United States v. Izzat Freitekh — Published Opinion (Fourth Circuit, September 3, 2024)
Summary
A published opinion of the United States Court of Appeals for the Fourth Circuit, argued May 9, 2024, and decided September 3, 2024, on appeals by Izzat Freitekh and Tarik Freitekh from the Western District of North Carolina. Judge Thacker writes that, following a jury trial, the Appellants were convicted of various offenses arising from their roles in a fraudulent Paycheck Protection Program (PPP) loan scheme and received $1.75 million in PPP loan funds to which they were not entitled. The Appellants argued that the evidence was insufficient and challenged sentencing enhancements under Guidelines § 2B1.1. The court states that the Appellants fail to establish any reversible error and affirms.
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- Source documents
- Document type
- 00409934908
- Date
- 2026-07-01
- Case
- 00409934908
Cite this document
“United States v. Izzat Freitekh — Published Opinion (Fourth Circuit, September 3, 2024).”
Dated 2026-07-01. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2026-07-01-00409934908/
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USCA4 Appeal: 22-4735 Doc: 105 Filed: 09/03/2024 Pg: 1 of 50
PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 22-4735
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
IZZAT FREITEKH,
Defendant - Appellant.
No. 22-4736
UNITED STATES OF AMERICA,
Plaintiff - Appellee,
v.
TARIK FREITEKH, a/k/a Tareq Freitekh,
Defendant - Appellant.
Appeals from the United States District Court for the Western District of North Carolina,
at Charlotte. Frank D. Whitney, District Judge. (3:20-cr-00435-FDW-DCK-1; 3:20-cr-
00435-FDW-DCK-2)
Argued: May 9, 2024 Decided: September 3, 2024
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Before THACKER, QUATTLEBAUM, and BENJAMIN, Circuit Judges.
Affirmed by published opinion. Judge Thacker wrote the opinion in which Judge Benjamin
joined. Judge Quattlebaum wrote an opinion concurring in part, and concurring in the
judgment.
ARGUED: William Robinson Heroy, GOODMAN, CARR, LAUGHRUN, LEVINE &
GREENE PLLC, Charlotte, North Carolina; Mark Allen Yurachek, MARK ALLEN
YURACHECK & ASSOCIATES, LLC, Atlanta, Georgia; James Walter Kilbourne, Jr.,
ALLEN STAHL & KILBOURNE, PLLC, Asheville, North Carolina, for Appellants.
Kevin James Barber, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellee. ON BRIEF: Nicole M. Argentieri, Acting Assistant Attorney
General, Lisa H. Miller, Deputy Assistant Attorney General, Appellate Section, Jeremy R.
Sanders, Assistant Chief and Appellate Counsel, Fraud Section, Criminal Division,
UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Dena J. King,
United States Attorney, Charlotte, North Carolina, Amy E. Ray, Assistant United States
Attorney, OFFICE OF THE UNITED STATES ATTORNEY, Asheville, North Carolina,
for Appellee.
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THACKER, Circuit Judge:
Following a jury trial, Izzat Freitekh (“Izzat”) and Tarik Freitekh (“Tarik” and with
Izzat, “Appellants”) were convicted of various offenses arising from their roles in a
fraudulent Paycheck Protection Program 1 (“PPP”) loan scheme. As a result of the scheme,
Appellants received $1.75 million in PPP loan funds to which they were not entitled.
Appellants lodge several arguments on appeal. Appellants primarily argue that the
evidence supporting their convictions was insufficient. Tarik also avers that the district
court violated his Sixth Amendment right to counsel. Izzat argues that the district court
improperly limited his opportunity to cross examine Tarik’s prior counsel turned witness
in violation of the Sixth Amendment’s Confrontation Clause as well as erred by admitting
his own prior counsel’s testimony as a witness for the Government. Finally, Appellants
contend that the district court improperly inflated their sentencing range by applying
certain sentencing enhancements pursuant to the United States Sentencing Guidelines
(“Guidelines”) § 2B1.1.
For the reasons stated below, Appellants fail to establish any reversible error.
Therefore, we affirm.
1
In 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security
(“CARES”) Act, Pub. L. 116-136, § 1102, 134 Stat. 285, 286 (2020). Section 1102 of the
CARES Act created the Paycheck Protection Program to grant forgivable loans to small
business owners for certain expenses. Id.
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I.
A.
Izzat owned a restaurant in Charlotte, North Carolina called La Shish Kabob, as well
as related businesses including La Shish Catering, Aroma Packaging Systems, and Green
Apple Catering (the “Freitekh Businesses”). Izzat managed these businesses with the help
of his wife, Iman, and his eight children, including his son, Tarik.
1.
The PPP Loan Applications
Between April 7 and May 1, 2020, Appellants submitted five PPP loan applications
(the “Loan Applications”) to Bank of America (“BOA”) through an entity called Lendio,
a “facilitator for small business loans.” J.A. 783. 2 The Loan Applications were for each
of the four Freitekh Businesses, including a duplicate for Aroma Packaging Systems. Four
of the five Loan Applications were approved in May 2020. 3 As a result, $1.75 million was
deposited into several bank accounts controlled by Izzat, including one account for which
Tarik was also a signatory. Once these funds were deposited, Izzat used the funds to,
among other things, write checks to his family members in the amount of $30,000 apiece.
The memorandum lines on these checks stated that they were for purposes such as
“Payroll” and “Paycheck.”
2
Citations to the “J.A.” refer to the Joint Appendix filed by the parties in this appeal.
BOA terminated one application that it discovered was a duplicate loan application
3
for Aroma Packaging Systems.
4
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In late May 2020, BOA began investigating the Loan Applications after it
discovered that La Shish Catering’s application had used the employer identification
number 4 (“EIN”) of an unrelated company. Upon review, BOA flagged several issues and
inconsistencies in connection with the Loan Applications. BOA and the Government later
discovered that all of the Loan Applications were fraudulent.
The Loan Applications contained false representations and were corroborated by
supporting documents that were fabricated, including fake payroll summaries and tax
documents that were never filed with the Internal Revenue Service (“IRS”). For instance,
the Green Apple Catering application sought a $1 million loan based on certifications that
the company was in operation as early as February 15, 2020 5 and had 25 employees. In
reality, Green Apple Catering did not exist until March 2020, and it had no employees.
The other Loan Applications similarly inflated the companies’ employee numbers and
payrolls, and they included falsified tax and payroll documents.
2.
The July 2020 Meeting with the Government
Izzat requested a proffer meeting with the Government that took place on July 27,
2020 (the “July 2020 Meeting”). Izzat disclaimed any involvement in preparing or
submitting the Loan Applications. Indeed, during the July 2020 Meeting, Izzat stated that
4
A business’s EIN is a unique nine-digit identifier assigned by the Internal Revenue
Service to businesses for tax purposes.
To qualify for a PPP loan, an entity must have been “in operation on February 15,
5
2020” according to Section 1102 of the CARES Act.
5
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neither he nor his wife contacted BOA in connection to the Loan Applications. Instead,
Izzat accused a third party, Kyber Capital (“Kyber”), of initiating and filing the false Loan
Applications. Izzat claimed that Kyber had contacted him by phone in March 2020,
offering assistance in applying for PPP loans. He claimed that Kyber proposed to handle
the submission of the PPP loan applications, with the condition that it receive 3% of the
loan amount as a fee.
According to Izzat, Kyber also requested that he pay an up front fee of $1,000 in
order to initiate the loan application process. Izzat alleged that he paid this fee by
electronically transferring $1,000 to an entity called “Seven Digital FZE” at Kyber’s
request. Additionally, Izzat stated that Kyber required him to execute power of attorney
documents, which he alleged he did on April 1, 2020. Following the July 2020 Meeting,
Izzat’s attorney, Preston Odom (“Odom”) sent the Government a package containing
envelopes that Kyber had ostensibly used to mail the power of attorney documents to Izzat
as well as additional information with respect to the Seven Digital bank account.
Under scrutiny, Appellants’ story fell apart. First, the envelopes Kyber allegedly
used to mail Izzat the power of attorney documents listed a return address and phone
number for Kyber that did not correspond to any known company named Kyber or any
entity associated with PPP loans. Because the envelopes were purchased with cash, the
Government was unable to trace them back to any individual purchaser. But, notably, the
envelopes were mailed from a post office less than a mile from Tarik’s California
residence. Moreover, the envelopes did not align with the timeline provided by Izzat. The
6
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envelopes were postmarked more than a month after Izzat claimed he received the power
of attorney forms from Kyber.
Second, the Government was able to trace the IP addresses that generated the online
submissions in support of the Loan Applications. The IP addresses traced back to
Appellants. Moreover, within Lendio’s system, which Appellants used to facilitate their
application process, “all of the key events associated with setting up the account [for the
Loan Applications], submitting the applications, certifying the application[s], and
uploading supporting documents” all occurred from an IP address, ending in -192, which
traced back to Tarik’s California residence. J.A. 1834. A second IP address, ending in -
252, was also associated with the Lendio account. The -252 IP address belonged to La
Shish Kabob. The first logged event from that IP address occurred in Charlotte, North
Carolina on May 23rd, 2020. Through a subpoena for the contents of Tarik’s iCloud
account, the Government was able to deduce that Tarik traveled to Charlotte “the day
before that first logged event” from La Shish Kabob’s IP Address. Id. at 1335.
