U.S. v. Kress

• Decision Date: 18 October 1991
• Docket Number: No. 91-1237,91-1237
• Citation: 944 F.2d 155
• Parties: UNITED STATES of America v. Gerald KRESS, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

Page 155

944 F.2d 155

UNITED STATES of America v. Gerald KRESS, Appellant.

No. 91-1237.

United States Court of Appeals,

Third Circuit.

Argued Aug. 15, 1991.

Decided Sept. 16, 1991.

Rehearing Denied Oct. 18, 1991.

Lee J. Dobkin (argued), Office of the U.S. Atty., Philadelphia, Pa., for appellee.

Brian P. Flaherty (argued), Wolf, Block, Schor & Solis-Cohen, Philadelphia, Pa., for appellant.

Before COWEN, NYGAARD and WEIS, Circuit Judges.

OPINION OF THE COURT

COWEN, Circuit Judge.

The issue presented by this appeal is whether a district court may properly require a criminal defendant to pay post-judgment interest on restitution due the United States government as a condition of probation, when that interest accrues from the day of sentencing at a monthly rate of one-and-one-half percent. Because we hold that the Victim and Witness Protection Act (VWPA), 18 U.S.C. §§ 3663-64 (1988) (formerly 18 U.S.C. §§ 3579-80 (1982)), permits federal courts to order a defendant to pay post-judgment interest of this nature, we will affirm.

I.

For his role in a scheme to defraud the United States Department of Defense, Gerald Kress was sentenced on March 14, 1989, to a prison term of 366 days followed by five years of probation. ¹ In addition, the district court determined that Kress could afford to compensate the United States for losses it suffered as a result of his wrongdoing, and ordered Kress to pay the government $300,000.00 in restitution as a condition of his probation. The $300,000 was payable in sixty monthly installments, with payment to begin upon the commencement of his probation. Interest on the unpaid balance was to begin accruing immediately and was to be "computed at the rate of 1.5% per month as provided in 18 U.S.C. § 3565." App. at 46a. While the district court explained the basis for setting the interest rate at 18% annually, it did not specify the statutory authorization for requiring that interest be paid in the first place.

Kress thereafter appealed the judgment of conviction. He also filed on April 14, 1989, a Rule 35 motion to reduce or modify his sentence. Fed.R.Crim.P. 35. ² At the center of Kress's motion was a request that the interest rate on the restitution be reduced to 10.43% annually, which corresponded to the rate of interest allowed on civil judgments at the time. 28 U.S.C. § 1961. On June 5, 1989, the district court vacated the 366 day prison term, substituting a four month term of imprisonment. The rest of the sentence, including the requirement of restitution and interest, was left unchanged. Following our affirmance of the Kress conviction, United States v. Educational Development Network Corp., 884 F.2d 737 (3d Cir.1989), the United States Supreme Court denied certiorari on April 16, 1990.

Another Rule 35 motion was filed by Kress on April 19, 1990, which the district court subsequently denied. Kress then served his prison term and was released on October 2, 1990. After his release, Kress filed a Motion for Modification of Conditions of Probation under Rule 32.1(b). Building on the premise that he was given an illegal sentence, Kress requested that the sentencing order be clarified or modified to reflect that interest on the restitution payments did not start to accrue until Kress's release from prison. ³ On March 12, 1991, the district court denied the motion, prompting Kress to file this appeal.

II.

Subject matter jurisdiction over this matter was properly invoked pursuant to 18 U.S.C. § 3563(c) and Fed.R.Crim.P. 32.1(b). Our jurisdiction is predicated on 28 U.S.C. § 1291, 18 U.S.C. § 3742(a)(1), and Fed.R.Crim.P. 35(a). ⁴ Since the legality of the sentence imposed by the district court is being challenged, our review is plenary. See United States v. Fredenburgh, 602 F.2d 1143, 1148 (3d Cir.1979), overruled on other grounds, United States v. Busic, 639 F.2d 940 (3d Cir.1981).

This case presents several questions of first impression in our circuit. Initially, we must decide if a district court may properly order a criminal defendant to pay post-judgment interest on restitution owed to the victim of his crimes. Should we hold that it may, we must then determine if the interest can accrue from the date that the sentencing order is entered. We must also ascertain whether Kress, having failed to appeal from the district court's order of June 5, 1989, is now barred from relitigating the issue of the appropriate interest rate. Finally, we must decide if the interest requirement unconstitutionally burdens a defendant's right to appeal.

