When defending individuals in federal court, most practitioners are primarily and appropriately focused on the threat to the client’s liberty. We spend significant amounts of time whittling the Government’s case down to its basest level so that we can minimize the threat or length of potential incarceration. But, in doing so, it’s important to remember the role that restitution will play in the client’s sentence. Because even after the client’s custodial sentence is completed, restitution will still play a significant role in the client’s life.
What is restitution?
Individuals convicted in federal court may be ordered to reimburse victims for financial losses incurred as restitution that resulted from their illegal conduct. Restitution is different than fines or fees, which may also be imposed. The Mandatory Victims Restitution Act (MVRA), 18 U.S.C. § 3663A, requires that defendants pay restitution to victims for any offense against property under Title 18, which includes almost all white-collar crimes, such as mail and wire fraud, health care fraud, bank fraud and securities fraud. The general conspiracy statute within Title 18 can also pull a non-Title 18 offense within the mandatory requirements.
How is the amount of restitution determined?
Restitution ordinarily must cover the full extent of a victim’s losses, which may include verified lost income and necessary child care, transportation and other expenses related to the participation in the investigation or prosecution of the offense. Attorney fees and tax penalties are typically not included in a restitution order. Since there is no standardized method for estimating the dollar amount of harm, significant discretion is left to the courts to impose restitution, and it is imposed without consideration of the defendant’s ability to pay.
The court may not impose restitution in very limited circumstances, such as where compensation is impracticable given either the number of victims or the difficulty in identifying them, or where the fact-finding required is so complex that it would delay the sentencing process and cause an undue burden on the court.
Does the amount of restitution equate “just” compensation?
Not always. While restitution largely relates to the defendant’s criminal conduct in the course of a scheme or conspiracy, the conduct of others that was foreseeable to, and jointly undertaken by, the defendant, is also considered. This means that defendants can be liable for harms that might otherwise be considered indirect. If multiple defendants are liable for reimbursing a victim, each defendant can be held joint and severally responsible for the full amount of the restitution, regardless of their degree of culpability.
Consider a hypothetical: Individual A conspired with the President of a bank to fraudulently secure $2 million dollars in loans by submitting falsified documentation and then splitting the loan proceeds with the President 50/50. The bank collapses, causing $50 million losses, and Individual A learns after an indictment that the President engaged in the same scheme with several other borrowers.
In the above example, Individual A’s participation in the conspiracy may cause him to be smacked with a joint and several $50 million restitution order. Individual A is now liable for the entire $50 million, even though Individual A may not have known the scope of the fraud, all the details, who the others were involved and only received $1 million of the fraud proceeds. In such a situation, the government would likely argue that the collapse of the bank was a “reasonably foreseeable” consequence of the defendant’s criminal conduct, supporting the $50 million restitution order.
What happens after restitution is ordered?
Once a restitution order is imposed, compliance is a condition of the defendant’s probation or supervised release. The obligation to pay restitution arises on the entry of judgment and continues for 20 years from its entry or after the individual’s release from imprisonment or until the restitution order is satisfied. If the defendant does not have adequate resources to satisfy a judgment, the court can set a payment schedule. Restitution is not dischargeable in bankruptcy.
The Financial Litigation Unit (FLU) of the U.S. Attorney’s Office is responsible for enforcing the collection of restitution, even after the termination of supervised release. FLU is aggressive in its efforts to repatriate assets for victims. If a defendant does not pay his or her restitution, the U.S. Attorney’s Office must first notify the client of the delinquency. If no payment is made in over 90 days, then the defendant is in default, and the U.S. Attorney’s Office can use aggressive tactics to collect, including initiating citation to discover assets proceedings.
How can restitution be mitigated?
Defense attorneys can play a key role in mitigating the potential hit of a hefty restitution order by:
- Ensuring the restitution amount is accurate by closely scrutinizing the government’s calculation. The burden of establishing the restitution amount is on the government, so defense attorneys must make sure the government meets its burden. In addition, defense counsel should not accept at face value an argument that the amount of restitution is the same as the “loss” amount under the Federal Sentencing Guidelines. Guidelines “loss” can sometimes be far different than the restitution amount ordered by the sentencing court.
- Negotiating the breadth of criminal charges and the restitution obligation in the plea agreement if the client intends to plead guilty. While prosecutors have an obligation to pursue restitution where it is owed, they can agree to reduce or limit charges so that restitution is limited in the first instance. For example, in the hypothetical case above, if Individual A intended to plead guilty, his or her defense attorney should avoid agreeing to a charge that directly implicates the complete failure of the bank. Rather, defense counsel should negotiate for an offense of conviction that only reflects Individual A’s level of contribution to the bank’s loss. Or, Individual A’s defense counsel could negotiate for a factual stipulation that, for example, no more than $2 million of the bank’s loss was reasonably foreseeable to Individual A. If the court accepts the stipulation, this could provide a basis for effectively capping the restitution amount at $2 million. Alternatively, negotiating the amount of restitution owed in the plea agreement eliminates the uncertainty of the potential restitution. If defense counsel can get the prosecutors to agree to a set amount, this will remove any uncertainty at sentencing. Defense counsel should be aware that victims are entitled to be heard on the amount of restitution they feel they are owed. A compelling argument by a victim or the victim’s lawyer can cause a prosecutor or judge reluctance in limiting the amount of restitution.
Distinguishing between restitution and forfeiture in cases that have both. Criminal forfeiture seeks to penalize defendants for any gains resulting from or used in illegal conduct. To avoid the very real possibility of double financial penalties, defense counsel should confirm that the plea agreement clearly delineates the amount of restitution owed by the defendant versus any proceeds that are to be forfeited.
This article was authored by Taft partner John R. Mitchell and associate Carly Chocron.
