7th Circuit Criminal Law Alert

On Restitution: No Longer Error For District Court Not to Set a Payment Schedule

USA v. Michael E. Sawyer, Patrick Duncan, and Terrell Rogers, Nos. 06-1275, 06-1614 & 06-4030.  In each of these appeals, the sole argument is that the district court committed plain error by not specifying an installment plan for the payment of restitution.

In one of the three cases the district judge set a plan (which we call a "schedule" following the statutory usage) to begin after release from custody; this defendant maintains that doing so delegated schedule-setting during imprisonment to the Bureau of Prisons.

In the other cases the district judge ordered all restitution to be paid immediately.

None of the three defendants protested in the district court. We conclude that the first decision is correct and that the oversight in the others need not be corrected on appeal under the plain-error doctrine. See Fed. R. Crim. P. 52(b).

All three defendants pleaded guilty, and for current purposes their crimes don't matter. Michael Sawyer was sentenced to 51 months' imprisonment and ordered to pay $1,386,082 as restitution. The judgment provides that the full sum is due immediately.

Patrick Duncan was sentenced to 96 months' imprisonment plus $177,727 as restitution. The judgment provides that "[p]ayments are due immediately" but does not deal with time in prison other than to say that money "may be paid from prison earnings in compliance with the Inmate Financial Responsibility Program." After release, Duncan must pay $100 per month or 10% of his net earnings, whichever is greater.

Terrell Rogers was sentenced to 51 months' imprisonment plus $1,837 as restitution. The judgment provides that the full sum is due immediately. All three defendants assert that they are unable to pay the whole award now, and that 18 U.S.C. §3664(f)(2) therefore required the district judges to set a schedule of payments. See United States v. Day, 418 F.3d 746, 751--57 (7th Cir. 2005).

The prosecutors concede the point for all three defendants; we accept that concession.

Because a prisoner's earnings while in custody depend on the Bureau of Prisons, as well as the prisoner's cooperation with its programs, it is not clear what payment schedule a court could set if it wanted.

Prison earnings and other transactions concerning prison trust accounts are so completely within the Bureau of Prisons' control that it would be pointless for a judge to tell the convict how much to pay a month. We therefore agree with United States v. Dawkins, 202 F.3d 711 (4th Cir. 2000), and United States v. Miller, 406 F.3d 323 (5th Cir. 2005), that a judgment of conviction need not contain a schedule of restitution payments to be made during incarceration.

Thus we hold that leaving payment during imprisonment to the Inmate Financial Responsibility Program is not an error at all, let alone a plain error. The statute requires the judge to set a schedule if the defendant cannot pay in full at once, see 18 U.S.C. §3664(f)(2), but it does not say when the schedule must begin.

We hold today that it need not, and as a rule should not, begin until after the defendant's release from prison. Payments until release should be handled through the Inmate Financial Responsibility Program rather than the court's auspices.

With respect to Sawyer and Rogers, however, the district judges erred. Neither has the ability to pay immediately, and §3664(f)(2) therefore required the judges to set schedules for repayment from future earnings and other income once they leave prison.

Several decisions in this circuit hold that omissions of any schedule at all meets the requirements of "plain error" under Fed. R. Crim. P. 52(b).  Plain-error review has three requirements and one discretionary component. The requirements are (1) error that (2) is plain and (3) affects substantial rights. See United States v. Olano, 507 U.S. 725 (1993).

Quite apart from the question whether a statement that restitution is due immediately affects defendants' substantial rights, it is difficult to understand how a judicial order that does no more than require a defendant to pay what he owes could undermine the fairness, integrity, or public reputation of judicial proceedings.

A judgment requiring defendants to pay restitution immediately after release, while erroneous (if the defendant lacks the wealth to pay at once), does not jeopardize substantial rights, and the uncorrected error does not imperil the fairness, integrity, or public reputation of judicial proceedings.

We therefore overrule any and all other decisions in this circuit treating an immediate-payment requirement as plain error that the court of appeals must correct.   

AFFIRMED.

