United States v. Chao Fan Xu , 706 F.3d 965 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA , No. 09-10189
Plaintiff-Appellee,
D.C. No.
v. 2:02-CR-00674-
PMP-LRL-1
CHAO FAN XU ,
Defendant-Appellant.
UNITED STATES OF AMERICA , No. 09-10193
Plaintiff-Appellee,
D.C. No.
v. 2:02-CR-00674-
PMP-LRL-4
YING YI YU ,
Defendant-Appellant.
UNITED STATES OF AMERICA , No. 09-10201
Plaintiff-Appellee,
D.C. No.
v. 2:02-CR-00674-
PMP-LRL-2
GUO JUN XU ,
Defendant-Appellant.
2 UNITED STATES V . XU
UNITED STATES OF AMERICA , No. 09-10202
Plaintiff-Appellee,
D.C. No.
v. 2:02-CR-00674-
PMP-LRL-3
WAN FANG KUANG ,
Defendant-Appellant.
OPINION
Appeal from the United States District Court
for the District of Nevada
Philip M. Pro, District Judge, Presiding
Argued and Submitted
April 17, 2012—San Francisco, California
Filed January 3, 2013
Before: Alfred T. Goodwin, Stephen Reinhardt,
and Mary H. Murguia, Circuit Judges.
Opinion by Judge Goodwin
UNITED STATES V . XU 3
SUMMARY*
Criminal Law
The panel affirmed the convictions and vacated the
sentences of four Chinese nationals who participated in a
scheme to steal funds from the Bank of China and to escape
prosecution and retain the proceeds by illegal transfers of
funds and by immigration fraud.
The panel held that the defendants’ RICO conspiracy
convictions are not the result of an improper extraterritorial
application of 18 U.S.C. § 1962(d) because the defendants’
criminal enterprise involved both bank fraud and immigration
fraud centered on stealing money from the Bank of China and
traveling freely with the stolen money in the United States.
Explaining that conspiracy does not require completion of
the substantive crime, the panel held that there was sufficient
evidence to support the defendants’ money laundering
conspiracy convictions under 18 U.S.C. § 1956(h), and that
18 U.S.C. § 1957(d)’s jurisdictional requirement is met
because the transactions took place in the United States. The
panel likewise held that there was sufficient evidence to
support the defendants’ convictions for conspiracy to
transport stolen money under 18 U.S.C. § 2314.
The panel held that the district court did not plainly err in
its treatment of videotaped testimony at trial, that the
defendants’ Confrontation Clause rights were not violated,
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
4 UNITED STATES V . XU
and that the district court did not abuse its discretion in
limiting the testimony of the defendants’ expert witnesses.
The panel rejected as meritless the defendants’ jury
instruction challenges related to burden shifting, Chinese law,
fatal variance/constructive amendment, theory of defense,
aiding and abetting, the definition of “on or about,” and the
incomprehensibility of the numerous Chinese names
presented to the jury.
The panel held that the district court did not violate the Ex
Post Facto Clause by applying the 2007 Sentencing
Guidelines to a conspiracy that did not end until the
defendants’ 2004 arrest.
The panel remanded for resentencing under U.S.S.G.
§ 2S1.1(a)(2) because the district court improperly relied on
the defendants’ foreign conduct to meet the requirements of
U.S.S.G. § 2S1.1(a)(1)(A). The panel rejected as meritless an
objection to an abuse of trust enhancement under U.S.S.G.
§ 3B1.3, and deemed waived an objection to an enhancement
for relocation to avoid law enforcement under U.S.S.G.
§ 2B1.1(b)(9)(A).
Because the district court did not provide sufficient
grounds to support the $482 million restitution order, the
panel remanded for reconsideration regarding its legal and
factual basis.
UNITED STATES V . XU 5
COUNSEL
Mario D. Valencia, Henderson, Nevada, for Defendant-
Appellant Chao Fan Xu; Marc Picker, Reno Nevada, for
Defendant-Appellant Guo Jun Xu; Loren Graham, Stateline,
Nevada, for Defendant-Appellant Ying Yi Yu; Chad A.
Bowers, Las Vegas, Nevada, for Defendant-Appellant Wan
Fang Kuang.
Krista Tongring, United States Department of Justice,
Organized Crime and Gang Section, Washington, D.C.;
Ronald L. Cheng, United States Department of Justice,
Organized Crime and Gang Section, Los Angeles, California,
for Plaintiff-Appellee.
OPINION
GOODWIN, Circuit Judge:
Four Chinese nationals appeal their convictions and
sentences for federal crimes that they committed as part of a
scheme to steal funds from the Bank of China, where two of
the defendants were high-level employees, and to escape
prosecution and retain the proceeds by illegal transfers of
funds and by immigration fraud. We affirm the convictions,
and vacate the sentences and remand for resentencing.
Defendants Xu Chaofan (“Chaofan”), Xu Guojun
(“Guojun”), Yu Ying Yi (“Yingyi”), and Kuang Wan Fang
6 UNITED STATES V . XU
(“Wanfang”)1 (collectively, “Defendants”), challenge the
application of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) to extraterritorial conduct which
occurred in China, as well as various rulings on evidence and
defense motions. They also challenge their sentences.
The scheme involved diverting bank funds from the Bank
of China to a holding company in Hong Kong. Defendants
were charged with manipulating auditing controls to conceal
their diversion of bank funds, and using the funds to speculate
in foreign currency, to make fraudulent loans, to purchase
real estate in Asia and North America, and to finance
gambling trips to Las Vegas and other casino venues. As an
essential part of the scheme, each of the Defendants entered
into a fraudulent marriage with a spouse who held valid
United States immigration status. After the Bank of China
discovered their scheme, Defendants fled to the United States
using their falsified immigration documents. Defendants
were arrested and brought to trial in the United States District
Court for the District of Nevada.
We have jurisdiction under 28 U.S.C. § 1291 and
18 U.S.C. § 3742.
I. Facts and Procedural Background
Guojun and Yingyi were legally married in China in
1985. Chaofan and Wanfang were legally married in China
in 1992. Chaofan was employed by the Bank of China from
1982 through 2001. The Bank of China is a state-owned
1
Chinese custom puts a person’s surname first and given name last. W e
refer to Defendants by their first name to avoid confusion with certain
witnesses who share a surname with a defendant.
UNITED STATES V . XU 7
bank that is headquartered in Beijing. It operates throughout
China through a series of provincial branches, second-level
branches, and sub-branches. In 1992, Chaofan was promoted
to president/general manager of the Kaiping sub-branch in
Guangdong province, and he served in that position until
August 1998. Guojun was hired in 1994 as head of
accounting at the Kaiping sub-branch. In August 1998,
Chaofan was promoted, and unindicted co-conspirator Yu
Zhendong (“Zhendong”) became president/general manager
of the Kaiping sub-branch. When Zhendong was promoted
in May 2000, Guojun took over at the Kaiping sub-branch
and served as president/general manager until the Bank of
China discovered the fraud in October 2001.
During their management of the Kaiping sub-branch, the
three managers engaged in three types of fraud: (1) foreign
exchange speculation, resulting in a loss to the Bank of China
of approximately $147 million; (2) “out-of-book” loans,
which are loans that were not properly recorded in the bank’s
accounting system, resulting in a loss of approximately $181
million; and (3) false loans, in which loans totaling $90-95
million were entered into the bank’s accounts, but the
proceeds from the loans were diverted into a Hong Kong
conduit company named Ever Joint.
In 1995, the Bank of China conducted a foreign exchange
audit including the Kaiping sub-branch. To avoid discovery
of the foreign currency exchange losses, Chaofan, Guojun,
and Zhendong directed Kaiping sub-branch employees to
falsify bank records. These efforts succeeded. The three
managers were able to pass subsequent audits by the Bank of
China in the same way.
8 UNITED STATES V . XU
During the course of the fund diversions, Chaofan,
Guojun, Wanfang, and Yingyi entered into false marriages
with spouses who held valid United States immigration
status. The purpose of the false marriages was to gain
residency status in the United States to avoid Chinese Law
enforcement.
During the time alleged in the indictment, Chaofan,
Guojun, Wanfang, and Yingyi made numerous gambling trips
to Macao, Australia, Malaysia, and the Philippines. These
trips were financed with wire transfers totaling more than $80
million from Ever Joint accounts. Using counterfeit visas and
passports, the group also traveled to Las Vegas in 2000 and
2001, where they stayed at casino hotels and spent substantial
sums playing baccarat. The gambling money was arranged
through intermediaries who used cashier’s checks drawn from
Ever Joint accounts to set up credit lines at the casinos. The
Las Vegas gambling money included wire transfers totaling
over $2 million from Ever Joint accounts that resulted in
checks being issued by the casinos to the intermediaries to
facilitate the return of the funds to Defendants for their
personal use.
On October 12, 2001, due to a change in accounting
procedures, the Bank of China discovered a $482 million
discrepancy in bank records that was attributed to the Kaiping
sub-branch. Chaofan and Guojun fled to Hong Kong. Using
their fraudulent passports and visas, they flew to Vancouver,
British Columbia, and continued on to Las Vegas. Chaofan
and Guojun then discovered that Chinese authorities had
frozen the $8 million that they had transferred to Caesars
Palace casino for their personal use. Wanfang and Yingyi
fled separately to Vancouver and then to the United States
UNITED STATES V . XU 9
using their fraudulently obtained immigration status. The
United States does not have an extradition treaty with China.
Zhendong was arrested in Los Angeles on December 19,
2002. Zhendong pleaded guilty to federal charges and agreed
to return to China. He cooperated with the FBI in the
investigation and prosecution of Defendants. Id. Guojun and
Yingyi were arrested in Wichita, Kansas, on September 22,
2004. Chaofan and Wanfang were arrested in Edmond,
Oklahoma, on October 6, 2004.
In the second superseding indictment, Defendants were
charged with RICO conspiracy in violation of 18 U.S.C.
