N O T FO R PUB L ICAT IO N UNITED STATES C OUR T OF APPEALS FOR THE NINTH C IR C UIT UNITED STATES OF AM ER IC A,

Pla i ntiff-Appe lle e , v. C HAO FAN XU,

De fe nda nt-Appe l la

nt. No. 15-10016

D.C . No. 2:02-c r-00674-PM P-LRL-1 M EM O R ANDUM *

UNITED STATES OF AM ER IC A,

Pla i ntiff-Appe lle e , v. W AN FANG KUANG,

De fe nda nt-Appe l la

nt. No. 15-10017

D.C . No. 2:02-c r-00674-PM P-LRL-3



# FIL ED SEP 28 2016 M OLLY C. DW Y ER, CLERK U
. S
. CO URT O F APPEALS

* This disposition is not a ppropria te for public at ion a

nd is not pre c e de nt e xc e pt a s provide d

by Ninth C irc uit R

ule 36-3.UNITED STATES OF AM ER IC A, Pla i ntiff-Appe lle e , v. YING YI YU,

De fe nda nt-Appe l la

nt. No. 15-10018

D.C . No. 2:02-c r-00674-PM P-LRL-4

UNITED STATES OF AM ER IC A,

Pla i ntiff-Appe lle e , v. GUO JUN XU,

De fe nda nt-Appe l la

nt. No. 15-10022

D.C . No. 2:02-c r-00674-PM P-LRL-2

Appe a l from

the Unite d

Stat e s Distric t C ourt for the Distric t of Ne v a da Philip M . Pro, Distric t Judge , Pre siding Argue d a nd Subm itte d Se pte m

be r 13, 2016 San Fran c isc o , C a lifornia B e fore : W . FLETC HER , C HR ISTEN, a nd FRIEDLAND, C i rc uit Judge s.

2De fe nda nts C ha o Fan Xu (C ha ofan), Guo Jun Xu (Guojun), Wan Fang Kua ng (W anfang), a

nd Ying Yi Yu (Yingy

i) 1 a ppe a l, for the se c ond tim e , the se nte nc e s im

pose d following the ir c onvic tions for ra c k e t e e ring c onspira c y , c onspira c y

to tra nsport a n d tra n sa c t in c rim i na lly

de rive d funds in viola

tion of 18 U.S.C . §§ 1957 a

nd 2314, a

nd im m igration fra

u d. 2 W e have jurisdic tion pursua nt to 28 U.S.C . § 1291 a

n d 18 U.S.C . § 3742. For the following re a sons, we va c ate and re m and. 1. In de fe nda

nts’ first a

ppe a l, we he ld tha

t on re m and the distric t c ourt c ould not a

pply a one -le ve l se nte nc ing e nha nc e m e nt unde r U.S.S.G. § 2S1.1(b)(2)(A) for a substa ntive viola

t ion of 18 U.S.C . § 1957. Se e Unite d State s v . C hao Fan Xu , 706 F.3d 965, 993 (9th C ir. 2013), abrogate d on othe r grounds by

RJ R N abisc o , Inc . v . Europe an C mty . , 136 S. C t. 2090 (2016). On re m and, howe ve r, the distric t c ourt c ontinue d to a p ply a one -le ve l se nte nc ing e nha nc e m e nt unde r U.S.S.G. § 2S1.1(b)(2)(A). This wa s e rror. S e e Gall v . Unite d State s , 552 U.S. 38, 51 (2007) (sta ting tha t “ fa iling to c a lc ulate (or im prope rly

1 W e re fe r to de fe n da

nts by the i r first na

m e s to a void c onfusion a

m ong the d e fe nda

nts who sha

re the sa m e surna m e . 2 W an fa

ng a nd Yingy i ha

ve a l re a d y c om ple te d the ir te rm s of im prisonm e nt a

nd supe rvise d re le a se . The gove rnm e nt c onc e d e s, howe ve r, tha t the i r a p pe a ls a re not m oot be c a

u se W anfang a

nd Yingy i a

re still subje c t to a re stitution orde

r. W an fang a

n d Yingy i a d o pt the argum e nts of C ha ofan and Guojun, but only

the re stitution issue s a ffe c t W a n fang a nd Yingy i. 3c a lc ulat ing) the G u ide l ine s ra nge ” c onstitute s “ signific ant proc e dura l e rror” ); Unite d State s v . C arty , 520 F.3d 984, 991 (9th C ir. 2008) (“ A ll se nte nc ing proc e e dings a

