United States v. Hussein

In the

United States Court of Appeals
For the Seventh Circuit

No. 11-2248

U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.

N AEIL H USSEIN,
Defendant-Appellant.

Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 10 CR 482-1— Rebecca R. Pallmeyer, Judge.

A RGUED O CTOBER 5, 2011—D ECIDED D ECEMBER 13, 2011

Before E ASTERBROOK, Chief Judge, and M ANION and
R OVNER, Circuit Judges.
M ANION, Circuit Judge. Naeil Hussein and his girlfriend,
Lisa Bazian, operated what appeared to be convenience
stores on the south side of Chicago. In fact they were little
more than fronts where the couple rang up phony sales for
food-stamp recipients looking to exchange their benefits
for discounted amounts of cash. When federal investigators
discovered the fraudulent scheme at one location, the pair
simply obtained government authorization to accept food
2 No. 11-2248

stamps at a different address where they continued their
operation. Through a surrogate Hussein opened a third
store and even attempted to qualify an ineligible restau-
rant. Hussein eventually pleaded guilty to eight counts of
wire fraud, 18 U.S.C. § 1343, and was sentenced to a total of
60 months’ imprisonment and ordered to pay almost $1.7
million in restitution. On appeal he challenges the amount
of loss and a 4-level leader-ship adjustment used in
calculating his offense level, as well as the reasonableness
of his prison term. We affirm the judgment.

I.
Hussein and Bazian launched their scam at The Spot
Food Mart (“Spot Mart”), a store that Bazian had acquired
in the Englewood neighborhood of Chicago. In 2003 Bazian
applied to the United States Department of Agriculture on
behalf of Spot Mart to participate in the federal Food
Stamp Program. The program supplies low-income persons
with debit cards, known in Illinois as LINK cards, that can
be used to purchase food.1 The USDA approved
Spot Mart’s application but not before making Bazian send
proof that she was not connected to the store’s prior owner,
who had accepted food stamps but later was sanctioned for
abusing the program. Spot Mart brought in a little more
than $2,000 in benefits in June 2004, its first month with a

1
Congress has since renamed the program the Supplemental
Nutrition Assistance Program. See Food, Conservation, and
Energy Act of 2008, Pub. L. No. 110-246, § 4001(b), 122 Stat. 1651,
1853 (2008).
No. 11-2248 3

LINK scanner, but by October 2005, the monthly total had
ballooned more than 60-fold to nearly $130,000. Near the
end of that month, a USDA informant twice used a LINK
card at Spot Mart to trade food-stamp benefits for
lesser amounts of cash. The description the informant gave
of the clerk who processed one of those fraudulent transac-
tions matched Hussein. The next week federal agents
executed a search warrant at the store. During that search
a USDA agent interviewed Hussein, the store manager,
who denied trading cash for food-stamp benefits. The
USDA disqualified Bazian from the program but took no
action against Hussein.
About three months later Hussein applied to the Food
Stamp Program on behalf of a second Englewood store,
Halsted Food Mart (“Halsted”). Despite his role as man-
ager at Spot Mart, the USDA approved the application.
Again using an informant, the USDA developed evidence
that the new location, like the old, was nothing more than
a front for swapping benefits for cash. Once more authori-
zation to participate in the program was revoked, but not
before the Halsted scam had run for more than two years
and at its height brought in over $100,000 a month in
benefits.
In addition, shortly before federal agents executed a
search warrant at Halsted, one of Hussein and Bazian’s
employees, Dwight Fleming, applied to the program
on behalf of a third Englewood location, Route 69 Pal-
ace. Fleming represented on the application that he owned
Route 69 but later admitted that Hussein, the true owner,
had paid him to claim ownership. The USDA developed
4 No. 11-2248

