In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 18-2169 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v.

ISHAIHU HARMELECH, 

Defendant-Appellant. 

____________________ 

Appeal from the United States District Court for the 

Northern District of Illinois, Eastern Division. 

No. 15-CR-724 — Elaine E. Bucklo, Judge. 

____________________ 

ARGUED NOVEMBER 28, 2018 — DECIDED JUNE 24, 2019 

____________________ 

Before ROVNER, HAMILTON, and BRENNAN, Circuit Judges. 

BRENNAN, Circuit Judge. A federal grand jury indicted 

Ishaihu Harmelech on two counts of mail fraud under 18 

U.S.C. § 1341. Harmelech pleaded guilty to the first count, and 

the government dismissed the remaining count. In pleading 

guilty, Harmelech, who owned and operated multiple cable 

installation companies, admitted to setting up hundreds of 

DIRECTV accounts under a fraudulent scheme and pocketing 

the money that should have been paid for servicing those 
2 No. 18-2169 

accounts. He now appeals his sentence, arguing the district 

court erred in calculating DIRECTV’s losses and in applying 

a four-level sentencing enhancement pursuant to Sentencing 

Guideline § 3B1.1(a). Because we see no error in the district 

court’s loss calculation and sentencing determination, we affirm. 

I. The Scheme 

Between 2005 and 2011, Harmelech owned and operated 

three companies that installed cable television services at single-family residences and in multi-dwelling unit properties, 

such as hospitals, nursing homes, motels, senior living facilities, and apartment buildings. Harmelech managed nine 

different employees across his three companies, and he was 

responsible for the day-to-day operations. He continuously 

held himself out as an authorized dealer and distributor of 

cable installation services, despite his authorization having 

lapsed in 2005. As an “authorized” dealer, Harmelech contracted directly with cable providers—including DIRECTV—

to install receivers in over 150 multi-dwelling unit properties. 

Unlike single-family residences, multi-dwelling units typically have one master antenna system with multiple cable receivers placed in a rack called a “headend.” Each receiver in 

the headend is tuned to one channel, and the signal is then 

distributed throughout the building. Each television set in the 

building may access multiple channels through the headend. 

For multi-dwelling unit buildings, it is usually the building 

owner or manager (rather than individual unit residents) who 

contracts with a cable provider for the entire building’s service. A multi-dwelling receiver is generally more expensive 

than the same receiver installed in a single-family residence 

because it provides service to the entire building. 
No. 18-2169 3

DIRECTV provides satellite television programming to 

single-family and multi-dwelling customers by installing a 

satellite receiver on the customer’s property and charging a 

subscription fee. Each receiver bears a unique identification 

code, which helps tie that receiver to an individual account. 

The cost of a subscription depends on the type of account (single-family or multi-dwelling) and the channels provided. As 

is standard industry practice, DIRECTV charges more for 

multi-dwelling subscriptions than for single-family subscriptions. This rate structure reflects the different installation and 

service requirements for multi-dwelling unit buildings described above. 

Authorized dealers and distributors routinely contract 

with DIRECTV to install receivers in multi-dwelling unit 

buildings. Despite lacking authorization, Harmelech installed 

DIRECTV receivers and exploited the multi-dwelling receiver 

configuration to commit fraud. Harmelech misrepresented 

his authority to customers to gain their trust and access their 

personal information to set up fraudulent accounts, as well as 

used fictitious names, to open approximately 384 single-family residential accounts. Once a fraudulent single-family account was created, he would place the receiver meant for that 

account into the headend at a multi-dwelling building, tuning 

the receiver to a channel not already included in the building’s subscription—usually a premium channel with a higher 

price. Harmelech would then charge the building customer 

for the fraudulently-installed channel as part of a multi-dwelling subscription. The building customer would pay 

Harmelech directly for all channels installed under a multidwelling subscription, despite being billed by DIRECTV 

(through Harmelech) at a single-family rate. Harmelech 

would then pay DIRECTV the lower-billed rate, pocketing the 
4 No. 18-2169 

difference between what was charged and what the building 

customer paid. Ultimately, Harmelech’s scheme caused 

DIRECTV to provide multi-dwelling buildings with channels 

for which neither Harmelech nor the customers were paying. 

