PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v. No. 10-4057
WILLIAM ROOSEVELT CLOUD,
Defendant-Appellant.
Appeal from the United States District Court
for the Western District of North Carolina, at Charlotte.
Frank D. Whitney, District Judge.
(3:06-cr-00096-FDW-DSC-1)
Argued: January 27, 2012
Decided: May 31, 2012
Before GREGORY, DAVIS, and DIAZ, Circuit Judges.
Affirmed in part, reversed in part, vacated in part, and
remanded by published opinion. Judge Diaz wrote the opin-
ion, in which Judge Gregory and Judge Davis joined.
COUNSEL
ARGUED: Arza Feldman, FELDMAN & FELDMAN,
Uniondale, New York, for Appellant. Kurt William Meyers,
OFFICE OF THE UNITED STATES ATTORNEY, Char-
lotte, North Carolina, for Appellee. ON BRIEF: Claire J.
2 UNITED STATES v. CLOUD
Rauscher, Executive Director, Matthew R. Segal, Assistant
Federal Defender, Alexandra Cury, Adeel Bashir, FEDERAL
DEFENDERS OF WESTERN NORTH CAROLINA, INC.,
Asheville, North Carolina; Kevin Tate, Assistant Federal
Defender, FEDERAL DEFENDERS OF WESTERN NORTH
CAROLINA, INC., Charlotte, North Carolina, for Appellant.
Anne M. Tompkins, United States Attorney, Charlotte, North
Carolina, for Appellee.
OPINION
DIAZ, Circuit Judge:
A jury convicted William Roosevelt Cloud of various
offenses stemming from an extensive mortgage fraud conspir-
acy. On appeal, Cloud challenges the district court’s evidenti-
ary rulings, loss calculation, and order directing him to
reimburse his court-appointed attorneys’ fees. We affirm the
district court’s judgment on the first two issues, but vacate the
court’s reimbursement order. Cloud also argues that his
money laundering convictions must be reversed under United
States v. Santos, 553 U.S. 507 (2008), and thus, that the dis-
trict court erred in rejecting his motion for judgment of
acquittal on this ground. Applying Santos, as interpreted by
United States v. Halstead, 634 F.3d 270 (4th Cir. 2011), to the
facts underlying Cloud’s substantive money laundering con-
victions, we agree and therefore reverse those convictions.
I.
A.
Following his indictment in the Western District of North
Carolina, Cloud was convicted of one count of mortgage
fraud conspiracy, in violation of 18 U.S.C. § 371; three counts
of mail fraud, in violation of 18 U.S.C. § 1341; thirteen
UNITED STATES v. CLOUD 3
counts of bank fraud, in violation of 18 U.S.C. § 1344; one
count of money laundering conspiracy, in violation of 18
U.S.C. § 1956(h); and six counts of money laundering, in vio-
lation of 18 U.S.C. § 1956(a)(1). The convictions stemmed
from Cloud’s leadership of a mortgage-fraud conspiracy from
1999 until 2005.1 The scheme involved multiple coconspira-
tors, at least fourteen of whom—including two mortgage bro-
kers, two attorneys, an appraiser, a bank insider, and Cloud’s
wife—pleaded guilty to various offenses.
The government alleged that Cloud recruited buy-
ers—friends, church members, and members of the Filipino-
American community—with good credit to purchase various
properties. He offered the buyers an opportunity to become
real estate investors with no money down, earning cash upon
buying a home. To lull the buyers, Cloud offered to make
ownership of the properties easy, assisting with rent or mort-
gage payments, taking care of repairs to the properties, and
ensuring that rental income would cover the mortgage pay-
ments. Cloud claimed that he would eventually sell the prop-
erties, splitting the profit with the buyers.
Unbeknownst to the buyers, Cloud bought the properties
shortly before the buyers, and then "flipped" the property to
the buyer, making money off each transaction. Cloud
arranged for the buyers to purchase multiple properties within
a short time frame, to prevent the earlier sales from appearing
on their credit reports. Once a buyer purchased his or her last
home, Cloud ceased contact with the buyer. Although Cloud
received some rental income from tenants, the money was not
used to pay the mortgages. Ultimately, many of the homes
went into foreclosure.
To perpetrate the scheme, Cloud falsified the loan applica-
1
Based on the jury’s verdict, we recite the facts in the light most favor-
able to the government. United States v. Kelly, 510 F.3d 433, 435 n.1 (4th
Cir. 2007).
4 UNITED STATES v. CLOUD
tions. Although the buyers supplied accurate information, the
loan applications 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 suffi-
cient funds to cover the down payment. Because the buyers
trusted Cloud, they often signed the documents without
reviewing them. In some instances, Cloud forged the buyers’
signatures on the applications. Further, because Cloud offered
the buyers an opportunity to invest in real estate with no
money down, he provided cashier’s checks to closing attor-
neys, which falsely indicated that the buyers were providing
the down payment. The attorneys, in turn, falsely represented
on the HUD-1 Settlement Statements that the buyers were
providing the down payment. Cloud then signed the HUD-1
forms containing the false information. Cloud also paid thou-
sands of dollars in kickbacks to buyers, at least one mortgage
broker, and the recruiters responsible for finding the buyers.
These payments were not disclosed on the HUD-1 forms.
