U.S. v. Vaknin

• Decision Date: 09 April 1997
• Docket Number: 96-1393 and 96-1373,Nos. 96-1394,s. 96-1394
• Citation: 112 F.3d 579
• Parties: UNITED STATES of America, Appellee, v. Moshe VAKNIN, Defendant, Appellant. UNITED STATES of America, Appellee, v. E. Eric YEGHIAN, Defendant, Appellant. UNITED STATES of America, Appellee, v. Michael J. FONSECA, Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 579

112 F.3d 579

UNITED STATES of America, Appellee, v. Moshe VAKNIN, Defendant, Appellant.

UNITED STATES of America, Appellee, v. E. Eric YEGHIAN, Defendant, Appellant.

UNITED STATES of America, Appellee, v. Michael J. FONSECA, Defendant, Appellant.

Nos. 96-1394, 96-1393 and 96-1373.

United States Court of Appeals First Circuit.

Heard April 9, 1997.

Decided May 6, 1997.

Mark J. Gillis, Boston, MA by appointment of the court, for appellant Vaknin.

C. Leonard O'Brien, Providence, RI, for appellant Yeghian.

John A. MacFadyen, Providence, RI, for appellant Fonseca.

Ira Belkin, Assistant United States Attorney, Providence, RI, with whom Sheldon Whitehouse, United States Attorney, and Margaret E. Curran, Assistant United States Attorney, were on brief, for the United States.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and STAHL, Circuit Judge.

SELYA, Circuit Judge.

These consolidated appeals raise, inter alia, an interesting question anent the standard of causation that courts must apply in fashioning restitutionary orders under the Victim and Witness Protection Act (VWPA), 18 U.S.C. §§ 3663(a), 3664(a) (1994). The appeals arise out of a multi-count indictment: each of the three appellants bribed the same bank official in connection with the making of loans; some of the loans soured; the bank failed; and the Federal Deposit and Insurance Corporation (FDIC) was left holding an empty bag. When the appellants pled guilty to criminal charges, the district court imposed sentences which included orders of restitution to cover what the court considered to be the attributable losses.

The appellants now challenge these impositions, and, in addition, one appellant, citing his cooperation with the prosecution, assails the district court's refusal to depart downward from the guideline sentencing range (GSR). We affirm the court's eschewal of a downward departure, uphold one restitutionary order (albeit with a modest modification), vacate the other two, and remand for further findings.

I. AN HISTORICAL PERSPECTIVE

Compulsory restitution as a societal response to criminal wrongdoing dates back over 4,000 years to the Code of Hammurabi and the Old Testament. See, e.g., Exodus 22:1-3 ("If a man shall steal ... he should make full restitution."). In its earliest iterations, the practice was designed to forfend against the high social costs of blood feuds and the wreaking of personal vengeance by compensating victims in a more civilized way. See generally Thomas M. Kelly, Note, Where Offenders Pay for Their Crimes: Victim Restitution and Its Constitutionality, 59 Notre Dame L.Rev. 685, 686-88 (1984). By the Middle Ages, however, the sovereign had begun to administer the criminal law directly, and criminal restitution fell into desuetude. See id. The device remained moribund for several centuries. In the United States, for example, federal judges were not able to impose criminal restitution as a condition of probation until 1925 when Congress passed the Federal Probation Act, 18 U.S.C. § 3651 (repealed 1984). Even then, judges used the power sparingly. See Peggy M. Tobolowsky, Restitution in the Federal Criminal Justice System, 77 Judicature 90, 90-91 (1993).

The tectonic plates shifted in 1982 when Congress enacted the VWPA in response to a growing cognizance of victims' rights. Notable for the speed of its election-year passage--the legislation was introduced in the Senate on April 22, 1982, and signed into law by President Reagan less than six months later--the VWPA transmogrified criminal restitution from a sporadically imposed condition of probation into the sentencing norm in cases involving quantifiable economic loss.

The congressional purpose that animated the VWPA is no secret: "the court in devising just sanctions for adjudicated offenders, should insure that the wrongdoer make good[ ], to the degree possible, the harm he has caused his victim." S.Rep. No. 532, at 31 (1982), reprinted in 1982 U.S.C.C.A.N. 2515, 2536. To accomplish this purpose, a district court, when pronouncing sentence, "may order, in addition to ... any other penalty authorized by law, that the defendant make restitution to any victim of such offense." 18 U.S.C. § 3663(a). In determining whether to award restitution (and, if so, in what amount), the sentencing court "shall consider the amount of the loss sustained by any victim as a result of the offense, the financial resources of the defendant, the financial needs and earning ability of the defendant and the defendant's dependents, and such other factors as the court deems appropriate." Id. at § 3664(a).

