southern district of texas houston division united … · the fifth defendant, alejandro isturiz...

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION UNITED STATES OF AMERICA § § v. § CRIMINAL NO. H-17-514-2 § NERVIS GERARDO § VILLALOBOS-CÁRDENAS §

GOVERNMENT’S OPPOSITION TO DEFENDANT VILLALOBOS’S MOTION TO DISMISS COUNTS ONE, TWO, AND FOUR OF THE INDICTMENT

The United States, by and through its attorneys, the Acting Chief of the Fraud Section of

the Criminal Division of the United States Department of Justice and the United States Attorney

for the Southern District of Texas, hereby respectfully submits its opposition to Defendant Nervis

Gerardo Villalobos Cárdenas’ Motion to Dismiss Counts One, Two, and Four of the Indictment

(“Defendant’s Motion”). This Court should deny Defendant’s Motion as premature, as it involves

questions of fact that are more appropriately resolved after the Defendant appears in the United

States to answer the charges against him and receives discovery.

The evidence at trial will show that Nervis Gerardo Villalobos Cárdenas (“Defendant”) is

a sophisticated, international money launderer who engaged in a large-scale scheme to bribe

officials of Petróleos de Venezuela S.A. (“PDVSA”), Venezuela’s state-owned and state-

controlled oil company. The evidence will demonstrate that Defendant engaged in specific acts in

furtherance of the scheme while he was physically present in the United States, including multiple

meetings in furtherance of the crimes charged in the Indictment. Defendant also exploited the

United States’s financial system for criminal purposes, and throughout the relevant time period

Case 4:17-cr-00514 Document 140 Filed on 05/13/19 in TXSD of 22

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owned a residence in south Florida. He is not, as he would have this Court believe, “a foreigner”

who participated solely in “foreign conduct.” Def’s Mot. at 2.

Should the Court decide to reach the merits of Defendant’s Motion at this time, Defendant’s

Motion should be denied because the expected evidence at trial will show that Defendant acted

corruptly while in the territory of the United States. Therefore, Defendant, who was not a foreign

official at the time of the events alleged in the Indictment, is properly charged with conspiring to

violate the Foreign Corrupt Practices Act (“FCPA”), 15 U.S.C. 78dd-1 et seq., with the goal of

obtaining business advantages for U.S. businesses and individuals (Count Two). Defendant is also

properly charged with conspiring with a U.S. citizen and using the U.S. financial system to launder

the proceeds of the bribery scheme (Count One) and with substantive money laundering involving

conduct that occurred, in part, in the United States (Count Four).

BACKGROUND

I. The Allegations in the Indictment

This case involves a corrupt scheme in which Venezuelan officials and U.S.-based

suppliers of equipment and services exploited an energy and financial crisis in Venezuela to

unlawfully enrich themselves. These U.S.-based suppliers paid bribes to Venezuelan government

officials in exchange for the PDVSA officials’ assistance in ensuring that the U.S.-based suppliers

were paid on outstanding invoices and continued to obtain new contracts with PDVSA.

Specifically, Defendant, the former Venezuelan Vice Minister of Energy, helped set up and

facilitate the scheme and acted as an intermediary between the U.S.-based suppliers and PDVSA

officials. In or around 2011, Defendant and Luis Carlos De Leon Perez (“De Leon”) approached

two PDVSA suppliers who lived and worked in the United States, Roberto Rincon (“Rincon”),

who lived and operated his businesses in the Southern District of Texas, and Abraham Shiera

(“Shiera”), who lived and operated his businesses in Miami, Florida, with a proposal. By 2011


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Defendant and De Leon were no longer Venezuelan officials, but they, together with several then-

current PDVSA officials, exercised a great deal of influence within PDVSA, including over

PDVSA’s wholly-owned procurement subsidiary, Bariven. On behalf of this group, referred to in

the Indictment as the “management team,” De Leon and Defendant offered to give Rincon and

Shiera’s companies payment priority over other PDVSA vendors—ensuring that Rincon and

Shiera’s companies would get at least partial payment on their outstanding PDVSA invoices

despite the fact that Venezuela was experiencing a liquidity crisis and not all of PDVSA’s suppliers

were being paid—and to provide their companies with assistance in obtaining future PDVSA

business, in exchange for bribe payments of 10% of all payments that Rincon and Shiera received

from PDVSA. Defendant and De Leon explained that the bribe payments would be split among

the members of the “management team,” including Defendant and De Leon. Rincon and Shiera

agreed.

In order to facilitate the scheme and conceal the payments, Defendant, De Leon, and

several other members of the management team set up Swiss bank accounts into which bribe

payments could be received and orchestrated false justifications for the payments. Defendant and

De Leon were the authorized signatories on a funnel account, referred to in the Indictment as

“Swiss Account 1,” into which Rincon and Shiera deposited bribe payments that Defendant and

De Leon then distributed to various members of the management team. Defendant personally

obtained more than $16 million from this illegal scheme.

