Petition for Writ of Certiorari — Lazarenko v. United States (No. 09-49)

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FILED

-49 JUL 9- 2009

VWitiams K. Suter, Clerk

jn The

Supreme Court of the Anited States

PAVEL IVANOVICH LAZARENKO,

Petitioner,

VS.

UNITED STATES,

Respondent.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

DENNIS RIORDAN*

DONALD HORGAN

TED SAMPSELL JONES

RIORDAN & HORGAN

523 Octavia Street

San Francisco, CA 94102

(415) 431-3472

Attorneys for Petitioner

Pavel Lazarenko

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO. (800) 225-6964

OR CALL COLLECT (402) 342-2831

IT.

QUESTIONS PRESENTED

IS THE OMISSION OF AN ELEMENT OF A

CRIMINAL OFFENSE FROM A FEDERAL

INDICTMENT —- HERE, THAT A SPECIFIED

UNLAWFUL ACTIVITY MUST VIOLATE

FOREIGN LAW — STRUCTURAL ERROR?

MAY A FOREIGN HEAD OF STATE BE

CONVICTED OF MONEY LAUNDERING

BASED ON PURPORTED BRIBES RECEIVED

ON FOREIGN SOIL, WHEN AMERICAN

GOVERNMENT OFFICIALS HAD FORMALLY

STATED THAT SUCH CONDUCT WAS NOT

THEN WITHIN THE SCOPE OF THE MONEY

LAUNDERING STATUTES?

TABLE OF CONTENTS

Page

QUESTIONS PRESEN SieD cecccccscescccscscsssccccoseee i

TABLE OF AUTHORITIBES.......... tikarsasenssesss lv

CITATION OF OPINION BELOW. ...................... 1

STATEMENT OF JURISDICTION ..................... 1

CONSTITUTIONAL AND STATUTORY PRO-

VISION Bie Ws icetescnsnccccccceceess 2

STATEMENT OF THis CAB es.....................5..0.00 2

REASONS FOR GRANTING THE WRIT ........... 5

I. Review Is Warranted to Settle Whether

the Omission of an Element of an Offense

from an Indictment Is Structural Error.... 5

A. Foreign Crimes as a_ Required

ri iekk cine scccccccesee 5

B. The Remedy for Failure to Plead an

SN rica nna s.s.......... 9

Il. Review Is Warranted to Decide if a

Foreign Head of State Can Be Convicted

of Money Laundering Based on Conduct

on Foreign Soil That Neither He, Nor

Any Reasonable Person, Could Have

Known Then Came Within the Scope of

the Money Laundering Statutes ............... 13

CON CLUS ra a Nass ccacs.......00.. 20

11l

TABLE OF CONTENTS -— Continued

Page

APPENDIX

United States v. Lazarenko, 564 F.3d 1026 (9th

Cir. 2009), including Order Denying Petition

SO TI, siivssiisdnviecasscrecserssessswaresteaseeae App. 1

EPUMEP ICE Teer e PURE assassins es cecsvnsvedecess App. 46

Oe Us SRG asiiescsstisenciaecivaineoeae App. 58

Second Superseding Indictment ....................... App. 74

TABLE OF AUTHORITIES

Page

CASES

Apprendi v. New Jersey, 530 U.S. 466 (2000).............. 7

Evans v. United States, 504 U.S. 255 (1992)....... 15, 16

Jones v. United States, 526 U.S. 227 (1999)................ 9

Richardson v. United States, 526 U.S. 813 (1999)......... 8

Stirone v. United States, 361 U.S. 212 (1960) ........... 11

United States v. Allen, 406 F.3d 940 (8th Cir.

MUNIN a4. ave tacecgd 6 ucaueaamnamnee moieeeiadeteraes Bunaaete secede 10

United States v. Du Bo, 186 F.3d 1177 (9th Cir.

I ae eee ea ae ee ee 10

United States v. Lanier, 520 U.S. 259 (1997) ............ 19

United States v. Lazarenko, 546 F.3d 593 (9th

Bes MII. avcavecsccucasuicermunn act asseead aaemecdtanectis wraxtarnes 1

United States v. Lazarenko, 564 F.3d 1026 (9th

Se IT oai.05.c<secausnsuaa tessa cassnee euveieetie es aauce goss passim

United States v. Omer, 549 U.S. 1174 (2007) ............ 12

United States v. One 1997 E35 Ford Van, 50

B, Duh. Seb TOS CG. ED. BL. BO) wicesccscieccedecssssiesenencics 6

United States v. Resendiz-Ponce, 549 U.S. 102

+S 8 RRR Senet ee Reet a tn Pale Sea Be © 5, 12,13

United States v. Spinner, 180 F.3d 514 (3d Cir.

Banke ue ieee aca enee corer ence aoe eae 10

United States v. Trennell, 290 F.3d 881 (7th Cir.

MEE Sores cents setcnatceda eae rE Cecio eae ied 10

Washington v. Guillen, 537 U.S. 129 (2003).............. 17

TABLE OF AUTHORITIES — Continued

Page

STATUTES

Se NN II oa.s5irists is scseleexdisaevaicoreasaeseanseerees passim

Te eo a vs vc ccdccackxdsaunuannteciwesisenebeina passim

eA NR ava sacacestasssccsnierinchievindosenusastes naesaveseel 2

ee A as ors ciecs st hncso roe chun sasnonsacestacoedbocadaaenctreesl 3

MISCELLANEOUS

IGG COnm. Nec. NO. TOG-GS...........6.sccccceccessccsscncessess me

FSB. BOD. THO, DOTBOO COO) onc cciscsccvéscecsscscnsdecsveseess 17

Pub. Law 107-56, 315, 115 Stat. 272, 309 (Oct.

I wants aks cai uncan oacenatéansseuss panasccuaenede meinntbeds 14

4 Wayne R. LaFave et al., Criminal Procedure

ey CEE Rs OD eek ccs skccecnesescsnevesstcevecesisves 7,10

Wayne R. LaFave, Criminal Law § 20.4 (4th

ET IID 5 ccCaardns Frese Ldn nuns oxcendneud peonesusocs neucavaverhion tenebes 15

Andrew D. Leipold, Why Grand Juries Do Not

(And Cannot) Protect the Accused, 80 Cornell

Le. BOV. BGO (IOOS)..... ccc ceseceses Se a aoe aes ee ) |

Lawrence H. Summers & Janet Reno, The

National Money Laundering Strategy For

PF TOE FD ns in vnncinncucinevcuncscacvicvcesnsdiincevacscsecs 17

Richard D. Younger, The People’s Panel: The

Grand Jury in the United States, 1634-1941

EET esvicavasns caves s4ssacnusedovscoacnesaveessaeueoutaevanaontiaaid: 11

TABLE OF AUTHORITIES — Continued

Page

The Trial of the Earl of Shaftesbury, 8 How. St.

Tr. 759, 771-74 (1681), reprinted in 5 The

Founders’ Constitution (P. Kurland & R.

EN MR BET Ping scscncsuneessvescreseonescases NAAN PETIA 11

]

PETITION FOR WRIT OF CERTIORARI

Petitioner Pavel Lazarenko respectfully prays

that a Writ of Certiorari issue to review the judgment

and decision of the United States Court of Appeals for

the Ninth Circuit entered on April 10, 2009.

CITATION OF OPINION BELOW

The published opinion of the United States Court

of Appeals for the Ninth Circuit is reproduced at

Appendix (“App.”) 1-47. The official reporter citation

of the opinion is United States v. Lazarenko, 564 F.3d

1026 (9th Cir. 2009).

STATEMENT OF JURISDICTION

On September 26, 2008, a three-judge panel of

the United States Court of Appeals for the Ninth

Circuit issued a published opinion affirming some of

petitioner’s criminal convictions. United States ov.

Lazarenko, 546 F.3d 593 (9th Cir. 2008). Petitioner

filed a timely petition for panel rehearing and

rehearing en banc. On April 10, 2009, the same panel

granted in part Lazarenko’s petition for panel

rehearing and issued an amended opinion. United

States v. Lazarenko, 564 F.3d 1026 (9th Cir. 2009)

(App. 1-47). The panel also denied Lazarenko’s

petition for rehearing en banc and stated that no

further petitions for rehearing or petitions for

rehearing en banc wouid be entertained. 564 F.3d at

1029 (App. 1-2).

The jurisdiction of this Court is invoked under 28

U.S.C. § 1254.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fifth Amendment to the United States

Constitution provides in relevant part:

“No person shall be held to answer for a

capital, or otherwise infamous crime, unless

on a presentment or indictment of a Grand

Jury.... nor be deprived of life, liberty, or

property, without due process of law... .”

Section 1956 of Title 18 of the United States Code

is reproduced at App. 58-73.

STATEMENT OF THE CASE

Petitioner Pavel Lazarenko is the former prime

minister of Ukraine. He rose to that position in 1996

after serving in a variety of positions in President

Leonid Kuchma’s government. In 1997, however, he

broke with Kuchma to form an opposition party. He

subsequently faced death threats from Kuchma

loyalists, as had other opposition politicians and

journalists. He fled to the United States in 1999,

where immigration officials initially concluded that

he would face a well founded fear of prosecution if

returned to Ukraine.

In 2000, Lazarenko was indicted in the Northern

District of California. The prosecution alleged that

between 1992 and 1999, while he was a government

official in Ukraine, Lazarenko had abused his

position of power for personal gain. It alleged that he

had amassed great personal wealth through various

acts of fraud, extortion, and self-dealing. Most

significantly, the indictment charged that Lazarenko

had conspired with Yulia Tymoshenko, then the head

of the United Energy Systems of Ukraine (“UESU”),

to siphon nearly two hundred million dollars from

UESU. Lazarenko was eventually charged with fifty-

three counts of conspiracy, money laundering, wire

fraud, and interstate transportation of stolen

property. The second superseding indictment (“indict-

ment”) is reproduced at App. 74-121.

Most of the charges were eventually dismissed by

the district court or the Ninth Circuit. After the

government’s case-in-chief, the district court granted

the defense’s Rule 29 motion as to twenty-four of the

fifty-three counts. Most significantly, the district

court dismissed all counts related to UESU as wholly

unproven. The district court dismissed an additional

fifteen counts for insufficiency following the jury’s

guilty verdict.

Lazarenko appealed the remaining fourteen

counts to the Ninth Circuit, which had jurisdiction

under 28 U.S.C. § 1291. The Ninth Circuit ruled that

the evidence supporting the remaining wire fraud

and ITSP counts was insufficient, and it thus

reversed the convictions on those six counts. See 564

F.3d at 1047. The Ninth Circuit affirmed the

convictions on the remaining eight counts of money

laundering and conspiracy to commit money

laundering. See 564 F.3d at 1047.

The sole specified unlawful activity left to

support those eight money laundering convictions

was extortion, “an offense against a foreign nation”

listed in 18 U.S.C. § 1956(c)(7)(B)(ii). The govern-

ment’s theory on the remaining extortion allegations

was that while in Ukraine Lazarenko had received

bribes from Peter Kiritchenko, Lazarenko’s partner in

business who had become quite wealthy through his

joint ventures with Lazarenko. Those funds later

passed through American banks. It is worth noting

that the government recently filed a brief in a

pending Ninth Circuit appeal of the district court’s

restitution award to Kiritchenko urging vacation of

the award on the grounds that it “seriously affected

the fairness, integrity, and public reputation of the

proceedings.” The government’s brief maintains that:

“The evidence at trial, and the jury’s verdict, amply

supports the conclusion that Kiritchenko was not

harmed by Lazarenko’s money laundering activities.”

Since Lazarenko’s trial, Yulia Tymoshenko (1)

has both been acquitted in Ukraine of any wrong-

doing in the UESU affair; (2) led the “Orange

Revolution” which put an end to the Kuchma regime;

and (3) is presently the democratically elected prime

minister of Ukraine.

Lazarenko now petitions this Court for a Writ of

Certiorari from the decision of the Ninth Circuit

Court of Appeals.

REASONS FOR GRANTING THE WRIT

I. Review Is Warranted to Settle Whether

the Omission of an Element of an Offense

from an Indictment Is Structurai Error

Three years ago, this Court granted certiorari

in United States v. Resendiz-Ponce to determine

“whether the omission of an element of a criminal

offense from a federal indictment can constitute

harmless error.” 549 U.S. 102, 103 (2007). Ultimately,

however, this Court declined to reach that important

constitutional question because it found that the

indictment in that particular case had sufficiently

alleged the elements of the offense. Jd. at 107-10.

This case presents the opportunity to settle the

question that this Court declined to reach in

Resendiz-Ponce.

A. Foreign Crimes as a Required “Element”

Petitioner Pavel Lazarenko was charged with

money laundering and related offenses. The govern-

ment’s theory was that Lazarenko had committed

crimes in Ukraine, while he was a government official

there, and then transferred the illegally-obtained

funds to the United States. The predicate offenses for

the money laundering offenses, in other words, were

the alleged crimes committed in Ukraine. The

indictment, however, did not allege any violations of

Ukrainian criminal law, much less any specific provi-

sions of the Ukrainian Criminal] Code (“UCC”). See

indictment, App. 91-95. In fact, the money laundering

counts made no allegations whatsoever that Lazarenko

committed conduct that constituted “an offense

against a foreign nation.” Jd.

The money laundering statute prohibits certain

financial transactions involving proceeds of predicate

crimes. It also defines a wide variety of predicate

crimes. See 18 U.S.C. § 1956(c)(7) (App. 65-70).

Certain crimes committed on foreign soil in violation

of foreign law — “offense[s] against a foreign nation” —

constitute predicate crimes. 18 U.S.C. § 1956(c)(7)(B)

(App. 65-66).

When money laundering is charged based on

predicate acts occurring in foreign nations, the acts

must be crimes in the nations where the acts occur. In

other words, it is not enough that such acts would be

crimes if committed in the United States — they must

be local crimes as well. United States v. One 1997 E35

Ford Van, 50 F. Supp. 2d 789, 802 (N.D. Ill. 1999)

(“([T]he phrase ‘against a foreign nation’... requires

that the conduct be prohibited under the law of the

foreign nation in which it is committed.”). Thus, that

the predicate act was a local crime is a fact necessary

to sustain a conviction. It is therefore an element of

the offense. See Apprendi v. New Jersey, 530 U.S. 466,

476 (2000).

The inclusion of each element of an offense in an

indictment ensures that the grand jury was aware of,

and found evidence to support, each element

necessary to constitute the commission of the alleged

offense.

The inclusion of each of the essential ele-

ments in the indictment tends to structure

the grand jury’s charging decision, focusing

its attention on the specific requirements for

criminal liability rather than a general sense

of the accused wrongdoing. Without a specific

reference to an element, the indictment

contains no assurance that the grand jury

deliberated or even considered whether the

facts established that element.

4 Wayne R. LaFave et al., Criminal Procedure

§ 19.2(f) at 895 (4th ed. 2004) (internal quotation

marks omitted, alteration removed).

Here, however, the government did not obtain an

indictment alleging as an element of any of the

charged offenses that Lazarenko’s conduct violated

Ukranian law. Specifically, as noted above, the

indictment did not allege the statutory requirement

that extortion was an offense against a foreign

nation. The grand jury thus did not consider whether

probable cause existed that Lazarenko’s conduct

violated Ukranian law. That is because the govern-

ment’s pre-tmal position was that the illegality of

Lazarenko’s conduct under Ukranian law was not an

element of any charged offense; at best, the legality of

that conduct could be raised as a defense to the

charged crimes.

The trial court below correctly ruled, however,

that before the petit jury could convict Lazarenko for

money laundering, it had to find that Lazarenko’s

acts were crimes in Ukraine. It thus instructed the

jury that it was required to find that the defendant

violated either UCC Article 168-2 (bribery by extor-

tion) or 165 (abuse of power). It held that violations of

the UCC were elements of the offense, at least for the

purposes of the jury instructions submitted to the

petit jury.

Still, although the indictment contained no

allegations that Lazarenko’s acts were local crimes,

the trial court rejected Lazarenko’s arguments that

the charges were deficiently pled. It drew a

distinction between the factual findings that must be

made by the grand jury and those that must be made

by the petit jury. It held that a violation of foreign law

was “not an element, for pleading purposes.” The

Ninth Circuit found no fault with that reasoning. In

distinguishing this Court’s ruling in Richardson uv.

United States, 526 U.S. 813 (1999), it held that

Richardson (which discussed which facts constitute

“elements” for the CCE statute) “did not comment on

the sufficiency of an indictment.” 564 F.3d at 1034.

But an element is an element. There is no

distinction between an element for the purposes of

pleading and an element for the purposes of petit jury

instructions. Every element must be found both by a

grand jury and by a petit jury. Every element “must

be charged in an indictment, submitted to a jury, and

proven beyond a reasonable doubt.” Jones v. United

States, 526 U.S. 227, 243 n.6 (1999). Both the trial

court and the Ninth Circuit held that although a

violation of foreign law was necessary for the

conviction, such a violation did not need to be pled.’

The lower courts’ distinction between pleading ele-

ments and conviction elements cannot be sustained.

B. The Remedy for Failure to Plead an

Element

Under this Court’s precedent, it is clear that

every element of a federal criminal offense must be

pled in the indictment. It is not clear, however, what

remedy must be granted for a violation of that rule.

Put differently, 1t is not clear whether the failure to

plead an element constitutes structural error, or

whether it 1s subject to harmless error review.

' The Ninth Circuit suggested that the indictment may

have been sufficient because “the government need not allege all

the elements of the ‘specified unlawful activity,’ i.e., the

underlying offense.” 564 F.3d at 1033. Whether or not that is

true, the indictment in a money laundering case certainly must

allege all of tre statutory elements of the charged money

laundering offenses. When the specified unlawful activity

alleged is “extortion,” as defined in 18 U.S.C. § 1956(¢)(7)(B ii),

those elements include that the offense be “against a foreign

nation.”

There is currently a division of authority among

the circuits on the question. Compare United States v.

