United States v. Kyle Grasso

9,3 authority and we of no other tion REMAND n. know for proceedings consis- supporting proposition. opinion. tent with this

3. The Source License does not modi-

fy jurisdic- rules’ UNCITRAL provisions.

tional

Finally, argues par Oracle

ties’ arbitration clause modified the UNCI- that arbitrability

TRAL rules such must by be determined the court. The arbitra America, UNITED STATES of tion clause the Source License states Plaintiff-Appellee, that arbitration is to be “in administered accordance with the rules [UNCITRAL] ... in effect time of at the arbitration as Kyle GRASSO, John Defendant- The paragraph herein.” after modified Appellant. the arbitration clause sets specific out regarding proceedings rules arbitration No. 10-50116. rules, that differ from but the UNCITRAL States of Appeals, Court ques none modifications concern Ninth Circuit. of arbitrability.

tions Similarly, vesting Oracle maintains that Argued Submitted Dec. authority adjudi-

courts with “exclusive” Filed July relating parties’ cate claims intellec- property rights relating tual claims compliance with the

Myriad’s TCK License

constitutes modification of the UNCI- argues

TRAL rules. Oracle that this mod- requires

ification court determine

arbitrability. disagree. argu- This merely

ment recasts Oracle’s contention provision carve-out evidences

parties’ intention for a court to decide

arbitrability of that fall It claims within it.

is foreclosed the discussion above.

IV. CONCLUSION

Incorporation arbi- UNCITRAL commercial parties’

tration rules into the clear

contract constitutes and unmistak- parties

able evidence that the agreed arbitrability. Accordingly,

arbitrate partial

REVERSE the district court’s de- Myriad’s compel

nial motion to arbitra- cited, others, among

3. The court Terminix F.3d at 208. Int'l, Corp., F.3d at Contec Hills, Laguna H. (argued),

Karen Bucur CA, for Defendant-Appellant. Jr., André Birotte States United Attor- E. Assistant ney; Dugdale, Robert (ar- Attorney; Jeremy States D. Matz Attorney, States gued), Assistant United CA, Angeles, Plaintiff-Appellee. Los for BERZON, Before: S. MARSHA IKUTA, JACQUELINE S. and SANDRA NGUYEN, Judges. H. Circuit (for seller) purchase OPINION the actual price showing and purchase one the inflated IKUTA, Judge: Circuit (for lender); price finally .and the Mul- Kyle appeals his convictions (MLS) tiple Listing Service had to show fraud, fraud, bank money laundering, loan falsely price inflated sales commit loan bank conspiracy to homes. Abrams Fitzgerald coordinat- stemming Angeles-based from Los ed range colleagues the efforts scheme to mortgage defraud lenders. We make conspiracy work. Abrams re- conclude that the evidence adduced at tri Matykowski, lied on Jamieson one of his al, light taken in the most favorable to the Maize, employees, and Richard who con- government, adequate to enable ra Americorp trolled Funding, among others. tional trier of to find fact the essential broker, Americorp, mortgage would send elements of each conviction. See United loan packages lending agents review Nevils, States v. 1163-64 approval. The conspirators generally (9th Cir.2010) (en banc). Accordingly, we targeted require banks that did not their affirm on all counts. lending agents rigorous to use documenta- approval tion and standards. Over the I scheme, course the conspirators of the con- already explained We have this how roughly ducted 80 fraudulent transactions. Rizk, operated scheme in United States v. The banks that ultimately financed the (9th Cir.2011) (affirming F.3d 1125 loans their lending agents approved, Rizk, ap- conviction of Lila a real estate Lehman including (through Brothers its praiser in the and one of Grasso’s agent, Services), lending Aurora Loan co-defendants). Therefore, we provide Bank (through GreenPoint its lending only a brief of the overview scheme before agent, Mortgage), GreenPoint and RBC detailing particular aspects the relevant to Mortgage Company, lost at together least Grasso’s appeal. Abrams-Fitzgerald million the $46 con- spiracy. A Grasso was one of and Fitzger- Abrams scheme,

The crafted Mark ald’s recruits for this Grasso scheme. and Abrams, broker, mortgage and Charles partner Joseph Babajian were success- Fitzgerald, developer, Elliott a real estate agents ful real same estate affluent took advantage frenzy real estate area that Abrams and Fitzgerald targeted, the early conspirators 2000s. The would Angeles. Westside Los From to Jan- enter purchase agreement into a for a uary Babajian Grasso and were the home in Ange- an exclusive Westside Los top-producing real agents estate Fred les community, and then obtain a for loan Beverly Sands Realtors in Hills. Grasso significantly than price, more the sale Babajian subsequently left Fred pocketing money. the extra For Sands and became affiliated with Pruden- work, scheme to the conspirators had to Realty. tial compen- California Prudential exert control multiple aspects over of each Babajian sated their Grasso move real Among estate transaction. other by conveying an interest in things, ownership sev- agents keep sellers had to eral price of Prudential’s subsidiaries to Grasso purchase true confi- home dential; Babajian’s wholly company, show and owned appraisal reports had to homes; falsely FSC One of subsidiaries inflated values of the Ventures. these Title, companies pre- company title and escrow was a title had to Cal insurance documents, pare showing approval process two sets of whose lax one would become Claridge inflating purchase price co-conspirators’ opera- instrumental large property forego putting Drive “to tion. payment down.” down trial, presented evi- At in- that Grasso became prove dence to over the sum- plan The moved forward Abrams-Fitzgerald scheme volved in the purchase into a mer. Grasso entered and worked them some time Menendez, Jose the owner agreement with According through at least late pur- property, Drive Claridge participated pri- government, Grasso. early $890,000.1 In. chase house to be included marily by identifying houses 2000, Grasso submitted two September scheme, ensuring seller in the Americorp applications fraudulent loan confidential, price keep would the sales Funding, seeking mortgage one a first reported in managing the information $746,250, seeking and the a home second the title insur- listings, obtaining MLS $149,200. appli- equity credit line Both ance needed for and escrow documents price of purchase cations stated that the conspiracy his access to Cal Title. through $995,000, appli- home and the first was against case government’s making cation stated that Grasso relating six heavily rested evidence $120,000. Ameri- payment of some down transactions, real estate describe application to corp submitted Grasso’s they occurred. order Mortgage. reviewing GreenPoint applications, Mortgage GreenPoint identi- a red owned flag: already fied Grasso a purchase of a begin with Grasso’s a value than the higher home had Drive, Beverly Hills property Claridge on Claridge property, Drive raised the July In after personal for use. his use planned inference that Grasso to wife, his he separated Grasso from was Claridge property Drive rental. In home, and the market for his own focused inqui- to response Mortgage’s GreenPoint Claridge property. on Accord- Drive ry point, falsely this on Grasso stated that trial, ing adduced to the evidence to into he and wife intended move and thought Abrams that Grasso’s skills with that explanation, home. Satisfied in furthering were contacts useful Mortgage approved GreenPoint Grasso’s scheme and to himself “ingratiate” wanted with to to As procedure Grasso induce him continue loans. was the standard for Therefore, helping with the fraud. Abrams origi- all loans that Mortgage GreenPoint help purchase offered to Clar- Grasso time, nated at that GreenPoint Bank fund- idge by following Drive same property ed the loan. blueprint basic for other transactions used escrow closing, At Abrams’s in-house in the scheme.' Abrams plán, Under company fraudulent documents prepared

would front for down Grasso $995,000, reflecting a purchase price but payment, Grasso would obtain inflated to sent a settlement statement Menendez loan, pay and then the extra funds to use $890,000 stating price. the correct sales Abrams, According Abrams back. to Grasso knew the scheme worked and how Matykowski willing was a participant. purchasing At the same time he was acknowledged he

confirmed Grasso property, was from to “going Claridge August do one our deals” Drive agreement purchase version Menendez that his initials on One testified trial $990,000 price, agreement were showed an sales but fabricated. inflated (which sought purchase provided September price Grasso Abrams would be lender) with to- the and the Fitzgerald’s help prop- and a client’s second with the (that erty purchase price Hills. The actual seller Beverly on Alta Drive could review). property Although on the for near- Fitzgerald had been market Abrams and seller, ly year, Vigen Shaghzo, attempted companies other and use title transactions, putting was on Grasso to sell it. their these pressure companies soon them, Fitzgerald agreed buy Abrams and declined to work and Abrams they began Alta Drive if work and property Fitzgerald using could one ex- Cal Title clusively, their deals. or Babaji- fraudulent whether not.Grasso acting agent an was as the for the transac- The Alta Drive transaction unfolded as tion. early August follows. Abrams $2,000,000 offered Shaghzo name Sometime in Grasso called Maty- father, purchaser. complain Abrams’s straw kowski to Abrams Fitz- Abrams, According gerald using Grasso knew had been Cal Title for trans- actually purchas- Abrams’s was not he father actions where was the agent. not ing Shaghzo accepted the home. After the Grasso agitated was about this develop- $2,000,000 offer, ment, Grasso withdrew the the Abrams-Fitzgerald forbade $2,050,000 listing using MLS for the house and team from Cal Title unless Grasso $4,495,000. Babajian relisted it for false This relist- were the deal. Abrams problem, caused a however: when later told Matykowski agreed that he it, Shaghzo Babajian found out about he ordered Grasso pay Pruden- —via misinformation, Grasso to correct the and tial—a commission transactions where involved, agreed to do so. Abrams and Fitz- Cal Title they was even when gerald then submitted a fraudulent loan serving agents.

