Court Opinion

ID: 3158268
Source: CourtListenerOpinion
Date Created: 2015-11-25 20:00:51.711148+00
Date Added: 2024-06-11T12:00:00.421342
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 14-6969

CHRISTOPHER REGINALD HINES,

                Petitioner - Appellant,

           v.

WARDEN DREW,

                Respondent - Appellee.

Appeal from the United States District Court for the District of
South Carolina, at Charleston.   Mary G. Lewis, District Judge.
(2:12-cv-01890-MGL)

Argued:   September 15, 2015                 Decided:   November 25, 2015

Before NIEMEYER, GREGORY, and THACKER, Circuit Judges.

Affirmed by unpublished opinion.       Judge Gregory wrote           the
opinion, in which Judge Niemeyer and Judge Thacker joined.

ARGUED: Joel    Morris   Bondurant,   Jr.,  BONDURANT  LAW   FIRM,
Atlanta, Georgia, for Appellant. Anthony Joseph Enright, OFFICE
OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for
Appellee. ON BRIEF: Jill Westmoreland Rose, Acting United
States   Attorney,   OFFICE   OF  THE   UNITED  STATES   ATTORNEY,
Charlotte, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
GREGORY, Circuit Judge:

     Christopher Reginald Hines pleaded guilty to two offenses

stemming    from     an    extensive    mortgage         fraud    conspiracy.      On

appeal,     Hines    argues     that    his      money    laundering      conspiracy

conviction must be reversed under United States v. Santos, 553
U.S. 507 (2008), and thus, that the district court erred in

denying his petition for a writ of habeas corpus under 28 U.S.C.

§ 2241.     We disagree.        Because we find no merger problem under

Santos, we affirm the district court’s denial of Hines’s § 2241

petition.

                                            I.

                                            A.

     A    grand     jury   in   the   Western     District       of   North   Carolina

returned a second superseding indictment that charged Hines with

eleven    counts     related    to    his    investment     scheme.       Count    one

charged Hines with conspiracy to commit offenses against the

United States in violation of 18 U.S.C. § 371, including making

a false statement in connection with a loan, 18 U.S.C. § 1014;

mail fraud, 18 U.S.C. § 1341; wire fraud, 18 U.S.C. § 1343; and

bank fraud, 18 U.S.C. § 1344.                Counts two through five charged

Hines with substantive mail fraud offenses occurring on four

specific dates in 2001.           Counts six through eight charged Hines

with substantive bank fraud offenses occurring on three specific

                                            2
dates in 2000 and 2001.            Counts nine and ten charged Hines with

wire fraud offenses occurring on two specific dates in 2000.

Count    eleven     charged      Hines    with      conspiracy      to     commit      money

laundering in violation of 18 U.S.C. § 1956(h).

       Following his indictment, Hines pleaded guilty to one count

of conspiracy to commit offenses against the United States in

violation     of    18    U.S.C.   § 371     (Count        One)   and    one     count    of

conspiracy to commit money laundering in violation of 18 U.S.C.

§ 1956(h) (Count Eleven).                The government dismissed all other

counts.      The convictions stemmed from Hines’s leadership of a

mortgage fraud scheme from March 2000 until September 2001.                              The

scheme involved multiple coconspirators, at least two of whom

pleaded guilty to various offenses.

       In   his    plea   agreement,      Hines      admitted       that    he    and    his

coconspirators created several entities, referred to as “Mega

Group” entities, to facilitate the conspiracy.                           Through those

entities, Hines recruited buyers with good credit to purchase

various properties.            He offered the buyers to become real estate

investors with no money down, earning cash on each home that

they    purchased.        To    lull   the       buyers,    Hines   offered       to    make

ownership of the properties easy:                    buyers were told that they

would not be responsible for any mortgage payments, that Mega

Group entities would place renters in the properties, and that

the Mega Group entities would be responsible for the renters and

                                             3
any payments they failed to make.              Hines claimed that the Mega

Group entities would eventually sell the properties, splitting

the profit with the buyers.