re to be gin by de te rm ining thea pplic a ble Guide line s ra

nge . The range m ust be c a lc ulate d c orre c tly .” ). W e c annot de te rm ine whe the r the distric t c o urt would ha

ve im pose d the sam e se nte n c e if it kept the c orre c t guide line s ra nge in m i nd throughout the proc e s s. Se e Unite d State s v . Munoz–C

amare na , 631 F.3d 1028, 1031 (9th C ir. 2011) (de c lining to find ha rm le ss a distric t c ourt’ s inc orre c t a pplic ation of a

n e nha nc e m e nt be c a

use it wa s unc le ar whe the r the distric t c ourt would im pose the sam e se nte n c e if the c orre c t guide l ine s ra n ge we re “ k e p t in m ind throughout the proc e s s” (c ita

tion omitte d)). W e the re fore c onc lude tha t m ate ria l e rrors a ffe c te d the d istric t c o urt’ s guide line s c a lc ulation a nd tha t we m ust va c ate de fe nda

nts’ se nte nc e s a

nd re m and this m atte r for re s e nte nc ing. W e de c line to re a c h de fe nda n ts’ argum e nts re ga

rding thesubsta

ntive re a sona

ble ne ss of the ir se nte nc e s. 2. De fe nda

nts a rgue tha t in c a lc u lating these nte nc ing guide line s ra nge for ra c k e te e ring c onspira c y , the distric t c ourt inc orre c tly c onside re d

a pproxim ate ly $20 m i llion in tra

nsfe rs to the Unite d State s. The gove rnm e nt c ite s no pe rsua sive a uthority in support of its position tha t the tra n sa c tions we re prope rly

c onside re d. At re se nte nc ing, thedistric t c o urt ba se d its guide line s c a lc ulation on the pre dic ate 4ra c k e te e ring offe nse of e nga ging in mone ta ry tra nsa c tions in c rim i na lly -de rive d funds, 18 U.S.C . § 1957(a), and prope rly re lie d on U.S.S.G. § 2S1.1(a )(2). Se c tion 2S1.1(a )(2) provide s for a ba s e offe nse le ve l of 8 plus the num be r of offe nse le ve ls from the ta ble “ c orre sponding to the va lue of the la unde re d funds.” The a pplic a ble c om m e nta ry de fine s “ la

unde re d funds” a s the funds

“ involve d in the transa c tion . . . in v iolation of 18 U.S.C . § 1956 or § 1957. ” U.S.S.G. § 2S1.1 c m

t. n.1 (e m pha sis a dde d). As we e xpla i ne d in de fe nda nts’ first a ppe a l, the gove rnm e nt fa ile d to prove a

substa ntive viola

tion of 18 U.S.C . § 1957 be c a use the gove rnm e nt c o uld not tra c e any funds to fra udule nt a c tivity that oc c urre d within the jurisdic tiona l re a c h of the sta tute of c o nvic tion. Se e C hao Fan Xu , 706 F.3d a

t 992; se e also RJ

R N abisc o , 136 S. C t. at 2101 (holding tha t 18 U.S.C . § 1957 a

pplie s to som e c onduc t outsidethe Unite d Stat e s whe n “ t

he de fe nda n t is a Unite d State s pe rson” (quoting 18 U.S.C . § 1957(d)(2)). The gove rnm e nt did not cure this de fic ie nc y at re se nte nc i ng. B e c a use the gove rnm e nt fa ile d to provetha

t a ny tra nsa c t ions oc c urre d “ in viola tion of . . . § 1957,”

the distric t c o urt e rre d in inc re a sing de fe nda nts’ ba se offe nse le ve ls using the $20 m illion in funds tra

nsfe rre d to La s Ve ga s. The gove rnm e nt’ s atte m

p t to re l y on § 2S1.1 Applic ation Note 3(B ) is a lso una va iling. Note

3(B ) only a

pplie s whe re “ a

tra nsa c t ion . . . re

sults in the 5c om

m ingling of le gitim ate ly

de rive d funds with c rim ina lly de rive d funds.” U.S.S.G. § 2S1.1 c m

t. n.3(B ) (e m

pha sis a dde d). It is unc onte ste d tha t the $20 m illion tra

n sfe rre d to La s Ve ga s wa s pre viously c o m m ingle d in C h ina . The transa c tions tha

