Three District Courts Address Calculation and Enforcement of Restitution

As courts retreat from heavy custodial sentences in white collar cases (see here), one can expect alternative measures, like forfeiture, fines and restitution, to become the new punitive focal point.  In fact in United States v. Brennan, 05 CR 747 (JBW), (previously discussed here), EDNY Judge Weinstein announced last year that he intended to reject lengthy guideline sentences and instead impose probation on nine defendants in a $100 million fraud scheme, but directed a report and recommendation from a magistrate on any restitution they owed.  That report, along with some other recent decisions, amplifies the nascent but burgeoning jurisprudence on the Mandatory Victims Restitution Act (MVRA), previously blogged about here and here, an area of law that can significantly impact the post-conviction lives of defendants.

Brennan ($100 million Newsday Circulation Fraud)

Brennan arose out of a $100 million fraud perpetrated on the advertisers of Newsday and Hoy newspapers involving the inflation of paid circulation statistics.  Indicating his intention not to impose custodial sentences on all nine defendants, including the one who did not cooperate with the government, Judge Weinstein referred the case to Magistrate Judge Gold for a report and recommendation as to the amount of restitution that should be ordered in the case under the MVRA.  Following hearings and briefing, Judge Gold delivered in In re Newsday Litigation, 08 MC 96, 2008 WL 2884784 (E.D.N.Y. July 23, 2008), a thoughtful and detailed review of the applicable legal standards and complicated facts at issue.  

Judge Gold’s report is notable for the following:  he credited the $96 million already paid in restitution to the victim advertisers by the newspapers themselves (essentially, unindicted co-conspirators) against any restitution amount imposed on the defendants; the claims of victims who did not attend the hearings or respond to the government’s filings, despite ample notice, would be disregarded; to the extent the court’s recommended restitution amount of almost $6 million overstated the victim’s losses, that over-estimate was justified by the court’s recommendation not to impose prejudgment interest nor estimate amounts owing for portions of the fraud that lacked adequate records; and, finally, an individual who presented a factually dubious claim that he was fired as a result of the circulation fraud would not be considered a “victim” under the MVRA, which requires that the victim’s losses be “clearly causally linked to the offense” (citing the Senate Report).  

In the end, at sentencing, Judge Weinstein rejected the $6 million restitution figure, although he did impose fines of up to $125,000 on each defendant.  He reasoned that these victims – to the extent they could be identified – had plenty of time to come forward and claim amounts owing to them and they had elected not to.  

Update 10/07/08:  Judge Weinstein has published a decision explaining his adoption of most of Judge Gold's recommendation and his rejection of the recommended $6 million restitution figure, available at In re Newsday Litigation, 2008 WL 4279570 (E.D.N.Y. September 18, 2008): "There is no need to order restitution in these cases. Most victims have been made whole. Providing restitution to a relatively few who did not receive compensation for small amounts will prolong the sentencing process to a degree that the need to provide restitution is outweighed by the burden on the sentencing process. This memorandum and order shall be attached to the judgment and commitment of each defendant." 

Donaghy (NBA Referee Fraud)

United States v. Donaghy, 07-cr-587 (CBA), 2008 WL 2884748 (E.D.N.Y. July 23, 2008), involved another high-profile fraud – an NBA referee who placed bets, through a friend, on games over which he officiated.  He pled to conspiracy to commit wire fraud, and at issue in this decision was the amount of restitution he and his co-conspirators owed to his former employer.  Similar to Judge Gold’s analysis in the Newsday decision, this case is a lengthy consideration of the relevant principles and complicated fact issues.  Most notable is the court’s analysis of whether the restitution award should include losses for conduct that was not expressly part of the offense of conviction, but arguably encompassed within the offense of conviction under the “single conspiracy” rule.   The court’s decision to apportion some of the restitution amount among the three defendants – which the court has the discretion to do – is also of note.  

Yalincak (Lien on Future Assets)

Finally, in United States v. Yalincak, 3:05cr111 (JBA), 2008 WL 3833713 (D.Conn. August 14, 2008), in which a defendant sought to prevent the government from attaching his potential personal injury litigation recoveries, the court pointed out that under 18 U.S.C. § 3613(c) and (f), “an order of restitution” imposed on a defendant is considered “a lien in favor of the United States” on all of that person’s property rights which “arises on the entry of judgment and continues” for “at least twenty years,” during which time, “the Government can collect property already held by the Defendant and also any additional ‘substantial resources’ he receives, ‘including inheritance, settlement, or other judgment.’”  18 U.S.C. § 3664(n).