Restitution for Federal Crimes: Supreme Court Agrees to Hear Case Involving Money Owed by Defendant Involved in Mortgage Fraud

October 22, 2013 by Paul Kish

Federal criminal cases often result in a Defendant being sentenced to jail time, as well as being ordered to pay "restitution". A 1996 law called the Mandatory Victims Restitution Act (or "MVRA") says that when the victim of a crime is entitled to restitution for the loss of "property", and it is impossible, impracticable, or inadequate to return that property, then a defendant must pay "an amount equal to (i) the greater of * * * (I) the value of the property on the date of the damage, loss, or destruction; or (II) the value of the property on the date of sentencing, less (ii) the value (as of the date the property is returned) of any part of the property that is returned.” Earlier this week, the United States Supreme Court accepted a case involving questions surrounding how to calculate restitution when the Defendant committed mortgage fraud. The question in Robers v. United States is whether the district court erred in calculating restitution for banks who lost money because of the Defendant’s loan fraud when the court reduced the victims’ losses by the amount they recouped years later from the sale of the collateral securing the loans, as opposed to reducing the amount based on the value of the collateral at the time when the victims foreclosed on the mortgaged properties. This type of questions arises with some frequency in federal criminal cases, so it's important to keep an eye on how the high Court resolves the case.

Mr. Robers was like so many Americans in the past decade. Some sharp operators figured out that inflated real estate values could be used to skim money off the top of mortgage loans. One necessary component of these schemes is that there needs to be a "straw buyer", a person without any blemishes on their credit score, but who merely signs the paperwork for the loan application, and who has no intention in actually moving into the property. The straw buyer signs bogus paperwork claiming that he or she actually makes far more money that they really do, so the foolish banks and mortgage lenders regularly gave large loans to such people to fund the purchase of inflated real estate. When the loan closed, some of the loan proceeds would get skimmed to pay for the brokers or others who organized the scheme, the straw buyer normally got a small amount of money for signing the documents, and the house went into foreclosure when the straw buyer did not make any payments. The bank or mortgage lender then was stuck with a non-performing loan. Lenders generally then took the property back, which played a large part in the recent real estate debacle.

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Federal Criminal Case Sent Back to Lower Court for New Sentencing Hearing: The Importance (Again) of Having a Lawyer Who Knows When to Object

October 19, 2013 by Paul Kish

Any casual reader of this blog knows that I regularly discuss how important it is for people facing criminal charges to have an attorney who is creative, who is willing to fight for his or her client, and who knows when to "object" in court. Some lawyers fail to recognize that objecting to the prosecutor's tactics does not end with the trial. The attorney also needs to be prepared to complain when the government tries some improper tactic at the sentencing hearing. A case issued this week by the federal Court of Appeals here in Atlanta proves this principle. The case is United States v. Rodriguez, and can be accessed here.

Mr Rodriguez was prosecuted in federal court in Miami, Florida. The prosecutors alleged that he ran a scheme to defraud investors.The evidence at trial revealed that Mr. Rodriguez was involved in four companies that sold coffee and other vending machines. Mr. Rodriguez posted Internet ads looking for investors. When a potential investor responded, Rodriguez had some associates contact them and inform them about their golden opportunity to invest in a new coffee machine, vending machine, or drinking water machine. He made various promises about the quality of the investment and the level of support he would provide to the investor. Unfortunately, it seemed that most of his promises were untrue, and investors lost money. The jury found Rodriguez guilty of mail and wire fraud.

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Restitution in Federal Criminal Cases: Georgia Appellate Court Reverses For Improper Procedure

September 9, 2013 by Paul Kish

Readers are aware that we do lots of federal criminal cases, and that many of our white collar matters sometimes result in a sentencing hearing. In federal court, some lawyers not accustomed to the often arcane rules fail to appreciate the intricate procedures found in the Mandatory Victims Restitution Act (MRVA). I have given lots of speeches about the MRVA to lawyers around the country, so I have a fair understanding of how difficult it can be to plow through and be aware of the traps in this law. Basically, this law makes it mandatory for a federal judge to impose "restitution" to a "victim" of a federal crime. Last week, a Georgia federal appeals court issued a ruling that was a mixed bag for the Defendant. The United States Court of Appeals for the Eleventh Circuit rejected most of the Defendant's restitution claims, but did agree on one, sending the case back for more hearings. The case is U.S. v. Edwards, and can be found here.