§ 1962(d) (count one), money laundering conspiracy in
violation of 18 U.S.C. § 1956(h) (count two), conspiracy to
transport stolen money in violation of 18 U.S.C. § 371 (count
three), use of a fraudulently obtained visa in violation of
18 U.S.C. §§ 1546(a) & 2 (counts four through nine), and use
of a fraudulent passport in violation of 18 U.S.C. §§ 1542 &
2 (counts ten through fifteen).
From February 2005 through early 2008, the parties were
involved in lengthy pretrial motions and discovery, including
two rounds of videotaped depositions of witnesses who either
lived in or were incarcerated in China. The government,
together with Defendants and their counsel, conducted the
depositions from Las Vegas, Nevada, via video link with the
witnesses in China. Defendants cross-examined each
witness. Defendants waived their right to be present in China
to confront the witnesses face to face.
After a 38-day trial (from June 10, 2008, to August 29,
2008), the jury convicted Defendants on all counts. The
district court sentenced Chaofan to 25 years in prison, Guojun
10 UNITED STATES V . XU
to 22 years, and Wangfan and Yingyi to 8 years each. The
court also sentenced each defendant to three years of
supervised release, and entered restitution orders totaling
$482 million. Defendants timely appealed to this court. The
appeals were assigned to this panel and consolidated.
We granted the government’s motion to expand the record
for this appeal to include 31 DVDs containing the complete,
unedited video depositions for all witnesses who appeared at
trial.
II. Defendants’ Count One Rico Conspiracy Convictions
A. Count One Activities
Viewed as a whole, the activities subject to count one
encompass a unified scheme, wherein the Defendants: stole
as much money as possible from the Bank of China;
transferred the stolen funds out of China; escaped, through
immigration fraud, to a safe harbor in the United States; and
then spent the funds in, among other places, Las Vegas
casinos. Defendants were thus engaged in an international
enterprise, using many of the tools of the global economy.
We therefore consider RICO’s application in a multinational
context.
B. Extraterritorial Application of Rico
Defendants argue that their count one convictions are
invalid because the charged conspiracy was extraterritorial
and outside the reach of RICO. We review de novo a
challenge to the extraterritorial application of criminal
statutes. See Vasquez-Velasco, 15 F.3d 833, 838–40 (9th
Cir. 1994); see also United States v. Felix-Gutierrez,
UNITED STATES V . XU 11
940 F.2d 1200, 1203–04 (9th Cir. 1991); Chua Han Mow v.
United States, 730 F.2d 1308, 1311 (9th Cir. 1984).
In Morrison v. National Australia Bank Ltd., 130 S. Ct.
2869, 2875 (2010), the Supreme Court confronted the
question whether § 10(b) of the Securities Exchange Act
applies extraterritorially. The Court began its analysis under
the premise that “[w]hen a statute gives no clear indication of
an extraterritorial application, it has none.” Id. at 2878. The
Court then concluded that, because § 10(b) contained no
“affirmative indication” of extraterritorial effect, it could not
be applied extraterritorially. Id. at 2883.
In the wake of Morrison, this circuit has not considered
whether RICO applies extraterritorially. We have previously
held, however, that RICO is silent as to its extraterritorial
application. See Poulous v. Caesars World, Inc., 379 F.3d
654, 663 (9th Cir. 2004). Other courts that have addressed
the issue have uniformly held that RICO does not apply
extraterritorially. See generally Norex Petroleum Ltd. v.
Access Indus., Inc., 631 F.3d 29, 33 (2d Cir. 2010);
European Cmty. v. RJR Nabisco, Inc., 2011 WL 843957,
at *5 (E.D.N.Y Mar. 8, 2011); In re Toyota Motor Corp.,
785 F. Supp. 2d 883, 913 (C.D. Cal. 2011); Sorota v. Sosa,
842 F. Supp. 2d 1345, 1349 (S.D. Fla. 2012). Although those
cases addressed the civil rather than the criminal RICO
statute, they are faithful to Morrison’s rationale: “Rather
than guess anew in each case, this Court applies the
presumption [against extraterritorial application] in all cases,
preserving a stable background against which Congress can
legislate with predictable effects.” Morrison, 130 S. Ct. at
2881. Therefore, we begin the present analysis with a
presumption that RICO does not apply extraterritorially in a
civil or criminal context.
12 UNITED STATES V . XU
Defendants argue that because RICO does not apply
extraterritorially, the government cannot apply the statute in
this case because the conspiracy took place in China and
Hong Kong, not the United States. Defendants define the
enterprise as having two parts. Indeed, Defendants were
charged here with membership in a criminal enterprise that
involved not only embezzlement against the Bank of China
that occurred in China and Hong Kong (part one) but also
immigration fraud to escape to the United States with their
ill-gotten gains (part two). Accordingly, we must determine
whether under the circumstances of this case RICO can be
lawfully applied to any, or all, of Defendants’
conduct—foreign or domestic. See id. at 2884 (the
“presumption here (as often) is not self-evidently dispositive,
but its application requires further analysis.”).
C. Determining RICO’s Focus
Morrison frames the extraterritorial inquiry in terms of
“the ‘focus’ of congressional concern” in enacting the statute.
Id. The Morrison Court further defined the concept of focus
in terms of the “objects of the statute’s solicitude” and “th[e]
transactions that the statute seeks to regulate.” Id. (internal
quotation marks omitted).
The inquiry into RICO’s focus is far from clear-cut. See
In re Toyota, 785 F. Supp. 2d at 914 (“It is unclear how
Morrison’s logic, which evaluates the ‘focus’ of the relevant
statute, precisely translates to RICO.”). The Second Circuit
side-stepped the issue by summarily declaring in Norex that
the defendants’ “slim contacts with the United States . . . are
insufficient to support extraterritorial application.” Norex,
631 F.3d at 33 (2d Cir. 2010). Given Morrison’s detailed
UNITED STATES V . XU 13
analysis regarding the focus of the Exchange Act, however,
our best path forward is to determine RICO’s focus.
Courts that have addressed the issue fall essentially into
two camps. One camp asserts that RICO’s focus is on the
enterprise. See, e.g., Cedeno v. Intech Group, Inc.,
733 F. Supp. 2d 471, 473 (S.D.N.Y. 2010); European Cmty.,
2011 WL 843957, at *5; Farm Credit Leasing Servs. Corp. v.
Krones, Inc. (In re Le-Nature’s, Inc.), 2011 WL 2112533,
at *3 n.7 (W.D. Pa. May 26, 2011) (adopting the enterprise-
focused model but acknowledging that “RICO may have
more than one ‘focus’—including, for example, the pattern of
racketeering activity required by the statute.”); Mitsui O.S.K.
Lines, Ltd. v. Seamaster Logistics, Inc., 2012 WL 1657108,
at *4 (N.D. Cal. May 10, 2012); In Re Toyota,
785 F. Supp. 2d at 914; United States v. To, 144 F.3d 737,
744 (11th Cir. 1998) (a pre-Morrison case); United States v.
Hoyle, 122 F.3d 48, 51 (D.C. Cir. 1997) (a pre-Morrison
case).
The other camp asserts that RICO’s focus is on the pattern
of racketeering activity. See, e.g., Agency Holding v. Malley-
Duff, 483 U.S. 143, 154 (1987) (“the heart of any RICO
complaint is the allegation of a pattern of racketeering.”)
(emphasis in original omitted); United States v. Philip Morris
USA, Inc., 783 F. Supp. 2d 23, 29 (D.D.C. 2011) (addressing
the possibility that domestic conduct could provide the basis
for a foreign corporation’s RICO liability); CGC Holding Co.
v. Hutchens, 824 F. Supp. 2d 1193, 1209 (D. Colo. 2011)
(citing Philip Morris, 783 F. Supp. 2d at 29); Chevron Corp.
v. Donziger, 2012 WL 1711521, at *7–8 (S.D.N.Y. May 14,
2012) (quoting CGC Holding Co., 824 F. Supp. 2d at
1209–10); In re Le-Nature’s Inc., 2011 WL 2112533, at *3
n.7; accord Note, R. Davis Mello, Life After Morrison:
14 UNITED STATES V . XU
Extraterritoriality and RICO, 44 VAND . J. TRANSNAT ’L L.
1385, 1411 (2011) (arguing that courts should “apply RICO
in any case where a plaintiff alleges the commission of
enough predicate acts in the United States within the statutory
time period to establish a ‘pattern of racketeering activity,’
even if the ‘enterprise’ is a foreign enterprise or the scheme
involves the commission of predicate acts in a foreign
jurisdiction.”).
We address both models in turn.
1. Focus on the Enterprise
Two district courts in the Second Circuit have concluded
that the focus of RICO is on the enterprise—specifically,
domestic enterprises.
In Cedeno, 733 F. Supp. 2d at 472, the district court
addressed extraterritorial application of RICO in a civil action
seeking damages arising out of a wide-ranging money
laundering scheme through which Venezuelan nationals used
United States banks as conduits for fraudulently obtained
funds. The scheme’s contacts with the United States were
limited to the movement of currency into and out of New
York bank accounts. Id. After determining that the focus of
RICO is on “the enterprise as the recipient of, or cover for, a
pattern of racketeering activity,” the court held that “RICO
does not apply where . . . the alleged enterprise and the
impact of the predicate activity upon it are entirely foreign.”
Id. at 474.
In European Community, 2011 WL 843957, at *5, the
district court, upon examining the elements of RICO,
concluded that “the statute does not punish the predicate acts
UNITED STATES V . XU 15
of racketeering activity—indeed, each predicate act is, itself,
a separate crime—but only racketeering activity in
connection with an enterprise.” Thus, the “object of
[RICO’s] solicitude, and the focus of the statute” is the
enterprise. Id. (internal quotation marks omitted). The court
concluded that a RICO enterprise “must be a domestic
enterprise.” Id.
