United States v. Chao Fan Xu

Decision Date14 March 2013
Docket Number09–10201,09–10193,Nos. 09–10189,09–10202.,s. 09–10189
Citation706 F.3d 965
PartiesUNITED STATES of America, Plaintiff–Appellee, v. CHAO FAN XU, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Ying Yi Yu, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Guo Jun Xu, Defendant–Appellant. United States of America, Plaintiff–Appellee, v. Wan Fang Kuang, Defendant–Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

OPINION TEXT STARTS HERE

Mario D. Valencia, Henderson, NV, for DefendantAppellant Chao Fan Xu; Marc Picker, Reno, NV, for DefendantAppellant Guo Jun Xu; Loren Graham, Stateline, NV, for DefendantAppellant Ying Yi Yu; Chad A. Bowers, Las Vegas, NV, for DefendantAppellant Wan Fang Kuang.

Krista Tongring, United States Department of Justice, Organized Crime and Gang Section, Washington, D.C.; Ronald L. Cheng, United States Department of Justice, Organized Crime and Gang Section, Los Angeles, CA, for PlaintiffAppellee.

Appeal from the United States District Court for the District of Nevada, Philip M. Pro, District Judge, Presiding. D.C. No. 2:02–CR–00674–PMP–LRL–1, D.C. No. 2:02–CR–00674–PMP–LRL–4, D.C. No. 2:02–CR–00674–PMP–LRL–2, D.C. No. 2:02–CR–00674–PMP–LRL–3.

Before: ALFRED T. GOODWIN, STEPHEN REINHARDT, and MARY H. MURGUIA, Circuit Judges.

OPINION

GOODWIN, Circuit Judge:

Four Chinese nationals appeal their convictions and sentences for federal crimes that they committed as part of a scheme to steal funds from the Bank of China, where two of the defendants were high-level employees, and to escape prosecution and retain the proceeds by illegal transfers of funds and by immigration fraud. We affirm the convictions, and vacate the sentences and remand for resentencing.

Defendants Xu Chaofan (“Chaofan”), Xu Guojun (“Guojun”), Yu Ying Yi (Yingyi), and Kuang Wan Fang (Wanfang) 1 (collectively, Defendants), challenge the application of the Racketeer Influenced and Corrupt Organizations Act (RICO) to extraterritorial conduct which occurred in China, as well as various rulings on evidence and defense motions. They also challenge their sentences.

The scheme involved diverting bank funds from the Bank of China to a holding company in Hong Kong. Defendants were charged with manipulating auditing controls to conceal their diversion of bank funds, and using the funds to speculate in foreign currency, to make fraudulent loans, to purchase real estate in Asia and North America, and to finance gambling trips to Las Vegas and other casino venues. As an essential part of the scheme, each of the Defendants entered into a fraudulent marriage with a spouse who held valid United States immigration status. After the Bank of China discovered their scheme, Defendants fled to the United States using their falsified immigration documents. Defendants were arrested and brought to trial in the United States District Court for the District of Nevada.

We have jurisdiction under 28 U.S.C. § 1291 and 18 U.S.C. § 3742.

I. Facts and Procedural Background

Guojun and Yingyi were legally married in China in 1985. Chaofan and Wanfang were legally married in China in 1992. Chaofan was employed by the Bank of China from 1982 through 2001. The Bank of China is a state-owned bank that is headquartered in Beijing. It operates throughout China through a series of provincial branches, second-level branches, and sub-branches. In 1992, Chaofan was promoted to president/general manager of the Kaiping sub-branch in Guangdong province, and he served in that position until August 1998. Guojun was hired in 1994 as head of accounting at the Kaiping sub-branch. In August 1998, Chaofan was promoted, and unindicted co-conspirator Yu Zhendong (“Zhendong”) became president/general manager of the Kaiping sub-branch. When Zhendong was promoted in May 2000, Guojun took over at the Kaiping sub-branch and served as president/general manager until the Bank of China discovered the fraud in October 2001.

During their management of the Kaiping sub-branch, the three managers engaged in three types of fraud: (1) foreign exchange speculation, resulting in a loss to the Bank of China of approximately $147 million; (2) “out-of-book” loans, which are loans that were not properly recorded in the bank's accounting system, resulting in a loss of approximately $181 million; and (3) false loans, in which loans totaling $90–95 million were entered into the bank's accounts, but the proceeds from the loans were diverted into a Hong Kong conduit company named Ever Joint.

In 1995, the Bank of China conducted a foreign exchange audit including the Kaiping sub-branch. To avoid discovery of the foreign currency exchange losses, Chaofan, Guojun, and Zhendong directed Kaiping sub-branch employees to falsify bank records. These efforts succeeded. The three managers were able to pass subsequent audits by the Bank of China in the same way.