This scheme continued for over six years and involved 

several other participants who acted at Harmelech’s direction. 

For instance, Harmelech’s secretary assisted him in opening 

fraudulent accounts and used her personal credit card to 

make payments for those accounts on Harmelech’s behalf. 

Another employee aware of the fraud also opened fraudulent 

accounts for Harmelech and installed single-family receivers 

in multi-dwelling buildings under Harmelech’s control. 

Harmelech also directed the activities of seven other employees and convinced four separate companies that were authorized DIRECTV dealers to provide additional receivers to 

increase the number of fraudulent accounts he could open. 

In August 2009, suspecting Harmelech was committing 

fraud, DIRECTV opened an internal investigation, and hired 

an outside firm, Signal Audit, to assist. As part of the investigation, DIRECTV and Signal Audit attempted to locate and 

access the headend at each multi-dwelling building that 

Harmelech serviced. Once inside a building, investigators inspected each receiver in the headend to determine which type 

of account (single-family or multi-dwelling) was associated 

with the unique identification code on the receiver. This allowed investigators to determine whether receivers tied to 

single-family accounts were being used to provide programming for the entire building. 

DIRECTV and Signal Audit were able to inspect five multidwelling buildings in the Chicago area. For those five buildings, investigators identified the account type tied to each 
No. 18-2169 5

receiver in the headends and found the receivers did not correspond to the buildings’ DIRECTV accounts. Investigators 

also obtained from each building manager a list of the 

channels the building’s residents received. The investigation 

produced no evidence that residents were aware of any fraud 

occurring on their accounts. 

Once Harmelech learned of the investigation, he instructed the building managers to not cooperate and directed 

his employees to remove receivers from the remaining buildings he serviced before they could be inspected. Harmelech 

eventually stopped making payments to DIRECTV on behalf 

of all buildings with fraudulent accounts, causing hundreds 

of accounts to become delinquent. Within three to four 

months, DIRECTV terminated programming for all accounts 

serviced by Harmelech. 

Although Harmelech prevented DIRECTV from inspecting all impacted buildings, the five buildings it did inspect 

were used to determine the quantifiable value of its losses. At 

sentencing, a DIRECTV representative testified its investigators compared the large numbers of channels the five building 

managers reported that residents actually received with the 

smaller numbers of channels for which DIRECTV received 

subscription payments. This comparison showed DIRECTV 

should have been paid $2,006 per building per month for the 

full programming provided. In its internal calculations, 

DIRECTV credited Harmelech for all monthly payments 

made on behalf of the five buildings, resulting in a loss to 

DIRECTV of approximately $1,477 per month per building. 

Altogether, DIRECTV’s investigation revealed an average annual loss in programming costs of approximately $20,000 for 

each of the five buildings. 
6 No. 18-2169 

II. District Court Proceedings

Harmelech pleaded guilty to defrauding DIRECTV and, in 

his plea declaration, acknowledged the charge of mail fraud 

carries a maximum sentence of 20 years’ imprisonment. 

Harmelech also agreed to pay “any other penalties or restitution” imposed by the judge, but he did not stipulate to a restitution amount. 

At sentencing, the court and the parties discussed how to 

calculate DIRECTV’s losses. Harmelech argued he should be 

credited with all payments made, and he should not owe any 

restitution because he brought customers to DIRECTV. Although he admitted DIRECTV was not paid what it should 

have been because of his fraudulent scheme, Harmelech 

claimed his scheme benefited the company, and any losses 

suffered were a result of additional business he brought. Instead of proposing a calculation method, Harmelech argued 

DIRECTV suffered zero losses. 

