United States v. Arif , 897 F.3d 1 ( 2018 )

United States Court of Appeals
For the First Circuit
No. 17-1597
UNITED STATES OF AMERICA,
Appellee,
v.
MUSTAFA HASSAN ARIF,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Landya B. McCafferty, U.S. District Judge]
Before
Torruella, Lynch, and Kayatta,
Circuit Judges.
Benjamin Brooks, with whom Michael Schneider and Good
Schneider Cormier & Fried were on brief, for appellant.
Seth R. Aframe, Assistant United States Attorney, with whom
Scott W. Murray, United States Attorney, was on brief, for
appellee.
July 18, 2018
LYNCH, Circuit Judge. Mustafa Hassan Arif operated a
very profitable online business from Lahore, Pakistan, selling
non-prescription drug products that purported to treat or cure
hundreds of different diseases and medical conditions. He created
and operated over 1,500 websites containing altered clinical
studies, fabricated testimonials, and false indicia of origin to
induce consumers in the United States and elsewhere to purchase
his products. Through his misdeeds, Arif gained more than
$11 million in revenues. He conditionally pled guilty to wire
fraud in 2016, preserving two arguments for appeal that the
district court had rejected in two thoughtful memoranda. See
United States v. Arif (Arif I), No. 15-cr-057 (D.N.H. Sept. 16,
2016); United States v. Arif (Arif II), No. 15-cr-57, 2016 WL
5854217 (D.N.H. Oct. 6, 2016). Arif was sentenced to seventy-two
months of imprisonment.
On appeal, Arif's primary argument is that he was
prosecuted under the wrong statute. We reject Arif's argument
that prosecutions such as his must be pursued exclusively by the
Federal Trade Commission ("FTC") as false advertising cases, and
not by the Department of Justice ("DOJ") as wire fraud cases.1 As
1 Arif never maintained in district court that the
criminal provisions of the Federal Trade Commission Act, 15 U.S.C.
§§ 52-57, must be prosecuted by the FTC. Rather, he argued that
the DOJ may only initiate a prosecution for violations of these
provisions upon certification from the FTC under 15 U.S.C. § 56(b).
The district court rejected this argument, and Arif has abandoned
- 2 -
an issue of first impression, we hold that Congress did not
impliedly repeal the wire fraud statute, 18 U.S.C. § 1343, as to
prosecutions that also fall within the reach of the 1938
Wheeler-Lea Amendment to the Federal Trade Commission Act
("FTCA"), 15 U.S.C. §§ 52-57.2Arif also argues that, as a matter of law, he could not
have committed fraud because he "held an honest and sincere belief
in the efficacy of his products," and he correctly identified their
ingredients.
Arif's remaining arguments are that his seventy-two
month sentence must be vacated because the district court's
Guidelines calculation as to the loss amount was erroneous and,
further, because the court did not "adequately account" in its
sentence for the fact that his penalty would have been lower had
he been charged under the FTCA.
All of Arif's arguments are without merit. Accordingly,
we affirm both his conviction and sentence.
it on appeal. See Small Justice LLC v. Xcentric Ventures LLC, 873
F.3d 313, 323 n.11 (1st Cir. 2017) (holding that arguments not
raised in appellant's opening brief are waived).
2 One motivation for Arif's argument seems to be that under
the FTCA, there is a six-month maximum penalty for a first offense,
and a one-year maximum for a second offense. See 15 U.S.C.
§ 54(a). In contrast, there is a twenty-year maximum sentence for
fraud under the wire fraud statute. See 18 U.S.C. § 1343.
- 3 -
I. Facts
The following facts are drawn from Arif's conditional
guilty plea and from the district court's findings of fact.
Arif ran an elaborate, multi-million-dollar online
business from Lahore, Pakistan, selling non-FDA-approved drugs
that purported to cure hundreds of different diseases and medical
conditions. He primarily operated his business through MAK
International, a "parent company" he owned. Arif also worked with
CCNow, a third-party payment processor based in the United States.
