United States v. Ali

In the

United States Court of Appeals

For the Seventh Circuit

No. 06-3951

U NITED S TATES OF A MERICA,

Plaintiff-Appellee,

v.

M IR A LI,

Defendant-Appellant.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02-CR-825-1—Wayne R. Andersen, Judge.

A RGUED D ECEMBER 8, 2009—D ECIDED A UGUST 27, 2010

Before E ASTERBROOK, Chief Judge, and R OVNER and

T INDER, Circuit Judges.

R OVNER, Circuit Judge. Mir Ali, and his business

partner, Mohammad Shah, ran a grocery store and a

food stamp scam that defrauded the United States De-

partment of Agriculture (“USDA”) out of several million

dollars. They allowed food stamp recipients to exchange

food stamps for cash instead of food, a practice prohib-

ited by the food stamp program, see 7 U.S.C. § 2024, and

2 No. 06-3951

pocketed a portion of the proceeds. Ali pleaded guilty to

two counts of wire fraud, see 18 U.S.C. § 1343, and was

sentenced to 57 months’ imprisonment. On appeal, he

challenges his plea, his sentence, and the district court’s

orders of $4.9 million in restitution and $2.56 million

in forfeiture. We affirm the conviction and sentence

but remand with instructions to amend the restitution

award.

I.

Congress created the food stamp program to allow low-

income households to receive a greater share of the na-

tion’s food supply. 7 U.S.C. § 2011; see Affum v. United

States, 566 F.3d 1150, 1154 (D.C. Cir. 2009). Stores autho-

rized to participate in the program may accept food

stamps instead of cash for authorized food items and

then redeem those benefits with the government at face

value. See 7 U.S.C. § 2013(a). Illinois uses an electronic

card system known as LINK, similar to a debit card, to

process purchases with food stamps. See id. § 2016; United

States v. Haddad, 462 F.3d 783, 786 (7th Cir. 2006); United

States v. Alhalabi, 443 F.3d 605, 609 (7th Cir. 2006). The

LINK cards of qualified recipients are credited once a

month with benefits. Haddad, 462 F.3d at 786. When the

recipient uses the LINK card at a participating store to

obtain food, the store deducts the corresponding

benefits electronically with a specialized point-of-sale

machine and submits its total food stamp sales to the

USDA for reimbursement. Id.

No. 06-3951 3

Mir Ali, along with Mohammad Shah, owned and

operated Star Foods, Inc., a small grocery store in Chi-

cago. In 1996, Ali applied for Star Foods to participate

in the food stamp program. On his application he esti-

mated that Star Foods’s annual food stamp-eligible sales

would be $150,000 per year. He came to the attention of

law enforcement after Star Foods’s redemptions far

exceeded this estimate. Star Foods redeemed benefits

for over $640,000 in 1997. The next year, in which Star

Foods redeemed over $910,000 in benefits, two under-

cover agents posed as food stamp recipients looking

to exchange benefits for cash. They exchanged $231

and $230 in benefits for $150 in cash each. Star

Foods’s redemptions continued to escalate, amounting to

over $964,000 in 1999, over $1 million in 2000, over

$1.5 million in 2001, and over $1.8 million in 2002.

In 2005 Ali was charged with two counts of wire fraud

stemming from the agents’ undercover purchases. See 18

U.S.C. § 1343. (Shah was likewise indicted, but died

shortly thereafter.) In the indictment, the government

specified that Ali and Shah knowingly devised a scheme

to defraud the USDA by exchanging LINK card benefits

for cash. The government also sought forfeiture of almost

$4.9 million acquired from the scheme, including a resi-

dence and two bank accounts. See id. § 981(a)(c); 28

U.S.C. § 2461. Ali pleaded guilty to both counts without

a plea agreement, but sought a bench trial on the for-

feiture allegation.

At the plea hearing, the government described each of

the charges in the indictment and summarized the evi-

4 No. 06-3951

dence in support. After prompting from the court, the

government explained that each count carried a potential

penalty of 20 years’ imprisonment, a $250,000 fine, and 3-5

years’ supervised release. The total potential imprison-

ment, the government continued, would be 40 years

because the sentences could run consecutively. Ali stated

he understood that those were his potential penalties

and said that he was pleading guilty because he com-

mitted the crimes. His counsel then asked whether

the government would object to a 3-level adjustment

for accepting responsibility. See U.S.S.G. § 3E1.1. The

government stated it would not provided that Ali

was eligible. The court accepted the plea.

