FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 07-10529
v. D.C. No.
MIRZA ALI, CR-02-40081-CW
Defendant-Appellant.
UNITED STATES OF AMERICA,
Plaintiff-Appellee, No. 07-10539
v. D.C. No.
SAMEENA ALI, CR-02-40081-CW
Defendant-Appellant.
UNITED STATES OF AMERICA, No. 07-10542
Plaintiff-Appellee,
v. D.C. No.
CR-02-40081-CW
KEITH W. GRIFFEN,
OPINION
Defendant-Appellant.
Appeal from the United States District Court
for the Northern District of California
Claudia A. Wilken, District Judge, Presiding
Argued and Submitted
November 2, 2009—San Francisco, California
Filed August 25, 2010
12805
12806 UNITED STATES v. ALI
Before: Pamela Ann Rymer, M. Margaret McKeown, and
N. Randy Smith, Circuit Judges.
Opinion by Judge N.R. Smith
UNITED STATES v. ALI 12809
COUNSEL
Karen L. Landau, Oakland, California, for appellant Sameena
Ali.
Chris Cannon, San Francisco, California, for appellant Mirza
Ali.
David J. Cohen, Bay Area Criminal Lawyers, PC, San Fran-
cisco, California, for appellant Keith Griffen.
Joseph P. Russoniello, Barbara J. Valliere, and Hartley M. K.
West, for appellee, the United States of America.
OPINION
N.R. SMITH, Circuit Judge:
This case arises from a scheme whereby Mirza Ali, Sam-
eena Ali, and Keith Griffen (collectively “Defendants”) pur-
chased Microsoft software at discounted prices then resold the
software for a profit. The case calls upon us to interpret and
apply the mail and wire fraud statutes, 18 U.S.C. §§ 1341 and
1343. Significantly, we hold Defendants were properly con-
victed of mail and wire fraud, because (1) a right to payment
of money for the sale of software is “money or property” as
defined in 18 U.S.C. §§ 1341 and 1343, and (2) neither statute
requires a transfer directly to the defendant from the party
12810 UNITED STATES v. ALI
deceived by the defendant. Further, sufficient evidence sus-
tains all of the convictions with the exception of the promo-
tion money laundering counts. Lastly, the district court did
not err with regard to sentencing or with respect to Sameena
Ali’s motion for substitute counsel.
FACTUAL AND PROCEDURAL HISTORY
A. Microsoft’s Software Distribution System
Microsoft sells software1 in a variety of ways, one of which
is Microsoft’s Authorized Education Reseller (“AER”) pro-
gram. Through the AER program, Microsoft sells Academic
Edition (“AE”) software. While the AE software is in all rele-
vant ways equivalent to the retail version, Microsoft sells its
AE software only to authorized distributors, who have agreed
to sell the AE software only to AERs. These AERs have
agreed to sell the AE software only to qualified educational
users. Microsoft charges distributors of AE software a much
lower price than it charges distributors for comparable non-
academic editions. Distributors in turn generally sell AE soft-
ware to resellers at a lower price than non-AE software.
In order to become an AER, an entity must submit an appli-
cation to Microsoft. As part of the application process, the
entity promises, inter alia, to abide by the resale restrictions
on AE software imposed by Microsoft. Upon approval of the
application, the AER agreement requires that, if an AER sells
software in violation of the agreement, the AER would be lia-
ble to Microsoft for “the difference between [Microsoft’s]
estimated retail price for AE product and . . . commercial ver-
sions of the same products.”
1
As is common in the software industry, Microsoft does not “sell” its
product in the traditional sense of the word. Rather, Microsoft licenses its
software to end users. Nevertheless, because even within the industry such
transactions are referred to as “sales,” we use that terminology here.
UNITED STATES v. ALI 12811
B. Defendants’ Buying and Selling of AER
Defendants devised a scheme to fraudulently attain AER
status for various companies and then sell AE software to
unauthorized users (those who did not qualify as educational
users). Defendants first began purchasing AE software
through a company called Samtech Research, Inc.
(“Samtech”). Sameena Ali was president of Samtech and,
while president, submitted an AER application to Microsoft
on behalf of the company in September 1996. Microsoft
reviewed and approved the application, thereby allowing
Samtech to act as an AER. Over the course of the next four
or five months, Samtech purchased about $3.4 million of AE
product. In January 1997, Microsoft terminated Samtech’s
AER agreement, because Samtech was in breach of the agree-
ment for selling AE software to unauthorized users. Unde-
terred, over the next four years, all three Defendants engaged
in a scheme whereby they (1) created new companies under
false names and (2) purchased existing companies (which
were already AERs) in order to continue acquiring AE soft-
ware from Microsoft. Over this period, Defendants’ compa-
nies acquired approximately $30 million of AE software.
