United States v. Adefehinti

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.

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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

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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.

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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

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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

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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

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(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

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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

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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

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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

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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.

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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.