evidence that Hussein and Bazian were trading cash for
benefits at Route 69, though not before the pair had run
their scam there for more than seven months. Hussein also
applied to the Food Stamp Program on behalf of a fourth
Englewood business, Spot Chicken Fish & Pizza (“Spot
Chicken”), but the USDA rejected that application, presum-
ably because benefits generally cannot be used at restau-
rants. See 7 C.F.R. § 278.1(b)(1)(iv). Still, for reasons that
are unclear from the record, food-stamp recipients
were able to trade their benefits for cash at Spot Chicken.
In total, Hussein and Bazian ran their fraud for more than
four years.
According to bank records for Spot Mart and Halsted, the
two locations brought in a total of $1,859,939 in
LINK benefits. The government calculated that, during
roughly that same time period, Hussein and Bazian wrote
checks for food inventory totaling $164,660 from the
accounts where LINK funds were deposited. Route 69 took
in $128,198 in LINK benefits, and checks for food totaling
$49,043 were drawn on the account where those benefits
were deposited during the time the store had a LINK
scanner. According to the government, Spot Chicken
brought in another $228,497 in LINK receipts despite
having no authorization to accept LINK cards.
Following Hussein’s guilty plea, the probation officer
recommended in the presentence report that the district
court assess the loss from the fraud as $1,695,250 and apply
a 16-level increase. See U.S.S.G. § 2B1.1(b)(1)(I). The proba-
tion officer reached this figure by subtracting the checks
Hussein and Bazian wrote for food inventory at Spot Mart
No. 11-2248 5

and Halsted from the amount of LINK redemptions at
those locations. The probation officer’s total in-
explicably ignores the LINK receipts at Route 69 and Spot
Chicken, but still Hussein objected that the loss calculation
was too high. His lawyer contended, without explanation,
that inventory costs for food exceeded those listed in the
presentence report and argued that the government’s
formula failed to account for “legitimate profit” on food
sales. But Hussein did not present evidence of additional
inventory costs, nor did he attempt to quantify
the authorized food items sold at Spot Mart and Halsted.
Instead, counsel simply asserted without explanation that
the government’s loss was about $900,000, enough to yield
a 14-level increase but below the $1 million threshold for
th e pr op os ed 16 - l e v e l in c re as e. See U .S.S.G .
§ 2B1.1(b)(1)(H). The government responded that the
probation officer’s calculation was, if anything, under-
stated because it did not incorporate relevant conduct at
Route 69 or Spot Chicken and also assumed that every food
purchase at Spot Mart and Halsted was made with LINK
benefits rather than cash. And even focusing on just the
LINK sales, the government argued, Hussein was not
entitled to an adjustment for gross profit because he and
Bazian tried to mask their scheme by requiring persons
selling their benefits to buy a small food item
when presenting their LINK cards. The district
court overruled Hussein’s objection and adopted
the probation officer’s calculation. The court offered
its “layperson’s understanding” that grocery stores operate
at a “very low profit margin” and reasoned that any
adjustment to account for gross profit would be too
minimal to alter the guidelines calculation.
6 No. 11-2248

The parties also disagreed at sentencing about what
adjustment to apply for Hussein’s role in the offense. The
probation officer recommended a 4-level increase,
see U.S.S.G. § 3B1.1(a), after concluding that Hussein had
been “an organizer or leader of a criminal activity that
involved five or more participants or was otherwise
extensive.” The probation officer reasoned that the scheme
“involved at least three participants and was otherwise
extensive (in that benefits were exchanged for cash with
several other individuals/participants).” Hussein urged the
district court to apply instead a 2-level adjustment. Id. §
3B1.1(c). Defense counsel said nothing about the number
of people involved in the fraud and contended that the
scheme had been a “basic fraud” that was not exten-
sive. The prosecutor countered that the number of persons
involved could not possibly have been less than five
because, in the government’s view, every LINK cardholder
who illegally traded benefits for cash was a “participant”
in the scheme. The prosecutor also asserted that the scheme
had been extensive. The district court adopted the proba-
tion officer’s recommendation. The judge counted as
participants Hussein, Bazian, and Fleming but did not
comment on the government’s contention that the sellers
of LINK benefits also were participants. Rather, while not
officially labeling the many LINK traders as participants,
the court easily defined the scheme as extensive. She found
it significant that Hussein had run his scam from multiple
locations, supervised employees at his stores, and
traded cash for benefits with “dozens, probably hundreds,
of customers.”
No. 11-2248 7

