United States v. Alladawi

Docket NumberSACR 22-00008-CJC
Decision Date15 December 2023
PartiesUNITED STATES OF AMERICA, Plaintiff, v. OSAMA ALLADAWI, Defendant.
CourtU.S. District Court — Central District of California
MEMORANDUM OF DECISION

CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

The United States of America (the Government) charged Defendant Osama Alladawi with twenty-one counts of wire fraud arising out of a scheme to defraud the U.S Department of Agriculture (“USDA”) and the California Department of Public Health (“CDPH”). (See Dkt. 1 [Indictment].) Despite knowing he lacked the required authorizations, Mr. Alladawi submitted claims for nearly $10 million[1] from the USDA and the CDPH related to a program providing food to low-income women and children. (See Indictment ¶ 3; Dkt. 45 [Am. Trial Stip., hereinafter “TS”] ¶ 7.) The Court previously denied Mr. Alladawi's motion to dismiss the indictment for failure to state an offense, (see Dkt. 27 [Mot. to Dismiss, hereinafter “Mot.”]; Dkt. 31 [Order Denying Mot. to Dismiss]), and the parties then stipulated to a bench trial. (See Dkt. 33 at 2.) The relevant facts supporting the government's indictment are not disputed, (see TS at 1), so the parties submitted trial briefs articulating their legal positions regarding interpretation of the wire fraud statute. (Dkt. 42 [Def.'s Trial Memo., hereinafter “Def. Br.”]; Dkt. 43 [Gov't's Trial Br., hereinafter “Govt. Br.”].) On November 29, 2023, the Court heard the parties' arguments and evidence at a short bench trial held solely to determine whether Mr. Alladawi's actions constitute wire fraud in violation of 18 U.S.C. § 1343. Having considered the parties' trial stipulation, the government's evidence-to which Mr. Alladawi does not object, (see Def. Br. at 2)-both parties' briefing and arguments at trial, and cases published since the Court denied Mr. Alladawi's motion to dismiss, the Court finds Mr. Alladawi NOT GUILTY on all twenty-one counts of wire fraud.

II. FINDINGS OF FACT AND CONCLUSIONS OF LAW
A. Stipulated Facts[2]

The Special Supplemental Nutrition Program for Women, Infants, and Children (the “WIC Program”) provides low-income women, infants, and children who are at nutrition risk with nutritious foods to supplement their diets. (TS ¶ 1.) The WIC Program is funded and administered through the USDA's Food and Nutrition Service and the CDPH. (Id.)

WIC Program benefits are administered via food instruments (“FIs”), which are negotiable instruments (like checks) that beneficiaries take to authorized WIC Program vendors to purchase authorized food items. (Id. ¶ 2.) Like any other government benefits program, there are restrictions on the use of FIs. FIs cannot be used to purchase unauthorized food items, exchanged for cash or credit, or [e]xchange[d] . . . at any food vendor other than the one indicated by name on the food instrument.” Cal. Code Regs. Tit. 22, § 40749(a)(1)-(2), (4).

A store owner who wishes to be an authorized vendor must sign a vendor agreement with the CDPH. (TS ¶ 3.) From 2007 to 2016, Mr. Alladawi operated several authorized WIC Program vendor stores and signed numerous vendor agreements. (Id. ¶ 5.) In each of these agreements, Mr. Alladawi acknowledged that a [v]endor must not redeem a paper food instrument ... outside of authorized channels.” (Id. ¶ 5a.) An authorized channel is defined as “a vendor accepting a food instrument . . . at a vendor store authorized by its vendor agreement and associating the serial number of the food instrument ... with that vendor store's vendor authorization number and then depositing the food instrument . . . into that vendor's bank account.” (Id.) Notably, [f]ood instruments may not be used in the repayment of debts to other parties.” (Id.) In other words, WIC Program beneficiaries can redeem their FIs only at WIC Program authorized vendors, and vendors can submit requests to the CDPH for approval and payment only through the authorized vendor store at which the FIs were redeemed. (See id. ¶ 5a-b.)

