Ratliff v. U.S.

• Decision Date: 30 July 1993
• Docket Number: 92-5515,Nos. 92-5391,s. 92-5391
• Citation: 999 F.2d 1023
• Parties: Daryl E. RATLIFF, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1023

999 F.2d 1023

Daryl E. RATLIFF, Petitioner-Appellant, v. UNITED STATES of America, Respondent-Appellee.

Nos. 92-5391, 92-5515.

United States Court of Appeals Sixth Circuit.

Submitted Jan. 21, 1993.

Decided July 30, 1993.

Daryl Ratliff (pro se, briefed).

Karen K. Caldwell, U.S. Atty., David Bunning, Asst. U.S. Atty. (briefed), Office of U.S. Atty., Lexington, KY, for respondent-appellee.

Before: KEITH and RYAN, Circuit Judges; and PECK, Senior Circuit Judge.

JOHN W. PECK, Senior Circuit Judge.

I. Introduction

On March 2, 1990, a criminal information was filed which charged Ratliff with mail fraud and with knowingly filing false, fictitious and fraudulent claims against the United States, in violation of 18 U.S.C. §§ 1341 and 287. The information charged that, during his tenure as Deputy Commissioner for the Department of Labor, Office of Workmen's Compensation, Division of Black Lung Benefits, Ratliff engaged in a scheme in which he filed false claims for Coal Mine Worker's Compensation Benefits in the names of various individuals who were not entitled to benefits. The information further alleged that from December of 1983 through June of 1986, Ratliff's scheme secured $230,671.19 from the United States Treasury in fraudulent benefits.

A previously executed plea agreement was filed with the information. The plea agreement did not specify the offenses committed, but did indicate that Ratliff would plead guilty to a two-count information charging a violation of Title 18, United States Code, the specific sections to be determined at a later date. Ratliff also promised to make full restitution in an amount to be determined. In a later-executed "Restitution Agreement" filed simultaneously with the plea agreement and information, Ratliff agreed to pay "restitution to the United States of America in the amount of $230,671.19, plus interest at the rate of ten (10%) to begin accumulating on the date that the sentence is imposed for the offense charged."

On May 3, 1990, Ratliff appeared before the district court for sentencing. The government advised the court that Ratliff had arranged for restitution in full as agreed by the parties. The district court then sentenced Ratliff to three (3) years on each of the two counts in the information to run concurrently, and fined Ratliff an additional $5,000.00 on each count. The court also ordered Ratliff to make restitution to the United States in the amount of $280,671.00, which included the total loss to the government and an additional $50,000.00 for the cost of investigating Ratliff's fraudulent scheme. Ratliff did not appeal his sentence.

On August 31, 1990, Ratliff moved for a reduction of his sentence pursuant to Fed.R.Crim.P. 35(b), which motion was denied. On April 11, 1991, Ratliff filed this motion to vacate, set aside, or correct his sentence while in federal custody, pursuant to 28 U.S.C. § 2255. In his § 2255 motion, Ratliff moved to vacate the order requiring the $50,000 additional restitution. He also moved to reduce the fines imposed. Finally, Ratliff moved to correct information in his Presentence Investigation Report ("PSI"), regarding his financial status. ¹ The magistrate judge recommended denial of Ratliff's motion on all grounds, and the district court adopted that recommendation and denied the motion on March 5, 1992.

Proceeding pro se, Ratliff appeals numerous issues related to the denial of his § 2255 motion. ² For the following reasons, we affirm in part and reverse in part.

II. The Award of Restitution

Ratliff was ordered to pay restitution to the U.S. Department of Labor under 18 U.S.C. § 3663, the Victim and Witness Protection Act of 1982 (hereinafter "VWPA"). Ratliff challenges this award of restitution on several grounds.

Before proceeding to the merits of Ratliff's arguments, we must first address the government's contention that Ratliff has waived his right to challenge the award of restitution on collateral attack, absent a showing of cause to excuse his failure to appeal the issue and actual prejudice. United States v. Frady, 456 U.S. 152, 167-168, 102 S.Ct. 1584, 71 L.Ed.2d 816 (1982). In order to satisfy this standard, a defendant must "shoulder the burden of showing, not merely that the errors at trial created a possibility of prejudice, but that they worked to his actual and substantial disadvantage...." Id. at 170, 102 S.Ct. at 1596 (emphasis original). The Frady cause and prejudice standard applies to a defendant who pleads guilty and first asserts a claim for relief in a collateral proceeding. See Bateman v. United States, 875 F.2d 1304, 1307 (7th Cir.1989) (per curiam); see also United States v. Walsh, 733 F.2d 31, 35 (6th Cir.1984).