Determining the geographic location of an
enterprise—whether foreign or domestic—is a difficult
inquiry, however. See Chevron, 2012 WL 1711521, at *6
(“the emphasis on whether the RICO enterprise is domestic
or foreign simply begs the question of how to determine the
enterprise’s character.”). Two district courts have addressed
the issue of determining geographic location by utilizing the
“nerve center” test. See European Cmty., 2011 WL 843957,
at *5–6; Mitsui O.S.K. Lines, 2012 WL 1657108, at *4–5.
The nerve center test originated as “the vehicle of choice” in
determining the principle place of business for a corporation
when analyzing a federal court’s diversity jurisdiction. See
European Cmty., 2011 WL 843957, at *5 (internal quotation
marks omitted) (citing Hertz Corp. v. Friend, 130 S. Ct. 1181,
1192 (2010)). The nerve center test focuses on where the
enterprise’s decisions are made, as opposed to carried out,
and thus centers on the “brains” of an enterprise, not the
“brawn”. European Cmty., 2011 WL 843957, at *6.
European Community and Mitsui O.S.K. Lines entailed a
fairly straightforward application of the nerve center test that
resulted in different conclusions regarding extraterritoriality.
The European Community court concluded that a money-
laundering scheme that originated in South America and
Europe “issued from those criminal organizations located in
South America and Russia—not . . . in the United States,”
16 UNITED STATES V . XU
and, consequently, the enterprise was extraterritorial. 2011
WL 843957, at *2–3, *7. Mitsui O.S.K. Lines involved a
fraudulent shipping scheme conceived by United States
corporations but executed primarily overseas. 2012 WL
1657108, at *1, *7. In that case, the decision making process
of the criminal enterprise “occurred substantially within the
territory of the United States,” and, thus, the enterprise was
considered domestic. Id. at *7.
Both courts emphasized the administrative ease,
familiarity, and consistency of the nerve center test.
European Cmty., 2011 WL 84397, at *6; Mitsui O.S.K. Lines,
2012 WL 1657108, at *5. Both courts realized, however, that
application of the nerve center test could lead to “artificially
simplified results,” Mitsui O.S.K. Lines, 2012 WL 1657108,
at *4, and that “hard cases” will arise that do not “in all
instances, automatically generate a result,” European Cmty.,
2011 WL 84397, at *6. Indeed, as the Supreme Court has
noted, “it is a rare case of prohibited extraterritorial
application that lacks all contact with the territory of the
United States.” Morrison, 130 S. Ct. at 2884 (emphasis in
original).
The case before us presents just such a hard case that
illuminates the inadequacy of the nerve center test and the
enterprise-based model upon which it relies. As the Chevron
court pointed out, the nerve center test could “produce absurd
results” when applied to a hypothetical criminal prosecution
of two separate corporate entities—one foreign and one
domestic—both engaged in the same pattern of criminal
activity in the territorial United States. See Chevron, 2012
WL 1711521, at *6. The court labeled “risible” the notion
that the domestic corporation would be culpable whereas the
foreign corporation would be immune from prosecution
UNITED STATES V . XU 17
simply because its ringleaders had the forethought to
incorporate overseas. Id. This is sound reasoning.
The geographic location of an enterprise may be relevant
under certain factual scenarios, like the criminal schemes at
issue in European Community and Mitsui O.S.K. Lines. But
in a case like this one, where the “brains” of the operation
were located overseas but the enterprise violated United
States immigration law in the United States, “there is no
necessary or . . . even probable connection between where the
RICO enterprise makes its decisions and whether the
application of RICO to the racketeering activity at issue . . .
was the sort of activity with which Congress would have been
concerned.” Chevron, 2012 WL 1711521, at *7. Moreover,
while administrative simplicity may be “a major virtue in a
jurisdictional statute.” Hertz , 130 S. Ct. at 1193, a statute’s
extraterritorial reach is a merits question, not a question of
subject-matter jurisdiction. See Morrison, 130 S. Ct. at 2877
(“to ask what conduct [a statute] reaches is to ask what
conduct [a statute] prohibits, which is a merits question.”).
Therefore, an inquiry into the application of RICO to
Defendants’ conduct is best conducted by focusing on the
pattern of Defendants’ racketeering activity as opposed to the
geographic location of Defendants’ enterprise.
2. Focus on the Pattern of Racketeering Activity
“[T]he heart of any RICO complaint is the allegation of
a pattern of racketeering.” Agency Holding, 483 U.S. at 154
(emphasis in original omitted); see also H.J. Inc. v. Nw. Bell
Tel. Co., 492 U.S. 229, 236 (1989) (describing “RICO’s key
requirement of a pattern of racketeering”). As noted, several
post-Morrison courts have determined that RICO’s focus is
on the pattern of racketeering activity for purposes of
18 UNITED STATES V . XU
analyzing extraterritorial application of the statute. Philip
Morris, Inc., 783 F. Supp. 2d at 29; CGC Holding Co., 824 F.
Supp. 2d at 1209; Chevron, 2012 WL 1711521, at *7–8.
RICO’s statutory language and legislative history support
the notion that RICO’s focus is on the pattern of racketeering
activity. For example, 18 U.S.C. § 1962(c), which forms the
basis of Defendants’ count one convictions, prohibits the
conduct of a criminal enterprise’s affairs “through a pattern
of racketeering activity.” Other sections prohibit the use of
funds derived from a pattern of racketeering activity in the
investment in or acquisition of an enterprise involved in
interstate commerce. Id. §§ 1962(a)–(b). Furthermore,
RICO’s legislative history shows that the statute was enacted
to promote “the eradication of organized crime in the United
States by strengthening the legal tools in the evidence-
gathering process, by establishing new penal prohibitions,
and by providing enhanced sanctions and new remedies to
deal with the unlawful activities of those engaged in
organized crime.” Organized Crime Control Act of 1970,
Statement of Findings and Purpose, Pub. L. No. 91-452, 84
Stat. 922 (1970) reprinted in 1970 U.S. Code Cong. &
Admin. News 1073 (emphasis added).
Given this express legislative intent to punish patterns of
organized criminal activity in the United States, it is highly
unlikely that Congress was unconcerned with the actions of
foreign enterprises where those actions violated the laws of
this country while the defendants were in this country. See
Chevron, 2012 WL 1711521, at *6. Thus, to determine
whether Defendants’ count one convictions are within
RICO’s ambit, we look at the pattern of Defendants’
racketeering activity taken as a whole.
UNITED STATES V . XU 19
3. Application to the Case at Hand
The second superseding indictment describes two parts of
the enterprise: (1) “Enriching the members and associates . . .
through among other things, fraud, money laundering, and
foreign and interstate transfer of funds,” and (2) “Enabling
the members and associates . . . through marriage, passport,
and visa fraud, to travel, among other countries . . .
[including] the United States, and to flee China and Hong
Kong in the event that the criminal activity of the Enterprise
was discovered.” One part consisted of racketeering
activities conducted predominantly in China, and one part
consisted of racketeering activities in the United States.
The first part centers on the Bank of China fraud and, to
the extent it was predicated on extraterritorial activity, it is
beyond the reach of RICO even if the bank fraud resulted in
some of the money reaching the United States. See Cedeno,
733 F. Supp. 2d at 472 (“the scheme’s contacts with the
United States . . . were limited to the movement of funds into
and out of U.S.-based bank accounts.”); Norex, 631 F.3d at 33
(“The slim contacts with the United States . . . are insufficient
to support extraterritorial application of the RICO statute.”).
The second part, however, bound the Defendants’
enterprise to the territorial United States. This second part
involved racketeering activities conducted within the United
States including the commission of RICO predicate crimes
based on violations of United States immigration laws, as
codified in 18 U.S.C. §§ 1542, 1546(a). Specifically,
Defendants entered the United States using fraudulent visas
and passports. Defendants traveled within the United States
to execute documents in furtherance of their immigration
fraud and to open bank accounts. Finally, Defendants were
20 UNITED STATES V . XU
arrested in Kansas and Oklahoma in possession of these
fraudulent immigration documents.
By conspiring to enter and hide out in the United States
with the fruit of their ill-gotten gains, Defendants engaged in
an enterprise that had the implicit goal to breach United
States immigration law in furtherance of the overall goal of
the enterprise. The dual parts of Defendants’ enterprise were
necessarily conjoined in pursuit of that goal—i.e., to steal
large sums of money from the Bank of China and to get away
with it in the United States. Defendants intended to use the
immigration fraud to consummate the purpose of the
enterprise: to acquire the money and safely enjoy it the
United States, beyond the reach of Chinese law. Without the
immigration fraud, the bank fraud would have been a
dangerous failure. See, e.g., CGC Holding Co.,
824 F. Supp. 2d at 1210 (“In the present case, the conduct of
the enterprise within the United States was a key to its
success.”).
In sum, Defendants’ violations of United States
immigration laws fall squarely within RICO’s definition of
racketeering activity. See 18 U.S.C. § 1961(1)(B) (listing
18 U.S.C. §§ 1542, 1546 as RICO predicates); cf. Rocha v.
United States, 288 F.2d 545, 548 (9th Cir. 1961) (sham
marriages in violation of § 1542 are “crimes directed toward
the sovereign itself [and] may be tried within the jurisdiction
even though committed without”) (internal quotation marks
omitted). Defendants’ pattern of racketeering activity may
have been conceived and planned overseas, but it was
executed and perpetuated in the United States. Under
Morrison, we look “not upon the place where the deception
originated,” but instead upon the connection of the challenged
conduct to the proscription in the statute. 130 S. Ct. at 2884.
UNITED STATES V . XU 21
Having determined that RICO’s focus is on the pattern of
racketeering activity, we conclude that Defendants’ criminal
plan, which included violation of United States immigration
laws while the Defendants were in the United States, falls
within the ambit of the statute.
