United States v. Arnaout, Enaam M.

In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 03-3297 & 03-3412

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

Cross-Appellant,

v.

ENAAM M. ARNAOUT, also known as

ABU MAHMOUD, also known as

ABDEL SAMIA, also known as

ABU MAHMOUD AL SURI, also known as

ABU MAHMOUD AL HAMAWI,

Defendant-Appellant,

Cross-Appellee.

____________

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 02 CR 892—Suzanne B. Conlon, Judge.

____________

ARGUED FEBRUARY 15, 2005—DECIDED DECEMBER 2, 2005

____________

Before BAUER, ROVNER, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge. Enaam Arnaout pled guilty

to conspiracy to violate the Racketeer Influenced and

Corrupt Organizations Act (“RICO”) in violation of 18

U.S.C. § 1962(d). On appeal, both the government and

Arnaout challenge the sentence imposed by the district

court. We find that the district court erred when it imposed

2 Nos. 03-3297 & 03-3412

an enhancement for an offense involving fifty or more

victims pursuant to U.S.S.G. § 2B1.1(b)(2)(B) because there

is insufficient evidence in the record that Arnaout caused

an actual loss to at least 50 people. In addition, we find that

the district court erred when it failed to consider whether

Arnaout qualified for the abuse of trust enhancement

pursuant to U.S.S.G. § 3B1.3. Finally, we find that a

defendant need not have been convicted of a federal crime

of terrorism as defined by 18 U.S.C. § 2332b(g)(5)(B) for the

district court to consider whether to apply the terrorism

sentencing enhancement pursuant to U.S.S.G. § 3A1.4. The

district court, however, did not err when it did not impose

this enhancement on Arnaout. We, therefore, vacate

Arnaout’s sentence and remand this case for resentencing.

I. BACKGROUND

On January 2, 2003, Arnaout was charged in an

eight-count Second Superseding Indictment. The Indict-

ment alleged that Arnaout conspired to defraud donors to

a charity he operated, the Benevolence International

Foundation, Inc. (“BIF”). Arnaout represented to donors

that BIF would use donated funds solely for humanitarian

purposes. In reality, Arnaout along with others diverted

a portion of the money raised to support groups engaged

in armed confrontations and violence overseas.

On February 10, 2003, Arnaout pled guilty, pursuant to

a written plea agreement, to conspiring to violate RICO in

violation of 18 U.S.C. § 1962(d). In the plea agreement,

Arnaout acknowledged that beginning in May 1993, he

was responsible for and directed BIF’s operations in the

United States. Arnaout admitted that, while he directed

BIF’s operations, he solicited donations from the public by

purporting that BIF and its related overseas offices were

part of a charitable organization involved solely in humani-

tarian work for the benefit of civilian populations, including

Nos. 03-3297 & 03-3412 3

refugees and orphans. Arnaout also admitted that he and

others agreed to conceal from donors, potential donors, and

federal and state governments that a material portion of

the donations received by BIF were being used to support

soldiers overseas. The support he and others agreed to

provide included boots intended for ultimate use by

Chechen soldiers, and boots, tents, uniforms and

an ambulance intended for ultimate use by Bosnian sol-

diers. Arnaout also used donor funds to purchase uniforms

for a department of a provisional but unrecognized govern-

ment in Chechnya.

Following the 2001 version of the Sentencing Guidelines

for fraud,1 the district court calculated Arnaout’s offense

level as follows:

! Base offense level of six pursuant to § 2B1.1(a);

plus

! twelve levels based on an amount of loss calcu-

lated to be between $200,000 and $400,000

pursuant to § 2B1.1(b)(1)(G); plus

! four levels based on the fraudulent scheme

affecting at least fifty victims pursuant to

§ 2B1.1(b)(2)(B); plus

! four levels pursuant to § 3B1.1(a) because

Arnaout was the leader of a criminal activity;

plus

! two levels based on the offense involving mis-

representations while acting on behalf

of a charitable organization pursuant to

§ 2B1.1(b)(7)(A); plus

! two levels pursuant to § 2B1.1(b)(8)(B) because

1

The predicate RICO offense to which Arnaout pled guilty was

fraud.

4 Nos. 03-3297 & 03-3412

a substantial part of the offense occurred out-

side of the United States; plus

! two levels pursuant to § 3C1.1 for Arnaout’s

obstruction of justice; and minus

! two levels pursuant to § 3E1.1 for Arnaout’s

acceptance of responsibility in light of his plea.

The court then departed upward an additional two levels

based on the harm Arnaout caused to those who should

have received the charitable donations, which brought

the total offense level to 32. The court determined that

Arnaout was in criminal history category I, which corre-

sponded to a Guidelines range of imprisonment be-

tween 121 and 151 months. The court sentenced Arnaout to

136 months.