      Unbeknownst to the buyers, the Mega Group entities bought

the properties shortly before the buyers, and then “flipped” the

property to the buyer, making money off each transaction.                          Hines

and   his   coconspirators       arranged    for    the     buyers      to    purchase

multiple properties within a short time frame, to prevent the

earlier sales from appearing on their credit reports.                          After a

short period of time during which mortgage payments were made by

the Mega Group entities to induce the buyers to purchase more

than one “investment property,” the Mega Group entities stopped

making mortgage payments, eventually causing the mortgage loans

to    become   delinquent.        Ultimately,       many    of    the    investment

properties went into foreclosure.

      To    perpetrate     the    scheme,      Hines       falsified         the    loan

applications.      Although the buyers supplied accurate information

to    the   Mega   Group   entities,        Hines   and     his   coconspirators

misrepresented the buyers’ income, falsely indicated that the

buyers were purchasing the property as a residence, and made it

appear as though the buyers had sufficient funds to cover the

down payment.

      In total, Hines and his coconspirators defrauded at least

100 individual buyers in North Carolina, along with numerous

                                       4
mortgage lenders throughout the United States.                             The mortgage

loans that they fraudulently obtained exceeded $23 million.

                                             B.

       Hines stipulated to the factual basis for his guilty plea.

The    “Stipulation         to   Factual    Basis”      states,    “With     respect    to

Count One,” Hines “was aware that false information regarding

the source of down payments was contained in HUD-I Settlement

Statements in which Mega Group and its related companies were

sellers, and that this information was being sent to potential

lender    financial          institutions.”         J.A.    84.      The     stipulation

further states that, “With respect to Count Eleven,” Hines “was

aware    [that]       at   least   a    portion    of     the    proceeds    from   loans

involved in Count One were used to facilitate other financial

transactions to further or promote the conspiracy charged in

Count One.”          Id.

       At his Rule 11 hearing, Hines affirmed to the magistrate

judge that “[w]ith respect to Count [Eleven], [he] was aware

that at least a portion of the proceeds from loans involved in

Count One were used to facilitate other transactions to further

or    promote    the       conspiracy    charged     in    Count    One.”      J.A.    94.

During    the    plea       colloquy,      the    magistrate      judge     specifically

asked Hines, “[I]s this a true statement and do you affirm this

statement       at    this    time?”       Id.      Hines       stated,    “Yes.”      Id.

Further, at the plea proceeding, the government proffered that,

                                             5
with respect to Count One, Hines and his coconspirators used the

Mega   Group       entities    to     purchase    real    estate     and    inflate     its

value before selling it to the buyers.                          Hines then took the

difference         between    the     purchase     and    the    sale      price     “as   a

profit.”      J.A. 92.        With respect to Count Eleven, the government

proffered that “some of the proceeds . . . that were received in

the profits” from the transactions “were then used to make the

mortgage payments on behalf of the buyers and also used to make

. . . down payments on behalf of the buyers.”                         J.A. 70.        After

the    government’s         factual    proffer,    the    magistrate        judge     asked

Hines,       “[D]o    you     understand        both     what    I    said     and     [the

government] said to expand upon it are the charges to which

you’re pleading guilty . . . ?”              Id.       Hines stated, “Yes.”          Id.

       The     district       court      sentenced       Hines       to    a    term       of

imprisonment of 188 months, which included a term of 60 months

on Count One and a term of 188 months on Count Eleven, to be

served concurrently.

                                            C.

       After unsuccessful appeals, Hines filed a habeas petition

in which he argued that the savings clause of 28 U.S.C. § 2255

applied      and     that    his    money   laundering      conspiracy         conviction

should be invalidated in light of Santos on the ground that the

government failed to show that the transactions underlying the

money laundering conspiracy conviction involved the profits of

                                            6
unlawful    activity.           Hines    claimed       that    the        transactions

supporting his money laundering conspiracy conviction were the

same   transactions    listed     in    the    indictment     as     overt    acts    in

furtherance    of   the   mortgage       fraud    conspiracy,        leading     to   a

“merger    problem.”      The    district      court   found     that      Santos,    as

interpreted by United States v. Halstead, 634 F.3d 270 (4th Cir.

2011), and United States v. Cloud, 680 F.3d 396 (4th Cir. 2012),

was    inapplicable     because     it    did    not     apply       to    conspiracy

offenses.     Hines then filed a motion for reconsideration under

Federal Rule of Civil Procedure 59(e), which the district court

denied.    Hines timely appealed.

                                         II.

