Wednesday, April 29, 2015

Helpful Decision on Restitution; Sprint Not Entitled to Retail Value of Fraudulently Acquired Phones

U.S. v. Ferdman, 2015 WL 619629 (2/13/15) (N.M.) (Published) - Important restitution case: Mr. Ferdman pleaded guilty to acquiring some phones from Sprint by impersonating corporate account representatives after getting the corporations' account information. Sprint, the government and ultimately the judge believed restitution should be the retail, unsubsidized price of 86 cell phones, not just the cost of the phones to Sprint, plus Sprint's shipping and investigative costs. The 10th held there was an insufficient evidentiary basis for that conclusion because restitution may only equal the actual loss of the victim, not all the padding (unjust enrichment) Sprint would get under the judge's ruling. While the 10th did not rule out that a theft victim might be entitled to lost profits from lost retail sales in some cases, for that to happen there must be some evidence the defendant's theft in fact caused the victim to lose retail sales. Sprint presented no such evidence, only a 2-page, unverified letter, like a bill, concerning the retail price and other costs. But it did not show, for example, that it lost any sales because people bought Mr. Ferdman's phones instead of Sprint's or that Sprint didn't have enough phones on hand to sell other customers because of the theft. Absent such proof, something like replacement or wholesale cost is the better measure of actual loss. Plus Sprint's estimates of its investigation expenses supported by an unverified signature of a Sprint officer didn't amount to proof of actual loss. The 10th's reasoning in this regard might prove the most valuable of all for the future. The 10th said:"the likelihood that certain facts exist to confirm the estimates, no matter how probable, does not relieve the government of its burden to establish their actuality." There must be actual evidence of how each employee's time was spent pursuing the investigation in this case.

Other helpful things the court said. Loss under the Guidelines is not the same as actual loss for restitution purposes. The district court should not be a "rubber stamp" of the victim's claims. Some precision is required to determine actual loss, not speculation. If the court is uncertain, it should ask for more information or hold a hearing, but restitution unsupported by evidence "is not an option." Restitution should not include consequential or incidental damages because restitution awards are not a substitute for civil lawsuits. The 10th observed that maybe Paroline v, U.S., 134 S. Ct. 1710 (2014), the child-porn restitution case, called into question the 10th's precedent that restitution is remedial, not punitive. In Paroline, the Court explained that restitution does serve punitive purposes. This has implications for the application of Apprendi and the Ex Post Facto Clause, etc. on restitution decisions. Finally, another excellent quote:: "Undoubtedly the Mandatory Victims' Restitution Act's (MVRA's) overriding purpose is to assure that district courts fully compensate victims for actual losses they suffer. But that must not deter us from reading the MVRA as Congress wrote it and, more particularly, from requiring some proof of the actual loss that a defendant caused the victim."