United States v. Arnaout, Enaam M.

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-3297 & 03-3412
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
Cross-Appellant,
v.
ENAAM M. ARNAOUT, also known as
ABU MAHMOUD, also known as
ABDEL SAMIA, also known as
ABU MAHMOUD AL SURI, also known as
ABU MAHMOUD AL HAMAWI,
Defendant-Appellant,
Cross-Appellee.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 02 CR 892—Suzanne B. Conlon, Judge.
____________
ARGUED FEBRUARY 15, 2005—DECIDED DECEMBER 2, 2005
____________
Before BAUER, ROVNER, and WILLIAMS, Circuit Judges.
WILLIAMS, Circuit Judge. Enaam Arnaout pled guilty
to conspiracy to violate the Racketeer Influenced and
Corrupt Organizations Act (“RICO”) in violation of 18
U.S.C. § 1962(d). On appeal, both the government and
Arnaout challenge the sentence imposed by the district
court. We find that the district court erred when it imposed
2 Nos. 03-3297 & 03-3412
an enhancement for an offense involving fifty or more
victims pursuant to U.S.S.G. § 2B1.1(b)(2)(B) because there
is insufficient evidence in the record that Arnaout caused
an actual loss to at least 50 people. In addition, we find that
the district court erred when it failed to consider whether
Arnaout qualified for the abuse of trust enhancement
pursuant to U.S.S.G. § 3B1.3. Finally, we find that a
defendant need not have been convicted of a federal crime
of terrorism as defined by 18 U.S.C. § 2332b(g)(5)(B) for the
district court to consider whether to apply the terrorism
sentencing enhancement pursuant to U.S.S.G. § 3A1.4. The
district court, however, did not err when it did not impose
this enhancement on Arnaout. We, therefore, vacate
Arnaout’s sentence and remand this case for resentencing.
I. BACKGROUND
On January 2, 2003, Arnaout was charged in an
eight-count Second Superseding Indictment. The Indict-
ment alleged that Arnaout conspired to defraud donors to
a charity he operated, the Benevolence International
Foundation, Inc. (“BIF”). Arnaout represented to donors
that BIF would use donated funds solely for humanitarian
purposes. In reality, Arnaout along with others diverted
a portion of the money raised to support groups engaged
in armed confrontations and violence overseas.
On February 10, 2003, Arnaout pled guilty, pursuant to
a written plea agreement, to conspiring to violate RICO in
violation of 18 U.S.C. § 1962(d). In the plea agreement,
Arnaout acknowledged that beginning in May 1993, he
was responsible for and directed BIF’s operations in the
United States. Arnaout admitted that, while he directed
BIF’s operations, he solicited donations from the public by
purporting that BIF and its related overseas offices were
part of a charitable organization involved solely in humani-
tarian work for the benefit of civilian populations, including
Nos. 03-3297 & 03-3412 3
refugees and orphans. Arnaout also admitted that he and
others agreed to conceal from donors, potential donors, and
federal and state governments that a material portion of
the donations received by BIF were being used to support
soldiers overseas. The support he and others agreed to
provide included boots intended for ultimate use by
Chechen soldiers, and boots, tents, uniforms and
an ambulance intended for ultimate use by Bosnian sol-
diers. Arnaout also used donor funds to purchase uniforms
for a department of a provisional but unrecognized govern-
ment in Chechnya.
Following the 2001 version of the Sentencing Guidelines
for fraud,1 the district court calculated Arnaout’s offense
level as follows:
! Base offense level of six pursuant to § 2B1.1(a);
plus
! twelve levels based on an amount of loss calcu-
lated to be between $200,000 and $400,000
pursuant to § 2B1.1(b)(1)(G); plus
! four levels based on the fraudulent scheme
affecting at least fifty victims pursuant to
§ 2B1.1(b)(2)(B); plus
! four levels pursuant to § 3B1.1(a) because
Arnaout was the leader of a criminal activity;
plus
! two levels based on the offense involving mis-
representations while acting on behalf
of a charitable organization pursuant to
§ 2B1.1(b)(7)(A); plus
! two levels pursuant to § 2B1.1(b)(8)(B) because
1
The predicate RICO offense to which Arnaout pled guilty was
fraud.
