United States v. Banki

• Decision Date: 22 February 2012
• Docket Number: Docket No. 10–3381–cr.
• Citation: 685 F.3d 99
• Parties: UNITED STATES of America, Appellee, v. Mahmoud Reza BANKI, Defendant–Appellant.
• Court: U.S. Court of Appeals — Second Circuit

685 F.3d 99

UNITED STATES of America, Appellee,

v.Mahmoud Reza BANKI, Defendant–Appellant.

Docket No. 10–3381–cr.

United States Court of Appeals, Second Circuit.

Argued: Feb. 15, 2011.

Decided: Oct. 24, 2011.

Amended: Feb. 21, 2012.

Amended: Feb. 22, 2012.

E. Danya Perry, Assistant United States Attorney (Katherine Polk Failla, Assistant United States Attorney, on the brief), for Preet Bharara, United States Attorney for the Southern District of New York, New York, NY, for Appellee.

Kathleen M. Sullivan (Christine H. Chung, Marc L. Greenwald, William B. Adams, on the brief), Quinn Emanuel Urquhart & Sullivan, LLP, Tai H. Park, Park & Jensen LLP, New York, NY; Baruch Weiss, Arnold & Porter LLP, Washington, D.C., for Defendant–Appellant.

Raymond A. Cardozo, Paige H. Forster, Donna M. Doblick, Reed Smith LLP, Pittsburgh, PA, for Amici Curiae Iranian American Bar Association et al.

Before: CABRANES, POOLER, and CHIN, Circuit Judges.

CHIN, Circuit Judge:

Defendant-appellant Mahmoud Reza Banki (“Banki”) appeals from a judgment of the United States District Court for the Southern District of New York convicting him, following a jury trial, of (1) conspiracy to violate the Iranian Transactions Regulations (the “ITR”) and operate an unlicensed money-transmitting business; (2) violating the ITR; (3) operating an unlicensed money-transmitting business; and (4) two counts of making false statements in response to government subpoenas.

On appeal, Banki argues that the district court erred in several respects when instructing the jury on the conspiracy, ITR, and money-transmitting counts. He also argues that he is entitled to a new trial on the false statement counts because the government constructively amended the indictment. He further accuses the government of misconduct in its rebuttal summation, which he claims necessitates a new trial on all counts. Finally, he argues that he should be resentenced because the district court miscalculated the applicable offense level.

We AFFIRM in part and VACATE and REMAND in part.

STATEMENT OF THE CASE

1. The Facts

Born in Tehran, Iran, Banki is a naturalized U.S. citizen who has lived in the United States since he was 18. After completing high school in Iran, Banki moved in 1994 to the United States to attend college. While Banki has lived in the United States, many of his family have continued to reside in Iran, including his father, mother, uncle, and cousin.

In Iran, Banki's family owned three power companies and a pharmaceutical company; his uncle was a director of all four companies, and his cousin was the CEO of one of the power companies.

Beginning in May 2006, Banki's family began to transfer large amounts of money—totaling some $3.4 million—from Iran to the United States. At trial, the defense argued these transfers were necessary to protect the family's assets. Banki's mother testified that the money was intended to be used to purchase an apartment in the United States for herself, Banki, and his brother.

The transfers were effectuated through an informal system called a “hawala.” The hawala system is widely used in Middle Eastern and South Asian countries, and is primarily used to make international funds transfers.¹ Though there are many forms of hawala, in the paradigmatic hawala system, funds are transferred from one country to another through a network of hawala brokers (i.e., “hawaladars”), with one hawaladar located in the transferor's country and one in the transferee's country. In this form, a hawala works as follows: If Person A in Country A wants to send $1,000 to Person B in Country B, Person A contacts Hawaladar A in Country A and pays him $1,000. Hawaladar A then contacts Hawaladar B in Country B and asks Hawaladar B to pay $1,000 in Country B currency, minus any fees, to Person B. The effect of this transaction is that Person A has remitted $1,000 (minus any fees) to Person B, although no money has actually crossed the border between Country A and Country B.

Eventually, Hawaladar B may need to send money to Country A on behalf of a customer in Country B; he will then contact Hawaladar A, with whom he now has a credit due to the previous transaction. Hawaladar A will remit the money in Country A to the designated person there, thus clearing the debt between the two hawaladars. Typically, Hawaladar A and Hawaladar B would engage in many parallel transactions moving in both directions. A number of transactions might be required before the books are balanced between the two hawaladars. If after some period of time their ledgers remain imbalanced, the hawaladars may “settle” via wire transfer or another, more formal method of money transmission. The hawala system operates in large part on trust, since, as in the example above, a hawaladar will remit money well before he receives full payment, and he does so without the benefit of a more formal legal structure to protect his investment.

