While the [Sentencing] Commission concurs in the policy expressed by Congress,

courts to date generally have held that the ex post facto clause does apply to

sentencing guideline amendments that subject the defendant to increased punishment.
U.S.S.G. § 1B1.11, Commentary, Background. [November 1, 2002]. Ordinarily, the sentencing
guidelines in effect at the time of sentencing should be applied. U.S.S.G. § 1B1.11; United States
vy. Hartz, 296 F.3d 595, 598 (7° Cir. 2002); United States v. Fones, 51 F.3d 663, 669 (7" Cir. 1995).
However, when a guideline or application note is amended after the date of the underlying offense,
the amendment is not applied retroactively if substantive changes would result in increased
punishment. See, e.g., United States v. Bailey, 227 F.3d 792, 801 n. 1 (7 Cir. 2000) [Generally
to avoid Ex Post Facto Clause violations, we apply the sentencing guidelines in effect at the time of
the commission of the offense . .. However, we consider an amendment made to the commentary
to a guideline if the amendment is to clarify, rather than to substantively change the Guidelines”);
United States v. Nichols, 169 F.3d 1255, 1270 n. 3 (10" Cir. 1999) [district court correctly refused
to apply § 3A1.4 in Oklahoma bombing case because guideline amended after time of offense to
include domestic terrorism; retroactive application implicates ex post facto clause]. See also United
States v. Wells, 163 F.3d 889, 899 (4 Cir. 1998) [same].

Conclusion. For the foregoing reasons, the court will not apply the terrorism enhancement.
Arnaout’s objection to the 12 level increase in his guideline calculations and the five category
increase in his criminal history are sustained. The government’s other theories for application of

§ 3A1.4 are moot.

13


evidence suggests Abzoutov coordinated - and still coordinates - humanitarian efforts for Chechen
refugees.

Nor does the court find that the eight-hour usefulness of the warmers constitutes a sufficient
basis alone to infer they were intended for military use The affidavit of Farrukh Younus, the BIF
employee who actually located the California supplier and ordered the warmers, explains the
circumstances and reasons BIF decided to buy these warmers for Chechen refugees in Ingushetia in
late 2000. DX C. According to Younus, Chechen refugees were suffering from frostbite not
alleviated by gloves and shoes; the chemical warmers were a comparatively inexpensive short-term
solution to sub-zero refugee suffering. There can be no serious dispute that BIF provided significant
humanitarian aid to Chechen refugees, widows and orphans during 1999-2001. See, e.g., DX C
(attached photographs); character reference letters and photographs submitted through the Probation
Office on June 10, 2003.

Based on the record, the court cannot conclude by a preponderance of the evidence that the
warmers were intended for military use. Therefore, these items shall not be added to the loss
calculations. Arnaout’s objection to the presentence report on this issue is sustained.

Storage items provided to the Bosnian army. The presentence report and the government
include $133,982 for military uniforms, boots, nylon and walkie-talkies that a Saudi-based charity,
Lajnat Al Birr Al Islamia (“LBI”), left in a Bosnian storage facility. Arnaout formally gained control
over the storage facility in December 1993, when LBI founder Adel Batterjee - who was also
chairman of the Saudi-based Benovolence International Foundation - authorized Arnaout to take
control of BIF offices in the United States and Croatia. DX E. U.S.-based BIF was incorporated in
Illinois in March 1992. GX F. There is no evidence that the stored items were purchased by BIF
or Arnaout. Indeed, there is no direct evidence at all concerning the source, value, age or condition

