Court Opinion

ID: 2994279
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:13:46.788923+00
Date Added: 2024-06-11T15:02:59.526776
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 99-2423

United States of America,

Plaintiff-Appellee,

v.

Emad Jamal Hassan,

Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 98 CR 613-2--David H. Coar, Judge.

Argued February 9, 2000--Decided May 1, 2000

  Before Bauer, Easterbrook, and Ripple, Circuit Judges.

  Bauer, Circuit Judge. On November 20, 1998,
after a bench trial, the district court found
Emad Jamal Hassan guilty on two counts of food
stamp fraud in violation of 7 U.S.C. sec.sec.
2024(b) and (c) and one count of conspiracy
pursuant to 18 U.S.C. sec. 371. On May 18, 1999,
Hassan was sentenced to thirty-seven months
incarceration, three years of supervised release,
and ordered to pay restitution in the amount of
$1,031,873. Hassan appeals the district court’s
calculation of the total loss amount for
sentencing purposes.

Background

  In February 1994, Yousef Hassan, Emad’s brother,
opened the Halsted Street Market, a small
neighborhood grocery store located at 7548 N.
Halsted Street in Chicago. Yousef applied for a
federal food stamp license with the USDA to
enable the store to accept food stamps from
customers. On the application, Yousef estimated
the annual gross sales for the Halsted Market as
$280,000 and the annual eligible food sales (food
items eligible to be purchased with food stamps)
as $200,000. The USDA approved the application
and the store received its food stamp license in
mid-May 1994. Emad worked at the store and
functioned as its manager. He ran the day-to-day
operations of the store. He was assisted by his
wife, Cathi, who worked in the store on a part-
time basis.

  Yousef, with the help of Maher Nubani, opened
eight different bank accounts for the store
between 1994 and 1995. From June 2, 1994 through
April 21, 1995, Yousef and Emad redeemed over
$1.2 million worth of food stamps in the Halsted
Street Market bank accounts. Of the $1.2 million,
a substantial amount of the food stamps were
exchanged for cash in transactions with other
neighborhood grocers who were not licensed to
accept food stamps. Typically, Yousef and Emad
purchased food stamps from other store owners at
discounts, often 10%, deposited the stamps into
their various bank accounts, and then collected
full remuneration from the government.

  At the trial, an official from the USDA
testified that licensed store owners who
illegally obtain stamps typically sell them to
other licensed store owners to avoid being
detected by the USDA for excessively high food
stamp redemptions. The USDA monitors the actual
redemptions of authorized food stores and
compares those to the reported level of sales of
the stores. Halsted Market’s suspiciously high
food stamp redemption rate alerted the USDA that
there may be fraud afoot.

  On September 1, 1998 both Yousef and Emad were
indicted and charged with one count of conspiracy
to defraud the United States government and
commit food stamp trafficking and two counts of
food stamp trafficking. Yousef has not been
arrested and is considered a fugitive. Emad was
arrested in Arlington, Texas and transferred to
the Northern District of Illinois on August 28,
1998 to await trial. Emad then waived his right
to a jury trial.

  Maher Nubani, who owned and operated his own
food store, testified he was barred from
participating in the food stamp program because
of a conviction in 1990 for food stamp fraud.
Yousef and Emad regularly gave him cash in
amounts ranging from $500 to $3,000 so that he
would purchase food stamps from his customers at
a discounted rate. He gave the food stamps to
Yousef and Emad, who redeemed the food stamps
through the Halsted Market bank accounts. Between
May 1994 and February 1995 Nubani redeemed
approximately $10,000 to $15,000 a month in food
stamps through Yousef and Emad and the Halsted
Market bank accounts.

  Yousef and Emad prepared and signed bank
deposit slips and food stamp redemption
certificates and deposited the food stamps into
the Halsted Market accounts to seek reimbursement
for the face value of the food stamps from the
government. The USDA’s account at the Federal
Reserve then credited their accounts. Yousef and
Emad withdrew the money and gave the cash value
of the food stamps back to the store owners minus
their 10% commission.