Many of Rincon’s and Shiera’s businesses that received assistance from the management

team in exchange for bribe payments were incorporated in the United States, in either Florida or

Texas, and headquartered in the United States, including in the Southern District of Texas. Bribe

payments made in the course of the scheme were sent from multiple accounts, including accounts


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in the United States and in the Southern District of Texas.

II. Procedural History

On August 23, 2017, a grand jury sitting in the Southern District of Texas returned a

twenty-count indictment against five defendants, including Defendant, based upon a multi-million

dollar bribery and money laundering scheme. Defendant was charged with conspiring to launder

money in violation of Title 18, United States Code, Section 1956(h) (Count One); conspiring to

violate the FCPA in violation of Title 18, United States Code, Section 371 (Count Two); and

laundering money, in violation of Title 18, United States Code, Sections 1956(a)(1)(B)(i) and 2

(Count Four). In October 2017, four of the five defendants, including Defendant, were arrested in

Spain.

To date, two of the five defendants, Cesar David Rincon Godoy (“Cesar Rincon”) and De

Leon, have appeared in the Southern District of Texas and have been arraigned on the charges

against them. Dkt. Nos. 29 and 40. Cesar Rincon pled guilty to Count One of the Indictment on

April 19, 2018. Dkt. No. 65. De Leon pled guilty to an information setting forth substantially

similar facts to those alleged in the indictment on July 16, 2018. Dkt. No. 102.

Two defendants, Defendant and Rafael Ernesto Reiter Munoz remain in extradition

proceedings in Spain. The fifth defendant, Alejandro Isturiz Chiesa is a fugitive.

On March 28, 2019, Defendant filed the instant motion. Defendant has not appeared in the

United States, been arraigned on these charges, or received discovery.1

1 Defendant’s attorneys have not even entered their Notices of Appearance in this case, highlighting how premature this motion is.


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III. Additional Facts Regarding Defendant’s Ties to the United States

During the relevant time period the co-conspirators, including Defendant, met periodically

and discussed the scheme, including several times in the United States. Specifically, at least two

of these meetings—on February 27, 2012, and March 16, 2013—took place at a Capital Grille

restaurant located in south Florida.

At trial, the government expects to present testimony and other evidence relating to

Defendant’s attendance and participation in these meetings while in the United States, including

details concerning his discussions regarding the bribery and money laundering scheme, as well as

text messages concerning the arrangements made by Defendant and his co-conspirators.

The government will also present evidence that Defendant owns a residence in Boca Raton,

Florida.

ARGUMENT

I. Defendant’s Motion to Dismiss is Premature

Defendant’s argument hinges on his position that “the facts that would require dismissal

are not reasonably in dispute.” Def’s Mot. at 7. But the facts in relation to Defendant are very

much in dispute—the government expects to prove at trial that Defendant committed acts in the

United States in furtherance of the conspiracies charged in Counts One and Two. The Supreme

Court and the Fifth Circuit have long held that a facially sufficient indictment returned by a legally

constituted grand jury calls for a trial on the merits, and a defendant may not challenge such an

indictment on the ground that the allegations are not supported by adequate evidence. Costello v.

United States, 350 U.S. 359, 364 (1956); United States v. Mann, 517 F.2d 259, 267 (5th Cir. 1975)

(reversing pretrial grant of motion to dismiss). In reviewing a challenge to whether an indictment

properly alleges an offense, the Fifth Circuit has also explained that a reviewing court should take

the indictment’s allegation as true. United States v. Crow, 164 F.3d 234 (5th Cir. 1999). “When


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a pretrial motion raises questions of fact which are intertwined with issues involving the merits, a

determination of that matter must be deferred until trial.” United States v. Greater Syracuse Bd.

of Realtors, Inc., 449 F. Supp. 887, 899 (N.D.N.Y. 1978) (collecting cases).

The cases cited by the Defendant on pages 7–8 of his motion thus support the government’s

position, as they deal with situations where the facts were not in dispute. United States v. Kaluza,

669 F.3d 647, 657 (5th Cir. 2015), examined whether 18 U.S.C. § 1115’s definition of

“[e]very . . . other person employed on any . . . vessel” applied to “well site leaders” dispatched to

a vessel, not whether the defendants were in fact “well site leaders.” United States v. Radley, 632

F.3d 177 (5th Cir. 2011), considered whether the defendants’ commodity trades fit within a

statutory exemption, not where the trades occurred or who placed them. See id. at 181 (“The

dispute focuses on the meaning of ‘transaction’ in Section 2(g) [of the Commodities and Exchange

Act].”).