       We review de novo a district court’s grant or denial of a

writ of habeas corpus on questions of law.                     United States v.

Brown, 155 F.3d 431, 434 (4th Cir. 1998).                 We have jurisdiction

over this appeal under 28 U.S.C. § 1291.               Id. at 433.

                                        III.

       Applying Santos, Hines contends that the money laundering

conspiracy merges into the mortgage fraud conspiracy, as the

same transactions support convictions for both crimes.                        He thus

claims that Santos requires that the money laundering conspiracy

statute be construed narrowly so as to apply only to the “net

                                          7
profits” of the mortgage fraud conspiracy.              Hines asserts that

because the government did not prosecute the money laundering

conspiracy statute in his case narrowly, as required by Santos,

his money laundering conspiracy crime merged with the mortgage

fraud conspiracy, requiring that the money laundering conspiracy

conviction be vacated.          As he argues, “[my] conviction under

Count   [Eleven]    of   the   indictment    simply    cannot   stand.         The

financial transactions charged therein are entirely duplicative

of the financial transactions that form the basis for the Count

[One] conviction. . . .         In light of the plain and undeniable

overlap in the underlying financial transactions charged in both

counts, the two conspiracy charges . . . ‘obviously merged.’”

Appellant’s Br. at 29-30 (quoting United States v. Crosgrove,

637 F.3d 646, 655 (6th Cir. 2011)).

     Setting aside the issues of appellate waiver, see United

States v. Archie, 771 F.3d 217, 223 (4th Cir. 2014), and actual

innocence   of     the   dismissed   charges,    see    Bousley    v.    United

States, 523 U.S. 614, 623-24 (1998), we find no merger problem.

                                     A.

     To assess Hines’s claim on appeal, it is first necessary to

put his argument in context by briefly discussing the Supreme

Court’s Santos      decision   and   our    application   of    that    case    in

Halstead and Cloud.         Hines was convicted of money laundering

conspiracy under 18 U.S.C. § 1956(h).           To prove money laundering

                                      8
conspiracy,        the      government       was    required     to    show     (1)    the

existence of an agreement between two or more persons to commit

one   or    more       of   the       substantive     money     laundering      offenses

proscribed under 18 U.S.C. § 1956(a) or § 1957; (2) that the

defendant       knew     that     the    money     laundering    proceeds      had    been

derived from an illegal activity; and (3) that the defendant

knowingly and voluntarily became part of the conspiracy.                          United

States     v.   Singh,      518 F.3d 236,   248   (4th   Cir.    2008)    (citing

United States v. Alerre, 430 F.3d 681, 693 (4th Cir. 2005)).                            At

the time of the transactions at issue here, the statute provided

no definition of “proceeds.” 1

      In Santos, a divided Supreme Court grappled with alternate

definitions of “proceeds” as either “receipts” or “profits” of a

crime.     553 U.S. 507.          Citing the rule of lenity, a plurality of

the   Court      adopted        the     “profits”     definition.        Id.     at    514

(plurality       opinion).            The   plurality    further      noted    that    the

“receipts” interpretation would create a “merger problem” for

statutes such as the illegal gambling statute, 18 U.S.C. § 1955,

      1Congress amended the money laundering statute in May 2009;
that amendment effectively overruled Santos, defining proceeds
to include “gross receipts.” Fraud Enforcement and Recovery Act
of 2009, Pub.L. No. 111–21, § 2(f)(1), 123 Stat. 1617, 1618
(2009) (codified at 18 U.S.C. § 1956(c)(9)).        Nevertheless,
because the amendment was not enacted at the time of the conduct
giving rise to Hines’s convictions, this expanded definition of
“proceeds” does not apply in this case.

                                              9
at issue in Santos itself:               “If ‘proceeds’ meant ‘receipts,’

nearly every violation of the illegal-lottery statute would also

be a violation of the money-laundering statute, because paying a

winning   bettor     is   a   transaction      involving      receipts   that      the

defendant intends to promote the carrying on of the lottery.”

Id. at 515 (plurality opinion).