The government called numerous witnesses at trial to sup-
port its theory of the fraud. For example, Joseph Goines testi-
fied that Cloud paid him a commission—between $1,500 and
$3,000 per head—to obtain buyers with good credit. As a
"pitch" to the buyers, Cloud instructed Goines to tell them
that Cloud would pay $5,000 for the use of their credit. Rob-
ert Moore, a buyer, testified in part that he was not aware that
the property he bought for $120,000 was purchased by Cloud
for $64,000 less than one month prior. Moore also testified
that Cloud typically paid him between $2,000 and $3,000 at
closing, and that all ten properties he purchased ultimately
went into foreclosure. Kim Dauria, a loan officer, testified
that Cloud brought buyers to her, that she was involved in the
mortgage fraud conspiracy, and that Cloud paid her. Another
government witness, Daniel Greene, testified that as a mort-
gage broker, he conducted fraudulent real estate transactions
with Cloud, that Cloud was responsible for the down pay-
ments, and that his transactions with Cloud involved false
lease agreements.
UNITED STATES v. CLOUD 5
At trial, Cloud insisted that he was "a neophyte real estate
investor who had to rely on professionals—criminals, as it
turned out—to structure his transactions," but that he "be-
lieved his buyers would make money by renting out their
properties and benefitting from rising housing prices." Appel-
lant’s Br. 1.
B.
Following the close of the government’s case and again
before the case was submitted to the jury, Cloud moved for
a judgment of acquittal under Federal Rule of Criminal Proce-
dure 29. The district court denied both motions. Although the
jury acquitted Cloud on one money laundering count, it con-
victed him on all others.
Cloud later moved for a judgment of acquittal on his money
laundering convictions based on United States v. Santos, 553
U.S. 507 (2008), in which the Supreme Court affirmed the
vacatur of the defendants’ money laundering convictions after
concluding that the offenses merged with the defendants’ con-
victions for operating an illegal gambling business. The dis-
trict court denied Cloud’s motion, concluding that United
States v. Howard, 309 F. App’x 760 (4th Cir. 2009) (unpub-
lished), limited Santos to illegal-gambling offenses.
Prior to sentencing, the probation officer prepared a presen-
tence report ("PSR"), calculating Cloud’s total offense level
as 42 and his criminal history category as I, resulting in an
advisory Guidelines range of 360 months to life imprison-
ment. The offense level calculation was based on Cloud’s
estimated intended loss to lenders of $10 million as well as
approximately $11 million in collateral loss to the surround-
ing communities. At sentencing, the court adopted the
intended loss figure, but limited Cloud’s collateral loss to $9
million, reducing the total loss amount to just over $19 mil-
lion. This reduction decreased Cloud’s offense level to 39,
and his Guidelines range to 262-327 months. The court sen-
6 UNITED STATES v. CLOUD
tenced Cloud to 324 months’ imprisonment. Cloud timely
appealed.
II.
On appeal, Cloud first challenges the admission of victim-
impact testimony and hearsay statements at trial. Second, he
argues that the district court wrongly rejected his Rule 29
motions as to his money laundering convictions, arguing that
the convictions cannot stand under Santos and our subsequent
decision in United States v. Halstead, 634 F.3d 270 (4th Cir.
2011), and that there was insufficient evidence to support
these convictions. Third, Cloud contends that the district
court’s loss calculation was clearly erroneous. Finally, he
asserts that the district court erred in ordering him to reim-
burse the United States for the services of his court-appointed
attorneys. We address these arguments in turn.
III.
Cloud challenges the district court’s admission of victim-
impact testimony from buyers and hearsay statements from
tenants. We review evidentiary rulings for an abuse of discre-
tion and "will only overturn an evidentiary ruling that is ‘arbi-
trary and irrational.’ " United States v. Cole, 631 F.3d 146,
153 (4th Cir. 2011) (quoting United States v. Blake, 571 F.3d
331, 346 (4th Cir. 2009)). Under Federal Rule of Criminal
Procedure 52(a), evidentiary rulings are subject to harmless
error review. " ‘[I]n order to find a district court’s error harm-
less, we need only be able to say with fair assurance, after
pondering all that happened without stripping the erroneous
action from the whole, that the judgment was not substantially
swayed by the error.’ " United States v. Johnson, 617 F.3d
286, 292 (4th Cir. 2010) (quoting United States v. Brooks, 111
F.3d 365, 371 (4th Cir. 1997)).
A.
Cloud first argues that victim-impact testimony from five
buyers was irrelevant and highly prejudicial. The buyers testi-
UNITED STATES v. CLOUD 7
fied that as a result of their dealings with Cloud, they suffered
liens on their property, were unable to borrow money, were
sued, suffered bad credit, or faced foreclosure. Cloud assigns
particular prejudice to the testimony of Rodney Thompson,
who testified that all six properties he purchased as part of
Cloud’s scheme went into foreclosure and that he was forced
to file for bankruptcy. In response to government questioning
about his first purchase, Thompson responded that he bought
a home next to his parents "with the idea when they got
older," he could "take care of" them. J.A. 2136. Thereafter,
Thompson began to cry.
We conclude that the district court did not abuse its discre-
tion in admitting the victim-impact testimony. First, testimony
regarding the impact of the offenses on the victims met the
low bar of relevancy, given Cloud’s defense that the buyers
were guilty of bank fraud. In his opening statement to the
jury, Cloud identified the buyers associated with the bank
fraud charges and argued that "[t]hese people are not victims.
. . . [T]hey are the ones that committed the bank fraud." Id.
427. In United States v. Copple, 24 F.3d 535, 545 (3d Cir.
1994), the Third Circuit concluded that victim-impact testi-
mony was relevant to show intent to defraud in a mail fraud
prosecution where the defendant claimed that "he had simply
made a bad business decision," explaining that "[p]roof that
someone was victimized by the fraud is . . . treated as some
evidence of the schemer’s intent." So too here. We further
find that the probative value of the victims’ testimony was not
"substantially outweighed by a danger of . . . unfair prejudice,"2
Fed. R. Evid. 403.