application price for an inflated purchase $4,395,000 to Aurora Loan Services approval. A for the amount loan full February From approximately by funded Lehman After Brothers. 2002, through represent- summer Grasso 2000, September sale in closed and the Fitzgerald their acqui- ed Abrams and in escrow company pro- disbursed the loan properties sition of four additional rele- Brothers, ceeds from Lehman Abrams vant to this For appeal. property on $46,436 paid Grasso’s firm in commissions. Hills, Canyon Road, Beverly Mandeville later, reported Several months MLS the Grasso several submitted unsuccessful price property sold its true using purchase offers the names dif- $2,000,000. prevent To Loan Ser- Aurora buyers, submitting ferent straw before seeing vices and Lehman Brothers from third, offer on successful behalf “Ja- listing, again this accurate ar- Grasso mieson Matykowski assignee.” and/or ranged listing to to change MLS show escrow, While the transaction was in Ma- $4,495,000. price a sales tykowski pur- purportedly assigned agreement yet chase another straw transaction, buyer. in Alta As Drive In January buyer pur- after Grasso became the straw was not the true affiliated with Prudential obtained an in fact and chaser and did not know con- Title, spirators indirect In interest Cal Abrams and had used his name. addi- Fitzgerald began using pro- Cal Title to straw multiple purchasers, tion purchases. vide title conspirators insurance for their also used two different es- Cal willing prepare companies: original Title was two title crow escrow policies, company determining insurance one with the inflated after it resigned Ventures) transaction, percent commis- a three FSC was uncomfortable transaction, together Title. FSC sion for each Cal replaced and (Grasso wholly $50,833. Babajian’s amounted to Abrams made these Ventures $19,231 payments separately earned in com- after the deals closed company) owned already deal. transferred missions for the and the bank had wire did not proceeds; loan conspirators in Grasso assisted also go up or on through escrow show Drive on Claircrest purchasing property statements for transactions. settlement According Matykow- Beverly Hills. characterized these Abrams Grasso ski, conspira- aware that Grasso was payments as “referral fees.” purchaser a straw for this using tors were point, Matykow- At well. one property, as B office, testified, he was Grasso’s ski grand jury August In indicted Grasso, your “Turn back for a jokingly told conspiracy for one count of to com- Grasso this contract.” going sign I’m second mit bank and loan violation “Hugo name Matykowski forged then charge This named 18 U.S.C. 371.2 purchase on the offer. Grasso Wendt” co-defendants, including Grasso and three forgery “just normal.” treated this Babajian, co- along Rizk and with six other accepted the offer for the Once the seller including and Fitz- conspirators, Abrams property, Drive asked Claircrest Listing gerald. nine transactions as overt purchase assign the escrow officer acts, alleged co- purchaser. to a different straw agreement devised and executed a conspirators Fitzgerald paid Ven- Abrams and FSC against scheme to commit bank fraud Leh- $21,490 in commissions for tures Brothers, Bank, and oth- man GreenPoint transaction when it closed. federally-insured er institutions between Fitzgerald Abrams and summer 2000 and and to commit loan fraud Beverly proper- more Hills purchased two statements, by submitting reports, false ties, one Yoakum Drive and the other and valuations connection with the listed Canyon they Although on Benedict Drive. transactions.3 Babajian did use either Grasso charged The indictment also Grasso with agent, they did their real estate use Cal aiding one count of bank fraud and prior Title. Abrams’s Consistent with (which 2,4 §§ abetting, in violation of 18 agreement, paid Abrams Prudential U.S.C. 1344(1);5 Babajian paid through in turn seventeen counts of loan fraud Grasso and 371, here, Malibu, provides Angeles, § in 2. 18 as Stradella Road Los and U.S.C. relevant Road, Angeles. in Los conspire Roscomare also persons either "[i]f two or more any against the United to commit offense "(a) [wjhoever provides § 2 4. 18 U.S.C. States, States, any or to defraud the United or against commits an offense the United States agency any any in or for thereof manner abets, aids, counsels, commands, induces, or purpose, persons and one or of such do more commission, procures punishable or its is as a any object conspiracy,” act to effect [, (b) principal willfully and] [w]hoever causes subject penalties. each criminal shall be directly performed if an act to be done which by him or another would be an offense Drive, Claridge These Alta include States, against punishable is United Drive, Road, Canyon Mandeville Claircrest principal.” Drive, Drive, Canyon Benedict Yoakum and transactions, here, 1344(1), Drive pro- § as discussed in detail 5. 18 U.S.C. as relevant above, “knowingly penalties as well as three additional transactions vides criminal for exe- execute, involving Anacapa cuting], attempting] properties at View or a scheme Drive aiding abetting, day and in violation of-18 and prison and one and million in $13 2, restitution. 1014;6 §§ and three counts U.S.C.

money aiding abetting, and and II 1956(a)(1).7 2, §§ in violation of 18 U.S.C. appeal, argues On Grasso that the charge

The bank fraud named all four district court erred in denying his motion allega- on the defendants and rested same for acquittal, 29, see Fed.R.Crim.P. be conspiracy charge. tions as the The mon- cause the evidence was sup insufficient to loan re- ey laundering charges and fraud port a guilty verdict on the conspiracy, specific lated to real estate transactions.8 fraud, fraud, bank loan money laun The three money laundering charges relat- dering for counts which he was convicted.9 ed individual “referral” Abrams made to Prudential after the Yoa- jurisdiction have under 28 § Canyon kum Drive Benedict Drive U.S.C. We review denials of Rule for acquittal motions novo. de transactions. Gonzalez-Diaz, States v. trial, jury After a Grasso was convicted (9th Cir.2011). In considering a ‘ all conspiracy, on bank claim that the evidence adduced at trial laundering charges, and on the loan fraud conviction, was insufficient to sustain a “[a] Drive, charges relating Claridge court reviewing must consider the evi Drive, Road, Canyon Alta Mandeville presented light dence at trial most Drive transactions. Clairerest Grasso favorable to the prosecution.” United for acquittal charges moved on all or in thé Nevils, States v.

alternative for a new trial. The district Cir.2010) (en banc) (citing Jackson v. Vir motions, rejecting court denied his these 307, 319, ginia, 443 U.S. 99 S.Ct. sufficiency (1979)). of the evidence claims. L.Ed.2d This means that “a court sentenced Grasso twelve months court ‘must reviewing presume if it —even (1) charges sep- to defraud financial institu- 8. The loan arose from five artifice — Drive, Claridge tion." arate transactions: Alta Drive, Road, Canyon Mandeville and Clair- here, § provides 6. 18 U.S.C. as relevant Drive, above, crest discussed as well as a penalties "knowingly mak[ing] criminal property Fitzgerald fifth pur- that Abrams and any report pur- false statement or ... for the Angeles. chased on Roscomare Road Los any pose influencing way the action of acquitted loan fraud any ... institution the accounts of which are relating counts Road Roscomare trans- Deposit insured the Federal Insurance action, part which are of this therefore Corporation.”' appeal. . 1956(a)(1), here, 7. 18 U.S.C. as relevant argues also 9. Grasso district court “[w]hoever, provides penalties criminal right violated Sixth Amendment to con- knowing property finan- involved in a by admitting frontation a statement from Tim represents proceeds cial transaction the of Holland, co-conspirator a who controlled one activity, some form of unlawful conducts or companies. of Abrams’s in-house escrow Al- attempts to conduct such a financial transac- though Sixth the Amendment limits the ad- which in proceeds tion fact involves the of evidence, missibility of testimonial see (A)(i) Craw- specified activity unlawful with the —... 36, Washington, v. 541 124 U.S. S.Ct. promote carrying to specified intent the on of ford 1354, (2004), (B) co-conspirator 158 L.Ed.2d 177 activity knowing [or] unlawful ... the that conspiracy in a designed part (i) transaction is in statements furtherance of are whole or — nature, location, testimonial, Allen, disguise conceal v. to or the the United States 425 source, 1231, Cir.2005), (9th ownership, the the or the of F.3d 1235 and therefore control proceeds activity.” specified reject argument. the unlawful 1086 a con in rec- Where the defendant has affirmatively appear the

does not (even the any slight) conspiracy, resolved if to trier of fact nection ord—that the the prosecution, the also show that government in favor of must such conflicts ” to resolution.’ Id. is conspiracy that to the and must defer defendant’s connection 326, Jackson, is, 443 S.Ct. U.S. 99 (quoting knowledgeable; government “that 2781). Second, the court must determine beyond a reasonable doubt prove must evidence, viewed in that man- whether the knew of connection that the defendant ner, any to rational trier adequate “is allow 847 charged conspiracy.” Meyers, elements of a of fact find the essential to a con knowing To establish F.2d a reasonable doubt.” beyond not, course, crime nection, be need “[t]here (internal marks and alterations quotation proof conspirators were aware omitted). objective,” the criminality Ingram of their States, 672, 678, v. 360 U.S. United

