People v. Ozkan

• Citation: 124 Cal.App.4th 1072,21 Cal.Rptr.3d 854
• Decision Date: 09 December 2004
• Docket Number: No. A103438.,A103438.
• Court: California Court of Appeals
• Parties: The PEOPLE, Plaintiff and Appellant, v. Sezer OZKAN, Defendant and Respondent.

21 Cal.Rptr.3d 854

124 Cal.App.4th 1072

The PEOPLE, Plaintiff and Appellant, v. Sezer OZKAN, Defendant and Respondent.

No. A103438.

Court of Appeal, First District, Division 5.

December 9, 2004.

Bill Lockyer, Attorney General, Robert R. Anderson, Chief Assistant Attorney General, Gerald A. Engler, Senior Assistant Attorney General, Laurence K. Sullivan, Supervising Deputy Attorney General, Catherine A. Rivlin, Supervising Deputy Attorney General, for Plaintiff and Appellant.

Laureen A. Bethards, under appointment by the Court of Appeal, Berkeley, for Defendant and Respondent.

STEVENS, J.

Sezer Ozkan (Ozkan) was convicted of two felonies, grand theft by fraud (Pen.Code, § 484, subd. (a)) and filing false and fraudulent sales and use tax returns (Rev. & Tax.Code, § 7153.5), on a negotiated plea of guilty. The trial court placed Ozkan on probation, and imposed a condition of restitution as to certain damages suffered by direct victims, but the court declined to order restitution for investigative costs to government agencies that had investigated the crimes.

The People appeal, contending the trial court should have ordered full restitution of the public agencies' losses, including investigative costs, which were incurred as a result of Ozkan's criminal conduct. We agree, and reverse the trial court's order.

I. FACTUAL AND PROCEDURAL HISTORY

The criminal charges in issue arose out of a scheme by Ozkan to sell regular gasoline as higher priced mid-grade and premium gasoline. In addition to bilking the public, Ozkan's business also failed to remit to the State Board of Equalization (SBE) the full amount of the sales taxes collected on gasoline sold at his stations. The direct victims of these acts included the defrauded members of the public who had purchased regular gasoline at premium prices. Other victims included the SBE, to which taxes were due, as well as the Division of Measurement Standards (DMS), which enforces and certifies the quality, advertising, and labeling standards for petroleum products.

Ozkan entered a negotiated plea of guilty to charges alleging grand theft (count one) and filing false sales tax returns (count four). (Pen.Code, § 484, subd. (a); Rev. & Tax.Code, § 7153.5.) Counts charging conspiracy to obtain money by false pretenses (count two), and conspiracy to defraud by use of false advertising (count three), were dismissed subject to Harvey waivers,¹ which allowed the court to consider the dismissed counts for purposes of sentencing and restitution. (Bus. & Prof.Code, §§ 12026, 13413, subds (a)-(d), 13501, 13595, 17500; Pen.Code, § 182, subd. (a)(1).)

The counts that were dismissed, but could be considered by the trial court under the Harvey waiver, contained allegations that Ozkan committed various illegal acts by unlawfully selling and advertising gasoline, in violation of the laws regarding accurate weights and measures, as set forth in the Business and Profession Code. For example, the amended complaint charged that Ozkan and his codefendants sold gasoline as "Unleaded Plus" or "Super Unleaded" on specified dates in January and February of 1998, even though this gasoline did not have the octane rating necessary for such advertising and sales in violation of Business and Professions Code sections 13413 and 13501. Ozkan acknowledged that a consequence of his guilty plea would be the payment of restitution to "any victims that there may be in this case" as a condition of his probation.

The following recited facts formed the factual basis of Ozkan's plea: "Mr. Ozkan is the president of CSN Oil Corporation which owned a series of gas stations called IGS, standing for Independent Gas Station. [¶] Mr. Ozkan during the progress of that business, and as its president, learned of the fact that regular gasoline was being placed in the supreme and midgrade tanks. In fact, one of the drivers who was asked to place more of the incorrect gasoline into that tank than he thought appropriate personally confronted Mr. Ozkan regarding that matter. [¶] Mr. Ozkan, as the president, was also responsible for signing the sales tax returns, and Robert Ferraro, who is a[n] auditor with the Board of Equalization, conducted an audit of the sales tax returns, the sales information taken from the CSN Oil offices from a search warrant, and the actual delivery invoices provided by the suppliers, and he calculated that the way the sales were manipulated so as to explain the supreme versus regular versus mid-grade and make those all come out, that approximately $27,000 in sales tax which was collected was not paid to the State of California and was not declared on the tax forms."

