UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 14-6969
CHRISTOPHER REGINALD HINES,
Petitioner - Appellant,
v.
WARDEN DREW,
Respondent - Appellee.
Appeal from the United States District Court for the District of
South Carolina, at Charleston. Mary G. Lewis, District Judge.
(2:12-cv-01890-MGL)
Argued: September 15, 2015 Decided: November 25, 2015
Before NIEMEYER, GREGORY, and THACKER, Circuit Judges.
Affirmed by unpublished opinion. Judge Gregory wrote the
opinion, in which Judge Niemeyer and Judge Thacker joined.
ARGUED: Joel Morris Bondurant, Jr., BONDURANT LAW FIRM,
Atlanta, Georgia, for Appellant. Anthony Joseph Enright, OFFICE
OF THE UNITED STATES ATTORNEY, Charlotte, North Carolina, for
Appellee. ON BRIEF: Jill Westmoreland Rose, Acting United
States Attorney, OFFICE OF THE UNITED STATES ATTORNEY,
Charlotte, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
GREGORY, Circuit Judge:
Christopher Reginald Hines pleaded guilty to two offenses
stemming from an extensive mortgage fraud conspiracy. On
appeal, Hines argues that his money laundering conspiracy
conviction must be reversed under United States v. Santos, 553
U.S. 507 (2008), and thus, that the district court erred in
denying his petition for a writ of habeas corpus under 28 U.S.C.
§ 2241. We disagree. Because we find no merger problem under
Santos, we affirm the district court’s denial of Hines’s § 2241
petition.
I.
A.
A grand jury in the Western District of North Carolina
returned a second superseding indictment that charged Hines with
eleven counts related to his investment scheme. Count one
charged Hines with conspiracy to commit offenses against the
United States in violation of 18 U.S.C. § 371, including making
a false statement in connection with a loan, 18 U.S.C. § 1014;
mail fraud, 18 U.S.C. § 1341; wire fraud, 18 U.S.C. § 1343; and
bank fraud, 18 U.S.C. § 1344. Counts two through five charged
Hines with substantive mail fraud offenses occurring on four
specific dates in 2001. Counts six through eight charged Hines
with substantive bank fraud offenses occurring on three specific
2
dates in 2000 and 2001. Counts nine and ten charged Hines with
wire fraud offenses occurring on two specific dates in 2000.
Count eleven charged Hines with conspiracy to commit money
laundering in violation of 18 U.S.C. § 1956(h).
Following his indictment, Hines pleaded guilty to one count
of conspiracy to commit offenses against the United States in
violation of 18 U.S.C. § 371 (Count One) and one count of
conspiracy to commit money laundering in violation of 18 U.S.C.
§ 1956(h) (Count Eleven). The government dismissed all other
counts. The convictions stemmed from Hines’s leadership of a
mortgage fraud scheme from March 2000 until September 2001. The
scheme involved multiple coconspirators, at least two of whom
pleaded guilty to various offenses.
In his plea agreement, Hines admitted that he and his
coconspirators created several entities, referred to as “Mega
Group” entities, to facilitate the conspiracy. Through those
entities, Hines recruited buyers with good credit to purchase
various properties. He offered the buyers to become real estate
investors with no money down, earning cash on each home that
they purchased. To lull the buyers, Hines offered to make
ownership of the properties easy: buyers were told that they
would not be responsible for any mortgage payments, that Mega
Group entities would place renters in the properties, and that
the Mega Group entities would be responsible for the renters and
3
any payments they failed to make. Hines claimed that the Mega
Group entities would eventually sell the properties, splitting
the profit with the buyers.