And often, the activity on Tarik’s IP address occurred close in time after Izzat
forwarded emails he received from BOA to Tarik. For example, on April 16, 2020, Izzat
received an email from BOA with the subject line, “We have not received all of your loan
application documents,” asking for additional documentation in support of the Loan
Applications. J.A. 1316. That same day, Izzat forwarded the email to Tarik. That evening,
someone using Tarik’s IP address logged in and uploaded the additional documents
requested by BOA to support the Loan Applications. Additionally, despite Izzat’s claims
that neither he nor his wife ever contacted BOA about the Loan Applications, the
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Government recovered multiple emails from Iman’s email address to BOA officials. In
those emails, someone using Iman’s email address provided BOA with updated
information to support the Loan Applications and requested estimated timelines from BOA
on the processing time for the Loan Applications.
The circumstances surrounding the $1,000 initial payment to Kyber raised similar
credibility issues. First, the Seven Digital email account that confirmed receipt of the
$1,000 payment was linked to SMM Lite, a company run by an associate of Tarik’s.
Beyond that, the Seven Digital bank account, which was supposed to have received the
$1,000 initial payment to Kyber, did not exist.
Finally, Izzat falsely indicated on the checks to his family members that they were
payroll payments. At trial, Izzat admitted that he used some of the funds received to give
“each child $30,000,” because, “he owed them money and they worked with him all his
life.” J.A. 1087–88. But none of the recipients were listed on the relevant companies’
payroll records. Despite this, the memo lines on the checks read “Payroll” or “Paycheck.”
Presumably, Izzat made these notations on the checks in order to give the impression that
he was adhering to the CARES Act’s permitted uses of PPP loan funds. 6
Ultimately, BOA froze the accounts into which the PPP loan money was deposited,
and the Government was able to seize $1.3 million of the $1.75 million in PPP funds that
6
Section 1102 of the CARES Act limited “allowable uses” of PPP loans to business
expenses such as “payroll costs,” “employee salaries, commissions, or similar
compensations,” “rent,” and “utilities.” Pub. L. 116-136, § 1102, 134 Stat. 285, 290 (2020)
(codified as amended at 15 U.S.C. § 636(a)(36)(F) (2022)).
8
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Appellants had received from the frozen accounts. Eventually, that money was returned to
BOA as the lender of the PPP loans.
B.
1.
In December 2020, Appellants were indicted for bank fraud and conspiracy to
commit wire fraud (“Original Indictment”). Additionally, the Original Indictment included
a charge against Izzat for false statements allegedly made during the July 2020 Meeting
with the Government. The false statement charge relied on statements Izzat made
regarding the existence of Kyber, including the alleged envelopes Izzat provided to the
Government through his counsel, which the Government alleged were falsified. The false
statements charge also arose out of Izzat’s claims that neither he nor his wife ever contacted
BOA about the Loan Applications, when, in fact, someone using Iman’s email address
contacted BOA. Because Odom, who had represented Izzat during the July 2020 Meeting,
was to be a necessary witness for the Government, Izzat opted for new counsel.
During the discovery process, Tarik’s attorney, Christopher Fialko (“Fialko”)
provided the Government with computer screenshots of a chat conversation between Tarik
and an alleged representative of Kyber. This conversation allegedly took place on Seven
Digital’s website, smmlite.com. The screenshots purported to show Tarik providing
various information and login credentials to the Kyber representative for the purpose of
obtaining the PPP loans. Toward the end of the purported chat, the Kyber representative
expressed dissatisfaction, stating “Why you don’t send me my 3 percent? You keep
ignoring. It’s not good. I only was paid $1,000.” J.A. 1371.
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Like the Kyber envelopes, these screenshots were inconsistent with Appellants’
account of the events involving Kyber. Tarik’s chat conversation with the alleged Kyber
representative was time-stamped a week before the $1,000 payment was even made. And
the chat messages, like the Seven Digital bank account, were also associated with SMM
Lite -- the company run by Tarik’s associate.
On August 17, 2021, a multi-count superseding indictment (“Superseding
Indictment”) -- the operative indictment here -- was returned against Appellants. In
addition to the counts in the Original Indictment, which were conspiracy to commit wire
fraud (Count One against both Appellants); bank fraud (Count Two against both
Appellants); and making false statements (now Count Eight against Izzat), the Superseding
Indictment added the following charges:
• Count Three -- conspiracy to commit money laundering (both Appellants);
• Count Four -- money laundering in the amount of $149,000 for an online banking
transfer (both Appellants);
• Count Five -- money laundering in the amount of $30,000 for a check written in the
amount of $30,000 (Izzat);
• Count Six -- money laundering in the amount of $30,000 for a check written in the
amount of $30,000 (both Appellants);
• Count Seven -- money laundering in the amount of $30,000 for a check written in
the amount of $30,000 (Izzat); and,
• Count Nine -- falsifying and concealing material facts (Tarik).
Count Nine of the Superseding Indictment charged Tarik with submitting false evidence to
the Government by “produc[ing] computer screenshots to the [G]overnment purporting to
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show Tarik . . . providing information to an unknown individual [allegedly from Kyber]
and that the unknown individual submitted the loan applications.” J.A. 47.
2.
To prosecute the false statements charges (Counts Eight and Nine) against Izzat and
Tarik, the Government requested that Appellants stipulate to the admissibility of the
underlying documentation -- that is, the envelopes, the bank account documents, and the
chat screenshots. When Appellants refused to stipulate, the Government filed a “Motion
for Inquiry into Status of Counsel” since Fialko became a necessary witness for the
Government because he would be required to testify regarding the provenance of the
screenshots. Fialko agreed that his role as both counsel and witness would be improper
and moved to withdraw as Tarik’s counsel. The district court granted the motion and
delayed trial for six months to allow new counsel adequate time to prepare a defense.
When the Government issued subpoenas to Fialko and Odom for trial testimony,
Appellants moved to quash the subpoenas primarily on the basis that the attorneys’
testimony would breach attorney-client privilege. While Fialko and Odom joined in each
of Appellants’ motions, they also filed their own motions objecting to the Government’s
subpoenas. Tarik’s motion alternatively suggested modifying the subpoena to limit the
Government’s examination and restrict the Government’s questioning to only the
attorneys’ involvement and actions regarding the purportedly false evidence. The district
court agreed with this alternative approach and limited the trial subpoenas to Fialko and
Odom to the following inquiries:
1. Did you previously represent [Appellant] in this case?
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2. During that representation, did you receive [the documents
at issue] that you provided to the Government on [date]?
3. What is the name of the person who gave you the
[documents at issue]?
4. Were these documents provided to the Government for
[reciprocal discovery/in connection with an interview]?
5. Did you alter the [documents at issue] in any way before
providing them to the Government?
J.A. 360–61.
During the trial, Odom and Fialko, as the former attorneys of Appellants, provided
limited testimony according to the court mandated questions. The district court instructed
the jury that neither Fialko nor Odom was testifying “on their own volition,” but instead
was appearing because the court “ha[d] issued a subpoena forcing them to [testify].” J.A.
1143. Then, the district court excused the jury from the courtroom in order to conduct a
preview of the cross examination of prior counsel so as to assure that no issues of attorney-
client privilege would arise. Thereafter, the jury returned for the actual cross examination.
During his testimony, Odom stated that he received the Kyber envelopes and the
Seven Digital bank account information from Izzat. Fialko testified that he received the
screenshots depicting Tarik’s chats with the alleged Kyber representative via email from
someone named Rashan Verm. Fialko recalled that he made “a couple of attempts” to
reach out to Verm after receiving the email, but Fialko never received a response, nor was
he able to garner additional information as to Verm’s identity. J.A. 1254.
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3.
Izzat testified in his own defense at trial. He admitted that the Loan Applications
for his businesses were falsified but placed the blame on Kyber as the alleged preparer of
the Loan Applications. Izzat claimed he only realized something was amiss when he
received the $1 million loan for Green Apple Catering on May 14, 2020. This was due to
Green Apple’s lack of employees and its formation occurring after the requisite date for an
entity to qualify for a PPP loan -- February 15, 2020. Izzat again denied having written
“Payroll” in the memo line on any of the checks to his family members. Izzat said that he
did not speak enough English and therefore “relied on English-speaking family members
to write words on checks after he filled in the numbers.” Izzat’s Opening Br. at 17. Izzat
also testified that one of the “Payroll” checks was made out to his son-in-law for replacing
La Shish Kabob’s air conditioning system. Tarik chose to invoke his Fifth Amendment
right to remain silent and opted not to testify at trial.
The jury found Izzat guilty of the following:
• Count Three (conspiracy to commit money laundering);
• Count Five (money laundering);
• Count Six (money laundering);
• Count Seven (money laundering); and,
• Count Eight (false statements).
Izzat was acquitted of the following charges:
• Count One (conspiracy to commit wire fraud);
• Count Two (bank fraud); and,
• Count Four (money laundering).