4 Nos. 03-3297 & 03-3412
a substantial part of the offense occurred out-
side of the United States; plus
! two levels pursuant to § 3C1.1 for Arnaout’s
obstruction of justice; and minus
! two levels pursuant to § 3E1.1 for Arnaout’s
acceptance of responsibility in light of his plea.
The court then departed upward an additional two levels
based on the harm Arnaout caused to those who should
have received the charitable donations, which brought
the total offense level to 32. The court determined that
Arnaout was in criminal history category I, which corre-
sponded to a Guidelines range of imprisonment be-
tween 121 and 151 months. The court sentenced Arnaout to
136 months.
II. ANALYSIS
Post-Booker, we continue to review the district court’s
factual findings at sentencing for clear error and the
application of those facts to the Sentencing Guidelines
de novo. United States v. Turner, 400 F.3d 491, 500 (7th Cir.
2005).
A. Enhancement for a Substantial Part of the Fraudulent
Scheme Committed From Outside the United States
The Guidelines, pursuant to § 2B1.1(b)(8)(B), allow for a
two-point enhancement if a substantial part of a fraudulent
scheme was committed from outside of the United States.
Arnaout admits that the results of his crime occurred
outside of the United States, but argues that the district
court erred in applying the enhancement because the
racketeering acts of mail fraud, wire fraud, and money
laundering were all completed within the United States. We
find that the district court did not err in applying this
Nos. 03-3297 & 03-3412 5
enhancement because, even though all of Arnaout’s racke-
teering activities occurred within the United States, the
fraud in this case was not complete until the diverted funds
from the charitable organization were used to deliver
resources to soldiers overseas. The district court’s applica-
tion of this enhancement, therefore, was entirely appropri-
ate.
B. Enhancement for an Offense Involving Fifty or More
Victims
The Guidelines allow for an enhancement of four levels
where an offense involves fifty or more victims. U.S.S.G.
§ 2B1.1(b)(2)(B). The term victim is defined as “any person
who has sustained any part of the actual loss.” U.S.S.G.
§ 2B1.1 cmt. n.1 (2002). Arnaout argues that the district
court erred in applying this enhancement to him be-
cause there was no showing that the funds of fifty donors
were illegally diverted and used for non-charitable pur-
poses. Arnaout admits that a portion of the total dona-
tions to BIF went to non-humanitarian, non-charitable uses
and that more than fifty donors contributed to BIF during
his time as executive director. Arnaout argues that the
district court erred when it failed to account for each dollar
diverted and did not trace each diverted dollar back to a
specific donor. We agree with Arnaout.
According to the record, between 1994 and 2001, BIF
received over $17 million in donations from over 17,000
individuals, businesses and organizations. The district court
found that the amount of loss attributable to Arnaout,
however, was approximately $300,000. There is insufficient
evidence in the record to support a calculation of the
number of donors that contributed the approximate
$300,000. It is entirely conceivable that of the over 17,000
potential victims, more than fifty contributed to the
6 Nos. 03-3297 & 03-3412
$300,000, but we cannot find proof by a preponderance of
the evidence in the record that at least fifty donors contrib-
uted the amount attributable to Arnaout. Accordingly, we
reverse the district court’s application of this enhancement.
C. Abuse of Trust Enhancement
The government argues that the district court erred in not
applying the abuse of trust enhancement pursuant to
§ 3B1.3. At sentencing, the district court stated that it was
not persuaded that the application of the abuse of trust
enhancement was appropriate in this case after having
already applied enhancements for the defendant’s fraudu-
lent misrepresentations while acting on behalf of a charity
pursuant to § 2B1.1(b)(7)(A) and for the defendant’s role as
a leader or organizer of criminal activity pursuant to
§ 3B1.1(a). The court reasoned that applying the abuse of
trust enhancement would result in “significant double
counting” as there was already “substantial overlap”
between the predicate offense and the two enhancements
already applied. We disagree.