Unbeknownst to the buyers, the Mega Group entities bought
the properties shortly before the buyers, and then “flipped” the
property to the buyer, making money off each transaction. Hines
and his coconspirators arranged for the buyers to purchase
multiple properties within a short time frame, to prevent the
earlier sales from appearing on their credit reports. After a
short period of time during which mortgage payments were made by
the Mega Group entities to induce the buyers to purchase more
than one “investment property,” the Mega Group entities stopped
making mortgage payments, eventually causing the mortgage loans
to become delinquent. Ultimately, many of the investment
properties went into foreclosure.
To perpetrate the scheme, Hines falsified the loan
applications. Although the buyers supplied accurate information
to the Mega Group entities, Hines and his coconspirators
misrepresented the buyers’ income, falsely indicated that the
buyers were purchasing the property as a residence, and made it
appear as though the buyers had sufficient funds to cover the
down payment.
In total, Hines and his coconspirators defrauded at least
100 individual buyers in North Carolina, along with numerous
4
mortgage lenders throughout the United States. The mortgage
loans that they fraudulently obtained exceeded $23 million.
B.
Hines stipulated to the factual basis for his guilty plea.
The “Stipulation to Factual Basis” states, “With respect to
Count One,” Hines “was aware that false information regarding
the source of down payments was contained in HUD-I Settlement
Statements in which Mega Group and its related companies were
sellers, and that this information was being sent to potential
lender financial institutions.” J.A. 84. The stipulation
further states that, “With respect to Count Eleven,” Hines “was
aware [that] at least a portion of the proceeds from loans
involved in Count One were used to facilitate other financial
transactions to further or promote the conspiracy charged in
Count One.” Id.
At his Rule 11 hearing, Hines affirmed to the magistrate
judge that “[w]ith respect to Count [Eleven], [he] was aware
that at least a portion of the proceeds from loans involved in
Count One were used to facilitate other transactions to further
or promote the conspiracy charged in Count One.” J.A. 94.
During the plea colloquy, the magistrate judge specifically
asked Hines, “[I]s this a true statement and do you affirm this
statement at this time?” Id. Hines stated, “Yes.” Id.
Further, at the plea proceeding, the government proffered that,
5
with respect to Count One, Hines and his coconspirators used the
Mega Group entities to purchase real estate and inflate its
value before selling it to the buyers. Hines then took the
difference between the purchase and the sale price “as a
profit.” J.A. 92. With respect to Count Eleven, the government
proffered that “some of the proceeds . . . that were received in
the profits” from the transactions “were then used to make the
mortgage payments on behalf of the buyers and also used to make
. . . down payments on behalf of the buyers.” J.A. 70. After
the government’s factual proffer, the magistrate judge asked
Hines, “[D]o you understand both what I said and [the
government] said to expand upon it are the charges to which
you’re pleading guilty . . . ?” Id. Hines stated, “Yes.” Id.
The district court sentenced Hines to a term of
imprisonment of 188 months, which included a term of 60 months
on Count One and a term of 188 months on Count Eleven, to be
served concurrently.
C.
After unsuccessful appeals, Hines filed a habeas petition
in which he argued that the savings clause of 28 U.S.C. § 2255
applied and that his money laundering conspiracy conviction
should be invalidated in light of Santos on the ground that the
government failed to show that the transactions underlying the
money laundering conspiracy conviction involved the profits of
6
unlawful activity. Hines claimed that the transactions
supporting his money laundering conspiracy conviction were the
same transactions listed in the indictment as overt acts in
furtherance of the mortgage fraud conspiracy, leading to a
“merger problem.” The district court found that Santos, as
interpreted by United States v. Halstead, 634 F.3d 270 (4th Cir.
2011), and United States v. Cloud, 680 F.3d 396 (4th Cir. 2012),
was inapplicable because it did not apply to conspiracy
offenses. Hines then filed a motion for reconsideration under
Federal Rule of Civil Procedure 59(e), which the district court
denied. Hines timely appealed.
II.
We review de novo a district court’s grant or denial of a
writ of habeas corpus on questions of law. United States v.