Based on a total offense level of 24 and a criminal history
category of I, Hussein faced a guidelines imprisonment
range of 51 to 63 months. The government argued for a
sentence within the guidelines. Pointing to the dearth of
grocery stores in Englewood, the prosecutor criticized
Hussein for offering the community nothing more than
“pop, chips, candy, and cash” and speculated that some of
his clients used the cash they got from him to buy drugs.
Hussein’s lawyer countered that the government had
presented no evidence connecting Hussein to the drug
trade and could not hold him responsible for drug use in
Englewood. Counsel also highlighted Hussein’s limited
criminal record, his family ties, and his history of seizures
stemming from a medical condition that had required
brain surgery.
The district court sentenced Hussein to 60 months. The
judge emphasized Hussein’s decision to continue the fraud
after the search at Spot Mart and his bilking of a taxpayer-
funded program. The court also found significant the
breadth of the scheme and the options Hussein had
available to him as a property owner and businessman.
Echoing the government’s theme about the lack of grocery
stores in Englewood, the court commented:
[T]hese individuals who are entitled to be nourished
just like I am really don’t have much of an option here.
I recognize that that’s not directly relevant to the fraud
that’s been charged, but . . . the fraud relies on a
program that is made available to enable poor people
to eat. And in that sense, I think the fact that
Mr. Hussein was essentially providing them with
nothing but chips and pop is relevant.
8 No. 11-2248

The judge did not embrace the prosecutor’s speculation
about drug use, however, and clarified the court’s under-
standing that the prosecutor’s remarks had been “aimed at
the harm that this particular crime imposes on the commu-
nity as opposed to a suggestion about Mr. Hussein’s
knowing culpability.” The court acknowledged Hussein’s
medical condition but concluded that he would receive
adequate treatment in prison and made no mention of his
other arguments in mitigation.

II.
On appeal Hussein first argues that the district court
erred in imposing the 16-level increase under
§ 2B1.1(b)(1)(I) for a loss of more than $1 million because,
Hussein insists, the court ignored “legitimate profit
margin” in assessing what portion of the food-stamp
benefits were obtained fraudulently. Hussein repeats his
assertion made in the district court, again without citing to
any evidence in the record, that the actual loss was about
$900,000, which would have limited the increase to 14
levels under subsection (b)(1)(H).
The proper method to calculate loss from food-stamp
fraud is to subtract legitimate food-stamp sales from total
food-stamp redemptions. United States v. Ali, 619 F.3d 713,
721 (7th Cir. 2010); United States v. Hassan, 211 F.3d 380, 383
(7th Cir. 2000); United States v. Barnes, 117 F.3d 328, 335 (7th
Cir. 1997). When precise evidence about legitimate sales is
unavailable, the sentencing court may rely on the estimate
of a store’s monthly eligible food sales given to the USDA
during the application process. See United States v. Haddad,
No. 11-2248 9

462 F.3d 783, 794 (7th Cir. 2006); United States v. Alburay,
415 F.3d 782, 790 (7th Cir. 2005).
Hussein is correct to the extent he contends that the
district court’s loss analysis was incomplete. Merchants
mark up the price of the inventory they sell, and
by subtracting only the cost of the food from the LINK
receipts, the court made no attempt to accurately account
for gross profit on legitimate sales. But for several reasons
this misstep had no practical effect on the choice between
subsections (b)(1)(I) and (b)(1)(H). First, the district court’s
loss calculation ignores more than $350,000 in LINK
receipts at Route 69 and Spot Chicken, even though the
fraud at those two locations was relevant conduct because
it was “part of the same course of conduct or common
scheme or plan as the offense of conviction.” See U.S.S.G.
§ 1B1.3(a)(2); United States v. Barnhart, 599 F.3d 737, 748 (7th
Cir. 2010); United States v. Swanson, 483 F.3d 509, 514 (7th
Cir. 2007). In fact, every cent of the $228,497 in LINK
receipts at Spot Chicken was necessarily fraudulent
because that establishment had been denied authorization
to accept food stamps. Second, the district court’s calcula-
tion assumes, to Hussein’s benefit, that legitimate custom-
ers used LINK cards to buy all of the food inventory at
Spot Mart and Halsted, though bank records show that
both stores received a small portion of their proceeds in
cash. Third, just as the district court recognized,
any adjustment for gross profit on the meager
food inventory legitimately sold at these locations would
have been too minimal to affect the guidelines calculation.
In their applications to the USDA, Hussein and Bazian had
estimated $15,000 in monthly sales on food items at Spot
10 No. 11-2248

