U.S. v. Gordon

• Decision Date: 30 December 2004
• Docket Number: No. 03-10322.,03-10322.
• Citation: 393 F.3d 1044
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. Robert S. GORDON, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

393 F.3d 1044

UNITED STATES of America, Plaintiff-Appellee, v. Robert S. GORDON, Defendant-Appellant.

No. 03-10322.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 15, 2004.

Filed December 30, 2004.

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William J. Genego, Santa Monica, CA, for the defendant-appellant.

Kevin V. Ryan, San Jose, CA; Hannah Horsley, San Jose, CA; and David R. Callaway, San Jose, CA, for the plaintiff-appellee.

Appeal from the United States District Court for the Northern District of California; Jeremy Fogel, District Judge, Presiding. D.C. No. CR-01-20077-JF.

Before: FERNANDEZ, PAEZ, and CLIFTON, Circuit Judges.

CLIFTON, Circuit Judge:

This case presents the disappointing story of a promising federal appellate law clerk gone bad. Robert Gordon, a graduate of Stanford Law School and a former law clerk for one of our colleagues, a judge on the U.S. Court of Appeals for the Seventh Circuit, embezzled millions of dollars in cash and stock from his employer, Cisco Systems. Following his guilty plea conviction for wire fraud, 18 U.S.C. § 1343, and insider trading, 15 U.S.C. § 78j(b), Gordon appeals the district court's final order of restitution. The district court imposed restitution in a total amount of $27,397,206.84 under the Mandatory Victims Restitution Act of 1996 ("MVRA"), Title II, Subtitle A of the Antiterrorism and Effective Death Penalty Act of 1996, Pub.L. No. 104-132, 110 Stat. 1214, codified in relevant part at 18 U.S.C. §§ 3663A, 3664 (1996). Gordon does not dispute the entire amount of the restitution order but contends that certain portions should not be included. At issue on appeal are the restitution order's award of $12,593,902.23 for embezzled shares from one company; prejudgment interest of $2,424,913.32; and reimbursable investigation costs totaling $1,038,477.00.

The primary and overarching goal of the MVRA is to make victims of crime whole. In achieving this objective, Congress intended district courts to engage in an expedient and reasonable restitution process, with uncertainties resolved with a view toward achieving fairness to the victim. Guided by these principles, we hold that the district court's restitution analysis for the embezzled shares, including its fairly sophisticated "date of the loss" calculation, was not an abuse of discretion. Nor did the district court abuse its discretion in declining to account for brokerage house commissions or for awarding restitution for costs incurred by Cisco during its participation in the criminal investigation. Finally, we conclude that the district court did not abuse its discretion in awarding prejudgment interest in regards to the embezzled cash and shares of the companies Terayon and Cabletron. The district court did, however, abuse its discretion in awarding prejudgment interest for the other embezzled securities. We therefore affirm in part, reverse in part, and remand for entry of a new order of restitution.

I. BACKGROUND

A. Statutory Framework

The MVRA makes restitution mandatory for particular crimes, including those offenses which involve fraud or deceit. See 18 U.S.C. § 3663A(c)(1)(A)(ii). Under the MVRA, a court must order restitution to each victim of an offense, and the court cannot consider the defendant's economic circumstances. See 18 U.S.C. § 3664(f)(1)(A). The prior restitution statute, the Victim and Witness Protection Act ("VWPA"), required courts to consider the economic circumstances of the defendant prior to ordering restitution, and the granting of restitution was discretionary, not mandatory. See 18 U.S.C. § 3663. With these exceptions, the two statutes are identical in all important respects, and courts interpreting the MVRA may look to and rely on cases interpreting the VWPA as precedent. See United States v. Randle, 324 F.3d 550, 555-56 & nn. 2-3 (7th Cir.2003) ("The provisions of the VWPA and the MVRA are nearly identical in authorizing an award of restitution.").

B. Factual Background and Procedural History

Robert Gordon attended Stanford Law School, where he was an associate managing editor of the Stanford Law Review. Upon graduating from law school, Gordon served as a law clerk for a judge on the U.S. Court of Appeals for the Seventh Circuit. Prior to his employment at Cisco Gordon was an investment banker at Goldman Sachs and First Boston.

Gordon was employed at Cisco from September 1995 to April 2001. He started at Cisco as a director in the Corporate Finance Department and, in 1999, transferred to the Business Development Group. Through late 1997 until April 2001, Gordon obtained stock certificates from companies in which Cisco had acquired an interest and, instead of depositing those certificates with Cisco's treasury department, transferred them to two brokerage accounts he had established. He then sold the embezzled shares and used the proceeds to make stock trades using information gained from his insider position with Cisco.

