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UNITED STATES v. CABA

January 11, 1996

UNITED STATES OF AMERICA against JOSE R. CABA, Defendant.


The opinion of the court was delivered by: TRAGER

 TRAGER, District Judge:

 On April 10, 1995, a jury found the defendant, Jose Caba, guilty of conspiracy to launder money in violation of 18 U.S.C. § 1956(g); money laundering, in violation of 18 U.S.C. § 1956(a)(1)(A); conspiracy to commit food stamp fraud, in violation of 18 U.S.C. § 371; and five counts of food stamp fraud, in violation of 7 U.S.C. § 2024(b)(1). The case was tried by visiting Judge Howard B. Turrentine. The matter is now on for sentencing and a number of issues have arisen in the process of determining a lawful and appropriate sentence.

 (1)

 In 1992, after employees of Caba's store -- Johnathan's (or Joe's) Grocery Store -- accepted food stamps in return for non-food items, the United States Department of Agriculture ("USDA") suspended Caba's license to accept food stamps for three years. Shortly thereafter, in May 1992, Joselin Mejia, owner of Mejia Deli Grocery, gave Caba a power of attorney to handle Mejia's bank account in which Mejia deposited food stamps. PSR PP5-6. Caba, thereafter, deposited food stamps into Mejia's bank account, certifying that they were accepted in accordance with USDA regulations. Id. at P7.

 At trial, however, it was proven that these food stamps were not obtained in accordance with the certification. The chain of events was as follows: self-employed truck drivers purchased from wholesalers items which can be bought by food stamps as well as those which legally could not. At the same time, some retail stores accepted food stamps from customers even though these stores are not licensed to do so by the Department of Agriculture. Also, these stores accepted food stamps for items such as beer and cigarettes, which, under the USDA regulations, cannot be bought with food stamps. Even licensed stores are known to engage in this practice. Trial Tr. at 40-41. Since these unlicensed retail stores had no way to convert these food stamps into cash, they paid the truck drivers in food stamps for their merchandise. Id. at P8. Because the truck drivers, too, were not authorized to accept food stamps, they needed a way to convert the food stamps into cash.

 Caba aided these truck drivers by redeeming these stamps for checks, made out to the wholesale companies or drivers, deducting four to five percent from the face value of the food stamps. At trial, the Government produced evidence of five transactions in which a cooperating, but non-testifying witness went to Caba's store and exchanged $ 20,650 worth of food stamps for cash at a five percent discount. Id. at P16.

 Caba then made deposits of the accumulated food stamps into Mejia's bank account until 1994. Caba's deposits to Mejia's bank account through 1994 amounted to over $ 7,000,000. Id. at PP9-10. At the end of April 1994, Caba began using the account of Caba Grocery which was owned by Caba's sister, Maritza Caba. The amount going through this account was approximately $ 4,500,000. Id. at P10-11. Caba also enlisted the help of at least four people -- Joselin Mejia, Cruz Tavarez, Maritza Caba, and one of his workers. Id. at 55-62; 69-74; 110-11; 116-17; 175-77; 179-80; 305.

 In sum, the Government showed that Caba devised a scheme by which he received food stamps which were funneled up from the groceries to the truck drivers to Caba or directly from Mejia Deli-Grocery or Bushwick Beer, a beer distributor. This scheme involved the use of food stamps for prohibited purposes, including the sale of non-eligible items such as alcohol and cigarettes with food stamps, as well as the "discounting" of the food stamps in exchange for cash. In addition, the scheme also indirectly facilitated unlicensed groceries' acceptance of food stamps. Testimony of Joselin Mejia, Trial Tr. at 66-67; 71-72.

 Thus, the evidence at trial, viewed most favorably to the Government, established that Caba had laundered approximately $ 11,700,000 in proceeds from unauthorized food stamp transactions through the use of three bank accounts and two food stamp licenses in other people's names, making a personal profit of over $ 660,000 in the course of only two and a half years. Trial Tr. at 312-13. The Government, by cross examination of the defendant and from Mejia's testimony, also attempted to demonstrate Caba's structuring of his deposits under $ 10,000. Trial Tr. at 77, 323.