Allen, 406 F.3d 940, 943-45 (8th Cir. 2005) (holding

that failure to allege an element may be harmless),

and United States v. Trennell, 290 F.3d 881, 889-90

(7th Cir. 2002) (same), with United States v. Spinner,

180 F.3d 514, 515-16 (3d Cir. 1999) (holding that

failure to allege an element is structural error). See

also 4 Wayne R. LaFave et al., Criminal Procedure

§ 19.3(a) (4th ed. 2004) (discussing the conflict).

The Ninth Circuit had previously held that

failure to plead an element is structural error. United

States v. Du Bo, 186 F.3d 1177, 1179 (9th Cir. 1999).

In its brief to the Ninth Circuit, the government

suggested that Du Bo was no longer good law. While

it did not address the issue explicitly, the panel below

apparently sided with the government. It held that

Lazarenko was not entitled to relief because the

indictment had not “misled or prejudiced” him, in

part because it had provided sufficient other details

regarding the nature of the government’s allegations.

564 F.3d at 1034. It also found that Lazarenko was

not prejudiced because “the [petit] jury was

instructed that it had to find a violation of Ukranian

law and was provided with the elements of the

relevant Ukranian statutes.” Jd. In short, it held that

any error in the failure to allege a foreign offense was

harmless in this case.

Whether such an error may be harmless is an

exceptionally important question. It is important not

simply to settle the circuit split, but also to clarify the

role of the grand jury in our constitutional system.

To be sure, the grand jury is considered an

anachronism by some, and it is undoubtedly an

inconvenience to federal prosecutors. But to the

framers, the grand jury played a crucial role in

protecting against government abuses. In late

seventeenth century England, grand juries refused to

indict subjects for crimes of sedition. See, e.g., The

Trial of the Earl of Shaftesbury, 8 How. St. Tr. 759,

771-74 (1681), reprinted in 5 The Founders’

Constitution, at 246-47 (P. Kurland & R. Lerner, eds.

1987). In colonial America, grand juries likewise

refused to indict citizens like John Peter Zenger who

criticized the colonial government. See Richard D.

Younger, The People’s Panel: The Grand Jury in the

United States, 1634-1941, at 28-52 (1963). Cf. Stirone

uv. United States, 361 U.S. 212 (1960) (recognizing

and affirming the historical importance of, and

protections inhering in, indictment by grand jury and

holding that after an indictment has been returned,

its charge may not be broadened through amendment

except by grand jury itself).

By contrast, modern critics assert that the grand

jury has devolved into a rubber stamp. Andrew D.

Leipold, Why Grand Jurtes Do Not (And Cannot)

Protect the Accused, 80 Cornell L. Rev. 260, 263-64

(1995). For the sake of expedience if nothing else, the

government would perhaps prefer an even weaker

grand jury system. It is therefore not surprising that

the government has urged for years that deficient

indictments are subject to harmless error review. If

the grand jury is relatively unimportant, then it

naturally follows that errors in the grand jury process

are relatively unimportant as well.

A rule allowing harmless error review, however,

could fatally undermine the grand jury system. See

Resendiz-Ponce, 549 U.S. at 116-17 (Scalia, J.,

dissenting); United States v. Omer, 549 U.S. 1174

(2007) (Scalia, J., concurring in denial of certiorari).

Once it is established that a pleading error may be

held harmless, pleading errors almost always will be

held harmless. The pernicious argument for routine

harmlessness runs like this: so long as an element of

the offense is ultimately found by the petit jury, the

grand jury’s initial failure to find that element must

be harmless.

That argument has been repeatedly suggested by

the government, both in this case and elsewhere. Cf.

Resendiz-Ponce, supra, United States’ Petition for a

Writ of Certiorari at 12 (“|A|lthough the grand jury

undoubtedly performs a vital protective function, it is

the petit jury that provides the ultimate protection

for the accused.”). That argument was implicitly

accepted by the Ninth Circuit panel below, which, in

response to Lazarenko’s pleading claim, found it

“significant” that the previously omitted element had

been ultimately found by the petit jury. 564 F.3d at

1034. And that argument, taken to its logical

conclusion, would mean that a grand jury’s failure to

find an element of an offense would almost always be

harmless. If that were true, there would he little

point to maintaining the grand jury requirement at

all.

The question of harmlessness is_~ thus

exceptionally important. This Court should grant

certiorari in part to settle a circuit split on a

frequently recurring issue. But more importantly, this

Court should grant certiorari in order to clarify the

constitutional role of the grand jury, and the

relationship between the grand jury and the petit

jury. As this Court already recognized when it

granted certiorari in Resendiz-Ponce, it is a question

that merits this Court’s attention.

II. Review Is Warranted to Decide if a

Foreign Head of State Can Be Convicted

of Money Laundering Based on Conduct

on Foreign Soil That Neither He, Nor Any

Reasonable Person, Could Have Known

Then Came Within the Scope of the Money

Laundering Statutes

The second question posed by this petition is of

paramount legal and diplomatic importance: how

could Mr. Lazarenko have committed a money

laundering offense between 1994 and 1999 involving

the alleged proceeds of foreign bribery when,

according to the Department of Justice and con-

gressional leaders, such conduct remained outside the

reach of the money laundering statutes until the

passage of the Patnot Act in 2001?

The government alleged that while he was a

government official in Ukraine, Lazarenko took

bribes from a businessman named Peter Kiritchenko.

At trial, the government presented evidence that

Kiritchenko split the profits from business ventures

with Lazarenko. Although the evidence demonstrated

that the ventures made Kiritchenko a _ multi-

millionaire and that he was a close personal friend of

Lazarenko, Kiritchenko also testified that he feared

that if he failed to give Lazarenko money, his

business would suffer. Put differently, the govern-

ment alleged that Lazarenko threatened Kiritchenko

with economic harm if he failed to make payments.

The government made no allegation § that

Lazarenko made any threats of violence against

Kiritchenko. Indeed, the government has now taken

the position in the Ninth Circuit that Kiritchenko

should be stripped of the restitution awarded him by

the district court because “Kiritchenko conspired with

Lazarenko to launder funds throughout the entire

time he made extortion payments” and because the

restitution “statutes were never intended to authorize

courts to award restitution to the perpetrators of an

offense.”

Foreign acts of bribery are now listed as a

specified unlawful activity in the money laundering

statute. 18 U.S.C. § 1956(c)(7)B)(iv). But at the time

of Lazarenko’s conduct, bribery was not listed. The

bribery provision was added as part of the Patriot Act

in 2001. See Pub. Law 107-56 § 315, 115 Stat. 272,

309 (Oct. 26, 2001). Thus, since bribery was not

explicitly listed at the time of the alleged offenses

between 1994 and 1998, the government in this case

relied on the extortion provision, added to the list of

foreign offense predicates in 1992. 18 U.S.C.

§ 1956(c)(7)(B)(ii).

The government argued that the cxtortion

provision of the statute already covered acts of

bribery and official corruption prior to 2001. The

Ninth Circuit agreed. It relied on this Court’s opinion

in Evans v. United States, 504 U.S. 255 (1992), which

held that “extortion” in the Hobbs Act covers acts of

bribery. Purportedly following Evans, the panel below

concluded: “The term ‘extortion’ has an ordinary

meaning and it is not ambiguous.” 564 F.3d at 1039.

That conclusion was grossly oversimplified and

betrayed a remarkable misunderstanding of both the

crime of extortion and the general rules of statutory

interpretation.

The term “extortion” has many _ different

meanings, and in various statutes and various times,

it has covered different types of conduct. The

statutory definitions of “extortion” in American law

“vary greatly.” Wayne R. LaFave, Criminal Law

§ 20.4 at 1014 (4th ed. 2003). Most significantly, some

definitions cover extortion by threats of economic

harm, while many others cover only extortion by

threats of violence. See id.

It may or may not be true as a historical matter,

as this Court held in Evans, that at common law,

extortion “by the public official was the rough

equivalent of what we would now describe as ‘taking

a bribe.’” 504 U.S. at 260. As Justice Thomas noted in

his dissent, “[m]lost commentators maintain that

extortion and bribery were distinct crimes at early

English common law.” Id. at 280 n.2 (Thomas, J.,

dissenting). Regardless, even if the Evans majority

was correct about the eighteenth century meaning of

“extortion,” the fact remains that by the twentieth

century, the meaning of “extortion” had changed. See

LaFave, supra, § 20.4. It is unclear why the Ninth

Circuit was so confident that when Congress added

“extortion” to the money laundering statute in 1992,

it sought to use the ancient meaning rather than the

modern meaning.

It is true that statutory terms are “generally

presumed” to have their common law meaning.

Evans, 504 U.S. at 259 (quoting Taylor v. United

States, 495 U.S. 575, 592 (1990)). But that general

presumption is not an immutable rule. If there is

some indication that Congress used a term to mean

something different than what the term meant 200

years ago, the general presumption should give way.

And in this instance, every indication is that Con-

gress intended “extortion” in the money laundering

statute to mean extortion by threats of violence.

In the statute, extortion is included with other

acts of violence. See 18 U.S.C. § 1956(c)(7)(B)(ii).

When the extortion provision was passed in 1992, it

was grouped with kidnaping and robbery. As Senator

D’Amato explained, the purpose of the 1992 amend-

ment was to reach “terrorists and other violent

offenders.”

Prior to 2001, it was the common understanding

of the statute that it covered only violent acts of

extortion. In fact, the very reason that bribery was

added to the statute in 2001 was to cover non-violent

acts of corruption — acts that were not previously

covered. In 2000, when the Departinents of Justice

and Treasury first asked Congress to add bribery, it

explained that bribery and acts of official corruption

were “not currently covered by the money laundering

statute.” Lawrence H. Summers & Janet Reno, The

National Money Laundering Strategy For 2000, at 19,

73 (March 2000).

The legislative history of Section 315 of the

Patriot Act, moreover, makes abundantly clear that

Congress believed that it was amending the money

laundering statute to reach — for the first time — acts

of bribery and public corruption. See, e.g., H.R. Rep.

No. 107-250 at 55 (2000); 106 Cong. Rec. No. 106-38,

at 363-64. See also Washington v. Guillen, 537 U.S.

129, 145 (2003) (“When Congress acts to amend a

statute, we presume it intends its amendment to

have real and substantial effect.”).

Furthermore, the Department of Justice’s “Field

Guidance on New Authorities (Redacted) Enacted in

the 2001 Anti-Terrorist Legislation” made clear that

the term “extortion” in § 1956(c)(7)(B)Gii) had referred

only to a crime of violence, and that it was with the

addition of (c)(7)(B)(iv) that § 1956 finally reached

foreign bribery and corruption:

Until now, the only foreign crimes listed

as predicates for money laundering under

18 U.S.C. §§ 1956 and 1957 were drug

trafficking, bank fraud, and certain crimes of

violence including murder,’ kidnaping,

robbery, extortion and use of explosives. See

18 U.S.C. §§ 1956(c)7)B). This list is

expanded to some extent by Section 315 of the

Anti-Terrorism Act to include 1) any crime of

violence, 2) bribery of a public official, or

misappropriation of public funds; 3) smug-

gling munitions or technology with military

applications; and 4) any “offense with respect

to which the United States would be

obligated by multilateral treaty” to extradite

or prosecute the offender.

Id. at 12 (emphasis added).

None of this legislative history was ever disputed

by either the government or by the Ninth Circuit

below. The Ninth Circuit simply ignored all of it. It

held that extortion means bribery, period, so no

further analysis is needed.

The implications of that holding are remarkable.

The Ninth Circuit implicitly held that the Depart-

ments of Justice and Treasury, as well as Congress

itself, were mistaken in their belief that extortion did

not cover bribery. It also therefore implicitly held that

if a foreign official like Lazarenko were similarly

mistaken about the meaning of extortion, his mistake

could lead to criminal liability and imprisonment.

That ruling cannot be squared with the fair

warning requirement. Where criminal statutes are

reasonably susceptible of two interpretations, the

narrower interpretation must be chosen. United

States v. Lanier, 520 U.S. 259, 265 (1997). At a

minimum, the legislative history regarding the

money laundering statute and the Patriot Act’s

amendments thereto demonstrates that the statute

was susceptible to two interpretations. Even if it is

true that the Departments of Justice and Treasury

were mistaken about the meaning of the statute prior

to 2001, they were not unreasonably mistaken. No

American citizen, much less a foreign head of state,

should go to prison for making the same reasonable

mistake. Under the rule of lenity, because the term

“extortion” was ambiguous in the money laundering

statute, the narrower definition must be chosen.

Mr. Lazarenko, the prime minister of Ukraine in

the mid-1990s, was the leader of the Ukranian

parliamentary opposition at the time of his 2000

indictment. A perception that his trial and conviction

here were fundamentally unfair could profoundly

prejudice this country’s relations with other nations.

Of equal importance, globalization requires that

private and public funds of the United States pass

through banking systems around the world, thereby

subjecting public officials and private citizens of this

country to the jurisdiction of foreign judicial systems.

We cannot expect to be afforded any greater degree of

due process in the courts of other countries than that

which we provide to foreign officials and citizens in

our own judicial system. Certiorari should be granted

to decide the “fair warning” issue.

a —

CONCLUSION

For the reasons stated, certiorari should be

granted on either or both of the important questions

discussed above.

Dated: July 9, 2009

Respectfully Submitted,

DENNIS RIORDAN

DONALD HORGAN

TED SAMPSELL JONES

Attorneys for Petitioner

App. 1

564 F.3d 1026

United States Court of Appeals,

Ninth Circuit.

UNITED STATES of America, Plaintiff-Appellee,

Pavel Ivanovich LAZARENKO, Pavlo Ivanovych

Lazarenko, Defendant-Appellant.

No. 06-10592.

Argued and Submitted June 9, 2008.

Filed April 10, 2009.

Dennis P. Riordan (argued), Donald M. Horgan,

Riordan & Horgan, San Francisco, CA; Doron Wein-

berg, Weinberg & Wilder, San Francisco, CA, for the

defendant-appellant.

Hartley M.K. West (argued), Assistant United

States Attorney; Scott N. Schools, United States At-

torney; Barbara J. Valliere, Chief, Appellate Section,

San Francisco, CA, for the plaintiff-appellee.

Appeal from the United States District Court

for the Northern District of California, Martin J.

Jenkins, District Judge, Presiding. D.C. No. CR-0-

00284-MJJ.

Before A. WALLACE TASHIMA, M. MARGARET

McKEOWN, and RONALD M. GOULD, Circuit Judg-

es.

ORDER

The petition for panel rehearing is granted in

part. The opinion filed September 26, 2008, and

App. 2

appearing at 546 F.3d 593, is withdrawn and it may

not be cited as precedent by or to this court or any

district court of the Ninth Circuit. A new opinion is

filed contemporaneously.

The full court has been advised of the petition for

rehearing and rehearing en banc and no judge has

requested a vote on whether to rehear the matter en

banc. Fed. R.App. P. 35. The petition for rehearing en

banc is denied. No further petitions for rehearing or

petitions for rehearing en banc will be entertained.

OPINION

McKEOWN, Circuit Judge:

During his meteoric rise from serving as a local

Ukrainian official to Prime Minister of Ukraine,

Pavel Ivanovich Lazarenko formed multiple business

relationships and engaged in a tangled series of busi-

ness transactions that netted him millions of dollars.

Lazarenko kept his money in foreign bank accounts,

transferring funds from one account to another across

the globe in an effort, so he was accused, to disguise

and conceal the sources and ownership of the pro-

ceeds from the Ukrainian people. After the money

passed through bank accounts in the United States,

from Swiss, off-shore, and other accounts, the United

States charged him in a 53-count indictment with

conspiracy, money laundering, wire fraud, and inter-

state transportation of stolen property. Lazarenko

was convicted on fourteen counts and now challenges

App. 3

those convictions on appeal. We affirm eight of his

convictions, but reverse six others.

I. BACKGROUND

During the 1990s, Lazarenko was a public official

in Ukraine. For several years he served in regional

governmental positions, including as Governor of the

Dnepropetrovsk region of Ukraine. He rose to the

level of Ukrainian First Vice Prime Minister in 1995

and in May 1996, Lazarenko was appointed Prime

Minister. Following a rift in his relationship with

President Leonid Kuchma, he was dismissed from

this position in July 1997. He then became a member

of the Ukrainian Parliament and led the opposition

Hromada Party.

While serving as a government official, Lazarenko

became involved in the affairs of a number of busi-

nesses and formed relationships with prominent busi-

nessmen. The United States alleged that certain of

Lazarenko’s business relationships amounted to ex-

tortion and that he defrauded the Ukranian [sic]

people by ebtaining interests in companies, allocating

privileges t> cronies, and then failing to disclose his

assets and wealth as required on Ukran:an [sic]

financial disclosure forms. The government identified

five arrangements that formed the basis for the

charges in the indictment.

App. 4

A. THE UNDERLYING SCHEMES

1. Extortion of Kiritchenko

According to testimony at trial, Lazarenko was ex-

tremely powerful as the governor of the Dnepropetrovsk

region of Ukraine and in his other public roles. He

required businesses to pay him fifty percent of their

profits in exchange for his influence to make the busi-

nesses successful. Conversely, Lazarenko used his in-

fluence to disadvantage the businesses if he was not

paid.

In 1990, Peter Kiritchenko, a businessman, formed

a company known as Agrosnabsbyt, which was in-

volved in agriculture and metals. In 1992, Kiritchenko

met with Lazarenko because, according to Kiritchenko,

“to do any kind of serious trade one needed [Lazarenko’s]

agreement.” Lazarenko informed Kiritchenko that he

worked with everyone “50-50,” which Kiritchenko

interpreted as meaning that Lazarenko would control

fifty percent of the business and take fifty per-cent of

the profits. Kiritchenko initially transferred $40,000

to Lazarenko as a gesture of “good faith.” In January

1993, Kiritchenko transferred a fifty percent interest

in Agrosnabsbyt to Ekaterina Karova, a relative of

Lazarenko, and transferred fifty percent of the profits

from the business to accounts controlled by Lazarenko.

Later, Lazarenko and Kiritchenko partnered to move

Lazarenko’s money between accounts and together

they purchased the European Federal Credit Bank

(“EKuroFed”).