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As to Tarik, the jury found him guilty of the following:
• Count One (conspiracy to commit wire fraud);
• Count Two (bank fraud);
• Count Three (conspiracy to commit money laundering);
• Count Four (money laundering); and,
• Count Nine (falsifying and concealing material facts).
The jury acquitted Tarik of Count Six (money laundering). The district court denied
Appellants’ separate motions for a judgment of acquittal and a new trial.
4.
According to Izzat’s Presentence Investigation Report (“PSR”), his money
laundering convictions subjected him to Guidelines § 2S1.1, which sets the base offense
level by reference to the Guideline section “for the underlying offense from which the
laundered funds were derived.” Guidelines § 2S1.1(a)(1). The underlying offense here
was the bank fraud that resulted in the improper deposit of the PPP loan money. The
sentencing range for fraud is determined by reference to Guidelines § 2B1.1 which
calculates the amount of loss derived from the fraudulent scheme. The PSR noted that
despite Izzat being acquitted of the bank fraud and conspiracy to commit wire fraud
charges, Guidelines § 1B1.3 nonetheless holds Izzat accountable for the conduct related to
the PPP loan scheme because the evidence presented at trial proved that Izzat participated
in the illicit conduct underlying both counts. Thus, the PSR recommended a base offense
level of six for Izzat.
Because Appellants’ fraud sought $1.75 million in loans to which they were not
entitled, the PSR recommended a 16 level increase to Izzat’s base offense level. This is
because Guidelines § 2B1.1 recommends a 16 level increase if “the amount of loss [was]
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more than $1,500,000 but [did] not exceed $3,500,000.” J.A. 2655 (citation omitted).
Izzat’s PSR also recommended the following enhancements:
• +2 levels because Izzat had “derived more than $1,000,000 in gross receipts
from one or more financial institutions as a result of the offense,” id.,
pursuant to Guidelines § 2B1.1(b)(17)(A);
• +2 levels for obstruction of justice pursuant to Guidelines § 3C1.1;
• +2 levels for use of sophisticated means pursuant to Guidelines §
2B1.1(b)(1)(l); and,
• +1 level pursuant to Guidelines § 2S1.1(b)(2)(A) because Izzat was
convicted of a crime in violation of 18 U.S.C. § 1957. 7
In sum, the PSR recommended a total offense level of 29, which, in light of Izzat’s criminal
history category of I, resulted in a recommended Guidelines sentencing range of 87 to 108
months of imprisonment.
Tarik’s PSR followed a similar format. Based on his fraud convictions, Tarik’s PSR
assigned a base offense level of six pursuant to Guidelines § 2B1.1. Tarik’s PSR
recommended the following enhancements:
• +16 levels because the amount of loss was more than $1,500,000 but less
than $3,500,000 pursuant to Guidelines § 2B1.1(b)(1)(I);
• +2 levels for use of sophisticated means pursuant to Guidelines §
2B1.1(b)(1)(l);
• +2 levels for obstruction of justice pursuant to Guidelines § 3C1.1; and,
7
Izzat’s convictions pursuant to 18 U.S.C. § 1957 include Counts Five through
Seven, the substantive money laundering counts.
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• +1 level pursuant to Guidelines § 2S1.1(b)(2)(A) because Tarik was
convicted of a crime in violation of 18 U.S.C. § 1957. 8
This resulted in a total offense level of 27, which based on Tarik’s criminal history category
of I, amounted to a Guidelines sentencing range of 70 to 87 months of imprisonment.
5.
At his sentencing hearing, Izzat made multiple objections to enhancements
recommended in his PSR. Izzat objected to the loss amount calculation as well as to the
gross receipts enhancement. Regarding the loss attributed to Izzat, he maintained that the
evidence was insufficient to tie him to the fraudulent Loan Applications, such that Izzat
caused $0 in actual or intended loss and was undeserving of any loss enhancement. As to
the gross receipts enhancement, Izzat argued that it was improperly applied because Izzat
was acquitted on all of the substantive fraud counts. In other words, Izzat argued that he
never received gross receipts as a result of the crimes for which he was convicted, which
included only conspiracy to commit wire fraud, money laundering, and false statements.
In ruling on Izzat’s objections, the district court noted, “We do look at all of the
evidence, even relevant conduct.” J.A. 2258. And in looking to Izzat’s relevant conduct,
the district court held that “the evidence presented at trial proved that [Izzat] participated
in the conspiracy to commit wire fraud and [the] bank fraud [scheme], and that these
offenses resulted in the funds laundered into a money laundering conspiracy, even if [Izzat]
8
Tarik’s conviction pursuant to 18 U.S.C. § 1957 arises from Count Four, a
substantive money laundering count.
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wasn’t found guilty beyond a reasonable doubt for [the substantive charges].” Id. Thus,
the district court overruled both of Izzat’s sentencing objections.
At his sentencing, Tarik also lodged several objections to the enhancements listed
in his PSR. Tarik objected to the amount of “loss” calculated for his offenses. Tarik
objected to the use of the full PPP Loan Application amount of $1.75 million to calculate
his Guidelines sentencing range. In his view, only the laundered amount of money --
$149,000 -- should have been used to calculate the base offense level for his money
laundering conviction (Count Four). The $149,000 amount is derived from the bank
transfer amount giving rise to Count Four of the Superseding Indictment. Further, Tarik
argued that because the Government recovered approximately $1.3 million of the $1.75
million PPP loan money, the actual loss amount of $449,691, or the money the Government
did not recover, should have been used to calculate his base offense level for his fraud
convictions (Counts One and Two). The district court instead used the “intended loss,”
which equated to the full $1.75 million.
Tarik also objected to the sentencing enhancement for use of sophisticated means.
He argued that sophistication requires more than the common concealment or complexities
inherent in fraud. He argued that the PPP loan scheme necessarily required the fabrication
of documents and the establishment of a shell corporation, and, therefore, it did not meet
the threshold for utilizing sophisticated means. The district court overruled each of Tarik’s
objections.
The district court sentenced Izzat to a term of 48 months of imprisonment and Tarik
to 87 months of imprisonment, each to be followed by three years of supervised release.
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This timely appeal followed.
II.
On appeal, Izzat challenges the sufficiency of the evidence to support his
convictions for conspiracy to commit money laundering (Count Three) 9 and making false
statements to the Government (Count Eight); the district court’s limitation on his cross
examination of Tarik’s former attorney, Fialko; the court’s admission of the testimony of
Izzat’s own former attorney, Odom; and the court’s calculation of his Guidelines
sentencing range.
For his part, Tarik contests the sufficiency of the evidence to support his falsified
evidence conviction (Count 9); 10 the district court’s grant of Fialko’s motion to withdraw
as Tarik’s counsel; the district court’s calculation of his Guidelines sentencing range; and
the reasonableness of his sentence pursuant to 18 U.S.C. § 3553(a).
We approach these issues by first addressing the sufficiency of the evidence, then
turning to the contentions regarding Appellants’ former attorneys, and finally turning to
the issues at sentencing.
9
Izzat does not challenge his convictions for money laundering (Counts Five
through Seven).
10
Tarik does not challenge the sufficiency of the evidence against him on the
remaining counts of conviction.
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A.
Whether Sufficient Evidence Supports Appellants’ Convictions
1.
Once a jury returns a guilty verdict, “the court may set aside the verdict and enter
an acquittal” if the court concludes that the evidence presented at trial is insufficient to
sustain a conviction. Fed. R. Crim. P. 29(c)(2). “Reversal for insufficient evidence is
reserved for the rare case where the prosecution’s failure is clear.” United States v. Beidler,
110 F.3d 1064, 1067 (4th Cir. 1997) (internal quotation marks omitted). Thus, a defendant
who challenges the sufficiency of the evidence “bears a heavy burden.” Id. (internal
quotation marks omitted).
On appeal, we review a denial of a motion for acquittal de novo. United States v.
Smith, 21 F.4th 122, 139 (4th Cir. 2021). “If there is substantial evidence to support the
verdict, after viewing all of the evidence and the inferences therefrom in the light most
favorable to the Government, then we must affirm.” United States v. Murphy, 35 F.3d 143,
148 (4th Cir. 1994); see also Musacchio v. United States, 577 U.S. 237, 243 (2016) (“The
reviewing court considers only the legal question whether, after viewing the evidence in
the light most favorable to the prosecution, any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt.” (internal quotation marks
omitted)). “Furthermore, this court cannot make its own credibility determinations but
must assume that the jury resolved all contradictions in testimony in favor of the
Government.” United States v. Penniegraft, 641 F.3d 566, 572 (4th Cir. 2011) (cleaned
up).
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2.
Appellants argue that the district court erred in denying their motions for judgment
of acquittal by concluding that substantial evidence supported Appellants’ convictions.
Izzat contends that the evidence fails to support a conviction against him for Count Three
(conspiracy to commit money laundering) and Count Eight (false statements). Tarik argues
that the evidence was insufficient to convict him on Count Nine (falsifying and concealing
material evidence).
