United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 12, 2007 Decided December 18, 2007
Amended February 15, 2008
No. 04-3080
UNITED STATES OF AMERICA,
APPELLEE
V.
SUNDAY YEMI ADEFEHINTI,
APPELLANT
Consolidated with
05-3046, 05-3055
Appeals from the United States District Court
for the District of Columbia
(No. 01cr00451-01)
(No. 01cr00451-02)
(No. 01cr00451-04)
Charles B. Wayne, appointed by the court, argued the
cause and filed the brief for appellant Sunday Yemi
Adefehinti.
2
Sandra G. Roland, Assistant Federal Public Defender,
argued the cause for appellant Tayo John Bode. With her on
the briefs was A.J. Kramer, Federal Public Defender. Neil H.
Jaffee and Shawn Moore, Assistant Federal Public Defenders,
entered appearances.
Michael Alan Olshonsky, appointed by the court, argued
the cause and filed the brief for appellant Olushola Akinleye.
Ellen R. Meltzer, Attorney, U.S. Department of Justice,
argued the cause for appellee. With her on the brief was
Jeffrey A. Taylor, U.S. Attorney.
Before: GRIFFITH, Circuit Judge, and EDWARDS and
WILLIAMS, Senior Circuit Judges.
Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.
WILLIAMS, Senior Circuit Judge: Five defendants—
appellants Adefehinti, Akinleye, and Bode, and two others
(Akinkuowo and Protech Builders)—were tried together for a
variety of crimes arising out of a scam by which they
contrived to secure mortgages on items of real property at
vastly inflated values. The three appellants were convicted on
counts of racketeering, in violation of 18 U.S.C. § 1962(c);
bank fraud, in violation of 18 U.S.C. § 1344; and interstate
transportation of stolen property, in violation of 18 U.S.C. §
2314. Adefehinti and Bode were also convicted of money
laundering, in violation of 18 U.S.C. § 1956(a)(1)(B)(i). The
district court sentenced Adefehinti to 74 months in prison,
Akinleye to 37 months, and Bode to 57 months.
Adefehinti, Akinleye, and Bode attack their convictions
on multiple grounds. Adefehinti also challenges his sentence.
The only claims meriting discussion in a published opinion
are (1) Adefehinti’s and Bode’s contention that the evidence
3
was insufficient to convict them of intending to conceal funds,
an essential element of the money laundering charge, and (2)
appellants’ claim that the circumstances under which loan
documents were admitted into evidence compromised their
rights under the Confrontation Clause of the Sixth
Amendment. We reverse Adefehinti’s and Bode’s money
laundering convictions but otherwise affirm the judgments in
all respects.
* * *
Between 1995 and 1999, defendants defrauded banks of
millions of dollars through real estate and mortgage
transactions involving properties in Washington, D.C. The
scheme consisted of a series of fraudulently executed land
“flips”: defendants bought cheap properties with fake
identities and then sold them to each other for artificially high
prices, using bank loans to fund the purchase. Defendants
fabricated the identity of buyers, providing the straw buyers
with false employment histories, financial records, and
addresses. In some cases, the buyers had the names of real
individuals, but defendants doctored their employment or
financial histories so that they would qualify for more
substantial loans; occasionally, defendants would sign the
name of a real person without his knowledge. At defendants’
behest, appraisers lied about the properties’ value, inflating
the listing price.
The schemers submitted the fraudulent loan applications
to banks, which relied on them in making lending decisions.
On the issuance of loan checks to the straw buyers, the
defendants distributed the proceeds among themselves. The
non-existent or unqualified buyers naturally failed to make
mortgage payments, which eventually led the banks to
foreclose.
4
Adefehinti, owner of W.H.V. Realty, served as the real
estate broker and orchestrated many facets of the scheme.
Akinleye owned Protech, a company at which some of the
straw buyers falsely claimed to work, and signed a variety of
loan documents in other people’s names. Bode, a co-owner
and officer of Protech, played various roles, helping to
fabricate the straw buyers’ financial and employment records
and facilitating the purchase and sale of properties.