The government, in contrast, proposed two different loss 

calculation methods. The first was an estimate of the value of 

the programming Harmelech’s customers received, but for 

which DIRECTV was never paid. That required taking the 

average monthly cost of the stolen channels from the five inspected buildings and multiplying it by 150, the number of 

multi-dwelling buildings that Harmelech serviced. This calculation yielded a total loss of approximately $3,511,917 a 

year, or $21,071,502 for years 2005-2010. The government conceded, though, that “[w]hile the value of those stolen channels 

would best capture the true loss suffered by DIRECTV,” the 

$21 million estimate was speculative because it was based on 

a small sample size of only the five inspected buildings. 
No. 18-2169 7

The second loss calculation was based on actual losses 

from identified fraudulent accounts. Under this method, the 

government identified the fraudulent accounts and calculated 

the losses associated with those accounts based on three categories: (1) the cost of account delinquencies for fraudulent accounts that became delinquent when Harmelech stopped 

making payments; (2) the value of DIRECTV receivers that 

were not returned to DIRECTV when it terminated service on 

fraudulent accounts; and (3) the value of promotional credits 

that DIRECTV gave to fraudulent accounts that would not 

have otherwise qualified for such credits but for Harmelech’s 

fraudulent scheme. This second calculation did not consider 

the value of the stolen channels; it focused only on account 

delinquencies, lost equipment, and promotional credits, making it conservative even in Harmelech’s view. 

The district court rejected Harmelech’s position, characterizing the relevant question as whether DIRECTV was paid 

what it should have been for the services provided. The district court adopted the government’s second, conservative 

loss calculation and found Harmelech owed: (1) $108,000 in 

account delinquencies; (2) $39,000 in unrecovered DIRECTV 

receivers; and (3) $29,600 in promotional customer credits. 

The court also assessed $166,0001 in stolen channels for the 

five inspected buildings and $35,000 for the price DIRECTV 

 

1 To accurately calculate DIRECTV’s known programming losses, the 

district court began with the $20,000 baseline estimate for annual programming costs per account. It then considered the account opening dates 

for each of the five buildings; the longer an account was open, the greater 

the programming costs. Based on the age of each account, the district court 

estimated the total programming loss for the audited buildings as 

$166,000. 
8 No. 18-2169 

paid to Signal Audit to assist in the internal investigation. In 

sum, the district court ordered $372,600 in restitution.2 

After calculating DIRECTV’s losses, the court considered 

Harmelech’s sentencing range. The court assessed a four-level 

sentencing enhancement for Harmelech’s role as the organizer and leader of an otherwise extensive fraudulent scheme. 

U.S.S.G. § 3B1.1(a). Combined with his category II criminal 

history, the sentencing range came out between 46 to 57 

months. The court sentenced Harmelech to 48 months. 

While Harmelech conceded he acted as the manager of the 

scheme, he argued he should have received only a two-level 

enhancement under the Guidelines because the scheme 

involved fewer than five participants3 and was not otherwise 

extensive. U.S.S.G. § 3B1.1(c). In response, the government 

conceded they had identified only two employees who knew 

of the scheme, but that it was otherwise extensive based on 

several factors: (1) it spanned six years and involved 384 

fraudulent accounts across 150 multi-dwelling buildings; (2) 

the number of people Harmelech needed to maintain the 

scheme—nine employees, four separate authorized dealers, 

DIRECTV representatives, building owners and managers, 

and hundreds of unknowing residents; and (3) the dishonest 

conduct Harmelech displayed in using unknowing 

 2 The district court’s calculation was $5,000 less than what the figures 

add up to, but neither party noticed or corrected the district court’s mathematical error at sentencing. Because the error did not affect the court’s 

sentencing calculation under the Guidelines, and because neither party 

seeks to correct the court’s error on appeal, we accept the restitution 

amount as calculated. 

3 See U.S.S.G. § 3B1.1, cmt. n.1 (defining a “participant” as someone 

who is “criminally responsible for the commission of the offense”). 
No. 18-2169 9

participants to further his scheme, including in some cases 

stealing their identities. 

On appeal, Harmelech pursues two principal arguments: 

(1) the district court erred in calculating DIRECTV’s loss 

amount when it declined to assess zero losses; and (2) the 

district court erred in applying a four-level sentencing enhancement instead of a two-level enhancement.4 For the reasons below, we reject these arguments and affirm the district 

court. 

III. Loss Calculation

We review the district court’s loss calculation for clear error. United States v. Rosen, 726 F.3d 1017, 1024 (7th Cir. 2013). 

