Rahim Shafa, a psychiatrist, owned a Massachusetts clinic that treated patients with imported drugs containing disulfiram and naltrexone for addiction. The FDA had approved only tablets and injectable liquids of these drugs, but Shafa imported unapproved pellet implants and injections from Hong Kong. To bypass customs, the shipments were mislabeled as 'plastic beads in plastic tubes' and undervalued. Shafa was convicted of three counts of international money laundering, three counts of unlawful importation, and one count of receipt and delivery of misbranded drugs. The jury acquitted him of conspiracy to defraud and felony misbranding, finding he lacked intent to defraud for the misbranding count. At sentencing, the District Court applied the fraud guideline enhancement, increasing his offense level based on the magnitude of loss and the number of victims, and imposed a 36-month sentence for each count to run concurrently. Shafa appealed, arguing the evidence was insufficient, certain testimony was improperly admitted, and the sentencing court misapplied the Guidelines by relying on acquitted conduct.
The First Circuit addressed Shafa's challenges in two main categories: trial errors and sentencing errors. Regarding trial errors, the court affirmed the convictions. It held that the District Court did not abuse its discretion in excluding prior testimony from a witness named Moran, as the government's motive to cross-examine Moran in Shafa's trial differed from the Gooberman trial where Moran testified for the government. The court also rejected arguments that the exclusion violated the right to present a complete defense or that other admitted testimony regarding clinic conditions and sterility was unfairly prejudicial or constituted improper expert testimony. The court found the evidence regarding the unapproved nature of the drugs and the conditions of the clinic was relevant to Shafa's intent and the government's theory of the case. Regarding sentencing, the court focused on the application of the fraud guideline (U.S.S.G. § 2B1.1) to the misbranding conviction. The District Court had applied this guideline, which carries a significant enhancement, but failed to clearly articulate the basis for its determination. The court noted that Shafa had been acquitted of conspiracy to defraud and felony misbranding, raising concerns under the 'acquitted-conduct amendment' which bars using acquitted conduct to increase a sentence unless that conduct establishes the instant offense of conviction. The First Circuit found the record ambiguous regarding whether the District Court relied on conduct for which Shafa was acquitted or on uncharged conduct. The court also noted a procedural error: the District Court imposed a 36-month sentence for misdemeanor misbranding, which exceeds the one-year statutory maximum for that offense. Consequently, the court could not affirm the application of the fraud guideline without further clarification from the District Court.
Shafa's convictions for money laundering and drug offenses stand, but his sentence for misdemeanor misbranding is vacated. The case is remanded to the District Court to clarify the basis for applying the fraud guideline, specifically addressing whether the enhancement relies on conduct for which Shafa was acquitted. The District Court must also resentence Shafa on the misbranding count to comply with the one-year statutory maximum. The First Circuit retains jurisdiction over the appeal pending these resentencing proceedings.
Podcast (federal-narrative-summaries): Play in new window | Download