The district court then held a bench trial on the forfei-

ture allegation. The government stated it would use

the forfeiture proceeding to prove both the forfeiture

amount and, for purposes of sentencing and restitution,

the loss to the USDA. The government began by

asserting that Ali should forfeit $4,950,992.80, the

alleged proceeds of his wire fraud scheme, and pay

restitution in a like amount to the USDA. Ali countered

that the loss was only $461, the sum of the two under-

cover sales. In the course of the forfeiture hearing,

the government reduced the forfeiture amount to

$2,567,587.05 because the statute allowing for forfeiture

had not become effective until August 2000, two-and-a-

half years after Ali’s scheme began. The government

also revised the loss amount for restitution to $4,290,000.

The principal witness at the forfeiture proceeding

was Mireille Swain, a special agent with the USDA, who

No. 06-3951 5

testified to the existence and extent of the fraud. She

began by explaining that Star Foods had not bought

sufficient inventory to justify its redemptions. She com-

piled a comprehensive list of Star Foods’s monthly re-

demptions since 1997 to August 2002 and noted that

the monthly redemptions significantly exceeded Ali’s

estimate every year. And, Star Foods’s redemptions

also exceeded the redemptions of even much larger

local stores. Based on Star Foods’s bank accounts, it had

deposited $7,159,838 during the scheme, with more than

98% of these deposits consisting of electronic food

stamp redemptions.

She then compared Star Foods’s sizable deposits to

its purchased food and non-liquor stock, which she

assumed were all food stamp-eligible items. Relying

exclusively on Ali’s own business records, Swain deter-

mined that, although Star Foods deposited over

$7 million, Star Foods wrote checks totaling only

$1,829,290.39 to buy food and non-liquor stock. Some

purchases likely included non-food stock, but because

she assumed that all purchases were food stamp-

eligible purchases, this increased the amount of sales Ali

could justify. So, any discrepancy favored Ali. She also

concluded that Star Foods spent only $1.8 million on

food and non-liquor stock because she could not find

any evidence that Star Foods made purchases in any

other form, i.e., with cash. To this end, she reviewed

sixteen months’ of bank reconciliations that cate-

gorized purchases, but no category accounted for pur-

chases made with cash, and each had a reference

number that Swain determined corresponded to a check

6 No. 06-3951

number. She also spot-checked the daily expense

folders seized from Ali’s business and similarly found

that each invoice had a corresponding check. Thus, she

concluded that Ali spent $1,829,290.39 on food and non-

liquor stock.

Swain then estimated that the retail value of the food

and non-liquor stock was approximately $2.7 million. To

arrive at this figure, she applied a 50% markup (what

Swain estimated was the general retail markup for

grocery items) to the amount Star Foods spent on food

and non-liquor inventory. She then assumed that all

these sales were made with food stamps (another as-

sumption that favored Ali). Thus, she concluded, Ali

could justify $2.7 million in food stamp redemptions.

So Swain deducted this amount from the total food

stamps redeemed (approximately $7 million) and opined

that $4.29 million was not justified by Ali’s food and non-

liquor stock purchases. This unjustified amount, she

concluded, was the total loss to the USDA and the pro-

ceeds of Ali’s criminal scheme.

Finally, to calculate the forfeiture amount, Swain con-

sidered only Star Foods’s redemptions and sales after

the forfeiture law was effective. She found that, after the

law’s effective date, Ali redeemed $3,822,432.97 in food

stamps but had only $836,563.35 in food and non-

liquor stock purchases. After applying the 50% markup

($1,254,845.02), Swain concluded that approximately

$2.56 million was not justified by Ali’s food stock pur-

chases. Ali offered no evidence to refute the govern-

ment’s loss or forfeiture calculations.

