Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-07-03036/USCOURTS-caDC-07-03036-0/pdf.json

Parties Involved:
Charles E. Hall
Appellant
United States of America
Appellee

Document Text:

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2010 Decided July 16, 2010

No. 07-3036

UNITED STATES OF AMERICA,

APPELLEE

v.

CHARLES E. HALL,

APPELLANT

Appeal from the United States District Court

for the District of Columbia

(No. 04cr00543-01)

Charles B. Wayne, appointed by the court, argued the cause

and filed the briefs for appellant.

Katherine M. Kelly, Assistant U.S. Attorney, argued the

cause for appellee. With her on the brief were Roy W. McLeese

III, Chrisellen R. Kolb, and Virginia Cheatham, Assistant U.S.

Attorneys.

Before: SENTELLE, Chief Judge, GINSBURG and BROWN,

Circuit Judges.

Opinion for the Court filed by Chief Judge SENTELLE.

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SENTELLE, Chief Judge: Charles Hall appeals from a

judgment of conviction imposed against him for one count of

conspiracy to commit crimes against the United States, two

counts of bank fraud, four counts of wire fraud, and one count

of money laundering conspiracy. He assigns error relating to

both the admission and the sufficiency of evidence. We affirm

all convictions save the one count of money laundering

conspiracy, which we reverse. As the sentences on all counts

were concurrent, there is no need for a remand for resentencing.

I

From April 2002 until May 2003 appellant Charles Hall

worked as a loan officer at mortgage company Guaranty

Residential Lending (“GRL”). While in this position, Hall

became involved in a scheme with six others to “flip” numerous

residential properties in Washington, D.C. In perpetrating the

scheme, co-conspirator Alan Davis would buy homes in

disrepair. Hall would then find straw buyers to purchase the

homes from Davis. Before the homes were resold to the straw

buyers, however, co-conspirator Robbie Colwell, a sham

appraiser, would appraise the homes in disrepair as if they had

been renovated. These higher (false) appraisals were then sent

to GRL and another mortgage company, National City Mortgage

Company (“NCM”). These lending institutions would then

provide mortgage funding, facilitated by co-conspirators Susan

Shelton and Marcus Wiseman, underwriters at GRL and later

NCM. The funds were sent to co-conspirator Vicki Robinson,

the settlement agent for the property sales. Robinson worked for

Vanguard Title, a settlement company owned by attorney Marc

Sliffman. Robinson would give a portion of the funds to Hall,

who would then convert a portion of those funds into cashier’s

checks in the amount that the straw buyer was supposed to bring

to settlement as a downpayment. At settlement Hall would

receive the loan proceeds, identified on the property settlement

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documents as reimbursement for “rehab construction,” most of

which was never done. Instead, Hall took the money as income

for himself. Most of the properties involved later went into

foreclosure, with a resulting loss to GRL and NCM of over $5

million.

Hall was indicted on charges of conspiracy, bank fraud,

wire fraud, and money laundering. At trial Hall’s coconspirators, who had pled guilty to charges against them,

testified against Hall. Hall testified in his own defense, claiming

that Robinson and Sliffman had told him that what he was doing

was legal. He was found guilty as charged by the jury, and

sentenced to 293 months on each of the bank fraud and money

laundering charges, and 60 months on each of the remaining

charges. All sentences were imposed to run concurrently.

On appeal Hall raises six issues. First, he argues that the

government failed to prove the elements of bank fraud. Next, he

claims that the government failed to prove the elements of

conspiracy to commit money laundering. Third, he claims that

his Sixth Amendment rights were violated when he was

precluded from cross-examining the government’s witnesses on

the details of their plea agreements. Fourth, he asserts that the

district court erred in refusing to allow evidence in support of

his defense that he lacked the specific intent necessary to

commit the charged offenses. Fifth, he claims that the district

court erred in treating the sentencing guidelines as

presumptively applicable. Finally, he contends that a hearing

should be ordered on his ineffective assistance of counsel claim. 

Because we see no merit in Hall’s claims that the district court

erred in treating the guidelines as presumptively reasonable or

that a hearing should be ordered on his ineffective assistance of

counsel claim, our discussion is limited to his arguments

concerning the sufficiency-of-the-evidence and his evidentiary

objections.