To sell his products, Arif created, maintained, and
controlled more than 1,500 websites. Over 1,000 of these websites
directly offered drugs for sale, with each individual website
selling a single drug that purported to treat a single disease or
medical condition. The remaining 400 or so websites were
"referral" sites, which purported to be "independent and
impartial," but were, in fact, conduits to one or more of Arif's
websites selling his products.
Arif organized his websites into subnetworks or groups,
each with a unique brand name and color scheme. These included
Berlin Homeo (comprising more than 250 sites), Botanical Sources
(comprising more than 200 sites), Gordon's Herbal Research Center
(comprising more than 120 sites), Healing Plants Ltd. (comprising
more than 60 sites), Oslo Health Network (comprising more than 300
sites), and Solutions by Nature (comprising more than 70 sites).
- 4 -
He also created two referral networks: "Society for the Promotion
of Alternative Health" and "Toward Natural Health." In general,
each website within a group "contained the same verbiage," with
"the only material difference being the name of the disease or
medical condition, the name of the drug, and the variations in the
purported ingredients."
All of the websites contained misleading mail-forwarding
addresses that were "intended to make customers more comfortable
purchasing the drugs." For instance, websites in the Berlin Homeo
network included an address in Germany. Websites in the other
networks contained forwarding addresses in Italy, New Zealand,
Australia, Norway, Denmark, England, and Scotland. In fact, all
of the drugs originated in Pakistan.
Most of the websites also contained various other false
and misleading statements. For instance, many websites in the
Solutions by Nature group contained the following (completely
fabricated) treatment statistics:
[Name of drug] has been shown in clinical
trials to provide a complete [name of disease
or medical condition] cure rate for 90% of
subjects. [Name of drug] has been proven an
effective [name of disease or medical
condition] medication for 95% of people,
significantly improving their condition. Like
no other product, has also been shown to be a
highly effective [name of disease or medical
condition] treatment in people with severe
cases, a response rate of 85%.
- 5 -
Additionally, certain websites contained links to plagiarized
research papers, which "were not written about the drugs they
purported to reference." And many touted fictitious testimonials
by customers.
Arif sold the drugs globally, generating approximately
$12 million in sales between 2007 and 2014, more than $9 million
of which came from customers in the United States. CCNow processed
his customers' online payments and then sent the proceeds from its
bank account in Minnesota to Arif's bank accounts in Pakistan and
the United Kingdom via wire transfers through JP Morgan Chase.
On April 8, 2015, a federal grand jury in the District
of New Hampshire indicted Arif on one count of wire fraud and
aiding and abetting the same, in violation of 18 U.S.C. §§ 1353and 2, and two counts of shipment of misbranded drugs in interstate
commerce, in violation of 21 U.S.C. §§ 331(a), 333(a)(2), and
352(a).3 A superseding indictment was filed on September 9, 2015,
3 The briefs provide no information on the origins of the
investigation into Arif's businesses. However, Arif's indictment
and pre-trial briefing offer the following account. On or about
April 14, 2010, an undercover agent from New Hampshire purchased
a product from one of Arif's websites. When Arif landed in New
York City on February 2, 2014, Department of Homeland Security
special agents were notified and drafted a criminal complaint
charging Arif with wire fraud. The agents appeared before a
magistrate judge in the district of New Hampshire on February 7th,
and an arrest warrant was issued that same day. The original
February 2014 criminal complaint against Arif was sealed until he
was arrested in the Southern District of New York.
- 6 -
adding two additional counts of shipment of misbranded drugs in
interstate commerce and aiding and abetting the same.
Arif waived his right to a jury trial. He filed two
pre-trial motions asking the district court to rule, as a matter
of law, on his good faith defense (that he lacked the requisite
intent to defraud), and on his jurisdictional defense (that the
1938 amendment to the FTCA "preempted" the wire fraud statute as
to his offense). The district court denied the motions in two
separate orders.
