U.S. v. Esterman

• Decision Date: 02 April 2003
• Docket Number: No. 01-2594.,01-2594.
• Citation: 324 F.3d 565
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Gary ESTERMAN, Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

324 F.3d 565

UNITED STATES of America, Plaintiff-Appellee, v. Gary ESTERMAN, Defendant-Appellant.

No. 01-2594.

United States Court of Appeals, Seventh Circuit.

Argued September 13, 2002.

Decided April 2, 2003.

Patrick J. King, Jr. (argued), Office of U.S. Atty., Crim. Div., Chicago, IL, for Plaintiff-Appellee.

Jerold S. Solovy, Joseph F. Marinelli (argued), Jenner & Block, Chicago, IL, for Defendant-Appellant.

Before POSNER, DIANE P. WOOD, and EVANS, Circuit Judges.

DIANE P. WOOD, Circuit Judge.

After he stole money from a Russian business partner, Gary Esterman was tried and convicted on two counts of wire fraud, one count of transacting in criminally derived property, and four counts of money laundering. The district court sentenced Esterman to concurrent terms of 57 months on each count and ordered him to pay $638,540 in restitution. Before this court, Esterman now challenges various aspects of his conviction and sentence. We find it necessary to address only two of his arguments: first, that his money laundering convictions must be vacated because he did nothing to conceal the source of the ill-gotten funds; and second, that the district court erred in finding that his Russian business partner was a "vulnerable victim" within the meaning of the Sentencing Guidelines because of his limited command of English. We find merit in both these points, and thus we must return the case to the district court for further proceedings.

I

In February 1995, Esterman and Igor Sivokozov walked into the Edens Bank in Skokie, Illinois, and opened a joint bank account ("Edens account"). Sivokozov, a Russian businessman and owner of Alfa, Ltd., had recently concluded an agreement with a U.S. company to construct a plant in Volvograd, Russia, for the production of intravenous solutions. The Edens account was to aid in the financing of the project by facilitating so-called mutual payments between parties in the United States and Russia. Under the mutual payments system, payments owed by debtors outside Russia to Russian creditors are matched up with payments owed by Russian debtors to foreign creditors; the result is to avoid or minimize the need for foreign currency. (At trial, Esterman challenged Sivokozov's account of the underlying business deals, but it is not important for our purposes to resolve who was telling the truth.)

What is relevant is that in April 1995, shortly after Sivokozov returned to Russia, a significant amount of money flowed into the Edens account, apparently through mutual payments. First came a cash deposit of $20,000, followed by two transfers of $300,000 and $18,565. Soon thereafter, Sivokozov, Esterman, and some others arranged for a third transfer of $299,975. On April 18, 1995, Sivokozov tried to check on the status of this third transfer, but he was unable to reach Esterman by telephone. With the help of an interpreter, he then placed a direct call to the Edens Bank. Bad news awaited him. He was told that the third transfer had not yet occurred and also that the funds from the previous transfers had been withdrawn. A few days later, Sivokozov finally reached Esterman by telephone. Esterman initially denied making the withdrawals, but then he confessed that he had done so and offered to explain his actions if Sivokozov could meet him in New York City.

Sivokozov then took matters into his own hands. He dispatched to the United States his "deputy," Andrei Skorikov (Vice President of Sivokozov's company, Alfa), to intercept the last transfer. Skorikov brought with him two checks signed by Sivokozov, presumably so that he could withdraw whatever funds remained in the Edens account. Skorikov may have been trying to work fast, but Esterman was faster. Upon arriving in Skokie, Skorikov found that the third transfer had already landed in the Edens account and been withdrawn by Esterman.

At this point, Skorikov's mission expanded considerably. Having failed to intercept the transfer, Skorikov sought out Esterman. The two met at a Chicago hotel and spoke by telephone on at least four other occasions. Skorikov surreptitiously recorded all of these conversations. In them, Esterman admitted that he had withdrawn the funds from the Edens account, but he promised to replenish the account. In keeping with this representation, in May 1995 Esterman signed a promissory note for the nearly $650,000 that he had taken. In the meantime, it appears from the record that Skorikov may also have engaged in at least two different conversations, one in Chicago and the other in Minsk, about the possibility of taking out a contract on Esterman's life. Despite Esterman's promise to pay back the funds, he had taken no steps in this direction by September. Out of options, and apparently unwilling to take more drastic steps, Sivokozov filed a complaint with the Skokie police and initiated this case.

