United States v. Chao Fan Xu, 673 F. App'x 616

Background

Four defendants (Chaofan Xu, Guojun Xu, Wanfang Kuang, Yingyi Yu) convicted of racketeering conspiracy, money-transaction offenses (18 U.S.C. §1957/2314), and immigration fraud; sentences challenged on second appeal.
This Court previously held that a one-level enhancement under U.S.S.G. §2S1.1(b)(2)(A) for a substantive §1957 violation could not be applied on remand. United States v. Chao Fan Xu.
On remand the district court nevertheless applied that one-level enhancement and calculated guidelines using about $20 million in transfers to Las Vegas.
Defendants also received a two-level position-of-trust enhancement and a $7.8 million restitution order; some defendants had completed imprisonment but remained subject to restitution.
This panel vacated and remanded: (1) sentences because the prohibited §2S1.1 enhancement was reapplied; (2) the $20 million guidelines calculation because the government failed to prove §1957 violations or jurisdictional nexus; and (3) restitution for clarification of the legal basis. The court declined to reach substantive reasonableness of the sentences.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether district court could apply 1-level §2S1.1(b)(2)(A) enhancement for a substantive §1957 violation after prior remand holding	Government treated transactions as substantive §1957 violations supporting enhancement	Defendants argued enhancement was barred by prior remand ruling and lack of proof of §1957 violations	Enhancement improperly applied; vacated and remanded because Guidelines range was miscalculated (procedural error)
Whether ~$20M in transfers to U.S. could be used to increase base offense level under §2S1.1(a)(2)	Government argued transfers reflected laundered funds and commingling per commentary, so they could be counted	Defendants argued government failed to trace funds to §1957 violations or to show U.S. persons carried out transactions; commingling alone insufficient	Court held government failed to show transactions were “in violation of §1957” or within U.S. jurisdiction; $20M could not support the Guidelines increase
Whether district court violated Rule 32(i)(3)(B) by insufficiently explaining position-of-trust enhancement	Government implied enhancement was properly explained by court’s statements	Defendants said explanation was inadequate under Rule 32	Court held Rule 32(i)(3)(B) applies only to factual objections; defendants raised legal, not factual, challenges, so Rule 32 did not require more explanation
Whether restitution ($7.8M) had a proper legal basis in defendants’ criminal conduct	Government treated scheme-wide losses and related conduct as basis for restitution	Defendants argued restitution relied on §1957-based loss findings that lacked tracing to criminal losses and thus was unsupported	Court remanded for clarification of the legal basis for restitution because district court did not specify what criminal conduct supported the award

Key Cases Cited

Gall v. United States, 552 U.S. 38 (sentencing-Guidelines procedural error standard)
United States v. Carty, 520 F.3d 984 (Guidelines range must be calculated correctly)
United States v. Munoz–Camarena, 631 F.3d 1028 (harmlessness inquiry when Guidelines misapplied)
RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090 (interpretation of §1957 territorial reach)
Rita v. United States, 551 U.S. 338 (district court should explain reasons for sentence sufficiently)
United States v. Chao Fan Xu, 706 F.3d 965 (prior Ninth Circuit decision limiting §1957 application in this case)
United States v. Petri, 731 F.3d 833 (Rule 32 scope limited to factual objections)
United States v. Lawrence, 189 F.3d 838 (limits on restitution based on non-criminal conduct)