  Nubani also testified that he personally
witnessed, on multiple occasions, other grocery
store owners illegally deliver and sell thousands
of dollars worth of food stamps to Yousef and
Emad, including Qais Nofal, Abed Mustafa, and
Bashar Sweiss. Nubani stated that Yousef told him
he only bought food stamps from people he knew
because he was wary of undercover agents and that
he did not want to take any chances with his food
stamp license. Yousef also told Nubani that he
only purchased stamps from other owners, never
customers, to avoid the undercover agents. Nubani
witnessed Yousef and Emad paying store owners for
the food stamps they had redeemed for them from
their bank accounts. Cathi Hassan also testified
that Yousef told her not to buy stamps from
customers. While working at the market she saw
other Arabic males bring both Emad and Yousef
large quantities of food stamps. Each night large
amounts of food stamps were delivered to the
apartment she shared with Emad and Yousef where
they counted thousands of dollars worth of food
stamps and prepared them for deposit.

  On November 20, 1998, Emad was found guilty on
all counts. On May 18, 1999 a sentencing hearing
was held. Emad filed numerous objections to the
probation officer’s Sentencing Guideline
calculations that were contained in the
presentence investigation report. Specifically,
Emad challenged the calculation of the amount of
food stamp fraud loss attributable to him under
sec. 2F1.1(b)(1). The PSR recommended and the
government adopted a fraud loss estimate of
$1,031,873. This figure was based on the
testimony of Cathi Hassan in which she testified
that when the store first opened the total gross
sales averaged about $1000 to $1,200 a day. After
about five months and until April 1995, sales
decreased to between $300 and $500 because the
cooler broke and meat sales ceased. These figures
are similar to the figures Yousef used in his
application for the food stamp license.
Legitimate sales during this time were
approximately $209,700. The loss figure was
derived by subtracting Halsted Market’s actual
total sales from its actual food stamp redemption
($1,241,573) for a total of $1,031,873.

  Emad appeals this calculation.

Analysis
  Emad argues that the district court improperly
shifted the burden of proof to him in calculating
the loss. Section 2F1.1(b) of the Sentencing
Guidelines applies to crimes of fraud and deceit,
which is included under 18 U.S.C. sec. 2024(b)
and (c). Under the Guidelines, if the amount of
loss is over $2,000, the sentence is enhanced
according to the amount of loss caused. See sec.
2F1.1(b)(1). The district court’s finding of a
loss amount of $1,031,873 resulted in an eleven-
point offense level enhancement which raised his
minimum sentence from 6 months to 37 months.

  The calculation of the amount of loss by the
district court is reviewed for clear error while
the determination of the meaning of "loss" is
reviewed de novo. United States v. Brown, 136
F.3d 1176 (7th Cir. 1998).

  Under U.S.S.G. sec. 2F1.1(b)(1), a district
court may increase the sentence of one who has
violated 7 U.S.C. sec. 2024(b)(1) by eleven
levels if such offense resulted in a "loss"
exceeding $800,000. For purposes of sec.
2F1.1(b)(1), the loss need not be determined with
precision. U.S.S.G. sec. 2F1.1, Application Note
8. Rather, "[t]he [sentencing] court need only
make a reasonable estimate of the loss, given the
available information." Id. A defendant appealing
the court’s loss calculation must carry the heavy
burden that the determination "was not only
inaccurate but outside the realm of permissible
computations." United States v. Jackson, 25 F.3d
327, 330 (6th Cir. 1994).

  In United States v. Barnes, 117 F.3d 328, 335
(7th Cir. 1997), we defined "loss" in the context
of food stamp fraud as "the value of the benefits
diverted from intended recipients or uses." The
court stated that the "intended use" of food
stamps is to purchase specified food products
from authorized retailers. Id. In determining the
amount of loss, the court should calculate the
aggregated food stamp redemptions less actual
food sales. Id.

