United States v. Ethan Jinian ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA , No. 11-10593
Plaintiff-Appellee,
D.C. No.
v. 3:09-cr-01103-
JSW-1
ETHAN FARID JINIAN , AKA Farid
Khoujinian, ORDER AND
Defendant-Appellant. AMENDED
OPINION
Appeal from the United States District Court
for the Northern District of California
Jeffrey S. White, District Judge, Presiding
Argued and Submitted
October 18, 2012—San Francisco, California
Filed March 26, 2013
Amended July 23, 2013
Before: Dorothy W. Nelson, Mary H. Murguia, and
Morgan Christen, Circuit Judges.1
Order;
Opinion by Judge Murguia
1
This case was submitted to a panel that included Judge Betty B.
Fletcher, who recently passed away. Following Judge Fletcher’s death,
Judge Christen was drawn by lot to replace Judge Fletcher. Judge
Christen has read the briefs, reviewed the record, and listened to the oral
argument.
2 UNITED STATES V . JINIAN
SUMMARY*
Criminal Law
The panel amended its opinion filed March 26, 2013, and
deleted Judge Christen’s concurrence, in a case in which the
panel affirmed a defendant’s conviction and sentence on
thirteen counts of wire fraud in violation of 18 U.S.C. § 1343stemming from a scheme to defraud his employer, Bricsnet
FM America, Inc., by diverting part of the company’s profits
to a shell company through which the defendant and other
employees distributed the diverted profits in the form of
salaries, dividends, and bonuses.
The defendant asserted that routine wire communications
between two California banks and the Federal Reserve Bank
in Dallas occurred after the defendant deposited the monies
into his Mechanics Bank account and, as a result, were
neither initiated for the purpose of defrauding Bricsnet nor
related to his scheme to defraud. In the amended opinion, the
panel disagreed because the defendant conducted an ongoing
scheme to defraud Bricsnet, and even if each check the
defendant deposited is viewed as a discrete fraudulent
scheme, the interstate wire communications were necessary
to complete the fraud. The panel explained that the wire
transfer was necessary to complete and conceal the fraud
because until the checks cleared, the defendant could not be
certain it would be Bricsnet that would be swindled.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
UNITED STATES V . JINIAN 3
The panel rejected the defendant’s arguments that his
conviction should be overturned because there was
insufficient evidence to prove that his use of an interstate
wire communication was reasonably foreseeable and because
the jury should have been instructed to find the same. The
panel wrote that no mens rea requirement exists with regard
to the jurisdictional, interstate nexus of the defendant’s
actions under § 1343, which requires only that the defendant
used – or caused the use of – interstate wires in furtherance of
his scheme to defraud Bricsnet.
The panel held that § 1343 is a valid extension of
congressional power under the Commerce Clause, and that
since Congress enacted the statute based upon a
constitutionally enumerated power, analysis of the statute
under the Necessary and Proper Clause is inappropriate. The
panel also held that because § 1343 is a valid exercise of
powers delegated to Congress by the Commerce Clause, the
defendant’s Tenth Amendment challenge to the statute fails.
The panel denied a petition for panel rehearing and the
court denied a petition for rehearing en banc.
COUNSEL
Benjamin L. Coleman, Coleman & Balogh LLP, San Diego,
California; and Ethan A. Balogh, Coleman & Balogh LLP,
San Francisco, California, for Defendant–Appellant.
Suzanne Miles, Assistant United States Attorney, San
Francisco, California, for Plaintiff–Appellee.
4 UNITED STATES V . JINIAN
ORDER
The Opinion filed March 26, 2013, appearing at 712 F.3d
1255, is amended as follows:
1. On page 7 of the slip opinion, first paragraph that
begins on the previous page (712 F.3d at 1259), replace in the
penultimate sentence “instruction’s” with “instructions’”. As
amended, the new sentence is:
If the district court’s instructions fairly and
adequately covered the elements of the
offense, then we review the instructions’
“‘precise formulation’ for an abuse of
discretion.” Id.
2. On page 13 of the slip opinion, first full paragraph
(712 F.3d at 1263), replace the third and fourth sentences
with
Similarly, “the execution of the scheme as
conceived” by Jinian depended upon each
check successfully clearing through the
federal reserve because, if either bank had
been left holding the dishonored check,
Jinian’s scheme would have been discovered.
Id. at 715.
As amended, the paragraph is:
We conclude that Jinian’s conduct is more
akin to the fraud perpetrated in Schmuck than
in Kann. The scheme in Schmuck remained
incomplete until the mailing activity, thereby
UNITED STATES V . JINIAN 5
rendering the mailing an “essential step in the
successful passage of title,” occurred. Id. at
714. Similarly, “the execution of the scheme
as conceived” by Jinian depended upon each
check successfully clearing through the
federal reserve because, if either bank had
been left holding the dishonored check,
Jinian’s scheme would have been discovered.
Id. at 715. As long as Bricsnet was the victim
of his crime, Jinian could cover his tracks by
giving false assurances to Brown.
3. Beginning on page 15 of the slip opinion (712 F.3d at
1264), second full paragraph, delete the second sentence and
remainder of the paragraph. Add a new second sentence:
The wire transfer was necessary to complete
the fraud because, until the checks cleared,
Jinian could not be certain it would be
Bricsnet that would be swindled.