No. 06-3951 7

After the hearing, the government inexplicably reverted

to its original $4,950,992 figure for restitution when it

gave the probation officer its official version of Ali’s

offense conduct, which the probation officer accepted

without comment. The presentence investigation report

also recommended that Ali not receive the adjustment

for accepting responsibility because Ali told the proba-

tion officer that he was innocent and pleaded guilty just

to get rid of the case. At the sentencing hearing, the

district court invited Ali to respond to whether he

should get the adjustment. Ali minimized his conduct

and said he was merely following Shah’s instructions.

He further insisted that he and Shah had not properly

recorded cash purchases for food and non-liquor stock,

so the government had understated his inventory and

overstated the loss to the USDA. Ali also asserted that

his was not the only store that gave cash for benefits.

After hearing Ali’s statements, the district concluded

that he had not accepted responsibility and would not

receive the adjustment. The district court also acknowl-

edged Ali’s objection to the government’s loss figures

but accepted the probation officer’s $4,950,992 recom-

mendation. The court then calculated Ali’s imprison-

ment range: his offense warranted a base offense level of

7 with an added 18 points for a loss between $2.5 million

and $5 million, see U.S.S.G. § 2B1.1(a), (b)(1)(J), and

when combined with his criminal history category I

yielded a guidelines range of 57-71 months’ imprison-

ment. The court ordered Ali to pay restitution of

$4,900,000, to forfeit $2,560,000, and sentenced him to 57

months’ imprisonment and 3 years’ supervised release.

8 No. 06-3951

II.

Ali appealed, and his lawyer filed a motion to with-

draw under Anders v. California, 386 U.S. 738 (1967),

contending that Ali had no non-frivolous issue to raise

on appeal. But we denied counsel’s motion and observed

that an argument premised on the discrepancy between

the $4.29 million that the government proved for restitu-

tion and $4.9 million that the district court ordered

would not be frivolous. Counsel raises a host of other

issues on appeal but ignores the one argument about

restitution that we considered non-frivolous. Ali now

attacks the voluntariness of his plea, the denial of the

adjustment for acceptance of responsibility, the reliability

of the government’s loss calculation, and the accuracy

of certain statements the government made at oral argu-

ment. We address each in turn.

A.

Ali first argues that he did not knowingly and intelli-

gently plead guilty. Because Ali did not move to with-

draw his guilty plea in the district court, we review for

plain error only. See F ED. R. C RIM. P. 52(b); Puckett v.

United States, 129 S. Ct. 1423, 1429 (2009); United States

v. Anderson, 604 F.3d 997, 1001 (7th Cir. 2010). Under

plain error review, we must find that an error affected

Ali’s substantial rights and seriously affected the fair-

ness, integrity, or public reputation of the judicial pro-

ceedings. See United States v. Marcus, 130 S. Ct. 2159, 2164

(2010); United States v. Polak, 573 F.3d 428, 431 (7th

Cir.), cert. denied, 130 S. Ct. 654 (2009). Ali contends that

No. 06-3951 9

during the plea colloquy, the district court failed to

ensure that he knew the elements of wire fraud. A defen-

dant does not enter a plea voluntarily and knowingly if

he pleads guilty to a crime without knowledge of the

crime’s essential elements. Bradshaw v. Stumpf, 545 U.S.

175, 182-83 (2005); United States v. Davey, 550 F.3d 653, 656

(7th Cir. 2008). But the record does not support Ali’s

argument. The court asked the government to explain

the charges, and the government stated that the two

charges of wire fraud involved an intentional plan to

defraud the USDA’s food stamp program by electronic

means. And to convict a defendant of wire fraud, the

government was required to show just that: an inten-

tional scheme to defraud that uses wires in furtherance

of that scheme. See, e.g., United States v. McGowan, 590

F.3d 446, 457 (7th Cir. 2009); United States v. Leahy, 464

F.3d 773, 786 (7th Cir. 2006).