United States v. Flores is especially unhelpful to the Defendant’s position. “The facts

essential to this appeal are undisputed,” began the Court’s discussion of the case’s background.

404 F.3d 320, 322 (5th Cir. 2005). After summarizing the facts, which involved a defendant

charged with possessing a firearm while in the United States illegally, but who claimed that his

application for Temporary Protected Status (“TPS”) under 8 U.S.C. § 1254a exempted him from

the firearms ban in 18 U.S.C. § 922(g)(5)(A), the Court provided an excellent summary of why

resolution of the motion to dismiss was proper in that case, and why it is similarly improper here:

Initially, the government contends that the district court erred procedurally in dismissing the indictment. We disagree, however, because the district court based its disposition entirely on its resolution of a legal question and the facts are undisputed. Both Flores and the government agree that Flores initially entered the country illegally. Both parties agree that prior to his arrest, Flores applied for TPS and, while his TPS applications were pending, he received an employment authorization card and social security card. The sole question in this case, therefore, is a question of law: whether Flores’s application for TPS and subsequent


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receipt of temporary treatment benefits cured his illegal entry into the United States for the purposes of § 922(g)(5)(A).

In this circuit, “‘[t]he propriety of granting a motion to dismiss an indictment under [Fed. R. Crim. P.] 12 by pretrial motion is by-and-large contingent upon whether the infirmity in the prosecution is essentially one of law or involves determinations of fact.’” United States v. Korn, 557 F.2d 1089, 1090 (5th Cir.1977) (quoting United States v. Miller, 491 F.2d 638, 647 (5th Cir.1974)). “If a question of law is involved, then consideration of the motion is generally proper.” Id. (citing United States v. Jones, 542 F.2d 661, 664 (6th Cir.1976)). Thus, the district court did not err by considering the purely legal question at hand in Flores’s pretrial motion.

Flores, 404 F.3d at 323–24 (internal citations omitted) (emphasis added).

Finally, the Second Circuit’s opinion in United States v. Hoskins, 902 F.3d 69, 97 (2d Cir.

2018), also involved undisputed facts. The situation in Hoskins, which is discussed in detail below,

is the exact opposite of the situation here, where it is both premature and wrong to assert that the

defendant did not act illegally in the United States.

Once Defendant is arraigned in the United States and receives and reviews discovery, he

will have a much greater understanding of the evidence that will be introduced against him at trial,

including the evidence of his actions in the United States. And if Defendant wishes to argue that

the evidence presented by the government is insufficient to establish that he participated in

meetings in the United States in furtherance of the conspiracy to violate the FCPA, then he may

raise that argument upon receipt of discovery—if he thinks there is no evidence of his acts in the

United States—or at the close of the government’s case. Until that time, Defendant’s Motion,

which clearly turns on issues of fact, is not ripe, and the Court should reject it on this basis alone.

II. Defendant is Properly Charged in Count Two

In his motion, Defendant argues that Count Two should be dismissed for lack of

extraterritorial jurisdiction. As explained above, this Court should deny Defendant’s Motion as

premature. If, however, the Court chooses to reach the merits of Defendant’s Motion at this time,


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it should deny Defendant’s Motion to dismiss Count Two of the Indictment because Defendant,

who was not a foreign official at the time of the charged conduct, acted in furtherance of the scheme

while in the United States.

Defendant Was Not a Foreign Official and May Be Charged With Violating the FCPA

It is well established in criminal law that “a conspirator may be convicted ‘even though he

was incapable of committing the substantive offense himself.” Ocasio v. United States, 136 S. Ct.

1423, 1430 (2016). Thus, for example, a person who is not bankrupt can be convicted of

conspiring with a bankrupt person to conceal the bankrupt person’s property, Gebardi v. United

States, 287 U.S. 112, 120 n.5 (1932), and similarly a person who is not a felon may be convicted

of aiding and abetting a felon’s receipt of a firearm, United States v. Falletta, 523 F.2d 1198 (5th

Cir. 1975). There is, however, an exception to this general rule where there is “an affirmative

legislative policy to leave unpunished a well-defined group of persons who were necessary parties

to the acts constituting a violation of the substantive law.” United States v. Castle, 925 F.2d 831,

836 (5th Cir. 1991).