For the reasons stated below, we affirm the district court’s denial of Appellants’
motions for judgment of acquittal.
a.
Sufficiency of the evidence to support Count Three
Izzat argues that the evidence at trial was insufficient to support a conviction on
Count Three -- conspiracy to commit money laundering. Count Three alleges Izzat’s
knowledge of, or at least willful blindness to, the illicit nature of the Loan Applications. A
conviction for the crime grounding the conspiracy, substantive money laundering pursuant
to 18 U.S.C. § 1957, requires proof that “the defendant knowingly participated in a
monetary transaction involving criminally derived proceeds.” United States v. Cherry, 330
F.3d 658, 668 (4th Cir. 2003) (internal quotation marks omitted). A money laundering
conspiracy pursuant to 18 U.S.C. § 1956(h) “require[s] nothing more than an agreement to
launder money.” United States v. Ojedokun, 16 F.4th 1091, 1105 (4th Cir. 2021). The
Government “may prove knowledge by establishing that the defendant deliberately
shielded himself from clear evidence of critical facts that are strongly suggested by the
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circumstances” surrounding the conspiracy. United States v. Vinson, 852 F.3d 333, 358
(4th Cir. 2017) (internal quotation marks omitted).
Izzat argues that the district court failed to consider the lack of direct evidence
supporting any knowledge on his part of a money laundering scheme. For instance, Izzat
emphasizes that no forensic evidence inculpating Izzat ever arose, “such as
communications directing others to forge documents.” Izzat’s Opening Br. at 21. Izzat
also argues that even if he “wrote” the checks improperly distributing the PPP loan money
to his family, it would have only been the dollar amounts, the date, and his signature -- “not
the English words” such as “Payroll.” Id. at 10, 22. Instead, Izzat shifts the blame to his
daughter, who had “special access” to Izzat’s business dealings and “helped . . . with check
writing.” Id. at 22.
We conclude that the circumstantial evidence cited by the Government is sufficient
to uphold Izzat’s conviction on Count Three. As proof of Izzat’s conspiracy to launder
money, the Government submitted multiple emails in which Izzat forwarded Tarik the
requests from BOA for more information or documentation in support of the Loan
Applications. It was following these emails that Tarik allegedly uploaded falsified
documentation in support of the Loan Applications. This provided the jury a basis from
which to infer that Izzat conspired to engage in monetary transactions involving criminally
derived proceeds by, for example, writing checks to his family members with funds from
the fraudulently obtained PPP loans. Regarding the checks made out to his family, Izzat
admitted at trial that he “paid [his] family” because they had worked to help him and he
“thought to help them as they help[ed] [him].” J.A. 1672–73. Even if Izzat denied writing
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“Payroll” on the checks to his family as part of the scheme, it is the role of the jury to weigh
credibility. See Penniegraft, 641 F.3d at 572.
Despite Izzat’s contentions to the contrary, the Government was not required to
present direct evidence of his knowledge of the illicit nature of the funds -- evidence of
willful blindness was sufficient for the jury to convict. As the Supreme Court has stated,
“[b]ecause the text of § 1956(h) does not expressly make the commission of an overt act
an element of the conspiracy offense, the Government need not prove an overt act to obtain
a conviction.” Whitfield v. United States, 543 U.S. 209, 214 (2005). It is enough to support
the conspiracy conviction if substantial evidence supports that Izzat “deliberately turned a
blind eye to any illegal . . . activity” regarding the Loan Applications and illicitly obtained
funds. Vinson, 852 F.3d at 357 (citation omitted).
Considering the emails between Izzat and Tarik, as well as the checks written by
Izzat to his family improperly distributing the PPP loan money, we hold that the evidence
presented at trial was sufficient to prove conspiracy to commit money laundering, and thus
sufficient to uphold Izzat’s conviction on Count 3.
b.
Sufficiency of the evidence to support Count Eight
Count Eight charged Izzat with knowingly making materially false statements in
violation of 18 U.S.C. § 1001(a)(2) during the July 2020 Meeting with the Government.
To prove a violation of § 1001(a)(2), the Government must establish that (1) “the defendant
made a false statement to a governmental agency or concealed a fact from it or used a false
document knowing it to be false”; (2) “the defendant acted knowingly or willfully”; and
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(3) “the false statement or concealed fact was material to a matter within the jurisdiction
of the agency.” United States v. Ismail, 97 F.3d 50, 60 (4th Cir. 1996) (internal quotation
marks omitted).
In support of Izzat’s conviction on Count Eight, the Government relies on allegedly
false statements made by Izzat during the July 2020 Meeting. Specifically, through
counsel, Izzat provided the Government with the purported Kyber power of attorney
documents, the envelopes associated with those documents, and information, including
screenshots, of the Seven Digital bank account to which Izzat transferred the alleged $1,000
payment to Kyber. The Government alleged these documents were falsified. Count Eight
also relies on statements made by Izzat during that same meeting that neither he nor his
wife, Iman, emailed BOA officials regarding the status of the PPP loans. The Government
likewise alleged these statements were false.
Substantial evidence supports Izzat’s conviction as to Count Eight. During the July
2020 Meeting with the Government, Izzat claimed that Kyber collected his information
and business records and submitted the Loan Applications on his behalf in exchange for a
payment of $1,000 and a return of 3% of the loan amount. During trial, Izzat confessed to
having concerns about the PPP loans and acknowledged that he sensed “something was
wrong.” J.A. 1647. And Izzat further testified that he realized that something was not right
when he received the $1 million loan for Green Apple Catering in May 2020, which “way
exceeded his needs.” Id. at 1648. Notably, Green Apple Catering had no employees and
had only been operational for two months prior to Appellants obtaining the loan. Yet,
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despite these suspicions arising months before the July 2020 Meeting with the Government,
Izzat still placed full blame for the PPP loan scheme on Kyber.
And, at trial, the Government presented evidence that a rudimentary search into
Kyber’s purported contact information should have revealed to Izzat that the company was
fake. For instance, the purported mailing address and telephone number for Kyber
belonged to real companies with no relation to a “Kyber” or any PPP loan company. A
jury, considering this evidence in the Government’s favor, could reasonably doubt Izzat’s
claim that he believed Kyber was a legitimate company. And the envelopes Izzat alleged
to have received from Kyber did not match the timeline Izzat provided to the Government.
Izzat claimed that, on April 1, 2020, he signed the power of attorney agreements he
received from Kyber. But the envelopes which allegedly contained the power of attorney
documents from Kyber were actually dated a month later, May 11, 2020, and were mailed
to Izzat from a post office located less than one mile from Tarik’s residence in California.
Weighing these facts favorably for the Government, a rational fact finder could readily
conclude that Izzat assisted in creating the purported Kyber story by, among other things,
falsifying the envelopes Izzat allegedly received from Kyber in order to conceal the illicit
PPP loan scheme.
As to Izzat’s knowledge of Iman’s emails, the Government presented evidence at
trial that Iman sent two emails to BOA, asking for updates on the Loan Applications. Izzat
was copied on these emails. Therefore, a rational trier of fact could conclude that Izzat
made false statements at the July 2020 Meeting with the Government when he swore to the
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Government that neither he nor Iman had reached out to BOA regarding the status of the
Loan Applications.
c.
Sufficiency of the evidence to support Count Nine
Tarik argues that the evidence presented at trial was insufficient to convict him on
Count Nine -- falsifying and concealing material facts in violation of 18 U.S.C.
§ 1001(a)(2). Count Nine relies on Tarik’s production of “computer screenshots to the
[G]overnment purporting to show Tarik . . . providing information to an unknown
individual and that the unknown individual submitted the loan applications.” J.A. 47. A
violation of 18 U.S.C. § 1001(a)(2) for falsifying and concealing material facts relies on
the same elements described above for Count Eight. See Ismail, 97 F.3d at 60.
Tarik first argues that the chat log was not material to the Government’s
investigation as the “decision to charge [him] on the other alleged offenses[] had been
reached long prior” to the submission of the chat log to the Government. Tarik’s Opening
Br. at 29. And second, Tarik argues that the evidence as to Count Nine is insufficient
because the Government did not prove that he submitted the chat log in question to his
attorney. Instead, Tarik relies on the fact that Fialko received the chat log in an email from
a third party, Verm. These arguments lack merit.
First, Tarik’s argument that the chat log was immaterial to the Government’s
investigation is nonsensical. A “materially false statement is one that has a natural
tendency to influence, or is capable of influencing, the decision-making body to which it
was addressed.” United States v. Barringer, 25 F.4th 239, 251 (4th Cir. 2022) (internal
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quotation marks omitted). It is irrelevant “whether the false statement actually influenced
the agency’s decision-making process.” United States v. Hamilton, 699 F.3d 356, 362 (4th
Cir. 2012) (emphasis added).
Tarik argues that the chat log could not have affected the Government’s decision to
charge him because “the proffered discovery response occurred at a juncture when it could
not possibly have altered the Government’s decision to charge the Defendant” because
Tarik had already been charged. Tarik’s Opening Br. at 30. But § 1001(a) is not limited
to only the Government’s decision to charge Tarik. See United States v. Smith, 54 F.4th
755, 769 (4th Cir. 2022), cert. denied 143 S. Ct. 1097 (2023) (holding that false statements
made during the investigation were capable of influencing the “still-active investigation”).
