U.S. v. Hanafy

• Citation: 124 F.Supp.2d 1016
• Decision Date: 05 December 2000
• Docket Number: No. CRIM.A.3:99-CR-041-L.,CRIM.A.3:99-CR-041-L.
• Parties: UNITED STATES of America, v. Ibrahim Elsayed HANAFY (8) Mohamed M. Mokbel (10) Samer Samad Quassas (11) Adel Hisham Saadat (13)
• Court: U.S. District Court — Northern District of Texas

124 F.Supp.2d 1016

UNITED STATES of America, v. Ibrahim Elsayed HANAFY (8) Mohamed M. Mokbel (10) Samer Samad Quassas (11) Adel Hisham Saadat (13)

No. CRIM.A.3:99-CR-041-L.

United States District Court, N.D. Texas, Dallas Division.

December 5, 2000.

Paul E. Coggins, Jr., Joseph M. Revesz, Ass't U.S. Atty., Irma C. Ramirez, Ass't U.S. Atty., U.S. Attorney's Office, Dallas, TX, for U.S.

William D. Sims, Jr., Scott Wayne Breedlove, Todd A. Murray, Vinson & Elkins L.L.P., Dallas, TX, for Ibrahim Elsayed Hanafy.

Frank H. Jackson, Dallas, TX, for Mohamed M. Mokbel.

Donald E. Ervin, Houston, TX, for Samer Samad Quassas.

Jerry J. Lofton, Ft. Worth, TX, for Adel Hisham Saadat.

MEMORANDUM OPINION AND ORDER

LINDSAY, District Judge.

Before the court are Defendant Mokbel's Motion for Judgment of Acquittal and Motion for New Trial, filed August 4, 2000; Defendant Hanafy's Motion for Judgment of Acquittal, filed August 8, 2000; and Defendant Saadat's Motion for Judgment of Acquittal, filed August 16, 2000; collectively, "Defendants' motion."¹ Also before the court are four Motions for Issuance of a Preliminary Order of Forfeiture, one for each Defendant, filed by the Government on September 11, 2000. After careful consideration of the motion, briefs, response, and applicable law, the court grants in part and denies in part Defendants' motion; and denies the Government's motions. Defendants are acquitted of counts 2-99 of the indictment. Defendants' request for a judgment of acquittal on count 1 is denied, but their alternative request for a new trial is granted. Defendants' conviction on count 1 of the indictment is therefore vacated.

I. Factual and Procedural Background

This case involves the purchase, repackaging, and sale of infant formula. The alleged scheme, in essence, proceeded as follows. Various unidentified individuals sold individual cans or cases of infant formula, some of which were probably stolen, to a number of different convenience stores in Texas. The convenience stores in turn sold the infant formula to various companies owned by Defendants. Defendants obtained cardboard containers or shipping trays for the formula. The shipping trays, designed to extend upward only a few inches and leave visible most of the containers therein, were deliberately designed to resemble the containers of the manufacturers, including use of the manufacturers' trademarks. Defendants had no authorization from the manufacturers to do this. Defendants then repackaged the original cans of infant formula, by placing them in a "counterfeit" shipping tray and shrink-wrapping the tray and contents, for resale. No evidence was presented that Defendants had removed infant formula from the original cans and repackaged that; the repackaging was limited to placing the intact cans in shipping trays. At least one transportation of the formula across state lines was proved, involving a truck shipment from Texas to Louisiana.

The Government contends that at least some of the cans or cases of formulas sold to convenience stores were acquired by the seller illegally, for example, by shoplifting, other thefts, or acquiring the goods through a food stamp or equivalent program with the intent to resell. Defendants claim that their business relied on "the price differential between the sales price of certain massive retailers and the purchase price available to most other wholesalers and retailers," Defendant Hanafy's Motion for Judgment of Acquittal at 2. The profitability of the business thus depended, according to Defendants, on a type of arbitrage rather than purchasing stolen goods.

Defendants were tried on a 99 count indictment based on the conduct noted above and related actions. The charges included conspiracy, 18 U.S.C. § 371 (count 1); interstate transportation of stolen goods, 18 U.S.C. § 2314 (count 2); trafficking in goods with counterfeit marks, 18 U.S.C. § 2320 (counts 3-11); selling misbranded good with intent to defraud, 21 U.S.C. §§ 331(a), 333(a)(2) (counts 12-17); money laundering, 18 U.S.C. § 1956 (counts 18-49); and engaging in monetary transactions with criminally derived property, 18 U.S.C. § 1957 (counts 50-99). On July 14, 2000 the jury, after deliberating for less than three hours, which included a break of twenty minutes, returned guilty verdicts on all counts of the indictment. On July 17, 2000 the jury also assessed cash forfeitures against Defendants,² based on the convictions on counts 18-99, pursuant to 18 U.S.C. § 982(a)(1). Defendants now contest the verdicts on all 99 counts, and seek judgments of acquittal pursuant to Fed. R.Crim.P. 29(c) or, in the alternative, a new trial pursuant to Fed.R.Crim.P. 33.

