United States v. Hamza Dridi

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 18-3334

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

v.

HAMZA DRIDI, a/k/a ALEX,

Defendant-Appellant.

____________________

Appeal from the United States District Court for the

Southern District of Indiana, Indianapolis Division.

No. 16-cr-00167 — William T. Lawrence, Judge.

____________________

ARGUED DECEMBER 4, 2019 — DECIDED MARCH 13, 2020

____________________

Before MANION, KANNE, and BARRETT, Circuit Judges.

KANNE, Circuit Judge. From 2012 to 2015, employees of

Elite Imports, a car dealership, engaged in a variety of fraud-

ulent activities. For his involvement in these illegal schemes,

one employee, Hamza Dridi, was charged with conspiring to

violate the Racketeer Influenced and Corrupt Organizations

Act, 18 U.S.C. § 1962(d), and interstate transportation of stolen

property, 18 U.S.C. § 2314. A jury found him guilty of both

2 No. 18-3334

crimes. The district court sentenced him to 72 months in

prison and ordered $1,811,679.25 in restitution.

Dridi now challenges his sentence and the restitution or-

der, arguing that the district court—before sentencing Dridi

and ordering restitution—should have made specific factual

findings about Dridi’s participation in the conspiracy.

We agree with Dridi that the district court erred both by

not making specific factual findings prior to sentencing Dridi

and by not adequately demarcating the scheme before impos-

ing $1,811,679.25 in restitution. But because only the second

error affected Dridi’s substantial rights, we affirm Dridi’s

prison sentence, vacate the restitution order, and remand the

issue of restitution for further proceedings consistent with

this opinion.

I. BACKGROUND

Mahammad Hindi and Mohamed Mahmoud co-owned

two car dealerships in Indianapolis: Elite Imports and Elite

Car Imports (collectively “Elite Imports”). By 2012, Elite Im-

ports’s employees were engaged in a variety of illegal

schemes intended to defraud lenders and insurance compa-

nies.

A. Fraudulent Schemes

Before acquiring cars for resale, Elite Imports needed to

obtain financing from floor-plan lenders. Floor-plan lenders

provide loans to dealerships like Elite, enabling them to buy

cars in bulk. In exchange for these loans, a dealership agrees

that, shortly after a car is sold, the dealership will pay the

floor-plan lender the amount borrowed for that car. To ensure

payment, floor-plan lenders hold on to the title of each car,

and only release the title to a dealership once the floor-plan

No. 18-3334 3

lender receives payment for the car. Floor-plan lenders also

send auditors to a dealership’s car lot to make sure the deal-

ership is not selling cars without repaying the loan after each

sale.

However, Elite Imports’s employees found a way around

acquiring a car’s title from floor-plan lenders: lying. Instead

of seeking the original title from the floor-plan lender, an Elite

Imports employee would obtain a copy of the car’s title from

the Indiana Bureau of Motor Vehicles’s online portal. If a copy

of the title could not be acquired, employees could still avoid

asking floor-plan lenders to release the car’s title—by contin-

ually issuing the customer temporary license plates.

To prevent this scheme from being detected by floor-plan

lenders and their auditors, Elite Imports’s employees would

call customers and request that their cars be returned to the

lot for a VIN number inspection or a free oil change. The cus-

tomers who obliged would return their cars to the lot before

an auditor’s inspection. If a car could not be returned, em-

ployees would simply lie to the auditor, saying that the car

was not on the lot due to a test drive or repairs.

In the end, this multi-layered scheme allowed Elite Im-

ports to sell cars without repaying floor-plan lenders.

Elite Imports’s employees also defrauded consumer lend-

ers. Sometimes, employees would be approached by custom-

ers who could not afford a car without a loan and did not

qualify for a consumer loan. To sell cars to these customers,

employees helped the customer submit fraudulent applica-

tions to consumer lenders. Employees would create fake bank

statements, driver’s licenses, and social security cards for the

customers to send to their lenders. Multiple customers used

4 No. 18-3334

these fraudulent documents to obtain financing for a car pur-

chase. When the loan was approved, the lenders paid Elite

Imports the price of the vehicle, shifting all risk of loan non-

payment to the consumer lenders, who were often never re-

paid by the customer.