Even assuming that the court erred in admitting this testi-
2
For that reason, we also reject Cloud’s separate due process challenge
to the victim-impact testimony. See Payne v. Tennessee, 501 U.S. 808,
825 (1991) ("In the event that evidence is introduced that is so unduly
prejudicial that it renders the trial fundamentally unfair, the Due Process
Clause of the Fourteenth Amendment provides a mechanism for relief.").
8 UNITED STATES v. CLOUD
mony, we find any error to be harmless. Cloud was convicted
following a lengthy trial that included testimony from multi-
ple witnesses regarding various elements of Cloud’s conspir-
acy. Given the overwhelming evidence against Cloud, we are
satisfied " ‘with fair assurance . . . that the judgment was not
substantially swayed by the error,’ " Johnson, 617 F.3d at 292
(quoting Brooks, 111 F.3d at 371).
B.
Cloud next argues that the district court erred in admitting
hearsay testimony from buyers detailing conversations
between Cloud and several tenants. In one instance, Reginald
Foster, a buyer, testified that a tenant told Foster that Cloud
described Foster—an African-American—as a racist Cauca-
sian who did not want to deal with his African-American ten-
ants. In another, Rodney Thompson testified that a tenant told
him that Cloud kept tenants "in the fog" about who owned the
properties and that Cloud indicated that he was the landlord.
J.A. 2182.
Cloud asserts that the admission of this testimony cannot be
dismissed as harmless because it buttressed the government’s
theory that Cloud was dishonest with tenants to disguise his
scheme and portrayed Cloud as an "immoral" person who
would falsely accuse an African-American of racism. Appel-
lant’s Br. 41. Cloud’s concerns as to Foster’s testimony, how-
ever, were specifically addressed by the district court in its
instructions.3 Following Foster’s testimony, the court
instructed the jury that the statement "obviously [was] not
being admitted for what we call the truth of the matter
asserted," and that it should not "inject" race into the trial, but
should be used, if the jury so chose, "to weigh . . . [whether]
Mr. Cloud [would] have made this statement to help in a
cover up . . . because he didn’t want . . . the tenants [to] talk
3
Cloud raised no objection to Thompson’s testimony, and thus, the dis-
trict court provided no instruction to the jury.
UNITED STATES v. CLOUD 9
to Mr. Foster." J.A. 1245. Cloud challenged the last part of
the instruction and in response, the court further instructed the
jury that its instruction was "in no way . . . an expression of
the Court’s view of the guilt or innocence" of Cloud. Id. 1257.
In any event, we conclude that any error in admitting the
tenants’ hearsay statements was harmless. Looking to the
weight of the evidence against Cloud, and the comparative
insignificance of the tenants’ statements, we again find
" ‘with fair assurance . . . that the judgment was not substan-
tially swayed by the error,’ " Johnson, 617 F.3d at 292 (quot-
ing Brooks, 111 F.3d at 371).
IV.
Cloud also contends that the district court erred in denying
his Rule 29 motions. Cloud argues that the government failed
to prove Counts 27-33 of the indictment, which charged
Cloud with money laundering under 18 U.S.C. § 1956(a)(1)
and money laundering conspiracy under 18 U.S.C. § 1956(h)
by (1) failing to show that the transactions involved the profits
of unlawful activity as required by Santos, and (2) offering
insufficient evidence. We review the denial of a Rule 29
motion for judgment of acquittal de novo, sustaining a guilty
verdict that, when viewed in the light most favorable to the
government, is supported by substantial evidence. United
States v. Alerre, 430 F.3d 681, 693 (4th Cir. 2005).
We find that Cloud’s money laundering convictions on
Counts 28-33 suffer from a merger problem, as they charge
the payment of the "essential expenses" of the fraud. Hal-
stead, 634 F.3d at 279 (quoting Santos, 553 U.S. at 528 (Ste-
vens, J., concurring)). Because we reverse these convictions
under Santos and Halstead, we do not address Cloud’s addi-
tional argument that Counts 28-33 are not supported by suffi-
cient evidence. See United States v. Moreland, 622 F.3d 1147,
1166-68 (9th Cir. 2010) (reversing defendant’s convictions
under 18 U.S.C. § 1956(a)(1)(A)(i) based on Santos, and
10 UNITED STATES v. CLOUD
declining to address defendant’s additional sufficiency of the
evidence challenge). As to Cloud’s money laundering con-
spiracy conviction on Count 27, however, we affirm, finding
no merger problem and sufficient evidence.
A.
Cloud was convicted of promotional money laundering
under 18 U.S.C. § 1956(a)(1) and of money laundering con-
spiracy under 18 U.S.C. § 1956(h). To prove promotional
money laundering, the government was required to show that
Cloud (1) conducted or attempted to conduct a financial trans-
action; (2) involving the proceeds of a specified unlawful
activity; (3) knowing that the property involved proceeds of
an unlawful activity; and (4) intending to promote the carry-
ing on of the specified unlawful activity. See United States v.
Singh, 518 F.3d 236, 246 (4th Cir. 2008).