On page 16 of the slip opinion, first full paragraph, replace
from the first sentence “The government also” with “The
government” and merge the remainder of the paragraph with
the preceding paragraph. The new sentence is:
The government introduced evidence that
Jinian directed Brown to issue multiple,
smaller-denomination checks, rather than a
large, lump-sum payment.6
As amended, the second full paragraph beginning on page 16
of the slip opinion is:
6 UNITED STATES V . JINIAN
Here, the mere clearing of a check is
enough because the interstate communication
was necessary to complete and conceal
Jinian’s fraud. The wire transfer was
necessary to complete the fraud because, until
the checks cleared, Jinian could not be certain
it would be Bricsnet that would be swindled.
The government introduced evidence that
Jinian directed Brown to issue multiple,
smaller-denomination checks, rather than a
large, lump-sum payment.6 Such conduct
gives rise to inferences that Jinian intended to
conceal his transactions entirely from
detection by Bricsnet or structure the
transactions in a manner that gave them the
appearance of regular or necessary business
expenditures. Jinian’s conduct further
suggests that depositing multiple, smaller-
denomination checks insulated his conduct
from suspicion by or scrutiny from Mechanics
Bank about large-sum deposits. Thus, a
rational jury could have concluded that Jinian
utilized the interstate wires to structure,
perpetuate, and conceal his fraudulent
scheme.
4. On pages 26–29 of the slip opinion (712 F.3d at
1269–71), delete Judge Christen’s concurrence.
With these amendments, the panel has voted to deny
Appellant’s petition for rehearing. Judge Murguia and Judge
Christen vote to deny the petition for rehearing and Judge
Nelson so recommends.
UNITED STATES V . JINIAN 7
The full court has been advised of the petition for
rehearing en banc and no judge has requested a vote on
whether to rehear the matter en banc. Fed. R. App. P. 35.
IT IS ORDERED denying the petition for panel
rehearing and the petition for rehearing en banc (Doc. 40).
“No further petitions for rehearing or rehearing en banc will
be entertained in this case.”
OPINION
MURGUIA, Circuit Judge:
Ethan Farid Jinian was charged with fourteen counts of
wire fraud in violation of 18 U.S.C. § 1343 stemming from
his scheme to defraud his employer. Jinian contends that the
district court erred in denying his motions for judgment of
acquittal, a new trial, and for an arrest of judgment.
Specifically, he argues that (1) routine transmissions
occurring during the interbank collection process are not
made for the purpose of executing a scheme to defraud or in
furtherance thereof, (2) the jury should have been instructed
that it was necessary to find that the interstate nature of the
wire communications was reasonably likely or foreseeable,
(3) there was insufficient evidence to establish that an
interstate wire communication was reasonably foreseeable
between two California banks, and (4) the wire fraud statute
is unconstitutional as applied to him. We reject these
arguments and affirm Jinian’s conviction and sentence.
8 UNITED STATES V . JINIAN
I. FACTUAL AND PROCEDURAL BACKGROUND
From 2004 until 2008, Jinian served as the chief executive
officer (“CEO”) of Bricsnet FM America, Inc. (“Bricsnet”),
a company that developed and sold software. As CEO, Jinian
was authorized to spend Bricsnet monies to further its
business operations and make executive and financial
decisions. He was also responsible for reviewing the
company’s daily expenditures. Briscnet’s board of directors
and a majority of its investors were located in Europe,
enabling Jinian to control Briscnet’s operations from the
company’s San Francisco, California office with limited daily
oversight.
In 2006, Jinian informed Leon Brown, Bricsnet’s finance
manager, that the company’s chairman of the board of
directors authorized Jinian to receive compensation in excess
of his annual salary and to draw advances on that
compensation. Unbeknownst to Brown, Jinian never received
any such authorization. Nevertheless, Brown, in reliance
upon Jinian’s representations, began issuing to Jinian checks
from Bricsnet’s account at Silicon Valley Bank in Santa
Clara, California. Jinian deposited these checks into his
account at Mechanics Bank in Hercules, California.
Jinian instructed Brown to issue multiple, small-
denomination checks instead of a single, lump-sum payment.
Between November 2006 and September 2008, Jinian
obtained from Brown nearly 100 checks, ranging in monthly
amounts from $25,000 to over $60,000. The checks were
issued regularly, some within days of each other. In total,
Jinian improperly obtained over $1.5 million from Bricsnet.
UNITED STATES V . JINIAN 9
Jinian was indicted on fourteen counts of wire fraud,
which corresponded to fourteen Bricsnet checks Jinian
deposited into his Mechanics Bank account. At trial, the
government presented evidence showing that Mechanics
Bank utilized the Federal Reserve Bank as an intermediary
between it and Silicon Valley Bank to process the checks for
payment. Howard Ng, an internal auditor for the Federal
Reserve Bank, testified about the process through which
checks were cleared. Ng explained that, when Jinian
deposited a check into his Mechanics Bank account,
Mechanics Bank sent an electronic image of the check via
wire communication to the Federal Reserve Bank, which
utilized an image server located in Dallas, Texas to sort and
process the check. Once the check was processed in Dallas,
Ng testified, the Federal Reserve Bank wired an image of the
check to Silicon Valley Bank to be negotiated and paid. Ng
testified that these wire communications facilitated the check
clearing process by ensuring that the appropriate accounts
were debited and credited.