We affirm Defendants’ count one convictions because the
convictions are not based on an improper extraterritorial
application of RICO, but rather are based on a pattern of
racketeering activities that were conducted by the Defendants
in the territorial United States.2
III. Defendants’ Count Two Convictions for Money
Laundering Conspiracy
Defendants challenge the sufficiency of the evidence on
their count two convictions for conspiracy in violation of
18 U.S.C. § 1956(h). We review sufficiency of the evidence
challenges de novo to determine whether, “viewing the
evidence in the light most favorable to the prosecution, any
rational trier of fact could have found the essential elements
of the crime beyond a reasonable doubt.” Jackson v.
Virginia, 443 U.S. 307, 319 (1979) (emphasis in original
omitted); accord United States v. Nevils, 598 F.3d 1158,
1163–64 (9th Cir. 2010) (en banc).
2
It was constitutional error for the jury to be instructed on the first part
of the second superseding indictment, to the extent that this part of the
indictment was predicated on extraterritorial activity that is not a basis for
RICO liability. See Hedgpeth v. Pulido, 555 U.S. 57, 60 (2008).
However, the error was harmless beyond a reasonable doubt as the
“evidence was overwhelming” as to the second part of the second
superseding indictment, and the jury would have convicted on the basis of
that evidence alone. United States v. Green, 592 F.3d 1057, 1071 (9th Cir.
2010).
22 UNITED STATES V . XU
Conviction under § 1956(h) with the object of the
conspiracy being a violation of 18 U.S.C. § 1957(a) requires
proof that Defendants agreed to engage in a monetary
transaction over $10,000 derived from a criminal act. See
18 U.S.C. §§ 1956(h), 1957(a); United States v. Alghazouli,
517 F.3d 1179, 1190 (9th Cir. 2008). Defendants allege that
the government introduced no evidence connecting their
monetary transactions to any theft or fraud. Defendants also
raise a jurisdictional challenge to the application of § 1957(a).
Defendants argue that the government cannot trace the
money used by the Defendants in the United States to any
money obtained fraudulently from the Bank of China, and
that this inability to trace is fatal to their count two
convictions. Generally, a conviction under § 1957 requires
that the government be able to trace the money transactions
at issue to a criminal act. United States v. Rutgard, 116 F.3d
1270, 1291–92 (9th Cir. 1997). The government concedes
that they are unable to trace the proceeds of the Bank of
China fraud directly to the money brought into the United
States. At best, the government can show only that the “vast
majority” of the funds in Ever Joint accounts were
fraudulently obtained.
But Defendants were charged with conspiracy, a crime
that does not require completion of the object offense. See
United States v. Alvarez-Cardenas, 902 F.2d 734, 736 (9th
Cir. 1990) (“a conspiracy conviction does not turn on the
question of whether defendant succeeds in doing all he
attempted to do.”). The conspiratorial agreement represents
the crystallization of the conspirator’s culpable criminal
intent; accomplishment of the underlying crime is immaterial
to culpability. United States v. Cruz, 127 F.3d 791, 803 (9th
Cir. 1997) (Hall, J., concurring in part and dissenting in part),
UNITED STATES V . XU 23
abrogated on other grounds by United States v. Jimenez
Recio, 537 U.S. 270 (2003). Contrary to the Defendants’
contention, no tracing is necessary in this case. The
agreement itself establishes that the funds to be transferred
are a portion of the illegally derived proceeds. All that is
required here, where the crux of Defendants’ count two
convictions is that Defendants agreed to transfer to the
United States more than $10,000 in fraudulent proceeds, is
that: there was an agreement to transfer that amount of the
“fraudulent proceeds”; and Defendants’ criminal intent was
corroborated by “significant objective acts.” United States v.
Posey, 864 F.2d 1487, 1492 n.4 (9th Cir. 1989). A formal
agreement is not necessary; rather, the agreement may be
inferred from the defendants’ acts pursuant to the scheme, or
other circumstantial evidence. United States v. Bibbero,
749 F.2d 581, 587 (9th Cir. 1984).
At trial, through the video deposition testimony of
Zhendong and the direct testimony of Bank of China auditors,
the government introduced evidence that Chaofan and
Guojun engaged in various acts of fraud during their tenure
as managers at the Kaiping sub-branch. They engaged in
unauthorized foreign currency speculation. They concealed
the immense losses resulting from this speculation, almost
$150 million, by manipulating Bank of China account
records. Chaofan also approved loans, totaling approximately
$181 million, from the Kaiping sub-branch to local Kaiping
businesses that were not properly recorded in the Bank of
China accounting system. The interest payments for those
loans were channeled into Ever Joint accounts, which were
controlled by Chaofan and Guojun. The government also
introduced evidence of “false loans,” totaling $90–95 million
from the Kaiping sub-branch, that were approved by Chaofan
and intended for various Kaiping businesses but were actually
24 UNITED STATES V . XU
diverted to Ever Joint accounts. Zhendong testified that
Chaofan authorized the loans, Guojun tracked the money as
it flowed into Ever Joint accounts, and all three men
discussed the need to alter bank records to conceal the
massive losses.
The government also introduced testimony regarding the
structure of the Ever Joint company and its relation to
Chaofan and Guojun’s criminal activities. Specifically, the
government introduced evidence that Chaofan was the
primary owner of Ever Joint during the course of its history.
Zhendong testified that he and Chaofan made false
representations that the Bank of China owned Ever Joint and
made payments using Ever Joint funds to influence at least
one Chinese government official. The government’s
accounting expert testified that Ever Joint had “no
commercial justification” but rather served as a “conduit for
funds” in order for Ever Joint’s principals to engage in
activities consistent with money laundering. Zhendong
testified that Chaofan and Guojun were aware of the
corporate structure and mission of Ever Joint and were aware
that Ever Joint would be funded from money sourced from
the Bank of China. Zhendong testified that he, Chaofan, and
Guojun paid an accountant, Yu Hongbin, to make transfers
from the Bank of China to Ever Joint to cover expenses.
These transfers involved the use of bank customer names and
account information on official loan documents to transfer the
loan proceeds to Ever Joint through “underground banks” to
evade China’s banking regulators. Zhendong characterized
this activity as “stealing” the customers’ money from Kaiping
sub-branch accounts and transferring the money to Ever Joint.
Zhendong testified that Chaofan oversaw a team of
accountants, including Chaofan’s cousin and his cousin’s
wife, who altered the account records to evade detection.
UNITED STATES V . XU 25
To be sure, the record reflects that Ever Joint engaged in
real estate investments that could have been legitimate,
including purchase and renovation of real estate in Hong
Kong.3 Zhendong testified, however, that speculation in
foreign currency was greater in volume than Ever Joint’s real
estate related activity. And the record reflects that, from
1995–2001, Chaofan, who determined Ever Joint bonuses,
received 1.7 billion Hong Kong dollars ($218 million U.S.)
and Guojun received 290.9 million Hong Kong dollars ($37.3
million U.S.) in Ever Joint bonus payments. During the
entire time they worked at Bank of China, Chaofan never
earned more than $40,000 per year for his work with the bank
and Guojun’s maximum salary was $30,000 per year.
The government also introduced evidence that Defendants
intended to transfer Ever Joint funds into the United States to
facilitate escape from Chinese authorities once their fraud
was discovered. Specifically, Zhendong testified regarding
an agreement between himself, Chaofan and Guojun to
transfer millions of dollars to Caesars Palace casino to fund
their escape to the United States. This money came from
Ever Joint accounts.
Defendants Wanfang and Yingyi similarly engaged in
activities that show their intent to conspire with Chaofan and
Guojun to bring fraudulently obtained funds into the United
States. According to Zhendong, Wanfang and Yingyi entered
into false marriages to acquire residency status in the United
States in order to flee there in the event their husbands’ bank
fraud was discovered. These false marriages were facilitated
3
Although Defendants allege that these real estate investments were
legitimate, Zhendong testified that Chaofan and Guojun improperly used
Bank of China assets to fund Ever Joint’s real estate purchases as well.
26 UNITED STATES V . XU
by a Kaiping government clerk who testified that he had
altered marriage records to remove evidence of Chaofan’s
marriage to Wanfang and Guojun’s marriage to Yingyi.
Wanfang’s and Yingyi’s false marriages with American
citizens were set up by intermediaries. Neither Wanfang nor
Yingyi ever lived with their respective sham spouses as
husband and wife. Wanfang was naturalized as an American
citizen on June 22, 2000, and she divorced her fake spouse on
July 28, 2000. Yingyi was naturalized on November 10,
1999, and she divorced her fake spouse on April 17, 2001. At
the time of their arrests in September 2004, Guojun and
Yingyi had been reunited and were living in Kansas. By the
time they were arrested in Oklahoma in October 2004,
Chaofan and Wanfang had also been reunited.
Evidence introduced at trial also showed that on at least
one occasion Wanfang and Yingyi traveled to Las Vegas with
Chaofan and Guojun and gambled with funds that, as
described above, were linked to Ever Joint. Specifically,
Defendants traveled to Las Vegas on or about October 4,
2000, and gambled at the Rio and Bellagio casinos using two
million dollars drawn from the Hua Chao Commercial Bank
in Hong Kong. These funds were sent to the Defendants in
Las Vegas via Wanfang’s brother, Kwong Wa Po, and the
funds were booked in Ever Joint’s ledger as a loan.
In light of the foregoing, viewing the evidence in the
government’s favor, a rational juror could find that the
Defendants violated § 1956(h) by conspiring to defraud the
Bank of China through activities related to the Ever Joint
company and that they conspired to engage in transactions
with domestic casinos using more than $10,000 of the
illegally derived funds. Conspiracy does not require
completion of the substantive crime. It requires an intent to
UNITED STATES V . XU 27
complete the substantive crime. Defendants’ intent can
reasonably be inferred from their actions pursuant to the
scheme. Section 1957(d)’s jurisdictional requirement is met
because the transactions took place in the United States.
Therefore, we affirm Defendants’ convictions on count two.
