Among other Issues, Court Found that Restitution Properly Ordered for Offenses other than those of Conviction, where Conduct was Part of Same Scheme

United States v. Westerfield, 714 F.3d 480 (7th Cir. 2013).The defendant was a lawyer working for a title insurance company in Illinois when she facilitated fraudulent real estate transfers in a mortgage fraud scheme. The scheme used stolen identities of homeowners to “sell” houses that were not for sale to fake buyers, and then collect the mortgage proceeds from lenders who were unaware of the fraud. Westerfield facilitated five such real estate transfers, and was later indicted on fourcounts of wire fraud. She claimed that she had been unaware of the scheme’s fraudulent nature and argued that she had merely performed the typical work of a title agent. A jury disagreed, and convicted her on three of the counts. On appeal, she challenged her conviction for insufficient evidence and argued that the district court improperly admitted a codefendant’s testimony during trial. Additionally, she challenged her sentence based on the district court’s application of the U.S. Sentencing Guidelines and the district court’s restitution calculation. On the sufficiency question, although no direct evidence was presented against the defendant, the circumstantial evidence was sufficient to support the verdict. Regarding the codefendant’s testimony, he testified about the general workings of the scheme and the defendant’s role in the scheme. The court found the evidence to be admissible both from the view as occurrence witness and lay expert witness testimony. On the sentencing issue, the defendant argued that the court incorrectly calculated the amount of loss by using the value of loss from all five of the transactions she facilitated instead of only three transactions for which she was convicted. The court rejected this argument, noting that the loss from the other transactions was properly included as relevant conduct. For purposes of restitution, the court rejected the same argument. The MVRA allows for restitution to be ordered for offenses of conviction and conduct in the course of the same scheme. Here, although the district court did not make a specific “scheme” finding, reviewing for plain error, the findings regarding scheme for loss purposes under the guidelines were sufficient. NOTE: This case serves as a good reminder that restitution cannot be ordered for any offenses other than the offenses of conviction unless the other conduct is part of the same scheme. In such cases, the court should explicitly make a finding as to scheme. Thus, not all “loss” which incorporates relevant conduct in a case can be awarded as restitution with a finding of a “scheme.”

United States v. Wolfe, 701 F.3d 1206 (7th Cir. 2012). The defendant was convicted on one count of bank theft and one count of interstate transportation of stolen goods under 18 U.S.C. §§ 2113(b) and 2314 for his role in a copper theft scheme. On appeal, he challenged his conviction based upon the prosecutor’s statements during closing argument, his sentence, and the court’s order of restitution. Concerning restitution, the defendant challenged the amount of restitution on the ground that it was not supported by the jury’s factual findings, a violation of the Sixth Amendment underApprendi v. New Jersey, 530 U.S. 466 (2000). Specifically, he contended that the recent Supreme Court decision in SouthernUnion Co. v. United States, ___ U.S. ___, 132 S. Ct. 2344 (2012), first, required the court to overturn its longstanding jurisprudence that restitution is not a criminal penalty, and second, mandated that all restitution amounts be supported by the jury’s verdict. Southern Union held that Apprendi applies to criminal fines. The court, however, noted that the law in the Seventh Circuit is that restitution is not a criminal penalty and, therefore, Southern Union could not be extended to restitution. While noting that this is a minority position amount the circuits, the court refused to overturn its precedent on this question and therefore rejected the Apprendi challenge. PRACTICE NOTE: The question of whether restitution is a criminal or civil penalty is now an entrenched circuit split ripe for review. I would expect a petition for certiorari to be filed in this case. If you can make an Apprendi challenge to restitution in the district court, you should continue to preserve this objection until someone can get the Supreme Court to resolve this circuit split.

