U.S. v. Abdi

• Decision Date: 03 September 2003
• Docket Number: No. 02-4815.,No. 02-4814.,No. 02-4759.,No. 02-4774.,02-4759.,02-4774.,02-4814.,02-4815.
• Citation: 342 F.3d 313
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Abdillah S. ABDI, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellee, v. Abdirahman Sheik-Ali Isse, Defendant-Appellant. UNITED STATES of America, Plaintiff-Appellant, v. Abdirahman Sheik-Ali Isse, Defendant-Appellee. UNITED STATES of America, Plaintiff-Appellant, v. Abdillah S. Abdi, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

342 F.3d 313

UNITED STATES of America, Plaintiff-Appellee, v. Abdillah S. ABDI, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellee, v. Abdirahman Sheik-Ali Isse, Defendant-Appellant.

UNITED STATES of America, Plaintiff-Appellant, v. Abdirahman Sheik-Ali Isse, Defendant-Appellee.

UNITED STATES of America, Plaintiff-Appellant, v. Abdillah S. Abdi, Defendant-Appellee.

No. 02-4759.

No. 02-4774.

No. 02-4814.

No. 02-4815.

United States Court of Appeals, Fourth Circuit.

Argued: May 9, 2003.

Decided: September 3, 2003.

ARGUED: Christopher Dean Latsios, Fairfax, Virginia, for Appellant Abdi; Jonathan Shapiro, LAW OFFICES OF JONATHAN SHAPIRO, P.C., Alexandria, Virginia, for Appellant Isse.

Gordon Dean Kromberg, Assistant United States Attorney, Alexandria, Virginia, for Appellee.

ON BRIEF: Paul J. McNulty, United States Attorney, Neil Hammerstrom, Jr., Assistant United States Attorney, Alexandria, Virginia, for Appellee.

Before NIEMEYER and MOTZ, Circuit Judges, and Joseph R. GOODWIN, United States District Judge for the Southern District of West Virginia, sitting by designation.

Affirmed in part, vacated in part, and remanded by published opinion. Judge NIEMEYER wrote the opinion, in which Judge GOODWIN joined. Judge DIANA GRIBBON MOTZ wrote a separate opinion concurring in Part III and in the judgment.

OPINION

NIEMEYER, Circuit Judge:

Abdirahman Isse and Abdillah Abdi pleaded guilty to conspiracy to structure financial transactions to evade reporting requirements, in violation of 31 U.S.C. § 5324. The total amount of money structured during the course of the conspiracy was over $4.2 million, all of which was attributable to Isse and approximately $3.3 million of which was attributable to Abdi, who joined later. The district court sentenced Isse to 18 months' imprisonment and Abdi to 5 months' imprisonment and 5 months' home confinement.

On appeal, the defendants challenge their sentences, contending that the district court did not properly apply U.S.S.G. § 2S1.3(b)(2) so as to reduce their sentencing levels to reflect that they had no knowledge of whether the funds that they structured were the proceeds of unlawful activities or were to be used for unlawful purposes. The government cross-appealed, contending that the district court erred in failing to take into account all of the funds structured, rather than only 3% of that amount.

For the reasons that follow, we affirm on the defendants' appeals and we reverse on the government's cross-appeals, remanding these cases for resentencing.

I

Between 1997 and November 7, 2001, Isse operated a money-transmitting service, which Abdi, Isse's nephew, joined in 2000. Isse initially operated the service from his home in Alexandria, Virginia, but later, doing business as Rage Associates, conducted the service as an agent of the Al-Barakat network, an international money-transmitting exchange headquartered in the United Arab Emirates, using Al-Barakat's premises in Alexandria. During the conspiracy, the defendants' business received a total of $4,244,499 in cash from individuals wishing to transmit money to Somalia, Ethiopia, Kenya, and Sudan. The defendants did not ask their customers about the sources of the cash that the defendants received for transmission through Al-Barakat nor the uses for which the money was to be transmitted, although some customers told the defendants that they were sending money to relatives.

When the defendants received funds from customers, they deposited them in multiple accounts at various branches of banks in Northern Virginia. To avoid the $10,000 threshold for reporting transactions, they always deposited the amounts with the banks in sums of less than $10,000 — usually between $9,000 and $9,990 — and on some days, they made several such deposits. Because the deposits were in cash amounts less than $10,000, they did not prompt the banks to file currency transaction reports required under 31 U.S.C. § 5313 and 31 C.F.R. § 103.22(b)(1) for amounts more than $10,000. The defendants then transmitted the funds from the bank accounts to the Al-Barakat headquarters in the United Arab Emirates for further transfer to agents in Somalia, Ethiopia, Kenya, and Sudan. As compensation for each transmission of funds for a customer, the defendants generally retained 1% of the deposit and remitted another 3% to Al-Barakat, of which Al-Barakat kept two-thirds (2% of the total deposit) and remitted the remaining one-third (1% of the total deposit) to the agent in the receiving country.