In a final scheme, Elite Imports’s employees used the deal-

ership’s resources to defraud insurance companies for their

own financial gain. Multiple employees used a chop shop lo-

cated behind the dealership to disassemble their own vehi-

cles. The employees would then report their vehicles as stolen

to law enforcement agencies and insurance companies. Em-

ployees even directed customers to file similarly fraudulent

insurance claims. The employee or the customer would then

receive insurance proceeds on the reportedly stolen car.

B. Dridi’s Involvement

The parties dispute the exact time Dridi began working for

Elite Imports. The government claims Dridi started in late

2012 or early 2013; Dridi claims it was late 2013 but testified

at trial that he did not remember the exact date. Although the

record does not pin down exactly when Dridi began working

there, it does reveal his employment began in or before May

2013: Pam Tatom, Elite Imports’s finance manager, testified

that Dridi was already working at Elite Imports by the time

she started working there in May 2013.

At some point after Dridi began working for Elite Imports,

he participated in various aspects of its fraudulent schemes.

For example, Dridi opened an insurance policy on a truck in

August 2013. A few months later, he reported the truck stolen

and collected $1,600.90 in insurance proceeds.

No. 18-3334 5

Looking at another example, by late 2014, Elite Imports

had promoted Dridi to service manager, a position in the

body shop. In this role, Dridi oversaw the disassembly of mul-

tiple vehicles that would later be reported stolen. Specifically,

Dridi directed an employee to disassemble a red Ducati mo-

torcycle that belonged to another employee, Mahdi Khelefi.

Khelefi then reported the motorcycle stolen, received a check

for the proceeds, and endorsed that check to Dridi.

Dridi also participated in Elite Imports’s other fraudulent

activity. In preparation for an audit by floor-plan lenders,

Dridi would call customers to request that they return their

cars to the lot; then, he would help clean the car so auditors

could not tell the car had been sold. Additionally, Tatom

would email Dridi documents to be used in defrauding con-

sumer lenders.

C. Charges, Trial, and Sentencing

In an eight-count indictment in August 2016, the govern-

ment charged four Elite Imports employees—Mohamed

Mahmoud, Mahdi Khelefi, Issa Kayyali, and Hamza Dridi—

for their roles in Elite Imports’s fraudulent schemes. Dridi

faced two counts: conspiring to violate the Racketeer Influ-

enced and Corrupt Organizations Act, 18 U.S.C. § 1962(d),

and interstate transportation of stolen property, 18 U.S.C. §

2314. Mahmoud and Kayyali pled guilty; Dridi and Khelefi

proceeded to trial.

In a nine-day joint jury trial, the government called nearly

sixty witnesses, including Dridi’s coconspirators, representa-

tives from defrauded insurance companies and lenders, and

former Elite Imports customers. The jury found Dridi guilty

of both charged counts.

6 No. 18-3334

After Dridi’s trial, but before he was sentenced, the district

court sentenced Mahmoud, the conspiracy leader. For

Mahmoud’s sentencing, the court required the government to

“prepare and file a chart that lists each victim, the fraud

scheme with which that victim is associated, the loss amount

for that victim, the restitution amount due to that victim, and

the source or sources for the loss and restitution numbers.”

The government complied and concluded that Elite Imports’s

fraud schemes caused $1,812,788.19 in total loss.

A few months later, the probation office submitted Dridi’s

final revised presentence investigation report (“PSR”). Based

on the government’s loss calculation and updated victim in-

formation, the PSR indicated that the offense 1 involved

$1,848,868.50 in loss. Using this loss amount, the probation of-

fice recommended a sixteen-level increase in Dridi’s offense

level and a restitution amount of $1,811,679.25. U.S.S.G. §

2B1.1(b)(1)(I).

At Dridi’s sentencing hearing, the district court first re-

viewed restitution and reminded Dridi that he was jointly and

severally liable for $1,811,679.25 in total restitution to more

than thirty victims. Then the district court calculated Dridi’s

guideline range to be 78 to 97 months in prison; this range

included a sixteen-level enhancement based on a loss amount

between $1,500,000 and $3,500,000. U.S.S.G. § 2B1.1(b)(1)(I).

