United States v. Hamza Dridi ( 2020 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 18-3334
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
v.
HAMZA DRIDI, a/k/a ALEX,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 16-cr-00167 — William T. Lawrence, Judge.
____________________
ARGUED DECEMBER 4, 2019 — DECIDED MARCH 13, 2020
____________________
Before MANION, KANNE, and BARRETT, Circuit Judges.
KANNE, Circuit Judge. From 2012 to 2015, employees of
Elite Imports, a car dealership, engaged in a variety of fraud-
ulent activities. For his involvement in these illegal schemes,
one employee, Hamza Dridi, was charged with conspiring to
violate the Racketeer Influenced and Corrupt Organizations
Act, 18 U.S.C. § 1962(d), and interstate transportation of stolen
property, 18 U.S.C. § 2314. A jury found him guilty of both
2 No. 18-3334
crimes. The district court sentenced him to 72 months in
prison and ordered $1,811,679.25 in restitution.
Dridi now challenges his sentence and the restitution or-
der, arguing that the district court—before sentencing Dridi
and ordering restitution—should have made specific factual
findings about Dridi’s participation in the conspiracy.
We agree with Dridi that the district court erred both by
not making specific factual findings prior to sentencing Dridi
and by not adequately demarcating the scheme before impos-
ing $1,811,679.25 in restitution. But because only the second
error affected Dridi’s substantial rights, we affirm Dridi’s
prison sentence, vacate the restitution order, and remand the
issue of restitution for further proceedings consistent with
this opinion.
I. BACKGROUND
Mahammad Hindi and Mohamed Mahmoud co-owned
two car dealerships in Indianapolis: Elite Imports and Elite
Car Imports (collectively “Elite Imports”). By 2012, Elite Im-
ports’s employees were engaged in a variety of illegal
schemes intended to defraud lenders and insurance compa-
nies.
A. Fraudulent Schemes
Before acquiring cars for resale, Elite Imports needed to
obtain financing from floor-plan lenders. Floor-plan lenders
provide loans to dealerships like Elite, enabling them to buy
cars in bulk. In exchange for these loans, a dealership agrees
that, shortly after a car is sold, the dealership will pay the
floor-plan lender the amount borrowed for that car. To ensure
payment, floor-plan lenders hold on to the title of each car,
and only release the title to a dealership once the floor-plan
No. 18-3334 3
lender receives payment for the car. Floor-plan lenders also
send auditors to a dealership’s car lot to make sure the deal-
ership is not selling cars without repaying the loan after each
sale.
However, Elite Imports’s employees found a way around
acquiring a car’s title from floor-plan lenders: lying. Instead
of seeking the original title from the floor-plan lender, an Elite
Imports employee would obtain a copy of the car’s title from
the Indiana Bureau of Motor Vehicles’s online portal. If a copy
of the title could not be acquired, employees could still avoid
asking floor-plan lenders to release the car’s title—by contin-
ually issuing the customer temporary license plates.
To prevent this scheme from being detected by floor-plan
lenders and their auditors, Elite Imports’s employees would
call customers and request that their cars be returned to the
lot for a VIN number inspection or a free oil change. The cus-
tomers who obliged would return their cars to the lot before
an auditor’s inspection. If a car could not be returned, em-
ployees would simply lie to the auditor, saying that the car
was not on the lot due to a test drive or repairs.
In the end, this multi-layered scheme allowed Elite Im-
ports to sell cars without repaying floor-plan lenders.
Elite Imports’s employees also defrauded consumer lend-
ers. Sometimes, employees would be approached by custom-
ers who could not afford a car without a loan and did not
qualify for a consumer loan. To sell cars to these customers,
employees helped the customer submit fraudulent applica-
tions to consumer lenders. Employees would create fake bank
statements, driver’s licenses, and social security cards for the
customers to send to their lenders. Multiple customers used
4 No. 18-3334
these fraudulent documents to obtain financing for a car pur-
chase. When the loan was approved, the lenders paid Elite
Imports the price of the vehicle, shifting all risk of loan non-
payment to the consumer lenders, who were often never re-
paid by the customer.