For the full opinions visit the 7th Circuit Court of Appeals Web Site.

For more about attorney Michael J. Petro, visit www.mjpetro.com .

On Restitutuion: Beyond a Reasonable Doubt Not Required

USA v. VERNON BONNER AND MARIA MAGANA-BONNER,  06-3350.The defendants challenge various aspects of restitution payments they are required to make under the Mandatory Victims Restitution Act ("MVRA"), 18 U.S.C. § 3663A. In particular, the defendants claim that restitution under the MVRA is a criminal punishment and that the facts underlying the restitution amount must be proven beyond a reasonable doubt to a jury.

These arguments lack merit. This court has consistently held that restitution under the MVRA is not a criminal punishment and does not need to be proven to a jury. And the district court properly relied on intended loss in calculating Vernon Bonner's advisory guidelines range. Therefore, we affirm the district court's awards of restitution.

The defendants claim that the district court erred by ordering restitution without accounting for various protections set forth in Apprendi v. New Jersey, 530 U.S. 466 (2000), Blakely v. Washington, 542 U.S. 296 (2004), and Booker, 543 U.S. 220 (2005). These cases hold that facts underlying certain criminal punishments must be proven beyond a reasonable doubt to a jury.

The defendants claim that restitution is in fact a criminal punishment and these protections apply.  The defendants rely on Pasquantino v. United States, 544 U.S. 349, 365 (2005), which mentions in passing, "The purpose of awarding restitution [under the MVRA] in this action is not to collect a foreign tax, but to mete out appropriate criminal punishment for that conduct."

The problem with the defendants' argument is that we have rejected it many times, even after Pasquantino was decided.  See, e.g., United States v. Lagrou Distrib. Sys., 466 F.3d 585, 593 (7th Cir. 2006) ("We reiterate: restitution is not a penalty for a crime for Apprendi purposes since restitution for harm done is a classic civil remedy that is administered for convenience by the courts that have entered criminal convictions." Restitution under the MVRA is not a criminal punishment, at least not in this circuit.

Moreover, the Third Circuit, which recognizes that restitution under the MVRA is a criminal penalty, has held: restitution constitutes a return to the status quo, a fiscal realignment whereby a criminal's ill-gotten gains are returned to their rightful owner. In these circumstances, we do not believe that ordering a convicted defendant to return ill-gotten gains should be construed as increasing the sentence authorized by a conviction pursuant to Booker.  United States v. Leahy, 438 F.3d 328, 338 (3d Cir. 2006)

Alternatively, the defendants suggest that if restitution is a civil remedy, then the Seventh Amendment guarantees them a jury trial.  We have already implicitly rejected this argument. See United States v. Scott, 405 F.3d 615, 619 (7th Cir. 2005) ("[T]he amount of criminal restitution is determined by the judge, whereas a suit for damages is a suit at law within the [Seventh] [A]mend-ment's meaning.").

Finally, the defendants point out that the district court's written judgments still prohibit the defendants from obtaining any federal benefits until they have completed their restitution payments, even though the district court did not mention this requirement when pronouncing judgment at the sentencing hearings. The government claims these were merely clerical errors. The defendants do not dispute this characterization.

We agree that these errors were likely clerical in nature [and] "[i]f an inconsistency exists between an oral and the later written sentence, the sentence pronounced from the bench controls." United States v. Becker, 36 F.3d 708, 710 (7th Cir. 1994).

The judgments are AFFIRMED, but the cases are REMANDED solely for the district court to correct the above-specified clerical errors in the judgments.

For the full opinions visit the 7th Circuit Court of Appeals Web Site.

For more about attorney Michael J. Petro, visit www.mjpetro.com .

Honest Services Fraud Explained

USA v. Robert Sorich, 06-4251.  Despite the existence of a federal consent decree and other measures that for decades have sought to bring more transparency and legitimacy to the City of Chicago's civil service hiring, patronage appointments have continued to flourish. The centerpiece of this appeal is a challenge to the government's theory of prosecution: they contend that their behavior, while dubious, is not criminal  and that the honest services mail fraud statute, 18 U.S.C. § 1346, is unconstitutionally vague.

