United States v. Sheets
| Decision Date | 10 February 2016 |
| Docket Number | No. 15–10555.,15–10555. |
| Citation | 814 F.3d 256 |
| Parties | UNITED STATES of America, Plaintiff–Appellee, v. Doyle Brent SHEETS, Defendant–Appellant, Elizabeth Sheets; Jordan Paige Sheets; Kristin Whitney Sheets; Tatum Elizabeth Sheets, Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Melissa A. Childs, Asst. U.S. Atty., James Wesley Hendrix, Asst. U.S. Atty., U.S. Attorney's Office, Dallas, TX, for Plaintiff–Appellee.
Bruce K. Thomas, Law Office of Bruce K. Thomas, Dallas, TX, Gary Phillip Krupkin, Esq., Richardson, TX, for Defendant–Appellant.
Steven M. Griggs, Dallas, TX, for Appellants.
Before STEWART, Chief Judge, and REAVLEY, and DAVIS, Circuit Judges.
Defendant–Appellant Doyle Brent Sheets ("Sheets") pleaded guilty to an offense related to a scheme to defraud the United States Department of Education ("DOE"). The district court ordered each defendant involved in the scheme to pay restitution in various amounts. When the district court indicated that it intended to return certain garnished funds to Michael Otto ("Otto"), one of Sheets' co-defendants, the Government requested that Otto's garnished funds be applied to the overall outstanding restitution obligation. The district court denied the Government's request and returned the garnished funds to Otto. Sheets appeals the district court's denial of the Government's proposed application of restitution payments. We REVERSE.
Sheets, the former president of American Commercial Colleges, Inc. ("ACC"), was convicted of misprision of a felony in violation of 18 U.S.C. § 4 for concealing knowledge of ACC's theft of government funds in violation of 18 U.S.C. § 641.1
Beginning in 2005, ACC, on behalf of its students, submitted hundreds of claims to the DOE for Federal Student Aid ("FSA") program funds and received millions of dollars in student loans and grants. The DOE is charged with the responsibility of operating, administering, and regulating the various FSA programs throughout the country. Students who are eligible for financial assistance may apply for assistance in the form of grants and loans to pursue post-secondary education. Once a student is deemed eligible for aid, an educational institution may use the student's FSA program funds to cover tuition and fees for the academic year. Under Title IV of the Higher Education Act of 1965, as amended, institutions like ACC are required to derive at least 10 percent of their revenues from sources other than FSA program funds (the "90/10 Rule").2 In 2007 and earlier, if a school did not meet the 90/10 Rule, it was automatically ineligible to receive FSA program funds during the next fiscal year. In 2008, during the reauthorization process, the penalty for a school's failure to meet the 90/10 Rule was revised so that a noncompliant institution's eligibility to participate in the FSA programs became provisional for the next two years. Any failure to meet the 90/10 Rule thereafter resulted in the automatic termination of funds.
In 2010, an investigation revealed that ACC continuously misrepresented its 90/10 Rule compliance to the DOE by constructing a fraudulent scheme in order to mischaracterize the actual portion of funds each of its campuses received as FSA versus non-FSA program funds. Had ACC not misrepresented that it was compliant with the 90/10 Rule, it would have been ineligible for FSA program funds from fiscal year 2006 until fiscal year 2010.
In separate proceedings, Sheets and his co-defendants were convicted and sentenced for their involvement in the scheme. Each was ordered to immediately pay the following to the DOE, jointly and severally:
| Defendant | Sentencing Date | Special Assessment | Fine | Restitution |
| ACC | Oct. 2, 2014 | $400 | $1,200,000 | $972,794.70 |
| Sheets | Oct. 2, 2014 | $100 | $5,000 | $972,794.70 |
| Otto | Sept. 19, 2014 | $100 | $5,000 | $66,606.48 |
| Reed | Sept. 19, 2014 | $100 | $5,000 | $66,606.48 |
| Richardson | Oct. 9, 2014 | $25 | $1,000 | $87.02 |
| McNelly | Sept. 23, 2014 | $25 | $1,000 | $87.02 |
| Summers | Sept. 23, 2014 | $25 | $1,000 | $87.02 |
The Presentence Investigation Reports ("PSR") in Otto's case and in Reed's case attributed the $66,606.48 loss to the same conduct, with neither party making objections to the PSRs.
In November 2014, following sentencing, the Government applied for a writ of garnishment for substantial nonexempt property belonging to Sheets, Otto, and Reed. On November 24, 2014, the district court ordered that writs of garnishment be issued to recover $50,969.46 from each of Otto and Reed's retirement funds, and $957,257.68 from Sheets' investment accounts.