Impermissible double counting occurs when identical
conduct justifies two upward adjustments under the
Guidelines. United States v. Beith, 407 F.3d 881, 888 (7th
Cir. 2005) (citations omitted). In other words, a sentenc-
ing court may not describe the same conduct in two differ-
ent ways to justify two separate upward adjustments. Id. So
long as there is a sufficient factual basis for each upward
adjustment, a district court does not engage in double
counting when it enhances a defendant’s sentence for
separate elements of the same act. Id.
We find that the district court incorrectly held that
applying a separate enhancement for Arnaout’s abuse of
trust would amount to impermissible double counting.
Abuse of trust is not an element of Arnaout’s predicate
offense of fraud, and the application of the abuse of trust
Nos. 03-3297 & 03-3412 7
enhancement could account for behavior separate from
Arnaout’s fraudulent misrepresentations while acting
on behalf of a charitable activity and separate from his
role as leader or organizer of a criminal activity.
The § 2B1.1(b)(7)(A) enhancement for fraudulent mis-
representation while acting on behalf of a charity captures
the aggravating nature of Arnaout’s conduct in solicit-
ing money from donors who thought that their money
was being applied to humanitarian assistance for needy
individuals. This enhancement would apply equally to
a low-level BIF employee who solicited donors without
leveraging any trust the donors placed in the employee
individually. In addition, the enhancement would apply
to someone who was not employed by BIF but falsely
purported to be associated with BIF to solicit donations.
The § 3B1.1(a) enhancement for Arnaout’s role as the
leader of criminal activity addresses his activities as head
of a racketeering operation in concert with others to di-
vert charitable donations. Arnaout properly received this
enhancement not because he abused the trust others placed
in him or because he committed a fraud while acting on
behalf of a charitable organization, but because he led
others in the commission of extensive criminal activity. Had
Arnaout acted alone, this enhancement would not apply,
but the other two enhancements would be no less applica-
ble.
In contrast, the abuse of trust enhancement pursuant
to § 3B1.3 accounts for the faith and confidence placed in
him as executive director of the BIF by the donors who
relied on his word and his title within the organization in
making their decision to contribute. In addition, this
enhancement accounts for the faith and confidence placed
in him by the federal government when the government
relied on the representations made by Arnaout on behalf of
BIF that its purpose was solely humanitarian and thereby
granted tax-exempt status to BIF.
8 Nos. 03-3297 & 03-3412
Each of these three enhancements could account for
related but separate conduct in this case. The application of
each enhancement would not improperly use identical
conduct to account for different enhancements. It is unclear
from the record, however, whether the district court
believed that to apply the abuse of trust enhancement
would amount to impermissible double counting or whether
the district court found that there were insufficient facts in
the record to support the application of the abuse of trust
enhancement by a preponderance of the evidence or both.
Accordingly, we remand with instructions to consider its
application.
D. The Domestic Terrorism Enhancement
The government argues that the district court erred in not
applying the domestic terrorism enhancement pursuant to
§ 3A1.4. The district court found § 3A1.4 did not apply
because Arnaout was not convicted of a federal crime of
terrorism as defined by 18 U.S.C. § 2332b(g)(5)(B). United
States v. Arnaout, 282 F. Supp. 2d 838, 843 (N.D. Ill. 2003).
We disagree.
As a matter of first impression in this circuit, we find that
a defendant need not be convicted of a federal crime of
terrorism as defined by § 2332b(g)(5)(B) for the district
court to apply § 3A1.4. Instead, the domestic terrorism
enhancement is applicable where a defendant is convicted of
a federal crime of terrorism as defined by § 2332b(g)(5)(B)
or where the district court finds that the purpose or intent
of the defendant’s substantive offense of conviction or
relevant conduct was to promote a federal crime of terror-
ism as defined by § 2332b(g)(5)(B).