Mart and $3,900 in monthly food sales at Halsted.
Spot Mart accepted LINK benefits for 18 months, and
Halsted accepted LINK benefits for 27 months, so the
alternative method approved in Haddad and Alburay would
yield estimated legitimate sales totaling $375,300. Subtract-
ing this amount from the LINK receipts at the two loca-
tions equals a loss of $1,484,639, well over the $1 million
minimum for a 16-level increase. And as far as we can tell
from the record, once the relevant conduct from Route 69
and Spot Chicken is added to that figure, the
only conclusion to be drawn is that the loss
amount calculated by the district court is understated,
not overstated.2

2
In a snippet of his discussion about the guidelines loss,
Hussein asserts that the district court’s incomplete methodology
also adversely influenced its calculation of restitution. The court
used the probation officer’s loss calculation to impose a restitu-
tion award of $1,695,250. The amount of restitution does not
always correspond to guidelines loss because the rules for
calculating each differ, see United States v. Middlebrook, 553 F.3d
572, 579 (7th Cir. 2009); United States v. Caputo, 517 F.3d 935, 943
(7th Cir. 2008), but at sentencing Hussein made only a pro forma
objection to the probation officer’s calculation of restitution and
arguably waived even that objection by declining the court’s
invitation to vet the issue at a hearing for that purpose. See
United States v. Roberts, 534 F.3d 560, 571-72 (7th Cir. 2008);
United States v. White, 993 F.2d 147, 148-49 (7th Cir. 1993). And
now on appeal Hussein has omitted from his opening brief any
analysis of the restitution award; his statement of the issues does
not even mention restitution. We have admonished that a party
(continued...)
No. 11-2248 11

Hussein next contends that the district court erroneously
assessed a 4-level increase under § 3B1.1(a). Hussein does
not dispute that he was an organizer or leader of the scam.
But he insists that the court should have added only 2
levels under § 3B1.1(c) because, he maintains, the scheme
was not “otherwise extensive” and did not involve five or
more participants. For purposes of § 3B1.1, a participant
must be “criminally responsible for the commission of the
offense, but need not have been convicted.” U.S.S.G.
§ 3B1.1 cmt. n.1. The government insists, as it did at
sentencing, that anyone who sold food-stamp benefits to
Hussein or Bazian was actively involved in their scam and
thus a “participant” for purposes of § 3B1.1.
This reasoning seems sensible, though the government
could have strengthened its point by introducing evi-
dence—which we presume it possesses—that many of the
LINK cardholders who sold their benefits to Hussein and
Bazian did so repeatedly. Yet simply accepting

(...continued)
waives or abandons a potential appellate claim by not develop-
ing an argument in his brief. Montgomery v. Am. Airlines, Inc., 626
F.3d 382, 392 n.2 (7th Cir. 2010); United States v. Elst, 579 F.3d
740, 747 (7th Cir. 2009). It is not enough “ ’to mention a possible
argument in the most skeletal way, leaving the court to do
counsel’s work, create the ossature for the argument, and put
flesh on its bones.’ ” Bank of Am., N.A. v. Veluchamy, 643 F.3d
185, 190 (7th Cir. 2011) (quoting United States v. Zannino, 895
F.2d 1, 17 (1st Cir. 1990)). Hussein has failed to brief, and thus
abandoned, any claim of error concerning restitution.
12 No. 11-2248