On October 11, 2016, Arif pled guilty to one count of
wire fraud, pursuant to Rule 11(a)(2) of the Federal Rules of
Criminal Procedure, reserving the right to appeal the district
court's adverse rulings. He was sentenced to seventy-two months
of imprisonment on May 26, 2017. On appeal, Arif challenges his
conviction and sentence.
II. Analysis
A. The FTCA Does Not Impliedly Repeal the Wire Fraud Statute
Throughout his briefing, Arif couches his argument as
one of the "preemptive effect" of the FTCA over the wire fraud
statute. We believe that this categorization is incorrect. In
the end, the issue is one of congressional intent. "The proper
mode of analysis" in situations such as this, when there is an
alleged conflict between an earlier and a later statute is "that
- 7 -
of implied repeal." State of Rhode Island v. Narragansett Indian
Tribe, 19 F.3d 685, 703 (1st Cir. 1994).
"The cardinal rule is that repeals by implication are
not favored." Posadas v. Nat'l City Bank of N.Y., 296 U.S. 497,
503 (1936); see also Narragansett, 19 F.3d at 703. The federal
judiciary must faithfully adhere to this rule of construction not
only as a matter of logic, but also, of principle. It serves to
honor the doctrine of separation of powers by showing respect for
the legislative branch.
A steady adherence to [the implied repeal
doctrine] is important, primarily to
facilitate not the task of judging but the
task of legislating. It is one of the
fundamental ground rules under which laws are
framed. Without it, determining the effect of
a bill upon the body of preexisting law would
be inordinately difficult, and the legislative
process would become distorted by a sort of
blind gamesmanship, in which Members of
Congress vote for or against a particular
measure according to their varying estimations
of whether its implications will be held to
suspend the effects of an earlier law that
they favor or oppose.
United States v. Hansen, 772 F.2d 940, 944 (D.C. Cir. 1985)
(Scalia, J.).
We put aside the fact, inconvenient to Arif,4 that the
FTCA provision said to impliedly repeal the wire fraud statute was
4 Arif's premise that an earlier Congress can preclude a
later Congress from enacting new laws is itself unsound. See Ray
v. Spirit Airlines, Inc., 767 F.3d 1220, 1225 (11th Cir. 2014)
(holding that "[r]egardless of whether the FAA established a
- 8 -
enacted in 1938, see 15 U.S.C. § 54, long before the wire fraud
statute came into effect in 1952, see 18 U.S.C. § 1343. Because
the wire fraud statute was premised on the mail fraud statute,
however, and that statute was first enacted in 1872, see Skilling
v. United States, 561 U.S. 358, 399 (2010), we will assume
arguendo, in Arif's favor, that the wire fraud statute came first
and that the usual rules for evaluating implied repeal apply.
The Supreme Court has long held that repeals by
implication may not be found "unless [Congress's] intent to repeal
is 'clear and manifest.'" Rodriguez v. United States, 480 U.S.
522, 524 (1987) (per curiam) (quoting United States v. Borden Co.,
308 U.S. 188, 198 (1939)). This, in turn, requires either a
showing that "the later act covers the whole subject of the earlier
one and is clearly intended as a substitute," Posadas, 296 U.S. at
503, or that an "irreconcilable conflict" exists between the
provisions of the two statutes, Rodriguez, 480 U.S. at 524.
Under the first test, this is plainly not a situation
where a later statute (here, assuming arguendo, the FTCA is later),
covers the same subject matter as an earlier statute (again,
assuming arguendo the wire fraud statute is earlier) so
comprehensively that it is meant as a substitute.
'comprehensive federal regulatory scheme governing air carriers,'"
the "1958 FAA could not have repealed any part of the
yet-to-be-born 1970 RICO statute" (quoting Musson Theatrical, Inc.
v. Fed. Express Corp., 89 F.3d 1244, 1250 (6th Cir. 1996))).