Defendants did not buy AE software directly from Microsoft
but rather purchased the software from other AERs. Had
Microsoft known of Defendants’ involvement, the parties
both agree and have stipulated that Microsoft would not have
authorized Defendants’ companies as AERs (which would
have prevented Defendants from acquiring AE product from
Microsoft or other AERs). Defendants resold the AE product
to 120 different entities, 90% of which were unauthorized to
purchase AE software. Defendants used the mail and wires as
part of this scheme.
C. Disposition of the Proceeds of the Sales
The Alis owned four bank accounts into which they depos-
ited proceeds from the sale of the AE software. They used
funds from these accounts to purchase nominee companies,
12812 UNITED STATES v. ALI
additional software, and real property in the name of their son.
They also transferred some of the funds from these accounts
to Pakistan. Additionally, they used proceeds from the sales
of AE software to purchase real property at 9900 Longview
Lane, Pleasanton, California and 1069 Canyon Creek Terrace,
Fremont, California. These transactions are the bases of the
money laundering charges.
D. Indictment and Trial
A grand jury in the Northern District of California indicted
Mirza Ali, Sameena Ali, Keith Griffen, and William Glushenko2
of mail fraud, wire fraud, and money laundering on April 10,
2002.
On March 19, 2003, citing difficulties in the relationship
with his client, Sameena Ali’s appointed counsel moved to
withdraw, at Sameena Ali’s request. The court referred the
motion to the magistrate court for further review and to deter-
mine whether Sameena Ali was eligible for appointed coun-
sel. However before referral, the court informed counsel and
Sameena Ali that they could revisit the motion if they could
not mend their differences. The magistrate found that Sam-
eena Ali was eligible for appointed counsel, but neither coun-
sel nor Ali herself raised the motion before the court again.
On March 10, 2005, the grand jury returned a 31 count
superseding indictment. Count 1 of the indictment charged
conspiracy to commit mail and wire fraud under 18 U.S.C.
§ 371, Counts 2-5 charged mail fraud in violation of 18
U.S.C. § 1341, Counts 6-9 charged wire fraud in violation of
18 U.S.C. § 1343, Count 10 charged conspiracy to launder
money under 18 U.S.C. § 1965(h), Counts 11-20 charged pro-
motion money laundering under 18 U.S.C. § 1956(a)(1)(A)(i),
Counts 21-26 charged concealment money laundering under
2
Glushenko pleaded guilty, did not stand trial with the defendants
named in this appeal, and is not party to this appeal.
UNITED STATES v. ALI 12813
18 U.S.C. § 1956(a)(1)(B)(i), Counts 27-30 charged exporta-
tion money laundering under 18 U.S.C. § 1956(a)(2)(B)(i),
and Count 31 charged criminal forfeiture under 18 U.S.C.
§ 982. Mirza and Sameena Ali were charged with all 31
counts, and Keith Griffen was charged with counts 1-9.
On March 6, 2006, Defendants waived their right to a jury
trial. Instead they entered into an agreement with the govern-
ment for a bench trial based on stipulated facts, but limiting
the sentence to a maximum of 60 months for the Alis and 33
months for Keith Griffen. After trial, the court found all three
Defendants guilty on Counts 1-9 and Mirza and Sameena Ali
guilty on Counts 10-31.
E. Sentencing
The court sentenced Mirza and Sameena Ali to 60 months
incarceration and three years’ supervised release on each
count, running concurrently, $20 million restitution, and a for-
feiture judgment of about $5 million. The pre-sentence report
had calculated 60 months as the appropriate range for count
one and 121-151 months for counts 2-30 based on the sen-
tencing guidelines and seriousness of the offenses. (Again,
count 31 charged criminal forfeiture.) However, the report
finally recommended a total sentence of 60 months, because
the parties had agreed to a 60-month cap when they stipulated
to the facts and agreed to the bench trial.
The court sentenced Keith Griffen to 33 months incarcera-
tion and three years supervised release (on each count), and
$20 million restitution. Like the Alis, the pre-sentence report
calculated a longer sentence (46-57 months) based on the
guidelines, but ultimately recommended 33 months based
upon the pre-trial agreement.
As to the restitution amount, the judge relied upon spread-
sheets prepared by IRS agents to calculate Microsoft’s loss at
$20 million. The agents prepared these spreadsheets based on
12814 UNITED STATES v. ALI
an analysis of Defendants’ bank records as well as invoices
from Microsoft’s distributors. With regard to all Defendants,
the court pointed out that the sentences imposed would still fit
the guideline range, even if the loss amount were later deter-
mined (possibly by a higher court) to be much lower (as low
as $200,000). The district court also confirmed that it would
impose the same sentences even if the loss were smaller.