App. 5

2. Extortion of Dityatkousky

According to the indictment, Lazarenko estab-

lished a similar relationship with Alexei Alexandrovich

Dityatkovsky. In 1993, Lazarenko met Dityatkovsky

and took a fifty percent interest in his company,

Dneproneft, along with fifty percent of the profits as

well. Lazarenko’s share went to his driver and to an

associate.

3. Naukovy State Farm

While Lazarenko was governor of Dnepropetrovsk,

he was also actively involved in the operations of

Naukovy State Farm (“Naukovy”), a dairy operation

that was directed by Mykola Agafonov.' Naukovy also

had secured the right to export metal products and

raw materials. Naukovy purchased cattle and farm

equipment from a Dutch company, Van der Ploeg von

Terpstra (“Van der Ploeg”). Van der Ploeg kept a

foreign currency account at ABN Amro Bank for its

business with Naukovy (the “ABN Amro account”).

Unbeknownst to Van der Ploeg’s chief accountant,

Agafonov was given access to this account for his own

use. Agafonov used the money in the ABN Amro

account to, among other things, purchase a BMW and

pay his credit card bills.

' “Naukovy” is the spelling of the name of the company in

Ukrainian. Occasionally the parties or the record refer to it by

its Russian name “Naucnij.”

App. 6

Lazarenko was also actively involved in the

operations at Nikopolsky Metal Works factory

(“Nikopolsky”). At his direction, $2.4 million was

transferred from Nikopolsky to Van der Ploeg’s ABN

Amro account supposedly to purchase wheat on

behalf of Naukovy to combat a food crisis that was

plaguing Ukraine at the time.” The accountant for

Naukovy and the bookkeeper for Van der Ploeg both

testified that they did not know whether wheat was

ever purchased. The records reflect that $1.2 million

was transferred from the ABN Amro account to

Agafonov’s account in Hungary at Postabank (the

“PostaBank account”). In turn, $1.205 million was

transferred from the PostaBank account tc an ac-

count known as LIP Handel, controlled by Lazarenko

in Switzerland. Lazarenko then transferred the mon-

ey from this Swiss account to various banks, includ-

ing a $1.8 million transfer to an account controlled by

Kiritchenko at Bank of America in San Francisco,

California.

4. United Energy Systems of Ukraine

Eventually, Lazarenko became the First Prime

Minister of Ukraine and was responsible for the ener-

gy section within the government. According to the

indictment, an associate of Lazarenko’s, Yulia

“ Nikopolsky Metal Works factory is sometimes referred to

in the record and by the parties as “Nikopol” or as “Nikopol

Ferroalloy.”

App. 7

Tymoshenko, created a natural gas company, United

Energy Systems of Ukraine (““UESU”), which received

deliveries of gas from RAO Gazprom. UESU was held

in large part by United Energy International, Ltd.

(““UEIL”), which was owned by a Turkish national.

UESU conveyed title to the gas to UEIL such that

payments from Ukrainian customers for gas were

diverted to UEIL. UEIL did not pay RAO Gazprom

for the gas deliveries with the money it received from

customers. Instead, it transferred approximately

$140 million to a Cypriot company, Somolli, that was

controlled, in part, by Tymoshenko. UEIL and Somolli

transferred $97 million to accounts controlled by

Kiritchenko in Switzerland, Poland, and the United

States. Kiritchenko then transferred $120 million to

accounts controlled by Lazarenko in Switzerland and

Antigua. Lazarenko made two transfers of $14 mil-

lion each from one of these accounts to accounts in

the United States.

5. PMH/GHP

Lazarenko and Kiritchenko also allegedly con-

trolled a Panamanian company, GHP Corp. (“GHP”).

According to the U.S. government, in 1997, Lazarenko,

by then Prime Minister, caused the Ukrainian Cab-

inet of Ministers to contract with GHP for the

purchase of six pre-fabricated homes. GHP turned to

Pacific Modern Homes (“PMH”) in California and

purchased six pre-fabricated homes for $524,763. The

Cabinet of Ministers purchased the homes from GHP

for $1,416,000. GHP produced false invoices to

App. 8

customs officials to make it appear that it had

shipped the homes and paid $1,416,000 for them.

Half of the profit realized by GHP was deposited into

an account controlled by Lazarenko.

B. THE CHARGES

Based on Lazarenko’s business activities, the

government brought numerous charges. Count 1

charged Lazarenko with conspiracy to commit money

laundering, in violation of 18 U.S.C. § 1956(h), for

conducting financial transactions that involved the

proceeds of extortion, wire fraud, and receipt and

transfer of property that was stolen.

Counts 2 through 5 charged Lazarenko with

money laundering, in violation of 18 U.S.C.

§ 1956(a)(2). The indictment specifically identified

four wire transfers from Kiritchenko’s ABS Trading

account in San Francisco to Lazarenko’s account in

Geneva, Switzerland in 1994 and early 1995. Counts

6 through 8 charged Lazarenko with money laun-

dering, in violation of 18 U.S.C. § 1956(a)(1)(B). These

transactions allegedly occurred in November 1997,

August 1998, and September 1998. All the money

laundering counts were based on the specific un-

lawful activities of receipt and transfer of property

that was “stolen, unlawfully converted, and taken by

fraud,” in violation of 18 U.S.C. §§ 2314 and 2315;

“extortion as specified in 18 U.S.C. § 1956(c)(7)(B)(ii);

and wire fraud in violation of 18 U.S.C. §§ 1343 and

1346.” Id.

App. 9

Counts 9 through 30 charged Lazarenko with

wire fraud in violation of 18 U.S.C. 8§ 1343 and 1346.

Specifically, Lazarenko was charged with honest

services fraud against the people of Ukraine for ob-

taining ownership interests in Agrosnabsbyt, Dneproneft,

and GHP, using his authority and influence to grant

these companies privileges, and receiving money from

these businesses. The indictment identified specific

wire transfers in 1997 and 1998.

Counts 31 through 53 charged Lazarenko with

transportation of stolen property in violation of 18

U.S.C. § 2314. The indictment identified a wire trans-

fer in 1994 and several others in 1997 and 1998.

C. DISMISSAL OF SOME CHARGES

At the close of the government’s case-in-chief, the

district court granted in part Lazarenko’s Rule 29

motion for a judgment of acquittal. The scope of the

indictment was massive and the trial testimony volu-

minous. The district court carefully reviewed the evi-

dence in addressing the Rule 29 motion. Significantly,

the district court dismissed the allegations that

related to Lazarenko’s relationship with UESU. The

district court ruled that the government failed to

prove that there was fraud in Lazarenko’s alleged

dealings with UESU, that Lazarenko’s failure to

inform the Ukrainian people that he was receiving

money from UESU was a material omission in sup-

port of the government’s property fraud theory, or

that there was material harm to support the theory

App. 10

that the UESU dealings constituted honest services

fraud. The court also held that the money laundering

charges could not rest on the property fraud theory

with respect to UESU.

The court further concluded that the evidence did

not support charges arising out of the PMH-GHP

fraud because the government failed to establish the

element of material harm. On the government’s mo-

tion, the court dismissed the allegations regarding

Dityatkovsky. Altogether, the court dismissed 24

counts: counts 9 through 19 (wire fraud), count 30

(wire fraud), counts 32 through 42 (interstate trans-

portation of stolen property), and count 53 (interstate

transportation of stolen property).

Following the jury’s verdict of guilty on all of the

remaining counts, the district court partially granted

Lazarenko’s renewed Rule 29 motion and dismissed

counts 20 through 24 and counts 43 through 52. The

court concluded that “[njo reasonable jury could find

that the transfers [in counts 20-23 (wire fraud) and

counts 43-46 (interstate transportation of stolen

property)] represented the proceeds of Kiritchenko

extortion or Naukovy fraud.” The court further con-

cluded that counts 24 and 47, for wire fraud and

interstate transportation of stolen property, respec-

tively, failed because the government’s theory that

the funds involved in that alleged transfer had been

extorted from Kiritchenko was not supported by the

indictment. Finally, the court dismissed counts 48

through 52, which charged Lazarenko with interstate

transportation of stolen property, because the court

App. ll

found that there were sufficient clean funds in the

accounts at issue to cover the transfers.

Lazarenko now challenges his remaining

convictions on counts 1 through 8, 25 through 29, and

31.

Il. ANALYSIS

A. SUFFICIENCY OF THE INDICTMENT

Lazarenko argues that the indictment must be

dismissed because it failed to allege that his conduct

violated Ukrainian law. We review the sufficiency of

an indictment de novo. United States v. Berger, 473

F.3d 1080, 1097 (9th Cir.2007). An indictment is

sufficient if it (1) “contains the elements of the offense

charged and fairly informs a defendant of the charge

against which he must defend” and (2) “enables him

to plead an acquittal or conviction in bar of future

prosecutions for the same offense.” Hamling v. United

States, 418 U.S. 87, 117, 94 S.Ct. 2887, 41 L.Ed.2d

590 (1974). “[A]ln indictment ‘should be read in its

entirety, construed according to common sense, and

interpreted to include facts which are necessarily

implied.’” Berger, 473 F.3d at 1103 (quoting United

States v. King, 200 F.3d 1207, 1217 (9th Cir.1999)).

“Unless the defendant was misled and thereby preju-

diced, neither an error in a citation nor a citation’s

omission is a ground to dismiss the indictment or

information or to reverse a conviction.” Fed.R.Crim.P.

7(cX3).

App. 12

The indictment tracks the statutory language in

charging money laundering, wire fraud and interstate

transportation of stolen property. We have previously

held that those statutes set forth the essential ele-

ments of these offenses. See United States v. Savage,

67 F.3d 1435, 1441 (9th Cir.1995) (money laundering);

United States v. Ladum, 141 F.3d 1328, 1341 (9th

Cir.1998) (money laundering); United States v.

Bonallo, 858 F.2d 1427, 1433 (9th Cir.1988) (wire

fraud); United States v. Rosi, 27 F.3d 409, 414-15 (9th

Cir.1994) (interstate transportation of stolen prop-

erty). Lazarenko seeks to import an additional ele-

ment into these offenses, claiming that the Ukrainian

law at issue is also an essential element because the

government must prove a violation of Ukrainian law

to sustain a conviction.

Nothing in our case law supports requiring the

government to plead a specific violation of foreign law

in an indictment. Indeed, Lazarenko’s challenge does

not achieve novelty status simply because it involves

foreign law. To analyze his claim, we look for guid-

ance to our general precedent on indictments. For

example, when bringing charges of money launder-

ing, the government need not allege all the elements

of the “specified unlawful activity,” i.e., the under-

lying offense. See United States v. Lomow, 266 F.3d

1013, 1017 (9th Cir.2001); United States v. Golb, 69

F.3d 1417, 1429 (9th Cir.1995). Here, the violation of

Ukrainian law is the specified unlawful activity.

Nor can it be said that the omission of a citation

to foreign law in the charges of wire fraud and

App. 13

interstate transportation of stolen property misled or

prejudiced Lazarenko. See Fed.R.Crim.P. 7(c)(3). The

indictment provided detailed allegations regarding

the basis for the charges, including dates, amounts,

account numbers, and sources of the money. Cf.

Berger, 473 F.3d at 1101. Significantly, the jury was

instructed that it had to find a violation of Ukranian

[sic] law and was provided with the elements of the

relevant Ukranian [sic] statutes.

Relying on Richardson v. United States, 526 U.S.

813, 119 S.Ct. 1707, 143 L.Ed.2d 985 (1999),

Lazarenko contends that there is a long list of

predicate offenses to the money laundering statute

and without a finding regarding the specific predicate

offense, there is a risk of disagreement among the

jurors as to what the defendant did. This argument

falters, though, because not only did the Supreme

Court not comment on the sufficiency of an indict-

ment in Richardson, here the indictment identified

interstate transportation of stolen property, extortion,

and wire fraud as the “specified unlawful activitlies]”

and provided detailed allegations regarding cach of

these offenses. There was little room for jurors to

disagree on the underlying offenses. The indictment

against Lazarenko was legally sufficient.

B. WIRE FRAUD CHARGES - COUNTS 25

THROUGH 29

Lazarenko claims that the government construc-

tively amended the indictment following the court’s

App. 14

dismissal of the UESU allegations by changing its

theory to argue that the wire transfers charged as

wire fraud in counts 25 and 26 of the indictment were

in furtherance of the Naukovy fraud. He also chal-

lenges the sufficiency of the evidence on counts 25

through 29.

We review de novo whether there has been a

constructive amendment to an indictment. United

States v. Pang, 362 F.3d 1187, 1193 (9th Cir.2004). “A

constructive amendment occurs when the defendant

is charged with one crime but, in effect, is tried for

another crime.” Pang, 362 F.3d at 1193.

The indictment charged generally that’ the

accounts involved in the transfers alleged as wire

fraud in counts 25 to 26 received proceeds from both

fraud and extortion. However, under the heading

“The UESU Fraud,” the government alleged more

specifically that

Between February of 1996 and September of

1997, the money from Somolli, along with

other funds, totaling more than $120,000,000

was transferred from Kiritchenko’s accounts

into accounts controlled by Lazarenko in

Switzerland and Antigua. Thereafter, Lazarenko

transferred portions of these funds from

Switzerland into bank accounts in the

Northern District of California, including

two transfers of $14,000,000 each on August

1, 1997.

Count 25 and count 26 both allege a transfer of $14

million into a bank account in the Northern District

App. 15

of California on August 1, 1997. The plainest reading

of these allegations is that the transfers in counts 25

and 26 are the same two transfers alleged under the

heading “The UESU Fraud.” When the district court

dismissed the UESU allegations after the close of the

government’s case-in-chief, counts 25 and 26 should

have been dismissed as well.

The government asserted in its brief that the $14

million transfers were not necessarily funds derived

from the UESU scheme because the indictment

alleged that money from Somolli, “along with other

funds,” was deposited into Lazarenko’s Swiss bank

account. We decline to read this catch-all phrase as

turning the two $14 million transfers into proceeds

from the Naukovy fraud. The paragraph in which

these allegations are found begins, “Lazarenko ..

received and transferred money that had been stolen,

converted and taken by fraud in connection with the

distribution of natural gas in Ukraine as follows.”

Each allegation following relates directly to the

UESU scheme, including allegations about the par-

ties involved and payments between UEIL, Somolji,

and UESU. It simply makes no sense to read this

paragraph as concluding with Lazarenko transferring

money from a completely different scheme. The de-

tails of the transfers in this paragraph and in counts

25 and 26 are identical and the only logical conclusion

that can be drawn is that those counts are premised

on the UESU scheme.

At oral argument, the government claimed that

an allegation in a later paragraph, paragraph 35,

App. 16

supported its argument that the transfers of $14

million in counts 25 and 26 were part of the Naukovy

fraud. This paragraph, though, does not advance the

government’s position. The portion of the paragraph

to which the government points merely alleges that

“(bletween 1993 and 1994, Lazarenko received at

least $14,000,000 from Naukovy State Farm.” This

allegation neither speaks to whether two transfers of

$14 million were made in August 1997, nor does

anything there cause us to read the allegations under

“The UESU Fraud” any differently.

Even with the government’s shift in theory, the

government failed to provide sufficient evidence to

support Lazarenko’s wire fraud convictions on counts

25 and 26, as well as on counts 27, 28, and 29. We

evaluate a challenge to the sufficiency of the evidence

by viewing the evidence in the light most favorable to

the prosecution. Jackson v. Virginia, 443 U.S. 307,

324, 99 S.Ct. 2781, 61 L.Ed.2d 560 (1979). Evidence is

sufficient to support a conviction if, viewed in this

light, a rational trier of fact could have found the

essential elements of the crime beyond a reasonable

doubt. Jd.

We first address a threshold question, namely

whether the government must trace the wire transfer

proceeds back to some unlawful! activity. Lazarenko

puts it this way: whether “a wire transfer not proven

to contain proceeds of theft or fraud for the purpose of

a transporting stolen property offense [can] be found,

on the same evidence, to contain such illegal pro-

ceeds.” This argument piggy-backs on the government’s

App. 17

burden ii: the context of interstate transportation of

stolen property.

To sustain a conviction for interstate transporta-

tion of stolen property, the government must prove

that the money transported was stolen, converted,

taken by fraud, or derived from such property. See

United States v. Morgan, 805 F.2d 1372, 1377-78 (9th

Cir.1986). The property must be “directly traceable”

to the fraud or theft. Jd. at 1378. By contrast, in a

money laundering charge, the commingling of tainted

money with clean money taints the entire account.

See United States v. English, 92 F.3d 909, 916 (9th

Cir.1996). The money transferred from a commingled

account does not need to be traceable to fraud, theft,

or any wrongdoing at all. It is enough that the money,

even if innocently obtained, was commingled in an

account with money that was obtained illegally. See

id.

Wire fraud does not necessarily rest on the char-

acterization of the funds. It is well-established that

the wire used in the wire fraud scheme need only

have been “in furtherance” of the scheme. Schreiber

Distrib. Co. v. Serv-Well Furniture Co., Inc., 806 F.2d

1393, 1399-1400 (9th Cir.1986); see, e.g., United

Stutes v. Johnson, 297 F.3d 845, 871 (9th Cir.2002)

(upholding a wire fraud conviction where the wire

involved was a telephone call). In a case such as this,

where the wire at issue is a wire transfer of funds

that are connected to an unlawful activity, the “in

furtherance” inquiry may be met without a strict

tracing of the wired funds. We decline to narrow the

App. 18

“in furtherance” focus by requiring the funds to be

traced back to a particular unlawful activity.”

We turn, then, to the question whether the wire

transfers alleged in counts 25 to 29 were “in further-

ance” of the Naukovy fraud. To support a wire fraud

charge, the wire must be “incident to the execution of

the scheme” and not “part of an after-the-fact trans-

action that, although foreseeable, was not in further-

ance of the defendant’s fraudulent scheme.” United

States v. Lo, 231 F.3d 471, 478 (9th Cir.2000) (explain-

ing the principle in the context of mail fraud);* United

States v. Manarite, 44 F.3d 1407, 1413 (9th Cir.1995)

(finding that mailings and phone calls made after a

“one-shot” credit scam was completed were not in

furtherance of an ongoing scheme). The importance of

the temporal aspect of the wire transfer to the

underlying scheme is best illustrated in our case law:

“(T]he pertinent question is not whether or not the

defendant ‘had obtained all the money[she] expected

to get’ before the [wire] occurred. Rather, ... the

* Thus, we are not persuaded by Lazarenko’s argument that

there was instructional error with respect tu the wire fraud

counts. The district court correctly instructed the jury that it

needed to determine whether the wire was “an important part of

the scheme,” defining “important” as “incident to an essential

part of the scheme.” The court was not required to instruct the

jury on how to determine whether the accounts contained the

proceeds from a fraud.

