Court Opinion

ID: 4463918
Source: CourtListenerOpinion
Date Created: 2019-12-12 22:00:29.49954+00
Date Added: 2024-06-11T14:53:33.480737
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2010                    Decided July 16, 2010
                                   Reissued December 12, 2019

                        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.
                                2

    Before: SENTELLE, Chief Judge, GINSBURG and BROWN,*
Circuit Judges.

    Opinion for the Court filed by Chief Judge SENTELLE.

    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.

                                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,

*Retired Circuit Judge Brown was a member of the panel at the time
the July 16, 2010 opinion issued.
                                3

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
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 co-
conspirators, 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
                                4

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.

                               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.
                                 5

     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)
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
                                6

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
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
                                7

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.

                               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 down-
payment 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.
                                  8

     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
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
                                9

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
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”).
                                10

                                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
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 co-
conspirators 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 cross-
                                11

examination 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
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.
                                12

During trial Hall’s attorney attempted to cross-examine the co-
conspirators 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
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.
                               13

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 cross-
examination 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
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
                                14

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,
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), and remand the case to
the district court for resentencing.

                                                       So ordered.