Monday, September 29, 2008
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Ninth Circuit Upholds Former Ukrainian Leader’s Convictions
By STEVEN M. ELLIS, Staff Writer
The Ninth U.S. Circuit Court of Appeals on Friday affirmed former Ukrainian Prime Mister Pavel Lazarenko’s convictions on charges that he laundered money through American banks, but reversed his convictions of wire fraud and interstate transportation of stolen property and remanded for resentencing.
Upholding conspiracy and mail fraud convictions because the funds at issue could be traced to accounts where Lazarenko deposited proceeds from fraud and extortion while in office from 1996-1997, and during his earlier tenure as a provincial governor, the court nevertheless ruled that transfers more than three years after the conclusion of fraudulent activity could not be “in furtherance” of that activity under federal wire fraud statutes.
It also held that the government could not maintain a charge of interstate transportation of stolen property arising from a separate transaction in which Lazarenko transferred funds to the United States via a Swiss bank account without evidence as to the account from which those funds initially came.
Lazarenko was a public official in Ukraine in the 1990’s, and served for several years in regional government positions, including as governor of the Ukraine’s Dnepropetrovsk region. He rose to the level of first vice prime minister, and in 1996 was appointed prime minister, but left office the following year after rift with then-President Leonid Kuchma, becoming a member of Parliament and leading the opposition Hromada Party.
Upon Lazarenko’s arrest after trying to enter the United States in 1999 while fleeing corruption charges, the government alleged that certain of his business relationships amounted to extortion and that he had defrauded the Ukrainian people by obtaining interests in companies, allocating privileges to cronies, and then failing to disclose his assets and wealth as required on Ukrainian financial disclosure forms.
Money Laundering
Prosecutors accused Lazarenko of laundering some $114 million through American banks from Swiss, off-shore, and other accounts, and a jury convicted him of 14 counts of conspiracy, money laundering, wife fraud and interstate transportation of stolen property in 2004 in a trial before then-U.S. District Judge Martin J. Jenkins of the Northern District of California, now a justice on the First District Court of Appeal.
Lazarenko was later sentenced to nine years in prison and ordered to pay a $10.5 million fine.
On appeal, Judge M. Margaret McKeown, opining that the government was not required to plead a specific violation of Ukrainian law in its indictment, rejected Lazarenko’s argument that “extortion” predicating a money laundering charge required a showing of violence, writing that it can also be committed under color of official right. She similarly rejected Lazarenko’s contention that the government’s inconsistency in characterizing the laundered funds as proceeds from fraud or extortion required reversal.
Wire Fraud Convictions
But McKeown opined that reversal was required for Lazarenko’s wire fraud convictions because no rational trier of fact could have concluded that transfers of funds occurring three years after the fraudulent activity had concluded and the money concealed by Lazarenko were “in furtherance” of that activity.
“If the government’s theory were correct, then it would be possible for an ordinary fraud to be converted 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,” she wrote. “The government’s theory extends an already broad statute too far.”
McKeown further agreed with Lazarenko that the evidence presented by the government as to a separate transfer was insufficient to support the interstate transportation of stolen property charge.
“[T]he evidence reflects money into the…account and money out of the account, but missing is evidence about the account itself and whether the transferred money was ‘directly traceable’ to the fraud itself,” she said.
However McKeown rejected the contention that Jenkins had erred when he denied a motion for a new trial based on Lazarenko’s argument that the government had prejudiced him by bringing certain charges it knew it could not prove, and then referring to them in closing argument after the charges had been dismissed.
Noting that the doctrine of “retroactive misjoinder” or “prejudicial spillover—which arises where joinder of multiple counts was initially proper but later rendered improper by developments such as dismissal or reversal of some charges—is not limited to cases with more than one defendant, McKeown concluded that Jenkins had not abused his discretion because the evidence was not so inflammatory that it would tend to cause jury to convict on remaining counts, the dismissed counts were similar to those remaining, and the government’s case on the remaining counts had been strong.
Judges A. Wallace Tashima and Ronald M. Gould joined McKeown in her opinion.
The case is United States v. Lazarenko, 06-10592.
Copyright 2008, Metropolitan News Company