U.S. v. Kones, s. 95-1434 and 95-1435

• Decision Date: 20 February 1996
• Docket Number: Nos. 95-1434 and 95-1435,s. 95-1434 and 95-1435
• Citation: 77 F.3d 66
• Parties: UNITED STATES of America v. Richard Joseph KONES, Michele Harris, Appellant * .
• Court: U.S. Court of Appeals — Third Circuit

Page 66

77 F.3d 66

UNITED STATES of America v. Richard Joseph KONES, Michele Harris, Appellant^*.

Nos. 95-1434 and 95-1435.

United States Court of Appeals Third Circuit.

Argued Dec. 5, 1995.

Decided Feb. 20, 1996.

Michael R. Stiles, United States Attorney, Walter S. Batty, Jr., Assistant U.S. Attorney, Chief of Appeals, Edward Zittlau (argued), Assistant U.S. Attorney, Office of U.S. Attorney, Philadelphia, PA, for appellee United States of America.

Laurence S. Shtasel, Blank, Rome, Comisky & McCauley, Philadelphia, PA, Bruce A. Franzel (argued), Oxenburg & Franzel, Philadelphia, PA, for appellee Richard Joseph Kones.

Anna M. Durbin (argued), Pamela A. Wilk, Ardmore, PA, for appellant Michele Harris.

Before: SLOVITER, Chief Judge, and STAPLETON and SAROKIN, Circuit Judges.

OPINION OF THE COURT

STAPLETON, Circuit Judge:

Michele Harris appeals the judgment of sentence imposed on Richard Kones. At sentencing, Harris sought restitution pursuant to the restitution provisions of the Victim and Witness Protection Act of 1982 (VWPA), 18 U.S.C. §§ 3663-3664. The district court concluded that it had no power to order restitution because Harris was not a "victim" of Kones' offenses within the meaning of 18 U.S.C. § 3663(a). We agree with this conclusion and will affirm.

I.

Kones was a medical doctor licensed to practice medicine in the Commonwealth of Pennsylvania when a grand jury indicted him on 200 counts of mail fraud in violation of 18 U.S.C. § 1341. Specifically, the indictment alleged that Kones had submitted over $1,000,000 in false insurance claims based on nonexistent medical services to eighteen of his patients. Harris was one of those patients. According to the indictment, Kones submitted approximately $85,000 in false insurance claims for services that he never provided to Harris.

The government also filed an information adding charges for filing false claims with the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) in violation of 18 U.S.C. § 287 and laundering the funds received from the insurance companies in violation of 18 U.S.C. § 1957. The information sought criminal forfeiture of $2 million pursuant to 18 U.S.C. § 982.

Kones and the government reached a plea agreement. Kones plead guilty to all counts and agreed to the $2 million forfeiture for purposes of restitution to the health insurance companies which were victims of his fraud, a sentence of between 51 and 71 months in prison, a fine of up to $4 million, a payment of $1.5 million to the IRS to settle outstanding tax claims, a $10,100 special assessment, and the surrender of all of his licenses to practice medicine in the United States.

Before sentencing, Harris filed a claim for $1 million in restitution and submitted supporting affidavits. Harris alleged that Kones gave her prescriptions for excessive amounts of a pain killer. She contended that she became addicted, lost her job, and continues to need psychiatric care. According to Harris, Kones did this in furtherance of his scheme and it was only by inducing her drug dependency that he was able to control her and carry out his fraudulent scheme.

Accepting arguendo Harris' allegations of injury and Kones' motivation in prescribing drugs for her, the district court rejected Harris' claim for restitution and sentenced Kones pursuant to the plea agreement. The district court concluded that it was without power to order restitution to Harris because Harris was not a "victim" of Kones' offenses of conviction within the meaning of 18 U.S.C. § 3663(a).

II.

The district court had jurisdiction pursuant to 18 U.S.C. § 3231 as Kones was charged with violations of federal law. We have appellate jurisdiction pursuant to 28 U.S.C. § 1291. We exercise plenary review regarding whether a district court has power to order restitution. United States v. Seligsohn, 981 F.2d 1418, 1421 (3d Cir.1992).

III.

A.

