United States v. Mustafa

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
2-1-2001
United States v. Mustafa
Precedential or Non-Precedential:
Docket 99-1702
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Filed February 1, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-1702
UNITED STATES OF AMERICA
v.
MIKE MUSTAFA a/k/a
DARWISH MUSTAFA
Mike Mustafa,
Appellant
Appeal from United States District Court
for the Eastern District of Pennsylvania
Docket No. 98-cr-00609-1
District Judge: Honorable Robert F. Kelly
Argued December 5, 2000
Before: McKEE, ROSENN and CUDAHY,*
Circuit Judges.
(Opinion Filed: February 1, 2001)
THOMAS C. EGAN III,
ESQUIRE (Argued)
621 Swede Street
Norristown, Pa. 19401
Attorney for Appellant
_________________________________________________________________
* The Honorable Richard D. Cudahy, United States Court of Appeals for
the Seventh Circuit, sitting by designation.
MICHAEL R. STILES,
UNITED STATES ATTORNEY
MITCHELL S. GOLDBERG, (Argued)
RICHARD J. ZACK
Office of United States Attorney
615 Chestnut Street
Ste. 1250
Philadelphia, Pa. 19106-4476
Attorneys for Appellee
OPINION OF THE COURT
McKEE, Circuit Judge:
Mike Mustafa appeals following acceptance of his guilty
plea. He argues that his guilty plea was not knowing,
voluntary, and intelligent, and that the district court erred
in relying upon the money laundering guideline in
calculating his sentence. We affirm the district court's use
of the money laundering sentencing guideline, and we
conclude that his plea was knowing, voluntary, and
intelligent. Accordingly, we deny Mustafa's r equest to
withdraw his guilty plea. However, we conclude that the
district court did err in not considering Mustafa's ability to
pay the restitution that was imposed in the amount of
$732,223. Accordingly, we will remand for resentencing
proceedings consistent with this opinion.
I.
On December 8, 1998, a federal grand jury in the
Eastern District of Pennsylvania retur ned a 46 count
indictment charging Mike Mustafa with mail fraud,
malicious destruction of a building by fir e, use of fire to
commit a felony, food stamp fraud, money laundering and
making false statements in obtaining a bank loan. The
indictment charged that Mustafa fraudulently inflated his
income in documents he had submitted to the Shar on
Savings Bank to purchase and renovate a building in which
he planned to operate a supermarket.
2
According to the indictment, Mustafa operated the Buy
and Save Supermarket in the building he pur chased with
the loan proceeds. He also obtained an insurance policy on
the building and business, and he subsequently caused the
building to be destroyed by a four alar m fire so that he
could collect the proceeds of the insurance policy. The
indictment also charged that, while he operated the
supermarket, he deposited over $1.5 million worth of
fraudulently obtained food stamps into an account at the
Sharon Savings Bank; a bank authorized to r eceive food
stamps. In order to participate in the food stamp program,
Mustafa had to submit an application to the United States
Department of Agriculture acknowledging that the account
would be used to deposit food stamps obtained pursuant to
applicable regulations and restrictions. The indictment
further alleged that Mustafa completed a requir ed
"redemption certificate" with each food stamp deposit. Each
redemption certificate purported to verify that the food
stamps Mustafa was depositing were obtained in a manner
that was consistent with controlling USDA r egulations.
Mustafa originally entered a plea of not guilty and
proceeded to trial. During the first thr ee days of that trial
the government called 20 witnesses. The testimony
included evidence of Mustafa's motive to set thefire and
collect the insurance proceeds,1 the suspicious nature of
the fire, and circumstances tending to establish that only
Mustafa and his brothers had access to the building, and
the alarm code. The government also intr oduced the
testimony of an employee who testified that Mustafa had
attempted to persuade him to say that the fir e was caused
by a pot of potatoes left on the stove.
The government also introduced a financial analysis of
supermarket records, and testimony of witnesses regarding
the food stamp fraud Mustafa was conducting fr om the
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1. Mustafa had over $500,000 in personal debt, and the supermarket
was in serious financial trouble. Some of the income Mustafa was
deriving from the supermarket was derived from a fraudulent food stamp
scheme, but changes in the food stamp program itself meant that the
scheme would soon end, and Mustafa's only viable asset was the
insurance policy on the building and the super market business.