* “It is well settled that cases construing the mail fraud and

wire fraud statutes are applicable to either.” United States v.

Shipsey, 363 F.3d 962, 971 n. 10 (9th Cir.2004).

App. 19

[wire] can occur after the defendant has obtained her

fee, if ‘the [wire] is part of the execution of the scheme

as conceived by the perpetrator at the time.’” Lo, 231

F.3d at 478 (quoting United States v. Sampson, 371

U.S. 75, 79, 838 S.Ct. 173, 9 L.Ed.2d 186 (1962);

Schmuck v. United States, 489 U.S. 705, 715, 109

SeCt. 1443, 103 L.Ed.2d 734 (1989)).

The wire transfers at issue occurred in 1997 and

1998, approximately three or four years after the

money was wired into the account. Counts 25 and 26

are transfers of $14 millior from Lazarenko’s

CARPO-53 account in Switzerland to Kiritchenko’s

EuroFed accounts at Pacific Bank in California and

at Commercial Bank of San Francisco. Count 27 is a

transfer of $24 million from Lazarenko’s EuroFed

account in Switzerland to a EuroFed account at

Hambrecht & Quist in California. Counts 28 and 29

are transfers of $9 million and $5.3 million from

Lazarenko’s Lady Lake account in the Bahamas to

Kiritchenko’s account at Commercial Bank of San

Francisco and to an account controlled by Lazarenko

at WestAmerica Bank in California.

The government’s theory was that these transfers

were meant to hide Lazarenko’s fraudulent activity as

he sought political office. Kiritchenko testified at trial

that Lazarenko closed his CARPO-55 bank account in

Switzerland in 1997, after Lazarenko was dismissed

as Prime Minister. This account contained close to

$200 million. He explained that Lazarenko made the

transfers that are alleged in counts 25 to 29 of the

App. 20

indictment because he was under investigation in

Ukraine and did not want his assets frozen.

Under the facts of this case, we conclude no

rational trier of fact could find that these transfers in

1997 and 1998 were “in furtherance” of the Naukovy

fraud, which centered on allegedly shady agricultural

and personal purchases. The fraudulent activity was

completed, and the money concealed, in 1994, when

the money reached Lazarenko’s control and he de-

posited it into coded bank accounts where it remained

for three years. Subsequent transfers were not part of

the scheme as it was originally conceived. Cf. Lo, 231

F.3d at 478. Nothing in the evidence supports an in-

ference, let alone a conviction, on the grounds that

the transfers were simply a delayed link in the

fraudulent chain.

If the government’s theory were correct, then it

would be possible for an ordinary fraud to be con-

verted into wire fraud simply by the perpetrator

picking up the telephone three years later and asking

a friend if he can store some fraudulently-obtained

property in his garage before the police execute a

search warrant or later taking the proceeds of fraud

and transferring them to another bank. The govern-

ment’s theory extends an already broad _ statute

too far. Concealing the source and ownership of

fraudulently-obtained property in downstream trans-

actions is better understood as money laundering

absent evidence that the wire transfer is “incident to

an essential part of the scheme.” Lo, 231 F.3d at 478

App. 21

(quoting Pereira v. United States, 347 U.S. 1, 8, 74

S.Ct. 358, 98 L.Ed. 435 (1954)) (emphasis omitted).

We reverse Lazarenko’s convictions on counts 25

through 29.

C. MONEY LAUNDERING - COUNTS 6

THROUGH 8

Our reversal of Lazarenko’s convictions on counts

25 to 29 does not, as Lazarenko urges, require us to

reverse his convictions on counts 6, 7, and 8 for

money laundering. Count 6 alleged that in November

1997 Lazarenko laundered $6 million from a EuroFed

account at Commercial Bank in San Francisco to

another EuroFed account. Just three months earlier,

in August 1997, the Commercial Bank account had

received the $14 million transfer that was charged

as wire fraud in count 26. Count 7 alleged that

Lazarenko laundered $6.745 million by drawing a

check on the account of one of his companies,

Dugsbery, Inc., and using it to purchase a home in

Marin County, California, in 1998. Count 8 charges

Lazarenko with an unlawful transfer of $2.3 million

from one Dugsbery account at WestAmerica Bank to

another at Bank Boston Robertson Stevens, also in

1998. The money in the Dugsbery account can be

traced to Lazarenko’s Lady Lake bank account in the

Bahamas; the transfer of money from Lady Lake to

the Dugsbery account was charged as wire fraud in

count 29.

App. 22

The funds in the San Francisco EuroFed account

and in the Dugsbery WestAmerica account can be

traced back to Lazarenko’s large CARPO-53 account,

where he deposited proceeds from his Naukovy fraud

and from his extortion of Kiritchenko. The govern-

ment contends that even if Lazarenko’s wire fraud

convictions are reversed, the money laundering

charges in counts 6, 7, and 8 still rest on Lazarenko’s

laundering of funds extorted from Kiritchenko.

The government was somewhat inconsistent in

how it portrayed these counts to the jury. During its

closing argument, when summing up counts 6, 7, and

8, the government at times referred only to the fraud

allegations, making no mention of extortion proceeds.

Nonetheless, argument is not evidence, and the evi-

dence shows that proceeds from extortion ended up in

the EuroFed accounts and in the Dugsbery account.

At trial, the government showed that Lazarenko

laundered proceeds from the extortion. Recognizing

that we consider these facts in the light most favor-

able to the government, Jackson, 443 U.S. at 324, 99

S.Ct. 2781, we affirm the convictions on counts 6, 7,

and 8.

D. MONEY LAUNDERING - COUNTS 2

THROUGH 5

We affirm Lazarenko’s money laundering convic-

tions on counts 2 through 5. The statute clearly lists

“extortion” as a foreign offense that may be a pred-

icate offense for money laundering. 18 U.S.C.

App. 23

§ 1956(c)(7)(B)(Gi). Lazarenko asserts that “extortion”

as it was used in the money laundering statute, 18

U.S.C. § 1956, at the time of his conduct, is limited to

extortion through violence and the extortion he is

charged with is more akin to bribery. We review de

novo “(t]he district court’s interpretation of the money

laundering statute ... and the scope of the conduct

covered by the statute.” United States v. Deeb, 175

F.3d 1163, 1166-67 (9th Cir.1999).

Generally speaking, § 1956 criminalizes the laun-

dering of the proceeds of a “specified unlawful

activity.” 18 U.S.C. § 1956. During the period alleged

in the indictment against Lazarenko, 1992-1998,

“specified unlawful activity” was defined to include:

(A) any act or activity constituting an

offense listed in section 1961(1) of this

title except an act which is indictable

under subchapter II of chapter 53 of title

31;

(B) with respect to a financial transaction

occurring in whole or in part in the

United States, an offense against a

foreign nation involving

(i) the manufacture, importation, sale,

or distribution of a controlled sub-

stance (as such term is defined for

the purposes of the Controlled Sub-

stances Act)

App. 24

(ii) kidnapping, robbery, or extortion; or®

(iii) fraud, or any scheme or attempt to

defraud, by or against a foreign

bank (as defined in paragraph 7 of

section l(b) of the International

Banking Act of 1978).

18 U.S.C. § 1956(c)(7) (1992). In 2001, Congress

amended this section to include “bribery of a public

official, or the misappropriation, theft, or embezzle-

ment of public funds by or for the benefit of a public

official” as a “specified unlawful activity.” 18 U.S.C.

§ 1956(c)(7)(B)Civ).

Extortion, as it is criminalized under the Hobbs

Act, 18 U.S.C. § 1951, can be committed through the

threat of violence or under color of official right. See

Evans v. United States, 504 U.S. 255, 261-62, 112

S.Ct. 1881, 119 L.Ed.2d 57 (1992). Lazarenko urges

that “extortion” as it is used in §1956 does not

include nonviolent foreign extortion. He claims that

such conduct is equivalent to foreign bribery and

public corruption and that these offenses were beyond

the reach of federal law until the Patriot Act of 2001.°

* In 1996, Congress amended this clause to add “or destruc-

tion of property by means of explosive or fire.” See 18 U.S.C.

§ 1956(c)(7)(B)(ii).

* The Foreign Corrupt Practices Act punished those who

offered bribes to foreign officials, but did not reach the foreign

officials who received the bribes. 15 U.S.C. §§ 78dd-1, 78dd-2;

United States v. Castle, 925 F.2d 831, 833-34 (5th Cir.1991).

App. 25

“It is a familiar ‘maxim that a statutory term is

generally presumed to have its common law mean-

ing.’” Evans, 504 U.S. at 259, 112 S.Ct. 1881 (quoting

Taylor v. United States, 495 U.S. 575, 592, 110 S.Ct.

2143, 109 L.Ed.2d 607 (1990)). At common law, extor-

tion was a crime that resembled what we know as

bribery, and involved an abuse of power by a public

official. Jd. at 260, 112 S.Ct. 1881. Federal statutes

have expanded that definition to include the ob-

taining of property by force. Jd. at 261, 112 S.Ct.

1881.

We presume that Congress was aware of the com-

mon law meaning of extortion when it enacted § 1956.

As the Supreme Court has explained,

[Wlhere Congress borrows terms of art in

which are accumulated the legal tradition

and meaning of centuries of practice, it

presumably knows and adopts the cluster of

ideas that were attached to each borrowed

word in the body of learning from which it

was taken and the meaning its use will

convey to the judicial mind unless otherwise

instructed. In such case, absence of contrary

direction may be taken as satisfaction with

widely accepted definitions, not as a depar-

ture from them.

Evans, 504 U.S. at 259-60, 112 S.Ct. 1881 (quoting

Morissette v. United States, 342 U.S. 246, 263, 72

S.Ct. 240, 96 L.Ed. 288 (1952)). Significantly, Con-

gress did not qualify the term in any way that sug-

gests that we should read “extortion” as excluding the

App. 26

common law definition. The fact that “extortion” is

listed with “kidnapping” and “robbery” does not com-

pel us to give the term a narrower meaning or one

predicated on force or violence.

The 2001 amendment to § 1956 does not become

superfluous if we read “extortion” to include extortion

under color of official right. Bribery and extortion

under color of official right are not co-extensive.

“Bribery of a public official” extends to the individual

who offers the bribe as well as to the public official

who accepts the bribe.’ “Misappropriation, theft, or

embezzlement of public funds by or for the benefit of

a public official” will also capture conduct not pun-

ishable as “extortion under color of official right” be-

cause misappropriation, theft, and embezzlement do

not necessarily require the quid pro quo of an official

action. See Evans, 504 U.S. at 258-59, 112 S.Ct. 1881.

The Supreme Court’s recent decision in United

States v. Santos, ___ U.S. __, 128 S.Ct. 2020, 170

L.Ed.2d 912 (2008), does not change our analysis of

the statute. In Santos, the Supreme Court examined

the word “proceeds” as it was used in § 1956. See id.

at 2023-26. The Court concluded that the term, left

undefined in the statute, was ambiguous as to wheth-

er it meant “profits” or “receipts,” and so defined it in

’ The federal bribery statute punishes both one who “cor-

ruptly vives, offers or promises anything of value to any public

official” and public officials who “corruptly demand[], seek| J,

receive| |, accept [|] or agree|] to receive or accept anything of

value.” 18 U.S.C. §§ 201(b1), (2)

App. 27

the more defendant-friendly terms of “profits,” based

on the rule of lenity. Id. at 2025.

Critical to the issue here, the Court began its

analysis by reaffirming the principle that “[w]Jhen a

term is undefined, we give it its ordinary meaning.”

Id. at 2024. This principle both starts and ends our

analysis. The term “extortion” has an ordinary mean-

ing and it is not ambiguous. Unlike the word “pro-

ceeds,” “extortion” has a common law meaning and

federal statutes use the term to mean both extortion

by violence and extortion under color of official right.

See, e.g., Evans, 504 U.S. at 261, 112 S.Ct. 1881;

James v. United States, 550 U.S. 192, 127 S.Ct. 1586,

1604-05, 167 L.Ed.2d 532 (2007) (Scalia, J. dissent-

ing) (citing the Travel Act, 18 U.S.C. § 1952, the

Hobbs Act, 18 U.S.C. § 1951, RICO, 18 U.S.C. § 1961,

and the Model Penal Code § 223.4 as examples of

statutes with a broad interpretation of “extortion”).

Lazarenko has not directed us to any statute

where Congress used the word “extortion” and meant

only extortion by violence or only extortion under

color of official right. Cf’ Santos, 128 S.Ct. at 2024

(observing that Congress “sometimes has defined

{proceeds} to mean ‘receipts’ and sometimes ‘prof-

its.’”). The ambiguity that the Court wrestled with in

Santos is simply absent with respect to “extortion.”

App. 28

E. INTERSTATE TRANSPORTATION OF

STOLEN PROPERTY - COUNT 31

Lazarenko also challenges the sufficiency of the

evidence for his conviction on count 31 for interstate

transportation of stolen property. Count 31 alleges a

transfer of $1.8 million from Lazarenko’s LIP Handel

account in Switzerland to Kiritchenko’s ABS Trading

account at Bank of America in California. As noted

earlier, this charge requires a tracing of the fraud

proceeds, not simply a commingled account. What is

totally missing here is evidence from the key account

at the Hungarian PostaBank, from which the money

was transferred into the LIP Handel account.

According to the testimony of the former director

of Nikopolsky, Boris Velychko, in 1992, Lazarenko’s

deputy negotiated for Nikopolsky to loan $2.4 million

to a Dutch company, Van der Ploeg, on behalf of

Naukovy to purchase wheat. The $2.4 million was

transferred to Van der Ploeg’s account at ABN Amro

Bank in the Netherlands in December 1992. The loan

to Naukovy was repaid in local currency, which,

according to Velychko, was devalued in 1993. On

January 19, 1993, $1.2 million was transferred from

the ABN Amro account to Agafonov’s account at

PostaBank in Hungary. In June 1993, $1.205 million

was transferred from the PostaBank account to

Lazarenko’s LIP Handel account in Switzerland. In

July 1994, $1.8 million was transferred from the LIP

Handel account to Kiritchenko’s ABS Trading account

at Bank of America in San Francisco. It is this final

App. 29

transfer that is charged as the interstate transporta-

tion of stolen property in count 31.

Anyone who “transports, transmits, or transfers

in interstate or foreign commerce any goods, wares,

merchandise, securities or money, of the value of

$5,000 or more, knowing the same to have been

stolen, converted or taken by fraud” is guilty of inter-

state transportation of stolen property. 18 U.S.C.

§ 2314. We will uphold the conviction if, viewing the

evidence in the light most favorable to the govern-

ment, there is sufficient evidence for a rational juror

to find guilt beyond a reasonable doubt. Jackson, 443

U.S. at 324, 99 S.Ct. 2781.

The ledger from Van der Ploeg’s account at ABN

Amro shows a transfer of $1.2 million to an account

at PostaBank, and the ledger for Lazarenko’s LIP

Handel at Union Bank of Switzerland shows a receipt

of $1.205 million from PostaBank, but the glaring gap

is that there are no records from PostaBank at all.

The government was unable to produce any docu-

ments from PostaBank itself. Lazarenko asserts that

this gap is fatal to the government’s charge of inter-

state transportation of stolen property because with-

out those records it is impossible to know whether the

$1.205 million that was transferred to LIP Handel

was the proceeds of fraud or derived from the pro-

ceeds of fraud. We agree.

The district court instructed the jury that to find

Lazarenko guilty of interstate transportation of

stolen property, the funds that were transferred must

App. 30

be the proceeds of fraud or derived from the proceeds

of fraud. This rule has its roots in United States v.

Poole, 557 F.2d 531 (5th Cir.1977). There, the defen-

dant, Poole, deposited a check that contained

fraudulently-obtained funds into his bank account

and then, on the same day, wrote a check on that

account for an amount identical to the amount that

had been deposited. Jd. at 533-34. He deposited that

check into an out-of-state bank. Jd. The Fifth Circuit

reversed the conviction because the bank account into

which Poole deposited the fraudulently-obtained

funds had sufficient clean funds to cover the amount

of the check that was transported across state lines.

Id.

The government relies on the Seventh Circuit’s

ruling in United States v. Quintanilla, 2 F.3d 1469

(7th Cir.1993), to argue that it does not matter

whether there were sufficient clean funds in the

PostaBank account to cover the transfer of $1.205

million to the LIP Handel account. In Qu:ntanilla,

the defendants were found guilty of defrauding the G.

Heileman Brewing Company’s corporate sponsorship

program and convicted of, among other charges,

interstate transportation of stolen property. Jd. at

1471. Defendant Monreal, the director of the pro-

gram, devised a scheme to receive kickbacks from

organizations who received sponsorship awards. Id.

The money passed from Heileman to the organization

and the organization would, in turn, pass a portion to

Monreal. /d. Quintanilla was the director of one of

the organizations, Operation Search, that had kicked

App. 3l

money back to Monreal. 7d. Quintanilla argued on

appeal that Operation Search had sufficient clean

funds in its account each time a kickback check was

drawn and transported to Monreal. Jd. at 1478. The

Seventh Circuit rejected this argument. It explained

that,

[tlhe evidence at trial showed, and

Quintanilla does not dispute, that he agreed

to pay Monreal a portion of every Heileman

grant that Operation Search received.

Accordingly, the ultimate source of the funds

used to pay Monreal was Heileman. The

evidence also showed that Quintanilla fol-

lowed Monreal’s’ directions concerning

exactly how the kickbacks were to be made;

there is no suggestion that these directions

were not followed to the last detail. Given

the nexus between the Heileman grants and

the kickbacks made to Monreal, we do noft]

think § 2314 liability hinges in this case on

whether or not Operation Search had suffi-

cient clean funds in its bank account each

time a kickback check was drawn and

transported across state lines to Monreal.