In a final scheme, Elite Imports’s employees used the deal-
ership’s resources to defraud insurance companies for their
own financial gain. Multiple employees used a chop shop lo-
cated behind the dealership to disassemble their own vehi-
cles. The employees would then report their vehicles as stolen
to law enforcement agencies and insurance companies. Em-
ployees even directed customers to file similarly fraudulent
insurance claims. The employee or the customer would then
receive insurance proceeds on the reportedly stolen car.
B. Dridi’s Involvement
The parties dispute the exact time Dridi began working for
Elite Imports. The government claims Dridi started in late
2012 or early 2013; Dridi claims it was late 2013 but testified
at trial that he did not remember the exact date. Although the
record does not pin down exactly when Dridi began working
there, it does reveal his employment began in or before May
2013: Pam Tatom, Elite Imports’s finance manager, testified
that Dridi was already working at Elite Imports by the time
she started working there in May 2013.
At some point after Dridi began working for Elite Imports,
he participated in various aspects of its fraudulent schemes.
For example, Dridi opened an insurance policy on a truck in
August 2013. A few months later, he reported the truck stolen
and collected $1,600.90 in insurance proceeds.
No. 18-3334 5
Looking at another example, by late 2014, Elite Imports
had promoted Dridi to service manager, a position in the
body shop. In this role, Dridi oversaw the disassembly of mul-
tiple vehicles that would later be reported stolen. Specifically,
Dridi directed an employee to disassemble a red Ducati mo-
torcycle that belonged to another employee, Mahdi Khelefi.
Khelefi then reported the motorcycle stolen, received a check
for the proceeds, and endorsed that check to Dridi.
Dridi also participated in Elite Imports’s other fraudulent
activity. In preparation for an audit by floor-plan lenders,
Dridi would call customers to request that they return their
cars to the lot; then, he would help clean the car so auditors
could not tell the car had been sold. Additionally, Tatom
would email Dridi documents to be used in defrauding con-
sumer lenders.
C. Charges, Trial, and Sentencing
In an eight-count indictment in August 2016, the govern-
ment charged four Elite Imports employees—Mohamed
Mahmoud, Mahdi Khelefi, Issa Kayyali, and Hamza Dridi—
for their roles in Elite Imports’s fraudulent schemes. Dridi
faced two counts: conspiring to violate the Racketeer Influ-
enced and Corrupt Organizations Act, 18 U.S.C. § 1962(d),
and interstate transportation of stolen property, 18 U.S.C. §
2314. Mahmoud and Kayyali pled guilty; Dridi and Khelefi
proceeded to trial.
In a nine-day joint jury trial, the government called nearly
sixty witnesses, including Dridi’s coconspirators, representa-
tives from defrauded insurance companies and lenders, and
former Elite Imports customers. The jury found Dridi guilty
of both charged counts.
6 No. 18-3334
After Dridi’s trial, but before he was sentenced, the district
court sentenced Mahmoud, the conspiracy leader. For
Mahmoud’s sentencing, the court required the government to
“prepare and file a chart that lists each victim, the fraud
scheme with which that victim is associated, the loss amount
for that victim, the restitution amount due to that victim, and
the source or sources for the loss and restitution numbers.”
The government complied and concluded that Elite Imports’s
fraud schemes caused $1,812,788.19 in total loss.
A few months later, the probation office submitted Dridi’s
final revised presentence investigation report (“PSR”). Based
on the government’s loss calculation and updated victim in-
formation, the PSR indicated that the offense 1 involved
$1,848,868.50 in loss. Using this loss amount, the probation of-
fice recommended a sixteen-level increase in Dridi’s offense
level and a restitution amount of $1,811,679.25. U.S.S.G. §
2B1.1(b)(1)(I).
At Dridi’s sentencing hearing, the district court first re-
viewed restitution and reminded Dridi that he was jointly and
severally liable for $1,811,679.25 in total restitution to more
than thirty victims. Then the district court calculated Dridi’s
guideline range to be 78 to 97 months in prison; this range
included a sixteen-level enhancement based on a loss amount
between $1,500,000 and $3,500,000. U.S.S.G. § 2B1.1(b)(1)(I).