Dridi did not object to the restitution amount or the loss cal-

culation. The district court ultimately sentenced Dridi to 72

1Both counts of conviction involved “substantially the same harm”

and were grouped together for guideline calculation purposes. U.S.S.G.

§ 3D1.2.

No. 18-3334 7

months in prison and held him jointly and severally liable for

$1,811,679.25 in restitution.

II. ANALYSIS

Dridi argues that the district court erred in calculating

both his guideline range and his restitution amount. The gov-

ernment responds that Dridi waived these arguments because

he did not raise them before the district court. So, before

reaching the merits of Dridi’s arguments, we must first deter-

mine whether Dridi waived or merely forfeited his two argu-

ments.

A. Waiver or Forfeiture

“Waiver is the intentional relinquishment of a known

right.” United States v. Butler, 777 F.3d 382, 387 (7th Cir. 2015).

Forfeiture is the accidental or neglectful failure to timely as-

sert a right. United States v. Jaimes-Jaimes, 406 F.3d 845, 847–49

(7th Cir. 2005). Waiver precludes appellate review, but forfei-

ture allows review for plain error. United States v. Olano, 507

U.S. 725, 733–34 (1993). The line between waiver and forfei-

ture, however, is sometimes hard to delineate and can depend

on the nature of the right at issue. United States v. Flores, 929

F.3d 443, 447 (7th Cir. 2019). We construe waiver principles

liberally in favor of the defendant. United States v. Perry, 223

F.3d 431, 433 (7th Cir. 2000).

We have found waiver when there are “sound strategic

reasons” a defendant would choose to forego an argument be-

fore the district court. Jaimes-Jaimes, 406 F.3d at 848. But we

have found forfeiture when the government cannot proffer a

plausible strategic justification for a decision to not object.

United States v. Oliver, 873 F.3d 601, 607 (7th Cir. 2017).

8 No. 18-3334

Here, the government has not convinced us that strat-

egy—as opposed to inadvertence—explains why Dridi’s at-

torney did not object to the increased offense level and resti-

tution amount. The government claims the lack of objections

can be attributed to Dridi throwing “himself on the mercy of

the court.” But a defendant can request lenience and apolo-

gize for his behavior and still object to ensure his guideline

range and restitution amount are based on the correct con-

duct.

So, construing waiver principles liberally in Dridi’s favor,

his attorney’s failure to object looks more inadvertent than in-

tentional. We therefore find that Dridi forfeited, rather than

waived, his two related arguments on appeal.

B. Guideline Range

Dridi argues that the district court erred by not specifically

determining which conduct of Dridi’s coconspirators could

be attributed to him for purposes of sentencing. U.S.S.G.

§ 1B1.3(a)(1)(B).

Because Dridi forfeited this argument, we review for plain

error. Fed. R. Crim. P. 52(b); Jaimes-Jaimes, 406 F.3d at 847. We

may reverse if: (1) the court made an error that was plain and

(2) that error affected the defendant’s substantial rights.

United States v. Garvey, 688 F.3d 881, 884 (7th Cir. 2012). An

error is plain when “the law at the time of appellate review

shows clearly that [the deviation] was an error.” United States

v. Pierson, 925 F.3d 913, 919 (7th Cir. 2019). “Substantial rights

are affected when the defendant can show ‘a reasonable prob-

ability that, but for the error, the outcome of the proceeding

would have been different.’” United States v. Burns, 843 F.3d

No. 18-3334 9

679, 688 (7th Cir. 2016) (quoting United States v. Hulburt, 835

F.3d 715, 725 (7th Cir. 2016)).

In turning to our first question—whether the district court

committed an error that is plain—we start with Sentencing

Guideline § 2B1.1. Section 2B1.1 explains that the defendant’s

offense level should be increased based on the amount of loss

the defendant caused. Loss is defined as “the greater of” in-

tended loss or actual loss. U.S.S.G. § 2B1.1 cmt. n. 3(A). Actual

loss “means the reasonably foreseeable pecuniary harm that

resulted from the offense.” Id. § 2B1.1 cmt. n. 3(A)(i).