Defendants appeal their convictions, arguing: (1) the indict-
ment was insufficient in that it failed to state an offense
because Defendants did not take “money or property” from
Microsoft; (2) there is insufficient evidence to support their
convictions; and (3) their sentences are substantively unrea-
sonable and the district court erred in its calculation of their
sentences. Sameena Ali appeals the district court’s actions
with respect to her motion for substitute counsel.
DISCUSSION
I. A right to payment is “money or property” under
18 U.S.C. §§ 1341 and 1343.
A. Standard of Review
We review de novo a district court’s construction of a crim-
inal statute. United States v. Blixt, 548 F.3d 882, 886 (9th Cir.
2008). We also review de novo a district court’s denial of a
motion to dismiss an indictment for failure to state an offense.
Id.
B. Analysis
[1] Mail and wire fraud are both defined as “any scheme
or artifice to defraud, or for obtaining money or property by
means of false or fraudulent pretenses, representations, or
promises.” 18 U.S.C. §§ 1341, 1343. Defendants challenge
their convictions on the ground that the indictment failed to
state an offense under either statute, because Microsoft was
UNITED STATES v. ALI 12815
only deprived of “potential profits” which are not “money or
property” under the law. We do not agree.
There are four main Supreme Court cases interpreting the
phrase “money or property” in the relevant statutes: McNally
v. United States, 483 U.S. 350 (1987), superseded by statute,
18 U.S.C. § 1346; Carpenter v. United States, 484 U.S. 19
(1987); Cleveland v. United States, 531 U.S. 12 (2000); and
Pasquantino v. United States, 544 U.S. 349 (2005). McNally,
chronologically first, held that the definition of property does
not reach “the intangible right of the citizenry to good govern-
ment.” McNally, 483 U.S. at 356. Later that same year in Car-
penter, the Court clarified that “McNally did not limit the
scope of § 1341 to tangible as distinguished from intangible
property rights.” Carpenter, 484 U.S. at 25. In Carpenter, the
Court also held that “[c]onfidential business information”
qualified as property under the mail fraud statute. Id. at 26.
Cleveland held that business licenses issued by a state “do not
qualify as ‘property’ within § 1341’s compass.” Cleveland,
531 U.S. at 15. The Court went on to explain that to qualify
as property “the thing obtained must be property in the hands
of the victim.” Id.
[2] Finally, in Pasquantino, the Supreme Court held that
“an entitlement to collect money from [a party]” is money or
property under the mail and wire fraud statutes. 544 U.S. at
355. In Pasquantino, the defendants engaged in a scheme to
avoid Canadian excise taxes on liquor. The Court found that
the defendants were attempting to “deprive Canada of money
legally due,” id. at 356, and that “Canada’s right to uncol-
lected excise taxes . . . is ‘property’ in its hands,” id. at 355.
Under this line of cases, we conclude that Microsoft’s right to
full payment for that software is “money or property.” Micro-
soft had a right to full payment for its software and was
deprived of that right when Defendants fraudulently obtained
the software for less than full payment. We therefore reject
Defendants’ characterization of Microsoft’s loss as only the
expectation of “potential profits.” It does not affect our analy-
12816 UNITED STATES v. ALI
sis that Defendants obtained the software through third party
distributors. Microsoft only sold the software to those distrib-
utors with the agreement that it would only be resold to other
AERs or to AE users. The mere fact that the software traveled
through other hands on its way from Microsoft to Defendants
is immaterial: Microsoft sold the software only for limited
distribution and Defendants fraudulently obtained it for indis-
criminate distribution.3
Of course, in some transactions, Defendants did not obtain
the software directly from Microsoft. Thus, Defendants argue
that this right to payment was not “property in the hands of
the victim” as Cleveland requires. Cleveland, 531 U.S. at 15.
Defendants are mistaken. Here, Microsoft’s third party resel-
lers were not deprived of any payment: they purchased soft-
ware licenses at the wholesale AE price and resold the
licenses for a corresponding price. Microsoft, on the other
hand, had a right to full payment when the software was sold
outside the AE restrictions by Defendants. Just as the Cana-
dian government’s deprivation of payment rightly due was “in
its hand,” here, Microsoft—the only party deprived of proper
payment—lost property “in its hand.”
Defendants contend that these cases together stand for the
proposition that only “traditionally recognized forms of prop-
erty” constitute property under the statutes. Defendants then
argue that the right to be paid is not traditionally recognized
as a form of property. Pasquantino prevents us from accept-
ing their argument.