By October 2016, all of Mr. Alladawi's stores were either disqualified or terminated from the WIC Program or closed by Mr. Alladawi. (Id. ¶ 6.) Although he thereafter knew he lacked authorization to participate in the WIC Program as a vendor or to accept FIs, Mr. Alladawi nonetheless obtained USDA and CDPH funds through the WIC Program through October 2019. (Id. ¶¶ 7-8.) Mr. Alladawi's scheme entailed obtaining FIs belonging to WIC Program beneficiaries and then submitting the FIs to the CDPH for approval for payment through CDPH's online portal, known as the Vendor WIC Information eXchange (“VWIX”). (Id. ¶¶ 4, 7.) Mr. Alladawi needed login credentials to access VWIX. (Id.) In some instances, he submitted the FIs using his own credentials despite no longer having authorization. (Id. ¶ 7a.) In others, he submitted FIs using credentials belonging to different authorized vendor stores, which he obtained through various methods, including by posing as a WIC Program employee to dupe vendor store employees to disclose their credentials. (Id.) Once Mr. Alladawi submitted the FIs for approval through VWIX, he presented the FIs to financial institutions for payment to accounts that he owned and controlled. (Id. ¶¶ 7b-c.) Mr. Alladawi submitted the twenty-one FIs in Counts 1-21 of the indictment by means of interstate wires. (Id. ¶ 7; Indictment ¶ 4.)

Though Mr. Alladawi admits to intentionally deceiving the USDA and the CDPH, there is no evidence before the Court that Mr. Alladawi did not provide approved food items in exchange for valid FIs to authorized recipients of those FIs. In other words, the allegations focus on Mr. Alladawi's deceptive behavior as an unauthorized middleman between these FI recipients and the agencies. The Government does not allege that any WIC Program beneficiaries did not receive what they paid for or that any FIs submitted for reimbursement were falsified.

B. Conclusions of Law

The Government charged Mr. Alladawi with twenty-one counts of wire fraud in violation of 18 U.S.C. § 1343. (Indictment at 1-6.)

1. Legal Standard

The wire fraud statute states as follows:

Whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises, transmits or causes to be transmitted by means of wire, radio, or television communication in interstate or foreign commerce, any writings, signs, signals, pictures, or sounds for the purpose of executing such scheme or artifice, shall be fined under this title or imprisoned not more than 20 years, or both.

18 U.S.C. § 1343. To find a defendant guilty of wire fraud, a court must find that: (1) the defendant knowingly devised a scheme or plan to defraud for the purpose of obtaining money or property by means of false or fraudulent pretenses, representations, or promises; (2) the statements made as part of the scheme were material; that is, they had a natural tendency to influence, or were capable of influencing, a person to part with money or property; (3) the defendant acted with the intent to defraud, that is, the intent to deceive and cheat; and (4) the defendant used, or caused to be used, an interstate wire communication to carry out or attempt to carry out an essential part of the scheme. Ninth Cir. Model Crim. Jury Instr. 15.35 (2023); see also United States v. Jinian, 725 F.3d 954, 960 (9th Cir. 2013) (“The elements of wire fraud are: (1) the existence of a scheme to defraud; (2) the use of wire, radio, or television to further the scheme; and (3) a specific intent to defraud.”). The Supreme Court has made clear that the wire fraud statute “criminalize[s] only schemes to deprive people of traditional property interests.” Ciminelli v. United States, 598 U.S. 306 (2023) (citing Cleveland v. United States, 531 U.S. 12, 24 (2000)).

2. Mr. Alladawi's Alleged Scheme to Defraud the USDA and CDPA

The indictment alleges that Mr. Alladawi “knowingly and with the intent to defraud” “devised, participated in, and executed a scheme to defraud the [USDA] and the CDPH as to material matters” “to obtain money and property from the United States and the State of California, by means of material false and fraudulent pretenses, representations, and promises, and through the concealment of material facts.” (Indictment ¶ 2.) It then alleges that, “for the purpose of executing the above-described scheme to defraud, [Mr. Alladawi] ... transmitted and caused the transmission of [FIs] by means of wire communication in interstate and foreign commerce.” (Id. ¶ 4.)

Mr Alladawi does not dispute that the Government has proven most of the elements of wire fraud as to each count in the indictment. In partial satisfaction of the first and third elements of wire fraud as identified in the Ninth Circuit Model Jury Instructions, supra, Mr. Alladawi “admits that in making false representations to CDPH, he acted with the intent to deceive,” that he “knew that his stores were no longer authorized to receive FIs from WIC Program beneficiaries and knew that he was no longer authorized [to] redeem FIs,” and that he “falsely represented to CDPH that the FIs that he sought to redeem had been received by the WIC authorized vendor whose login credentials were used to access VWIX.” (TS at 5-6.) As to the fourth element, Mr. Alladawi further admits that “these transactions, specifically the transactions in Count One to Twenty-One of the Indictment, involved the use of interstate wires.” (Id. ¶ 7.) And based on the Trial Stipulation, Mr. Alladawi's deceptive statements were obviously material, fulfilling the second element, because they admittedly enabled him to “obtain[] money from WIC Program funds administered by CDPH” which he could not...

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