3
supermarket. That evidence established that Mustafa had
to submit a USDA application stating that his account at
Sharon Savings Bank would be used for food stamps that
the supermarket received in exchange for food pursuant to
USDA regulations. The government's witnesses established
that Mustafa regularly purchased food stamps from
persons trafficking in illegal food stamps, and that he then
deposited those stamps into the Sharon Savings Bank
account. Each time he made such a deposit, he had to
submit a redemption certificate, confir ming that the
deposited food stamps were properly r eceived in connection
with the purchase and sale of groceries. When records from
legitimate food stamp transactions were compar ed with the
deposits to the Sharon Bank account, the evidence
established that Mustafa had deposited over $1.5 million in
illegal food stamps into that account.
Three days into the trial, Mustafa changed his plea
pursuant to a written plea agreement. He ther eafter entered
an open plea of guilty to all counts of the indictment except
those related to the arson of the super market. The arson
related charges were dismissed pursuant to the plea
agreement. That agreement stated in part:
Total possible maximum sentence is 830 years of
incarceration, a fine of $1,260,000 plus twice the value
of property involved in the money laundering scheme,
and five years supervised release.
The defendant further understands that supervised
release may be revoked if its terms and conditions are
violated. When supervised release is revoked, the
original term of imprisonment may be incr eased by the
period of three years. Thus a violation of supervised
release increases the possible period of incarceration
and makes it possible that the defendant will have to
serve the original sentence, plus a substantial
additional period, without credit for time alr eady spent
on supervised release.
***
***
***
4
8. The defendant may not withdraw his plea because
the Court declines to follow any recommendation,
motion or stipulation by the parties to this agr eement.
No one has promised or guaranteed to the defendant
what sentence the Court will impose.
***
10. It is agreed that no additional promises,
agreements or conditions have been enter ed into other
than those set forth in this document, and none will be
entered into unless in writing and signed by all the
parties.
Supplemental App. at 341a -343a.
On March 18, 1999, during the change of plea hearing,
the government outlined the terms of the plea to the
defendant in open court. The government r eiterated many
of the terms of the written agreement including the
maximum sentences for each count Mustafa was pleading
guilty to. The Assistant United States Attor ney told the
defendant:
[t]he plea agreement states that the defendant may not
withdraw the plea because this Court may decide to
decline to follow any recommendation or stipulation by
the parties.
The plea also indicates that no one has promised or
guaranteed Mr. Mustafa what the sentence will be, and
the plea states that Mr. Mustafa is satisfied with his
legal representation and that he is agr eeing to plead
guilty because he is in fact guilty.
Lastly, the plea agreement states that no pr omises,
agreements or conditions have been enter ed into other
than those that I've articulated as part of the plea
agreement.
App. at 40. The following exchange ensued:
THE COURT: Could you total the -- give the total
maximum?
AUSA: Yes. I'm sorry. I neglected to state that.
The total maximum sentence, your Honor, is 830 years
5
incarceration, a fine of $1,260,000, plus twice the
value involved in the money laundering scheme, and
five years of supervised release.
THE COURT: [Defense counsel], is that your
understanding of the agreement?
DEFENSE ATTORNEY: It is, sir.
THE COURT: Mr. Mustafa, is that your understanding
of the agreement?
DEFENDANT MUSTAFA: Yes.
App. at 41-42.
Since Mustafa had pled guilty to 40 counts of money
laundering, the district court applied U.S.S.G.S 2S1.1, the
money laundering guideline, and determined that Mustafa's
base offense level was 20. The district court then increased
that level by five because the value of the funds was greater
than $1 million but less than $2 million, see U.S.S.G.
S 2S1.1(b)(2)(F), and added an upward adjustment of two
levels for obstruction of justice based on Mustafa's attempt
to change testimony of a former employee, see U.S.S.G.
S 3C1.1, and a three level upward adjustment based upon
endangering public safety, and the extensive damage
caused by the fire, see U.S.S.G.SS 5K2.14, 5K2.5. The
court determined that Mustafa had not fully accepted
responsibility for his crimes, and it ther efore refused to
grant a reduction for acceptance of responsibility under
U.S.S.G. S 3E1.1. The court calculated a criminal history
category of II based upon a 1985 conviction for distribution
of cocaine. That criminal history category combined with
the resulting total base offense level of 30 yielded a
sentencing range of 108 to 135 months. The court
sentenced Mustafa to 135 months of imprisonment,five
years supervised release, special assessments in the
amount of $4,300, and restitution in the amount of
$732,223.2 This appeal followed.
_________________________________________________________________
2. Mustafa objected to the PSI on several factual grounds, however, he
did not object to the application of the money laundering guidelines.
6
II.