* * *
Bode’s and Adefehinti’s money laundering convictions
under 18 U.S.C. § 1956(a)(1)(B)(i) turned on their roles in
allocating the proceeds from the fraudulent sale of a property
located at 137 Adams Street, N.W. They argue that the
prosecution failed to offer sufficient evidence of a crucial
element of such a conviction, namely that they intended to
conceal the funds in question. In reality, they say, the
transactions amount to no more than divvying up the joint
venture’s gains, albeit illegally obtained. We agree.
To convict a person for money laundering under 18 U.S.C.
§ 1956(a)(1)(B)(i), the government must prove that (1) the
defendant conducted or attempted to conduct a financial
transaction; (2) the transaction involved the proceeds of
unlawful activity; (3) the defendant knew that the proceeds
were from unlawful activity; and (4) the defendant knew “that
the transaction [was] designed in whole or in part—(i) to
conceal or disguise the nature, the location, the source, the
ownership, or the control of the proceeds of specified
unlawful activity.” 18 U.S.C. § 1956(a)(1)(B)(i); see also
United States v. Majors, 196 F.3d 1206, 1212 (11th Cir.
1999). Bode and Adefehinti claim that the government failed
to prove the fourth element of the offense, namely that they
5
attempted to “conceal or disguise” the fraudulently obtained
funds.
The basis of the money laundering convictions was the
disposition of a settlement check for $41,010, which was
payable to “Mohamed Massaqudi,” an evidently fictional
seller. The lower left-hand corner of the check stated that the
check was “for proceeds of settlement of 137 Adams St.” See
GX 234. The check was endorsed in Massaqudi’s name to
Bernard Adeola of Image Construction, with a notation of the
account number of W.H.V. Realty, Adefehinti’s real estate
company, and was negotiated at NationsBank. Immediately
thereafter, $8000 was deposited into Bode’s account at
NationsBank, $16,340 into W.H.V. Realty’s account there,
$8010 into an unrelated account there, and $7000 was
received as cash. Adefehinti then wrote checks to Akinkuowo
on his W.H.V. Realty account for a total of $7000 (one for
$3000 immediately after the transaction, another for $4000 a
few days later).
The government contends that a reasonable jury could
conclude that these transactions, originating with a check
made payable to a fictitious individual, were part of a scheme
to conceal the fact that these funds were the proceeds of
fraudulently obtained bank loans. As usual, we review the
evidence in the light most favorable to the government.
United States v. Carson, 455 F.3d 336, 368-69 (D.C. Cir.
2006).
The money laundering statute criminalizes behavior that
masks the relationship between an individual and his illegally
obtained proceeds; it has no application to the transparent
division or deposit of those proceeds. “In its classic form, the
money launderer folds ill-gotten funds into the receipts of a
legitimate business.” United States v. Esterman, 324 F.3d
565, 570 (7th Cir. 2003). Section 1956, enacted as part of the
6
Money Laundering Control Act of 1986, punishes those who
“inject[] illegal proceeds into the stream of commerce while
obfuscating their source.” United States v. Wynn, 61 F.3d
921, 926 (D.C. Cir. 1995).
It seems clear that, as the Seventh Circuit has observed,
the necessary intent to conceal requires “something more”
than the mere transfer of unlawfully obtained funds, though
that “‘something more’ is hard to articulate.” Esterman, 324
F.3d at 572. Rather, “subsequent transactions must be
specifically designed to hide the provenance of the funds
involved.” United States v. Jackson, 935 F.2d 832, 843 (7th
Cir. 1991). Esterman noted that cases in which courts have
upheld money laundering convictions “have in common the
existence of more than one transaction, coupled with either
direct evidence of intent to conceal or sufficiently complex
transactions that such an intent could be inferred.” 324 F.3d
at 572. The court’s list of cases that have found laundering is
instructive:
Cases concluding that the line has been crossed into the
“money laundering” territory include United States v.
Thayer, 204 F.3d 1352, 1354-55 (11th Cir. 2000)
(funneling illegal funds through various fictitious
business accounts); United States v. Majors, 196 F.3d
1206, 1212-13 (11th Cir. 1999) (“elaborate shell game”
involving multiple inter-company transfers with a variety
of signatory names); United States v. Willey, 57 F.3d
1374, 1387 (5th Cir. 1995) (“highly unusual” transactions
involving cashier’s checks, third party deposits, and trust
accounts used to disguise source of funds); United States
v. Garcia-Emanuel, 14 F.3d 1469, 1476-79 (10th Cir.