Defendants, citing our opinion in United States v. Bruch-
3
Because we conclude that Microsoft’s right to payment for that soft-
ware is money or property under the statute, we need not address the cases
cited by Defendants holding that market share (Lancaster v. Cmty. Hosp.
v. Antelope Valley Hosp. Dist., 940 F.2d 397 (9th Cir. 1991)) and contract
rights (TransWorld Airlines, Inc. v. Am. Coupon Exch., Inc., 913 F.2d 676
(9th Cir. 1990)) are not money or property.
UNITED STATES v. ALI 12817
hausen, 977 F.2d 464 (9th Cir. 1992), also argue that Micro-
soft was only deprived of post sale control of its software, not
of any money or property. This argument fails, because
Microsoft was deprived of more than downstream control in
this case. Defendants are correct that, in Bruchhausen, we
held that the right to control the future sales of property is not
an interest cognizable as property under the mail fraud statute.
Id. at 467. There the defendants had made false representa-
tions in order to obtain firearms which they then sold to for-
eign nations. Id. at 466. The manufacturers would not have
sold the weapons had they known the defendants’ true intent.
Id. We found that there was no property interest of the manu-
facturers at stake in that case. Id. at 467.
Bruchhausen is substantially different from the case at bar.
There, the defendants paid full price for the firearms and did
not use the misrepresentations in order to obtain a different
price. Here, Microsoft’s loss was not the lost ability to control
the downstream disposition of its products, but lost revenue
when the products were sold at a discount as a result of the
fraud. Thus, Microsoft’s right to receive full payment for its
product mirrors the loss of taxes due in Pasquantino and not
a mere loss of control as in Bruchhausen.
The Tenth Circuit made a similar distinction in United
States v. Stewart, 872 F.2d 957 (10th Cir. 1989). There the
defendants obtained pharmaceuticals at a discounted cost
based on their fraudulent representations of how they intended
to distribute the drugs. The defendants in Stewart argued that
the only thing they had deprived the manufacturer of was the
business expectation relating to how the products would be
sold, but the Tenth Circuit disagreed. That court found that
the defendants had, in actuality, taken from the manufacturers
“money which they should have received on sales of pharma-
ceuticals to wholesalers.” Id. at 960; cf. United States v. Nel-
son, 988 F.2d 798 (8th Cir. 1993) (holding defendants
deprived IBM of property where they fraudulently obtained
computer components at reduced prices). We agree with this
12818 UNITED STATES v. ALI
analysis and hold that here, like in Pasquantino and Stewart,4
Defendants deprived the victim of money properly due based
on the nature of the transaction.
[3] Defendants also argue, in the alternative, that even if a
right to payment constitutes property, “the stipulated facts do
not establish that Microsoft lost any future profits.” Defen-
dants make this argument, because the stipulated facts do not
state that consumers who purchased AE software from Defen-
dants would have otherwise purchased full price software.
This argument is misplaced. It does not matter whether those
who purchased lower priced software from Defendants would
have paid the higher price otherwise. Rather, the fact that
Defendants acquired the lower priced software when they
should have paid the higher price establishes Microsoft’s loss.5
II. There was sufficient evidence for the district court
to find (1) Defendants guilty of the mail and wire fraud
charges and (2) the Alis guilty of conspiracy to launder
money, concealment money laundering, exportation
money laundering, and criminal forfeiture. However,
4
Defendants attempt to distinguish Stewart, because there the defen-
dants purchased the pharmaceuticals directly from the manufacturer. This
argument is not compelling. Microsoft lost payment rightly due as a result
of the Defendants’ misrepresentations, regardless of the fact that the soft-
ware was not purchased directly from Microsoft.
Defendant Griffen makes the related argument that, because there was
no agency relationship between Microsoft and its distributors and Micro-
soft was paid the full AE price for the software, Microsoft was not
deprived of anything as a result of Defendants’ conduct. We disagree.
Again, it is not necessary that Defendants obtain the property directly from
Microsoft or an agent in order to engage in a scheme to defraud Microsoft.
5
We also note that defendant Griffen argues that the rule of lenity
should apply with regard to the definition of property under the statutes.
The rule of lenity only applies when the application of a term is ambigu-
ous. In the context of this case, “property” is not ambiguous and, there-
fore, this argument is unavailing.
UNITED STATES v. ALI 12819
there is insufficient evidence to support the Alis’ convic-
tions for promotion money laundering.
A. Standard of Review
“There is sufficient evidence to support a conviction if,
‘viewing the evidence in the light most favorable to the prose-
cution, any rational trier of fact could have found the essential
elements of the crime beyond a reasonable doubt.’ ” United
States v. Sullivan, 522 F.3d 967, 974 (9th Cir. 2008) (quoting
Jackson v. Virginia, 443 U.S. 307, 319 (1979)).
