United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT October 24, 2006
_______________________ Charles R. Fulbruge III
Clerk
No. 05-30841
_______________________
UNITED STATES OF AMERICA,
Plaintiff-Appellee,
versus
WAJDI ABDULAZIZ BEYDOUN,
also known as Mohamed Beydoun,
also known as Wajdi A. Beydoun,
also known as Joe Bazzi,
Defendant-Appellant.
On Appeal from the United States District Court
for the Western District of Louisiana
Docket No. 04-CR-50128-01
Before JONES, Chief Judge, and REAVLEY and PRADO, Circuit Judges.
EDITH H. JONES, Chief Judge:
Wajdi Abdulaziz Beydoun pled guilty to conspiracy to
traffic in counterfeit goods and trafficking in counterfeit goods.
He now appeals his sentence and restitution order on several
grounds. We AFFIRM his sentence but VACATE and REMAND the district
court’s restitution order.
I. BACKGROUND
Mr. Beydoun conspired with others to import cigarette
rolling papers falsely trademarked as “Zig-Zags” for resale in the
United States.1 The conspirators purchased low-quality papers
abroad and sent them to Mexico. They then had booklet covers and
cartons for more expensive Zig-Zag papers printed and sent to
Mexico, where inmates in a women’s prison repackaged the cheap
papers into the counterfeit packages, creating a total of over one
million counterfeit booklets.2 Mexican officials retained fifteen
percent of the booklets as payment for the labor, shipping the
remainder to Beydoun in the United States for sale in Michigan and
Louisiana.
After being apprehended, Beydoun pled guilty pursuant to
a plea agreement to conspiracy to traffic in counterfeit goods and
trafficking in counterfeit goods. The Presentence Report (“PSR”)
grouped the offenses together and calculated a base offense level
of eight under the 2004 edition of the Sentencing Guidelines. See
U.S.S.G. § 2B5.3(a). The PSR found the infringement amount to be
$1.25 million for the one million counterfeit books, thus
1
Zig-Zag is a registered U.S. Trademark currently registered by
Bollore A France Corporation under U.S. Trademark registration number 610,530.
The North Atlantic Trading Company is the exclusive United States distributor of
Zig-Zag white rolling papers. Blue Zig-Zag rolling papers are not authorized for
distribution in the United States.
2
Beydoun contracted with Unicom Grafix to produce one million booklet
covers, all of which were sent to Mexico for repackaging. A small number of the
booklets were damaged in production. Additionally, Unicom contracted with one
of Beydoun’s co-conspirators, Nabil Saad, to produce 250,000 booklet covers,
which were also sent to Mexico.
2
increasing his offense level by sixteen. See U.S.S.G.
§ 2B1.1(b)(1)(I), § 2B5.3(b)(1)(B). Beydoun also received a two-
level increase because the offense involved the manufacture and
importation of infringing items, see U.S.S.G. § 2B5.3(b)(3), and a
three-level reduction for acceptance of responsibility, see
U.S.S.G. § 3E1.1, resulting in a total offense level of twenty-
three. Combined with his criminal offense history of I, this level
resulted in a sentencing range of forty-six to fifty-seven months
imprisonment. The PSR also recommended $1.85 million in
restitution, based on one million infringing items and a retail
value of $1.85 per authentic Zig-Zag booklet.
At sentencing, the government presented the testimony of
an FBI agent, Larry Reichardt, and an intelligence officer for the
U.S. Attorney’s Office, David Hudson, regarding the quantity of
infringing items. The witnesses testified to information obtained
from the owner of the print shop that manufactured the booklets and
packaging and a former print-shop employee, Manual Bracamonte, who
helped arrange the repackaging in Mexico and the shipments across
the border, regarding the number of booklets printed and shipped.
The government also produced a chart listing the various print
orders, totaling one million.
Beydoun argued that only 32,640 booklets should have been
counted to calculate the infringement amount used to enhance the
sentence and determine restitution, rather than one million. Only
the lower number was conclusively proven to have been shipped for
3
distribution. He further argued that restitution should not have
been based on the average retail price of Zig-Zag booklets, but
should have taken into account profits and losses. The district
court overruled Beydoun’s objection concerning the infringement
amount, but set restitution at only $566,267, the value of the
impact of one million infringing items on the legitimate sellers’
profits, not the $1.85 million recommended by the PSR. The
district court further sentenced Beydoun to forty-six months
imprisonment, three years of supervised release, and a $200 special
assessment. Beydoun now appeals.