Mustafa raises numerous issues on appeal.3 However, we
conclude that only three of his assertions merit discussion.
Accordingly, we will limit our discussion to: 1) the
voluntariness of the guilty plea, 2) the application of the
money laundering guideline, and 3) whether the district
court erred by failing to inquire into Mustafa's ability to pay
the restitution that was imposed. In all other respects, the
district court's judgment is affirmed without further
discussion.
A.
Although Mustafa now seeks to withdraw his guilty plea,
he never moved to withdraw the plea in the district court,
nor did he object to any portion of the Rule 11 change of
plea colloquy. He now alleges that the district court failed
to comply with the requirements of Fed. R. Crim. P. 11, and
that the error was not harmless.4 See United States v. DeLe
Puente, 755 F.2d 313,314 (1985).
_________________________________________________________________
3. He argues that his guilty plea was not knowing, voluntary and
intelligent, and should therefore be withdrawn. He also claims that the
district court erred in each of the following r espects: applying the
money
laundering guideline to his conviction, imposing a sentence outside of
the "applicable guideline range on the loan fraud count," upwardly
adjusting the sentence for obstruction of justice, applying an
enhancement under U.S.S.G. SS 5K2.4 and 5K2.14, calculating the
amount of loss for the food stamp fraud, failing to give a downward
adjustment for acceptance of responsibility, failing to adjust his
sentence
for "family and his tremendous civic involvement," and failing to inquire
into his ability to pay restitution "in excess of $700,000." See
Appellant's
Br. at 3.
Initially counsel also challenged the district court's failure to advise
of
the affect of special parole. However , at oral argument, he conceded that
argument was without merit. We agr ee. Although the Rule 11 colloquy
here does not contain an explanation of what could happen if Mustafa
violated supervised release or special par ole, it does show that Mustafa
was informed that the maximum sentence was 830 years imprisonment
and a maximum term of five years supervised release. App. 39-41. His
sentence of 135 months imprisonment plus five years supervised release
is far less than the maximum that was explained to him. See United
States v. Electrodyne Systems, 147 F . 3d 250 (3d Cir. 1998).
4. Federal Rule of Criminal Procedur e 11(h) provides:
(h) Harmless Error. Any variance from the procedures required by
7
Mustafa's request to withdraw his guilty plea is based
upon his contention that the court failed to infor m him that
restitution could be ordered as part of the sentence, and
the court's failure to inquire into the pr omises that Mustafa
said had been made outside the change of plea hearing. He
also argues that his plea should be withdrawn because he
received ineffective assistance of counsel before pleading
guilty.
Federal Rule of Criminal Procedure 11(1)(c) provides:
(c) Advice to Defendant. Before accepting a plea of
guilty . . . the court must address the defendant
personally in open court and inform the defendant of,
and determine that the defendant understands, the
following:
(1) the nature of the charge to which the plea is offered,
the mandatory minimum penalty provided by law, if
any, and the maximum possible penalty provided by
law, including the effect of any special par ole or
supervised release term, the fact that the court is
required to consider any applicable sentencing
guidelines but may depart from those guidelines under
some circumstances, and, when applicable, that the
court may also order the defendant to make r estitution
to any victim of the offense.
Fed. R. Crim. P. 11(c)(1) (emphasis added).
Mustafa correctly asserts that the word"restitution" was
never used during the change of plea colloquy. The
government did inform Mustafa that he could be fined
$1,260,000 plus twice the amount involved in the money
laundering scheme. However, as Mustafa points out,
restitution is not the same as a fine. A criminal fine is a
form of punishment, whereas restitution is merely intended
to compensate the victim. United States v. Edwar ds, 162
F.3d 87, 91-92 (3d Cir. 1988). Nevertheless, although this
_________________________________________________________________
this rule which does not effect substantial rights shall be
disregarded.
Fed. R. Crim. P. 11(h).
8
distinction is real, it is irrelevant her e. See United States v.
Electrodyne Systems, 147 F.3d 250 (3d Cir. 1998).
In Electrodyne Systems, the district court erred in
advising the defendant of the correct statutoryfine on one
of the counts he pled guilty to. Id. at 252. The defendant
was, however, properly advised of the total maximum fine
that could be imposed on a second count that he also pled
guilty to. The total fine that was imposed was less than the
stated maximum on that latter count. We held that the
court's error as to the amount of the fine that could be
imposed on the first count was harmless. W e concluded:
[w]hen all is said and done, the immutable fact is that
[the defendant] was advised its maximum fine exposure
was $1,010,000, when in fact the maximum fine
exposure was $1,500,000, Defendant was fined $1
million, an amount below the exposure about which it
was informed. Under this circumstance, the error must
be characterized as harmless.
