Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-18-2007

USA v. Ali
Precedential or Non-Precedential: Precedential

Docket No. 05-4375




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                                           PRECEDENTIAL

          UNITED STATES COURT OF APPEALS
               FOR THE THIRD CIRCUIT


                         No. 05-4375


              UNITED STATES OF AMERICA

                              v.

                    SHAMSUD-DIN ALI,
                                 Appellant


        On Appeal from the United States District Court
           for the Eastern District of Pennsylvania
               D.C. Criminal No. 04-cr-0611-1
              (Honorable Bruce W. Kauffman)


                   Argued April 23, 2007
          Before: SCIRICA, Chief Judge, FUENTES
              and ALARCÓN*, Circuit Judges.


    *
    The Honorable Arthur L. Alarcón, United States Circuit
Judge for the Ninth Judicial Circuit, sitting by designation.
                     (Filed July 18, 2007)

JAMES J. BINNS, ESQUIRE (ARGUED)
925 Harvest Drive, Suite 300
Blue Bell, Pennsylvania 19422

THOMAS D. SCHNEIDER, ESQUIRE
55 Green Valley Road
Wallingford, Pennsylvania 19086
      Attorneys for Appellant

FRANK A. LABOR III, ESQUIRE (ARGUED)
ZANE D. MEMEGER, ESQUIRE
Office of United States Attorney
615 Chestnut Street, Suite 1250
Philadelphia, Pennsylvania 19106
       Attorneys for Appellee


                 OPINION OF THE COURT


SCIRICA, Chief Judge.

       At issue in this fraud and racketeering case is whether the
District Court erred by allowing a jury to hear evidence about a
criminal defendant’s contact with drug dealers even though the
defendant was not charged with a drug offense. The District


                                2
Court evaluated the prejudicial impact of the evidence by
balancing it against its probative value, as required by Fed. R.
Evid. 403. We will affirm.
                               I.
       Shamsud-Din Ali was indicted on charges he directed
and managed a racketeering enterprise in violation of 18 U.S.C.
§ 1962(c). Also part of the enterprise were his wife, Faridah
Ali, who is not a party to this appeal; the Sister Clara
Muhammad School, which the Alis controlled and operated;
Keystone Information and Financial Services, Inc., a
Pennsylvania corporation owned in part by the Alis and
controlled by them; Hi-Technology Recycling Waste
Management, Inc., a Pennsylvania corporation that employed
Ali; and several other individuals.
        The indictment alleged Ali, who was Imam at the
Philadelphia Masjid, used the racketeering enterprise to obtain
money and property through fraud and extortion, and to receive
and use illegally obtained money to benefit the enterprise and
himself. The indictment alleged Ali, among other activities,
used actual and perceived political influence with high-ranking
city officials to support the racketeering enterprise.
       The indictment alleged twelve Racketeering Acts by Ali.
Racketeering Act 1 involved a scheme to defraud the City of
Philadelphia in its collection of delinquent property taxes. Acts
2 and 3 involved commercial bribery of a telecommunications
executive in order to gain minority-owned business participation


                               3
for Ali’s company in a venture at the Philadelphia International
Airport. Act 4 involved submission of false tax returns to
fraudulently obtain a line of credit. Acts 5 and 6 involved
extortion and attempted extortion of two waste haulers
contracting with the City of Philadelphia. Acts 7–10 involved
mail fraud in a scheme by Ali to divert donations to the Sister
Clara Muhammad School for his personal use. Act 11 alleged
the fraudulent collection of rents from the Community College
of Philadelphia, supposedly for adult education classes at the
Sister Clara Muhammad School. Act 12 involved wire fraud in
faxing a proof of insurance card in a scheme to obtain a
Mercedes-Benz automobile based on false financial information.
        According to Count One of the indictment, Ali received
“cash payments obtained from individuals who were engaged in
the illegal distribution of controlled substances.” Ali also “used
[Sister Clara Muhammad School] to disguise and conceal the
receipt of cash for the use and benefit of the Enterprise,
including the collection of proceeds from drug traffickers.”
       At the start of trial, Ali filed a motion in limine seeking
to exclude evidence relating to his alleged association with drug
dealers, arguing irrelevance because none of the indictment’s
racketeering acts was related to drug trafficking. Furthermore,
Ali contended the evidence of contact with drug dealers would
unduly prejudice the jury.
      At a hearing on Ali’s in limine motion, the government
contended the evidence—proposed testimony from two
witnesses and recordings of intercepted telephone