- 9 -
So we focus instead on the second test: whether there is
an "irreconcilable conflict" between the two statutes. We find no
such conflict on the face of the statutes.5 To state the obvious,
the FTCA and the wire fraud statute address different activities.
The wire fraud statute requires the use of "wires"; the FTCA does
not. Compare 18 U.S.C. § 1343 (proscribing "[f]raud by wire,
radio, or television"), with 15 U.S.C. § 52 (proscribing the
"[d]issemination of false advertisements"). Further, the FTCA
applies only to false advertising, whereas the wire fraud statute
covers fraud generally.6 See, e.g., United States v. Meléndez-
González, 892 F.3d 9, 13-14, 20 (1st Cir. 2018) (affirming wire
fraud conviction for submitting false information to the military
in order to obtain recruitment bonuses).
5 Since the text of the statutes is clear, we do not resort
to examining the legislative history. See Star Athletica, L.L.C.
v. Varsity Brands, Inc., 137 S. Ct. 1002, 1010 (2017) (holding
that a "controlling principle" of statutory interpretation is "the
basic and unexceptional rule that courts must give effect to the
clear meaning of statutes as written" (quoting Estate of Cowart v.
Nicklos Drilling Co., 505 U.S. 469, 476 (1992))). However, in an
abundance of caution, we add that the legislative history of the
two statutes, as described in the parties' briefing, does not even
begin to show any conflict. The arguments are described later in
the text of this opinion.
6 Indeed, "both Congress and the Supreme Court have
repeatedly placed their stamps of approval on expansive use of the
mail fraud statute," the predecessor to the wire fraud statute at
issue in this case. See Jed S. Rakoff, The Federal Mail Fraud
Statute, 18 Duquesne L. Rev. 772-73 (1980).
- 10 -
Even if the two statutes do overlap in some situations,
such as this one, "[that] is not enough to establish" an implied
repeal; the FTCA "may be merely affirmative, or cumulative or
auxiliary" to the wire fraud statute. Ray v. Spirit Airlines,
Inc., 767 F.3d 1220, 1225 (11th Cir. 2014) (quoting Wood v. United
States, 41 U.S. 342, 363 (1842)). That Arif cannot point to any
"positive repugnancy" between the two statutory provisions is
fatal to his claim of implied repeal. Wood, 41 U.S. at 363.
Further, the Supreme Court has held that "[w]hen two
statutes are capable of co-existence, it is the duty of the courts,
absent a clearly expressed Congressional contention to the
contrary, to regard each as effective." FCC v. NextWave Personal
Commc'ns Inc., 537 U.S. 293, 304 (2003) (quoting J.E.M. AG Supply,
Inc. v. Pioneer Hi-Bred Int'l Inc., 534 U.S. 124, 143-44 (2001)).
Co-existence is more than possible here.
Arif purports to find support for the contrary in the
Supreme Court's decision in Dowling v. United States, 473 U.S. 207(1985). But Dowling is not a case about implied repeal at all.
It dealt with an issue of statutory interpretation: whether the
felony provision of the National Stolen Property Act, 18 U.S.C.
§ 2314, extended to the interstate transportation of bootlegged
records. See Dowling, 473 U.S. at 208. Because the statutory
language was ambiguous, the Court turned to legislative history.
See id. at 218. It concluded that "Congress had no intention to
- 11 -
reach copyright infringement when it enacted § 2314," id. at 226,
given its later enactment of amendments to the Copyright Act, which
included criminal penalties for infringement. See id. at 225-26.
The Court's approach in Dowling to statutory interpretation is
inapplicable here because the text of the wire fraud statute is
clear. And Arif makes no argument that the plain language of the
statute does not embrace his conduct.
Arif nevertheless insists that we turn to the
legislative history of the FTCA because he says that it shows
Congress intended the FTC to have sole enforcement authority over
false advertising cases. He cites to three cases that he argues
establish, as a matter of statutory construction, that the wire
fraud statute cannot be read to reach his conduct: Tamburello v.
