FILED
NOT FOR PUBLICATION AUG 27 2014
MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 10-56466
Plaintiff - Appellee, D.C. Nos. 3:09-cv-00614-MMA
3:00-cr-02580-MMA-
v.
WILLIAM F. MCCRAY, MEMORANDUM*
Defendant - Appellant.
Appeal from the United States District Court
for the Southern District of California
Michael M. Anello, District Judge, Presiding
Argued and Submitted August 6, 2014
Pasadena, California
Before: REINHARDT, WARDLAW, and CALLAHAN, Circuit Judges.
William F. McCray appeals the district court’s denial of his 28 U.S.C.
§ 2255 motion to vacate his convictions for promotional money laundering. We
have jurisdiction under 28 U.S.C. § 2253(a), and we reverse.
*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
1. The district court erred in concluding that McCray’s promotional
money laundering counts, counts 23 and 24 of the Indictment, did not merge with
his wire fraud counts, counts 16 and 17. The core of McCray’s fraudulent scheme
was to churn the funds in his investors’ accounts to drive up commissions. Unlike
a traditional Ponzi scheme, McCray actually used investor capital to trade foreign
currency from which he profited by receiving commissions. His trading scheme
was a fraud, however, because he misrepresented his returns. The $5.8 million
wire transfers to International Forex Limited’s account at the Bank of Bermuda
(hereafter the “Bermuda Transfers”) were a “central component of the scheme to
defraud.” United States v. Van Alstyne, 584 F.3d 803, 815 (9th Cir. 2009). Indeed,
after the $5.8 million was transferred to the Bank of Bermuda, subsequent trading
in that account generated commissions of over $640,000. As in Van Alstyne,
where distribution checks sent directly to investors were crucial to the “very nature
of the scheme,” id. at 815, transfers of investor capital to foreign currency
exchange trading desks for the purpose of executing trades and generating
commissions were at the heart of McCray’s scheme.
Furthermore, the Bermuda Transfers were “central to carrying out the
scheme’s objective of encouraging further investment” and perpetuating the
scheme’s continued viability. United States v. Moreland, 622 F.3d 1147, 1166 (9th
2
Cir. 2010); see also United States v. Ali, 620 F.3d 1062, 1072 (9th Cir. 2010)
(holding that there was a “merger” problem because “an illegal scheme to buy and
sell discounted software will continue to buy and sell software to perpetuate the
scheme”). For example, McCray specifically marketed the benefits of offshore
accounts to attract further investment, and some investors even called the Bank of
Bermuda to verify that McCray was trading there. Also, unlike in United States v.
Bush, 626 F.3d 527, 538 (9th Cir. 2010), where the defendant moved money
offshore after government authorities began investing his scheme, McCray did not
transfer funds offshore to hide them. Rather, he transferred the funds to Bermuda
months before the search warrant was executed for use in his scheme. Although it
is unclear what portion of the $5.8 million was used for trading—as opposed to
refunds, commissions, or bank fees—the Bank of Bermuda was the most active
trading desk in 1999, accounting for 54% of International Forex Limited’s
commissions that year.
Even if a portion of the Bermuda Transfers was used in a way that did not
implicate the “merger” problem, the transfers themselves would remain a “central
component of the scheme” because they provided the investor capital necessary to
execute trades and generate commissions. See Moreland, 622 F.3d at 1165.
Therefore, because the Bermuda Transfers were a “central component of the
3
scheme to defraud,” McCray’s promotional money laundering counts trigger the
“merger” problem and the “profits” definition of “proceeds” should apply. See
Van Alstyne, 584 F.3d at 815-16 (discussing United States v. Santos, 553 U.S. 507
(2008)).
The promotional money laundering counts also led to “a radical increase in
the statutory maximum sentence.” Bush, 626 F.3d at 538. While the statutory
maximum for the underlying offense of wire fraud was five years, see 18 U.S.C.
§ 1343 (1999), the statutory maximum for promotional money laundering was
twenty years, see 18 U.S.C. § 1956 (1999). Thus, as warned of by the Santos
plurality, the money laundering counts “eviscerated” the statutory cap of the
underlying offense. 553 U.S. at 527 (Stevens, J., concurring).