4


was intended to promote, a federal crime of terrorism” in § 3A1.4 should be read to expand
application beyond the congressional directive that the enhancement shall apply only to federal
crimes of terrorism. The government relies on a decision of another Circuit to support its
interpretation. United States v. Graham, 275 F.3d 490, 517 (6" Cir. 2001). In Graham, the terrorism
enhancement was applied to a conviction for conspiracy to possess machine guns, threaten to assault
and murder federal officers and employees, to forcibily assault, resist, oppose, impede, intimidate
and interfere with federal officers when they were engaged in their official duties, and to maliciously
damage and destroy and attempt to damage and destroy by means of an explosive a building, or other
real or personal property used in interstate commerce. Jd. at 515. Even though conspiracy offenses
under 18 U.S.C. § 371 are not included in the statutory list of federal crimes of terrorism, some of
Graham’s predicate offenses and offense behavior are virtually identical to listed crimes of terrorism.
Id. at 515-16. A majority of a divided appellate panel agreed with the district court’s conclusion that
the nature of Graham’s conspiracy conviction was sufficiently analogous to the terrorist acts listed
in § 2332b(g)(5). In the specific context of the Graham case, the majority concluded that the objects
of the offense of conviction - conspiracy - constituted federal crimes of terrorism, and the terrorism
enhancement could be applied on that basis. Jd. at 518-19. A vigorous dissent found application of
the terrorism enhancement unsupportable on the record and under the clear terms of § 2332b(g)(5)
and its legislative history. Id. at 528-37.

The divided Graham opinion is neither binding authority on this court nor factually
analogous to this case. Even if this court followed the majority’s questionable redrafting of
§ 2332b(g)(5), the racketeering fraud conspiracy offense of conviction is not predicated on any
terrorist conduct enumerated in that statute. The government has not established that the Bosnian
and Chechen recipients of BIF aid were engaged in a federal crime of terrorism, nor that Arnaout

9


donation resulted in a letter of gratitude from the Bosnian army. GX 6. However, it is problematic
to place a reasonable value on these items in war-torn Bosnia in 1992-1994. Accordingly, the court
adopts Arnaout’s alternative suggestion that the stored items be valued at $66,991, one-half of the
government’s estimate. Def. Supp. Br. at 14.

Conclusion. For the foregoing reasons, Arnaout’s objections to the loss calculations for
Chechen hand and foot warmers and storage items donated to the Bosnian army are sustained in part.
The loss attributed to the fraud totals $315,624 [$248,633 + $66,991] and results in the addition of
12 levels to the sentencing guideline calculations.*

IL. Terrorism enhancement

Application of § 3A1.4.

Arnaout does not stand convicted of a terrorism offense. Nor does the record reflect that he
attempted, participated in, or conspired to commit any act of terrorism. In its written plea agreement,
the government agreed to dismiss sensational and highly publicized charges of providing material
support to terrorists and terrorist organizations. Nevertheless, the presentence report applies the
terrorism enhancement, § 3A1.4 of the sentencing guidelines. The terrorism guideline provides:

(a) If the offense is a felony that involved, or was intended to promote, a federal

crime of terrorism, increase [the offense level] by 12 levels; but if the

resulting offense level is less than level 32, increase to level 32.

(b) In each such case, the defendant’s criminal history category . . . shall be
Category VI.

USS.S.G. § 3A1.4 [Emphasis in original]. Application of the terrorism guideline would not only

require imposition of the statutory maximum sentence (20 years), but it would also place Arnaout

3 The court notes that adopting the government’s full $133,982 estimate would not
change this result.


of these items. The absence of documents about the stored items in either BIF’s Bosnian or Chicago
offices suggests these materials were purchased by LBI/Batterjee.’ It is beyond dispute that the
stored items were turned over to the Bosnian army sometime between the end of 1992 and June
1994. GX 6.

The government predicates Arnaout’s responsibility for these donations to the Bosnian army
on his involvement in Bosnia in 1992, and his association with Batterjee and LBI before he became
Executive Director of the American-based BIF. The government points out that BIF’s own records
reflect that the organization - and Arnaout - were engaged in humanitarian work in Bosnia as early
as May 1992. GX C, D, E. Arnaout acknowledges that he managed BIF’s Chicago and Bosnian
offices before Batterjee actually appointed him to be BIF’s Executive Director. Def. Supp. Br. at
10. However, he argues that because there is no evidence BIF funds were used to purchase the stored
items abandoned by LBI, their donation to the Bosnian army could not have perpetrated a fraud on
BIF donors.

Amaout ignores the fact that he consistently represented to donors and government
authorities that BIF supported only humanitarian causes. Whether BIF directly purchased or merely
inherited the stored items, a preponderance of the evidence establishes that the undisclosed donation
of this BIF property to the Bosnian army was during Arnaout’s “watch” and. perpetrated a fraud on
BIF donors.