Here, the FCPA criminalizes the payment of bribes to foreign officials to influence acts or

decisions of such officials in exchange for business advantages—but does not criminalize the

receipt of such bribes. 15 U.S.C. § 78dd-1 et seq. Specifically, the FCPA criminalizes the payment

of bribes by three categories of individuals and entities:

(1) issuers of certain securities, or any officer, director, employee, agent, or stockholder

of such an issuer, 15 U.S.C. § 78dd-1;

(2) United States companies and persons using interstate commerce in connection with the

payment of bribes, 15 U.S.C. § 78dd-2; and


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(3) any person not covered by sections 78dd-1 and dd-2, who uses interstate commerce or

does any other act in the United States to further the payment of bribes to foreign officials,

15 U.S.C. § 78dd-3.

In United States v. Castle, the Fifth Circuit confronted a question of first impression:

whether two Canadian officials—bribe recipients, who could not be charged with violating the

FCPA itself—could nonetheless be convicted of conspiring to violate the FCPA. 925 F.2d 831,

832 (5th Cir. 1991). The Castle Court held that foreign official bribe recipients could not be

convicted of conspiring to violate the FCPA due to Congress’s decision “to leave unpunished a

well-defined group of persons [(i.e., the foreign officials)] who were necessary parties to the acts

constituting a violation of the substantive law.” Id. at 836. In other words, Congress clearly

contemplated the foreign official bribe recipient when it enacted the FCPA—after all, they were a

necessary participant in each and every FCPA violation—yet, nevertheless, chose to leave this

category of persons unpunished under the FCPA.

In articulating the rule in Castle the Fifth Circuit relied on the Supreme Court’s Gebardi

decision, which held that a woman transported across state lines for immoral purposes could not

be convicted of conspiring to violate the Mann Act. 925 F.2d 832-836. Under the Mann Act, only

the person who transported the woman could be convicted of violating the act itself, and so, the

Supreme Court concluded, to allow the transported woman to be convicted of conspiring to violate

the Mann Act would effectively override Congressional intent. Id. at 833. Specifically, the Fifth

Circuit reasoned that “Congress intended in both the FCPA and the Mann Act to deter and punish

certain activities which necessarily involved the agreement of at least two people, but Congress

chose in both statutes to punish only one party to the agreement.” Id. at 833. Under the Mann

Act, the two necessary parties were the transporter and the transported woman, and under the


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FCPA, the two necessary parties were the bribe payor and the foreign official recipient. The Castle

court explained that in criminalizing the payment of bribes to foreign officials under the FCPA,

but not the receipt of such bribes, Congress intended to exempt one party to the transaction—the

official—from liability and that this unpunished, but necessary, party to the transaction could not

be responsible for conspiring to violate a statute that they were incapable of substantively violating.

Id. at 836.

Defendant and the government appear to agree that between 2011 and 2013, the relevant

time period in the Indictment, Defendant was not a foreign official. Def’s Mot. at 5; Indictment

¶ 8. Instead, Defendant is alleged to have initiated the scheme and served as an intermediary

between Rincon and Shiera and the PDVSA officials. Indictment ¶¶ 45, 50, 51, 55, 69, 69, 81, 82.

The reasoning of the Castle court does not extend to intermediaries because they are not necessary

parties to foreign bribery transactions—indeed, there are bribes that take place without

intermediaries—and they are not among the well-defined group that Congress chose to leave

unpunished. Therefore, Defendant is properly charged with conspiring to violate the FCPA under

the Fifth Circuit’s holding in Castle.

United States v. Hoskins Is Inapposite Because Defendant Engaged in Acts in Furtherance of the Corrupt Scheme and Conspiracy While in the United States

Unable to find refuge in Castle, Defendant claims to be similarly situated to the defendant

in United States v. Hoskins, 902 F.3d 69 (2d Cir. 2018). Def’s Mot. at 13. He is not.2

2 As a threshold matter, the government does not concede that United States v. Hoskins was correctly decided. To the contrary, the government’s position is that in the context of the FCPA, conspiratorial and accessorial liability apply to all individuals who are not foreign official bribe recipients. Because the government expects to prove that Defendant is separately liable under the FCPA for actions taken in the United States, however, we do not address that argument further in this brief. Should the Court wish to address whether Hoskins should be adopted in this Circuit, the government respectfully requests the opportunity to provide additional briefing on this topic.


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Lawrence Hoskins was charged as part of a scheme in which several defendants were

alleged to have conspired to pay bribes to officials in Indonesia to ensure that Alstom S.A., a

company headquartered in France, was awarded a contract from the Indonesian government. 902

F.3d at 72. During the relevant time, Hoskins was a United Kingdom national employed by the

United Kingdom subsidiary of Alstom, worked in France, and never stepped foot in the United

States. Id. In its briefing before the Second Circuit, the government conceded that Hoskins did

not travel to the United States while the bribery scheme was ongoing. Id.

After considering Gebardi, additional Second Circuit precedent, and the legislative history

of the FCPA, the Hoskins court concluded that “[t]o hold Hoskins liable, the government must

demonstrate that he falls within one of those categories [listed in 15 U.S.C. § 78dd-2] or acted

illegally on American soil.” Hoskins, 902 F.3d at 97. On that basis, the Second Circuit upheld the

partial dismissal of the charges against Mr. Hoskins.