Clear error exists only when we are “left with the definite and 

firm conviction that a mistake has been made.” United States 

v. Vivit, 214 F.3d 908, 914 (7th Cir. 2000). The loss calculation 

must be “not only inaccurate but outside the realm of permissible computations.” See United States v. Gumila, 879 F.3d 831, 

834 (7th Cir. 2018) (quoting United States v. Littrice, 666 F.3d 

1053, 1060 (7th Cir. 2012)). 

Harmelech fails to make such a showing. He does not argue the court’s calculation was inaccurate or outside the realm 

of permissible computations; indeed, he admits that the 

calculation is accurate and even produces a conservative estimate of DIRECTV’s losses. Rather, Harmelech objects to 

 4 Harmelech’s brief also notes his opposition to the inclusion of evidence at sentencing showing his personal finances. The district judge 

noted she had either not seen the relevant evidence or it had not influenced her calculations. Because neither party asserts this evidence was the 

reason for the district court’s loss and sentencing determinations, we do 

not address it on appeal. 
10 No. 18-2169 

calculating any loss at all. He argues that all payments he 

made to DIRECTV on the fraudulent accounts should be 

“fully credited” to him—without further calculation—because “[l]oss cannot include the value of services a defendant 

legitimately performed for the victims of his fraud.” United 

States v. Swanson, 483 F.3d 509, 513 (7th Cir. 2007). 

This reasoning overlooks a critical step in analyzing loss. 

“Nominally legitimate payments are not offset against intended loss when they are ‘intertwined with and an ingredient of [an] overall fraudulent scheme.’” United States v. Stochel, 

901 F.3d 883, 890 (7th Cir. 2018) (quoting United States v. 

Marvin, 28 F.3d 663, 665 (7th Cir. 1994)). When reviewing a 

loss calculation this court does not credit payments made in 

furtherance of the scheme. See Stochel, 901 F.3d at 890 (holding 

that defendant should not receive a credit against loss for payments covering legitimate expenses because the payments 

made were “essentially the cost of perpetuating the scheme,” 

“designed to lull his victims so he could avoid detection.”). 

We decline to adopt Harmelech’s position which would require us to skip this step in our review of the district court’s 

loss calculation. 

While Harmelech admits he made payments in furtherance of the scheme, he claims the payments were nevertheless 

“legitimate” because DIRECTV financially benefitted. We 

again reject his argument. In United States v. Lane, 323 F.3d 

568, 585 n. 4 (7th Cir. 2003), we declined to credit “gains made 

by successful investors in a fraudulent investing scheme, as 

those gains [were] only intended to lure and defraud other 

investors.” And in Stochel, 901 F.3d at 890, we refused to credit 

a defendant who “stole receivership funds and covered his 

tracks with money from other sources for the purpose of 
No. 18-2169 11

throwing the [victims] off his scent and keeping the scam 

alive.” 

Notably, in Stochel, we relied on the district court’s finding 

that the defendant was not entitled to any credit “for the value 

of the services he provided” regardless of the “substantial financial benefit” the victims gained. Id. Here, the district court 

did credit Harmelech for the value of the payments he made 

to DIRECTV over the course of the scheme (based on the figures produced by the internal investigation), but those payments were less than the full amount owed. That was, in fact, 

the entire structure of Harmelech’s scheme: make less-thanfull payments to skim money off the top without DIRECTV 

noticing. Harmelech now asks this court to apply an unprecedented and extraordinary remedy, beyond what we contemplated in Stochel. He asks the court to find not only that his 

payments were legitimate (as they may be credited without 

being legitimate), but also that they were sufficient to fully 

compensate DIRECTV for its losses such that no further loss 

calculation is required. Harmelech’s request conflicts with applicable case law and fails to acknowledge the extent of the 

harm he caused DIRECTV. 