Ali next contends that the admonitions he received

during the plea colloquy about his possible sentence

were inadequate. See F ED. R. C RIM. P. 11(b)(1)(H). Specifi-

cally, he claims that the government led him to believe

that he would receive a lower sentence for acceptance

of responsibility. See U.S.S.G. § 3E1.1(a)-(b). But the gov-

ernment was clear on whether Ali would receive that

reduction: it would not object to an adjustment under

§ 3E1.1 provided that Ali was eligible, and the district

court found he was not. The government never stipulated

that Ali was eligible for the adjustment. Moreover,

during the colloquy, the government warned that the

potential term of imprisonment was 40 years, and Ali

received just 57 months’ imprisonment, well below the

10 No. 06-3951

total that he was warned about. Thus, Ali has not

shown that the government’s statement about his sen-

tence exposure affected any substantial right. See United

States v. Parker, 368 F.3d 963, 968-69 (7th Cir. 2004).

B.

Ali next contends that the district court erroneously

denied him the adjustment for acceptance of responsi-

bility. See U.S.S.G. § 3E1.1. We review the district court’s

ruling for clear error. See, e.g., United States v. DeLeon,

603 F.3d 397, 406 (7th Cir. 2010); United States v. Panice,

598 F.3d 426, 435 (7th Cir. 2010). Ali maintains that the

district court should have held a hearing on the matter,

rather than just relying on the PSR’s factual finding that

Ali stated he was innocent and pleaded guilty to get rid

of the case. But Ali did not dispute these factual findings

at sentencing and a district court may accept any undis-

puted portion of the PSR as a finding of fact. See F ED.

R. C RIM. P. 32(i)(3)(A); United States v. Heckel, 570 F.3d

791, 795-96 (7th Cir. 2009).

In any event, Ali did have a hearing during which

the court considered acceptance of responsibility. At the

sentencing hearing the district court invited comments

from the government, Ali’s counsel, and Ali himself on

this very issue. Ali spoke at length as to why he was

entitled to the § 3E1.1 adjustment. But as the district court

found, Ali’s testimony supported the recommenda-

tion in the PSR. Ali showed no contrition or remorse.

Instead, he tried to minimize his conduct by claiming that

No. 06-3951 11

Shah set up the fraud scheme and that Ali unwittingly

followed instructions. But blaming someone else for

one’s own actions or minimizing one’s involvement in

the offense is not the sort of genuine contrition the accep-

tance of responsibility reduction seeks to reward. See

United States v. Munoz, 610 F.3d 989, 993 (7th Cir.

2010); DeLeon, 603 F.3d at 408. The purpose of § 3E1.1

is not just to induce guilty pleas, but to identify

defendants who have demonstrated sincere remorse for

their crime and are thereby less likely to delay justice

or engage in further criminal activity when they com-

plete their sentence. United States v. Wells, 154 F.3d 412,

413 (7th Cir. 1998). Thus, even though his guilty plea

reflects some measure of acceptance of responsibility,

the plea alone does not entitle him to a reduction under

§ 3E1.1. See U.S.S.G. § 3E1.1 cmt. n.3; Munoz, 610 F.3d at

993; Panice, 598 F.3d at 435. We therefore do not think

the district court’s conclusion that Ali had not accepted

responsibility was clear error.

C.

Ali also attacks the restitution award, the forfeiture

order, and the loss amount used for sentencing. The

government was required to prove by a preponderance

of the evidence the loss amount for both forfeiture and

sentencing. See United States v. Melendez, 401 F.3d 851,

856 (7th Cir. 2005); United States v. Vera, 278 F.3d 672, 673

(7th Cir. 2002); United States v. Jarrett, 133 F.3d 519, 530

(7th Cir. 1998). The calculation of this amount is a

12 No. 06-3951

factual determination that we review for clear error.

See United States v. Sutton, 582 F.3d 781, 783-84 (7th Cir.

2009); United States v. Oros, 578 F.3d 703, 711 (7th Cir. 2009);

United States v. Swanson, 394 F.3d 520, 528 (7th Cir. 2005);

United States v. Baker, 227 F.3d 955, 967 (7th Cir. 2000);

Jarrett, 133 F.3d at 530. Criminal forfeiture is available

generally for convictions of mail and wire fraud, and

not merely for those special cases that injure financial

institutions. See United States v. Day, 524 F.3d 1361, 1376

(D.C. Cir. 2008); United States v. Schlesinger, 514 F.3d 277,

278 (2d Cir. 2008); see also United States v. Venturella, 585

F.3d 1013, 1016 (7th Cir. 2009), cert. denied, 130 S. Ct. 1547

(2010); United States v. Silvious, 512 F.3d 364, 369 (7th

Cir. 2008).