Dridi did not object to the restitution amount or the loss cal-
culation. The district court ultimately sentenced Dridi to 72
1Both counts of conviction involved “substantially the same harm”
and were grouped together for guideline calculation purposes. U.S.S.G.
§ 3D1.2.
No. 18-3334 7
months in prison and held him jointly and severally liable for
$1,811,679.25 in restitution.
II. ANALYSIS
Dridi argues that the district court erred in calculating
both his guideline range and his restitution amount. The gov-
ernment responds that Dridi waived these arguments because
he did not raise them before the district court. So, before
reaching the merits of Dridi’s arguments, we must first deter-
mine whether Dridi waived or merely forfeited his two argu-
ments.
A. Waiver or Forfeiture
“Waiver is the intentional relinquishment of a known
right.” United States v. Butler, 777 F.3d 382, 387 (7th Cir. 2015).
Forfeiture is the accidental or neglectful failure to timely as-
sert a right. United States v. Jaimes-Jaimes, 406 F.3d 845, 847–49
(7th Cir. 2005). Waiver precludes appellate review, but forfei-
ture allows review for plain error. United States v. Olano, 507
U.S. 725, 733–34 (1993). The line between waiver and forfei-
ture, however, is sometimes hard to delineate and can depend
on the nature of the right at issue. United States v. Flores, 929
F.3d 443, 447 (7th Cir. 2019). We construe waiver principles
liberally in favor of the defendant. United States v. Perry, 223
F.3d 431, 433 (7th Cir. 2000).
We have found waiver when there are “sound strategic
reasons” a defendant would choose to forego an argument be-
fore the district court. Jaimes-Jaimes, 406 F.3d at 848. But we
have found forfeiture when the government cannot proffer a
plausible strategic justification for a decision to not object.
United States v. Oliver, 873 F.3d 601, 607 (7th Cir. 2017).
8 No. 18-3334
Here, the government has not convinced us that strat-
egy—as opposed to inadvertence—explains why Dridi’s at-
torney did not object to the increased offense level and resti-
tution amount. The government claims the lack of objections
can be attributed to Dridi throwing “himself on the mercy of
the court.” But a defendant can request lenience and apolo-
gize for his behavior and still object to ensure his guideline
range and restitution amount are based on the correct con-
duct.
So, construing waiver principles liberally in Dridi’s favor,
his attorney’s failure to object looks more inadvertent than in-
tentional. We therefore find that Dridi forfeited, rather than
waived, his two related arguments on appeal.
B. Guideline Range
Dridi argues that the district court erred by not specifically
determining which conduct of Dridi’s coconspirators could
be attributed to him for purposes of sentencing. U.S.S.G.
§ 1B1.3(a)(1)(B).
Because Dridi forfeited this argument, we review for plain
error. Fed. R. Crim. P. 52(b); Jaimes-Jaimes, 406 F.3d at 847. We
may reverse if: (1) the court made an error that was plain and
(2) that error affected the defendant’s substantial rights.
United States v. Garvey, 688 F.3d 881, 884 (7th Cir. 2012). An
error is plain when “the law at the time of appellate review
shows clearly that [the deviation] was an error.” United States
v. Pierson, 925 F.3d 913, 919 (7th Cir. 2019). “Substantial rights
are affected when the defendant can show ‘a reasonable prob-
ability that, but for the error, the outcome of the proceeding
would have been different.’” United States v. Burns, 843 F.3d
No. 18-3334 9
679, 688 (7th Cir. 2016) (quoting United States v. Hulburt, 835
F.3d 715, 725 (7th Cir. 2016)).
In turning to our first question—whether the district court
committed an error that is plain—we start with Sentencing
Guideline § 2B1.1. Section 2B1.1 explains that the defendant’s
offense level should be increased based on the amount of loss
the defendant caused. Loss is defined as “the greater of” in-
tended loss or actual loss. U.S.S.G. § 2B1.1 cmt. n. 3(A). Actual
loss “means the reasonably foreseeable pecuniary harm that
resulted from the offense.” Id. § 2B1.1 cmt. n. 3(A)(i).