Tarik, through Fialko, submitted the chat log to the Government in March 2021. At that
time, Appellants were charged only with the Original Indictment. Had the chat log been
genuine, it would have served as exculpatory evidence in Tarik’s defense. Exculpatory
evidence supporting the Kyber story could have influenced the Government’s trial
preparation, including decisions as to how to prosecute the case as well as any potential
plea negotiations. See id. (“These misrepresentations, under normal circumstances, could
cause [the Government] to re-direct their investigation to another suspect, question their
informant differently or more fully, or perhaps close the investigation altogether.” (internal
quotation marks omitted)). Thus, the fabricated chat log was material because it had the
“natural tendency to influence” the Government’s decisions in trial preparation. Barringer,
25 F.4th at 251 (internal quotation marks omitted).
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Next, viewing the record in a light most favorable to the Government, we conclude
that sufficient evidence supported that Tarik knew the chat log was false and that it would
be submitted to the Government. The jury was presented with sufficient evidence to
support that the chat log was created on a website associated with a company owned by an
associate of Tarik -- SMM Lite. SMM Lite is the same company associated with the bank
account to which Izzat paid $1,000 purportedly to Kyber. Given this evidence, despite the
email to Fialko containing the falsified chat log coming from Verm, a third party, a
reasonable fact finder could conclude that Tarik fabricated the chat log and had it submitted
to Fialko so that it would be used to support his defense at trial.
Thus, the evidence was sufficient for the jury to convict Tarik of Count Nine,
falsifying and concealing material facts.
B.
Sixth Amendment and Evidentiary Issues at Trial
On appeal, Appellants raise three issues related to the testimony of their former
counsel at trial. Tarik argues that the district court violated his Sixth Amendment right to
counsel of his choice when it granted Fialko’s motion to withdraw as counsel over Tarik’s
objection. And Izzat contends that the district court violated his Sixth Amendment right to
confront Fialko by limiting his cross examination of Fialko. Finally, regarding his own
prior counsel, Izzat argues that the district court erred by admitting Odom’s testimony
which he asserts was unduly prejudicial and unnecessary to the Government’s case.
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1.
The Sixth Amendment provides, “In all criminal prosecutions, the accused shall
enjoy the right . . . to have the Assistance of Counsel for his defence.” U.S. Const. amend.
VI. “[A]n element of this right is the right of a defendant who does not require appointed
counsel to choose who will represent him.” United States v. Gonzalez-Lopez, 548 U.S.
140, 144 (2006). However, this right is not without limits. “The right is circumscribed by,
among other things, the obligation of trial courts to safeguard the integrity of the
proceedings before them.” United States v. Howard, 115 F.3d 1151, 1155 (4th Cir. 1997).
“Trial judges may on occasion be required to decline a defendant’s offer to waive his own
attorney’s conflict of interest and indeed district courts ‘must be allowed substantial
latitude’ in rejecting waivers of this sort.” Id. (quoting Wheat v. United States, 486 U.S.
153, 163 (1988)). We have insisted that a trial court “must have sufficiently broad
discretion to rule without fear that it is setting itself up for reversal on appeal” if it
disqualifies a defendant’s chosen lawyer. United States v. Williams, 81 F.3d 1321, 1324
(4th Cir. 1996).
Prior to trial, the district court granted Fialko’s motion to withdraw as counsel based
on the Government’s intention to call him as a necessary witness to Tarik’s false statement
charge. When the Government subpoenaed Fialko and Odom to testify, Appellants, as well
as prior counsel, filed separate motions to quash the subpoenas. The district court denied
the motions but cabined the Government’s direct examination to the five inquiries
regarding counsels’ prior representation of Appellants. We review the district court’s
rulings regarding Fialko’s motion to withdraw and Appellants’ motion to quash for abuse
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of discretion. United States v. Calwell, 7 F.4th 191, 202 (4th Cir. 2021) (review of motion
to disqualify counsel).
The Sixth Amendment also guarantees a defendant the right “to be confronted with
the witnesses against him” in all criminal prosecutions. U.S. Const. amend. VI. The right
of confrontation “means more than being allowed to confront the witness physically.”
Davis v. Alaska, 415 U.S. 308, 315 (1974). Indeed, the Supreme Court has stated, “The
main and essential purpose of confrontation is to secure for the opponent the opportunity
of cross-examination.” Id. at 315–16 (internal quotation marks omitted).
“It does not follow, however, that the Confrontation Clause of the Sixth Amendment
prevents a trial court from imposing any limits on the scope of defense counsel’s cross-
examination and presentation of evidence related to the impeachment of a key prosecution
witness’s credibility.” Quinn v. Haynes, 234 F.3d 837, 847 (4th Cir. 2000). “On the
contrary, trial judges retain wide latitude insofar as the Confrontation Clause is concerned
to impose reasonable limits on such cross-examination based on concerns about, among
other things, harassment, prejudice, confusion of the issues, the witness’ safety, or
interrogation that is repetitive or only marginally relevant.” Delaware v. Van Arsdall, 475
U.S. 673, 679 (1986).
We review de novo any alleged violation of the Confrontation Clause. United States
v. Mouzone, 687 F.3d 207, 213 (4th Cir. 2012). On appeal, violations of the Confrontation
Clause are subject to harmless error review. United States v. Banks, 482 F.3d 733, 741
(4th Cir. 2007) (internal quotation marks omitted)).
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2.
a.
Tarik’s Sixth Amendment right to counsel of his choice
Tarik argues that the district court violated his Sixth Amendment right to counsel of
his choice when it granted Fialko’s motion to withdraw. Specifically, Tarik contends that
“[t]he Government caused Mr. Fialko’s disqualification by issuing a subpoena for his
testimony.” Tarik’s Opening Br. at 20. Tarik believes that Fialko’s testimony was
unwarranted and unnecessary because the Government had other “independent proof that
[Appellants] had not relied on third parties who were the source of the fraud.” Id. at 24.
We hold that granting Fialko’s motion to withdraw was well within the district
court’s broad discretion. Fialko was the only available witness who could lay the
foundation of the documents in support of Tarik’s falsifying and concealing material
evidence charge. Thus, the need for Fialko to testify at trial created a conflict of interest
where Fialko would no longer be in the position to challenge the submission of the chat
log to the Government. Indeed, North Carolina Rule of Professional Conduct 3.7 prohibits
a lawyer from “act[ing] as advocate at a trial in which the lawyer is likely to be a necessary
witness.” N.C. R. Prof. Conduct 3.7(a).
And disqualifying Fialko was proper where “the essential aim of the [Sixth]
Amendment is to guarantee an effective advocate for each criminal defendant rather than
to ensure that a defendant will inexorably be represented by the lawyer whom he prefers.”
United States v. Urutyan, 564 F.3d 679, 686 (4th Cir. 2009) (internal quotation marks
omitted). Tarik was free to hire a lawyer to defend him who was not also an essential
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witness in the Government’s case. Thus, the district court properly disqualified Fialko,
particularly given that Tarik refused to stipulate to the foundation of the evidence in order
to remedy the situation.
b.
Izzat’s Sixth Amendment right to confront witnesses against him
Izzat argues that the district court violated his Sixth Amendment right to confront
witnesses against him when the district court limited Izzat’s cross examination of Fialko
due to attorney-client privilege concerns. Izzat wanted to cross examine Fialko because
Fialko had received an email from a purported third party, Verm, containing conversations
allegedly supporting the existence of Kyber. Izzat hoped to call into question the
provenance of that email in order to establish Tarik’s relationship with a potential co-
conspirator -- Verm -- or further establish Tarik as the true mastermind behind the Kyber
cover story.
At trial, the district court and the parties agreed that Fialko and Odom would first
answer the court approved questions on direct examination by the Government. Then, the
jury would be excused from the courtroom for cross examination, in case any privilege
issues arose. Once any issues were decided by the court and preliminary cross examination
was complete, the jury would return for the actual cross examination.
During Izzat’s cross examination of Fialko outside of the presence of the jury, Izzat
attempted to question Fialko about the third party email from Verm sending the falsified
chat log to Fialko. Specifically, Izzat asked Fialko whether he recalled any other
information in the email besides the attached screenshots. When Fialko responded that he
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would have to discuss communications between Tarik and himself in order to answer
Izzat’s question, Tarik objected on the basis that the response could reveal information
subject to the attorney-client privilege. This objection prompted the court to continue the
questioning ex parte outside of the presence of the Government. The district court allowed
Izzat to further question Fialko for the record, though it sustained Tarik’s objection that the
content of the email from Verm was protected by attorney-client privilege.
Izzat argues that the district court violated his right to confront Fialko when it
limited Izzat’s line of questioning about the contents of the third party email from Verm to
Fialko. Izzat argues that the district court prevented him “from establishing through Fialko
that Izzat did not direct someone else to send the screenshots” and from eliciting
information about Tarik’s relationship with the third party who sent the email, who Izzat
argues could have been Tarik’s co-conspirator, not Izzat. See Izzat’s Opening Br. at 28–
29. In response, the Government contends that no error occurred because the district
court’s restriction of Izzat’s questioning of Fialko was modest, requiring only that Izzat’s
questioning refrain from those “questions that are directly communications between client
and counsel.” J.A. 1255.