A (1959). 1314, In S.Ct. 3 L.Ed.2d begin appeal stead, with Grasso’s government We must show that the conspiracy his conviction for to commit “the ob was aware of unlawful defendant bank fraud. To convict loan fraud and ject agreement [was] toward which conspiracy, government Krasovich, Grasso of directed,” States v. United conspiracy (9th must that a existed. prove Cir.1987); first 253, 255 also id. F.2d see prove conspiracy “To a under U.S.C. (“Knowledge objective of the con establish; 371, must first spiracy any an element of con is essential (1) engage criminal agreement conviction.”) spiracy (citing Ingram, 360 (2) activity, one or overt acts taken more 1314). govern U.S. at 79 S.Ct. (3) agreement, implement may rely ment on circumstantial evidence requisite intent to commit the substantive and inferences drawn from that evidence Rizk, 1134 (quoting crime.” 660 F.3d at knowing prove order to the defendant’s Sullivan, United v. 522 F.3d States conspiracy. connection to the See United (9th Cir.2008)). “Once existence of Johnson, 868-69 States v. shown, is evidence estab conspiracy (9th Cir.2002). lishing beyond reasonable doubt a know Here, undisputed govern- it is ing connection of the defendant with the sufficiently of a proved ment existence conspiracy, though even the connection is conspiracy to commit bank fraud and loan him slight, is sufficient convict of know Rizk, “Abrams, explained fraud. As we ing participation conspiracy.” Unit with Fitzgerald, others associated 1408, 1413 Meyers, ed F.2d States them initiated carried out a scheme to Cir.1988). (9th explained have Rizk, 660 mortgage defraud lenders.” may have “slight defendant connection” does contest F.3d at Nor Grasso even if conspiracy the defendant did in the participated conspiracy; that he not know all the did not conspirators, par rather, he disputed issue is whether ticipate conspiracy from begin its knowingly. did so ning enterprises, or participate all its end, To that argues all otherwise know its details. the government failed to adduce sufficient Reed, States v. Cir.2009). prove “knowledge he had However, evidence is not a crime “[i]t conspiracy,” id. at objective of acquainted phys be or to criminals Grasso, ically According 1134. Abrams present they committing when are him Fitzgerald targeted manipulated crimes.” United States Herrera-Gon zalez, (9th Cir.2001). respected of his and ex- “highly 263 F.3d because practice objective in knew of tremely real estate the of the conspiracy. successful” Rizk, at disagreed, Grasso that the evi- 660 F.3d 1134. Angeles. Los claims We holding that a rational could jury that his have dence showed involvement beyond found a reasonable that Rizk doubt legitimate the conspiracy was limited to intended to defraud the in transactions, victim lenders real aspects of the estate light of significantly evidence that Rizk steps of the in he was unaware fraudulent overvalued properties preparing the her Fitzgerald’s Abrams and scheme. appraisals, requested that MLS the data- Viewing light the facts most fa- manipulated higher base be to show sales Nevils, prosecution, vorable to the her prices, appraisals and knew were be- govern- F.3d at we conclude that get properties. used to loans on the presented ment more than evi- sufficient Grasso, at 1134-35. Like Rizk also objectives dence that knew Grasso raised the defense that “duped she was jury fraudulent scheme. A rational by Fitzgerald, and used” Abrams and but beyond could determine a reasonable government held that had intro- early July doubt that as Grasso duced sufficient evidence to overcome this knew that the real estate transactions by showing defense that Rizk anwas “ex- were to deceive Broth- structured Lehman perienced appraiser,” ap- “knew that her ers, Bank, GreenPoint federally other praisals being used finance banks, and that insured he assisted purchase properties,” and “was unduly deception. The evidence showed that by influenced forth put by values co-conspirators Grasso assisted his in con- Rizk, Fitzgerald.” Abrams and vincing properties lenders that various Here, too, government’s evi- were sold for more than actual their sales dence, the light taken in most favorable to prices. personally Grasso benefitted from Nevils, prosecution, see falsely inflating the purchase price for his 1164, was jury reject sufficient Claridge property, personally Drive and he Grasso’s exculpatory theory and to find inflated listing the MLS in the Alta Drive beyond a reasonable doubt that he had transaction. He was aware of the role Cal “knowledge objective conspir- played creating Title two different title Rizk, acy.” 660 F.3d at 1135. insurance one policies, showing inflated with other purchase price that he purchase price. Matykowski’s testimony the transaction. field, Matykowski knew that chasers who showed that Grasso was an signature he was not so the by using joked evidence, jury into might of a straw purchaser, along conspirators and one could innocently carrying duped by Finally, not even be aware of Grasso about indicated names of straw reasonably showing furthered the the evidence expert Abrams and conclude the true forging Grasso in his pur- § out ment or influencing in dant convictions for loan fraud associated with Insurance actions. To obtain Canyon Next, we bank Claridge “[1] Road, insured knowingly report consider Grasso’s Corporation.” Drive, any way and Claircrest Drive trans- must ... a loan Alta [made] B the Federal prove for the ^[2] Drive, the action of ... any that the defen- appeal 18 U.S.C. purpose false state- Mandeville conviction, Deposit his the acts described above. a similar reached conclusion Rizk. Grasso,

Like Rizk argued that evi- begins by challenging dence was Claridge insufficient establish she loan fraud conviction for the “a jury that rational could Grasso claims that court concluded transaction.

Drive easily beyond infer a reasonable doubt that prove that he had not government did pres- his Bellucci knew would [that broker] that false state- knowledge sufficient variety application ent his loan to a buy the he to obtain loans to ments made institutions, including financial banks.” influence would a Claridge property Drive Here, at trial showed that evidence bank, failed to federally insured and so experienced Grasso an real estate was his that he made false statements prove who, Bellucci, agent like was well-versed in purpose. for that process. For lending in- mortgage argument. with disagree this stance, partner Babajian, his Grasso claims, Contrary govern to Grasso’s team, top-grossing as a real es- prove the element of knowledge ment can agents Prudential tate California by showing that made false Grasso also evidence showed Grasso’s obtaining purpose for the a statements understanding Claridge that Drive loan, would knowing that those statements operate deal would the scheme’s basic federally submitted to insured banks.10 blueprint, generally which was to obtain Bellucci, 995 F.2d See United States impose that funding from banks did not (9th Cir.1993) curiam) (“Sec (per rigorous lending agents. standards on their misrep proscription knowing tion 1014’s Taking together, jury this evidence could knowl resentation defendant’s reach[es] reasonably conclude Grasso knew that edge presentation statement’s false made his statements to obtain loan generally[,] as from a distinguished banks ultimately would influence insured (internal bank.”) quotations particular Bellucci, 995 bank. See F.2d at 159.11 omitted) Lentz, (quoting United States v. (5th Cir.1975)). Belluc

ci, applica the defendant submitted a loan argues next that there Grasso was through tion with false statements insufficient to convict him of evidence loan broker, conveyed mortgage eventually who only fraud because he involved Be them to a 995 F.2d at 159. bank. legitimate step of the real first estate long cause had a career as a de transactions, Bellucci knowledge no had veloper banks, and thus “was familiar builder and did defraud lending pro any manner which the make a federally false statements to even operates,” cess testified he insured financial institution Alta Drive, Drive, understood his broker “would use loan Claircrest and Mandeville loans,” shop Drive applications go transactions.12 Congress § 1014 in 2009 to cov- knew his false would amended statements businesses,” Bellucci, lending ultimately "mortgage but a bank er this influence under Bellucci, reject argument. expanded applies only prospectively definition this F.2d 159; McDow, does not cover the events this United States v. therefore cf. 1994). Recovery case. Fraud Enforcement and Act Cir. 111-21, (FERA), of 2009 Pub.L. No. 12.Although argument Grasso addresses 2(c)(2), 4(f). §§ (for to all four of his loan fraud convictions Drive, Drive, Claridge Alta argues 11. Grasso Mandeville also Road, Canyon failed to Green- and Claircrest Drive transac- demonstrate nexus between tions), Mortgage inapplicable Claridge it Point and GreenPoint Bank that is Grasso’s conviction, juris- satisfy § Drive was sufficient to 1014’s federal loan because Grasso Claridge personally in his dictional element for the Drive trans- made false statements loan already application action. we have and related documents for Ciar- Because concluded