This loss calculation includes losses caused by others’ ac-
tions if those actions were (1) “within the scope of the jointly
undertaken criminal activity,” (2) “in furtherance of that crim-
inal activity,” and (3) “reasonably foreseeable in connection
with that criminal activity.” U.S.S.G. § 1B1.3(a)(1)(B)(i)–(iii);
see United States v. White, 883 F.3d 983, 987–88 (7th Cir. 2018).
We have required district courts to make independent find-
ings on each of these elements before basing a defendant’s
sentence in part on loss caused by the entire conspiracy. See,
e.g., United States v. Sykes, 774 F.3d 1145, 1150 (7th Cir. 2014)
(requiring a similar elemental analysis under a prior version
of § 1B1.3); United States v. Aslan, 644 F.3d 526, 536 (7th Cir.
2011) (same). Other circuits have imposed the same require-
ment. See, e.g., United States v. Figueroa-Labrada, 720 F.3d 1258,
1266–67 (10th Cir. 2013); United States v. Childress, 58 F.3d 693,
722 (D.C. Cir. 1995).
The government argues that it is unclear whether a district
court must make findings under § 1B1.3 when loss is undis-
puted. The government leans on our recent statement in
White: “When the issue of individual responsibility for con-
duct of others is contested, a district court should make a
10 No. 18-3334
finding on each element of the relevant conduct test.” 883 F.3d
at 988 (emphasis added). Unless the defendant contests the
loss amount, the government reasons, the error cannot be
plain.
We disagree. White did not address what a court must do
when a defendant does not contest the loss amount. After all,
the defendant in White objected to the district court’s loss cal-
culation. Id. Thus, White did not disturb the clear law in our
circuit: before sentencing a defendant based on the loss
caused by the entire conspiracy, the district court must make
particularized findings about the scope of conduct attributa-
ble to the defendant. The district court here did not make
those findings; that error is plain.
Now we must determine whether the error affected
Dridi’s substantial rights. See Burns, 843 F.3d at 688. The dis-
trict court attributed $1,848,868.50 in loss to Dridi. Under the
Guidelines, if the loss was more than $1,500,000, the district
court was to add sixteen levels to Dridi’s base offense level.
See U.S.S.G. § 2B1.1(b)(1)(I). But if the loss was $1,500,000 or
less, the district court was to add no more than fourteen levels
to the base offense. See id. at § 2B1.1(b)(1)(H). And, keeping all
else the same, had Dridi’s offense level dropped at all, his
guideline range would have dropped as well. So, because he
says his guideline range would have been different, Dridi ar-
gues the district court’s error requires resentencing. See Mo-
lina-Martinez v. United States, 136 S. Ct. 1338, 1345 (2016)
(“When a defendant is sentenced under an incorrect Guide-
lines range … the error itself can, and most often will, be suf-
ficient to show a reasonable probability of a different outcome
absent the error.”).
No. 18-3334 11
Thus, to show that Dridi is entitled to resentencing based
on a different loss amount, Dridi must demonstrate a reason-
able probability that relevant conduct findings under § 1B1.3
would reveal loss attributable to Dridi of $1,500,000 or less. In
other words, Dridi must show that—had the district court
made specific findings under § 1B1.3—the loss amount would
have been $348,868.50 less than the amount the district court
attributed to Dridi.
Dridi’s argument rests predominantly on the “reasonably
foreseeable” requirement of § 1B1.3. Under that requirement,
loss may be attributable to Dridi only if the acts producing the
loss were “reasonably foreseeable” to him. See Sykes, 774 F.3d
at 1150–51. He argues that he couldn’t have foreseen cocon-
spirators’ acts before he joined the conspiracy—which he says
happened in late 2014; and at least $139,308.67 of the conspir-
acy’s loss came from acts that happened before October 2014.
Dridi also argues, relying on new information provided by
the government,2 that only $1,377,305.10 in losses occurred af-
ter he joined the conspiracy in late 2014. So, Dridi reasons that
a § 1B1.3 factual finding would show that no more than
$1,500,000 in loss can be attributed to him, resulting in a lower
guideline range.
But the record is not as clear as Dridi suggests. While Dridi
claims he started working for Elite Imports in late 2013, Pam
Tatom testified that Dridi was already working there by May
2013. Dridi also claims that he did not join any part of the
2 The government filed a motion with the district court to supplement
the record on appeal with the documents underlying its loss calculation.