At the close of the government’s case and the close of all
evidence, Jinian moved, pursuant to Federal Rule of Criminal
Procedure 29, for a judgment of acquittal, arguing that the
government failed to prove each element of wire fraud
beyond a reasonable doubt. The district court denied Jinian’s
motion, and the jury returned a guilty verdict on thirteen of
fourteen counts charged in the indictment.
Following his conviction, Jinian renewed his motion for
judgment of acquittal. Jinian also moved for a new trial and
for an arrest of judgment pursuant to Federal Rules of
Criminal Procedure 33 and 34, respectively, arguing, among
other things, that there was insufficient evidence that he
knew—or knew it was reasonably likely—that interstate
10 UNITED STATES V . JINIAN
wires would be used to further the fraudulent scheme. The
district court again denied Jinian’s motions and affirmed the
jury’s convictions. It then sentenced Jinian to sixty-four
months imprisonment, three years of supervised release, and
ordered him to pay restitution of $1,587,860.04.
Jinian timely appealed. We have jurisdiction pursuant to
28 U.S.C. § 1291.
II. STANDARD OF REVIEW
We review de novo a district court’s interpretation of a
criminal statute, United States v. Dahl, 314 F.3d 976, 977
(9th Cir. 2002), and denial of a motion for judgment of
acquittal, United States v. Anaya-Acosta, 629 F.3d 1091,
1093 (9th Cir. 2011). Sufficient evidence to support a
conviction exists if, “after 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). We also review de novo whether the district court’s
jury instructions adequately presented the defendant’s theory
of the case and whether the district court presented the jury
with every element of the crime. United States v. Knapp,
120 F.3d 928, 930 (9th Cir. 1997). If the district court’s
instructions fairly and adequately covered the elements of the
offense, then we review the instructions’ “‘precise
formulation’ for an abuse of discretion.” Id. Finally, we
review de novo questions regarding the constitutionality of a
federal statute. United States v. Zakharov, 468 F.3d 1171,
1176 (9th Cir. 2006).
UNITED STATES V . JINIAN 11
III. DISCUSSION
The wire fraud statute criminalizes conduct by any person
who, “having devised or intending to devise any scheme or
artifice to defraud, . . . transmits or causes to be transmitted
by means of wire . . . communication in interstate or foreign
commerce, any writings, signs, signals, pictures, or sounds
for the purpose of executing such scheme or artifice . . . .”
18 U.S.C. § 1343 (2006). Section 1343, however, “does not
purport to reach all frauds, but only those limited instances”
wherein use of a wire “is a part of the execution of the fraud,
leaving all other cases to be dealt with by appropriate state
law.” Kann v. United States, 323 U.S. 88, 95 (1944).2
The elements of wire fraud are: (1) the existence of a
scheme to defraud; (2) the use of wire, radio, or television to
further the scheme; and (3) a specific intent to defraud.
United States v. Pelisamen, 641 F.3d 399, 409 (9th Cir.
2011). “The specific intent requirement is an aspect of the
‘scheme to defraud’ requirement; i.e., there is no fraudulent
scheme without specific intent.” United States v. Bohonus,
628 F.2d 1167, 1172 (9th Cir. 1980). “One ‘causes’ use of
. . . wire communications where such use can reasonably be
foreseen, even though not specifically intended.” United
States v. Cusino, 694 F.2d 185, 188 (9th Cir. 1982). A wire
communication is “in furtherance” of a fraudulent scheme if
2
Kann involved alleged violations of the mail fraud statute. Since mail
and wire fraud are both defined as “any scheme or artifice to defraud, or
for obtaining money or property by means of false or fraudulent pretenses,
representations, or promises,” 18 U.S.C. §§ 1341, 1343, “the wire fraud
statute is read in light of the case law on mail fraud,” United States v.
M anarite, 44 F.3d 1407, 1411 n.5 (9th Cir. 1995); accord Carpenter v.
United States, 484 U.S. 19, 25 n.6 (1987) (applying the same analysis to
mail and wire fraud).
12 UNITED STATES V . JINIAN
it is “incident to the execution of the scheme,” United States
v. Lo, 231 F.3d 471, 478 (9th Cir. 2000), meaning that it
“need not be an essential element of the scheme, just a ‘step
in the plot,’” United States v. Garlick, 240 F.3d 789, 795 (9th
Cir. 2001) (quoting Schmuck v. United States, 489 U.S. 705,
711 (1989)); accord United States v. Garner, 663 F.2d 834,
838 (9th Cir. 1981) (explaining that the wire transfer “need
only be made for the purpose of executing the scheme”).
For purposes of 18 U.S.C. § 1343, a wire communication
cannot be “part of an after-the-fact transaction that, although
foreseeable, was not in furtherance of the defendant’s
fraudulent scheme.” Lo, 231 F.3d at 478. Ultimately, “the
issue is not one purely of time sequence.” Id. As the
Supreme Court recognized in United States v. Sampson,
“subsequent mailings can in some circumstances provide the
basis for an indictment under the mail fraud statutes.”
