584 F.3d 803 (9th Cir. 2009), 07-50105, United States v. Van Alstyne
|Citation:||584 F.3d 803|
|Opinion Judge:||BERZON, Circuit Judge:|
|Party Name:||UNITED STATES of America, Plaintiff-Appellee, v. Lance VAN ALSTYNE, Defendant-Appellant.|
|Attorney:||James H. Locklin (argued), Sean K. Kennedy, Los Angeles, CA, for defendant-appellant Lance Van Alstyne. Douglas F. McCormick (argued), Thomas P. O'Brien, Robb C. Adkins, Santa Ana, CA, for plaintiff-appellee the United States of America.|
|Judge Panel:||Before: HAWKINS, MARSHA S. BERZON and RICHARD R. CLIFTON, Circuit Judges.|
|Case Date:||October 22, 2009|
|Court:||United States Courts of Appeals, Court of Appeals for the Ninth Circuit|
Argued and Submitted March 9, 2009.
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Appeal from the United States District Court for the Central District of California, Alicemarie H. Stotler, District Judge, Presiding. D.C. No. CR-98-00118-AHS-1.
Lance Van Alstyne appeals his conviction for money laundering and the sentence imposed by the district court following a limited remand. After Van Alstyne filed his appeal to this court but before briefing, the Supreme Court decided United States v. Santos, __ U.S. __, 128 S.Ct. 2020, 170 L.Ed.2d 912 (2008), which addressed-with less than clear results, as will appear-the meaning of the money laundering statute.
Van Alstyne now argues that Santos requires us to reverse his money laundering conviction. We agree in part. We hold that Santos undermines our earlier approach to determining whether funds arising from a specified illegal activity constitute " proceeds" for the purposes of the money laundering statute, 18 U.S.C. § 1956, and requires a reversal of Van Alstyne's money laundering conviction for two of the three money laundering counts. As to the third count, we affirm the conviction as consistent with Santos. We agree with Van Alstyne that the district court erred in calculating the enhancement to the money laundering sentence under U.S.S.G. § 2S1.1, in determining his fraud offense level under U.S.S.G. § 2F1.1(b)(1), and in imposing the restitution requirement, and so remand for reconsideration of those portions of Van Alstyne's sentence.
FACTS AND PROCEDURAL BACKGROUND
Van Alstyne defrauded approximately 450 victims through a Ponzi scheme involving a number of companies that he organized for that purpose. The fraudulent scheme, begun in 1992, was built around thirteen oil and gas limited partnerships.
These partnerships, LEM Pacific Income Fund I-IV, Sandstone Gas Fund I-V, and American Gas Fund I-IV, were controlled by Van Alstyne. Other companies he owned or controlled, Liberty Energy Management and Sabre Asset Management, served as the general partners for the limited partnerships. Continental Mineral Acquisitions and Blake Energy Corporation, two acquisition companies also owned by Van Alstyne, purchased oil and gas properties on behalf of the limited partnerships.
Van Alstyne perpetuated the scheme by selling interests in the limited partnerships to elderly and retired investors. Victims were solicited by brokers from Coastline Financial and Merchant Banking Services, both of which were, at the time, broker/dealers registered with the National Association of Securities Dealers (NASD).1 Van Alstyne required the brokers to adhere to a script that described a safe investment with a more than ten percent annual return, backed by AAA-rated government bonds. Only after making their initial investments did the victims receive a printed prospectus disclosing that the investments were in fact risky and that losses could result from fluctuations in oil and gas prices. Nonetheless, because victims received distribution checks shortly after making their initial investments, they believed they had invested wisely and often re-invested when contacted by brokers. In reality, the distribution checks were largely funded not by oil and gas revenues but by the investors' own principal.2
The scheme began to unravel in October 1994, when NASD shut down Van Alstyne's sales operation, Merchant Banking Services. Although Van Alstyne's agents continued to peddle partnership interests, new investments slowed. Shortly thereafter, Van Alstyne sent a letter to investors, revealing that the distributions they had received so far were not, in fact, oil and gas revenues, but instead a return of their own principal. The letter explained that distributions were made by refunding the investors' principal " so that the distributions could begin immediately rather than waiting until the production proceeds were actually received." Henceforth, the letter indicated, investors would receive only their share of the oil and gas revenue. Investors testified that when they contacted Van Alstyne to address concerns his letter raised, he reassured them that " everything was going to be all right" and that investors could continue to expect distribution checks. Distribution checks did in fact continue to arrive but at a much slower pace-quarterly, instead of monthly-and in vastly decreased amounts. Some of the complaining investors received checks refunding some or all of their contributions, although at least some were unable to cash the checks because of insufficient funds.
