quoted earlier, starts off by saying that he had been “retained by Karim Alhalabi of Holyland
Food, Inc. to represent them.” Gov’t Ex. 14 at 1 (emphasis added); see also Gov’t Ex. 17. But
that letter does not contain any of the statements the government proposes to introduce against
Alhalabi. Williams’ October 1998 letter, which contains the purported false exculpatory
statement, unambiguously provides “information regarding our client, Holyland Food.” Gov’t
Ex. 20 at 1 (emphasis added). Taken as a whole, Williams’ letters provide little support for the
government’s contention that he was speaking on behalf of Alhalabi individually as well as on
behalf of the corporation when he responded to the FNS charges.

In making its charges, FNS sought to impose sanctions against the corporate entity, not
against Afhalabi individually. See Gov't Ex. 13 at 2 (“your firm is being considered for
permanent disqualification”; “YOUR FIRM IS LIABLE FOR THE TRAFFICKING ...
VIOLATIONS INDICATED ABOVE”). Though Williams testified at the hearing on the motion
in limine that sanctions imposed by FNS can have an effect on the individual owner of a
corporation as well as a corporation itself, there is no indication from the materials submitted by
the parties that FNS took any steps to sanction Alhalabi during the administrative proceedings.
See Gov’t Ex. 16 at 2 (determining that “Holyland Food, Inc. ... shall be permanently disqualified
from participation in the Food Stamp Program”); Gov’t Ex. 22 (referring to review “of the
determination ... to permanently disqualify your client’s firm from participation in the Food
Stamp Program”).

Williams was retained in this matter following Holyland’s receipt of a letter stating that
the firm would be sanctioned. There is no evidence that Athalabi, after receiving the letter,

sought personal, as opposed to corporate counsel. Williams testified that he frequently represents


exculpatory statements. See, e.g., United States v. Rajewski, 526 F.2d 149, 158 (7th Cir. 1976)
(untrue exculpatory statement may be considered as evidence of the defendant’s consciousness of
guilt).’ The government does not contend that Williams knew or should have known that the
statements were false; rather it seeks to attribute the alleged false statements to Alhalabi. It
argues that Williams’ statements are admissible against Alhalabi as admissions of an agent under
Federal Rule of Evidence 801(d)(2)(D).

Rule 801(d)(2)(D) provides that “a statement is not hearsay if ... [t]he statement is offered
against a party and is made by the party’s agent or servant concerning a matter within the scope
of the agency or employment, made during the existence of the relationship.” Fed. R. Evid.
801(d)(2)(D). As the proponent of the evidence, the government bears the burden of showing its
admissibility.

There is no question that an attorney may be the agent of his client for purposes of Rule
801(d\(2)(D). See, e.g., United States v. Harris, 914 F.2d 927, 931 (7th Cir. 1990). But “[t}he
unique nature of the attorney-client relationship ... demands that a trial court exercise caution in
admitting statements that are the product of this relationship.” Jd In the present context, the
Court must examine carefully whether the predicate of admissibility under Rule 801(d)(2)(D) has
been met.

In responding to the FNS inquiries, Williams was acting as counsel for Holyland, a
corporation. The government maintains that he was also acting as counsel for Alhalabi

individually. There is some evidence to support this claim: Williams’ initial letter to FNS,

‘ The government says that Alhalabi made similar admissions following his arrest. Any
such statements, of course, would be independently admissible and are unaffected by the
discussion in this Memorandum Opinion.


business in matters involving sanctions for violation of the food stamp regulations. He stated
that he generally treats both the corporation and its owner as his client. He does this, he said, to
be “safe” — as a sanction against the corporation may have an effect no its owner as well. But
when asked directly about discussions with clients regarding who he represents, Williams
testified that his habit, during the time in question, was nof to discuss the question of who he
represents with the person who consulted him on behalf of a corporation. He also testified that
he recalled no conversation with Alhalabi in which they had discussed the topic. In sum, there is
no evidence to indicate any awareness on Alhalabi’s part that he was hiring personal, as opposed
to corporate counsel.

The government points out that Holyland Foods, Inc, had only a single owner. But that
does not provide a basis to disregard the corporate form. A corporation can hire a lawyer only if
some live person acting on the corporation’s behalf seeks out counsel; that act does not give rise
to a personal attorney-client relationship involving the person who hires counsel on the
corporation’s behalf. As Alhalabi notes, an attorney for a corporation does not have an attomney-
client relationship with corporate officers simply by virtue of representing the corporation. See
Westinghouse Electric Corp. v. Kerr-McGee Corp., 580 F.2d 1311, 1318 (7th Cir. 1978). The
evidence is insufficient to indicate that there was an express agreement for individual
representation; there is no indication that Alhalabi sought individual representation; and there is
no evidence of any manifestation on Alhalabi’s part to have personal as opposed to corporate
representation. See United States v. Keplinger, 776 F.2d 678, 700-01 (7th Cir. 1985). To put it
in the terms used in the government's post-hearing memorandum, the evidence does not show a

*meeting of the minds” between Alhalabi and Williams “to represent [Alhalabi] as well as the


nue Order Form (06/97)

United States District Court, Northern District of IMinois

Name of Assigned Judge

Matthew F. Kennelly

Sitting Judge if Other

Trial[set for/re-set for] on

[Bench/Jury trial] [Hearing] held/continued to at

or Magistrate Judge than Assigned Judge
CASE NUMBER 03 CR 971 DATE 12/14/2004
CASE USA vs. Abdul Karim Alhalabi
TITLE
{In the following box (a) indicate the party filing the motion, .g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
(OTION: of the motion being presented. }
OICKET ENTRY:
Oo Filed motion of [ use listing in “Motion” box above.]
Oo Brief in support of motiondue
oO Answer brief to motion due, . Reply to answer brief due____-
o Ruling/Hearingon___setfor___at
a) Status hearing[held/continued to) [set for/re-set for] on setfor saat
Qa Pretrial conference[held/continued to] [set for/re-set for]on__setfor_—s— at.
o
Q
0

| {Other docket entry]

OFRCP4i(aX{1) 01 FRCP41(a)(2).

