No Money Laundering in Scammer’s Commissions

     (CN) – The 4th Circuit tossed the 60-year sentence of a convicted investment scammer, finding that he was not laundering money by paying commissions to pull off the fraud.
     Adley Abdulwahab was indicted in the Eastern District of Virginia in September 2010 and charged with 16 counts, including six counts of money laundering, over a life insurance investment scheme that defrauded investors of nearly $100 million.
     Christian Allemendinger and Brent Oncale formed Houston-based A&O in 2004, and hired Abdulwahab to sell the company’s life insurance policy investments in 2005.
     The investments were for fixed terms of four to seven years. If the insured died during that time the life insurance company would pay a benefit. If the insured stayed alive past the term, however, A&O would buy a re-insurance bond that pays out and takes over the policy.
     Abdulwahab owned and ran Houston Investment Center as A&O’s marketing division.
     In A&O marketing materials, Abdulwahab, Allmendinger and Oncale claimed to house investor funds in a segregated account that paid policy premiums up front.
     In reality, however, investor money commingled in a general operating account and paid premiums as they came due. Allmendinger, Oncale and Abdulwahab meanwhile took millions from the account for themselves.
     A&O also set up websites that listed fictitious people as company owners, and claimed A&O had enabled its clients to leverage $375 million to $800 million in fewer than five years, when no investor had actually received a return at the time.
     After Allmendinger and Oncale made Abdulwahab an equal partner in A&O in 2006, regulators began sniffing around, based on concerns A&O was selling unregistered securities.
     The regulators’ attention prompted A&O’s owners to switch to selling interest in life insurance-backed hedge funds.
     Abdulwahab agreed to serve as the funds’ manager. In the offering and disclosure documents he included false information about his background.
     The documents falsely stated that Abdulwahab had an economics degree from Louisiana State University, and had never been convicted of a felony related to investment fraud, bribery, extortion or forgery.
     But Abdulwahab had pleaded guilty to felony forgery in 2004 in Harris County, Texas.
     With regulators still on their backs after A&O switched products, the owners agreed to sell A&O. The new owner, Blue Dymond, was an offshore shell company created by Abdulwahab and Oncale.
     Prosecutors said A&O took more than $104 million from investors between 2004 and 2008, and Abdulwahab got $8 million from the scheme.
     Despite the substantial revenue raised from investors, A&O declared bankruptcy in 2009.
     A grand jury then indicted Allemendinger, Abdulwahab and David White, who was hired as A&O’s president in September 2007, over the investment scheme.
     Allmendinger was sentenced to 540 months in prison and ordered to pay $101 million in restitution, while Oncale got 10 years after cooperating with the government. White received a five-year sentence on a plea deal.
     On the government’s motion, the trial judge dismissed three of Abdulwahab’s 16 charges. Abdulwahab moved to dismiss all but two counts: conspiracy to commit mail fraud and conspiracy to commit money laundering.
     Abdulwahab tried to get the money-laundering charges dismissed by arguing that the transactions in the indictment were not money laundering because they were solely commission payments earned from the sale of A&O products.
     The District Court denied Abdulwahab’s motion and, after a jury found him guilty on all remaining counts, sentenced him to 60 years in prison with restitution topping $100 million.
     Abdulwahab appealed his sentence to the Richmond, Va.-based 4th Circuit, arguing that his money laundering convictions should not stand based on the Supreme Court’s decision in United States v. Santos.
     The case involved an illegal gambling operation in which a defendant was convicted of money laundering for paying runners who sold bets and prize money to winning bettors.
     The court held that the collectors cannot be convicted of money laundering for receiving salaries from the illegal scheme.
     “If ‘proceeds,’ referred to ‘gross receipts,’ nearly every violation of the illegal-lottery statute would also be a violation of the money-laundering statute, because paying a winning bettor is a transaction involving receipts that the defendant intends to promote the carrying on of the lottery,'” Justice Antonin Scalia wrote for the plurality. “Since few lotteries, if any, will not pay their winners, the statute criminalizing illegal lotteries would ‘merge’ with the money-laundering statute.”     
     Justice John Paul Stevens called the practical effect of such prosecution “tantamount to double jeopardy.”
     The 4th Circuit agreed with Abdulwahab and tossed his money laundering charges Monday.
     These charges stemmed from commissions Abdulwahab paid to a Houston Investment Center sales agent.
     “While payment of the commissions may have constituted evidence of the fraud underlying the money laundering charges, the payments did not constitute money laundering. We therefore hold that the district court erred in rejecting Abdulwahab’s contrary argument and denying his motion for judgment of acquittal as to those counts,” Chief Judge William Traxler Jr. wrote for a three-judge panel.
     “The government contends that our reversal of the money laundering convictions should not warrant a full resentencing since all of Abdulwahab’s sentences for these counts were ordered to be served concurrently with the three consecutive 240-month sentences he received for Counts 1, 2, and 3,” Traxler added. “However, as the government concedes, the error is not harmless in light of the court’s imposition of a separate special assessment for each count. … On the facts before us, we believe a remand is appropriate so that the district court may consider whether the reversal of the money laundering convictions warrants any change in Abdulwahab’s sentence.”

%d bloggers like this: