusion of

foreign crimes in the base offense level calculation would

generate.” See Azeem, 946 F.2d at 18. Because Defendants’

foreign conduct cannot be used to meet the requirements of

§ 2S1.1(a)(1)(A), the district court procedurally erred in

applying that section to Defendants’ sentences and we,

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accordingly, remand for resentencing under § 2S1.1(a)(2) in

light of this conclusion.

Defendant Chaofan also objects to various enhancements

resulting in an increase to his base level. Chaofan’s objection

to a two-level enhancement for abuse of a position of trust

under § 3B1.3 is meritless. See U.S.S.G. § 3B1.3 cmt. n.1

(providing “a bank executive’s fraudulent loan scheme” as an

example of abuse of trust). Chaofan’s objection to a twolevel enhancement for relocation to avoid law enforcement

under § 2B1.1(b)(9)(A) is devoid of analysis and therefore

waived. See United States v. Belgarde, 300 F.3d 1177, 1181

n.1 (9th Cir. 2002). However, Chaofan’s objection to a onelevel enhancement under § 2S1.1(b)(2)(A), for conviction

under 18 U.S.C. § 1957, has merit because a finding of

conviction under § 1957 for sentencing purposes depends on

Chaofan’s foreign conduct, which we have held cannot be

applied here. Therefore, on remand the enhancement under

§ 2S1.1(b)(2)(A) cannot be applied.

We need not reach the issue of the substantive

reasonableness of Defendants’ sentences because we have

determined that the district court erred procedurally. United

States v. Rudd, 662 F.3d 1257, 1264 (9th Cir. 2011).

C. The $482 Million Restitution Order

Defendants allege that the district court did not adequately

explain its conclusions in support of the $482 million

restitution award. Specifically, Defendants argue that the

district court never explicitly stated that restitution was

mandatory, never explained how it determined that the Bank

of China qualified as a victim, and never justified the $482

million award. We agree and remand for reconsideration.

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UNITED STATES V. XU 51

“A restitution order is reviewed for an abuse of discretion,

provided that it is within the bounds of the statutory

framework. Factual findings supporting an order of

restitution are reviewed for clear error. The legality of an

order of restitution is reviewed de novo.” United States v.

Marks, 530 F.3d 799, 811 (9th Cir. 2008) (internal quotation

marks omitted). The district court’s valuation methodology

is reviewed de novo. United States v. Bussell, 504 F.3d 956,

964 n.9 (9th Cir. 2007). 

The district court engaged in a cursory analysis of the

legal and factual basis for the restitution award before

concluding that the evidence at trial supported a finding “by

clear and convincing evidence that the loss to the Bank of

China resulted from the underlying scheme to defraud in

excess of $480 million.” The $482 million restitution amount

is for the most part consistent with the statement of offense

conduct in the Presentence Report. However, Defendants

contested those facts, and the district court rejected the

presentence report’s factual findings to the extent they were

inconsistent with the district court’s findings. Although we

may uphold a restitution order when the district court fails to

make pertinent factual findings, the basis of the court’s

calculations must be clear for us to do so. United States v.

Yeung, 672 F.3d 594, 604 (9th Cir. 2012). The basis for the

district court’s calculations are not clear here.

“Restitution can only be based on actual loss.” United

States v Stoddard, 150 F.3d 1140, 1147 (9th Cir. 1998)

(internal citations omitted). A restitution order must also be

“based on losses directly resulting from a defendant’s

offense.” Bussell, 504 F.3d at 964 (internal quotation marks

omitted). We have previously noted the difficulties inherent

in relying on loss determinations for purposes of Guidelines

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calculations during the calculation of restitution amounts, see

United States v. Gossi, 608 F.3d 574, 581–82 (9th Cir. 2010),

and have held that such reliance is improper, Yeung, 672 F.3d

at 604. The transcript of the sentencing hearing reveals that

the district court referred to its Guidelines calculations in

making factual findings regarding the amount of actual loss

suffered by the Bank of China. This reference is especially

inappropriate given the previously discussed inability to trace

Defendants’ fraudulent activity to actual bank losses.

Therefore, because the district court did not provide sufficient

grounds to support the $482 million figure, we remand for

reconsideration regarding the legal and factual basis for the

restitution order. See United States v. Waknine, 543 F.3d

546, 557–58 (9th Cir. 2008).

IX. Conclusion

We affirm Defendants’ convictions but vacate their

sentences and remand for resentencing. Defendants’ count

one convictions are not the result of an improper

extraterritorial application of the RICO conspiracy statute

because Defendants’ criminal enterprise involved both bank

fraud and immigration fraud centered on stealing money from

the Bank of China and traveling freely with that stolen money

in the United States. The evidence was sufficient to support

convictions on count two, money laundering conspiracy, and

count three, conspiracy to transport stolen money.

We remand for resentencing because the district court

improperly relied on Defendants’ foreign conduct to meet the

requirements of § 2S1.1(a)(1)(A) resulting in procedural

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UNITED STATES V. XU 53

error, improperly applied a one-level enhancement based on

foreign conduct, and failed to provide an adequate legal and

factual basis for the $482 million restitution order.

AFFIRMED, IN PART, VACATED, IN PART, AND

REMANDED.

Case: 09-10201 01/03/2013 ID: 8459112 DktEntry: 81-1 Page: 53 of 53