B. Analysis
1. Mail and Wire Fraud
Mail and wire fraud both consist of using the mail or wires
in “any scheme or artifice to defraud, or for obtaining money
or property by means of false or fraudulent pretenses, repre-
sentations, or promises.” 18 U.S.C. § 1341, 1343. Further-
more, as explained in more detail below, courts have
interpreted these statutes to require that the property taken
come from the “victim” of the deception.
Defendants challenge the sufficiency of the evidence as to
the mail and wire fraud charges6 in three ways: (1) the evi-
dence was insufficient to show Microsoft was deprived of
property; (2) the evidence was insufficient to show that
Microsoft was the “victim” of the fraud; and (3) based on the
evidence, this case is only about a violation of antitrust or
copyright law, not mail or wire fraud.
6
Defendants do not separately challenge the conspiracy to commit mail
and wire fraud under Count 1. Rather, Defendants only challenge conspir-
acy inasmuch as they challenge the sufficiency of the evidence as to the
mail and wire fraud charges themselves.
12820 UNITED STATES v. ALI
a.
We have already addressed Defendants’ first challenge.
There is sufficient evidence to show that Microsoft was
deprived of money or property because Microsoft’s right to
proper payment for its software is money or property within
the meaning of the statute. Furthermore, not only was Micro-
soft properly entitled to the payment, no other party—
including the authorized distributors—was deprived of any
right to proper payment.
b.
[4] Second, Defendants contend that precedent requires
that Microsoft be the “victim” of the fraud and that the evi-
dence is insufficient to support such a finding here. There are
two relevant cases on this point. First, Cleveland requires that
the property taken be property “in the hands of the victim,”
531 U.S. at 15, suggesting that at least some level of conver-
gence between the fraud and the loss is required. Second, we
held in United States v. Lew, 875 F.2d 219 (9th Cir. 1989),
that, for mail fraud, “the intent must be to obtain money or
property from the one who is deceived.” Id. at 221.
[5] Cleveland cannot be read to mean the property must
actually be taken directly from the victim; depriving a victim
of property rightfully due is enough. See Pasquantino, 544
U.S. at 355-56 (holding that Canada’s right to receive tax pay-
ments on imported liquor was “ ‘property’ in its hands” under
Cleveland). On sufficiency of the evidence review, viewing
the evidence in the light most favorable to the government,
we hold that Microsoft’s right to full payment was “property
in its hands” under Cleveland and Pasquantino.
[6] In Lew, we held that for mail fraud, “the intent must be
to obtain money or property from the one who is deceived.”
875 F.2d at 221. Defendants made misrepresentations directly
to Microsoft in order to obtain AER status. Defendants rightly
UNITED STATES v. ALI 12821
point out, however, with respect to the companies (already
certified as AERs) purchased by Defendants, that Defendants
made no misrepresentation directly to Microsoft.7 We never-
theless conclude that there is sufficient evidence to support
Defendant’s convictions with respect to all the transactions.
[7] The Defendants’ acquisition of companies with AER
status was part of a larger scheme to defraud Microsoft, so
Defendants need not have made a misrepresentation directly
to Microsoft in order to be guilty of mail and wire fraud.
“Under the mail fraud statute the government is not required
to prove any particular false statement was made. Rather,
there are alternative routes to a mail fraud conviction, one
being proof of a scheme or artifice to defraud, which may or
may not involve any specific false statements.” United States
v. Munoz, 233 F.3d 1117, 1131 (9th Cir. 2000) (citations
omitted), superseded by statute, 18 U.S.C. § 2B1.1. Defen-
dants acquired these AER companies as part of an overall
scheme to defraud Microsoft, in which they made misrepre-
sentations to Microsoft. Therefore, we conclude that there is
sufficient evidence to demonstrate that Defendants were
engaged in a scheme to defraud Microsoft, even if there were
no specific false statements made to Microsoft.
Further, under Lew, Microsoft must be the victim from
whom property was taken. Again, we have no trouble finding
7
The parties do not cite any case that stands for the proposition that
Defendants had a duty to disclose that they were purchasing companies
that had previously been certified as AERs even though they knew Micro-
soft would have likely terminated the agreements had Microsoft known
Defendants were in possession of these companies. While Defendants did
purchase and establish nominee companies in order to shield their identi-
ties from Microsoft, this court has held in a RICO case that “[a]bsent an
independent duty, such as a fiduciary duty or an explicit statutory duty,
failure to disclose cannot be the basis of a fraudulent scheme.” California
Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d
1466, 1472 (9th Cir. 1987). Here, Defendants had no independent duty to
disclose their identities to Microsoft in connection with the purchase of
these companies.