fraud proceeds, stolen goods, or other contraband does not
make recipients participants in the underlying scheme that
produced the ill-gotten benefits when they are simply
customers and not part of the operation. See United States
v. Barrie, 267 F.3d 220, 223 (3d Cir. 2001); United States v.
Egge, 223 F.3d 1128, 1133 (9th Cir. 2000); United States v.
Melendez, 41 F.3d 797, 800 (2d Cir. 1994). What matters is
whether the recipient played an active role in the scheme.
See United States v. Butler, 646 F.3d 1038, 1041-42 (8th Cir.
2011) (counting as participants recipients of fraudulent
checks who cashed checks and split proceeds with other
schemers); United States v. Zichettello, 208 F.3d 72, 108 (2d
Cir. 2000) (counting as participant the recipient of an
illegally discounted car where evidence permitted infer-
ence that recipient was criminally involved in broader
scheme). We decline to decide on which side of this line the
food-stamp sellers in this case fall because we agree with
the district court that the fraud scheme was “otherwise
extensive,” and thus the number of participants does
not matter. An offense can be otherwise extensive
for purposes of § 3B1.1 even if fewer than five
people participated. See U.S.S.G. § 3B1.1 cmt. n.3;
United States v. Sheikh, 367 F.3d 683, 688-89 (7th Cir. 2004);
United States v. Frost, 281 F.3d 654, 658 (7th Cir. 2002). And
a scheme such as this one can be otherwise extensive when
the defendant made a substantial portion of his income
(close to two million dollars) through fraudulent redemp-
tions, continued in operation for an extended period, and
“used many people (including the food stamp vendors)
to make the profit from the scheme.” Sheikh, 367
F.3d at 688-89 (food-stamp fraud); see also United
No. 11-2248 13

States v. Diekemper, 604 F.3d 345, 354 (7th Cir. 2010) (bank-
ruptcy fraud); United States v. Dong Jin Chen, 497 F.3d 718,
722 (7th Cir. 2007) (extortion and tax fraud). Similar factors
were present here; the district court noted that Hussein ran
his scam from multiple locations, traded cash for benefits
with “probably hundreds” of customers, and supervised
employees at his stores. Thus the court did not clearly err
in finding the scheme otherwise extensive.3

3
The facts of this case cast an unfortunate shadow on the
government’s ability to ferret out fraudulent applications from
merchants seeking approval to accept food-stamp benefits, and
an even longer shadow on the government’s willingness to
combat fraud aggressively after its discovery. Presently there are
over 45 million people receiving food stamps—an increase of
almost 70% since October 2007. See Supplemental Nutrition
A ssistance Pro gra m M onth ly D ata, available at
http ://ww w .fns.usd a.gov/pd /34S N A P m o n th ly .h tm (last
visited Nov. 10, 2011). For fiscal year 2010, the program cost
over $68 billion. See Supplemental Nutrition Assistance
Program Participation and Costs, available at
http://www.fns.usda.gov/pd/SNAPsummary.htm (last visited
Nov. 10, 2011). Most of the illegal trafficking occurs in
small stores with limited food supplies, which the
USDA approves “so that low-income participants in areas
with few supermarkets have access to food.” G OVERNMENT
A CCOUNTABILITY O FFICE , S UPPLEMENTAL N UTRITION A SSISTANCE
P ROGRAM : P AYMENT E RRORS AND T RAFFICKING H AVE D ECLINED ,
B UT C HALLENGES R EM AIN 11, 13 (2010), available at
http://www.gao.gov/new.items/d10956t.pdf (last visited Nov.
10, 2011). Perhaps because of the relatively low volume of
(continued...)
14 No. 11-2248

In the alternative Hussein contends that the 4-level
upward adjustment should not apply because he did not
exercise control over at least four participants during
the scheme. But a leader or organizer under § 3B1.1 need
control only one participant, not four. § 3B1.1 cmt. n.2;
United States v. Blaylock, 413 F.3d 616, 621 (7th Cir.
2005). Hussein exercised control over Fleming—the district
court adopted the probation officer’s finding that Hussein
recruited Fleming to participate in the scheme and paid
him to falsely claim ownership of Route 69—and that level
of supervision was sufficient for the adjustment to apply.