In essence, Ali’s challenges to the loss calculation,

forfeiture order, and restitution award are the same. He

disputes the reliability of the government’s evidence

used to establish the loss to the USDA. Thus, we analyze

these challenges together. Sentencing judges are not

bound by the stringent evidentiary standards applicable

at trial; rather, the evidence need only be reliable. E.g.,

United States v. Angle, 598 F.3d 352, 357 (7th Cir. 2010);

United States v. Mays, 593 F.3d 603, 608 (7th Cir.), cert.

denied, 130 S. Ct. 3340 (2010).

First, Ali argues that the loss should be measured by

the gain to Ali personally, and thus the government was

required to call as witnesses the cash recipients to deter-

mine the amount that Ali pocketed. He did not make

this argument at the forfeiture proceeding. Arguments

not raised below are forfeited and thus reviewed for

No. 06-3951 13

clear error only. See, e.g., United States v. Alviar, 573 F.3d

526, 538 (7th Cir. 2009), cert. denied, 130 S. Ct. 1312 (2010);

United States v. Middlebrook, 553 F.3d 572, 577 (7th Cir.

2009). The government’s position was that the dollar

value of food stamps that were not spent on eligible

food items but exchanged for cash, were the proceeds—the

gain—of the offense, and were likewise subject to forfei-

ture. See United States v. Uddin, 551 F.3d 176, 181 (2d

Cir.), cert. denied, 129 S. Ct. 2886 (2009); United States v.

Hassan, 211 F.3d 380, 384 (7th Cir. 2000); United States v.

Barnes, 117 F.3d 328, 335 (7th Cir. 1997); United States v.

Lewis, 104 F.3d 690, 692-93 (5th Cir. 1996). According to

the government, therefore, the loss was the entire

amount that Ali received in illegitimate redemptions,

regardless of whether he shared the cash he received

from the government with a food stamp beneficiary.

And we have recognized before that “[t]o determine the

USDA’s loss caused by a food stamp scheme, the proper

calculation is to take the total food stamp redemptions

(i.e., both the fraudulent and legitimate redemptions) less

the legitimate food stamp sales.” United States v. Alburay,

415 F.3d 782, 788 (7th Cir. 2005); see also Haddad, 462 F.3d

at 793; Hassan, 211 F.3d at 383; United States v. Brown, 136

F.3d 1176, 1183 (7th Cir. 1998), superseded by, U.S.S.G.

§ 3B1.2, cmt. n.3(A), as recognized in United States v. Rodri-

guez-Cardenas, 362 F.3d 958, 960 (7th Cir. 2004); Barnes, 117

F.3d at 334-35. And that is what Agent Swain did here:

she determined Star Foods’s total food stamp redemp-

tions (approximately $7 million) and deducted legitimate

food stamp sales (approximately $2.7 million) to arrive

at the loss figure of approximately $4.29 million. She

14 No. 06-3951

estimated Star Foods’s legitimate sales by assuming all

inventory purchases were legitimately exchanged for

food stamp-eligible items. And to determine Ali’s pur-

chases, she relied upon Ali’s own business records, bank

accounts, invoices, and financial statements. By assuming

that all purchases (including a 50% markup) were then

exchanged for food stamp-eligible items, Swain inter-

preted the records and the data in a way that favored Ali.

On this record, we cannot say that the district court’s

factual findings supporting the forfeiture award were

clearly erroneous. See Haddad, 462 F.3d at 793-94 (up-

holding loss calculation under similar circumstances);

Hassan, 211 F.3d at 383-84 (same); United States v. Bahhur,

200 F.3d 917, 924-25 (6th Cir. 2000) (same); United States

v. Cheng, 96 F.3d 654, 657-58 (2d Cir. 1996) (same).

