GOVERNMENT’S OPPOSITION TO DEFENDANT’S MOTION TO STAY SENTENCE AND/OR FOR BAIL PENDING APPEAL
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
____________________________________
Criminal No. 12-CR-10014-DPW
UNITED STATES OF AMERICA v. MUHAMMAD (“M.J.”) SHAHEED,
Defendant.
GOVERNMENT’S OPPOSITION TO DEFENDANT’S
MOTION TO STAY SENTENCE AND/OR FOR BAIL PENDING APPEAL
Defendant Muhammad (“M.J.”) Shaheed, who pleaded guilty to wire and mail fraud and was sentenced to 21 months in prison, moves to stay his sentence pending appeal. (See Motion to Stay Sentence or for Bail Pending Appeal and Memorandum in Support Thereof and Request for Hearing Thereon, Dkt. No. 139 (“Motion” or “Def. Mem.”)). Shaheed, however, cannot establish that his appeal raises a substantial question of law or fact likely to result in reversal or a significantly reduced sentence and thus cannot overcome the presumption that he begin serving his sentence as ordered by the Court. Indeed, at least one of the issues raised in his Motion has been waived and none raise any possibility, let alone a likelihood, of reversal or a significantly reduced sentence. Shaheed’s Motion should be denied.
Background
On January 18, 2012, a federal grand jury returned a six count Indictment charging Shaheed with three counts of wire fraud in violation of 18 U.S.C. §§ 1343, 1349 and 2 and three counts of mail fraud in violation of 18 U.S.C. §§ 1341, 1349 and 2. (Indictment Counts 1-6). The Indictment alleges that, in November 2010, Shaheed, then the Chief Executive Officer and Chairman of Augrid Global Holdings Corp., met with an individual he believed to be a representative of a major investment fund willing to invest his fund’s monies in publicly traded companies, like Augrid, in exchange for a secret fifty percent kickback. (Indictment ¶¶ 1-2, 6, 7). The individual was actually an undercover agent with the FBI (“UA”) and the fund, known to Shaheed as Seafin Capital LLC (“Seafin”), did not exist. (See Indictment ¶ 3). At the November 2010 meeting, Shaheed readily agreed to participate in the kickback transactions.
Thereafter, Shaheed sent UA documents related to the kickback transactions, including false invoices intended to cover up the kickbacks, and, after receiving three payments purportedly from the investment fund, Shaheed sent three separate wire transfers, each representing fifty percent of the payments Shaheed received, to a bank account purportedly belonging to UA. (Indictment ¶¶ 11-12, 14-15, 17-18). Shaheed also caused a transfer agent to send to UA, by Federal Express, stock certificates, which represented the fund’s purchase of shares. (Indictment ¶¶ 13, 16, 19). The wire transfers representing Shaheed’s payment of the kickbacks and the mailing of the stock certificates via Federal Express form the basis for the wire and mail fraud charges, respectively. (Indictment ¶¶ 11-19, Counts 1-6).
Trial was scheduled for February 11, 2013 and, in light of certain last minute issues raised by the defendant, was continued to February 19, 2013. Although the deadline for substantive motions had passed, on February 4, 2013, the defendant filed a motion to dismiss the Indictment. (“Motion to Dismiss” or “Dismissal Motion,” attached as Exhibits B and C to Def. Mem.) His principle complaint was that, because Shaheed was not alleged to have conceived of the mail and wire fraud schemes with which he is charged, the Indictment failed to state an offense. Then, before the government filed its opposition, and before the Court ruled on the Motion to Dismiss, the defendant pleaded guilty to all six counts in the Indictment. (See Dkt., Feb. 12, 2013). The defendant’s plea was unconditional and he did not preserve the dismissal issue for appeal.
Argument
I. The Legal Standard – 18 U.S.C. § 3143(b)(1)(B)
Provided he is not a flight risk or danger to the community, a defendant may be released pending appeal only if his appeal is not brought for the purpose of delay and raises a substantial question of law or fact likely to result in a reversal, a sentence without a prison term, or a reduced sentence that will have been served by the end of the appeals process. See 18 U.S.C. § 3143(b). In United States v. Bayko, 774 F.2d 516 (1st Cir. 1985), the First Circuit held that Section 3143(b) creates a two-part inquiry: the court first asks whether the appeal presents a substantial question of law or fact. If it does, the court determines whether a favorable appellate ruling on that question would make a reversal or a substantially reduced sentence likely. Id. at 522.
The Bayko Court defined “a substantial question” as one that is “close” or could “very well be decided the other way.” Id. at 523. Adopting the standard from United States v. Giancolo, 754 F.2d 898, 901 (11th Cir. 1985), the Court in Bayko expounded on the “substantial question” requirement, rejecting interpretations that equated a “substantial” question with one that is “novel,” “undecided,” “fairly debatable,” or not the subject of “controlling precedent.” Bayko, 774 F.2d at 523 (quoting Giancolo, 754 F.2d at 901 (finding that a question can be without controlling precedent, and yet not be substantial, “largely because that issue is so patently without merit”)). The mere “possibility of reversal” is not enough to satisfy the
substantiality requirement. Bayko, 774 F.2d at 523.