Id. at 253.
Here, Mustafa was advised that he faced a fine of several
million dollars but was actually ordered to pay far less than
that amount in restitution. However , he clearly was
informed of the potential financial exposur e that his plea
subjected him to, and the amount he was order ed to pay
was far less than the maximum that he could have been
ordered to pay. Accordingly, despite the technical
distinction between a fine and restitution, no substantial
rights were affected by the district court's failure to
specifically mention restitution or infor m Mustafa that he
could be ordered to compensate the victims for any
financial loss. Thus, the error was har mless.
B.
In his brief before us, Mustafa argues that his plea was
not voluntary because when the court asked him whether
other promises had been made, he answer ed, "yes," and the
court never inquired further. Rule 11(d) provides in
pertinent part:
9
Insuring That the Plea is Voluntary. The court shall not
accept a plea of guilty or nolo contendere without first,
by addressing the defendant personally in open court,
determining that the plea is voluntary and not the
result of force or threats or of promises apart from a
plea agreement. The court shall also inquire as to
whether the defendant's willingness to plead guilty or
nolo contendere results from prior discussions between
the attorney for the government and the defendant or
the defendant's attorney.
Fed.R.Crim.P. 11(d) (emphasis added).
As noted above, during the change of plea pr oceeding,
the Assistant United States Attorney r ead the plea
agreement to the court, Mustafa, and his attor ney. The
court then asked defense counsel, "is that your
understanding of the agreement," and counsel responded:
"It is, sir." App. at 41. The court then asked the same
question of Mustafa, and he answered, "Y es." Id. The court
and Mustafa then had the following exchange:
THE COURT: Do you think any other promises have
been made to you?
DEFENDANT MUSTAFA: Except what they said right
here.
THE COURT: In open court her e?
DEFENDANT MUSTAFA: Yes.
Id. There was no further inquiry by the court, counsel, or
the government, and that "omission" is the basis of part of
Mustafa's attack on the Rule 11 colloquy. However , the
court's failure to inquire further must be viewed in context
with the entire colloquy. Prior to the exchange that we have
set forth above, the Assistant United States Attor ney
advised the court and Mustafa that:
[t]he plea agreement states that the defendant may not
withdraw the plea because this Court may decide to
decline to follow any recommendation or stipulation by
the parties.
The plea also indicates that no one has pr omised or
guaranteed Mr. Mustafa what the sentence will be, and
10
the plea states that Mr. Mustafa is satisfied with his
legal representation and that he is agr eeing to plead
guilty because he is in fact guilty.
Id. at 40 (emphasis added). In addition, immediately after
Mustafa suggested that other promises had been made, his
attorney stated:
I should add for the record, your Honor , that I've also
consulted with my client concerning the Sentencing
Guidelines and their applicability here.
I don't know if I spoke too soon, if the Court was going
to get to that, but in answering the Court's question, we
have gone over the Guidelines, and I've told him what
my understanding of those Guidelines are befor e
entering the plea.
Id. at 42 (emphasis added). The judge then asked Mustafa
if he had any questions "of me about what you'r e doing[ ]"
and Mustafa answered, "[n]o, sir ." Id.
Thus, the only reasonable conclusion that this record
supports is that Mustafa had been advised of counsel's best
estimate of what the court would actually impose, and
Mustafa was interpreting counsel's estimate as a "promise"
as to the sentence he was going to receive. Mustafa said
absolutely nothing after his attorney infor med the court of
guidelines discussions, and he never said anything to
suggest that his affirmative response about other promises
was anything more than a reference to"assurances" he had
received from his attorney as to what sentence would most
likely be imposed.
Mustafa was told that the total maximum sentence was
830 years of imprisonment. The sentence of imprisonment
he received, though substantial (135 months), was far less
than the maximum that he was aware of. Mor eover, any
alleged misrepresentations that Mustafa's former counsel
may have made regarding sentencing calculations were
dispelled when Mustafa was informed in open court that
there were no guarantees as to sentence, and that the court
could sentence him to the maximum. Thus, we conclude
11
that Mustafa's answering "yes" to the court's inquiry about
promises is not grounds to invalidate his plea.5
C.