Id. at 1478-79 (footnote omitted). The court looked at

the purpose behind § 2314, and noted specifically that

the statute was meant to prevent those who were

attempting to “‘utilize the channels of interstate com-

merce make a successful get away.” Id. at 1479 (quot-

ing United States v. Sheridan, 329 U.S. 379, 384, 67

S.Ct. 332, 91 L.Ed. 359 (1946)). It concluded that

“(l]ooking to the substance of Quintanilla’s conduct, it

App. 32

is apparent that the checks he caused to be trans-

ported in interstate commerce represented, and were

directly derived from, fraudulently obtained Heile-

man funds.” Id.

Quintanilla does not save the government in this

case because the evidence of the nexus between the

grants and the kickbacks in that case was sufficient.

Here, the chain of alleged kickbacks from the wheat

deal is missing a few links. More significantly,

though, the jury here was instructed in accordance

with Poole and the government did not object to the

premises underlying that decision.

In any event, even if we infer that Lazarenko was

connected to the wheat deal because it was negotiated

by his deputy and he received a payment that repre-

sented approximately fifty percent of the proceeds,

PostaBank records are still required for there to

be sufficient evidence that Lazarenko’s subsequent

transfer of $1.8 million to Kiritchenko constituted

interstate transportation of stolen property. The

government’s argument that the transfer of $1.205

million to Lazarenko’s LIP Handel account was the

proceeds of fraud because the fraud was not complete

until the money reached Lazze*enko does not per-

suade us that the PostaBank records are unneces-

sary.

For the $1.8 million transferred from Lazarenko’s

LIP Handel account to Kiritchenko’s ABS Trading

account to be fraudulently-obtained property, it must

have contained at least $5,000 of the $2.4 million

App. 33

transferred to Van der Ploeg in the phony wheat deal.

We cannot look only at whether the $1.8 million con-

tained at least $5,690 of the $1.205 million trans-

ferred into Lazarenko’s LIP Handel account as the

government urges because the evidence viewed in the

light most favorable to the government shows only

that the $1.205 million payment was an extortion

payment, i.e., fifty percent of the proceeds from the

phony wheat transaction. The fraud was Lazarenko’s

deputy arranging for Nikopol to give Van der Ploeg

$2.4 million to buy wheat that was never purchased.

That fraud was completed when the money was

transferred to Van der Ploeg.

The record supports an inference that Lazarenko

extorted $1.205 million from Agafonov, because

Lazarenko always extorted half of the profits from

businesses. But making an extortion payment and

completing a fraud are entirely different propositions.

The $1.205 million extortion payment also may have

been money derived from the phony wheat deal.

Without the records from PostaBank, which would

show whether there were clean funds in the account

from which Agafonov could make the required pay-

ment to Lazarenko, this inference is speculation. In

short, the evidence reflects money into the Hungarian

account and money out of the account, but miss ng is

evidence about the account itself and whether the

* Kiritchenko testified that Lazarenko worked with every-

one 50-50. We give the government the benefit of the inference

that Lazarenko worked with Agafonov 50-50 as well.

App. 34

transferred money was “directly traceable” to the

fraud itself. See Morgan, 805 F.2d at 1378. Accord-

ingly, we reverse Lazarenko’s conviction on count 31.”

F. RETROACTIVE MISJOINDER

Lazarenko also appeals the denial of his Rule 33

motion for a new trial. He argues that the govern-

ment indicted him on the UESU charges, knowing

that the charges could not be proven, and then, after

the directed verdict of acquittal, used the evidence

from the alleged UESU scheme against him in its

closing argument, in violation of the doctrine of retro-

active misjoinder.”” He asserts that he was denied v.:e

opportunity to respond in his own closing argument

to the government’s misleading statements.

We review for an abuse of discretion the district

court’s denial of a motion for a new trial made on the

grounds of retroactive misjoinder. United States v.

Aldrich, 169 F.3d 526, 528 (8th Cir.1999). Although

we consider de novo whether a defendant has been

deprived of his constitutional right to present closing

argument, see United States v. Igbinosun, 528 F.3d

387, 391 (5th Cir.2008), a district court’s limitation on

” Because we reverse Lazarenko’s conviction on this count,

we do not need to reach his argument that the government’s

closing argument was misleading.

" This doctrine is closely related to prejudicial spillover.

The concepts and terms are often used interchangeably. See

United States v. Vebeliunas, 76 F.3d 1283, 1293-94 (2d Cir.1996).

App. 35

a closing argument is reviewed for an abuse of dis-

cretion. United States v. Spillone, 879 F.2d 514, 518

(9th Cir.1989).

The Federal Rules of Criminal Procedure allow

for several offenses and several defendants to be

joined in a single indictment. If, however, some of the

offenses or defendants are ‘ismissed mid-trial, in

some cases the trial court must sever the proceedings

in order to protect the defendant from prejudice. See

Schaffer v. United States, 362 U.S. 511, 514, 80 S.Ct.

945, 4 L.Ed.2d 921 (1960).

As the Second Circuit explained in Vebeliunas,

“*Retroactive misjoinder’ arises where joinder

of multiple counts was proper initially, but

later developments -— such as a district

court’s disinissal of some counts for lack uf

evidence or an appellate court’s reversal of

less than all convictions — render the initial

joinder improper. In this Circuit, ‘[t]o invoke

retroactive misjoinder, a defendant ‘must

show compelling prejudice.’ Prejudicial spill-

over from evidence used to obtain a convic-

tion subsequently reversed on appeal may

constitute compelling prejudice.”

Vebeliunas, 76 F.3d at 1293-94 (internal citations

omitted) (quoting United States v. Jones, 16 F.3d 487,

493 (2d Cir.1994)). The First Circuit has set a high

bar for proving prejudicial spillover: “[A] claim of

prejudicial spillover cannot succeed unless ‘a defen-

dant ... provels] prejudice so pervasive that a mis-

carriage of justice looms.’” United States v. Trainor,

App. 36

477 F.3d 24, 36 (1st Cir.2007) (quoting United States

v. Levy-Cordero, 67 F.3d 1002, 1008 (1st Cir.1995)).

We have examined the issue of prejudicial spill-

over in the context of a defendant’s motion to sever

his trial from a codefendant. In United States v.

Cuozzo, 962 F.2d 945 (9th Cir.1992), we stated that,

“liJn assessing the prejudice to a defendant from the

‘spillover’ of incriminating evidence, the primary con-

sideration is whether ‘the jury can reasonably be ex-

pected to compartmentalize the evidence as it relates

to separate defendants, in view of its volume and the

limited admissibility of some of the evidence.’” Jd. at

950 (quoting United States v. Escalante, 637 F.2d

1197, 1201 (9th Cir.1980)). The trial court’s instruc-

tions to the jury are a “critical factor” in this assess-

ment. Cuozzo, 962 F.2d at 950. Also, “[t]he fact that

the jury rendered selective verdicts is highly indica-

tive of its ability to compartmentalize the evidence.”

Id.

At the outset, we reject the government’s conten-

tion that we have limited the doctrine of retroactive

misjoinder only to cases where there is more than one

defendant. The government reads United States v.

Anguiano, 873 F.2d 1314 (9th Cir.1989), too broadly.

In Anguiano, we held that the trial court did not err

in refusing to give a multiple conspiracies instruction

where there was a single defendant. /d. at 1318. We

stated that,

(a] multiple conspiracies instruction is gen-

erally required where the indictment charges

App. 37

several defendants with one overall con-

spiracy, but the proof at trial indicates that a

jury could reasonably conclude that some of

the defendants were only involved in sep-

arate conspiracies unrelated to the overall

conspiracy charged in the indictment. The

instruction is required because, in such a

situation, there is a possibility of prejudicial

variance between the indictment and the

trial proof. The variance may be prejudicial

in a number of ways, but the problem that is

of concern here is the possibility of trans-

ference or “spillover” of guilt. In this type of

situation, one of the defendants argues that

he or she was only involved, if at all, ima

minor conspiracy that is unrelated to the

overall conspiracy charged in the indictment,

and that a multiple conspiracies instruction

is required in order to ensure that there is no

“spillover” of guilt from one defendant to

another. However, there is no problem of

spillover when, as in this case, the defendant

stands trial alone. Accordingly, Anguiano was

not entitled to a multipie conspiracies in-

struction on this basis.

Id. at 1317-18 (internal citations and footnotes

omitted). We did not hold broadly that the doctrine of

prejudicial spillover is inapplicable where there is

only one defendant.

The government’s citation to the Seventh Cir-

cuit’s decision in United States v. Holzer, 840 F.2d

1343 (7th Cir.1988), as limiting the applicability of

the doctrine of prejudicial spillover or retroactive

App. 38

misjoinder, also misses the mark. The Seventh Cir-

cuit stated that “[nJo rule of evidence is violated by

the admission of evidence concerning a crime of which

the defendant is acquitted, provided the crime was

properly joined to the crime for which he was

convicted and the crimes did not have to be severed for

purposes of trial.” Id. at 1349 (emphasis added). The

Seventh Circuit thus is consistent with our sister

circuits in recognizing that there are circumstances

where charges in a trial must be severed to avoid

prejudice. See, e.g., Vebeliunas, 76 F.3d at 1293-94;

Aldrich, 169 F.3d at 528. We thus clarify that the

doctrine of prejudicial spillover or retroactive mis-

joinder may apply to a case where there is only one

defendant.

Invoking the three-factor test that the Second

Circuit developed in Vebeliunas, the district court

concluded that Lazarenko was not prejudiced by the

now-dismissed charges. Under the Vebeliunas test,

the court considers: (1) whether the evidence was so

inflammatory that it would tend to cause the jury to

convict on the remaining counts; (2) the degree of

overlap and similarity between the dismissed and

remaining counts; and (3) a general assessment of the

strength of the government’s case on the remaining

counts. Vebeliunas, 76 F.3d at 1294. These factors

reasonably address concerns about prejudicial spill-

over. We adopt these factors and add to them the

factors we identified in Cuozzo — whether the trial

court diligently instructed the jury and whether there

is evidence, such as the jury’s rendering of selective

App. 39

verdicts, to indicate that the jury compartmentalized

the evidence. Cuozzo, 962 F.2d at 950.

The district court did not abuse its discretion in

denying Lazarenko a new trial based on prejudicial

misjoinder. The court first found that the evidence

presented in connection with the UESU and GHP

frauds was not inflammatory. It was not persuaded

that the jury “threw up their hands” over the $200

million associated with the dismissed counts because

the jury deliberated for four days and sent questions

to the court. Certainly, the UESU scheme was a sig-

nificant component of the government’s case against

Lazarenko. But the evidence of fraud, illegal trans-

fers and coverups was so extensive that evidence of

$200 million in allegedly unlawful transfers is hardly

more inflammatory than evidence of the other trans-

fers or the evidence that Lazarenko extorted fifty

percent of the profits from all the businesses he was

involved with. The testimony on the $200 million

transfer did not amount to compelling prejudice.

The government does not challenge the district

court’s ruling that some of the evidence would have

been inadmissible if the dismissed counts had been

dismissed before trial. See United States v. Ilamilton,

334 F.3d 170, 182 (2d Cir.2003) (“[Pjrejudicial spill-

over is unlikely if the dismissed count and the re-

maining counts were either quite similar or quite

dissimilar.”).

Finally, the district court concluded that the

governments case on the remaining counts was

App. 40

sufficiently strong. The court sent 29 counts to the

jury, but overturned the verdict on 15 counts. We

have reversed an additional six counts. This issue

presents a closer question, but “liJt is not necessary

that the court agree with jury verdicts on all counts

to determine that the jury carefully weighed the

evidence.” United States v. Stefan, 784 F2d 1093,

1101 (11th Cir.1986). Lazarenko has not explained

how the evidence related to the dismissed counts was

tainted by the UESU evidence. The overall evidence

of fraud was strong, although it was incumbent on

the government to weave that evidence through the

technical threads of multiple counts. That the govern-

ment was not 100% successful does not undermine

the evidence that was airtight.

Lazarenko further argues that the prejudicial

impact of the evidence on the dismissed counts was

compounded in the government's closing argument.

He claims that while the government referred to

the scheme in the “indictment,” he was prevented

from arguing that the single conspiracy alleged in

count 1 was not proven because the central allega-

tions — the UESU fraud, the GHP/PMIH fraud, and

the Dityakovsky [sic] extortion — were not proven. He

further asserts that the government improperly re-

ferred to the UESU fraud in arguing that Lazarenko

was “never engaged in legitimate business,” while he

was precluded from responding that the funds from

UESU were not unlawful.

The jury did not see the indictment and was not

informed of the specific allegations in the indictment

App. 41

related to UESU. The district court gave counsel

three guidelines for their closing arguments: (1) coun-

sel could not “implicate the Court and its ruling on

the dismissed counts in your argument”; (2) counsel

could not “comment on why the theories were no

longer before” the jury; and (3) counsel could not

“mislead them by way of argument ... that they can

acquit based on the absence” of the UESU counts.

The government’s references to the indictment

were not improper. The jury was specifically in-

structed that certain counts were no longer before

them, the government stated at the beginning of its

closing argument that it was not addressing those

counts, and the jury never saw the indictment. With

these safeguards in place, the government’s mention

of “the crimes charged in the indictment,” or the

schemes “alleged in the indictment,” — references that

did not mention UESU - did not improperly implicate

the dismissed UESU counts.

Lazarenko appears to want it both ways. He

argues that he was prevented from countering the

government’s references to the indictment and that

he should have been able to argue that the gov-

ernment failed to prove the single conspiracy and

wire fraud allegations that it promised to prove

because the evidence did not support the UESU,

GHP, PMH, and Dityakovsy [sic] allegations. In his

closing argument, Lazarenko’s counsel argued,

[I]s that plan or scheme that the government

is now presenting to you, is that the same

App. 42

plan or scheme that Mr. Lazarenko was

charged with, that the government has been

prosecuting in this case?

Is what the government's presented to you in

final argument the same scheme that they

argued to you the whole case?

Remember, the government argued to you

that UESU, UEIL, Itera, prefab houses,

Nakosta were all part of the scheme.

Now the government argues, the scheme was

Naukovy and Kiritchenko alone. That’s the

scheme.

We will talk more about this, but the defen-

dant has a constitutional right to be tried on

only what he has been charged with, and a

constitutional right not to be convicted —

The court then sustained “its own objection to

that part of the argument.”

Outside the presence of the jury, the court ex-

plained its view. The court commented that Lazarenko’s

counsel had “very deftly for the most part ... com-

plied” with the guidelines. The court stated, though,

that counsel crossed the line when he argued that

“the defendant has a right under the Constitution ...

to be convicted on the... indictment |returned by the

grand jury|.” The court stated that “[t]here is nothing

in our record that tells them about the grand jury,

their function or what they do.... I did not want to

mislead this jury and have them now consider what

the grand jury did or didn’t do.” The court’s objection

App. 43

was limited to counsel’s references to what had or had

not been charged. Lazarenko’s counsel was not pre-

cluded from arguing that the government did not

prove the scheme they initially laid out based on the

evidence. At that point, the indictment was not in

play. It was not improper for the court to limit the

closing argument to the evidence.

We aiso disagree with Lazarenko’s assertion that

the government improperly relied on the UESU

scheme when it argued that Lazarenko had “never

engaged in legitimate business.” The government

argued to the jury that,

the evidence in this case shows that through-

out this period of time the only position the

defendant held was an official position. The

only thing he did was exercise his official

authority.

He was never engaged in any legitimate

business. He never received, legitimately,

any income from. Kiritchenko or from

Naukovy State Farms.

The UESU allegations are not implicated in this ar-

gument. Not only did the government at the be-

ginning of its argument state that it would not be

referring to the UESU counts, the government fol-

lowed up its statement that Lazarenko did not have

any legitimate business by linking that reference to

the claim that the income from Kiritchenko and

Naukovy was illegal.

App. 44

At most, the government indirectly suggested

that the UESU business was illegitimate. Lazarenko

responded by arguing that “the suggestion that mon-

ey from UESU or Itera or UEIL and Nakosta had an

unlawful source is now no longer before you. Those

sources are not unlawful.” The government did not

make a contemporaneous objection, but argued to the

court during a break that this statement was in-

appropriate. The court ruled that counsel could argue

using the terms of the jury instructions that certain

evidence was “not before” the jury, and stated that

“there is more than enough in this record to argue the

schemes are not proven based on the weight of the

record itself, and that’s where the argument ought to

be.” This ruling did not prevent Lazarenko from

dispelling any impression, however faint, that may

have been left with the jury that all of Lazarenko’s

wealth was obtained illegally. Understandably, the

district court required that the argument, however,

would have to be based on the evidence.

The counts we have dismissed fall of their own

weight and those we have affirmed stand on their

own. The district court did not abuse its discretion in

denying the motion for a new trial based on retro-

active misjoinder, nor did the court improperly limit

Lazarenko’s closing argument.

We affirm Lazarenko’s convictions on count 1 for

conspiracy, counts 2 through 5 for money laundering,

and counts 6 through 8 for money laundering. We

reverse Lazarenko’s convictions on counts 25 through

29 for wire fraud, and count 31 for interstate

App. 45

transportation of stolen property. Because we reverse

on six of the fourteen counts of which Lazarenko was

convicted, we vacate the sentence and remand for

resentencing on the remaining eight counts as to

which we affirm the conviction.

AFFIRMED IN PART, REVERSED IN PART,

AND REMANDED.

App. 46

United States District Court

Northern District of California

UNITED STATES OF JUDGMENTINA

AMERICA CRIMINAL CASE

V. Case Number:

PAVEL LAZARENKO = ©R00-0284-01 MJJ

USM Number: 94430-011

CCAM Number:

Defendant’s Attorney:

Doran Weinberg

(Filed Dec. 14, 2006)

THE DEFENDANT:

| ] pleaded guilty to count(s) ©

| ] pleaded nolo contendere to count(s)

which was accepted by the court.

[ ] was found guilty on count(s) 1, 2-8, 25-29, and 31

of the Indictment after a plea of not guilty.