371 U.S. 75, 80 (1962). Thus, the “relevant question at all
times” is whether a wire “is part of the execution of the
scheme as conceived by the perpetrator at the time,”
Schmuck, 489 U.S. at 715, not whether the defendant, prior to
the wiring, “had obtained all the money [he] expected to get,”
Sampson, 371 U.S. at 79.
A.
Jinian’s principle argument is that the Supreme Court’s
decision in Kann is legally indistinguishable from this case
and, as such, compels a reversal of his conviction and entry
of judgment of acquittal. Kann, together with six other
employees, devised a scheme to defraud their employer by
diverting part of the company’s profits to a shell company
through which the defendants distributed the diverted profits
in the form of salaries, dividends, and bonuses. Kann,
UNITED STATES V . JINIAN 13
323 U.S. at 89–90. The defendants were indicted on three
counts—based upon three banking transactions—of using the
mail in execution of a scheme to defraud, though the
government abandoned the first count at trial.3 Id. at 89–91.
Kann was convicted on the remaining two counts. Id. at 89;
supra note 3. Challenging his conviction, Kann argued that
the mailing of the checks by the banks “could not be for the
purpose of executing the scheme since the defendants to
whom those checks were delivered had received the money
represented by the checks and each transaction, after such
receipt, was irrevocable as respects the drawer.” Kann,
323 U.S. at 93.
The Supreme Court agreed with Kann, explaining that the
defendants received the money “irrevocably” once the two
checks were cashed or deposited, which constituted the point
at which “the scheme in each case had reached fruition.”4 Id.
at 94; accord id. at 95 (determining that “the scheme was
3
The second count alleged that the defendants, who defrauded a
contractor hired to build a factory for their shell company, endorsed and
cashed in Maryland the contractor’s check in the amount of $12,000,
which the Maryland bank then “deposited in the mail to be delivered to the
bank in Wilmington, Delaware, on which it was drawn.” Kann, 323 U.S.
at 92. The third count alleged that one defendant deposited a check in the
amount of $5,000 at a Delaware bank, which then mailed the check to the
drawee bank located in Maryland. Id. at 92.
4
The Supreme Court, however, rejected Kann’s contention that he
lacked the requisite intent under the mail fraud statute based upon the fact
that he had no reasonable belief that the checks would go through the
mails, explaining: “[W ]e think it a fair inference that those defendants who
drew, or those who cashed, the checks believed that the banks which took
them would mail them to the banks on which they were drawn, and
assuming [Kann] participated in the scheme, their knowledge was his
knowledge.” Kann, 323 U.S. at 93.
14 UNITED STATES V . JINIAN
completely executed as respects the transactions in question
when the defendants received the money intended to be
obtained by their fraud”). The banks became the owners of
the checks once they were cashed or deposited and, “being
holders in due course, were entitled to collect from the
drawee bank . . . and the drawer had no defense to payment.”
Id. at 94. Reasoning that it was “immaterial” to the
defendants “or to any consummation of the scheme[] how the
bank which paid or credited the check would collect from the
drawee bank,” id., the Kann Court concluded that, based upon
the facts before it, the “subsequent banking transactions
between the banks concerned were merely incidental and
collateral to the scheme and not a part of it.” Id. at 95.
Because the mailings at issue were not for the purpose of
executing the fraud, the Supreme Court reversed Kann’s
conviction. Id.Jinian asserts that the wire communications between the
two California banks and the Federal Reserve Bank in Dallas,
like the mailings in Kann, occurred after he deposited the
monies into his Mechanics Bank account and, as a result,
were neither initiated for the purpose of defrauding Bricsnet
nor related to his scheme to defraud. We disagree for two
reasons. First, Jinian conducted an ongoing scheme to
defraud Bricsnet. Second, even if we view each check Jinian
deposited as a discrete fraudulent scheme, the interstate wire
communications were necessary to complete and conceal
each fraud.
Kann involved two discrete, independent transactions.
There was no indication that the transactions were sequential
or that the success of one depended upon the other. Although
the government argued in Kann that the two transactions were
part of a larger scheme devised by the defendants to commit
UNITED STATES V . JINIAN 15
future frauds against their employer, the Kann Court
construed the scheme narrowly, focusing upon the
“transactions in question” and explaining that the scheme was
“completely executed” once the defendants “received the
money intended to be obtained by their fraud.” Id. at 95.
Determining that the funds were irrevocably in the
defendants’ possession at the moment the checks were
deposited or cashed, id. at 94, the Kann Court concluded that
the subsequent interbank mailings were separate and distinct
from the defendants’ fraudulent scheme. Id. at 95.
Jinian’s conduct, in contrast to the circumstances at issue
in Kann, suggests that he executed an ongoing scheme to
defraud Bricsnet. The government, which charged Jinan with
fourteen counts of wire fraud, introduced evidence showing
that Jinian deposited nearly 100 checks over the course of a
two-year period. Thus, Jinian’s ability to perpetuate his
scheme without interruption for two years was dependent
upon the successful completion of the check clearing process
for each Briscnet check Jinian deposited into his Mechanics
Bank account. See Schmuck, 489 U.S. at 711–12.