IV. Defendants’ Count Three Convictions for
Conspiracy to Transport Stolen Money
Conviction for conspiracy to violate § 2314, count three,
requires proof beyond a reasonable doubt that Defendants
agreed to move at least $5000 into the United States while
“knowing the same to have been stolen, converted or taken by
fraud.” 18 U.S.C. § 2314. The count three conspiracy also
requires at least one overt act in furtherance of the agreement.
18 U.S.C. § 371. We review de novo Defendants’ challenge
to the sufficiency of the evidence, and we make all inferences
in favor of the government.
Defendants raise essentially the same challenge to their
count three convictions as they did regarding their count two
convictions—namely, that the government cannot trace the
Las Vegas casino transactions to the Bank of China fraud.
Their arguments fail under the same analysis as discussed
above. Conspiracy is an inchoate offense that centers upon
the agreement to commit an unlawful act, not the commission
of the unlawful act itself. Cruz, 127 F.3d at 803. Therefore,
this case is distinguishable from United States v. Lazarenko,
in which we reversed a conviction because the substantive
§ 2314 charge requires that the transferred money be directly
traceable to the underlying fraud. 564 F.3d 1026, 1042 (9th
Cir. 2009).
28 UNITED STATES V . XU
We affirm Defendants’ count three convictions here
because evidence in the record, summarized above, supports
a finding that Defendants agreed to commit the acts
prohibited by § 2314. Through the testimony of Zhendong,
forensic accounting experts, and Defendants’ false spouses,
the government introduced evidence sufficient to allow a
rational juror to find that Defendants reached an agreement to
steal large sums of money from the Bank of China and to use
that money, channeled through Ever Joint accounts, in the
United States.
V. Defendants’ Sixth Amendment Objections to the
Video Deposition Testimony at Trial
The government presented the jury with fourteen days of
videotaped deposition evidence involving witnesses in China.
During presentation of the evidence, it became clear that the
video replay was consuming a large amount of court time,
resulting in delay and juror fatigue. Accordingly, the district
court, with the consent of all parties, approved an edited
version of the videotapes to be shown to the jury. The edited
version omitted the translation into Chinese of counsel’s
questions in English, but it left unaltered the English
questions, the witnesses’ responses in Chinese, and the
English translations of the Chinese responses.
Defendants argue that the edited version violated their
Sixth Amendment rights to a fair trial and to confront the
witnesses against them.4 Because the Defendants failed to
4
Defendants also argue that their Confrontation Clause rights were
violated when the videotaped deposition testimony was admitted without
the government making a showing at trial that the witnesses were
unavailable. As Defendants concede, however, this argument is waived
UNITED STATES V . XU 29
object at the time the deposition testimony was introduced
into evidence, we review for plain error. See United States v.
Matus-Zayas, 655 F.3d 1092, 1101 n.7 (9th Cir. 2011).
Defendants raise two main challenges to the presentation
of the videotaped testimony. First, they argue that they were
denied a fair trial because the replay subjected the jury to
“brutally boring ‘spurts’ of video-taped deposition testimony,
marked by computer difficulties, erroneous redactions, and
confusing names.” Second, Defendants argue that the edited
video depositions impeded the jury’s ability to observe the
witnesses’ demeanor and body language while they were
being asked questions in their native language.
Regarding the fair trial argument, the parties do not
dispute that portions of the trial were long or that juror
attentiveness was an issue. Recognizing these problems, the
district court took steps to help the jury by clarifying the
names and roles of the parties, and by placing in the
courtroom a face and name chart of all relevant persons. The
district court also addressed juror attentiveness by dismissing
one of the alternate jurors who appeared to be falling asleep.
These actions were reasonable steps in managing a lengthy
and difficult trial. See, e.g., United States v. Springfield,
829 F.2d 860, 864 (9th Cir. 1987) (no abuse of discretion
where the district court took steps to ensure that missed
testimony was insubstantial).
Turning to Defendants’ Confrontation Clause argument,
we reiterate that the major purposes of the Confrontation
Clause are “(1) ensuring that witnesses will testify under
because they raised it for the first time in the reply brief. See Bazuaye v.
I.N.S., 79 F.3d 118, 120 (9th Cir. 1996).
30 UNITED STATES V . XU
oath; (2) forcing witnesses to undergo cross-examination; and
(3) permitting the jury to observe the demeanor of witnesses.”
United States v. Sines, 761 F.2d 1434, 1441 (9th Cir. 1985)
(internal citations omitted). The district court conducted a
hearing during trial on the problems posed by video replay of
the depositions. The district court stated that editing the tapes
would speed up the proceedings while still allowing the jury
to view the body language of the witnesses as they responded
to questions. On this appeal, we granted the governments’
motion to expand the record to include thirty-one DVDs with
complete unedited versions of the depositions, and we have
reviewed that evidence. These DVDs reveal that the jury was
exposed to relevant witness body language and demeanor
even taking into account the district court’s edits. The fact
that the Defendants consented at trial to the edited format and
participated in crafting the structure for the edits further
militates against their assertion that the jury was deprived of
the opportunity to evaluate witness demeanor.
In sum, the district court did not plainly err in its
treatment of videotaped testimony at trial, and Defendants’
rights under the Confrontation Clause were not violated.5
VI. Defendants’ Expert Witnesses
Defendants challenge the district court’s ruling that
limited the testimony of three defense expert witnesses:
Professor John Copper, Professor Andy Sun, and Professor
Victor Shih. The district court’s decision to admit or exclude
5
Defendants’ argument that they have been deprived of the opportunity
for meaningful appellate review because the government failed to enter the
videos into the record has been mooted by our decision to grant the
government’s motion to expand the record.
UNITED STATES V . XU 31
expert testimony is reviewed for an abuse of discretion. See
United States v. Freeman, 498 F.3d 893, 900–01 (9th Cir.
2007). Abuse of discretion is evaluated by looking at
whether the trial court determined the correct legal rule to
apply to the requested relief and then at whether the trial
court’s application of that rule was (1) “illogical,” (2)
“implausible,” or (3) without “support in inferences that may
be drawn from the facts in the record.” United States v.
Hinkson, 585 F.3d 1247, 1264 (9th Cir. 2009) (en banc)
(citation omitted).
“The admissibility of expert testimony is a subject
peculiarly within the sound discretion of the trial judge, who
alone must decide the qualifications of the expert on a given
subject and the extent to which his opinions may be
required.” Fineburg v. United States, 393 F.2d 417, 421 (9th
Cir. 1968). The district court conducted an extensive voir
dire of the witnesses outside the presence of the jury.
Defendants sought to have Copper testify about the
economic and political structure in China at the time of the
Defendants’ criminal activities at the Bank of China, about
defendant Guojun’s military service, and about Chinese
family structure and sociology. Defendants sought to have
Sun testify about the Chinese legal system, and they sought
to have Shih testify about the effect of Communist Party
politics on China’s banking system, including the operation
of the Bank of China. The district court allowed Copper’s
testimony on the comparative political and economic
situations in China and Hong Kong, and allowed brief
discussion of defendant Guojun’s military status. However,
the court found Copper unqualified to testify regarding the
respective roles of spouses in China because his experience
on that issue was merely anecdotal. After a long colloquy,
32 UNITED STATES V . XU
the court allowed Sun’s testimony regarding the double
designation experience—whereby persons suspected of
criminal activity are subjected to isolated, indeterminate
detention during pending administrative and criminal
investigations. The district court also allowed Shih’s
testimony on “monitoring rooms”—rooms where bank
officials monitor activities at the branch and consider whether
to pursue Communist Party disciplinary actions—and
differences between private and state-owned banks in China,
but the court excluded his testimony on out-of-book loans
because Shih did not actually review any records for the
transactions at issue in the case.
In allowing all three defense witnesses to testify, the
district court adhered to circuit precedent requiring that
expert testimony be “construed liberally” in considering
admissibility. See United States v. Hankey, 203 F.3d 1160,
1168 (9th Cir. 2000). In light of the reasons stated at the
hearing, the district court understood its function as an
evidentiary gatekeeper and took seriously its responsibility to
admit only expert testimony that would help the jury
determine relevant issues. Therefore, the district court did
not abuse its discretion in limiting the testimony of
Defendants’ expert witnesses.
VII. Jury Instructions
Defendants raise seven challenges to the jury instructions.
“In reviewing jury instructions, the relevant inquiry is
whether the instructions as a whole are misleading or
inadequate to guide the jury’s deliberation.” United States v.
Garcia-Rivera, 353 F.3d 788, 792 (9th Cir. 2003) (internal
quotation marks omitted).
UNITED STATES V . XU 33
A. Burden Shift Argument
Defendants argue that the inclusion of twenty statements
of what the government did not have to prove to meet certain
elements of the charged offenses impermissibly shifted the
burden to the defense by lessening the government’s burden
of proof. Defendants also allege that the district court erred
in failing to include specific language in the jury instructions
that the Defendants must be presumed innocent “unless and
until” proven guilty.
Challenges to the formulation of jury instructions are
generally reviewed under an abuse of discretion standard.6
See United States v. Dearing, 504 F.3d 897, 900 (9th Cir.
2007). Plain error review applies here, however, because
Defendants did not adequately preserve the burden-shifting
issue for appeal.7
The district court repeatedly instructed the jury regarding
the correct burden of proof. Specifically, the instructions
6
Defendants’ assertion that de novo review applies pursuant to United
States v. Shannon, 137 F.3d 1112, 1117 (9th Cir. 1998), is incorrect. See
United States v. Heredia, 483 F.3d 913, 922 (9th Cir. 2007) (en banc)
(overruling Shannon and reiterating the general applicability of abuse of
discretion review to the formulation of jury instructions).
7
The record reflects two opportunities for preservation of this issue.
First, Defendants raised an objection to the government’s proposed
instructions on count two. After consultation, however, Defendants
withdrew their objection, thereby waiving it. See United States v.
Masters, 118 F.3d 1524, 1526 (11th Cir. 1997); United States v. Thomas,
896 F.2d 589, 591 (D.C. Cir. 1990). Defendants’ second objection
became moot when the district court declined to give the challenged
instruction. Thus, Defendants did not properly preserve their burden-
shifting challenge, and plain error review applies.