                                4
conversations—was relevant to show the nature and existence
of the enterprise, and the purpose and structure of the enterprise,
with Ali at its head.
        The District Court sought to have the parties agree on a
stipulation, omitting any reference to drugs, but which would
nevertheless characterize the source of the funds received from
drug dealers as illegal. Both sides demurred, the government
contending the evidence would demonstrate that Ali’s RICO
activities included swindling drug dealers out of their money,
and demonstrating drug dealers’ recognition of Ali’s power and
position in the RICO enterprise and his perceived ability to
provide them with some protection. For his part, Ali rejected
the proposition that the stipulation could avoid potential
prejudice.
       The District Court denied the motion in limine after
weighing the risk of unfair prejudice to the defendants against
what it found was the substantial probative value of this
evidence, and the fact that the evidence was necessary for the
Government to show one of the essential elements of its primary
RICO enterprise charge. The District Court found that the
source of funding for the enterprise was integral to the
government’s case, and that the probative value of the evidence
far outweighed the risk of unfair prejudice to the defendant.
Further, the judge stated he was confident that any unfair
prejudice could be avoided through the use of limiting
instructions.
       Before the presentation of evidence, the District Court

                                5
gave the jury a limiting instruction, emphasizing that Ali was
not charged with a drug offense, and that the limited purpose for
which the drug-related evidence could be evaluated was only as
it related to conducting the affairs of the alleged illegal RICO
enterprise.
       The drug-related evidence came from several sources:
       (1) an FBI special agent who testified he was part of a
drug investigations squad, was monitoring a wiretap as part of
a drug investigation, and was already familiar with Ali’s voice
from prior investigations;
       (2) an IRS special agent who investigated tax and money
laundering violations, and who testified that cash deposits of
$350,000 made by Faridah Ali from 1998–2001 came from a
source other than the Sister Clara Muhammad School;
       (3) convicted drug dealer Rodney Saunders, who testified
Ali and other Sister Clara Muhammad School employees knew
he was a drug dealer, that they solicited donations to the school
from him, and that on one occasion he gave Ali money to pay
off a cocaine debt he owed to a jailed cousin;1
       (4) tapes of conversations between Ali and drug dealers
in which Ali told the drug dealers he or others needed money;
       (5) convicted drug dealer Leonard Wideman, who


  1
    Saunders also testified that when he gave the money to Ali,
Ali put a finger to his lips and said “shh.”

                               6
cooperated with the government by wearing a wire, and testified
he paid Ali for protection at a time when Wideman was selling
sham chemicals to other drug dealers.
       At trial, the government presented substantial evidence
of the RICO enterprise describing the following schemes:
        (1) a scheme to defraud the City of Philadelphia by (a)
obtaining a tax collection contract with the city law department
for Keystone Information and Financial Services through false
and fraudulent misrepresentations, and (b) obtaining a $60,595
commission for Keystone Information and Financial Services by
converting a delinquent taxpayer’s attempt to pay delinquent
real estate taxes into a personal windfall;
       (2) a commercial bribery scheme in which Ali paid
kickbacks to AAT Communications Corporation, a
communications company that listed Ali’s Keystone Information
and Financial Services as a minority-owned business participant,
even though Keystone did not do any work other than seeking,
with AAT Communications Corporation, other commissions
without providing any actual services;
        (3) a scheme to defraud Commerce Bank by submitting
false financial information to the bank in order to induce it to
extend the maturity of a $100,000 debt owed by Keystone
Information and Financial Services, the purpose being to
maintain the false appearance that the company was a viable
entity;
       (4) a scheme to defraud individuals, labor unions and