II. ANALYSIS

Post-Booker, we continue to review the district court’s

factual findings at sentencing for clear error and the

application of those facts to the Sentencing Guidelines

de novo. United States v. Turner, 400 F.3d 491, 500 (7th Cir.

2005).

A. Enhancement for a Substantial Part of the Fraudulent

Scheme Committed From Outside the United States

The Guidelines, pursuant to § 2B1.1(b)(8)(B), allow for a

two-point enhancement if a substantial part of a fraudulent

scheme was committed from outside of the United States.

Arnaout admits that the results of his crime occurred

outside of the United States, but argues that the district

court erred in applying the enhancement because the

racketeering acts of mail fraud, wire fraud, and money

laundering were all completed within the United States. We

find that the district court did not err in applying this

Nos. 03-3297 & 03-3412 5

enhancement because, even though all of Arnaout’s racke-

teering activities occurred within the United States, the

fraud in this case was not complete until the diverted funds

from the charitable organization were used to deliver

resources to soldiers overseas. The district court’s applica-

tion of this enhancement, therefore, was entirely appropri-

ate.

B. Enhancement for an Offense Involving Fifty or More

Victims

The Guidelines allow for an enhancement of four levels

where an offense involves fifty or more victims. U.S.S.G.

§ 2B1.1(b)(2)(B). The term victim is defined as “any person

who has sustained any part of the actual loss.” U.S.S.G.

§ 2B1.1 cmt. n.1 (2002). Arnaout argues that the district

court erred in applying this enhancement to him be-

cause there was no showing that the funds of fifty donors

were illegally diverted and used for non-charitable pur-

poses. Arnaout admits that a portion of the total dona-

tions to BIF went to non-humanitarian, non-charitable uses

and that more than fifty donors contributed to BIF during

his time as executive director. Arnaout argues that the

district court erred when it failed to account for each dollar

diverted and did not trace each diverted dollar back to a

specific donor. We agree with Arnaout.

According to the record, between 1994 and 2001, BIF

received over $17 million in donations from over 17,000

individuals, businesses and organizations. The district court

found that the amount of loss attributable to Arnaout,

however, was approximately $300,000. There is insufficient

evidence in the record to support a calculation of the

number of donors that contributed the approximate

$300,000. It is entirely conceivable that of the over 17,000

potential victims, more than fifty contributed to the

6 Nos. 03-3297 & 03-3412

$300,000, but we cannot find proof by a preponderance of

the evidence in the record that at least fifty donors contrib-

uted the amount attributable to Arnaout. Accordingly, we

reverse the district court’s application of this enhancement.

C. Abuse of Trust Enhancement

The government argues that the district court erred in not

applying the abuse of trust enhancement pursuant to

§ 3B1.3. At sentencing, the district court stated that it was

not persuaded that the application of the abuse of trust

enhancement was appropriate in this case after having

already applied enhancements for the defendant’s fraudu-

lent misrepresentations while acting on behalf of a charity

pursuant to § 2B1.1(b)(7)(A) and for the defendant’s role as

a leader or organizer of criminal activity pursuant to

§ 3B1.1(a). The court reasoned that applying the abuse of

trust enhancement would result in “significant double

counting” as there was already “substantial overlap”

between the predicate offense and the two enhancements

already applied. We disagree.

Impermissible double counting occurs when identical

conduct justifies two upward adjustments under the

Guidelines. United States v. Beith, 407 F.3d 881, 888 (7th

Cir. 2005) (citations omitted). In other words, a sentenc-

ing court may not describe the same conduct in two differ-

ent ways to justify two separate upward adjustments. Id. So

long as there is a sufficient factual basis for each upward

adjustment, a district court does not engage in double

counting when it enhances a defendant’s sentence for

separate elements of the same act. Id.

We find that the district court incorrectly held that

applying a separate enhancement for Arnaout’s abuse of

trust would amount to impermissible double counting.

Abuse of trust is not an element of Arnaout’s predicate

offense of fraud, and the application of the abuse of trust

Nos. 03-3297 & 03-3412 7

enhancement could account for behavior separate from

Arnaout’s fraudulent misrepresentations while acting

on behalf of a charitable activity and separate from his

role as leader or organizer of a criminal activity.

The § 2B1.1(b)(7)(A) enhancement for fraudulent mis-

representation while acting on behalf of a charity captures

the aggravating nature of Arnaout’s conduct in solicit-

ing money from donors who thought that their money

was being applied to humanitarian assistance for needy

individuals. This enhancement would apply equally to

a low-level BIF employee who solicited donors without

leveraging any trust the donors placed in the employee

individually. In addition, the enhancement would apply

to someone who was not employed by BIF but falsely

purported to be associated with BIF to solicit donations.