In Santos, the Supreme Court considered whether the term
"proceeds" (which was not then defined in the federal money
laundering statute) means "receipts" or "profits." 553 U.S. at
509 (plurality opinion). Santos was convicted of operating an
illegal gambling business and of laundering the proceeds of
that business. Santos’s runners collected bets from gamblers,
retaining a percentage as a commission and delivering the rest
to Santos’s collectors. The collectors delivered the money to
Santos, who used it to pay the salaries of the collectors and
to pay the winners. The district court vacated Santos’s money
laundering convictions under § 1956(a)(1)(A)(i) and
§ 1956(h), finding that "the proceeds admittedly used by San-
tos to pay winners and couriers could only have been gross
proceeds," rather than net proceeds. United States v. Santos,
342 F. Supp. 2d 781, 799 (N.D. Ind. 2004), aff’d, 461 F.3d
886 (7th Cir. 2006).
The Supreme Court affirmed in a 4-1-4 decision. Although
yielding a fractured opinion, the judgment of the Court was
driven by a concern regarding a so-called " ‘merger prob-
UNITED STATES v. CLOUD 11
lem.’ " Santos, 553 U.S. at 515 (plurality opinion). As Justice
Scalia, writing for the plurality, explained, if "proceeds"
meant "gross 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 trans-
action involving receipts that the defendant intends to pro-
mote the carrying on of the lottery." Id. "Since few lotteries,
if any, will not pay their winners, the statute criminalizing
illegal lotteries, 18 U.S.C. § 1955, would ‘merge’ with the
money-laundering statute." Id. at 515–16. Looking beyond
illegal gambling, Justice Scalia added the following:
For a host of predicate crimes, merger would depend
on the manner and timing of payment for the
expenses associated with the commission of the
crime. Few crimes are entirely free of cost, and costs
are not always paid in advance. Anyone who pays
for the costs of a crime with its proceeds—for exam-
ple, the felon who uses the stolen money to pay for
the rented getaway car—would violate the money-
laundering statute. And any wealth-acquiring crime
with multiple participants would become money
laundering when the initial recipient of the wealth
gives his confederates their shares. Generally speak-
ing, any specified unlawful activity, an episode of
which includes transactions which are not elements
of the offense and in which a participant passes
receipts on to someone else, would merge with
money laundering.
Id. at 516 (footnote omitted).
Justice Stevens, writing separately and concurring in the
judgment only, agreed, finding that "[a]llowing the Govern-
ment 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 (Stevens, J.,
concurring) (emphasis added).
12 UNITED STATES v. CLOUD
In Halstead, we considered the impact of Santos in the con-
text of a healthcare fraud scheme. Before turning to the record
evidence, we observed generally that " ‘[w]hen a fragmented
Court decides a case and no single rationale explaining the
result enjoys the assent of five Justices, the holding of the
Court may be viewed as that position taken by those Members
who concurred in the judgments on the narrowest grounds.’ "
Halstead, 634 F.3d at 277 (quoting Marks v. United States,
430 U.S. 188, 193 (1977)). Looking to Santos, we concluded
the following:
In its narrowest sense . . . the five justices could be
found to have held that the money laundering term
"proceeds" means "net profits" when the proceeds
are from an illegal gambling operation. They also
agreed that the driving force for their holding was
the merger problem resulting from the circumstances
in that case—a prosecution of defendants for trans-
actions that supported convictions for both illegal
gambling and money laundering. Finally, they
agreed that the merger problem had to be solved by
defining the term "proceeds" in the money launder-
ing statute to mean "net profits," because if "pro-
ceeds" were defined to mean "gross receipts," any
crime involving costs would automatically become
money laundering when the money received from
the crime was used to pay expenses.
Id. at 278.
In evaluating how to apply this narrowest holding of San-
tos, we determined that because Justice Stevens’ concurrence
was limited to the facts of the case, it did not control cases
where "a merger problem arises in the context of money laun-
dering and an illegal activity other than illegal gambling." Id.
at 279 (emphasis added). Contemplating such other offenses,
we explained that "when the illegal activity includes money
transactions to pay for the costs of the illegal activity, a
UNITED STATES v. CLOUD 13
merger problem can occur if the government uses those trans-
actions also to prosecute the defendant for money launder-
ing." Id. And, we added that Santos made "clear" that "when
a merger problem arises, a judicial solution must be found to
eliminate its unfairness." Id. When, however, "the financial
transactions of the predicate offense are different from the
transactions prosecuted as money laundering, the merger
problem . . . does not even arise." Id. at 279-80. Turning to
the facts in Halstead, we found no merger problem.
Halstead was convicted of healthcare fraud under 18 U.S.C.
§ 1347 and money laundering conspiracy under 18 U.S.C.
§ 1956(h). Trained as a chiropractor, Halstead led a scheme
that fraudulently billed insurance companies for non-
legitimate services for patients. As part of the scheme, Hal-
stead "orchestrated the cash flow thus obtained from the
insurance companies and healthcare providers." Id. at 273.
Priority One—a clinic opened at Halstead’s direction—billed
for the services and received the insurance payments. Upon
receiving those payments, Priority One transferred the monies
to West Virginia Healthcare Management, another company
formed by a coconspirator. Finally, West Virginia Healthcare
Management transferred the monies to checking accounts for
Halstead and a coconspirator.
Finding no merger problem, we determined that Halstead’s
healthcare fraud was "complete" "the moment that the health-
care provider paid money to Priority One." Id. at 280. The
money paid was the "proceeds" of the healthcare fraud. Id.
When Halstead later directed that the proceeds be transferred
from Priority One to West Virginia Medical Corporation and
then to himself, "[t]hese transfers constituted the ‘transac-
tions’ of money laundering." Id. We noted that these transac-
tions "were separate from the transactions constituting
healthcare fraud," adding that while "[t]he healthcare fraud
charges were defined by the obtaining of money from the
fraudulent billing of healthcare providers, . . . the money laun-
dering charge was defined by transferring the proceeds there-
14 UNITED STATES v. CLOUD
after." Id. at 280-81. Accordingly, we concluded that "the
merger problem never arises in the circumstances of this
case." Id. at 281.