We review the district court’s interpretation of the
Guidelines de novo. United States v. Von Loh, 417 F.3d 710,
712 (7th Cir. 2005). Courts interpreting the Guidelines
must “begin with the text of the provision and the plain
Nos. 03-3297 & 03-3412 9
meaning of the words in the text.” Id. (quoting United
States v. Garcia Lopez, 375 F.3d 586, 587 (7th Cir. 2004)).
In addition to the actual language of the Guidelines, we
must also consider the Guidelines’ Application Notes, as
they are viewed as “part of the Guidelines themselves,
and not mere commentary on them.” Id.; see also Stinson v.
United States, 508 U.S. 36, 38 (1993).
Section 3A1.4 of the Sentencing Guidelines provides:
(a) If the offense2 is a felony that involved, or was
intended to promote, a federal crime of terrorism,
increase [the offense level] by 12 levels; but if the
resulting offense level is less than level 32, increase
to level 32.
(b) In each such case, the defendant’s criminal
history category . . . shall be Category VI.
U.S.S.G. § 3A1.4. Although this is an issue of first im-
pression in this circuit, we are guided in our decision by the
decisions of other circuit courts that have addressed this
very issue. See United States v. Mandhai, 375 F.3d 1243,
1247 (11th Cir. 2004) (holding that where the purpose or
intent of a defendant’s underlying conviction or relevant
conduct is to promote a federal crime of terrorism as defined
by § 2332b(g)(5)(B) then § 3A1.4 is triggered); United States
v. Graham, 275 F.3d 490, 517 (6th Cir. 2001) (same).
The district court, relying on the enabling legislation of
§ 3A1.4, ruled that Congress intended § 3A1.4 to apply only
upon a federal crime of terror conviction as detailed in 18
U.S.C. § 2332b(g)(5)(B). Arnaout, 282 F. Supp. 2d at 844. In
reaching this conclusion, the district court gave meaning
2
The Guidelines define “offense” as “the offense of conviction and
all relevant conduct under § 1B1.3 (Relevant Conduct) unless a
different meaning is specified or is otherwise clear from the
context.” U.S. Sentencing Guidelines Manual § 1B1.1 cmt. n.1(k)
(2002).
10 Nos. 03-3297 & 03-3412
only to the word “involved,” and ignored the words “or was
intended to promote.” The Guidelines must be interpreted,
however, so no words are discarded as meaningless, redun-
dant or surplusage. Witzke v. Femal, 376 F.3d 744, 753 (7th
Cir. 2004) (finding that this court must read a statute to
give effect to each word so as to avoid rendering any words
meaningless, redundant, or superfluous).
The ordinary and plain meaning of “involved” means “to
include.” See Random House Webster’s College Dictionary
689 (2d ed. 1997). We thus agree with the district court’s
interpretation that the word “involved,” as used in § 3A1.4,
signifies that where a defendant’s offense or relevant
conduct includes a federal crime of terrorism as defined in
18 U.S.C. § 2332b(g)(5)(B), then § 3A1.4 is triggered. See
Mandhai, 375 F.3d at 1247-48 (“The term ‘involve’ means to
‘include’ ”). This interpretation of the word “involved” is also
consistent with how the word is used throughout the
Guidelines. See Graham, 275 F.3d 490, 516 (“The word
‘involved’ occurs frequently throughout the Guidelines, both
in the substantive provisions and in the commentary, and
is typically employed to mean ‘included.’ ”)
In interpreting the phrase “or was intended to promote,”
we find that the district court erred by ignoring the plain,
unambiguous text of the Guidelines. As the Eleventh
Circuit stated:
Had the Guideline drafters intended that § 3A1.4
apply only where the defendant is convicted of a
crime listed in 18 U.S.C. § 2332b(g)(5)(B), they
would have included such limiting language. In-
stead, they unambiguously cast a broader net by
applying the enhancement to any offense that
“involved” or was “intended to promote” a terrorism
crime.