1994) (land purchased in name of restaurant to make it
appear that business was source of wealth and truck
purchased in wife’s name for stated purpose of deceiving
IRS); United States v. Campbell, 977 F.2d 854, 858 n.4
7
(4th Cir. 1992) (reduction in price for sale of house
combined with under-the-table payment); United States v.
Beddow, 957 F.2d 1330, 1334-35 (6th Cir. 1992) (use of
“front man” and “convoluted financial dealings” to invest
in emeralds and a charter boat, designed to disguise
ownership and evade transaction reporting requirements);
United States v. Lovett, 964 F.2d 1029, 1033-37 (10th
Cir. 1992) (convoluted financial transactions leading up
to purchase of house, combined with misleading
statements regarding nature and source of purchase
money).
324 F.3d at 572. At the other end of the spectrum are
“typically simple transactions that can be followed with
relative ease, or transactions that involve nothing but the
initial crime.” Id; see also United States v. Olaniyi-Oke, 199
F.3d 767, 770-71 (5th Cir. 1999).
The transactions in this matter are of the latter sort. A
check was negotiated at a bank. A little less than half its
proceeds ($16,340) were deposited into Adefehinti’s business
account. Other than $7000 that was received as cash upon
negotiating the check, the rest was divided among Bode’s
account and another individual’s. Other than the two checks
totaling $7000 that Adefehinti addressed to Akinkuowo from
his W.H.V. Realty account after depositing some of the funds
there, all the proceeds of the initial check were either cashed
or went directly into accounts in the name of defendants or
their associates without passing through any other person’s
account.
Bode’s share was deposited into an account in his own
name at the bank he frequents. There is no evidence that
Adefehinti or Bode took steps to disguise or conceal the
source or destination of the funds. Even assuming the check’s
original endorsee—Bernard Adeola—was a fictional
8
character, the funds never entered his account, and the check
expressly indicated a link to W.H.V. Realty, a firm that could
easily be tied to Adefehinti. We also note that an FBI agent
who testified on behalf of the prosecution stated that, in the
course of his investigation, he never bothered to track down or
even attempt to contact Adeola or look up his company
(Image Construction) in Virginia, DC, or Maryland business
directories. The irrelevance of Adeola was perhaps so
obvious that the agents saw no point in investing time in his
pursuit.
An observer who reads the endorsement on the initial
check and studies the names and numbers on the subsequent
deposit slips and checks could discern the money trail with
ease. The record has no suggestion that the prosecutors and
law enforcement agents had any difficulty doing so. All the
transactions conspicuously lack the “convoluted” character
associated with money laundering.
During oral argument, the government maintained that
defendants’ intent to conceal started (and perhaps ended) with
the deception inherent in making checks payable to straw
buyers (each of whom, of course, received a check in phase
two of the transactions, on reselling to a new straw buyer).
But the proposed analysis would conflate the act of
fraudulently obtaining money with the act of concealing it—
two different activities which rarely are one and the same.
See United States v. Seward, 272 F.3d 831, 836 (7th Cir.
2001) (emphasizing that the “transaction or transactions that
created the criminally-derived proceeds must be distinct from
the money-laundering transaction”); United States v.
Mankarious, 151 F.3d 694, 705 (7th Cir. 1998) (“Money
laundering criminalizes a transaction in proceeds, not the
transaction that creates the proceeds.”). Having carried out a
fraud of which concealment was an integral part, defendants
cannot be charged with the same concealment a second time,
9
as if it were the sort of independent manipulation of the
proceeds required for money laundering.
Accordingly, Adefehinti’s and Bode’s convictions for
money laundering under 18 U.S.C. § 1956(a)(1)(B)(i) cannot
stand.
* * *
Adefehinti (joined by his fellow appellants) argues that the
district court violated his rights by admitting into evidence
loan documents based on certificates that the records’
custodians provided pursuant to Federal Rule of Evidence
902(11). As it appears in the opening brief, the claim appears
to have two elements: first, that the custodians making the
certificates lacked knowledge of the propositions they
certified and that those propositions were altogether
unsupported; second, that the assertions in the Rule 902(11)
certificates constituted testimonial evidence within the
meaning of Crawford v. Washington, 541 U.S. 36, 42-56
(2004), so that introduction of the loan documents via those
certificates rather than by live testimony violated defendants’
rights under the Sixth Amendment’s Confrontation Clause.