At sentencing, Ozkan requested a hearing as to the issue of whether direct victim restitution would include investigative expenses. The court suspended imposition of sentence, placed Ozkan on probation for five years, ordered the payment of restitution to victims as to all counts, and scheduled a restitution hearing to ascertain the amounts to be paid.

The first restitution hearing took place on March 13, 2003. This was followed by the court's written order, dated March 24, 2003, which imposed restitution to the victim agencies, SBE and DMS, for the unpaid taxes, penalties, and interest. Pursuant to Business and Professions Code section 12015.5, the court also ordered restitution for investigative costs, based on the public agencies' investigation of the nature and extent of Ozkan's criminal conduct. However, on defense motion, the court reopened the question of restitution and set a further hearing that took place on June 26, 2003. The ultimate result of that hearing was the issuance of a supplemental order which reduced restitution by over $200,000, by excluding reimbursement for the agencies' investigative costs. The People's appeal addresses only the court's reduction of the restitution order relative to the claimed investigative costs.

II. DISCUSSION

In determining whether it was error to deny restitution to the public agencies for their investigative costs, we are mindful that the trial court's ruling "must be sustained unless it constitutes an abuse of discretion or rests upon a demonstrable error of law." (In re S.S. (1995) 37 Cal App.4th 543, 550, 43 Cal.Rptr.2d 768; accord, People v. Draut (1999) 73 Cal.App.4th 577, 581-582, 86 Cal.Rptr.2d 469 (Draut).)

We first consider whether such investigative costs were recoverable under the general restitution statute, Penal Code section 1202.4, which was cited as controlling by the trial court in its ruling. We then consider whether these costs are recoverable as restitution under another more limited statute, Business and Profession Code section 12015.5, which had been cited by the trial court in its original ruling which tentatively allowed such a recovery.

A. INVESTIGATIVE COSTS ARE NOT GENERALLY RECOVERABLE AS RESTITUTION UNDER PENAL CODE SECTION 1202.4.

The general restitution statute, Penal Code section 1202.4, subdivision (a)(1), provides that "a victim of crime who incurs any economic loss as a result of the commission of a crime shall receive restitution directly from any defendant convicted of that crime." The definition of a "victim" in Penal Code Section 1202.4, subdivision (k), includes a governmental agency "when that entity is a direct victim of a crime." (Italics added.)

In People v. Torres (1997) 59 Cal.App.4th 1, 68 Cal.Rptr.2d 644 (Torres), Division Four of this court considered the question of whether an investigating public agency was a "direct victim" under the general restitution statute. There, sheriff's deputies investigating illegal drug trafficking had used county funds to buy illegal drugs from the defendant, and the prosecution sought the recovery of those sums in the form of restitution. Interpreting the 1995 statutory scheme (Former Pen.Code, § 1202.4, subd. (p), added by Stats.1994, ch. 1106, § 3, p. 6548), Torres held that restitution was unauthorized under these circumstances. The court reasoned that the public did not suffer loss as "direct victim[s]" of crime by spending money for drug purchases in the course of investigating criminal activity. (Torres, supra, at pp. 4-5, 68 Cal.Rptr.2d 644.) In the words of the court, "The sheriff's deputies bought and apparently received what they paid ... for, methamphetamine." (Id. at p. 3, 68 Cal.Rptr.2d 644.)

This analysis is consistent with that in People v. Birkett (1999) 21 Cal.4th 226, 87 Cal.Rptr.2d 205, 980 P.2d 912 (Birkett), where the high court concluded that an insurance company is not a "direct victim" under the 1994 statutory scheme. In Birkett, defendants were convicted of illegal activities connected to the operation of a "chop shop," i.e., a facility used for the illegal trade in stolen cars. The trial court ordered restitution to the direct victims of the auto thefts, as well as to two insurance companies that had indemnified certain insureds for their stolen vehicles. (Id. at pp. 229-230, 87 Cal.Rptr.2d 205, 980 P.2d 912.) After a lengthy analysis of the statute and its Proposition 8 origin, the court observed: "[n]othing in the language or history of the initiative measure compels the conclusion that persons other than the real, actual, immediate, and direct victims of crime have a constitutional right to restitution from the offenders." (Id. at p. 243, 87 Cal.Rptr.2d 205, 980 P.2d 912.)²

Appellate cases that follow Torres also recognize the recovery of restitution only for losses directly "resulting from unusual expenses directly incurred because of defendant's conduct." (See, e.g., People v. Rugamas (2001) 93 Cal.App.4th 518, 523, 113 Cal.Rptr.2d 271 [upholding a restitution award to a police department for medical bills it had paid on behalf of a defendant following his violent arrest].)

Citing Penal Code section 1202.4, the People argue that where a public agency acts in a public safety capacity in its investigative role, the costs it incurs may be direct economic...