Arnaout asserts that the government’s $133,982 estimate overstates the actual value of these
items and is speculative. There is a dearth of evidence about the purchase, source, age, value or

condition of these items. Although Arnaout claims these items were only of nominal value, their

2 This inference is reasonable because the proof of BIF’s undisputed aid to military
beneficiaries is otherwise documented by BIF’s own records.

5


special maritime and territorial jurisdiction of the United States; destruction of an energy facility;
Presidential and Presidential staff assassination and kidnaping; wrecking trains; terrorist attacks and
other acts of violence against mass transportation systems; destruction of national defense materials,
premises, or utilities; violence against maritime navigation and fixed platforms; homicides and other
violence against United States nationals occurring outside the United States; use of weapons of mass
destruction; acts of terrorism transcending national boundaries; bombing of public places and
facilities; harboring terrorists; providing material support to terrorists or terrorist organizations;
financing of terrorism; torture; sabotage of nuclear facilities or fuel; aircraft piracy; assault ona flight
crew with a dangerous weapon; explosive or incendiary devices, or endangerment of human life by
means of weapons, on aircraft; homicide or attempted homicide on aircraft; and destruction of
interstate gas or hazardous liquid pipeline facility.

Insum, Congress has specifically and exhaustively identified criminal offenses that constitute
federal crimes of terrorism. Those specifications control application of § 3A1.4. Further, Congress
clearly intended the revised terrorism guideline to be “applicable only to those specifically listed
federal crimes of terrorism, upon conviction of those crimes with the necessary motivational
element to be established at the sentencing phase of the prosecution.” Conference Report on S.735,
142 Cong. Rec. H. 3305-01, § 730, Directions to Sentencing Commission [Emphasis added].

Arnaout stands convicted of conspiracy to commit racketeering, in violation of 18 U.S.C.
§ 1962(d). Amaout’s offense is not included in the exhaustive list of federal offenses defined by
Congress as terrorism crimes. The enabling legislation and § 3A.1.4 plainly preclude application of
the terrorism enhancement to the racketeering fraud conspiracy offense of conviction. Nonetheless,
the government argues that the crime of conviction need not be enumerated in 18 U.S.C.
§ 2332b(g)(5) because the Sentencing Commission’s use of the phrase “a felony that involved, or

8


‘Minute Order Form (96/97)

United States District Court, Northern District of Illinois

Ni: of Assigned Jud; S Sitting Judge if Othe
nor Magistrate Judge Suzanne B. Conlon than Assigned Judge
CASE NUMBER 02 CR 892 DATE 7/17/2003
CASE UNITED STATES vs. ENAAM M. ARNAOUT
TITLE

[in the following box (a) indicate the party fling the motion, ¢.g,, plaintiff, defendant, 3rd party plaintifi, and (b) state briefly the nature
of the motion being presented.]

MOTION:

DOCKET ENTRY:

q) Oo Filed motion of [ use listing in “Motion” box above.]

Q) Oo Brief in support of motion due

@) Oo Answer brief to motion due__- Reply to answer brief due___.

(4) oO Ruling/Hearingon set for_____at

(5) Oo Status hearing[held/continued to] [set for/re-set for}on__—ssetfor_———sat_—

(6) o Pretrial conference[held/continued to] [set for/re-set for]on__——sset fort _

(©) Oo Trial[set for/re-set for]on_—sat_

(8) oO [Bench/Jury trial] [Hearing] held/continued to __at

(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
OOFRCP4(m) OLocal Rule 41.1 COFRCP41(a)\(1) OFRCP41(a)(2).

ao [Other docket entry]  Defendant’s objection to including Chechen foot and hand warmers in

calculating loss is sustained. His objection to including Bosnian storage items is sustained in part. His
objections to application of § 3A1.4 are sustained. ENTER MEMORANDUM OPINION AND ORDER.

dl) [For further detail see order attached to the original minute order. ]

No notices required, advised in open court.

No notices required.

Notices mailed by judge’s staff.

oY | Notified counsel by telephone
Docketing to mail notices.
Mail AO 450 form.