The disputed materials are hundreds of loan applications,
sales contracts, promissory notes, verifications of deposit,
verifications of employment and similar documents that,
according to the government, the banks relied upon in
determining whether to lend money. They were received in
evidence on the basis of certificates under Federal Rule of
Evidence 902(11), which permits authentication of “certified
domestic records of regularly conducted activity” without
“[e]xtrinsic evidence of authenticity,” provided that the
records are admissible under Federal Rule of Evidence 803(6),
the business records exception to the hearsay rule, and are
10
accompanied by a certificate meeting the rule’s standards.
The certificate must contain “a written declaration of [the
record’s] custodian or other qualified person . . . , certifying”
that the record
(A) was made at or near the time of the occurrence of the
matters set forth by, or from information transmitted by,
a person with knowledge of those matters; (B) was kept
in the course of the regularly conducted activity; and (C)
was made by the regularly conducted activity as a regular
practice.
Fed. R. Evid. 902(11). The required assertions are, of course,
almost exactly the propositions needed for admission of a
business record under Rule 803(6).
Here the disputed records were accompanied by
certificates with assertions tracking Rule 902(11)’s
specifications. In some instances the certifying custodians
testified as well. Adefehinti, in his opening brief, alludes to
the testimony of several witnesses who had provided such
certificates, claiming that their testimony in fact undermines
the certificates. Each of the three involves different types of
documents: (1) a bank official certified the authenticity of
documents that the bank relied upon in making lending
decisions; (2) a legal support employee of another bank
certified the authenticity of checks, deposit slips, and other
documents related to defendants’ depositing the proceeds of
their ill-gotten gains; and (3) an operations manager of a title
company certified the authenticity of certain identifications
and documents used at closing. The primary focus of
Adefehinti’s argument, however, is the first category—loan-
supporting documents. Indeed, this is where his argument is
strongest, as the way in which the other types of documents
were created and used more obviously fits the business
11
records exception. We limit our discussion, then, to the
certifiers of loan-supporting documents.
Frederick Richter, an employee of Standard Federal
Bank, certified such documents. He testified that he was
familiar with his bank’s lending process. He explained that,
for each loan, the bank would receive a set of documents from
a mortgage broker—documents that the bank would rely on in
extending loans and that it would store once a loan was made.
We now turn to the specific claims.
Alleged absence of support for assertions in the Rule
902(11) certificates. Adefehinti points to Richter’s testimony
on cross-examination, which he believes shows that Richter
(and, by implication, the multiple non-testifying bank officials
who certified loan-supporting documents) was plainly not
qualified to make the assertions required by Rule 902(11).
For example, counsel brought out from Richter that his
knowledge of the role of specific documents was not based on
familiarity with the specific transaction but rather on
knowledge of the bank’s processes and relationship with
mortgage brokers, and on the fact that the documents were in
the bank’s files. Apart from that knowledge, and from
material in the documents themselves (such as dates and
signatures), he had no way of knowing when, how, or by
whom a document was initially created, or when it initially
came into the bank’s possession.
Assuming the non-testifying certifiers had no more
knowledge of the documents’ creation than did Richter, there
are two arguable weaknesses in the factual basis underlying
the certificates. First, the certifying officials had no direct
knowledge of the circumstances under which the records were
made in the sense of being incorporated into the bank’s
records. Second, the bank certifiers could not competently
address the original creation of the records; that had occurred
12
in the course of the mortgage brokers’ business. That being
so, appellants question whether the certifiers could
legitimately assert (as required by the rule) that the records
were “made at or near the time of the occurrence of the
matters set forth by, or from information transmitted by, a
person with knowledge of those matters.” Fed. R. Evid.
902(11) (emphasis added).
Neither weakness is fatal to the admissibility of the
documents. To lay an adequate foundation under Rule
902(11) (or under Rule 803(6), which Rule 902(11) extends
by allowing a written foundation in lieu of an oral one), the
“custodian [of the records] need not have personal knowledge
of the actual creation of the document.” United States v.