Dridi did not oppose this motion, and the district court added the pro-
posed documents to the record.
12 No. 18-3334
conspiracy until late 2014, yet Dridi filed a fraudulent insur-
ance claim on his truck in late 2013. The record also shows
that, during an undefined time period, Dridi helped defraud
floor-plan lenders by asking customers to return their vehicles
to the lot, and he participated in Elite Imports’s scheme to de-
fraud consumer lenders.
So, the record does not uncover exactly when Dridi began
participating in Elite Imports’s fraudulent schemes. Accord-
ingly, the record does not confirm which of Dridi’s cocon-
spirators’ actions were “within the scope of,” “in furtherance
of,” and “reasonably foreseeable in connection with” the
jointly undertaken criminal activity in which Dridi took part.
U.S.S.G. § 1B1.3.
But we are sure that the record contradicts Dridi’s asser-
tion—on which he builds his argument—that he did not join
any part of the conspiracy until late 2014. Dridi therefore did
not demonstrate, based on the record, a reasonable probabil-
ity that, but for the district court’s failure to make § 1B1.3 find-
ings, the outcome of his sentencing hearing would have been
different. So, the district court’s error in foregoing findings
under § 1B1.3 did not affect Dridi’s substantial rights.
C. Restitution Amount
Finally, Dridi argues the district court erred by not
“mak[ing] findings on the scope of the scheme” before impos-
ing restitution. As with Dridi’s first argument, Dridi failed to
object with this contention during his sentencing hearing. So,
we review his restitution argument for plain error.
“The restitution issue is similar but not identical to the loss
amount issue.” White, 883 F.3d at 992. The Mandatory Victim
Restitution Act, which authorizes restitution in this case,
No. 18-3334 13
applies to “a victim’s losses from the offense of conviction,
which is narrower than relevant conduct under the Guide-
lines.” Id. (emphasis added). Restitution is thus limited to the
“actual losses caused by the specific conduct underlying the
offense” and the government must “establish [actual loss] by
a preponderance of the evidence.” United States v. Orillo, 733
F.3d 241, 244 (7th Cir. 2013).
When calculating a defendant’s restitution amount, dis-
trict courts should “adequately demarcate the scheme” by ex-
plaining the scheme’s scope. United States v. Smith, 218 F.3d
777, 784 (7th Cir. 2000). This process necessarily requires the
district court to explain how the defendant is responsible for
the amount of restitution ordered. See White, 883 F.3d at 992.
Here, the district court did not adequately demarcate the
scheme. Instead, it accepted the loss amounts set forth in the
PSR without explaining how and when the loss occurred and
whether Dridi was responsible for it. For example, the restitu-
tion recommendation in the PSR—which the district court
fully accepted—includes $11,428.00 representing the remain-
ing loan amount of a victim who purchased a car from Elite
Imports in May 2012. Importantly, this victim’s loss occurred
in mid-2012. And based on the evidence in the record, we can-
not assume that Dridi worked at Elite Imports during this
time. So, the lack of factual findings on how Dridi is respon-
sible for this restitution amount is a plain error.
This error affected Dridi’s substantial rights: he was “re-
quired to pay more in restitution than he owes.” Burns, 843
F.3d at 689; see White, 883 F.3d at 992 (“[W]e must remand be-
cause the evidence actually contradicts the restitution
award.”). The district court ordered $1,811,679.25 in restitu-
tion—the full amount recommended in the PSR. But as
14 No. 18-3334
discussed above, the evidence does not support holding Dridi
liable for this entire amount. Therefore, the district court or-
dered restitution beyond what the record indicates Dridi
caused; this warrants reconsideration of the entire restitution
award. See Burns, 843 F.3d at 690. In redetermining the resti-
tution award on remand, the court should demarcate the
scheme and establish the actual amount of loss caused by
Dridi’s conduct.
III. CONCLUSION
The district court’s errors at sentencing affected only
Dridi’s restitution amount, not his guideline range. We there-
fore AFFIRM his sentence, VACATE the restitution order, and
REMAND the issue of restitution for proceedings consistent
with this opinion.