14N09 Lom isia gq

U | Copy to Probation Office.

courtroom
cB deputy’s
initials



Benevolence International Foundation, Inc., v. John Ashcroft, et al., 02 C 0763 (Judge Alesia). GX
15, Declaration of Enaam Arnaout executed March 22, 2002; GX 16, Corrected Declaration of
Enaam Arnaout executed April 1, 2002. The two declarations are identical in all material respects.
Arnaout’s declarations were submitted in support of BIF’s motion for a preliminary injunction
seeking release of BIF assets frozen by the government several month earlier under the International
Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06. This legislation empowers the
Department of the Treasury to take such action against persons or groups who plan, authorize, aid
or engage in hostilities or attacks against the United States.

Inhis declarations, Arnaout attested that BIF uses its funds only to assist the poor and needy;
donations to BIF are used solely for charitable, humanitarian purposes; and BIF has never provided
aid or support to people or organizations known to be engaged in violence, terrorist activities, or
tnilitary operations of any nature. GX 15, 16 at [| 5, 6, 7. The court found these attestations were
false, based on Arnaout’s admissions during his guilty plea and substantial documentary evidence
that establish BFF used a portion of its funds to aid military operations in Chechnya and Bosnia. The
court found these false statements were willfully made and material to this case because at the time
Arnaout knew that BIF’s Bosnian operations were under investigation. GX 20,21. The use of BIF
humanitarian funds to aid military forces in Bosnia and Chechnya are at the heart of the racketeering
conspiracy. The court did not find that Arnaout obstructed an investigation of BIF for providing
material support to terrorists or terrorist organizations or any other federal crime of terrorism, or that
he intended to promote a federal crime of terrorism.

Application Note 2 was adopted by the Sentencing Commission on November 1, 2002, and

provides in relevant part:

11


intended the donated boots, uniforms, blankets, tents, x-ray machine, ambulances, nylon and
walkie-talkies to be used to promote a federal crime of terrorism.
Moreover, it should be noted that the phrase “involved or was intended to promote” in
§ 3A1.4 was carried over verbatim from the original international terrorism guideline. The phrase
is repeated in the revised guideline without any explanation or comment in the application notes -
or even acknowledgment that the enhancement was to apply only to federal crimes of terrorism.
Indeed, all the Sentencing Commission did to comply with the congressional mandate was to change
_the phrase “international terrorism” to “federal crime of terrorism.” Even if it is inferred that the
Sentencing Commission intended to expand application of the terrorism enhancement to conduct
beyond the offense of conviction, the Sentencing Commission lacks authority to preempt the specific
directives of Congress. United States v. LaBonte, 520 U.S. 751, 757 (1997). Finally, in 2002, the
Sentencing Commission obviated any ambiguity about § 3A1.4's use of the phrase in issue by
striking Application Note 1 containing the “involved, or was intended to promote” language and
inserted in its place the following:

‘Federal Crime of Terrorism’ Defined.- For purposes of this guideline, “federal crime
of terrorism’ has the meaning given that term in 18 U.S.C. § 2332b(g)(5).

Accordingly, the court concludes that § 3A1.4 does not apply to a racketeering offense because it is
not a federal crime of terrorism as defined by § 2332b(g)(5).

Obstruction of Justice

Alternatively, the government invokes Application Note 2 as a basis for applying § 3A1.4
because Arnaout’s relevant conduct includes obstruction of justice. At the June 16" sentencing
hearing, the court determined that a two-level enhancement under § 3C1.1 for attempted obstruction.

of justice applied, based on two declarations under penalty of perjury Arnaout signed and filed in

10


in the highest criminal history category even though he has no prior arrests or convictions. Based
on his actual criminal history, Arnaout falls in Category I. +

The terrorism enhancement in its present form is a relatively new guideline, promulgated by
the United Sentencing Commission as an emergency amendment in November 1996. Sentencing
Guidelines, Appendix C, Amendment 539. The amendment responded to a congressional directive
that the existing international terrorism guideline be defined more broadly to include only federal
crimes of terrorism. Antiterrorism and Effective Death Penalty Act of 1996 § 730, Pub. L. 104-132,
110 Stat. 1303.