Williams, 205 F.3d 23, 34 (2d Cir. 2000) (quoting Phoenix
Assocs. III v. Stone, 60 F.3d 95, 101 (2d Cir. 1995)); see also
United States v. Jakobetz, 955 F.2d 786, 800 (2d Cir. 1992)
(holding that a toll receipt incorporated into a business’s
records qualified as a business record, despite the fact that its
custodian had no knowledge of the toll receipt’s preparation,
because the receipt had been so embedded in the company’s
business records to allow such an inference of authenticity).
Further, several courts have found that a record of which a
firm takes custody is thereby “made” by the firm within the
meaning of the rule (and thus is admissible if all the other
requirements are satisfied). We join those courts. Thus
United States v. Duncan, 919 F.2d 981, 986 (5th Cir. 1990),
found that there was “no requirement that the [business]
records be created by the business having custody of them,”
so that insurance company custodians could lay an adequate
foundation for admitting records compiled by those
companies from the business records of hospitals. To the
same effect is United States v. Childs, 5 F.3d 1328, 1333 (9th
Cir. 1993), which accepted documents under Rule 902(11)
(such as certificates of title and odometer statements) that
13
were maintained by an automobile dealership in the regular
course of business though not originated by the dealership.
See id. at 1333-34 (reviewing similar cases); Matter of Ollag
Construction Equipment Corporation, 665 F.2d 43, 46 (2d
Cir. 1981) (finding that “business records are admissible if
witnesses testify that the records are integrated into a
company’s records and relied upon in its day-to-day
operations,” and noting that relevant financial statements were
completed at bank’s request and were of a type that the bank
regularly used to make decisions whether to extend credit);
United States v. Carranco, 551 F.2d 1197, 1200 (10th Cir.
1977) (holding that freight bills, though drafted by other
companies, were business records of a shipping company
because they were “adopted and relied upon by” the shipping
company). Compare United States v. Petrie, 302 F.3d 1280,
1287-88 (11th Cir. 2002), where the court found no clear error
in the district court’s finding that certain documents created
by defendant and his associates lacked indicia of reliability,
and thus no abuse of discretion in exclusion of such
documents, notwithstanding the custodian’s testimony as to
her employer’s maintenance of the documents.
Before leaving this topic we must briefly discuss a claim
that appears only in Adefehinti’s reply brief—a brief in which
the opening brief’s two-page Rule 902(11) argument burgeons
into seven pages. Normally, we would not address a claim
originating in the reply brief. See e.g., Carter v. George
Washington University, 387 F.3d 872, 883 (D.C. Cir. 2004);
United States v. Caicedo-Llanos, 960 F.2d 158, 164 (D.C. Cir.
1992); Carducci v. Regan, 714 F.2d 171, 177 (D.C. Cir.
1983). But appellants’ new issues shed light both on what we
have just held and on appellants’ next theory—the claim that
the assertions contained in the 902(11) certificates were
testimonial and could thus, under the Confrontation Clause, be
introduced only in the form of live testimony.
14
Adefehinti’s reply brief contends that the government
offered the loan-supporting documents “to demonstrate that
defendants made false statements in those exhibits to the
lenders and others.” Adefehinti Reply 3. And, in a creative
but perplexing formulation, it says that “the alleged false
statements contained in the 500 exhibits were most definitely
offered for the truth—the ‘truth’ of their falsity.” Id.
The first claim is comprehensible but flatly wrong.
During a bench conference at which defense attorneys
objected to the admission of six loan-related documents, the
judge decided to accept the documents into evidence with the
explicit understanding that the prosecution could not offer
them as evidence of the truth or falsity of their contents: The
documents and the financial information represented in them,
he said, “are being offered to demonstrate the basis on which
the lender made its decision to loan money.” 10/2/03 PM Tr.
8 (emphasis added). Further, the prosecution and court
explicitly recognized that the government needed evidence
completely independent of the bank documents to show both
(1) the defendants’ role in causing the false statements’
presence in those documents, as well as in submitting the
documents to the banks, and (2) the falsity of the statements.
See, e.g., 10/2/03 PM Tr. 4, 12. Adefehinti has not even
attempted a sufficiency-of-the-evidence attack on the
government’s proof of those elements of its case.