B.
Because Cloud was not convicted of operating an illegal
gambling business, we must determine whether a merger
problem arises on the facts of this case. Halstead, 634 F.3d at
279 (noting that "Justice Stevens’ 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").
The indictment charges Cloud in Count 27 with conspiracy
to commit money laundering and in Counts 28-33 with six
substantive money laundering transactions. Counts 28 and 30
stem from commissions Cloud paid to Joseph Goines for
recruiting buyers William Lytle and Reggie Thompson.
Goines testified that he was paid between $1,500 and $3,000
for each investor he "brought" to Cloud. J.A. 1812. Count 29
relates to a kickback Cloud paid to Lytle, which Lytle testi-
fied was paid only after he signed the relevant documents.
Count 31 charges Cloud with repaying Kenneth Strong for
money Strong loaned to Cloud for a previous closing. And
Counts 32 and 33 relate to payments Cloud made to Burt
Bartniski, another buyer. For example, Count 32 was based in
part on $5,000 that Bartniski received approximately one
week after Bartniski purchased a property. Bartniski also tes-
tified that Cloud paid the first mortgage payment for a prop-
erty he purchased, forming the basis of Count 33. As
Bartniski testified, Cloud informed him that he would help
cover the mortgage.
We have stated that "[a]n individual cannot be convicted of
money laundering for paying the ‘essential expenses of oper-
ating’ the underlying crime." Halstead, 634 F.3d at 279 (quot-
ing Santos, 553 U.S. at 528 (Stevens, J., concurring)). In this
UNITED STATES v. CLOUD 15
case, Cloud’s money laundering convictions are based on
payments to recruiters, buyers, and other coconspirators for
the role each person played in the mortgage fraud scheme.
Cloud’s mortgage fraud depended on the help of others, and
their help, in turn, depended on payments from Cloud. Such
payments are no different than "the felon who uses the stolen
money to pay for the rented getaway car" or "the initial recipi-
ent of the wealth" in "any wealth-acquiring crime with multi-
ple participants . . . [who] gives his confederates their shares."
Santos, 553 U.S. at 516 (plurality opinion). Because Cloud’s
money laundering convictions on Counts 28-33 were based on
paying the "essential expenses" of his underlying fraud, we
find a merger problem.
1.
In resisting this conclusion, the government (1) seizes on
our language in Halstead that the underlying fraud was "com-
plete" before the money laundering transactions occurred, and
(2) argues that Cloud’s money laundering transactions were
not for services rendered, but were designed to perpetuate the
scheme. We are not persuaded.
First, the government emphasizes that in finding no merger
in Halstead, we noted that " ‘Halstead’s commission of
healthcare fraud was complete before he committed money
laundering.’ " Appellee’s Supp. Br. 1 (quoting Halstead, 634
F.3d at 272). The government’s argument, however, does not
reflect a complete reading of Halstead and fails to account for
important factual differences in the two cases.
Initially, we note that Halstead was a standard money laun-
dering case, where the defendant transferred the fraudulent
proceeds through various companies and into his own coffers.4
4
We acknowledge that the fraudulent proceeds in Halstead were eventu-
ally transferred into two coffers. See Halstead, 634 F.3d at 273 (explaining
that "Halstead and Burns [a coconspirator] also orchestrated the cash flow
16 UNITED STATES v. CLOUD
Cloud, conversely, was not charged with transferring the pro-
ceeds into his personal account, but with paying persons
involved in the underlying fraud for services necessary to the
operation of the fraud. This factual difference is important, as
Halstead makes clear that a merger problem can occur in
these circumstances. See 634 F.3d at 279 ("[A] merger prob-
lem can occur" "when the illegal activity includes money
transactions to pay for the costs of the illegal activity . . .
[and] the government uses those transactions also to prosecute
the defendant for money laundering."). In transferring the pro-
ceeds from the fraud into his own account, the defendant in
Halstead was not paying the "essential expenses" of the
underlying fraud.
Moreover, the distinction we made in Halstead between
fraudulently procuring funds from a healthcare provider and
then funneling those funds from one corporate entity to
another was in response to the defendant’s argument that
"both crimes were the product of a single conspiracy, imply-
ing that a conspiracy can involve only the commission of one
crime." Id. at 280. As we explained in Halstead and reaffirm
now, it is without doubt that a single conspiracy can encom-
pass an agreement to commit multiple discrete offenses. In
rejecting Halstead’s argument to the contrary, we emphasized
that the healthcare fraud was "complete" once the fraudulent
thus obtained from the insurance companies and healthcare providers"
with the money ultimately "transferred . . . to Halstead and Burns’ check-
ing accounts"). The simple fact that a coconspirator was paid, however,
does not result in a merger problem. Rather, we must look to the nature
of the payment to determine if it charges the "money transactions to pay
for the costs of the illegal activity." Id. at 279. In Halstead, both men
received proceeds from the fraud according to a plan which they orches-
trated to ensure that the monies ultimately flowed to their coffers. Indeed,
the indictment charged Burns in at least six instances with causing the
transfer of funds from Healthcare Management to his account. Thus, in
facilitating these transfers, Halstead and Burns were not paying the
expenses of the fraud, but rather were reaping the fruits of their crimes.