Defendants assert that their conduct does not, as a matter of law, violate 18 U.S.C. § 2320 and 21 U.S.C. §§ 331(a), 333(a)(2). They further assert that the evidence presented at trial is insufficient for counts 1-17. The money laundering and engaging in monetary transactions with criminally derived property counts require an associated unlawful activity as the source of the funds in the transactions. Because the alleged underlying unlawful activity for these counts was the interstate transportation of stolen goods and trafficking in goods with counterfeit marks, Defendants argue that counts 18-99 must fall with those other counts.

II. Standard of Review

The standard of review for a motion of acquittal is whether, "reviewed in the light most favorable to the Government, drawing all reasonable inferences in support of the verdict," "a reasonable jury could find that the evidence establishes the guilt of the defendant beyond a reasonable doubt." United States v. Pennington, 20 F.3d 593, 597 (5th Cir.1994). The court does not assess the credibility of the evidence, since "it is the jury's sole province to assess the weight of the evidence and the credibility of the witnesses." United States v. Molinar-Apodaca, 889 F.2d 1417, 1423 (5th Cir.1989).

III. Analysis

A. Count 2 — Interstate Transportation of Stolen Goods, 18 U.S.C. § 2314

Defendants assert a lack of proof as to this count. Before reviewing the evidence, it is useful to review the requirements of the offense. To convict Defendants of the interstate transportation of stolen goods under 18 U.S.C. § 2314 ("Whoever transports, transmits, or transfers in interstate or foreign commerce any goods, wares, merchandise, securities or money, of the value of $5,000 or more, knowing the same to have been stolen, converted or taken by fraud ..."), the Government must demonstrate "that defendants transported stolen goods in interstate commerce, that defendants knew the goods were stolen, and that the goods were worth more than $5000." United States v. Anderson, 174 F.3d 515, 522 (5th Cir.1999); United States v. Mackay, 33 F.3d 489, 493 (5th Cir.1994). "Stolen" has a "wide-ranging meaning," including "any dishonest transaction whereby one person obtains that which rightfully belongs to another and deprives the owner of the rights and benefits of ownership." United States v. McClain, 545 F.2d 988, 995 (5th Cir.1977).³ "Taken by fraud" also is a broad term, including goods obtained through "false representations, dishonesty, and deceit" as well as "reckless and needless representation even when not made with a deliberate intent to deceive." United States v. Grainger, 701 F.2d 308, 311 (4th Cir.1983). After reviewing the evidence, the court concludes that the Government has failed to prove the Defendants transported goods valued in excess of $5,000 that were "stolen, converted or taken by fraud."

The Government, in its response to Defendants' motion, discusses various batches of cans of infant formula. Most of these batches, however, are not directly relevant to this count, as they were either not stolen or not linked to interstate transportation. For example, evidence was presented as to Defendant Quassas' confession to a state theft charge resulting from an undercover police "sting" operation. Evidence was also presented concerning cans (identified by "microdots") that were sold to various grocery stores by a shoplifter who had been apprehended by and was cooperating with law enforcement officers; those cans, however, had been donated, rather than stolen. In any event, both of these batches of cans were, at the time sold to Defendants or their agents, under the control of a law enforcement agent and therefore not actually "stolen."

The Government also note that thefts of infant formula declined drastically after Defendants were served with search warrants. Asserting this decline as evidence that substantial portions of the Defendants' purchases were of stolen formula, however, relies on "an old error of logic: post hoc, ergo propter hoc." See United States v. Lewis, 211 F.3d 932, 935 (5th Cir.), cert. denied, ___ U.S. ___, 121 S.Ct. 259, 148 L.Ed.2d 187 (2000). The fact that the decline in thefts occurred after execution of the search warrants does not necessarily mean that the decline in thefts was caused by execution of the search warrants. Although the decline in thefts is entitled to some consideration, it falls far short of carrying the day for the Government's case.

The indictment is based on 5,343 cases of infant formula transported by truck from Texas to Louisiana. Of this shipment, 1,705 cases came from Central Texas Wholesale (operated by Defendant Hanafy) and 3,638 cases came from Sarah International (operated by Defendant Mokbel, and at which Defendant Quassas worked). The Government must show that, of these 5,343 cases, a portion worth at least $5,000 was actually stolen.⁴ The Government relies on statements by two Government witnesses, Musa Yousef Hamdan and Husam Ali Bakeer.

Hamdan, who operated MBK Mart, purchased infant formula from consumers and sold it to A.G. International (owned by Defendant Saadat), which in turn sold the formula to Central Texas Warehouse which in turn sold infant formula to Sarah International and other...