Court Opinion

ID: 2721444
Source: CourtListenerOpinion
Date Created: 2014-08-27 21:01:29.193096+00
Date Added: 2024-06-11T13:26:25.499414
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                  AUG 27 2014

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

UNITED STATES OF AMERICA,                        No. 10-56466

              Plaintiff - Appellee,              D.C. Nos.     3:09-cv-00614-MMA
                                                               3:00-cr-02580-MMA-
  v.

WILLIAM F. MCCRAY,                               MEMORANDUM*

              Defendant - Appellant.

                   Appeal from the United States District Court
                      for the Southern District of California
                   Michael M. Anello, District Judge, Presiding

                       Argued and Submitted August 6, 2014
                               Pasadena, California

Before: REINHARDT, WARDLAW, and CALLAHAN, Circuit Judges.

       William F. McCray appeals the district court’s denial of his 28 U.S.C.

§ 2255 motion to vacate his convictions for promotional money laundering. We

have jurisdiction under 28 U.S.C. § 2253(a), and we reverse.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      1.       The district court erred in concluding that McCray’s promotional

money laundering counts, counts 23 and 24 of the Indictment, did not merge with

his wire fraud counts, counts 16 and 17. The core of McCray’s fraudulent scheme

was to churn the funds in his investors’ accounts to drive up commissions. Unlike

a traditional Ponzi scheme, McCray actually used investor capital to trade foreign

currency from which he profited by receiving commissions. His trading scheme

was a fraud, however, because he misrepresented his returns. The $5.8 million

wire transfers to International Forex Limited’s account at the Bank of Bermuda

(hereafter the “Bermuda Transfers”) were a “central component of the scheme to

defraud.” United States v. Van Alstyne, 584 F.3d 803, 815 (9th Cir. 2009). Indeed,

after the $5.8 million was transferred to the Bank of Bermuda, subsequent trading

in that account generated commissions of over $640,000. As in Van Alstyne,

where distribution checks sent directly to investors were crucial to the “very nature

of the scheme,” id. at 815, transfers of investor capital to foreign currency

exchange trading desks for the purpose of executing trades and generating

commissions were at the heart of McCray’s scheme.

      Furthermore, the Bermuda Transfers were “central to carrying out the

scheme’s objective of encouraging further investment” and perpetuating the

scheme’s continued viability. United States v. Moreland, 622 F.3d 1147, 1166 (9th

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Cir. 2010); see also United States v. Ali, 620 F.3d 1062, 1072 (9th Cir. 2010)

(holding that there was a “merger” problem because “an illegal scheme to buy and

sell discounted software will continue to buy and sell software to perpetuate the

scheme”). For example, McCray specifically marketed the benefits of offshore

accounts to attract further investment, and some investors even called the Bank of

Bermuda to verify that McCray was trading there. Also, unlike in United States v.

Bush, 626 F.3d 527, 538 (9th Cir. 2010), where the defendant moved money

offshore after government authorities began investing his scheme, McCray did not

transfer funds offshore to hide them. Rather, he transferred the funds to Bermuda

months before the search warrant was executed for use in his scheme. Although it

is unclear what portion of the $5.8 million was used for trading—as opposed to

refunds, commissions, or bank fees—the Bank of Bermuda was the most active

trading desk in 1999, accounting for 54% of International Forex Limited’s

commissions that year.

      Even if a portion of the Bermuda Transfers was used in a way that did not

implicate the “merger” problem, the transfers themselves would remain a “central

component of the scheme” because they provided the investor capital necessary to

execute trades and generate commissions. See Moreland, 622 F.3d at 1165.

Therefore, because the Bermuda Transfers were a “central component of the

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scheme to defraud,” McCray’s promotional money laundering counts trigger the

“merger” problem and the “profits” definition of “proceeds” should apply. See

Van Alstyne, 584 F.3d at 815-16 (discussing United States v. Santos, 553 U.S. 507

(2008)).

      The promotional money laundering counts also led to “a radical increase in

the statutory maximum sentence.” Bush, 626 F.3d at 538. While the statutory

maximum for the underlying offense of wire fraud was five years, see 18 U.S.C.

§ 1343 (1999), the statutory maximum for promotional money laundering was

twenty years, see 18 U.S.C. § 1956 (1999). Thus, as warned of by the Santos

plurality, the money laundering counts “eviscerated” the statutory cap of the

underlying offense. 553 U.S. at 527 (Stevens, J., concurring).