34 UNITED STATES V . XU
referred to the presumption of innocence and the
government’s burden to prove guilt beyond a reasonable
doubt. The district court also instructed the jury that a guilty
verdict must be unanimous, and that the Defendants’ decision
not to testify should not be used to infer guilt. Despite
conclusory allegations, Defendants do not show how the
twenty references to what the government did not have to
prove lessened the government’s burden of proof.
Furthermore, the Defendants’ allegation that the district
court erred in failing to include specific language that the
Defendants are to be presumed innocent “unless and until”
proven guilty is unavailing. Defendants’ own authority,
Rhoades v. Henry, 598 F.3d 495, 506–08 (9th Cir. 2010),
subverts their argument. The Rhoades court professed no
preference for Defendants’ desired “unless and until”
language. See id. Moreover, even if omitting such language
was erroneous, when read in the context of the overall
instructions, it is unlikely that the omission would cause the
jury to misapply the government’s burden of proof. See id.
at 508.
B. Jury Instruction Based on Chinese Law
Over Defendants’ objection, the district court gave the
following jury instruction: “You are instructed that fraud, or
a scheme or attempt to defraud the Bank of China is a felony
under foreign Chinese law.” Defendants argue that this
instruction was improper because it: (1) took away from the
jury the ability to find an essential element of the alleged
crimes, (2) interpreted and sought to enforce unsettled
Chinese law that is different from law applied in the United
States, and (3) based its conclusions on extradition case law,
UNITED STATES V . XU 35
which liberally construes criminality in violation of the rule
of lenity.
We review de novo all determinations of foreign law
under Rule 26.1 of the Federal Rules of Criminal Procedure.
See United States v. Fowlie, 24 F.3d 1059, 1064 (9th Cir.
1994). Rule 26.1 gives the district court broad discretion in
considering evidence to make determinations of foreign law.8
See United States v. Mitchell, 985 F.2d 1275, 1280 (4th Cir.
1993).
To support a conviction on the RICO conspiracy charge
in count one and the money laundering conspiracy charge in
count two, the government was required to prove that the
property at issue (the funds from the Bank of China) was
derived from a specified unlawful activity. The specified
unlawful activity the government identified was an offense
against a foreign nation involving “fraud, or any scheme or
attempt to defraud, by or against a foreign bank.” See
18 U.S.C. §§ 1956(c)(7)(B) & (B)(iii), 1957(a).
Defendants cite no case law in support of their challenge
to the district court’s authority to determine foreign law as a
predicate to jury determination of guilt on a substantive
offense. Given Rule 26.1’s express grant of authority to the
district court, “[i]t has long been thought . . . that the jury is
not the appropriate body to determine issues of foreign law.”
United States v. McClain, 593 F.2d 658, 669 n.17 (5th Cir.
1979) (internal quotation marks omitted). The challenged
8
In relevant part, Rule 26.1 states, “[i]ssues of foreign law are questions
of law, but in deciding such issues a court may consider any relevant
material or source--including testimony--without regard to the Federal
Rules of Evidence.” Fed. R. Crim. P. 26.1.
36 UNITED STATES V . XU
instruction here does not impinge on the jury’s fact finding
because the jury was still charged with determining beyond
a reasonable doubt whether the underlying fraud actually took
place.
Defendants’ other challenges based on the “unsettled”
nature of Chinese law and the district court’s reliance on
extradition cases are similarly unavailing. It is true that
extradition treaties are construed liberally, see United States
v. Kin-Hong, 110 F.3d 103, 109 (1st Cir. 1997); however, the
rule of lenity is not helpful to Defendants because the rule
applies where there is ambiguity concerning the applicability
of criminal statutes. See Liparota v. United States, 471 U.S.
419, 428 (1985); United States v. Gonzalez-Mendez, 150 F.3d
1058, 1061 (9th Cir. 1998) (“[W]e resort to the rule of lenity
only if the statute is ‘truly ambiguous.’”). No such ambiguity
exists here. American law provides a straightforward
definition of common fraud as, “wronging one in his property
rights by dishonest methods or schemes, and usually
signif[ies] the deprivation of something of value by trick,
deceit, chicane or overreaching.” See McNally v. United
States, 483 U.S. 350, 359 (1987) (citation and internal
quotation marks omitted), superseded on other grounds by
statute, Anti-Drug Abuse Act of 1988, Pub. L. No. 100-690,
§ 7603, codified at 18 U.S.C. § 1346, as recognized in United
States v. Stoneman, 870 F.2d 102, 105 n.2 (3d Cir. 1989).
Chinese law is equally clear in prohibiting fraudulent acts.
Articles 192 and 382 of the Criminal Law of the People’s
Republic of China unambiguously criminalize Defendants’
UNITED STATES V . XU 37
fraudulent acts against the Bank of China.9 Not incidentally,
four other articles in the Chinese criminal code would equally
cover the Defendants’ convicted conduct.10 Consequently,
Defendants’ arguments based on the shortcomings of the
Chinese criminal justice system fail because Defendants’
fraudulent acts are unlawful in both the United States and
China.
Defendants’ alternative argument that the government
impermissibly seeks to enforce Chinese law is meritless. The
Supreme Court has upheld criminal convictions based on
interpretations of foreign law where the foreign violations are
simply a means to violate United States laws. See
Pasquantino v. United States, 544 U.S. 349, 369 (2005). In
this case, Defendants’ foreign fraud was a means to violate
United States laws. The challenged instruction incorporates
9
Article 192, in relevant part, provides that “[w]hoever, for the purpose
of illegal possession, unlawfully raises funds by means of fraud shall be
[guilty of a crime].” Crim. L. PRC art. 192 (adopted by the Fifth Nat’l
People’s Cong., July 1, 1979, revised Mar. 14, 1997) (China) available at
http://www.cecc.gov/pages/newLaws/criminalLawENG.php.
Article 382, in relevant part, provides that “[a]ny state functionary,
who, by taking advantage of his office, appropriates, steals or swindles
public money or property or by other means illegally takes it into his own
possession shall be regarded as being guilty of embezzlement.” Crim. L.
PRC art. 382 (adopted by the Fifth Nat’l People’s Cong., July 1, 1979,
revised M ar. 14, 1997) (China) available at
http://www.cecc.gov/pages/newLaws/criminalLawENG.php.
10
See Crim. L. PRC arts. 193–95, 266 (adopted by the Fifth Nat’l
People’s Cong., July 1, 1979, revised Mar. 14, 1997) (China)
(criminalizing fraud against banks and financial institutions regarding
loans, financial bills, and letters of credit, as well as criminalizing
s w i n d l i n g o f p u b l i c o r p r iv a te m o n e y) a v a il a b l e a t
http://www.cecc.gov/pages/newLaws/criminalLawENG.php.
38 UNITED STATES V . XU
Chinese law only as a predicate to enforcement of the money
laundering statute.
C. Fatal Variance Regarding Count Two
Defendants challenge the omission of the phrase “foreign
commerce” from the first element in the count two money
laundering instruction. The challenged instruction states,
“The elements of money laundering, as charged in the second
superseding indictment, are as follows: First, an individual
engaged in or attempted to engage in a monetary transaction
in or affecting interstate commerce.” Defendants allege that
this omission is a fatal variance rendering their conviction on
that count invalid. Because Defendants did not object at trial,
we review for plain error.
Defendants’ challenge amounts to a “constructive
amendment” claim, although Defendants do not use that term.
A constructive amendment requires reversal and occurs
“when the charging terms of the indictment are altered, either
literally or in effect, by the prosecutor or a court after the
grand jury has last passed upon them.” United States v.
Hartz, 458 F.3d 1011, 1020 (9th Cir. 2006) (internal
quotation marks omitted).
Defendants’ argument fails for two reasons. First, the
omission was cured by a later instruction on the same page
that defines monetary transaction, as used in the challenged
instruction, as a “deposit, withdrawal, transfer or exchange,
in or affecting interstate or foreign commerce.” The
instructions on that same page also reference “foreign
commerce” two additional times. Second, we consider the
phrase “interstate or foreign commerce” to be a unitary
phrase; that is, by referencing one, the other is included as
UNITED STATES V . XU 39
well. See United States v. Garcia, 94 F.3d 57, 64 (9th Cir.
1996) (describing the phrase “interstate or foreign commerce”
as “one concept”).
Because Defendants were not convicted at trial of an
offense broader than the one charged in the indictment,
Defendants’ fatal variance/constructive amendment claim
fails. See Hartz, 458 F.3d at 1020.
D. Defendants’ Proposed “Theory of Defense”
Instructions
The denial of a defendant’s jury instruction due to an
inadequate factual basis is reviewed for an abuse of
discretion. See United States v. Daane, 475 F.3d 1114, 1119
(9th Cir. 2007). Whether the instructions, taken as a whole,
adequately cover the defense theory is a question of law
reviewed de novo. See United States v. Wills, 88 F.3d 704,
715 (9th Cir. 1996).
At trial, the Defendants requested an instruction on the
necessity defense, based on the Defendants’ contention that
their immigration to the United States using fraudulently
obtained visas was due to fear of harm if they remained in
China after being caught.
Defendants invoke necessity without proper legal basis.
Fear of prosecution for crimes committed is not an
appropriate reason to claim necessity. Cf. United States v.
Schoon, 971 F.2d 193, 196–97 (9th Cir. 1991) (discussing
permissible uses of the necessity defense in cases such as:
prisoners escaping a burning prison, a person stealing food
from a cabin to survive if lost in the woods, and destruction
of property to prevent the spread of fire).
40 UNITED STATES V . XU
Defendants also requested three related instructions
regarding governmental authorization based on the allegation
that their illegal money transactions were due to requirements
put in place by Chinese Communist Party leadership.