Before addressing these questions, we need to frame our analysis. The district court unfortunately did not point to any authority sanctioning the restitution portion of its sentencing order. Nevertheless, a pair of congressional acts clearly permitted it to order Kress to pay restitution to the government as a condition of probation. The first of these is the Federal Probation Act (FPA), 18 U.S.C. § 3651, ⁵ which was repealed in 1984 but still applies to crimes committed before November 1, 1987. See Pub.L. 98-473, Title II, ch. II, § 212(a)(2), Oct. 12, 1984, 98 Stat.1987 (repealing 18 U.S.C. § 3651); Pub.L. 98-473, Title II, ch. II, § 235, Oct. 12, 1984, 98 Stat.1987 (providing for applicability of sentencing provisions to offenses committed before Nov. 1, 1987). Since Kress was sentenced for criminal activity which commenced in 1983, the FPA supports the district court's actions. Also applicable is the VWPA, which was enacted in 1982. The VWPA states that the "court, when sentencing a defendant under [Title 18], may order ... that the defendant make restitution to any victim of such offense." 18 U.S.C. § 3663(a)(1). We have held that defendants may be required under the VWPA to pay restitution to federal governmental bodies as a special condition of probation. United States v. Hand, 863 F.2d 1100 (3d Cir.1988).

Where the district court fails to specify whether the FPA or the VWPA authorized its actions, the general rule is that the VWPA controls. See United States v. Miller, 900 F.2d 919, 921-22 (6th Cir.1990); United States v. Padgett, 892 F.2d 445, 448 (6th Cir.1989) ("unless a clear intention appears to the contrary, we will assume restitution orders are made pursuant to the broader provisions of the VWPA"). See also United States v. Spambanato, 876 F.2d 5, 7 (2d Cir.1989) ("for crimes committed after January 1, 1983, ... restitution is to be awarded only pursuant to the VWPA"). This rule makes sense, given the broad provisions of the VWPA and the repeal of 18 U.S.C. § 3651. See United States v. Padgett, 892 F.2d at 448; United States v. Ferrera, 746 F.2d 908, 914 (1st Cir.1984). Therefore, we hold that the VWPA, and not the FPA, governs this case, and we will analyze the issues accordingly.

III.

Kress first argues that post-judgment interest on restitution payments can never be assessed under the VWPA. The VWPA itself is silent with respect to the payment of interest in connection with restitution. "However, the absence of a specific provision for interest in a statute does not necessarily 'manifest[ ] an unequivocal congressional purpose that the obligation shall not bear interest.' " United States v. Sleight, 808 F.2d 1012, 1019 (3d Cir.1987) (quoting Rodgers v. United States, 332 U.S. 371, 373, 68 S.Ct. 5, 7, 92 L.Ed. 3 (1947)). Rather, we are to "fashion the grant or denial of interest based on the congressional purpose in imposing the particular statutory obligation and in light of general relevant principles." Id. at 1019-20 (paraphrasing Rodgers, 332 U.S. at 373, 68 S.Ct. at 7). Thus, if it would serve the purpose behind the statute at issue, interest may be awarded. Utilizing this test, the Supreme Court has held that interest cannot be added to a fine or penalty the purpose of which is to deter prohibited conduct, since the government does not suffer a money loss if that fine or penalty is not paid immediately. Rodgers, 332 U.S. at 376, 68 S.Ct. at 8 (penalties incurred under the Agricultural Adjustment Act of 1938 for marketing cotton in excess of fixed quotas should not bear pre-judgment interest).

However, a restitution order under the VWPA is quite different from a fine or penalty payable to the government. The purpose of the VWPA restitution provisions is to compensate victims for their losses, not to punish the wrongdoer. See Hughey v. United States, 495 U.S. 411, 110 S.Ct. 1979, 1984-85, 109 L.Ed.2d 408 (1990) (summarizing congressional intent with respect to the VWPA). ⁶ In this case, the restitution order works to compensate the government completely for losses incurred as a result of Kress's fraud. Adding interest to the principal furthers that purpose. For example, if post-judgment interest were not required and the restitution not paid promptly, the government would suffer a loss, since the government cannot earn interest on or invest the money Kress retains from his fraud. See Sleight, 808 F.2d at 1020 n. 4. Therefore, requiring a defendant to pay interest on restitution due its victim is entirely consistent with the congressional purpose behind the VWPA and comports with the equitable principles surrounding the compensation of victims.

Wrestling with the same question, the Court of Appeals for the Fifth Circuit reached the same conclusion. In United States v. Rochester, 898 F.2d 971 (5th Cir.1990), the court held that post-judgment interest on restitution owed a federal agency could be awarded pursuant to the VWPA. ⁷ Applying the Rodgers/ Sleight analysis, the court reasoned that:

restitution imposed pursuant to the VWPA ... is not in the nature of a fine. Rather, the purpose of the VWPA is "to ensure that wrongdoers, to the degree possible, make their victims whole."

This purpose is effectuated by the payment of the fine to the victim rather than the Government.... [T]he purpose of the VWPA would be served by the inclusion of interest in the judgment.

Id. at 983 (citation omitted). See also United States...