Mr. Edwards and his company were found guilty by a jury of wire fraud, mail fraud, and money laundering, all offenses arising out of a high yield investment scheme. In the scheme, Edwards solicited funds from investors by promising astronomical returns and then used the funds for extravagant personal expenditures. At sentencing, the district court ordered Edwards to pay the victims over six million dollars in restitution pursuant to the MVRA.

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U.S. Attorney General Intends to Reduce Mandatory Sentences for Non-Violent, Drug Crimes: Will our Clients in Federal and Georgia Courts See a Change?

August 16, 2013 by Paul Kish

Finally, with Monday's announcement by Eric Holder, we have a public acknowledgment by our country’s top law enforcement official that the War on Drugs and its policies, implemented since the 1970’s, have failed. Holder went further than to offer an empty statistic. He basically stated that the U.S. has not only utterly failed at its claimed mission to reduce criminal drug activity, but our criminal justice system has instead exacerbated an epidemic of poverty, addiction, and criminality enough to create the almost inability to achieve public safety and effective law enforcement in our current society.

In federal courts each year, 25,000 people are convicted for drug offenses, with 45% of those convictions for lower level offenses. According to the Justice Department, the cost of incarceration in the United States was $80 billion in 2010. Despite the fact that the U.S. contains 5% of the world’s population, we incarcerate 25% of the world’s prisoners. Justice Department officials said federal prisons are operating at nearly 40 percent over capacity.

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Federal Criminal Sentencing Hearings: Constitution Mandates That Judge Use Older Version of Sentencing Guidelines if it Helps the Defendant

June 14, 2013 by Paul Kish

We do lots of sentencing hearings in federal criminal cases, here in Atlanta, throughout Georgia and other parts of the country, like Florida, Alabama, New York, California and Tennessee. Whatever state they are in, all federal judge are first required to consult the Federal Sentencing Guidelines when deciding the appropriate sentence for a person who has either pled guilty to or who a jury has found is guilty of a federal crime. These Guidelines are amended all the time, and it seems for some categories of crimes the suggested range of punishment keeps getting more and more harsh. However, what we lawyers call the "Ex Post Facto" clause from the Fifth Amendment to our beloved Constitution says that it is unconstitutional to increase punishments "after the fact." Several days ago ( I was not able to get to this post as I have been in federal court all week) the United States Supreme Court held that the Ex Post Facto clause requires a new sentencing hearing for an Illinois businessman who had been convicted of bank fraud. The case is Peugh v. United States and can be accessed here.

Mr. Peugh was convicted of five counts of bank fraud in a scheme that caused more than $2.5 million in losses by the victim bank. The crimes took place around 1999 and 2000. However, when he went to court years later, the Sentencing Guidelines in effect at the time of his sentencing hearing suggested 70 to 87 months in prison. Peugh objected to use of the 2009 guidelines, insisting that the judge should use the guidelines in effect at the time of his crimes. Under those earlier Guidelines, the appropriate sentence ranged from 30 to 37 months in prison. Peugh argued that relying on higher guidelines enacted after his crimes were committed would amount to the use of an ex post facto law. The sentencing judge rejected the argument, and sentenced Peugh to 70 months in prison. A panel of the Seventh US Circuit Court of Appeals also rejected the ex post facto argument and upheld the sentence.

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Federal Court in Atlanta Overturns Fraud Sentence: the Importance of Good Lawyering at the Sentencing Hearing

April 26, 2013 by Paul Kish

Like our federal cases here in Atlanta and throughout the country, it is important to keep in mind how a federal sentencing hearing takes place. The various phases of the federal sentencing process require the Defendant's attorney to not only know the law, but also to know the procedure, so that "objections" are properly preserved. A decision issued today by the United States Court of Appeals for the Eleventh Circuit makes this point. In that case, the attorney properly objected, thus preserving the issue for appeal. In the Court of Appeals, the Defendant raised the same argument, and the appellate tribunal agreed. The result is a lower sentence for the Defendant. The case is United States v. Washington.

Mr. Washington was charged in a large fraud scheme involving banks and credit card customers. He pled guilty. As a result, the United States Probation Officer prepared the very important document called the "Presentence Investigation Report", which is often called the "PSR". The PSR has two major parts, one of which is sort of a miniature biography of the Defendant. The second part of the PSR is where the probation officer makes some recommendations as to how the complex Federal Sentencing Guidelines should apply.

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Atlanta Federal Criminal Child Pornography Cases: Part of a National Trend

February 27, 2013 by Paul Kish

Federal criminal charges are being brought against a series of Atlanta-based employees of schools. Here and here are some stories. We represent one of the people accused in these matters, which are very difficult to defend. These cases are part of an ever-expanding national trend. We have done many such cases, involving doctors, federal employees, computer programmers, salesmen and others. No matter what business our client is in, all of these cases require sensitivity, compassion, along with a willingness to try new tactics in the right situation.

