United States v. Hussein

• Decision Date: 13 December 2011
• Docket Number: No. 11–2248.,11–2248.
• Citation: 664 F.3d 155
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Naeil HUSSEIN, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

664 F.3d 155

UNITED STATES of America, Plaintiff–Appellee,

v.Naeil HUSSEIN, Defendant–Appellant.

No. 11–2248.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 5, 2011.Decided Dec. 13, 2011.

David E. Bindi, Attorney, Office of the United States Attorney, Chicago, IL, for Plaintiff–Appellee.

William S. Stanton, Attorney, Law Office of William S. Stanton, Michael P. Gillespie, Attorney, Michael P. Gillespie, Ltd., Chicago, IL, for Defendant–Appellant.

Before EASTERBROOK, Chief Judge, and MANION and ROVNER, Circuit Judges.

MANION, Circuit Judge.

Naeil Hussein and his girlfriend, Lisa Bazian, operated what appeared to be convenience stores on the south side of Chicago. In fact they were little more than fronts where the couple rang up phony sales for food-stamp recipients looking to exchange their benefits for discounted amounts of cash. When federal investigators discovered the fraudulent scheme at one location, the pair simply obtained government authorization to accept food stamps at a different address where they continued their operation. Through a surrogate Hussein opened a third store and even attempted to qualify an ineligible restaurant. Hussein eventually pleaded guilty to eight counts of wire fraud, 18 U.S.C. § 1343, and was sentenced to a total of 60 months' imprisonment and ordered to pay almost $1.7 million in restitution. On appeal he challenges the amount of loss and a 4–level leadership adjustment used in calculating his offense level, as well as the reasonableness of his prison term. We affirm the judgment.

I.

Hussein and Bazian launched their scam at The Spot Food Mart (“Spot Mart”), a store that Bazian had acquired in the Englewood neighborhood of Chicago. In 2003 Bazian applied to the United States Department of Agriculture on behalf of Spot Mart to participate in the federal Food Stamp Program. The program supplies low-income persons with debit cards, known in Illinois as LINK cards, that can be used to purchase food.¹ The USDA approved Spot Mart's application but not before making Bazian send proof that she was not connected to the store's prior owner, who had accepted food stamps but later was sanctioned for abusing the program. Spot Mart brought in a little more than $2,000 in benefits in June 2004, its first month with a LINK scanner, but by October 2005, the monthly total had ballooned more than 60–fold to nearly $130,000. Near the end of that month, a USDA informant twice used a LINK card at Spot Mart to trade food-stamp benefits for lesser amounts of cash. The description the informant gave of the clerk who processed one of those fraudulent transactions matched Hussein. The next week federal agents executed a search warrant at the store. During that search a USDA agent interviewed Hussein, the store manager, who denied trading cash for food-stamp benefits. The USDA disqualified Bazian from the program but took no action against Hussein.

About three months later Hussein applied to the Food Stamp Program on behalf of a second Englewood store, Halsted Food Mart (“Halsted”). Despite his role as manager at Spot Mart, the USDA approved the application. Again using an informant, the USDA developed evidence that the new location, like the old, was nothing more than a front for swapping benefits for cash. Once more authorization to participate in the program was revoked, but not before the Halsted scam had run for more than two years and at its height brought in over $100,000 a month in benefits.

In addition, shortly before federal agents executed a search warrant at Halsted, one of Hussein and Bazian's employees, Dwight Fleming, applied to the program on behalf of a third Englewood location, Route 69 Palace. Fleming represented on the application that he owned Route 69 but later admitted that Hussein, the true owner, had paid him to claim ownership. The USDA developed evidence that Hussein and Bazian were trading cash for benefits at Route 69, though not before the pair had run their scam there for more than seven months. Hussein also applied to the Food Stamp Program on behalf of a fourth Englewood business, Spot Chicken Fish & Pizza (“Spot Chicken”), but the USDA rejected that application, presumably because benefits generally cannot be used at restaurants. See 7 C.F.R. § 278.1(b)(1)(iv). Still, for reasons that are unclear from the record, food-stamp recipients were able to trade their benefits for cash at Spot Chicken. In total, Hussein and Bazian ran their fraud for more than four years.