Brown, 155 F.3d 431, 434 (4th Cir. 1998). We have jurisdiction
over this appeal under 28 U.S.C. § 1291. Id. at 433.
III.
Applying Santos, Hines contends that the money laundering
conspiracy merges into the mortgage fraud conspiracy, as the
same transactions support convictions for both crimes. He thus
claims that Santos requires that the money laundering conspiracy
statute be construed narrowly so as to apply only to the “net
7
profits” of the mortgage fraud conspiracy. Hines asserts that
because the government did not prosecute the money laundering
conspiracy statute in his case narrowly, as required by Santos,
his money laundering conspiracy crime merged with the mortgage
fraud conspiracy, requiring that the money laundering conspiracy
conviction be vacated. As he argues, “[my] conviction under
Count [Eleven] of the indictment simply cannot stand. The
financial transactions charged therein are entirely duplicative
of the financial transactions that form the basis for the Count
[One] conviction. . . . In light of the plain and undeniable
overlap in the underlying financial transactions charged in both
counts, the two conspiracy charges . . . ‘obviously merged.’”
Appellant’s Br. at 29-30 (quoting United States v. Crosgrove,
637 F.3d 646, 655 (6th Cir. 2011)).
Setting aside the issues of appellate waiver, see United
States v. Archie, 771 F.3d 217, 223 (4th Cir. 2014), and actual
innocence of the dismissed charges, see Bousley v. United
States, 523 U.S. 614, 623-24 (1998), we find no merger problem.
A.
To assess Hines’s claim on appeal, it is first necessary to
put his argument in context by briefly discussing the Supreme
Court’s Santos decision and our application of that case in
Halstead and Cloud. Hines was convicted of money laundering
conspiracy under 18 U.S.C. § 1956(h). To prove money laundering
8
conspiracy, the government was required to show (1) the
existence of an agreement between two or more persons to commit
one or more of the substantive money laundering offenses
proscribed under 18 U.S.C. § 1956(a) or § 1957; (2) that the
defendant knew that the money laundering proceeds had been
derived from an illegal activity; and (3) that the defendant
knowingly and voluntarily became part of the conspiracy. United
States v. Singh, 518 F.3d 236, 248 (4th Cir. 2008) (citing
United States v. Alerre, 430 F.3d 681, 693 (4th Cir. 2005)). At
the time of the transactions at issue here, the statute provided
no definition of “proceeds.” 1
In Santos, a divided Supreme Court grappled with alternate
definitions of “proceeds” as either “receipts” or “profits” of a
crime. 553 U.S. 507. Citing the rule of lenity, a plurality of
the Court adopted the “profits” definition. Id. at 514
(plurality opinion). The plurality further noted that the
“receipts” interpretation would create a “merger problem” for
statutes such as the illegal gambling statute, 18 U.S.C. § 1955,
1Congress amended the money laundering statute in May 2009;
that amendment effectively overruled Santos, defining proceeds
to include “gross receipts.” Fraud Enforcement and Recovery Act
of 2009, Pub.L. No. 111–21, § 2(f)(1), 123 Stat. 1617, 1618
(2009) (codified at 18 U.S.C. § 1956(c)(9)). Nevertheless,
because the amendment was not enacted at the time of the conduct
giving rise to Hines’s convictions, this expanded definition of
“proceeds” does not apply in this case.
9
at issue in Santos itself: “If ‘proceeds’ meant ‘receipts,’
nearly every violation of the illegal-lottery statute would also
be a violation of the money-laundering statute, because paying a
winning bettor is a transaction involving receipts that the
defendant intends to promote the carrying on of the lottery.”
Id. at 515 (plurality opinion).