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II

We turn first to Hall’s challenge to the sufficiency of the

evidence against him on the bank fraud counts. Hall was

charged with, and found guilty of, two counts of bank fraud in

violation of 18 U.S.C. §§ 1344 & 2; one count alleged the

defrauding of GRL and the other the defrauding of NCM. To

prove bank fraud under § 1344 the government must show that

the defendant knowingly defrauded a federally insured financial

institution. See, e.g., United States v. Brandon, 17 F.3d 409, 424

(1st Cir. 1994). At trial, the government put forth evidence

showing that GRL was a wholly-owned subsidiary of federally

insured Guaranty Bank, and that NCM was an operating

subsidiary of federally insured National City Bank of Indiana. 

Hall does not dispute the accuracy of this evidence, but he

argues that without more the evidence was insufficient to prove

that the parent banks were victims of the fraud. He also argues

that the evidence failed to prove that Guaranty Bank was

federally insured from April 2002 to May 2003, the time of the

alleged fraud, because the only evidence put forth by the

government showed that Guaranty Bank was insured on

February 14, 2005, but no earlier. The government disagrees,

arguing that the evidence was sufficient to support Hall’s

conviction of defrauding federally insured financial institutions.

We review sufficiency-of-the-evidence challenges in the

light most favorable to the government, “giving full play to the

right of the jury to determine credibility, weigh the evidence and

draw justifiable inferences of fact.” United States v. Carson,

455 F.3d 336, 368–69 (D.C. Cir. 2006). There is little precedent

on the sufficiency of evidence governing this issue. As the First

Circuit has observed, “[n]either the statute nor the case law fully

instructs just how tight a factual nexus is required to allow a jury

to decide that a scheme, formally aimed at one (uninsured)

company, operates in substance to defraud another (insured)

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entity with whom the defendant has not dealt directly.” United

States v. Edelkind, 467 F.3d 791, 797 (1st Cir. 2006). The easier

case for us is that of GRL: being wholly owned by federally

insured Guaranty Bank, a loss to GRL would constitute a loss to

Guaranty Bank. See United States v. White, 882 F.2d 250, 253

(7th Cir. 1989) (“A wholly owned subsidiary is, by definition,

wholly owned by its parent, so it is natural to attribute its assets

to the parent.”). A somewhat more difficult situation arises with

respect to NCM, described at trial only as an operating

subsidiary of federally insured National City Bank of Indiana. 

However, even though NCM was not, like GRL, described as a

wholly owned subsidiary, its status as an operating subsidiary

implies at least a majority or controlling interest held by

National City Bank of Indiana, and consequently a loss to NCM

would constitute a loss to federally insured National City Bank

of Indiana.

We are not quite finished with our insurance discussion,

however, as Hall contends that in any event Guaranty Bank was

not shown to be federally insured from April 2002 to May 2003,

the time of the alleged fraud. He notes that the government put

forth evidence showing only that Guaranty Bank was federally

insured as of February 14, 2005. We confronted a similar

situation in United States v. Nnanyererugo, 39 F.3d 1205 (D.C.

Cir. 1994). In that case the defendant, like Hall, was charged

with, and convicted of, bank fraud under 18 U.S.C. § 1344. He

too claimed that the government did not prove that the defrauded

bank was federally insured at the time of the offense. The only

evidence of such insurance came from the trial testimony of an

official of the defrauded bank, given two years after the crime

took place. That official stated at trial that the bank “is”

federally insured. We nevertheless ruled “that the government

may rely on testimony of present insured status as evidence of

its prior existence, ‘at least where the time span is not too great

and there is no suggestion of an intervening circumstance that

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might call its previous existence into question.’” Nnanyererugo,

39 F.3d at 1208 (quoting United States v. Sliker, 751 F.2d 477,

484 (2d Cir. 1984)). We concluded that the bank official’s

“testimony was sufficiently close in time (two years) to the date

the crime took place to justify a jury inference that the bank was

previously insured.” Id. at 1209 (citing Sliker, 751 F.2d at 484,

which held that an unspecified length of time (at most 3 years)

was “not too great”). Reasoning consistently with 

Nnanyererugo and Sliker, we hold that a trier of fact could

reasonably infer from the trial evidence that during the time

period of Hall’s bank fraud, which was two to three years before

the evidence showed federally insured status, Guaranty Bank

was in fact federally insured. Therefore, we conclude that the

evidence was sufficient to support Hall’s conviction for

defrauding federally insured financial institutions. 

Before ending our insurance discussion, however, we must,

as we did in Nnanyererugo in 1994, castigate the government

for not taking the simple steps necessary to prevent this

insurance-status problem. As we stated those many years ago,

quoting Sliker, 751 F.2d at 484, “we are bemused to discover

that the Justice Department ‘still has not effectively instructed

prosecutors to ask the simple question that would avoid the need

for judicial consideration of what should be a non-problem.’” 