To send money to Banki in the United States, Banki's family retained the services of Ali Bakhtiari, a Tehran-based hawaladar. In contrast to the paradigmatic, two-hawaladar system discussed above, Bakhtiari used a “matching” hawala system to facilitate the transfer of funds from Iran to the United States. Under the “matching” system, when Bakhtiari knew that Banki's family wanted to send a sum of money to the United States, he would search among his U.S.-based contacts for someone who wanted to send approximately the same amount to Iran. If he was unable to find a “match” among his U.S.-based contacts, which was often the case, he would reach out to his network of Iran-based brokers to see if any of them knew of a match. These brokers generally did not reveal the identity of their U.S.-based contact, for fear of being cut out of the transaction by Bakhtiari; instead, Bakhtiari would give the Iran-based broker Banki's account information, which the broker would relay to his U.S.-based contact. The U.S.-based contact would then transfer into Banki's account a sum comparable to the amount Banki's family wished to send. Once Bakhtiari confirmed that the U.S.-based contact had transferred the money into Banki's account, he would pay an equivalent amount to the U.S.-based contact's intended recipient or to the Iran-based broker who facilitated the match for the broker to distribute to the intended recipient. Bakhtiari and the broker would split the profits, which were derived from the difference in the “buy” and “sell” exchange rates, on any completed transaction.

Between May 2006 and September 2009, Banki received as many as 56 hawala-related deposits in his Bank of America account from at least 44 different individuals and companies. Most of the deposits were made via wire transfer, but some were made via ATM deposit, counter credit, or check. Wires for the transfers included references to one contract for pistachios and to another for “tomato paste and transportation.” The denominations of the individual deposits ranged from $2,600 to $199,971. There were nine deposits of $10,000 or less; forty-one deposits of between $10,000 and $100,000; and six deposits of more than $100,000. In total, almost $3.4 million was deposited into Banki's account. Banki retained this $3.4 million for his personal use, including the purchase of a $2.4 million apartment in New York City.

The majority of the depositors were individuals, but some were business entities, located all over the world, including Hillmarcs Construction Corp. in the Philippines, United Gulf Exchange Company in Kuwait, Torgovy Dom Atlanta in Russia, and the Trenton Group, LLC, in Latvia. Banki did not personally know any of the depositors.

For most of these deposits, after the funds were deposited into Banki's account, Banki e-mailed a family member, almost always his father, to confirm that he had received the funds. For example, on May 8, 2006, Banki received a wire transfer of $199,971 from United Gulf Exchange Co.'s account at a Kuwaiti bank; then, on May 10, 2006, Banki wrote an e-mail to his father stating, “Here is a list of what I have received so far in the account.... May 8, 2006: 199k from Kuwait....”

Though most of Banki's e-mails did not explicitly acknowledge that there was a corresponding payout in Iran for each deposit into Banki's account, one August 2006 email exchange clearly displayed Banki's knowledge that money was moving to Iran, at least with respect to the August 2006 transaction. On August 9, 2006, Banki's uncle sent Banki an e-mail that stated: “I told your father that a friend of mine wants to send 6000 USDA to Iran. I asked him to send the money to that account you gave me before.” Shortly thereafter, Ahmad Sheikholeslami transferred $6,000 into Banki's account, and Banki e-mailed his uncle to confirm receipt of the money. According to Sheikholeslami, a defense witness, Banki's uncle was doing him a personal favor by facilitating the transfer, and Bakhtiari was not involved in the $6,000 transaction. Sheikholeslami's claim that the $6,000 transaction was unrelated to Bakhtiari's hawala was confirmed by Bakhtiari's ledgers, which did not reflect the transaction. This transfer was undisputed by Banki.

The transfers into Banki's account came to the attention of the government, and in 2008, the U.S. Treasury Department Office of Foreign Asset Control (“OFAC”) served Banki with two administrative subpoenas. Both subpoenas requested information about transfers into Banki's account and advised Banki that “knowingly falsifying or concealing a material fact in [his] response ... is a felony.” The January 2008 subpoenarequested information about a $100,000 transfer into Banki's account in January 2007. By letter dated January 16, 2008, Banki responded, identifying his cousin as the source of the transfer. Then, in a June 2008 subpoena, OFAC requested “details of all payments [Banki had] made, received, or facilitated in any manner involving Iran since July 1, 2003.” In his response, Banki again...