While Kann certainly represents an “important
limitation[] on the government’s use of the mail fraud
statute,” United States v. Lack, 129 F.3d 403, 407 (7th Cir.
1997), we must consider it in light of the Supreme Court’s
more recent pronouncements in Schmuck. See United States
v. Ashman, 979 F.2d 469, 482 (7th Cir. 1992) (acknowledging
that Schmuck did not overrule Kann). The fraudulent scheme
in Schmuck was devised by a used-automobile distributor
who rolled back odometers and sold the vehicles to dealers at
artificially inflated prices. 489 U.S. at 707. The dealers then
resold the automobiles to customers. Id. In order to complete
the resale of each automobile to its customers, the dealers had
16 UNITED STATES V . JINIAN
to obtain title to each vehicle. Id. To that end, the dealers
mailed title application forms to the state on behalf of their
customers. Id. Schmuck was indicted on—and convicted
of—twelve counts of mail fraud, id., and challenged his
conviction on the basis that the mailings were routine,
occurred after the fraud came to fruition, and were “merely
tangentially related to the fraud,” id. at 711.
The Supreme Court disagreed with Schmuck’s
characterization of the mailings. Id. Focusing upon the
“scope” of the fraudulent scheme, the Schmuck Court
observed that Schmuck did not engage in a “‘one-shot’
operation in which he sold a single car to an isolated dealer”
but rather maintained “an ongoing fraudulent venture.” Id. at
711. The scheme, the Schmuck Court reasoned, “did not
reach fruition until the retail dealers resold the cars and
effected transfers of title” and would have “come to an abrupt
halt” if the dealers were unable to resell the cars they
purchased from Schmuck. Id. at 712. Thus, it concluded
that, “although the registration-form mailings may not have
contributed directly to the duping of either the retail dealers
or the customers, they were necessary to the passage of title,
which in turn was essential to the perpetuation of Schmuck’s
scheme.” Id. The registration-form mailings were therefore
distinguishable from the intrabanking mailings in Kann
because the former were “essential step[s] in the successful
passage of title to the retail purchasers,” while the latter
“involved little more than post-fraud accounting among the
potential victims of the various schemes, and the long-term
success of the fraud did not turn on which of the potential
victims bore the ultimate loss.” Id. at 714. On this basis, the
Schmuck Court held that a rational jury could have found that
the title-registration mailings were part of the execution of
Schmuck’s fraudulent scheme. Id. at 712.
UNITED STATES V . JINIAN 17
We conclude that Jinian’s conduct is more akin to the
fraud perpetrated in Schmuck than in Kann. The scheme in
Schmuck remained incomplete until the mailing activity,
thereby rendering the mailing an “essential step in the
successful passage of title,” occurred. Id. at 714. Similarly,
“the execution of the scheme as conceived” by Jinian
depended upon each check successfully clearing through the
federal reserve because, if either bank had been left holding
the dishonored check, Jinian’s scheme would have been
discovered. Id. at 715. As long as Bricsnet was the victim of
his crime, Jinian could cover his tracks by giving false
assurances to Brown.
Our ruling today is consistent with the manner in which
we, as well as our sister courts, have interpreted Kann and
Schmuck. For example, in United States v. Shipsey, a case
involving the diversion of construction loan proceeds through
wire payment transfers, we distinguished Kann by observing
that the fraudulent scheme “did not ‘reach fruition’” when the
wire draw requests were submitted and concluded, under the
logic of Schmuck, that the wires were incident to an essential
part of the fraudulent scheme. 363 F.3d 962, 965–66, 972
(9th Cir. 2004). The Seventh Circuit, in Lack, distinguished
the mailings at issue in that case—opening a bank account to
launder money and providing a mailing address to which
monthly statements were mailed—from those in Kann by
explaining that they, like the mailings in Schmuck, helped
conceal and were in furtherance of the fraudulent scheme.
129 F.3d at 408–09. The Third Circuit, affirming a
conviction for mail fraud where the defendant “devised and
executed a scheme to obtain additional bonuses” from her
employer by falsifying reports, distinguished Kann by
explaining that the fraud was “ongoing,” rather than
involving a single false report, and was therefore similar to
18 UNITED STATES V . JINIAN
the scheme in Schmuck. United States v. Tiller, 302 F.3d 98,
100, 102 (3d Cir. 2002). Furthermore, the Fifth Circuit, in
United States v. Mills, relied principally upon Schmuck to
conclude that the defendant, who wrongfully obtained funds
from his company’s bank account in Colorado and deposited
them into his personal bank accounts in Texas, engaged in an
“ongoing venture and not a ‘one-shot’ operation” that
involved numerous checks over the course of at least thirteen
months.5 199 F.3d 184, 187, 189–90 (5th Cir. 1999). Finally,
the Seventh Circuit has also distinguished Kann by virtue of
the fact that the decision predated the Uniform Commercial
Code, “which ma[de] it easy for a customer’s bank to reverse
the credit if the instrument cannot be collected.” United
States v. Franks, 309 F.3d 977, 978 (7th Cir. 2002).
Even if we construe each check Jinian deposited as an
individual, discrete scheme, Kann remains distinguishable.