Many of these cases involve clients with eerily similar backgrounds. Many of our clients are men who have been happily and successfully married for many years. These men often are exemplary fathers. I recall one poignant sentencing hearing where the 20-something daughters of our client made such fantastic speeches that the Judge commented how as a feminist she could not help but praise our client and his wife for raising such amazing daughters. After the sentencing hearing, that Judge even took off her robe, and came down to spend some time with the wife and daughters.

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Good lawyering results in federal criminal case going to Supreme Court: Will the Apprendi decision be extended to sentencing factors that change mandatory minimum punishments?

October 25, 2012 by Paul Kish

Good lawyering in federal criminal cases often requires that the attorney not only be a student of the law, he or she needs to also recognize when a particular issue might be a current "loser" but the higher courts are waiting to change the rule. That might turn out to be the situation in Alleyne v. United States, a case recently accepted for review by the United States Supreme Court. Mr. Alleyne's prescient Public Defenders objected to a ruling that was correct at the time it was made, but early next year the Supreme Court will hear arguments as to whether the rule should be changed.

In 2000, the Supreme Court issued the landmark ruling of Apprendi v. New Jersey. That case held for the first time that any fact that can change the maximum punishment to which a Defendant is exposed must be pled in the indictment, and proven to the jury by the usual "beyond a reasonable doubt" standard. This is very important because until that time many facts that result in potentially longer prison sentences could be decided by one person, the sentencing judge, and that judge could use the less stringent "preponderance" evidentiary standard.

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Federal Sentencing Law in the Eleventh Circuit: United States Sentencing Commission Issues Summary of Decisions To Assist Federal Practitioners

August 29, 2011 by Carl Lietz

Lawyers that specialize in defending federal criminal cases may be interested to know that the federal sentencing commission recently released a document entitled: "Selected Post-Booker and Guideline Application Decisions for the Eleventh Circuit". According to the Commission, "[t]he document is not a substitute for reading and interpreting the actual Guidelines Manual or researching specific sentencing issues." However, those of you that practice federal criminal law in Georgia, Alabama and Florida will find the document useful, because it does contain helpful "annotations to certain Eleventh Circuit judicial opinions that involve issues related to the federal sentencing guidelines."

I reviewed the document this morning and it is a fairly comprehensive. It not only includes case annotations dealing with many of the more common guideline provisions (including fraud, internet, and immigration offenses), but it also includes several sections that involve general principles of federal sentencing law, such as burden of proof issues, the requirements for sentencing on acquitted conduct, and departures and variances.

The document can be found here and for those of you that practice in other federal circuits, links to similar documents for those other circuits can be found here.

Restitution in Federal Criminal Cases: Prove it or Lose it

August 15, 2011 by Paul Kish

The Eleventh Circuit issued an opinion today on a fraud case out of Florida involving issues related to restitution. The appellate court reversed the restitution order, ruling that the government had not adequately proved the amount of restitution, nor had the district judge calculated restitution based on specific factual findings. The case is United States v. Singletary.

Like many of the federal fraud cases we handle, Singletary involved questions of how much "loss" was involved, along with how much "restitution" could be ordered. Many lawyers forget that these are two very distinct issues. "Loss" is a calculation under the United States Sentencing Guidelines, and this figure is one of the major factors that drives the calculation of the prison sentence in a fraud case. The Guidelines tell a judge to calculate "loss" as the "greater of actual or intended loss". Additionally, the Guidelines also instruct that loss can be "estimated" when the proof is difficult to establish.

Restitution is quite different than "loss." Restitution is based on the loss the victim actually suffered. In other words, "loss" can be much higher than restitution when the defendant tried to get money but was unsuccessful.

While "loss" and restitution are distinct concepts, each figure needs to be adequately proven by the prosecutor. Furthermore, when a defendant objects to either calculation, the sentencing judge must support the ultimate "loss" or restitution number with specific factual findings.

In Singletary, the Court of Appeals confronted a case where the prosecutor used a broad-brush approach to restitution, trying to come up with an estimated figure. The sentencing judge basically agreed with the prosecutor's approach, estimating a loss of $1 million. The Eleventh Circuit reversed because the trial court "failed to carry out the task" of rendering factual findings for each and every specific loss that supported the restitution order.

This case holds lessons for lawyers who handle federal fraud cases. Remember to make the government prove both the "loss" and restitution, and when they do not, appeal the issue. It might help the client in the long run.