The § 3B1.1(a) enhancement for Arnaout’s role as the

leader of criminal activity addresses his activities as head

of a racketeering operation in concert with others to di-

vert charitable donations. Arnaout properly received this

enhancement not because he abused the trust others placed

in him or because he committed a fraud while acting on

behalf of a charitable organization, but because he led

others in the commission of extensive criminal activity. Had

Arnaout acted alone, this enhancement would not apply,

but the other two enhancements would be no less applica-

ble.

In contrast, the abuse of trust enhancement pursuant

to § 3B1.3 accounts for the faith and confidence placed in

him as executive director of the BIF by the donors who

relied on his word and his title within the organization in

making their decision to contribute. In addition, this

enhancement accounts for the faith and confidence placed

in him by the federal government when the government

relied on the representations made by Arnaout on behalf of

BIF that its purpose was solely humanitarian and thereby

granted tax-exempt status to BIF.

8 Nos. 03-3297 & 03-3412

Each of these three enhancements could account for

related but separate conduct in this case. The application of

each enhancement would not improperly use identical

conduct to account for different enhancements. It is unclear

from the record, however, whether the district court

believed that to apply the abuse of trust enhancement

would amount to impermissible double counting or whether

the district court found that there were insufficient facts in

the record to support the application of the abuse of trust

enhancement by a preponderance of the evidence or both.

Accordingly, we remand with instructions to consider its

application.

D. The Domestic Terrorism Enhancement

The government argues that the district court erred in not

applying the domestic terrorism enhancement pursuant to

§ 3A1.4. The district court found § 3A1.4 did not apply

because Arnaout was not convicted of a federal crime of

terrorism as defined by 18 U.S.C. § 2332b(g)(5)(B). United

States v. Arnaout, 282 F. Supp. 2d 838, 843 (N.D. Ill. 2003).

We disagree.

As a matter of first impression in this circuit, we find that

a defendant need not be convicted of a federal crime of

terrorism as defined by § 2332b(g)(5)(B) for the district

court to apply § 3A1.4. Instead, the domestic terrorism

enhancement is applicable where a defendant is convicted of

a federal crime of terrorism as defined by § 2332b(g)(5)(B)

or where the district court finds that the purpose or intent

of the defendant’s substantive offense of conviction or

relevant conduct was to promote a federal crime of terror-

ism as defined by § 2332b(g)(5)(B).

We review the district court’s interpretation of the

Guidelines de novo. United States v. Von Loh, 417 F.3d 710,

712 (7th Cir. 2005). Courts interpreting the Guidelines

must “begin with the text of the provision and the plain

Nos. 03-3297 & 03-3412 9

meaning of the words in the text.” Id. (quoting United

States v. Garcia Lopez, 375 F.3d 586, 587 (7th Cir. 2004)).

In addition to the actual language of the Guidelines, we

must also consider the Guidelines’ Application Notes, as

they are viewed as “part of the Guidelines themselves,

and not mere commentary on them.” Id.; see also Stinson v.

United States, 508 U.S. 36, 38 (1993).

Section 3A1.4 of the Sentencing Guidelines provides:

(a) If the offense2 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.

U.S.S.G. § 3A1.4. Although this is an issue of first im-

pression in this circuit, we are guided in our decision by the

decisions of other circuit courts that have addressed this

very issue. See United States v. Mandhai, 375 F.3d 1243,

1247 (11th Cir. 2004) (holding that where the purpose or

intent of a defendant’s underlying conviction or relevant

conduct is to promote a federal crime of terrorism as defined

by § 2332b(g)(5)(B) then § 3A1.4 is triggered); United States

v. Graham, 275 F.3d 490, 517 (6th Cir. 2001) (same).

The district court, relying on the enabling legislation of

§ 3A1.4, ruled that Congress intended § 3A1.4 to apply only

upon a federal crime of terror conviction as detailed in 18

U.S.C. § 2332b(g)(5)(B). Arnaout, 282 F. Supp. 2d at 844. In

reaching this conclusion, the district court gave meaning

2

The Guidelines define “offense” as “the offense of conviction and

all relevant conduct under § 1B1.3 (Relevant Conduct) unless a

different meaning is specified or is otherwise clear from the

context.” U.S. Sentencing Guidelines Manual § 1B1.1 cmt. n.1(k)

(2002).