The Supreme Court recognized exceptions to the rule it
announced in Kann: instances in which the mails—or, as
here, interstate wires—are used as “a means of concealment
so that further frauds which are part of the scheme may be
perpetuated.” 323 U.S. at 94. The Kann Court observed that,
in such cases, “the mailing has ordinarily had a much closer
relation to further fraudulent conduct than has the mere
clearing of a check . . . .” Id. at 95. It also described as
“conceivable” that the mere clearing of a check, “alone, in
some settings, would be enough” to support a fraud
conviction. Id.5
The Mills Court also recognized that the defendant’s conduct fell
within an exception set forth in Kann, discussed infra, namely that it was
conceivable in some settings that the mere clearing of a check would be
enough to confer federal jurisdiction under the wire fraud statute. Mills,
199 F.3d at 189.
UNITED STATES V . JINIAN 19
Here, the mere clearing of a check is enough because the
interstate communication was necessary to complete and
conceal Jinian’s fraud. The wire transfer was necessary to
complete the fraud because, until the checks cleared, Jinian
could not be certain it would be Bricsnet that would be
swindled. The government introduced evidence that Jinian
directed Brown to issue multiple, smaller-denomination
checks, rather than a large, lump-sum payment.6 Such
conduct gives rise to inferences that Jinian intended to
conceal his transactions entirely from detection by Bricsnet
or structure the transactions in a manner that gave them the
appearance of regular or necessary business expenditures.
Jinian’s conduct further suggests that depositing multiple,
smaller-denomination checks insulated his conduct from
suspicion by or scrutiny from Mechanics Bank about large-
sum deposits. Thus, a rational jury could have concluded that
Jinian utilized the interstate wires to structure, perpetuate, and
conceal his fraudulent scheme.
In short, having considered the principles set forth in
Kann and Schmuck, we sustain Jinian’s wire fraud conviction.
B.
Next, Jinian, interpreting 18 U.S.C. § 1343 to require that
the government prove beyond a reasonable doubt that a
defendant intended to use an interstate wire communication
as part of a scheme to defraud, contends that the district court
erred by failing to instruct the jury that the interstate
6
For example, Jinian, on March 3, 2008, deposited two separate checks
in the amounts of $17,500 and $15,500, rather than one check for $33,000.
On April 4, 2008, Jinian deposited two separate checks in the amounts of
$14,000 and $9,000, rather than one check for $23,000.
20 UNITED STATES V . JINIAN
component of a wire must be reasonably likely or foreseeable.
The district court instructed the jury, in relevant part, as
follows:
With regard to each of these 14 counts, in
order for the defendant to be found guilty . . . ,
the government must prove each of the
following elements beyond a reasonable
doubt:
First, the defendant knowingly devised a
scheme or plan to defraud or a scheme or plan
for obtaining money by means of false or
fraudulent pretenses, representations, or
promises[.]
....
Third, the defendant acted with the intent
to defraud; that is, the intent to deceive or
cheat[.] And fourth, the defendant used or
caused to be used a wire communication in
interstate commerce to carry out or attempt to
carry out an essential part of the scheme.
....
A wire fraud involves the use of wire in
interstate commerce. An interstate wire
communication includes a wire transmission
so long as it goes across a state line.
A wiring is caused when one knows that a
wire will be used in the ordinary course of
UNITED STATES V . JINIAN 21
business or when one can reasonably foresee
such use. It does not matter whether the
information wired was itself false or deceptive
so long as the wire was used as part of the
scheme, nor does it matter whether the
scheme or plan was successful or that any
money was obtained.
An intent to defraud is an intent to deceive
or cheat.
These jury instructions fairly and adequately covered the
elements of wire fraud. See Pelisamen, 641 F.3d at 409;
Knapp, 120 F.3d at 930.
While there is a presumption in favor of finding an intent
requirement in each statutory element that criminalizes
otherwise innocent conduct, United States v. X-Citement
Video, Inc., 513 U.S. 64, 72 (1994), the Supreme Court has
distinguished between proscribed conduct generally and
conduct that falls within the scope of congressional
regulation. Specifically, it explained that a “requirement is
sufficient to confer jurisdiction on the federal courts for what
otherwise are state crimes precisely because it implicates
factors that are an appropriate subject for federal concern”:
The significance of labeling a statutory
requirement as “jurisdictional” is not that the
requirement is viewed as outside the scope of
the evil Congress intended to forestall, but
merely that the existence of the fact that
confers federal jurisdiction need not be one in
the mind of the actor at the time he perpetrates
the act made criminal by the federal statute.
22 UNITED STATES V . JINIAN
The question, then, is not whether the
requirement is jurisdictional, but whether it is
jurisdictional only.
United States v. Feola, 420 U.S. 671, 676 n.9 (1975). Here,
the “fact that confers federal jurisdiction,” id., in 18 U.S.C.
§ 1343 is the interstate nexus: use of an interstate
communication “is included in the statute merely as a ground
for federal jurisdiction . . . . If the wire employed is an
interstate wire the requirements for federal jurisdiction are
satisfied.” United States v. Blassingame, 427 F.2d 329, 330
(2d Cir. 1970). The interstate nexus is necessary, of course,
“because Congress’s power over intrastate activities is limited
by the Commerce Clause.” United States v. Lindemann,
85 F.3d 1232, 1241 (7th Cir. 1996). We therefore hold that
the interstate requirement in 18 U.S.C. § 1343 is jurisdictional
and not a substantive element of a wire fraud offense.