1089 argument also fails. Abrams This Under admitted that he committed loan States, Pinkerton v. United a defendant transactions, fraud in each of these which charged in a participating conspiracy with place took to according the scheme’s basic may subject liability for offenses blueprint. Because Grasso was aware of part committed of conspiracy, even blueprint, reasonably this he could have if directly did not participate defendant foreseen loan Abrams’s those 640, 647, in each offense. 328 66 U.S. Thus, transactions. there pro is no due 1180, (1946); S.Ct. L.Ed. 90 1489 see also problem holding cess him liable for Hernandez-Orellana, v. United States 539 Abrams’s acts under Pinkerton. Because Cir.2008). (9th 994, F.3d 1007 Pinkerton there is sufficient evidence uphold Gras co-conspirators “renders all lia criminally so’s convictions for loan fraud under Pink ble reasonably for foreseeable overt acts erton, it does not matter whether Grasso by others in committed furtherance of was aware of when or whether Abrams they conspiracy joined, they have whether committed the constituting acts loan fraud of them or aware not.” Hemandez- Hernandez-Orellana, in each transaction. Orellana, F.3d Although at 1007. 539 F.3d at 1007. have may process noted there be due limi imposing tations to Pinkerton on liability C extremely “with defendants minor roles now turn to Grasso’s of appeal his the conspiracy,” Bing United States v. fraud, for bank conviction based role ham, (9th Cir.2011), or F.3d in the scheme to defraud Lehman Broth- relationship where “the between the defen ers GreenPoint Bank. The bank fraud dant and the slight,” substantive .offense is statute, 1344(1), § provides 18 U.S.C. Castaneda, United States v. penalties anyone criminal for who “know- (9th Cir.1993), overruled on other executes, execute, ingly attempts or grounds by Nordby, States (1) or artifice —... to defraud a (9th Cir.2000), F.3d 1053 such are concerns financial argues institution.”13 Grasso present in this case. government failed to suffi- adduce Taking the evidence adduced at trial cient he knowledge evidence that had the light most favorable to the govern- object the scheme to defraud banks ment, juror a reasonable could find all or he requisite had the intent de- necessary impose elements to Pinkerton Rizk, fraud. See (stating 660 F.3d at 1135 liability, contrary to Grasso’s contention one the “essential elements” nothing that he had to do the fraud. 1344(1) § bank fraud under is that Matykowski Abrams and testified that attempted defendant executed exe- conspiracy’s was well aware of the cute the fraudulent scheme the in- “with fraudulent had a purpose and substantial defraud”). tent to Drive, role in it time Alta Road, Canyon Mandeville making Claircrest In its case that Grasso was Moreover, Drive transactions occurred. guilty bank re- Bennett, idge Drive. We affirm that count States v. Cir.2010). reasons discussed above. applies prospec- This amendment however, tively, respect and with events 2009, Congress amended 18 U.S.C. case, only definition of "financial 20(1), § supplies the definition of "fi- 20(1) §in institution” relevant was "in- here nancial institution” to cover sured financial institution." FERA "mortgage lending businesses” such 2(a)(3), 4(f). §§ Mortgage GreenPoint and Aurora. See United ity for See 18 U.S.C. of Grasso’s or concealment. evidence lied on the same added). 1956(a)(1) § (emphasis his conviction knowledge supported that ' commit bank fraud. Ac- conspiracy to for Santos, Supreme v. In States the that the evi- argument cordingly, Grasso’s attempted “pro- term to define the Court fails for the same dence was insufficient five-justice reach ceeds” but could not a conspiracy to his challenge reason that his 507, 128 S.Ct. majority to do so. 553 U.S. the facts in the viewing fails: conviction (2008). Santos, 2020, 170 L.Ed.2d prosecution, the favorable to light most running an the was convicted of defendant that was ample there evidence Grasso was lottery, took “runners” illegal ob- fraudulent well aware of scheme’s the mon- gamblers from and delivered bets intentionally he furthered jective and that 509, 128 ey “collectors.” 553 U.S. at to supra at 1086-87.14 turn, the fraud. See collectors, S.Ct. 2020. Those to San- passed money along defendant

D tos, paid then and collec- who runners Finally, argument address Grasso’s we for their services and disbursed tors presented insufficient government that lottery Id. The awards to winners. money him of launder- evidence to convict money government Santos with charged ing when he received two “referral fees” 1956(a) theory § under laundering on for the Drive and Benedict Can- Yoakum runners, money pay that the used yon argues Grasso Drive transactions. collectors, lottery was the winners gave that Abrams him referral fees illegal lottery and that proceeds of his Title, access to that the loan fraud and Cal money promote was using Santos bank scheme could not have oc- lottery activity. fraud on carrying Id. access, and, therefore, 509-10,128 curred such without at S.Ct. money laundering merged

that the offense wheth- appeal, On the Court considered underlying into the loan fraud and bank §in “proceeds” er the word 1956 meant separately offenses cannot receipts illegal activity, gross of an punished. i.e., profits net only receipts, activity. Writing four-justice a plurality, Scalia concluded that Justice argument,

