United States v. Willis
| Decision Date | 26 October 2018 |
| Docket Number | 1:15-cr-3764 WJ |
| Parties | UNITED STATES OF AMERICA, Plaintiff, v. BOBBY WILLIS, Defendant. |
| Court | U.S. District Court — District of New Mexico |
THIS MATTER comes before the Court following restitution hearings on June 27, 2018, and October 22, 2018. Following an evidentiary hearing on the amount of restitution and any offset to restitution, the Court FINDS that restitution is in the remaining amount of $776,640, plus post-judgment interest. A restitution order shall not be issued until the matters of Defendant's ability to pay, and payment schedule, are resolved.
Defendant pled guilty to two counts of wire fraud pursuant to 18 U.S.C. § 1343. The victims transferred $1 million to Defendant to invest in a real-estate LLC on their behalf. Defendant pocketed $995,000 and did not invest the money as promised. $5,000 went to a third party for fees.
At both restitution hearings, the parties agreed that the amount of actual loss was $1 million. Defendant did not object to the PSR factual finding that the amount of loss was $1 million. The Government also requested prejudgment interest at the federal statutory rate, and apparently Defendant took no position.
Defendant and the victims entered into a settlement in a civil case involving this same fraud in the Second Judicial District, Bernalillo County, New Mexico. In the civil settlement, the parties agreed as follows:
G. Victim Restitution. The Lees acknowledge and agree that the consideration being provided to Plaintiffs hereunder constitutes full and complete restitution to which the Lees might otherwise be entitled in USA v. Willis, 15-CR-037640-MCA ().
Doc. 64-14, p. 3. As part of the settlement, Defendant (1) transferred real property, and (2) promised to pay $50,000, to the victims. Defendant has paid at least $15,000, and alleges to have paid $25,000 on the promissory note.
Paragraph 38 of the PSR provided:
According to defense counsel, the defendant has paid all but $35,000 that were due under a Promissory Note. The Government advised that the defendant has given the victim's in this case a piece of property in the Farmington, New Mexico area that has been appraised at $223,360.00 as part of a civil settlement. The settlement also included a promissory note for $45,000 that has a remaining balance of $35,000.
Doc. 55, ¶ 38. Defendant objected to the above, stating that restitution was paid in full by the civil settlement. Doc. 59. The PSR also provided that the total loss the victims was $1,000,000. At the sentencing hearing, the Court reserved addressing the amount of restitution until a subsequent hearing.
The Government argues that the restitution amount should be $1 million, before any offset for the value of the property transferred to the Lees. The $1 million restitution amount, before considering any offsets, is supported by the admission in the plea agreement and the undisputed facts in the PSR. Defendant does not dispute the $1 million restitution amount, but instead argues that the real property, along with the $50k promissory note, satisfies his restitution obligation.
A hearing was held on October 22, 2018 to determine the value of the property transferred to the Lees as part of the civil settlement.
The Mandatory Victim Restitution Act ("MVRA") provides that the district 18 U.S.C. § 3663A(a)(1).
"[A]n order of restitution imposed pursuant to the MVRA must be based on the 'full amount of each victim's losses as determined by the court....'" United States v. Ferdman, 779 F.3d 1129, 1132 (10th Cir. 2015) (quoting 18 U.S.C. § 3664(f)(1)(A)). United States v. Gallant, 537 F.3d 1202, 1252 (10th Cir. 2008) (internal citations and quotation marks omitted). In calculating loss, "[s]peculation and rough justice are not permitted." Ferdman, 779 F.3d at 1132.
"The burden of demonstrating the amount of loss sustained by the victim as a result of the offense shall be on ... the Government." 18 U.S.C. § 3664(e). The PSR must contain Id. § 3664(a). "Any dispute as to the proper amount ... of restitution shall be resolved by the court by the preponderance of the evidence." Id. § 3664(e). "A district court 'may resolve restitution uncertainties with a view towards achieving fairness to the victim so long as it still makes a reasonable determination of appropriate restitution rooted in a calculation of actual loss.' " Ferdman, 779 F.3d at 1133 (alteration omitted) (quoting Gallant, 537 F.3d at 1252). See generally United States v. Dickerson, 678 F. App'x 706, 722 (10th Cir. 2017).
Both parties agreed at the previous restitution hearing on June 27, 2018 that the amount of actual loss is $1 million - the amount of money the Defendant took from the victims. See Transcript of June 27, 2018 Restitution Hearing, Doc. 82, p. 17, 19, 23. Moreover, Defendant did not challenge this loss amount in the PSR. Therefore, the amount of actual loss suffered by the victims is $1 million.
The Government argues that the loss amount should include prejudgment interest, apparently running from the date the money was transferred from the victims to the Defendant:
Generally, prejudgment interest may be awarded as restitution because it "reflects the victim[s'] loss due to [their] inability to use the money for a productive purpose, and is therefore necessary to make the victim[s] whole." United States v. Patty, 992 F.2d 1045, 1050 (10th Cir. 1993) (), cited in United States v. Bizzell, 7 F.3d 1045 (Table), 1993 WL 411470 (10th Cir. 1993) (unpublished). "Foregone interest is one aspect of the victim's actual loss." Smith, 944 F.2d at 626, quoted in Patty, 992 F.2d at 1050. The rate of interest to be awarded is not fixed, but is at the discretion of the Court as necessary to compensate the victims for their lost gains.
The burden demonstrating the amount of interest is on the Government. See 18 U.S.C. 3664(e) (). Here, the Government appears to assert that the prejudgment interest should run at the federal statutory rate on the full $1 million until the property was transferred, then interest should run on the remainder.
However, there was nothing in the record indicating whether and how the victims invested the $1 million previously, and what their rate of return was. Similarly, there was no factual finding in the PSR about their rate of return, or any stipulation by the parties. This is insufficient to award prejudgment interest. Prejudgment interest should not awarded as a matter of course, but is tailored to compensate victims for their lost investment gains. See, e.g., United States v. Scott, 321 F. App'x 71, 72 (2d Cir. 2009) (), citing United States v. Shepard, 269 F.3d 884, 886 (7th Cir. 2001) (). However, there is nothing in the record to indicate their lost investment gain and how much prejudgment interest is necessary to compensate them.
The Government suggests that the Court apply the federal statutory rate, typically used for post-judgment interest. The federal statutory rate is based on a 1-year constant maturity Treasury bill. 18 U.S.C. § 3612(f)(2). Again, there is nothing in the record to indicate that this would compensate the victims for their actual loss, or is a reasonable determination of actual loss. United States v. Williams, 292 F.3d 681, 688 (10th Cir. 2002) () (internal citations and quotation marks omitted); United States v. Smith, 156 F.3d 1046, 1057 (10th Cir. 1998) ().
The victims' impact statement in the PSR estimated a 4% return rate on their investments. However, the PSR noted that the victims provided no evidence to support that rate of return. The victims' unsupported statements of loss are insufficient to support an award of prejudgment interest. See United States v. Ferdman, 779 F.3d 1129, 1133 (10th Cir. 2015); see also United States v. Steele, 897 F.3d 606, 613 (4th Cir. 2018) (); United States v. Edwards, 19 F. Supp. 3d 366, 376 (D. Mass. 2014) (). This is not a...
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