II. DISCUSSION
A. Sentence
This court reviews a district court’s interpretation and
application of the Sentencing Guidelines de novo and its factual
findings for clear error. United States v. Villaneuva, 408 F.3d
193, 202-03 & n.9 (5th Cir.), cert. denied, 126 S. Ct. 268 (2005).
A factual finding is not clearly erroneous if it is plausible in
light of the record read as a whole. Id. at 203.
Beydoun argues that the district court erred in basing
the sixteen-level increase in his base offense level on the
production of one million, rather than approximately 32,000,
counterfeit booklets. He contends that the court improperly used
the amount of intended loss, rather than actual loss, to determine
the number of infringing items. However, the PSR, the parties, and
4
the district court used the terms “loss” and “intended loss”
interchangeably at sentencing. Beydoun cannot show any effect from
the use of the varying terms.
Moreover, Beydoun is incorrect that he is only
accountable for the number of infringing items the government can
prove he actually sold. The offense of trafficking in counterfeit
goods, to which Beydoun pled guilty, is complete when one
“intentionally traffics or attempts to traffic in goods or services
and knowingly uses a counterfeit mark on or in connection with such
goods and services....” 18 U.S.C. § 2320(a). The term traffic
means to “transport, transfer, or otherwise dispose of, to
another...or to make, import, export, obtain control of, or
possess, with intent to so transport, transfer, or otherwise
dispose of.” Id. § 2320(e)(2). Under this definition, even if
Beydoun never sold a single infringing booklet, he remains
accountable for the full amount, as he admits he caused infringing
items to be produced with the intent to sell them.
The government adduced sufficient proof as to the number
of booklets trafficked by Beydoun. Under the copyright
infringement guideline, “[i]n a case in which the court cannot
determine the number of infringing items, the court need only make
a reasonable estimate of the infringement amount using any relevant
information, including financial records.” See U.S.S.G. § 2B5.3,
Application note 2(E). At sentencing, Officer Hudson testified
that Bracamonte, the print-shop employee who assisted Beydoun, told
5
Hudson that the printer had produced one million booklet covers,
and Mexican prisoners had repackaged all one million, save a
negligible amount damaged in assembly. He also testified that
eighty-five percent of the completed booklets were sent back to
Beydoun, with the remaining fifteen percent being retained by
prison officials to pay for the labor. The papers retained by
Mexican officials were eventually distributed in Mexico or Arizona
by prison officials. Hudson acknowledged that the two recovered
invoices from the printer showed the receipt of only fifty-two
cartons in the United States, which, by weight, would account for
97,000 counterfeit booklets, but testified that the other invoices
had been purged from the records before 2002. He further testified
that other invoices stated that one million booklet covers had been
ordered, of which 960,500 were printed, paid for, and shipped for
packaging.
The district court found clear and convincing evidence
that at least 850,000 booklets had been repackaged.3 Guided by the
methodology of the Eleventh Circuit's decision in United States v.
Guerra, 293 F.3d 1279 (11th Cir. 2002),4 and the Seventh Circuit's
3
As 850,000 booklets would be sufficient to put Beydoun in the $1
million to $2.5 million sentencing guideline range, the court did not need to
determine whether the amount was 850,000 or 960,500.
4
In Guerra, which involved counterfeit cigars, the Eleventh Circuit
held that the number of “infringing items” should be determined by looking at:
“(1) how close the defendants came to completing additional sales; (2) whether
there was a reasonable likelihood of generating revenue corresponding to the
amounts assigned....” 293 F.3d at 1293. The mere potential to form a component
of a finished product is insufficient, absent a finding that the defendants had
a “reasonable likelihood of actually completing the goods.” Id. at 1294.
6
decision in United States v. Sung, 51 F.3d 92 (7th Cir. 1995),5 the
court considered Beydoun’s intent and found a reasonable likelihood
that at least 960,000 booklets had been repackaged and that the
entire order of one million booklets would be produced. Evidence
that it was likely that the entire amount would have been produced,
but for the government’s intervention, was sufficient to sentence
Beydoun for the entire amount. Thus, based on the retail value of
$1.25 per package,6 the court correctly calculated the amount of
loss at $1.25 million, and the sixteen-level sentencing
enhancements for infringement amounts over $1 million was
warranted.