“Jurisdictional language need not contain the same
culpability requirement as other elements of the offense.”
United States v. Yermian, 468 U.S. 63, 68 (1984). In light of
our holding, the government is not required to prove under
18 U.S.C. § 1343 that the interstate nature of the wire was
reasonably likely or foreseeable, see Lindemann, 85 F.3d at
1241, because the statute “does not condition guilt upon
knowledge that interstate communication is used” and “use of
interstate communication is logically no part of the crime
itself,” Blassingame, 427 F.2d at 330; see also United States
v. Roselli, 432 F.2d 879, 891 (9th Cir. 1970) (explaining that
the purpose of statutes such as 18 U.S.C. § 1343 “argues
against a construction making a specific ‘anti-federal’ intent
an element of the offense”). As the Seventh Circuit
recognized,
UNITED STATES V . JINIAN 23
it has consistently been held that for statutes
in which Congress included an “interstate
nexus” for the purpose of establishing a basis
for its authority, the government must prove
that the defendant knew he was involved in
the wrongful conduct, but need not prove that
the defendant knew the “interstate nexus” of
his actions.
Lindemann, 85 F.3d at 1241 (emphasis added). It is therefore
“wholly irrelevant to any purpose of the statute that the
perpetrator of the fraud knows about the use of interstate
communication.” Blasingame, 427 F.2d at 330; accord
United States v. Bryant, 766 F.2d 370, 375 (8th Cir. 1985)
(explaining that 18 U.S.C. § 1343, “read literally, require[s]
only that the wire communication be interstate, not that
defendants know that it is to be interstate”).
A specific intent to defraud is the only mens rea
requirement under the wire fraud statute. See United States
v. Green, 745 F.2d 1205, 1207 (9th Cir. 1984) (construing the
mail fraud statute); accord United States v. Walker, 191 F.3d
326, 334 (2d Cir. 1999) (construing the mail fraud statute and
explaining that “[p]roof of fraudulent intent, or the specific
intent to harm or defraud the victims of the scheme, is an
essential component of the ‘scheme to defraud’ element”).
The Supreme Court’s decision in Pereira v. United States,
which establishes that a defendant “causes” an interstate wire
if he acts “with knowledge that the use of the [wire] will
follow in the ordinary course of business, or where such use
can reasonably be foreseen, even though not actually
intended,” 347 U.S. 1, 8–9 (1954), does not hold to the
contrary.
24 UNITED STATES V . JINIAN
Jinian’s reliance upon Fowler v. United States, 131 S. Ct.
2045 (2011), which he contends supports his position that the
government must prove he reasonably foresaw that an
interstate wire communication—rather than a wire
communication in general—would occur, is misplaced. At
issue in Fowler was the federal witness tampering statute,
which makes it a crime to kill—or attempt to kill—another
person “with intent to . . . prevent the communication by any
person to a law enforcement officer . . . of the United States
of information relating to the commission or possible
commission of a Federal offense . . . .” 18 U.S.C.
§ 1512(a)(1)(C) (2006). Focusing upon instances where a
defendant killed a person with an intent to prevent the victim
from communicating with law enforcement officers generally
but did not have federal law enforcement officers in mind, the
Supreme Court addressed how the government needed to
prove a federal nexus under the statute in order “to show that
the defendant more particularly intended to prevent
communication with federal officers as well.” Fowler, 131
S. Ct. at 2048. Since it could not construe the witness
tampering statute “as intending to excuse the Government
from proving something about the hypothetical
communication with federal officers,” id. at 2051, the
Supreme Court held that the government was required to
show there was a reasonable likelihood that a relevant
communication would have been made to a federal officer,7
id. at 2048. In other words, killing a victim with an intent to
prevent communication with law enforcement officers
7
The government, however, need not show that the defendant intended
to prevent a communication from reaching a law enforcement officer
whom the defendant knew to be a federal officer because 18 U.S.C.
§ 1512(g)(2) provides that “no state of mind need be proved” with respect
to the victim’s status as a federal officer. Fowler, 131 S. Ct. at 2049.
UNITED STATES V . JINIAN 25
generally includes “an intent to prevent communications with
federal law enforcement officers only if it is reasonably likely
under the circumstances that . . . at least one of the relevant
communications would have been made to a federal officer.”8
Id. at 2052.
The Fowler Court adopted a foreseeability standard
because the witness tampering statute addresses hypothetical
communications. See 131 S. Ct. at 2049 (“Witness tampering
may prove more serious (and more effective) when the crime
takes place before the victim has engaged in any
communication at all with law enforcement officers—at a
time when the precise communication and nature of the
officer who may receive it are not yet known.”). The wire
fraud statute, by contrast, requires an actual wire
communication. Moreover, the Fowler Court’s enunciation
of a “reasonable likelihood” standard was directed toward the
“broad indefinite intent,” id. at 2050, set forth in 18 U.S.C.