Justice Stevens, concurring, disagreed with the plurality’s
broad application of the rule of lenity and focused instead on
the merger issue. With respect to the illegal gambling statute,
Justice Stevens stated that “[t]he revenue generated by a
gambling business that is used to pay the essential expenses of
operating that business is not ‘proceeds’ within the meaning of
the money laundering statute,” because “[a]llowing the
Government to treat the mere payment of the expense of operating
an illegal gambling business as a separate offense is in
practical effect tantamount to double jeopardy.” Id. at 527-28
(Stevens, J., concurring). Justice Stevens suggested, however,
that the Court “need not pick a single definition of ‘proceeds’
applicable to every unlawful activity,” thereby implying that
the “profits” definition is only warranted in the context of
crimes creating such merger problems. Id. at 525 (Stevens, J.,
concurring).
In United States v. Halstead, we considered the reach of
Santos in the context of a defendant convicted of healthcare
10
fraud and money laundering. 634 F.3d 270. Halstead’s fraud
convictions arose from his scheme to capitalize on his patients’
healthcare benefits by making phony medical diagnoses. Id. at
272-73. His money laundering conviction, by contrast, arose
from his transfer of the illicit gains into his personal bank
account. Id. at 280-81. He claimed that Santos prohibited his
money laundering conviction because transferring his ill-gotten
gains into his own bank accounts constituted an essential
expense of operating his healthcare fraud. Id.
To resolve Halstead’s argument we first examined what,
exactly, Santos held. Relying on Marks v. United States, 430
U.S. 188 (1977), we interpreted Santos narrowly to bind lower
courts only in cases where illegal gambling constituted the
predicate for the defendant’s money laundering conviction.
Halstead, 634 F.3d at 278-79. But, because the merger problem
provided the “driving force” behind both the plurality’s and
Justice Stevens’s opinions, we recognized that Santos compelled
us to construe the money laundering statute so as to avoid
punishing a defendant twice for the same offense. Id. We
concluded that a defendant cannot be convicted of money
laundering merely “for paying the ‘essential expenses of
operating’ the underlying crime.” Id. at 279 (citing Santos,
553 U.S. at 528 (Stevens, J., concurring). But if “the
financial transactions of the predicate offense are different
11
from the transactions prosecuted as money laundering” no merger
problem arises. Id. at 279–80.
Applying this rule to Halstead, we held that no merger
problem tainted his money laundering conviction. His healthcare
fraud was “complete” as soon as he received the ill-gotten
healthcare reimbursements. Id. at 280. Transferring these
reimbursements into his own account thereafter constituted an
altogether “separate” offense that the government properly
prosecuted as money laundering. Id.
We again had occasion to apply Santos in United States v.
Cloud, a case involving strikingly similar facts as these. 680
F.3d 396. Cloud’s scheme, at its essence, involved convincing
people to invest in real estate properties that, unbeknownst to
the buyers, Cloud had recently purchased for a lesser amount.
Id. at 399–400. The scheme also involved falsification of loan
applications and the payment of “thousands of dollars in
kickbacks to buyers, at least one mortgage broker, and the
recruiters responsible for finding the buyers.” Id. at 400.
Cloud was convicted of several crimes, including, as is relevant
here, one count of conspiracy to commit money laundering, one
count of mortgage fraud conspiracy, and six counts of money
laundering. Id. at 399. The substantive counts all concerned
various payments Cloud made “to recruiters, buyers, and other
coconspirators for the role each person played in the mortgage
12
fraud scheme.” Id. at 406. On appeal, we reversed those
convictions, finding that they suffered from the merger problem
identified in Santos. Id. at 408. We concluded that, unlike
the payments in Halstead, the charged transactions were payment
of “the ‘essential expenses’ of the underlying fraud” because it
was only through the promise of these payments that Cloud was
able to persuade his coconspirators to do business with him.
Id. at 406–08. That the payments were made after the services
were performed did nothing to change that. Id. at 408. In
order to correct the merger problem, we defined “proceeds” as
“profits,” as the Santos Court had done, and reversed the money
laundering convictions on that basis. Id. at 409.