VWPA, 18 U.S.C. § 3663(a)(1) provides that a court, "when sentencing a defendant convicted of an offense under this title or section 46312, 46502, or 46504 of title 49, may order, in addition to or, in the case of a misdemeanor, in lieu of any other penalty authorized by law, that the defendant make restitution to any victim of such offense." Thus, in order for a district court to have power to order restitution, the person awarded restitution must be "a victim of such offense." Even where there is a "victim of the offense," § 3663(d) provides that the court may decline to order restitution "to the extent that the court determines that the complication and prolongation of the sentencing process [required to do so] outweighs the need to provide restitution to any victims." We understand this provision to call for a weighing of the burden of adjudicating the restitution issue against the desirability of immediate restitution--or otherwise stated, a weighing of the burden that would be imposed on the court by adjudicating restitution in the criminal case against the burden that would be imposed on the victim by leaving him or her to other available legal remedies. ¹

The legislative history of the VWPA does not provide a direct answer to the issue posed in this appeal, but it does reflect what Congress contemplated would be involved in making restitution awards and we find this helpful. Nothing in the legislative history evidences an expectation that a sentencing judge would adjudicate, in the course of the court's sentencing proceeding, all civil claims against a criminal defendant arising from conduct related to the offense. Rather, it was expected that entitlement to restitution could be readily determined by the sentencing judge based upon the evidence he had heard during the trial of the criminal case or learned in the course of determining whether to accept a plea and what an appropriate sentence would be. While the original statute, similar to the current version, provided for discretion to decline to grant restitution when it would be an undue burden to do so, this was not because Congress expected that sentencing judges would be required to hold an evidentiary hearing on liability issues in the course of the sentencing proceedings. As the Senate Report explains, "the Committee added this provision to prevent sentencing hearings from becoming prolonged and complicated trials on the question of damages owed the victim." S.Rep. No. 532, 97th Cong., 2d Sess. 31 (1982), reprinted in 1982 U.S.C.A.N. 2515, 2537 (emphasis added). The kind of case that Congress had in mind was one in which liability is clear from the information provided by the government and the defendant and all the sentencing court has to do is calculate damages. See id. at 2536-37 (discussing a case where the victim of a purse snatching suffered a broken hip).

This aspect of Congress' expectation is important because it counsels against construing the text of the statute in a way that would bring fault and causation issues before the sentencing court that cannot be resolved with the information otherwise generated in the course of the criminal proceedings on the indictment. We are persuaded that this counsel should guide our interpretation of the restitution provisions of the VWPA.

In Hughey v. United States, 495 U.S. 411, 110 S.Ct. 1979, 109 L.Ed.2d 408 (1990), the Supreme Court interpreted the phrase "restitution to any victim of such offense" as used in § 3663(a). Hughey was indicted for three counts of theft by a Postal Service employee in violation of 18 U.S.C. § 1709, and three counts of use of an unauthorized credit card in violation of 18 U.S.C. § 1029(a)(2). After he pled guilty to one count of use of an unauthorized credit card, the district court ordered restitution for loss caused by all of the counts. Id. at 413-14, 110 S.Ct. at 1981. The Supreme Court held that "such offense" in § 3663(a)(1) refers to the offense of conviction. In other words, Congress authorized restitution "only for the loss caused by the specific conduct that is the basis of the offense of conviction." Id. at 413, 110 S.Ct. at 1981. Accordingly, the district court exceeded its powers when it ordered restitution for similar and related conduct that was not a part of the conduct constituting the offense of which the defendant was convicted. Id. at 422, 110 S.Ct. at 1985.

Not long after the Supreme Court decided Hughey, Congress amended the VWPA by adding 18 U.S.C. § 3663(a)(2) which provides:

For the purposes of restitution, a victim of an offense that involves as an element a scheme, a conspiracy, or a pattern of criminal activity means any persons directly harmed by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern.

Crime Control Act of 1990, Pub.L. No. 101-647, 104 Stat. 4789, 4863 (1990). This amendment, as Kones stresses, expands the restitution granting authority of district courts beyond that found in Hughey. By its own terms, however, § 3663(a)(2) applies only in cases where a scheme, conspiracy, or pattern of criminal activity is an element of the offense of conviction. In such cases, § 3663(a)(2) authorizes restitution to "any person directly harmed by the defendants' criminal conduct in the course of the scheme, conspiracy, or pattern" that was an element of the offense of conviction.

Section 3663(a)(2) expanded the district courts' restitution powers in such cases to the extent that a district court could order restitution for any harm directly caused by the defendant's criminal conduct in the course of the scheme, conspiracy, or pattern, even though such conduct is not "the specific conduct that is the basis of the offense of conviction." See United States v. Seligsohn, 981 F.2d 1418, 1421-22 (3d Cir.1992). For example, where a defendant is...