UNITED STATES v. CLOUD 17
funds were paid by the healthcare provider—before the trans-
actions underlying Halstead’s money laundering convictions
occurred. Here, in reversing Cloud’s money laundering con-
victions, we do not suggest that the crimes merge because
they were part of one conspiracy. Rather, we conclude that the
specific money laundering transactions were the payment of
the "essential expenses" of Cloud’s underlying fraud, thus
presenting a merger problem.
Nonetheless, the government argues that Cloud’s
fraud—"obtaining money by the submission of false informa-
tion to the victim—precisely parallels the underlying fraud in
Halstead." Appellee’s Supp. Br. 1. This argument, however,
focuses exclusively on the underlying fraud offense, ignoring
the critical other half of our merger analysis—the money
laundering transactions. In Halstead, the money laundering
transactions were not based on the payment of the essential
expenses of his fraud. It was for that reason that we noted
there that the money laundering transactions were "distinct
from and subsequent to the transactions involved in the
healthcare fraud itself." Halstead, 634 F.3d at 271 (emphasis
added). In other words, Halstead’s healthcare fraud did not
require the cooperation, procured via payment, of coconspira-
tors to succeed. Cloud’s mortgage fraud conspiracy, on the
other hand, could not have succeeded otherwise.
Simply put, Cloud lured his coconspirators with promises
of payment. Without these payments, there would have been
no recruiters, no buyers, no coconspirators. And without the
recruiters to provide the buyers, or the buyers to provide the
good credit, or the coconspirators more generally, there would
have been no mortgage fraud. Applying Santos as interpreted
in Halstead, we conclude that Cloud’s substantive money
laundering transactions were simply the "essential expenses"
of his underlying fraud, thus presenting a merger problem.
We also reject the government’s second argument that
Cloud’s money laundering transactions were intended to per-
18 UNITED STATES v. CLOUD
petuate the scheme, not to pay for services rendered. On this
point, the government urges that the transactions underlying
Cloud’s money laundering convictions were designed to "lure
[buyers] into engaging in additional fraudulent transactions"
and "to perpetuate the scheme." Appellee’s Supp. Br. 7-8. The
evidence, however, shows that Cloud paid these recruiters,
buyers, and coconspirators for services performed. And, as
Justice Scalia noted in Santos, "costs are not always paid in
advance." 553 U.S. at 516 (plurality opinion). That these same
individuals were often repeat players in the conspiracy does
not negate the fact that the specific transactions alleged in
Counts 28-33 of the indictment were for the past and essential
expenses of Cloud’s mortgage fraud conspiracy.
In rejecting the government’s arguments, we recognize the
difficult line-drawing problems cases like this one present.
See Santos, 553 U.S. at 545 (Alito, J., dissenting) (describing
the difficulty of distinguishing between payments to partici-
pants who "expect to receive a certain amount for their ser-
vices whether or not the operation is profitable," and
payments to those who expect to receive "a certain percentage
of the gross revenue (perhaps even in addition to a salary)").
Nonetheless, the similarity of the payments charged in Counts
28-33 to those the defendant in Santos made to the runners,
collectors, and winners in the illegal gambling operation com-
pels us to find a merger problem.
We reach a different conclusion as to Count 27, which
alleges conspiracy to commit money laundering. Unlike
Cloud’s substantive money laundering charges, the conspir-
acy charge was not tied to any specific payment to a recruiter,
buyer, or coconspirator. Moreover, there was evidence that
Cloud used the profits from his previous flips to finance addi-
tional purchases. Specifically, attorney John Lee testified that
Cloud left monies he acquired from previous closings in Lee’s
trust account, and later "us[ed] those monies to buy" the prop-
erty underlying Count 6. J.A. 945. In utilizing monies from
previous properties to finance future purchases, Cloud was
UNITED STATES v. CLOUD 19
not paying the "essential expenses" of the underlying crime.
Thus, Count 27 does not present a merger problem.5
Nor do we believe that Count 27 fails for insufficient evi-
dence. In reviewing the denial of a Rule 29 motion for judg-
ment of acquittal, we must affirm a guilty verdict that, when
viewed in the light most favorable to the government, is sup-
ported by " ‘substantial evidence.’ " Alerre, 430 F.3d at 693
(quoting United States v. Burgos, 94 F.3d 849, 862 (4th Cir.
1996) (en banc)). "Substantial evidence" is defined as " ‘evi-
dence that a reasonable finder of fact could accept as adequate
and sufficient to support a conclusion of a defendant’s guilt
beyond a reasonable doubt.’ " Id. (quoting Burgos, 94 F.3d at
862). Based on Lee’s testimony, we are satisfied that the gov-
ernment met its burden of proof on Count 27.
2.
In reversing Cloud’s substantive money laundering convic-
tions, we again emphasize that wide-ranging conspiracies
such as Cloud’s can support multiple discrete convictions. See
Halstead, 634 F.3d at 280. And, we do not suggest that the
government may not successfully prosecute promotional
money laundering in connection with similar conspiracies
where the transactions are designed "to promote the carrying
on of specified unlawful activity," 18 U.S.C.
§ 1956(a)(1)(A)(i). On the facts of this case, however, we are
5
Cloud asserts that because the jury instructions referenced "proceeds"
not "profits," the government’s argument that the jury "could have" con-
cluded that his money laundering conspiracy was tied to "profits" is "in-
valid." Appellant’s Br. 51-52. We are not persuaded, as jury instructions
are subject to harmless error review. See United States v. Ramos-Cruz, 667
F.3d 487, 496 (4th Cir. 2012) ("We find an error in instructing the jury
harmless if it is clear beyond a reasonable doubt that a rational jury would
have found the defendant guilty absent the error.") (internal quotations
omitted). For the reasons supporting our finding of no merger, we also
find that any error in the court’s instruction did not affect Cloud’s convic-
tion on Count 27.