The Hoskins court did not end its analysis there, however. Hoskins was charged with

conspiring to violate 15 U.S.C. § 78dd-2 (the domestic concern provision of the FCPA) as well as

15 U.S.C. § 78dd-3 (the territorial provision of the FCPA). The Second Circuit reversed the district

court’s dismissal of the 78dd-3 object, because if the government were able to prove that Hoskins

fell into one of the categories of 78dd-2, he could then be criminally liable for conspiring to violate

78dd-3. See Hoskins, 902 F.3d at 97-98.

Here, Defendant is correct that the Indictment does not allege that he falls into one of the

categories listed in 15 U.S.C. § 78dd-2. But that is where the similarity between Defendant and

Hoskins ends, and why Defendant’s reliance on Hoskins is misplaced. At trial, the government

expects to introduce evidence showing that Defendant was present in the United States at various

times during the course of the bribery scheme, during which he participated in acts in furtherance


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of the bribery scheme—including, but not limited to, the two lunch meetings held at the Capital

Grille restaurant described above—placing him squarely in the categories of persons covered by

15 U.S.C. § 78dd-3.

In other words, Defendant is not a member of a “well-defined group of persons who were

necessary parties” to the substantive violation but whom Congress decided to leave “unpunished.”

See Castle, 925 F.2d at 836.3 Because the government’s evidence at trial will show that Defendant

“acted illegally on American soil,” Hoskins, 902 F.3d at 97, he can conspire to violate any

provision of the FCPA, including 15 U.S.C. § 78dd-2.

III. Defendant is Properly Charged in Counts One and Four

Defendant’s arguments in favor of dismissing the money laundering charges against him

are equally unavailing.

Case Law, Including Hoskins, Makes Clear that a Defendant May Be Convicted of Money Laundering Predicated on Violating the FCPA Regardless of Whether Defendant Is Charged with the Underlying Crime

Defendant’s attempt to argue that Hoskins should be extended to apply to the money

laundering charges in this case must be rejected, as it has no basis in law or fact, because the

government will present evidence that Defendant acted illegally in furtherance of the scheme while

3 That Defendant is not charged in the Indictment with conspiring to violate 15 U.S.C. § 78dd-3 does not impact the analysis. Defendant is charged with conspiracy, where the object of the conspiracy was to bribe Venezuelan officials in exchange for business advantages to U.S. companies. Defendant, a person who falls into the category described in 15 U.S.C. § 78dd-3, is capable of conspiring to violate 15 U.S.C. § 78dd-2, under the rule set forth in Hoskins. The conduct alleged is described, at length, in a 57-page indictment. As the Fifth Circuit has recognized, “[A]n indictment is sufficient if it ‘contains the elements of the offense charged and fairly informs the defendant of the charge against which he must defend.’” United States v. Lawrence, 727 F.3d 386, 397 (5th Cir. 2013) (quoting United States v. Graves, 669 F.2d 964, 968 (5th Cir. 1982)). The Indictment contains each of the requisite elements, including more than twenty overt acts for Count Two. Defendant cannot claim that he has not been given adequate notice of the charges against him.


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in the United States. In fact, Defendant’s argument that Hoskins should be extended to money

laundering charges is done away with by Hoskins itself, in which the money laundering chargers

were left untouched by the decision. Here, Counts One and Four properly charge Defendant with

conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (Count 1), and money

laundering and aiding and abetting money laundering, in violation of 18 U.S.C.

§§ 1956(a)(1)(B)(i) and 2 (Count 4).

As an initial matter, and as explained above, the Hoskins ruling is not applicable to

Defendant because he engaged in acts in furtherance of the corrupt scheme and conspiracy charged

in Count Two while in the United States. Even in situations in which Hoskins would be applicable

to a defendant charged with conspiracy to violate the FCPA, however, such an analysis is wholly

inapplicable to money laundering charges. In Hoskins, the Second Circuit held that the money

laundering conspiracy and substantive money laundering charges against Hoskins (for which the

specified unlawful activity was a violation of the FCPA) could proceed, despite the fact that the

FCPA conspiracy charge was dismissed. 902 F.3d at 73 n.3. Thus, the Hoskins Court explicitly

recognized that its decision regarding the conspiracy to violate the FCPA had no bearing on the

money laundering charges against Hoskins. Id.