12822 UNITED STATES v. ALI
sufficient evidence to show that Microsoft was deprived of its
right to payment for its software and that Defendants deprived
Microsoft of this money or property, even though the transfer
also involved third party distributors.
Defendants counter that, at most, they are only in breach of
contract with Microsoft and that a contract dispute is not itself
grounds for mail or wire fraud. Defendants cite the Eleventh
Circuit in United States v. Chandler, 388 F.3d 796, 800 (11th
Cir. 2004) and the Second Circuit in United States v. Han-
dakas, 286 F.3d 92 (2d Cir. 2002), overruled on other
grounds by United States v. Rybicki, 354 F.3d 124 (2d Cir.
2003), which both came to the conclusion that the mail and
wire fraud statutes cannot be read to criminalize every breach
of contract. Further, Chandler found that the object of mail or
wire fraud must be the underlying criminal behavior. Chan-
dler, 388 F.3d at 804-05.
We do not read Handakas or Chandler to preclude Defen-
dants’ criminal prosecution in this case. The simple fact that
Microsoft may have brought a civil contract claim against
Defendants does not immunize Defendants’ conduct from
criminal prosecution if that conduct meets the elements of the
criminal statutes as well. Further, we need not decide if Chan-
dler is correct that underlying criminal activity is always nec-
essary; the criminal activity in this case is straightforward.
Defendants’ deprived Microsoft of revenue when they pur-
chased AE software through false pretenses.
c.
Third, Defendants argue that this case is controlled by
copyright or antitrust law, not fraud. Even if Microsoft were
in violation of copyright or antitrust law, the appropriate rem-
edy would be found in copyright or antitrust law, and such
illegal behavior by Microsoft would not immunize Defen-
dants’ fraud. United States v. Weinstein, 762 F.2d 1522, 1533
(11th Cir. 1985) (whether a pricing scheme is illegal is imma-
UNITED STATES v. ALI 12823
terial to the issue of fraud because “[i]f defendants doubted
the legality of that practice their recourse would have been
through antitrust action, not through a scheme of misrepresen-
tations communicated through U.S. mails and wires”).
2. Money Laundering
[8] In order to show money laundering, 18 U.S.C.
§ 1956(a)(1) requires the government to prove that a defen-
dant participated in a financial transaction using the “pro-
ceeds” of an unlawful activity. “Proceeds” generally means
“that which is obtained . . . by any transaction.” United States
v. Akintobi, 159 F.3d 401, 403 (9th Cir. 1998) (quotation
marks omitted). More recently, we have recognized that this
broad definition must be narrowed in certain contexts. See
United States v. Van Alstyne, 584 F.3d 803, 814-15 (9th Cir.
2009) (discussing United States v. Santos, 553 U.S. 507
(2008)). Specifically, we distinguish between the profits and
gross receipts of an illegal venture when defining proceeds as
gross receipts results in the merger of two crimes charged
against a defendant. Id. at 810. This “merger” problem arises
when a money laundering count essentially serves to increase
the sentence for the very same behavior constituting the
underlying criminal violation. Santos, for example, dealt with
an illegal lottery. 553 U.S. at 507. Payments to lottery winners
from the gross receipts of the operation are necessary to the
function of the illegal activity and, categorizing such pay-
ments as promotion money laundering also essentially
increases the penalty for conducting an illegal lottery. See Van
Alstyne, 584 F.3d at 810. By showing that profits (as opposed
to gross proceeds) are used in furtherance of the illegal opera-
tion, a merger problem is avoided. Id. at 814. Likewise, use
of proceeds (whether they be profits or not) outside the illegal
operation does not implicate the merger problem, making the
distinction between gross proceeds and profits irrelevant in
that context. United States v. Fernandez, 559 F.3d 303, 317
(5th Cir. 2009) (holding that use of receipts outside of the
criminal enterprise necessarily means that those receipts are
12824 UNITED STATES v. ALI
profits as the funds are, necessarily, not needed to run the
operation).
[9] In the case at bar, the Alis were convicted of: 10 counts
of promotion money laundering under 18 U.S.C.
§ 1956(a)(1)(A)(i); six counts of concealment money launder-
ing under 18 U.S.C. § 1956(a)(1)(B)(i); and four counts of
exportation money laundering under 18 U.S.C.
§ 1956(a)(2)(B)(i). With respect to all of these counts, the
government did not specifically show that profits were used
to conduct the money laundering activities. The Alis only
challenge the sufficiency of the evidence as to their convic-
tions for money laundering,8 based on this failure to show that
profits were used in the transactions. Under the Van Alystne
standard, the money laundering charges will only be sup-
ported by sufficient evidence if there is no merger problem.