Comm-Tract Corp., 67 F.3d 973 (1st Cir. 1995), United States v.
Boffa, 688 F.2d 919 (3d Cir. 1982), and Holloway v. Bristol-Myers
Corp., 485 F.2d 986 (D.C. Cir. 1973). None of these cases are
helpful to him.
Tamburello and Boffa both concern unfair labor
practices, defined by the National Labor Relations Act ("NLRA"),
which is administered by the National Labor Relations Board
("NLRB"). See Tamburello, 67 F.3d at 976; Boffa, 688 F.2d at 927.
But the NLRA and FTCA are not analogous. Congress clearly intended
the NLRA to be a "uniform, nationwide body of labor law interpreted
by a centralized expert agency -- the [NLRB]." Tamburello, 67
- 12 -
F.3d at 976. And the Supreme Court has long recognized the primary
jurisdiction of the NLRB. See Nat'l Licorice Co. v. NLRB, 309
U.S. 350, 365 (1940).
Here, were we forced to consider it, the legislative
history of the 1938 Wheeler-Lea Amendment shows quite the opposite
of what Arif argues. The House Report supporting the amendment's
enactment clearly states that the "criminal offenses will not be
prosecuted by the Federal Trade Commission, but through the
Department of Justice." H.R. Rep. No. 75-1613, at 6 (1937). There
is no indication whatsoever that Congress intended all cases
involving false advertising to be prosecuted solely by the FTC
under the FTCA and no other criminal statute.
Arif cites Holloway, but that case only held that the
FTCA does not create a private right of action, 485 F.2d at 999,
an issue not presented here. The D.C. Circuit gave an informative
description of the FCTA and the 1938 Wheeler-Lea Amendment, no
part of which suggests that Congress intended to preclude criminal
wire fraud prosecutions for conduct also covered by the FTCA. See
id. at 992-97.
It is true that the Third Circuit held in Boffa that the
mail fraud statute does not extend to deprivations of rights which
are created only by section 7 of the NLRA. 688 F.2d at 930. But
that case is inapposite here. The FTCA created no rights, unlike
the statutory creation in the NLRA of the duty of fair
- 13 -
representation, which was enforced by the NLRB in a comprehensive
scheme. Further, Boffa itself expressly held that the NLRA did
not impliedly repeal the mail fraud statute as to conduct that was
"arguably prohibited" by the NLRA and "independently prohibit[ed]"
by the mail fraud statute. Id. at 932.
Tamburello is also plainly inapposite. It concerned the
reach of the NLRB's primary jurisdiction over a private,
non-governmental cause of action alleging a RICO extortion claim.
See Tamburello, 67 F.3d at 976. As we held there, the NLRB had
exclusive jurisdiction because none of the conduct "[was] illegal
without reference to the NLRA. It is the NLRA that prohibits
employers from creating intolerable working conditions to
discourage union activities." Id. at 978 (citations omitted).
That is not at all the situation here.
To the extent Arif tries to find significance in the
lower penalties associated with prosecutions under the FTCA, his
argument also goes nowhere. The Supreme Court squarely rejected
this notion in United States v. Batchelder, 442 U.S. 114 (1979).
There, the Court held that "when an act violates more than one
criminal statute, the Government may prosecute under either so
long as it does not discriminate against any class of defendants."
Id. at 123-24.
We have also rejected arguments of implied repeal of the
wire fraud statute by another statute on this basis. In United
- 14 -
States v. Brien, 617 F.2d 299 (1st Cir. 1980), we held that the
Commodities Futures Trading Act, a statute targeting the specific
type of fraud in that case, did not impliedly repeal the general
mail and wire fraud statutes, even though it carried a lesser
maximum sentence. See id. at 309-310, 310 n.14. We further noted
that "[t]he government's election to prosecute appellants under
the statute which, at the time, provided the more severe penalty,
was an exercise of discretion that violated no rights of
appellants." Id. at 310-11.