Defendants base their argument on the fact that the state
owned the Bank of China and the fact that the Chinese
banking sector was in a period of transition at the time of the
convicted offenses. The instruction is unnecessary, however,
because the elements of the charged conspiracy adequately
covered any claim of Chinese government approval of
Defendants’ actions. If the jury believed that the money
transactions at issue were not fraudulent because the
government approved the transactions, the jury could have
found for the Defendants under the elements of money
laundering and transportation of stolen money. See United
States v. Ramirez, 710 F.2d 535, 543 (9th Cir. 1983) (“The
refusal to give a requested instruction is not error if the
charge as a whole adequately covers the theory of the
defense.” (citation and internal quotation marks omitted)).
Moreover, Defendants provided no evidence that their
immigration fraud was in any way connected to a government
directive. See United States v. Dorrell, 758 F.2d 427, 430
(9th Cir. 1985) (where the evidence is insufficient to support
a theory of defense, the district court need not instruct the
jury on that defense). The district court did not err in refusing
to give Defendants’ proffered defense theory instructions.
E. The Aiding and Abetting Counts
Defendants argue that any conviction for aiding and
abetting in the conspiracy counts (counts one through three)
should be reversed because aiding and abetting was not
charged on those counts in the second superseding
UNITED STATES V . XU 41
indictment. Plain error review applies because no objection
was made at trial.
The aiding and abetting charges, under 18 U.S.C. § 2,
applied to counts four through fifteen only. Defendants admit
that the jury was instructed on aiding and abetting only for
counts four through fifteen. Juries are presumed to follow the
instructions given them. See Richardson v. Marsh, 481 U.S.
200, 206 (1987). There is no error here.
F. The Absence of an Instruction Defining “On or
About”
Defendants challenge the absence of an instruction
defining “on or about” as used in the second superseding
indictment. Although Defendants did not propose an “on or
about” instruction at trial, Defendants now argue that such an
instruction was needed to provide the jury with “sufficient
guidance” to navigate the time frames involved in the charged
crimes. Defendants did not object at trial, so we review for
plain error.
Defendants cite United States v. McCown, 711 F.2d 1441,
1450–51 (9th Cir. 1983), and United States v. Zepeda-
Martinez, 470 F.3d 909, 912 n.1 (9th Cir. 2006), but those
cases are inapposite. They concern challenges to crimes
charged during allegedly open-ended or indefinite time
frames. In this case, the dates alleged are not indefinite. The
RICO conspiracy was alleged to have begun in 1991 with the
improper foreign currency exchange speculation that resulted
in unlawful use of the Bank of China’s interbranch accounts
and to have ended with the arrests of Chaofan and Kuang in
2004. The conspiracies alleged in counts two and three began
in 1998 and ended with the same arrests in 2004. Counts four
42 UNITED STATES V . XU
through fifteen allege that the various acts of immigration
fraud occurred on specific dates. Defendants do not argue
that the government presented evidence outside the dates
outlined in the indictment or otherwise deviated from the time
frames alleged in the indictment. Accordingly, we find no
error.
G. Defendants’ Incomprehensibility Claims Due to
Numerous Chinese Names Presented to the Jury
Defendants challenge the fairness of the proceedings
based on the numerous Chinese names before the jury.
Defendants argue that the names are essentially
interchangeable and incomprehensible to any juror who is not
familiar with Chinese, thus rendering the charging process
incomprehensible. Plain error review applies because no
objection was made at trial.11
We are not persuaded by Defendants’ argument. The
parties engaged in voir dire, which included a jury
questionnaire inquiring about any prospective bias or
difficulty with the fact that the defendants were Chinese.
Several interpreters were present during trial. The district
court also took steps to clarify the names and roles of the
parties by placing on display in the courtroom a chart with the
faces and names of all relevant persons. Furthermore,
Defendants point to no specific evidence of prejudice
warranting reversal on these grounds.
11
Defendants allege that they preserved this claim of error during the
jury instructions hearing. The colloquy, however, dealt only with the jury
instructions in general and did not reference the Chinese language issues
specifically enough to preserve the issue for appeal. See United States v.
Klinger, 128 F.3d 705, 711–12 (9th Cir. 1997).
UNITED STATES V . XU 43
In sum, Defendants’ seven challenges to the jury
instructions are meritless.
VIII. Sentencing Issues
A. Application of the 2007 Sentencing Guidelines
Defendants argue that the application of the 2007
Guidelines to their sentences violates the Ex Post Facto
Clause of the Constitution. We review de novo the district
court’s interpretation of the Sentencing Guidelines, including
challenges under the Ex Post Facto Clause. United States v.
Staten, 466 F.3d 708, 713 (9th Cir. 2006).
The district court “shall use the Guidelines Manual in
effect on the date that the defendant is sentenced” unless such
application violates the Ex Post Facto Clause. U.S.S.G.
§ 1B1.11 (2011). An ex post facto sentencing violation
occurs when application of a later edition of the Guidelines
would result in a higher base level. See United States v.
Rising Sun, 522 F.3d 989, 993 n.1 (9th Cir. 2008). The ex
post facto issue arises here because the sentences that the
Defendants received under the 2007 Guidelines were longer
than the sentences they likely would have received under
earlier Guidelines. Compare U.S.S.G. § 2B1.1(a) (2007)
(base offense level of either 6 or 7) with U.S.S.G. § 2B1.1(a)
(2000) (base offense level of 4). The district court found that
the charged conspiracy extended beyond November 1, 2001,
and thus it applied the amended Guidelines with the higher
base offense levels.
Defendants argue that the second superseding indictment
alleged two separate groups of criminal activities—the Bank
of China fraud and the immigration fraud—and that the date
44 UNITED STATES V . XU
of the last activity associated with the Bank of China fraud
ended prior to the immigration fraud. Specifically,
Defendants allege that any conspiracy to transport money
associated with their bank fraud ended when Chaofan and
Guojun crossed the border into the United States on October
15, 2001—before the November 1, 2001, effective date of the
new Guidelines.
Defendants’ arguments are unpersuasive because,
contrary to Defendants’ assertions, the second superseding
indictment did not allege two separate conspiracies. Instead,
it alleged a single RICO conspiracy with two purposes: the
Bank of China fraud and immigration fraud. Defendants
conspired to steal money from the Bank of China and then to
travel to the United States with their ill-gotten gains. The
charged conspiracy encompassed both the Defendants’ fraud
in China, including illegal money transactions and
transportation of stolen money, and the Defendants’ later
immigration fraud to escape to the United States to flee
Chinese law enforcement.
“Conspiracy is a continuing crime,” People of Territory
of Guam v. Ignacio, 852 F.2d 459, 461 (9th Cir. 1988), and a
conspiracy does not automatically terminate because the
government has defeated the conspiracy’s objective, see
Jimenez Recio, 537 U.S. at 274. Nevertheless, the duration of
a conspiracy cannot be indefinitely extended “merely because
the conspiracy is kept a secret, and merely because the
conspirators take steps to bury their traces, in order to avoid
detection and punishment.” Grunewald v. United States,
353 U.S. 391, 397 (1957).
A conspiracy to conceal cannot be implied from
circumstantial evidence supporting the existence of an
UNITED STATES V . XU 45
agreed-upon coverup after the central purpose of a conspiracy
has been attained. Id. at 401–02. Courts should be wary of
finding an “actual” as opposed to “implied” conspiracy to
conceal based on “desperate attempts to cover up after the
crime begins to come to light.” Id. at 403. In this case,
however, the Defendants’ immigration fraud was not a
desperate attempt to cover up the bank fraud; it was part of
the bank fraud scheme. Defendants’ elaborate immigration
fraud scheme included false marriages involving all four
Defendants who entered into the marriages before the bulk of
the bank fraud even occurred. Those marriages were part of
an overall plan to steal the money and get away with it in the
United States. Recognizing the difference between “acts of
concealment done in furtherance of the main criminal
objectives of the conspiracy, and acts of concealment done
after these central objectives have been attained, for the
purpose only of covering up after the crime,” id. at 405, we
conclude that, to the extent that the immigration fraud was an
act of concealment, it was an integral part of the conspiracy’s
main criminal objective.
Furthermore, the conspiracy continued until October
2004. During their flight from Chinese authorities,
Defendants traveled from California to Wichita, Kansas, in
2002. During these travels within the United States,
Defendants carried with them and used the false identities and
fraudulent immigration documents that were charged as part
of the conspiracy. Guojun and Yingyi were arrested in
Wichita on September 22, 2004. Documents related to
Defendants’ fraudulent marriages were found in the house
where they were living. Chaofan and Wanfang were arrested
in Edmond, Oklahoma, on October 6, 2004. A search of their
residence resulted in the seizure of jewelry and cash totaling
$154,000, stashed in various locations throughout the house.
46 UNITED STATES V . XU
Because Defendants continued their hiding and flight
throughout the United States until October 2004—using
fraudulently obtained immigration documents and carrying
bundles of cash—the conspiracy continued until that date.
Therefore, application of the amended Guidelines as reflected
in the 2007 edition was appropriate.
Defendants argue that, even if the conspiracy did not end
until Defendants’ arrests, the 2004 Guidelines should have
been consulted to determine whether they would be more
favorable to Defendants. However, the Guidelines sections
relevant to Defendants’ RICO convictions (U.S.S.G. § 2S1.1
and § 2B1.1) are identical in the 2004 and 2007 editions.
Thus, Defendants were not prejudiced by application of the
2007 Guidelines over the 2004 Guidelines.
Defendants’ supplemental argument that application of
pre-2001 Guidelines to unindicted co-conspirator Yu
Zhendong should estop the government from applying later
Guidelines to Defendants is devoid of supporting authority.
Moreover, the district court considered Yu Zhendong’s lesser
sentence as a mitigating factor for Defendants.
In sum, the district court did not violate the Ex Post Facto
Clause by applying the 2007 Guidelines to a conspiracy that
did not end until Defendants’ 2004 arrests.