Finally, relying on United States v. Cho, 136 F.3d 982
(5th Cir. 1998), Beydoun contends that the district court
erroneously considered his intent, when many of the booklets had
not yet been repackaged or shipped. Beydoun argues that under Cho,
the reference in § 2B5.3 (infringement guidelines) to the table in
§ 2B1.1 (theft/fraud guideline) does not incorporate the commentary
on loss theories, which encompasses consideration of intended or
5
In Sung, which involved counterfeit hair care products, the Seventh
Circuit concluded that, for purposes of calculating the loss, the court must
determine whether the defendant had “any reasonable expectation” of being able
to sell the infringing items. 51 F.3d at 95.
6
Arguably, the retail value of the authentic booklets, $1.85, should
have been used rather than the retail value of the counterfeit booklets, $1.25.
However, the outcome would not change, as either amount puts the infringement
amount between U.S.S.G. § 2B1.1(b)(1)(I)’s $1 million and $2.5 million range for
a sixteen-level enhancement. The government did not object to the district court
using the lesser amount.
7
speculative losses.7 However, the district court determined, based
on the testimony of Officer Hudson, that 850,000 booklets were
assembled (and thus “made or controlled” by Beydoun, meeting the
statutory definition of trafficked). This number alone would
supply an infringement amount of $1,062,500, which exceeds the $1
million minimum for the sixteen-level increase. The distinction
between actual and intended loss is thus inconsequential. The
district court did not clearly err in calculating the defendant’s
final offense level.
B. Restitution
The court ordered Beydoun to pay $566,267 in restitution
pursuant to the Mandatory Victims Restitution Act (“MVRA”),
18 U.S.C. § 3663A, basing the amount on the lost profits for one
million counterfeit booklets. Under the MVRA, defendants are
required to make full restitution for offenses in which an
identifiable victim has suffered a pecuniary loss. Id.
§ 3663A(c)(1)(B). The burden of proof is on the government to
demonstrate by a preponderance of the evidence the amount of loss
sustained by a victim. Id. § 3664(a), (e). The MVRA does not
permit restitution awards to exceed a victim’s loss. See United
States v. Boccagna, 450 F.3d 107, 117 (2d Cir. 2006). A district
7
In Cho, this court held that the retail value of the counterfeit
items, not the loss resulting from the defendant’s trademark infringement,
determined the sentence enhancement under the fraud/deceit table. While § 2B5.3
references the table in the fraud/deceit guideline, only that table was
incorporated by reference, not the accompanying prefatory materials or
commentary. 136 F.3d at 984.
8
court’s fact-finding as to the amount of restitution under the MVRA
is reviewed for clear error. See United States v. Cihak, 137 F.3d
252, 264 (5th Cir.), cert. denied, 525 U.S. 847, 119 S. Ct. 118
(1998). A reviewing court will reverse a restitution award only if
the defendant shows that it is probable that the sentencing court
failed to consider one of the mandatory factors and that failure
influenced the court. United States v. Schinnell, 80 F.3d 1064,
1070 (5th Cir. 1996).
The district court calculated the amount of restitution
by multiplying one million booklets by the legitimate sellers’
gross profit per booklet, as evidenced by the testimony of its
corporate officer. Beydoun argues that the district court erred
both in using the one million booklet amount and in using a lost
gross profit, rather than net profit, multiplier.
In this case, the government demonstrated loss based on
the value of diverted sales, offering evidence of the legitimate
sellers’ lost gross profits for booklets of authentic Zig-Zag
papers. However, the government did not contend that all one
million booklets were distributed or sold. The government’s proof
was sufficient to establish a violation of the trafficking statute
and support a sentence enhancement, but it was insufficient to
establish that the actions caused the victims an actual loss. See
18 U.S.C. § 3664(e); see also United States v. Gordon, 393 F.3d
1044, 1060 (9th Cir. 2004); United States v. Dawson, 250 F.3d 1048,
1050 (7th Cir. 2001) (a victim “should not receive anything more in
9
restitution than is required to make [it] whole”); United States v.