InUnited States v. Laraneta, 700 F.3d 983 (7th Cir. 2012), the Seventh Circuit decided several important issues related to awards of restitution for the victims of child pornography offenses. The district court awarded the two victims depicted in child pornography possessed by the defendant restitution in the amount of $3,367,854 and $965, 827.64 respectively. These same amounts had been awarded to the same victims in hundreds of other child pornography cases. The district judge, however, ordered that the amount one victim recovered from other defendants to be subtracted from what the defendant owed to her, but did not do so for the other victim. The victims intervened on appeal. The court first addressed whether the victims in this case were properly allowed to intervene. The court concluded that although such victims should not be allowed to intervene to protect their interests in the district court, they may do so on appeal. The court next held that the amount of restitution recovered from other victims should have been subtracted from the award for both victims, not just one. Regarding the amount of restitution, the now-adult victims premised their claims for restitution on costs of therapy, lost and expected to be lost income because of psychological damage that impairs their ability to work, and other items, all within the specific statutory definitions of victims’ compensable losses. The defendant argued that he should not have been held responsible for all of the victim’s losses, as he was only one of an unknown number of viewers. Looking to exactly what harm the defendant caused the victims, they argued that apportioning their harm among the numerous past, present, and future defendants was all but impossible. But the court disagreed. First, it was an open question of whether the defendant only uploaded the images or if he also then redistributed those images. If the court considered only his having seen those images, and imagine his being the only person to have seen them, the victims’ losses would not have been as great as they were. Think of a victim’s stalker, whose stalking of her, inspired by seeing her pornographic images, caused significant psychological harm that could not be attributed to the defendant in this case to the slightest degree if he never uploaded any of her images. All that’s clear, according to the court is that without a finding that the defendant was a distributor, it is beyond implausible that the victims would have suffered the harm they did had he been the only person in the world to view pornographic images of them. The case was therefore remanded for a redetermination not of the victims’ total damages, which were conceded, but of the portion allocable to the defendant. Additionally, the judge cannot make the defendant’s liability “joint and several,” which would then allow him to seek contribution from other contributors to the victims’ losses. Restitution in criminal cases is governed by statute, and the statute in question allows joint and several liability only if the court finds more than one defendant. There is only one defendant in this case, so joint and several liability was inappropriate.

In United States v. Robers, 698 F.3d 937 (7th Cir. 2012), the the defendant pleaded guilty to conspiracy to commit wire fraud in violation of 18 U.S.C. § 371, based on his role as a straw buyer in a mortgage fraud scheme; Robers signed mortgage documents seeking loans which were based on false and inflated income and assets and based on his claim that he would reside in the houses as his primary residence and pay the mortgages. The loans went into default and the real estate which served as collateral for the loans were later foreclosed upon and resold. For his role in the scheme, the district court sentenced Robers to three years’ probation and ordered him to pay $218,952 in restitution to the victims—a mortgage lender of one property and the mortgage insurance company which had paid a claim on the other defaulted mortgage. The MVRA that where property has been returned to a victim, the defendant pay restitution "less the value (as of the date the property is returned) of any part of the property that is returned, i.e. "offset value." The dispute in this case concerned the calculation of the “offset value.” Robers argued that the MVRA requires the court to determine the offset value based on the fair market value the real estate collateral had on the date the victim lenders obtained title to the houses following foreclosure because that is the “date the property is returned.” The government countered that money was the property stolen in the mortgage fraud scheme and that foreclosure of the collateral real estate is not a return of the property stolen; rather, only when the collateral real estate is resold do the victims receive money (proceeds from the sale) which was the type of property stolen. Accordingly, the government argued that the offset value must be determined based on the eventual cash proceeds recouped following the sale of the collateral real estate. The court of appeals noted that a circuit split exists on this issue: the Second, Fifth, and Ninth Circuits use the defendant's approach, but the Third, Eight, and Tenth Circuits (as well as the Seventh in two non-precedential opinions) use the government's. The Seventh Circuit in this case joined the latter circuits, holding that the offset value is the eventual cash proceeds recouped following a foreclosure sale. Accordingly, the property stolen is only returned upon the resale of the collateral real estate and it is at that point that the offset value should be determined by the part of the cash recouped at the foreclosure sale. The court also held that the victims are entitled to expenses (other than attorney’s fees and unspecified fees) related to the foreclosure and sale of the collateral property because those expenses were caused by Robers’s fraud and reduced the amount of the property (cash) returned to the victim lenders. Because the district court included attorney’s fees and unspecified fees in the restitution award, the court vacated that portion of the district court’s award, but otherwise affirmed. PRACTICE NOTE: This is now a well-established circuit split which is ripe for review by the United States Supreme Court.