Nnanyererugo, 39 F.3d 1208. The government should not

continue to test its luck and our patience. We perceive no

explanation, nor has the government offered one, as to why the

government should not be introducing certificates reflecting the

dates in the indictment rather than the one reflecting the

institutions’ insured status at some later date. The sufficiency

of evidence is always situational. The government should not

find out the hard way what change in circumstances would be

sufficient to render its inadequate performance on this issue fatal

to a conviction.

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III

We turn next to Hall’s claim that the government failed to

prove the elements of conspiracy to commit money laundering. 

Hall was charged in the indictment with, and found guilty by the

jury of, conspiracy to commit money laundering in violation of

18 U.S.C. §§ 1956(a)(1)(A)(i) and 1956(h). During Hall’s trial,

Robinson, the settlement agent from Vanguard Title, testified

that at settlements for three of the properties with which Hall

was involved, she received the loan money from the lender and

gave Hall a check for the rehab construction alleged to have

been done. Robinson further testified that after receiving his

check Hall would then go to a bank where he would get

Robinson a cashier’s check for the amount of the funds the

buyer was to bring to the closing. According to the government,

Robinson’s testimony showed that Hall’s bank fraud offense

was complete when Robinson received the loan money from the

lender, and that Hall’s money laundering offense occurred when

he took his check from Robinson and used part of it for downpayment cashier’s checks. Hall argues that the evidence was

insufficient to support his money laundering conviction because

the alleged money laundering activity was part and parcel of the

underlying bank fraud. We agree with Hall.

Section 1956(a)(1)(A)(i) of 18 U.S.C. prohibits money

laundering, while § 1956(h) penalizes conspiracy to commit

money laundering. Section 1956(a)(1) states, “Whoever,

knowing that the property involved in a financial transaction

represents the proceeds of some form of unlawful activity,

conducts or attempts to conduct such a financial transaction

which in fact involves the proceeds of specified unlawful

activity—(A)(i) with the intent to promote the carrying on of

specified unlawful activity . . . shall be sentenced to a fine . . . or

imprisonment . . . .” The offense of money laundering must be

separate and distinct from the underlying offense that generated

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the money to be laundered. See United States v. Castellini, 392

F.3d 35, 47 (1st Cir. 2004) (money laundering “cannot be the

same as the illegal activity which produces the proceeds”);

United States v. Butler, 211 F.3d 826, 830 (4th Cir. 2000) (“the

laundering of funds cannot occur in the same transaction

through which those funds first became tainted by crime”);

United States v. Mankarious, 151 F.3d 694, 706 (7th Cir. 1998)

(“a money laundering transaction . . . must be separate from any

transaction necessary for the predicate offense to generate

proceeds”); United States v. Edgmon, 952 F.2d 1206, 1213 (10th

Cir. 1991) (“Congress appears to have intended the money

laundering statute to be a separate crime distinct from the

underlying offense that generated the money to be laundered.”).

Hall’s scheme involved fraudulently obtaining bank loans

for the sale and purchase of properties. To sell and purchase the

properties, Hall went through the settlement process which

involved the presentation by the buyers of downpayments by

cashier’s check. In other words, completion of the settlement

process made the bank fraud successful. If the bank fraud

offense was complete when Robinson received the loan money

from the lender, as the government argues, and the defendants

at that point had just stopped the settlement process and run off

with the money, the bank fraud would not have been very

successful, to say the least.

Moreover, Hall was charged in the indictment with two

counts of devising a scheme to defraud banks GRL and NCM. 

The two counts reference specific preceding paragraphs of the

indictment for a description of the bank fraud scheme. These

descriptive paragraphs state that the banks required cash from

the borrower to purchase property, and that Hall “used a portion

of the loan money to fund the ‘cash from borrower’ by

purchasing cashier’s checks so that it would appear as though

the buyers had paid their own money as part of the purchase

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price.” Additionally, the indictment alleged that the goal of the

conspiracy was, in pertinent part, to “obtain in excess of 5.3

million [dollars] by . . . after the settlement process, using the

loan money to purchase cashier’s checks so that the borrowers’

cash appeared to have come from the buyers . . . .” 

Consequently, based on the scheme alleged in the indictment,

this purchasing of cashier’s checks to be used as cash from the

borrowers at settlement was a necessary element to complete the

bank fraud. This same transaction, however, was alleged in the

indictment as the overt act for money laundering. Viewing the

evidence in the light most favorable to the government, we

conclude that this same transaction cannot be money laundering. 