Mustafa argues that the district court err oneously used
the guideline for money laundering, U.S.S.G. S 2S1.1, to
calculate his sentence. Since he did not object to using that
guideline at sentencing, we review this claim only for plain
error. United States v. Cefaratti , 221 F.3d 502, 512 (3d Cir.
2000) (citing United States v. Knobloch, 131 F.3d 366,370
(3d Cir. 1997)).
In United States v. Smith, 186 F.3d 290 (3rd Cir. 1999)
we explained the proper inquiry for deter mining when
U.S.S.G. S 2S1.1 applies. There, the defendants had been
convicted of 15 counts of money laundering arising out of
an embezzlement/kickback scheme. Id. at 293. The scheme
involved Smith diverting numerous corporate checks to his
own creditors for the announced purpose of securing the
services of various lobbyists. The sentencing judge
sentenced the defendants pursuant to U.S.S.G. S 2S1.1,
and they argued that was error. Id. at 297.
In reversing, we began by explaining that:
In determining sentences, courts consult the Statutory
Index, Appendix A to the Guidelines Manual for a list
of guidelines that correspond to the statute of
conviction. See U.S.S.G. S 1B1.2(a) and App. Note 1. If,
however, ``in an atypical case,' the guideline indicated
for the statute of conviction is ``inappropriate because
of the particular conduct involved,' the court is
instructed to use the guideline ``most applicable to the
_________________________________________________________________
5. We recognize that the maximum sentence authorized by law is often
so extraordinarily long that few defendants other than "career criminals"
plead guilty with the expectation that the maximum sentence applies to
them. However, all that the law requir es is that the defendant be
informed of his/her exposure in pleading guilty. The law does not require
that a defendant be given a reasonably accurate"best guess" as to what
his/her actual sentence will be; nor could it, given the vagaries and
variables of each defendant's circumstances and offending behavior. See
United States v. Clearly, 46 F.3d 307, 311 (3rd Cir. 1995).
12
nature of the offense conduct char ged.' Appendix A at
417 (Introduction).
Appendix A sets up a two-step inquiry:
1. Does the designated guideline apply or is the
conduct ``atypical' in comparison to that usually
punished by the statute of conviction; and
2. If the conduct is ``atypical' which guideline is more
appropriate?
Id. We also offered the following guidance:
In making its selection, the sentencing court must
determine if the conduct being punished falls within
the particular guideline's heartland, a set of typical
cases embodying the conduct described in each
guideline.
Id. at 297-98 (internal quotations omitted). Inasmuch as
the money laundering statutes had only recently been
enacted when S 2S1.1 became effective, and the statutes
did not have the extensive history of other federal crimes,
we focused on the statements of the Commission itself to
assist in determining if a given offense fell within the
statute's "heartland." Id. at 298. W e stated,
[f]or that reason the Commission chose a high offense
level to punish the activity which had aroused
congressional concern: 1) situations in which the
laundered funds derived from serious underlying
criminal conduct such as significant drug trafficking
operation or organized crime; and 2) situations in
which the financial transaction was separate fr om the
underlying crime and was undertaken to either: a)
make it appear that the funds were legitimate, or b)
promote additional criminal conduct by r einvesting the
funds in additional criminal conduct.
Id. (citing United States Sentencing Commission, Report to
the Congress: Sentencing Policy for Money Laundering
Offenses, including Comments on Department of Justice
Report at 3 & n.2 (Sept. 18 1997) (internal quotations
omitted).
13
We also noted that U.S.S.G. S 2S1.1 had been criticized
because it resulted in "sentences for money laundering
offenses [that] were substantially greater than sentences
established for the less serious crimes that pr oduced the
laundered proceeds (e.g., minor fraud)." Id. (quoting United
States Sentencing Commission, Report to the Congr ess:
Sentencing Policy for Money Laundering Offenses, including
Comments on Department of Justice Report at 3 & n.2
(Sept. 18 1997)). We observed that the Commission
appeared to respond to this criticism by proposing
amendments directed at " ``both the seriousness of the
underlying criminal conduct,' and to ``the natur e and
seriousness of the laundering conduct itself.' " Id. at 299
(citing United States v. Woods, 159 F .3d 1132, 1135 (8th
Cir. 1998). However, Congress did not approve the changes
because of its concern that doing so would send the wrong
message. Id. Nevertheless, the House Report did
acknowledge that:
the application of the current guidelines to r eceipt-and-
deposit cases, as well as to certain other cases that do
not involve aggravated money laundering activity, may
be problematic. Nevertheless, past sentencing
anomalies arising from relatively few cases do not
justify a sweeping downward adjustment in the money
laundering guidelines.
