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United States v. Abdulwahab, No. 11-5093

Decided: April 29, 2013

Adley H. Abdulwahab appealed his conviction and sentence for several crimes related to a fraudulent investment scheme. The Fourth Circuit reversed Abdulwahab’s conviction for money laundering, but affirmed the conviction on all other counts.

Abdulwahab’s conviction stemmed from a fraudulent investment scheme where Abdulwahab and two co-conspirators sold interests in life insurance polices through their company A&O. Abdulwahab joined A&O in 2005 as the main salesperson for the fraudulent securities, and with his co-conspirators, misrepresented numerous critical facts about the company and misappropriated in excess of one-hundred million dollars, personally receiving in excess of eight million dollars. In addition, Abdulwahab misrepresented several important facts about his past on documents relating to the sale of securities, including falsely stating that he held an economics degree from Louisiana State University and failing to disclose a 2004 guilty plea for the felony forgery of a commercial instrument. In late 2006, state regulators began to investigate A&O under suspicion that it was selling unregistered securities. To shield the company from investigation, A&O undertook a sham sale to a company partially owned by Abdulwahab. In 2010, Abdulwahab was convicted of: (1) money laundering, (2) conspiracy to commit money laundering, (3) mail fraud, (4) conspiracy to commit mail fraud, and (5) securities fraud. The court sentenced Abdulwahab to 720 months imprisonment. Abdulwahab appealed all convictions and the length of the sentence.

On appeal, Abdulwahab first argued that the district court erred in denying his motion for acquittal relating to the money laundering conviction. The Fourth Circuit agreed, finding that certain counts of money laundering were barred by the “merger problem” identified by the Supreme Court in United States v. Santos. A conviction for money laundering may be based only on the “proceeds” of the illegal activity, which the Fourth Circuit defined as the “net profits” of the fraudulent scheme. Thus, certain expenses and payments made to carry out the fraud, while serving as evidence of the fraud, do not constitute money laundering because they are not “net profits.” In particular, the Fourth Circuit held that district court erred in determining that commission payments to sales agents were “proceeds,” finding instead that they were part of the “essential expenses” of the illegal activity. Since the Fourth Circuit reversed the money laundering conviction, and the error was not harmless, the court remanded Abdulwahab’s case for resentencing.

Second, Abdulwahab argued that his conviction for conspiracy to commit money laundering also suffers from the same “merger problem” as the substantive money laundering conviction. The Fourth Circuit, reviewing for plain error, rejected his argument. The court found that Abdulwahab’s sham sale of A&O provided sufficient evidence for a rational jury to conclude that the transactions were intended to promote the continuation of the fraudulent investment scheme. Furthermore, there was no “merger problem” because the payments Abdulwahab received from the sham sale were not included in the “essential expenses” of the scheme, but rather were part of the general plan of deception to defraud investors.

Third, Abdulwahab argued that the district court erred in denying his motion for acquittal regarding the convictions for mail fraud, conspiracy to commit mail fraud, and securities fraud because the evidence was insufficient for a jury to conclude that he knew of and intended to participate in a scheme to defraud. The Fourth circuit disagreed, citing the numerous misrepresentations Abdulwahab made to investors personally. In addition, Abdulwahab’s extensive participation in the sham sale provided evidence that was “well beyond what was necessary to support his convictions.”

Finally, Abdulwahab argued that the district court erred in holding him responsible at sentencing for losses of funds that were invested with A&O before he became an equity partner. The Fourth Circuit disagreed, finding that the Abdulwahab became a part of the conspiracy when he joined the company as a salesperson and agreed to make false representations to induce investors to invest their money with A&O. The court emphasized that as a salesperson, Abdulwahab knew that investor funds were being procured by fraud and in concert with his co-conspirators to continue the scheme.

Full Opinion

– Wesley B. Lambert