B. Procedural Error
Defendants argue that the district court erred in applying
Guidelines § 2S1.1(a)(1) instead of § 2S1.1(a)(2), resulting in
a higher base offense level. We agree and remand for
resentencing.
UNITED STATES V . XU 47
“We review the district court’s interpretation of the
Guidelines de novo, the district court’s application of the
Guidelines to the facts of the case for abuse of discretion, and
the district court’s factual findings for clear error.” United
States v. Treadwell, 593 F.3d 990, 999 (9th Cir. 2010).
Incorrect calculation of the Guidelines range constitutes
procedural error. United States v. Carty, 520 F.3d 984, 993
(9th Cir. 2008) (en banc).
The district court determined that § 2S1.1(a)(1) applied to
Defendants’ count one RICO conspiracy conviction. Section
2S1.1(a)(1) instructs that Defendants’ base offense level
should be calculated by using the offense level for the
underlying offense (here, the specified unlawful activity of
“fraud, or a scheme to defraud, by or against a foreign bank”)
when two conditions are met. First, Defendants must have
“committed the underlying offense” or would be accountable
for the underlying offense under a relevant conduct analysis.
U.S.S.G. § 2S.1.1(a)(1)(A). Second, the offense level for that
underlying offense must be able to be determined. U.S.S.G.
§ 2S.1.1(a)(1)(B).
Here, Defendants were convicted of conspiracy, an
inchoate crime which does not require commission of the
underlying offense. See United States v. Thomas, 887 F.2d
1341, 1345 (9th Cir. 1989). Defendants did not admit guilt
on the substantive crimes enumerated in 18 U.S.C. §§ 1957
& 2314, and as discussed above, the government was unable
to establish the tracing of funds necessary to establish guilt on
those underlying offenses. Therefore, the government must
rely on relevant conduct to meet § 2S.1.1(a)(1)(A)’s first
condition. For the following reasons, we hold that applying
the relevant conduct analysis to Defendants’ foreign conduct
is not permissible.
48 UNITED STATES V . XU
We have not addressed the applicability of foreign
conduct to a base offense level calculation in analogous
circumstances, but case law from other circuits that have
confronted the issue makes us hesitant to apply the
Defendants’ foreign conduct to the base level calculation
here. In United States v. Farouil, 124 F.3d 838 (7th Cir.
1997), the Seventh Circuit allowed consideration of drugs
found on an overseas co-conspirator in the determination of
a defendant’s base offense level. The drugs were discovered
in the co-conspirator’s carry-on luggage as she was preparing
to board a flight to the United States. Id. at 840, 845. The
court determined that the drugs should be counted against the
defendant because the drug crimes were directed against the
United States. Id. at 845.
Here, Defendants were Chinese nationals who committed
fraud against the Bank of China while on Chinese soil. The
fraudulent proceeds were, of course, later laundered through
Ever Joint and brought into the United States. However, the
United States was only indirectly affected by Defendants’
bank fraud. Put another way, the connection between
Defendants’ bank fraud and the United States is too
attenuated to be considered when calculating a base offense
level. By contrast, Defendants’ immigration fraud directly
impacted United States’ interests, and thus it is properly
considered domestic conduct that does not implicate the same
relevant conduct concerns.
Similarly, in United States v. Greer, 285 F.3d 158 (2d Cir.
2002), drugs intended for foreign distribution were also
included as relevant conduct in determining the base offense
level because the underlying statute criminalized foreign
conduct (i.e., drug possession abroad) where the drugs were
intended for distribution in the United States. 285 F.3d at
UNITED STATES V . XU 49
179–180 n.10. In Greer, however, the district court had no
need to consider whether the defendant violated foreign law
to hold him responsible for his foreign acts because the
statute at issue specifically covered the extraterriorial
conduct. Id. at 179–80. But here, by instructing the jury that
Defendants’ fraud against the Bank of China was a crime
under Chinese law, the district court placed the issue of
determining foreign law front and center. Such
determinations are highly problematic for sentencing
purposes.
In United States v. Azeem, 946 F.2d 13 (2d Cir. 1991), the
Second Circuit warned that, “To permit foreign crimes to
figure in fixing the base offense level would require courts to
perform a careful comparative analysis of foreign and
domestic law in such instances.” 946 F.2d at 17. The issue
is more straightforward here because, as noted earlier, the
Defendants’ acts during the bank fraud would have been a
crime under Chinese or American law. Nevertheless, it is
easy to contemplate scenarios where a comparison of foreign
and domestic law is not so clear cut. See id. at 18.
(“Examples of activities that violate one, but not both, foreign
and domestic laws could be the use and sale of certain drugs
that would have violated our law, but not the foreign law
where sold and used, or a certain use of alcohol that violates
the foreign law where used but would not have done so under
domestic law.”). Therefore, we follow the Second Circuit
and “decline to create the complexities that the inclusion of
foreign crimes in the base offense level calculation would
generate.” See Azeem, 946 F.2d at 18. Because Defendants’
foreign conduct cannot be used to meet the requirements of
§ 2S1.1(a)(1)(A), the district court procedurally erred in
applying that section to Defendants’ sentences and we,
50 UNITED STATES V . XU
accordingly, remand for resentencing under § 2S1.1(a)(2) in
light of this conclusion.
Defendant Chaofan also objects to various enhancements
resulting in an increase to his base level. Chaofan’s objection
to a two-level enhancement for abuse of a position of trust
under § 3B1.3 is meritless. See U.S.S.G. § 3B1.3 cmt. n.1
(providing “a bank executive’s fraudulent loan scheme” as an
example of abuse of trust). Chaofan’s objection to a two-
level enhancement for relocation to avoid law enforcement
under § 2B1.1(b)(9)(A) is devoid of analysis and therefore
waived. See United States v. Belgarde, 300 F.3d 1177, 1181
n.1 (9th Cir. 2002). However, Chaofan’s objection to a one-
level enhancement under § 2S1.1(b)(2)(A), for conviction
under 18 U.S.C. § 1957, has merit because a finding of
conviction under § 1957 for sentencing purposes depends on
Chaofan’s foreign conduct, which we have held cannot be
applied here. Therefore, on remand the enhancement under
§ 2S1.1(b)(2)(A) cannot be applied.
We need not reach the issue of the substantive
reasonableness of Defendants’ sentences because we have
determined that the district court erred procedurally. United
States v. Rudd, 662 F.3d 1257, 1264 (9th Cir. 2011).
C. The $482 Million Restitution Order
Defendants allege that the district court did not adequately
explain its conclusions in support of the $482 million
restitution award. Specifically, Defendants argue that the
district court never explicitly stated that restitution was
mandatory, never explained how it determined that the Bank
of China qualified as a victim, and never justified the $482
million award. We agree and remand for reconsideration.
UNITED STATES V . XU 51
“A restitution order is reviewed for an abuse of discretion,
provided that it is within the bounds of the statutory
framework. Factual findings supporting an order of
restitution are reviewed for clear error. The legality of an
order of restitution is reviewed de novo.” United States v.
Marks, 530 F.3d 799, 811 (9th Cir. 2008) (internal quotation
marks omitted). The district court’s valuation methodology
is reviewed de novo. United States v. Bussell, 504 F.3d 956,
964 n.9 (9th Cir. 2007).
The district court engaged in a cursory analysis of the
legal and factual basis for the restitution award before
concluding that the evidence at trial supported a finding “by
clear and convincing evidence that the loss to the Bank of
China resulted from the underlying scheme to defraud in
excess of $480 million.” The $482 million restitution amount
is for the most part consistent with the statement of offense
conduct in the Presentence Report. However, Defendants
contested those facts, and the district court rejected the
presentence report’s factual findings to the extent they were
inconsistent with the district court’s findings. Although we
may uphold a restitution order when the district court fails to
make pertinent factual findings, the basis of the court’s
calculations must be clear for us to do so. United States v.
Yeung, 672 F.3d 594, 604 (9th Cir. 2012). The basis for the
district court’s calculations are not clear here.
“Restitution can only be based on actual loss.” United
States v Stoddard, 150 F.3d 1140, 1147 (9th Cir. 1998)
(internal citations omitted). A restitution order must also be
“based on losses directly resulting from a defendant’s
offense.” Bussell, 504 F.3d at 964 (internal quotation marks
omitted). We have previously noted the difficulties inherent
in relying on loss determinations for purposes of Guidelines
52 UNITED STATES V . XU
calculations during the calculation of restitution amounts, see
United States v. Gossi, 608 F.3d 574, 581–82 (9th Cir. 2010),
and have held that such reliance is improper, Yeung, 672 F.3d
at 604. The transcript of the sentencing hearing reveals that
the district court referred to its Guidelines calculations in
making factual findings regarding the amount of actual loss
suffered by the Bank of China. This reference is especially
inappropriate given the previously discussed inability to trace
Defendants’ fraudulent activity to actual bank losses.
Therefore, because the district court did not provide sufficient
grounds to support the $482 million figure, we remand for
reconsideration regarding the legal and factual basis for the
restitution order. See United States v. Waknine, 543 F.3d
546, 557–58 (9th Cir. 2008).
IX. Conclusion
We affirm Defendants’ convictions but vacate their
sentences and remand for resentencing. Defendants’ count
one convictions are not the result of an improper
extraterritorial application of the RICO conspiracy statute
because Defendants’ criminal enterprise involved both bank
fraud and immigration fraud centered on stealing money from
the Bank of China and traveling freely with that stolen money
in the United States. The evidence was sufficient to support
convictions on count two, money laundering conspiracy, and
count three, conspiracy to transport stolen money.
We remand for resentencing because the district court
improperly relied on Defendants’ foreign conduct to meet the
requirements of § 2S1.1(a)(1)(A) resulting in procedural
UNITED STATES V . XU 53
error, improperly applied a one-level enhancement based on
foreign conduct, and failed to provide an adequate legal and
factual basis for the $482 million restitution order.
AFFIRMED, IN PART, VACATED, IN PART, AND
REMANDED.