To this we first con- address “proceeds” plausi- both definitions of legal sider the relevant framework. Un- ble, ‘profits’ and that “because the defini- statute, der always more defendant- proceeds tion of is 1956(a)(1), must government U.S.C. definition, friendly ‘receipts’ than the prove that a defendant: ^[1] knew that rule of lenity dictates it should be in a money being used financial transaction Id. 2020. In adopted.” at S.Ct. conclusion, was the some form unlaw- “proceeds plurality this supporting ful attempted activity,” conduct, ^[2] then conducted or financial transac- noted that “receipts” would defining “proceeds” frequently lead to mean tion with such proceeds; ^[3] for the pur- “merger problem”: “nearly every violation pose illegal-lottery of either an activ- of statute would also be promoting unlawful argued respect 14. As adduced suffi- he his loan fraud concluded convictions, knew contends here that cient evidence to establish that Grasso also federally insufficiently in- there close the scheme was aimed at connection banks, reject argument. Mortgage again between GreenPoint and Green- sured Edelkind, satisfy § jurisdic- Point federal Bank 1344’s United States Cf. Cir.2006). (1st already have tional Because we element. 797-98 money laundering part stat- is it duly violation of the normal a crime had “a ute, winning because bettor is a paying appropriately punished considered and involving receipts transaction that the de- Code,” elsewhere Criminal should promote carrying fendant intends to Id. punished money also be laundering. lottery.” S.Ct. 128 S.Ct. 2020. Justice Stevens plurality Congress noted that would explained that this “particularly result was a not have “wanted transaction that is a [Santos ] penalties unfair in because the normal of it had part duly a crime consid- laundering are substantially punished ered and appropriately elsewhere more than severe those for the underlying in radically to increase Criminal Code operating gambling offense of a business.” crime” by application sentence for that Id. at 527, 128 Congress S.Ct. 2020. had Id. at of the money-laundering statute. capped the maximum for engag- sentence 517, 128 S.Ct. Because Santos’s illegal in an five lottery years, an runners, payments to the collectors and “important limitation” that would be “evis- lottery a normal of the part winners were cerated” if a court impose could a sentence (and prof- cost of not doing pure business up twenty years, of statutory maxi- it), plurality payments concluded the Id. Justice money laundering. mum for “proceeds” did not constitute for purposes Congress Stevens concluded’that could not of the statute. have such “perverse intended result.” rejected justices Four and analysis Id. at 528,128 S.Ct. 2020. dissented. The dissent that contended Although agreed Justice Stevens “proceeds” be “gross should defined as proceeds “profits” meant in the lottery receipts,” “merger any and would leave scheme, agreed he justices with the four problems” judges’ district discretion at proceeds dissent profits did not mean Id. at sentencing. 2020 S.Ct. every case. Among things, other he (Alito, J., dissenting). analysis, Under this “the explained, legislative history of runners, Santos’s collec- § Congress 1956 makes it clear that in- lottery tors and winners were out of made ‘proceeds’ tended the term gross to include gross of receipts lottery business from revenues the sale of contraband and “proceeds” pur- thus constituted operation organized syndi- crime poses statute. Id. 526-27, involving cates such sales.” Stevens, concurrence, reject- Justice S.Ct. ed both “proceeds,” definitions of Santos quickly caught the attention of adopted a case-by-case approach. He was § which Congress, amended particularly troubled the fact that the “proceeds” “any property define de- dissenting opinion allowed “the Govern- retained, directly rived from or obtained or ment to payment treat the mere indirectly, through some form of unlaw- expense of operating illegal gambling ful activity, including gross receipts Id. separate' business as a offense.” 2(f). activity.” § such FERA The amend- (Stevens, J., 128 S.Ct. 2020 concur- effectively ments Justice endorsed Alito’s ring). both Considering “common'sense” interpretation dissent overruled any lenity,” and the “rule of Justice Stevens “proceeds” based on Scalia’s and agreed Justice with Justice Scalia that there was S. opinions. Rep. Justice Stevens’ Ill— Congress no reason to think intended that (2009) 10, at generated by (explaining plu- “revenue busi- gambling Santos pay rality ness that is ex- used essential decision “erroneous” business,” intent.”). penses operating “contrary to Congressional § after there of an investor’s investment current version entire Under that Grasso’s “referral raise began no debate to unravel did not such could be Drive and Benedict the Yoakum fees” for reasoned that merger problem. Id. We would sepa- Canyon Road transactions part the refund check was of the “core not money laundering. rately punishable payment because the scheme” “under- retroactive, amendments are The 2009 than mined rather advanced” Ponzi 4(f), however, and so FERA we must see 815-16; scheme. Id. at see also United merger in assessing Grasso’s apply Santos Bush, States v. argument. Cir.2010) (reasoning transfers of pro- four-year, million ceeds from a Ponzi $36 opinions the three analyzing “carrying court, scheme were not central to out we have by the Santos produced “ objective[s]” part the scheme’s in because controlling ‘pro rule that derived ‘profits’ viewing ‘pro means where “operated ceeds’ the defendant had his scheme ‘receipts’ present ‘merg would a ceeds’ years” transferring for several before that problem er’ of the kind troubled account, concluding his funds to in See plurality and concurrence Santos.” prob- not merger transfers did raise a Alstyne, States v. 584 F.3d United Van lem); 704 Phillips, United States v. F.3d (2009). 803, subsequent case law 814 Our (9th Cir.2012) n. 11 (looking 766 we in has identified three factors consider money laundering whether the transaction “merger a determining prob when such component” was the underly- a “central lem” arises. scheme); Moreland, ing United States First, given look a trans- (9th we to whether Cir.2010) (same). 1166 component” action a “central was Second, we consider whether the underlying Alstyne, scheme. Van money laundering charges inclusion Alstyne, In F.3d at 815. defendant Van “ in leads to radical the statuto ‘a increase charged counts of mail fraud with 19 ry maximum the underlying sentence’ for running for a Ponzi scheme and three offense,” in justices because five Santos money Id. at 809. laundering convictions. Bush, expressed also this concern. considering challenge In the defendant’s F.3d (quoting at 538 States v. convictions, money laundering we (6th Cir.2009)).15 Kratt, regular based on struck down the two words, In Congress caps other when distributions to individual investors maximum for the defendant’s sentence un “issuing Ponzi scheme. Because distribu- something offense at derlying radically represented supposedly tion checks that less for than maximum sentence mon generous on his victims’ invest- returns ey may laundering, Congress we infer that component ment was a central ” did intend the “important not limitation” defraud,’ ‘scheme to we held that convict- penalty underlying on the for the offense money laundering defendant of by penalty be “eviscerated” “for the bank transfers inherent Santos, laundering money conviction. central mail fraud charges” ‘scheme’ By contrast, U.S. at 128 S.Ct. 2020. a merger problem. would raise Id. at 815. underlying mail hand, money other where a defendant’s On the we held laundering based on refund wire-fraud carried a statutory conviction convictions Although Alstyne, questions our reliance between these cases and Van dissent they Phillips conducting did on Bush because followed not consider issue its Therefore, analysis. approach, op. merger by the Sixth see we are Circuit’s dis. bound 1100-01, precedent. conflict our see no irreconcilable (cid:127) Wilkes, United States v. thirty years, Con In maximum sentence we extended choice of would not be gress’s penalty beyond drug Webster’s rationale cases and ten-year statutory “eviscerated” into the context of and bribery. (9th Cir.2011). Wilkes, money laundering. maximum sentence F.3d 524 Bush, Phil 538; see also ringleader 626 F.3d at of a involving kickbacks Cir.2012) lips, n. 11 F.3d at 766 Congressman to a exchange for lucra- (holding regarding concern Santos’s tive challenged contracts his Congress’s the evisceration of of a choice money conviction concealment launder- statutory un penalty low maximum for an ing.16 challenged The defendant his con- not derlying apply offense did where grounds. viction on two He first argued underlying sen offenses carried maximum use that his of multiple transfers to indi- money of twenty years, tences and the rectly off the pay Congressman did not maxi offense carried lower id. at 545-47. “concealment,” constitute years). mum sentence of ten Santos, Second, relying on argued Wilkes transfer pay of funds to off the Third, we generally consider the Congressman merely “was an expense as- used transfers co-conspirator crimes and, thus, bribery, sociated contraband, such the sale of ‘proceeds’” money under the laundering bribery constituting “proceeds” the of Id. rejected statute. 548-49. We both money crimes for of purposes such arguments. We that govern- first held United States laundering statute. Webster, proven ment had concealment because money we that when concluded “a “the to disguise effort the source of the laundering count is based on transfers money was an act among sepa- additional that is co-conspirators money of from Id. at 547. rately punishable.” drugs, of ‘re- With re- ‘proceeds’ sale includes all Santos spect argument to defendant’s from that ceipts’ such sales.” (9th Cir.2010). there was insufficient acknowledged that evidence that We plurality opinion “proceeds,” Justice Scalia’s bribes constituted we stated conclud- “[ujnder Webster, ed that merger problem might [the that exist for defendant’s] payments among but conspirators, money laundering certain count was based on a concluded that was a view to a minority co-conspirator money transfer of from Rather, Id. controlling. not we bribery that was honest fraud and such services dissent, justices plus relied the four in ‘proceeds’ ‘receipts’ that would include all Stevens, from the fraud.” Id. at 549. agreed leg- Justice Accordingly, who that “the history rejected argument § islative of clear makes it defendant’s that be- Congress ‘pro- that intended the term kickback payments cause the were an in- defraud, gross ceeds’ include revenues from the herent part they scheme operation sale contraband and the could not constitute proceeds purposes organized syndicates statute, crime such involving and con- sales.” cluded that defendant’s transfers to the proceeds; ture, ment ey laundering financial some conducted dant: To form of was establish the sort of concealment mon- ^[1] location, transaction knew ^[3] required financial unlawful "to involved conceal money being source, was the transaction with activity,” prove "Wilkes, or disguise that “proceeds and [2] ownership, the defen- used govern- such then in a na- cause prove money laundering § op. at 1100. or the analysis "proceeds” of an unlawful 6(a)( )(B)(i) both control of Santos is promotional defendant require the (emphasis applicable proceeds.” knowingly activity, here. Cf. added). concealment 18 U.S.C. used the Wilkes's Dis, Be- viewing We whether ‘proceeds’ of fraud. first consider “constituted Congressman defraud,” “proceeds” “receipts” in this context id. “of kind merger problem raise a would argument the dissent’s disagree plurality troubled the and concurrence that kickback that Wilkes’s determination Alstyne, 584 F.3d at 814. Santos.” Van Congressman “pro- Alstyne. with Van inconsistent ceeds” is face, On the loan their Alstyne not Van did op. Dis. at 1100. merger prob do' not raise such a counts co-conspirator address have occasion to statute, § crim lem. The loan fraud transfers, appro- and Wilkes while Webster “makfing] any false knowingly inalizes justices’ five views priately relied on an insured report” statement defraud concluding that such transfers Santos institution, while 1956 criminalizes know problem. Van Al- merger did not raise “conducting] a transaction” ingly .financial problem styne merger ’s statement proceeds activity unlawful involving when in a may triggered confederates these specified Because purposes. based on a profits scheme shared criminalize types different of be statutes plurality opin- Scalia’s summary of Justice havior, did money laundering counts ion, not and does neces- 584 F.3d at increase Grasso’s sentence for beyond the situation identi- sarily extend underlying behavior the loan fraud same Stevens, illegal that of by fied Justice counts. operations. Accordingly, we are gambling counts, the Unlike the loan fraud precedent bound our Webster charged bank fraud count Grasso with Wilkes.17 Abrams-Fitzgerald entire “scheme to de 2 fraud,” encompasses and Yoakum so and Drive principles Canyon these Gras- Drive Benedict transac apply We now government’s But ar argument reject merger so’s mon- tions. we Grasso’s First, gument two ey laundering charges for the Yoakum here as well. Abrams’s Canyon not a “central Drive and Benedict Road transac- kickbacks to Grasso were component” underlying Under the scheme. merger problem. tions raise a law, argument Alstyne, F.3d that applicable Van 584 at 815. Given case Grasso’s Fitzgerald lasted government pro- has the Abrams and scheme turns on whether the years roughly that the referral three involved 80 vided sufficient evidence and fraud transactions, fees loan fraud bank ulent and that Abrams and “proceeds” are and sentence, only tory 17. The the Fourth Cir- maximum when noth- dissent’s reliance on Cloud, opinion v. cuit's in United States 680 ing legislative history suggests that Cir.2012) (4th is mis- F.3d 407 also increase”); Congress such an Gar- intended placed. defining applying "essential (5th Cir.2010) Roy, land v. 615 F.3d expenses,” plurali- Santos Cloud relies on the (applying presumption "proceeds” that ty’s reasoning "proceeds” the term ex- that “gross receipts” means there is ade- unless any payout co-conspirator. cludes to a legislative history quate rebut the presump- interpreted 403-09. We have not Santos so Fishman, tion); F.3d United States v. broadly, relying Justice Stevens’s instead on Cir.2011) (holding, 1193-94 See, Wilkes, case-by-case e.g., approach. Santos, light that fractured nature of have F.3d at 549. Other circuits likewise setting opinion so is confined to its factual broadly interpret refused to as the Santos "proceeds” "profits” only where that means Kratt, F.3d Fourth Circuit. See at 562 involved); illegal gambling operation is (holding "proceeds” "profits” means Demarest, 570 F.3d United States money laundering only imposing when (11th Cir.2009) (same). "leads count to a radical increase the statu- Fitzgerald generally money secured access to Because the laundering Cal convic- through participation Grasso’s in this merger Title tions case do not raise a transactions, the their real estate two iso- problem respect either the loan lated referral at the Grasso convictions, fraud or bank fraud we define end of were not “central” to the scheme “proceeds” “gross to mean receipts,” and Bush, the scheme’s success. See conclude may that these referral fees operated at 537. The fact that the scheme “proceeds” viewed as of the loan bank successfully years several before basis, fraud. On that reject Grasso’s ever Fitzgerald gave Abrams and argument government presented is powerful kickback evidence of the kick- insufficient evidence his money laun- overarching backs’ “irrelevance dering were charges based on “separate Moreover, fraud scheme.” Id. Abrams’s activity and distinct” from the Yoakum kickbacks Grasso drained off funds that Drive and Canyon Benedict Drive transac- in purchas- Abrams could have re-invested tions. property another to extract fraudulent undisputed It is remaining ele- proceeds, loan hindering thus promotion money laundering, ments un- way the same the returned investment 1956(a)(l)(A)(i), der were fulfilled here. Alstyne Van hindered the defendant’s adduced evidence that Ponzi Alstyne, scheme. Van Grasso knew that the referral fees were 815-16. from Canyon derived the Benedict Second, money the inclusion of the transactions, Yoakum Drive and that Gras- laundering did ‘“a charges not threaten so knew these activities involved bank and statutory radical increase in the maximum Further, testimony loan fraud. underlying sentence’ offense.” Matykowski Abrams and dem- sufficiently Bush, Kratt, (quoting 626 F.3d at 538 onstrates that Grasso had the requisite 562). Here, underlying F.3d at bank promote carrying intent to on of loan 30-year statutory fraud count has a maxi money as his demands for mum, while count conspirators’ ongo- intended ensure the 20-year statutory has a maximum. As in ing access to Title. af- Cal We therefore Phillips, statutory Bush and the cap on money laundering firm Grasso’s conviction penalty for bank fraud is not “eviscer 1956(a)(l)(A)(i), § under and need con- not by penalty money ated” the maximum for alternatively sider whether could up- it laundering, and no thus raises inference 1966(a)(l)(B)(i). § held under Congressional Finally, regarding intent.18 to “proceeds” have declined to define Ill mean a “profits” money when We conclude there was sufficient is conviction based on and kickbacks trans support evidence to Grasso’s Convictions co-conspirators fers to in schemes to de fraud, Wilkes, conspiracy, for loan bank and fraud such as Abrams’s. See 662 laundering, F.3d at 547. money and that the district above, plurality Sentencing parsimony 18. As noted Santos and Guidelines and Here, 3553(a). Justice Stevens on how a laun- focused principle of U.S.C. charge dering statutory instance, could affect the maxi- guidelines range Grasso’s Congress by mum underlying chosen for the months, just he- but received twelve question Congressional This offense. of in- day imprisonment and of for his months one a tent is distinct from district court's exercise 11; Phillips, crimes. See 704 F.3d at 766 n. fashioning of appropriate discretion in Bush, see F.3d at also 538. sentence, inherently which is limited denying conspiracy, simply knowledge in if he has did not err a therefore court acquittal. a conspiracy motion of the “connection” its Grasso’s That, participants. Maj. Op. AFFIRMED. course, See, e.g., of is not law. United BERZON, Judge, concurring (9th Circuit Tran, 1156, 1164-65 States v. 568 F.3d part: dissenting part Cir.2009) a convic (reversing conspiracy no ... tion because there was “evidence I II.A-C of the I concur in Parts from which it could be inferred —much less opinion separately but write with panel’s proved beyond reasonable respectfully dis- doubt—that to Part II.A and regard in the con participated [the defendant] from II.D. sent Part manner”) added). any spiracy (emphasis I. years panel thirty-five ago, More than in Part II.A of The case relied on Reed provide greater court endeavored to following: panel’s opinion says law clarity regarding aspect one established, only is a conspiracy “Once doing, and in conspiracy, emphasized so conspiracy is nec slight connection “proliferat[ing]” “statement[s]” risk essary support a conviction. The term misleading that are if taken “highly law that a defendant ‘slight connection’ means out particular of the context of the cases in conspirators, need not have known all the which ... made.” See States v. United from participated conspiracy its be Cir.1977).1 (9th Dunn, participated enterprises, in all its ginning, process, the court that “evi- stated A or known all its details. connection establishing beyond dence a reasonable conspiracy may be inferred from cir doubt a connection of defendant with [a] cumstantial evidence. Innocent associa tion, conspiracy, though it is does amount even the connection knowing, even if is ” ‘slight slight, to a connection.’ States him is sufficient to convict with Cir.2009) Reed, knowing conspiracy.” participation (internal citations, marks, added). quotation (emphasis Id. at 357 At the same omitted); Op. Maj. see at 1086. time, alterations panel noted that “after much Reed, and, although majority relies reflection, [it of the mind that” that was] slightly language it paraphrases “may ap- statement of law be of doubtful majority I opinion, opinion understand the pellate application when issue for re- incorporate holding concerning Reed’s view concerns whether the defendant was “slight connec import limited connected with the at all.” conspiracy I concur in Part tion” locution. therefore quoted approv- 357 n. The court opinion. II.A of the Circuit, al explain- a decision of the Fifth “ its proper appli- that this rule ‘finds I write separately, nonetheless to ex- persons clearly cation where are connected my quota- concern that some of press read, conspiring group acting in II.A be in iso- or are found tions Part could lation, in may unmistakably that a defendant be such manner as for- suggest ” any way purposes.’ (quot- in its Id. at n. 21 participating convicted without ward 357 Dunn, omitted). argued quotation that intemal marks We ob- " Knight conspiracy quoted is from the existence of served statement '[o]nce established, clearly slight may "obviously was evidence be intended ... [not] to state evidence,” it,’ id., regarding defendant law and sufficient to connect a clarified quoting Knight, must be ”establish[ed] from United States v. 416 F.2d evidence be- 1181, doubt,” (some Cir.1969).” yond (9th id. Id. at 356 a reasonable at 357. Alvarez, 542, Huezo, v. 548 F.2d ed ing United States States v. 546 F.3d 184-85 Cir.1977)). (2d Cir.2008) (Newman, J., concurring, Walker, J., joined by Sotomayor, J., and doubts Despite expressed part). relevant court, intervening years, Dunn proliferated have ... “repeatedly th[e] Here, there is no doubt that Grasso may a defendant be con- statement” that committed overt acts in furtherance “knowing victed of con- participation [a] conspiracy. panel As the opinion explains, spiracy” of a “slight” based evidence Grasso “assisted his co-conspirators con- the conspiracy. “connection” with See id. vincing properties lenders various noted, at other have judges 356-57. As were sold for more than their actual sales misleading, ambiguous, this is a or at least prices.” Maj. also Op. “per- 1087. He standard. It could be read “mean that sonally listings inflated MLS B conspire, ‘slight once A ... [a] Claridge Drive Alta Drive transac- enough connection’ to convict C of the is Maj. tions.” atOp. therefore crime, proposition.” same an intolerable have no occasion to consider whether our Ortiz, See United v. de 883 F.2d States repeating case law the “slight connection” (7th Cir.1989) (Easterbrook, J., standard is a useful statement the law concurring), reh’g granted judgment “when the issue for review concerns grounds, vacated on other 897 F.2d 220 whether defendant was connected with (7th Cir.1990). It also could be read to all,” Dunn, conspiracy see 564 F.2d appellate “mean keep that an court must 21, whether, at 357 n. instead, the use of in mind possibility may that evidence phrase “slight connection” should slight although be be quantitatively substan- qualitatively single tial piece ambiguous of abandoned as misleading. —that context, may enough evidence unexceptionable proposition.” Id. On the II. hand,

