United States v. Kadhem

• Decision Date: 14 January 2022
• Docket Number: Criminal No. 1:20-2-1
• Citation: 580 F.Supp.3d 132
• Parties: UNITED STATES of America v. Laith KADHEM
• Court: U.S. District Court — Western District of Pennsylvania

580 F.Supp.3d 132

UNITED STATES of America

v.Laith KADHEM

Criminal No. 1:20-2-1

United States District Court, W.D. Pennsylvania.

Filed January 14, 2022

Paul S. Sellers, US Govt Atty, U.S. Attorney's Office, Erie, PA, for United States of America.

OPINION AND ORDER

Stephanie L. Haines, United States District Judge

On March 8, 2021, Laith Kadhem ("Defendant") pled guilty to conspiracy to defraud the United States by committing food stamp fraud in violation of 18 U.S.C. § 371. On October 7, 2021, Defendant was sentenced to a term of probation of three years and ordered to pay a special assessment of $100.

Presently before the Court is the Government's motion for restitution [Doc. 81], Defendant's response in opposition [Doc. 96] and the Government's reply [Doc. 98]. On January 12, 2022, the Court held a hearing on the Government's motion for restitution [Doc. 102] and took the matter under advisement. For the following reasons, the Government's motion for restitution will be denied, and the Court will not award restitution in this case.

I. Background

On January 14, 2020, a grand jury returned a five-count indictment against Defendant and co-defendant Haydar Al-Kofi. Both defendants were charged at Count One with conspiracy to defraud the United States by committing food stamp fraud.¹

The gist of the scheme was that Defendant, the owner and operator of Anwar Fresh Meat Market, and Al-Kofi, his business partner, conspired to exchange cash and ineligible items for Supplemental Nutrition Assistance Program ("SNAP") benefits provided to eligible recipients by the United States Department of Agriculture Food and Nutrition Service ("FNS"). Under the scheme, Anwar's Market accepted food stamps in exchange for cash at a mark-up, roughly exchanging every $2 of SNAP redemptions for $1 in cash or ineligible items. There is no dispute, however, that in the first instance the SNAP benefits were given by the FNS to eligible recipients, who then used the benefits for an unintended purpose.

Following Defendant's guilty plea to Count One, the Court entered a sentencing order setting procedures and deadlines for sentencing, and setting a sentencing date of July 16, 2021 [Doc. 57]. On June 8, 2021, the United States Probation Office disclosed the Final Presentence Investigation Report ("PSR") [Doc. 66]. In that report, the Probation Officer noted that "to date, the Probation Office has not received any requests for restitution" [Id. at 12]. On July 12, 2021, the Court granted Defendant's motion to continue sentencing, and reset the hearing for October 7, 2021 [Doc. 74].

On September 30, 2021, seven days before the scheduled sentencing hearing, the Government filed the pending motion for restitution [Doc. 81], providing to the Court, Defendant, and the Probation Office, for the first time, a specific restitution request in the amount of $121,677 to the FNS as an identifiable victim of the food stamp fraud conspiracy. In light of the last minute request, the Court postponed ruling on the Government's motion and set a hearing date of December 7, 2021, for a final determination of restitution [Doc. 85]. Sentencing proceeded on October 7, 2021, and Judgment was entered on October 15, 2021, with restitution to be determined [Doc. 93].

On November 18, 2021, Defendant filed a motion in opposition to the Government's restitution request, arguing that restitution is not available under the Mandatory Victim Restitution Act ("MVRA"), 18 U.S.C. § 3663A, because the FNS did not suffer any pecuniary loss as a result of Defendant's conduct [Doc. 96]. On November 30, 2021, the Government filed a reply [Doc. 98], contending that Defendant's diversion of program benefits from their intended use constitutes a compensable loss under the MVRA. Following two more postponements, the restitution hearing was held on January 12, 2022.

II. Standard

The MVRA provides for mandatory restitution to victims of certain enumerated offenses, without regard to a defendant's financial ability to pay. 18 U.S.C. § 3663A(a)(1). In pertinent part, the Act provides:

This section shall apply in all sentencing proceedings for convictions of, or plea agreements relating to charges for, any offense -- (A) that is -- ... (ii) an offense against property ... including any offense committed by fraud or deceit ... and (B) in which an identifiable victim or victims has suffered a physical injury or pecuniary loss.