We conclude that the defendants' actions do constitute mail fraud, and that the statute is not unconstitutionally vague as applied to the facts of this case.

The defendants' chief argument on appeal is that the district court's jury instructions on honest services mail fraud impermissibly expand the scope of that crime beyond the statute. They also contend that the honest services mail fraud statute is unconstitutionally vague, and that only state law can supply the fiduciary duty that runs between public officials and the citizenry. Before turning to those arguments, we provide a bit of background on honest services mail fraud.

The mail fraud statute, 18 U.S.C. § 1341, criminalizes the use of the mails for carrying out a "scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises." The courts had long interpreted this statute as encompassing schemes to defraud another not just of money and property, but also "intangible rights," chief among them the right of citizens to the honest discharge of public duties by public servants.

In most honest services cases, the defendant violates a fiduciary duty in return for cash-kickbacks, bribes, or other payments.  The "[m]isuse of office (more broadly, misuse of position) for private gain is the line that separates run-of-the-mill violations of state-law fiduciary duty . . . from federal crime." United States v. Bloom, 149 F.3d 649, 655 (7th Cir. 1998).

The defendants' chief argument centers on the "private gain" requirement. The district court's jury instruction stated that a scheme to defraud requires an intent "to deprive a governmental entity of the honest services of its employees for personal gain to a member of the scheme or another".

Imagine scenario (A) in which a mayor surreptitiously channels city contracts to his cronies in the business community; they get a windfall whereas he has merely helped his friends and takes no money. Or imagine scenario (B) in which an attorney bribes a court in order to obtain favorable results for his clients in their lawsuits. Or scenario (C) where a union boss sells union property to a senator even though the senator did not offer the highest price, and in exchange receives the senator's vote on a matter that concerns the union.

In all three scenarios the public has been defrauded of the honest services of its public servants: the mayor, the court, and the senator. Moreover, in all three scenarios the defendant-the mayor, the attorney, and the union boss-was not the one who stood to gain financially. Certainly the defendants all received something: in (A), the mayor received the gratitude of his friends; in (B), the attorney could boast to future clients of a high success rate, which is good for business; and in (C) the union boss curried valuable favor with the senator. But the money went to another party. All three scenarios have played out in the federal courts and have resulted in convictions for mail fraud.  See United States v. Fernandez, 282 F.3d 500, 503-05 (7th Cir. 2002), United States v. Silvano, 812 F.2d 754, 759-60 (1st Cir. 1987) (scenario A); Ginsburg v. United States, 909 F.2d 982 (7th Cir. 1990) (scenario B); Lombardo v. United States, 865 F.2d 155, 159-60 (7th Cir. 1989) (scenario C).

Reading Bloom's private gain requirement to include gain by non-schemers does not, as the defendants warn, "effectively eliminate[ ]" this limit on the scope of honest services mail fraud. As we have noted, it will be a rare case when a party engaged in fraud directs the benefits to non-schemers. 

Unlikely scenarios, maybe, but mail fraud nevertheless. Robin Hood may be a noble criminal, but he is still a criminal.

The defendants also contend that United States v. Thompson, 484 F.3d 877 (7th Cir. 2007)
compels a decision in their favor. The point that distinguishes Thompson from this case is the absence of a scheme to defraud.

The present case, by contrast, features a massive scheme to defraud, complete with specific intent and material misrepresentations. The defendants created an illegitimate, shadow hiring scheme based on patronage and cronyism by filling out sham interview forms, falsely certifying that politics had not entered into their hiring, and covering up their malfeasance. These are the hallmarks of a fraud. See United States v. Bush, 522 F.2d 641, 647-48 (7th Cir. 1975). Thompson is miles away.

For the foregoing reasons, we AFFIRM the convictions and sentences of the defendants.

For the full opinions visit the 7th Circuit Court of Appeals Web Site.

For more about attorney Michael J. Petro, visit www.mjpetro.com .