United States v. Khan

• Citation: 771 F.3d 367
• Decision Date: 24 October 2014
• Docket Number: 13–2681.,Nos. 13–2662,s. 13–2662
• Parties: UNITED STATES of America, Plaintiff–Appellee, v. Mazher Ali KHAN and Shakil Wamiq, Defendants–Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

771 F.3d 367

UNITED STATES of America, Plaintiff–Appellee,
v.
Mazher Ali KHAN and Shakil Wamiq, Defendants–Appellants.

Nos. 13–2662, 13–2681.

United States Court of Appeals,
Seventh Circuit.

Argued Feb. 24, 2014.
Decided Oct. 24, 2014.

[771 F.3d 370]

Carol L. Kraft, Laura S. Kwaterski, Office of the United States Attorney, Milwaukee, WI, for Plaintiff–Appellee.

Michael Joseph Levinsohn, Levinsohn & Associates, Chicago, IL, for Defendant–Appellant.

[771 F.3d 371]

Before FLAUM and ROVNER, Circuit Judges, and KENDALL, District Judge.^*

KENDALL, District Judge.

A jury convicted Shakil Wamiq of four counts of knowingly shipping, transporting, receiving, possessing, selling, distributing, or purchasing contraband cigarettes in violation of 18 U.S.C. § 2342(a) of the Contraband Cigarette Trafficking Act (“CCTA”). The same jury convicted Mazher Ali Khan, who acted independently of Wamiq, of three counts of knowingly shipping, transporting, receiving, possessing, selling, distributing, or purchasing contraband cigarettes in violation of 18 U.S.C. § 2342(a). Both Wamiq and Khan appeal their respective convictions, forfeitures, and denial of their post-trial motions. Wamiq also appeals his sentence. Finding no error, we affirm.

I

In 2011, agents from the Bureau of Alcohol, Tobacco, Firearms and Explosives ran a warehouse in Milwaukee, Wisconsin as part of an undercover investigation into the trafficking of contraband cigarettes. The Milwaukee warehouse did not have any exterior signage. Nor was there any signage inside the Milwaukee warehouse. The only warehouse equipment inside the warehouse was a hand truck used to move cases of cigarettes and some old pallets. Although there was an office inside the Milwaukee warehouse, there were no computers. Apart from some basic furnishings, the only piece of office equipment in the Milwaukee warehouse was a money counter.

ATF agents purchased cigarettes from two tobacco companies. One company sold cigarettes, primarily Newport brand cigarettes, to the ATF, while the other provided cigarettes, primarily Marlboro and Parliament brand cigarettes, to the ATF on consignment. The latter company simply accepted whatever proceeds the ATF received from purchasers of the cigarettes provided by that company as payment for its cigarettes. ATF used the Milwaukee warehouse to store and sell the cigarettes they received from the tobacco companies. ATF agents sold the cigarettes, none of which bore any evidence of the payment of applicable State or local cigarette taxes, to various purchasers, to include Wamiq and Khan.

Khan first received cigarettes from the Milwaukee warehouse in May 2011. Mohammad Uddin purchased ten cases of Marlboro cigarettes from the Milwaukee warehouse on May 19, 2011. Each case contained sixty cartons of cigarettes; each carton contained ten packs of cigarettes; and each pack of cigarettes contained twenty cigarettes. He paid a total of $15,000 in cash, cash he received from Khan, for the ten cases of Marlboro cigarettes, which he placed in his silver Nissan. After completing his purchase, Uddin met Khan a short distance from the Milwaukee warehouse and transferred the ten cases of Marlboro cigarettes to Khan's blue minivan before returning to the Milwaukee warehouse to purchase additional cigarettes.

Uddin returned to the Milwaukee warehouse on June 30, 2011, this time accompanied by Khan. Uddin drove Khan's blue minivan to the Milwaukee warehouse and purchased twenty-six cases of cigarettes. He paid $39,000 in cash and then he and Khan left the Milwaukee warehouse. A short while later, Uddin returned to the Milwaukee warehouse in his silver Nissan and purchased additional cigarettes.

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Uddin purchased cigarettes from the Milwaukee warehouse for Khan three more times. Uddin paid $75,000 in cash for fifty cases of cigarettes on July 8, 2011; $78,000 in cash for fifty-two cases of cigarettes on July 15, 2011; and $75,000 in cash for fifty cases of cigarettes on September 21, 2011. Uddin drove Khan's yellow conversion van to the Milwaukee warehouse to make these three purchases and then returned the van and the cigarettes to Khan. Neither Uddin nor Khan received any receipts or invoices for these five purchases. After each purchase, Khan transported the cigarettes purchased at the Milwaukee warehouse to Illinois.