 In addition to requesting that the court apply the money laundering guideline, § 2S1.1, Gov't Ltr. Br., dated 11/15/95, the Government requests that Caba's sentence be enhanced pursuant to Guideline § 3B1.1 because of his role in the offense -- he was a leader directing the actions of Joselin Mejia, truck drivers (including Cruz Tavarez), Caba's store employees, Caba's sister, and the owner of Bushwick Beer, a beer distributor. The Government maintains that he planned the offense, made the decisions, and recruited others to help in his scheme involving more than five participants. Addendum to PSR at 1.

 The Government further requests an enhancement in Caba's sentence because it claims that he obstructed justice by committing perjury at trial. U.S.S.G. § 3C1.1. Specifically, the Government focuses on Caba's denial that he knew his actions were illegal at the time he conducted the financial transactions. Knowledge of the illegality was a necessity in order for the jury to find Caba guilty. Thus, according to the Government, Caba's testimony can only be viewed as consisting of false statements about a material issue in a court proceeding. Id. at 2. In addition, the Government maintains that there were two other instances of perjury at trial which related to Caba's dealings with Joselin Mejia. Gov't Ltr. Br., dated 9/25/95, at 3-4. According to the Government, he denied these dealings because, as the Government explains: "Caba apparently concluded that Mejia's testimony of their dealings had been particularly harmful to his defense. . . . This testimony obviously undermined Caba's attempt to portray his scheme as involving only food stamps that he thought had originated from actual sales of food." Id. at 6, fn. 4.

 (2)

 Although the Government maintains that Caba's activities enabled unlicensed groceries to accept food stamps which then paid a 4% surcharge to Caba in order to redeem them, Caba contextualizes his actions explaining that groceries in impoverished areas deal almost exclusively in food stamps as currency because customers often do not have cash. Furthermore, and more relevant to his position here, he asserts that the truck drivers and most groceries cannot redeem the food stamps either because they are unlicensed or, even if licensed, the banks require that the retailer have significant minimum amounts before they will accept deposits of food stamps. Thus, Caba asserts, he was openly providing a necessary service, a form of discounting akin to the discounting of commercial paper, to these small retailers and self-employed truck drivers. Trial Tr. at 288; 316-17.

 With respect to the money laundering charge, Caba explained that he divided his deposits in less than $ 10,000 increments because the bank teller at Banco Popular told him to do that so that she could avoid filling out forms required by the bank. Trial Tr. at 287-88, 323. Furthermore, he points out that there were sixty-nine deposit slips for amounts under $ 10,000 but eighty slips over $ 10,000. Trial Tr. at 218-19. The time period for the deposits over $ 10,000 was June and July of 1994 after Caba had switched banks from Banco Popular, with its allegedly "finicky tellers, to Citibank, thereby supporting his contention that he limited the amounts of his deposits solely at the request of the bank tellers and not to avoid detection. *fn1" Caba Ltr. Br., dated 12/15/95 at 8, fn. 8. See also Trial Tr. at 288; 316-17. In addition, all his financial transactions were conducted by check and fully documented in bank statements, further demonstrating the lack of any intent to conceal his activities. Caba Ltr. Br., dated 12/15/95, at 9, fn. 11. Finally, he alleges that he paid taxes on all the income derived from these transactions.

 Based on the above, defendant is now maintaining that his actions do not fall within the "heartland" of the money laundering guideline, § 2S1.1, and that the appropriate guideline to be employed here is the food stamp guideline of § 2F1.1. Furthermore, he claims that an adjustment is merited because he accepted responsibility for his actions, § 3E1.1(a), and a further adjustment for extraordinary family circumstances is appropriate. United States v. Johnson, 964 F.2d 124 (2d Cir. 1992).

 Caba's principal contention is that his activities do not fall within the "heartland" of the money laundering guideline and that the court should downwardly depart and employ as the appropriate guideline the one for unlawful acquisition of food stamps. If the court agrees with the approach urged by Caba, the next issue that must be determined under the food stamp guideline is the amount of loss. Then, the additional issues raised by the parties -- role in the ...


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