Opinion ID: 814677
Heading Depth: 2
Heading Rank: 2

Heading: Defendants’ Count Two Convictions for Money

Text: 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). 2 It was constitutional error for the jury to be instructed on the first part 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). 22 UNITED STATES V . XU 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), 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 24 UNITED STATES V . XU 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. UNITED STATES V . XU 25 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.3 Zhendong testified, however, that speculation in 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 3 Although Defendants allege that these real estate investments were legitimate, Zhendong testified that Chaofan and Guojun improperly used Bank of China assets to fund Ever Joint’s real estate purchases as well. 26 UNITED STATES V . XU 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 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.