Because Fialko’s testimony was “only marginally relevant” to Izzat, we hold that
the district court did not err by limiting the cross examination of Fialko. Van Arsdall, 475
U.S. at 679. The Government called Fialko to lay the foundation of the allegedly falsified
chat log. At no point did the Government contend that Izzat played any part in falsifying
those documents or submitting them to the Government. Therefore, Fialko’s testimony
was not related to Izzat’s charges.
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And even so, Izzat was able to cross examine Fialko regarding any accusation that
Izzat played a role in falsifying the chat log. For instance, Izzat’s counsel asked Fialko on
cross examination, “Did you have any indication that that email was sent from Izzat
Freitekh? . . . And you’re not aware of any involvement on Izzat’s part of sending that
email to you, are you?” J.A. 1170. Fialko answered both questions in the negative.
In any event, even if Izzat could point to an abuse of discretion by the trial court in
limiting his cross examination of Fialko, any such error would be harmless. United States
v. Draven, 77 F.4th 307, 319 (4th Cir. 2023) (“[A]n error is harmless if it did not have a
substantial and injurious effect of influence in determining the jury’s verdict.” (internal
quotation marks omitted)). Fialko’s testimony had little to no effect on Izzat’s verdict.
Rather, Fialko’s testimony only served “to prove that Tarik [was the one who] gave the
screenshots to the [G]overnment through Fialko, and the [G]overnment never claimed or
even suggested Izzat was involved” in that event. United States Resp. Br. at 38. Therefore,
because Izzat’s convictions did not rely on Fialko’s testimony, the limitation on Izzat’s
cross examination of Fialko, especially in light of attorney-client privilege concerns, was
harmless.
c.
The relevance of Odom’s testimony against Izzat
Over Izzat’s objection, the district court admitted the testimony of Izzat’s prior
counsel, Odom, who represented Izzat at the July 2020 Meeting with the Government.
Odom’s testimony related to the Kyber envelopes and Seven Digital banking information,
and, specifically, how Odom received those documents from Izzat and turned them over to
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the Government at Izzat’s request. On appeal, Izzat argues that the testimony was
irrelevant and unduly prejudicial in violation of Federal Rules of Evidence 401 and 403
because Izzat never alleged that Odom altered the documents or that Odom turned them
over without Izzat’s permission.
We review “a district court’s evidentiary rulings for abuse of discretion.” United
States v. Ortiz-Orellana, 90 F.4th 689, 698–99 (4th Cir. 2024). Here, we apply “a highly
deferential standard of review to . . . a trial court’s decision to admit evidence over a Rule
403 objection,” and that decision “will not be overturned except under the most
extraordinary circumstances, where that discretion has been plainly abused.” United States
v. Hassan, 742 F.3d 104, 132 (4th Cir. 2014) (internal quotation marks omitted).
Izzat argues that the testimony of his former attorney regarding the documents
submitted at the July 2020 Meeting was unduly prejudicial and unnecessary to the
Government’s case such that it should have been excluded. Izzat contends that he never
intended to argue that the documents were not provided to the Government in the exact
form that Izzat received them. Therefore, in Izzat’s view, because he did not plan to argue
that the documents were altered, Odom’s testimony was not necessary to establish a chain
of custody for the envelopes. Rather, Izzat argues that the fact that “he passed the Kyber
documents [to the Government] in the same condition that [the Postal Inspector] received
them was a necessary aspect to Izzat’s defense that he was an innocent victim of Tarik’s
scam.” Izzat’s Opening Br. at 35–36.
In response, the Government argues that Odom’s testimony was highly relevant
because it established Izzat’s responsibility “for providing the phony Kyber Capital
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envelopes and Seven Digital banking information to the [G]overnment.” United States
Resp. at 42. This is particularly true, the Government notes, because Izzat refused to
stipulate to the admissibility of the allegedly false documents.
It is well settled that “[i]rrelevant evidence is not admissible.” Fed. R. Evid. 402.
Evidence is relevant only if it has the “tendency to make a fact more or less probable than
it would be without the evidence,” and then only if that “fact is of consequence in
determining the action.” Fed. R. Evid. 401(a)–(b). Even where arguably relevant, “Rule
403 requires exclusion of evidence only in those instances where the trial judge believes
that there is a genuine risk that the emotions of the jury will be excited to irrational
behavior, and that this risk is disproportionate to the probative value of the offered
evidence.” United States v. Mohr, 318 F.3d 613, 618 (4th Cir. 2003) (internal quotation
marks omitted); see also Fed. R. Evid. 403 (“The court may exclude relevant evidence if
its probative value is substantially outweighed by a danger of . . . unfair prejudice . . . .”).
Here, Odom’s testimony did not create any risk of unfair prejudice. “The mere fact
that the evidence . . . damage[d] the defendant’s case is not enough” to hold that the
evidence was unfairly prejudicial such that its admission was an abuse of discretion.
United States v. Hammoud, 381 F.3d 316, 341 (4th Cir. 2004) (en banc). Odom’s testimony
that Izzat provided him with the Kyber envelopes and other documents that Odom then
provided to the Government without alteration was both relevant and highly probative to
Izzat’s false statement charge. This is because “no other witness c[ould] provide the
information [in support of Count Three] that Izzat allegedly gave Odom the false
documents which Odom provided to the Government.” J.A. 2242. And although Izzat
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argues that he did not “challeng[e] that he passed the Kyber documents in the same
condition [he] received them” to Odom, see Izzat’s Opening Br. at 35, Izzat nevertheless
declined to stipulate to their admissibility when requested to do so by the Government. It
was thus necessary to authenticate their provenance.
Moreover, the district court took great care to ensure that Odom’s testimony did not
create any undue prejudice. The court limited the testimony to only five questions which
pertained specifically to the admissibility of the documents. Further, the district court
excused the jury during the cross examination of Odom in order to address any matters of
attorney-client privilege without the jury present. The district court also instructed the jury
that Odom was appearing pursuant to a subpoena and not on his own volition so as to avoid
any impression that Odom was supporting the prosecution’s case against Izzat.
Where the testimony was highly probative and limited by the district court to only
the relevant information, the district court did not abuse its discretion in admitting it.
C.
The Calculation of Izzat’s Guidelines Sentencing Range
Izzat challenges the district court’s application of the “loss” and “gross receipts”
enhancements pursuant to Guidelines § 2B1.1. He argues that these enhancements do not
apply because he was acquitted of the associated conduct at trial. Izzat further argues that,
even if the district court properly relied on acquitted conduct, the court erred by failing to
consider whether “loss” as written in section 2B1.1 is genuinely ambiguous before relying
on the commentary to that section. Izzat argues that because “loss” is not ambiguous and
means only actual loss, the district court erred in relying on the commentary’s definition
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of “intended loss” to enhance his sentence. “When considering a challenge to a district
court’s application of the Guidelines, this Court reviews factual findings for clear error and
legal conclusions de novo.” United States v. Shivers, 56 F.4th 320, 324 (4th Cir. 2022).
1.
Use of acquitted conduct at sentencing
At his sentencing hearing, the district court relied on Izzat’s knowledge of the
fraudulent PPP loan scheme to enhance to his base offense level. Specifically, the district
court held that “the evidence presented at trial proved that [Izzat] participated in the
conspiracy to commit wire fraud and [the] bank fraud [scheme], and that these offenses
resulted in the funds laundered into a money laundering conspiracy, even if [Izzat] wasn’t
found guilty beyond a reasonable doubt for [either charge].” J.A. 2258. Concluding that
Izzat’s participation in the fraudulent scheme was supported by a preponderance of the
evidence, the district court applied the total $1.75 million as the loss amount caused by
Appellants to Izzat’s Guidelines sentencing range calculation. And because the loss
amount known or reasonably foreseeable based on Appellants’ conduct was “[m]ore than
$1,500,000” but less than $3,500,000, Izzat received a 16 level increase to his base offense
level. See Guidelines § 2B1.1(b)(1)(I).
Izzat contends that the district court erred in relying on acquitted conduct to enhance
his sentencing range. Regarding the section 2B1.1 sentencing enhancements, Izzat argues
that he did not cause any “loss” associated with the PPP loans because he was acquitted of
the fraud charges. Nor did he receive any “gross receipts” based on his convicted activity
of conspiracy to commit money laundering.
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Izzat’s contention that his Guidelines base offense level can only consider the
amount of money he laundered defies the plain text of the Guidelines. In order to calculate
the base offense level for a money laundering offense, Guidelines § 2S1.1 points a
sentencing court to the Guidelines base offense level “for the underlying offense from
which the laundered funds were derived.” Guidelines § 2S1.1(a)(1). Here, the underlying
offense from which the PPP loans were derived was the fraudulent loan scheme. Fraud
offenses rely on section 2B1.1 for their recommended Guidelines sentencing range.