In addition, under Gordon's guidance, Cisco loaned $15 million to Spanlink, a start-up company in which Cisco had previously invested. Cisco was not aware, however, that Gordon personally had previously lent Spanlink $5 million, posing as a venture capital investor and using funds previously embezzled by him from Cisco, and that Gordon had received 50,000 shares of Spanlink "Series B" Preferred Stock in return for arranging that loan. After Spanlink received the $15 million, Gordon redeemed the preferred shares for $10 million, turning a $5 million profit for himself.

In April 2001, Cisco discovered that shares were missing from one of the accounts from which Gordon had embezzled stock. Cisco's officers spoke to Gordon about the missing shares. They asked him for his laptop computer. Gordon said his laptop was at home, but he agreed to bring it to Cisco the following day. Gordon was told that he should not erase anything from the hard drive. Yet as confirmed by subsequent forensic analysis, Gordon went home that night and used an "evidence eliminator" software program to delete files from his computer. Further analysis established that Gordon had run that program at least five times to overwrite deleted files.

Discovering that Gordon had embezzled certain shares, Cisco launched an internal investigation to determine the extent of the embezzlement. This involved identifying all the transactions in which Gordon had been involved during his five years with the company. As a result of this investigation, Cisco identified five additional embezzlements totaling more than $13 million in losses to Cisco. Two of these embezzlements involved Cisco's investments in another technology company called Terayon.

In April 2001, the government charged Gordon with wire fraud, and in May 2001, an indictment alleging two counts of wire fraud was returned. Gordon pled guilty to a superseding information alleging two counts of wire fraud, one count of insider trading, and one forfeiture count. Under the plea agreement, Gordon agreed to pay restitution totaling $14,114,372.38 to Cisco and $343,173.40 to the government, and to forfeit the amounts alleged in the forfeiture count. Gordon also agreed to waive his right to appeal his "convictions, the judgment, and orders of the Court," in addition to the right to appeal his sentence. The government reserved the right in the plea agreement to argue for additional restitution for Cisco's "lost opportunity" costs for the Terayon shares, investigation costs, and prejudgment interest.

The district court sentenced Gordon to a term of 66 months in prison. The court scheduled a further hearing pursuant to 18 U.S.C. § 3664(d)(5) to address the disputed issues of restitution. The court established July 30, 2002 (the date of Gordon's guilty pleas) as the cut-off date for prejudgment interest. The district court subsequently issued an order addressing the areas of restitution and forfeiture that were not contested by the parties and conducted an evidentiary hearing regarding the remaining disputed restitution issues. In the court's Final Order of Restitution, Gordon was ordered to pay restitution totaling $27,397,206.84, including:

(1) $12,593,902.23 for the embezzled Terayon shares;

(2) prejudgment interest of $2,424,913.32; and

(3) reimbursable investigation costs totaling $1,038,477.00.¹

Both the Final Order of Restitution and Final Order of Forfeiture were incorporated into the Amended Judgment. Gordon timely appealed.

II. DISCUSSION

A. Waiver of Right to Appeal

We review de novo the question of whether a defendant has validly waived his statutory right to appeal. United States v. Anglin, 215 F.3d 1064, 1066 (9th Cir.2000). A defendant's right to appeal is statutory, rather than constitutional, in nature. Id. Knowing and voluntary waivers of appellate rights in criminal cases are "regularly enforce [d]." Id. "The sole test of a waiver's validity is whether it was made knowingly and voluntarily." Id. at 1068; see also United States v. Baramdyka, 95 F.3d 840, 843 (9th Cir.1996) (noting that the "proper enforcement of appeal waivers serves an important function in the judicial administrative process by preserving the finality of judgments and sentences imposed pursuant to valid plea agreements") (quotation marks and citation omitted).

The government argues that because Gordon waived the right to appeal the "orders of the Court" in his plea agreement, he waived his right to appeal the restitution order. At Gordon's plea colloquy, the district court also emphasized its view that Gordon had waived the right to appeal the restitution order. We disagree. Gordon lacked sufficient notice to waive his right to appeal the restitution award. As we held in United States v. Phillips, 174 F.3d 1074 (9th Cir.1999), while "[i]t is true that a court can impose restitution when the plea agreement is silent as to the amount of restitution as long as the amount is based on actual damages[,] .... [a]...