Van Alstyne was forced to cut back operations in 1995. From then until 1998 investors received only sporadic distribution checks, sometimes for amounts as low as a few cents. In the end, the investors collectively invested more than $10 million in the limited partnerships and received a total distribution of approximately $2 million. Van Alstyne made off with more than $2 million in salary and payments
from the various companies he had set up to carry out this scheme.3
In October 1998, a federal grand jury returned an amended indictment charging Van Alstyne with nineteen counts of mail fraud in violation of 18 U.S.C. § 1341 and three counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(A)(i). The money laundering charges were based on three specific transactions: Counts 20 and 21 involved transfers of funds, one in January 1994 and one in June 1994, from the acquisition company Blake Energy Corporation to one of the limited partnerships. Trial testimony revealed that these transfers were made for the purpose of making distributions to individual investors. Count 23 involved a transfer of funds from Blake Energy to a limited partnership, executed in November 1994-that is, after the scheme began to unravel. Testimony elicited at trial indicated that this transfer was made to refund one investor's entire outlay.
In June 2001, after a three-week trial, a jury returned a guilty verdict on seven of the mail fraud counts and all three counts of money laundering. Van Alstyne was sentenced to a 290-month prison term (approximately 24 years), three years of supervised release, a special assessment of $5,000, and restitution of more than $9 million. Van Alstyne appealed, and this court affirmed his convictions and his sentence.4 United States v. Van Alstyne, 87 Fed.Appx. 640 (9th Cir.2004). The Supreme Court subsequently granted Van Alstyne's petition for certiorari, vacated his sentence, and remanded for reconsideration in light of United States v. Booker, 543 U.S. 220, 125 S.Ct. 738, 160 L.Ed.2d 621 (2005). See Van Alstyne v. United States, 543 U.S. 1116, 125 S.Ct. 1110, 160 L.Ed.2d 990 (2005). On remand, this court affirmed Van Alstyne's convictions and remanded his sentence for reconsideration pursuant to United States v. Ameline, 409 F.3d 1073 (9th Cir.2005) (en banc). United States v. Van Alstyne, 143 Fed.Appx. 45 (9th Cir.2005).
Pursuant to the Ameline remand, the trial judge determined that she would have imposed a materially different sentence had the guidelines not been mandatory and resentenced Van Alstyne to a 216-month prison term, three years of supervised release, a special assessment of $500, and $9 million in restitution. The new sentence required that, if any restitution remains unpaid after Van Alstyne's release, it shall be paid in " nominal" monthly payments of $10,000 each, as " the court finds that the defendant's economic circumstances do not allow for either immediate or future payment of the amount owed." Van Alstyne timely appealed.
A. Effect of Santos on Van Alstyne's Money Laundering Conviction
Van Alstyne was convicted of three counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1). That section provides, in relevant part:
Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful
activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity ... with the intent to promote the carrying on of specified unlawful activity ... shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both.
18 U.S.C. § 1956(a)(1)(A)(i) (emphasis added).5 The statute defines " specified unlawful activity" by enumerating certain predicate offenses, including " any act or activity constituting an offense listed in [18 U.S.C.] section 1961(1)." 18 U.S.C. § 1956(c)(7). Mail fraud, prohibited under 18 U.S.C. § 1341, is one such listed offense. 18 U.S.C. § 19.
We begin by closely examining the Santos decision, as it is both the substantive and procedural predicate for Van Alstyne's challenge to the money laundering conviction.
The defendant in Santos operated an illegal lottery in bars and restaurants in Indiana. Santos employed " runners" to gather bets from gamblers and to deliver the funds to " collectors." The...
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