Section 2B1.1(b)(1) requires a sentencing court to apply certain enhancements to a
defendant’s offense level depending on the amount of “loss” related to the fraud
committed. And section 2B1.1 also allows a sentencing court to apply a two level
enhancement if “the defendant derived more than $1,000,000 in gross receipts from one or
more financial institutions as a result of the offense.” Id. § 2B1.1(b)(17)(A).
Further, as it currently stands, “it is firmly established that a jury’s verdict of
acquittal does not prevent the sentencing court from considering conduct underlying the
acquitted charge[s], so long as that conduct has been proven by a preponderance of the
evidence.” United States v. Hunt, 99 F.4th 161, 191 (4th Cir. 2024) (internal quotation
marks omitted) (alterations in original); see Guidelines § 1B1.3(a)(1)(A) (instructing
sentencing court to consider “all acts and omissions committed, aided, abetted, counseled,
commanded, induced, procured, or willfully caused by the defendant”). Indeed,
“[s]entencing judges may find facts relevant to deter[]mining a Guidelines range by a
preponderance of the evidence, so long as that Guidelines sentence is treated as advisory
and falls within the statutory maximum authorized by the jury’s verdict.” United States v.
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Grubbs, 585 F.3d 793, 799 (4th Cir. 2009) (internal quotation marks omitted). In other
words, “a court’s consideration of acquitted conduct does not violate the Sixth Amendment
because as far as the law is concerned, the judge could disregard the Guidelines and apply
the same sentence in the absence of the special facts.” United States v. Medley, 34 F.4th
326, 336 (4th Cir. 2022) (cleaned up).
While the Supreme Court has recently called this practice into question, see
McClinton v. United States, 600 U.S. -- , 143 S. Ct. 2400, 2401 (2023) (noting that the
practice of relying on acquitted conduct “raises important questions that go to the . . .
perceived fairness of the criminal justice system.”), the Court has not yet put an end to it.
And as recently as 2022, we have confirmed that district courts have “broad discretion to
impose sentences fully reflecting the defendant’s background, character, and conduct”
which includes “bad conduct,” such as “related criminal activity.” United States v. Legins,
34 F.4th 304, 326 (4th Cir. 2022) (internal quotation marks omitted). Without contrary
authority, the district court did not err when it considered acquitted conduct that was
established by a preponderance of the evidence to apply the loss and gross receipts
enhancements. 11
11
On April 17, 2024, the Sentencing Commission voted in favor of revising the
Guidelines to limit the ability of a sentencing judge to consider conduct for which criminal
defendants were acquitted at trial. The amendment, which is slated to go into effect on
November 1, 2024 unless Congress acts to disapprove it, would add to Guidelines § 1B1.3
a new subsection providing that “[r]elevant conduct does not include conduct for which the
defendant was criminally charged and acquitted in federal court unless such conduct also
establishes, in whole or in part, the instant offense of conviction.” See Amendments to the
Sentencing Guidelines 1 (Apr. 30, 2024).
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2.
Application of “intended loss” pursuant to § 2B1.1
Next, we consider whether the district court properly calculated the loss amount
applicable to Izzat’s sentencing range. In calculating Izzat’s base offense level, the district
court relied on the commentary to section 2B1.1. That commentary directs the district
court to calculate “loss” as the greater of actual or intended loss. Izzat argues that, even if
the district court properly considered conduct for which he was acquitted, it nonetheless
erred when it applied the intended loss amount to enhance Izzat’s sentence. Izzat contends
that “loss” should be interpreted strictly as actual loss. Therefore, he argues that the district
court should not have included the full amount of the PPP loan funds in its calculations at
sentencing. Izzat maintains that the true “actual loss” suffered by the Government was
only $299,691. When determining whether to defer to the Guidelines’ commentary, we
apply the framework set forth in Kisor v. Wilkie, 588 U.S. 558 (2019). See United States
v. Boler, -- F.4th --, 2024 WL 3908554 (4th Cir. Aug. 23, 2024); see also United States v.
You, 74 F.4th 378, 397 (6th Cir. 2023). Pursuant to Kisor’s directive, we defer to agencies’
interpretations of their own rules only in certain circumstances. This deference is
commonly referred to as Seminole Rock/Auer deference. 12 “Auer deference ‘can arise only
if a regulation is genuinely ambiguous.’” Romero v. Barr, 937 F.3d 282, 291 (4th Cir.
2019) (quoting Kisor, 588 U.S. at 573).
Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414 (1945); Auer v. Robbins,
12
519 U.S. 452, 461 (1997).
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We recently addressed this issue in United States v. Boler. We held that “loss” as
written in Guidelines § 2B1.1 is genuinely ambiguous. 2024 WL 3908554, at *5–7. We
further determined that the commentary’s definitions of “[a]ctual loss” and “[i]ntended
loss” were reasonable interpretations of section 2B1.1. Id. at *7. And finally, we
concluded that the “character and context” of the commentary to Guidelines § 2B1.1
supported that it was deserving of deference. Id. at *9. Thus, the district court did not err
in relying on the commentary to calculate Izzat’s sentencing Guidelines sentencing range
pursuant to Guidelines § 2B1.1. 13
D.
The Calculation of Tarik’s Guidelines Sentencing Range
On appeal, Tarik argues that the district court improperly calculated the amount of
loss applicable to his sentencing pursuant to Guidelines § 2B1.1. In doing so, Tarik first
contends that only the amount of money laundered in connection with his substantive
money-laundering conviction on Count Four ($149,000), as opposed to the amount of the
entire PPP loan scheme ($1.75 million), should control his sentencing calculations. Similar
to Izzat, Tarik argues that the district court improperly calculated the loss amount by
relying on the “intended loss” definition in the commentary to Guidelines § 2B1.1. Tarik
also argues that the district court improperly applied a two level enhancement for use of
13
As we noted in Boler, the Sentencing Commission has recently promulgated
amendments to the Guidelines that will resolve this issue going forward. The amendments
will incorporate the intended loss commentary, Guidelines § 2B1.1 cmt. 3(A), into the
Guidelines’ text. 89 Fed. Reg. 36,853, 36,855–36,857 (May 3, 2024) (effective Nov. 1,
2024, absent contrary action by Congress). Thus, the text of the Guideline itself will define
“loss” as the greater of the actual loss or intended loss.
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sophisticated means because PPP loan fraud necessarily relies on sophisticated conduct.
Finally, Tarik contends that the district court erred by refusing to consider relevant 18
U.S.C. § 3553(a) factors that he says warranted a downward variance 14 in his case.
1.
Calculation of Tarik’s “loss” amount pursuant to section 2B1.1
Again, as discussed above, Guidelines § 2S1.1 points to section 2B1.1 as the section
associated with “the underlying [fraud] from which the laundered funds were derived.”
See Guidelines § 2S1.1(a)(1). Section 2B1.1 directs the sentencing court to apply the
higher of the intended loss or actual loss amount. Here, Appellants received $1.75 million
in PPP loan funds to which they were not entitled. Whether the Government was able to
collect $1.3 million from Appellants’ BOA accounts is of no moment. Appellants would
only receive a credit of that amount for sentencing purposes if they themselves had returned
the illicitly obtained funds before the offense was detected. Indeed, the commentary to
section 2B1.1 accounts for such credits where the money or property at issue is “returned
. . . by the defendant or other persons acting jointly with the defendant, to the victim before
the offense was detected.” Id. § 2B1.1 cmt. 3(E)(i) (emphasis supplied).
14
Although Tarik argues on appeal that a “downward departure[]” was warranted,
we review his request as one for a downward variance. The terms “variance” and
“departure” describe two distinct sentencing options available to a sentencing court. See
Irizarry v. United States, 553 U.S. 708, 713–16 (2008). A departure is a sentence “imposed
under the framework set out in the Guidelines.” Id. at 714. Conversely, a variance has
been recognized as a non-Guidelines sentence (either above or below the properly
calculated advisory Guidelines range) that is nevertheless “justified under the sentencing
factors set forth in 18 U.S.C. § 3553(a).” Id. at 715.
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And Tarik fails to point to any precedent that would require a sentencing court to
apply only the amount of money laundered as opposed to the full amount of the fraudulent
PPP loan scheme to calculate “loss” in this circumstance. Indeed, doing so would
contradict the Guidelines, which direct the sentencing court to apply the higher intended
loss amount. See Guidelines § 2B1.1 cmt. 3(A).
Finally, as we previously held, “loss” as written in § 2B1.1 is genuinely ambiguous
such that the district court properly relied on the commentary to calculate the appropriate
amount of “loss” for sentencing. Boler, 2024 WL 3908554 at *9).
2.
Tarik’s sophisticated means enhancement
The district applied a two level sentencing enhancement to Tarik’s sentence for the
use of sophisticated means in carrying out the crime. The Guidelines provide for a two
level enhancement when the offense involves “sophisticated means” when the scheme
arose out of “especially complex or especially intricate offense conduct pertaining to the
execution or concealment of an offense.” Guidelines § 2B1.1 cmt. 9(B); see also id. §
2B1.1(b)(10)(C) (requiring a two level increase if the defendant used “sophisticated
means”). “Conduct such as hiding assets or transactions, or both, through the use of
fictitious entities, [and] corporate shells . . . ordinarily indicates sophisticated means.” Id.
cmt. 9(B). The sophisticated means enhancement “applies where the entirety of a scheme
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constitutes sophisticated means, even if every individual action is not sophisticated.”