      Lastly, because the government did not show that the Bermuda Transfers

involved profits from McCray’s scheme, his promotional money laundering

convictions cannot stand. See Ali, 620 F.3d at 1072. Thus, the promotional money

laundering “counts implicate the merger problem discussed in Van Alstyne and

Santos and, because the government did not show that only profits were used, there

is insufficient evidence to support [McCray’s] conviction under the promotion[al]

money laundering counts.” Id.

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      2.     Even if McCray procedurally defaulted on his Santos-based claim,

because his claim succeeds on the merits, his default is excused because he has

demonstrated “actual innocence.” See United States v. Avery, 719 F.3d 1080, 1085

(9th Cir. 2013) (“A petitioner is actually innocent when he was convicted for

conduct not prohibited by law.”) (internal quotation marks omitted). Because the

Bermuda Transfers were client capital, and not profits of the scheme, “it is more

likely than not that no reasonable juror would have found [McCray] guilty beyond

a reasonable doubt.” Id. at 1083 (quoting Schlup v. Delo, 513 U.S. 298, 327

(1995)). In light of all the evidence, no reasonable juror would have been able to

conclude beyond a reasonable doubt that McCray knowingly used the profits from

his scheme in the Bermuda Transfers. See, e.g., Avery, 719 F.3d at 1085 (holding

that defendant’s procedural default was excused because he was actually innocent

of honest services fraud in light of Skilling v. United States, 561 U.S. 358 (2010)).

      3.     Accordingly, we REVERSE the denial of McCray’s § 2255 motion,

VACATE his convictions on counts 23 and 24 of the Indictment, and REMAND

for resentencing in accordance with this disposition.

      REVERSED, VACATED, and REMANDED.

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                                                                              FILED
USA v McCray 10-56466                                                         AUG 27 2014

                                                                         MOLLY C. DWYER, CLERK
CALLAHAN, Circuit Judge, dissenting:                                      U.S. COURT OF APPEALS

      I respectfully dissent. In contrast to the payments to winners and employees

of the illegal gambling scheme in Santos v. United States, 553 U.S. 507 (2008), the

1999 wire transfers were not critical to McCray’s foreign currency currency

trading scheme. Although more than half of the commissions generated by the

scheme in 1999 were due to trading from McCray’s Bank of Bermuda account, the

amount of commissions from that account, about $641,000, is less than 10% of the

overall total of $6.7 million in commissions generated by the scheme over four

years. Furthermore, in 1998, the scheme generated $3.9 million in commissions

without any trading from the Bank of Bermuda account. Thus, while McCray’s

scheme required that he transfer money to trading desks, he did not have to engage

in wire transfers to the Bank of Bermuda. Contrary to the majority’s

determination, the transfers were not necessary to “perpetuate the scheme’s

continued viability.” See Majority 2.1

      Since the transfers were not central to the scheme, “proceeds” is defined as

gross receipts. See United States v. Grasso, 724 F.3d 1077, 1095 (9th Cir. 2013).

      1
       Further, although McCray made the transfers in an effort to promote his
scheme, the evidence in the record tends to show that investors were not interested
in investing offshore.

                                         1
There is clearly sufficient evidence for a jury to find that the transfers involved

gross receipts of McCray’s scheme because the transfers were made using

fraudulently-obtained client funds. Accordingly, McCray’s Santos claim fails on

its merits.

       Finally, I would also hold that McCray is barred from raising his Santos

merger argument on habeas review. McCray did not raise a merger argument on

direct appeal even though such an argument had already been approved in United

States v. Scialabba, 282 F.3d 475 (7th Cir. 2002). Also, because the 1999 wire

transfers were not central to McCray’s scheme and clearly involved proceeds of the

fraudulent scheme, McCray cannot show actual innocence under Schlup v. Delo,

513 U.S. 298, 327 (1995).2 Accordingly, McCray has not shown cause and

prejudice or actual innocence excusing his failure to raise his Santos argument in

his direct appeal, and his claim is procedurally defaulted under Bousley v. United

States, 523 U.S. 614, 622 (1998).

       Because McCray’s Santos claim both fails on the merits and is procedurally

defaulted, I would affirm the district court’s denial of McCray’s motion to vacate.

       2
       Notably, McCray does not challenge his other convictions and does not
claim he was actually innocent of operating a fraudulent currency scheme.

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