As reflected in Application Note 1 of § 3A1.4, federal crimes of terrorism are defined and
identified by statute. Specifically, 18 U.S.C. § 2332(b)(g)(5) defines a federal crime of terrorism as
an offense “calculated to influence or affect conduct of government by intimidation or coercion, or
to retaliate against government conduct.” In addition, the offense must be a violation of one of alist
of specified offenses: destruction of aircraft or aircraft facilities; violence at international airports;
arson within special maritime and territorial jurisdiction; biological weapons; chemical weapons;
congressional, cabinet, and Supreme Court assassination and kidnaping; nuclear materials; plastic
explosives; arson and bombing of Government property risking or causing death; arson and bombing
of property used in interstate commerce; killing or attempted killing during an attack on a Federal
facility with a dangerous weapon; conspiracy to murder, kidnap, or maim persons abroad; protection
of computers; killing or attempted killing of officers and employees of the United States; murder or
manslaughter of foreign officials, official guests or internationally protected persons; hostage taking;

destruction of communication lines, stations, or systems; injury to buildings or property within the

* A prisoner’s criminal history category has a direct effect on the designation of the
facility by the Bureau of Prisons and the conditions of his incarceration.

7


The government now offers two Russian news reports indicating Abzoutov was removed
from his provisional government post in October 2000, two months before the warmers were shipped
to him. GX A, B. Arnaout counters with a Russian news report dated December 19, 1999, which
tefers to Abzoutov as the Chechen representative to Turkey. DX B. The court finds news reports
about Abzoutov’s official status in December 1999 and October 2000 lack significant probative
value in determining whether BIF intended the warmers for humanitarian or military use when they
were shipped to Turkey in December 2000.

Far more significant and reliable is the affidavit of Marie Bennigsen Broxup, a British-based
historian and editor specializing in the North Caucuses. DX A. Broxup traveled frequently to
Chechnya from 1992 to 1999 on behalf of various governmental and non-governmental
organizations. Her last visit to Chechnya was in July 1999, on behalf of the United States Marine
Corps, to interview Chechen commanders about military tactics. Broxup attests that Isa Abzotov
[sic] was

.... the appropriate channel through which charitable organisations as well as

individuals, could send donations to relieve the humanitarian catastrophe brought

about by the [Russo-Chechen] war. Because of the danger of operating in Chechnya,

many [non-governmental organizations] unable to distribute aid directly, worked in

collaboration with the Chechen representatives.

Inhis official capacity, Isa Abzotov [sic] collected funds and medical equipment that
served to establish a rehabilitation centre for handicapped children . . . .

Isa Abzotov [sic] presently lives in Istanbul. Although he is no longer the
official representative of his government, he continues to be active in the
humanitarian field, trying to alleviate the suffering of the numerous Chechen
refugees who arrive in Turkey.
DX A [Emphasis added]. Given the Broxup affidavit, the court finds it is unreasonable to infer BIF
intended the warmers for military use simply because they were shipped through Abzoutov.

Whether or not he was an official of the Chechen government at the time of shipment, reliable

3


Til. Guideline Calculations

Base offense level 6
Loss 12
50+ victims 4
Acting for charity 2
Fraud outside U.S. 2
Role in offense 4
Obstruction of justice 2
Adjusted Offense Level (Subtotal) 32
Acceptance of responsibility 2
Total Offense Level 30
Criminal History Category I
Sentencing Guideline Range 97 to 121 months

IV. Remaining Issues

The government’s alternative motion for an upward departure, and Arnaout’s motions for
downward departure and to strike portions of the presentence report, will be considered in the
context of counsels’ respective arguments in aggravation and mitigation at the sentencing hearing

on August 18, 2003.

July 17, 2003 ENTER:

S B. Conlon.
United States District Judge

14


IL Loss calculations

Hand and foot warmers. It is undisputed that Arnaout is accountable for $196,653 in losses
due to improper diversion of BJF humanitarian funds to purchase Chechen military boots, uniforms
and an ambulance; and Bosnian boots, blankets and tents.' At the June 16" hearing, the court
overruled Arnaout’s objections to including Chechen shoes ($34,500), an x-ray machine ($6,755),
cash ($3,225) and another ambulance for Bosnian fighters ($7,500). This brought the total loss to
$248,633.