During the course of the fund diversions, Chaofan, Guojun, Wanfang, and Yingyi entered into false marriages with spouses who held valid United States immigration status. The purpose of the false marriages was to gain residency status in the United States to avoid Chinese Law enforcement.

During the time alleged in the indictment, Chaofan, Guojun, Wanfang, and Yingyi made numerous gambling trips to Macao, Australia, Malaysia, and the Philippines. These trips were financed with wire transfers totaling more than $80 million from Ever Joint accounts. Using counterfeit visas and passports, the group also traveled to Las Vegas in 2000 and 2001, where they stayed at casino hotels and spent substantial sums playing baccarat. The gambling money was arranged through intermediaries who used cashier's checks drawn from Ever Joint accounts to set up credit lines at the casinos. The Las Vegas gambling money included wire transfers totaling over $2 million from Ever Joint accounts that resulted in checks being issued by the casinos to the intermediaries to facilitate the return of the funds to Defendants for their personal use.

On October 12, 2001, due to a change in accounting procedures, the Bank of China discovered a $482 million discrepancy in bank records that was attributed to the Kaiping sub-branch. Chaofan and Guojun fled to Hong Kong. Using their fraudulent passports and visas, they flew to Vancouver, British Columbia, and continued on to Las Vegas. Chaofan and Guojun then discovered that Chinese authorities had frozen the $8 million that they had transferred to Caesars Palace casino for their personal use. Wanfang and Yingyi fled separately to Vancouver and then to the United States using their fraudulently obtained immigration status. The United States does not have an extradition treaty with China.

Zhendong was arrested in Los Angeles on December 19, 2002. Zhendong pleaded guilty to federal charges and agreed to return to China. He cooperated with the FBI in the investigation and prosecution of Defendants. Id. Guojun and Yingyi were arrested in Wichita, Kansas, on September 22, 2004. Chaofan and Wanfang were arrested in Edmond, Oklahoma, on October 6, 2004.

In the second superseding indictment, Defendants were charged with RICO conspiracy in violation of 18 U.S.C. § 1962(d) (count one), money laundering conspiracy in violation of 18 U.S.C. § 1956(h) (count two), conspiracy to transport stolen money in violation of 18 U.S.C. § 371 (count three), use of a fraudulently obtained visa in violation of 18 U.S.C. §§ 1546(a) & 2 (counts four through nine), and use of a fraudulent passport in violation of 18 U.S.C. §§ 1542 & 2 (counts ten through fifteen).

From February 2005 through early 2008, the parties were involved in lengthy pretrial motions and discovery, including two rounds of videotaped depositions of witnesses who either lived in or were incarcerated in China. The government, together with Defendants and their counsel, conducted the depositions from Las Vegas, Nevada, via video link with the witnesses in China. Defendants cross-examined each witness. Defendants waived their right to be present in China to confront the witnesses face to face.

After a 38–day trial (from June 10, 2008, to August 29, 2008), the jury convicted Defendants on all counts. The district court sentenced Chaofan to 25 years in prison, Guojun to 22 years, and Wangfan and Yingyi to 8 years each. The court also sentenced each defendant to three years of supervised release, and entered restitution orders totaling $482 million. Defendants timely appealed to this court. The appeals were assigned to this panel and consolidated.

We granted the government's motion to expand the record for this appeal to include 31 DVDs containing the complete, unedited video depositions for all witnesses who appeared at trial.

II. Defendants' Count One Rico Conspiracy ConvictionsA. Count One Activities

Viewed as a whole, the activities subject to count one encompass a unified scheme, wherein the Defendants: stole as much money as possible from the Bank of China; transferred the stolen funds out of China; escaped, through immigration fraud, to a safe harbor in the United States; and then spent the funds in, among other places, Las Vegas casinos. Defendants were thus engaged in an international enterprise, using many of the tools of the global economy. We therefore consider RICO's application in a multinational context.

B. Extraterritorial Application of Rico

Defendants argue that their count one convictions are invalid because the charged conspiracy was extraterritorial and outside the reach of RICO. We review de novo a challenge to the extraterritorial application of criminal statutes. See United States v. Vasquez–Velasco, 15 F.3d 833, 838–40 (9th Cir.1994); see also United States v. Felix–Gutierrez, 940 F.2d 1200, 1203–04 (9th Cir.1991); Chua Han Mow v. United States, 730 F.2d 1308, 1311 (9th Cir.1984).

In Morrison v. National Australia Bank Ltd., ––– U.S. ––––, 130 S.Ct. 2869, 2875, 177...

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