United States District Court, D. Massachusetts
Patti B. Saris Chief United States District Judge
Sihai Cheng pled guilty to six counts of a ten-count indictment, including: Count 1, conspiracy to commit export violations, in violation of 50 U.S.C. § 1705; Count 2, conspiracy to violate the Anti-Smuggling Statute, in violation of 18 U.S.C. § 371; and Counts 3 through 6, unlawful export of U.S. goods to Iran, in violation of 50 U.S.C. § 1705. Cheng signed a plea agreement with the government, under which the government agreed to dismiss Counts 7 through 10-smuggling goods, in violation of 18 U.S.C. § 554-following sentencing. In short, Cheng was part of an illicit scheme to export highly sensitive goods with nuclear applications, called pressure transducers, from the United States to Iran through China. Pressure transducers can be used in gas centrifuges to enrich uranium to produce weapons-grade uranium. The International Emergency Economic Powers Act, several executive orders issued thereunder, and the Iranian Transaction Regulations prohibit the export of pressure transducers to Iran. See 50 U.S.C. § 1705; 31 C.F.R. pt. 560; Exec. Order No. 13, 382, 70 Fed. Reg. 38, 567 (June 28, 2005).
The parties and the Probation Office agree that U.S.S.G. § 2M5.1 is the applicable sentencing guideline. The Probation Office determined that the base offense level is 26, and the total offense level is 23, after applying the three-level reduction for acceptance of responsibility under § 3E1.1. Cheng has a criminal history category of I, and the Probation Office calculated a guideline imprisonment range of 4 6-57 months.
The government objected to the Probation Office's determination that the four-level aggravating role adjustment under U.S.S.G. § 3Bl.l(a) does not apply. Although the government argued in its sentencing memorandum that the Court should apply the terrorism enhancement under U.S.S.G. § 3A1.4, the government did not object to the Probation Office's decision not to apply § 3A1.4 in calculating the total offense level in the Presentence Report (PSR). Rule 32(f)(1) of the Federal Rules of Criminal Procedure states: "Within 14 days after receiving the presentence report, the parties must state in writing any objections, including objections to material information, sentencing guideline ranges, and policy statements contained in or omitted from the report." Fed. R. Crim. P. 32(f). However, the Court "may impose sentencing enhancements belatedly suggested by the Government and not contained in the PSR, provided the defendant is afforded an adequate opportunity to respond to the Government's late submission and any revision of the PSR." United States v. Young, 140 F.3d 453, 457 (2d Cir. 1998); see also United States v. Rolfsema, 468 F.3d 75, 78-79 (1st Cir. 2006).
Here, Cheng was afforded an adequate opportunity to respond because the government stated its intention to argue for the terrorism enhancement at the Rule 11 hearing, and defense counsel stated that he had already discussed the potential application of the enhancement with his client prior to the Rule 11 hearing. Defense counsel opposed applying the enhancement at the sentencing hearing, but did not argue that the government's objection was untimely.
In the alternative, the government contended that the Court should upwardly depart under Application Note 2 to U.S.S.G. § 2M5.1, which states a departure from the guidelines may be warranted when four factors are "present in an extreme form": "the degree to which the violation threatened a security interest of the United States, the volume of commerce involved, the extent of planning or sophistication, and whether there were multiple occurrences." U.S.S.G. § 2M5.1 cmt. n.2.
The Court held an evidentiary hearing at which the government's expert, David Albright, testified. Albright is the founder and President of the Institute for Science and International Security, a non-profit, non-partisan institution that conducts technical, scientific, and policy research on the spread of nuclear weapons and related technology. Albright has published numerous assessments of clandestine nuclear weapons programs in technical and policy journals such as the Bulletin of the Atomic Scientists, Science, Scientific American, Science and Global Security, Washington Quarterly, and Arms Control Today. He has coauthored four books on the spread of nuclear technology, including Peddling Peril: How the Secret Nuclear Trade Arms America's Enemies, published in 2010. After careful consideration, I find that neither the aggravating role adjustment nor the terrorism enhancement apply. However, I find that all four factors in U.S.S.G. § 2M5.1 Application Note 2 are present in an extreme form, and upwardly depart by six levels, for the reasons discussed herein.
I. Aggravating Role Adjustment: U.S.S.G. § 3B1.1(a)
The government argued that the Court should apply an upward adjustment of four levels for Cheng's aggravating role in the offense under U.S.S.G. § 3Bl.l(a). To apply the aggravating role enhancement, a district court must find that (1) the scope of the criminal activity "involved five or more participants or was otherwise extensive, " and that (2) "the defendant was an organizer or a leader" of the criminal activity. U.S.S.G. § 3Bl.l(a); see also United States v. Arbour, 559 F.3d 50, 53 (1st Cir. 2009); United States v. Tejada-Beltran, 50 F.3d 105, 111 (1st Cir. 1995). The parties do not dispute that the export scheme involved five or more participants. The defendant admitted in his sentencing memorandum, and stated in online chat messages with his co-conspirator Seyed Abolfazl Shahab Jamili, that the conspiracy involved at least six people in China, Iran, and the United States. Furthermore, the government conceded that Cheng did not serve as a "leader" of the criminal activity. Thus, whether the aggravating role enhancement applies turns on whether the defendant is appropriately classified as an "organizer" under § 3Bl.l9 (a).
U.S.S.G. § 3B1.1 does not define what constitutes an organizer for purposes of the guideline. "One may be classified as an organizer, though perhaps not as a leader, if he coordinates others so as to facilitate the commission of criminal activity." Tejada- Beltran, 50 F.3d at 112. The First Circuit has emphasized that a defendant who recruits others into the criminal organization is "the very prototype of an organizer, serving as a magnet to bring others together and thereby lend feasibility to the commission of the crime." Id. at 111-13.
Here, the government emphasized that Cheng is an organizer because he "recruited Wang Ping to act as his agent and facilitate the illegal acquisition of the pressure transducers from the United States to China." Government's Sentencing Mem., Docket No. 83, at 24. The PSR presented the following, unobjected-to facts. In early 2009, Jamili informed Cheng that an Iranian customer was looking for pressure transducers manufactured by either Edwards Ltd., a company based in the United Kingdom, or MKS Instruments, a U.S. manufacturer. Cheng then reached out to Lily Lee at MKS-Shanghai to inquire about placing orders for pressure transducers. Lily Lee directed Cheng to contact Wang Ping. With the knowledge and agreement of other MKS-Shanghai employees, Wang Ping set up two front companies in China to pose as end-users for Cheng, in order to fraudulently obtain export licenses from the United States. MKS-Shanghai had already devised "a system by which export licenses were obtained in the names of legitimate Chinese companies, sometimes without those companies' knowledge, to hide sales to other companies (like Cheng's Iranian customer, Eyvaz) that did not or could not similarly obtain export licenses." PSR 1 31. Based on these facts, I find that Cheng did not recruit Wang Ping to engage in the criminal activity.
Furthermore, the evidence introduced at the sentencing hearing indicates that Cheng and Jamili were coequals in the criminal scheme to export pressure transducers to Iran. Jamili is a citizen of the Islamic Republic of Iran, who introduced Cheng to their Iranian customer, Eyvaz Technic Manufacturing Company (Eyvaz). Online chats and emails between Jamili and Cheng demonstrate that they conspired together to supply pressure transducers to Eyvaz, they both exercised some level of decision-making authority, and they both played an active role in the scheme. Jamili served as the primary point of contact for Eyvaz, taking orders for the pressure transducers. Jamili then sent these orders to Cheng, who served as ...