[10] The Alis’ convictions for promotion money launder-
ing cannot stand. The government did not show that profits
were used to purchase additional software and companies in
furtherance of Defendants’ scheme. Under Van Alstyne, with-
out such a showing, a conviction for promotion money cannot
be supported. Just as an illegal lottery will pay winners, an
illegal scheme to buy and sell discounted software will con-
tinue to buy and sell software to perpetuate the scheme. Thus,
the promotion money laundering counts implicate the merger
problem discussed in Van Alstyne and Santos and, because the
government did not show that only profits were used, there is
insufficient evidence to support the Alis’ conviction under the
promotion money laundering counts.9
[11] The same is not true with respect to the counts for
concealment and exportation money laundering. The Alis
8
As with the fraud charges, the Alis do not separately challenge the con-
spiracy to commit money laundering count.
9
We note that Van Alstyne was decided after the district court handed
down its decision in this case.
UNITED STATES v. ALI 12825
stipulated that they used proceeds from the software operation
(1) to purchase two parcels of real estate and (2) in transfers
of funds from the United States to Pakistan. These uses of the
funds do not implicate the merger problem, as they were used
for purposes outside the scheme to defraud Microsoft. Thus,
the distinction between profits and proceeds is not relevant as
to these counts. Because Defendants stipulated that proceeds
of the illegal operation were used in these transactions, there
is sufficient evidence to sustain the Alis’ convictions for con-
cealment money laundering and exportation.
3. Criminal Forfeiture
[12] Because the concealment and exportation money
laundering counts are supported by sufficient evidence, we
also affirm the criminal forfeiture count. We need not reach
the Alis’ argument that, in the indictment, the criminal forfei-
ture count was never based on mail or wire fraud.
III. The district court did not err with regard to the
sentences imposed.
Defendants present four challenges to the sentences
imposed by the court.
A. Standard of Proof
First, Defendants argue that the court applied an incorrect
standard of proof with regard to the calculation of loss. Spe-
cifically, Defendants contend that the court should have
required the government to prove loss by clear and convinc-
ing evidence. The government concedes that the district court
applied a preponderance of the evidence standard to calculate
the loss here, but argues that this was not error.
[13] We hold that the district court did not err in using a
preponderance of the evidence standard. In United States v.
Riley, 335 F.3d 919, 925 (9th Cir. 2003), we held that courts
12826 UNITED STATES v. ALI
should look to a “totality of the circumstances” when deter-
mining what standard to apply in sentencing and that the clear
and convincing standard is appropriate when “contested
enhancements would have ‘an extremely disproportionate
effect on the sentence imposed.’ ” Garro, 517 F.3d at 1168
(citation omitted). In this case, the sentences and the loss cal-
culated are not extremely disproportionate. The sentences are
well within the maximum sentence for mail and wire fraud
(30 years) and the court reduced the loss calculations to fit
within the agreed upon sentence caps. Furthermore, we
decline application of the clear and convincing standard for
establishing losses in fraud cases where the losses are “based
on conduct for which [defendant] was charged and convict-
ed.” United States v. Garro, 517 F.3d 1163, 1169 (9th Cir.
2008). Here, the loss being calculated was based on the
Defendants’ charged and convicted conduct.
B. Calculation of the Loss
Defendants challenge the district court’s method of calcu-
lating loss. A district court’s method of calculation is
reviewed de novo while the determination of the amount is
reviewed for clear error. See United States v. Santos, 527 F.3d
1003, 1006 (9th Cir. 2008).
[14] The district court relied upon spreadsheets, created by
IRS agents, that approximated the difference between the full
retail price of the software sold by Defendants and the AE
price Defendants paid for it. Though these spreadsheets were
admittedly hearsay, the district court was justified in relying
upon them. See United States v. Littlesun, 444 F.3d 1196,
1200 (9th Cir. 2006) (“[H]earsay is admissible at sentencing,
so long as it is accompanied by some minimal indicia of reli-
ability.”) (citation and internal quotation marks omitted). The
spreadsheets contained substantial detail and were reviewed
both by the IRS agents (who also sent in sworn affidavits
regarding the methodology) and Microsoft consultants who
reviewed the information. Therefore, the district court did not
UNITED STATES v. ALI 12827
err in its method of calculation of the loss. There is sufficient
indicia of reliability for the district court to have relied on
these spreadsheets.10
Given this record, the determination of the loss amount was
not clearly erroneous. The district court made “a reasonable
estimate of the loss, given the available information.” United
States v. Bussell, 504 F.3d 956, 960 (9th Cir. 2007) (citation
and internal quotation marks omitted).