The defendant is adjudicated guilty of these

offense(s):

Title & Nature of Offense

Section Offense Ended Count

18 U.S.C. Conspiracy to May 2000 1

§ 1956(h) Commit Money

Laundering

18 US.C. Money ' 2-5

§ 1956(a\(2) Laundering

App. 47

18 U.S.C. Money 2 6-8

§ 1956(aX1XB) Laundering

18 U.S.C. Wire Fraud = 25-29

§§ 1343 and

1346

18 U.S.C. Interstate . 31

§ 2314 Transportation of

Stolen Property

The defendant is sentenced as provided in

pages 2 through 6 of this judgment. The sentence is

imposed pursuant to the Sentencing Reform Act of

1984.

[ ] The defendant has been found not guilty on count(s)

[x] Count(s) 20-24, and 43-52 of the Indictment

(is)(are) dismissed on the motion of the United

States.

IT IS ORDERED that the defendant must

notify the United States attorney for this district

within 50 days of any change of name, residence, or

mailing address until all fines, restitution, costs,

and special assessments imposed by this judgment

are fully paid. If ordered to pay restitution, the

defendant must notify the court and United States

attorney of material changes in economic circum-

stances.

App. 48

8/25/2006

Date of Imposition of Judgment

/s/ Martin J. Jenkins

Signature of Judicial Officer

Honorable Martin J. Jenkins,

U.S. District Judge

Name & Title of Judge

12/14/2006

Date

IMPRISONMENT

The defendant is hereby committed to the

custody of the United States Bureau of Prisons to

be imprisoned for a total term of 108 months, as to

each count to be served concurrently.

[ ] The Court makes the following

recommendations to the Bureau of Prisons:

[ | The defendant is remanded to the custody of

the United States Marshal.

[ |] The defendant shall surrender to the United

States Marshal for this district:

| Jat | Jam [ Jpmon |

[ J as notified by the United States Marshal.

[ |] The defendant shall surrender for service of

sentence at the institution designated by the

Bureau of Prisons:

[ ] before 2:00 pm on

[ } as notified by the United States Marshal.

App. 49

[ ] as notified by the Probation or Pretrial

Services Office.

RETURN

I have executed this judgment as follows:

Defendant delivered on to

at , with a certified copy of this judgment.

UNITED STATES MARSHAL

Deputy United States

Marshal

SUPERVISED RELEASE

Upon release from imprisonment, the defendant

shall be on supervised release for a term of 3 years, as

to each count to be served concurrently.

The defendant must report to the probation office in

the district to which the defendant is released

within 72 hours of release from the custody of the

Bureau of Prisons.

The defendant shall not commit another federal,

state or local crime.

The defendant shall not unlawfully possess a

controlled substance. The defendant shall refrain

App. 50

from any unlawful use of a controlled substance.

The defendant shall submit to one drug test within

15 days of release from imprisonment and two

periodic drug tests thereafter.

[x] The above drug testing condition is suspended,

based on the court’s determination that the

defendant poses a low risk of future substance

abuse. (Check if applicable.)

[ |] The defendant shall not possess a firearm, ammu-

nition, destructive device, or any other dangerous

weapon. (Check if applicable.)

{| | The defendant shall cooperate in the collection of

DNA as directed by the probation officer. (Check

if applicable. )

| | The defendant shall register with the state sex

offender registration agency in the state where

the defendant resides, works, or is a student, as

directed by the probation officer. (Check, if

applicable.)

[ | The defendant shall participate in an approved

p p Pp

program for domestic violence. (Check, if

applicable. )

If this judgment imposes a fine or restitution, it

is a condition of supervised release that the

defendant pay in accordance with the Schedule of

Payments sheet of this judgment.

The defendant must comply with the standard

conditions that have been adopted by this court as

well as with any additional conditions in this

judgment.

App. 51

STANDARD CONDITIONS

The defendant shall not leave the judicial

district without permission of the court or

probation officer;

The defendant shall report to the probation

officer, and shall submit a truthful and

complete written report within the first five

days of each month;

The defendant shall answer truthfully all

inquiries by the probation officer and follow the

instructions of the probation officer;

The defendant shall support his or her dependents

and meet other family responsibilities;

The defendant shall work regularly at a lawful

occupation, unless excused by the probation officer

for schooling, training, or other acceptable

reasons;

The defendant shall notify the probation officer

at least ten days prior to any change in

residence or employment;

The defendant shall refrain from excessive use

of alcohol and shall not purchase, possess, use,

distribute, or administer any controlled sub-

stance or any paraphernalia related to any con-

trolled substances, except as prescribed by a

physician;

The defendant shall not frequent places where

controlled substances are illegally sold, used,

distributed, or administered;

10)

11)

12)

App. 52

The defendant shall not associate with any

persons engaged in criminal activity and shall

not associate with any person convicted of a

felony unless granted permission to do so by the

probation officer;

The defendant shall per:ait a probation officer to

visit him or her at any time at home or

elsewhere, and shall permit confiscation of any

contraband observed in plain view of the

probation officer;

The defendant shall notify the probation officer

within seventy-two hours of being arrested or

questioned by a law enforcement officer;

The defendant shall not enter into any

agreement to act as an informer or a special

agent of a law enforcement agency without the

permission of the Court; and

13) As directed by the probation officer, the

defendant shall notify third parties of risks that

may be occasioned by the defendant’s criminal

record or personal history or characteristics, and

shall permit the probation officer to make such

notifications and to confirm the defendant’s

compliance with such notification requirement.

SPECIAL CONDITIONS OF SUPERVISION

The defendant shall comply with the rules and

regulations of the Bureau of Immigration and

Customs Enforcement and, if deported, not

reenter the United States without the express

consent of the Secretary of the Department of

Homeland Security. Upon reentry into the

App. 53

United States during the period of court

ordered supervision, the defendant shall report

to the nearest U.S. Probation Office within 72

hours.

2) The defendant shall pay any restitution, fine

and special assessment that is imposed by this

judgment, and that remains unpaid at the

commencement of the term of supervised

release.

3) The defendant shall provide the probation

officer access to any requested financial

information, including tax returns, and shall

authorize the probation office to conduct credit

checks and obtain copies of income tax returns.

4) The defendant shall not own or possess any

firearms, ammunition, destructive devices, or

other dangerous weapons.

5) The defendant shal] cooperate in the collection

of DNA as directed by the probation officer.

CRIMINAL MONETARY PENALTIES

The defendant must pay the total criminal

monetary penalties under the schedule of payments

on Sheet 6.

Assessment Fine Restitution

Totals: $1,150.00 $10million $ TBD

[x] The determination of restitution is deferred

until TBD. An Amended Judgment in a

Criminal Case (AO 245C) will be entered after

such determination.

App. 54

{| ) The defendant shall make restitution (including

community restitution) to the following payees

in the amount listed below.

If the defendant makes a partial payment, each

payee shall receive an approximately proportional

payment, unless specified otherwise in the priority

order or percentage payment column below. However,

pursuant to 18 U.S.C. § 3664(i), all nonfederal victims

must be paid before the United States is paid.

Name of Total Restitution Priority or

Payee Loss* Ordered Percentage

Totals: $ $

[ ] Restitution amount ordered pursuant to plea

agreement $_

| | The defendant must pay interest on restitution and

a fine of more than $2,500, unless the restitution or

fine is paid in full before the fifteenth day after the

date of the judgment, pursuant to 18 U.S.C.

§ 3612(f). All of the payment options on Sheet 6, may

be subject to penalties for delinquency and default,

pursuant to 18 U.S.C. § 3612(g).

| | The court determined that the defendant does not

have the ability to pay interest, and it is ordered

that:

* Findings for the total amount of losses are required under

Chapters 109A, 110, 110A, and 113A of Title 18, for offenses

committed on or after September 13, 1994 but before April 23,

1996

App. 55

{| }The interest requirement is waived for the

[ J} fine [ ] restitution.

[ ] the interest requirement for the

{ | fine [ ] restitution is modified as follows:

SCHEDULE OF PAYMENTS

Having assessed the defendant’s ability to pay,

payment of the total criminal monetary penalties are

due as follows:

A |x] Lump sum payment of $1,150.00 due imme-

diately, balance due to be determined.

{ ] not later than , or

[ Jin accordance with ( )C, ( )D,()E, or

(x) F below; or

B [|] Payment to begin immediately (may be

combined with ( )C, ( )Dor, ( ) F below); or

C [| ] Payment in equal (e.g., weekly, monthly, quar-

terly) installments of $ over a period of (e.g.,

months or years), to commence (e.g., 30 or

60 days) after the date of this judgment; or

D [ | Payment in equal (e.g., weekly, monthly, quar-

terly) installments of $ over a periodof__ (e.g..,

months or years), tocommence __ (e.g., 30 or

60 days) after release from imprisonmerit to a

term of supervision; or

K | | Payment during the term of supervised release

will commence within (e.g., 30 or 60 days) after

release from imprisonment. The court will set

the payment plan based on an assessment of

the defendant’s ability to pay at that time; or

App. 56

F | | Special instructions regarding the payment of

criminal monetary penalties:

Unless the court has expressly ordered otherwise, if

this judgment imposes imprisonment, payment

of criminal monetary penalties is due during impris-

onment. All criminal monetary penalties, except

those payments made through the Federal Bureau of

Prisons’ Inmate Financial Responsibility Program,

are made to the clerk of the court.

The defendant shall receive credit for all payments

previously made toward any criminal monetary

penalties imposed.

| | Joint and Several

Defendant |Case Total |Joint Corresponding

and co- Numbers |Amount | and Payee (if

defendant |(including Several | appropriate)

Names defendant Amount

number)

— oe eS

{ ] The defendant shall pay the cost of pros-

ecution.

| |} The defendant shall pay the following court

cost(s):

| | The defendant shall forfeit the defendant's

interest in the following property to the United

States:

App. 57

Payments shall be applied in the following order:

(1) assessment, (2) restitution principal, (3) restitution

interest, (4) fine principal, (5) fine interest, (6) com-

munity restitution, (7) penalties, and (8) costs,

including cost of prosecution and court costs.

App. 58

Effective: May 20, 2009

18 U.S.C.A. § 1956 Laundering of monetary

instruments

(a)(1) Whoever, knowing that the property involved

in a financial transaction represents the proceeds of

some form of unlawful activity, conducts or attempts

to conduct such a financial transaction which in fact

involves the proceeds ef specified unlawful activity —

(A)(i) with the intent to promote the carrying

on of specified unlawful activity; or

(ii) with intent to engage in conduct con-

stituting a violation of section 7201 or 7206 of the

Internal Revenue Code of 1986; or

(B) knowing that the transaction is 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; or

(ii) to avoid a _ transaction § reporting

requirement under State or Federal law,

shall be sentenced to a fine of not more than $500,000

or twice the value of the property involved in the

transaction, whichever is greater, or imprisonment

for not more than twenty years, or both. For purposes

of this paragraph, a financial transaction shall be

considered to be one involving the proceeds of

specified unlawful activity if it is part of a set of

parallel or dependent transactions, any one of which

App. 59

involves the proceeds of specified unlawful activity,

and all of which are part of a single plan or

arrangement.

(2) Whoever transports, transmits, or transfers, or

attempts to transport, transmit, or transfer a

monetary instrument or funds from a place in the

United States to or through a place outside the

United States or to a place in the United States from

or through a place outside the United States —

(A) with the intent to promote the carrying on

of specified unlawful activity; or

‘B) knowing that the monetary instrument or

funds involved in the transportation, trans-

mission, or transfer represent the proceeds of

some form of unlawful activity and knowing that

such transportation, transmission, or transfer is

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; or

(ii) to avoid a _ transaction’ reporting

reguirement under State or Federal law,

shall be sentenced to a iine of not more than $500,000

or twice the value of the monetary instrument or

funds involved in the transportation, transmission, or

transfer whichever is greater, or imprisonment for not

more than twenty years, or both. For the purpose of

the offense described in subparagraph (B), the

defendant’s knowledge may be established by proof

App. 60

that a law enforcement officer represented the matter

specified in subparagraph (B) as true, and the

defendant’s subsequent statements or _ actions

indicate that the defendant believed such represen-

tations to be true.

(3) Whoever, with the intent —

{A) to promote the carrying on of specified

unlawful activity;

(B) to conceal or disguise the nature, location,

source, ownership, or control of property believed

to be the proceeds of specified unlawful activity;

ment under State or Federal law,

conducts or attempts to conduct a financial

transaction involving property represented to be the

proceeds of specified unlawful activity, or property

used to conduct or facilitate specified unlawful

activity, shall be fined under this title or imprisoned

for not more than 20 years, or both. For purposes of

this paragraph and paragraph (2), the term

“represented” means any representation made by a

law enforcement officer or by another person at the

direction of, or with the approval of, a Federal official

authorized to investigate or prosecute violations of

this section.

(b) Penalties. —

(1) In general. — Whoever conducts’ or

attempts to conduct a transaction described 1n

App. 61

subsection (a)\(l) or (a)(3), or section 1957, or

a transportation, trarsmission, or transfer

described in subsection (a)(2), is liable to the

United States for a civil penalty of not more than

the greater of —

(A) the value of the property, funds, or

monetary instruments involved in_ the

transaction; or

(B) $10,000.

(2) Jurisdiction over foreign persons. — For

purposes of adjudicating an action filed or

enforcing a penalty ordered under this section,

the district courts shall have jurisdiction over

any foreign person, including any financial

institution authorized under the laws of a foreign

country, against whom the action is brought, if

service of process upon the foreign person is

made under the Federal Rules of Civil Procedure

or the laws of the country in which the foreign

person is found, and —

(A) the foreign person commits an offense

under subsection (a) involving a financial

transaction that occurs in whole or in part in

the United States;

(B) the foreign person converts, to his or

her own use, property in which the United

States has an ownership interest by virtue of

the entry of an order of f>rfeiture by a court

of the United States; or

institution that maintains a bank account at

a financial institution in the United States.

(3)

App. 62

Court authority over assets. — A court

may issue a pretrial restraining order or take any

other action necessary to ensure that any bank

account or other property held by the defendant

in the United States is available to satisfy a

judgy#ent under this section.

(4)

Federal receiver. —

(A) In general. — A court may appoint a

Federa: Receiver, in accordance with sub-

paragraph (B) of this paregraph, to collect,

marshal, and take custody, control, and

possession of all assets of the defendant,

wherever located, to satisfy a civil judgment

under this subsection, a forfeiture judgment

under section 981 or 982, or a criminal

sentence under section 1957 or subsection (a)

of this section, including an order of

restitution to any victim of a_ specified

unlawful activity.

(B) Appointment and authority. -— A

Federal Receiver described in subparagraph

(A) -

(i) may be appointed upon application

of a Federal prosecutor or a Federal or

State regulator, by the court having

jurisdiction over the defendant in the

case;

(ii) shall be an officer of the court, and

the powers of the Federal Receiver shall

include the powers set out in section 754

of title 28, United States Code; and

(c)

App. 63

(iii) shall have standing equivalent to

that of a Federal prosecutor for the

purpose of submitting requests to obtain

information regarding the assets of the

defendant —

(I) from the Financial Crimes

Enforcement Network of _ the

Department of the Treasury; or

(II) from a foreign country pur-

suant to a mutual legal assistance

treaty, multilateral agreement, or

other arrangement for international

law enforcement assistance, pro-

vided that such requests are in

accordance with the policies and

procedures of the Attorney General.

As used in this section —

(1) the term “knowing that the _ property

involved in a financial transaction represents the

proceeds of some form of unlawful activity”

means that the person knew the _ property

involved in the transaction represented proceeds

from some form, though not necessarily which

form, of activity that constitutes a felony under

State, Federal, or foreign law, regardless of

whether or not such activity is specified in

paragraph (7);

(2) the term “conducts” includes aitiating,

concluding, or participating in isiiating, or

concluding a transaction;

(3) the term “transaction” includes a purchase,

sale, loan, pledge, gift, transfer, delivery, or other

App. 64

disposition, and with respect to a financial

institution includes a deposit, withdrawal,

transfer between accounts, exchange of currency,

loan, extension of credit, purchase or sale of any

stock, bond, certificate of deposit, or other

monetary instrument, use of a safe deposit box,

or any other payment, transfer, or delivery by,

through, or to a financial institution, by whatever

means effected;

(4) the term “financial transaction” means (A) a

transaction which in any way or degree affects

interstate or foreign commerce (i) involving the

movement of funds by wire or other means or (ii)

involving one or more monetary instruments, or

(iii) involving the transfer of title to any real

property, vehicle, vessel, or aircraft, or (B) a

transaction involving the use of a financial

institution which is engaged in, or the activities

of which affect, interstate or foreign commerce in

any way or degree;

(5) the term “monetary instruments” means (i)

coin or currency of the United States or of any

other country, travelers’ checks, personal checks,

bank checks, and money orders, or (ii)

investment securities or negotiable instruments,

in bearer form or otherwise in such form that

title thereto passes upon delivery;

(6) the term “financial institution” includes —

(A) any financial institution, as defined in

section 5312(a)(2) of title 31, United States

Code, or the regulations promulgated there-

under; and

App. 65

(B) any foreign bank, as defined in section

1 [FN1] of the International Banking Act of

1978 (12 U.S.C. 3101);

(7) the term “specified unlawful activity”

means —

(A) any act or activity constituting an

offense listed in section 1961(1) of this title

except an act which is indictable under

subchapter II of chapter 53 of title 31;

(B) with respect to a financial transaction

occurring in whole or in part in the United

States, an offense against a foreign nation

involving —

(i) the manufacture, importation, sale,

or distribution of a controlled substance

(as such term is defined for the purposes

of the Controlled Substances Act);

(ii) murder, kidnapping, robbery, extor-

tion, destruction of property by means of

explosive or fire, or a crime of violence

(as defined in section 16);

(iii) fraud, or any scheme or attempt to

defraud, by or against a foreign bank (as

defined in paragraph 7 of section 1(b) of

the International Banking Act of 1978));

|FN2]

(iv) bribery of a public official, or the

misappropriation, theft, or embezzle-

ment of public funds by or for the benefit

of a public official;