Id. (quoting H.R.Rep. No. 104-272, at 14-15, reprinted in
1995 U.S.C.C.A.N. 335, 348-49) (internal quotations
omitted). We inferred that the House Judiciary Committee
meant for resolution of these "anomalies" to be left up to
the courts. Id. (citing Woods, 159 F.3d at 1135).
Accordingly, we concluded that "the Sentencing
Commission itself has indicated that the heartland of
U.S.S.G. S 2S1.1 is the money laundering activity connected
with extensive drug trafficking and serious crime." Id. at
300.
That "heartland" conduct was not, however , present in
Smith's case. The money laundering there was based solely
on the 15 checks sent to Smith's creditors, and Smith's
conduct left a "paper trail" that was the antithesis of any
claim of planned concealment. Id. (citing United States v.
14
Caba, 911 F. Supp. 630, 636 (E.D.N.Y .), aff 'd, 104 F.3d 354
(2d Cir. 1996)). We stated:
The money laundering activity, when evaluated against
the entire course of conduct, was an ``incidental by-
product' of the kickback scheme. The root of
defendant's activity in this case was the fraud . . .
* * *
To use the money laundering guideline in this routine
fraud case would let the ``tail wag the dog.'
Id. (citations omitted).
We concluded by finding that the Commission's
"overarching directive" is "to match the guideline to the
offense conduct which formed the basis of the underlying
conviction," and held that Smith's case "pr esents one of
those anomalies that Congress intended the courts to deal
with fairly." Id.
In United States v. Cefaratti, we applied the reasoning of
Smith. 221 F.3d 502, 513-15 (3d Cir . 2000). There, Cefaratti
pled guilty to mail fraud, student loan fraud, and money
laundering. Id. at 504. Cefaratti owned a beauty school that
participated in federal student financial assistance
programs. Id. at 505. The school was authorized to act as
a dispensing agent for federally funded Pell grants, and it
also received Stafford loan checks. Id. Before the latter
could be deposited into the school's account, the checks
had to be endorsed by both the student and a
representative of the school. Id.
Pursuant to DOE regulations, a school could lose its
eligibility to participate in federal student assistance
programs if its students had an excessive default rate on
their student loans. Id. The default rate at the defendant's
school was so high that it would have jeopar dized its ability
to receive these federal funds.
In order to preserve the flow of the pr oceeds from student
loans despite a poor default rate, Cefaratti manipulated the
default rate by advancing false deferment and forbearance
forms to lenders and by making payments on behalf of
students who were on the brink of default. Id. The loan
15
checks at issue were mailed to the school and made
payable to the student and the school. Id. at 511. As a
result, the school received over $840,000 in federal funds
that it would not otherwise have received because of its
poor default rate. Id. at 506.
On appeal, Cefaratti relied on our holding in Smith and
argued that the sentencing court should not have applied
the money laundering guideline in calculating his sentence
because his case was "little more than r outine fraud to
which the money laundering was incidental" Id . at 514. He
insisted that his conduct was the kind of routine "receipt-
and-deposit" anomaly that was not intended to be
sentenced as money laundering because it "did not involve
large scale drug trafficking or organized crime," Id. at 512,
and was not the proper focus of S 2S1.1 under Smith. We
rejected Cefaratti's argument, and explained that Smith did
not depart from prior cases involving conduct similar to
Cefaratti's.6 Id. W e stated:
We read Smith, in conjunction with our prior cases, to
stand for the unremarkable principle that in certain
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6. See, e.g., United States v. Morelli, 169 F.3d 798, 809 n. 13 (3d Cir.
1999) (sentencing under S 2S1.1; proceeds of scheme to embezzle excise
taxes on fuel sales laundered by wiring funds between companies
controlled by defendants); United States v. Cocivera, 104 F.3d 566, 570
n. 2 (3d Cir. 1996) (summarily rejecting argument that S 2F1.1 rather
than S 2S1.2 should have been applied wher e defendant who had
committed medicare fraud and other crimes was also convicted of 22
counts under S 1957); United States v. Conley, 92 F.3d 157, 162-63 (3d
Cir. 1996) (sentencing under S 2S1.1; defendant convicted of running
illegal gambling scheme and conspiring to do the same and to launder
the proceeds); United States v. Sokolow, 91 F.3d 396, 410-13 (3d Cir.
1996) (defendant sentenced under S 2S1.2 for , inter alia, misrepresenting
the nature of his benefits plan and defrauding plan members of
insurance premiums; indictment alleged defendant laundered funds
through a series of accounts, property, and mortgages); United States v.
