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United States v. Uddin, No. 07-3121-cr (2d Cir. January 6, 2009) (Kearse, Sack, Katzmann, CJJ)

Mohammed Uddin owned a small grocery store in Manhattan, and used it to commit food stamp fraud between 2003 and 2006 by dispensing cash in exchange for food stamps. He pled guilty but admitted in his allocution only that the amount of fraud exceeded $5,000 - the jurisdictional amount. After a Fatico hearing, the district court concluded that the loss amount was $377,799, and sentenced Uddin accordingly. On appeal, Uddin challenged the loss calculation.

The District Court Proceedings

The government had been seeking a loss in excess of $1.2 million, arguing that all of Uddin’s food stamp redemptions exceeding $50 during the relevant time period were fraudulent. Uddin argued instead that the loss should be limited to $5,000, the amount he admitted in his plea.

The evidence at the Fatico hearing showed that his store redeemed several times more in food stamp benefits than did two comparably sized stores nearby, and that he exchanged food stamps for cash with a CI on fourteen occasions in 2006 alone.

An agent also testified that, based on his experience, any food stamp redemptions of more than $50 at Uddin’s store were fraudulent. He characterized this as a “conservative” estimate based on the fact that the store had a very limited supply of eligible food items for sale, and those that it did stock were “dusty” and “outdated.” In addition, the store was small, lacked baskets or carts, and did not offer delivery service. Video surveillance in 2006 showed no customers leaving the store carrying groceries worth $50 or more; some appeared to be counting cash as they exited.

A second agent testified that, while the store had been well stocked in 2002 - when it first obtained its license to redeem food stamps - by 2006 the store sold very little eligible food. Moreover, the average food stamp transaction in New York City was about $12, thus the activity in Uddin’s store was quite unusual.

After hearing this testimony, the district court concluded that the government’s estimate of loss was too high, while Uddin’s was too low. The court first assumed that the store’s stock declined steadily and gradually between 2002 and 2006. This led it to discount the government’s proposed loss amount by half, which led to a loss of $629,665. The court also disagreed with the government that every transaction of $50 or more was completely fraudulent, and discounted that assumption by forty per cent. Sixty per cent of $629,665 is $377,799, and that was the amount the court settled on.

The Circuit’s Decision

The court of appeal affirmed, noting that the Sentencing Guidelines require only a “reasonable estimate” of loss in financial crimes. A court can make such an estimate by “extrapolating the average amount of loss from known data.” Here, the district court’s estimate was reasonable and was supported by a preponderance of the evidence, given the evidence of the decline in the store’s stock during the relevant time period. The use of the $50 transaction figure as a “general point of reference for likely fraudulent transactions” was likewise reasonable. Even if “not based on precise data,” it was based on “known” data such as the average dollar amount of food stamp redemptions at similar stores in New York City and the witnesses’ observations of Uddin’s own store.

The court then added - not particularly helpfully - that while “there will undoubtedly be situations in which a district court’s estimate of a loss amount falls outside the boundaries of reasonableness, we need not define precisely what those boundaries are. It is enough that the district court here did not exceed them.”

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