Ali next argues that Agent Swain’s testimony was

unreliable (and thus the court’s conclusion about the

loss was clear error) because the agent failed to recognize

that some bank deposits came from legitimate sales

and not redemptions. But Ali is incorrect. Agent Swain

testified that almost 98% of the bank deposits in Star

Foods’s account consisted of electronic food stamp re-

demptions, and the government removed from its loss

calculation the 2% of deposits unrelated to food stamp

redemptions from its calculation. Ali also complains

that Swain failed to account for Star Foods’s cash pur-

chases for food and non-liquor stock, thereby over-

stating the loss. Ali speculates that Swain spot-checked

too few of his daily expense folders and had she exam-

ined more she would have discovered cash purchases.

But Swain reviewed Ali’s and Star Foods’s records for

No. 06-3951 15

about a 4-year period to hunt for any evidence to sup-

port Ali’s claim that he bought inventory with cash; she

found none. The sentencing court credited Swain’s testi-

mony, a finding that we accord deference, see United

States v. Ngatia, 477 F.3d 496, 500 (7th Cir. 2007). And Ali

offered nothing to rebut Swain’s conclusion of no cash

purchases. Thus, the district court’s conclusion was not

clearly erroneous. See Alburay, 415 F.3d at 790 (holding

district court’s loss calculation not plain error when

government determined loss for food stamp fraud

by relying on defendant’s own estimates and business

documents); Hassan, 211 F.3d at 384 (upholding district

court’s loss calculation when, after government estab-

lished loss by deducting legitimate business from

amount of redemptions, district court provided defen-

dant an opportunity to rebut the government’s evi-

dence and establish transactions were legitimate, but

he did not do so).

Finally, Ali makes a puzzling argument, contending

that Swain failed to account for spoilage and theft in her

loss calculations. But this “failure” would work against

him. Swain assumed that all Star Foods’s inventory pur-

chases led to legitimate food stamp sales and then were

legitimately redeemed. Had Swain assumed that some

purchased inventory spoiled or was stolen (or not legiti-

mately redeemed), Ali would be able to justify fewer of

his redemptions and the loss amount would be greater.

We do not see how the more favorable assumption to Ali

constitutes clear error. See Alburay, 415 F.3d at 788

(stating court would not take issue with government’s

16 No. 06-3951

rounding redemption figure down when it benefitted

defendant).

Nevertheless, we note a problem with the restitution

order. The government concedes that the total loss

proven at the forfeiture proceeding was only $4,290,000

but the district court ordered Ali to pay about $4,900,000

in restitution. The government recognized this error

and moved in the district court to amend the restitution

order. The district court did so but Ali had already filed

a notice of appeal. “The filing of a notice of appeal is

an event of jurisdictional significance—it confers juris-

diction on the court of appeals and divests the district

court of its control over those aspects of the case involved

in the appeal.” Griggs v. Provident Consumer Discount Co.,

459 U.S. 56, 58 (1982); see United States v. Burton, 543

F.3d 950, 952 (7th Cir. 2008); United States v. McHugh,

528 F.3d 538, 540 (7th Cir. 2008). At argument the gov-

ernment recognized this problem as well and asked to

remand. We agree with the government that a corrective

remand is in order. Accordingly, we remand the case,

instructing the district court to correct the restitution

award to reflect that the amount proven at the forfeiture

proceeding was $4,290,000. See Alburay, 415 F.3d at 788.

D.

Ali frames his final issue as a motion seeking remand

for an evidentiary hearing. He argues that at oral argu-

ment the government misrepresented that certain

business records were available to Ali before the forfei-

ture proceeding. He contends that the prosecutor

No. 06-3951 17

never delivered these business records, seized from his

store, but he acknowledges (and the record and the docu-

ments he submits with his motion verify) that his

counsel and Ali himself had access to the records

before the forfeiture proceeding. Thus, we have no

reason to believe that the sentencing judge did not have

the opportunity to hear this evidence. See United States

v. Neal, No. 08-3611, 2010 WL 2652463, at *2 (7th Cir.

July 6, 2010). His motion is denied.

III.

Accordingly, we D ENY Ali’s motion to remand for an

evidentiary hearing, A FFIRM IN PART, and R EMAND

WITH INSTRUCTIONS for the district court to correct

the judgment to reflect that the restitution award

is $4,290,000.

8-27-10