This is consistent with the many other courts that have held that a defendant could be

convicted of committing money laundering (or conspiring to commit money laundering) where

the specified unlawful activity was a violation of the FCPA, even where the defendant could not

be convicted of violating the FCPA. After the Fifth Circuit’s decision in Castle, 925 F.2d 831 (5th

Cir. 1991), the Eleventh Circuit and a number of district courts have upheld convictions of foreign

officials for engaging in money laundering where the specified unlawful activity was a violation

of the FCPA. See, e.g., United States v. Duperval, 777 F.3d 1324 (11th Cir. 2015) (affirming


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conviction of Haitian foreign official for money laundering and conspiracy to commit money

laundering where the money laundering involved the proceeds of violations of the FCPA). In fact,

in United States v. Bodmer, 342 F. Supp. 2d 176, 191 (S.D.N.Y. 2004), the court expressly

addressed this very issue. The court dismissed the FCPA conspiracy count under the Gebardi

principle because the defendant did not fall within the categories of individuals covered by the

FCPA, but nonetheless permitted the money laundering charges to proceed, holding that

“[w]hether [the defendant] violated the FCPA, and the fact that he cannot be criminally sanctioned

for that conduct, is irrelevant to proving that he transported money in furtherance of FCPA

violations.” Bodmer, 342 F. Supp. 2d at 191. In allowing the money laundering charge to proceed,

the Bodmer court noted that “[i]f immunity from the FCPA’s criminal penalties automatically

conferred non-resident foreign nationals with immunity from the money laundering statute, these

non-resident foreign nationals could openly serve as professional money launderers of proceeds

derived from violations of the FCPA, without repercussion,” which “would contravene Congress’s

clearly articulated intention to include foreigners within the scope of the money laundering

statute.” Id.4

This is also consistent with the more general proposition, widely recognized by courts, that

a defendant need not be charged with, or even involved in, the underlying crime associated with

the money laundering charge in order to be convicted of money laundering. See e.g., United States

v. Lineberry, 702 F.3d 210 (5th Cir. 2012) (upholding money laundering conviction where

defendant was not charged with underlying crime); see also United States v. Martinelli, 454 F.3d

1300, 1312 (11th Cir. 2006) (“It is by now abundantly clear that in a money laundering case (or

4 Notably, nowhere in his Motion does Defendant claim that he did not commit the acts alleged in the indictment. He argues only that his actions are outside the reach of United States jurisdiction.


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money laundering conspiracy case), the defendant need not actually commit the alleged specified

unlawful activity.”); United States v. Awada, 425 F.3d 522, 525 (8th Cir. 2005) (explaining that

“there is absolutely no requirement that a money laundering defendant also be involved in the

underlying crime.”); United States v. Cherry, 330 F.3d 658, 667 (4th Cir. 2003) (“It is clear that a

defendant may be convicted of money laundering even if she is not a party to, much less convicted

of, the specified unlawful activity.”); United States v. Mankarious, 151 F.3d 694, 703 (7th Cir.

1998) (upholding money laundering convictions even though the defendant had been acquitted of

specified unlawful activity).

Defendant has not pointed to a single case suggesting otherwise, because no court has held

that a defendant incapable of committing an FCPA violation cannot be convicted of money

laundering where the specified unlawful activity is a violation of the FCPA.

The Alleged Money Laundering Utilized the United States Financial System, Involved a United States Citizen, and Included Acts in Furtherance of the Conspiracy Committed in the United States

Defendant’s argument that Counts One and Four should be dismissed should be rejected

based on the plain language of 18 U.S.C. § 1956(f).

i. This Court Has Jurisdiction Over All Co-Conspirators in the Money Laundering Conspiracy Alleged in Count One

“To establish conspiracy to commit money laundering, the government must prove (1) that

there was an agreement between two or more persons to commit money laundering and (2) that

the defendant joined the agreement knowing its purpose and with the intent to further the illegal

purpose.” United States v. Fuchs, 467 F.3d 889, 906 (5th Cir. 2006). “The government need not

prove an overt act in furtherance of the conspiracy.” Id. (citing Whitfield v. United States, 543

U.S. 209, 219 (2005)). Section 1956(f) provides for extraterritorial jurisdiction over money

laundering offenses where (1) “the conduct is by a United States citizen or, in the case of a non-


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United States citizen, the conduct occurs in part in the United States, and (2) the transaction or

series of related transactions involves funds . . . exceeding $10,000.” 18 U.S.C. § 1956(f).

“The United States has long adhered to the objective principle of territorial jurisdiction,

which holds that it has jurisdiction to attach criminal consequences to extraterritorial acts that are

intended to have effect in the United States, at least where overt acts within the United States can

be proved.” United States v. Postal, 589 F.2d 862, 885 (5th Cir. 1979) (citing Ford v. United

States, 273 U.S. 593, 620 (1927)); see also United States v. Winter, 509 F.2d 975, 982 (5th Cir.

