United States v. Illarramendi
| Decision Date | 11 December 2015 |
| Docket Number | No. 3:11-cr-41 (SRU),3:11-cr-41 (SRU) |
| Court | U.S. District Court — District of Connecticut |
| Parties | UNITED STATES OF AMERICA v. FRANCISCO ILLARRAMENDI |
On March 7, 2011, Francisco Illarramendi waived indictment and pleaded guilty to an Information charging him with two counts of wire fraud, in violation of 18 U.S.C. § 1343; securities fraud, in violation of 15 U.S.C. §§ 78j(b) and 78ff, and 17 C.F.R. § 240.10b-5; investment adviser fraud, in violation of 15 U.S.C. §§ 80b-6 and 80b-17; and conspiracy to obstruct justice, obstruct an official proceeding, and defraud the U.S. Securities and Exchange Commission ("SEC"), in violation of 18 U.S.C. §§ 371, 1503, and 1512.
The United States ("the government") provided notice of its intent to move for restitution in accordance with the recommendation of the court-appointed receiver (the "Receiver") in the related SEC case against Illarramendi on January 16, 2015. (doc. 171) It made a supplemental request for restitution on June 10, 2015 (doc. 176).
On August 25, 2015, Illarramendi moved for release pending his appeal, (docs. 191, 197), which motion the government correctly re-characterized as a motion for bail pending appeal (doc. 194).
For the reasons set forth below, and based upon the entire record before me, I grant the government's request for restitution (doc. 176) in the amount of $370,482,716.54, to be distributed pro rata in the amounts and to the victims identified by the Receiver, as specified in the government's exhibit (186-1), which is incorporated here by reference as Exhibit A. I also grant the government's request that Illarramendi be required to refund the amount of $59,051.81 to the CJA fund. I deny Illarramendi's motion for bail pending his appeal. (doc. 194).
The Mandatory Victim Restitution Act of 1996 ("MVRA"), codified at 18 U.S.C. § 3663A, requires that a district court order restitution to victims of certain crimes.1 The MVRA defines a victim as "a person directly and proximately harmed as a result of the commission of" an offense set forth in the MVRA, "including, in the case of an offense that involves as an element a scheme . . . any person directly harmed by the defendant's criminal conduct in the course of the scheme." 18 U.S.C. § 3663A(a)(2). The MVRA identifies several crimes for which restitution may be ordered, and its provisions "shall apply in all sentencing proceedings for convictions of, or plea agreements relating to charges for" any offense that is "an offense against property . . . including any offense committed by fraud or deceit." 18 U.S.C. § 3663(c)(1)(A)(ii). For cases in which the original property cannot be returned to the owner or her designee, and there has been damage, loss, or destruction of property as a result of a defendant's criminal conduct, that defendant may be ordered to pay an amount equal to the greater of the value of the property on the date of the damage, loss or destruction, or the value of the property on the date of sentencing, less the value of any part of the property that is returned, as of the date it is returned. 18 U.S.C. § 3663(b)(1). "When restitution is mandatory, the amount of restitution can only be challenged on the ground that it does not reflect the losses to victims." Harris, 302 F.3d at 75 (citing 18 U.S.C. § 3664(f)(1)(A)).
When determining value for the purpose of restitution, "a district court must consider that the purpose of restitution is essentially compensatory," United States v. Boccagna, 450 F.3d 107, 115 (2d Cir. 2006), and accordingly, a district court must "order restitution to each victim in the full amount of each victim's losses . . . without consideration of the economic circumstances of the defendant." 18 U.S.C. § 3664(f)(1)(A); see also United States v. Walker, 353 F.3d 130, 131, 133 (2d Cir. 2003) (); United States v. Catoggio, 326 F.3d 323, 329 (2d Cir. 2003) (); United States v. Harris, 302 F.3d 72, 75 (2d Cir. 2002) (). The government bears the burden of demonstrating, by a preponderance of the evidence, the amount of loss sustained by a victim as a result of the offense. 18 U.S.C. § 3664(e). Those losses do not require "mathematical precision," but instead may be based on "a reasonable approximation of losses supported by sound methodology." United States v. Gushlak, 728 F.3d 184, 196 (2d Cir. 2013). The final restitution figure "must correspond to all actual losses," and a "reasonable estimate" suffices in circumstances where it may be impossible to determine a precise amount. Catoggio, 326 F.3d at 329.