Other circuits have adopted similar reasoning. See
Hansen, 772 F.2d at 945 (government could charge defendant
criminally under 18 U.S.C. § 1001 for making false statements,
instead of under the Ethics in Government Act, which only imposes
civil penalties); United States v. Zang, 703 F.2d 1186, 1196 (10th
Cir. 1982) (misdemeanor provisions of the Emergency Petroleum
Allocation Act did not impliedly repeal the mail and wire fraud
statutes as to conduct that violated both); United States v.
Burnett, 505 F.2d 815, 816 (9th Cir. 1974) (government could charge
defendant criminally under § 1001, instead of under a specific
misdemeanor statute for making false statements to obtain
unemployment benefits).
This case provides a good example for why Congress has
vested discretion in the prosecutorial agencies as to which statute
to employ. The offense here was not a run-of-the-mill false
- 15 -
advertising of a single product. Arif, in order to make millions,
mounted an elaborate worldwide scheme to defraud: he deliberately
posted numerous false and misleading statements on over a thousand
websites that he created and maintained in order to gull those
with medical ailments into purchasing his products. The FTCA
penalties for first or second offenders would hardly have been an
adequate deterrent for such egregious conduct. Crime must be made
not to pay.
B. Rejection of Arif's Defense as to Intent to Defraud
Arif next argues that the district court erred in
rejecting his defense that he did not commit wire fraud because he
was pure of heart and mind as to the efficacy of his products.
Both parties requested that the district court rule on
this defense before trial, based on the agreed-upon stipulated
facts.7 The court also considered Arif's assertions in his pro se
briefs, which the court construed in his favor (such as accepting
Arif's assertion that he had a good-faith belief in the efficacy
7 Arif's counsel presented, but refused to endorse, Arif's
good faith defense in its trial briefing. Consequently, Arif
sought leave to argue his good faith defense pro se. The district
court permitted him to do so. Arif then filed a pre-trial motion
asking the district court to rule on the issue as a matter of law.
Shortly after the district court denied this motion, Arif pled
conditionally guilty, reserving the right to challenge the
district court's ruling.
- 16 -
of the drugs8 that he had sold on his websites). Arif insists on
appeal, as he did before the district court, that he is entitled
to a finding that he lacked the requisite intent to commit wire
fraud as a matter of law.
The well-established elements of wire fraud are: "(1) a
scheme or artifice to defraud using false or fraudulent pretenses;
(2) the defendant's knowing and willing participation in the scheme
or artifice with the intent to defraud; and (3) the use of the
interstate wires in furtherance of the scheme." United States v.
Appolon, 715 F.3d 362, 367 (1st Cir. 2013). The district court
correctly rejected Arif's legal defense that the elements of the
wire fraud statute were not met because he did not subjectively
intend to commit fraud.
Arif's argument misapprehends the nature of his charged
offenses. The trial judge accurately ruled that Arif was not being
charged "with selling drugs that did not work as intended . . . or
for harming his customers." Rather, he was charged with "making
misrepresentations on his websites," which were designed to give
false comfort to buyers, in order to induce their purchases.
Specifically, Arif pled guilty to knowingly misrepresenting, inter
8 The district court used the definition of "drug" in the
Food, Drug, and Cosmetic Act ("FDCA"), 21 U.S.C. § 321(g)(1).
Arif's brief uses the language "homeopathic and naturopathic
herbal remedies," but he does not deny that the products are drugs
under the FDCA.
- 17 -
alia, that: (1) there was clinical research showing outstanding
results for the drugs he sold, including specific cure rates; (2)
actual customers attested to the efficacy of the drugs; and (3)
his businesses were operating from various western countries.
Those admissions are more than enough to satisfy the
intent requirement. In United States v. Mueffelman, 470 F.3d 33(1st Cir. 2006), this court expressly held that a wire-fraud
defendant cannot "knowingly . . . make false statements to secure
money from clients" even if he subjectively "believe[s] that his
enterprise w[ill] succeed."9 Id. at 37. So too here. Arif's
belief in the efficacy of his products does not negate his
fraudulent intent when he knowingly made false statements that
went to the heart of his customer's purchases.
