U.S. v. Abboud, No. 04-3942.

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Writing for the CourtClay
Citation438 F.3d 554
PartiesUNITED STATES of America, Plaintiff-Appellee, v. Elie F. ABBOUD (04-3942) and Michel Abboud (04-3943), Defendants-Appellants.
Decision Date17 February 2006
Docket NumberNo. 04-3943.,No. 04-3942.
438 F.3d 554
UNITED STATES of America, Plaintiff-Appellee,
v.
Elie F. ABBOUD (04-3942) and Michel Abboud (04-3943), Defendants-Appellants.
No. 04-3942.
No. 04-3943.
United States Court of Appeals, Sixth Circuit.
Argued: November 29, 2005.
Decided and Filed: February 17, 2006.

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ARGUED: David L. Doughten, Cleveland, Ohio, James R. Willis, Cleveland, Ohio, for Appellants. Matthew B. Kall, Assistant United States Attorney, Cleveland, Ohio, for Appellee. ON BRIEF: David L. Doughten, Cleveland, Ohio, James R. Willis, Cleveland, Ohio, for Appellants. Matthew B. Kall, Ann C. Rowland,

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Assistant United States Attorneys, Cleveland, Ohio, for Appellee.

Before: SILER and CLAY, Circuit Judges; COOK, District Judge.*

OPINION

CLAY, Circuit Judge.


Defendants Elie F. Abboud and Michel Abboud appeal the July 13, 2004 order of the United States District Court for the Northern District of Ohio convicting and sentencing Defendants for bank fraud in violation of 18 U.S.C. § 1344(1); money laundering in violation of 18 U.S.C. § 1957; conspiracy to commit money laundering in violation of 18 U.S.C. § 371; and failure to file income tax return in violation of 26 U.S.C. § 7203. Additionally, the order convicted and sentenced Defendant Michel Abboud for filing a false income tax return in violation of 26 U.S.C. § 7206. For the reasons set forth below, we AFFIRM the convictions on all counts, but we VACATE Defendants' sentences and REMAND to the district court for resentencing.

I. BACKGROUND

A. PROCEDURAL HISTORY

On June 14, 2002, a federal grand jury indicted Defendants Elie Abboud and Michel Abboud on twenty-seven counts of bank fraud, one count of conspiracy to commit bank fraud, forty-four counts of money laundering, and one count of conspiracy to commit money laundering. On December 11, 2002, a federal grand jury returned a superseding indictment that added tax charges for both Defendants and firearm charges against Defendant Michel Abboud. Specifically, the grand jury charged Defendant Elie Abboud with failure to file an income tax return in 1999 and 2000. The grand jury charged Defendant Michel Abboud with filing a false tax return in 1999, and failure to file a tax return in 2000.

The district court granted Defendant Michel Abboud's motion to sever the firearm counts from the other counts.

Defendant Michel Abboud made a pre-trial motion to suppress evidence seized from his home and his businesses. On April 7, 2003, the district court denied Defendant's motion. With respect to Defendant's request for an evidentiary hearing, the district court found that Defendant did not allege disputed issues of fact. Instead, Defendant made "general conclusions" and arguments "entirely legal in nature." (J.A. at 235.) The district court also found that the warrant was supported by sufficient probable cause for the crimes of bank fraud, money laundering, and tax violations. The district court found that the warrant also met the particularity requirement with respect to the items to be seized. The district court ruled that the warrant was not stale, as it described ongoing criminal activity. With respect to seizure of items outside of the scope of the warrant, the district court reasoned that, from a practical perspective, law enforcement officers could not be expected to sift through all documents to exclude those outside the scope of the warrant, and that, in any case, the warrant was not general in nature. With respect to Defendant's claim of omissions from the search warrant, the district court ruled that Defendant could not prove deliberateness or recklessness in connection with the omissions, and even if the omissions were included in the search

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warrant, probable cause would have still existed.

On September 5, 2003, the government made a motion in limine to prevent Defendants from presenting evidence of selective prosecution at trial. The district court granted the motion.

On January 20, 2004, the government gave notice of its intent to offer Rule 404(b) evidence. The district court admitted this evidence.

On February 17, 2004, the jury found Defendants guilty on all counts. Defendants filed a motion for a judgment of acquittal, a motion for a new trial, and a motion for arrest of judgment. On May 7, 2004, the district court denied these motions.