  Citing the Supreme Court’s decision in Liparota
v. United States, 471 U.S. 419, 426 (1985),
Barnes recognized that:

[Section] 2024(b)(1) declared it criminal to use,
transfer, acquire, alter, or possess food stamps
in any manner not authorized by statute or
regulations. The statute provides further that
"[c]oupons issued to eligible households shall be
used by them only to purchase food in retail
stores which have been approved for participation
in the food stamp program at prices prevailing in
such stores." 7 U.S.C. sec. 2016(b) (emphasis
added); see also 7 CFR sec. 274.10(a) (1985).
This seems to be the only authorized use.

Id. The applicable regulation provides in
pertinent part that:

Coupons may be accepted by an authorized retail
food store only from eligible households or the
households’ authorized representative, and only
in exchange for eligible food. Coupons may not be
accepted in exchange for cash, except when cash
is returned as change in a transaction in which
coupons were accepted in payment for eligible
food under paragraph (d) of this section. Coupons
may not be accepted in payment of interest on
loans or for any other nonfood use. An authorized
retail food store may not accept coupons from
another retail food store. . .

7 CFR sec. 278.2(a). Further, illegal redemption
of coupons violates 7 U.S.C. sec. 2024(c) which
provides:

whoever presents, or causes to be presented,
coupons for payment or redemption of the value of
$100 or more, knowing the same to have been
received, transferred, or used in any manner in
violation of the provisions of this chapter in
violation of the provisions of this chapter or
the regulations issued pursuant to this chapter
shall be guilty of a felony.

  In the present case, the government and the PSR
recommended a calculation that followed the
reasoning in Liparota and Barnes. The loss figure
was established by subtracting Halsted Market’s
legitimate sales from the actual food stamp
redemptions. Emad, however, argues that the
calculations do not take into account the value
of food stamps exchanged for legitimate food
purchases.

  Emad contends that the government only accounted
for $150,000 of the purported loss through the
testimony of Nubani. The remaining $880,000 he
claims was not supported by the evidence. In
fact, he argues that not every illegal
transaction of food stamps creates a loss for the
government under sec. 2F1.1 and that most likely
some of the transactions involved the purchase of
legitimate food items in exchange for the food
stamps. The mere fact that a store owner accepted
food stamps for authorized goods is not the
issue. The violation occurs when the store owner
not licensed to accept food stamps does so and
then sells them to a licensed store owner to be
redeemed. These illegal cash transfers constitute
an illegal diversion from the food stamp
programs’ intended uses and recipients under
U.S.S.G. sec. 2F1.1.
  In United States v. Cheng, 96 F.3d 654, 657
(2nd Cir. 1996), the court stated that food
stamps diverted from the intended use cause a
loss under sec.2F1.1. The Sentencing Guidelines
consider the defendant’s secondary illegal
receipt of stamps to be the same as the initial
illegal receipt. Id. Absent a reason by the
defendant why the stamps would be illegally
redeemed through him rather than through the
proper legal channels, the court concluded that
the stamps were diverted from their intended use
and upheld the district courts determination of
loss. Id.

  As the court stated in Barnes, the purpose of
the food stamp program is to ensure that every
citizen of this nation receives sufficient
nutrition to enjoy a healthy existence. Barnes,
at 335. Through Emad’s fraudulent actions he has
frustrated this goal. Exchanging food stamps with
parties not authorized by the USDA amounts to a
"loss" of the entire value because the
unauthorized transaction diverts the intended use
of the food stamps away from those less
fortunate.

  The district court in determining the "loss"
attributable to Emad did not improperly shift the
burden of proof to him. The court, finding that
the government had met its burden, stated:

The government has established the volume of
business, the legitimate business in the store,
and the government has established the amount of
redemptions. The figures used to calculate the
"loss" were based on the testimony of several
witnesses including Cathi Hassan, Nubani and the
USDA agent.

The court then gave Emad the opportunity to
rebut, like an affirmative defense, the
government’s evidence and to establish that some
of the transactions were legitimate. Emad made no
showing and in the absence of any showing the
court overruled the objection. The court did not
err in making this determination.

  Therefore the decision of the district court is
Affirmed.