§1512(a)(1)(C) that requires the likelihood of communication
to a federal officer to be “more than remote, outlandish, or
simply hypothetical,” id. at 2052. No such broad, indefinite
intent exists in the wire fraud statute, which requires an intent
to defraud, see Bohonus, 628 F.2d at 1172, not the intent to
utilize an interstate wire communication, 18 U.S.C. § 1343.
Fowler, therefore, is wholly inapposite.
We reject Jinian’s arguments that his conviction should be
overturned on the basis that there was insufficient evidence
8
The “reasonable likelihood” standard the Fowler Court adopted
reflected the shortcomings of a “mere possibility” standard that, it
reasoned, would enable the government “to show little more than the
possible commission of a federal offense.” 131 S. Ct. at 2051 (emphasis
added).
26 UNITED STATES V . JINIAN
to prove his use of an interstate wire communication was
reasonably foreseeable and the jury should have been
instructed to find the same. No mens rea requirement exists
with regard to the jurisdictional, interstate nexus of Jinian’s
actions under 18 U.S.C. § 1343, which requires only that
Jinian used—or caused the use of—interstate wires in
furtherance of his scheme to defraud Bricsnet. The
government proved each element of wire fraud by introducing
sufficient evidence for a reasonable jury to conclude that (1)
Jinian devised a scheme with the specific intent to defraud
Bricsnet, (2) it was reasonably foreseeable to Jinian that wire
communications between Mechanics Bank and Silicon Valley
Bank would be made in furtherance of his scheme, and (3)
interstate wire communications actually occurred in
furtherance of Jinian’s scheme. Accordingly, the district
court properly instructed the jury and did not abuse its
discretion by refusing to give Jinian’s proposed jury
instruction.
C.
Finally, Jinian argues that the district court erred by
denying his motion for judgment of acquittal because the wire
fraud statute, as applied to his case, constitutes an improper
exercise of congressional authority under the Necessary and
Proper Clause and violates the Tenth Amendment. We reject
these constitutional challenges.
The Necessary and Proper Clause “grants Congress broad
authority to enact federal legislation.” United States v.
Comstock, 130 S. Ct. 1949, 1956 (2010). When determining
whether the Necessary and Proper Clause grants Congress the
legislative authority to enact a federal statute, courts examine
whether “the statute constitutes a means that is rationally
UNITED STATES V . JINIAN 27
related to the implementation of a constitutionally
enumerated power.” Id.The wire fraud statute falls “within the extensive reach of
the Commerce Clause,” United States v. Hook, 195 F.3d 299,
310 (7th Cir. 1999), under which Congress may (1) “regulate
the use of the channels of interstate commerce,” (2) “regulate
and protect the instrumentalities of interstate commerce, or
persons or things in interstate commerce, even though the
threat may come only from intrastate activities,” and (3)
“regulate those activities having a substantial relation to
interstate commerce, i.e., those activities that substantially
affect interstate commerce,” United States v. Lopez, 514 U.S.
549, 558–59 (1995) (citation omitted); accord Gonzales v.
Raich, 545 U.S. 1, 22 (2005) (recognizing that it is “of no
moment” that Congress’s valid regulation of interstate
activity “ensnares some purely intrastate activity”). Wires are
channels or instrumentalities of interstate commerce. See
Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241,
271 (1964) (“The facilities and instrumentalities used to carry
on . . . commerce, such as railroads, truck lines, ships, rivers,
and even highways are also subject to congressional
regulation . . . .”); United States v. Carnes, 309 F.3d 950, 954
(6th Cir. 2002) (recognizing that telecommunications are
channels and instrumentalities of interstate commerce); see
also United States v. Wright, 625 F.3d 583, 594 (9th Cir.
2010) (“[O]ur precedent indicates that criminal statutes
punishing the transmission of the relevant material ‘in
interstate or foreign commerce’ require the material itself to
cross state lines.”). Accordingly, 18 U.S.C. § 1343 “is a valid
extension of congressional power” under the Commerce
Clause. Hook, 195 F.3d at 310.
28 UNITED STATES V . JINIAN
Since Congress enacted 18 U.S.C. § 1343 based upon a
constitutionally enumerated power, analysis of the statute
under the Necessary and Proper Clause is inappropriate.
Gonzales, 545 U.S. at 39 (explaining that the Necessary and
Proper Clause “empowers Congress to enact laws in
effectuation of its enumerated powers that are not within its
authority to enact in isolation” (emphasis added) (citing
McCulloch v. Maryland, 17 U.S. (4 Wheat.) 316, 421–22
(1819))). Furthermore, because 18 U.S.C. § 1343 is a valid
exercise of powers delegated to Congress by the Commerce
Clause, Jinian’s Tenth Amendment challenge fails. United
States v. Jones, 231 F.3d 508, 515 (9th Cir. 2000) (“We have
held that if Congress acts under one of its enumerated
powers, there can be no violation of the Tenth Amendment.”).
IV. CONCLUSION
We conclude that Jinian’s fraudulent scheme closely
resembles the fraud perpetrated in Schmuck, rather than the
conduct at issue in Kann, and hold that the interstate
requirement in 18 U.S.C. § 1343 is jurisdictional and not a
substantive element of the wire fraud offense. We further
conclude that Jinian’s constitutional challenges to the wire
fraud statute are without merit. Accordingly, we affirm
Jinian’s conviction and sentence.
AFFIRMED.