      Justice Stevens, concurring, disagreed with the plurality’s

broad application of the rule of lenity and focused instead on

the merger issue.         With respect to the illegal gambling statute,

Justice    Stevens    stated     that    “[t]he      revenue    generated     by    a

gambling business that is used to pay the essential expenses of

operating that business is not ‘proceeds’ within the meaning of

the    money    laundering       statute,”          because     “[a]llowing        the

Government to treat the mere payment of the expense of operating

an    illegal   gambling      business    as    a    separate    offense    is     in

practical effect tantamount to double jeopardy.”                   Id. at 527-28

(Stevens, J., concurring).          Justice Stevens suggested, however,

that the Court “need not pick a single definition of ‘proceeds’

applicable to every unlawful activity,” thereby implying that

the “profits” definition is only warranted in the context of

crimes creating such merger problems.                Id. at 525 (Stevens, J.,

concurring).

      In United States v. Halstead, we considered the reach of

Santos in the context of a defendant convicted of healthcare

                                         10
fraud and money laundering.                     634 F.3d 270.              Halstead’s fraud

convictions arose from his scheme to capitalize on his patients’

healthcare benefits by making phony medical diagnoses.                                      Id. at

272-73.        His money laundering conviction, by contrast, arose

from his transfer of the illicit gains into his personal bank

account.       Id. at 280-81.               He claimed that Santos prohibited his

money laundering conviction because transferring his ill-gotten

gains       into     his      own    bank     accounts      constituted         an    essential

expense of operating his healthcare fraud.                         Id.

       To    resolve          Halstead’s       argument     we     first    examined         what,

exactly, Santos held.                     Relying on Marks v. United States, 430
U.S. 188 (1977), we interpreted Santos narrowly to bind lower

courts      only        in   cases    where     illegal     gambling       constituted         the

predicate          for       the    defendant’s       money      laundering          conviction.

Halstead, 634 F.3d at 278-79.                     But, because the merger problem

provided the “driving force” behind both the plurality’s and

Justice Stevens’s opinions, we recognized that Santos compelled

us    to    construe         the    money    laundering       statute      so   as     to    avoid

punishing a defendant twice for the same offense.                                      Id.      We

concluded          that       a    defendant     cannot       be    convicted         of     money

laundering          merely         “for     paying    the     ‘essential        expenses        of

operating’ the underlying crime.”                        Id. at 279 (citing Santos,
553 U.S.        at    528       (Stevens,    J.,    concurring).             But    if     “the

financial transactions of the predicate offense are different

                                                11
from the transactions prosecuted as money laundering” no merger

problem arises.       Id. at 279–80.

     Applying       this    rule      to   Halstead,        we    held    that    no    merger

problem tainted his money laundering conviction.                           His healthcare

fraud   was    “complete”        as    soon    as     he    received      the     ill-gotten

healthcare     reimbursements.             Id.      at     280.     Transferring         these

reimbursements into his own account thereafter constituted an

altogether     “separate”          offense       that       the   government        properly

prosecuted as money laundering.                Id.

     We again had occasion to apply Santos in United States v.

Cloud, a case involving strikingly similar facts as these.                                 680
F.3d 396.      Cloud’s scheme, at its essence, involved convincing

people to invest in real estate properties that, unbeknownst to

the buyers, Cloud had recently purchased for a lesser amount.

Id. at 399–400.          The scheme also involved falsification of loan

applications       and     the     payment       of      “thousands       of     dollars   in

kickbacks     to   buyers,       at    least       one     mortgage      broker,    and    the

recruiters responsible for finding the buyers.”                                Id. at 400.

Cloud was convicted of several crimes, including, as is relevant

here, one count of conspiracy to commit money laundering, one

count   of    mortgage     fraud      conspiracy,          and    six    counts    of    money

laundering.        Id. at 399.         The substantive counts all concerned

various payments Cloud made “to recruiters, buyers, and other

coconspirators for the role each person played in the mortgage

                                              12
fraud   scheme.”         Id.   at   406.         On   appeal,   we   reversed    those

convictions, finding that they suffered from the merger problem

identified in Santos.           Id. at 408.            We concluded that, unlike

the payments in Halstead, the charged transactions were payment

of “the ‘essential expenses’ of the underlying fraud” because it

was only through the promise of these payments that Cloud was

able to persuade his coconspirators to do business with him.

Id. at 406–08.        That the payments were made after the services

were performed did nothing to change that.                        Id. at 408.        In

order to correct the merger problem, we defined “proceeds” as

“profits,” as the Santos Court had done, and reversed the money

laundering convictions on that basis.                  Id. at 409.