In general, restitution under the VWPA is limited to "the loss caused by the specific conduct that is the basis of the offense of conviction." Hughey v. United States, 495 U.S. 411, 413, 110 S.Ct. 1979, 1981, 109 L.Ed.2d 408 (1990). ¹ When the fact, cause, or amount of the loss is disputed, the government must establish it by a preponderance of the evidence. See United States v. Baker, 25 F.3d 1452, 1454-55 (9th Cir.1994); United States v. Diamond, 969 F.2d 961, 967 (10th Cir.1992); see also 18 U.S.C. § 3664(d).

II. THE FACTUAL PREDICATE

We present the facts relevant to these appeals as best they have presented themselves, mindful that the record is noticeably underdeveloped.

Kenneth Annarummo was a bad apple. While working as a loan officer for Attleboro-Pawtucket Savings Bank (APSB or the Bank), he solicited and accepted bribes from numerous customers. Annarummo's skulduggery came to light after the Bank failed and the FDIC intervened. In due course, the government indicted Annarummo and several complicit borrowers, including appellants Moshe Vaknin, Michael J. Fonseca, and E. Eric Yeghian (all real estate developers). ² We recount the circumstances of each appellant's involvement.

A. Vaknin's Troubles.

Vaknin first approached APSB in 1987, seeking to refinance several properties. Informed by Annarummo that his request for funds would be facilitated if he greased the wheels, Vaknin paid Annarummo $17,500 and thereafter received the loan. In 1988, Vaknin sought to borrow more money and Annarummo again asked for a bribe in exchange for his assistance in getting the loan underwritten. Vaknin paid him $12,500 prior to securing loan approval. This sequence repeated itself later that same year, when Vaknin slipped Annarummo another bribe and secured a third loan (which was approved by the bank after a series of machinations in which Annarummo presented false information to the credit committee). Although Vaknin repaid the initial refinancing in full, he defaulted on both the 1988 loans and the Bank sustained losses in excess of $900,000.

When indicted, Vaknin pled guilty to a single count of bank bribery. See 18 U.S.C. § 215 (1994). The Presentence Investigation Report (PSI Report) did not recommend restitution. In response to the prosecution's objection, the probation officer explained:

[I]t is not clear as to whether the losses incurred by the bank were a direct result of a fraudulent loan being negotiated as a result of the bank bribery or whether the losses were attributable to other factors, such as a downturn in the economy which affected the real estate market.

At the disposition hearing, Judge Boyle sentenced Vaknin to an incarcerative term of twelve months and one day, two years' supervised release, and a $50 special assessment. On the restitution issue, the judge sided with the prosecution; concluding that there would have been no funds advanced if the bribes had not been paid, the judge held Vaknin liable for the losses resulting from the defaulted loans, rejected the probation officer's "downturn in the economy" hypothesis, and ordered Vaknin to pay restitution to the FDIC in the sum of $1,000,000.

B. Fonseca's Troubles.

By the time Annarummo arrived on the scene, Fonseca was a valued customer of the Bank, having roughly $750,000 in outstanding loans. This debt had been incurred through normal channels and without subterfuge, mostly in connection with single-family residential properties in Rhode Island. Annarummo made no immediate demands on Fonseca, and Fonseca succeeded in securing additional financing through APSB.

In 1987, Fonseca encountered business difficulties and became fearful that he would not be able to meet the repayment schedule on an outstanding APSB note. When he voiced concern to Annarummo, the banker demanded a bribe for his help in warding off trouble should a default ensue. Fonseca paid Annarummo $3,000 but proved able to meet his payment obligation on time and in full.

In 1988, Fonseca applied for a $4,250,000 loan to cover the development of a much larger project than he had ever tackled--a subdivision of more than 50 lots in Bristol, Rhode Island. The record suggests (though it does not pin down) that, after approval of the loan request but prior to its disbursement, Annarummo demanded one of the lots as a bribe. Fonseca acquiesced and transferred title to Annarummo's nominee, leaving one less lot as security for APSB's loan.

The Bank terminated Annarummo's employment in March 1990. Fonseca's subdivision loan (which had a remaining principal balance of $611,500) was then 30 days in arrears, and Annarummo's successor recommended foreclosure. Fonseca negotiated with APSB (which knew nothing of the bribes), and the parties agreed to enter into a forbearance agreement (FA) under which Fonseca would make a lumpsum payment of $450,000 in full satisfaction of the outstanding indebtedness. Fonseca tendered the funds within the agreed 35-day period. In time, the Bank failed, the FDIC intervened, the bribes were discovered, and the indictment materialized.

Fonseca pled guilty to a single count of bank bribery. The district court sentenced him to serve twelve months and one day in prison and a three-year term of supervised release. The court also imposed a $5,000 fine and a $50 special assessment. The matter of restitution...