United States v. Adepoju, 756 F.3d 250, 257 (4th Cir. 2014)
Whether a defendant’s conduct involved sophisticated means is a factual inquiry
that we review for clear error. See Adepoju, 756 F.3d at 256. When reviewing for clear
error, the district court’s determination need only be “plausible in light of the record viewed
in its entirety.” United States v. Gross, 90 F.4th 715, 722 (4th Cir. 2024) (internal quotation
marks omitted).
Tarik argues that because money laundering in and of itself necessarily involves
complex transactions, his conduct does not rise to the level required for a “sophisticated
means” enhancement. In response, the Government points to several pieces of evidence in
support of the enhancement. First, the Government notes that Tarik created Green Apple
Catering in March 2020 which he used as a shell company to obtain $1 million in PPP
loans. Next, the Government emphasizes that Tarik created a fictitious entity, Kyber, as
well as the deceptive chat log to attempt to hide his scheme.
On these facts, we cannot say that the district court clearly erred in applying a
sophisticated means enhancement where Tarik took several complex steps to execute and
then cover up his criminal conduct. The evidence cited by the Government is more than
sufficient to support a sophisticated means enhancement. Initially, Tarik created a shell
company, Green Apple Catering, for which he submitted a fraudulent PPP loan application
that relied on falsified payroll and tax documents. See United States v. Bisong, 645 F.3d
384, 400 (D.C. Cir. 2011) (concluding that the defendant’s use of computer software to
generate the fraudulent checks underlying the check fraud conviction warrant sophisticated
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means enhancement). Moreover, he orchestrated the existence of a third party, Kyber, on
which he attempted to pin responsibility for the Loan Applications. And in doing so, he
created a false chat log with a purported Kyber representative to support his story. See
United States v. Allan, 513 F.3d 712, 714 (7th Cir. 2008) (holding that conduct in support
of wire fraud conviction such as “fabricated identities, e-mail addresses, and telephone
numbers, which [the defendant] listed on the forms so that any effort to verify the phony
purchasers would be routed back to him” justified a sophisticated means enhancement).
3.
The § 3553(a) sentencing factors
Finally, Tarik contends that the district court erred by refusing to consider relevant
18 U.S.C. § 3553(a) factors that he says warranted a downward variance in his case.
“Section 3553(a) compels district courts to consider several factors in order to impose
lawful sentences.” United States v. Montes-Pineda, 445 F.3d 375, 378 (4th Cir. 2006). “A
district court need not provide an exhaustive explanation analyzing every § 3553(a) factor.”
United States v. Jenkins, 22 F.4th 162, 170 (4th Cir. 2021); United States v. Johnson, 445
F.3d 339, 345 (4th Cir. 2006) (explaining that to establish the reasonableness of a sentence,
a district court need not “robotically tick through” every § 3553(a) factor on the record).
“This is particularly the case when the district court imposes a sentence within the
applicable Guidelines range.” Johnson, 445 F.3d at 345.
At his sentencing, Tarik argued that various § 3553(a) factors warranted a
downward variance. First, Tarik argued that he did not personally profit from the
fraudulent scheme and engaged in the scheme only to help his family “under the
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extraordinary pressure of the pandemic.” Tarik’s Opening Br. at 49. Tarik further noted
his lack of criminal history, his educational background, and his strong family support to
argue that he poses a low risk of recidivism.
Tarik also argued that, were the district court to sentence him within the
recommended Guidelines range, it would create a disparity in sentencing among similarly
situated defendants. Tarik presented the district court with similar cases in which
defendants received substantially lower sentences than Tarik’s proposed Guidelines
sentencing range.
For instance, Tarik highlighted the case of United States v. Pan, No. 5:20-cr-436
(E.D.N.C.) in which a North Carolina defendant “was sentenced . . . to 20 months in prison
for fraudulently obtaining over $1.7 million in” PPP loans. J.A. 2116 (quoting Dept. of
Defense, North Carolina Man Sentenced for $1.7 Million COVID-19 Fraud (Mar. 15,
2022), https://www.justice.gov/opa/pr/north-carolina-man-sentenced-17-million-covid-
19-fraud [https://perma.cc/8JHK-CA6T]). And in the case of United States v. Jaafar, No.
1:20-cr-185 (E.D. Va.), the defendant was “sentenced to 12 months in prison and two years
of supervised release” for conspiring “to create four shell companies” and applying “for 18
separate PPP loans totaling approximately $6.6 million,” from which that defendant
“received approximately $1.4 million.” Id. (citing Dept. of Defense, Man Sentenced for
COVID-19 Fraud Involving Paycheck Protection Program (Nov. 13, 2020),
https://www.justice.gov/usao-edva/pr/man-sentenced-covid-19-fraud-involving-
paycheck-protection-program [https://perma.cc/9S9Z-HZ6H]).
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On appeal, Tarik argues that the district court erred when it refused to consider these
§ 3553(a) factors. Contrary to Tarik’s assertion, the district court did, in fact, consider his
§ 3553(a) arguments but found them unavailing. The district court considered the §
3553(a) factors, including the seriousness of the offense, Tarik’s lack of criminal history
and record of “assisting good deeds,” and the need for deterrence. See J.A. 2435–41. This
was more than sufficient to discharge the district court’s duty to consider the § 3553(a)
factors. And the district court found Tarik’s argument concerning the need to avoid
unwarranted sentence disparities among similar defendants unpersuasive, noting that the
cases he cited were not comparable to his own. See 18 U.S.C. § 3553(a)(6). For instance,
the district court pointed out that the cited cases involved only fraud counts and did not
have “any discussion [of] money laundering.” J.A. 2405. And, significantly, as the district
court noted, those cases were resolved through plea negotiations rather than proceeding to
trial, a factor that distinguishes them from Tarik’s case.
Finally, as we have repeatedly held, “[a] sentence that falls within the advisory
Guidelines range . . . is deemed presumptively reasonable.” United States v. Everett, 91
F.4th 698, 714 (4th Cir. 2024) (internal quotation marks omitted). “[A] defendant can only
rebut the presumption by demonstrating that the sentence is unreasonable when measured
against the § 3553(a) factors.” Montes-Pineda, 445 F.3d at 379 (internal quotation marks
omitted) (alterations in original). Although at the high end of his sentencing range, Tarik
was sentenced to 87 months imprisonment -- a term that falls within his recommended
Guidelines sentencing range of 70 to 87 months. Tarik has failed to demonstrate that his
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sentence was unreasonable, and we conclude that the district court’s discussion of the
§ 3553(a) factors sufficiently supports the sentence imposed.
III.
Finding no reversible error, the judgment of the district court is
AFFIRMED.
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QUATTLEBAUM, Circuit Judge, concurring in part, and concurring in the judgment:
I join the majority opinion except for part II.C.2. As to that part, I also affirm the
district court. But I do so for different reasons.
Izzat Freitekh challenges the district court’s loss calculation under U.S.S.G.
§ 2B1.1. According to Izzat, the district court abused its discretion with respect to the loss
amount by finding him responsible for $1.75 million in intended loss from fraud. Izzat
points out that the jury acquitted him of fraud and convicted him of laundering $299,261.
Thus, he argues $299,261 is the actual loss for his conduct. As a result, he maintains that
finding him responsible for $1.75 million in intended loss from fraud was improper.
Following our decision in United States v. Boler, No. 23-4352, 2024 WL 3908554
(4th Cir. Aug. 23, 2024), the majority holds that the term “loss” in § 2B1.1 is ambiguous
and therefore permits deference to that section’s Guidelines commentary. That
commentary provides that loss includes not just “actual loss” but “intended loss.” So, the
majority affirms the district court’s reliance on that commentary to find Izzat responsible
for $1.75 in losses.
As I explained in my dissenting opinion in Boler, I disagree that “loss” in § 2B1.1
is ambiguous. In my view, loss means actual loss, not intended loss. See Boler, 2024 WL
3908554 at *9. But Boler is now the law in our Circuit and thus binding on this panel.
Even so, I do not think Boler applies to Izzat’s challenge to the district court’s loss
calculation under U.S.S.G. § 2B1.1. That’s because his primary argument focuses on
convicted versus acquitted conduct, not actual loss versus intended loss. And as the
majority properly points out, Supreme Court and Fourth Circuit precedent forecloses that
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argument. See Maj. Op. at 39. What’s more, to the extent Izzat advances an actual loss
versus intended loss position, the entire $1.75 million received in fraudulent PPP loans was
an actual loss. True, after the fraudulent scheme was discovered, the bank froze certain
accounts permitting the government to recoup some of its losses. But that does not mean
the losses were not actual or that they did not occur. The entire amount of the proceeds
represents actual losses.
So, although I would not rely on Boler, I still would affirm the district court’s loss
calculation under U.S.S.G. § 2B1.1.
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