This loss calculation includes losses caused by others’ ac-

tions if those actions were (1) “within the scope of the jointly

undertaken criminal activity,” (2) “in furtherance of that crim-

inal activity,” and (3) “reasonably foreseeable in connection

with that criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B)(i)–(iii);

see United States v. White, 883 F.3d 983, 987–88 (7th Cir. 2018).

We have required district courts to make independent find-

ings on each of these elements before basing a defendant’s

sentence in part on loss caused by the entire conspiracy. See,

e.g., United States v. Sykes, 774 F.3d 1145, 1150 (7th Cir. 2014)

(requiring a similar elemental analysis under a prior version

of § 1B1.3); United States v. Aslan, 644 F.3d 526, 536 (7th Cir.

2011) (same). Other circuits have imposed the same require-

ment. See, e.g., United States v. Figueroa-Labrada, 720 F.3d 1258,

1266–67 (10th Cir. 2013); United States v. Childress, 58 F.3d 693,

722 (D.C. Cir. 1995).

The government argues that it is unclear whether a district

court must make findings under § 1B1.3 when loss is undis-

puted. The government leans on our recent statement in

White: “When the issue of individual responsibility for con-

duct of others is contested, a district court should make a

10 No. 18-3334

finding on each element of the relevant conduct test.” 883 F.3d

at 988 (emphasis added). Unless the defendant contests the

loss amount, the government reasons, the error cannot be

plain.

We disagree. White did not address what a court must do

when a defendant does not contest the loss amount. After all,

the defendant in White objected to the district court’s loss cal-

culation. Id. Thus, White did not disturb the clear law in our

circuit: before sentencing a defendant based on the loss

caused by the entire conspiracy, the district court must make

particularized findings about the scope of conduct attributa-

ble to the defendant. The district court here did not make

those findings; that error is plain.

Now we must determine whether the error affected

Dridi’s substantial rights. See Burns, 843 F.3d at 688. The dis-

trict court attributed $1,848,868.50 in loss to Dridi. Under the

Guidelines, if the loss was more than $1,500,000, the district

court was to add sixteen levels to Dridi’s base offense level.

See U.S.S.G. § 2B1.1(b)(1)(I). But if the loss was $1,500,000 or

less, the district court was to add no more than fourteen levels

to the base offense. See id. at § 2B1.1(b)(1)(H). And, keeping all

else the same, had Dridi’s offense level dropped at all, his

guideline range would have dropped as well. So, because he

says his guideline range would have been different, Dridi ar-

gues the district court’s error requires resentencing. See Mo-

lina-Martinez v. United States, 136 S. Ct. 1338, 1345 (2016)

(“When a defendant is sentenced under an incorrect Guide-

lines range … the error itself can, and most often will, be suf-

ficient to show a reasonable probability of a different outcome

absent the error.”).

No. 18-3334 11

Thus, to show that Dridi is entitled to resentencing based

on a different loss amount, Dridi must demonstrate a reason-

able probability that relevant conduct findings under § 1B1.3

would reveal loss attributable to Dridi of $1,500,000 or less. In

other words, Dridi must show that—had the district court

made specific findings under § 1B1.3—the loss amount would

have been $348,868.50 less than the amount the district court

attributed to Dridi.

Dridi’s argument rests predominantly on the “reasonably

foreseeable” requirement of § 1B1.3. Under that requirement,

loss may be attributable to Dridi only if the acts producing the

loss were “reasonably foreseeable” to him. See Sykes, 774 F.3d

at 1150–51. He argues that he couldn’t have foreseen cocon-

spirators’ acts before he joined the conspiracy—which he says

happened in late 2014; and at least $139,308.67 of the conspir-

acy’s loss came from acts that happened before October 2014.

Dridi also argues, relying on new information provided by

the government,2 that only $1,377,305.10 in losses occurred af-

ter he joined the conspiracy in late 2014. So, Dridi reasons that

a § 1B1.3 factual finding would show that no more than

$1,500,000 in loss can be attributed to him, resulting in a lower

guideline range.

But the record is not as clear as Dridi suggests. While Dridi

claims he started working for Elite Imports in late 2013, Pam

Tatom testified that Dridi was already working there by May

2013. Dridi also claims that he did not join any part of the

2 The government filed a motion with the district court to supplement

the record on appeal with the documents underlying its loss calculation.