As we have already noted, the offense of money laundering

must be separate and distinct from the underlying offense that

generated the money to be laundered. We further note that the

alleged money laundering transaction at issue is, in this instance,

an expense of the bank fraud, and an expense of an underlying

fraud cannot be money laundering. United States v. Santos, 128

S.Ct. 2020, 2027 (2008) (“a criminal who enters into a

transaction paying the expenses of his illegal activity cannot

possibly violate the money-laundering statute”).

IV

Hall contends next that his Sixth Amendment rights were

violated when he was precluded from cross-examining the

government’s witnesses on the details of their plea agreements. 

During trial Hall’s attorney attempted to cross-examine two of

Hall’s co-conspirators, who were testifying against him for the

government, on the effect their plea agreements would have on

their potential prison sentences. In particular, Hall’s attorney

asked Alan Davis, who had been charged with bank fraud,

whether he ever learned what the prison sentence was for that

crime, and questioned Susan Conner on whether she understood

that the charges against her could result in 30 years of prison

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time. The government objected to each of these questions, and

the district court sustained the objections. Hall argues on appeal

that in sustaining the government’s objections, the district court

prohibited him from cross-examining the co-conspirators on the

details of their plea agreements and thus deprived him of an

important means of exposing any bias, violating his Sixth

Amendment right to confront the witnesses against him. The

government argues that additional cross-examination of the coconspirators on the terms of their plea agreements was sufficient

to satisfy Hall’s Sixth Amendment rights.

Cross examination of the prosecution’s witnesses is a right

fundamentally guaranteed by the Confrontation Clause of the

Sixth Amendment. United States v. George, 532 F.3d 933, 934

(D.C. Cir. 2008). This Sixth Amendment right, however, “does

not require a trial court to permit unlimited cross-examination

by defense counsel,” but rather requires “the court to give a

defendant a ‘realistic opportunity to ferret out a potential source

of bias.’” United States v. Davis, 127 F.3d 68, 70 (D.C. Cir.

1997) (quoting United States v. Derr, 990 F.2d 1330, 1334 (D.C.

Cir. 1993)); see also United States v. Anderson, 881 F.2d 1128,

1139 (D.C. Cir. 1989) (A trial court “may limit crossexamination only after there has been permitted, as a matter of

right, a certain threshold level of cross-examination which

satisfies the constitutional requirement.”). A violation of the

right has occurred if “‘[a] reasonable jury might have received

a significantly different impression of [the witness’s] credibility

had [defense] counsel been permitted to pursue his proposed line

of cross-examination.’” Davis, 127 F.3d at 70-71 (quoting

Delaware v. Van Arsdall, 475 U.S. 673, 680 (1986)). A

violation has not occurred “so long as defense counsel is able to

elicit enough information to allow a discriminating appraisal of

the witness’s motives and bias.” United States v. Graham, 83

F.3d 1466, 1474 (D.C. Cir. 1996) (internal quotations and

citation omitted). In the present case, the district court allowed

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Davis to testify on cross-examination that he had made a deal

with the government, that pursuant to the deal he was going to

be treated favorably in exchange for his testimony, that the

government was allowing him to plead guilty to only one

offense, and that without the plea agreement he was facing

substantially more charges. The court also allowed Conner to

testify on cross-examination that she had made a deal with the

government and that she had been allowed to plead guilty to

only one count of bank bribery. Taking this evidence allowed

by the district court into consideration, the evidence disallowed

regarding the potential sentences faced, or avoided, by Davis

and Conner by pleading guilty would not have given the jury “a

significantly different impression” of any bias. We conclude

that the district court allowed sufficient cross-examination of

Davis and Conner on their plea bargains to satisfy Hall’s Sixth

Amendment rights.

V

Finally, Hall argues that the district court erred in refusing

to allow evidence in support of his defense that he lacked the

specific intent necessary to commit the charged offenses. 