                               7
other entities by inducing contributions to the Sister Clara
Muhammad School, representing to donors that these funds
would be used exclusively to benefit the school, when they were
instead used for the Alis’ personal expenses;
       (5) a scheme to defraud the Community College of
Philadelphia by obtaining hundreds of thousands of dollars in
rents and salaries for adult education courses that never took
place;
        (6) two schemes to extort private companies seeking
waste management contracts with the City of Philadelphia, using
the perception that Ali had political influence with high-ranking
city officials.
        Ali moved for acquittal following conclusion of the
prosecution’s case, contending the government had failed to
prove the existence of an enterprise or pattern of racketeering
activity. This motion was denied.
       The jury deliberated for a week before issuing a special
verdict convicting Ali on twenty-two counts of the indictment.
The jury found seven of the Racketeering Acts were proven
(Racketeering Acts 1-6 and 11). But Racketeering Acts 7–10
were not proven, and the jury was deadlocked on Racketeering
Act 12. Also, Ali was acquitted on four mail fraud counts and
the jury was deadlocked on seven wire fraud counts. Ali
renewed his motion for judgment of acquittal after his
conviction, but this, too, was denied.
       Ali filed a post-trial motion for a new trial on the ground

                                8
he was prejudiced by the inclusion of references to drug dealing
during the trial. The District Court denied this motion, noting
the evidence demonstrated that money solicited from drug
dealers was filtered through the Sister Clara Muhammad School
to be used for the Alis’ benefit, which helped to prove the means
of the enterprise and Ali’s knowing participation in it. The
District Court referenced its use of limiting instructions, and
posited that Ali’s contention that the drug references resulted in
undue prejudice was undermined by the jury’s acquittal of Ali
on some counts and failure to reach a verdict on others.
Furthermore, the District Court noted, the verdicts were amply
supported by the evidence.
        Ali was sentenced to 87 months’ imprisonment on the
RICO, bank fraud and extortion violations, and to a concurrent
60 months for mail fraud, conspiracy to commit mail fraud,
interstate travel in aid of racketeering and tax violations. Ali
also received five years of supervised release, a restitution
charge of $365,440, and a $2600 special assessment.
       Ali filed a timely notice of appeal.
                               II.
       Ali was indicted for alleged violations of 18 U.S.C. §
1962 (RICO), 18 U.S.C. § 1341 (mail fraud), 18 U.S.C. § 1343
(wire fraud) and other federal criminal statutes. The District
Court had jurisdiction under 18 U.S.C. § 3231. We have
jurisdiction under 18 U.S.C. § 1291.
       We review a ruling under Fed. R. Evid. 403 for abuse of

                                9
discretion. United States v. Eufrasio, 

, 571 (3d Cir.
1991). A trial judge is given “very substantial discretion” in
making a Fed. R. Evid. 403 balancing of probative value against
potential unfair prejudice. United States v. Long, 

,
767 (3d Cir. 1978).
                              III.
       “All relevant evidence is admissible, except as otherwise
provided” by the Constitution, an act of Congress, rules
prescribed by the Supreme Court or the Federal Rules of
Evidence. Fed. R. Evid. 402. Evidence is “relevant” if it has
“any tendency to make the existence of any fact that is of
consequence to the determination of the action more probable or
less probable than it would be without the evidence.” Fed. R.
Evid. 401.
       Although relevant, evidence may be excluded if
       its probative value is substantially outweighed by
       the danger of unfair prejudice, confusion of the
       issues, or misleading the jury, or by
       considerations of undue delay, waste of time, or
       needless presentation of cumulative evidence.
Fed. R. Evid. 403.
        The government contended that shaking down drug
dealers was one of the means of operation employed by the
enterprise, and that these drug dealers were vulnerable because
of Ali’s perceived power in the enterprise and because of the
illegal nature of their business. The District Court found this

                               10
evidence was necessary to establish Ali’s participation in the
alleged RICO enterprise; the continuous existence of the
enterprise separate and apart from the criminal acts constituting
racketeering activity; its purpose in generating income for the
Alis from illegal activity; and its common means of operation to
further this purpose.
       We see no abuse of discretion. The court carefully
examined the evidence for potential prejudice and balanced this
against its probative value. After determining the evidence was
relevant and its probative value outweighed its potential
prejudicial impact, the District Court gave the jury a limiting
instruction on the use of drug-related evidence. The court acted
within the discretion afforded it by Fed. R. Evid. 403.2

  2
    The 1972 Advisory Committee notes accompanying the rule
offer a practical approach to identifying and deciding whether
to admit potentially prejudicial evidence:
       “Unfair prejudice” within its context means an
       undue tendency to suggest decision on an
       improper basis, commonly, though not
       necessarily, an emotional one . . . .
       In reaching a decision whether to exclude on
       grounds of unfair prejudice, consideration should
       be given to the probable effectiveness or lack of
       effectiveness of a limiting instruction . . . . The
       availability of other means of proof may also be
       an appropriate factor.
Fed. R. Evid. 403 Advisory Committee’s Notes.