From about 2006 through 2011, Illarramendi engaged in a large-scale Ponzi scheme to defraud investors, creditors, and the SEC. The facts regarding the substantive offense are set out in the Information (doc. 3), to which Illarramendi pleaded guilty on March 7, 2011, (doc. 5). At that time, Illarramendi was released on bail. (doc. 6) As part of his plea agreement with the government, Illarramendi consented to making restitution by cooperating with the Receiver appointed in Securities and Exchange Commission v. Illarramendi, No. 3:11c-cv-78 (JBA) ("theSEC action"), and Illarramendi also acknowledged that the government had reserved its right to seek restitution consistent with the provisions set forth in 18 U.S.C. § 3663A. Plea Agreement 4; Rider Concerning Restitution (doc. 10).
On August 3, 2012, the government moved to revoke Illarramendi's bail on the grounds that he had received and spent a $600,000 state tax refund while on bail without notifying the court. (doc. 48) Although I warned Illarramendi that his conduct was inappropriate, I denied the government's motion on August 10, 2012. (doc. 57). On January 18, 2013, however, in light of numerous violations, I terminated Illarramendi's release and ordered him to surrender himself by January 25, 2013. (doc. 99)
On September 16, 2014, the Receiver in the SEC action submitted a distribution plan. 3:11-cv-78 (JBA) (doc. 905-1) After a hearing and significant briefing, Judge Arterton approved the plan on October 27, 2014. (doc. 941)
On January 29, 2015, I sentenced Illarramendi to 156 months' imprisonment, three years' supervised release, and a $500 special assessment (docs. 163, 183). See also Judgment (doc. 169). At sentencing, Illarramendi objected to imposing restitution. I held a separate hearing on the issue of restitution on June 15, 2015 (doc. 180) and accepted supplemental briefing from both parties before the restitution hearing (docs. 171, 176, 177). At that hearing, I also ordered Illarramendi to reimburse the CJA fund for his improper use of that resource, given his ability to pay for counsel. (doc. 180). I also accepted further supplemental briefing from both the government and Illarramendi regarding restitution after the hearing. (docs. 186, 188, 190, 192, 193).
Under the MVRA, 18 U.S.C. §§ 3663A and 3664, I am required to impose an order of restitution in favor of the victims of Illarramendi's criminal conduct for the full amount of their losses, without consideration of Illarramendi's ability to pay. Id. § 3664(f)(1)(A). I am also required to set a schedule for payment of restitution, and in doing so, must consider the following statutory factors: the financial resources and other assets of the defendant; the projected earnings and income of the defendant; and any financial obligations of the defendant. 18 U.S.C. § 3664(f)(2).
i. Restitution Amount
In this case, the government argues that a restitution order in the amount of $370,482,717 is an appropriate measure of the losses Illarramendi caused to his victims. In support of that argument, it has submitted extensive documentation from the court-appointed Receiver in the SEC action (docs. 176-1, 177-1, 186-1, 188-1).
The government concedes that the Receiver's plan is only a "reasonable approximation" of the victims' losses because a precise dollar amount cannot be calculated due to the scale of the losses. Gov't Reply Br. at 4 (doc. 192). Nevertheless, it correctly argues that the Receiver is in an excellent position to evaluate the loss to Illarramendi's victims, and has now spent considerable time and resources to do so. Id. at 4-5; see also Gushlak, 728 F. 3d at 196 ().
Illarramendi asserts that the government has not provided sufficient evidence to support its position on restitution, and that he needs more time and access to documents in order to correctperceived errors in the Receiver's accounting. But, as the government points out, Illarramendi had nearly four years between his guilty plea and his sentencing to prepare, and has also had nearly another year after the sentencing to collect additional evidence on the issue of restitution. Despite filing a prolix opposition brief, Illarramendi has failed to identify any material error in the Receiver's plan, or any new evidence that would call the plan into question.
I find that the Receiver's methodology, which primarily relies on the sworn claims submitted through the claims administration process, is a fair and reasonable way to determine the victims' losses. Accordingly, I adopt the government's exhibit (186-1) in full, both as to the identity of Illarramendi's victims and the amount of their losses, and I grant the government's request for restitution in the amount of $370,482,716.54 (doc. 176). Illarramendi shall receive credit against his restitution obligation for the value of any distributions made by the Receiver between the date of the government's submission on June 25, 2015 and the date of this Order.
A...
To continue reading
Request your trial