During trial Hall’s attorney attempted to cross-examine the coconspirators testifying for the government about what attorney

Marc Sliffman, the owner of Vanguard Title, had told them

about the legality of the mortgage scheme. The district court

disallowed this line of cross-examination following an objection

by the government. Hall argues on appeal that the district court

erred in sustaining the government’s objection in that the ruling

denied him the opportunity to present evidence supporting his

defense that he lacked the specific intent required for each of the

charged offenses. He contends that at the time of the attempted

cross-examination he had planned to argue, as his primary

defense, that he believed that all of his conduct was legal

because of statements made to him and his co-conspirators by

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attorney Sliffman. If such cross-examination had been

permitted, Hall claims, his co-conspirators would have

corroborated his own direct testimony, given later, that attorney

Sliffman had stated that the transactions were legal. In its brief,

the government’s main response to Hall’s argument is that the

district court did not err in its evidentiary ruling because the

testimony Hall sought to elicit constituted impermissible

hearsay.

We review a district court’s decision to exclude evidence

for abuse of discretion. United States v. Lipscomb, 702 F.2d

1049, 1068 (D.C. Cir. 1983). We begin by noting that although

the district court sustained the government’s objection, the court

gave no express reason for its decision, and our analysis is

consequently somewhat more difficult. The government’s

argument at the time of its objection was that the questioning

was not allowable because the testimony elicited would have

been hearsay. Hearsay is a statement made out of court that is

“offered in evidence to prove the truth of the matter asserted.” 

Fed. R. Evid. 801(c). But the statement here was not offered for

its truth, i.e., that the mortgage scheme was legal; rather, it was

offered to show that Hall believed that the scheme was legal. 

The elicited testimony was therefore not hearsay and the

government’s counsel admitted as much at oral argument. 

Consequently the testimony was not excludable on that basis.

Nevertheless, the district court did not err in excluding the

testimony. In United States v. Hemphill, 514 F.3d 1350, 1360

(D.C. Cir. 2008), we noted that although the right to crossexamination was “an important component of the right of

confrontation,” the trial court nevertheless “retains broad

discretion to control cross-examination.” We noted in particular

that the trial court “may prevent questioning that does not meet

the basic requirement of relevancy, as well as other factors

affecting admissibility.” Id. (internal quotations and citation

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omitted). In this case, the testimony called for by the

examiner’s question did not meet the minimal standard of

relevance. The Federal Rules of Evidence provide an explicit

definition of “relevant evidence”:

“Relevant evidence” means evidence having any tendency

to make the existence of any fact that is of consequence to

the determination of the action more probable or less

probable than it would be without the evidence.

Fed. R. Evid. 401.

Testimony as to whether attorney Sliffman had told Hall

that the transactions were legal did not make any fact then

within the consideration of the court or jury either more or less

probable than it would have been without the testimony. When

questioned on this subject at oral argument, defense counsel

stated, consistent with the trial record, that the evidence was

offered to corroborate testimony that the defense expected to

offer during its case in chief. As it developed, perhaps the

disputed testimony may have been relevant after the defense

made such an introduction in its case in chief. However, at the

time the district court made its ruling, no such testimony was

before it. While it is true, as appellant argues on appeal, that

trial courts from time to time may admit evidence that is not yet

relevant subject to its being stricken should its relevance not be

shown later, we can hardly say that the district court abused its

discretion by refusing to admit evidence that was not then

relevant. This is especially true in the case at bar. The defense

proffer is based on the theory that the evidence would

corroborate testimony to be given later by the defendant. The

choice of whether to testify is a personal right of the defendant. 

See Jones v. Barnes, 463 U.S. 745, 751 (1983). If the evidence

were admitted subject to being stricken, and the defendant did

not testify or testified inconsistently with the disputed testimony,

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then the judge’s act in ordering it stricken might well call to the

jury’s attention in an arguably impermissible manner the fact

that the defendant had exercised his rights against self

incrimination. See generally Griffin v. California, 380 U.S. 609

(1965) (explaining that commenting on a defendant’s failure to

testify violates the Fifth Amendment). We are not deciding that

it would have been error for the judge to run that risk, but it

certainly was not error for him to refuse to do so. In short, we

conclude that the district court’s sustaining of the government’s

objection was not an abuse of discretion.

VI

In summary, we affirm Hall’s convictions on bank fraud,

reject his evidentiary objections, and reject also his sentencing

guidelines and inadequacy of counsel claims. We reverse his

money laundering conviction, representing the charges under 18

U.S.C. §§ 1956(a)(1)(A)(i) and 1956(h). Since concurrent

sentences of 293 months were imposed on each of the bank

fraud charges as well as on the money laundering charge, no

remand for resentencing is necessary. See, e.g., United States v.

Kearney, 498 F.2d 61, 63 n.2 (D.C. Cir. 1974) (remand for

resentencing unnecessary where concurrent sentences imposed

for both vacated convictions and affirmed convictions).

So ordered.

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