Mandhai, 375 F.3d at 1247. In its ordinary usage, “promote”
means “to help or encourage.” See Random House Webster’s
Nos. 03-3297 & 03-3412 11
College Dictionary 1042 (2d ed. 1997). As a result, the word
“promote,” as used in § 3A1.4, signifies that where a defen-
dant’s offense or relevant conduct helps or encourages a
federal crime of terrorism as defined in 18 U.S.C.
§ 2332b(g)(5)(B), then § 3A1.4 is triggered. See Mandhai,
375 F.3d at 1248 (“Under a plain reading, the phrase
‘intended to promote’ means that if a goal or purpose was to
bring or help bring into being a crime listed in 18 U.S.C. §
2332b(g)(5)(B), the terrorism enhancement applies.”). We
find, therefore, that § 3A1.4 must be considered when a
defendant is convicted of a federal crime of terrorism as
defined by 18 U.S.C. § 2332b(g)(5)(B) or when a defendant’s
felony conviction or relevant conduct has as one purpose the
intent to promote a federal crime of terrorism. In enhancing
a defendant’s sentence pursuant to § 3A1.4 where the
defendant has not been convicted of a federal crime of
terrorism, however, a district court must identify which
enumerated federal crime of terrorism the defendant
intended to promote, satisfy the elements of
§ 2332b(g)(5)(A), and support its conclusions by a prepon-
derance of the evidence with facts from the record. See,
e.g., Graham, 275 F.3d at 517. After application of § 3A1.4,
the district court can then impose a sentence up to the
statutory maximum of the underlying offense of conviction.
U.S.S.G. § 5G1.1(a) (“Where the statutorily authorized
maximum sentence is less than the minimum of the
applicable guideline range, the statutorily authorized
maximum sentence shall be the guideline sentence.”); Dean,
414 F.3d at 727.
In this case, the district court found that Arnaout’s
offense of conviction was not included in the exhaustive list
of federal offenses set out in 18 U.S.C. § 2332b(g)(5)(B) and,
therefore, did not apply § 3A1.4. We now know that the
district court should have considered whether Arnaout’s
offense or relevant conduct promoted a federal crime of
terrorism. This error notwithstanding, the district court did
12 Nos. 03-3297 & 03-3412
find that the record did not establish by a preponderance of
the evidence that Arnaout attempted, participated in, or
conspired to commit any act of terrorism. The district court
also found that the government had not established that the
Bosnian and Chechen recipients of BIF aid were engaged in
a federal crime of terrorism, or that Arnaout intended the
donated boots, uniforms, blankets, tents, X-ray machine,
ambulances, nylon or walkie talkies to be used to promote
a federal crime of terrorism. We find all of the district
court’s findings on this issue consistent with the record, not
clearly erroneous, and sufficient to support the district
court’s refusal to apply § 3A1.4.
In the alternative, the government argues that Applica-
tion Note 2 of § 3A1.4 stands as an independent basis
for applying § 3A1.4 because Arnaout’s relevant conduct
includes obstruction of justice.
Application Note 2 reads as follows:
2. Harboring, Concealing, and Obstruction Of-
fenses.—For purposes of this guideline, an offense
that involved (A) harboring or concealing a terrorist
who committed a federal crime of terrorism (such as
an offense under 18 U.S.C. § 2339 or 2339A); or (B)
obstructing an investigation of a federal crime of
terrorism, shall be considered to have involved, or
to have been intended to promote, that federal
crime of terrorism.