Thompson, 40 F.3d 48, 50 (3d Cir. 1994) (defendants who intercepted
and diverted funds mailed to securities fir m sentenced under S 2S1.1);
United States v. Cusumano, 943 F.2d 305, 312-14 (3d Cir. 1991)
(sentencing under S 2S1.1 where underlying conduct was
embezzlement/kickback scheme involving employee benefit plan;
rejecting argument that "core" offense of conviction was kickback scheme
rather than money laundering).
16
cases ``strict focus on the technicalities of the
sentencing process obscures the overar ching directive
to match the guideline to the offense conduct . . .' In
Smith, the overarching offense conduct was ``routine
fraud,' and the money laundering, though technically a
violation of S 1956, was merely an ``incidental by
product' of that fraud.
Id. at 514 (citations omitted). In r ejecting Cefaratti's
contention that the money laundering guideline did not
apply to his "garden variety" fraud we stated:
To be sure, the deposit of the fraudulently-obtained
Stafford loan checks can be characterized in this
manner. However, in Smith we emphasized the concern
of Congress and the Sentencing Commission with
separate financial transactions undertaken to legitimize
illegally-obtained funds or to promote additional criminal
conduct. The evidence in this case demonstrates that
Cefaratti used the proceeds of his mail and wir e fraud
to promote further acts of fraud.
Id. at 514-15 (citations omitted) (emphasis added).
Accordingly, we refused to view his case as merely one of
receipt-and-deposit of fraudulently obtained funds, and
concluded that the district court had not committed plain
error in sentencing Cefaratti under that guideline.
Recently, we again applied Smith in United States v.
Bockius, 228 F.3d 305 (3rd Cir . 2000). There, Bockius
pleaded guilty to wire fraud and money laundering. Id. at
308. At sentencing, Bockius objected to the pr osecution's
attempt to have the court apply the money laundering
guideline, and the district court agreed. The court
concluded that Bockius' conduct did not fall within the
heartland of S 2S1.1 under Smith, and refused to apply that
guideline. The government appealed. In defending the
district court's refusal to rely uponS 2S1.1, Bockius argued
that the district court correctly deter mined that his conduct
fell outside the heartland of the money laundering
guideline. We disagreed. We r eversed and remanded for
application of the money laundering guideline stating:
Smith makes clear that a court's S 2S1.1 heartland
analysis should address whether defendants engaged
17
in money laundering in which the laundered funds
derived from serious underlying criminal conduct such
as a significant drug trafficking operation or organized
crime or in typical money laundering in which a
defendant knowingly conducted a financial transaction
to conceal tainted funds or funnel them into additional
criminal conduct.
Id. at 312 (internal quotation marks omitted) (emphasis
added). Bockius' conviction stemmed from embezzling
funds in an escrow account and his subsequent attempt to
funnel those funds into dummy corporations in the
Cayman Islands, and foreign bank accounts. W e instructed
the district court as follows:
[a]s noted in Smith, on remand the District Court
should engage in a heartland analysis before applying
the money laundering guideline. Where money
laundering is not "minimal or incidental," and is
"separate from the underlying crime" and intended to
"make it appear that the funds were legitimate" or to
funnel the money into further criminal activities,
S 2S1.1 is an applicable guideline. The guideline may
also be applicable if there is evidence that the activities
which fulfilled the broad statutory r equirements for
money laundering were connected with extensive drug
trafficking or other serious crime.
Id. at 313 (emphasis added).
Bockius' conduct was clearly more akin to traditional
notions of money laundering than the conduct Mustafa
engaged in here. Nevertheless, Mustafa pled guilty to 40
counts of money laundering in violation of 18 U.S.C.
S 1956(a) (1)(B)(i). He thereby admitted engaging in conduct
that involved deposits of over $1.5 million that wer e
intended to disguise the source and natur e of the proceeds
of his fraudulent activity. Each of those deposits was
separate and distinct from the criminal activity they were
derived from. Moreover, in making each of the numerous
deposits, Mustafa necessarily represented to the bank and
the U.S. Department of Agriculture that he had received
food stamps in a legitimate manner (in exchange for food),
and his conduct was therefore intended to create an
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appearance that the illegally obtained proceeds were
legitimate. Of course, Mustafa needed to do this because
the food stamps were of no use to him unless they were
converted to cash. However, that does not negate the fact
that he was concealing the original source of the funds, and
he clearly intended to effectuate that concealment.