Arif counters that the district court erred in relying
on Mueffelman because that case dealt with financial fraud, whereas
his case concerns "a form of alternative medicine." We do not see
9 Our Mueffelman ruling is in accord with the ruling of
other circuits that a defendant's subjective good-faith belief in
the efficacy of the product does not negate his intent to defraud
when the defendant has made false statements to induce purchase.
See United States v. Spirk, 503 F.3d 619, 622 (7th Cir. 2007)
(holding that a good-faith belief that investors would profit does
not negate defendant's intent to defraud); United States v. Benny,
786 F.2d 1410, 1417 (9th Cir. 1986) (holding that although an
honest belief in the truth of misrepresentations may negate an
intent to defraud, a good-faith belief that the victim will suffer
no loss is "no defense at all"); accord United States v. Stull,
743 F.2d 439, 446 (6th Cir. 1984); Sparrow v. United States, 402
F.2d 826, 828 (10th Cir. 1968); United States v. Painter, 314 F.2d
939, 943 (4th Cir. 1963).
- 18 -
this supposed distinction. A lie is a lie, whether it is in the
form of a falsified financial statement or a falsified clinical
study of a drug. There was no error.
Further, Arif's reliance on the Sixth Circuit's opinion
in Harrison v. United States, 200 F. 662 (6th Cir. 1912) -- a
more-than-a-century-old decision that predates both the FTCA and
the wire fraud statute -- is also misplaced. Arif asserts that
Harrison stands for the proposition that
"misrepresentations . . . relating to the advertised efficacy" of
a product are merely "a form of puffery or exaggeration," as long
as "there [is] an 'inherent utility' to the product sold." Not
so. Harrison never held as much. Arif's proposed reading
contradicts the substantial body of law that establishes that the
demarcation line is between misrepresentations that go to the
essence of a bargain and those that are merely collateral. See,
e.g., United States v. Regent Office Supply Co., 421 F.2d 1174,
1179-1181 (2d Cir. 1970).
Here, the misrepresentations Arif made were plainly
material. By falsifying the origin of his products, clinical
studies about them, and customer testimonials, Arif clearly
intended to deprive his victims of the "facts obviously essential
in deciding whether to enter the bargain." United States v.
- 19 -
London, 753 F.2d 202, 206 (2d Cir. 1985). This is not a case of
mere exaggeration or puffery.10
We also reject Arif's argument that the disclaimer on
the third-party credit-card processor's website shows that the
trial judge erred. That disclaimer stated, in pertinent part:
[T]he product(s) purchased are not intended to
diagnose, mitigate, treat, cure or prevent any
disease or health condition, and I will not
use any information or statements contained on
the website through which this product is
purchased, or contained on or in such
product(s), for such purposes.
Arif argues that after reading this statement, any potential
customer of "reasonable prudence" would have known not to rely on
the other statements made on his websites; therefore, "the
misrepresentations did not persist through the point of sale."
But reliance is not an element of wire fraud. Cf. Bridge v.
Phoenix Bond & Indem. Co., 553 U.S. 639, 642, 649-50 (2008)
(holding that "a showing of reliance" is not required for mail
fraud). Accordingly, the presence of a disclaimer does not defeat
Arif's criminal liability under the wire fraud statute. See United
10 Also beside the point is Arif's argument that the trial
judge erred in not drawing a distinction "between a lie or
misrepresentation[] and a specific intent to defraud." This
assertion boils down to an argument that Arif's misrepresentations
were not material. As explained above, these misrepresentations
in sum were plainly material. We do not disaggregate the different
types of misrepresentations charged, and so do not reach questions
of whether any one of them, independently, would suffice. Nor
does Arif make such an argument.
- 20 -
States v. Weaver, 860 F.3d 90, 95 (2d Cir. 2017); United States v.