App. 66

(v) smuggling or export’ control

violations involving —

(I) an item controlled on _ the

United States Munitions List estab-

lished under section 38 of the Arms

Export Control Act (22 U.S.C. 2778);

(II) an item controlled under regu-

lations under the Export Adminis-

tration Regulations (15 C.F.R. Parts

730-774);

(vi) an offense with respect to which

the United States would be obligated by

a multilateral treaty, either to extradite

the alleged offender or to submit the

case for prosecution, if the offender were

found within the territory of the United

States; or

(vii) trafficking in persons, selling or

buying of children, sexual exploitation of

children, or transporting, recruiting or

harboring a person, including a child, for

commercial sex acts;

continuing criminal enterprise, as that term

is defined in section 408 of the Controlled

Substances Act (21 U.S.C. 848);

(D) an offense under section 32 (relating

to the destruction of aircraft), section 37

(relating to violence at _ international

airports), section 115 (relating to influencing,

impeding, or retaliating against a Federal

App. 67

official by threatening or injuring a family

member), section 152 (relating to conceal-

ment of assets; false oaths and claims;

bribery), section 175c (relating to the variola

virus), section 215 (relating to commissions

or gifts for procuring loans), section 351

(relating to congressional or Cabinet officer

assassination), any of sections 500 through

503 (relating to certain counterfeiting

offenses), section 513 (relating to securities

of States and private entities), section 541

(relating to goods falsely classified), section

542 (relating to entry of goods by means of

false statements), section 545 (relating to

smuggling goods into the United States),

section 549 (relating to removing goods from

Customs custody), section 554 (relating to

smuggling goods from the United States),

section 641 (relating to public money,

property, or records), section 656 (relating to

theft, embezzlement, or misapplication by

bank officer or employee), section 657

(relating to lending, credit, and insurance

institutions), section 658 (relating to

property mortgaged or pledged to farm credit

agencies), section 666 (relating to theft or

bribery concerning programs _ receiving

Federal funds), section 793, 794, or 798

(relating to espionage), section 831 (relating

to prohibited transactions involving nuclear

materials), section 844(f) or (i) (relating to

destruction by explosives or fire of Govern-

ment property or property affecting inter-

state or foreign commerce), section 875

(relating to interstate communications),

App. 68

section 922(1) (relating to the unlawful

importation of firearms), section 924(n)

(relating to firearms trafficking), section 956

(relating to conspiracy to kill, kidnap, maim,

or injure certain property in a foreign

country), section 1005 (relating to fraudulent

bank entries), 1006 [FN3] (relating to

fraudulent Federal credit institution

entries), 1007 [FN3] (relating to fraudulent

Federal Deposit Insurance transactions),

1014 [FN3] (relating to fraudulent loan or

credit applications), section 1030 (relating to

computer fraud and abuse), 1032 [FN3]

(relating to concealment of assets from

conservator, receiver, or liquidating agent of

financial institution), section 1111 (relating

to murder), section 1114 (relating to murder

of United States law enforcement officials),

section 1116 (relating to murder of foreign

officials, official guests, or internationally

protected persons), section 1201 (relating to

kidnaping), section 1203 (relating to hostage

taking), section 1361 (relating to willful

injury of Government property), section 1363

(relating to destruction of property within

the special maritime and __= territorial

jurisdiction), section 1708 (theft from the

mail), section 1751 (relating to Presidential

assassination), section 2113 or 2114 (relating

to bank and postal robbery and theft),

section 2252A (relating to child pornography)

where the child pornography contains a

visual depiction of an actual minor engaging

in sexually explicit conduct, section 2260

(production of certain child pornography for

App. 69

importation into the United States), section

2280 (relating to violence against maritime

navigation), section 2281 (relating to violence

against maritime fixed platforms), section

2319 (relating to copyright infringement),

section 2320 (relating to trafficking in

counterfeit goods and services), section 2332

(relating to terrorist acts abroad against

United States nationals), section 2332a

(relating to use of weapons of mass

destruction), section 2332b (relating to

international terrorist acts transcending

national boundaries), section 2332g (relating

to missile systems designed to destroy

aircraft), section 2332h (relating to

radiological dispersal devices), section 2339A

or 2339B (relating to providing material

support to terrorists), section 2339C (relating

to financing of terrorism), or section 2339D

(relating to receiving military-type training

from a foreign terrorist organization) of this

title, section 46502 of title 49, United States

Code, a felony violation of the Chemical

Diversion and Trafficking Act of 1988

(relating to precursor and_— essential

chemicals), section 590 of the Tariff Act of

1930 (19 U.S.C. 1590) (relating to aviation

smuggling), section 422 of the Controlled

Substances Act (relating to transportation of

drug paraphernalia), section 38(c) (relating

to criminal violations) of the Arms Export

Control Act, section 11 (relating to violations)

of the Export Administration Act of 1979,

section 206 (relating to penalties) of the

International Emergency Economic Powers

App. 70

Act, section 16 (relating to offenses and

punishment) of the Trading with the Enemy

Act, any felony violation of section 15 of the

Food and Nutrition Act of 2008 [7 U.S.C.A.

§ 2024] (relating to supplemental nutrition

assistance program benefits fraud) involving

a quantity of benefits having a value of not

less than $5,000, any violation of section

543(a)(1) of the Housing Act of 1949 [42

U.S.C.A. § 1490s(a\(1)] (relating to equity

skimming), any felony violation of the

Foreign Agents Registration Act of 1938, any

felony violation of the Foreign Corrupt

Practices Act, or section 92 of the Atomic

Energy Act of 1954 (42 U.S.C. 2122) (relating

to prohibitions governing atomic weapons)

[FN4)]

ENVIRONMENTAL CRIMES

(8)

(E) a felony violation of the Federal Water

Pollution Control Act (33 U.S.C. 1251 et

seq.), the Ocean Dumping Act (33 U.S.C,

1401 et seq.), the Act to Prevent Pollution

from Ships (33 U.S.C. 1901 et seq.), the Safe

Drinking Water Act (42 U.S.C. 300f et seq.),

or the Resources Conservation and Recovery

Act (42 U.S.C. 6901 et seq.); or

(F) any act or activity constituting an

offense involving a Federal health care

offense;

the term “State” includes a State of the

United States, the District of Columbia, and any

App. 71

commonwealth, territory, or possession of the

United States; and

(9) the term “proceeds” means any property

derived from or obtained or retained, directly

or indirectly, through some form of unlawful

activity, including the gross receipts of such

activity.

(d) Nothing in this section shall supersede any

provision of Federal, State, or other law imposing

criminal penalties or affording civil remedies in

addition to those provided for in this section.

(e) Violations of this section may be investigated by

such components of the Department of Justice as the

Attorney General may direct, and by such compo-

nents of the Department of the Treasury as the

Secretary of the Treasury may direct, as appropriate,

and, with respect to offenses over which the

Department of Homeland Security has jurisdiction,

by such components of the Department of Homeland

Security as the Secretary of Homeland Security may

direct, and, with respect to offenses over which the

United States Postal Service has jurisdiction, by the

Postal Service. Such authority of the Secretary of the

Treasury, the Secretary of Homeland Security, and

the Postal Service shall be exercised in accordance

with an agreement which shail be entered into by the

Secretary of the Treasury, the Secretary of Homeland

Security, the Postal Service, and the Attorney

General. Violations of this section involving offenses

described in paragraph (c)(7)(E) may be investigated

by such components of the Department of Justice as

App. 72

the Attorney General may direct, and the National

Enforcement Investigations Center of the Environ-

mental Protection Agency.

(f) There is extraterritorial jurisdiction over the

conduct prohibited by this section if —

(1) the conduct is by a United States citizen or,

in the case of a non-United States citizen, the

conduct occurs in part in the United States; and

(2) the transaction or series of related

transactions involves funds or monetary instru-

ments of a value exceeding $10,000.

(g) Notice of conviction of financial

institutions. — If any financial institution or any

officer, director, or employee of any financial

institution has been found guilty of an offense under

this section, section 1957 or 1960 of this title, or

section 5322 or 5324 of title 31, the Attorney General

shall provide written notice of such fact to the

appropriate regulatory agency for the financial

institution.

(h) Any person who conspires to commit any offense

defined in this section or section 1957 shall be subject

to the same penalties as those prescribed for the

offense the commission of which was the object of the

conspiracy.

(i) Venue. — (1) Except as provided in paragraph

(2), a prosecution for an offense under this section or

section 1957 may be brought in —

App. 73

(A) any district in which the financial or

monetary transaction is conducted; or

(B) any district where a prosecution for the

underlying specified unlawful activity could be

brought, if the defendant participated in the

transfer of the proceeds of the specified unlawful

activity from that district to the district where

the financial or monetary’ transaction is

conducted.

(2) A prosecution for an attempt or conspiracy

offense under this section or section 1957 may be

brought in the district where venue would lie for the

completed offense under paragraph (1), or in any

other district where an act in furtherance of the

attempt or conspiracy took place.

(3) For purposes of this section, a transfer of funds

from 1 place to another, by wire or any other means,

shall constitute a single, continuing transaction. Any

person who conducts (as that term is defined in

subsection (c)(2)) any portion of the transaction may

be charged in any district in which the transaction

takes place.

So in original. Probably should read “section1(b)”.

* So in original. The second closing parenthesis probably

should not appear.

’ So in original. Probably should be preceded by “section”.

* So in original. Probably should have a semicolon at the

end.

App. 74

ROBERT S. MUELLER, III (CSBN 59775)

United States Attorney

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

UNITED STATES

OF AMERICA,

Piaintiff,

No. CR 00-0284-MJJ

)

) VIOLATIONS: Title 18, United

’ States Code, § 1956(h) —

Conspiracy to Commit Money

Laundering; Title 18, United

PAVEL IVANOVICH ? States Code, § 1956(a) — Money

LAZARENKO, a/k/a) Laundering; Title 18, United

“Pavlo Ivanovych ; States Code, § 1343 — Wire

Lazarenko,” ’ Fraud; Title 18, United States

Defendant . Code, § 2314 — Transportation

of Stolen Property; Title 18,

| United States Code, Section 2 —

( Aiding and Abetting

)

SAN FRANCISCO VENUE

SECOND SUPERSEDING INDICTMENT

(Filed July 19, 2001)

I. INTRODUCTION

1. At all times relevant to this indictment,

Pavel Ivanovich Lazarenko, a/k/a/ “Pavlo Ivanovych

Lazarenko” (hereafter “Lazarenko”), was a citizen

and resident of Ukraine.

App. 75

2. From March of 1992 through June of 1994,

Lazarenko was a Representative of the President of

Ukraine in the Dnepropetrovsk District of Ukraine.

3. From June of 1994 through July of 1995,

Lazarenko was the Chairman of the Dnepropetrovsk

District Council of People’s Deputies.

4. From July of 1995 through September of

1995, Lazarenko was the Head of the Dnepropetrovsk

District government.

5. From September of 1995 through May of

1996, Lazarenko was the First Vice Prime Minister of

Ukraine.

6. On May 28, 1996, Lazarenko became the

Prime Minister of Ukraine, a position he held until

7. After July 1, 1997, Lazarenko became a

member of the Ukrainian Parliament and the head of

the Hromada Party.

8. At all times relevant to the charges herein,

Peter Nikolayevich Kiritchenko (hereinafter “Kiritchenko”

was a citizen of Ukraine.

9. On December 14, 1990, Kiritchenko formed,

among other enterprises, a Poland-based firm named

Agrosnabsbyt, also known by its English acronym,

ASS, Ltd. (“Agresnabsbyt/ASS”), which engaged in

business in Ukraine, Poland, and elsewhere.

10. In 1991, Kiritchenko incorporated ABS Enter-

prises, Inc., in Delaware, and, in 1994, incorporated

App. 76

ABS Trading, Inc. in California, which he merged

with ABS Enterprises, Inc. (“ABS”). Since 1994 ABS

has been wholly owned by Agrosnabsbyt/ASS and

engaged in business in the United States, Ukraine,

and elsewhere.

11. ABS maintained its offices in San Francisco,

California until August 1997, when it moved its

offices to Sausalito, California.

12. Since approximately March 1995, Kiritchenko

has been a resident of California and the United

States.

13. On September 14, 1995, Kiritchenko was

named an advisor to Lazarenko, who at the time was

First Deputy Prime Minister, by Directive No. 586 of

the Ukrainian Cabinet of Ministers.

14. On July 12, 1996, Kintchenko was named

as an advisor to then-Prime Minister Lazarenko by

Ukrainian Cabinet of Ministers Directive 596. He

served as an advisor until he and Lazarenko were

dismissed by Ukrainian Cabinet of Ministers Di-

rective 677 on July 3, 1997.

COUNT ONE: (18 U.S.C. § 1956(h) — Conspiracy to

Commit Money Laundering)

15. The allegations set forth in Paragraphs One

through Fourteen of this Second Superseding Indict-

ment are hereby incorporated by reference.

App. 77

16. On or about and between January 1992 and

June 1999, both dates being approximate and inclu-

sive, in the Northern District of California, and else-

where, the defendant

PAVEL IVANOVICH LAZARENKO,

a/k/a “Pavlo Ivanovych Lazarenko,”

together with Peter Nickolayevich Kiritchenko and

others, did knowingly and intentionally conspire to

conduct and attempt to conduct financial transactions

affecting interstate and foreign commerce, which

transactions involved the proceeds of specified unlaw-

ful activity, to wit — extortion as specified in 18 U.S.C.

§ 1956(c)(7)(B)(ii); wire fraud in violation of 18 U.S.C.

§ 1343 and § 1346; and receipt and transfer of prop-

erty that was stolen, unlawfully converted, and taken

by fraud in violation of 18 U.S.C. § 2314 and § 2315 —

knowing that the transactions were designed in

whole or in part to conceal and disguise the nature,

location, source, ownership, and control of the pro-

ceeds of the specified unlawful activity, and while

conducting and attempting to conduct such financial

transactions knowing that the property involved in

the financial transactions represented the proceeds of

some form of unlawful activity, in violation of 18

U.S.C. §1956(a)(1) and (2).

Il. THE MANNER AND MEANS OF THE CON-

SPIRACY

17. It was part of the conspiracy that

Lazarenko, as a government official in Ukraine,

App. 78

would engage in various acts of extortion and fraud,

and would receive funds that had been stolen,

converted and taken by fraud, and would transfer the

proceeds of this activity into bank accounts in

Switzerland, Antigua, Poland, the United States, and

elsewhere.

18. It was further part of the conspiracy that

Lazarenko induced Kiritchenko to assist Lazarenko

to open bank accounts in Switzerland, Antigua,

Poland, and the United States, and to transfer the

proceeds of fraud and extortion into and out of these

bank accounts in an effort to conceal and disguise the

nature, location, source, ownership, and control of the

proceeds of the specified unlawful activity.

A. The Extortion and Frauds

1. The Extortion

19. It was part of the conspiracy’ that

Lazarenko, while a government official in Ukraine,

obtained property, including money and ownership

interests in certain companies, from individuals and

entities, with their consent, induced by wrongful use

of actual or threatened fear of economic harm, and

under color of official right.

a. Beginning sometime in 1992, when

Lazarenko was a Representative of the President of

Ukraine in Dnepropetrovsk, he met with Kiritchenko

and by threat of economic harm and under color of

official right induced Kiritchenko to transfer to a

App. 79

relative of Lazarenko’s a 50% _ interest in

Agrosnabsbyt/ASS, which was doing business in

Ukraine, and to pay Lazarenko 50% of the profits of

the business.

1) In approximately January 1993,

Kiritchenko transferred a 50% interest’ in

Agrosnabsbyt/ASS to Ekaterina S. Karova, a relative

of Lazarenko, and transferred $40,000 to an account

controlled by Lazarenko.

2) Thereafter, Kiritchenko transferred

50% of the profits of the business to accounts

controlled by Lazarenko as Lazarenko’s “share” of the

profits of Kiritchenko’s business in Ukraine.

b. Beginning sometime in 1993, when

Lazarenko was a Representative of the President of

Ukraine in Dnepropetrovsk, he met with Alexei

Alexandrovich Dityatkovsky (hereinafter “Dityatkovsky”),

who at that time was a resident of Ukraine, and by

threat of economic harm and under color of official

right induced Dityatkovsky to transfer to Lazarenko

a 50% interest in his business activity in Ukraine and

to pay Lazarenko a percentage of the profits of the

business.

1) Dityatkovsky thereafter registered a

company, called Dneproneft, and gave Lazarenko a

50% interest in that company, which interest was

held in the name of Lazarenko’s former driver and

associate, Leonid Gadyatsky.

App. 80

2) Thereafter, Dityatkovsky transferred

a percentage of the profits of his business to accounts

controlled by Lazarenko.

2. The Frauds

a. Lazarenko Transferred Money That

Had Been Stolen, Converted and

Taken By Fraud

1) The Naukovy Fraud

20. It was further part of the conspiracy that

Lazarenko, while a government official in Ukraine,

received and transferred money that had been stolen,

converted and taken by fraud from Ukraine as

foilows:

a. From at least approximately 1992

Mykola Agafonov was the director of Naukovy State

Farm, a Ukrainian government enterprise located in

Dnepropetrovsk, Ukraine, that produced milk and

dairy products.

b. During the time that Lazarenko was a

government official in Dnepropetrovsk, Naukovy

State Farm received certain benefits and privileges

from the government of Ukraine, including the right

to export from Ukraine metal products and raw

materials produced by other Ukrainian state

enterprises.

c. During 1992, Agafonov entered into a

business relationship with Van der Ploeg von

Terpstra, B.V., in Leeuwarden, The Netherlands, a

App. 81

producer of dairy cattle, milking equipment, and

related products. Sometime prior to January 1993,

Rienz Van der Ploeg, the director of Van der Ploeg

von Terpstra, made available Van der Ploeg’s foreign

currency account at ABN Amro Bank in Leeuwarden

for use by Agafonov. Thereafter, money derived from

the sale of Ukrainian metal products and raw

materials was deposited into that account on behalf of

Naukovy State Farm.

d. During 1992, Lazarenko, through his

deputy, instructed the director of Nikopolsky Metal

Works factory in Dnepropetrovsk to transfer $2,400,000

from Nikopolsky’s hard currency account to the Van

der Ploeg ABN Amro account. Lazarenko told the

deputy that this money was to be used to buy wheat,

but no wheat was ever purchased with the money.