The ensuing investigation produced evidence that Esterman had withdrawn the funds from the Edens account and transferred them to his G.E. International Account ("G.E.account") at the Michigan Avenue National Bank in at least 33 separate transactions, including wire transfers and withdrawals. A separate wire transfer went to an account at the Chemical Bank in New York. Esterman spent the funds transferred to the G.E. account either by withdrawing cash or by writing checks. One such check for $36,620 went to a local pawn broker. A second check in the amount of $4,064.65 represented a down payment on a Mercedes for Alex Nersessov, another of Esterman's business partners. Two more checks for $5,000 and $3,500 went to Nersessov directly.

On April 20, 2000, a grand jury returned a seven-count indictment against Esterman, including two counts of wire fraud in violation of 18 U.S.C. § 1343, one count of engaging in a monetary transaction in criminally deprived property in violation of 18 U.S.C. § 1957(a), and four counts of money laundering in violation of 18 U.S.C. § 1956(a)(1)(B)(i). Esterman was tried before a jury and was found guilty on all seven counts. Esterman's defense strategy took several tacks. First, his lawyer attempted to cross-examine Skorikov on the conversations about murder-for-hire, but the court cut off that line of questioning. Second, in a postconviction motion, Esterman claimed that he could not have swindled Sivokozov because the money he took did not belong to Sivokozov in the first place and, moreover, Sivokozov was lying when he said there was an intravenous solutions factory and a mutual payments arrangement. The district court denied the motion, largely because Esterman failed to spell out these assertions in sufficient detail. It sentenced him to concurrent terms of 57 months' imprisonment and ordered him to pay $638,540 in restitution.

On appeal, Esterman raises four issues. First, he claims that his money laundering convictions cannot stand because the government failed to prove the necessary intent to conceal the source of the illegally obtained funds, as required under 18 U.S.C. § 1956(a)(1)(B)(i). Next, Esterman argues that the district court erred by finding that Sivokozov, whose command of English was limited, was a vulnerable victim within the meaning of § 3A1.1(b) of the Sentencing Guidelines. Third, Esterman claims that the district court erred in imposing an enhanced sentence for obstruction of justice under U.S.S.G. § 3C1.1. Last, he asserts that his Sixth Amendment right to confrontation was violated by the district court's order precluding his cross-examination of Skorikov on the murder-for-hire conversations. Because we find that the last two claims lack merit (there was no clear error in the court's finding that Esterman's lies to the probation officer about his assets amounted to obstruction, nor did the court abuse its discretion in restricting the cross-examination), our discussion is limited to Esterman's attacks on the money laundering convictions and the vulnerable victim adjustment.

II

We turn first to Esterman's challenge to the sufficiency of the evidence against him on the four money laundering counts. To convict under 18 U.S.C. § 1956(a)(1)(B)(i), the government must prove that the defendant conducted a financial transaction knowing that the property involved in the transaction was illegally derived and knowing that the transaction was designed in whole or in part to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds. United States v. Gabel, 85 F.3d 1217, 1223 (7th Cir.1996). The statute itself states:

(a)(1) 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 —

(A)(i) with the intent to promote the carrying on of specified unlawful activity; or

(ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code; or

(B) knowing that the transaction is designed in whole or in part —

(i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or

(ii) to avoid a transaction reporting requirement under State or Federal law,

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)(B)(i).

Esterman's core claim is that the government did not prove that he attempted "to conceal or disguise" the stolen funds, because he merely transferred the funds to a separate account and then spent them in an "open and notorious" way. As a result, Esterman claims, his conduct did not amount to the kind of concealment necessary for a money laundering conviction under subpart (B)(i) of the statute. That subpart calls for another transaction...