     On the other hand, we found no merger problem with Cloud’s

conviction     for    conspiracy      to    commit     money    laundering   because

“[u]nlike      Cloud’s    substantive        money      laundering    charges,      the

conspiracy charge was not tied to any specific payment to a

recruiter, buyer, or coconspirator” and “there was evidence that

Cloud   used    the   profits       from    his   previous      [illegal   deals]    to

finance additional purchases.”               Id. at 408.         Thus, we affirmed

the conspiracy conviction.            Id.

                                            B.

     Because Hines was not convicted of operating an illegal

gambling business, we must determine whether a merger problem

arises on the facts of this case.                 See Halstead, 634 F.3d at 279

                                            13
(noting    that    “Justice     Stevens’s              opinion       . . .     would    require

addressing    that     situation         on        a    case-by-case          approach”     and

“leav[ing] further development of a solution to a future case

that presents the problem”).

     We     have     repeatedly          held          that         if   “‘the     financial

transactions of the predicate offense are different from the

transaction prosecuted as money laundering’ no merger problem

arises.”     United States v. Simmons, 737 F.3d 319, 324 (4th Cir.

2013) (quoting Halstead, 634 F.3d at 279-80).                            Hines stipulated

to a factual basis supporting his guilty plea to Counts One and

Eleven in the second superseding indictment.                             That stipulation

states, with respect to the money laundering conspiracy count,

that Hines “was aware th[at] at least a portion of the proceeds

from loans involved in Count One were used to facilitate other

financial    transactions         to    further          or    promote       the   conspiracy

charged in Count One.”                 J.A. 84 (emphasis added).                       Further,

Hines   admitted,      at   his    plea       hearing,          that     the    transactions

underlying    his    money        laundering            conspiracy           conviction     are

different from those underlying the mortgage fraud conspiracy

conviction.

     In    addition,    Hines      agreed          with       the    government’s       proffer

that during the conspiracy period, he used the “profits” from

his previous flips to make down payments on future properties.

In utilizing monies from previous properties to finance future

                                              14
purchases, Hines was not paying the “essential expenses” of the

underlying crime.     See Cloud, 680 F.3d at 408.

     Hines’s     admissions,   therefore,      are    fatal    to     his   Santos

claim.   See id. (“In utilizing monies from previous properties

to finance future purchases, Cloud was not paying the ‘essential

expenses’ of the underlying crime.             Thus, [the conspiracy to

commit   money    laundering   count]     does       not   present     a    merger

problem.”);      Halstead, 634 F.3d   at     279-80       (“But    when    the

financial transactions of the predicate offense are different

from the transactions prosecuted as money laundering, the merger

problem recognized in Santos does not even arise.”).                   Thus, the

merger problem never arises in the circumstances of this case,

and Santos provides Hines no relief. 2

     2 Hines’s reliance on United States v. Crosgrove, 637 F.3d
646 (6th Cir. 2011), is misplaced.    Crosgrove was hired as a
claims adjuster and attorney in a fraudulent insurance scheme.
Id. at 655.    Crosgrove was indicted for conspiracy to commit
mail fraud, in violation of 18 U.S.C. § 371, and conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956(h).
Id. at 650-51.    Crosgrove stood trial on both counts and was
convicted. Id. at 652. On appeal, the government conceded that
the “only transactions on which the conviction” for conspiracy
to launder money “could be upheld were Crosgrove’s deposits of
checks” that amounted to “salary payments” to him. Id. at 654-
55.    The Sixth Circuit held that the “crimes as charged
obviously merge” because “the payments Crosgrove received for
his services as an attorney and claims adjuster, which the
Government states are the only basis for upholding Crosgrove’s
conviction for conspiracy to commit money laundering, are also
listed in the indictment as overt acts in furtherance of the
mail/wire fraud conspiracy.”   Id. at 655.   Crosgrove, however,
(Continued)
                                    15
                                     IV.

     For   the   reasons   stated,   the   district   court’s   denial   of

Hines’s § 2241 petition is

                                                                AFFIRMED.

is easily distinguishable from the case at issue, because here,
Hines explicitly agreed that the transactions supporting his
money laundering conspiracy conviction were different from those
underlying his conviction under 18 U.S.C. § 371.

                                     16