According to bank records for Spot Mart and Halsted, the two locations brought in a total of $1,859,939 in LINK benefits. The government calculated that, during roughly that same time period, Hussein and Bazian wrote checks for food inventory totaling $164,660 from the accounts where LINK funds were deposited. Route 69 took in $128,198 in LINK benefits, and checks for food totaling $49,043 were drawn on the account where those benefits were deposited during the time the store had a LINK scanner. According to the government, Spot Chicken brought in another $228,497 in LINK receipts despite having no authorization to accept LINK cards.

Following Hussein's guilty plea, the probation officer recommended in the presentence report that the district court assess the loss from the fraud as $1,695,250 and apply a 16–level increase. See U.S.S.G. § 2B1.1(b)(1)(I). The probation officer reached this figure by subtracting the checks Hussein and Bazian wrote for food inventory at Spot Mart and Halsted from the amount of LINK redemptions at those locations. The probation officer's total inexplicably ignores the LINK receipts at Route 69 and Spot Chicken, but still Hussein objected that the loss calculation was too high. His lawyer contended, without explanation, that inventory costs for food exceeded those listed in the presentence report and argued that the government's formula failed to account for “legitimate profit” on food sales. But Hussein did not present evidence of additional inventory costs, nor did he attempt to quantify the authorized food items sold at Spot Mart and Halsted. Instead, counsel simply asserted without explanation that the government's loss was about $900,000, enough to yield a 14–level increase but below the $1 million threshold for the proposed 16–level increase. See U.S.S.G. § 2B1.1(b)(1)(H). The government responded that the probation officer's calculation was, if anything, understated because it did not incorporate relevant conduct at Route 69 or Spot Chicken and also assumed that every food purchase at Spot Mart and Halsted was made with LINK benefits rather than cash. And even focusing on just the LINK sales, the government argued, Hussein was not entitled to an adjustment for gross profit because he and Bazian tried to mask their scheme by requiring persons selling their benefits to buy a small food item when presenting their LINK cards. The district court overruled Hussein's objection and adopted the probation officer's calculation. The court offered its “layperson's understanding” that grocery stores operate at a “very low profit margin” and reasoned that any adjustment to account for gross profit would be too minimal to alter the guidelines calculation.

The parties also disagreed at sentencing about what adjustment to apply for Hussein's role in the offense. The probation officer recommended a 4–level increase, see U.S.S.G. § 3B1.1(a), after concluding that Hussein had been “an organizer or leader of a criminal activity that involved five or more participants or was otherwise extensive.” The probation officer reasoned that the scheme “involved at least three participants and was otherwise extensive (in that benefits were exchanged for cash with several other individuals/participants).” Hussein urged the district court to apply instead a 2–level adjustment. Id. § 3B1.1(c). Defense counsel said nothing about the number of people involved in the fraud and contended that the scheme had been a “basic fraud” that was not extensive. The prosecutor countered that the number of persons involved could not possibly have been less than five because, in the government's view, every LINK cardholder who illegally traded benefits for cash was a “participant” in the scheme. The prosecutor also asserted that the scheme had been extensive. The district court adopted the probation officer's recommendation. The judge counted as participants Hussein, Bazian, and Fleming but did not comment on the government's contention that the sellers of LINK benefits also were participants. Rather, while not officially labeling the many LINK traders as participants, the court easily defined the scheme as extensive. She found it significant that Hussein had run his scam from multiple locations, supervised employees at his stores, and traded cash for benefits with “dozens, probably hundreds, of customers.”

Based on a total offense level of 24 and a criminal history category of I, Hussein faced a guidelines imprisonment range of 51 to 63 months. The government argued for a sentence within the guidelines. Pointing to the dearth of grocery stores in Englewood, the prosecutor criticized Hussein for offering the community nothing more than “pop, chips, candy, and cash” and speculated that some of his clients used the cash they got from him to buy drugs. Hussein's lawyer countered that the government had presented no evidence connecting Hussein to the drug trade and could not hold him responsible for drug use in Englewood. Counsel also highlighted Hussein's limited criminal record, his family ties, and his history of seizures stemming from a medical condition that had required brain surgery.

The district court sentenced Hussein to 60 months. The judge emphasized Hussein's decision to continue the fraud after the search at Spot Mart and his bilking of a taxpayer-funded program. The court also found significant the breadth of the scheme and the options Hussein had available to him as a...