Court Opinion

ID: 768581
Source: CourtListenerOpinion
Date Created: 2012-04-18 09:08:23+00
Date Added: 2024-06-11T17:55:36.621486
License: Public Domain

211 F.3d 380 (7th Cir. 2000)
United States of America,    Plaintiff-Appellee,v.Emad Jamal Hassan,    Defendant-Appellant.
No. 99-2423
In the  United States Court of Appeals  For the Seventh Circuit
Argued February 9, 2000
Decided May 1, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Eastern Division.  No. 98 CR 613-2--David H. Coar, Judge.
Before Bauer, Easterbrook, and Ripple, Circuit Judges.
Bauer, Circuit Judge.

1
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

2
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.

3
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.

4
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.

5
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.

6
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.

7
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.

8
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.

9
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.

10
Emad appeals this calculation.

Analysis

11
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.

12
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).

13
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).

14
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.

15
Citing the Supreme Court's decision in Liparota  v. United States, 471 U.S. 419, 426 (1985),  Barnes recognized that:

16
[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.

17
Id. The applicable regulation provides in  pertinent part that:

18
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. . .

19
7 CFR sec. 278.2(a). Further, illegal redemption  of coupons violates 7 U.S.C. sec. 2024(c) which  provides:

20
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.

21
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.

22
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.

23
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.

24
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.

25
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.

26
Therefore the decision of the district court is  Affirmed.