Accordingly, we can not find that it was plain error for
the district court to conclude that the financial transactions
were separate from the underlying crime of food stamp
fraud, or that the deposits were intended to make it appear
that the food stamps were legitimate.7 Therefore, we will not
reverse the district court's application of U.S.S.G. S 2S1.1.8
Before discussing Mustafa's next allegation of error, we
need to mention one final point. The United States
Sentencing Commission amended the guidelines, ef fective
November 1, 2000. Sections 1B1.1 and 1B1.2 wer e
amended as well as Appendix A's introduction. Appendix
A's introductory comments, as amended, omit language
that we relied on in Smith. See Smith, 186 F.3d at 297
(referring to Appendix A's reference to "atypical" cases). The
Sentencing Commission's statement of its "Reason for
Amendment" reveals that these amendments wer e
"intended to emphasize that the sentencing court must
apply the offense guideline refer enced in the Statutory
Index for the statute of conviction," and specifically cites
our opinion in Smith. U.S. Sentencing Guidelines Manual
app.C at 32 (Supp. 2000) (emphasis added).
Given these amendments, the continued relevance of
Smith is open to question. Here, Mustafa was sentenced on
September 3, 1999. Therefore, whether the sentencing
_________________________________________________________________
7. The government does not argue that Mustafa deposited the food
stamps in order to reinvest the funds in additional criminal conduct.
8. We are not unmindful of the abuse that can occur when the
government relies upon the money laundering guideline to reflexively
ratchet up penalties by stapling the money laundering guideline to the
ultimate realization of financial gain that is the goal of nearly all
criminal
schemes. Here, however, Mustafa admitted money laundering and the
conduct supporting his guilty plea involved converting vast amounts of
food coupons into cash. Accordingly, the district court did not commit
plain error in finding his conduct within the heartland of this guideline.
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court was bound by the subsequent amendment depends
on whether the amendment is a clarifying amendment or a
substantive change to the guidelines. United States v.
Roberson, 194 F.3d 408, 417(3d Cir . 1999) (explaining that
"substantive amendments -- in contrast to clarifying
amendments-- are not given retroactive effect"). The
amendment directs the sentencing court to focus on the
offense of conviction and apply the "applicable" guideline as
determined by the Statutory Index in Appendix A without
conducting the heartland analysis we requir ed under Smith.
If the amendment applies to Mustafa's sentence (i.e. if it
was merely a "clarifying" amendment), the money
laundering guideline clearly controlled, and was properly
applied. That is the applicable guideline for Mustafa's
conduct under the Statutory Index in Appendix A, and
Smith's heartland analysis would have been impr oper. On
the other hand, if the amendment constituted a substantive
change in the law, it could not be applied r etroactively to
Mustafa's sentence, and Smith and its pr ogeny would still
require the analysis we have conducted above. Accordingly,
we need not determine if the amendment was a substantive
change in the law because, under either scenario,
application of the money laundering guideline her e can not
rise to the level of plain error.
III.
Mustafa claims that his plea should be withdrawn
because his attorney rendered constitutionally ineffective
assistance. However, claims of ineffective assistance of
counsel are generally not cognizable on dir ect appeal.
United States v. Tobin, 155 F.3d 636, 643 (3d Cir. 1998).
The proper device for challenging assistance of counsel is a
motion under 28 U.S.C. S 2255. Accordingly, we will not
address this issue now. Mustafa can attempt to raise this
claim in a properly filed petition underS 2255.
IV.
Lastly, Mustafa argues that the district court erred by
never inquiring into his ability to pay the amount of
restitution that was ordered. Our r eview of the record
20
confirms that the court did fail to conduct an adequate
inquiry into Mustafa's ability to pay as requir ed under 18
U.S.C. S 3664 (f)(2), See United States v. Coates, 178 F.3d
681 (3d cir. 1999), and the government has conceded this
error. To its credit, the government states that "the
restitution order should be vacated and sentencing
remanded for the sole purpose of allowing the court to
access Mustafa's financial resources before re-ordering
restitution." Government's Br. at 21. We agree, and we will
remand for resentencing limited to the issue of Mustafa's
ability to pay. Of course, the district court will be free to
order restitution in an appropriate amount after conducting
an appropriate inquiry.
V.
For the above reasons, we will affirm the judgment of the
district court except for the order of r estitution. The order
of restitution will be vacated, and we will r emand for
further proceedings to determine the amount of restitution,
if any, that Mustafa should be ordered to pay.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
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