1975) (upholding convictions of three non-U.S. citizens who, prior to their arrest, had never set

foot in the United States where their U.S. citizen co-conspirator “committed three seemingly

innocuous overt acts in furtherance of the conspiracy within the territorial jurisdiction of the United

States.”); United States v. Sadighi, 199 F.3d 1334, 1999 WL 980661 at *3 (9th Cir. 1999)

(affirming conviction of a defendant charged with conspiring to launder money and explaining

that the district court “had subject matter jurisdiction because Sadighi is a United States citizen

living in Los Angeles, and as Rayhani’s co-conspirator (thus making Rayhani liable for all of his

conspiratorial acts) he engaged in conduct to further the conspiracy in the United States”).

“[W]hen the statute itself does not require proof of an overt act, jurisdiction attaches upon a mere

showing of intended territorial effects.” United States v. Ricardo, 619 F.2d 1124, 1129 (5th Cir.

1980) (citing Postal, 589 F.2d at 886, n.39)).

The Indictment alleges a conspiracy between Defendant, a U.S. citizen (De Leon), two

individuals living in the United States (Rincon and Shiera), and others, to carry out a bribery and

money laundering scheme that would benefit Rincon’s and Shiera’s U.S. businesses. Defendant

does not argue, nor could he, that he and his co-conspirators did not “intend[] territorial effects,”

Ricardo, 619 F.2d at 1124, within the United States. Although an overt act is not required under


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18 U.S.C. § 1956(h), the substantive money laundering counts alleged in the Indictment, including

Count Four, make clear that acts in furtherance of the conspiracy, including financial transactions,

took place in the Southern District of Texas and elsewhere in the United States. In addition,

Defendant is alleged to have sent electronic communications to co-conspirators in the United

States and as a result of those electronic communications caused wire transfers to be sent from the

United States—including from accounts in the Southern District of Texas—to Swiss Account 1,

the Swiss account under Defendant’s and De Leon’s control. See e.g., Indictment ¶¶ 79-80. Nor

does Defendant dispute that the conspiracy involved funds in excess of $10,000—indeed, it is

alleged to be over $27 million. Indictment ¶ 74. Thus, the requirements of 18 U.S.C. § 1956(f)

are satisfied with respect to the allegations in Count One.

ii. This Court Has Jurisdiction Over Money Laundering Transactions Occurring in the United States

The requirements of 18 U.S.C. § 1956(f) are likewise met with respect to the allegations

supporting Count Four. Count Four alleges that Defendant and De Leon “did knowingly conduct,

and aid, abet, and cause others to conduct, and attempt to conduct” a financial transaction

“designed, in whole or in part, to conceal and disguise the nature, the location, the source, the

ownership, and the control of proceeds of said specified unlawful activity, that is, a felony violation

of the FCPA” on October 26, 2011, when a wire in the amount of $515,513.20 was sent from

Rincon Company 2 to Swiss Account 1. Indictment ¶ 172.

Section 1956(f) provides for jurisdiction over non-United States citizens when the

prohibited conduct “occurs in part in the United States.” 18 U.S.C. § 1956(f). “But section 1956

was not intended to only apply when the defendant acts within the borders of this country. Rather

it was intended to reach situations in which ‘the transaction occurred in whole or in part in the

United States.’” United States v. Stein, 1994 WL 285020 at *5 (E.D. La. June 23, 1994) (holding


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that when a defendant, who never entered the United States, initiated a transfer of funds from New

Orleans to London there was extraterritorial jurisdiction). To read section 1956(f) otherwise would

add an additional element—physical presence—to those the government is required to prove at

trial. Id. at *4.

This Indictment, like the indictment in Stein, “does not allege conduct wholly outside this

country,” but rather is based upon a transaction that originated in the United States and therefore

involves conduct that occurred in part in the United States. See Stein, 1994 WL 285020 at *5;

Indictment ¶ 172. The alleged wire transfer which is the basis for Count Four was sent from

Rincon Company 2, which is defined in the Indictment as a company headquartered in the Southern

District of Texas, and the conduct alleged in Count Four itself “occurred in the Southern District

of Texas and elsewhere.” The $515,513.20 wire transfer is, of course, for an amount greater than

$10,000. Again, the requirements of 18 U.S.C. § 1956(f) are easily met by the allegations of Count

Four in the Indictment.

IV. Charming Betsy, Due Process, and Defendant’s Other Arguments

As noted above, this Court has jurisdiction over Counts One, Two, and Four, because

Defendant took actions in furtherance of the corrupt scheme while within the territory of the United

States relating to the conspiracies alleged in Counts One and Two, and because the transaction at

issue in Court Four originated in the United States. Therefore, Defendant’s argument—based on

a case from 215 years ago—that the principle articulated by the Supreme Court in Murray v.