10 Nos. 03-3297 & 03-3412

only to the word “involved,” and ignored the words “or was

intended to promote.” The Guidelines must be interpreted,

however, so no words are discarded as meaningless, redun-

dant or surplusage. Witzke v. Femal, 376 F.3d 744, 753 (7th

Cir. 2004) (finding that this court must read a statute to

give effect to each word so as to avoid rendering any words

meaningless, redundant, or superfluous).

The ordinary and plain meaning of “involved” means “to

include.” See Random House Webster’s College Dictionary

689 (2d ed. 1997). We thus agree with the district court’s

interpretation that the word “involved,” as used in § 3A1.4,

signifies that where a defendant’s offense or relevant

conduct includes a federal crime of terrorism as defined in

18 U.S.C. § 2332b(g)(5)(B), then § 3A1.4 is triggered. See

Mandhai, 375 F.3d at 1247-48 (“The term ‘involve’ means to

‘include’ ”). This interpretation of the word “involved” is also

consistent with how the word is used throughout the

Guidelines. See Graham, 275 F.3d 490, 516 (“The word

‘involved’ occurs frequently throughout the Guidelines, both

in the substantive provisions and in the commentary, and

is typically employed to mean ‘included.’ ”)

In interpreting the phrase “or was intended to promote,”

we find that the district court erred by ignoring the plain,

unambiguous text of the Guidelines. As the Eleventh

Circuit stated:

Had the Guideline drafters intended that § 3A1.4

apply only where the defendant is convicted of a

crime listed in 18 U.S.C. § 2332b(g)(5)(B), they

would have included such limiting language. In-

stead, they unambiguously cast a broader net by

applying the enhancement to any offense that

“involved” or was “intended to promote” a terrorism

crime.

Mandhai, 375 F.3d at 1247. In its ordinary usage, “promote”

means “to help or encourage.” See Random House Webster’s

Nos. 03-3297 & 03-3412 11

College Dictionary 1042 (2d ed. 1997). As a result, the word

“promote,” as used in § 3A1.4, signifies that where a defen-

dant’s offense or relevant conduct helps or encourages a

federal crime of terrorism as defined in 18 U.S.C.

§ 2332b(g)(5)(B), then § 3A1.4 is triggered. See Mandhai,

375 F.3d at 1248 (“Under a plain reading, the phrase

‘intended to promote’ means that if a goal or purpose was to

bring or help bring into being a crime listed in 18 U.S.C. §

2332b(g)(5)(B), the terrorism enhancement applies.”). We

find, therefore, that § 3A1.4 must be considered when a

defendant is convicted of a federal crime of terrorism as

defined by 18 U.S.C. § 2332b(g)(5)(B) or when a defendant’s

felony conviction or relevant conduct has as one purpose the

intent to promote a federal crime of terrorism. In enhancing

a defendant’s sentence pursuant to § 3A1.4 where the

defendant has not been convicted of a federal crime of

terrorism, however, a district court must identify which

enumerated federal crime of terrorism the defendant

intended to promote, satisfy the elements of

§ 2332b(g)(5)(A), and support its conclusions by a prepon-

derance of the evidence with facts from the record. See,

e.g., Graham, 275 F.3d at 517. After application of § 3A1.4,

the district court can then impose a sentence up to the

statutory maximum of the underlying offense of conviction.

U.S.S.G. § 5G1.1(a) (“Where the statutorily authorized

maximum sentence is less than the minimum of the

applicable guideline range, the statutorily authorized

maximum sentence shall be the guideline sentence.”); Dean,

414 F.3d at 727.

In this case, the district court found that Arnaout’s

offense of conviction was not included in the exhaustive list

of federal offenses set out in 18 U.S.C. § 2332b(g)(5)(B) and,

therefore, did not apply § 3A1.4. We now know that the

district court should have considered whether Arnaout’s

offense or relevant conduct promoted a federal crime of

terrorism. This error notwithstanding, the district court did

12 Nos. 03-3297 & 03-3412

find that the record did not establish by a preponderance of

the evidence that Arnaout attempted, participated in, or

conspired to commit any act of terrorism. The district court

also found that the government had not established that the

Bosnian and Chechen recipients of BIF aid were engaged in

a federal crime of terrorism, or that Arnaout intended the

donated boots, uniforms, blankets, tents, X-ray machine,

ambulances, nylon or walkie talkies to be used to promote

a federal crime of terrorism. We find all of the district

court’s findings on this issue consistent with the record, not

clearly erroneous, and sufficient to support the district

court’s refusal to apply § 3A1.4.

In the alternative, the government argues that Applica-

tion Note 2 of § 3A1.4 stands as an independent basis

for applying § 3A1.4 because Arnaout’s relevant conduct

includes obstruction of justice.