other casual association with “[m]ere I respectfully dissent from Part II.D. conspiring people is not see enough,” Unit- law, Under our case Grasso’s convictions Bautista-Avila, ed States v. money laundering cannot stand. (9th Cir.1993), face, on its though “casual certainly association” sounds like a A. “slight connection.” As the majority recognizes, under the observed, Judge As Easterbrook has statute here applicable, 18 U.S.C. phrase “slight is ultimately connection” (2006), superseded,2 now a defendant ordi- best “if understood mean that someone narily be charged could not with both a joins conspiracy, ‘slight’ activity to ac- and a separate money criminal offense complish objectives enough, pe- its is conduct, offense the same ripheral conspirators commit crime no “very when the nature of the re- Ortiz, less than the mastermind.” de payment[ ... quired is [the] ]” 883 F.2d at 524. “This interpretation fol- charged money laundering. See United definition (agreement lows the of the crime Alstyne, States Van act) plus troubling. one overt and is not (9th Cir.2009). Such charging— double That to we have tease it out a formula “merger which we have denominated the meanings, with though, dubious alternative only permissible gov- if the problem” is a mark its A against panel use.” Id. —was the agreed. proved payment charged Second Circuit has See ernment Unit- 1956(c)(9) (2009). § 2. See 18 U.S.C.