20 UNITED STATES v. CLOUD
confronted with a merger problem that Halstead directs us to
correct.
In Halstead, we concluded that Santos made "clear" that
"when a merger problem arises, a judicial solution must be
found to eliminate its unfairness." 634 F.3d at 279. And we
added that the solution dictated by Santos for a merger prob-
lem in the context of an illegal gambling business "is to define
the proceeds . . . as its net profits." Id. In the context of
another predicate crime, however, we left "further develop-
ment of a solution to a future case that presents the problem."
Id. That case is now before us, and we see no better course
to correct the merger problem here than that adopted in San-
tos, defining "proceeds" as "profits." So defined, we reverse
Cloud’s substantive money laundering convictions on Counts
28-33 because they do not comport with the definition of
"proceeds" announced in Santos.6
V.
Cloud also challenges the district court’s loss calculation.
We review for clear error the district court’s factual determi-
nation of the amount of loss attributable to Cloud, United
States v. Miller, 316 F.3d 495, 503 (4th Cir. 2003), mindful
that the court "need only make a reasonable estimate of the
loss," U.S. Sentencing Guidelines Manual ("U.S.S.G.")
§ 2B1.1 cmt. n.3(C).
6
Following the Court’s holding in Santos, Congress amended the
money-laundering statute to provide a definition of "proceeds." Fraud
Enforcement and Regulatory Act of 2009, Pub. L. No. 111–21, § 2(f)(1),
123 Stat. 1617, 1618 (2009). As amended, the statute defines "proceeds"
broadly as "any property derived from or obtained or retained, directly or
indirectly, through some form of unlawful activity, including the gross
receipts of such activity." 18 U.S.C. § 1956(c)(9). See Garland v. Roy, 615
F.3d 391, 394 n.1 (5th Cir. 2010). Thus, the issue we address today is not
likely to arise in many more cases.
UNITED STATES v. CLOUD 21
The district court concluded that Cloud was responsible for
an intended loss equal to the entire loan amount on the prop-
erties, minus a proxy for the value of the house. The proxy
was set by the price Cloud paid for the properties prior to the
"flip." After subtracting the proxy from the value of the loan,
the court arrived at an intended loss figure of approximately
$10 million. As to the collateral loss, the district court relied
on expert testimony regarding the impact that foreclosed
properties have on surrounding communities. The court, how-
ever, reduced the expert’s collateral figure—originally
encompassing properties within 800 to 900 meters of the fore-
closed property—based on the court’s conclusion that an
impact "over a half mile away" was not reasonably foresee-
able to Cloud. J.A. 3237. Reducing the collateral loss radius
to 100 to 200 meters, the court found that Cloud was responsi-
ble for over $9 million in collateral loss.
On appeal, Cloud argues that neither the intended nor col-
lateral loss figures were tied to evidence of Cloud’s intent.
Specifically, Cloud asserts that the court "overlooked evi-
dence that Cloud intended that the lenders would be repaid at
least in part and that Cloud did not intend any losses to the
community." Appellant’s Br. 55.7
7
Cloud also alleges that the district court "did not apply [a] subjective
measure" of intent as to the intended loss. Appellant’s Br. 57. We find that
"[t]his conclusory remark is insufficient to raise on appeal any merits-
based challenge to the district court’s ruling," Eriline Co. S.A. v. Johnson,
440 F.3d 648, 653 n.7 (4th Cir. 2006) (citing Fed. R. App. P. 28(a)(9)(A)
and its requirement that argument section of brief contain "appellant’s
contentions and the reasons for them, with citations to the authorities and
parts of the record on which the appellant relies"). Moreover, we note that
in making its loss ruling, the district court rejected Cloud’s argument that
there was no intended loss, finding that "there was really an intent to
defraud lending institutions and to run away with that spread." J.A. 3108.
In support, the court noted that Cloud received phone calls from "investors
who said they [were] receiving foreclosure notices, and [that] they thought
that [Cloud] was covering the debt service," id. 3101, and that "[i]f there
truly was no intent to cause a loss to a financial institution or to an inves-
tor, then [Cloud] would have done what he did not do, and that was stay
tied close to these investors when they were . . . complaining to him that
they were getting foreclosure notices," id. 3108. Thus, we think the district
court adequately accounted for Cloud’s subjective intent.
22 UNITED STATES v. CLOUD
As to intended loss, Cloud asserts that "even the most
government-friendly reading of the evidence does not estab-
lish that Cloud intended the lenders to lose the entire spread
between his purchase and sale prices." Id. 58. In support,
Cloud argues that he could have intended this amount of loss
only if he intended that the buyers would not make a single
mortgage payment. According to Cloud, evidence of his prop-
erty management shows otherwise.
Although the district court noted that Cloud "did do some
property management," it clarified that this management was
"very minor . . . and a lot of it was to make the property look
more appropriate for closing." J.A. 3108-09. And, it con-
cluded that the "small amount of property management
[Cloud] did does not offset the fact that virtually the vast
majority of the properties went into foreclosure." Id. 3109.
We find no clear error in the district court’s assessment of
Cloud’s property management as it influenced the intended
loss calculation.
As to collateral loss, Cloud faults the district court for over-
looking that many of the properties were in foreclosure when
Cloud purchased them, and argues that the government failed
to present evidence demonstrating why Cloud should have
foreseen that additional loss would occur if previously fore-
closed properties were later returned to foreclosure. We dis-
agree.