t re sulte d in c om

m ingle d funds in the

Eve r Joint a c c ount oc c urre d in C hina . On re m and, the gove rnm e nt did not show tha t a ny of the tra

nsa c t ions we re a c c o m

plishe d by U.S. pe rsons. The re fore , the gove rnm e nt did not show tha t the t ran sa c tions tha

t re sulte d in c om

m i ngle d funds we re within the jurisdic t iona l re a c h of the Unite d State s. The gove rnm e nt’ s re lia

nc e on the c om

m e nta ry to U.S.S.G. § 2E1.1 is e qua lly una

va iling. Thegove rnm e nt a rgue s tha t the distric t c ourt c o uld “ tre at e a c h unde rly ing [pre dic ate ] offe nse a s if c onta i ne d in a se pa rate c ount of c onvic tion,” U.S.S.G. § 2E1.1 c m

t. n.1, a nd, in this wa

y , se nte n c e de fe nda

nts a s if the y

ha d c om m itte d a substa ntive 18 U.S.C . § 1957 viola tion. Thegove rnm e nt c ite s no binding a uthority in support of this a

rgum e nt. Nothing in the

guide line s a llows the distric t c o urt to c a lc ulate de fe nda nts’ ba se offe n se le v e l s using the $20 m illion without sa

tisfa c tion of 18 U.S.C . § 1957’ s tra c ing re quire m e nt. The distric t c ourt’ s findings a re insuffic ie nt to support the gove rnm e nt’ s a lte rnative argum e nt tha

t the distric t c o urt c onside re d the $20 m illion under 18 U.S.C . § 3553. Se e Rita v . Unite d State s , 551 U.S. 338, 356 (2007) (“ [T] he 6se nte nc ing judgeshould se t forth e nough to sa tisfy the a ppe lla te c ourt tha

t he ha s c onside re d the pa

rtie s’ argum e nts a

nd ha s a re a sone d ba s is for e xe rc ising his own le ga l de c i sionm a

king a uthority .” ). 3. De fe nda

nts a rgue tha t the distric t c ourt viola

te d Fe de ra l R

ule of C rim ina l Proc e d ure 32(i)(3)(B ) by

insuffic i e ntly e xpla ining its im position of a two-le ve l position-of-trust e

nha nc e m e nt. R

ule 32 a pplie s only

to fa c tua l obje c tions. Se e Unite d State s v . Pe tri , 731 F.3d 833, 836 (9th C ir. 2013). De fe nda nts do not a

rgue that the distric t c ourt ina de quate ly e xpla ine d its re s olution of fa c tua l dispute s, only that it ina de quate ly e xpla ine d the le ga l ba sis for these nte nc e s. De fe nda nts’ le ga l argum e nts did not trigge

r the distric t c ourt’ s fa c t-finding dutie s unde r R ule 32(i)(3)(B ). 4. The distric t c ourt orde re d de fe n da nts to pa y $7.8 m illion in re stitution. In c onspira c y

c a se s , a distric t c ourt m ay

ba se re stitution on a

de fe nda nt’ s “ c rim ina l c onduc t in thec ourse of the sc h e m e , c onspira c y , or patte rn” of c rim ina l a c tivity . 18 U.S.C . §§ 3663, 3663A. For purpose s of re stitution orde rs in c onspira c y

c a se s, c rim ina l c onduc t inc lude s “ re late d c onduc t for whic h [a de fe n da nt] wa s not c onvic te d,” but non-c rim ina l c onduc t c annot se rve a s the ba sis of a re s titution orde r. S e e Unite d State

s v . Law re nc e , 189 F.3d 838, 846-48 (9th C i r. 1999). W e pre v iously

he ld tha t loss de te rm inations using 18 U.S.C . § 1957 did not provide 7suffic i e nt grounds for the distric t c ourt’ s re stitution orde r “ give n the . . . ina

bility to tra c e De fe nda

nts’ fra u d ule nt a c tivity

to a c tua l . . . losse s.” C

h ao Fan Xu , 706 F.3d at 994. On re m and, the distric t c ourt did not e xpre ssly

c la rify what “ c rim ina l c onduc t” form e d the ba sis of its re stitution orde r. W e re m and for c la

rific ation re ga rding thele ga l ba sis of there stitution orde r. V ACAT E D AND RE M ANDE D.

8