On the other hand, we found no merger problem with Cloud’s
conviction for conspiracy to commit money laundering because
“[u]nlike Cloud’s substantive money laundering charges, the
conspiracy charge was not tied to any specific payment to a
recruiter, buyer, or coconspirator” and “there was evidence that
Cloud used the profits from his previous [illegal deals] to
finance additional purchases.” Id. at 408. Thus, we affirmed
the conspiracy conviction. Id.
B.
Because Hines was not convicted of operating an illegal
gambling business, we must determine whether a merger problem
arises on the facts of this case. See Halstead, 634 F.3d at 279
13
(noting that “Justice Stevens’s opinion . . . would require
addressing that situation on a case-by-case approach” and
“leav[ing] further development of a solution to a future case
that presents the problem”).
We have repeatedly held that if “‘the financial
transactions of the predicate offense are different from the
transaction prosecuted as money laundering’ no merger problem
arises.” United States v. Simmons, 737 F.3d 319, 324 (4th Cir.
2013) (quoting Halstead, 634 F.3d at 279-80). Hines stipulated
to a factual basis supporting his guilty plea to Counts One and
Eleven in the second superseding indictment. That stipulation
states, with respect to the money laundering conspiracy count,
that Hines “was aware th[at] at least a portion of the proceeds
from loans involved in Count One were used to facilitate other
financial transactions to further or promote the conspiracy
charged in Count One.” J.A. 84 (emphasis added). Further,
Hines admitted, at his plea hearing, that the transactions
underlying his money laundering conspiracy conviction are
different from those underlying the mortgage fraud conspiracy
conviction.
In addition, Hines agreed with the government’s proffer
that during the conspiracy period, he used the “profits” from
his previous flips to make down payments on future properties.
In utilizing monies from previous properties to finance future
14
purchases, Hines was not paying the “essential expenses” of the
underlying crime. See Cloud, 680 F.3d at 408.
Hines’s admissions, therefore, are fatal to his Santos
claim. See id. (“In utilizing monies from previous properties
to finance future purchases, Cloud was not paying the ‘essential
expenses’ of the underlying crime. Thus, [the conspiracy to
commit money laundering count] does not present a merger
problem.”); Halstead, 634 F.3d at 279-80 (“But when the
financial transactions of the predicate offense are different
from the transactions prosecuted as money laundering, the merger
problem recognized in Santos does not even arise.”). Thus, the
merger problem never arises in the circumstances of this case,
and Santos provides Hines no relief. 2
2 Hines’s reliance on United States v. Crosgrove, 637 F.3d
646 (6th Cir. 2011), is misplaced. Crosgrove was hired as a
claims adjuster and attorney in a fraudulent insurance scheme.
Id. at 655. Crosgrove was indicted for conspiracy to commit
mail fraud, in violation of 18 U.S.C. § 371, and conspiracy to
commit money laundering, in violation of 18 U.S.C. § 1956(h).
Id. at 650-51. Crosgrove stood trial on both counts and was
convicted. Id. at 652. On appeal, the government conceded that
the “only transactions on which the conviction” for conspiracy
to launder money “could be upheld were Crosgrove’s deposits of
checks” that amounted to “salary payments” to him. Id. at 654-
55. The Sixth Circuit held that the “crimes as charged
obviously merge” because “the payments Crosgrove received for
his services as an attorney and claims adjuster, which the
Government states are the only basis for upholding Crosgrove’s
conviction for conspiracy to commit money laundering, are also
listed in the indictment as overt acts in furtherance of the
mail/wire fraud conspiracy.” Id. at 655. Crosgrove, however,
(Continued)
15
IV.
For the reasons stated, the district court’s denial of
Hines’s § 2241 petition is
AFFIRMED.
is easily distinguishable from the case at issue, because here,
Hines explicitly agreed that the transactions supporting his
money laundering conspiracy conviction were different from those
underlying his conviction under 18 U.S.C. § 371.
16