1098 counts, turn, laundering money The laundering made with the money was successfully Grasso demand- (as charged with gross proceeds)” -to opposed “profits co-conspirators that his and See United States scheme. underlying —Abrams for their (9th Cir.2010). Fitzgerald pay him commissions 1062, Ali, 1072 v. 620 F.3d — carrying use of Title in out the Bene- Cal money laundering whether a To determine Canyon Yoakum Drive transac- dict and problem,” “merger charge triggered 1956(a)(l)(A)(i). § tions. See 18 U.S.C. on the concrete details of we “must focus Title, the scheme could not Without Cal underlying sep- scheme” particular generated reports have the false title nec- charges against defen- arate criminal inflated from the essary to obtain loans Alstyne, 584 F.3d at 815 Van dant. See Grasso “forbade” his defrauded lenders. omitted). (internal quotation marks using Title co-conspirators from Cal unless majority’s own ex- As is clear from Maj. him a See they paid Op. commission. of the scheme planation of the intricacies at “The nature the scheme very 1083. involved, money in which Grasso required” co-conspirators to make thus with laundering charged counts Grasso regular payments to Grasso. commission expenses of “essential conducting payment Alstyne, F.3d See at 815. Van fraud with which Grasso was of’ bank that, any Nor is it' of moment as the Santos, charged. also See United States payments argues, 2020, 507, 528, S.Ct. 553 U.S. provided “pro- Grasso for services also (2008) (Stevens, J., concur- L.Ed.2d 912 future fraud.” The Fourth Cir- mote[d] charged count ring). The bank fraud recently rejected argument cuit a similar a “scheme and carrying out with reversing a case a defendant’s lenders,” in- artifice defraud victim arising convictions out Brothers, cluding Lehman GreenPoint conspiracy.” mortgage “extensive Bank, Company. See Mortgage and RBC Cloud, See United States v. “[Ijnstrumental § 18 U.S.C. 1344. (4th Cir.2012). The scheme there at co-conspirators’ operation” was their use convincing “involved people issue invest Grasso held an of Cal Title—in which that, properties real estate unbe- prepare interest” —“to ... title “ownership to the buyers, recently knownst Cloud had ... insurance with inflated policies [an] purchased for a lesser amount. The Op. purchase Maj. See price.” scheme also involved falsification of loan ” co-conspirators “provided” then See United States v. Ab- applications.... lender[s],” “to the reports falsified title dulwahab, Cir.2013) F.3d id. to obtain See at 1083. inflated loans. 399-400) Cloud, (discussing “Although Fitzgerald Abrams and (internal omitted). [initial- citation Cloud “lured ly] attempted companies to use title other co-conspirators promises of pay- transactions, companies for their these ment,” including commissions for recruit- them, and Cloud, soon declined to work with ing buyers the scheme. See began using Abrams Fitzgerald Cál response gov- F.3d at Title or not Grasso exclusively, whether payments ernment’s contention ... was for the trans- acting agent “to designed only perpetuate here, scheme,” action.” Abrams pro- Relevant constituted id. therefore Fitzgerald money laundering, Title submit used Cal motional see 18 U.S.C. 1956(a)(l)(A)(i), reports emphasized lenders with false title the Ben- the court Canyon edict Yoakum Drive transac- were also for “services “past and essen- performed,” namely tions. expenses mortgage fraud con- tial checks were funded by any [the] not Cloud, at spiracy,” returns, 407-08. investment “but by the investors’ own principal,” were issued to cause Indeed, any payment for services al- they investors to “believe[] had invested ready rendered the context of a fraud wisely,” encourage and to them to invest promotes scheme also future fraudulent 808-09, additional funds. id. See at 815. activity by person paid, by creating Because issuance of the checks was will neces- expectation person paid that be sary inspire investor any involving confidence again. ongoing case Ponzi government’s scheme and to attract approach which, additional in- — note, vestment, I not majority does endorse— the distribution checks “a were would obliterate the limitations our central component cases scheme to de- merger fraud,” have set forth regarding prob- ran squarely therefore into the lem. (internal merger problem. id. See at 815 omitted). quotation marks the government

Because introduced no evidence Benedict- and Yoakum- regard separate With to a transaction— payments related commission were made on which majority focuses —we held revenues, profits, gross as opposed to merger problem. there was no See scheme, overall bank fraud Grasso’s id. 815-16. That transaction awas for money laundering convictions must be “full[ “one ] ]” of investor’s [initial] refundf Alstyne, reversed. See Van F.3d at outlay,” pursuant to that investor’s de- 815. mand. See id. at 815. “Returning the entire amount ... investment,” of th[at] B. we explained, “undermined rather than ad- To avoid the straightforward result com- scheme, vanced the core as the funds re- pelled by our precedents, majority turned ... would not available to lull points to four why reasons the transactions other investors maintaining into their in- charged money laundering, despite as be- vestment.” Id. at 815-16. scheme, necessary suppos- to the fraud Unlike the full Alstyne, refund Van edly no pose merger problem. None of payments Grasso’s commission for use of majority’s theories works. Cal Title expenses” were “essential underlying fraudulent scheme. See San- tos, (Ste- U.S. at S.Ct. 2020 First, contrary majority’s asser- vens, J., concurring). explained, As after tion, payments to Grasso for the Bene- time, only some Cal Title was the title Yoakum dict and transactions did not “hin- company that co-conspirators Grasso’s Maj. Op. scheme.” der[ ] See generate could use to the necessary false For that proposition, majority dubious Title, reports. To conspirators use Cal on relies our decision in Van Alstyne, pay had to Grasso a commission. Like the construed a scheme “Ponzi [that] periodic payments distribution pre- depended attracting new investments a merger problem sented Alstyne, Van using some but not all the amount pre- the commission to Grasso pay collected to returns earlier inves- vented the from using scheme some Alstyne, tors.” Van F.3d at 815. expand amount funds to We held that periodi- “distribution checks” further, cally always issued to even but is pursu- individual case investors ” chargeable pays ant to the scheme when a scheme its “essential “oper- mail both laundering. ating” “expenses,” such the commis- in of his “gathered veiling sonal interest sources the “runners” who paid sions to lottery in the at gamblers” public income from authorities.” bets from added); id. (emphasis explained in Santos. See id. transac- 538. The court By construing a opinion). 509 (plurality at tions made after be- only were authorities as somehow undermin- necessary payment associates; business gan investigating his anal- majority’s strained ing the sending mon- than risk investors “[r]ather money laundering upheld count ogy to the account, Bush ey directly to his [business] eviscerate Alstyne threatens to Van by steering deflected attention the invest- holding. core Santos’s As court ments overseas first.” Id. recognized, “[t]aking addi- appropriately ac- steps completed tional to hide criminal better contend- majority fares no tivity is not central to solicitations be- merger problem vanishes ing that the necessary for Ponzi scheme to continue paid cause Grasso commissions Abrams operating.” Id. transac- only for the Benedict and Yoakum Here, Grasso’s demands that his co-con- tions, transac- not for other fraudulent him to spirators pay commissions essential Op. Maj. tions out earlier. See at carried fraudulent fair- ongoing scheme cannot payments 1094. Abrams’s commission ly analogized to the transactions part an integral Grasso were fact simply Bush. were The commissions each fraud once title com- instance bank conspira- participation par- than Title refused to panies other Cal service, cy but for an providing essential ticipate in the scheme. conspirators’ once service was not otherwise obtain- that the In of its support pronouncement able. rendered payments to Grasso for services overarching “irrelevan[t] scheme,” Maj. Op. fraudulent] is merger problem mitigated by Nor which, plain case on majority relies the fact the money laundering count review, eighteen monetary error construed exposed “only” to “an additional personal transactions to the defendant’s years imprisonment,” beyond the 30- carrying bank as not “central to account year “statutory underly- maximum the objectively],” out the scheme’s Bush, charge.” bank fraud Bush, 527, 533, States v. 537-38 538; Maj. Op. F.3d at 1095. (9th Cir.2010). “the de Again, concrete matter, tails of scheme” must be As initial it is far from clear particular law, the context for examined understand that under our case extent analysis. Alstyne, See Van court’s increase statutory in the maximum sen- (internal quotation F.3d marks at 815 is tence a relevant consideration in deter- omitted). mining problem ex- merger whether the Alstyne, ists. In Van noted Bush, charged the transactions “ proceeds Sixth Circuit held that ‘means money laundering were complete before profits only predicate when the charged separately some of the conduct merger problem offense creates Bush, fraud was even out. See carried statutory leads to a radical increase merger F.3d at 537-38. There was no only nothing maximum when sentence wire- problem with regard separate legislative history suggests Ponzi charges —related ” Congress intended an increase.’ such “necessity scheme—because the per- (quoting at 814 Alstyne, transfers ... was limited Bush’s Van