                               11
       The District Court’s determinations were consistent with
our decisions in two RICO cases where we affirmed convictions
and found no abuse of discretion where district courts admitted
potentially prejudicial evidence of uncharged criminal activity.
See Eufrasio, 

; United States v. DiSalvo, 

(3d Cir. 1994).
        In Eufrasio, three defendants were convicted in a
racketeering case that included illegal gambling, collection of
unlawful debts and attempted extortion. On appeal, the
defendants contended the district court abused its discretion
under Fed. R. Evid. 403 by failing to exclude evidence of
“uncharged Mafia crimes undertaken during the
Scarfo/Riccobene mob war, and of other heinous Mafia
Crimes.” 

n.22. We found no abuse
of discretion under Fed. R. Evid. 403, and noted that the
evidence of the uncharged crimes “went to prove important
elements of the RICO counts charged,” including the existence
and nature of the RICO enterprise, acts taken in furtherance of
it and the defendants knowing association with it. 

       The disputed evidence was probative of
       appellants’ respective roles within the enterprise’s
       larger organization, history and operations. Thus,
       the relevance of the uncharged crimes evidence to
       the government’s case against appellants was
       substantial, certainly enough to offset its potential
       to cause prejudice for appellants.

DiSalvo, a defendant charged with non-drug-related
RICO violations appealed the introduction at trial of evidence of
his relationship with a drug dealer. As in Eufrasio, we found no
abuse of discretion because the evidence was “indicative of
knowledge of the structure of the [RICO] enterprise.” 

. The evidence was probative of “essential
elements of the RICO charges and [was] also offered to show
[defendant’s] familiarity with the enterprise’s illegal activities,
the nature of his relationship with other conspirators and
members of the RICO enterprise, and his knowledge of the
violent nature of . . . the enterprise.” 

challenged by Ali is in the same vein as the
evidence we held properly admitted under Fed. R. Evid. 403 in
Eufrasio and DiSalvo.3

   3
     In support, Ali cites United States v. Lupino, 

(8th Cir. 2002), where a district court abused its discretion by
admitting evidence of a conversation between an assault
defendant and a police officer, where the conversation involved
the defendant’s offer to sell drugs to the police officer. 

.
        Ali contends that in his case, as in Lupino, the references
to drugs in the evidence—despite the fact he was not charged
with a drug offense—created an unfair prejudice that might lead
the jury to believe he was involved in drug trafficking and that
he therefore had a propensity for criminal behavior or that he
had a bad character.
        But in Lupino, the conversation about selling drugs was

                                13
       The District Court thoroughly and carefully balanced the

not even tangentially connected to the assault charge against the
defendant. Here, in contrast, the probative value of the evidence
of Ali’s contact with drug dealers and his receipt of money from
them demonstrates how the enterprise operated and Ali’s
“seeming power to compel payments by others,” specifically,
from people Ali knew were involved in illegal activities.
(Appellee’s Br. 58.) The fact that Ali was not charged with a
drug-related offense does not automatically negate the probative
value of this evidence.
        Furthermore, the Lupino court concluded that the
admission of the evidence, albeit an abuse of the district court’s
discretion, was harmless error because it did not appear the
evidence had a substantial impact on the jury’s verdict. 

. Here, the prosecution introduced dozens of
witnesses, hundreds of transcribed phone conversations and
other evidence to show Ali’s guilt, separate from his receipt of
money from drug dealers.
        Though we do not see any error, in light of the
overwhelming evidence presented at trial, any error would have
been harmless. See Fed. R. Crim. P. 52(a) (“Any error, defect,
irregularity, or variance that does not affect substantial rights
must be disregarded”); 

(“The evidence of
guilt in this particular case is so substantial that the legal error
may be considered harmless”); Govt. of Virgin Islands v. Toto,

, 283–84 (3d Cir. 1976) (noting the test for
harmless error is whether it is highly probable that evidentiary
error did not contribute to conviction).

                                14
probative value and prejudicial impact of the evidence.
Furthermore, the District Court’s limiting instructions were
proper.
                            IV.
      We will affirm.




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