Lastly, because the government did not show that the Bermuda Transfers
involved profits from McCray’s scheme, his promotional money laundering
convictions cannot stand. See Ali, 620 F.3d at 1072. Thus, the promotional 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 [McCray’s] conviction under the promotion[al]
money laundering counts.” Id.
4
2. Even if McCray procedurally defaulted on his Santos-based claim,
because his claim succeeds on the merits, his default is excused because he has
demonstrated “actual innocence.” See United States v. Avery, 719 F.3d 1080, 1085
(9th Cir. 2013) (“A petitioner is actually innocent when he was convicted for
conduct not prohibited by law.”) (internal quotation marks omitted). Because the
Bermuda Transfers were client capital, and not profits of the scheme, “it is more
likely than not that no reasonable juror would have found [McCray] guilty beyond
a reasonable doubt.” Id. at 1083 (quoting Schlup v. Delo, 513 U.S. 298, 327
(1995)). In light of all the evidence, no reasonable juror would have been able to
conclude beyond a reasonable doubt that McCray knowingly used the profits from
his scheme in the Bermuda Transfers. See, e.g., Avery, 719 F.3d at 1085 (holding
that defendant’s procedural default was excused because he was actually innocent
of honest services fraud in light of Skilling v. United States, 561 U.S. 358 (2010)).
3. Accordingly, we REVERSE the denial of McCray’s § 2255 motion,
VACATE his convictions on counts 23 and 24 of the Indictment, and REMAND
for resentencing in accordance with this disposition.
REVERSED, VACATED, and REMANDED.
5
FILED
USA v McCray 10-56466 AUG 27 2014
MOLLY C. DWYER, CLERK
CALLAHAN, Circuit Judge, dissenting: U.S. COURT OF APPEALS
I respectfully dissent. In contrast to the payments to winners and employees
of the illegal gambling scheme in Santos v. United States, 553 U.S. 507 (2008), the
1999 wire transfers were not critical to McCray’s foreign currency currency
trading scheme. Although more than half of the commissions generated by the
scheme in 1999 were due to trading from McCray’s Bank of Bermuda account, the
amount of commissions from that account, about $641,000, is less than 10% of the
overall total of $6.7 million in commissions generated by the scheme over four
years. Furthermore, in 1998, the scheme generated $3.9 million in commissions
without any trading from the Bank of Bermuda account. Thus, while McCray’s
scheme required that he transfer money to trading desks, he did not have to engage
in wire transfers to the Bank of Bermuda. Contrary to the majority’s
determination, the transfers were not necessary to “perpetuate the scheme’s
continued viability.” See Majority 2.1
Since the transfers were not central to the scheme, “proceeds” is defined as
gross receipts. See United States v. Grasso, 724 F.3d 1077, 1095 (9th Cir. 2013).
1
Further, although McCray made the transfers in an effort to promote his
scheme, the evidence in the record tends to show that investors were not interested
in investing offshore.
1
There is clearly sufficient evidence for a jury to find that the transfers involved
gross receipts of McCray’s scheme because the transfers were made using
fraudulently-obtained client funds. Accordingly, McCray’s Santos claim fails on
its merits.
Finally, I would also hold that McCray is barred from raising his Santos
merger argument on habeas review. McCray did not raise a merger argument on
direct appeal even though such an argument had already been approved in United
States v. Scialabba, 282 F.3d 475 (7th Cir. 2002). Also, because the 1999 wire
transfers were not central to McCray’s scheme and clearly involved proceeds of the
fraudulent scheme, McCray cannot show actual innocence under Schlup v. Delo,
513 U.S. 298, 327 (1995).2 Accordingly, McCray has not shown cause and
prejudice or actual innocence excusing his failure to raise his Santos argument in
his direct appeal, and his claim is procedurally defaulted under Bousley v. United
States, 523 U.S. 614, 622 (1998).
Because McCray’s Santos claim both fails on the merits and is procedurally
defaulted, I would affirm the district court’s denial of McCray’s motion to vacate.
2
Notably, McCray does not challenge his other convictions and does not
claim he was actually innocent of operating a fraudulent currency scheme.
2
3