Dridi did not oppose this motion, and the district court added the pro-

posed documents to the record.

12 No. 18-3334

conspiracy until late 2014, yet Dridi filed a fraudulent insur-

ance claim on his truck in late 2013. The record also shows

that, during an undefined time period, Dridi helped defraud

floor-plan lenders by asking customers to return their vehicles

to the lot, and he participated in Elite Imports’s scheme to de-

fraud consumer lenders.

So, the record does not uncover exactly when Dridi began

participating in Elite Imports’s fraudulent schemes. Accord-

ingly, the record does not confirm which of Dridi’s cocon-

spirators’ actions were “within the scope of,” “in furtherance

of,” and “reasonably foreseeable in connection with” the

jointly undertaken criminal activity in which Dridi took part.

U.S.S.G. § 1B1.3.

But we are sure that the record contradicts Dridi’s asser-

tion—on which he builds his argument—that he did not join

any part of the conspiracy until late 2014. Dridi therefore did

not demonstrate, based on the record, a reasonable probabil-

ity that, but for the district court’s failure to make § 1B1.3 find-

ings, the outcome of his sentencing hearing would have been

different. So, the district court’s error in foregoing findings

under § 1B1.3 did not affect Dridi’s substantial rights.

C. Restitution Amount

Finally, Dridi argues the district court erred by not

“mak[ing] findings on the scope of the scheme” before impos-

ing restitution. As with Dridi’s first argument, Dridi failed to

object with this contention during his sentencing hearing. So,

we review his restitution argument for plain error.

“The restitution issue is similar but not identical to the loss

amount issue.” White, 883 F.3d at 992. The Mandatory Victim

Restitution Act, which authorizes restitution in this case,

No. 18-3334 13

applies to “a victim’s losses from the offense of conviction,

which is narrower than relevant conduct under the Guide-

lines.” Id. (emphasis added). Restitution is thus limited to the

“actual losses caused by the specific conduct underlying the

offense” and the government must “establish [actual loss] by

a preponderance of the evidence.” United States v. Orillo, 733

F.3d 241, 244 (7th Cir. 2013).

When calculating a defendant’s restitution amount, dis-

trict courts should “adequately demarcate the scheme” by ex-

plaining the scheme’s scope. United States v. Smith, 218 F.3d

777, 784 (7th Cir. 2000). This process necessarily requires the

district court to explain how the defendant is responsible for

the amount of restitution ordered. See White, 883 F.3d at 992.

Here, the district court did not adequately demarcate the

scheme. Instead, it accepted the loss amounts set forth in the

PSR without explaining how and when the loss occurred and

whether Dridi was responsible for it. For example, the restitu-

tion recommendation in the PSR—which the district court

fully accepted—includes $11,428.00 representing the remain-

ing loan amount of a victim who purchased a car from Elite

Imports in May 2012. Importantly, this victim’s loss occurred

in mid-2012. And based on the evidence in the record, we can-

not assume that Dridi worked at Elite Imports during this

time. So, the lack of factual findings on how Dridi is respon-

sible for this restitution amount is a plain error.

This error affected Dridi’s substantial rights: he was “re-

quired to pay more in restitution than he owes.” Burns, 843

F.3d at 689; see White, 883 F.3d at 992 (“[W]e must remand be-

cause the evidence actually contradicts the restitution

award.”). The district court ordered $1,811,679.25 in restitu-

tion—the full amount recommended in the PSR. But as

14 No. 18-3334

discussed above, the evidence does not support holding Dridi

liable for this entire amount. Therefore, the district court or-

dered restitution beyond what the record indicates Dridi

caused; this warrants reconsideration of the entire restitution

award. See Burns, 843 F.3d at 690. In redetermining the resti-

tution award on remand, the court should demarcate the

scheme and establish the actual amount of loss caused by

Dridi’s conduct.

III. CONCLUSION

The district court’s errors at sentencing affected only

Dridi’s restitution amount, not his guideline range. We there-

fore AFFIRM his sentence, VACATE the restitution order, and

REMAND the issue of restitution for proceedings consistent

with this opinion.