Ghilarducci, 480 F.3d 542, 546-47 (7th Cir. 2007).
Finally, Arif argues that even if his intent argument
was irrelevant, he nonetheless should have been able to present
his good-faith belief to the fact finder, in the hopes of
exoneration. That is not how the issue was framed to the trial
court, so the argument is waived. And there is no Sixth Amendment
right to present a defense based on irrelevant evidence. See
United States v. DeCologero, 530 F.3d 36, 72-74 (1st Cir. 2008).
We add that, in any event, the argument is misplaced.
Arif chose not to take his case to a jury or to have a bench trial.
He chose to plead guilty, presumably because it would give him
some benefits. After all, the prosecution agreed to dismiss the
remaining four counts of shipping misbranded drugs in commerce and
aiding and abetting the same, which each carried a maximum penalty
of three years of imprisonment, see 21 U.S.C. § 333(a)(2). By
pleading guilty, Arif reduced his potential sentence range.
C. There Was No Guidelines Calculation Error
We turn to address Arif's challenges to his sentence.
First, he contends that the district court erred in calculating
the Guidelines range by using Arif's total revenues, minus refunds,
as the loss figure. Specifically, Arif argues that the sales from
one group of websites, Botanical Sources, should have been excluded
from the loss amount because those websites did not contain any
- 21 -
misrepresentations about the products, only a misleading
forwarding address. He also argues that the government failed to
prove that his customers were dissatisfied or suffered any
pecuniary harm, as there were only five complaints out of over
128,000 transactions, and "only a small percentage of customers"
sought refunds "even though the product was clearly marked as being
from Pakistan." We see no error.
Under this court's decision in United States v. Alphas,
785 F.3d 775 (1st Cir. 2015), "a sentencing court may use the face
value of the claims as a starting point in computing loss," where,
as here, "defendant's claims were demonstrably rife with fraud."
Id. at 784. "The burden of production will then shift to the
defendant, who must offer evidence to show (if possible) what
amounts represent legitimate claims." Id.
Here, the district court gave Arif the opportunity to
show that a portion of the revenue obtained was not infected by
the fraudulent misrepresentations and it concluded that he had
presented insufficient evidence to that effect. There was no clear
error in that factual conclusion. That some customers may not
have been dissatisfied after making purchases from sites with false
information has no bearing on the loss amount, which is intended
to reflect the revenue from sales that were induced by Arif's
fraudulent misrepresentations.
- 22 -
In any event, even if the loss calculation was in error,
there would have been "no reasonable probability" of prejudice.
Molina-Martinez v. United States, 136 S. Ct. 1338, 1346 (2016).
The sentencing judge departed substantially downward from the
Guidelines range. The judge explained that regardless of the
Guidelines calculation, she would have "reach[ed] the same result
with respect to the appropriate sentence, via this variance"
because "a 72-month sentence is a fair and just sentence based
on . . . the totality of circumstances and totality of facts in
the record." Accordingly, any error would have been harmless.
See id. at 1347; United States v. Romero-Galindez, 782 F.3d 63, 70
(1st Cir. 2015).
D. The Sentence Was Substantively Reasonable
Next, Arif argues that his sentence was substantively
unreasonable because the trial judge "failed to take adequate
account" of the six-month maximum sentence under the FTCA. Despite
his failure to object at sentencing, we assume, favorably to Arif,
that our standard of review is for abuse of discretion. See United
States v. Tanco-Pizarro, 892 F.3d 472, 483 (1st Cir. 2018).
His argument clearly fails under any standard. The
district court obviously was not restricted to the FTCA range of
penalties, and it had been made well aware of that range. In
imposing the seventy-two-month sentence, the court noted that
Arif's colloquy at sentencing failed to demonstrate "complete and
- 23 -
utter total remorse." Nevertheless, the trial judge still imposed
a sentence well below the recommended Guidelines range of 134 to
168 months.
There was no error at all in the sentence; it was not
unreasonably long.
Affirmed.
- 24 -