Application Note 2 reads as follows:

2. Harboring, Concealing, and Obstruction Of-

fenses.—For purposes of this guideline, an offense

that involved (A) harboring or concealing a terrorist

who committed a federal crime of terrorism (such as

an offense under 18 U.S.C. § 2339 or 2339A); or (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.

The district court concluded that a two-level enhance-

ment under § 3C1.1 for obstruction of justice was appro-

priate in this case based on two declarations Arnaout

made under penalty of perjury in a separate case, Benevo-

lence Int’l Found., Inc. v. Ashcroft, 200 F. Supp. 2d 935

(N.D. Ill. 2002). In that case, Arnaout’s declarations were

submitted in support of BIF’s motion seeking release of BIF

assets frozen by the government. In his declarations,

Nos. 03-3297 & 03-3412 13

Arnaout attested that BIF used its funds only to assist

the poor and needy; donations to BIF were used solely

for charitable, humanitarian purposes; and BIF had never

provided aid or support to people or organizations known to

be engaged in violence, terrorist activities, or military

operations of any nature. The district court found these

attestations to be false based on Arnaout’s admissions

during his guilty plea and documentary evidence estab-

lishing that BIF used a portion of its funds to aid military

operations in Chechnya and Bosnia. The district court

concluded, however, that Arnaout did not obstruct an

investigation of a federal crime of terrorism nor did Arnaout

seek to promote a federal crime of terrorism by his obstruc-

tion. Instead, the district court held that Arnaout ob-

structed the federal investigation into his offense of fraud

and racketeering, which triggered the enhancement of §

3C1.1(A). See § 3C1.1(A) (obstruction of justice enhance-

ment applies if defendant willfully attempted to obstruct or

impede the administration of justice during the investiga-

tion of the instant offense of conviction). We find that the

district court’s findings on this issue are not clearly errone-

ous, and we agree with the district court’s conclusion that,

because there is insufficient evidence that Arnaout ob-

structed an investigation of a federal crime of terrorism or

intended to promote a federal crime of terrorism by his

obstruction, Application Note 2 of § 3A1.4 is inapplicable to

this case.

E. The District Court’s Application of its Own Upward

Departure

As a final note, Arnaout also argues that the district court

erred in imposing its own two-point upward departure.

Arnaout contends that the imposition of such a departure

was legally incorrect because it fell outside of the Guide-

lines’ provisions for departures and was otherwise unsup-

14 Nos. 03-3297 & 03-3412

ported by the factual record. Although we need not reach

this issue in light of the remand for resentencing, we note

that the concept of “departures” has been rendered obsolete

in the post-Booker world. See United States v. Johnson, No.

04-1463, 2005 WL 2592218, at *3 (7th Cir. Oct. 14, 2005).

Instead, “what is at stake is the reasonableness of the

sentence, not the correctness of the ‘departures’ as mea-

sured against pre-Booker decisions that cabined the discre-

tion of sentencing courts to depart from guidelines that

were then mandatory.” Id. Because the initial Guidelines

sentence here must be recalculated by the district court on

remand, we cannot reach the issue of the reasonableness of

Arnaout’s sentence. See Dean, 414 F.3d 725, 727-28 (sen-

tencing judge must properly compute the Guidelines

sentence to permit review for reasonableness). We note,

however, that the district court’s factual determination that

Arnaout also victimized Chechen and Bosnian refugees by

fraudulently diverting to the military charity funds that

were meant for refugees was not clearly erroneous. Con-

trary to Arnaout’s argument, the district court’s determina-

tion here was not based on pure speculation. Instead, the

district court reviewed actual letters from refugee vic-

tims submitted by the government to determine the

harm caused by Arnaout’s diversion of funds and reasonably

concluded that the diversion of the charity funds caused a

tangible harm to the refugees that was not adequately

represented in the Guidelines calculations.

F. Arnaout’s Booker-Related Arguments

Arnaout argues that his Sixth Amendment right to a

jury’s determination of facts underlying his sentence

enhancement was violated when the district judge made

several factual determinations by a preponderance of

the evidence that led to enhancements to his sentence.

See Booker, 125 S. Ct. at 756. Because we are already

Nos. 03-3297 & 03-3412 15

remanding this case for resentencing in accordance with

Booker, there is no need for us to consider the propriety of a

limited remand under United States v. Paladino, 401 F.3d

471, 484 (7th Cir. 2005).

III. CONCLUSION

For all the foregoing reasons, we VACATE Arnaout’s

sentence and REMAND for resentencing.

A true Copy:

Teste:

________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit

USCA-02-C-0072—12-2-05