Instead, on January 19, 1993, $1,200,000 of the

money was transferred from the ABN Amro account

to an account in Hungary opened by Agafonov, and on

June 9, 1993, $1,205,000 was transferred from this

account to an account controlled by Lazarenko in

Fribourg, Switzerland. Thereafter, Lazarenko caused

the transfer of these funds, among others, to bank

accounts in the United States, including a transfer of

$1,800,000 on July 1, 1994 to an account at Bank of

America in San Francisco, California.

e. Between 1992 and 1994, Agafonov, on

behalf of Naukovy State Farm, entered into a series

of agreements with Van der Ploeg for the purchase of

cattle and other related supplies by Naukovy State

Farm, pursuant to which the cattle and other related

App. 82

supplies were to be paid for in part with Ukrainian

government funds and in part from the proceeds of

the sale of metal products and raw materials from

state enterprises exported from Ukraine.

f. Between 1992 and 1994, approximately

$38,000,000 of the proceeds from the sale of metals

and raw materials, which were sold by or on behalf of

Naukovy State Farm, were deposited into Van der

Ploeg’s ABN Amro account.

g. Between 1992 and 1994, Agafonov ex-

pended approximately $13,000,000 of these proceeds

to purchase cattle and other supplies for Naukovy

State Farm.

h. Between 1992 and 1994, Agafonov trans-

ferred a portion of the proceeds of the sale of metals

and raw materials into accounts controlled by

Lazarenko. The transfers to Lazarenko included a

transfer on January 24, 1994 of $2,972,000 and on

March 8, 1994 of $4,000,000 to an account in Zurich,

Switzerland; and a transfer on November 22, 1994 of

$6,014,000 to an account in Geneva, Switzerland,

which was subsequently transferred to another

account in Switzerland controlled by Lazarenko.

i. Beginning in 1993, Agafonov asked Rienz

Van der Ploeg to sign false contracts written in

Russian which falsely represented the value of cattle

supplied by Van der Ploeg to Naukovy to be approx-

imately $2,400 per head, whereas in fact the actual

value of the cattle was approximately $1,300 per

head, and which falsely represented that Naukovy

App. 83

had purchased millions of other goods, whereas in

fact such goods had not been purchased. These con-

tracts were subsequently kept in the files of Naukovy

State Farm, thereby falsely representing that money

received from the sale of metals and raw materials

had been spent to acquire cattle and other goods for

Naukovy State Farm, when in fact the money had

been paid to Agafonov, Lazarenko, and others.

2) The UESU Frauds

22. It was further part of the conspiracy that

Lazarenko, when he was the First Vice Prime Min-

ister and the Prime Minister of Ukraine, received and

transferred money that had been stolen, converted

and taken by fraud in connection with the distribu-

tion of natural gas in Ukraine, as follows:

a. In approximately September 1995,

Lazarenko, as First Vice Prime Minister of Ukraine,

became responsible for the energy section in the

Ukrainian government.

b. Beginning in approximately December

1995, a Ukrainian company called United Energy

Systems of Ukraine (““UESU”), which was created on

November 20, 1995 by Yulia 'Eymoshenko, an associ-

ate of Lazarenko’s, was designated by the Ukrainian

government as one of several companies to supply

natural gas to Ukraine. UEFSU was given the author-

ity to distribute natural gas to the Dnepropetrovsk

region of Ukraine.

App. 84

c. From approximately December’ 1995

until sometime in 1997, UESU received deliveries of

natural gas from RAO Gazprom pursuant to contracts

entered on December 29, 1995 and December 31,

1996 between RAO Gazprom, UESU, and others.

d. Beginning in approximately January

1996, UESU fraudulently conveyed title to the im-

ported natural gas to United Energy International,

Ltd. (““UEIL”), an 85% shareholder of UESU that was

created on October 17, 1995, in London, England by a

Turkish national named Ercument Aksoy, at the di-

rection of Yulia Tymoshenko, and fraudulently di-

verted to foreign bank accounts belonging to UEIL

the payments from Ukrainian customers for the

natural gas delivered by UESU.

e. Between April 8, 1996 and December 31,

1996, rather than pay RAO Gazprom for the delivered

gas with the money that had been transferred to

UEIL, UEIL transferred approximately $140,000,000

to Somolli Enterprises, a Cypriot company that was

registered in Cyprus on October 8, 1992, and was

controlled by Yulia Tymoshenko and others.

f. Between April 1996 and Junc 1997,

Somolli Enterprises and UESU transferred a total of

approximately $97,000,000 into accounts that were

controlled by Kiritchenko in Switzerland, Poland, and

the United States, including transfers totaling ap-

proximately $13,000,000 to bank accounts in the

Northern District of California.

App. 85

g. Between February of 1996 and Septem-

ber of 1997, the money from Somolli, along with other

funds, totaling more than $120,000,000 was trans-

ferred from Kiritchenko’s accounts into accounts

controlled by Lazarenko in Switzerland and Antigua.

h. Thereafter, Lazarenko transferred por-

tions of these funds from Switzerland into bank

accounts in the Northern District of California, in-

cluding two transfers of $14,000,000 each on August

1, 1997.

3) The PMH/GHP Fraud

23. It was further part of the conspiracy that

Lazarenko, while he was the Prime Minister of

Ukraine, received and transferred money that had

been stolen, converted and taken by fraud by GHP

Corporation, as follows:

a. GHP Corporation was incorporated in

Panama on June 14, 1996, and was controlled by

Lazarenko and by Kiritchenko pursuant to a power of

attorney.

b. During 1997, as Prime Minister of

Ukraine, Lazarenko exercised his official authority in

favor of GHP Corporation by ensuring that the

Ukrainian Cabinet of Ministers entered a contract

with GHP Corporation for the purchase of six pre-

fabricated homes.

ec. On January 24, 1997, GHP Corporation

entered into a contract with Pacific Modern Homes

App. 86

(“PMH”) of Elk Grove, California, in which GP Cor-

poration agreed to purchase six prefabricated homes

for a total price of $524,763, to be shipped to the

Ukrainian Cabinet of Ministers by PMH.

d. On January 27, 1997, GHP Corporation

entered into a contract with the Ukrainian Cabinet of

Ministers in which GHP Corporation agreed to sell to

the government of Ukraine six prefabricated homes

for a total price of $1,416,000.

e. When the homes were delivered to

Ukraine, representatives of GHP Corporation pre-

sented false invoices to the Kiev Regional Customs-

house to make it appear as though GHP Corporation

was the shipper of the homes and had paid

$1,416,006, as provided in the contract between GHP

Corporation and the Ukrainian Cabinet of Ministers,

when in fact PMH had shipped the homes and the

homes actually cost only $524,763.

f. To pay for the homes, two wire transfers

were made from Ukrainian government accounts to a

GHP account in Switzerland, the first on January 30,

1997 and the second on March 18, 1997, for $708,000

each, or $1,416,000 total.

g. One half of the difference of $889,749

between the price paid for the homes by GHP Cor-

poration and the price paid for the homes by the

Ukrainian Cabinet of Ministers was transferred to

accounts controlled by Lazarenko.

App. 87

b. Lazarenko Devised a Scheme and Ar-

tifice to Defraud, to Obtain Money by

False and Fraudulent Pretenses, and

to Deprive the People and Govern-

ment of Ukraine of Their Right to his

Honest and Faithful Services.

24. It was further part of the conspiracy that

Lazarenko, while a government official in Ukraine,

devised a scheme and artifice to defraud and to

obtain money and property by means of false and

fraudulent pretenses, and to deprive the people and

government of Ukraine of their right to his honest

and faithful services as more fully set forth below in

Paragraphs Thirty-Two through Thirty-Eight, and

knowingly caused wire transfers of funds into bank

accounts in the Northern District of California, as set

forth below in Paragraph 40, and thereafter con-

ducted financial transactions involving the proceeds

of this fraud.

B. The Means of Disguising and Concealing

Payments of Money

25. It was further part of the conspiracy that

Lazarenko, while a government official in Ukraine

and continuing until 1999, devised a means of dis-

guising and concealing the money he was receiving

from extortion and fraud including, but not limited to,

the payments described above, by creating and caus-

ing the creation of various shell corporations and

bank accounts into which he would deposit or direct

the deposit of money from individuals and businesses

App. 88

in Ukraine, and from which he would transfer or

direct the transfer of money to mimself or to entities

he controlled.

1. The Swiss Bank Accounts

a. In March 1993, Lazarenko opened Ac-

count No. [Financial Account Number Omitted] at

Union Bank of Switzerland in Fribourg, Switzerland

in the name of LIP Hande!] A.G.

b. Beginning sometime in 1994, Kiritchenko,

upon Lazarenko’s instructions, opened and/or man-

aged bank accounts Kiritchenko and Lazarenko

established in Switzerland and Poland to receive and

transfer the money Lazarenko received from extor-

tion and fraud, including, but not limited to, the

payments described above, in order to conceal and

disguise the nature, origin, location, source, owner-

ship and control of the money that was paid for the

benefit of Lazarenko.

c. The accounts opened and managed by

Kiritchenko included: accounts in the name of GHP

Corporation at Banque SCS Alliance (Account No.

[Financial Account Number Omitted]) and at Banque

Populaire Suisse (Account No. [Financial Account

Number Omitted); accownts in the name of ORPHIN,

SA at American Bank in Poland (Account [Financial

Account Number Omitted]) and at Banquo Populaire

Suisse (Account No. [Financial Account Number

Omitted]); an account in the name of Bainfield Com-

pany, Ltd. at Banque SCS Alliance (Account No.

App. 89

[Financial] Account Number Omitted]); an account

in the name of WILNORTH, Inc. at Banque SCS

Alliance (Account No. [Financial Account Number

Omitted]); and an account in the name of PADDOX

INDUSTRIES at Credit Suisse (Account No. [Finan-

cial Account Number Omitted]).

d. Beginning in 1994, Lazarenko caused

money to be deposited into Kiritchenko’s accounts,

and thereafter directed Kiritchenko to transfer into

accounts controlled by Lazarenko the money Lazarenko

received from extortion and fraud, including, but not

limited to, the payments described above, in order to

conceal and disguise the nature, origin, location,

source, ownership and control of the money that was

paid for the benefit of Lazarenko.

e. The accounts opened and controlled by

Lazarenko included: an account in the name of

KATO-82 at Credit Lyonnais (Suisse) (Account No.

[Financial Account Number Omitted]); an account in

the name of CARPQO-53 at Banque SCS Alliance

(Account No. [Financial Account Number Omitted)]));

arm account in the name of NIHPRO at Banque

Populaire Suisse (Account No. [Financial Account

Number Omitted]), and jater at Credit Suisse (Ac-

count No. [Financial Account Number Omitted]); an

account in the name of Lady Lake at Bank SCS

Alliance (Bahamas) (Account No. [Financial Account

Number Omitted]); and an account in the name of

Fairmont Group, Ltd. at Bank SCS Alliance

(Bahamas) (Account No. {Financial Account Number

Omitted ]).

App. 90

2. European Federal Credit Bank in Antigua

f. Between May and August of 1997,

Kiritchenko and Lazarenko began negotiations to

purchase and purchased a majority share of Euro-

pean Federal Credit Bank in St. John’s, Antigua

(hereinafter “Eurofed”) in order to facilitate the trans-

fers of money and to further conceal and disguise the

nature, origin, location, source, ownership and control

of the money that was paid for the benefit of

Lazarenko.

g. Between May and September 1997,

Lazarenko transferred or caused the transfer of ap-

proximately $95,000,000 that Lazarenko had pre-

viously received from extortion and fraud including,

but not limited to, the payments described above, into

accounts he and Kiritchenko controlled at Eurofed.

These accounts were used in part to conceal and

disguise the nature, origin, location, source, owner-

ship and control of the money paid for the benefit of

Lazarenko and these accounts included: an account

controlled by Kiritchenko in the name of ORPHIN

(Account No. [Financial Account Number Omitted]);

an account controlled by Lazarenko in the name of

Lady Lake (Account No. [Financial Account Number

Omitted]); an account controlled by Lazarenko in

the name of Fairmont (Account No. [Financial Ac-

count Number Omitted]); an account coritrolled by

Lazarenko in the name of Guardian Investments

Group, Ltd. (Account No. [Financial Account Number

Omitted]); an account controlled by Lazarenko in the

App. 91

name of Nemuro Industrial Group, Ltd. (Account No.

[Financial Account Number Omitted]); an account

controlled by Lazarenko in the name of Firstar (Ac-

count No. [Financial Account Number Omitted]); and

a personal account of Lazarenko’s (Account No. [Fi-

nancial Account Number Omitted])).

3. Transfers Into The United States

26. Between 1994 and 1999, Kiritchenko and

Lazarenko transferred approximately $114,000,000

that Lazarenko had received from extortion and

fraud, including, but not limited to, the payments

described above, into bank and brokerage accounts in

the United States for the purpose of concealing and

disguising the nature, origin, location, source, owner-

ship and control of the money that was paid for the

benefit of Lazarenko. These accounts included ac-

counts located in the Northern District of California

at Commercial Bank of San Francisco; Pacific Bank;

Merrill, Lynch, Fenner & Smith; WestAmcrica Bank;

Bank of America; Fleet Boston Robertson & Stephens;

and Hambrecht & Quist.

All in violation of Title 18, United States Code,

Section 1956(h).

COUNTS TWO THROUGH FIVE: (18 U-S.C.

§ 1956(a)(2) —- Money Laundering)

27. The allegations in Paragraphs One through

Fourteen and Seventeen through Twenty-Six of this

App. 92

Second Superseding Indictment are hereby

incorporated by reference.

28. On or about the specific dates set forth

below, in the Northern District of California and

elsewhere, the defendant

PAVEL IVANOVICH LAZARENKO,

a/k/a “Pavlo Ivanovych Lazarenko,”

aid transport, transmit, and transfer, and attempt to

transport, transmit and transfer, funds from a place

in the United States to or through a place outside the

United States, and to a place in the United States

from or through a place outside the United States,

that is, the wire transfers of money as set forth below,

knowing that the funds involved in the transpor-

tation, transmission, and transfers represented the

proceeds of some form of unlawful activity, and

knowing that such transportation, transmission, and

transfers were designed in whole or in part to conceal

and disguise the nature, source, ownership and

control of the proceeds of specified unlawful activity,

to wit: receipt and transfer of property that was

stolen, unlawfully converted, and taken by fraud in

violation of 18 U.S.C. § 2314 and § 2315; extortion as

specified in 18 U.S.C. § 1956(c)(7)(B)(ii); and wire

fraud in violation of 18 U.S.C. § 1343 and § 1346:

COUNT DATE FINANCIAL TRANSACTION

2 7/11/94 Wire transfer of $1,510,000 from

ABS Trading Bank of America

account number [Financial

Account Number Omitted] in

8/18/94

12/12/94

App. 93

San Francisco, CA, to CARPO-53

account number [Financial

Account Number Omitted] at

Banque SCS Alliance in Geneva,

Switzerland

Wire transfer of $968,000 from

ABS Trading Bank of America

account number [Financial

Account Number Omitted] in

San Francisco, CA, to CARPO-53

account number [Financial

Account Number Omitted] at

Banque SCS Alliance in Geneva,

Switzerland

Wire transfer of $1,963,000 from

AES Trading Bank of America

account number [Financial

Account Number Omitted] in

San Francisco, CA, to CARPO-53

account number [Financial

Account Number Omitted] at

Banque SCS Alliance in Geneva,

Switzerland

Wire transfer of $2.210,000 from

ABS Trading Bank of America

account |Financial Account

Number Omitted] in San

Francisco, CA to NIHPRO

account number [Financial

Account Number Omitted!

at Banque Populaire Suisse

in Geneva, Switzerland

App. 94

All in violation of Title 18, United States Code,

Sections 1956(a)(2) and 2.

COUNTS SIX THROUGH EIGHT: (18 U.S.C.

§ 1956(a)(1)(B) — Money Laundering)

29. Paragraphs One through Fourteen and

Seventeen through Twenty-Six of this Second

Superseding Indictment are hereby incorporated by

reference.

30. On or about the specific dates set forth

below, in the Northern District of California and

elsewhere, the defendant

PAVEL IVANOVICH LAZARENKO,

a/k/a “Pavlo Ivanovych Lazarenko,”

did knowingly conduct and attempt to conduct

financial transactions affecting interstate and foreign

commerce, that is, the financial transactions set forth

below, which transactions involved the proceeds of a

specified unlawful activity, to wit: receipt and

transfer of property that was stolen, unlawfully

converted, and taken by fraud in violation of 18

U.S.C. § 2314 and § 2315; extortion as specified in 18

U.S.C. § 1956(c)(7)(B)(i1); and wire fraud in violation

of 18 U.S.C. § 1343 and § 1346, knowing that the

transactions were designed in whole or in part to

conceal and disguise the nature, source, ownership

and control of the proceeds of the specified unlawful

activity, and knowing that the property involved in

the financial transaction as set forth below

App. 95

represented the proceeds of some form of unlawful

activity:

COUNT DATE FINANCIAL TRANSACTION

6 11/21/97 Wire transfer of $6,000,000 from

European Federal Credit bank

account number [Financia]

Account Number Omitted] at

Commercial Bank of San

Francisco to European Federal!

Credit Bank account number

[Financial Account Number

Omitted] at Hambrecht & Quist

7 8/31/98 Cashier’s check for $6,745,000

drawn on Dugsbery, Inc.’s

WestAmerica Bank account

number [Financial Account

Number Omitted], deposited into

First American Title Co. escrow

account for the purchase of a

residence located at [Home Address

Omitted], Novato, California

8 9/9/98 A transfer of $2,300,000 from the

Dugsbery, Inc. WestAmerica bank

account number [Financial

Account Number Omitted] to

Dugsbery, Inc. account number

[Financial Account Number

Omitted] at Bank Boston

Robertson Stephens

All in violation of Title 18, United States Code,

Sections 1956(a)(1)(B) and 2.

App. 96

COUNTS NINE THROUGH THIRTY: (18

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