As best we can translate the argument that the government
offered the documents “for the ‘truth’ of their falsity,”
Adefehinti means to say that the government used them to
prove that the defendants caused the false assertions to be
made. As we have seen, that is simply not the case. The
government offered several dozen witnesses, all of whom the
defense had an opportunity to cross-examine, to show that
defendants were responsible for the false assertions in the loan
documents. And it provided completely independent evidence
15
that the names, phone numbers, addresses, work information,
citizenship status, financial information, and other
representations of those signing the various loan documents
were false and could be traced to defendants—the sufficiency
of which, again, Adefehinti does not contest.
We now return to the underlying requirements for 902(11)
authentication. The opening clause of Rule 803(6)’s business
records exception defines the sort of document involved:
[a] memorandum, report, record, or data compilation, in
any form, of acts, events, conditions, opinions, or
diagnoses, made at or near the time by, or from
information transmitted by, a person with knowledge.
Fed. R. Evid. 803(6). It then imposes the well-known
requirements relating to the document’s being kept in the
regular course of business. In this case, where the documents
were “made” by the banks in the sense of being acquired, used
and filed by them, the “knowledge” requirement is clearly
satisfied if, as the certificates indicated, the persons in charge
of the documents’ acquisition, use and filing had knowledge
of the circumstances in which the acquisition, use and filing
occurred. We need not address the question of the requisite
knowledge when the record is offered for the truth of the
propositions it contains, e.g., that a particular piece of
property could properly be appraised at the stated value. See
S. Rep. No. 93-1277 (1974), reprinted in 1974 U.S.C.C.A.N.
7051, 7063.
Alleged Confrontation Clause violation in substitution of
Rule 902(11) certificates for live testimony. Adefehinti argues
that the district court’s procedure denied him his Sixth
Amendment right to confront and cross-examine the
numerous declarants who executed the certificates. We note
Adefehinti does not argue that the court ever thwarted any
16
effort to call any of the certifying custodians to the stand, and
we have found no such ruling. Affirmatively, the contention
is that “witness affidavits in the form of Rule 902(11)
certificates fit squarely within the Supreme Court’s definition
of [testimonial] hearsay” in Crawford. See Adefehinti Br. 13.
Adefehinti maintains that the certificates are “solemn
declaration[s] or affirmation[s] made for the purpose of
establishing or proving some fact” and are “affidavits,” which
the Supreme Court classified as belonging to the “core class
of ‘testimonial statements.’” Crawford, 541 U.S. at 51-52.
Our disposition of this issue is simplified by the parties’
joint acceptance of the Seventh Circuit’s decision in United
States v. Ellis, 460 F.3d 920 (7th Cir. 2006). Starting from
Crawford’s explicit conclusion that business records “by their
nature were not testimonial” at the time of the Founding,
Crawford, 541 U.S. at 56, the Ellis court extended that
principle to evidence laying the foundation for such records’
admission: “Given the records themselves do not fall within
the constitutional guarantee provided by the Confrontation
Clause, it would be odd to hold that the foundational evidence
authenticating the records do[es].” 460 F.3d at 927.
Adefehinti seeks not to reject but to distinguish Ellis. But he
does so on grounds that we have already rejected—the
argument that, in light of Richter’s elucidation of the meaning
and basis of the certificates, the documents did not qualify as
business records at all.
We note in this connection that Rule 803(6) provides an
explicit exception: otherwise qualifying documents are
admissible “unless the source of information or the method or
circumstances of preparation indicate lack of trustworthiness.”
Rule 902(11) provides a procedural device for applying this
exception (and perhaps others) to certificates, requiring
advance notice by a party planning to offer evidence via
902(11) certificates in order “to provide an adverse party with
17
a fair opportunity to challenge them.” In an appropriate case
the challenge could presumably take the form of calling a
certificate’s signatory to the stand. So hedged, the Rule
902(11) process seems a far cry from the threat of ex parte
testimony that Crawford saw as underlying, and in part
defining, the Confrontation Clause.
In any event, as the Rule 902(11) certificates here were
used only to admit documents acceptable as business records
under Rule 803(6), and as the appellants neither attack nor
successfully distinguish Ellis, we find no error.
* * *
We vacate Adefehinti’s and Bode’s money laundering
convictions for the reasons stated and remand for such re-
sentencing as may be appropriate, and otherwise affirm the
judgments of the district court in their entirety.
So ordered.