The Mandatory Victims Restitution Act of 1996 (“MVRA”) provides that a victim of a federal crime may be entitled to an order of restitution for certain losses suffered as a direct result of the commission of the crime for which the defendant was convicted. For example, a corporation may be entitled to restitution from an employee who embezzled money or from a third party who engaged in wire fraud. This order of restitution, however, can sometimes arrive years after the commission of the crime. In the meantime, the criminal defendant has likely spent all of the money that he or she stole, leaving the victim corporation with an empty judgment. To prevent this unfortunate situation, corporations may wish to immediately engage in self-help like filing liens on property. The concern, though, is that this self-help may affect their rights to receive restitution under the MVRA.
Rejecting a defendant’s argument that ordered restitution of $285,000 should be offset by the victim’s self-help efforts, a federal appeals court in Chicago has ruled the amount is supported by the evidence under the Mandatory Victims Restitution Act. United States v. Malone, No. 13-2432 (7th Cir. Mar. 31, 2014). The U.S. Court of Appeals for the Seventh Circuit said the “property” returned to the victim must be of the “same type lost by the victim.”
Cattle farmer Elbea Malone sold nonexistent cattle to Larry O’Hern for $400,000. Once O’Hern discovered the ruse, Malone returned $115,000 to him “in an effort to appease him.” Wanting to be fully reimbursed, O’Hern engaged in “self-help” by removing an undetermined number of cattle from Malone’s feedlot (cattle that did not belong to Malone) and by obtaining liens on real property owned by Malone.
After he pled guilty to one count each of money laundering and bank fraud, Malone argued at his sentencing that the district judge should “refrain from ordering restitution” to O’Hern because O’Hern had been fully reimbursed for his losses by the cattle he took from Malone’s feedlot and by the liens on Malone’s real property. He also argued that O’Hern still owed Malone for the care of O’Hern’s cattle. The district judge rejected this argument and ordered restitution in the amount of $285,000.
The appellate court upheld the order. The Court found that “[t]he cattle O’Hern obtained through self-help, the cattle care services for which O’Hern had not paid Malone, and the liens O’Hern obtained on Malone’s real property were irrelevant to the restitution calculation.”
The Mandatory Victims Restitution Act allows a reduction of the restitution amount by “any part of the property that is returned.” The Court stated that this means “property of the same type as the property lost by the victim. “ The Court explained that “cash was stolen from O’Hern, and cattle, cattle care services, and liens are clearly not cash.” With respect to the cattle O’Hern took from Malone’s feedlot and sold for cash, the Court held that that amount could not be considered to offset the loss amount because it came from a source other than Malone. The Court ultimately held the district judge’s restitution award was supported by the preponderance of the evidence regarding O’Hern’s loss and the cash that was returned to him, “the only two relevant factors.”
Malone should be considered a victory to victims of federal crimes, representing the proposition that self-help to collect monies lost due to criminal acts need not reduce a restitution award. Jackson Lewis attorneys are available to advise companies on the scope of the Mandatory Victims Restitution Act and their rights in collecting amounts lost to criminal acts.