Schooner Charming Betsy counsels against his prosecution in the instant matter is inapposite. 6

Cranch 64 (1804). Despite Defendant’s creative arguments to the contrary, the money laundering

statute is not ambiguous in its extraterritorial reach. It clearly articulates when and under what

circumstances extraterritorial actions fall within the conduct proscribed by the statute. The statute

is not ambiguous with respect to a charged individual such as Defendant, who took actions within


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the United States in furtherance of the conspiracies alleged in Counts One and Two and to

effectuate the transaction alleged in Count Four. Defendant’s attempts to change the meaning of

“conduct” pursuant to Section 1956(f) to require that Defendant be present in the United States

during the exact moment of the monetary transfer are unavailing, regardless of whether they are

based on the proper application of the extraterritorial reach of the money laundering statute or the

principles articulated in Charming Betsy.

As explained above, the Indictment does not charge Defendant based solely on conduct

that occurred outside of the United States, and as such, the government is not prosecuting “crimes

of foreign nationals committed abroad,” as Defendant suggests. United States v. Ali, 718 F.3d 929,

942 (D.C. Cir. 2013). Defendant and his co-conspirators engaged in conduct in furtherance of the

scheme while in the United States. Therefore, and as explained above, the charges against

Defendant do not violate international law based on the territorial principle whereby “jurisdiction

is based on the place where the offense is committed.” Rivard v. United States, 375 F.2d 882, 885

n.2 (5th Cir. 1967).

Nor does Defendant’s prosecution for the instant offenses violate the Due Process Clause

of the Fifth Amendment. “[T]he animating principle governing the due process limits of

extraterritorial jurisdiction is the idea that ‘no man shall be held criminally responsible for conduct

which he could not reasonably understand to be proscribed.’” Ali, 718 F.3d at 944 (quoting Bouie

v. City of Columbia, 378 U.S. 347, 351 (1964)). The government and Defendant agree that there

must be a nexus between Defendant and the conduct at issue in the Indictment. Where the parties

disagree, however, is whether such a nexus exists here. Given the expected evidence that

Defendant engaged in acts in furtherance of the scheme in the United States, and caused a financial

transaction designed to conceal and disguise the nature, the location, the source, the ownership,


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and the control of proceeds of a felony violation of the FCPA, and where actions related to the

transaction (namely, that the funds were transferred from an account held by a company located

in the Southern District of Texas) occurred in the United States, there is a strong nexus between

Defendant, the alleged conduct, and the United States. The charges in the Indictment adhere to

the plain meaning of both the FCPA and the money laundering statutes, both of which provide for

jurisdiction over non-citizens when the prohibited conduct occurs within the United States. 15

U.S.C. § 78dd-3; 18 U.S.C. § 1956(f). The statutes are thus not vague as applied to Defendant,

nor do they fail to provide proper notice that Defendant’s actions would fall within their reach.5

5 The rule of lenity does not require a different result, despite Defendant’s argument to the contrary. Neither statute is unclear about conduct like that undertaken by Defendant, which involved acts in the United States. The rule of lenity “does not apply when a statute is unambiguous or when invoked,” as here, “to engraft an illogical requirement to its text.” Salinas v. United States, 522 U.S. 52, 66 (1997). There is no rule of statutory construction that would require this Court to read the FCPA or money laundering statute to exclude the conduct here, which falls within the scope of both statutes.


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CONCLUSION

WHEREFORE, it is respectfully requested that Defendant’s Motion to Dismiss Counts

One, Two, and Four of the Indictment be denied.

Respectfully submitted,

ROBERT ZINK RYAN K. PATRICK ACTING CHIEF, FRAUD SECTION UNITED STATES ATTORNEY Criminal Division Southern District of Texas United States Department of Justice

s/ Sarah E. Edwards s/ Robert S. Johnson SARAH E. EDWARDS JOHN PEARSON SONALI D. PATEL ROBERT S. JOHNSON TRIAL ATTORNEYS ASSISTANT U.S. ATTORNEYS Fraud Section, Criminal Division U.S. Attorney’s Office U.S. Department of Justice Southern District of Texas 1400 New York Avenue, N.W. 1000 Louisiana, Ste. 2300 Washington, D.C. 20005 Houston, TX 77002 Tel: (202) 305-6761 Tel: (713) 567-9342


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CERTIFICATE OF SERVICE

I hereby certify that, on May 13, 2019, I electronically filed the foregoing opposition with

the Clerk of the Court using the ECF/CM system for filing; I also emailed the opposition to

Defendant’s attorneys.

s/ Sarah E. Edwards Sarah E. Edwards Trial Attorney Fraud Section, Criminal Division U.S. Department of Justice


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