3
(...continued)
goods sold in these stores, or perhaps because of a lack
of inspectors, the agency inspects smaller stores only about
once every five years unless there is some indication of
a problem. See id. at 13. While it is repugnant that people
like Hussein have exploited this vulnerable system over the
years, as distressing is the fact that, for every Hussein
who operates such a scheme, there may be hundreds of benefi-
ciaries (LINK cardholders) who commit their own criminal act
by exchanging their food-stamp benefits for quick cash.
See 7 U.S.C. § 2024(b). We can only hope that with the very
large expansion of this program there is a similar expansion
of enforcement personnel to intercept the many millions
of dollars lost in cash-for-discounted-benefits schemes. And
we would hope that there is a strict warning to all who receive
this generous entitlement that any abuse similar to this cash-sale
scheme will cause the immediate curtailment of their LINK
benefits.
No. 11-2248 15

Hussein last asserts that his overall prison sentence is
unreasonable. In his view, the district court unfairly
penalized him for selling junk food instead of nutritious
items and was unduly harsh because of concern that some
of his patrons exchanged benefits for cash to buy drugs. He
also adds that the court ignored his arguments in mitiga-
tion.
Hussein’s within-range sentence is presumed reasonable,
Rita v. United States, 551 U.S. 338, 341 (2007); United States
v. Meschino, 643 F.3d 1025, 1030 (7th Cir. 2011), and he
bears the burden of rebutting that presumption, United
States v. Noel, 581 F.3d 490, 500 (7th Cir. 2009). Among the
reasons that influenced the choice of sentence, the district
court cited Hussein’s abuse of a taxpayer-funded program,
his continuation of the fraud after he knew he was under
investigation, the length of the scheme, and the number of
fraudulent exchanges involved. The court also noted
Hussein’s intelligence and his opportunities as a business-
man and property owner.
The sentencing court did, as Hussein asserts, criticize
him for operating stores “where people were provided
essentially nothing but calories.” But this criticism must be
read in context. See United States v. Nance, 611 F.3d 409, 417
(7th Cir. 2010); United States v. Hoke, 569 F.3d 718, 722 (7th
Cir. 2009). The court’s concern was not simply the food
selection at Hussein’s establishments but the fact that he
wasted an opportunity, handed to him by the government,
to serve the needs of a community with a real shortage of
grocery options. As we have noted, and as the district
judge recognized, Hussein and Bazian operated businesses
16 No. 11-2248

that were food stores in name only. A sentencing court
may consider the harm that society or a particular commu-
nity suffers from a crime. See United States v. Collins, 640
F.3d 265, 270 (7th Cir. 2011) (affirming sentence based
partly on harm to society caused by identity theft and
misuse of Social Security numbers); United States v. Brock,
433 F.3d 931, 935, 938 (7th Cir. 2006) (affirming sentence
based partly on defendant’s damage to his community by
possessing drugs and guns). That is all the court did here.
As for the judge’s comments about drug use, she never
embraced the government’s speculation about how
Hussein’s clients spent their ill-gotten cash and only
clarified her understanding of the prosecutor’s remarks.
And regarding Hussein’s arguments in mitigation,
the judge acknowledged Hussein’s medical condition and
was not required to discuss his commonplace contentions
about family circumstances, see United States v. Gary, 613
F.3d 706, 710 (7th Cir. 2010); United States v. Tahzib, 513 F.3d
692, 695 (7th Cir. 2008), and lack of criminal history, see
United States v. White, 582 F.3d 787, 798 (7th Cir. 2009);
United States v. Martinez, 520 F.3d 749, 753 (7th Cir. 2008).
Hussein has not rebutted the presumption that his within-
guidelines sentence is reasonable.
A FFIRMED.

12-13-11