First, no evidence as to the loss caused by a subsequent
foreclosure was presented because Cloud did not raise this
objection at sentencing. Second, Cloud does not dispute the
general rule that foreclosures have a negative impact on the
surrounding communities; indeed, Cloud’s own expert con-
ceded as much. See id. 3221 (testimony by Cloud’s expert that
foreclosures "[g]enerally" have a negative impact on sur-
rounding communities). Nor does Cloud suggest that all of the
properties were previously foreclosed. Third, Cloud’s argu-
ment assumes that none of the previously foreclosed proper-
UNITED STATES v. CLOUD 23
ties would have been purchased by legitimate buyers, an
assumption that is simply not supported by the evidence or by
common sense. After careful review, we are satisfied that the
district court did not clearly err in finding that the foreclosures
that resulted from Cloud’s scheme had a collateral impact on
the surrounding communities.8
In any event, even assuming some error in the district
court’s loss calculation, we are satisfied that such error was
harmless. Cloud’s offense level was increased by 20 levels
based on a loss of more than $7 million but less than $20 mil-
lion. See U.S.S.G. § 2B1.1(b)(1)(K). To qualify for the next
lowest offense level, Cloud would have to show that the dis-
trict court’s loss finding was wrong to the tune of $12 million,
taking the loss to more than $2.5 million but less than $7 mil-
lion. See id. § 2B1.1(b)(1)(J). Based on his arguments about
the impact of his property management and the double fore-
closures, this he cannot do. Accordingly, any error in the loss
calculation was harmless. See United States v. Mehta, 594
F.3d 277, 283 (4th Cir. 2010) (noting that in evaluating a dis-
trict court’s sentencing calculations, any error "is harmless if
the resulting sentence was not longer than that to which the
defendant would otherwise be subject" and finding that
because the defendant "received the same sentence that he
would have received had the district court not erred in its cal-
8
Cloud also argues that "once the district court found that the collateral
damage victims were ‘unintended,’ it could not permissibly resort to
collateral-loss findings based on Cloud’s expectations." Appellant’s Br.
60-61. This argument, however, seizes on a misstatement by the district
court that the collateral loss victims were "unintended." J.A. 3103. The
court subsequently corrected its mistake, noting that it should have
referred to the victims as collateral, not unintended victims, because
although specific intent was not required, "the defendant has to have some
recognition that the collateral damage will be broad." Id. 3115. Moreover,
in the case Cloud cites in support, United States v. Pendergraph, 388 F.3d
109, 113 (4th Cir. 2004), the district court found that there was "no
intended loss." Here, the district court found Cloud responsible for $10
million in intended loss.
24 UNITED STATES v. CLOUD
culations . . . . the error is harmless" (internal quotations omit-
ted)); United States v. Allen, 491 F.3d 178, 194 (4th Cir.
2007) (finding loss calculation harmless because the chal-
lenged loss figure resulted in the same offense level as the
calculated loss level).
VI.
Lastly, Cloud asserts that the district court erred when it
ordered him to reimburse the government for the services of
his court-appointed attorneys. We agree.9
In United States v. Moore, 666 F.3d 313 (4th Cir. 2012), we
noted that under the Criminal Justice Act, 18 U.S.C. § 3006A
("CJA"), the government must provide adequate legal repre-
sentation to criminal defendants charged with a federal felony
who are unable to pay, but if the court subsequently finds that
the defendant " ‘is financially able to obtain counsel or to
make partial payment for the representation,’ " repayment is
authorized under subsection (f). Id. at 321 (quoting 18 U.S.C.
§ 3006A(c)). Subsection (f) authorizes a court to order repay-
ment of attorneys’ fees "[w]henever . . . the court finds that
funds are available for payment from or on behalf of a person
furnished representation." 18 U.S.C. § 3006A(f).
In Moore, we held that to order reimbursement of attor-
neys’ fees, a court must "find[ ] that there are specific funds,
assets, or asset streams (or the fixed right to those funds,
assets or asset streams) that are (1) identified by the court and
(2) available to the defendant for the repayment of the court-
appointed attorneys’ fees." 666 F.3d at 322. We noted that the
district court made no findings that Moore "is financially able
. . . to make partial payment for the representation" or that
9
The government initially argued that the district court did not plainly
err in its reimbursement order. Before oral argument and citing our deci-
sion in United States v. Moore, 666 F.3d 313 (4th Cir. 2012), however, the
government conceded error on this point.
UNITED STATES v. CLOUD 25
"funds are available for payment." Id. at 323 (internal quota-
tions omitted). And we took "particular note" of the fact that
in the absence of such findings, the district court simulta-
neously concluded that Moore was unable to pay a fine or
interest. Id. Finding that the district court’s reimbursement
order conflicted with the statutory requirements, we vacated
that portion of the judgment and remanded for resentencing.
Similarly, the district court here made no findings regard-
ing Cloud’s ability to reimburse the government for attorneys’
fees or the availability of such funds. To the contrary, the dis-
trict court concluded that Cloud was unable to pay a fine or
interest. Because Cloud’s reimbursement order is of the same
type we rejected in Moore, we vacate that portion of the dis-
trict court’s judgment and remand for resentencing.
VII.
For the reasons stated, we affirm the district court’s eviden-
tiary rulings and loss calculation. We reverse Cloud’s money
laundering convictions on Counts 28-33, but otherwise affirm
his convictions. Finally, we vacate the attorneys’ fees reim-
bursement order, and remand for resentencing.
AFFIRMED IN PART,
REVERSED IN PART,
VACATED IN PART,
AND REMANDED