With respect to the motion for a judgment of acquittal, the district court first rejected Defendants' claim of multiplicity. Defendants' claim was that they were impermissibly indicted for each transaction of the bank fraud scheme. The district court found that Defendants had waived the argument, as they had not made a proper pretrial motion. In addition, the district court found that the argument was substantively incorrect, as the statute allowed separate counts for each transaction in the scheme.

The district court also found evidence sufficient to support the convictions of bank fraud, money laundering, and tax violations. The district court rejected Defendants' argument that the banks had allowed the practices at issue and that Defendants had acted in good faith. The district court found that the money laundering statute did not require concealment on the part of Defendants. The district court also found that Defendants failed to raise any issues with respect to the tax violations.

The district court further ruled that the introduction of Rule 404(b) "other acts" evidence without a limiting instruction did not require a judgment of acquittal.

The district court reaffirmed its position as to its decision to deny Defendant Michel Abboud's motion to suppress.

The district court rejected Defendants' contention that expert witness testimony was improperly admitted. The district court found that Defendants' arguments went to the weight and not to the admissibility of the evidence.

With respect to the motion for a new trial, the district court reaffirmed its decision to exclude Defendants' evidence that they were the target of selective prosecution. Specifically, Defendants alleged that they were targeted because of their Arab descent in the post-September 11 landscape. The district court found that Defendants did not make a selective prosecution claim via a pretrial motion, and that selective prosecution was not a matter for the jury.

With respect to the motion for arrest of judgment, the district court found that the government charged and proved Defendant Michel Abboud's guilt with respect to his filing of a false tax return.

On July 13, 2004, the district court sentenced each Defendant to ninety-seven months of imprisonment, three years of supervised release, and charged criminal monetary penalties. Defendants timely filed notices of appeal.

B. FACTS

1. Defendants' Business Practices

Defendants are brothers who own various "corner stores" that sell groceries and money orders, and offer check cashing services.

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Donald Slusher ("Slusher") worked for Defendants from 1994 to 1996. During his employment, Defendants would instruct Slusher to deposit checks from their accounts into other accounts controlled by them. Defendants controlled seven or eight bank accounts. Slusher deposited the checks into the various accounts in order to cover checks written the previous day from the accounts. In other words, Defendants would write a check from Account 1 on Day 1. Defendants would then have Slusher deposit a check from Account 2 on Day 2 into Account 1 to cover the check from Day 1. Defendants determined the check amounts and in which accounts to deposit which checks. Slusher believed that the practice was check kiting.1 Slusher had access to the check registers, and he found that the balances in the accounts were "very, very low." (J.A. at 536-37.)

Walter Ryder ("Ryder") also worked for Defendants, from 1990 or 1991 to 1999. When Slusher left in 1996, Ryder inherited Slusher's banking responsibilities. Defendants kept a separate book to track the true account balances versus the account balances shown by the banks, and Ryder was responsible for maintaining and informing Defendants of this difference. While the account balances given by the banks were usually positive, the actual balances tracked by Ryder were usually negative.

Defendants gave instructions to Ryder similar to those given to Slusher. For example, Ryder would "tell [Defendant Elie Abboud] what the balance at National City [Bank] was, what needed to be deposited, based on what was clearing that day, and I would ask what we should deposit that day." (J.A. at 555.) Defendant Elie Abboud would then tell Ryder to deposit a certain amount of money from Parkview Federal Bank ("PVF") accounts into the National City Bank ("NCB") accounts. Ryder would then deposit various forms of checks, such as customer checks, rent checks, and checks drawn from Defendants' other accounts into the PVF accounts.

Ryder was also responsible for maintaining "Elie's Special Report," which was a summary of the accounts in terms of bank balance, outstanding checks, and actual book balance. This report showed that although Defendants' accounts had positive bank balances, they had negative actual balances. For example, on September 1, 1998, the bank balance was positive $1.3 million, but the actual balance was negative $2.3 million.

In July of 1999, Defendants told Ryder that PVF had a policy change that disallowed Defendants from depositing PVF checks into PVF accounts. As a result, Defendants instructed Ryder to use accounts at other banks to make deposits into the PVF accounts.

2. Policy of the Banks

Defendants had zero balance accounts in connection with a controlled disbursement system with NCB. The zero balance accounts entailed a system that had two types of accounts: a main account, and separate disbursement...

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