18 U.S.C. § 3663A(c)(1) (emphasis added).

Under the MVRA, restitution must be limited to "an amount pegged to the actual losses suffered by the victims of the defendant's criminal conduct," and "based upon losses directly resulting from such conduct." United States v. Quillen , 335 F.3d 219, 222 (3d Cir. 2003) (quoting Gov't of Virgin Islands v. Davis , 43 F.3d 41, 45 (3d Cir. 1994) ). The burden of demonstrating the amount of loss is on the Government, and any dispute regarding the proper amount is to be resolved by a preponderance of the evidence. 18 U.S.C. § 3664(e) ; see also United States v. Vitillo , 490 F.3d 314, 330 (3d Cir. 2007).

III. Analysis

1. Timeliness

As an initial matter, the Court finds that the Government's request for restitution fails to comply with the time frames set forth in the statute setting forth procedures for the issuance and enforcement of restitution. The relevant statute explicitly provides that: "[u]pon the request of the probation officer, but not later than 60 days prior to the date initially set for sentencing , the attorney for the Government, after consulting, to the extent practicable, with all identified victims, shall promptly provide the probation officer with a listing of the amounts subject to restitution." 18 U.S.C. § 3664 (d)(1) (emphasis added). Moreover, the statute further provides that: "If the victim's losses are not ascertainable by the date that is 10 days prior to sentencing , the attorney for the Government or the probation officer shall so inform the court, and the court shall set a date for the final determination of the victim's losses, not to exceed 90 days after sentencing." 18 U.S.C.A. § 3664 (d)(5) (emphasis added).

Here, the Government undisputedly failed to comply with the statutory procedures. The date initially set for sentencing in this case was July 16, 2021. By statute, the Government was required to provide the probation officer with a listing of the amounts subject to restitution to all identified victims no later than May 17, 2021, sixty days prior to the initial sentencing date. The Government did not do so. In compliance with the Court's scheduling order, the Probation Office filed the PSR on June 8, 2021, indicating that Probation still had not yet received any requests for restitution from the Government. Not until September 30, 2021, over four months after the May 17, 2021, statutory deadline, and only seven days prior to the rescheduled sentencing date of October 7, did the Government for the first time request restitution in the amount of $121,677 to the FNS. Moreover, even the provisions of § 3664(d)(5), which should only be triggered when the victim's asserted losses are not ascertainable by ten days prior to sentencing, were not complied with, as the Government informed the Court of its restitution request only seven days before sentencing, thus necessitating post-sentencing briefing and a hearing for a final restitution determination.

Nevertheless, a number of courts have observed that because the procedural requirements of section 3664 were designed to protect victims, not defendants, the failure to comply with them is harmless error absent actual prejudice to the defendant. United States v. Cienfuegos , 462 F.3d 1160, 1163 (9th Cir. 2006) ; see also United States v. Johnson , 400 F.3d 187, 198-99 (4th Cir. 2005) (failure to comply with the ten-day limit in section 3664(d)(5) is harmless error absent a showing of prejudice); United States v. Vandeberg , 201 F.3d 805, 814 (6th Cir. 2000) (failure to afford defendant an opportunity to be heard as to the proposed amount of restitution within the time period prescribed by § 3664(d)(5) is harmless error because "the court provided him ample opportunity to object to the amount thereafter").

Since the Court can ascertain no prejudice to Defendant from the Government's failure to comply with the procedural requirements of the statute, the Court will turn to the merits of the Government's request.

2. MVRA

The parties do not dispute that the MVRA applies in this case. Nor do the parties dispute that the face value of the SNAP benefits provided to the intended recipients was $121,677. The only dispute in this case is whether the face value of the benefits constitutes a pecuniary loss directly resulting from Defendant's conduct for which restitution is mandatory under the MVRA. Upon careful consideration of the parties’ papers and the arguments made at the restitution hearing, the Court concludes that the USDA-FNS suffered no pecuniary loss directly resulting from Defendant's conduct. Accordingly, restitution under the MVRA will not be ordered.

Restitution under the MVRA requires that the victim suffer a pecuniary loss directly caused by the defendant's conduct. Defendant argues that the FNS did not suffer any pecuniary loss from Defendant's conduct because the SNAP benefits went first to individuals who were deemed eligible by the FNS, and only later were used for purposes for which they were not intended as part of Defendant's scheme. Defendant's argument is that the FNS would have provided the SNAP benefits to the eligible recipients regardless of what those eligible recipients later did with them, and thus could not have sustained a pecuniary loss. See United States v. Causey , 408 F.Supp.3d 1, 2 (D. Mass. 2019) (denying restitution request under MVRA on ground that USDA-FNS suffered no pecuniary harm as a result of Defendant's actions, as the SNAP recipients were entitled to the benefits that they illegally sold to Defendant, and USDA-FNS would have spent...