The magistrate judge found that "at no time has Defendant addressed the issue of why he did not appeal his sentence." Although it is true that the issue of cause and prejudice is not discussed in detail by this pro se petitioner, he did allege in his objections to the recommendation of the magistrate judge and in his brief to this court that he asked his attorney to appeal the restitution award but was rebuffed. Federal courts have long recognized that the pleadings of a pro se litigant must be construed liberally. See e.g. Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 595, 30 L.Ed.2d 652 (1972) (per curiam); Williams v. Browman, 981 F.2d 901, 903 (6th Cir.1992). Ratliff's allegations regarding the conduct of his appellate counsel bear directly on the issue of cause and prejudice.

The ineffective assistance of counsel constitutes cause. Murray v. Carrier, 477 U.S. 478, 488, 106 S.Ct. 2639, 2645, 91 L.Ed.2d 397 (1986). To establish the ineffective assistance of appellate counsel, it must be shown that counsel's performance was deficient and that the deficient performance was prejudicial. Strickland v. Washington, 466 U.S. 668, 687, 104 S.Ct. 2052, 2064, 80 L.Ed.2d 674 (1984); Bowen v. Foltz, 763 F.2d 191, 194 (6th Cir.1985). A refusal to appeal an erroneous restitution award, which award would have been subject to reversal on appeal, would meet the Strickland test and would clearly constitute cause for Ratliff's failure to appeal the award. Although the absence of a hearing on the issue of cause and prejudice makes it more difficult for this reviewing court to determine whether a sufficient showing has been made, it is obvious that Ratliff will suffer actual prejudice if his claim is not heard, because he will be forced to pay an award of restitution which could not otherwise be upheld. In light of the facially valid showing of cause and prejudice, this court will proceed to review the merits of Ratliff's claims regarding the restitution award.

On the merits, Ratliff argues that the costs of investigating and prosecuting an offense are not direct losses for which restitution may be ordered under the VWPA. We agree.

Restitution is limited to losses caused by the specific conduct that is the basis of the offense of conviction. Hughey v. United States, 495 U.S. 411, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990). ³ In United States v. Salcedo-Lopez, 907 F.2d 97, 98 (9th Cir.1990) (per curiam), the Ninth Circuit held that payments made during the course of investigating the defendant's illegal activities are not recoverable under the Act:

Any loss for which restitution is ordered must result directly from the defendant's offense. United States v. Kenney, 789 F.2d 783, 784 (9th Cir.1986) (citing United States v. Tyler, 767 F.2d 1350, 1351 (9th Cir.1985)). The costs of investigating and prosecuting an offense are not direct losses for which restitution may be ordered. Id. (salaries of bank employees who testified at trial are costs of prosecution too remote to form the basis for restitution); see Tyler, 767 F.2d at 1352 (§ 3651, predecessor to § 3663, does not authorize award of restitution for decline in value of stolen timber held for evidentiary purposes); United States v. Vaughn, 636 F.2d 921, 923 (4th Cir.1980) ("costs of investigation result only indirectly from the offense of income tax violation").

The Fourth Circuit has likewise held that restitution may not be awarded under the VWPA for investigation or prosecution costs incurred in the offense of conviction. See United States v. Vaughn, supra. Although prosecution costs did form the basis of an order of restitution in United States v. Hand, 863 F.2d 1100 (3rd Cir.1988), Hand was the rare case where certain prosecution costs were losses directly caused by the offense of conviction.

Patricia Hand was a juror in a multi-defendant criminal trial who admitted to impermissible contact with one of the defendants during the criminal trial. The government ultimately lost five original jury verdicts of guilt and suffered a mistrial as to a sixth defendant as a direct result of Hand's conduct. Hand was prosecuted for her conduct and pleaded guilty to contempt of court. On appeal, the Third Circuit affirmed an award of restitution against Hand which consisted of prosecution costs from the prior criminal trial. Although the court noted that prosecution expenses are ordinarily "too remote to form the basis for restitution," see United States v. Kenney, 789 F.2d 783 (9th Cir.1986), cert. denied, 479 U.S. 990, 107 S.Ct. 586, 93 L.Ed.2d 588 (1986), Hand's offense directly resulted in a loss of prosecution costs from the prior criminal trial which could be awarded as restitution. Hand, supra, 863 F.2d at 1105. Consistent with Salcedo-Lopez and Vaughn, no additional restitution was awarded for the costs of investigating or prosecuting Hand's improper conduct.

In this case, the award of restitution in the amount of $230,671.19, which amount was stipulated by the parties to be the sum embezzled by Ratliff, was proper. However, the sentencing court erred by awarding $50,000 as an additional amount of restitution, because that amount was based solely on the costs of investigating and prosecuting Ratliff's conduct and was not a direct loss...