The First Circuit has held that the second requirement of “likely to result in reversal” is read to mean that “it is more probable than not that” a favorable decision will result in a reversal of the conviction. Bayko, 774 F.2d at 522. The defendant cannot satisfy either of these elements.
II. There is No Substantial Appellate Issue Likely to Result in Reversal or a significantly Reduced Sentence.
Shaheed appears to identify two purported “issues” for his appeal—the first is his claim that the Indictment should have been dismissed (an issue the Court never reached before Shaheed entered his unconditional guilty plea) and the second appears to be an issue related to the Court’s loss calculation. Neither purported issue is colorable, let alone substantial, and neither is likely to result in a reversal or significantly reduced sentence.
A. Shaheed’s Dismissal Arguments Have Been Waived and, Even if Properly Preserved, are Not Substantial
Any claim of error based on Shaheed’s Motion to Dismiss has been waived. As noted, Shaheed filed his Dismissal Motion on February 4, 2013. But Shaheed never sought a ruling on that motion, instead opting to plead guilty before the government had filed its opposition and before the Court had the opportunity to decide it. Even if the Court had denied the Motion to Dismiss, however, Shaheed waived any objection to the Indictment (or even the non-existent ruling) by choosing to plead guilty, unconditionally. See Tollett v. Henderson, 411 U.S. 258, 267 (1973) (“When a criminal defendant has solemnly admitted in open court that he is in fact guilty of the offense with which he is charged, he may not thereafter raise independent claims relating to the deprivation of constitutional rights that occurred prior to the entry of the guilty plea”); United States v. Gonzalez-Mercado, 402 F.3d 294, 300 (1st Cir. 2005) (entry of unconditional guilty plea waives all non-jurisdictional challenges to conviction, save claims that plea was not knowing and voluntary); United States v. Valdez-Santana, 279 F.3d 143, 145-46 (exception to waiver for jurisdictional defects is a “narrow” one).
Recognizing this, Shaheed argues that his dismissal arguments were “jurisdictional” in nature, as jurisdictional claims cannot be waived even after an unconditional guilty plea. (See Def. Mem. at ¶¶ 11-12). But there is nothing jurisdictional about Shaheed’s challenge to the Indictment. In his Motion to Dismiss, Shaheed argued that the Indictment failed to state the offenses of wire and mail fraud because he was not alleged to have “devised” the scheme to defraud that was first proposed by UA. As set forth below, Shaheed need not have “devised” the scheme to be charged with, and guilty of, wire and mail fraud. Even if “devising” was an element of wire and mail fraud, however, it would be just that: an element. See United States v. Gonzalez-Mercado, 402 F.3d 294, 301 (1st Cir. 2005) (allegation regarding sufficiency evidence regarding an element does not raise a cognizable jurisdictional defect). The defendant’s role in “devising” the scheme is not the basis for federal jurisdiction for such charges—the interstate wires and mailings are.
Indeed, as the First Circuit has held, with few exceptions “‘a federal criminal case is within the subject matter jurisdiction of the district court if the indictment charges . . . that the defendant committed a crime described in [a federal criminal statute].” Gonzalez-Mercado, 402 F.3d at 301 (quoting United States v. Gonzalez, 311 F.3d 440, 442 (1st Cir. 2002)). The
Indictment charged Shaheed with violating the federal wire and mail fraud statutes and, accordingly, established federal jurisdiction. Shaheed’s Dismissal Motion did not raise any
jurisdictional defects and any claims based on that motion have been waived.
Even if Shaheed had not waived his dismissal arguments, they are baseless, and certainly do not present a “close” issue for appellate review. Indeed, the First Circuit has explicitly rejected the defendant’s assertion that he must have “devised” or instigated the wire and mail fraud scheme in order to be guilty of it.1 See United States v. Yefsky, 994 F.2d 885, 891-92 (1st Cir. 1993) (“[t]he defendant need not instigate the scheme so long as he willfully participates in it, with the knowledge of its fraudulent nature and with the intent to achieve its illicit
objectives”); United States v. Starck, 974 F.2d 1329, 1329 (1st Cir. 1992) (“[t]he government need not prove that the defendant devised the fraudulent scheme; but it must prove ‘willful
participation in the scheme with knowledge of its fraudulent nature and with intent that these illicit objectives be achieved’”) (quoting United States v. Serrano, 870 F.2d 1, 6 (1st Cir. 1989)). The First Circuit’s interpretation of the “devising” language in the mail and wire fraud statutes is in alignment with that of other Circuits. See United States v. Faulkenberry¸614 F.3d 573, 581 (6th Cir. 2010) (although “[t]he [wire fraud] statute’s terms suggest that [the defendant] must have ‘devised’ . . . the government need not prove that the defendant devised the fraudulent scheme . . . it must prove ‘willful participation in the scheme with knowledge of its fraudulent nature and with intent that these illicit objectives be achieved . . .all of the circuits to have decided the issue agree that willful participation is enough”); United States v. Manion, 339 F.3d 1153, 1156 (9th Cir. 2003) (“the intentional devising of a scheme is not an essential element of mail or wire fraud); United States v. Prows, 118 F.3d 686, 692 (10 th Cir. 1997) (“defendant may be convicted under either [the wire or mail fraud] statute[s] if the government shows that the defendant joined a scheme devised by someone else”).