In conducting their business, the defendants failed to obtain a money-transmittal license as required by Virginia and federal law.

On November 7, 2001, the Department of the Treasury froze the assets of the Al-Barakat network, including certain bank accounts of Rage Associates, on the ground that the owner of the network directed profits of the business to Al-Qaeda, a terrorist organization. On the same day, law enforcement agents executed search warrants on the offices of various agents of the Al-Barakat network, including the defendants' business in Alexandria. On the premises of the defendants' business, officers found $29,422 in cash. The defendants were indicted for numerous structuring offenses, and they pleaded guilty to the one conspiracy count.

At sentencing, the defendants testified that they knew many of their customers and kept records of the transactions they made, but they did not know from where the customers derived the money and they did not know for what the money was to be used once it was transmitted overseas. The government presented media reports documenting food-stamp fraud and the collection of funds by Somali refugees to transmit large amounts of money to Somalia for purposes other than simply supporting the contributors' families.

After the district court sentenced the defendants, they filed this appeal challenging the district court's determination that they were ineligible for reduction of their base offense level to level 6, pursuant to U.S.S.G. § 2S1.3(b)(2) — a reduction that would have lowered their sentences. The government cross-appealed, challenging the value of funds used by the district court to calculate the defendants' base offense level under U.S.S.G. § 2S1.3(a).

II

The defendants contend that the district court interpreted U.S.S.G. § 2S1.3(b)(2) — referred to as a "safe harbor" provision entitling an eligible defendant to reduction of the sentencing level — as a "strict liability" provision that denied them the reduction regardless of their state of knowledge. They contend that they did not and could not know whether the monies they structured were the proceeds of illegal activities or were to be used for illegal purposes and that the district court erred in not applying the generally applicable provisions of U.S.S.G. § 1B1.3(a), which limits or extends — depending on one's circumstances — a conspirator's sentencing liability to "reasonably foreseeable acts and omissions of others in furtherance of the jointly undertaken criminal activity." Arguing that the knowledge of any illegal activities of their customers was not foreseeable, they state that such facts "were unknown to the appellants and fall outside the scope of the appellants' relevant conduct. They are not to be held accountable for it under the guideline principles of relevant conduct."

We find these contentions to be without merit. The defendants' argument fails to account for the plain meaning of U.S.S.G. § 2S1.3(b)(2) and the burden that the defendants must carry in demonstrating that they are entitled to the benefit of the reduction.

Section 2S1.3 of the Sentencing Guidelines directs a sentencing court to assign to the defendant a base level of "6 plus the number of offense levels from the table in § 2B1.1 (Theft, Property Destruction, and Fraud) corresponding to the value of the funds." U.S.S.G. § 2S1.3(a) (2001). It directs a court to increase the base offense level by two levels "[i]f the defendant knew or believed that the funds were proceeds of unlawful activity, or were intended to promote unlawful activity." Id. § 2S1.3(b)(1). And, in what has been termed its "safe harbor" provision, the guideline directs a court to decrease the offense level to level 6 if four conditions are satisfied:

(A) subsection (b)(1) does not apply [that defendants did not know or believe that the funds were the proceeds of unlawful activity or were intended to promote unlawful activity] (B) the defendant did not act with reckless disregard of the source of the funds;

(C) the funds were the proceeds of lawful activity; and

(D) the funds were to be used for a lawful purpose.

Id. § 2S1.3(b)(2). Because the government concedes that (A) and (B) are satisfied in this case, this appeal involves only the final two conditions, (C) and (D).

The government, of course, bears the burden of demonstrating the requirements to increase the base offense level under § 2S1.3(b)(1). And because any reduction in a sentencing level under U.S.S.G. § 2S1.3(b)(2) can be given only upon demonstration of conditions (A)-(D), it follows that the defendant, not the government, has this burden of showing entitlement to any reduction. See United States v. Solomon, 274 F.3d 825, 828 n. 2 (4th Cir.2001) (noting that "every circuit to consider [who bears the burden of proof] has assigned to the defendant the burden of proving entitlement to a sentencing reduction"). Absent the government's demonstration that the defendants knew the activity or purpose was unlawful or the defendants' demonstration that the activity and purpose were lawful, the guideline defaults to an offense level of 6 plus the number of offense levels determined by the value of the funds involved. It is thus apparent that in order to benefit from the safe harbor provision, the defendants must carry the burden of showing that the funds were derived from lawful activity and were to be used for lawful purposes.

In this...