Messner, 107 F.3d 1448, 1455 (10th Cir. 1997) (the district court
abused its discretion in ordering restitution absent proof of the
amount of loss to the victims). The court may not award the victim
a windfall. United States v. Arutunoff, 1 F.3d 1112, 1121 (10th
Cir. 1993); see also United States v. Stanley, 309 F.3d 611, 613
(9th Cir. 2002) (MVRA does not allow “double recovery by a
victim”).
The district court did not believe it was necessary to
calculate the actual amount placed into commerce and sold to
determine the appropriate amount of restitution. The judge found
that the one million figure was “a goal or a target” and based
restitution on that amount. Because, however, there was no actual
loss to the legitimate sellers if the booklets were never placed
into commerce and sold, this was in error. Thus, we must remand to
the district court to re-analyze the government’s evidence and
determine the number of items actually shipped back to Beydoun in
the United States and put into the market to compete with
legitimate Zig-Zag papers.
Beydoun also contends that the district court erred in
basing restitution on the legitimate sellers’ gross, rather than
net, lost profits. Because the purpose of the MVRA is to compensate
a victim for its losses, the appropriate measure in this commercial
setting is lost net profit. On remand, the district court should
10
determine the amount of net profits the legitimate sellers lost as
a result of Beydoun’s actions and limit restitution to that amount.
C. Crawford
At trial, Officer Hudson testified about his
conversations with Beydoun’s co-conspirator, Bracamonte, and the
print shop owner regarding the number of booklets printed,
repackaged, and sent to Beydoun. The court relied on this
testimony to establish the number of counterfeit goods for both
sentencing and restitution purposes. Beydoun asserts that, because
the Guidelines calculation of infringement amount involves fact-
bound determinations capable of increasing his sentence, the
court’s reliance on hearsay testimony violated his right of
confrontation under Crawford v. Washington, 541 U.S. 36, 124 S. Ct.
1354 (2004). Crawford concerned testimonial hearsay that was
introduced at trial; unaddressed by Crawford is whether the Sixth
Amendment right to confront witnesses applies similarly at
sentencing. This court’s pre-Crawford precedent rejected a
confrontation right at sentencing. See United States v. Navarro,
169 F.3d 228 (5th Cir. 1999). Two unpublished opinions held that
Crawford does not extend a defendant’s rights under the
Confrontation Clause to sentencing proceedings. See United States
v. Leatch, 111 F.App’x 770 (5th Cir. 2004)(unpublished); United
States v. Salas, 2006 WL 1307500 (5th Cir. May 8, 2006)
(unpublished). Although this court’s unpublished opinions are not
11
precedential, their position on this issue comports with that of
the majority of our sister circuits. See, e.g., United States v.
Katzopoulos, 437 F.3d 569, 576 (6th Cir. 2006); United States v.
Luciano, 414 F.3d 174, 179 (1st Cir. 2005); United States v.
Martinez, 413 F.3d 239, 243-44 (2d Cir. 2005); United States v.
Roche, 415 F.3d 614, 618 (7th Cir. 2005); United States v. Chau,
426 F.3d 1318, 1323 (11th Cir. 2005). Following these authorities,
we conclude that there is no Crawford violation when hearsay
testimony is used at sentencing, rather than at trial.
D. Registration
For the first time on appeal, Beydoun argues that the
Zig-Zag booklets did not bear an “®” symbol or state “Reg. U.S.
Pat.,” as required for recovery of damages or restitution. See
15 U.S.C. § 1111, 18 U.S.C. § 2320(c). Contrary to his assertions,
however, both the legitimate and counterfeit Zig-Zag booklets
clearly contain the “®” symbol. This argument is meritless.
E. Booker
Beydoun argues for the first time on appeal that the
restitution order pursuant to the Mandatory Victims Restitution Act
of 1966, 18 U.S.C. §§ 3663A-3664, violates his Fifth and Sixth
Amendment rights under United States v. Booker, 543 U.S. 220, 125
S. Ct. 738 (2005). As Beydoun concedes, this issue is foreclosed
by United States v. Garza, 429 F.3d 165 (5th Cir. 2005).
III. CONCLUSION
12
Because there was sufficient evidence to support the
sixteen-level enhancement, Beydoun’s sentence is AFFIRMED. The
restitution order, however, is VACATED and REMANDED for the
district court to determine the amount of actual loss suffered by
the legitimate sellers of Zig-Zag rolling papers.
13