In sum, Shaheed’s dismissal argument is a non-starter. It is not a “close” question that could be decided either way and it is not substantial. Accordingly, reversal is not “likely” and
there is no basis to stay imposition of Shaheed’s sentence pending appellate review of the issues presented in his Motion to Dismiss.
B. The Court’s Loss Calculation Was Appropriate and Does Not Raise a Substantial Issue Likely to Result in a Significantly Reduced Sentence.
The second appellate “issue” noted by Shaheed is his objection to the Court’s loss calculation under the Sentencing Guidelines. (Def. Mem. at ¶ 13). Shaheed argues that the
Court erred in finding that the entire $60,000 fraudulent investment constitutes loss and contends that the Court should have held him accountable only for the $30,000 that he actually kicked back to the undercover agent. As set forth in the Pre-Sentence Report, and as the Court found, however, UA made clear that Augrid was not a viable candidate for any funding from Seafin. (See Pre-Sentence Report, PSR at ¶ 38). As UA explained at the meeting with Shaheed, UA was willing to invest Seafin money in Augrid—and mislead the fund about Augrid’s viability—only
because Shaheed agreed to pay a secret kickback to UA. The entirety of the transaction was a fraud and the entire amount that Shaheed received is not only an appropriate calculation of the
loss, but a conservative one.2 The loss issue, like the dismissal one, is not close and it is not substantial.
But even if it were a close call, in order to prevail on the instant motion, Shaheed must also establish that a ruling in his favor is likely to result in a significantly reduced sentence.3 See 18 U.S.C. § 3143(b). He cannot do that. Even assuming that the First Circuit disagreed with the Court’s loss calculation and adopted Shaheed’s, his total adjusted offense level would decrease by only two levels, yielding a Guidelines Sentencing Range (“GSR”) of 12-18 months, as opposed to the 18-24 month range found by the Court. (Def. Mem. at ¶ 13). Such a minimal difference in the GSR does not establish any likelihood that Shaheed’s sentence would be significantly reduced even if he did prevail on appeal.
Indeed, in this case, the Court carefully reviewed each of the factors in 18 U.S.C. §3553(a) before finding a 21-month prison sentence sufficient, but not greater than necessary, to comply with the purposes of sentencing set forth in that Section. Among other things, the Court commented on the seriousness of this particular offense, especially in light of the fraud that is
prevalent in the microcap market. Likewise, the Court noted the need not only for general deterrence in crimes such as these but, in this case, and in light of Shaheed’s past, specific
deterrence. In short, the Court, as required, calculated the GSR and then imposed a sentence in the middle of the GSR—and only three months more than the high end of the GSR adopted by
Shaheed—only after careful consideration of the Section 3553(a) factors. There is no reason to believe, and Shaheed cannot establish, that it is “likely” that even if he were to prevail on the sentencing issue that either (1) he would be sentenced to no prison time or (2) that his sentence would be reduced significantly.
CONCLUSION
For the foregoing reasons, the government respectfully requests that the Court DENY the defendant’s Motion to Stay Sentence or for Bail Pending Appeal and that the defendant be
ordered to report to the Bureau of Prisons to begin serving his sentence in accordance with the Court’s previous order.
Respectfully submitted,..................
1 In his Dismissal Motion, Shaheed did not seriously contend that the Indictment failed to provide him with sufficient notice of the charges against him under Federal Rule of Criminal
Procedure 7(c).
2 As the Court noted at the sentencing hearing, and as discussed in United States v. Palmquist, 712 F.3d 640, 648-49 (1st Cir. 2013), the fact that some money—in this case, the kickbacks—
was recouped by the government may be relevant to restitution but it does not detract from the totality of the intended loss here. The whole transaction was fraudulent and the defendant is not
entitled to the benefit of money that, unbeknownst to him, did make its way back to the government.
3 Specifically, Shaheed must establish that reversal is likely to result in “a sentence that does not include a term of imprisonment or a reduced sentence to a term of imprisonment less than the
total of the time already served plus the expected of the appeal process.” 18 U.S.C. § 3143(b)(B)(iii) and (iv). Significantly, Shaheed’s appeal has already been docketed and the majority of the transcripts have been prepared. There is no reason to believe that Shaheed’s appeal will take any significant time.