Here, the district court calculated DIRECTV’s losses by assessing whether “DIRECTV was getting paid what it should 

have been paid.” In calculating this amount, the parties presented the court three alternative theories: (1) Harmelech’s 

theory that DIRECTV’s loss was zero; (2) the government’s 

first proposal calculating losses for all impacted buildings by 

projecting costs across the board based on a sample size of 

five buildings; and (3) the government’s second proposal adding together the concrete losses for all known fraudulent 

accounts. 
12 No. 18-2169 

The court chose option three, plus two other known losses: 

the value of the stolen channels (for just the five inspected 

buildings) and the cost of the internal investigation. By both 

parties’ admissions, the court’s calculation was conservative. 

It did not assess speculative losses, but instead focused on 

specific, concrete loss figures: $108,000 in account delinquencies; $39,000 in unrecovered DIRECTV receivers; $29,600 in 

promotional customer credits; $166,000 in stolen channels for 

five buildings; and $35,000 to compensate for the internal investigation costs. 

Because the district court’s loss calculation was concrete, 

specific, conservative in its results, and consistent with this 

court’s existing precedent, we see no error in the calculation. 

We further conclude the calculation was neither inaccurate 

nor outside the realm of permissible computations—indeed, 

it was one of three alternative options the parties presented to 

the court, and each component of the court’s chosen figure accounted for a known and quantifiable loss. 

IV. Organizer or Leader of “Otherwise Extensive” Scheme

Under the Sentencing Guidelines, a four-level enhancement is applied to a defendant’s offense level when the defendant is an “organizer or leader” of criminal activity that 

“involved five or more participants or was otherwise extensive.” U.S.S.G. § 3B1.1(a). If the defendant is an organizer or 

leader of criminal activity with fewer than five participants 

and the activity is not considered otherwise extensive, then a 

two-level enhancement applies. U.S.S.G. § 3B1.1(c). On these 

issues, we review the district court’s factual findings for clear 

error and legal conclusions de novo. See Stochel, 901 F.3d at 

888; see also Rosen, 726 F.3d at 1024 (reviewing defendant’s 

role as leader or manager for clear error); United States v. 
No. 18-2169 13

Hussein, 664 F.3d 155, 156, 162 (7th Cir. 2011) (reviewing “otherwise extensive” element for clear error); United States v. 

Arojojoye, 753 F.3d 729, 737 (7th Cir. 2014) (reviewing whether 

§ 3B1.1 applies de novo). 

Harmelech admits he directed his fraudulent scheme, but 

claims it was not otherwise extensive. A fraudulent scheme is 

“otherwise extensive” if the defendant “made a substantial 

portion of [his] income” from the fraud scheme, the scheme 

“continued in operation” for an extended period, or the 

scheme “used many people,” including unknowing individuals “to make the profit from the scheme.” United States v. 

Sheikh, 367 F.3d 683, 688-89 (7th Cir. 2004); see also Hussein, 664 

F.3d at 161-62. If the “otherwise extensive” element is satisfied, the defendant need only have exercised actual control 

over one other participant for the four-level enhancement to 

apply. United States v. Blaylock, 413 F.3d 616, 621 (7th Cir. 

2005); see U.S.S.G. § 3B1.1, cmt. n.3 (“In assessing whether an 

organization is ‘otherwise extensive,’ all persons involved 

during the course of the entire offense are to be considered. 

Thus, a fraud that involved only three participants but that 

used the unknowing services of many outsiders could be considered extensive.”). 

Harmelech concedes the scheme spanned over six years 

and involved hundreds of fraudulent accounts from 150 

multi-dwelling buildings, often using the personally identifying information of residents without their knowledge. He personally owned the three businesses used to perpetuate the 

fraud and made his living operating them. He supervised 

nine employees, two of whom knew of the fraud and facilitated it at Harmelech’s direction. He lied to four separate authorized dealers, DIRECTV representatives, and building 
14 No. 18-2169 

owners and managers to open fraudulent customer accounts, 

gain access to the buildings, and increase the number of receivers he could fraudulently install. His customers identified 

him as their sole point of contact for cable services, and they 

refused to work with other cable providers, or DIRECTV or 

Signal Audit employees. Harmelech’s scheme was for his own 

financial benefit—and, for six years, he did benefit. Based on 

this evidence, we see no error in the district court’s decision 

to find the scheme was otherwise extensive. The four-level enhancement was properly applied. 

For the reasons above, we AFFIRM.