Uddin also orchestrated four cigarette purchases from the Milwaukee warehouse for Wamiq. Uddin's first purchase for Wamiq took place on October 26, 2011. The two met at a gas station near the Milwaukee warehouse where Wamiq gave Uddin the money necessary to purchase cigarettes from the Milwaukee warehouse. Uddin then went to the Milwaukee warehouse and used the money provided by Wamiq, $257,000, to purchase 158 cases of cigarettes. After loading the cigarettes into a rented truck, Uddin met up with Wamiq on the highway. Wamiq, Uddin, and Uddin's brother then drove back to Illinois as part of a three-vehicle convoy. Wamiq unloaded the cigarettes from the rented truck at a warehouse in Illinois.

Wamiq used Uddin to purchase cigarettes at the Milwaukee warehouse three more times. Using money received from Wamiq, Uddin paid $202,500 for 135 cases of cigarettes on December 8, 2011; $273,000 for 182 cases of cigarettes on December 21, 2011; and $132,000 for 88 cases of cigarettes on February 14, 2012. Neither Uddin nor Wamiq received any receipts or invoices for these four purchases.

An indictment charged Uddin, Wamiq, and Khan with conspiring to violate the CCTA. The indictment also charged Uddin with nine counts of violating the CCTA; Wamiq with four counts of violating the CCTA; and Khan with five counts of violating the CCTA. Uddin entered a plea agreement and testified at trial against Wamiq and Khan. At trial, Uddin explained his role in each of the purchases he made for Wamiq and Khan.

This was not the first undercover ATF investigation in which Wamiq purchased cigarettes from an ATF warehouse. A criminal complaint filed in the Northern District of Illinois charged Wamiq with purchasing contraband cigarettes from an ATF warehouse in Hickory Hills, Illinois. This criminal complaint was dismissed.

Prior to trial in this case, Wamiq moved to exclude any evidence related to the criminal complaint filed in the Northern District of Illinois under Fed.R.Evid. 403 and 404(b). The district court denied Wamiq's motion because it concluded that the evidence was admissible to prove motive or plan. The district court also concluded that Wamiq's cigarette purchases in the undercover ATF investigation in Illinois were direct evidence of guilt to the extent that Wamiq claimed that he had purchased enough tax stamps to apply to the cigarettes he purchased in both Wisconsin and Illinois.

A jury convicted Wamiq of four counts of knowingly shipping, transporting, receiving, possessing, selling, distributing, or purchasing contraband cigarettes and convicted Khan of three counts of knowingly shipping, transporting, receiving, possessing, selling, distributing, or purchasing contraband cigarettes. Following their convictions, Wamiq and Khan separately moved for judgment of acquittal. The district court denied both motions. Khan also moved to arrest judgment, which

[771 F.3d 373]

Wamiq joined. The district court denied this motion too. The district court sentenced Wamiq to twenty-one months imprisonment, three years of supervised release, ordered restitution in the amount of $220,882.20, and forfeiture in the amount of $472,993.20. The district court sentenced Khan to two years probation, restitution in the amount of $58,150.00, and forfeiture in the amount of $125,308.80, in addition to his conversion van.

II

The CCTA makes it a crime “for any person knowingly to ship, transport, receive, possess, sell, distribute, or purchase contraband cigarettes.” 18 U.S.C. § 2342(a). “Congress enacted the CCTA to enable federal enforcement agencies to assist states in curtailing interstate cigarette trafficking, which drains billions of dollars in tax revenues from state and local governments each year and often serves as a source of illicit financing for organized crime and terrorist organizations.” United States v. Mohamed, No. 13–2368, slip op. at 9 (7th Cir. Jul. 22, 2014) (citations omitted). The CCTA defines “contraband cigarettes” as “a quantity in excess of 10,000 cigarettes, which bear no evidence of the payment of applicable State or local cigarette taxes in the State or locality where such cigarettes are found, if the State or local government requires a stamp, impression, or other indication to be placed on packages or other containers of cigarettes to evidence payment of cigarette taxes.” 18 U.S.C. § 2341(2).

But the CCTA's definition of “contraband cigarettes” does not apply to cigarettes in the possession of certain persons. See18 U.S.C. §§ 2341(2)(A)-(D). For instance, the definition does not apply to a person “licensed or otherwise authorized by the State where the cigarettes are found to account for and pay cigarette taxes imposed by such State and who has complied with the accounting and payment requirements relating to such license or authorization with respect to the cigarettes involved.” 18 U.S.C. § 2341(2)(C). Both Wamiq, who claims to have been an agent of a licensed distributor in Illinois, and Khan, who was a licensed distributor in Illinois, sought to invoke this exception. But neither Wamiq nor Khan complied with the accounting and payment requirements required under the Illinois Cigarette Tax Act with respect to the cigarettes purchased at the Milwaukee warehouse. As discussed infra, neither received invoices for cigarettes purchased from the Milwaukee warehouse, nor did they make their out-of-state purchases from an approved cigarette distributor, maker, manufacturer, or fabricator. The Illinois Cigarette Tax Act required them to do both. There is no reason to allow Wamiq or Khan to seek refuge under 18 U.S.C. § 2341(2)(C) when neither did what...