The government contends $75,377 should be added for single-use chemical hand and foot
warmers intended for Chechen fighters. The government argues non-humanitarian use can be
inferred by the nature of the warmers and the fact they were shipped to Essa Abzoutov, who
previously received BIF boots and an x-ray machine for Chechen fighters. A former BIF associate
opined that Abzoutov was deeply committed to Chechnya’s struggle for independence against
Russia. The court does not find this opinion has any probative value. No doubt, anyone familiar
with Russo-Chechen history could reasonably conclude that Abzoutov’s views are shared by a vast
majority of Chechens.

At the hearing, Arnaout argued the warmers were intended for Chechen refugees subjected
to harsh winter conditions and that humanitarian aid was routinely shipped through Abzoutov
because he was the Turkey-based representative of the Chechen provisional government. Arnaout’s
contention about Abzoutov is consistent with the former BIF associate cited by the government: the
government’s witness also described Abzoutov as responsible for coordinating refugee relief. GX

3,41.

' Amaout candidly admitted responsibility for the Bosnian blankets and tents. These
items, valued at $27,000, were not included in the presentence report’s loss calculations.

2


‘IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
UNITED STATES OF AMERICA, )
Plaintiff, } No. 02 CR 892
v. } Suzanne B. Conlon, Judge
ENAAM M. ARNAOUT, } b
Defendant. } Ny Fel
19D

MEMORANDUM OPINION AND ORDER

On the morning trial was to begin, Enaam Arnaout entered a guilty plea to a charge of
racketeering fraud conspiracy committed in his operation of a charity, Benevolence International
Foundation (“BIF”). The agreed facts submitted in a written plea agreement and the government’s
evidentiary proffer during the plea hearing specified the fraud consisted of Amaout’s undisclosed
use of a portion of BIF’s funds, raised for humanitarian purposes only, to provide aid to militia in
Bosnia and Chechnya. The government agreed to dismiss other charges against Arnaout relating to
money laundering and providing support to terrorist groups.

During the initial sentencing hearing on June 16, 2003, all claimed factual errors in the
presentence investigation report (“PSI”) and all but two issues pertaining to application of the
sentencing guidelines were resolved. The court invited counsel to submit additional evidence and
citations of authority on two remaining guideline issues: calculation of loss and application of the

terrorism enhancement. These issues are now ripe for decision.

0)


Harboring, Concealing, and Obstruction Offenses. - For purposes of this guideline,

an offense that involved . . . (B) obstructing an investigation of a federal crime of

terrorism, shall be considered to have involved, or to have been intended to promote,

that federal crime of terrorism.

It must first be observed that Application Note 2 explicitly refers to offenses, not relevant
conduct. Arnaout does not stand convicted of an obstruction of justice offense, much less for aiding
or promoting a federal crime of terrorism. His sentencing guideline calculations include a two-level
punishment enhancement for relevant conduct that consists of submitting two declarations containing
false statements material to the investigation of the offense of conviction in this case. See
§ 3C1.1(A) [obstruction of justice enhancement applies if defendant willfully attempted to obstruct
or impede the administration of justice during the investigation of the instant offense of conviction].
The offense of conviction is clearly not a federal crime of terrorism.

Moreover, Application Note 2 was not adopted until November 1, 2002. Arnaout’s
declarations were executed on March 22, 2002 and April 1, 2002, seven months earlier. GX 15, 16.
Application Note 2 severely increases the level of punishment for obstruction offenses that aid or
promote federal crimes of terrorism. Obstruction offenses were not previously mentioned in
§ 3A1.4, and are not included in the statutory list of federal crimes of terrorism. Thus, even if
§ 3A1.4 applied to relevant obstructive conduct that was neither the offense of conviction nor a
federal crime of terrorism, ex post ‘facto concerns would be implicated.

In adopting the Sentencing Reform Act, Congress apparently did not believe the ex post facto

clause of the Constitution would apply to amended sentencing guidelines. S.Rep. No. 225, 98"

Cong., 1 Sess. 77-78 (1983). However, the reality is different.

12