1101 Kratt, 558, States v. 579 F.3d 562 United 4. Cir.2009)) added). (6th (emphasis majority’s The final rationale for resist- plurality nonetheless construed Santos merger problem here is that there Sixth differently and concurrence from the ostensibly is no such problem when a Circuit, holding merger that there was a “money laundering conviction is based on based problem on defendant’s convic- ... co-conspirators.” transfers See for both mail fraud and laun- money tion sure, at Maj. Op. 1095. To be some trans- dering, regard applicable without among fers of funds co-conspirators raise statutory years máximums—30 for mail problem. no merger But while some such years fraud and 20 for money laundering. merely' transfers co-conspirators involve id.; 1341, Indeed, §§ 18 U.S.C. 1956. crimes,” “reaping the fruits of their others Alstyne nowhere mentioned the statu- Van represent payments expenses of essential tory maximum for mail fraud in its consid- Cloud, of a fraud scheme. See 680 F.3d at problem. eration of the merger The case instance, 406 In n. 4. the latter merger relies, majority again on which the Bush— problem plainly exists. review, plain decided on error see 626 Again, the Fourth cogent Circuit’s anal- ap- at the Sixth 533—followed Circuit’s Cloud, ysis is instructive. In several of proach, rather our own.3 than money laundering, convictions reversed event, any In the extent of the “addition appeal involved payments to co-conspir- sentencing exposure al” that Grasso ators; only “it was through promise “face[dj” of the money as a result launder these that Cloud was able to Santos, 516, 128 ing charge, see 553 U.S. at persuade co-conspirators to do busi- 2020, S.Ct. was identical to what Al Van Abdulwahab, ness with him.” 715 F.3d at faced, Alstyne, styne see Van 584 F.3d at concluding, In so Fourth Circuit (noting Alstyne 809 that Van convicted carefully examined the “nature of the pay- mail fraud in violation of 18 U.S.C. ment” its relevance to the scheme. 1341); § § 18 1341 (providing U.S.C. Cloud, 4; 680 F.3d at 406 n. accord Van statutory years). maximum 30 As we Alstyne, 584 F.3d at 815. The court dis- by precedents involving “nearly are bound tinguished the perpetu- scheme that Cloud facts,” identical United see States v. Vas case, ated from scheme in an earlier (9th 987, quez-Ramos, 531 F.3d 989 Cir. Halstead, United States 634 F.3d 270

2008) curiam), (per the statutory máxi (4th Cir.2011), in co-conspirators mums at issue simply are not a basis for orchestrated insurance fraud. Hal- treating differently Grasso’s case than Van charged stead defendants were with mon- Nor, Alstyne’s. considering were we ey laundering only ill-gotten because funds initio, ab it fairly issue could be said that a ultimately transferred to their check- 20-year a 30-year increase of is sentence Cloud, ing accounts. F.3d at 406 n. 4 “radical[j,” Santos, see at U.S. Halstead, 279). 273, (citing F.3d at ordinary S.Ct. sense Halstead, the fact that the defendants ulti- being aby depar “marked considerable traditional,” mately paid posed merger from themselves no ture the usual or see (11th Collegiate Dictionary problem, they paying Webster’s “were not ed.2003) “radical”). (defining expenses but rather were Phillips, assessing Alstyne, States v. 704 F.3d 754 rather Van than the rele- Cir.2012), majority, also cited also re- vance of increase in the defendant’s sen- money laundering only viewed a conviction tence, see id. at 766 n. 11. error, Bush, plain id. followed statute, Cloud, ry their crimes.” the fruits

reaping merger that no n. 4. U.S.C. indicated problem in the case in particular exists our own case majority misconstrues The money laundering charge a is based which we have foreclosed concluding law that “ involving ‘gross on reve- a transaction money challenges to laun- all Santos-based from of and the nues the sale contraband simply predi- because convictions dering n operation syndicates of organized crime co-conspirators. to payments cated on ” Santos, involving (quoting such sales.’ Id. instance, noted that Alstyne, Van for “ (Stevens, at 128 2020 553 U.S. S.Ct. may ... be problem triggered ‘merger’ J., profits.” four multiple concurring)). share Because the dissent- participants when cases on which 584 F.3d at 815. two with agreed Justices in Santos Justice majority Santos, relies —United States v. Web- regard, 553 Stevens that see (9th Cir.2010), ster, F.3d 623 901 Unit- J., (Alito, 531-32, U.S. at 128 2020 S.Ct. Wilkes, 662 F.3d ed States dissenting), majority we concluded that Cir.2011) contrary. to the not —are Supreme of had held no Court that problem money where “a merger to existed conspiracy involved distrib- Webster Webster, methamphetamine. laundering ute on See count is based transfers argued appeal 905. on F.3d at Webster money from the among co-conspirators of charges given conspiracy that the' for to Webster, drugs.” of 623 F.3d at 906. sale possess with metham- intent distribute recognizes, Maj. majority Op. As the see § phetamine, posses- U.S.C. stand Webster alone does not for methamphet- sion with intent to distribute proposition broad that to co- 841(a)(1), amine, Santos U.S.C. conspirators generally present more no charge money an for barred additional problem. merger laundering, proof “pro- without Wilkes, Turning was the defendant in the relevant transac- ceeds” involved charged with honest services wire Webster, represented “profits.” tions bribery, money laundering, connec- specify at 905. did not F.3d Webster tion with a scheme to a member of bribe money gave transactions that rise Congress, Cunningham. Randall “Duke” laundering charge, nothing Cunningham See 662 F.3d at 530. secured opinion charge indicates that the for was in appropriations “millions dollars involving expenses” transactions “essential ... benefit” of Wilkes and another [the] drug underlying conspiracy. co-conspirator. “[T]hrough Id. at Santos, U.S. 128 S.Ct. 2020 complicated series financial transactions (Stevens, J., concurring).4 rejected companies, off among multiple paid Wilkes challenge money Webster’s his launder- $525,000 Cunningham’s on second mort- ing conviction, explaining that under the gage.” charged with mon- Wilkes statutes, drug relevant with crimes ey a wire making transfer which Webster was “need not in- charged in the course of those transactions. On exchange money”; volve the there was appeal, argued that the wire trans- Wilkes no accordingly merger problem. See Web- “merely expense ster, fer at issue was associ- at 906. We also noted that thus, and, bribery, ‘pro- with Justice Stevens’s concurrence ated Santos ” position legislative explained took the histo- ceeds.’ Id. at 549. Wilkes argued My appeal, review of Webster’s briefs firms Webster never 28(j) pursuant expenses necessary letter and his Rule in which transactions were for initially charged drug merger argument, he raised the con- consummate the crimes. Santos, occurred, could, co-conspirator” the defendant who was to a unlike there facto, money charged promotional ipso launder- be no merger problem. charged with

ing, Wilkes was concealment First, judge panel, as a three absent using Rather laundering. Id. than intervening controlling authority —of the bribery funds associated with there has been none—Wilkes could not payment directly to Cunningham, to remit Alstyne, have overruled Van in which we $525,000” from “Wilkes transferred “ noted that a ‘merger’ problem may ... his companies, one “another of multiple be triggered when participants accounts, WBR Id. at 547. Equities.” 815; profits.” share F.3d see Mil- panel emphasized measures Gammie, ler v. 335 F.3d took to disguise Wilkes source of (en Cir.2003) banc). Second, noted, as funds: expressly rejected Wilkes defendant’s $525,000 Wilkes could have sent characterization of “multi-layered Equities Cunningham from WBR transactions” as essential elements of the Capital directly. Again, he did Coastal Wilkes, bribery overall scheme. Instead, $525,000 wired from not. he Instead, at 547. the court held that the Financial, Equities WBR to Parkview wire transfers were “additional sep- act[s]” meantime, Inc. In the Parkview Finan- arately chargeable as money concealment engaged cial and Coastal had in a series laundering. Id. at majori- 549. The own, pro- of transactions of their which ty’s reading broader of Wilkes is foreclos- vided additional buffers between the case, fact by ed that unlike Grasso’s corrupt payoff contract and the Cun- of involved Wilkes no “necessary” ningham’s mortgage. Concealing to the scheme.5 See Alstyne, Van dominant, appears connection be the F.3d at 815. if not the of only, purpose these multi- short, layered neither transactions. Webster nor Wilkes— individually or collectively sustain the Id. Because of the extensive steps Wilkes —can weight majority places on them. funds, took to conceal source payment Neither case dealt with a to a co- separately charge- Wilkes’s conduct was conspirator involving expenses essential money laundering, able concealment was, underlying scheme. Webster just rather than “that transaction parlance, the Fourth Circuit’s useful a case crime,” nothing involve[d] but the initial merely “reap[ed] defendant namely bribery. See id. at 549. No Cloud, the fruits crimes.” See problem [his] merger therefore existed. n. 4. money F.3d at 406 Wilkes involved a “Webster, Wilkes also noted as in charge merge that did with money laundering Wilkes’s count was bribery count it was separate- because based a transfer to a co-conspirator ly money as concealment chargeable laun- money” ‘pro- from a scheme “such that Wilkes, See dering. 584 F.3d at 815. ceeds’ would all ‘receipts’ include from” that scheme. See id. 549. But C. analysis opinion support contained no Only reading a that conclusion. id. ma- series heretofore Unlike the I jority, expan- do not Wilkes for nonexistent rules into case law read our does proposition sive whenever a majority “transfer the conclusion that avoid Notably, chargeable rately money has not defended as concealment money laundering Grasso’s laundering. convictions on ground they sepa- were "additional acts” laundering convictions are

Grasso’s Be- progeny. and its by Santos

barred of “the analysis concrete proper

cause scheme” particular

details charged reveals that

which Grasso money laundering charges pose

additional problem, I would merger unequivocal convic- money laundering Grasso’s

reverse at 815 Alstyne, See Van

tions. omitted).

(internal marks quotation MURDAUGH,

Michael Joe

Petitioner-Appellant, RYAN, Respondent- L.

Charles

Appellee. 10-99020.

No. Appeals, States Court of

Ninth Circuit. Feb.

Argued and Submitted July

Filed

Case Details

Case Name: United States v. Kyle Grasso

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Jul 26, 2013

Citation: 724 F.3d 1077

Docket Number: 10-50116

Court Abbreviation: 9th Cir.