C. Reasonableness of the Sentence
Defendants argue that the district court failed to impose a
substantially reasonable sentence by failing to consider the
factors in 18 U.S.C. § 3553(a)(2). “We consider the substan-
tive reasonableness of a sentence under an abuse-of-discretion
standard.” United States v. Carter, 560 F.3d 1107, 1120 (9th
Cir. 2009) (citing Gall v. United States, 552 U.S. 38, 51
(2007)). A district court need not provide a lengthy explana-
tion of the § 3553 factors in order for its explanation to be
sufficient. See Rita v. United States, 551 U.S. 338, 356
(2007).
[15] Defendants contend that the court already had in mind
the desired sentence (the agreed upon cap) and, therefore, did
not adequately take into account the § 3553(a) factors. The
record does not support Defendants’ argument. During sen-
tencing the district court specifically stated, “I still think that
the sentences that were agreed upon were the appropriate sen-
10
Defendants present a related argument that, because the government
did not adequately prove loss, the court ordered $20 million in restitution
was in error. A restitution order itself is reviewed for abuse of discretion,
while the “factual findings supporting [the] order . . . are reviewed for
clear error” and the “valuation methodology . . . reviewed de novo.”
United States v. Da Liu, 538 F.3d 1078, 1090 (9th Cir. 2008) (citations
omitted). For the same reasons noted with the loss argument with regard
to sentencing, $20 million was a reasonable estimate of Microsoft’s loss
and the district court did not abuse its discretion in ordering restitution.
12828 UNITED STATES v. ALI
tences pursuant to a departure from the guidelines, as well as,
pursuant to the 3553 Sections.” Defendants’ contention that
the court abused its discretion by failing to consider the
§ 3553(a) factors is wholly without merit.
D. Sentencing Methodology
Defendants present the related argument that the district
court’s sentencing methodology was flawed, in that the court
already had in mind the desired sentence prior to analyzing
the guidelines or other sentencing criteria. We review “the
district court’s application of the Guidelines to the facts for
abuse of discretion.” Garro, 517 F.3d at 1167.
[16] Defendants’ argument fails. Again, the court explic-
itly stated that “I still think that the sentences that were agreed
upon were the appropriate sentences pursuant to a departure
from the Guidelines.” The court considered the guidelines and
imposed what it felt was the appropriate sentence, Defendants
present no persuasive argument that this was an abuse of the
district court’s decision.
E. Harmless Error
[17] Finally, even if the district court did err in any of the
respects outlined by Defendants, any error was harmless.
When an “alleged error is harmless [it is] not a ground for
resentencing.” Garro, 517 F.3d at 1169 (citing United States
v. Crawford, 185 F.3d 1024, 1029 (9th Cir. 1999)). All the
departures made by the court were to lessen the sentences the
court could have imposed on Defendants. If there was any
error, the error was harmless in that there is no evidence any
of these alleged errors, if changed, would result in a shorter
sentence for any of the Defendants. Indeed, the court stated
that, even if the loss calculation were much different, based
on the § 3553(a) factors, the same sentences would have been
imposed.
UNITED STATES v. ALI 12829
IV. The district court did not err with regard to
Sameena Ali’s request for substitute counsel.
A district court’s denial of a request for substitute counsel
is reviewed for an abuse of discretion. United States v.
George, 85 F.3d 1433, 1438 (9th Cir. 1996).
Sameena Ali contends that the district court abused its dis-
cretion in denying her motion for substitute counsel. How-
ever, the district judge did not deny this motion. When
presented with the motion for substitute counsel, the district
judge expressed some concern over whether Sameena Ali was
actually eligible for court appointed counsel and whether
appointment of substitute counsel would solve any problems.
Thus, the district judge referred the matter to the magistrate
judge and invited counsel and Sameena Ali to revisit the sub-
stitute counsel issue if (1) Sameena Ali was eligible and (2)
Sameena Ali and her attorney could not work out their differ-
ences. Notwithstanding this invitation, they did not again
bring the matter before the district judge after the magistrate
ruled that Sameena Ali was indeed eligible for court
appointed counsel. Sameena Ali does not argue that it was an
abuse of discretion for the district court to defer ruling on this
motion.
CONCLUSION
We AFFIRM: (1) Defendants’ convictions as to Counts 1-
9; and (2) the Alis’ convictions as to Counts 21-31. We
REVERSE the Alis’ convictions under Counts 11-20. We
also AFFIRM Defendants’ sentences and find no error in the
district court’s actions with regard to Sameena Ali’s motion
for substitute counsel.
AFFIRMED in part and REVERSED in part.