This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to}
DFRCP4m) Local Rule 41.1

For the reasons set forth on the attached Memorandum Opinion and Order,

the Court finds that the government has failed to establish the existence of an agency relationship between
Alhalabi individually and Edward Williams by either substantial evidence. The Court therefore denies
the government’s motion in limine regarding the statements of Edward Williams (docket #29-1). Status
hearing set to 12/21/04 at 9:30 a.m. Ordered time excluded through 12/21/04, pursuant to 18 U.S.C.

3161(h)(8)(i). (X-T1)

a (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.

Notified counsel by telephone.

Docketing to mail natices.

Mail AO 450 form

Zopy to judge/magistrate judge.

courtroom
OR6 deputy's
initials

segs sy

ee ee Re

DC 15 200

ALES

Sd

ave mailed novice

__.central Clerkts Office

Date/time received in

ling depuny iitials



store.” Gov’t Mem. at 5.
Conclusion
For the reasons stated above, the Court finds that the government has failed to establish
the existence of an agency relationship between Alhalabi individually and Edward Williams by
either substantial evidence, see United States v. Flores, 679 F.2d 173, 178 (9th Cir. 1982), or by
a preponderance of the evidence, see Gomez v. Rivera Rodriguez, 344 F.3d 103, 116 (1st Cir.
2003). The Court therefore denies the government’s motion in limine regarding the statements of

Edward Williams [docket # 29-1}.

MATTHEW F. RENNELLY
United States District Judge
Date: December 13, 2004


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

EASTERN DIVISION

UNITED STATES OF AMERICA )

)

vs. ) Case No. 03 CR 971

)

ABDUL KARIM ALHALABI )
MORANDUM OPINION AND O} Lp “MeN,
d

MATTHEW F, KENNELLY, District Judge: 5 204

Defendant Abdul Karim Alhalabi is charged with wire fraud and food stamp fraud. The
indictment alleges that he was the owner of Holyland Foods, a grocery store located on the west
side of Chicago. The indictment further alleges that Alhalabi exchanged cash for food stamp
benefits, knowing that this was prohibited, and fraudulently redeemed those benefits through the
United States Department of Agriculture, which administers the food stamp program.

In January 1998, the Department of Agriculture's Food and Nutrition Service sent a letter
to “Mr. Karim Alhalabi, President,” stating that “there is reason to believe that you, doing
business as Holyland Foods, Incorporated, have violated the terms and conditions of the
regulations governing the Food Stamp Program ....” Gov't Ex. 13 at 1, In particular, FNS
alleged violations of regulations prohibiting exchange of food stamps for cash. In the letter, FNS
stated that

[bJecause of the seriousness of the above charges, your firm is being considered

for permanent disqualification from the Food Stamp Program or the imposition of

a civil money penalty.

Id. at 2. ‘The letter invited a reply.

On January 15, 1998, attommey Edward Williams sent FNS a letter stating that “I have

SO


been retained by Karim Alhalabi of Holyland Food, Inc., 957 N. Drake, Chicago, Illinois 60651,
to represent them concerning the formal charges that were detailed in your letter which was dated
January 7, 1998.” Gov’t Ex. 14. Williams later met with FNS and evidently advised officials
verbally that “the increase in [the] store’s redemptions is the result of a new meat counter being
added to the store.” See Gov’t Ex. 16 (letter form FNS referencing statement by Williams) at 1.
FNS rejected this explanation and determined, in August 1998, that Holyland had accepted food
stamps for cash. Jd. at 2. FNS therefore permanently disqualified Holyland from participation in
the food stamp program, and determined to impose a civil money penalty. Id

Holyland requested administrative review of the decision. In October 1998, Williams
sent a letter, entitled “Re: Holyland Food, 957 N. Drake, Chicago, IL 60651,” to “provide [FNS]
with additional information regarding our client, Holyland Food, so that the USDA will
reconsider the determination of the Chicago Field Office to permanently disqualify Holyland
from the Food Stamp Program.” Gov’t Ex. 20 at 1. In the letter, Williams stated that in May
1997, Holyland had installed a new meat counter, which accounted for a dramatic increase in
food stamp redemptions from an average of $30,000 to an average of $150,000 per month.
Williams also provided explanations for certain transactions that FNS had cited. He asked FNS
to “reconsider the ... determination to permanently disqualify Holyland from the Food Stamp
Program.” Jd. at 2. In March 1999, an administrative review officer rejected Holyland’s appeal.
Gov't Ex. 22.

The government has moved in limine to call Williams to testify regarding his
communications with FNS and to introduce his correspondence to the agency. The government

intends to argue that the explanations that Williams provided to FNS amounted to false