The district court concluded that a two-level enhance-
ment under § 3C1.1 for obstruction of justice was appro-
priate in this case based on two declarations Arnaout
made under penalty of perjury in a separate case, Benevo-
lence Int’l Found., Inc. v. Ashcroft, 200 F. Supp. 2d 935
(N.D. Ill. 2002). In that case, Arnaout’s declarations were
submitted in support of BIF’s motion seeking release of BIF
assets frozen by the government. In his declarations,
Nos. 03-3297 & 03-3412 13
Arnaout attested that BIF used its funds only to assist
the poor and needy; donations to BIF were used solely
for charitable, humanitarian purposes; and BIF had never
provided aid or support to people or organizations known to
be engaged in violence, terrorist activities, or military
operations of any nature. The district court found these
attestations to be false based on Arnaout’s admissions
during his guilty plea and documentary evidence estab-
lishing that BIF used a portion of its funds to aid military
operations in Chechnya and Bosnia. The district court
concluded, however, that Arnaout did not obstruct an
investigation of a federal crime of terrorism nor did Arnaout
seek to promote a federal crime of terrorism by his obstruc-
tion. Instead, the district court held that Arnaout ob-
structed the federal investigation into his offense of fraud
and racketeering, which triggered the enhancement of §
3C1.1(A). See § 3C1.1(A) (obstruction of justice enhance-
ment applies if defendant willfully attempted to obstruct or
impede the administration of justice during the investiga-
tion of the instant offense of conviction). We find that the
district court’s findings on this issue are not clearly errone-
ous, and we agree with the district court’s conclusion that,
because there is insufficient evidence that Arnaout ob-
structed an investigation of a federal crime of terrorism or
intended to promote a federal crime of terrorism by his
obstruction, Application Note 2 of § 3A1.4 is inapplicable to
this case.
E. The District Court’s Application of its Own Upward
Departure
As a final note, Arnaout also argues that the district court
erred in imposing its own two-point upward departure.
Arnaout contends that the imposition of such a departure
was legally incorrect because it fell outside of the Guide-
lines’ provisions for departures and was otherwise unsup-
14 Nos. 03-3297 & 03-3412
ported by the factual record. Although we need not reach
this issue in light of the remand for resentencing, we note
that the concept of “departures” has been rendered obsolete
in the post-Booker world. See United States v. Johnson, No.
04-1463, 2005 WL 2592218, at *3 (7th Cir. Oct. 14, 2005).
Instead, “what is at stake is the reasonableness of the
sentence, not the correctness of the ‘departures’ as mea-
sured against pre-Booker decisions that cabined the discre-
tion of sentencing courts to depart from guidelines that
were then mandatory.” Id. Because the initial Guidelines
sentence here must be recalculated by the district court on
remand, we cannot reach the issue of the reasonableness of
Arnaout’s sentence. See Dean, 414 F.3d 725, 727-28 (sen-
tencing judge must properly compute the Guidelines
sentence to permit review for reasonableness). We note,
however, that the district court’s factual determination that
Arnaout also victimized Chechen and Bosnian refugees by
fraudulently diverting to the military charity funds that
were meant for refugees was not clearly erroneous. Con-
trary to Arnaout’s argument, the district court’s determina-
tion here was not based on pure speculation. Instead, the
district court reviewed actual letters from refugee vic-
tims submitted by the government to determine the
harm caused by Arnaout’s diversion of funds and reasonably
concluded that the diversion of the charity funds caused a
tangible harm to the refugees that was not adequately
represented in the Guidelines calculations.
F. Arnaout’s Booker-Related Arguments
Arnaout argues that his Sixth Amendment right to a
jury’s determination of facts underlying his sentence
enhancement was violated when the district judge made
several factual determinations by a preponderance of
the evidence that led to enhancements to his sentence.
See Booker, 125 S. Ct. at 756. Because we are already
Nos. 03-3297 & 03-3412 15
remanding this case for resentencing in accordance with
Booker, there is no need for us to consider the propriety of a
limited remand under United States v. Paladino, 401 F.3d
471, 484 (7th Cir. 2005).
III. CONCLUSION
For all the foregoing reasons, we VACATE Arnaout’s
sentence and REMAND for resentencing.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—12-2-05