The Government filed a Final Order of Garnishment seeking to obtain funds from the defendants. In addition, on February 5, 2015, the Government filed a Motion for Order Regarding Application of Payment (the "Restitution Motion"), describing the proposed collection of restitution under the Mandatory Victim Restitution Act ("MVRA")3 and confirming that payments would not end until either a defendant paid to the upper limit of the liability established by the court or the DOE was fully compensated.4 On February 6, 2015, the district court granted the Government's Restitution Motion.5 The court noted that because judgments for Reed, Richardson, McNelly, and Summers were already satisfied, any receipts from garnishment in the Otto case would be applied to satisfy Otto's fine ($5,000), and then applied toward the joint and several restitution imposed on ACC ($972,794.70). The Otto payment would therefore not count as an overpayment and would help to diminish any remaining payment required by Sheets and ACC.
On February 24, 2015, and acting sua sponte, the district court vacated its prior order and denied the Government's Restitution Motion. The court ordered that instead of applying payments received on behalf of Otto to the joint and several liability of ACC, it would return the garnished funds to Otto's garnishee. The court also ordered the Government to show cause as to why funds garnished should not be returned to the garnishee.
On March 24, 2015, in the case solely involving Otto, the district court ordered that any funds held for the benefit of Otto and subsequently garnished beyond the amount owed as a fine by him, were to be returned to the garnishee, instead of applied to the overall restitution sum remaining for all defendants. Sheets and his intervening family members timely appealed.
The main issue on appeal is whether the district court erred in denying the Government's Restitution Motion, thereby failing to apply the restitution sum garnished from Otto against the total loss suffered by the DOE.
In reviewing an order of restitution, if the restitution was imposed in violation of the MVRA, it is illegal, and the proper standard of review is de novo. See United States v. Maturin, 488 F.3d 657, 659 (5th Cir.2007) (citing United States v. Adams, 363 F.3d 363, 365 (5th Cir.2004) ). Once we have determined that an award of restitution is permitted by the appropriate law, we review the propriety of a particular award for an abuse of discretion. Adams, 363 F.3d at 365.
In the alternative, where the defendant has failed to object to either the amount of restitution recommended in the pre-sentence investigation report or the district court's restitution order, thereby denying the court the opportunity to identify and correct any errors, we review for plain error. See Maturin, 488 F.3d at 660. Under the plain error standard, we will correct an error in the district court proceeding only if the error was (1) "clear" or "obvious," and (2) affected the substantial rights of the defendant. Id. Where both elements are established, we may exercise our discretion to notice a forfeited error, but only if the error "seriously affects the fairness, integrity or public reputation of the judicial proceedings."
Johnson v. United States, 520 U.S. 461, 467, 117 S.Ct. 1544, 137 L.Ed.2d 718 (1997) (internal quotation marks omitted). A restitution order that fails to comply with statutory requirements, such as a failure to properly apply the restitution provisions of the MVRA, may constitute plain error. See, e.g., United States v. Ollison, 555 F.3d 152, 164 (5th Cir.2009) ; United States v. Trigg, 119 F.3d 493, 501 n. 7 (7th Cir.1997).
Sheets challenges the district court's denial of the Government's Restitution Motion. He argues that the district court committed error in failing to apply the restitution sum garnished from Otto against the total loss suffered by the DOE.
A victim of a crime has "[t]he right to full and timely restitution as provided in law." See 18 U.S.C. § 3771(a)(6). Under the MVRA, the United States may collect restitution owed to victims of criminal offenses. See 18 U.S.C. § 3664(f)(1)(A) ; United States v. Phillips, 303 F.3d 548, 550–51 (5th Cir.2002). Congress directed the Attorney General to aggressively enforce restitution orders with the intent that the Department of Justice would commit the resources necessary to ensure that the rights of victims are enforced. See 18 U.S.C. § 3612(c) ; Phillips, 303 F.3d at 550–51.
If the court finds that more than one defendant has contributed to a victim's loss, the court has the discretion to find each defendant liable for payment of the full amount of restitution, i.e., joint and several liability among the defendants. See 18 U.S.C. § 3664(h). In the alternative, the court may apportion liability among the defendants to require contribution from a defendant solely based on the loss the defendant caused to the victim and the economic circumstances of each defendant. See 18 U.S.C. § 3664(h) ; United States v. Scott, 270 F.3d 30, 52–53 (1st Cir.2001) ; Trigg, 119 F.3d at 501 ().
In some instances, courts apply a hybrid approach in imposing restitution—frequently employing a combination of the apportionment of liability approach while...
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